SM Investments Corp. (SM) yesterday reported a 26% gain in net income for the first half, excluding extraordinary items, due to a strong performance from its shops and mall operations.

The company, with interests in shopping center development and management, retailing, banking and real estate, said keeping a lid on costs had also helped its net recurring income rise to P2.9 billion.

Including the sale of marketable securities and global depository receipts, SM’s net for the first six months of 2006 was up 85% to P5.1 billion.

SM’s mall developer, SM Prime Holdings, operates 25 shopping centers across the Philippines. In May, it opened its biggest center to date, the 386,000-square meter Mall of Asia which is almost the same size as the Vatican City.

Consolidated revenue was up 11% to P27.8 billion, helped by a 7% increase in merchandise sales, its main revenue driver, an 18% increase in rental income to P4.9 billion and a 16% rise in revenues from its cinema operations to P1.1 billion, among others.

In a statement, SM president Harley Sy said ‘We are encouraged by the continued growth, profitability, and stability of SM, especially now that it has evolved into one of the country’s largest conglomerates.

‘New doors constantly open for us and we approach them with cautious optimism. We always look for new avenues to improve our products and services to meet the demands of the Filipino community, who we thank for showing strong faith in SM as a group.’

SM, also the country’s biggest cinema operator, benefits largely from sustained consumer spending fuelled by billions of dollars sent home yearly by Filipinos working abroad. It has interests in four areas: retail merchandising, shopping malls, banking and financial services, real estate development and tourism.

The group’s operating margin rose to 23% during the first half from 21.6% in the same period last year.

SM shares finished 0.47% lower at P213 yesterday in a general market that lost 0.6%.

In terms of its four major lines of business, SM still derived the bulk of revenues from retail operations, which accounted for 73%; followed by mall operations at 20%, real estate at 2% and banking, financial services and others at 5%.

Retail sales via SM Department Stores increased by 7.2% to P19.4 billion due to expansion. Overall sales growth, however, was tempered by the increase in the value-added tax rate to 12% in February.

SM Prime Holdings, Inc. recorded a 9% increase in its net income from mall operations to P2.6 billion, attributed to new malls such as SM City San Lazaro, SM Supercenter Valenzuela, SM Supercenter Molino, SM City Sta. Rosa, SM City Clark and the Mall of Asia. Two more malls are to be opened this year: SM Supercenter Pasig and SM City Lipa, bringing the total nationwide to 27.

SM’s main banking arm, Banco de Oro, recorded a 6% rise in profits to P1.3 billion.

In terms of real estate and property development, SM said sales revenues grew to P450 million this year from P48 million last year following the launch of high-rise residential condominiums.

SM Development Corp. reported profits of P119 million, down from last year’s P354 million which was boosted by unrealized mark to market gains from securities investments.

Highlands Prime Inc., which is niched in Tagaytay, reported an 11% in net income to P54 million.

SM also cited prospects for several projects, among them the SM Central Business Park which, when completed, will house not just the Mall of Asia but hotels, office and residential towers, and even a ferry terminal, and the Hamilo ecotourism development in Nasugbu. — with Reuters