SMC holds a dominant market position in various sectors of the Philippine economy; its diversified business profile insulates its earnings amid economic downturns and has enabled it to maintain a lengthy operating track history.

SMC operates in the rapidly growing, emerging economy of the Philippines which has a large and youthful population. It is well positioned to benefit from rising consumption levels, electricity demand and mobility in the country which should benefit its F&B, power, fuel refining and infra segments, respectively.

A number of SMC’s businesses (fuel refining, power, infra and cement) require heavy upfront capital costs. While expanding, these businesses necessitate additional debt incurrence that typically strain SMC’s stretched leverage metrics and free cash flows.

SMC’s various businesses (beer, packaging, fuel refining and retailing, infrastructure) are exposed to moderate levels of COVID-19 uncertainties, where any severe resurgence of infections and social restrictions would hinder sales growth.

SMC’s revenues are concentrated within the Philippines (~80%), which exposes the company’s earnings to potential domestic economic downturns, unstable political regimes and seismic activities.

A number of SMC’s businesses are highly capital intensive, require large upfront capital costs and have long gestation periods. In October 2020, SMC began construction of the mega New Manilla International Airport (located in Bulacan), which will require large investments and raise its capex and working capital requirements through this decade.

As a holding company, SMC is reliant on dividend upstreaming from its operating subsidiaries to service its debt, which can be difficult should the operating subsidiaries face cash flow difficulties.

SMC operates in the businesses of thermal power generation and fuel refining, which may be looked at unfavourably by some ESG-focused investors.