CLSA cites Phoenix Petroleum in recent report

MANILA, Philippines - Asia’s leading, independent brokerage and investment group CLSA Asia-Pacific Markets in a recent report named Phoenix Petroleum Philippines (PNX) one of the other economic moats in the Philippines, along with several top companies.

The report follows CLSA’s “The Moat Report” highlighting 246 companies in Asia that generated return ratios above cost of capital, sustained earnings growth, and were at undemanding valuations. “Economic moats” are the basis for this durable competitive advantage.

The moats, in medieval times, were deep wide ditches with water surrounding a fortress. Warren Buffet coined the term “economic moat” to refer to the ability to sustain such an advantage. Companies that have a moat around their operation can be said to have a business franchise. They generally have pricing power that leads to wide margins and good return ratios.

Out of the 246 companies CLSA mentioned, four are from the Philippines. These are PLDT, SM Investments, ICTSI, and Jollibee.

“Aside from the four companies mentioned, we believe that there are still other moats in the Philippines and these are Aboitiz Power, DMCI Holdings, Universal Robina, Alliance Global, and Phoenix,” said CLSA in their April 1, 2011 Market Outlook report written by analyst Alfred Dy.

CLSA cited Phoenix Petroleum’s strong 69 percent year-on-year earnings growth in 2011 underpinned by aggressive service station rollout this year, and inexpensive valuations (mid-single-digit PEs) further highlighted by strong earnings growth and 24-29 percent return on equity.

It said the company’s 8.8x PE at target price is still at a substantial 40 percent discount to the market PE.