PH blue-chip firms hit the big time

MANILA, Philippines—Four Philippine blue-chip firms made it to the elite list of 246 “durable” Asian companies drawn up by regional financial services group CLSA Asia-Pacific Markets.

The Hong Kong-based CLSA, a leading independent brokerage and investment group in the Asia-Pacific, recently published “The Moat Report,” which highlighted Asian companies that generated return ratios above cost of capital, sustained earnings growth, and were trading at “undemanding” valuations.

The local companies that made it to the regional list—Philippine Long Distance Telephone Co., SM Investments Corp., International Container Terminal Services Inc. and Jollibee Foods Corp.—are part of the main-share Philippine Stock Exchange index with the following index weights: 14.56 percent for PLDT; 6.08 percent, SMIC; 2.68 percent, ICTSI; and 2.43 percent, Jollibee.

The controlling stockholders of two of these blue chips—SMIC’s Henry Sy and ICTSI’s Enrique Razon—are on Forbes Magazine’s recent list of world billionaires (in US dollar terms).

“Economic moats” were cited as the basis for CLSA’s sifting of companies with durable competitive advantage.

American investment guru Warren Buffet previously coined the term “economic moat” to refer to the ability to sustain such an advantage.

Companies have a “moat” around their operation when they have a business franchise and pricing power that leads to wide margins and good return ratios, the CLSA report said.

CLSA Philippines, in a subsequent report, also said there were still other “moats” in the country, apart from the four blue chips that made it to the regional list. These are Aboitiz Power Corp., DMCI Holdings Inc., Univeral Robina Corp., Alliance Global Group Inc. and Phoenix Petroleum Philippines.

PLDT’s sister firm Metro Pacific Investments may also emerge as a powerhouse in the coming years, said the local unit of CLSA in a report dated April 1.

The local CLSA report, written by analyst Alfred Dy, explained that PLDT made it to the regional list after the country’s leading telco player succeeded in its bundling/convergence thrust “through affiliates such as Meralco and hospitals, allowing it to offer services [such as paying electric bills on the phone] that competitors will not be able to match.”

Dy noted that SMIC—the largest conglomerate in the Philippines—had been “savvy in capitalizing on the buying habits of the middle and mass markets.”

ICTSI was described as a “fast emerging” key player in medium-sized ports globally.

In the case of Jollibee, Dy said its nearest competitor McDonald’s Philippines was less than half the scale of Jollibee.

“With a strong balance sheet, the company is beginning to penetrate the vast China market,” Dy said.