PASAY CITY, PHILIPPINES, 16 September 2024—SM Investments Corporation is seen to benefit from a stronger second half, a traditionally better season for the retail business.
In a research report, Gilbert Lopez, Head of Research for Macquarie Capital Securities (Philippines) said SM Investments’ reported net profit of PHP40.2 billion in the first half which reflected a 10% year-on-year growth and a strong improvement in the second quarter. This was ahead of the brokerage firm’s forecast but in line with available full year consensus, bearing in mind SM key businesses typically have a seasonally stronger second half, Mr. Lopez said.
Mr. Lopez added that “what was good” was the sequential improvement in earnings across all of SM Investments’ major businesses in retail, banking and property. SM Retail had a net profit of PHP4.5 billion or a 49% quarter-on-quarter growth. He also noted that what was particularly interesting was the marked improvement in retail sales, reflective of consumption recovery. The standout was the Health & Beauty segment of SM Retail which grew 16% year-on-year for both the second quarter and the first half.
In another research report dated August 8, Philippine Equity Partners research analyst Russ Toribio echoed the sentiment, saying gains from the first half will continue “as a stronger second half lies ahead.”
Mr. Toribio said “there was notable recovery in consumer spending in discretionary items such as fashion and home in the second quarter.”
Sales in the fashion segment posted a 10.5% year-on-year growth in the same period largely due to back-to-school shopping in preparation for school openings at the start of the third quarter. Sales in the home segment saw a 4.6% year-on-year growth in the second quarter likely related to much warmer weather during the period.
The Philippine Statistics Authority reported that the Philippines’ headline inflation or overall inflation eased to 3.3 percent in August 2024 from 4.4 percent in July 2024. This brings the national average inflation from January to August 2024 to 3.6 percent.
“Moderating inflation increases the purchasing power of consumers which will drive growth in retail and leisure business,” Mr. Toribio said.
SM Investments closed at PHP885 a share at the end of trading last August 30, 2024 from PHP872 per share at the end of December 29, 2023.