Better-than-expected earnings drive SMIC stock higher

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SM Investments Corp. (SMIC) was the most actively traded stock last week after the company’s third-quarter earnings exceeded expectations.

A total of P3.345 billion worth of 3.181 million SMIC shares exchanged hands from Nov. 4 to 8, Philippine Stock Exchange (PSE) data showed.

SMIC stock grew by 3.88% on a week-on-week basis to P1,070 apiece last Friday. Since the start of the year, the stock has risen by 16.88%.

“SMIC recently reported 3Q earnings, which were above expectations,” Regina Capital Development Corp. Head of Sales Luis A. Limlingan said in an e-mail interview last Friday.

“The strong performance of its core businesses, namely property and banking, was enough to offset the one-percent decline in SM Retail, Inc…,” he added.

Unicapital Securities, Inc. Technical Analyst Cristopher Adrian T. San Pedro likewise cited the conglomerate’s earnings growth, noting foreigners are taking positions on the stock.

“It also recorded net foreign buying of P985.64 million (Nov. 4-7) in value turnover [last] week as the investors anticipate the rosy third-quarter earnings report,” Mr. San Pedro said.

The day before the release of the earnings report saw 729,660 SMIC shares being traded, bringing the stock’s intraday and closing price to P1,091 apiece. Some traders then took profits the day after, bringing the stock’s closing price down to P1,057 per share.

Net foreign buying for SMIC stood at P1.53 billion last week, 41% more than the P1.08 billion recorded the previous week.

The holding firm of the Sy family posted a net income of P33.1 billion as of end-September, up 26% from a year ago.

Its banking business accounted for 44% of SMIC’s reported net earnings. The period saw the earnings of BDO Unibank, Inc. and China Banking Corp. surge by 49% to P32.1 billion and 21% to P6.7 billion, respectively.

SM’s property segment, which is operated by SM Prime Holdings, Inc., saw an 18% year-on-year growth in its net income to P27.6 billion amid a 14% rise in revenues to P85 billion. Its mall segment posted an 8% growth in revenues to P42 billion while that of its residential business increased 26% to P31.9 billion.

On the other hand, its retail business, which is operated by SM Retail, reported a net income of P7.8 billion during the nine-month period, lower by 1% as a result of the implementation of the Philippine Financial Reporting Standards (PFRS) 16 that took effect this year. Excluding the impact of PFRS 16, net income in this segment grew by eight percent.

SM Retail’s revenues rose 12% to P253.9 billion during the nine-month period.

“We believe SMIC is in a position to break out net income forecast of P45 billion given that it is already ahead by 26% for the first nine months of the year,” Regina Capital’s Mr. Limlingan said.

For Unicapital’s Mr. San Pedro: “We expect the company to earn at least P36.4 billion [for the full-year 2019] to be driven by the core business of its property and banking segments.”

Mr. San Pedro noted the stock “remains bullish” as it is “supported by the bullish rounding bottom pattern in the medium term.”

“We expect the stock to range between [the support of] P1,020 and [the resistance level of] P1,091 with a [target price of] P1,142 if it stays above P1,040 in the short term,” Mr. San Pedro said.

Meanwhile, Regina Capital’s Mr. Limlingan pegged the stock’s support at P1,020 and resistance at P1,100. — Jobo C. Hernandez





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