By Revin Mikhael D. Ochave, Reporter
SM Investments Corp. (SMIC) reported a 13% increase in its net income for the second quarter (Q2), reaching P21.8 billion, primarily driven by a strong performance in the banking and property sectors, which offset the impact of lower retail sales.
“[O]ur banks, property, and portfolio investments continued to deliver,” SMIC President and Chief Executive Officer Frederic C. DyBuncio said in a statement on Wednesday.
“We remain cautiously optimistic for the balance of the year,” he added.
Second-quarter consolidated revenue increased by 6% to P157.7 billion, SMIC said.
SMIC saw a 10% increase in its first-half consolidated net income to P40.2 billion from P36.5 billion last year.
Its January to June consolidated revenue rose by 5% to P301.4 billion from P286.7 billion in 2023.
The conglomerate’s banking segment accounted for 50% of total net earnings, followed by property at 27%, retail at 14%, and share of portfolio investments at 9%.
Sought for comment, AP Securities, Inc. Research Head Alfred Benjamin R. Garcia said that SMIC is expected to have another “banner year,” with its first-half performance meeting expectations.
“It is in line with estimates. It’s only slightly behind the P40.4 billion we expected for the first half,” he said in a Viber message.
“Considering that the seasonality of SM’s earnings leans heavily towards the second half of the year, we can safely assume that the company is headed for another banner year,” he added.
However, he also said that SMIC’s property segment faces risks following the recent government ban on Philippine offshore gaming operators (POGOs).
“The biggest risk would be the effect of the POGO ban on SMIC’s property arm. Granted, they have limited exposure to POGOs, but they have a sizable portfolio of office spaces in the Bay Area. That’s one of the areas where we expect office vacancy to rise following the POGO ban, which could directly translate to lower lease rates. There could also be a knock-on effect on the residential side in terms of vacancies,” he said.
“Another potential risk is the return of weakness in consumer spending if the latest jump in inflation numbers is not a one-off as we expected,” he added.
The conglomerate’s banking business led by BDO Unibank, Inc. grew its first-half net earnings by 12% to P39.4 billion, driven by the momentum of its core lending and fee-based services.
Net interest income rose by 11% to P99.6 billion. Gross customer loans grew by 13% across all market segments, while total deposits increased by 13%.
China Banking Corp. recorded a 6% increase in its first-half net income to a record P11.4 billion on improved core lending and deposit-taking activities.
Net interest income rose by 19% to P30.4 billion as higher interest income offset the increase in interest expense. Gross loans climbed by 10% to P817 billion led by higher demand across market segments, while deposits increased by 14% to P1.3 trillion.
SMIC’s property unit, SM Prime Holdings, Inc., generated P22.1 billion in first-half consolidated net income, up by 13% from P19.4 billion in 2023.
Consolidated revenue increased by 8% to P64.7 billion from P59.9 billion in 2023.
SMIC said its retail business, led by SM Retail, saw a 9.5% decline in first-half net income to P7.6 billion from P8.4 billion as a result of a “high base effect from the impact of the lifting of mobility restrictions on consumption in 2023.”
SM Retail grew its first-half revenue by 4% to P196.9 billion from P188.5 billion in 2023.
“The second quarter reflected higher growth by 6% in retail revenues and 2% in net income, indicative of spending on discretionary items such as appliances, beauty, and fashion. Specialty retail revenues increased by 5%. Food retail revenues grew by 7%,” SMIC said.
As of end-June, SM Retail added 355 stores, bringing its total network to 4,208 stores.
Among its portfolio investments, SMIC said Atlas Consolidated Mining and Development Corp. more than doubled its first-half net income to P2.07 billion as revenue went up by 23% to P12.5 billion on higher copper metal prices.
The Philippine Geothermal Production Co., Inc. recently started the exploration and development of new geothermal energy sources in various parts of Luzon. This aims to support power security in Luzon and advance the country’s renewable energy objectives.
Logistics company 2GO Group, Inc. launched the 2GO M/V Masigla and 2GO M/V Masikap vessels in the second quarter, which will sail from Manila to destinations in Visayas and Mindanao. Both vessels will carry containerized freight and rolling cargo to businesses and consumers.
On July 18, SMIC listed $500 million worth of debt notes on the Singapore Exchange Securities Trading Ltd. The issuance came from the conglomerate’s $3-billion Euro Medium-Term Notes program established in May.
Final demand for the issuance reached $1.6 billion, marking SMIC’s largest offshore bond issuance since 2014.
“We were also pleased with the demand and positive feedback on our recent maiden Euro Medium-Term Notes issuance, highlighting the quality of our financials and the investability of strong Filipino companies,” Mr. DyBuncio said.
In a separate stock exchange disclosure, SMIC said its board also approved a property-for-share swap with its subsidiary Intercontinental Development Corp. (ICDC). The transaction involves ICDC landholdings in Muntinlupa City in exchange for new SMIC shares.
The conglomerate did not provide further details on the deal.
On Wednesday, SMIC shares rose by 1.14% or P10 to P890 apiece.
