EM ASIA CREDIT: SM Prime Holdings: New $ deal FV
(SMPHPM,NR)
New Issue: Max $350m 5Y
IPT: T+150bp (around z+187bp)
FV: T+123bp area (around z+160bp)
Philippines real estate company and subsidiary of SM Investments Corporation (49.7% owner), SM Prime Holdings, has announced an up to USD350m 5Y debut USD deal. The deal is capped at a maximum of USD350m, and with potential anchor investors following yesterday's investor call, we could see strong demand.
SM Prime Holdings is a subsidiary of SM Investments Corporation, which is the second largest company by market capitalisation after ports and terminals business, International Container Terminal Services (ICTPM). SM Prime Holdings represents around 28% of SM Investment Corporation net income, and considered a core business.
SM Prime Holdings is unrated, which is not unusual for Philippine corporates.
The business is focused on real estate activities, with the bulk of revenues (60%) from rents and the remainder mostly property sales (29%). The Malls (59%, occupancy 92%) and Residential (31%) segments are the main contributing segments.
In terms of the most recent results, H125 EBITDA rose 10% YoY to PHP42bn, with margin expansion (59% to 61%) on stronger revenues and cost controls. In terms of credit metrics, the company reported ICR of 6.7x, a slight improvement versus end 2024 (5.9x) and leverage more or less unchanged versus 2024, with LTM gross debt to EBITDA at 4.7x at end June.
In terms of notable risks, a large share of the capex commitment for 2025 (PHP25bn, around 25% of total) relates to an urban estate development project called Pasay 360, with the first milestone being land reclamation and sand filling by end 2025. Land is expected to be handed to the government in 2028. An ambitious, and risky project, that sees the JV with the Pasay City government envisage future hotels, malls, residential developments.
In terms of fair value, there are few natural peers, though SM Investments Corporation USD '29s is a natural anchor point, as well as well-known fast‑food restaurant operator Jollibee USD 30s. We would expect the new SM Holdings deal to trade 5-10bp wide to the parent given the risker nature of its real estate business and ongoing development projects. We see fair value around z+160bp area (T+120bp area).
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AUSSIE 10-YEAR TECHS: (U5) Recovers With Treasuries
- RES 3: 96.501 - 76.4% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 2: 96.207 - 61.8% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 1: 95.960 - High Apr 7
- PRICE: 95.710 @ 14:34 BST Aug 8
- SUP 1: 95.415/95.300 - Low May 15 / Low Jan 14
- SUP 2: 95.275 - Low Nov 14 (cont) and a key support
- SUP 3: 94.707 - 1.0% 10-dma envelope
Aussie 10-yr futures received a boost from the US Treasury rally that followed a poor NFP print. This keeps Aussie 10-year futures toward the top end of the recent range. To the upside, next resistance is at 96.207, a Fibonacci retracement point. Next support undercuts at 95.420 (pierced), the Feb 13 low, ahead of 95.275, the Nov 14 low and a key support. Clearance of this level would strengthen a bearish condition.
SECURITY: Trump To Sign Trilateral Peace Accord With Armenia/Azerbaijan Shortly
US President Donald Trump is shortly due to sign a trilateral peace agreement with Armenian Prime Minister Nikol Pashinyan and Azerbaijani President Ilham Aliyev at the White House. LIVESTREAM The event will provide another opportunity for Trump to style himself as peacemaker, after touting success in brokering peace deals between Rwanda/Congo, Cambodia/Thailand, and India/Pakistan.
- The accord aims to resolve a decade-long dispute over the sovereignty of Nagorno-Karabakh - a breakaway Azerbaijani province that was under de facto Armenian control from the dissolution of the Soviet Union until a 2020 war.
- Trump described the meeting on Truth Social as a “historic peace summit,” noting that the US will also sign “Bilateral Agreements [to] fully unlock the potential of the South Caucasus Region.”
- White House spokeswoman Anna Kelly told reporters that Trump would sign deals with both Armenia and Azerbaijan on energy, technology, economic cooperation, border security, infrastructure and trade.
- A White House official said: "It's about the entire region, and [the leaders] know that that region is known to be safer and more prosperous with President Trump."
- Reuters reports that the US will have development rights to build transportation links in the strategic Zangezur Corridor, a mountainous stretch of Armenian territory between Azerbaijan and its Nakhichevan exclave.
- Politico notes: “But whether this is just a photo opportunity or a lasting end to a conflict that has undermined stability in a region dominated by Russia and Iran will depend on whether the US can address several key challenges.”
FED: Balance Sheet Runoff Continues At Steady $20B/Month Pace (2/2)
Fed asset holdings were little changed in the past week. SOMA runoff totaled $2.8B (composed of $4.2B less nominal Tsy holdings and $1.4B more TIPS), with emergency lending/liquidity facilities $0.7B lower.
- Over the last 4 weeks, the $20B/monthly expected QT pace was roughly adhered to: MBS fell $18B, with Treasury net holdings down around $2B (a fall in TIPS holdings offsetting a slight rise in nominals).
- Discount window usage accounted for the fall in lending facility usage this week; takeup is now down to $4.9B, down $1.3B in the last month and down from the 1-year high of $6.4B set in July which looks to have been a temporary blip higher.
