It has a good starting point -Iran’s economy is already bigger than Australia’s and it is also surprisingly diverse. You might think Iranian prosperity is likely to be based on the fact that it has some of the largest oil and gas reserves in the world (fourth-largest oil reserves and the largest gas reserves of all). You’re wrong, says Mr Bokor-Ingram. Despite all this underground sun, the oil and gas industry made up only 10 per cent of GDP in 2014.There around 30 other sectors listedon the stock exchange: there may be no Rootes left, but the car industry remains Iran’s second-biggest contributor to GDP (look up Iran Khodro -I wouldn’t mind one of their four wheel drives). You might also think that much GDP is devoted to military spending. Again, wrong. It’s 2.7 per cent.Sounds good doesn’t it? There are risks. Lots of them. There is the risk that the reformers’ progress isshortlived -that religious ardliners take back control. And that the result of that is the thing investors in Iran most fear -“snapback,” or the automatic reimposition of sanctions.
Still, I’m prepared to overlook most of these risks. Why? Price. The Iranian stock market has risen 20 per cent since the end of sanctions but that still puts it on a
2016 price/earnings ratio of 5.5times with a dividend yield of 13 per cent (Mr Bokor-Ingram’s numbers). The Mobile Telecommunications Company of Iran has 6.5m subscribers and trades on a price/earnings ratio of 3.5 times. Buy it today and you’ll get a 12 per cent dividend. All thisdiscounts the kind of political and economic disasters that look increasingly unlikely (note that Russia, which I am also prepared to hold on the basisof cheapness is on over seven times) -and makesvery little allowance for the improvements that look increasingly likely.
Finantial Times, 11 march 2016