The Best Asian Performers
With the specter of $60-to-$70 oil hovering over energy-hungry Asia, a mad scramble is under way by regional oil and gas companies to lock up resources overseas and ramp up refinery capacity at home. That's why in Thailand, where oil imports are fast approaching 10% of the economy's gross domestic product, the country's most critical figure right now -- outside of Prime Minister Thaksin Shinawatra -- is probably Prasert Bunsumpun. The unassuming civil engineer is president of PTT PLC, a $15.7 billion state-controlled energy giant that is enjoying windfall profits at home thanks to inspired management and spiraling gas and diesel fuel prices.
The Bangkok company's second-quarter profits alone skyrocketed 30%, to $449 million, while sales jumped 50%. And no wonder, since PTT makes money all the way from the wellhead to the gas pump. PTT is now leveraging its supercharged shares -- up 40% over the last year -- to develop oil and gas assets from Algeria to Oman. "We want to have at least 20% of our revenues coming from international operations within five years," says Prasert.
At the Pinnacle
In many ways, PTT is emblematic of the sudden fortune visited upon hundreds of companies supplying Asia with the energy it needs to stoke its growth. What sets the Thai company and a handful of other top performers apart is a shared drive to prepare the stage for future growth through rapid acquisitions while maintaining stellar profits and rich shareholder returns. "The accounting standards are generally quite good, and there is a lot of interest [among global investors] in their acquisitions," notes Joanne Goh, a Singapore-based Asia emerging markets equity strategist with J.P. Morgan.
PTT's blockbuster returns helped land it at the pinnacle of BusinessWeek's first annual ranking of Asia's best-performing publicly listed companies. But it finds itself in good company. Indeed, the top four slots -- and 11 of the BW50 -- were captured by regional energy champions such as PetroChina, India's Oil and Natural Gas, and S-Oil of South Korea. No one economy dominates the top 50 rankings. But Northeast Asia was handsomely represented, with South Korean companies taking five of the top 10 and Japan 11 of the 50. Industries that stand out among the 50, in addition to oil and gas, include steel, shipping, construction, and electronics.
The new BusinessWeek ranking is drawn from the Standard & Poor's/Citigroup/Pan Asia Index, which is made up of major companies listed on established regional exchanges. (S&P, like BusinessWeek, is a division of The McGraw-Hill Companies. BusinessWeek's ranking is drawn from a list of 625 of the companies that met our criteria. The ranking uses a combination of financial measures for earnings and sales growth, plus return on assets and other benchmarks. Companies are evaluated over both one- and three-year time frames.
Whether based in Bangkok or Tokyo, basic materials suppliers were clearly the biggest winners. Investors have bid up the valuations of many of these stocks because of the high price of commodities and the powerful grip companies like PTT have on their home markets. What's more, the runup in prices comes at a time when governments in China, Thailand, and Indonesia are finally ready to dismantle subsidy regimes that kept prices of petroleum products artificially low.
China's biggest oil producer, PetroChina (No. 2), is a leading member of Asia's new energy aristocracy. Like PTT, it is in hypergrowth mode. In August it bid $4 billion for Canadian oil and gas company PetroKazakhstan. It also plans to spend $12 billion to develop a pipeline network stretching from Central Asia to its mainland refineries.
PetroChina's main state-controlled competitor for global petroleum resources resides across the Himalayas in India. State-run Oil and Natural Gas Corp. of India (No. 3) has bought up oil reserves in Sudan and Vietnam. But it regards Russia as one of its most important partners. It has a 20% stake in a $12.8 billion project to develop the oil and natural gas fields of Sakhalin in Russia's far east. And on Oct. 1, ONGC announced it had begun supplying natural gas and oil to the far east Russian province of Khabarovsk, and plans to start supplying the same oil to its home market in India within the year.
Producers, suppliers, and shippers of other raw materials are also a big component of the BW50, among them coal producers such as Indonesia's PT BUMI Resources and cargo-movers such as Malaysia International Shipping (MISC) and Japan's Mitsui OSK. The winner's circle is also brimming with steelmakers benefiting from the boom in building construction and auto sales, led by Tata Steel of India (No. 5) and South Korea's POSCO (No. 6).
Of course, there are plenty of leading lights in other sectors such as telecom and technology. Samsung Electronics made the top 10, while Taiwan Semiconductor Manufacturing (TSMC) was No. 11 and AU Optronics No. 13. Samsung, the highest ranked tech company (No. 9), has blown the socks off former mentor Sony Corp. (SNE ) in a number of critical categories under the leadership of CEO Yun Jong Yong. It is No. 1 in memory chips, a dominant force in cutting-edge LCD panels for televisions, and is making a serious run at Nokia Corp. and Motorola Inc. for leadership in feature-laden, high-end mobile phones. And the world's biggest chip foundry, TSMC, has continued to rake in steady profits despite a major turndown last year in chip prices. The secret? It pursues continuous cost savings and manufacturing excellence. It also invests heavily on the Chinese mainland, the fastest-growing chip market on the planet.
Making the BW50 requires that companies prove their worth even in the face of economic uncertainty. Among the disaster scenarios that could alter the profit picture in a big way: a full-blown global energy crisis, an unexpectedly severe contraction in China, or a dollar crash. Already there are signs the runup in prices for basic materials has peaked. Steel prices, for example, have fallen back from 2004 highs, the result of a glut of new mills coming online in China. That dip has evoked memories of the late 1990s, when prices of many commodities were stuck in the doldrums, trapping suppliers in a vicious cycle of price cuts and lower earnings.
Savvy chief executives are making plans now to ride out those kind of gyrations. Lee Ku Taek, CEO of steelmaker POSCO, is a big proponent of investing heavily in new production technologies to cut costs and keep his company at the head of the pack. Japanese heavy-equipment maker Komatsu Ltd. sees long-term profits in the construction boom under way in Brazil, Russia, India, and China.
Spin through the list, and you will find companies that have their acts together in more ways than one. True, some are enjoying the updraft from forces beyond their control, such as the dramatic upsurge in energy prices. But many of these share the competitive drive -- and strict attention to cost control -- of global peers in Europe and the U.S. They represent the very best in the fastest-growing region in the world.
By Brian Bremner in Hong Kong, with Bruce Einhorn and Frederik Balfour in Hong Kong, Dexter Roberts in Beijing, Assif Shameen in Singapore, Moon Ihlwan in Seoul, Ian Rowley and Kenji Hall in Tokyo, and Manjeet Kripalani in Bombay