SMC share price dips as power unit moves to buy back its debt overseas

SAN MIGUEL Corp. (SMC) was the 11th most actively traded stock last week when it announced that its unit SMC Global Power Holdings Corp. is set to buy back securities listed overseas.

Data from the Philippine Stock Exchange (PSE) showed a total of 5.7 million SMC shares worth P557.89 million were traded from Oct. 24 to 28, making the stock among the active movers.

SMC shares declined by 1.1% week on week, finishing at P96.20 apiece last Friday from its closing of P97.31 on Oct. 21. Year to date, the stock has fallen by 16.3%.

“There have been rumors of SMC Global Power’s financial strength. The volatility was supposedly caused by the continued pressure that SMC Global Power faced on its profits this year due to the spike in input costs,” Globalinks Securities and Stocks, Inc. Head of Sales Trading Toby Allan C. Arce said in a Viber message.

In a company disclosure on Wednesday, the Ang-led conglomerate announced that it authorized wholly owned subsidiary SMC Global Power to purchase $400 million worth of debt in a tender offer of securities listed in Singapore Exchange Securities Trading Ltd., or SGX-ST.

“The appropriate announcement of the tender offers shall be made by SMC Global Power in SGX-ST on even date,” SMC said.

The tender offer is said to be part of the company’s process of streamlining its existing financing mix. In a press release last week, SMC denied reports that the company is in a difficult financial position.

In a report, CreditSights said SMC Global Power’s perpetual capital securities are volatile in the short to medium term, prompting the credit research provider to withdraw its strong debt rating for SMC on rising concerns over its power arm.

Its assessment comes after the Energy Regulatory Commission denied a joint petition filed by Manila Electric Co. (Meralco) and two SMC units for an increase in their previously agreed electricity rate due to a change in circumstances.

Diversified Securities, Inc. Equity Trader Aniceto K. Pangan attributed the decline in SMC’s share price to the impact of the weakened peso against the greenback.

He said SMC was affected by the inflationary environment and the depreciation of the local currency “on foreign loans that have affected its raw materials including fuel prices, especially coal.”

Although SMC’s revenues were up so far this year, the increase in fuel prices, particularly coal, has hit the bottom line of its power business while the peso’s weakness resulted in forex losses, especially in the second quarter, Mr. Pangan said in a text message.

“This may mitigate their losses due to increased interest expense on dollar loans,” he said, adding that the depreciation of the peso “persists with the US Fed increasing lending rates to reign down on inflation.”

For Mr. Arce, SMC’s net income could reach P10.8 billion for the full year 2022.

Mr. Pangan expects a decline as SMC nears its full-year results despite easing restrictions.

In the third quarter, SMC’s net loss amounted to P7.68 billion, a turnaround from the P3.78 billion net income recorded in the same period last year. Its revenues increased by 88.9% to P394.65 billion from P208.97 million previously.

Mr. Pangan placed SMC’s near-term support at P96.20 and its resistance at P98.75.

“For the week, SMC support could range between P95.00 to P92.00, while resistance could be between P100.00 and P103.00,” Mr. Arce said. — Mariedel Irish U. Catilogo