Actinver’s Equity Research · Actinver’s Equity Research. CONFIDENCIAL Y DE USO INTERNO . 2 ....
Transcript of Actinver’s Equity Research · Actinver’s Equity Research. CONFIDENCIAL Y DE USO INTERNO . 2 ....
1 CONFIDENCIAL Y DE USO INTERNO
June 19, 2015
The Top 10 Stocks Of Actinver
Actinver’s Equity Research
2 CONFIDENCIAL Y DE USO INTERNO
Methodology
Methodology for The Top 10 Stocks of Actinver
We present in this report The Top 10 Stocks of Actinver. With an investment horizon of 18 to 36 months, we present the companies that in our view
will evidence significant value creation, either by growth in revenue, higher operating efficiencies and/or solid fundamentals.
This report will be updated weekly and distributed every Monday, with multiples based on closing share prices of the previous Friday. In addition, a
review of each company will be conducted monthly, and every quarter companies’ financial results will be considered and, if necessary, adjustments
will be made. If at any time a relevant event or news warrants a change, our analysis team will make the appropriate changes.
The valuation methodology used for this report is based on: a) Discounted Cash Flows (DCF); b) comparable multiples; and c) Sum of the Parts,
among others.
The presentation of companies in this report is in alphabetical order and the main sources of information used are: a) Actinver’s Analysis; b) the
Company itself; c) the Mexican Bolsa; and d) Bloomberg.
This report has a summary sheet, where the most relevant figures and multiples are presented for each company, followed by separate one-pagers
per business. Click here for summary.
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3 CONFIDENCIAL Y DE USO INTERNO
Index
1 ALFA Page 5
2 ALSEA Page 6
3 CEMEX Page 7
4 GFINTER Page 8
5 GISSA Page 9
6 GRUMA Page 10
7 HERDEZ Page 11
8 LAMOSA Page 12
9 LIVEPOLC Page 13
10 WALMEX Page 14
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17 de junio de 2014
Return Price Price Return Market EV/Sales EV/EBITDA P/E
12 M Today 2015 (e) Expected Cap Float 3-yr Avg. L12 M 2015 2016 3-yr Avg. L12 M 2015 2016 3-yr Avg. L12 M 2015 2016
ALFAA -17% 30.98 36.20 17% 159,315 45% 1.1 1.1 1.0 1.0 9.8 9.2 8.4 7.6 37.8 -27.3 44.2 22.1
ALSEA* -1% 46.88 55.00 17% 39,268 66% 2.6 1.9 1.6 1.4 21.0 15.8 12.8 10.9 68.8 44.7 31.0 29.6
CEMEXCPO -11% 14.84 19.00 28% 184,578 95% 1.9 2.0 1.8 1.6 11.4 11.4 9.7 8.1 -13.2 -35.8 -86.9 53.0
GFINTERO 5% 96.27 113.00 17% 25,986 31% 3.4 3.3 3.0 2.5 NA NA NA NA 15.7 14.3 11.4 9.8
GISSAA 12% 31.98 38.00 19% 11,387 57% 1.0 1.0 0.9 0.8 9.2 8.5 8.1 6.7 8.5 23.4 23.8 18.2
GRUMAB 31% 201.10 224.00 11% 87,026 26% 2.0 1.9 1.8 1.7 17.0 12.9 11.6 11.1 30.5 18.7 20.7 21.6
HERDEZ* 3% 39.97 49.00 23% 17,023 25% 2.1 2.0 1.9 1.8 13.0 11.4 10.5 10.0 23.5 20.7 17.5 17.3
LAMOSA* 20% 32.20 39.00 21% 12,181 13% 1.9 1.7 1.7 1.5 9.4 8.2 8.0 7.2 21.4 35.2 29.5 24.0
LIVEPOLC 16% 179.68 197.00 10% 241,166 15% 3.4 3.1 2.8 2.4 20.4 19.0 16.6 14.4 31.9 29.7 26.7 23.5
WALMEX* 13% 39.47 42.00 6% 690,987 30% 1.6 1.5 1.5 1.3 16.6 15.7 14.8 13.2 27.1 22.4 26.8 24.3
Margins
EBITDA EBITDA Net Inc. Net Inc. EBITDA EBITDA EBITDA Net Net
2015 2016 2015 2016 L12 M 2015 2016 2015 2016
ALFAA 12% 9% -260% 100% 11.4% 12.3% 13.2% 1.5% 3.0% Oil price recovery would benefit Alfa's results and valuation
ALSEA* 45% 15% 90% 5% 12.3% 12.7% 13.0% 4.0% 3.7% No more extraordinary expenses from Vips, and a smooth integration in Spain: time to harvest.
CEMEXCPO 18% 17% -69% -264% 17.8% 18.0% 20.0% -0.9% 1.4% With U.S economic recovery and national infrastructure plan, EBITDA in 2017 will grow 70% vs. 2013.
GFINTERO NA NA 17% 16% 0.0% 0.0% 0.0% 25.9% 25.4% Solid fundamentals and low valuation (2.0x P/BV and a P/E of 11.2x for 2015 and 9.6x for 2016)
GISSAA 13% 21% 13% 31% 11.6% 11.5% 12.0% 4.6% 5.2% Will specialize in auto parts, which will boost sales and expand margins.
GRUMAB 14% 2% -2% -4% 14.8% 15.3% 15.3% 7.6% 7.1% Recent stock downturn offers interesting upside on the back of continued operating improvements.
HERDEZ* 23% 9% 26% 1% 17.7% 17.8% 17.6% 5.8% 5.3% Ready to harvest Nutrisa’s shakedown, plus the incorporation of Nestlé’s Ice Cream.
LAMOSA* 4% 12% -6% 23% 21.0% 20.6% 21.0% 4.1% 4.6% The company with the highest EBITDA margin in the ceramic industry
LIVEPOLC 16% 12% 16% 14% 16.2% 16.6% 16.8% 9.9% 10.2% A lower delincuency rate will boost margins and a positive trend in the Departament stores.
WALMEX* 10% 10% -15% 10% 9.6% 9.9% 10.1% 5.4% 5.5% Positive results in the 1Q15, despite a slightly contraction in margins.
* Figures in million of pesos Methodology Note:
NA = Not Aplicable Price 2015(e). Estimated price for year end 2015.
NS = Not Significant For the selected companies, we are continually evaluating events and news stories that could significantly affect stock performance.
Estimates for 2014 and 2015 years
Source: Actinver and Bloomberg analysis
Investment Thesis
Las 10 Favoritas de Actinver
Growth %
June 19, 2015 The Top 10 Stocks Of Actinver
Summary
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Better oil price expectations, improving Newpek operating estimates and the PRE acquisition,
make Alfa an attractive option.
USD 68/bbl. year-end 2015 Brent estimate
After a 52% decline in Brent prices from USD 109.19 to a USD 52.59 5-year low, prices have somewhat recov-
ered.
Given the abovementioned, our year-end 2015 estimate remains at USD 68/bbl.
Oil prices may remain stable after OPEC confirmed its 30 million barrel-per-day production ceiling so as to keep
prices low and maintain its percentage of market share.
Favorable view for Alfa’s subsidiaries
We expect Newpek’s 2016e EBITDA will reach USD 81 million (+16% vs. our previous estimate).
At a consolidated level, we expect a 7.3% CAGR for Alfa’s EBITDA during the 2014-17 period (21.5% assuming
Alfa consolidates PRE).
Energy sector participation through Pacific Rubiales Energy purchase
Alfa has signed a definitive agreement to buy an additional 32% stake in Pacific Rubiales Energy at CAD 6.50
per share, reaching 50%; Harbour Energy would own the remaining 50%.
We expect Alfa will receive approx. 80% of the proceeds from Nemak’s IPO, which would more than cover the
USD 400 million to complete the PRE acquisition, and would allow Alfa to repay some debt.
We do not expect the purchase of PRE to be accretive in the short-term (we estimate PRE would need to gener-
ate a USD 1,800 million EBITDA in 2016); however, we expect the transaction will allow Alfa to position itself in
the Mexican energy sector.
Last Price: MP 30.98
Price Target 2015: MP 36.2 17% Return
Pablo Abraham Peregrina
Mining, Steel and Conglomerates [email protected] +52 (55) 1103 6600 x 1395
ALFA Liquidity High Figures in millions of pesos
2013 2014 2015e 2016e
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The Top 10 Stocks Of Actinver June 19, 2015
ALFA vs. IPC (Jun 2014 = 100)
Revenues 203,456 228,886 239,518 243,446
EBITDA 22,009 26,493 29,560 32,227
Margin 10.8% 11.6% 12.3% 13.2%
Growth YoY -9.1% 20.4% 11.6% 9.0%
Net Profit 5,926 (2,259) 2,125 5,717
Margin 2.9% -1.0% 0.9% 2.3%
EPS 1.15 (0.44) 0.41 1.11
Total Assets 165,390 232,540 224,352 222,523
Cash and ST Inv. 11,902 22,141 17,917 15,150
Total Liabilities 100,221 163,619 159,273 156,503
Net Debt 45,552 75,251 74,742 72,170
Equity 65,169 68,921 65,079 66,020
Majority 56,441 55,156 51,510 52,254
Multiples
EV/Sales 1.2x 1.1x 1.0x 1.0x
EV/EBITDA 11.0x 9.7x 8.4x 7.6x
P/E 31.8x NA 74.9x 27.8x
ROE 10.4% NA 5.5% 10.9%
ROA 4.1% NA 1.6% 3.2%
Net Debt/ EBITDA 2.1x 2.8x 2.5x 2.2x
Dividend Yield 2.7% 0.1% 1.7% 0.8%
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ALFAA IPC
Source: Bloomberg
The integration of Vips continues to boost 2015 results, while Grupo Zena will be an strategically im-
portant move that will add value in 2015 results.
Benefits from Vips consolidation took longer than anticipated; Zena is a straightforward integration
While one-off expenses from the Vips integration have impacted short-term results (2Q and 3Q14), our invest-
ment thesis remains unaffected after the positive results during the 1Q15 earning results, and expect the stock to
take off once results offer a clearer picture of the post-acquisition Alsea.
Alsea’s 1Q15 results outpaced our expectations for a second consecutive quarter, most notably at the EBITDA
and net profit level since profitability has improved beyond expectations, both ours and the company’s.
Entry to the European market, replicating Alsea’s current business model in Mexico
We like the entrance to the European market though the acquisition of Grupo Zena as it represents a similar busi-
ness platform to Alsea’s, and the timing (economy-wise) and valuation (8.1x EV/EBITDA) make sense.
Alsea estimates Zena will add 21% revenues and 20% EBITDA proforma, on top of the Vips incorporation.
Vips by itself added 37% to revenue and 46% to EBITDA, with a potential 80bp pro-forma margin expansion.
Execution risk is low
Zena’s management will remain in place, Alsea will focus on strategic decisions. No backoffice increase.
Synergies are foreseen by implementing Best Practices, leasing renegotiations and labor productivity; expect a
2pp margin improvement that would bring Zena’s into 14% levels, similar to pre-acquisition Alsea.
No changes in organic expansion are expected: € 15 mn capex program for 2015, centered in Domino’s.
Both Alsea and Zena will be FCF positive in 2015.
Expansion program in Latam also unchanged, based on Brasil, Colombia, and recent franchises in Mexico.
Leverage should be manageable
Alsea has ruled out a new equity offer to deleverage after Zena’s acquisition. Net debt to EBITDA is expected to
reach 2.5x at the end of 2015; we expected 2.7x in an initial estimate.
We foresee a quick improvement afterwards, given the size the company has reached.
Our latest PO revision at MP 50.0 offers a very attractive potential
Our target for 2015 is based on a DCF approach, as we believe the multiples valuation is voided by the size of
changes currently underway; once the operating platform is stabilized, we will witness an accelerated deprecia-
tion of market ratios, making sense (i.e. being comparable) only until 2016.
Current Price: MP 46.88
Price Objective 2015: MP 55.0 17% Return ALSEA Liquidity High
Figures in millions of pesos
2014 12 M 2015e 2016e
Alsea vs. IPC (June 2014 = 100)
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The Top 10 Stocks Of Actinver June 19, 2015
Carlos Hermosillo
Retail, Food and Beverage.
José Cebeira
Retail, Food and Beverage.
80.00
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110.00
Jun 14 Aug 14 Oct 14 Dec 14 Feb 15 Apr 15 Jun 15ALSEA IPC
Sales 22,787 26,152 31,991 35,833
EBITDA 2,802 3,220 4,058 4,664
Margin 12.3% 12.3% 12.7% 13.0%
Growth YoY 26.8% 54.1% 44.8% 14.9%
Net Profit 667 879 1,297 1,338
Margin 2.9% 3.4% 4.1% 3.7%
Growth YoY 86.6% 25.1% 94.6% 3.2%
EPS 0.990 1.048 1.548 1.597
Total Assets 29,338 29,413 31,505 34,348
Cash 1,113 891 787 1,790
Total Liabilities 19,603 19,394 19,855 20,260
Debt 11,239 11,579 11,508 11,463
Equity 9,735 10,019 11,650 14,089
Majority 8,800 9,057 10,688 13,127
Multiples
EV/Sales 2.2x 1.9x 1.6x 1.4x
EV/EBITDA 18.0x 15.8x 12.6x 10.7x
P/E 58.9x 44.7x 30.3x 29.4x
ROE 7.3% 8.2% 13.1% 10.9%
ROA 3.0% 3.4% 4.3% 4.0%
Net Debt/ EBITDA 3.6x 3.3x 2.6x 2.1x
Dividend Yield 0.0% 0.0% 0.0% 0.0%
With U.S economic recovery and national infrastructure plan, EBITDA in 2016 will grow 29% vs.
2013. Our recommendation, BUY
CEMEX’s top priority is recovering investment grade as soon as possible
We estimate an EBITDA generation of US 3.4 billion by 2016 (vs. 2.8 billion L12M) supported by Cemex’s operat-
ing leverage.
Based on our projections, the net debt to EBITDA ratio for 2016 will be 4.1x, improving substantially from the cur-
rent level of 5.1x and a peak of 7.4x in 2010.
Attractive EBITDA growth of 13% on average for the next years
This expected result is supported by a strong performance in key markets such as US (11% of total) and Mexico
(46% of total).
In Europe (19% of EBITDA) and Asia (7%) we estimate marginal growth.
Positive outlook in Mexico in the long term
The Mexican cement market was affected by the low levels of infrastructure spending.
A significant market recovery to greater investments in infrastructure and economic recovery is expected derived
from structural reforms and implementation of the National Infrastructure Plan.
Energy reform will further increase cement demand and help to reduce production costs.
The US market will maintain its positive trend
The 1Q15 was the twelfth consecutive quarter of positive EBITDA generation.
The residential/industrial/commercial sectors remained as the main drivers.
Solid Senior Management Team
After the unfortunate death of Cemex’s Chairman of the Board and CEO, Mr. Lorenzo Zambrano, Cemex has
demonstrated its high level of management institutionalization, keeping unchanged its long term strategy and
continuity in its operations.
Rogelio Zambrano was appointed as the new Chairman of the Board and Fernando González as CEO, both with
career paths in excess of 20 years in Cemex.
Last Price: MP 14.84
Price Target 2015: MP 19.00 28% Return
Ramón Ortiz
Cement, Concessions & Construction [email protected] +52 (55) 1103 66 00 x 1835
CEMEX Liquidity High Figures in millions of pesos
2013 2014 2015e 2016e
Sales 195,661 210,023 240,182 252,820
EBITDA 33,963 36,640 43,208 50,469
Margin 17.4% 17.4% 18.0% 20.0%
Growth YoY -1.2% 7.9% 17.9% 16.8%
Net Profit (10,834) (6,783) (2,125) 3,482
Margin -5.5% -3.2% -0.9% 1.4%
Growth YoY N.A. N.A. N.A. N.A.
Total Assets 496,130 514,961 515,619 507,993
Cash 15,176 12,589 12,850 13,150
Total Liabilities 347,812 366,790 369,457 358,348
Debt 221,758 233,267 232,088 218,870
Equity 148,318 148,171 146,163 149,645
Majority 133,379 131,103 128,765 131,833
Multiples
EV/Sales 2.1x 2.0x 1.8x 1.6x
EV/EBITDA 12.0x 11.5x 9.8x 8.1x
P/E N.A. N.A. N.A. 53.6x
ROE -7.3% -4.6% -1.5% 2.3%
ROA -2.2% -1.3% -0.4% 0.7%
Net Debt/ EBITDA 6.1x 6.0x 5.1x 4.1x
Dividend Yield 0.0% 0.0% 0.0% 0.0%
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The Top 10 Stocks Of Actinver June 19, 2015
CEMEX vs IPC (Jun 2014 = 100)
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CEMEXCPO IPC
Source: Bloomberg
High growth potential due to the company’s focus on the Government segment, solid asset quali-ty and very attractive multiples.
Low penetration of financial services in Mexico
• Total credit represents only 24% of GDP, which is substantially lower than in other Latin American countries.
• We expect commercial banking credit to expand at a 14% CAGR going forward.
Significant growth potential due to GFInter’s focus on the government segment
• GFInter’s loan portfolio will grow an estimated 20% in 2015 and 17% in 2006.
• We expect net profits to increase 17% in 2015 and 16% in 2016.
• The ROE should reach 17.6% in 2015 and 17.9% in 2016 (compared with 13.2% in 1Q15).
Excellent asset quality
• In 1Q15, GFInter registered an NPL ratio of only 0.1% and a coverage of 11.9x, which are among the indus-try’s strongest.
GFInter’s valuation compares favorably to its nation al peers’
• GFInter shares trade at a P/BV of 2.1x and projected P/E’s of 11.4x for 2015 and 9.8x for 2016, which makes it one of Mexico’s cheapest financial groups.
Last Price: MP 96.27
Price Target 2015: MP 113.0 17% Return
Martín Lara Telecoms, Media & Financials [email protected] +52 (55) 1103 66 00 x 1840
GFINTER O Medium Liquidity Figures in millions of pesos
2014 L12M 2015e 2016e
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The Top 10 Stocks Of Actinver June 19, 2015
GFINTER O vs. IPC (June 2014 = 100)
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IPC GFInter O
Financial Margin 2,488 2,568 3,302 3,852Provisions (961) (993) (1,167) (1,342)Adjusted Financial Margin 1,527 1,575 2,135 2,510Non Financial Income 3,854 3,584 3,797 4,134Administrative Expenses (2,746) (2,717) (2,843) (3,014)Net Profit 1,936 1,823 2,274 2,645EPS 7.17$ 6.75$ 8.43$ 9.80$
Loan Portfolio 81,643 78,782 97,999 114,814Core Deposits 56,231 54,018 66,923 79,961Total Capital 12,207 12,614 13,942 15,912
NIM 1.6% 1.7% 1.9% 1.7%Adjusted NIM 1.0% 1.0% 1.2% 1.1%ROE 17.3% 15.0% 17.6% 17.7%ROA 1.2% 1.1% 1.2% 1.1%Efficiency 43.3% 44.2% 40.0% 37.7%NPL Ratio 0.1% 0.1% 0.2% 0.2%Coverage 1194% 1187% 1144% 1127%
P / E 13.4x 14.3x 11.4x 9.8xP / BV 2.1x 2.1x 1.9x 1.6xDividend Yield 1.5% 1.5% 1.5% 1.8%
GISSA is concentrating in auto parts, which will boost sales, expand margins and lower forward
multiples.
NAFTA and U.S. economic recovery validate strategy of specialization in auto parts
NAFTA’s over 20 years of existence, continues to benefit the economy of Mexico. In particular, the Mexican auto-
motive sector promises to grow 33% in production in the next three years.
GIS’s strategy of specialization in auto parts makes it the best positioned company in Mexico to take advantage
of this major boom.
Specializing in auto parts will boost sales
Instead of being mostly a construction business, GIS is turning into an auto parts business: Currently this busi-
ness is equivalent to 37% of sales but we estimate it will rise to 60% by 2017.
In the next 3 years the auto parts business will grow its installed capacity by 62%, because of the expansion of its
Tisamatic plant and the JV with TRW. We estimate a growth in sales by 7% in 2015 and 15% in 2016.
Construction is a stable business and cash flow generator
Its construction business is primarily focused on self-construction; we expect an organic growth of 2-3% for the
following years.
Its main products are very well positioned in the market.
In 2017, auto parts will represent 70% of EBITDA with higher margins
Currently the auto parts business generates 61% of EBITDA, but we estimate its contribution will grow to 70% in
2017.
The EBITDA margin will increase from 10.9% in 2014 to a margin of 12.0% by 2016. Meanwhile, net margin also
will expand from 4% to 5% in the same period.
Substantial lowering of multiples and potential return on investment
GIS is trading at 2016E P/E multiple of 18.3x and EV/EBITDA multiple of 6.8x, which represents a 36% and 11%
discount compared with the historical average of the last 3 previous years.
Proven management and solid company
Top management has proven to be successful: It achieved a profound restructuring of liabilities after a major fi-
nancial hit in 2008. GIS currently has a net debt to EBITDA of -1.3x vs. 2.9x in 2010. The company has a net
cash position of MP 1,931 mn, equivalent to 17% of current market cap.
Last Price: MP 31.98
Price Target 2015: MP 38.00 19% Return
Federico Robinson Bours
Energy, Petrochemicals and Industrials [email protected] +52 (55) 1103 66 00 x 4127
GISSA Liquidity Low
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Figures in millions of pesos
2013 2014 2015e 2016e
Sales 8,845 9,709 10,377 11,964
EBITDA 950 1,058 1,191 1,438
Margin 10.7% 10.9% 11.5% 12.0%
Growth YoY -13.4% 11.3% 12.5% 20.7%
Net Profit 329 424 479 627
Margin 3.7% 4.4% 4.6% 5.2%
Growth YoY -89.9% 29.2% 12.7% 31.0%
Total Assets 11,855 12,916 13,172 14,013
Cash 1,911 2,053 2,106 2,406
Total Liabilities 3,433 3,791 3,886 4,449
Debt 387 389 297 664
Equity 8,422 9,124 9,286 9,564
Majority 8,387 9,088 9,218 9,494
Multiples
EV/Sales 1.1x 1.0x 0.9x 0.8x
EV/EBITDA 10.5x 9.3x 8.2x 6.8x
P/E 34.9x 27.1x 24.0x 18.3x
ROE 3.8% 4.8% 5.2% 6.6%
ROA 2.8% 3.4% 3.7% 4.6%
Net Debt/ EBITDA (1.6x) (1.6x) (1.5x) (1.2x)
Dividend Yield 5.4% 0.0% 3.0% 3.0%
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The Top 10 Stocks Of Actinver June 19, 2015
GISSA vs IPC (Apr. 2014 = 100)
After a significant price correction we believe the stock offers a very attractive entry point even with a short term horizon, and more so following a stellar 1Q15 performance that has set the tone for what is expected to be yet another year of operating improvements, even if the bulk of the gains from the strategy shake-up have been delivered in 2013/2014 numbers, we believe we will witness further gains in coming quarters.
Refocus efforts still to bear fruit
The declining corn flour price is a secondary concern, as Gruma usually passes on both gains and cuts in key
inputs to its customers, while profitability should be bolstered by the increased efficiency and product rationaliza-
tion implemented in these past couple of years.
Gruma once again surprised us with positive figures that were above our expectations. Following the sale of Mo-
limex —was 13.6% of total volume—, 2014 numbers are restated and all reported figures are on a comparable
basis.
Following the sale of Molimex in 2014, its wheat flour business, Gruma has become a pure corn-products com-
pany. The sole exclusion of Molimex from Gruma’s numbers has an immediate margin-expanding effect, as this
was the least profitable operation within the company’s portfolio, with EBITDA margins hardly surpassing the 5%
mark on its best quarters.
We reiterate our BUY rating; after incorporating 1Q15 figures into our earnings model we have adjusted our tar-
get price from MP 220.0 to MP 224.0.
A rare beneficiary of a weaker peso
Gruma is one of the few Mexican companies that actually shows direct benefits from a weaker-peso environment
since the bulk of its revenues, just over 60%, is generated in hard currency within Gruma Corporation, its subsidi-
ary comprising the US and Europe operations.
Even if corn prices have recovered somewhat in the final quarter of 2014, the absolute levels are well off histori-
cal and recent averages, so we would expect Gruma to benefit from these lower costs in its cost structure, while
not all of such price variations are passed on to customers. Hedging corn costs for 2015 should have been con-
cluded in these past months and even be well advanced with a view to 2016.
A strong balance sheet that will only get stronger: acquisitions plus a renewed dividend policy
By the end of 2014 we expect Gruma will have a net debt reduction of nearly 15% from 2014’s close. The net
debt to EBITDA ratio would be 1.8x, down from 2.4x a year ago.
Acquisitions will surely continue, but given that possible targets are now mostly small-sized enterprises, cash flow
will exceed both capex and acquisition needs and should actually accelerate the debt reduction that has been
consistent since 2012, after Archer-Daniel’s stake was bought out.
The implied accumulation of cash means its dividend policy is being reinstated in 2015.
Current Price: MP 201.10
Price Objective 2015: MP 224.0 11% Return
Carlos Hermosillo
Retail, Food and Beverage. [email protected] +52 (55) 1103 66 00 x 4134
GRUMA Liquidity High Figures in millions of pesos
2014 12 M 2015e 2016e
Gruma vs. IPC (June 2014 = 100)
10
The Top 10 Stocks Of Actinver June 19, 2015
José Cebeira
Retail, Food and Beverage. [email protected] +52(55)11036600 x 1394
Sales 49,935 51,434 55,626 56,967
EBITDA 7,493 7,614 8,506 8,698
Margin 15.0% 14.8% 15.3% 15.3%
Growth YoY 40.7% 15.0% 13.5% 2.3%
Net Profit 4,287 4,648 4,150 4,054
Margin 8.6% 9.0% 7.5% 7.1%
Growth YoY 183.6% 30.0% -3.2% -2.3%
EPS 7.309 10.740 9.591 9.367
Total Assets 40,637 41,730 46,283 50,848
Cash 1,465 1,487 1,234 3,959
Total Liabilities 22,552 22,769 24,045 24,272
Debt 10,761 11,410 11,289 11,213
Equity 18,084 18,961 22,238 26,577
Majority 16,564 17,372 20,422 24,483
Multiples
EV/Sales 2.0x 1.9x 1.8x 1.7x
EV/EBITDA 13.1x 12.9x 11.6x 11.1x
P/E 20.3x 18.7x 21.0x 21.5x
ROE 25.9% 23.3% 23.9% 19.0%
ROA 9.2% 9.7% 10.1% 8.9%
Net Debt/ EBITDA 1.2x 1.3x 1.2x 0.8x
Dividend Yield 0.9% 0.9% 1.0% 1.0%
90
110
130
Jun 14 Aug 14 Oct 14 Dec 14 Feb 15 Apr 15 Jun 15GRUMAB IPC
We recently increased our TP to MP 49.0 with a BUY recommendation. We regard Herdez as an attractive mid-cap stock in a defensive industry best suited for mid and long-term investment horizons, while tim-ing-wise, the stock’s underperformance for the past 12 months has generated an attractive discount to
its peers.
An attractive play in a defensive industry, at a discounted price.
We regard Herdez as an attractive opportunity in the mid cap sector as it trades at a significant discount to its
peers, but has the potential to outperform both comparable stocks and the domestic large-cap universe as the
company rides the consumption recovery in coming quarters and additionally harvests results from the 2013 ac-
quisition of Nutrisa and the incorporation of Nestlé’s Ice Cream assets.
Organic and acquisition-driven expansions, an easy comparison base for 2014, and an awakening in consumer
trends will aid for better performance in Herdez throughout 2015 and beyond, making it our favorite mid-cap
stock.
We consider Herdez’ risk profile as adequate, while financial improvement based on internal cash flow should
generate a fast recovery following its two strategic acquisitions—Nutrisa and Nestle.
Leading partners, leading brands, leading market shares.
Though most of its business is conducted through 4 JV’s, with this scheme Herdez has attained market-leading
positions in its two key markets, Mexico and the US, along most of its product portfolio as it leverages proven
know-how, widely-known brands, and effective production/distribution schemes. Herdez partners with Barilla for
its Pasta unit, with Hormel in processed foods, with McCormick in dressings, and with Kuo for its domestic
Herdez/Del Fuerte processed food unit.
The downside to this structure is that a significant portion of net income (usually 45%) is normally shared with its
partners, notably diluting from the operating front’s size that is apparent on a first sight.
Let´s take the consumption ride for the first half of the year...and beyond.
We anticipate positive numbers in consumption-related indicators for 2015, specially in the first half of the year as
we have already seen with Walmex and Antad’s SSS Jan-April figures.
While much of this has to do with the low comparison base posed by a 1H14 that was hit by fiscal changes and
eroded consumer confidence, we make the point for a rebound in consumption that should extend afterwards and
even gain further traction on the back of better employment figures, tame inflation, advances in average wages,
the bounce in the value of dollar-linked remittances and a resurgence in consumer confidence.
All of these indicators have already confirmed the start of a better trend, but their side-effects on consumer
spending are yet not that clear; they shall be.
Current Price: P$ 39.97
Price Objective 2015: P$ 49.0 27% Return HERDEZ Liquidity High
Figures in millions of pesos
2014 12 M 2015e 2016e
HERDEZ vs. IPC (June 2014 = 100)
11
The Top 10 Stocks Of Actinver June 19, 2015
Carlos Hermosillo
Retail, Food and Beverage.
José Cebeira
Retail, Food and Beverage.
Sales 14,319 14,787 16,648 18,472
EBITDA 2,415 2,611 2,970 3,244
Margin 16.9% 17.7% 17.8% 17.6%
Growth YoY 11.3% 24.2% 23.0% 9.2%
Net Profit 771 822 951 998
Margin 5.4% 5.6% 5.7% 5.4%
Growth YoY -23.1% 37.4% 23.3% 5.0%
EPS 1.407 1.927 2.229 2.340
Total Assets 23,261 24,170 25,601 27,767
Cash 2,451 1,752 1,109 736
Total Liabilities 10,085 10,474 10,588 10,658
Debt 6,860 7,264 6,991 6,747
Equity 13,176 13,695 15,014 17,110
Majority 6,309 6,589 6,756 7,699
Multiples
EV/Sales 2.0x 2.0x 1.9x 1.8x
EV/EBITDA 11.7x 11.4x 10.5x 10.0x
P/E 22.1x 20.7x 17.9x 17.1x
ROE 24.8% 12.4% 28.3% 26.6%
ROA 6.9% 7.2% 7.5% 7.3%
Net Debt/ EBITDA 1.8x 2.1x 2.0x 1.9x
Dividend Yield 1.0% 1.0% 1.7% 1.8%
80.
90.
100.
110.
Jun 14 Aug 14 Oct 14 Dec 14 Feb 15 Apr 15 Jun 15HERDEZ IPC
Great opportunity at inflection point for the residential sector
LAMOSA is the company with the highest EBITDA margin in the ceramic industry
The company’s profitability is higher than its competitors, with a 15% 2014 EBITDA margin, compared with Inter-
ceramic’s 10% and GISSA’s (construction division) 7%, the two main domestic competitors.
In a comparison with international peers, LAMOSA’s EBITDA margin is higher by around 325bps.
Substantial lowering of multiples
LAMOSA’s forward multiples reflect significant growth potential despite conservative estimates.
The current P/E multiple of 35.1x improves to 23.9x based on 2016 estimated EPS.
Meanwhile, the L12M EV/EBITDA multiple of 8.2x lowers to 7.2x based on 2016 EBITDA.
Positive outlook in Mexico in the long term
In December 2014 the construction industry gained 6% YoY. The improved performance is related to an increase
in housing construction and in specialized works.
A significant market recovery to greater investments in infrastructure (private and federal) and economic recovery
is expected derived from structural reforms and better performance in the housing sector.
Energy reform will help to reduce production costs.
Production with state-of-the-art technology
In the past ten years LAMOSA has invested around US$ 1.0 billion in technology and acquisitions (mainly in the
ceramic division representing 72% of total sales).
The company is one of the lowest cost producers in the industry.
Solid Senior Management Team
With more than 20 years of experience on average, LAMOSA’s top management led by Federico Toussaint
Elosua (CEO) and Tomas Garza de la Garza (CFO) have lead the company to position itself as one of the most
important ceramics producers worldwide.
Senior management team was able to reduce the company’s leverage from 6.8x in 2008 (Porcelanite acquisition)
to 2.2x in 2014, in an environment of high credit restrictions amidst the 2008 crisis.
Last Price: MP 32.20
Price Target 2015: MP 39.00 21% Return
Ramón Ortiz
Cement, Concessions & Construction [email protected] +52 (55) 1103 66 00 x 1835
LAMOSA Liquidity Low Figures in millions of pesos
2013 2014 2015e 2016e
Sales 8,624 8,971 10,162 11,154
EBITDA 1,809 2,011 2,095 2,340
Margin 21.0% 22.4% 20.6% 21.0%
Growth YoY -12.4% 11.2% 4.2% 11.7%
Net Profit 630 442 414 508
Margin 7.3% 4.9% 4.1% 4.6%
Growth YoY -26.1% -29.8% -6.4% 22.8%
Total Assets 15,043 15,077 15,734 16,216
Cash 627 290 520 450
Total Liabilities 9,290 9,105 9,584 9,653
Debt 5,149 4,695 5,155 5,073
Equity 5,753 5,972 6,150 6,563
Majority 5,753 5,972 6,150 6,563
Multiples
EV/Sales 1.9x 1.8x 1.7x 1.6x
EV/EBITDA 9.2x 8.2x 8.4x 7.5x
P/E 19.3x 27.6x 31.1x 25.3x
ROE 10.9% 7.4% 6.7% 7.7%
ROA 4.2% 2.9% 2.6% 3.1%
Net Debt/ EBITDA 2.5x 2.2x 2.2x 2.0x
Div. Yield (Cash) 1.0% 1.0% 0.8% 0.8%
12
The Top 10 Stocks Of Actinver June 19, 2015
Lamosa vs IPC (Jun 2014 = 100)
90
100
110
120
130
140
150
Jun
-14
Jul-
14
Au
g-1
4
Se
p-1
4
Oct-
14
No
v-1
4
De
c-1
4
Jan
-15
Fe
b-1
5
Ma
r-1
5
Ap
r-15
Ma
y-1
5
LAMOSA* IPC
Source: Bloomberg
An incipient consumer recovery, a re-focused commercial strategy that enhances the reach towards a growing middle-class, and a credit portfolio that is being effectively controlled make for an investment
case that will continue to produce market-leading returns, in our view.
Consumer trends, setting a solid base
2015 took off with solid statistics for the consumer front, with ANTAD’s aggregate Same-Store numbers growing
5.5%, and a stronger +9.0% hike among Department stores. While these figures are boosted by an easy YoY
comparison due to last year’s fiscal reform hit, coming months might experience softer rates. Yet, we do look for
a stronger showing this year as Consumer Confidence, employment and wage levels have made significant ad-
vances that have yet to show clearly in consumer spending.
Same Store Sales were up 7.5%, slightly below our projected 9% and ANTAD’s Department stores 9.2%. Even
so, this was the highest rate recorded by Livepol since 2014 took off.
Our estimates call for a 2% to 3% overall expansion, 2% for Self Service, a leading 5% to 6% for Department.
Management shows a strong hand over its credit portfolio
Following two consecutive quarters with NPL deterioration that was quickly translated into affected profit margins,
Livepol’s efforts to rein in credit portfolio growth and delinquency rates have already yielded positive results, fall-
ing from a NPL rate of 4.9% to 4.0% at the end of 2014.
Credit Portfolio growth was limited to 2% in 2014, even if sales were up over 9% in the year. Just remaining at
such level should fuel a 50bp expansion in the company’s EBITDA margins during 2015.
Expansion focused on lower middle-class segments
Livepol inaugurated two new Fabricas de Francia stores in the past twelve months, and in 2015 expects to open
5 more, out of a total 8 new stores. The shift in strategy recognizes the reach within middle-and higher income
segments that its footprint has attained following nearly a decade-long expansion in its traditional format.
The timing seems right to attend the lower-middle segments that have already shown purchasing power improve-
ments, but that are also expected to be the fastest-growing segment of the population in coming years—both in
terms of people count and consumption power.
Leverage is not an issue
Livepol has a net debt to EBITDA ratio of 1.0x and interest coverage of 11.7x, very solid figures already , and
even with an aggressive Capex program for 2015, it is expected that these numbers will improve notably in com-
ing months.
Current Price: P$ 179.68
Price Objective 2015: P$ 193.0 7% Return LIVEPOL Liquidity High
Figures in millions of pesos
2014 12 M 2015e 2016e
Livepol vs. IPC (June 2014 = 100)
13
The Top 10 Stocks Of Actinver June 19, 2015
Carlos Hermosillo
Retail, Food and Beverage.
José Cebeira
Retail, Food and Beverage.
Sales 81,027 82,711 90,996 100,920
EBITDA 13,024 13,383 15,140 16,997
Margin 16.1% 16.2% 16.6% 16.8%
Growth YoY 6.5% 5.5% 16.3% 12.3%
Net Profit 7,763 8,119 9,053 10,249
Margin 9.6% 9.8% 9.9% 10.2%
Growth YoY 7.0% 5.6% 16.6% 13.2%
EPS 5.738 6.049 6.745 7.636
Total Assets 103,438 101,084 114,427 128,419
Cash 570 282 3,614 9,011
Total Liabilities 40,772 38,125 44,517 48,813
Debt 13,344 13,501 13,382 13,307
Equity 62,666 62,960 69,911 79,606
Majority 62,663 62,955 69,906 79,601
Multiples
EV/Sales 3.1x 3.1x 2.8x 2.4x
EV/EBITDA 19.5x 19.0x 16.6x 14.4x
P/E 31.1x 29.7x 26.6x 23.5x
ROE 13.2% 13.4% 13.7% 13.7%
ROA 8.0% 8.2% 8.5% 8.6%
Net Debt/ EBITDA 1.0x 1.0x 0.6x 0.3x
Dividend Yield 0.0% 0.0% 0.5% 0.6%
90
100
110
120
Jun 14 Aug 14 Oct 14 Dec 14 Feb 15 Apr 15 Jun 15LIVEPOL IPC
The accelerated expansion behind, Walmex still stands out among its comparable due to its higher
profitability and better absolute growth rates, yet with a merely average valuation on its stock.
2015 is looking up for consumer Stocks.
Even if the general economic panorama this year remains a challenging one, we believe the bases for a con-
sumer recovery have been laid out as the April sales positive surprise. The still erratic, yet positive, trend in con-
sumer confidence, employment levels and average wages shall gain traction in coming months; the spillover
effect will turn up at a time when fiscal uncertainty has abated, adding to a positive shift in general consumer
conditions.
CA drives operating performance, but Mexico starts to look up.
Same-Store performance continues to improve; in Mexico the +4.9% hike includes a stronger 6.8% for Sam’s, a
first in many quarters. In CA a solid local-currency +7.7% was boosted to +19.8% in pesos by the FX translation.
CA continues to outperform also on profitability, and posted a 20bp gain in gross margin, but a 50bp advance in
EBITDA. Yet in absolute terms, its margin is still 2pp below the Mexican operations (EBITDA: 7.2% vs 9.1%).
The one disappointment for the quarter: a lower EBITDA margin (-20bp) that came entirely from a similar dilution
in the Mexican operations.
Once Vips and Banco Walmart have been sold, there is still the possibility of another sale: Suburbia.
Performance at the Department Store Format has been lagging, albeit not as severely as Sam’s. The focus on
Self-Service retailing could drive the decision, possibly as soon as this year also.
This would mean a marginal decrease in sales (3.2%), but also an improved profitability and enhanced strategy
focus. As was the case with Vips, we would expect extraordinary dividends to be paid, an equivalent 0.7% yield
pending from the Bank, and a somewhat smaller figure from Suburbia.
Premium profitability, average valuation.
While we should not expect the premium valuations that Walmex once commanded due to the accelerated
growth pace that was consistently achieved up until just four years ago, we do believe the market-leading organ-
ic growth and, most of all, the better profitability when compared to its peers (EBITDA consistently above 9% vs.
market 6%-7% range, ROE above 16% or double its peers’), calls for a premium to its comparable universe.
While the report has prompted a revision to our estimates, the impact in terms of cash flow expectations has
been modest; our target price stands at MP 42.0, on which we reiterate a BUY recommendation for Walmex
after also considering a 5% dividend yield.
Current Price: MP 39.47
Price Objective 2015: MP 42.0 6.4% Return WALMEX Liquidity High
Figures in millions of pesos
2014 12 M 2015e 2016e
Walmex vs. IPC (June 2014 = 100)
14
The Top 10 Stocks Of Actinver June 19, 2015
Carlos Hermosillo
Retail, Food and Beverage.
José Cebeira
Retail, Food and Beverage.
Sales 440,988 451,358 475,527 515,269
EBITDA 42,854 43,504 47,036 51,859
Margin 9.7% 9.6% 9.9% 10.1%
Growth YoY 2.1% 7.1% 9.8% 10.3%
Net Profit 30,426 30,850 25,973 28,545
Margin 6.9% 6.8% 5.5% 5.5%
Growth YoY -2.4% 37.1% -14.6% 9.9%
EPS 1.289 1.762 1.484 1.631
Total Assets 246,081 236,290 229,663 263,829
Cash 28,048 20,799 6,441 21,707
Total Liabilities 95,835 112,841 107,155 114,732
Debt 13,262 13,171 12,830 12,617
Equity 150,246 123,449 122,508 149,097
Majority 150,223 123,424 122,484 149,073
Multiples
EV/Sales 1.5x 1.5x 1.5x 1.3x
EV/EBITDA 15.8x 15.7x 14.8x 13.1x
P/E 22.7x 22.4x 26.6x 24.2x
ROE 18.6% 18.9% 22.3% 21.9%
ROA 11.0% 11.0% 11.4% 11.4%
Net Debt/ EBITDA (0.3x) (0.2x) 0.1x (0.2x)
Dividend Yield 3.1% 3.5% 4.6% 1.9%
80
90
100
110
120
Jun 14 Aug 14 Oct 14 Dec 14 Feb 15 Apr 15 Jun 15WALMEX IPC
1 CONFIDENCIAL Y DE USO INTERNO
Equity, Economic, Quantitative and Fixed Income Research Departments
15
Martín Lara [email protected]
Carlos Hermosillo Bernal [email protected]
Pablo Duarte de León [email protected]
Pablo Abraham Peregrina [email protected]
Ramón Ortiz Reyes Cement, Construction and Concessions [email protected]
Federico Robinson Bours Carrillo [email protected]
Juan Enrique Ponce Luiña jponce@actinver,com.mx
Enrique Octavio Camargo Delgado [email protected]
José Antonio Cebeira González [email protected]
Mauricio Arellano Sampson Mining, Metal, Paper, Conglomerates, Cement, Construction & Concessions [email protected]
Laura Elena Bosch Ramírez [email protected]
Ismael Capistrán Bolio Head of Economic and Quantitative Research [email protected]
Jaime Ascencio Aguirre Economy and Markets [email protected]
Santiago Hernández Morales Quantitative Research [email protected]
Roberto Galván González Technical Research [email protected]
Araceli Espinosa Elguea Head of Fixed Income Research [email protected]
Roberto Ramírez Ramírez Fixed Income Research [email protected]
Jesús Viveros Hernández Fixed Income Research [email protected]
Raúl Márquez Pardinas Fixed Income Research [email protected]
(52) 55 1103-6600 x1672
(52) 55 1103-6600 x1835
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(52) 55 1103-6600 x1100
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Economic and Quantitative Research
Junior Analysts
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2 CONFIDENCIAL Y DE USO INTERNO
Disclaimer
Important Statements.
Of the Analysts:
“The analysts in charge of producing the Analysis Reports:
Jaime Ascencio Aguirre; Mauricio Arellano Sampson; Laura Elena Bosch Ramírez; Enrique Octavio Camargo Delgado; Ismael Capistrán Bolio; José
Antonio Cebeira González; Pablo Enrique Duarte de León; Araceli Espinosa Elguea; Roberto Galván González; Carlos Hermosillo Bernal; Santiago
Hernández Morales; Martín Roberto Lara Poo; Raúl Márquez Pardinas; Ramón Ortiz Reyes; Pablo Abraham Peregrina; Juan Enrique Ponce Luiña;
Federico Robinson Bours Carrillo; Jesús Viveros Hernández, declare”:
"All points of view about the issuers under coverage correspond exclusively to the responsible analyst and authentically reflect his vision. All
recommendations made by analysts are prepared independently of any institution, including the institution where the services are provided or
companies belonging to the same financial or business group. The compensation scheme is not based or related, directly or indirectly, with any specific
recommendation and the remuneration is only received from the entity which the analysts provide their services.
"None of the analysts with coverage of the issuers mentioned in this report holds any office, position or commission at issuers underhis coverage, or
any of the people who are part of the Business Group or consortium to which they belong. They have neither held any position during the twelve months
prior to the preparation of this report. "
"Recommendations on issuers, made by the analyst who covers them, are based on public information and there is no guarantee of their assertiveness
regarding the performance that is actually observed in the values object of the recommendation"
"Analysts maintain investments subject to their analysis reports on the following issuers: AC, ACTINVR, ALFA, ALPEK, ALSEA, AMX, AZTECA,
CEMEX, CHDRAUI, FEMSA, FIBRAMQ, FINDEP, FUNO, GENTERA, GFREGIO, GRUMA, ICA, IENOVA, KOF, LAB, LIVEPOL, MEXCHEM,
OHLMEX, PEÑOLES, POCHTEC, TLEVISA, SORIANA, SPORTS, VESTA and WALMEX.
On Actinver Casa de Bolsa, S.A. de C.V. Grupo Financiero Actinver
Actinver Casa de Bolsa, S.A. de C.V. Grupo Financiero Actinver, under any circumstance shall ensure the sense of the recommendations contained in
the reports of analysis to ensure future business relationship.
All Actinver Casa de Bolsa, SA de C.V. Grupo Financiero Actinver business units can explore and do business with any company mentioned in
documents of analysis. All compensation for services given in the past or in the future, received by Actinver Casa de Bolsa, SA de C.V. Grupo
Financiero Actinver by any company mentioned in this report has not had and will not have any effect on the compensation paid to the analysts.
However, just like any other employee of Actinver Group and its subsidiaries, the compensation being enjoyed by our analysts will be affected by the
profitability gained by Actinver Group and its subsidiaries.
At the end of each of the previous three months, Actinver Casa de Bolsa, SA de C.V. Actinver Financial Group, has not held any investments directly or
indirectly in securities or financial derivatives, whose underlying are Securities subject of the analysis reports, representing one percent or more of its
portfolio of securities, investment portfolio, outstanding of the Securities or the underlying value of the question, except for the following: * AEROMEX,
AXML, BOLSA A, FINN 13, FSHOP 13, SMARTRC14.
Certain directors and officers of Actinver Casa de Bolsa, SA de C.V. Grupo Financiero Actinver occupy a similar position at the following issuers:
AEROMEX, MASECA, AZTECA, ALSEA, FINN, MAXCOM, SPORTS, FSHOP and FUNO.
This report will be distributed to all persons who meet the profile to acquire the type of values that is recommended in its content.
17