Investors want next leader to deliver infra

Equities investors hope the country’s next leader will continue President Benigno Aquino III’s platform of good governance and also make a strong push for much-needed infrastructure-building, investment house CLSA said.

“While the Philippines will be busy with politics from now until May 2016, the fortunes of the market will then depend on how well the new President executes his/her programs, especially as the market at 16.6x 2016 P/E (price to earnings ratio) is not cheap compared with Asean (Association of Southeast Asian Nation) peers,” CLSA analyst Alfred Dy said in a research note dated Dec. 10 titled “Philippines-Market: How to play the elections?”

A P/E ratio of 16.6x 2016 means that investors are paying 16.6 times the kind of money they expect to make from the market in the coming year.

Historically, the market has traded at an average of 14 to 15 times expected earnings, which means the market is paying premium versus historical levels as well as comparative emerging markets in the region.

“For the market to continue enjoying this multiple or move up, we need a President who can continue current President Aquino’s clean government platform and also execute on the country’s much delayed infrastructure initiative,” the CLSA research said.

The research note added that publicly listed companies must also deliver a growth in earnings per share in the mid-teens level.

“We need good earnings growth and governance plus infrastructure push for the market to move higher,” the research said.

The CLSA research note said it was too early to tell who was the front-runner in this hotly contested presidential race.

Surveys will be more reliable around the March to April period, the note said.