T HU 10 N O V 2016

SM INVESTMENTS CORPORATION:
9M16 earnings in line

9M16 income grew 11%. SM reported that 9M16 net income grew 11% y/y to Php22 Bil driven by SHARE DATA
growth in SM Retail, SMPH, and BDO. SM Retail figures for both 9M15 and 9M16 already reflect the
consolidation of the specialty retailers. SM’s 9M16 net income already accounts for 68% of COL and
Rating HOLD
Ticker SM
66.3% of consensus full-year estimates, putting it in line to meet FY16 estimates. Note that last year,
Fair Value (Php) 616.00
9M15 earnings accounted for 68.2% of full-year income.
Current Price 656.00
SM Retail growth momentum maintained. SM Retail’s revenues grew 9% y/y to Php186 Bil, Upside (%) -6.10
driving net income of the segment up 7% y/y to Php7 Bil. Both 9M15 and 9M16 figures reflect the
consolidation of the specialty stores which mean the growth came from same-store-sales growth
and contribution from the stores opened in the last two years. Breaking down revenue growth, the SHARE PRICE MOVEMENT
department stores segment grew 9.8%, the food segment grew 8.3%, and the specialty store grew
110
at a faster rate of 13%. Same store sales growth of department stores was a little less than 5%, the
food segment registered same-store-sales growth of around 2%, while the specialty retail had an
impressive 9% SSS growth. 100

Maintain HOLD. We are maintaining our HOLD rating on SM given its solid fundamentals despite
90
the current market price having exceeded our fair value estimate of Php616. SMPH remain very
stable as it continues to expand its mall portfolio. Meanwhile, SM Retail’s revenue growth has been
very solid this year and margin improvements are being sustained. The consolidation of the specialty 80
10-Aug-16 10-Sep-16 10-Oct-16 10-Nov-16
stores is also positive given its faster revenue and net income growth compared to SM Retail’s SM PSEi

existing businesses prior to the merger. Lastly, we continue to like BDO given its strong position
to capitalize on the country’s favorable economic prospects. The accelerating growth of the bank’s
core businesses should also continue to support net income despite the expected decline in trading
income. ABSOLUTE PERFORMANCE

1M 3M YTD
FORECAST SUMMARY:
Year to Dec. 31 2013 2014 2015 2016E 2017E
SM 0.07 -3.46 16.23
Sales 253,293 276,615 295,878 323,008 347,867 PSEi -3.97 -10.14 4.05
change y/y 13.1% 9.2% 7.0% 9.2% 7.7%
EBIT 51,285 52,459 56,907 61,831 68,217
change y/y 9.4% 2.3% 8.5% 8.7% 10.3%
EBIT Margin (%) 20.2 19.0 19.2 19.1 19.6 MARKET DATA
EBITDA 60,799 63,366 68,270 76,428 84,038
change y/y 10.7% 4.2% 7.7% 11.9% 10.0% Market Cap 806,468.23Mil
EBITDA Margin (%) 24.0 22.9 23.1 23.7 24.2 Outstanding Shares 1,204.58Mil
Net Profits 27,446 28,399 28,455 32,334 35,675
change y/y 11.2% 3.5% 0.2% 13.6% 10.3% 52 Wk Range 485.33 - 722.00
NPM (%) 10.8 10.3 9.6 10.0 10.3 3Mo Ave Daily T/O 256.39Mil
EPS (Php) 22.78 23.58 23.62 26.84 29.62
change y/y 11.2% 3.5% 0.2% 13.6% 10.3%

RELATIVE VALUE
P/E(X) 29.6 28.6 28.5 25.1 22.8
P/BV(X) 2.4 2.1 1.9 2.7 2.5 Richard Lañeda, CFA
ROE(%) 13.5 11.9 10.5 11.0 11.3 Senior Research Manager
BVPS(P) 275.7 320.1 354.2 253.0 271.3 richard.laneda@colfinancial.com
Dividend yield(%) 1.7 1.9 2.0 2.2 2.3
*So urce: COL estimates

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the COL Financial website as these may be subject to tampering or unauthorized alterations.
 E ar n i n g s A n al ysi s I S M I n vestments C or por ati on

TH U 10 NOV 2016

9M16 income grew 11%

SM reported that 9M16 net income grew 11% y/y to Php22 Bil driven by growth in SM Retail,
SMPH, and BDO. SM Retail figures for both 9M15 and 9M16 already reflect the consolidation
of the specialty retailers. SM’s 9M16 net income already accounts for 68% of COL and 66.3% of
consensus full-year estimates, putting it in line to meet FY16 estimates. Note that last year, 9M15
earnings accounted for 68.2% of full-year income.

Exhibit 1. Results summary

% of estimates
9M15 9M16 % change
in Php Mil COL Consensus
SM Retail 6,542 7,000 7.0%
SMPH 15,456 17,453 12.9% 73.4% 70.6%
BDO 17,603 19,308 9.7% 73.7% 73.3%
SM net income 19,820 22,000 11.0% 68.0% 66.3%
Source: SM, COL estimates, Bloomberg

SM Retail growth momentum maintained

SM Retail’s revenues grew 9% y/y to Php186 Bil, driving net income of the segment up 7% y/y to
Php7 Bil. Both 9M15 and 9M16 figures reflect the consolidation of the specialty stores which mean
the growth came from same-store-sales growth and contribution from the stores opened in the last
two years. Breaking down revenue growth, the department stores segment grew 9.8%, the food
segment grew 8.3%, and the specialty store grew at a faster rate of 13%. Same store sales growth
of department stores was a little less than 5%, the food segment registered same-store-sales
growth of around 2%, while the specialty retail had an impressive 9% SSS growth.

SM Prime earnings show steady growth

SMPH’s 9M16 core income improved 12.9% y/y to Php15.5 Bil. The strong performance during
9M16 was driven by an 11% growth in total revenues. Mall revenues grew 7% to Php32.3 Bil
on the back of a 7% growth in same-mall-sales and contribution from the 1 Mil sqm of space
added over the past two years. Other segments also had strong performances with the residential
segment growing 10% driven largely by the take-up of ready-for-occupancy units in its Quezon
City and Makati projects. Meanwhile, the contribution of FiveE-com led to a 47% improvement in
commercial property revenues. Lastly hotels and convention centers revenues grew 22% driven by
the contribution of Park Inn in Clark, and Conrad Manila in Pasay, as well as improved room rates
and occupancy in its other properties.

Disclaimer: All content provided in COL Reports are meant to be read in the COL Financial website. Accuracy and completeness of content cannot be guaranteed if reports are viewed outside 2
of the COL Financial website as these may be subject to tampering or unauthorized alterations.
 E ar n i n g s A n al ysi s I S M I n ves tments C or por ati on

TH U 10 NOV 2016

BDO earnings in line

BDO booked Php6.1Bil in profits for the third quarter, up 3% y/y. Net interest income continues
to grow at a steady pace, expanding 14% y/y in 3Q16 on the back of a 15% increase in loans.
Meanwhile, fee-based revenues grew 8% y/y. BDO’s 3Q16 results brought its 9M16 income to
Php19.3 Bil or 10% higher y/y. This is in line with both COL and consensus estimates.

Maintain HOLD

We are maintaining our HOLD rating on SM given its solid fundamentals despite the current
market price having exceeded our fair value estimate of Php616. SMPH remain very stable as
it continues to expand its mall portfolio. Meanwhile, SM Retail’s revenue growth has been very
solid this year and margin improvements are being sustained. The consolidation of the specialty
stores is also positive given its faster revenue and net income growth compared to SM Retail’s
existing businesses prior to the merger. Lastly, we continue to like BDO given its strong position
to capitalize on the country’s favorable economic prospects. The accelerating growth of the bank’s
core businesses should also continue to support net income despite the expected decline in trading
income.

Disclaimer: All content provided in COL Reports are meant to be read in the COL Financial website. Accuracy and completeness of content cannot be guaranteed if reports are viewed outside 3
of the COL Financial website as these may be subject to tampering or unauthorized alterations.
 E ar n i n g s A n al ysi s I S M I n vestments C or por ati on

TH U 10 NOV 2016

Important Rating Definitions

BUY
Stocks that have a BUY rating have attractive fundamentals and valuations based on our analysis. We expect the share price to outperform the market in the
next six to 12 months.

HOLD
Stocks that have a HOLD rating have either 1) attractive fundamentals but expensive valuations 2) attractive valuations but near-term earnings outlook might
be poor or vulnerable to numerous risks. Given the said factors, the share price of the stock may perform merely in line or underperform in the market in the
next six to twelve months.

SELL
We dislike both the valuations and fundamentals of stocks with a SELL rating. We expect the share price to underperform in the next six to12 months.

Important Disclaimer

Securities recommended, offered or sold by COL Financial Group, Inc. are subject to investment risks, including the possible loss of the principal amount
invested. Although information has been obtained from and is based upon sources we believe to be reliable, we do not guarantee its accuracy and said
information may be incomplete or condensed. All opinions and estimates constitute the judgment of COL’s Equity Research Department as of the date of the
report and are subject to change without prior notice. This report is for informational purposes only and is not intended as an offer or solicitation for the purchase
or sale of a security. COL Financial and/or its employees not involved in the preparation of this report may have investments in securities of derivatives of the
companies mentioned in this report and may trade them in ways different from those discussed in this report.

COL Research Team

April Lynn Tan, CFA

VP & Head of Research
april.tan@colfinancial.com

Charles William Ang, CFA George Ching Richard Lañeda, CFA

Deputy Head of Research Senior Research Manager Senior Research Manager
charles.ang@colfinancial.com george.ching@colfinancial.com richard.laneda@colfinancial.com

Jose Angelo Lecaros Frances Rolfa Nicolas Andy Dela Cruz

Research Analyst Research Analyst Research Analyst
angelo.lecaros@colfinancial.com rolfa.nicolas@colfinancial.com andy.delacruz@colfinancial.com

Justin Richmond Cheng

Research Analyst
justin.cheng@colfinancial.com

Contact

COL Financial Group, Inc.

2402-D East Tower, Philippine Stock Exchange Centre,
Exchange Road, Ortigas Center, Pasig City
1605 Philippines
Tel No. +632 636-5411
Fax No. +632 635-4632
Website: www.colfinancial.com

Disclaimer: All content provided in COL Reports are meant to be read in the COL Financial website. Accuracy and completeness of content cannot be guaranteed if reports are viewed outside 4
of the COL Financial website as these may be subject to tampering or unauthorized alterations.