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Politics

CEO in the news: Dennis Uy rides the Philippine president's coattails to success

Love for Davao and ambition unite Phoenix Petroleum CEO and Rodrigo Duterte

Phoenix Petroleum CEO Dennis Uy, seen here outside the company's headquarters in Davao, says he has no plans to move the main office to a more central location. (Photo by Kim Ignacio)

MANILA When Phoenix Petroleum Philippines celebrated the 10th anniversary of its listing at an event at the Philippine Stock Exchange on July 11, an unlikely special guest was on hand: President Rodrigo Duterte.

The leader has brushed off previous invitations to the bourse and has made no secret of his aversion to the markets, once suggesting he could hardly decipher stock charts.

But here he was, and he was positively gushing about Phoenix.

"Your inspiring story exemplifies the resilience of the Filipino entrepreneurial spirit," said Duterte, who tends to be stingy with his praise for big companies in public. "It is my hope it will encourage other companies to invest in the stock exchange, especially aspiring businessmen."

In his speech, Phoenix founder and CEO Dennis Uy was similarly effusive. "I thank President Duterte for being our inspiration and my inspiration -- a leader who is fair and just, decisive and a man of vision and action," he told investors and stockbrokers who had gathered at the exchange.

The mutual admiration stems from their shared history and geographical roots. Phoenix traces its beginnings to the southern city of Davao, where the company is headquartered and where Duterte was mayor for over 20 years before winning the May 2016 elections by a landslide. Uy was one of the local businessmen who helped finance Duterte's successful bid, which stunned the political and business elite in Manila.

"He is a mentor in life [and] in leadership," Uy told the Nikkei Asian Review.

Duterte said he "personally witnessed" Phoenix's ascent, watching it transform into a national player that now goes head to head with the likes of such multinationals as Royal Dutch Shell and Chevron of the U.S. Uy said Duterte was no mere passive observer, but instrumental in the company's success.

"He encouraged entrepreneurs by making it easy to do business by removing bureaucracy," the CEO said at the exchange, recalling the ease of doing business in Davao with Duterte as mayor. "This is how we were able to build [gas] stations in less than three months, compared to over six months in other parts of the country."

HOMEGROWN SUCCESS Phoenix has become a symbol of the type of homegrown enterprises that have flourished in the business environment that Duterte created. In 2016, it saw its revenue rise 2%, to 30.58 billion pesos ($643 million), and its net profit increase 21%, to 1.09 billion pesos. But the Philippine president may soon have a longer list of corporate names to cite when he talks about Davao success stories.

Uy has been aggressively building up his business empire since Duterte came to power on June 30 last year.

On Aug. 8, the CEO listed Chelsea Logistics Holdings on the PSE, raising 5.84 billion pesos through an initial public offering. The company, established in Davao in 2006 to support the logistical needs of Phoenix, is looking to acquire more vessels to help the company expand in Southeast Asia.

But that is just one of Uy's latest moves. In September last year, he launched a takeover of 2GO Group, the nation's largest end-to-end logistics company, despite efforts by shareholders at the target company to block the move. In May this year, he secured a license to build a $341 million resort and casino, as well as took out a $220 million foreign loan. Uy recently purchased Enderun Colleges, a hospitality management school, and Petronas Energy Philippines, a liquefied petroleum gas retailer.

But the serial entrepreneur had his eyes on the big time well before Duterte came to power. Business is in Uy's blood. In the 1930s, his grandparents emigrated to Davao from the Chinese province of Fujian. They went into copra trading and other businesses, including mining and retailing. Some members of the family went into politics in Mindanao.

Before founding Phoenix in 2002, the 43-year-old Uy managed the family's businesses, which included a car dealership. He also opened a chain of restaurants in Davao, which he later sold to his sister.

In 2002, four years after the Philippines deregulated its oil industry, drawing such foreign players as Thailand's PTT and France's Total, Uy started thinking about going into the business.

After scraping together 30 million pesos from his savings, inheritance and stock investments, Uy struck out on his own. "I needed to chart my own destiny," he said.

He was just 28 when he established Phoenix. "I told myself: I'll take a gamble while I'm young," Uy said. "My motto at that time was 'no guts, no glory.'"

In 2006, Uy founded Chelsea Shipping, the predecessor of Chelsea Logistics, to ensure that Phoenix had a stable supply of oil. Until then, Phoenix depended on rented tankers.

Today, Chelsea is a leading shipper that serves such big-name clients as budget airline Cebu Air and Phoenix rival Petron, a unit of conglomerate San Miguel, best known for its eponymous beer. In 2007, Phoenix went public, giving it the money needed to grow into the country's largest independent fuel retailer in 2012. Despite those achievements, however, Uy and his empire largely remained off the public's radar.

In May, Chelsea Logistics obtained a $220 million loan from Bank of China as part of a $24 billion credit and investment pledge that Duterte secured during his visit to China in October. The money will be used to finance the expansion of the logistics business, Uy said.

POLITICAL TAIL WIND The CEO has also aligned his businesses with Duterte's priorities. In building a $341 million integrated resort on the island of Cebu, Uy hopes to woo Chinese tourists. He expects more Chinese visitors to flock to the country following Duterte's visit to China last year to boost economic ties.

Uy also believes Duterte can make the country safer, and therefore more attractive to tourists. When asked if he supports the anti-narcotics crackdown that has led to the deaths of thousands of suspected peddlers and users, the CEO said, "There's no other way."

On the logistics business side, too, Uy is likely to get a boost from Duterte's policies. The president wants to promote stronger links between rural and urban areas, which is expected to fuel inter-island movement in the archipelago and thus jack up demand for logistics services.

Investors like Uy. As of Aug. 18, shares in Phoenix have surged 93.55% since June 30, 2016, while 2GO has soared 186.11% -- even after a fresh audit of 2GO's books lopped 90% and 74% off its 2015 and 2016 earnings, respectively. These performances are especially impressive when considering that the benchmark PSE index rose just 2.83% over the same period.

Eduardo Francisco, president of BDO Capital and Investment, the underwriter of Chelsea's IPO, said the issue was three times oversubscribed -- although Chelsea's share price has languished since the listing.

In March, Uy received a vote of confidence from the Philippines' most valuable conglomerate when SM Investments acquired a roughly 30% stake in 2GO. SM's backing will better equip Uy to take on such giants as Metro Pacific Investments, an affiliate of Indonesia's Salim Group and Ayala Corp., a major Philippine conglomerate, which are also expanding into the country's fragmented logistics industry.

SM President Frederic DyBuncio, who sits on the boards of 2GO and Phoenix, likened Uy's business acumen to that of the Sy family, which owns SM. "He is an entrepreneur, and he has some very good ideas in growing the business," DyBuncio said.

Uy's appeal is not limited to domestic investors. Suitors from Japan, China, Southeast Asia and the Middle East -- all places that Duterte has visited -- have also approached the tycoon about possible partnerships.

A Phoenix gas station in Manila   © Reuters

First Grade Finance's Astro del Castillo said investors are encouraged by Uy's political connections, but that is not the primary drawing card. "You cannot do away with the political connection, but I don't think that's the main reason why investors are confident," del Castillo said. "It's mainly the potential of the sectors he is into."

In the Philippines, where regulatory and judicial institutions are not fully developed, businesspeople tend to align themselves with those who hold power. The top executives at San Miguel, the nation's biggest company, backed Grace Poe during the presidential election. But the company's president, Ramon Ang, swiftly changed his tune after the election, pledging to invest billions of pesos in Davao and Mindanao.

ON THE WRONG SIDE Businesspeople who have chosen not to embrace Duterte have sometimes paid the price. Roberto Ongpin, the former chairman of online casino company PhilWeb, whom Duterte once described as an "oligarch" he wanted "to destroy," sold off his controlling interest in the business.

In July, the Prieto family announced it was selling top broadsheet the Philippine Daily Inquirer to San Miguel's Ang after Duterte publicly slammed the paper for publishing reports that were critical of him. On Aug. 16, Duterte said he would evict the Prietos from a government property they are leasing.

The sailing has been far smoother for Uy, who has had the good fortune of being on the winning side of politics. Last year, he was appointed Duterte's official adviser for sports and tasked with helping the Philippines win its first Olympic gold at the 2020 Tokyo Games.

Uy insists that he does not use these ties to the top for personal gain. He cited the government's plan to impose a higher excise tax on petroleum products, which could threaten Phoenix. "I don't lobby," Uy said. "I just follow the rules."

Uy is just one member of an emerging group of Philippine tycoons riding high on the country's sizzling economic growth -- the second-quarter expansion of 6.5% was one of the biggest in Asia -- but the Phoenix CEO stands out for his sheer hunger to grow.

Like Duterte, who flies back to Davao almost every weekend, Uy is charismatic and passionate about his roots.

When it was suggested that moving Phoenix's headquarters to Manila would mean that most shareholders would not have to fly to Mindanao for the annual meetings, the CEO was unmoved. "So what?" he said. "I love Davao."

The rise of the tycoon from faraway Davao is symbolic of Duterte's dream of bringing the nation's riches to all corners of the country and not just allowing the power -- corporate and otherwise -- to remain concentrated in Manila.

The president's influence may have helped shape Uy's audacity, which will be tested once Duterte's popularity fades or his clout crumbles. The CEO, however, is confident that the business models he has created will succeed regardless of who calls the shots in the capital.

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