Implementation/Execution Plan

This phase of the strategic management plan consists of the plan to achieve
the companys strategic objectives. As discussed earlier, it is composed of
four pars: Financial strategic objectives. Customer strategic objectives,
Operational strategic objectives and People strategic objectives.
Financial Strategic Objective #1: To double net income by 2018 to
PHP32bn through the implementation of the companys roadmap
SMPH should increase its large-scale strategic land bank acquisition
and lifestyle cities development. In optimizing the lifestyle cities, SMPH
should leverage its malls. Offering a wider range of products for its
residential segment while it will also continue to be aggressive in rolling out
BPO offices will help SMPH achieve doubling its net income.
Based on research, SMPH plans to have 10.96 million square meters of
shopping malls in the Philippines and China; over 139,000 residential units
across 41 projects; 2,500 units of leisure homes across 16 developments;
460,000 square meters of commercial space from seven office buildings; and
2,187 hotel rooms from 10 hotel developments by 2018. Pursuing more
investment to its operations
Financial Strategic Objective #2: To increase operating margins by 20%
annually
SMPH could increase operating margins by 20% through employing tighter
control over its operating expenses. The company should have an effective
and efficient budgeting for the operating expenses. This enables them to
apply the concepts of budget constraint. Identifying the expenses to focus on
and cut down the unimportant ones will help them achieve this financial
strategic objective. SMPH should ensure that the operations focus on
reducing its non-value added activities to eliminate the unnecessary
operating expenses.
Financial Strategic Objective #3: To increase market capitalization from
USD13.15bn to USD 20bn by 2018
The market capitalization is the product of price per share and shares
issued and outstanding. It represents the companys share capital adjusted
to the current market value. Therefore, SMPH could increase its market
capitalization by taking proper actions to entice shareholders to invest in
their company. This can be done through maintaining their excellent
performance. Of course, shareholders would want to invest more if they are
benefiting with this transaction. Pushing towards giving dividends to

investors and increasing the future value of the company and its cash flows
will help them achieve increasing its market capitalization.
Financial Strategic Objective #4: To spend an average of PHP60bn on
property developments, annually over the next 3 years
SMPH can achieve this financial strategic objective if the company has
its available cash for more capital expenditures in the future.
Financial Strategic Objective #5: To maintain prudent debt levels and a
sufficient equity buffer with a target net debt-to-equity ratio of no more than
50:50
With the components of the debt-to-equity ratio, we can come up with
the execution plan to make it to 50:50. This may be done through increasing
equity or reducing debts. In the current status of SMPH, the countrys largest
real estate company, the company should use its advantage through enticing
shareholders to invest instead of financing its activities through incurring
debt. This plan is associated with the financial strategic objective number 3
which is to increase the companys market capitalization.

Customer Strategic Objective # 1: to cater to the anticipated 5M tourist

arrivals in the coming year
SMPH could cater the anticipated 5M tourist arrivals in the coming year
through pursuing the development 2,187 hotel rooms.
Customer Strategic Objective # 2: To expand to the global marketplace
and take advantage of the ASEAN integration
SMPH currently has its opportunities in beginning to operate in Thailand and
Malaysia. This will be the best way to take advantage of the ASEAN
Integration.
Customer Strategic Objective # 3: To reduce non-renewal/termination of
contracts by the tenants from 3% to 1%.
Customer Strategic Objective # 4: To meet the demand for office
requirement
To meet the demand for office requirement by launching 7 commercial
towers by 2018.
Customer Strategic Objective # 5: To cater to the demand of middle
income earners for affordable housing

This customet strategic objective can be done by SMPH through continuing

its plan to launch 150,000 condominium units, each worth 1-2M pesos.

Operational Strategic Objective# 1: To successfully acquire reclamation

rights on the 660-hectare property in Pasay-Paranaque and 1,200-hectare
property in Cordova, Cebu.
Operational Strategic Objective# 2: To launch 4-5 malls in the Philippines
annually
Operational Strategic Objective# 3: To launch 1 mall in China annually

People Strategic Objective # 1: To maintain and uphold the loyalty toplevel officers with tenancy of at least 20 years.
To maintain and uphold the loyalty of top-level officers, first, SMPH should be
committed to employee development. They need these trainings to maintain
their skills.
People Strategic Objective # 2: To adhere to strong corporate governance
practices by having three out of eight members of the Board of Directors as
independent directors.
Business level strategies
SM Prime intends to employ the following strategies to make itself more
profitable and competitive amidst a dynamic business environment:
Maintain a strong financial position, prudent risk management and
good governance
SMPH believes that through maintaining a solid balance sheet, it will be
better able to thrive under unpredictable economic cycle. The company
keeps its net debt-to-equity ratio no more than 0.5 by prioritizing the
diversification of its fund sources and the spreading out of its debt maturity
profile. SMPH also employs a disciplined approach through strict application
of benchmarks for capital allocation. As for governance, the company applies
corporate governance standards and risk management best practices and
takes initiatives centered in integrated sustainability and corporate social
responsibility.
Strategic land banking
Through its consistent expansion strategy, SMPH taps into larger land banks
and employs an integrated development approach for mid-to-large mixed-

use projects. Accompanied by the companys firmed up balance sheet,

building scale enables SMPH to gain greater flexibility in undertaking more
lifestyle cities, thus, unlocking significant value for its stakeholders.
One product-One market as residential business strategy
SMPH targets the Philippine mass middle market by rolling out vertical
residential projects in areas near existing SM Prime developments. By
concentrating its efforts on residential development on low to middle cost
segments, the company plans to capitalize on the resilient housing demand,
increasing urbanization, and growing households.
Continuous mall and BPO office development
Since mall operations accounts for the majority of its income, SMPH focuses
on pushing forward with mall expansions to take advantage of the increasing
disposable income, especially in provinces where there is huge unmet
demand for shopping experiences. The company plans to develop 4 to 5
malls in the Philippines annually. As the anchor development, these malls are
slated to transform into mixed-use developments, creating additional sources
of revenue. SMPH also intends to expand its IT and BPO leasing portfolio in
second and third tier cities in the Philippines to cash in on the burgeoning
BPO industry.
Optimize existing developments through complementation
SMPH plans to pursue large scale mixed-use developments across the
country to optimize the value of the companys current portfolio of
properties, developments, and land bank. In an effort to replicate the
previous success of the MOA complex, SM Prime intends to expand its
existing property projects by creating integrated and self-sustaining
communities with office, residential, and retail components all in one area.