SMC can weather risks related to soaring capex, says Fitch unit

MANILA  -The Fitch Group’s CreditSights maintained its stable debt outlook for billionaire Ramon Ang-led San Miguel Corp. (SMC) despite the conglomerate’s soaring capital spending requirements for power and a new international airport in Bulacan province.

In a report, CreditSights said it was keeping its “market perform” recommendation on SMC, one of the country’s biggest companies with a portfolio spanning food, beverage, energy and infrastructure. Market perform is a neutral recommendation given by analysts.

“We think its large, diversified operations and stable fundamentals outweigh its high expansionary capex (capital expenditures) and extension/refinancing risk,” according to the report, which was dated Aug. 17 this year.

“We are still comfortable with SMC’s dominant market position in multiple sectors, long operating track record and diversified operations that reduce earnings volatility,” it added.

SMC’s earnings grew modestly while revenues were slightly lower during the first semester of the year. Liquidity also remains tight but CreditSights said SMC would be able to meet its financial obligations.

“At this point, we think SMCʼs strong banking relationships (aided by its long operating history, no history of default, solid domestic reputation, and large diversified operations) should still facilitate bank rollover and refinancing. SMC has also consistently rolled over its bank debts historically,” CreditSights said.

Moreover, it noted that SMC’s capital spending requirements would rise this year and remain elevated.

Its full-year 2023 spending estimate for the conglomerate stood at P140 billion to P150 billion. INQ