INVESTORS took positions on SM Investments Corp. (SMIC) last week following the release of the conglomerate’s earnings results, coupled with expectations of improving economic conditions in the near term that would send the company’s bottom line back in the black.
SMIC was the second-most actively traded stock with a total of 1.971 million shares worth P1.976 billion having exchanged hands on the trading floor from Nov. 3 to 6, data from the Philippine Stock Exchange showed.
Local financial markets were closed on Nov. 2 in observance of All Souls’ Day.
Week-on-week, SMIC’s share price grew by 6.3% to P1,010 per share on Friday from its Oct. 30 closing price of P950.50 apiece. Since the start of the year, its share price has fallen by 2.8%.
“SMIC was one of the most active stocks last week as third quarter results showed a reversal to a profit of P8.1 billion from a second-quarter loss of P1.9 billion, primarily driven by recovery in SM Retail, Inc. and BDO Unibank, Inc. (BDO),” PNB Research Department’s Equity Research Analyst Marco R. Mauleon said in an e-mail.
In a disclosure to the stock exchange, the Sy-led conglomerate said its consolidated attributable net income stood at P15.2 billion for the nine months ending September, down 54% from P33.1 billion in the same period a year ago.
Its revenues for the nine-month period declined 18% to P350.7 billion, despite a 36% improvement to P101.1 billion in the third quarter.
For the third quarter, attributable net income amounted to P8.11 billion, down 19% from P10 billion in 2019’s comparable three months.
Mr. Mauleon said that despite the decline in the third quarter, it brought year-to-date performance to a 54% contraction from 69% in the first half of 2020.
In a separate e-mail, Unicapital Securities, Inc. Technical Analyst Cristopher Adrian T. San Pedro attributed SMIC’s performance last week to “bargain hunting” amid a bullish breakout of the bellwether Philippine Stock Exchange index (PSEi).
Mr. San Pedro also noted renewed interest from foreigners with net foreign buying at P398.559 million last week, up 37.5% from the previous week’s P289.781 million.
“I believe the market already priced in the third-quarter earnings result and how the company adapted to the new normal brought about by COVID-19 this year. They are now looking forward to the fourth quarter of this year and how the country will manage to lessen the daily COVID-19 cases as the economy continues to reopen with revised quarantine restrictions,” Mr. San Pedro said.
Banking subsidiary BDO reported P16.6 billion net income, down 48% from a year ago. This was slightly offset by China Banking Corp., whose profits grew by 23% to P8.2 billion for the period.
SM Prime Holdings, Inc., which accounts for SMIC’s operations of malls and residences, among other real estate, posted a 48% income decline to P14.4 billion.
Meanwhile, profits of SM Retail were down 73% to P2.2 billion compared with the same period last year.
The banking segment contributed half of SMIC’s earnings for the nine-month period, followed by 41% from the property segment and the remaining nine percent from the retail segment.
“In our view, revenues in [the fourth quarter] should build on strong momentum gained in the third quarter as SM’s businesses enter the holiday season at full operational capacity,” PNB Research’s Mr. Mauleon said.
“Management already sees renewed consumer activity, noting that current mall foot traffic is now at 30-40% from pre-pandemic levels from a low of 18% during the lockdown. More importantly, sales recovery was even more drastic, already reaching 70-75% of pre-pandemic levels from a low of 40% during ECQ (extended community quarantine),” he added.
Mr. Mauleon placed SM’s “sum-of-the-parts” target price at P995 per share.
Unicapital Securities’ Mr. San Pedro pegged the stock’s short-term support and resistance levels at P951 and P1,047, respectively.
“[T]he stock is expected to become a potential trend reversal to test P1,059 and P1,100 for as long as it stays above P937,” he said. – Lourdes O. Pilar
