Disclaimer. We are not representatives or employees or promoters of PowerFill and Aunicaj Fuel. We just invested in their co-ownership programs a few years back. Caveat emptor. Your money, your rules. Ultimately, you are the one responsible for the investment decisions you make.
Sorry if this next update took some time. Too many things going on. Now while we’re under ECQ, I have a little bit more time since there’s not much to do during ECQ. So brace yourself, detailed update ahead.
Prior to this, we published two articles relating to the gasoline station co-ownerships, specifically the one offered by PowerFill and Aunicaj Fuel (where’s Marz Fuel? Read on to find out). Here are the links to previous articles ICYMI:
- PowerFill and Marz Fuel Gas Station Co-ownerships: Initial Review
- Construction Updates on PowerFill and Marz Fuel
As of this writing, and prior to ECQ, both gasoline stations have been operational, income earning and dividend paying. Though when ECQ started, we received very few updates for both stations, due to various reasons — their office personnel are unable to go to work, or unable to work from home, due to ECQ their offices were required to close, the gas station itself is closed, etc.
Aunicaj last emailed us April 15 to inform us that they have temporarily closed the gas station in Cavite to ensure safety of personnel, also considering much smaller demand as people are not traveling much, and the very low oil prices right now.
Our last email from PowerFill is March 7 still talking about income updates. Our branch is in Isabela so with the GCQ in effect, I hope business starts to bounce back soon enough. I hope all of them are doing ok and safe, the people, the business, and our investments.
PowerFill Income Updates (Month 32 as of April2020)
Aug2017: Invested in PowerFill co-ownership program
May2019: Our assigned branch in Divisoria, Santiago, Isabela (near Ford Isabela) became operational May2019, so it’s turning 1 year old this year!
Apr2020: They send us email updates at least once amount, again prior to ECQ, regarding total sales and income. The dividend income meanwhile is credited quarterly. We received dividends for 2Q19, 3Q19 and 4Q19. 1Q20 dividend is still pending. Understandable.
The business results for a few months of operations are below. I opted to use monthly averages (May19 to Jan20) and won’t provide actual details to be fair to PowerFill and other co-owners of said branch (I hope they don’t mind me posting this), after all this business is private to us co-owners.
After all is said and done, income to be distributed to co-owners is 2.5% of gross sales.
The charitable Ilocana and I noticed that the gross sales and income figures do not change much month-on-month. It seems demand and business is just … steady. We’re hoping that it grows though but post-ECQ and with minimal travelling and low prices, there’s so much uncertainty.
The common package back then is to get a minimum of 40 shares (for P400K). So if you got the minimum package, you earn P3,645 per month or P10,934 per quarter, at least based on this particular branch.
Note that this income is on top of the 1% interest they paid out monthly due to delay in branch opening past month 12, assuming this applies to you. For our case, we got 8 months of those. Of course, once operational, this already stopped.
Rough ROI. Assuming income is constant (hopefully it grows though!), and including the 1% monthly interest we got, return on investments is 109 months (from time of operations). I computed it as:
This computation assumes the branch is operational and income-earning by Day 1 of investment which is not the case. Hence, we need to add back the number of waiting months from investment placement to Day 0 of operations — in our case, 20 months. So the actual ROI assuming income is constant is 109 + 20 months = 129 months or 10 years and 9 months.
If we remove the 1% per month interest, and remove the excessive waiting time as well (assume operational by month 13), ROI is more or less still the same at 129 months.
The capitalization of this particular Powerfill Branch is 720*P10,000/sh = P7.2M. Is this reasonable enough?
Aunicaj Fuel Income Updates (Month 19 as of April2020)
Sep2018: Invested in Marz Fuel co-ownership program. Back then it was still Marz, but it was coursed through their marketing arm back then, Aunicaj.
1H2019: Aunicaj updated us that they are having issues with their partnership with Marz. According to them (note this is only the side of Aunicaj), they are having issues with their other operational Marz branches in terms decreasing sales and income. Further, they heard news about a foreign investor buying majority of Marz Fuel without their prior knowledge. So long story short, Aunicaj severed ties with Marz Fuel and started their own gasoline brand – Aunicaj Fuel. So our investment became Aunicaj Fuel.
Jul2019: The branch finally opened in Indang, Cavite after 10 months of waiting. While the gas station is finally operational, the Rapide branch within its lot is still under construction. Unlike Powerfill, Aunicaj is more diligent in terms of sending updates as they send us sales updates daily both through SMS and email (at least prior to ECQ) but the income statement is sent quarterly together with the dividends.
They also informed us that as they transition away from Marz Fuel, the initial supply of gasoline will still be coming from Marz as these are already in the tanks underneath the gas station. As such, income margin may not be as high in the first few months (July to August) compared to when Aunicaj is already directly getting its inventory from gasoline dealerships (latter months, without the cut from Marz). Hence figures below have some adjustments made, as detailed in the Remarks column.
Apr2020: Here’s the income update for Jul19 to Dec19.
After all is said and done, income to be distributed to co-owners is 4.6% of gross sales, higher vs PowerFill percentage-wise. In terms of amount, quarterly income is P9,249 (lower than PowerFill’s P10,934).
Here, we noticed that the gross sales and income figures fluctuates but not too volatile (as it should be in a normal business, and not flat month-on-month), but generally sales and income are in a significant uptrend and growth rate especially Sept onwards (hence the adjusted figures in Remarks column) which should be good news. Until Taal and ECQ happened. 🙁
Rough ROI. Assuming income remains within average of P123 (hopefully it continues to grow though especially once Rapide is operational), return on investments is 162 months (from time of operations), same formula as above. Adding back the number of waiting months from investment placement to Day 0 of operations (10 months), real ROI is 173 months or 14 years and 6 months. Around 2033 waaaah!.
However, removing the “Marz impact” in first 2 months, if we use the average income/sh of P154 instead, ROI and capital recovery is in less than 140 months or in less than 12 years.
If we bump up the income/sh by 10% to include income from Rapide (fingers crossed that it’s higher), ROI is 128 months or in less than 11 years.
The capitalization of this particular branch is a whopping 1600*20,000/sh = P32M. Is this reasonable enough, inclusive of Rapide? For us it’s too high that’s why we asked for the breakdown. No reply so far. A quick search on Rapide franchise will cost P4M to P7M capital.
ROI and Capital Recovery. In general, payback period for both gas stations is very long. Ideally it should be within 5 years, worse 7 to 10 years. But not beyond that. So I’m hoping for much improvement in the income figures to shorten payback period. If you can’t wait that long, then think twice about pursuing these. Note that this ROI also does not consider increased prices and inflation later on.
Between the two, if you’re looking for faster ROI (recover your invested capital sooner), and lower share price to earnings ratio (P/E), PowerFill is the better choice (129 months vs 140 months; 110x vs 129x). At least in our case, we so far earn a higher gross amount per month from them (P3,645 vs P2,455). This already factors in the delay in location assignment (compensated by 1% interest). As an investor, I think these are the major considerations — how fast do I recover my investment, and beyond that period, future cashflow is pure income.
Upside and Growth. But personally, for me, Aunicaj has a better upside (so far) compared to Powerfill, based only on the initial months of performance. So for me, it’s more promising in terms of potential higher earnings per share. Previously, I already mentioned that we prefer their approach on securing the location first before getting investors vs getting more and more investors while still looking for locations (PowerFill).
From a business standpoint, it seems Aunicaj -Indang is more healthy vs PowerFill- Divisoria, given the following:
- Much higher and increasing gross sales (though location and competition are factors)
- Better gross profit margin (10.5% vs 9.4% as % of gross sales)
- Better net income for shareholders (4.6% vs 2.5% as % of gross sales)
Plus the Rapide upside eventually. Again, in terms of ROI though, PowerFill has the shorter time frame but this can change if Aunicaj continues to improve its income per share, based on initial trajectory.
Location Difference. PowerFill rent on the location is 40% higher than Aunicaj’s, though the lot area of Aunicaj branch is much bigger than that of Powerfill so this factors in potential for expansion. The difference in rent rates may be due to the different agreements they had with the landowners (for Aunicaj, the land owner will own the gas station after 25 yrs), and of course the location itself.
It is hard to compare the locations as PowerFill is along the provincial highway in Isabela while Aunicaj’s location is more like along a municipal road, yet in Cavite. The two provinces itself are very much different in terms of population, economic activity, land valuation, and vehicular traffic. If you’re considering investing on either of the two, you’ll have a different location too, with a number other different factors to consider.
Downsides for Aunicaj: (1) the more expensive price per share which causes the longer capital recovery; and (2) despite having more expensive shares, it even has more than twice the number of total shares per branch, compared to PowerFill (1600 shares vs 720 shares).
Prior to Rapide franchise, when we signed up, if I recall correctly, total shares back then is 1,200, then it increased to 1,600 when Rapide franchise was included (no additional investment from us, we are included in Rapide income sharing, but overall, we were diluted in terms of dividend share).
In short, Aunicaj has a much higher invested capital in its branch. I do hope all the invested amount really went into reasonable costs to build the gas station. And I do hope the Rapide investment pays-off. Though both companies are reporting regularly, and there’s a level of trust involved, of course the investors are at the mercy of what they report. Should we want to really scrutinize their books (and yes we can but which we haven’t done due to lack of time), we will need to go to their offices.
Again, I do hope the Rapide expansion becomes operational soon (post-ECQ) and gives the branch an income boost.
New Investments Soon?
Will we invest in more co-owned branches soon? Not for now.
We just tried PowerFill and Aunicaj, and so far it seems it will take a decade before we even recover our initial investment. So it will take a decade before we even get to break-even (not factoring the salvage value of the property once the co-ownership is over). So we will just consider the income after break-even as “pension” and “passive income” in the next 2 decades. We have a number of other trial investments which we would rather focus on at the moment, with so far, faster capital recovery periods. Case in point being a Lazada microseller, which I intend to share with you soon.
Is This For You?
Good question. Is it?
For us, no regrets but it could have been better. We do hope it gets better.
We wanted to diversify from the usual stocks, managed funds, high yield deposits and farms. These gas stations may not give us the maximum returns, but it’s not our intent. We wanted to explore, we wanted to try. We wanted to have an idea how much these small gas stations cost and sell and earn on a monthly basis. We wanted to experience, to be able to say to ourselves that we co-own a very minute fraction of 2 gas stations out there, and gas-up at these stations from time to time. We wanted a business running on the side, but not much effort needed from us. A silent investor, income on the side, managed by someone else. So for these 2 gas stations, above is what we’re getting at least for now. I will update once we have more income numbers, probably by next year.
Sure, Juan can open a business for P400K capital but s/he will spend much more (in terms of money, stress, and patience) once that certain business becomes operational. Enough for a gas station? Maybe not. Other businesses like foodcart? P400K is a tight budget to be honest for a quality foodcart brand.
We realized the hassles, stress and ups and downs while the gas stations locations were still being negotiated, as the permits were being processed, while the stations are under construction, and as it was experiencing many hiccups from nature, from the government etc — based from updates of PowerFill and Aunicaj, considering they are already more familiar with the business. We even had a holdup incident in the Aunicaj branch!
We observed this when we invested in a friend running restaurants — it can be stressful doing it full-time. And we are not yet ready, and willing, to do this full-time. In terms of ROI, how long to recover? It depends. Foodcarts usually promise 3 to 5 years ROI, but bigger restaurants can take longer. For 7-11 franchise, we computed 5-year ROI if you can sell P22K daily and you have at least 3.5M for the initial investment.
Can you put up a gas station for P400K? Hmmm maybe not. Not really, especially if you don’t know the ins and outs of the business. Chances are it’s just for franchise fee. Besides, the target market of co-ownerships are those people with small extra money (e.g. less than a million) looking for a side-business and extra income, usually the employed with extra savings for investments. It’s not designed for those looking for a full-time business that you intend to manage on your own, or those with P5M parked in a savings account. If you are the latter, and you have the time and patience, then yes, you are probably better off starting a business on your own instead of putting money into co-ownerships.
But if you only have P400K or less for now, and you don’t appreciate managed funds or high yield deposits, your options are (1) wait and save more to make it into millions, or (2) try investing now, get it back in a decade and enjoy the “pension” afterwards, while you continue working and saving another 400K, or (3) invest it somewhere else that you are interested in and that you understand.
I got curious as to whether the margins of PowerFill and Aunicaj are reasonable, so I checked the financial disclosures (from PSE Edge) of 3 listed oil companies in the country: Petron (PSE: PCOR), Shell (PSE: SHLPH) and Phoenix (PSE: PNX). Here’s what they reported for 2019 and 2018.
Of course, it’s pointless to compare sales and income in actual amounts as these are in billions but for the big companies, net income performance is mostly lower in 2019 than in 2018. Gross sales suffered too, except for Phoenix. I’m not saying this is perfect apples-to-apples comparison with PowerFill and Aunicaj (far from it!), there are other factors to be considered such as but not limited to size, marketing expenses, brand name and accounting practices, but below can be a good baseline indicator, in the absence of other publicly available information.
Gross Profit as % of Gross Sales: PowerFill and Aunicaj (9% to 10%) are higher (vs 3% to 7%), meaning they have higher profit margins (and lower cost of oil sold), compared to the bigger oil companies. Higher margins even if they sell gasoline and diesel for a lower price compared to these companies.
Net Income as % of Gross Sales: Powerfill and Aunicaj (2.5% and 4.6%) are in the upper half (vs 0.9% to 4.4%) and they performed better if we only look at 2019 performance (same period as PowerFill and Aunicaj performance) as the bigger companies only managed 0.9% to 2.7% range in that period. This should be expected given less costs in terms of marketing and operations.
Net Income as % of Gross Profit: Powerfill and Aunicaj (30% and 43%) are somewhat in the middle compared to the 3 bigger brands. Well net income of the big brands here is not totally for distribution to shareholders, at least majority part of it is plowed back to the business for expansion. Only a portion, if any, is distributed as dividends. Share price fluctuates as well since these are publicly listed companies.
A quick search on franchises for these 3: Petron Bulilit (at least P2.5M) excluding the land I suppose, Shell (P5M, ave payback period 3yrs), Phoenix (P5M, 3-4yrs ave payback). Well if you have these big amounts and ideal locations, then maybe these 3 bigger brands are worth a shot. Things to consider will be the inventory cost in succeeding months, salaries and wages, rent and utilities, royalties, other fees, etc. Another option if you are really into gas stations is to consider the smaller independent players, those that are not yet mainstream nationwide brands.
#GrowYourMoney #BeFinanciallyFree #GYMBFF #InvestMoneyPH
Pictures our own and those sent to us as updates.