SM Recurring Net Income Up 13% in 2015

Pasay—(PHStocks)—SM Investments Corp. (PSE: SM) reported a 13% growth in recurring net income in 2015. Consolidated net income stood at PhP28.4 billion in 2015, posting the same level as last year. Consolidated revenues grew 7% to PhP295.9 billion for the period.

“Our strong underlying earnings growth in 2015 was due to favorable domestic market conditions and improved efficiencies which helped us widen our margins particularly in retail and property,” SM President Harley T. Sy said.

SM’s underlying earnings increase was driven by a 17% growth in retail earnings, 14% growth in property recurring net income and 10% growth in bank net income. For 2015, banks accounted for 40% of SM’s consolidated earnings, property 38% and retail 22%.

Retail

Retail operations under SM Retail Inc., which consist of both food (SM Markets) and non-food (The SM Store), reported sustained growth in total sales of 7% to PhP211.4 billion, while net income rose 17% to PhP6.8 billion.

SM Markets, which consist of the brands SM Supermarket, SM Hypermarket and Savemore, continued to expand in both urban and rural communities in various parts of Luzon, Visayas and Mindanao. The group added 31 new stores, most of which are standalone Savemore stores. SM Markets today follows a multi-format growth strategy to address the lack of organized retail in many parts of the country, largely diversifying from its previous strategy of operating anchor stores in malls.

SM Markets also recently invested in the minimart business with Alfamart, a highly successful minimart operator in Indonesia, and forged partnerships with WalterMart and Citymalls to further facilitate its provincial growth. Acquisition of existing chains of stores is another part of its growth strategy, the latest of which was the acquisition of three stores of Cherry Foodarama.

Last year, The SM Store opened three stores in San Mateo, Rizal; Cabanatuan, Nueva Ecija and Seaside Mall in Cebu City. As of 2015, the total net selling area of all 53 SM Stores stood at 471,000 sqm. In 2015, top British department store chain John Lewis opened its first shop-in-shop in SM Makati which offers a wide range of home products. American home retailer Crate & Barrel also opened its flagship store in SM Makati last year.

At end-December 2015, SM Retail had a total of 310 stores, comprising 53 The SM Stores, 45 SM Supermarkets, 44 SM Hypermarkets, 136 Savemore stores and 32 WalterMart stores.

Banking

BDO Unibank Inc. (PSE: BDO) recorded net interest income growth of 11% to PhP57.0 billion in 2015, with net income up 10% to an all-time high of PhP25 billion.

Gross customer loans grew 17% to PhP1.3 trillion and total deposits rose by 12% to PhP1.7 trillion.

The year end results reflected the completion of BDO’s acquisition of One Network Bank, the largest rural bank in Mindanao, in July. ONB has 98 active branches. The acquisition of ONB expands the regional presence of BDO in the country, particularly in its target market in the southern Philippines and opens up business lines for BDO.

China Banking Corp. (China Bank, PSE: CHIB) reported net interest grew 7% to PhP15.1 billion, with net income higher by 10% to PhP5.6 billion on the back of sustained growth in core business operations.

Property

SM Prime Holdings Inc. (PSE: SMPH), SM’s property holding firm said its recurring net income grew 14% in 2015 to PhP20.9 billion. Consolidated net income increased 54% to PhP28.3 billion which includes a PhP7.4 billion trading gain on marketable securities booked in the first quarter.

Consolidated revenues rose 8% to PhP71.5 billion last year. Rental revenues from malls and commercial spaces increased by 12% to PhP40.7 billion in the period. The housing group’s reservation sales grew by 12% to 14,390 units. For the period, the housing group’s net income increased 8% to PhP5.1 billion.

To date, SM Prime has a total of 56 Malls in the Philippines with total retail space of 7.3 million square meters. This includes SM Seaside City Cebu, SM Center Sangandaan, SM Cherry Shaw, SM City Cabanatuan, SM City San Mateo and SM Megacenter Cabanatuan. In China, SM Prime has six shopping malls with a GFA of 0.9 million sqm including the recently opened SM City Zibo. Taking into account both Philippine and China malls, SM Prime’s total retail space is at 8.3 million sqm.

SM Prime presently has 27 residential projects in the market, 25 of which are in Metro Manila and two in Tagaytay. For 2016, SM Development Corp. (SMDC) will launch between 11,000 to 14,000 units in Quezon City, Bicutan and Sucat in Paranaque, Las Piñas and Pasay at the Mall of Asia Complex.

SM Prime is also set to launch new mixed-use developments in Bulacan, Pampanga and Cavite. Currently, the Commercial Properties Group has five office buildings with an estimated gross floor area of 318,000 sqm. ThreeE-Com and FourE-Com Centers are under construction and scheduled for completion in 2017 and 2019, respectively. For hotels and convention centers, the 347-room Conrad Hotel Manila is expected to open in the second half 2016 which is seen to further enhance the value of the properties within the whole Mall of Asia (MoA) Complex.

Balance Sheet

As of end 2015, total assets of SM grew 8% to PhP771.1 billion. SM maintains a healthy balance sheet with a conservative gearing ratio of 36% net debt to 64% equity.