Property still drives SM’s healthy financials in 2017
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SM Investments Corporation (SMIC), the conglomerate of Henry Sy Sr, saw its net income increase by 6% to P32.9 billion in 2017, with its property business continuing to contribute most to its earnings.
SM told the local bourse on Wednesday, February 28, that its consolidated revenues rose by 9% to P396.1 billion in 2017, from P363.4 billion in 2016.
“Our core businesses continued to deliver strong results in 2017 with recurring net income growth of 9%, driven by overall growth in the economy and our nationwide expansion plans,” SM president Frederic DyBuncio said in a statement.
The listed conglomerate reported that property accounted for 40% of its total earnings, banks 38%, and retail 22%.
“Our property and specialty retail businesses delivered particularly strong results,” DyBuncio said.
Main driver: property
SM Prime Holdings Incorporated, the conglomerate’s property holding firm, saw its recurring net income grow by 16% in 2017 to P27.6 billion, driven by the increase in rental revenue from malls as well as the strong sales take-up of housing units.
Consolidated revenues of SM Prime surged by 14% to P90.9 billion in 2017, compared to the level recorded in 2016.
Revenues of its mall business – which includes rentals, cinema and event ticket sales, and other revenues – increased by 9% to P53.2 billion in 2017, thanks to the rising contribution of rentals from new and expanded malls that were launched in 2016 and 2017.
SM Prime has 67 shopping malls in the Philippines and 7 in China, as of end-2017.
The residential group led by SM Development Corporation (SMDC) saw an 18% surge in its consolidated revenues, which ended at P30 billion in 2017.
“Our property and specialty retail businesses delivered particularly strong results,”
“The growth was largely due to higher construction accomplishments of projects launched between 2013 and 2016, namely Shore Residences and Shore 2 Residences in Pasay City, Air Residences in Makati, and Fame Residences in Mandaluyong City as well as continued increase in sales take-up of ready-for-occupancy units,” SM said.
Meanwhile, BDO Unibank Incorporated posted a net income of P28.1 billion in 2017, from P26.1 billion in 2016.
Its net interest income grew by 25% to P81.8 billion last year, driven by the 18% growth in gross customer loans to P1.8 trillion.
China Banking Corporation, meanwhile, saw a 15% net income growth to P7.4 billion in 2017, on the back of sustained growth in core and fee-based businesses.
China Bank’s net interest income was up 17% to P20 billion in 2017, while gross loans grew 17% to P454 billion on strong demand across all segments.
Operations under SM Retail Incorporated, which consist of non-food and food stores, saw total revenues grow 7% to P297.4 billion in 2017. Its net income stood at P10.4 billion in 2017.
“The underlying performance of our retail operations remained good, led by strong growth in our higher margin specialty retailing and with the addition of the successful Miniso variety store chain during the year,” DyBuncio said.
In 2017, SM’s total assets grew by P100 billion to P960.1 billion.
SM participated in the rights offerings of BDO and China Bank and invested in the country’s largest integrated supply chain operator, 2GO Group Incorporated, as well as dormitory developer Philippine Urban Living Solutions.
SM maintains a healthy balance sheet with a conservative gearing ratio of 43% net debt to 57% equity.
“During 2017, SM made substantial investments in its banks and in new business opportunities, which we expect to contribute to higher earnings growth in future years,” DyBuncio said.
Questions & Answers
Q.Which of SM's business sectors contributed the most to its overall earnings in 2017?
Which of SM's business sectors contributed the most to its overall earnings in 2017?
The property business accounted for 40% of SM's total earnings in 2017. Banks contributed 38% and retail made up 22% of the total, making property the largest contributor.
Q.What specifically drove the growth in SM Prime's recurring net income for 2017?
What specifically drove the growth in SM Prime's recurring net income for 2017?
SM Prime's recurring net income grew by 16% in 2017 due to increased rental revenue from malls. Strong sales of housing units also contributed significantly to this growth figure.
Q.How many shopping malls did SM Prime operate by the end of 2017, and in which countries?
How many shopping malls did SM Prime operate by the end of 2017, and in which countries?
As of the end of 2017, SM Prime operated a total of 74 shopping malls. This comprised 67 malls located in the Philippines and an additional 7 malls situated in China.
Q.What investments did SM make in 2017 that are expected to boost future earnings?
What investments did SM make in 2017 that are expected to boost future earnings?
In 2017, SM invested in rights offerings of BDO and China Bank. They also acquired stakes in 2GO Group Incorporated, a supply chain operator, and Philippine Urban Living Solutions, a dormitory developer.
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