Property, banking fuel SM Investments’ net income

Chrisee Dela Paz
Property, banking fuel SM Investments’ net income
The Sy family's property and banking businesses continue to drive their conglomerate's financial performance

MANILA, Philippines – SM Investments Corporation (SMIC) saw its net income grow to P31.2 billion in 2016, fueled by strong revenues in its property and banking units.

SMIC told the local bourse on Wednesday, March 1, that its property unit accounted for 39% of total earnings. Banks comprised 37% and retail 24%.

“Our core businesses performed well and continue to grow in line with the country’s strong economic development,” SMIC president Harley Sy said in the disclosure.

“We are optimistic about continued development and that government plans for infrastructure, agriculture, and tourism in particular will enable broader regional growth. SM continues to prioritize regional investment and our nationwide expansion plans are focused on effective execution,” Sy added. 

SMIC’s consolidated revenues grew by 9% to P362.8 billion in 2016, up from P332.8 billion in 2015.

This was driven by an 8% increase in retail revenues and a 12% growth in property revenues, SMIC said.

Retail growth sustained

SM Retail Incorporated, which consists of non-food and food stores, saw its net income grow by 7% to P10.6 billion in 2016, from P9.9 billion in 2015.

Early in 2016, SMIC announced the merger of SM Retail with several leading specialty retail stores with over 1,400 outlets.

The merger received final approval from the Securities and Exchange Commission on July 7, 2016. The specialty stores added 153 stores nationwide last year.

“Following the retail merger last year, the performance of our specialty retail has been boosted by discretionary spending, especially in areas such as home furnishings and do-it-yourself goods, tracking the strong consumption and overall growth of the economy,” Sy said.

The SM Store also opened 4 stores in SM San Jose del Monte in Bulacan, SM Trece Martires and SM Molino in Cavite, as well as SM East Ortigas in Pasig. Total gross selling areas of all 57 department stores stood at 0.75 million square meters.

The food group, which includes SM Markets and WalterMart, continued to expand mostly in provincial areas in 2016. (READ: Upbeat retail, real estate lift SM Prime’s profit)

SMIC said the food group added 33 new stores, most of which are stand-alone Savemore stores. The food group also continues to expand in various regions with a multi-format growth strategy to address the lack of organized retail.

As of end-December 2016, SM Retail had a total of 2,110 outlets.

Boosted by real estate

SM Prime Holdings Incorporated saw its recurring net income grow by 14% in 2016 to P23.8 billion.

SMIC said revenues of its mall business increased by 9% to P48.6 billion due to added retail spaces in the last two years. 

To date, SM Prime has 60 shopping malls in the Philippines and 7 in China.

The residential group – which consists of SM Development Corporation (SMDC), Highlands Prime, and Costa del Hamilo among others – saw its consolidated revenues up by 13% to P25.4 billion in 2016.

Sy attributed the growth to higher sales take-up on ready for occupancy (RFO) units from projects such as Princeton, M Place, and Mezza II in Quezon City and Jazz Residences in Makati.

SMDC said its reservation sales grew 18% to P46.7 billion in 2016, translating to a 15% improvement in unit sales to 16,320 units.

SM Prime’s hotels and convention centers marked a 32% growth in revenues to P3.2 billion in 2016 largely due to improved occupancy rates and the opening of Park Inn Clark in December 2015 and Conrad Manila in June 2016. 

Banking sector upbeat

For its banking business, BDO Unibank Incorporated posted a net income of P26.1 billion in 2016.

Its net interest income grew by 15% to P65.6 billion, driven by the 16% growth in gross customer loans to P1.5 trillion.

Deposits grew 15% to P1.9 trillion, primarily in the form of low-cost Current Account, Savings Account (CASA) deposits.

China Banking Corporation, meanwhile, reported net income growth of 15% to P6.4 bilion in 2016 on the back of sustained growth in core and fee-based businesses.

China Bank issued the first tranche, amoounting to P9.6 billion, of its P20 billion long-term negotiable certificates of time deposits in 2016 to support its strategic initiatives and business expansion.

Its investment house, China Banking Capital Corporation, also put up stock brokerage house China Bank Securities Corporation and special purpose company CBC Assets One Incorporated. 

As of end-2016, the total assets of SMIC grew by 10% to P861.5 billion. The conglomerate said it maintains a healthy balance sheet, with a conservative gearing ratio of 37% net debt to 63% equity.

SMIC shares were down 0.45% to P660 apiece on Wednesday. –

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