SG Securities, one of the top 10 equity houses in Asia, said SMC’s profit growth is expected to climb to seven percent, 11 percent and 22 percent for the second, third and fourth quarter periods, respectively, as the restructuring gains from its purchases of the majority stakes in Coca-Cola Bottlers Phils. Inc. and Pure Foods Corp. start to be felt.
In the first three months of 2002, SMC posted a 35-percent gain in consolidated revenues to P30.17 billion with the addition of the new businesses, but its net income shrank by a third to P1.11 billion due to the short-term dilutive effect of these purchases.
SG Securities said that with the sustained earnings growth, SMC remains an attractive stock, with its "B" shares in particular targeted to hit P63.40, "an estimate that does not yet factor in the potentially value-enhancing deployment of the company’s cash hoard, including the possible acquisition or a share buyback."
Despite the substantial flow of funds out of SMC’s coffers due to its acquisition binge, its cash position remained formidable with the additional inflow early this year of about P28 billion from Japan’s Kirin Brewery which took it a 15-percent stake in SMC.
SMC officials said the company can tap as much as $1 billion in funds this year for its expansion program, including the prospect of more corporate acquisitions both here and abroad.
At the Philippine Stock Exchange (PSE) yesterday, SMC shares ended firm at P50 and P57.50 for it’s A and B shares, respectively.
In addition, SG Securities said coupled with savings on capital expenditures, SMC’s objective of raising dividends by 10 percent annually would be supported by these gains. Earlier, the company’s board approved the grant of a 50-percent increase in dividends over the next five years.