(8 August 2013. Pasay City, Philippines) SM Investments Corporation (SM) reported that net income for the first semester of 2013 grew 16.0% to Php12.6 billion from P10.9 billion in the same period last year. The growth was driven by the increase in the profits of the banking and mall businesses. Revenues likewise increased 16% to Php122.1 billion in the first six months from Php105.1 billion in the previous year. EBITDA rose 26% to Php30.1 billion, for an EBITDA margin of 24.7%.
SM President Harley T. Sy said, “Our first half financial results is ahead of our full-year target as BDO Unibank, Inc. delivered a stellar performance from trading gains.We expect the second half to normalize but still at the back of the strong growth expectations of all our core businesses. The Philippines is in a unique position to suport a vibrant domestic consumer sector. This gives us reason to pursue our growth and expansion plans over the medium term.”
Banks accounted for the largest share of SM’s consolidated net income, contributing 49.7% of the total. Retail merchandising contributed 20.0%, followed by commercial centers or the mall operations and real estate at 18.4% and 11.9%, respectively.
Banking
For the first semester of 2013, BDO Unibank, Inc. announced that it doubled its net income to Php14.1 billion from Php5.8 billion during the same period last year. Gross customer loans continued to expand by 12.0% year-on-year to Php806.6 billion, while total deposits grew 17.0% to over Php1.0 trillion. As a result, net interest income rose 14.0% to Php20 billion.
Non-interest income also increased 81.0% to Php20.3 billion, driven by fee-based service income and exceptional gains from trading and foreign exchange activities despite the market volatility in late June. Notwithstanding the sustained decline in its gross non-performing loan (NPL) ratio to 2.40% by end-June 2013, the bank accelerated provisions to raise its NPL coverage ratio to 148.0%.
Achieving more than two-thirds of its Php20.4 billion income guidance for 2013, the bank is optimistic of hitting its year-end targets as BDO continues to expand its businesses.
Mall Operations
SM Prime Holdings, Inc. said that its net income increased 15.0% to Php5.6 billion from Php4.9 billion in the same period last year. Revenues in the first half expanded 14.0% to Php16.6 billion from Php14.6 billion in the same period last year.
Rental revenues, which accounted for 83.8% of total revenues, rose 11.8% to Php13.9 billion, while EBITDA rose 14.0% to Php11.1 billion, for an EBITDA margin of 67.0%. New malls opened in 2012 and 2013 with a total GFA of 698,000 square meters (sqm) largely pushed rental revenues higher, add to that the higher contribution of SM’s China malls. New malls opened in 2012 and 2013 were SM City Olongapo, SM City Consolacion, SM City San Fernando, SM City General Santos, SM Lanang Premier and SM Aura Premier. Meanwhile, same-store rental growth stood at 7.0%.
SM Prime’s five malls in China contributed Php1.4 billion in revenues or 8.0% of total consolidated revenues of SM Prime. In terms of rental revenues, the China operations contributed 10.0% to SM Prime’s consolidated rental revenues. Gross revenues of the five malls in China increased 9.0% in 2013 compared with 2012 largely due to improved mall productivity and lease renewals for the first three malls opened, namely SM Xiamen, SM Jinjiang and SM Chengdu. The average occupancy rate for these first three malls is at 93%.
SM Prime has 47 Supermalls strategically located in the Philippines with a total gross floor area of about six million square meters (sqm). In China, SM Prime has five Supermalls located in the cities of Xiamen, Jinjiang, Chengdu, Suzhou and Chongqing with a total gross floor area of around 0.8 million sqm.
Early in the year, SM Prime opened SM Aura Premier, a state-of-the-art civic center in Taguig which spans a total gross floor area of 234,892 sqm. As an integrated development, SM Aura incorporates office towers, a chapel, a convention center, and mini-coliseum, supported by a retail podium with an upscale look and feel. SM Aura Premier also aims to be one of the first civic centers in the country to be certified Gold under the US Green Building Council Leadership in Energy and Environmental Design (LEED) program, an internationally-recognized green building program established in 135 countries.
For 2013, the company is also set to expand SM Megamall this year, with the opening of Building D. By yearend, SM Prime will have 48 malls in the Philippines and five in China with an estimated combined GFA of seven million sqm.
Shareholders of SM Prime recently approved a merger between SM Prime and SM Land, Inc. which will pave the way for the consolidation of the property-related businesses of the SM Group of Companies. The consolidation is intended to create an integrated real estate company, which will allow the merged entity to undertake larger scale projects with the participation of all of its business units. Its expanded scope, under a simpler and more transparent corporate structure, is expected by SMIC and SM Prime to create efficiencies and further crystalize the value of the Group’s real estate businesses. The merged company will be among the largest integrated property developers in the region with offerings spanning across diverse sectors of mall, office, residential, hotel and leisure development.
Property Development
SMDC reported that for the first half of 2013, consolidated net income amounted to Php2.8 billion, up 5.9% year-on-year. Revenues from real estate sales stood at at Php11.9 billion. Improved monitoring of costs and operating expenses also contributed to the growth in net income, resulting in improved net margin of 25.8% from 23.8% during the same period last year.
EBITDA stood at Php3.5 billion, up 17.1%, for an EBITDA margin of 29.0%. Annualized return on equity was at 11.5%. SMDC’s asset base expanded 24.4% year-on-year to Php99.8 billion. SMDC’s net debt to equity ratio remains conservative at a ratio of 32% net debt to 68% equity.
Earlier in the year, SMDC launched Grass Residences Phase 2 in Quezon City. Other launches slated for the year are Trees Residences in Quezon City; and Shore Residences at the Mall of Asia Complex. In addition, expansion towers at Wind Residences, Field Residences, and Grace Residences will also be launched. These new and expansion projects will add about 13,300 units of new inventory. SMDC currently has 14 ongoing residential condominium projects all over Metro Manila, with the exception of Wind Residences in Tagaytay.
Retail Operations
SM’s retail operations delivered positive results as the group reported a net income of Php3.1 billion, up 9.9% year-on-year in the first half of 2013, for a net margin of 3.7%. Sales rose 13.3% to Php83.6 billion, while EBIT rose 7.6% to Php4.4 billion.
At the end of the first half, SM Retail had a total of 208 stores, consisting of 47 SM Department stores, 38 SM Supermarkets, 37 SM Hypermarkets and 86 SaveMore stores.
SM Balance Sheet
The total assets of SM increased 13.1% year-on-year to Php586.8 billion. As of end-June 2013, SM’s gearing ratio stood at 36.0% net debt to 64.0% equity.
This year, SM, through its appointed depositary, The Bank of New York Mellon, launched its American Depositary Receipt (ADR) Level 1 program. Under the program, ADR securities issued in the US representing SM common shares can be traded over-the-counter (OTC) under the ticker symbol SMIVY. One SM ADR represents 0.5 common shares of SM. This facility will allow US investors to trade SM common shares in their own time zone and to settle their transactions locally. As such, it offers convenience and reduces currency risk on the part of the investor as they acquire the ADR in US dollars.
Secondly, it opens for SM the door that leads to a large pool of US ADR investors, thereby potentially diversifying and broadening SM’s shareholder base. Finally, it enhances corporate visibility and global presence.
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For further information, please contact:
Ms. Corazon P. Guidote
Senior Vice President for Investor Relations
SM Investments Corporation
E-mail: cora.guidote@sminvestments.com
Tel. No. 857-0117
Date: Thursday, August 8, 2013