SMIC sets massive P50-B spending for 2011

MANILA, Philippines - SM Investments Corp. (SMIC) has set a capital expenditure program of nearly P50 billion next year, 22.9 percent higher than the P40.6 billion budgeted this year, as it seeks to capitalize on a growing local economy, booming property market and rising remittances from overseas Filipinos.

At the same time, SMIC disclosed that its third quarter net earnings rose to a record P3.9 billion on the back of robust revenues from its banking, retail and real estate units. Revenues edged higher by six percent to P39.3 billion.

This pushed SMIC’s nine-month net income 16 percent higher to P12.5 billion from P10.8 billion a year earlier. Consolidated revenues went up 12 percent to P124.3 billion from P110.9 billion.

 “Historically, the third quarter had always been seasonally low particularly for the retail and mall businesses. This year is exceptionally strong, largely due to a more buoyant economy and stronger consumer spending,” said SMIC president Harley T. Sy.

 “With sustained growth supported by robust OFW remittances, which continue to fuel consumer spending, we expect this trend to continue as we move into the holiday season. These are positive indications for us to firmly pursue our growth and expansion programs across all of our core businesses.”

Among its core businesses, SMIC’s banking group cornered a big chunk, accounting for 31.5 percent of total profits followed by the retail group which plunked in 31 percent. Shopping malls and real estate, on the other hand, chipped in 24.3 percent and 13.2 percent, respectively.

On the sidelines of the firm’s third quarterly briefing yesterday, SMIC executive vice-president and chief finance officer Jose Sio said P20.6 billion of the total capex for 2011 will be used to bankroll the group’s residential and office development projects while another P20.1 billion will go to the expansion of its mall business locally and in China.

Jeffrey T. Lim, executive vice-president and chief finance officer of shopping mall giant SM Prime Holdings, said they are setting aside P11 billion for the construction of eight new malls next year while the remaining P9 billion will be used to expand its China operations which include the development of SM Chongquing, Zibo and Tianjin as well as acquisition of land.

Around P4.8 billion has been earmarked for the establishment of more department stores, supermarkets and hypermarkets.

For its banking businesses, the group is spending P3.4 billion to continue growing its presence in the industry. Officials said the group’s main banking arm, Banco de Oro, continues to be in talks with Asiatrust Bank for possible investment in the latter.

The balance of P1 billion will be used to build new hotels, including its entry into the budget or mid-cost lodging business. By the first half of 2011, the group expects to have a total of 814 hotel rooms from only 260. This would comprise 260 rooms from Tagaytay-based Taal Hotel, Raddison Blu Hotel in Cebu (400 rooms) and Pico Sands in Nasugbu, Batangas (154 rooms).

Sio said the group is open to doing retail bonds, convertible bonds and equity placement to fund its massive capital requirements for next year.

Given its impressive third quarter performance, Sio is confident SMIC could meet its income and sales targets this year as well as sustain its growth trajectory in 2012 with earnings seen to grow by 12 to 14 percent.

The group’s retail business earned P3.6 billion in the first nine months of the year, an increase of 16 percent from the year before, resulting from further expansion, particularly of the food business under the SaveMore format.