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OUTLIER: Investors unload SMPH shares on market jitters

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By Marissa Mae M. Ramos, Researcher

SM PRIME Holdings, Inc. (SMPH) was among the most traded stocks last week due to a slew of factors that may adversely affect the company’s bottom line in the short term such as the lower-than-expected second-quarter economic growth, the renewed escalation of US-China trade tensions, and statements of the Chinese Embassy signaling a crackdown of its citizens’ offshore gambling activities in the country.

A total of P1.954 billion worth of 53.792 million shares of SMPH exchanged hands on the trading floor from Aug. 5 to 9, data from the Philippine Stock Exchange showed.

The company’s share price slipped 5.6% on a week-on-week basis to P35.5 apiece last Friday versus the P37.6 closing price in Aug. 2. Year to date, the stock price dropped 4.1%.

“Mainly, it’s the escalation of the US-China Trade war wherein SMPH succumbed to profit-taking by foreign investors while other investors decided to accumulate,” said Aniceto K. Pangan, equity trader at Diversified Securities, Inc., in a mobile message.

This view was shared by Japhet Louis O. Tantiangco, senior research analyst at Philstocks Financial, Inc., adding that the sell-off was also due to the last week’s “overall market sentiment.”




“We faced a lot of headwinds [last] week including the escalating trade tensions between the US and China as well as the dismal second-quarter GDP (gross domestic product) data,” he said in an e-mail.

Mr. Tantiangco also cited China’s crackdown on cross-border gambling of its citizens, which “would have an effect” on SMPH’s earnings.

“The crackdown, if it pushes through, would vacate a lot of property spaces both in the commercial and residential segment. This, in turn, would bring down property prices which could then narrow SMPH’s margins,” he said.

“Taking away the Chinese offshore gaming workers in the Bay Area where SMPH has an exposure could drag the overall business activities in the said area which in turn would negatively affect the property company,” he added.

Trade tensions between the US and China rose anew last week after US President Donald J. Trump called China “a currency manipulator” due to the recent drop of the yuan against the dollar. This came after Mr. Trump threatened to impose a 10% tariff on $300 billion worth of Chinese imports the previous week.

At home, the economy displayed a slower-than-expected GDP growth at 5.5%, lower than the 5.6% expansion in the first quarter and is the slowest in 17 quarters or since the 5.1% growth logged in the first quarter of 2015.

Meanwhile, the Chinese Embassy in Manila issued a statement regarding a possible crackdown of the offshore gaming activities of its citizens in the Philippines amid allegations that Chinese nationals working in the country’s offshore gaming industry were recruited illegally.

The statement also mentioned the presence of overseas gambling hubs has resulted in the illegal transfer overseas of “hundreds of millions of Chinese yuan every year.”

The statement led to sell-offs in property stocks on Thursday and Friday wherein a significant portion of these companies’ earnings stemmed from leasing their spaces to gaming firms.

Despite these developments, the analysts remain optimistic on the SMPH’s profitability for the year.

SM Prime recorded a 16.1% net income growth in the first half of 2019 to P19.3 billion from P16.62 billion in the same period last year. At the second quarter alone, its net income attributable to parent company grew 16.4% to P10.503 billion from P9.025 billion in the same three months in 2018.

“Looking forward, we expect SMPH’s fundamentals to remain robust especially now that our monetary policies are easing [and] interest rates are moving downwards, giving bright prospects to the firm in particular and to the property sector as a whole,” said Philstocks’ Mr. Tantiangco.

“For this year, SMPH’s earnings growth could meet or even exceed its five-year compounded annual growth rate of 14.6% so long as it maintains its strength across all of its segments especially in its mall operations and residential arm,” he said.

Mr. Tantiangco noted that it could be “gloomy” for SMPH’s share price performance in the short term due to “overall market sentiment,” but that it may recover in the medium to long term “once things get clear.”

“For now, support is seen at P35.90 while resistance is at P37.00,” he said.

Diversified Securities’ Mr. Pangan shared this view.

“In the short term, it will continue to be volatile due to poor market conditions, but in the long run, [the] company will be able to sustain its growth,” he said.

Mr. Pangan placed the stock’s immediate support around P34 with next support at P31.2 while immediate and next resistance is pegged at P38.2 to P39.6, respectively.

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