Thursday, 2 April 2009

Philippines' SM group keeps banking on OFWs; expects to grow 12-14% in 2009

Rosemarie Francisco

Mall-to-banking group SM Investments Corp. expects its net income to grow 12 to 14 percent this year, ahead of market forecasts, as consumption and remittance income from Filipinos working overseas hold up despite a global financial crisis.

The group, owned by the country's richest man, Henry Sy, said it is not slowing its expansion plans even as forecasts point to braking growth in the local economy this year.

"Just like a chariot, all horses forward -- banking, retail, malls, property -- all competing with each other," group Chief Finance Officer Jose Sio told Reuters on Thursday in an interview at the company's headquarters overlooking Manila Bay. "All the four horses are pulling ahead."

"This year will be double digit," Sio said when asked about growth in the 2009 bottomline. "Our budget is 12-14 percent."

Analysts expect SM Investments' net income to be largely flat this year, according to Reuters Estimates. Net profit climbed 15.6 percent in 2008 to 14 billion pesos ($291 million) on revenue growth of 20 percent.

The company, which has grown from a small Manila shoe store that Sy built up in the 1950s, has set aside P25 billion in capital spending this year, up 25 percent from in 2008.

SM Investments would spend heavily in coming years on hotels and leisure developments in the Philippines, said investor relations chief Corazon Guidote, creating a fifth core business.

Group executive director Gregory Domingo said SM, which opened its first mall in 1985 with the country in the middle of a political crisis, was undaunted by the current downturn.

"Restaurants are still full, people are still shopping, malls are still full, so you don't yet feel it, unless there's a very long lag," he said.

The central bank expects remittances from more than 8 million overseas workers to hold steady at $16.4 billion -- more than a tenth of GDP -- this year, but analysts forecast a 6 percent decline, the first drop since 2001.

Mall developer SM Prime Holdings expects its revenues to grow 11 percent, just ahead of last year's levels, as it opens three new malls and spends 11 billion pesos to open and expand malls at home and in China.

Revenues from property development, which includes SM Development Corp., would likely increase 50 percent this year after 57 percent growth in 2008, as residential apartment developments come onstream, Domingo said.

The retail business, which includes the SM Department Store and supermarkets, is expected to post 10-12 percent revenue growth, half last year's growth, as consumers focus their spending on essentials such as food and clothing.

The retail segment posted 14-15 percent revenue growth in January-February, Guidote said.

Banco de Oro Unibank Inc., the country's largest lender by assets, expects its loan portfolio to grow 15 percent this year, higher than the expected industry average of 5 to 10 percent, but half last year's increase.

SM Investments is eyeing acquisitions, and Sio said the group had a P47 billion ($977 million) cash balance at end-2008.

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