SM Investments dips as postponed reclamation project prompts sell-off

SHARES in SM Investments Corp. slipped last week due to a market sell-off prompted by the postponement of the reclamation projects in Manila Bay and the disappointing second-quarter economic growth.

The Sy-led conglomerate was the most actively traded stock with a total of 25.12 million shares worth P21.61 billion having exchanged hands on the trading floor from Aug. 14 to 18, data from the Philippine Stock Exchange showed.

Week on week, SM Investments’ share price declined by 2.5% to P860.00 per share on Friday from its Aug. 11 closing price of P882.50 apiece. Since the start of the year, its share price has fallen by 4.4%.

Philippine National Bank Equity Research Department Head Jonathan J. Latuja said in an e-mail that SM Investments stock’s decline accelerated due to a sell-off amid the disappointing second-quarter of gross domestic product (GDP) growth and regulatory industry-related suspension of reclamation projects in Manila Bay.

“SM Investments is the largest index stock by market capitalization size and typically used as a proxy by investors who want exposure in the Philippine growth story. Sentiment towards the stock turned pessimistic when the weaker-than-expected second-quarter GDP results came out,” said Mr. Latuja.

“Another reason for the sell-off is related to the government’s suspension of reclamation projects in Manila Bay which directly affects SM’s real estate subsidiary, SM Prime Holdings, Inc., given their 360-ha. (hectare) reclamation project in Pasay City,” added Mr. Latuja.

In a Viber message, Mercantile Securities Corp. Head Trader Jeff Radley C. See also said that investors reacted negatively to the government’s announcement of halting reclamation projects on Manila Bay.

“The delay of the planned REIT offering wasn’t really a big influence to the price movement due to the market condition,” said Mr. See.

During the PSE STAR event held last week, the conglomerate announced the postponement of the market listing of its real estate investment trust (REIT) to next year.

Earlier this year, SM Prime said that it was planning to launch its REIT portfolio by the second half of the year.

The company’s target REIT offering is likely to be valued at around $3.5 billion to $4 billion and initially composed of 12 to 15 assets, which will come from the 82 malls it currently has, as 30 to 35 malls are now fully matured.

SM Investment also said that it fully stopped its reclamation operations after the government suspended all Manila Bay reclamation projects to review the environmental and social effects.

In a previous news briefing, President Ferdinand R. Marcos, Jr. suspended all reclamation projects in Manila Bay ahead of a review of their environmental and social effects.

The Philippine Statistics Authority earlier reported that the country’s GDP grew at 4.3% in the second quarter, slower than the 6.4% growth in the first quarter and 7.5% a year ago. It was the slowest growth in over two years.

The slower-than-expected growth as of June was dragged by elevated inflation, the impact of interest rate hikes, and a decline in government spending.

For the second quarter, SM Investment’s attributable net income amounted to P19.23 billion, up 30.7% from P14.72 billion in the comparable three months last year.

Its consolidated revenues also increased by 15.1% to P148.18 billion during the period.

In the first semester, its attributable net income rose 31.8% to P36.53 billion from P27.71 billion last year. Its top line rose by 18% to P286.24 billion in the first half.

“We project a full-year 2023 revenue growth of 13% to P583.4 billion,” Mr. Latuja said.

Mr. See pegged the stock’s support and resistance levels this week at P850.00 and P945.50 per share, respectively.

“Overall, SM group did pretty well but market sentiment weighed down its quarterly results. The stock might move sideways for now,” Mr. See said. — Lourdes O. Pilar