SM Development Corp., owned by Philippine billionaire Henry Sy, plans to build apartments in China as he aims to double the group’s number of shopping malls in the world’s fastest growing major economy. The stock rose to a record.
Manila-based SM Development’s first residential project in China may start as early as next year, said Chief Executive Officer Henry Sy Jr., the tycoon’s eldest son. The company is raising 11.68 billion pesos ($266 million) in a 1-for-3 rights offer next month.
The developer’s foray into China’s residential market comes as the family seeks to double by 2013 its three shopping malls in the world’s most populous nation. China has a $4.91 trillion gross domestic product, compared with the Southeast Asian nation’s $160.48 billion economy.
Residential projects in China are “very, very viable and I am getting ready to put up a company,” Sy, 56, said in a Sept. 24 interview in Manila. He declined to give the size of the potential investment and if the apartments will be located beside the group’s malls in China.
Shares of SM Development surged as much as 15 percent earlier today and rose 9.6 percent to 10.98 pesos at the noon close in Manila, the highest since the stock began trading in March 1992. The benchmark Philippine Stock Exchange Index rose 1.1 percent.
SM Prime Holdings Inc., the largest Philippine shopping mall operator and a unit of SM Development parent SM Investments Corp., is spending 3.5 billion yuan ($523 million) to open four more malls in China in three years.
SM Prime has malls in Xiamen, Jinjiang and Chengdu. It will open one in Suzhou later this year, Chongqing in 2011 and Tianjin and Shandong in 2013, according to the company.
“The group is trying to maximize what they can earn from China given they already have a presence in the market,” said Jidgette Velasco, analyst at Manila-based Philippine Equity Partners Inc. “The company is laying down the foundation for future growth and will likely pursue this in parallel with SM Prime’s strategy in China.”
China’s government has taken steps this year to cool record gains in property prices, including limiting lending, restricting multiple-home purchases and accelerating the construction of public housing.
SM Development builds apartments near SM Prime’s malls in the Philippines. The strategy has boosted home sales and allowed it to catch up with bigger and older residential builders. SM Development earlier this year became the third-largest Philippine developer by market value, overtaking Robinsons Land Corp., Filinvest Land Inc. and Vista Land & Lifescapes Inc.
Today’s gain valued SM Development at 60.35 billion pesos, surpassing Megaworld Corp. as the nation’s second-largest home- builder by market value. Megaworld is worth 58.97 billion pesos based on today’s prices.
Henry Sy, 85, migrated from China’s Fujian province at 12 and built his wealth from a shoe store that he opened in Manila in 1948. He has a $5 billion net worth, according to Forbes Asia in July. His companies include the largest Philippine bank by assets and the nation’s biggest department store and grocery chains.
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