SECURITIES AND EXCHANGE COMMISSION SEC FORM 17-Q QUARTERLY REPORT PURSUANT TO SECTION 17 OF THE SECURITIES REGULATION CODE 1. For the quarterly period ended : 30 June 2015 2. Commission Identification Number : 145490 3. BIR Tax Identification Number : 000-144-386 SHANG PROPERTIES, INC. 4. Exact name of the Issuer as specified in this charter: 5. Province, country or other jurisdiction of incorporation or organization: Not Applicable 6. Industry Classification Code: (SEC Use Only) Level 5, Shangri-La Plaza Mall, EDSA cor Shaw Boulevard, Mandaluyong City 1550 7. Address of issuer’s principal office Postal Code (632) 370-2700 8. Issuer’s telephone number, including area code ____________________________________________________________________________________ 9. Former name, former address and former fiscal year, if changed since last report: 10. Securities registered pursuant to Sections 8 and 12 of the SRC, or Sections 4 and 8 of the RSA. Title of each Class Number of shares of common stock outstanding and amount of debt outstanding Common Stock 4,764,056,287 common shares 11. Are any or all of the securities listed on a Stock Exchange? Yes [x ] No [ ] If yes, state the name of such Stock Exchange and the class/es of securities listed therein: Philippine Stock Exchange 12. Indicate by check mark whether the registrant: (a) Has filed all reports required to be filed by Section 17 of the SRC and SRC Rule 17 thereunder or Sections 11 of the RSA and RSA Rule 11(a)-1 thereunder, and Sections 26 and 141 of the Corporation Code of the Philippines, during the preceding twelve (12) months (or for such shorter period the registrant was required to file such reports). Yes [ x ] No [ ] (b) has been subject to such filing requirements for the past ninety (90) days. Yes [ x ] No [ ]
Quarterly report submitted by Shang Properties to the SEC.
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SECURITIES AND EXCHANGE COMMISSION
SEC FORM 17-Q
QUARTERLY REPORT PURSUANT TO SECTION 17 OF THE
SECURITIES REGULATION CODE
1. For the quarterly period ended : 30 June 2015 2. Commission Identification Number : 145490 3. BIR Tax Identification Number : 000-144-386 SHANG PROPERTIES, INC. 4. Exact name of the Issuer as specified in this charter: 5. Province, country or other jurisdiction of incorporation or organization: Not Applicable
6. Industry Classification Code: (SEC Use Only) Level 5, Shangri-La Plaza Mall, EDSA cor Shaw Boulevard, Mandaluyong City 1550 7. Address of issuer’s principal office Postal Code
(632) 370-2700 8. Issuer’s telephone number, including area code ____________________________________________________________________________________ 9. Former name, former address and former fiscal year, if changed since last report: 10. Securities registered pursuant to Sections 8 and 12 of the SRC, or Sections 4 and 8 of the RSA.
Title of each Class
Number of shares of common stock outstanding and amount of debt outstanding
Common Stock 4,764,056,287 common shares
11. Are any or all of the securities listed on a Stock Exchange? Yes [x ] No [ ] If yes, state the name of such Stock Exchange and the class/es of securities listed therein:
Philippine Stock Exchange 12. Indicate by check mark whether the registrant:
(a) Has filed all reports required to be filed by Section 17 of the SRC and SRC Rule 17 thereunder or Sections 11 of the RSA and RSA Rule 11(a)-1 thereunder, and Sections 26 and 141 of the Corporation Code of the Philippines, during the preceding twelve (12) months (or for such shorter period the registrant was required to file such reports).
Yes [ x ] No [ ]
(b) has been subject to such filing requirements for the past ninety (90) days. Yes [ x ] No [ ]
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PART 1 – FINANCIAL INFORMATION
Item 1. Management Discussion and Analysis of Financial Condition and Results of
Operations
Key Performance Indicators
June 30 June 30 Change
2015 2014
Turnover (Php M) 4,070.7 3,195.8 27.4%
Profit attributable to shareholders (Php M) 1,323.0 1,059.3 24.9%
Earnings per Share (Php Ctv) 0.278 0.222 24.9%
Net Asset Value per share (Php) 5.193 4.571 13.6%
Debt to Equity Ratio (Ratio) 0.904 0.730 23.8%
• Turnover consists of Condominium Sales, Rental Revenue, Interest Income and
Other Income. For the six (6) months ended June 30, 2015, the Group’s
consolidated revenues amounted to P4,070.7 million, higher by P874.9 million or
27.4% from P3,195.8 million of total revenues realized in the same period last year.
The condominium sales showed increment of P864.1 million mainly due to higher
sales of condominium projects. Leasing operation posted a revenue growth of 3.2%
or P40.9 million to P1,329.6 million in 2015 from P1,288.7 million in 2014. Interest
and Other income decreased by P30.1 million.
• Profit attributable to equity holders of Parent Company amounted to
P1,323.0 million, higher by P263.7 million or 24.9% compared with the same
period last year.
• Earnings per share showed a positive variance of 24.9% to P0.278 from last year’s
P0.222.
• Net Asset value per share is calculated by dividing the total net asset of the Group
(Total asset – Total liabilities and minority interest) by the number of shares
outstanding. Net asset value per share increased by 13.6% mainly due to the
income generated during the period.
• Debt to Equity measures the exposure of creditors to that of the stockholders. It
gives an indication of how leveraged the group is. It is determined by dividing total
debt by stockholder’s equity. The Group’s financial position remains solid with
debt to equity ratio of 0.904:1 as of 30 June 2015 and 0.730:1 as of 30 June 2014.
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Financial Condition
Total assets of the Company amounted to P54,741.0 million, an increase of P58.9 million
from total assets of P54,682.1 million in December 31, 2014. The following are significant
movements in the assets:
• Decrease in cash and cash equivalents by P1,145.2 million mainly due to repayment
of bank loans.
• Financial assets at fair value through profit or loss increased by P3.6 million or 11%
due to the fair market value adjustment recognized during the period.
• Receivables decreased by P562.9 million mainly due to the collection of installment
receivables and liquidation of advances to contractors and suppliers for the
completed projects.
• Prepayments and other current assets increased by P540.7 million mainly due the
sales proceeds of The Rise project was deposited in an escrow accounts as required
by the Housing and Land Use Regulatory Board (HLURB). The said deposit has
been released on July 27, 2015.
• Increase in real estate development projects by P790.9 million mainly pertains to
the construction cost of various projects.
• Increase in refundable deposits by P43.2 million or 63.1% mainly due to deposits
paid for construction works.
• The recognized deferred income tax assets decreased by P107.2 million mainly due
to difference in accounting recognition of profit between installment method versus
percentage of completion method.
• Current ratio is 2.16:1 as of June 30, 2015 from 2.37:1 as of December 31, 2014.
Total liabilities decreased by P913.0 million from P26,897.8 million in 2014 to
P25,984.8 million in 2015 due to the following:
• Income tax payable increased by P15.0 million due to taxable income generated
during the period.
• Decrease in accrued employee benefits by P18.5 million due to the payments made
during the period.
• Bank loans decreased due to repayment of bank loans.
• Decrease in deferred lease income by 20.5% or P4.1 million mainly due to
amortization using a straight-line basis over the lease term.
Results of Operation
Consolidated Net Income for the period ended June 30, 2015 amounted to P1,323.0 million
higher by 24.9% from last year’s P1,059.3 million due to the following:
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A. Condominium Projects:
• Increase in sales by P864.1million or 50.5% mainly due to the higher sales and
completion level of various projects.
B. Leasing Operations:
• Shangri-La Plaza’s revenue decline by a slight P25.7 million or 3.3% mainly due to
temporary close down of certain areas in the Main shopping mall due to renovation.
• The Enterprise Center’s rental revenue showed an improvements amounting to
P63.5 million or 15.2% mainly due to rental escalation and higher rental yields.
C. Interest income and other income decrease by P27.1 million mainly due to the
decrease in interest on installment contract receivables.
Total Expenses of the Group amounted to P1,981.7 million, higher by P336.9 million
compared with last year’s P1,644.8 million. This was mainly due to the following:
• Increase in cost of sales by 26.6% due to higher sales and completion level of
various development projects during the period.
• General and administrative expenses increase by P41.8 million or 19.8% primarily
due to additional operation activities of the Group.
• Recovery of reimbursable expenses improved by P11.7 million mainly due to lower
utility cost incurred during the period compared to the same period in 2014.
• Decrease in taxes and licenses by P15.3 million mainly due to lower documentary
stamp taxes on advances and bank loans compared to the same period in 2014.
• Increase in depreciation by P1.8 million or 19.9% due to the depreciation of
additional acquisitions during the year.
• Insurance expense increased by P0.9 million or 11.8% mainly due to the additional
insurance coverage of the properties.
• Interest expense and bank charges increased by P13.1 million mainly due to the
payment of interest on the existing loans, and bank charges for termination of
certain unused bank loan facilities.
Share in net loss of associates was lower by P3.4 million compared with same period last
year mainly due to the decrease in expenses of an associated company.
Increase in net income attributable to minority interest was mainly due to the acquisition of
additional 20% equity interest in Shang Global City Properties, Inc. (SGCPI) on April 30,
2014. As a result, the Group’ obtained controlling interest owning 60% equity interest and
consolidation of SGCPI to the Group.
4
Provision for income tax is higher by P177.9 million mainly due to higher taxable income
generated during the period against the same period last year.
Financial Soundness Indicators
End of
June 2015
End of
December 2014
Current Ratio1 2.16:1 2.37:1
Debt-to-equity ratio2 0.90:1 0.97:1
Asset-to-equity ratio3 1.90:1 1.97:1
2Q 20157 2Q 2014
Interest rate coverage ratio4 21.14:1 16.46:1
Return on assets5 4.80% 5.00%
Return on equity6 9.40% 8.20%
1Current assets/current liabilities
2Total liabilities/stockholders' equity
3Total asset/stockholders’ equity
4Income before interest and taxes/interest expense
5Net Income/average total assets
6Net Income/average stockholders' equity
72Q1 Net income after tax annualized/average of end June-2015 and end Dec-14 assets and
equity
Item 2. Information required by Part III, Paragraph (A) (2) (b) of “Annex C” of SRC
Rule 12
• There are no known trends or any known demands, commitments, events or
uncertainties that will result in or that are reasonably likely result in the registrant’s
liquidity increasing or decreasing in any material way.
• There are no known events that will trigger direct or contingent financial obligation that
is material to the company, including any default or acceleration of obligation.
• There are no off material balance sheet transactions, arrangements, obligations
(including contingent obligations), and other relationships of the company with
unconsolidated entities or other persons created during the reporting period.
• There are no material commitments for capital expenditures.
5
• There are no known trends, events or uncertainties that have had or that are reasonably
expected to have material favorable or unfavorable impact on net sales or revenues or
income from continuing operations.
• There are no significant elements of income or loss that did not arise from the
registrant’s continuing operations.
• There are no material changes in periodical reports.
• There are no seasonal aspects that had a material effect on the financial statements.
Item 3. Other Required Disclosures
A.) The attached interim financial reports were prepared in accordance with Philippine
Financial Reporting Standard. The accounting policies and methods of computation
followed in these interim financial statements are the same compared with the audited
financial statements for the period ended December 31, 2014.
B.) Except as reported in the Management’s Discussion and Analysis of Financial
Condition and Results of Operations, there were no unusual items affecting assets,
liabilities, equity, net income or cash flows for the interim period.
C.) There were no materials changes in estimates of amounts reported in prior period
that have material effects in the current interim period.
D.) Except as disclosed in the Management’s Discussion and Analysis of Financial
Condition and Results of Operations, there were no other issuances, repurchases and
repayments of debt and equity securities.
E.) There are no significant events happened subsequent to June 30, 2015 up to the date
of this report that needs disclosure herein.
F.) For the required disclosure as per SEC letter dated October 29, 2008 on the
evaluation of the company’s risk exposure and financial instruments profile please
see Note 10 of the attached interim financial statement.
SHANG PROPERTIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Amounts expressed in Php)
Unaudited Audited
June 30 December 31
Notes 2015 2014
ASSETS
Current Assets
Cash and cash equivalents 1,765,772,545 2,911,004,820
Financial assets at fair value through profit or loss 36,659,755 33,012,524
Receivables 3,599,377,507 4,162,249,384
Properties held for sale 6,018,803,497 5,773,117,694
Prepayments and other current assets 2,345,911,836 1,805,192,006
Total Current Assets 13,766,525,140 14,684,576,428
Non-Current Assets
Investment in associates 4 413,753,181 410,790,229
� PFRS 7 - Applicability of the Amendments to PFRS 7 to Condensed Interim
Financial Statements;
� PAS 19, Employee Benefits - Regional Market Issue Regarding Discount Rate; and
� PAS 34, Interim Financial Reporting - Disclosure of Information ‘Elsewhere in the
Interim Financial Report’.
Effective January 1, 2018
� PFRS 9, Financial Instruments - Hedge Accounting and amendments to PFRS 9,
PFRS 7 and PAS 39 (2013 version)
PFRS 9 (2013 version) already includes the third phase of the project to replace PAS 39
which pertains to hedge accounting. This version of PFRS 9 replaces the rules-based
hedge accounting model of PAS 39 with a more principles-based approach. Changes
include replacing the rules-based hedge effectiveness test with an objectives-based test
that focuses on the economic relationship between the hedged item and the hedging
instrument, and the effect of credit risk on that economic relationship; allowing risk
components to be designated as the hedged item, not only for financial items but also for
non-financial items, provided that the risk component is separately identifiable and
reliably measurable; and allowing the time value of an option, the forward element of a
forward contract and any foreign currency basis spread to be excluded from the
designation of a derivative instrument as the hedging instrument and accounted for as
costs of hedging. PFRS 9 also requires more extensive disclosures for hedge
accounting.
PFRS 9 (2013 version) has no mandatory effective date. The mandatory effective date
of January 1, 2018 was eventually set when the final version of PFRS 9 was adopted by
the FRSC. The adoption of the final version of PFRS 9, however, is still for approval by
BOA.
The adoption of PFRS 9 is not expected to have any significant impact on the Group’s
consolidated financial statements.
� PFRS 9, Financial Instruments (2014 or final version)
In July 2014, the final version of PFRS 9, Financial Instruments, was issued. PFRS 9
reflects all phases of the financial instruments project and replaces PAS 39, Financial
Instruments: Recognition and Measurement, and all previous versions of PFRS 9. The
standard introduces new requirements for classification and measurement, impairment,
and hedge accounting. PFRS 9 is effective for annual periods beginning on or after
19
January 1, 2018, with early application permitted. Retrospective application is required,
but comparative information is not compulsory. Early application of previous versions
of PFRS 9 is permitted if the date of initial application is before February 1, 2015. The
adoption of PFRS 9 is not expected to have any significant impact on the Group’s
consolidated financial statements.
The following new standard issued by the IASB has not yet been adopted by the FRSC.
� IFRS 15, Revenue from Contracts with Customers
IFRS 15 was issued in May 2014 and establishes a new five-step model that will apply
to revenue arising from contracts with customers. Under IFRS 15 revenue is recognized
at an amount that reflects the consideration to which an entity expects to be entitled in
exchange for transferring goods or services to a customer.
The principles in IFRS 15 provide a more structured approach to measuring and
recognizing revenue. The new revenue standard is applicable to all entities and will
supersede all current revenue recognition. Either a full or modified retrospective
application is required for annual periods beginning on or after January 1, 2017 with
early adoption permitted. The Group is currently assessing the impact of IFRS 15 and
plans to adopt the new standard on the required effective date once adopted locally.
2. Segment Information
The Group’s operating businesses are organized and managed according to the nature of the
products and services marketed, with each segment representing a strategic business unit
that offers different products and serves different markets.
The Group has operations only in the Philippines.
The Group derives revenues from two main segments as follows:
Property Development
This business segment pertains to the sale of condominium units.
Leasing
This business segment pertains to the leasing operations of the Shangri-La Plaza Mall, TEC
and their related carpark operations. It also includes leasing of a portion of the Parent
Company’s land to ESHRI.
Other business segments pertain to property management services and the results of
operations of real estate entities and BVI companies.
Except for the rental revenue from ESHRI, revenues come from transactions with third
parties. There is no transaction with a single external customer that amounts to 10% or
more of the Group’s aggregate revenues.
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The segment assets, liabilities and results of operations of the reportable segments of the Group as of and for the year ended June 30, 2015 are as follows:
Property
Development Leasing Others Total Segments Eliminations Consolidated
Capital expenditures for the year P=4,668,000 P=7,182,358 P=31,217 P=11,881,575 – P=11,881,575
The segment assets, liabilities and results of operations of the reportable segments of the Group as of and for the year ended December 31, 2014 are as follows:
21
Property
Development Leasing Others Total Segments Eliminations Consolidated