SMIC posts 8% income growth, plans more land reclamation

MANILA, Philippines – SM Investments Corporation (SMIC), the holding firm for the Sy family-led SM conglomerate, is off to a good start in 2016 as it posted a consolidated net income of P15 billion in the first half of the year.

The figure represents growth of 11% from 2015, and with the consolidated net income, excluding extraordinary items, growing by 8%.

Consolidated revenues rose 8.5% to P151.1 billion from January to June, from P139.2 billion in the same period last year.

"Our strong first half performance reflects continued economic growth, boosted in part by election spending. We continue to focus on cost efficiencies and operating margin improvements," SMIC president Harley Sy said on Thursday, August 4.

"With the merger of our retail businesses, we now cater to a much wider range of consumer needs and we look forward to benefiting from increasing consumer spending," he added.

The growth was largely driven by the property side of the conglomerate, which accounted for 41% of net income, followed by banks with 38%, and retail with 21%.

Reclamation project

SMIC also bared details about its plans to reclaim more land in Manila Bay, similar to what it had done in its Mall of Asia complex.

"SMIC wants to reclaim a total of 660 hectares – 360 hectares in the city of Pasay and 300 hectares in Parañaque, and we've already obtained the partnership with the cities," SMIC vice president for investor relations and communications Cora Guidote said on the sidelines of the SMIC briefing on Thursday.

Under government guidelines, 51% of the reclaimed land will go to the local government unit and the Philippine Reclamation Authority (PRA), while the remaining 49% will be owned by SMIC.

"The question now is when we will get approval from the central government as we are still waiting for the appointment of the PRA head. So we can't move forward with the project," Guidote said

If the project pushes through, SMIC is planning a mixed-use development which Guidote said will be "futuristic and competitive with other modern cities in Asia."

The timeframe is still unclear as the PRA will have to approve the technical compliance and the new government is still setting up their team, she explained.

But Guidote added that following approval, the project should take 5 to 7 years before structures can be built.

Property and retail

SMIC's property arm, SM Prime Holdings, hit a consolidated net income of P12.6 billion. Its recurring net income increased by 12% year-on-year.

Consolidated revenues reached P39.2 billion, an increase of 9% from P35.9 billion in the same period last year. Rental revenues from retail and commercial spaces accounted for 56% of consolidated revenues, and grew 13% in the period to P22 billion.

Besides its aggressive local expansion earlier this year, the group is also set to unveil a new mall in Tianjin, China, with the first phase to be completed by the end of 2016, and the whole project completed by the 4th quarter of 2017, Guidote said.

SM Retail reported sustained growth in total sales of 9% to P105.1 billion, while net income rose 14% to P3.5 billion, with its net margin expanding to 3.4% from 3.2%  last year.

As of end-June 2016, SM Retail had a total of 328 stores, including 55 The SM Stores, 47 SM Supermarkets, 45 SM Hypermarkets, 147 Savemore stores, and 34 WalterMart stores.

Earlier this year, SM announced the merger of SM Retail with Sy family-owned specialty store assets, with over 1,400 outlets, which was approved by the Securities and Exchange Commission in July. The move was done to boost synergies with SM malls, the firm said.

Banking

The group's main bank, BDO Unibank, Incorporated (BDO), recorded a 13% increase in net income to P13.2 billion, on improvements across the bank's businesses and a one-time gain from the consolidation of BDO Life.

Net interest income grew 17% over the 6-month period to P31.7 billion, and customer loan portfolio grew 21% to P1.4 trillion. CASA deposits advanced by 23%.

Earlier this year, the bank also announced an agreement with TPG Growth for it to acquire a 40%-stake in BDO's rural bank subsidiary, One Network Bank (ONB), in a bid to accelerate the SM group's move into serving the MSME market.

China Banking Corporation, for its part, reported a net income growth of 30% to P3.3 billion for the first half of the year.

Its net interest income was up 7% to P8 billion on the back of higher volume of earning assets while net loans expanded 12% year-on-year to P324 billion. The CASA to total deposits ratio stood at 51.7%.

As of end-June 2016, total assets of SMIC grew 7% to P770.2 billion while maintaining a balance sheet with a gearing ratio of 39% net debt to 61% equity.

The group plans to spend as much as P85 billion this year with the bulk focused on property development. – Rappler.com