Philippine firms grow second wing in expansion in emerging Southeast Asian markets

03, Dec. 2019

Aboitiz Power Corp. is acquiring full interest in the Dam Nai Wind Farm in Vietnam, its first overseas investment. (Photo courtesy of Aboitiz Power)
Aboitiz Power Corp. is acquiring full interest in the Dam Nai Wind Farm in Vietnam, its first overseas investment. (Photo courtesy of Aboitiz Power)

By Darlene Basingan

MANILA, NNA – Philippine firms are ramping up their overseas ventures into Southeast Asia to increase their revenue streams amid growing competition in their home market although the protracted U.S.-China trade war that now impacts the global economy may rein in their ambitions.

Some market analysts said keener competition on a crowded local turf in some industries has driven even the giant Philippine firms to seek growth overseas especially in emerging neighboring markets with huge potential.

“The Philippine market is already becoming too saturated for some industries that there is already very limited room to make good profits,” Jessica Pineda, equity analyst at RCBC Securities Inc., the stock brokerage unit of the Rizal Commercial Banking Corp., told NNA in an email.

“Their aim is to diversify their income sources to obtain better returns given that there is a lot of competition from the local front,” said Manny Cruz, chief strategist at Papa Securities Corp., a local brokerage, citing the food service industry as an example.

Fast-food giant Jollibee Foods Corp. bought stakes from two U.S. chains, taking full ownership of Smashburger in December 2018, and the struggling Coffee Bean & Tea Leaf in July this year.

Famous for its fried chicken, Jollibee still dominates the Philippine fast-food market but now faces many new players offering lower value, said Cruz.

Ayala Corp., the oldest conglomerate in the Philippines, recently expanded into Myanmar, buying a 20 percent stake in Singapore-listed Yoma Strategic Holdings Inc., and another 20 percent stake in First Myanmar Investment Public Co., both owned by Myanmar’s leading conglomerate Serge Pun & Associates Group, totalling $237.5 million.

It sees Myanmar as a promising “underpenetrated” market which has been growing at a robust 6 percent year on year.

The country also has similar growth factors like the Philippines such as a growing consumer demand and a young population,” said Paolo Borromeo, head of the corporate strategy and development of Ayala, who shared his observations with NNA in an email.


Borromeo said the conglomerate, which began its business in the Philippines in the mid-1800s, will continue to look for more opportunities in Southeast Asia.

The company, which has diverse portfolio that includes real estate, banking, healthcare and telecommunications, now has a presence in five major markets in Southeast Asia including Indonesia, Malaysia, Thailand and Vietnam.

Recently, Aboitiz Power Corp., the energy unit of conglomerate Aboitiz and Co., announced it would acquire a 100 percent stake in a wind power facility in Vietnam for an estimated $46 million.

“We will continue to explore opportunities abroad especially in the renewable energy space,” Emmanuel V. Rubio, chief operating officer of Aboitiz Power, told NNA in an email.

In Indonesia, the toll unit arm of infrastructure conglomerate Metro Pacific Investments Corp. has taken full control of a local toll road operator and developer PT Margautama Nusantara this year. In 2018, it bought 49 percent stake at a Vietnam water facility.

Piper Chaucer Tan of brokerage firm Philstocks Financial Inc. pointed out that emerging Southeast Asian markets are more sustainable because of their young workforce, unlike the ageing populations in advanced economies.

The Asian Development Bank expects Southeast Asia’s growth to be moderate this year given the slight impact from the trade dispute between the U.S. and China. But this will be offset by strong consumer demand and recovery in the region in 2020.

The IMF recently downgraded its forecast of the world economic growth to 3 percent this year, the slowest since the global financial crisis in 2008. China’s economy grew 6 percent in the third quarter, the lowest in 27 years.

These factors may hold Philippine companies back from making more overseas moves, particularly in countries like China and the United States, said Cruz.

Despite the spat between the U.S. and China, some Philippine executives believe expanding into China is important for growth, according to a 2019 survey of CEOs by the Management Association of the Philippines.

SM Prime Holding Inc., which has slowed down its overseas expansion, has been expanding in China, investing up to 8 billion pesos ($157 million) in 2019 for the construction of its eighth mall and expansion of an existing one, according to reports. It is thinking of opening more malls in other Asian countries like Vietnam.

Cruz said that some companies may still opt to invest to China since it still reigns as the biggest consumer market in the world but they are likely to be more cautious and selective.