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MODEL PORTFOLIO THE GIST
NEWS AND FEATURES
Global Philippines Fine Living
INSIGHTS
INVESTMENT STRATEGY
Economy Stocks Bonds Currencies
THE BASICS
Investment Tips Explainers Retirement
WEBINARS
2024 Mid-Year Economi Briefing, economic growth in the Philippines
2024 Mid-Year Economic Briefing: Navigating the Easing Cycle
June 21, 2024
Investing with Love
Investing with Love: A Mother’s Guide to Putting Money to Work
May 15, 2024
retirement-ss-3
Investor Series: An Introduction to Estate Planning
September 1, 2023
View All Webinars
DOWNLOADS
investment-ss-3
Reports
Policy rate views: Fed expected to do baby steps
September 18, 2025 DOWNLOAD
economy-ss-9
Economic Updates
Inflation Update: Faster but full-year average within target
September 5, 2025 DOWNLOAD
948 x 535 px AdobeStock_433552847
Reports
Monthly Economic Update: Waiting on Jay Powell
September 2, 2025 DOWNLOAD
View all Reports

Region: Philippines

Bonds Market Movements Top Picks Issuer List
  • Top Picks
  • San Miguel Corporation
Sovereign Bonds

San Miguel Corporation

  • Sector: Manufacturing
  • Sub Sector: Diversified Conglomerates
  • Country: Philippines
  • Region: Philippines
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Fundamental View

AS OF 27 May 2025
  • SMC’s FY24 earnings and credit metrics EBITDA improved YoY as we had expected from resilient broad-based demand recovery, lower thermal coal input costs, new project contributions, and good cost control measures.

  • We are comfortable with SMC’s large diversified operations and dominant market share in key sectors, which could outweigh its persisting high airport and infrastructure capex.

  • We see low non-call risk for the c.2025 and c.2026 perps in the SMC complex, given SMC’s strong ability and willingness to repay earlier perps at SMC GP, good access to diverse funding channels, and deep reputational concerns upon a non-call.

Business Description

AS OF 27 May 2025
  • SMC is a massive conglomerate in the Philippines with business interests across six business segments: Food & Beverage (F&B), fuel refining and retailing, power, packaging, infrastructure, and others.
  • Its F&B business is operated through San Miguel Food & Beverage, the largest F&B company in the Philippines with three main divisions: Beer and Non-alcoholic Beverage (including beers and juices), Spirits (gin and Chinese wine), and Food (including packaged foods, animal feeds, poultry and fresh meats).
  • SMC’s fuel refining and retailing business is operated through Petron Corporation (~68% stake), the largest oil refining and retailing company in the Philippines, and one of the largest in Malaysia. Petron has a total refining capacity of ~268k barrels/day.
  • SMC’s power business is operated through SMC Global Power Holdings (SMC GP, 100% stake), one of the largest power generating companies in the Philippines. It maintains a diversified portfolio across coal (62%), natural gas (26%), and renewable energy (12%) sources.
  • Through its packaging business, it manufactures glass containers, plastic crates, pellets, bottles and caps, aluminium cans, and other types of packaging products.
  • It operates its Infrastructure business through San Miguel Holdings Corp (SMHC), in which it holds a 100% stake. It currently operates ~190 km of toll roads in the country, connecting high-traffic, arterial routes in Luzon.

Risk & Catalysts

AS OF 27 May 2025
  • SMC’s revenues are concentrated in the Philippines (~80%), which poses geographical concentration risk.

  • SMC incurs significant capex, particularly in its power/energy and infrastructure businesses. In October 2020, SMC began construction of the mega New Manila International Airport (requires ~PHP 750 bn of capex spread over 5-7 years). This could keep SMC’s credit metrics elevated and free cash flows in negative territory.

  • 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.

Key Metric

AS OF 27 May 2025
PHP bn FY22 FY23 FY24 1Q24 1Q25
Debt to Book Cap 72.3% 71.6% 73.0% 72.0% 71.0%
Net Debt to Book Cap 58.5% 60.4% 61.2% 60.6% 58.0%
Debt/Total Equity 261.3% 251.9% 269.9% 256.7% 244.8%
Debt/Total Assets 69.8% 68.1% 68.2% 68.0% 68.4%
Gross Leverage 9.1x 8.4x 8.3x 8.2x 7.9x
Net Leverage 7.4x 7.1x 7.0x 6.9x 6.5x
Interest Coverage 2.8x 2.1x 2.1x 2.1x 2.1x
EBITDA Margin 12.2% 13.8% 14.0% 12.5% 15.6%
Scroll to view columns right arrow

CreditSight View Comment

AS OF 23 Jul 2025

We have a Market perform recommendation on SMC and its sole c.Jul-25 $ perp; we see limited extension risk for SMC’s perp, yet we don’t see much price upside from current levels. SMC’s c.Jul-2025 trades close to par and fairly to Ayala Corp’s c.Sep-2026 in our view. We like SMC’s dominant market position in multiple sectors, long operating track record and diversified operations. Yet it incurs sizable airport and infrastructure capex that would likely keep its credit metrics elevated and free cash flows negative. Meanwhile, we remain watchful of SMC’s ability to support SMC GP past 2025.

Recommendation Reviewed: July 23, 2025

Recommendation Changed: April 05, 2023

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Bonds Market Movements Top Picks Issuer List
  • Top Picks
  • UnionBank of the Philippines
Sovereign Bonds

UnionBank of the Philippines

  • Sector: Financial Services
  • Sub Sector: Banks
  • Region: Philippines
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Fundamental View

AS OF 19 May 2025
  • The bank has historically generated higher returns than peers, but it geared its focus significantly towards the retail segment through acquiring Citi’s Philippine retail portfolio in 2022 and organic growth, which brought retail loans to more than half the total book.

  • Returns have suffered despite the good boost to core revenues, as asset quality deterioration from the riskier growth direction resulted in high credit costs which we have forewarned. Continued rounds of capital infusions from shareholders have thus been required. The reserve cover is maintained relatively thin.

Business Description

AS OF 19 May 2025
  • UnionBank of the Philippines was incorporated in 1968, and listed on the Philippine Stock Exchange in June 1992. Principal shareholders are Aboitiz Equity Ventures (49.66%), Insular Life (16%), & Social Security System (18%).
  • UBP undertook mergers with International Corporate Bank in 1994 and International Exchange Bank in 2006. City Savings Bank (a thrift bank) was purchased in Jan 2013. City Savings received merger approval with PR Savings (a bank engaged in motorcycle, agri-machinery, & teachers' salary loans) in Dec 2018 from the BSP. It acquired the Citi Philippines retail franchise in 2022.
  • The loan book is broadly split 38% wholesale loans and 62% retail loans (comprising 34% credit cards, 21% mortgages and 7% salary loans at the parent, 36% teachers loans, salary loans and motorcycle loans by the thrift bank subsidiary, City Savings Bank, and 1% UnionDigital) at Mar-25.

Risk & Catalysts

AS OF 19 May 2025
  • Any rating downgrade of the Philippine sovereign or reduction of shareholding by Aboitiz Equity Ventures would negatively impact UBP.

  • The bank’s aggressive retail expansion has improved the NIM, but negatively impacted overall profitability because of high credit costs (particularly since 2H23) which we have forewarned. We continue to dislike its focus on riskier retail given the already large loan book exposure. It is now focusing on lower risk, shorter term loans at UnionDigital, but the improvement in credit costs have been slow to come through given fallout from higher risk taking in other segments.

  • The bank however benefits from good shareholder support; it successfully completed a third stock rights offering of PHP 10 bn in 2Q24 (2023: PHP 12 bn; 2022: PHP 40 bn) to shore up capital. Lower opex from 2Q24 onwards is also aiding the bottomline.

Key Metric

AS OF 19 May 2025
PHP mn FY21 FY22 FY23 FY24 1Q25
Net Interest Margin 4.60% 4.80% 5.50% 6.00% 6.30%
Reported ROA (Cumulative) 1.6% 1.3% 0.8% 1.1% 0.5%
Reported ROE (Cumulative) 11.5% 9.7% 5.6% 6.4% 2.9%
PPP ROA 2.59% 2.17% 2.31% 3.08% 2.74%
CET1 Ratio 16.3% 11.3% 13.9% 15.6% 14.9%
Total Equity/Total Assets 13.5% 13.6% 15.3% 17.1% 16.8%
Gross NPL Ratio 5.00% 4.80% 6.27% 6.89% 6.90%
Net LDR 63.1% 67.4% 73.8% 77.3% 74.6%
Liquidity Coverage Ratio 272% 148% 163% 250% n/m
Net Stable Funding Ratio 149% 124% 124% 128% n/m
Scroll to view columns right arrow

CreditSight View Comment

AS OF 19 Aug 2025

UBP’s NIM and core revenue generation is strong thanks to its pivot towards higher yielding retail via organic growth and acquiring Citi’s local retail portfolio. However, returns have suffered as the asset quality repercussions which we have forewarned from its aggressive growth strategy towards the risky retail segments have come through, with elevated credit costs since 2H23. It has slowed loan growth but credit costs have not shown signs of stabilisation given a still high appetite for risk. The reserve cover is maintained relatively thin. Continued shareholder support with yet another stock rights offering in 2Q24 has ensured sufficient capital for now. We drop coverage on UBP given the impending maturity of its sole $ bond in Oct-25.

Recommendation Reviewed: August 19, 2025

Recommendation Changed: January 01, 1970

see more issuers DOWNLOAD PDF
Recommended Issuers

Featured Issuers

Bank of Philippine Islands

Bond:
BPIPM 5 30
Credit Rating:
BBB
Read Details

SK Hynix

Bond:
HYUELE 4.375 30
Credit Rating:
Baa2/BBB/BBB ​
Read Details

Hyundai Motor

Bond:
HYNMTR 5.4 31
Credit Rating:
A3 / A- / A-
Read Details

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