- 6 days ago
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00:00We've just been talking about the weakness in the Philippine PESO.
00:03What's your take on the weakness we're seeing right now?
00:06Yeah, with the weakness, I think the prices will be higher on top of the oil crisis.
00:13And maybe the foreign investors will not look so kindly upon us because of the PESO exchange.
00:21But it's not a reflection of the fundamentals in the country?
00:23No, the country is quite, I mean, everything is still as is, except maybe prices are higher.
00:31The business is still doing okay.
00:32Consumer market is strong, it's still strong.
00:36And there are still expansions in the capital market.
00:43And I think the fundamentals are still there, except that maybe prices will be higher.
00:51We'll have higher OPEX, then we'll have lower margin.
00:55But I think it's about time that we also rethink about efficiency.
01:01Are businesses looking for the BSP to intervene, prop up the currency, because it adds to input
01:07costs for businesses, right?
01:09Imports become more expensive.
01:11Yes.
01:11That hurts businesses and margins.
01:13Yes, because we import a lot of our goods and also raw materials.
01:18So, if we intervene in the FX market, that would be good for us.
01:24So, would you like to see a more aggressive approach?
01:27We saw how the BSP prop up the currency when it was close to 60, but should it do more?
01:33If it can, we would appreciate that.
01:37Should the BSP raise rates?
01:40Yes.
01:41I think there's no choice.
01:43We have to raise rates because of what is happening now.
01:48And I guess in the past, we went a little bit too low.
01:53So, it's a natural consequence that we will just have to go up higher.
01:57But as to how much, I think they know their job.
02:01But we expect the interest to go a bit higher.
02:04Might rates be increased at the next meeting in April?
02:09Probably.
02:11I don't want to influence them, but probably.
02:14It makes sense for the BSP to raise rates at the next meeting.
02:17It does make sense also for the FX.
02:20Tessie, let's take a look at the impact of the Iran war and high oil prices on your businesses.
02:25Which ones have been vulnerable?
02:29Most of them will be vulnerable in the sense that our OPEX will be high because it's not
02:35only on the oil.
02:36The byproducts of the oils will all be rising.
02:42So, generally, everything will be higher.
02:45Can you quantify the impact on your businesses, let's say retail, because consumption obviously
02:51is hit by higher prices in the country.
02:54It will soften a bit, but it will go up again because, you know, they all have to buy.
02:59I mean, the consumer market is still there.
03:02They have to buy something.
03:04So, right now, if they are concerned, they buy only the essentials.
03:09And when they get used to it, then they go back to buy the discretionary.
03:14What are you seeing particularly?
03:16What trends are you looking at right now on the back of the Iran war?
03:20Softening for a while.
03:21I hope, you know, it depends upon how long the war will be.
03:24How much of a softening are you seeing?
03:28Maybe in terms of growth, perhaps it will be 5%.
03:33So, then we were hoping to make it up at the end of the year.
03:37And which are the businesses which are more resilient?
03:43I guess we are all in the consumer side.
03:47Maybe the banking will be more resilient.
03:50Why?
03:51Why so?
03:52Because it doesn't have that much asset except, you know, I mean, it doesn't really store assets.
04:00But given what's happening in the world today and the impact on investors' sentiment as well as consumers,
04:06might you see non-performing loans actually rise on the back of that?
04:09We have gone through that in the past and it's not significant, so I'm not concerned about that.
04:18Is this a good time for SM Investments to be looking at expansion or are you putting things on hold?
04:25No, no. We continue with our expansion.
04:27That's why the capital investments are still going on.
04:31We, it's business as usual, except that we have to watch our OPEX.
04:35We have to, I mean, we have to watch our margins will be affected.
04:41But in a way, like in the COVID time, we'll have to be more efficient.
04:49But with costs getting higher, should you be holding back?
04:53I mean, you know, for the businesses like logistics, shipping costs are higher.
04:57Are you not seeing higher shipping costs?
04:59Yes, I see that.
05:00I see that, and as a matter of fact, I spoke to them yesterday about it.
05:04But they know how to manage it, so I'm confident that it will be okay.
05:07What are you seeing in terms of shipping costs?
05:09How much higher are they?
05:10At what stage might you be concerned about?
05:13It could be upwards of 20%.
05:15That's currently?
05:16Yeah.
05:17No, I mean because of this conflict.
05:20But, you know, people still have to ship.
05:22People, you know, this transport still has to be there.
05:28But what kind of alternatives are you relying on?
05:32I mean, in terms of shipping, where are your products getting shipped from to headed?
05:38Well, they will look into the efficiency in the system.
05:41But I hope that they don't stop shipping.
05:43I mean, you know, transporting goods.
05:46What's the biggest concern for you right now?
05:47I mean, you seem to be quite optimistic that things will bounce back.
05:51I am optimistic because I view this as a temporary setback.
05:56And I hope that's temporary.
05:58And the Philippines have gone through a lot of this.
06:01And I hope that this is just one of them.
06:03Maybe a bit major, but one of them.
06:05But growth may see?
06:07Growth will be affected.
06:11Perhaps we may not be able to grow as much because of the external factor.
06:15But it will be good if we still grow.
06:17I mean, I think we would still grow.
06:20You know, the Philippines is often seen, or rather SM Investments is seen as a proxy to the economy.
06:25What are the biggest concerns that you have in the economy?
06:32It's the softening of the consumer demands.
06:35But everything seems to be doing okay.
06:38So there will be expansions of market.
06:41There will be urbanization.
06:42So I guess it will make up for the reductions in the demand.
06:47But can business be as usual when some, you know, across industries are talking about possibly fuel shortages and consumption
06:58getting hit?
06:59Yeah, business will not be as usual in the sense that you have to balance a lot of things.
07:04You have to replace a lot of things.
07:06So it's not business as usual in that aspect.
07:09But in terms of growth, we still have to grow.
07:13What are you balancing?
07:15The supply, the volume of the supply, the prices of the supply, the market demands.
07:22We will have to balance it.
07:24So in a way, our margins may be affected.
07:27In terms of input costs, where are you seeing the biggest cost increases?
07:31We are an import country.
07:34And I guess most of them will have to increase.
07:37But for the business?
07:38Yes.
07:39I mean, for us, we import a lot of things too.
07:42So except for the bank, which does not have, which doesn't import, it's not an asset company.
07:49But for all the others, we do import.
07:51How is the property sector doing, Tessie?
07:54Property is okay.
07:56It's not, it's not very, it's, it's not as strong, but I can see something going up.
08:03And so, which means that in spite of all of this factor, they are still buying.
08:09When you say that the impact has not been so much, can you, can you quantify that?
08:14Can you give a number?
08:15We have, there was a softening last year.
08:18And I guess this year we see some increases in the, in the sales.
08:23And so, which means the consumer, the house, the home buyers consumer, it's not really that, I mean, it's affected,
08:32but not as much.
08:3310% increase in sales, 20% increase in sales.
08:3710% increase in sales would already be good for us.
08:39Is that what you're seeing?
08:41Yeah.
08:42So then we control the effects.
08:43Might, might you see a greater increase once the Iran war is over and sentiment returns?
08:49Yes.
08:50Yes, yes.
08:51I think so.
08:52I think there's, the demand is always there.
08:54There's been a lot of talk about the disruption that AI will bring.
08:58It's, is that impacting, you know, demand for office spaces?
09:04Yes.
09:05For office spaces.
09:06Yes.
09:07But, you know, we need AI for productivity, for the customer front and for the back room.
09:12So, in a way, maybe one industries may be affected, but the other industries can be more productive.
09:19Hmm.
09:20So, in terms of office space, what are you seeing?
09:24What are you targeting?
09:25What's the estimates that you have for the next 12, 24 months?
09:28Uh, we are still watching it.
09:31Uh, so we thought that if there are more businesses, uh, somehow they will need, they will need some offices.
09:37Uh, you know, I think most of the business or even on the retail or office area, they do need
09:44something which is, uh, which is a structure rather than all digital.
09:49Hmm.
09:50Because the trust is also on something, uh, they want to, the consumer also want to see something that is,
09:56uh, structured.
09:56Which businesses and which sectors would require those spaces, you think?
10:01Oh.
10:01I mean, we talk about how tech companies are expanding and they're occupying these spaces.
10:05What are you seeing?
10:07Uh, if there are more businesses that are coming in, obviously they do need a place where they can meet
10:12their, uh, their customer.
10:14So, maybe they will not get as much as the BPO, but, uh, the BPO will reduce, but I guess
10:21they still need some physical space.
10:23So, I think that it's a change of business model.
10:28So, in that, in that way, then we'll just go to other, uh, other building structure, other purpose.
10:35BPO intact or not intact?
10:37BPO intact will still be there, but maybe on a reduced volume.
10:43But this one is coming in slowly, so right now we're still okay.
10:46Uh, and so it's a, it's a slow trend anyway.
10:51Mm-hmm.
10:51So, we're just watching it.
10:53You talked about how AI can be tapped to increase productivity.
10:57How are you deploying AI within your companies, within your businesses?
11:01Uh, yeah, we're still learning, but, you know, right now we're just doing on the customer front.
11:05And some of them on the, on the back room, productivity.
11:10So, we're not really reducing people.
11:12And the expense is also high in terms of technology.
11:16But, you know, we are seeing more productivity.
11:19Mm-hmm.
11:20You're not reducing people right now.
11:22Do you see AI eventually, you know, prompting you to reduce people?
11:26No.
11:26It's just that a change of work.
11:29Mm-hmm.
11:29Change of work.
11:30In what sense?
11:31And a lot of them will be, will be more on customer front,
11:34which means you really have to go out and meet your customer.
11:37Mm-hmm.
11:37But, as you hire for an AI future, are you looking for different attributes from potential employees?
11:48Oh, yeah.
11:49Yeah.
11:49They will have to learn, learn the, some of the, how to go about in the technologies that
11:57we have, we are employing.
11:59I, it's a, there's a training anyway.
12:01And we go into it slowly, so there's not much big disruptions in terms of employment.
12:07Mm-hmm.
12:07Uh, our, our people will be, will be, um, redeployed to more on the customer front.
12:14Because for us, we believe that customers should not only be on the digital, they should also be able to
12:19reach them on the physical structure.
12:30Mm-hmm.
12:31To, to upskill them, upskill those, uh, those group of people.
12:36Mm-hmm.
12:36Are you investing heavily in AI for the companies?
12:39Not really, but we are there.
12:41I cannot say heavily, but we are getting there.
12:45Why not, Tessie?
12:46They say AI is the future.
12:47No, we still believe that, you know, things have to go on slowly, uh, according to the, uh, according to
12:54the customer, uh, requirement.
12:56And the, what, not many customers do like to deal with AI purely.
13:02Tessie.
13:03So, so we're still very, very face-to-face oriented.
13:07We give the personal touch.
13:08We'veeszed them all the time to take rectitude and high school funds to takeibe program with high wiI on Canada.
13:08Our, given a terminator
13:08Our practices in this country.
13:09What's already done?