Strong Corporate Results in the Philippines

Strong Corporate Results in the Philippines

Ayala-led Bank of the Philippine Islands (BPI) chalked up P6.25 billion in net income for the first quarter, flat versus the same period last year, on higher expenses from technology investments and rollout of microfinance branches.

For the first quarter, however, BPI’s net profit exceeded the P5.9-billion bottomline level both reported by industry rivals BDO Unibank and Metropolitan Bank & Trust Co.

Total revenues reached P18.45 billion, higher by 2.7 percent year-on-year. Bulk of these came from net interest income, which rose by 8.9 percent as the bank expanded its loan book, driven primarily by corporate loans. Revenues growth, however, was curbed by the decline in non-interest earnings.

Loan yields improved but interest expense tempered the growth in net interest income, partly due to higher documentary stamp tax (DST) rates on deposits which increased the cost of funds by 5 basis points. Net interest margin (NIM) nonetheless widened by 4 basis points year-on-year.

Total loans stood at P1.21 trillion, marking a growth rate of 17.2 percent year-on-year. On the funding side, total deposits reached P1.59 trillion, up by 10.4 percent, of which 71.6 percent consisted of low-cost deposits.

Non-interest income dropped by 8.1 percent to P5.94 billion due to lower income from trust and investment management fees, securities trading and asset sales. Meanwhile, credit card fees, bank commissions, stock brokerage fees, and foreign exchange trading were higher for the period.

Operating expenses totaled P9.75 billion, up by 11.7 percent, driven mainly by accelerated technology spending. Likewise, manpower costs and premises costs were higher by 9 percent due to increased headcount and the continued build up of microfinance branches.

SM Prime

Property giant SM Prime Holdings grew its net profit in the first quarter by 15 percent year-on-year to P7.6 billion on a double-digit growth in revenues from shopping mall and residential development.

Driven by the expansion of its mall and residential businesses in key cities all over the country, SM Prime’s consolidated revenues reached P23.4 billion in the first three months, higher by 14 percent from the same period last year.

“The growing revenue contribution of our mall operations in the provinces and increasing reservation sales of our residential projects in Metro Manila drove our bottom line higher and kept us in line with our first quarter target in 2018. Nevertheless, we plan to continue expanding in key cities all over the Philippines to sustain our growth targets over the next few years,” said SM Prime president Jeffrey Lim said in a press statement.

SM Prime posted a 10-percent revenue growth in its malls business to P13.9 billion, accounting for 59 percent of total business.

The new malls that opened in 2016 and 2017 helped improve the mall rental revenues, delivering P11.9 billion, 12 percent higher from last year’s PHP10.7 billion. These malls include SM City San Jose Del Monte in Bulacan, SM City Trece Martires in Cavite, SM Cherry Congressional in Quezon City, SM City East Ortigas in Pasig City , SM CDO Downtown Premier in Cagayan de Oro, S Maison in Pasay City, SM Cherry Antipolo in Rizal, SM City Puerto Princesa in Palawan, SM Center Tuguegarao Downtown in Cagayan, SM Center Pulilan in Bulacan and SM Center Lemery in Batangas.

SM Prime’s malls operating income increased by 11 percent to P7.8 billion while operating margin was steady at 56 percent. Excluding the impact of newly opened malls, same-mall- sales grew by 7 percent year-on-year for the first three months of the year.

On the other hand, cinema and event ticket sales declined by 9 percent to P1.11 billion due to less-than-stellar international blockbuster movies shown compared to 2017.

Meanwhile, SM Prime’s residential group, led by SM Development Corp. (SMDC), posted a revenue growth of 25 percent in the first quarter to P7.5 billion. This unit reported a double-digit growth in residential real estate sales due to more projects being turned over from 2015 to 2017.

As an indicator of future growth, SMDC’s reservation sales grew by 20 percent in terms of sales value to P14.8 billion in the first quarter. In terms of unit sales, it was almost flat at 3,894. SM Prime is in line with its target to launch 12,000 to 15,000 residential units this year.

Globe

Globe Telecom, Inc. posted consolidated service revenues of P33.2 billion for the first three months of 2018. Service revenues benefitted from the demand for data-related products across all segments, given the increase in consumption for video streaming and on-demand entertainment. This was likewise helped by Globe’s 4G and LTE network, relevant and affordable product offerings, and an enhanced content portfolio in partnership with world-class content providers.

Mobile revenues reached P25.5 billion due to the growing demand for data as more Globe customers adopt the digital lifestyle. Globe’s mobile subscriber base reached 63.3 million as of end-March 2018, up 8% from the 58.6 million subscribers reported in the same period last year.

From a product perspective, mobile data remains the top contributor to total mobile revenues, accounting for 48%. Mobile data service revenues reached P12.3 billion in the first quarter of the year. Mobile data traffic grew 37% from 131 petabytes last year to 180 petabytes in the first quarter of 2018, given the increasing appetite for video-on-demand and multi-media content. Mobile SMS and mobile voice revenues, on the other hand, generated P5.6 billion and P7.6 billion, respectively, due to the continued shift to internet-based applications, consistent with global trends.

Globe’s home broadband business ended the first three months of the year with P4.3 billion. Its total subscriber base now reached 1.4 million or 17% higher from a year ago. The results were driven by subscriber expansion in fixed wireless solutions (+30%), the introduction of new broadband bundles and GoUnli plans which provide customers value for money, fast and reliable connections and world class entertainment. Globe remains on track with its commitment of bringing leading edge network technology to 2 million homes by 2020.

Globe’s corporate data business likewise posted P2.6 billion in revenues this period. This was mainly attributed to the increasing demand for connectivity and business solutions, resulting to higher customer base expansion, circuit count increase and higher usage. Traditional fixed line voice revenues, on the other hand, reached P770 million.

Globe posted consolidated EBITDA of P16.1 billion. Total operating expenses and subsidy ended at P17.1 billion. EBITDA margin was at 48%.

Net income for the first three months of 2018 stood at P4.7 billion. This was mainly due to EBITDA offsetting depreciation charges and non-operating expenses for the period just ended.
Likewise, Globe’s core net income, which excludes the impact of non-recurring charges, and foreign exchange and mark-to-market charges, stood at P4.8 billion.

Globe spent around P6.6 billion in capital expenditures as of end-March of 2018 to support the growing subscriber base and its demand for data. Of the total capital expenditures spent this period, about 64% was for the data service needs of its customers. To date, Globe has a total of 38,963 base stations, with over 25,600 for 4G (Includes HSPA+, WiMAX and LTE) to support the service requirements of its customers.

Last February, Globe announced today that it has initiated discussions with independent third parties for the establishment of a tower company to help speed up the build and deployment of cellular towers in the Philippines. Globe is looking at divesting all or part of its tower assets to independent tower companies as part of its network expansion and optimization plan.

Photo by jopetsy

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S. Jack Heffernan Ph.D. Funds Manager at HEFFX holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reach a peak market cap of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financial Services.

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