SM Investments Corp. is expected to benefit from a stronger second half, a traditionally better season for the retail business, according to a stock analyst.
Macquarie Capital Securities (Philippines) head of research Gilbert Lopez said in a research report SM Investments’ reported net profit of P40.2 billion in the first half, reflecting a 10-percent year-on-year growth and a strong improvement in the second quarter.
Lopez said this was ahead of the brokerage firm’s forecast but in line with available full-year consensus, bearing in mind SM key businesses typically have a seasonally stronger second half.
Lopez said “what was good” was the sequential improvement in earnings across all of SM Investments’ major businesses in retail, banking and property.
SM Retail had a net profit of P4.5 billion or a 49 percent quarter-on-quarter growth.
He also noted that what was particularly interesting was the marked improvement in retail sales, reflective of consumption recovery.
The standout was the health and beauty segment of SM Retail which grew 16 percent year-on-year for both the second quarter and the first half.
Philippine Equity Partners research analyst Russ Toribio, in another research report dated Aug. 8, echoed the sentiment, saying gains from the first half will continue “as a stronger second half lies ahead.”
Toribio said “there was notable recovery in consumer spending in discretionary items such as fashion and home in the second quarter.”
Sales in the fashion segment posted a 10.5-percent year-on-year growth in the same period largely due to back-to-school shopping in preparation for school openings at the start of the third quarter.
Sales in the home segment saw a 4.6 percent year-on-year growth in the second quarter likely related to much warmer weather during the period.
The Philippine Statistics Authority reported that the Philippines’ headline inflation or overall inflation eased to 3.3 percent in August 2024 from 4.4 percent in July 2024. This brought the national average inflation from January to August 2024 to 3.6 percent.
“Moderating inflation increases the purchasing power of consumers which will drive growth in retail and leisure business,” Toribio said.
SM Investments closed at P885 a share at the end of trading on Aug. 30, 2024 from P872 per share at the end of Dec. 29, 2023.
