It’s a bet on infrastructure and property stocks that has helped propel a Philippine fund to the top. And signs that President Rodrigo Duterte’s public-works program is taking off are poised to help it further.
That’s the view of Julian Tarrobago, head of equity at ATR Asset Management Inc., which has P125 billion ($2.4 billion) under management. His Alpha Opportunity Fund has returned 11 percent this year, the most among Philippine equity funds, data compiled by Bloomberg show.
That’s double the advance in the Philippine Stock Exchange Index and compares with gains of about 6 percent for other securities tracking the nation’s shares such as the BDO Equity Fund or UCPB Equity Fund.
“We are finally on the cusp of an infrastructure boom,” said Tarrobago, 45, who says his market experience goes back to 1995. “Unlike in the past, when it was just a story and theoretical, projects are now materializing. This could be one of our strongest periods given the strong GDP, strengthening corporate earnings and falling inflation.”
Duterte’s economic managers say the Philippines will enter a “golden age” of infrastructure as the government and private companies boost public works — a new Manila underground railway system and Makati subway are among the projects that have already started. To help sustain economic growth of at least 6 percent annually, the president wants the country to increase such spending to P9 trillion through 2022, compared with P2.27 trillion under his predecessor.
Infrastructure and property shares account for almost half of the Alpha Opportunity Fund now, up from 43.6 percent six months ago. Tarrobago, backed by a team of four analysts, accumulated the stocks in anticipation of what he calls a “massive upside.” The central bank’s pronouncement that it’s waiting for the right time to cut bank reserve requirements only bolsters his conviction.
Tarrobago makes his picks based on companies’ potential. He chooses smaller firms that aren’t popular with the market yet and have good growth prospects.
EEI Corp. and Megawide Construction Corp., which gained more than 13 percent each this year, are among his favorite builders, while Robinsons Land Corp. and DM Wenceslao and Associates Inc., up at least 20 percent each, are some of his top property holdings. Except for Robinsons, few analysts follow these stocks, and they don’t belong to the nation’s benchmark equity index.
“The Philippine infrastructure story isn’t a PowerPoint presentation anymore,” Tarrobago said, referring to the languishing public-private partnership program before Duterte’s presidency. “These projects will unlock property values, create jobs, boost tourism and boost consumer spending. The challenge is to identify those that will gain most from these changes.” (Bloomberg)