SM Investments FY23 net income up 25% to P77-B

SM Investments [SM 913.00, down 0.9%] [link] teased its FY23 results with a headline 25% improvement in its net income to P77.0 billion, backed by an 11% increase in consolidated revenues and strong performances across its portfolio, particularly in the banking and property development segments. The banking segment (BDO [BDO 148.00, up 2.9%] and Chinabank [CHIB 34.45, up 0.3%) accounted for 47% of SM’s FY23 net income, with property development (SM Prime [SMPH 32.50, up 0.6%], SM Malls, and SM Development Corporation) responsible for 25%, retail (SM Markets, WalterMart, Alfamart, SM Store) for 19%, and the remainder of SM’s portfolio investments (like 2Go, Belle Corp [BEL 1.23, up 1.6%], and Goldilocks). SM noted “healthy spending patterns” across both “essential and discretionary purchases”, with higher levels of discretionary spending in “fashion, dining, and entertainment.”

 

MB bottom-line: This is a well-positioned behemoth that took COVID on the chin, absorbed all the body shots of inflation, and has kept chugging along. SM’s profitability is 77% higher than its pre-COVID FY19 net income of P44 billion and 126% higher than its COVID lockdown FY20 net income of P34 billion. SM’s banking interests are likely to ride the profitability of elevated interest rates for some time, and then as rates fall, be well-positioned to profit from the uptick in commercial and consumer activity. The only issue here is the stock’s price performance. It’s up ~25% from the FY20 and FY22 lows of around P720/share, but it’s still 15% below the peaks it saw in FY19 and FY21.

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