Biz Buzz: The retail rush

The retail rush

Expect SM Retail to be more aggressive in putting up multiple format stand-alone food retail outlets—whether it’s SM Supermarket, Hypermarket, SaveMore or Waltermart—especially as its retailing “frenemy” has gained headway in the supermarket numbers game.

SM Retail ended last year with 241 stores, still the biggest in the country, but excluding 48 SM Department Stores (classified under the nonfood retail segment), it had 193 food stores consisting of 39 SM Supermarkets, 39 SM Hypermarkets, 93 SaveMore stores, and 22 WalterMart supermarkets.

On the other hand, Lucio Co-led Puregold Price Club reported a consolidated store count of 213 Puregold and S&R stores in operation at the end of last year.

This year, SM Retail will spend up to P6 billion for expansion (out of SM Investments’ total P80 billion in capital expenditure budget) and expect food retail to account for a big part of it.

“For the food retail, this is the area where we need to be very aggressive and do multiple formats so that we can penetrate and enter different types of market,” said Cora Guidote, head of SMIC’s investor relations. The investment in Double Dragon Properties’ community mall expansion is also part of this agenda to bring its food retailing formats—especially the mid-range SaveMore—to the provinces. In any case, she says it’s easier to do landbanking for the smaller stand-alone formats.

SMIC’s investor relations officer Tim Daniels adds that SM Retail’s strategy is not really to compete based on pricing (note that rival’s mantra is “everyday low price”) but in having the broadest range of products to cater to more people. Doris C. Dumlao

Fireworks and condos

There must be something about fireworks over Manila Bay that inspires people to buy seaside condominium units.

Apart from bringing extraordinary foot traffic to the SM Mall of Asia complex, the five-week international pyromusical competition held at the complex is—as far as the group of tycoon Henry Sy is concerned—a big success because this gave good mileage for SM Development Corp.’s marketing of Shore Residences.

During the five weekends of the Pyromusical shows, the group sold P1.1 billion worth of residential condominium units, said Jeffrey Lim, chief finance officer of SMDC’s parent firm SM Prime Holdings Inc. “This is where you will see synergy of the property area, where the mall and residential went into partnership in sponsoring pyromusical,” Lim said.

Lim said the outlook for SMDC’s sales take-up this year was “very good” and that the company might bring to the property market 11,000 to 12,000 units in new inventory from both new residential projects and expansion of existing ones. He said there was no slowing down from the usual range of 10,000 to 12,000 units that SMDC unveiled in a given year.

On foot traffic, about 3.5 million people visit SM’s nationwide mall network on a typical day, or during weekdays. On weekends and especially when there are special events like the pyromusical competition, foot traffic hits as much as 4.5 million—more than the daytime population of Makati. Doris C. Dumlao

PBCom comes full circle

Having finally paid off the state-owned Philippine Deposit Insurance Corp. last week, Philippine Bank of Communications also officially replaced last Friday several directors who were assigned by the regulator to help run the bank’s board. According to our source, four PDIC directors officially tendered their resignation from PBCom’s board after the Eric Recto-led bank repaid in full its P7.6-billion emergency assistance from PDIC.

The loan had a tenor of 10 years—granted after the bank suffered a crippling run a decade ago—and was repaid completely on the day it matured. Biz Buzz learned that four new directors would be elected to PBCom’s board today. They would likely include Edgar “Injap” Sia II, former SGV & Co. officials Louie Benitez and David Balangue, and a foreign banker who will serve as the eyes and ears of UK-based Ashmore Group (which has shifted its partnership to Recto after its falling out with former Marcos trade minister Roberto Ongpin).

Incidentally, PDIC’s loan to PBCom was packaged by a Department of Finance team a decade ago led by a young undersecretary named … drumroll please … Eric Recto. Daxim L. Lucas

Moment of truth

It is an important week ahead for the Department of Transportation and Communications in terms of the public private partnership (PPP) deals it has struggled to get off the ground.

Apart from today’s contract signing of the first PPP deal it has awarded (the common railway e-ticketing system won by Ayala Corp. and Metro Pacific Investments Corp.), the department is expected to come up with a final decision on who really bagged the P17.5-billion Mactan Cebu International Airport deal after a delay of almost three months.

The transportation department said it was trying to award the airport project—amid a row between the top two bidders—by the end of March, meaning today. But in case it misses that, it was still gunning to do this “within the week,” a government source told Biz Buzz.

As of the weekend, there has been no firm decision on who would win the award, our source said. There is frontrunner Megawide Construction Corp. and India’s GMR or No. 2 bidder Filinvest-Changi, with the Filipino partner seeking the frontrunner’s disqualification due to its alleged lack of financial capacity and conflict of interest issues.

Megawide-GMR has denied all these allegations and the issues, and several private-sector investors told us these have been running “too long” and wearying given endless word wars in the media and a congressional inquiry.

Addressing certain worries over the design, Megawide-GMR noted that they would tap local designers, including Cebu’s Kenneth Cobonpue, whose furniture pieces have made a splash in Hollywood.

The process with the Mactan-Cebu Airport PPP, considered a “big ticket” deal, is being closely watched by investors. And how it would be handled will likely increase or dampen investors’ interest in the Aquino administration’s keystone infrastructure program moving forward. And there is a long pipeline of even larger projects on the way.

Cebu Gov. Hilario Davide III said it best when he noted that Cebuano businessmen mainly wanted to have the project awarded and resolved as soon as possible, when asked his opinion in a Senate inquiry last week. Let’s see if their wish will be granted this week. Miguel R. Camus

Homestretch salvo

Given that the awarding of the Mactan airport project is imminent, the camp of bid frontrunner Megawide-GMR over the weekend fired a final salvo before the scheduled awarding today (Monday).

The pro-Megawide camp focused on the accusation by the pro-Filinvest-Changi group that the former should be disqualified because a certain Tan Sri Bashir sits in both the boards of GMR and of the Malaysia Airports Holdings Berhard (the foreign partner of losing bidder First Philippine Airports of the Lopez Group).

According the Team Megawide, Bashir was not a director of Megawide-GMR  consortium and “was not involved in any capacity whatsoever at any stage of the bidding process” for Megawide-GMR consortium. Bashir’s tie is with the parent GMR company, which is an altogether separate entity from Megawide-GMR,” they said.

DOTC’s bids and awards committee had also made it clear that there was no outright conflict of interest that could justify a bidder’s or bidders’ disqualification. The PBAC’s rules had earlier clarified that “the mere presence of a director on the board of two or more prospective bidders does not constitute a conflict of interest and hence cannot lead to automatic disqualification.”

For the sake of argument, however, the pro-Megawide camp asked: Is there conflict of interest between Megawide-GMR and First Philippine Airports-MAHB? They think not because Megawide-GMR’s winning bid was for P14.4 billion going to the Philippine government while the First Philippine Airports-MAHB’s bid was for only P4.7 billion.

This disparity “clearly shows” that there was no collusion between both groups even if they shared a director somewhere in their corporate structures. Collusion would’ve meant that their bids would be a lot closer.

Now let’s wait and see whether the DOTC is ready to award the project today. Daxim L. Lucas

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