Conglomerates in the Philippines and Vietnam are entering their most demanding investment cycle to date, which could test their funding flexibility, debt appetite and fiscal discipline more than any prior expansion, SandP Global Ratings said.
In a note to clients on Thursday, the debt watcher estimated that major companies in the two countries would invest about $185 billion in new ventures outside their core businesses over the next decade. This is roughly 2.5 times their capital spending in the past 10 years.
The analysis covered five Philippine conglomerates: Aboitiz Equity Ventures Inc., Ayala Corp., JG Summit Holdings Inc., San Miguel Corp. and SM Investments Corp.
It also covered four from Vietnam: FPT Corp., Hoa Phat Group Joint Stock Co., Masan Group Corp. and Vingroup Joint Stock Co.
Nearly two-thirds of the estimated outlay, SandP said, is earmarked for infrastructure and renewable energy projects.
The report said the four Vietnam conglomerates it studied would likely spend $80 billion in infrastructure over the next decade, with a particular focus on high-speed railways and fossil fueled power plants.
Renewable energy
Top Philippine companies, meanwhile, were projected to invest up to $28 billion in renewable energy-or about 20 percent of their total capital expenditure plans-supported by what SandP called ‘generally supportive’ government policies.
SandP said the region’s largest conglomerates are not starting from a weak position: mature core operations and access to deep funding pools give them a credible shot at expanding into high-barrier sectors.
‘Despite their diversification efforts, the conglomerates’ operational identity will remain largely defined by long-established core segments,’ SandP said.
‘In our view, the conglomerates will have to demonstrate competency outside of their core business and withstand competition,’ it added.
Still, the debt watcher said the scale and nature of these investments could push the conglomerates’ indebtedness beyond peer norms, raising questions about long-term capital structure and risk tolerance.
‘The risks are significant,’ SandP noted. ‘Venturing into less synergistic and technically complex sectors entails higher execution risks. The investment horizon is also likely to be long, and it remains uncertain when and whether operations will be profitable.’
Call for financial discipline
Looking ahead, SandP said Philippine conglomerates would benefit from robust cash flow and financial discipline, helping contain borrowing levels. However, it noted that debt-funded investments are driving a spike in leverage among Vietnamese peers.
To bankroll their expansion plans, conglomerates are expected to continue relying on domestic funding sources, with their scale and brand recognition supporting favorable access to local capital.
Even so, SandP said offshore funding-while inherently more volatile-remains a viable option for firms with strong operating track records, especially if interest rates fall and local currencies stabilize against the US dollar.
‘The challenge ahead is about diversifying funding access and building business models agile enough to support innovation through the next economic cycle,’ SandP said.
‘How conglomerates in the Philippines and Vietnam resolve today’s funding choices will not just shape their balance sheets but their capacity to invest in transformation, sustainability, and new markets,’ it added.