(06 March 2013. Pasay City, Philippines) SM Investments Corporation (SM) reported that net income for full-year 2012 amounted to Php24.7 billion, for a higher than expected growth of 16.3% from its 2011 earnings of Php21.2 billion. The growth in earnings was broad-based, with SM’s mall, property, retail and banking businesses delivering strong results. Revenues increased 12.0% to Php223.9 billion from Php199.9 billion in the previous year. EBITDA rose 24.2% to Php54.9 billion, for an EBITDA margin of 24.5%. Return on equity stood at 14.3%.
SM President Harley T. Sy said, “SM’s strong full-year results were anchored not only on very favorable economic conditions, but also on the ability of our businesses to efficiently and effectively address the needs of our customers, who have grown increasingly more discerning. Our performance during the year is testament to the hard work, focus, and dedication of the whole SM organization. With the positive economic outlook for 2013, we are confident of sustaining SM’s expansion and growth moving forward.”
Net Income Profile
Banks accounted for the largest share of SM’s consolidated net income, contributing 34.4% of the total. Retail operations accounted for 28.1% of consolidated net income, followed by mall operations with 22.9% and property development, with 14.6%.
Banking
BDO Unibank, Inc. (BDO) posted a record net income of Php14.3 billion in 2012, which exceeded its Php12.5 billion earnings guidance and was 36% higher than its 2011 profit of Php10.5 billion.
Net interest income amounted to Php36.2 billion, up 7% even as volume growth was offset by the impact of regulatory changes and excess system liquidity. BDO’s customer loan portfolio grew 15% to Php769.0 billion, while CASA supported the increase in total deposits to Php931.6 billion. Driving BDO’s solid performance was the robust expansion of its lending, deposit-taking, and fee-based businesses.
Total non-interest income rose 18% to Php24.6 billion, contributed substantially by trading gains from treasury activities, which amounted to Php8.2 billion. The bank was able to capitalize on market opportunities and realize exceptional gains from its investment portfolio.
The bank continued to set aside Php4.9 billion in provisions for the year. Its gross nonperforming loan (NPL) ratio further declined to 2.8%, while provisions covered 126% of NPL by year-end 2012.
The bank’s capital base stood at Php157 billion, the largest in the industry, while its Capital Adequacy Ratio (CAR) and Tier 1 Capital ratios were comfortably above the regulatory minimums, at 19.1% and 15.2%, respectively. Return on Common Equity settled at 11.5% in 2012.
With the Philippine economy expected to sustain its growth momentum, BDO looks forward to tapping the promising growth opportunities in its customer segments, capitalizing on its established business franchise and wide distribution network.
Retail Operations
For full-year 2012, SM Retail reported a net income of Php6.6 billion, up 12.5% from the previous year for a net margin of 4.1%. Sales rose 7.6% to Php159.5 billion, while EBITDA grew 13.5% to Php11.8 billion, for an EBITDA margin of 7.4%.
SM Retail grew its number of stores by a total of 34 stores, consisting of 5 department stores, 4 SM Supermarkets, 7 SM Hypermarkets and 18 SaveMore stores. At the end of the year, SM Retail had a total of 202 stores, consisting of 46 department stores, 37 SM Supermarkets, 37 SM Hypermarkets, and 82 SaveMore stores.
SM Department Stores introduced new store designs and lay-outs, as well as innovative display fixtures, which enhanced the overall shopping environment for its customers. Furthermore, the business completed the roll out of its Visual Store POS Application, which allows it to handle high volume, high value transactions involving complex promotional and pricing structures more efficiently. The system also provides greater convenience to customers.
Similarly, SM Retail’s Food Group took measures to increase shoppers’ convenience. These included new store lay-outs designed to enable shoppers to find products more easily, while they introduced service improvements which aimed to cut queuing times. To promote customer loyalty, the Food Group continued to develop and run creative promotional campaigns, one of which involved providing discounts and giveaways based on a shopper’s unique buying history.
In view of the positive outlook for the economy in 2013, SM Retail will continue to expand its various store formats, especially its highly-successful stand-alone SaveMore stores, which are typically located in areas underserved by organized retail.
Mall Operations
SM Prime Holdings, Inc., (SM Prime) had a good year in 2012 with a higher-than-expected growth of 16% in consolidated net income of Php10.5 billion from Php9.1 billion in 2011. Revenues rose 14% to Php30.7 billion. EBITDA increased 12% to Php20.7 billion, for an EBITDA margin of 67%. The strong performance of SM Prime was due largely to rentals from the new mall space created in 2012 and to its healthy same-store rental growth rate of 8%.
SM Prime opened six new malls during the year, five in the Philippines and one in China. The new malls in the Philippines were SM City Olongapo in Zambales, SM City San Fernando in Pampanga, SM City Consolacion in Cebu, SM City General Santos, and SM Lanang Premier in Davao. These new malls, along with the expansion of the existing SM City Davao, raised GFA of SM Malls in the country by 10% to 5.6 million sq.m. In China, SM Prime opened its fifth mall in Chongqing, China’s largest city. SM City Chongqing has a GFA of 149,000-sqm, bringing the total GFA of SM malls in China up to 794,248 sqm, 23% higher than in 2011.
SM China contributed positively to SM Prime’s overall results. These malls delivered a 24% increase in net income of Php1.1 billion. In addition to its newly opened mall in Chongqing, the company’s four other China malls are located in the cities of Xiamen, Jinjiang, Chengdu, and Suzhou. The average occupancy rate of the company’s malls in China stood at 92% as of year-end.
Property Development
SM Development Corporation (SMDC), SM’s residential property development arm, reported that for the full year of 2012, consolidated net income increased 17.5% to Php4.9 billion, for a net margin of 22.7%. Net income from real estate sales, meanwhile, amounted to Php4.7 billion, up 16.4% from Php4.0 billion in 2011.
Revenues from real estate sales increased by 33.3% to Php21.6 billion, from Php16.2 billion in the previous year. Meanwhile, EBITDA amounted to Php5.6 billion, for an EBITDA margin of 26.0%.
SMDC’s asset base expanded 47.3% year on year to Php79.4 billion. As of end-December 2012, SMDC’s net debt to equity ratio remained conservative at a ratio of 29% net debt to 71% equity.
The number of units pre-sold during the year increased 7.6% to 12,614 units from 11,726 units in 2011. This is equivalent to a 20.8% increase in value to Php31.7 billion, from Php26.3 billion in the previous year.
Most of the units sold during the year were from Shell Residences in the Mall of Asia Complex, Green Residences along Taft Avenue, Jazz Residences in Makati, Light Residences along EDSA, Sun Residences in Quezon City, Grass Residences, also in Quezon City, and Wind Residences in Tagaytay City.
As of end-December 2012, SMDC had fifteen ongoing residential condominium projects all over Metro Manila, with the exception of Wind Residences in Tagaytay. The projects include Grace Residences in Taguig, and Breeze Residences in Pasay, which were launched in the latter part of 2012.
SM Balance Sheet
The total assets of SM Investments increased 24.8% year on year to Php560.2 billion. In February, SM raised US$250.0 million through a five-year convertible bond (“CB”) offering, with a yield to maturity of 2.875% per annum. In July, SM issued Php15.0 billion of seven- and ten- year retail bonds with fixed annual coupon rates of 6.0% and 6.9442%, respectively. In August, SM raised US$150.0 million in equity via a top-up placement. Finally, in October, SM issued US$500.0 million of seven-year bonds with a fixed rate of 4.25% per annum. As of end-December 2012, SM’s balance sheet was strong, with a gearing ratio of 33% net debt to 67% equity.
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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: Wednesday, March 6, 2013