Sm Investment Corporation Case Study

Topics: SM Prime Holdings, SM Mall of Asia, Shopping mall Pages: 5 (1807 words) Published: March 2, 2013



SM Investments Corporation, SM Investments or SMIC is a holding company with interests in shopping mall development and management, retail, real estate development, banking and tourism. The SM Group was founded by Henry Sy, Sr. it has become one of the largest conglomerates in the Philippines.

SM Retail reported a net income for the first nine months of the year of Php4.1 billion, up 6.7% year on year, while sales increased 8.7% to Php110.8 billion. EBITDA amounted to Php7.6 billion, up 13.5% year on year, for an EBITDA margin of 6.9%. Net margin for the period stood at 3.7% From January to September 2012, SM Retail grew its number of stores by a total of 25 stores, consisting of 5 department stores, 4 SM Supermarkets, 4 SM Hypermarkets, and 12 SaveMore stores. As a result, the group now has a total of 193 stores, consisting of 46 department stores, 37 SM Supermarkets, 34 SM Hypermarkets, and 76 SaveMore stores.

In line with improving consumer sentiment and economic growth, the group will be continually expanding its various store formats, with particular emphasis on SaveMore stores. This stand-alone store format, which is similar to a typical neighbourhood grocery store, has gained wide market acceptance and serves communities marked by the absence of organized retail. On the department store business, initiatives are being undertaken not only to improve the stores’ look and feel, but also to promote and enhance shoppers’ convenience. New store designs and lay-outs, as well as innovative display fixtures aimed at enhancing the presentation of merchandise collections are being introduced.  Also, in line with the department store business’s consumer focus, it has completed the roll-out of point-of-sale technology that would enable it to more efficiently manage high-volume, high value transactions involving complex promotional and pricing structures.

SM Prime Holdings, Inc. (SM Prime), the Philippines’ dominant shopping mall developer and operator, exceeded its 2012 profit growth target for a second straight year as it registered a 16% increase in consolidated net income to Php10.53 billion for the full year, as compared to Php9.1 billion in 2011. Total revenues for the year rose by 14% to Php30.73 billion. EBITDA increased 12% to Php20.7 billion, for an EBITDA margin of 67%. These results include the operations of the five SM malls in China, in the cities of Xiamen, Jinjiang, Chengdu, Suzhou, and Chongqing.  SM Prime’s better-than-expected performance was largely due to rentals from new SM Supermalls launched in 2011 and 2012 coupled with a robust same-store rental growth of 8%. Moreover, SM Prime’s shopping malls in China continued to perform well, with net income amounting to Php1.10 billion in 2012, a 24% increase from Php0.89 billion in 2011. SM Prime President Mr. Hans T. Sy said, “We are very pleased to end 2012 with excellent results. We are confident that the Philippine growth story, which we saw unfold last year will continue in 2013. In line with this, we will proceed with our aggressive expansion plans and continue to pursue new opportunities for growth. We sincerely thank all our stakeholders for another year of remarkable growth and for the confidence they have entrusted upon us.” For full year 2012, SM Prime’s consolidated rental revenues contributed 84% to the total, and grew by 14% to Php25.90 billion. New rental space came from SM City Olongapo, SM City Consolacion, SM City San Fernando, SM City General Santos, SM City Lanang, and SM Chongqing.  Operating expenses for full year 2012 increased by 14%, to Php13.99 billion, largely due to expenses related to mall expansion. Income from operations posted a 14% growth from Php14.62 billion in 2011 to Php16.73 billion in 2012. Cinema ticket sales from January to December 2012 increased by 14% due to a series of both local and international...
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