Fried chicken to crayfish wraps: Philippines’ Jollibee eyes deals to grow

A customer walks past a Jollibee mascot at the entrance of a Jollibee franchise in Paranaque, Metro Manila. (Reuters)
Updated 18 February 2018

Fried chicken to crayfish wraps: Philippines’ Jollibee eyes deals to grow

MANILA/SINGAPORE: Filipino billionaire Tony Tan Caktiong, who has built Jollibee Foods Corp. into a near-4,000 store purveyor of sweet-style spaghetti, burgers and fried chicken, is looking to buy existing brands in mature markets to help fuel future growth.
Dominant at home, where Jollibee has 1,000 eponymous stores welcoming diners with its smiling bee logo, Tan now wants to reshape the $5 billion group as a global fast-food company, bankers and fund managers say.
Primary targets include the United States and China, where it already has joint ventures, including Dunkin’ Donuts .
Tan, 64, said at a company event in July that half of Jollibee’s total sales would come from overseas stores in the next five years. Currently, foreign stores including joint ventures account for 30 percent of sales.
This week, people familiar with the matter said Jollibee was considering bidding for Pret A Manger, a UK-based chain selling organic coffee and wholesome sandwiches to office workers. It is still working out a valuation and has not yet decided to bid, the people said.
“Jollibee has to keep chasing growth. They own pretty much every large chain in their home market,” said a regional banker who has dealt with the company. “They are definitely not shy when it comes to looking at mature markets.”
Ysmael Baysa, Jollibee’s chief finance officer, told Reuters this week that buying new businesses “has always been part of our growth strategy.”
Tan started out with two ice cream parlours in the 1970s, and expanded Jollibee rapidly into a fast food chain dubbed “the McDonald’s of the Philippines.” Forbes ranks him as the country’s eighth-wealthiest man.
“They see where they could utilize the knowledge and synergies they have,” said Robert Ramos at Unionbank, who helps manage $795 million in funds and holds Jollibee stock. “They are increasing the revenue stream beyond the businesses they have now... They are choosing businesses in line with their core competence.”
As discretionary incomes have grown in Asia, the region has become the second-largest fast food market globally after North America.
Jollibee has created new domestic brands and has tie-ups with foreign chains. It bought a stake in Highlands Coffee, which outsells Starbucks in Vietnam, and opened its own outlets in Saudi Arabia and the United States.
“Premium credit”
Jollibee’s interest in Pret A Manger — which owner Bridgepoint is said to be preparing for a US listing this year — comes just two years after Tan paid around $100 million for a 40 percent stake in US-based chain Smashburger, his biggest overseas deal to date.
“If Jollibee wanted to do a $1 billion acquisition, it will have access to capital. It’s very liquid whether overseas or onshore. Jollibee is a premium credit,” said a person close to the company, who was not authorized to speak to the media and asked not to be named.
“Jollibee is very clear where they would like to grow: the Philippines, China and the US”
In China, the company operates about 400 stores of various brands, including joint ventures.
While Jollibee’s original menu is a hit at home and among the diaspora of millions of Filipinos working overseas, it’s a challenge to broaden its appeal to international diners — hence the drive to acquire global brands.
Jollibee’s revenue has more than tripled over the past decade to 113.9 billion pesos ($2.2 billion), its net income has jumped to 6.16 billion pesos, powered by strong consumer spending in one of the world’s fastest-growing economies, and its shares trade at around 242 pesos each, up from 51.50 pesos a decade ago.
Other Philippine companies, too, have used their plentiful cash and access to bank credit to make overseas deals, such as Universal Robina Corp’s acquisition of Snackbrands Australia for $462 million last year, and Alliance Global Group’s earlier $291 million buy of Bodegas Fundador from Beam Suntory. ($1 = 50.9390 Philippine pesos)

Saudi stocks receive landmark emerging markets upgrade from MSCI

Updated 21 June 2018

Saudi stocks receive landmark emerging markets upgrade from MSCI

  • Market authorities in Saudi Arabia have introduced a series of reforms in the past 18 months
  • MSCI’s Emerging Market index is tracked by about $2 trillion in active and global funds

LONDON: Saudi Arabian equites are poised to attract up to $40 billion worth of foreign inflows, following a landmark decision by index provider MSCI to include the Kingdom’s stocks in its widely tracked Emerging Markets index.

"MSCI will include the MSCI Saudi Arabia Index in the MSCI Emerging Markets Index, representing on a pro forma basis a weight of approximately 2.6% of the index with 32 securities, following a two-step inclusion process," the MSCI said in a statement late on Wednesday night Riyadh time.

“Saudi Arabia’s inclusion in MSCI’s EM Index is a milestone achievement and will likely bring with it significant levels of foreign investment,” Salah Shamma, head of investment for MENA at Franklin Templeton Emerging Markets Equity, told Arab News. 

“It is a recognition of the progress Saudi Arabia has made in implementing its ambitious capital markets transformation agenda. The halo effect of such a move will be felt across the stock exchanges of the entire Gulf Cooperation Council (GCC).”

Market authorities in Saudi Arabia have introduced a series of reforms in the past 18 months to bring local capital markets more in line with international norms, including lower restrictions on international investors, and the introduction of short-selling and T+2 settlement cycles.

Such reforms prompted index provider FTSE Russell to upgrade the Kingdom to emerging market status in March, opening the country’s stocks up to billions worth of passive and active inflows from foreign investors.

MSCI’s Emerging Market index is tracked by about $2 trillion in active and global funds. The inclusion of Saudi stocks in the index, alongside FTSE Russell’s upgrade, is forecast to attract as much as $45 billion of foreign inflows from passive and active investors, according to estimates from Egyptian investment bank EFG Hermes. 

The upgrade announcement was widely expected by the region’s investment community, following a similar emerging markets upgrade announcement by fellow index provider FTSE Russell in March. 

“MSCI index inclusion will be a historic milestone for the Saudi market as it will allow for sticky institutional money to make an entry in 2019 which will help deepen the market,” said John Sfakianakis, director of economic research at the Gulf Research Center in Riyadh.