Monday, 1 June 2009

Philippines' SM sees resilience in retail business

Honey Madrilejos-Reyes
Business Mirror

THE SM group expects its retail business to remain resilient despite the slowdown in the country’s economic growth.

“The Gross National Product [GNP] still grew by 4.4 percent in the first quarter. That’s why on the retail level, it is not as bad as it looks like because the net factor income still buffers the economy that feeds the consumption spending,” explained SM Investments Corp. (SMIC) vice president for investor relations Cora Guidote.

While the Philippine economy, as measured by the Gross Domestic Product, only grew 0.4 percent in the first quarter due to the impact of the US financial meltdown and the global crisis, the demand for the services of the overseas Filipino workers (OFW) continued to increase, contributing to the hefty growth of the net factor income from abroad (NFIA) to 40.8 percent and thus, pushing GNP to grow by 4.4 percent in January to March.

“That’s why from an SM standpoint, we are okay as long as your NFIA is still boosted by the positive growth in OFW remittances,” added Guidote.

The SM group’s aggressive shopping mall expansion is also not affected by the economic slowdown, she said.

“We take a very long-term perspective in expansion so we are continuing with [the expansion program], with the view that once the projects are completed two to three years from now, the economy has already recovered. Even the malls we are opening this year are not as large as the ones last year. So if you take a look at it, we are calibrating the expansion on the basis of our own reading,” she said.

In the first quarter, SMIC, the group’s holding company for the mall, banking, retail merchandising, property development and hotel and entertainment investments, posted a 13-percent rise in net income to P4.2 billion as consolidated revenues grew 11 percent to P35.2 billion, primarily buoyed by retail sales.

In a related development, SMIC said it has obtained approval from the Securities and Exchange Commission (SEC) to sell fixed-rate domestic retail bonds.

The bonds—with a minimum investment value of P20,000 per transaction—will be issued in two tranches, maturing either in five or seven years. SMIC aims to issue an aggregate principal amount of P5 billion with an oversubscription option of up to P5 billion.

The bonds, which are jointly underwritten by BDO Capital & Investment

Corp., BPI Capital Corp., China Banking Corp., Union Bank of the Philippines and RCBC Capital Corp., is backed by a Triple A credit rating by Philippine Rating Services Corp. (PhilRatings).

Triple A is the highest rating assigned by PhilRatings to obligations that are of the utmost quality with minimal credit risk. It is also assigned to issuing companies with an extremely strong ability to meet its financial obligations.

Following SEC’s approval of the issuance, SMIC executives will conduct domestic roadshow starting today until June 3 in Manila, Davao and Cebu.

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