SMIC launches maiden fixed-rate bond offering

CEBU, Philippines – SM Investments Corporation (SMIC), the holding company of the SM Group, recently held the third leg of its domestic roadshow in Cebu for its five billion fixed rate bond offerings.

Banco De Oro Capital president Eduardo Francisco bared the joint lead underwriters for the summary offering as BPI Capital, China Bank, Unionbank, RCBC Capital and BDO Capital. The offer has options of a five-year and seven-year fixed rate bonds with an issue size of P5 billion and over subscription of another P5 billion worth.

Francisco said that the issue is the maiden offering of SMIC for domestic retail and the proceeds of the offering is for the funding of various expansion projects laid out by the SM Group.

The series A of the offering, which is the five years term will have about 7.75 to 8.25 percent interest rate while the series B which is the seven years term will be offered at 8.6 to 8.9 percent which is paid semi-annually in arrears. The denomination of the offering will have a minimum of P20,000 and multiples of P10,000 with secondary trading denominations at P10,000.

The series A’s maturity date will be five years plus one day from the issue date while series B will be seven years from the issue date and should be redeemed at 100 percent of face value on respective maturity dates, said Francisco.

SMIC’s tentative timetable for the pricing of the bond offering is June 5, signing of the underwriting agreement is on June 8 while the offer period is on June 8 to June 18 and the issue date will be on June 25, 2009.

“I suggest you focus on tapping on the five years term because the seven years term will have earlier orders from retirement and insurance companies. All our branches are selling. We intentionally made the offer period longer to accommodate and give enough time to buyers from the provinces. Should the demand exceed to P10 billion, we will close the offer period earlier and announce it in our banks,” said Francisco.

Meanwhile, in her company presentation, the vice president of SMIC Investor Relations Cora Guidote said that SMIC holds a strong financial position having achieved a strong balance sheet with a 17 percent increase of assets to P292 billion for the first quarter of this year while its net debt ration is only 31 percent.

For the first quarter, SMIC’s revenues went up by 11 percent to P35.2 billion and its net income grew by 13 percent with retail and property segment as growth drivers and its return of investment improved by 13.3 percent.

Guidote said that SMIC has high intrinsic value and its core businesses such as retail merchandising that is composed of retail chains: SM Department stores, SM Supermarkets, SM Hypermarkets, and Makro share 80 percent of its revenue profile, 33 percent if its net income profile with it shares a net asset value of 20 percent.

Its mall operations under SM Prime Holding Inc. contributed 12 percent to its revenues, 31 percent of its net income and 41 percent in net asset value.

Meanwhile, banking and financial services under its two major banks BDO and China Bank contributed two percent of revenues, 22 percent of its net income and 17 percent of its net asset value.

The property development segment on the other hand under SM Land, Inc. accounts six percent of SMIC’s revenues, 14 percent of its net income and 31 percent of its net asset value.