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Charlemagne’s Gems: Philippines - from basket case to global star
by Julian Mayo on Sep 26, 2013 at 14:17
This improvement has been welcomed by Fitch and S&P upgrading the country to investment grade.
For investors in the Philippines, the financial sector looks especially appealing. It is an under-geared economy, even by emerging markets standards. Private domestic credit is below 40% of GDP.
Our preferred bank, Metrobank, has a loans-to-deposits ratio of below 65%, a capital adequacy ratio of 18% and is focused on raising both low cost deposit funding and returns.
With more liquidity, inflationary risk can be passed on by companies which dominate their market and have pricing power.
Our portfolios are exposed to one such in San Miguel Pure Foods, a beneficiary of increased protein consumption via its poultry/hog operations, which should drive sustainable profit and free cash flow growth in the medium term.
Profits for the company should grow around 25% this year and a further 10-15% in each of the next two years.
The country’s per capita income, at below $5,000, is only half that of China and Thailand and the opportunity for growth is considerable.
With a strong economy, including a healthy current account surplus, it seemed unjustified for the Philippine currency and stock market to be hit by the summer sell-off, which affected emerging markets. However, this month the market has rallied sharply and the outlook for is bright.
What’s more, a quarter of a century after my first visit, they are even renovating Manila’s unloved airport.
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by Danielle Levy on Dec 12, 2013 at 09:03