SM Investments Corp.: Catalyst for development

Written By: Tina Arceo-Dumlao

Investors here and abroad who want to have a better idea of how the resilient Philippine economy is faring amid geo- political tensions and external headwinds need not go far to look for clues.

They can simply go beyond academic papers and research reports and instead pore over the income reports and disclosures of SM Investments Corp., one of the country’s largest conglomerates in terms of market capitalization.

It traces its roots all the way back to 1958, when the late re- tail titan and visionary Henry Sy, Sr established the first humble Shoe Mart, which laid the foundation for what would be- come one of the country’s most respected conglomerates with interests in key sectors powering the continued expansion of Philippine output.

MOA Photo: (From article) Through its efforts, SM is an enabler for businesses, consumers and communities across the Philippines through the members of its growing group.

Today, its SM retail operations are the country’s largest and most diversified, consisting of grocery stores, department stores and specialty retail stores.

Its listed property arm, SM Prime Holdings Inc., is one of the largest integrated property developers in the country with interests in malls, residences, offices, hotels, convention centers and other tourism-related property developments.

The group also has interests in banking through BDO Uni- bank Inc., the country’s largest bank, and China Banking Corp., the fourth largest private bank in the Philippines.

The list goes on.

And with its businesses firmly embedded in the Philippines’ growth engines, SM Investments can indeed be considered a catalyst for development for the Philippines with their fates inextricably intertwined.

As such, SM Investments takes its role seriously in enabling advancement across different sectors.

This is reflected by its efforts to be an enabler for businesses, consumers and communities across the Philippines through the members of its growing group.

SM malls, for example, serve as a marketplace and mentoring ground for micro, small and medium-scale enterprises. Indeed, some of the country’s largest re- tail and service brands across the Philippines grew into giants in their field through their partner- ship with the SM Group.

SM Prime also develops integrated lifestyle cities to drive growth, particularly in the provinces where SM has served as a catalyst for heightened and more robust economic growth.

SM Retail continues to offer a broad array of choices for consumers anchored on a culture of service excellence.

Customer Service: SM Retail continues to offer a broad array of choices for consumers anchored on a culture of service excellence.

BDO and Chinabank, mean- while, provide access to relevant financial services across all sec- tors and across customer types.

BDO and Chinabank, meanwhile, provide access to relevant financial services across all sectors and across customer types.

BDO and Chinabank, meanwhile, provide access to relevant financial services across all sectors and across customer types.

It has also deployed its funds for critical projects from logistics to energy and housing to pro- vide the needs of individuals and corporations who need financial support to achieve their growth ambitions and, consequently, the country’s goals as well.

But SM Investments continually expands without losing sight of its unwavering commitment to inclusive growth, environmental stewardship and community development.

This laser focus on both the bottom line and sustainable development has made SM Investments a core stock in local and international fund managers’ portfolio.

For one, SM Investments has consistently performed to expectations given its high-quality as sets that generate consistent cash flow from core operations.

In the first quarter, SM posted a consolidated net income of PHP20.1 billion, marking a 9% increase from PHP18.4 billion in the same period last year. Consolidated revenues for the January to March period rose 6% to PHP152.0 billion, up from PHP143.7 billion in the first quarter of 2024.

“We are encouraged by the positive start to 2025. Consumer confidence remains good and our businesses are well-positioned to serve in all categories. Positive sentiment is supported by falling inflation, which was at 1.4% in April,” said Frederic C. DyBuncio, President and Chief Executive Officer of SM Investments.

“We continue to monitor un- certainties in the global macroeconomic environment, but remain positive about the Philippines. SM remains focused on serving and enabling our local customers and stakeholders,” Mr. DyBuncio said.

In the first quarter, banking accounted for 51% of reported net earnings, followed by property at 29%, retail at 14% and portfolio in- vestments at 6%.

These lines of business may seem disparate or unrelated but there is a thread that connects all of these businesses and that is the singular attention on the consumer, of which the group never lost sight since its founding.

This consumer-driven character of SM Investments has served it well, considering that consumption accounts for over 75 percent of Gross Domestic Product.

And with local incomes steadily going up, and population remaining young and large, SM Investments has the tools to capitalize on a strong positive macro- economic environment.

“The Philippine economy re- mains consumption-driven, and SM Investments is well-positioned to support and capture this demand. Our strong ecosystem— spanning retail, banking, and property—enables us to navigate challenges while delivering long- term value,” said DyBuncio.

Equity research firm CLSA supports this view.

In a recent report on Philip- pine conglomerates, CLSA emphasized that SM’s powerhouse retail segment was poised to benefit from minimum wage increases, sustained remittances from Filipinos living and working abroad, and consumer spending resilience despite macroeconomic uncertainties.

While consumer spending patterns may evolve, CLSA maintains that overall consumption will remain a key economic driver.

“We would note SM Investments remains largely resilient and is worth a look given its valuation. SM Investments is a beneficiary of a consumption-driven economy,” said CLSA equity analyst Joyce Anne Ramos.

But more than the investments in various well-oiled growth engines that are firing on all cylinders, SMIC is likewise benefiting from its adherence to the highest governance standards, ensuring that it is run professionally with decisions guided by diverse voices and geared toward continuous growth.

In 2023, for example, former Bangko Sentral ng Pilipinas Governor Amando M. Tetangco Jr. was elevated to Chairman of the Board, the first independent di- rector to hold the position in SM’s history.

It is deemed a testament to the company’s commitment to professionalization, accountability, integrity, fairness, sustainability and transparency. Tetangco’s position exemplifies the group’s prioritization of expertise and value of independent leadership in shaping its future.

Indeed, over half of SM’s board seats are held by independent directors who are chosen not just for their expertise but integrity. Just recently, SM Investments elected women’s advocate and corporate leader Marife Zamora to its board, the second female in- dependent director to have a seat at the table.

Such diversity of voices at the highest corporate level gives SM Investments the lens needed to see risks and opportunities way ahead of competition.

These long-held values of meritocracy plus commitment to the consumer and to the nation have combined to ensure the continued dominance of SM Investments.

This was not lost on prestigious award-giving bodies such as Hong Kong-based publication FinanceAsia, which recently named SM Investments the Best Large Cap Company in the Philippines, in recognition of its excellent corporate behavior and performance by Asia’s active community of influential investors and financial analysts.

Not to say, however, that SM Investments is immune to disruptions and the adverse effects of geopolitical tensions and external headwinds such as the trade war resulting from US President Donald Trump’s sweeping tariffs on its major trading partners.

Like other large cap stocks, it has also taken some hits.

This explains why despite the excellent fundamentals and the robust economic growth of the Philippines that is feeding into its own expansion, its shares have been recently trad- ing at prices far below where they should be.

SM Investments indeed believes strongly that its shares have been significantly under- valued relative to historical valuation multiples and do not reflect its fundamentals and growth outlook. Its market capitalization has remained largely unchanged despite doubling of earnings since 2019 or below the COVID-19 pandemic hit.

This points to a significant upside that SM Investments itself wants to take advantage of, thus its recent approval of a massive P60-billion share buyback program – the first in its history and underscores its strong confidence in the growth prospects across all of its business units.

Investors can follow SM Investments’ example and go along for the ride. Now is the time to take the rare oppor- tunity to invest not just in SM but in the broader Philippine growth story.

ADVT.

This article is brought to you by SM Investments Corp.

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