SM Investments Corporation (SM), one of the largest conglomerates in the Philippines, is primed to earmark about 80 billion pesos (USD1.7 billion) in an aggressive expansion bid, fueled by the economy's strong momentum.
The Philippine economy has continued to outshine its peers In Asia, expanding by 6.9% in the first quarter of 2016, the highest in almost three years, powered by overseas workers' remittances and the expansion of the outsourcing industries.
"With the economy's strong performance, SM will be at the forefront of supporting this growth through our consumer centric portfolio," SM Executive Vice President and Chief Finance Officer Jose T. Sio said.
Sustaining its growth pace, SM posted consolidated net Income of PHP28.4 billion (USD600 million) in 2015 with recurring earnings up 12.6%. In the first quarter of 2016, consolidated net income stood at PHP7.0 billion (USD150 million) sustaining its Income growth of 12%.
The Philippines' economic trajectory is urbanizing more cities in the countryside and empowering a growing middle class which is presenting new opportunities for the company and its subsidiaries.
SM Prime Holdings, SM's property arm is spending the lion's share of the capital as it gears up for an aggressive expansion program in the next three years. This follows the opening of the 430,000 sqm SM Seaside Cebu, the largest mall in the Visayas and Mindanao regions on a 30-hectare complex. Five more new malls will be opened this year mostly in the provinces such as in Cavite, Bulacan, and Antipolo. SM Prime has built 38 malls in the provinces and 20 in Metro Manila since 1985.
In China, SM Prime is set to open SM City Tianjin with a gross floor area of over 560,000 sqm at the Tianjin Binhai New Area, China's latest economic development zone near Beijing. By end 2016, SM Prime will have 61 malls in the Philippines and six malls in China with an estimated combined gross floor area (GFA) of 8.6 million sqm.
In residential development, SM Prime is also poised to gradually enter the economic housing market in the provincial areas by launching new mixed-use developments in Cabanatuan, Pampanga and Cavite this year.
In banking, SM's banking arm, BDO Unibank, the country's largest bank acquired One Network Bank (ONB), the largest rural bank in Mindanao. The acquisition of ONB expands the regional presence of BDO in the country, particularly in its target market in the southern Philippines' consumer base and opens up business lines for BDO.
In retail, SM's department store business under THE SM STORE recently opened three new branches in emerging provincial markets in San Mateo in Rizal, Cabanatuan in Nueva Ecija and In Cebu's SM Seaside City which is aligned with the mall's accelerated growth in the provincial territories.
SM Markets, which consists of the brands SM Supermarket, SM Hypermarket and Savemore, continued to aggressively expand in both urban and rural communities in various parts of Luzon, Visayas and Mindanao. The group added 31 new stores in 2015, most of which are stand-alone 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.
Cora Guidote, SM Senior Vice President for Investor Relations observed that SM's retail stores, especially the medium to small food formats, are well-positioned to take advantage of growth opportunities across the country. “There is definitely more room for growth as these formats are efficient in reaching so many underserved communities especially in provincial areas. Formal retail still constitutes a small portion of total retail in the Philippines,” Guidote said.
SM's track record in pouring substantial resources into the country, regardless of the economic environment, reflects its steadfast commitment to keep growing and being a catalyst in all its host communities. With that commitment is also a resilient desire to Innovate and keep developing with its customers, delivering on their aspirations.
Corazon P. Guidote
Senior Vice President
Corazon P. Guidote
Senior Vice President
Friday, July 1, 2016
Finance Asia/ Advertorial