From a sequential basis, Petron Corp (PCORPM) has exhibited revenue and income improvement over the last 3 quarters driven by higher refined product prices and demand on the back of inventory restocking. NOCF has lagged somewhat due to higher working-capital requirements driven by an increase in receivables and inventories. These higher working-capital requirements would ease as we expect Petron’s NOCF to further improve on the back of strong refined product demand, selling prices and an expansion in its gross refining margins.
Although company leverage is high, the company’s capex requirements have been moderate and refinancing needs have been adequately met in the local currency debt markets. We are not anticipating any liquidity problems to immediately surface.
The Asian USD HY market has experienced heightened volatility over the past few months driven by the knock-on effects originating from Evergrande and in turn the China HY property sector. Even unrelated issuers in other geographies and sectors have not been spared. However, the Philippine corporate credit market has offered investors relief by being a relatively more defensive HY/EM region from a market perspective. This has been proven time and again in the past and in more recent months.