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$ICT Up-Rates, $SM Down-Rates: When the Market Puts a Premium on “Global” and a Discount on “Domestic”

 


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Disclaimer: This is for informational purposes and is not investment advice. Figures are taken from company disclosures and exchange data; valuation ratios include the author’s calculations based on cited inputs.



The market has been running a split screen: ICTSI’s valuation has been re-rated upward, while SM’s has been marked down—despite both being best-in-class franchises. The cleanest way to describe what’s happening is multiple expansion versus multiple compression: the market is willing to pay more for ICTSI’s earnings stream, and less for SM’s—even if SM remains profitable and resilient.

The bridge between price and valuation is always the same question: what did the latest quarter do to conviction? In their 3Q 2025 SEC Form 17-Qs, ICTSI delivered the kind of numbers that investors tend to reward with a higher multiple—double-digit growth, margin lift, and strong operating cash generation.
SM, meanwhile, showed steady but moderating growth, with a visible soft spot in property revenue recognition and a balance sheet/cash flow mix that could keep the market cautious—higher capex, higher debt, and lower cash. 

ICTSI: the quarter that justifies a premium

If ICTSI’s stock has been trending up, its 3Q filing gives investors the fundamental rationale.

For the nine months ended September 30, 2025, ICTSI posted gross revenues from port operations of US$2.338B, up from the prior year, alongside a step-up in profitability: EBITDA rose to US$1.544B and net income reached US$813.8M, with net income attributable to equity holders at US$751.6M.
Volume corroborated the earnings momentum: consolidated throughput reached 10.687M TEUs for the nine months, higher year-on-year. 

That combination—volume growth plus operating leverage—is precisely what commands multiple expansion in infrastructure-like businesses. And it wasn’t only the income statement doing the work. ICTSI also generated US$1.284B in net cash provided by operating activities in the nine months—real cash, not just accounting earnings. 

Investors also like to see that growth doesn’t come at the expense of balance sheet discipline. ICTSI’s filing shows short-term loans were fully repaid during the nine-month period, even as the company continued to fund expansion. 

Then there’s capital allocation. ICTSI raised its regular cash dividend per share to US$0.247 (₱14.16) from US$0.167 (₱9.35) the year prior—an explicit “cash confidence” signal.
Meanwhile, it kept investing for the next cycle: capex for the nine months climbed to US$449.6M, supporting expansion and asset upgrades across regions.

In short: ICTSI’s 3Q numbers read like an investor’s checklist for re-rating: growing volumes, expanding earnings, strong operating cashflow, continued capex, and visible shareholder returns.
That is how a market justifies paying a premium multiple—and why valuation can trend up with the price. 

SM: still profitable, but the filing explains why the market stays cautious

SM’s valuation trend is down because the business stopped earning. The 17-Q shows it remains a profit machine. But the market doesn’t de-rate on profit alone; it de-rates on slowing momentum, mixed segment signals, and capital intensity under a domestic macro cloud.

Start with 3Q itself. For the three months ended September 30, 2025, SM reported revenues of ₱163.08B and operating income of ₱38.04B, with net income of ₱30.00B and net income attributable to the parent of ₱21.83B.

For the nine months, SM delivered ₱482.28B in revenues and ₱113.59B in operating income, with ₱88.79B net income and ₱64.39B attributable to the parent—still growing year-on-year, but at a pace that the market may read as “solid, not exciting.”

The most valuation-relevant detail is the segment that often drives sentiment: property. SM’s real estate sales declined: ₱31.20B for nine months (down from ₱31.80B) and ₱11.18B for 3Q (down from ₱12.21B).
That matters because in conglomerates, it’s often the “swing factor” segment—property—where investors look for upside torque. When that line item trends down, the multiple tends to compress, even if retail and banking keep the engine running. 

Cash and capital intensity also leaned the “cautious” way. SM’s cash and cash equivalents fell to ₱85.78B from ₱112.53B at year-end, while net cash from operating activities was ₱63.71B, roughly flat/slightly down year-on-year.

At the same time, investment spending remained heavy: additions to investment properties reached ₱57.91B (up from ₱45.92B), reflecting ongoing build-out. 

Debt trends weren’t alarming for a conglomerate of SM’s scale, but they reinforce the market’s “domestic cycle + capex” discount: long-term debt rose to ₱492.42B (from ₱476.50B). 

Capital returns were meaningful—yet can be interpreted two ways by investors. SM declared dividends, including ₱11.00 regular + ₱2.00 special per share in 2025, and it initiated a buyback program of up to ₱60.0B, with ₱2.8B spent to repurchase 3.7M shares by September 30.

In an up-rating environment, that’s bullish. In a down-rating environment, the market may still ask: are buybacks a substitute for growth re-acceleration, or a complement to it? 

In short: SM’s 3Q filing supports why valuation can trend down even while earnings rise—property sales slipped, cash declined, capex remained heavy, and debt inched up, all within a domestic macro narrative the market has been discounting. 

The investor takeaway: the market is pricing “earnings quality” as much as “earnings level”

ICTSI is being rewarded because it delivered what the market loves to underwrite at a higher multiple: global throughput growth + operating leverage + cash flow + rising dividends, backed by continued expansion capex.

SM is being discounted because the quarter reinforces the parts of the domestic story investors are least willing to pay up for right now: property softness, capital intensity, and a cash/debt mix that invites caution, even as profits remain strong.

A simple “watchlist” for the next re-rating leg

  • ICTSI (defend the premium): watch throughput, revenue growth persistence, and whether operating cash flow continues to comfortably fund elevated capex and dividends. 
  • SM (shrink the discount): watch for stabilization/re-acceleration in real estate sales, plus a steadier cash trajectory while capex remains high.

We’ve been blogging for free. If you enjoy our content, consider supporting us!

Disclaimer: This is for informational purposes and is not investment advice. Figures are taken from company disclosures and exchange data; valuation ratios include the author’s calculations based on cited inputs.

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