SM Investments Corp., already the Philippines’ biggest lender and retailer, wants to expand its presence in businesses from bakeries to geothermal power to diversify into fast-growing sectors.
While the conglomerate gets most of its revenue through its retail and property units, Chief Executive Officer Frederic DyBuncio wants non-core assets like logistics, renewables, mining and gaming to account for 15% of earnings within the next three to five years. The goal, the first explicit target to come from the CEO, compares with 11% of last year’s record P61.7-billion ($1.1 billion) profit, and the low single-digit share when he took the helm in 2017.
“There are still many areas for us to grow and expand into,” Mr.DyBuncio, 63, said in an interview. The expansion will see excess capital redeployed to sectors that are fast growing and scalable, and the company is considering both acquisitions and asset sales, he said.
Still, Mr. DyBuncio cautioned the plan to hit 15% of earnings will be challenging as core businesses like banks, shopping malls, residential and property are also growing.
SM’s shares are up more than 27% since Mr. DyBuncio became CEO, compared with a 16% slump in the benchmark Philippine stock index and the 25% loss for rival Ayala Corp. He’s helmed $1 billion worth of acquisitions during his tenure, including the purchase of Southeast Asia’s oldest geothermal steam field last year, while the firm’s core consumer-dependent businesses like shopping malls are rebounding after being hit by pandemic curbs.
SM owns BDO Unibank Inc., SM Prime Holdings Inc. and SM Retail Inc., the nation’s biggest lender, shopping mall operator and retailer respectively. It’s the largest company in the Philippines by market capitalization.
Core to Mr. DyBuncio’s plans are the outlooks for 2GO Group Inc., the country’s largest integrated supply chain operator, as the logistics sector grows at twice the pace of the economy. Meanwhile, Philippine Geothermal Production Co. will develop six to seven greenfield projects in five years to double capacity and benefit from the shift to renewable energy, he said.
SM is open to bringing in partners, according to Mr. DyBuncio. “We are not tied to keeping this portfolio like with our core assets,” he said. “If we feel we have maximized what we can do and somebody else will bring it to another level then we are very open” to becoming a minority, he said.
In other comments from the CEO:
There are opportunities for further growth of bakeshop Goldilocks in provincial areas.
Even with increased focus on non-core assets, SM will seek to expand its biggest earners, according to Mr. DyBuncio, who pointed to the country’s large unbanked population, housing backlog, and importance of consumer spending to the economy.
Company will remain conservative around its debt levels and will seek to avoid foreign currency exchange exposure as most of its debt is in pesos.
His comments follow scrutiny from the Philippine central bank around the foreign-debt levels of major business groups on concerns it may be larger than expected. — Bloomberg