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April 16, 2019 www.banorte.com @analisis_fundam
Manuel Jiménez Director Equity Research Telecommunications / Media manuel.jimenez@banorte.com
Marissa Garza Equity Research – Conglomerates / Financials/ Mining / Petrochemicals marissa.garza@banorte.com
José Espitia Equity Research – Airlines / Airports / Cement / Infrastructure / REITs jose.espitia@banorte.com
Valentín Mendoza Equity Research – Auto Parts/ Consumer Discretionary / Real Estate / Retail valentin.mendoza@banorte.com
Jorge Izquierdo Analyst jorge.izquierdo.lobato@banorte.com
This document is provided for the reader’s convenience only. The translation from the original Spanish version was made by Banorte’s staff. Discrepancies may possibly arise between the original document in Spanish and its English translation. For this reason, the original research paper in Spanish is the only official document. The Spanish version was released before the English translation. The original document entitled “Presión en márgenes y efectos de NIIF 16” was released on April 12, 2019. Document for distribution among public
Document for distribution among public
2019 is expected to kick-off with mild growth and lower operating
leverage. Hence, for the companies we have under coverage, we
estimate a 3.3% yoy revenue growth and 0.3% in EBITDA
The IFRS 16 accounting rules regarding leasing shall affectt the
comparability of figures -mainly in retail and transportation sectors-
increasing EBITDA, and the companies’ assets and liabilities
This quarter, the ten companies with the highest expected growth in
EBITDA are the following: Volar, Sport, Livepol, Chdraui, Lacomer,
Gmxt, Alsea, Pinfra, Gap and Oma
A less dynamic year-start. Revenue figures from the companies that we cover
are expected to begin 2019 with lower dynamism, in view of more moderate
economic growth and an adverse environment for commodity prices. Meanwhile,
lower operating leverage, certain pressures on costs and, in some cases,
consolidation effects of less profitable businesses, are expected to affect margins.
However, a more favorable FX effect would undermine pressures in margins,
boosting net profit similarly to revenue. Thus, our estimates assume a 3.3%
growth in revenue, 0.3% in EBITDA and 3.4% in net profit. It should be noted
that as of this quarter, the companies will begin to implement the IFRS 16
accounting standard, over leases, which would affect the comparability of figures,
because now, their value will be recognized in their balance sheets, increasing
assets and liabilities. Additionally, rental expenses will no longer be reported at
an operating level and are now being replaced by depreciation expenses and
declining interest accruals, which may affect the operating income, but would
benefit EBITDA. In terms of net income, higher financial expenses, given the
increase in liabilities from leasing and, in some cases, exchange volatility over
leases in other currencies, could affect net results. It should be mentioned that our
estimates do not reflect this accounting change; therefore the figures may vary
considerably.
Top ten companies with the highest estimated EBITDA growth in 1Q19 Chg % yoy
Revenue and EBITDA quarterly performance Chg % yoy
Stock Sector Revenue Ebitda Volar Transportation 18.8% 54.7% Sport Services 18.8% 27.8%
Liverpol Retail 9.7% 23.4%
Chdraui Retail 37.5% 17.2% Lacomer Retail 14.0% 17.1%
Gmxt Transportation 12.7% 15.7% Alsea Retail 23.9% 12.1%
Pinfra Infrastructure 28.4% 11.4% Gap Airports 11.8% 10.7% Oma Airports -4.2% 9.4%
Source: Banorte
3.6% 6.2%
11.0%
15.3%
10.5%
28.9%
5.5% 7.1% 3.3%
0.3%
0%
10%
20%
30%
40%
Revenue EBITDA1Q18 2Q18 3Q18 4Q18 1Q19e
PREVIEW 1Q19 Pressure on margins and the effects of IFRS 16
Equity Research Mexico
Earnings Calendar
The following chart pinpoints the dates on which some companies have
commented the possible release of their earnings releases. It is important to
mention that most of the companies report by the third week of the month,
marking Tuesday, April 30th as the deadline to do so.
Preview 1Q19 – Earnings Calendar by Company
April 2019
MONDAY TUESDAY WEDNESDAY THURSDAY FRIDAY
1 2 3 4 5
8 9 10 11 12
15 16 17 18 19
Holy Thursday Good Friday
22 23 24 25 26
FIHO
ALFA
ALPEK
ASUR*
AXTEL
GMEXICO*
GMXT*
LIVEPOL
NEMAK
AZTECA*
CREAL
GCC*
GENTERA
MEXCHEM
OMA
PINFRA*
CEMEX
GAP*
HOTEL
VOLAR
WALMEX
AC
KOF
SORIANA
SPORT
29 30
AMX
FEMSA
GICSA
IENOVA
LAB
MEGA
TLEVISA
ALSEA
BIMBO
CHDRAUI
LACOMER
Deadline
Source: Banorte, Bloomberg, Thomson Reuters, Infosel * Tentative
Estimates Summary
In the following chart we include the companies that we have under coverage and
which are part of the document herein. This quarter we have included FEMSA on
which we recently initiated coverage. Based on our estimates for 34 companies,
we expect nominal variations of 3.3% in sales and 0.3% in EBITDA. In the chart
below, we separate the estimates of 30 companies classified as Retail, Industrial
and Services, two from the financial sector and two others from the real estate
sector.
Quarterly Estimates for 1Q19MXN, million pesos
1Q18 1Q19e Var. % 1Q18 1Q19e Var. % 1Q18 1Q19e Var. % 1Q18 1Q19e Var. %
Alfa 85,850 87,578 2.0% 11,787 10,826 -8.2% 7,046 6,071 -13.8% 3,554 1,917 -46.1%
Alpek 28,746 30,241 5.2% 3,391 3,151 -7.1% 2,695 2,368 -12.1% 1,550 1,179 -23.9%
Alsea 11,012 13,644 23.9% 1,426 1,599 12.1% 672 749 11.4% 212 159 -24.8%
Amx 253,422 253,037 -0.2% 71,820 70,623 -1.7% 30,408 34,787 14.4% 18,087 18,369 1.6%
Asur 3,917 4,327 10.5% 2,670 2,675 0.2% 2,197 2,169 -1.3% 1,455 1,340 -7.9%
Axtel 3,753 3,197 -14.8% 1,379 1,084 -21.4% 343 186 -45.9% 960 -141 NA
Azteca 3,427 3,117 -9.0% 521 307 -41.2% 264 90 -66.1% 174 -413 NA
Cemex* 62,810 63,529 1.1% 9,938 9,695 -2.4% 6,204 5,704 -8.1% 482 1,902 294.4%
Chdraui 23,289 32,030 37.5% 1,594 1,867 17.2% 1,174 1,202 2.4% 573 648 13.1%
Femsa 115,337 121,096 5.0% 13,006 13,790 6.0% 8,412 8,778 4.4% 1,476 4,337 193.9%
Gap 3,408 3,811 11.8% 2,230 2,469 10.7% 1,845 2,035 10.3% 1,114 1,312 17.7%
Gcc* 3,533 3,376 -4.4% 859 784 -8.7% 473 429 -9.2% 212 199 -6.2%
Gmexico* 49,936 50,426 1.0% 23,574 23,419 -0.7% 18,115 17,754 -2.0% 6,776 6,905 1.9%
Gmxt 10,182 11,472 12.7% 4,196 4,857 15.7% 2,491 3,036 21.9% 1,866 1,604 -14.0%
Hotel 575 627 9.0% 226 217 -3.9% 171 161 -6.3% 152 70 -53.8%
Ienova* 5,390 6,473 20.1% 3,957 4,220 6.6% 2,809 2,910 3.6% 2,387 2,202 -7.7%
Kof 49,713 48,278 -2.9% 8,706 9,351 7.4% 5,883 6,154 4.6% 2,414 3,190 32.2%
Lab 3,025 3,177 5.0% 684 655 -4.3% 667 626 -6.2% 379 336 -11.2%
Lacomer 4,287 4,886 14.0% 369 432 17.1% 207 235 13.5% 172 199 15.7%
Livepol 25,262 27,716 9.7% 2,373 2,929 23.4% 1,547 1,984 28.2% 1,003 1,311 30.7%
Mega 4,695 5,132 9.3% 2,374 2,499 5.3% 1,613 1,688 4.6% 1,155 1,232 6.7%
Mexchem* 32,867 33,410 1.7% 6,173 5,658 -8.3% 4,243 3,640 -14.2% 1,480 1,532 3.5%
Nemak 23,163 21,323 -7.9% 3,695 3,100 -16.1% 2,032 1,323 -34.9% 1,287 753 -41.5%
Oma 1,932 1,852 -4.2% 1,072 1,173 9.4% 945 1,020 8.0% 608 691 13.6%
Pinfra 2,340 3,006 28.4% 1,686 1,878 11.4% 1,582 1,761 11.3% 876 985 12.4%
Soriana 35,487 35,112 -1.1% 2,505 2,349 -6.3% 1,751 1,554 -11.2% 817 633 -22.6%
Sport 450 535 18.8% 59 76 27.8% 9 21 126.5% -4 -1 NA
Tlevisa 22,812 23,291 2.1% 8,579 8,530 -0.6% 3,624 3,312 -8.6% 678 614 -9.5%
Volar** 5,850 6,951 18.8% 823 1,273 54.7% -906 -453 NA -1,118 -322 NA
Walmex 145,054 151,685 4.6% 14,378 15,193 5.7% 11,334 11,724 3.4% 8,349 8,625 3.3%
Subtotal 1,021,524 1,054,332 3.2% 206,050 206,678 0.3% 119,849 123,017 2.6% 59,123 61,368 3.8%
Cemex (US$) 3,381 3,308 -2.2% 535 505 -5.6% 334 297 -11.1% 26 99 281.5%
Gcc (US$) 189 176 -6.9% 46 41 -11.0% 25 22 -11.5% 11 10 -8.6%
Gmexico (US$) 2,668 2,625 -1.6% 1,259 1,219 -3.2% 968 924 -4.5% 362 359 -0.7%
Ienova (US$) 288 337 17.0% 211 220 3.9% 150 152 1.0% 128 115 -10.1%
Mexchem (US$) 1,756 1,739 -0.9% 330 295 -10.7% 227 190 -16.4% 79 80 0.9%
* Conversion of dollars to closing exchange rate. The company reports its f igure in dollars. ** In Volar the data is EBITDAR
1Q18 1Q19e Var. % 1Q18 1Q19e Var. % 1Q18 1Q19e Var. % 1Q18 1Q19e Var. %
GICSA 1,050 1,337 27.4% 934 901 -3.6% 890 885 -0.6% 410 224 -45.4%
FIHO 1,009 1,057 4.8% 314 294 -6.4% 368 346 -6.1% 175 95 -45.8%
Subtotal 2,058 2,395 16.3% 1,248 1,195 -4.3% 1,258 1,231 -2.2% 585 319 -45.5%
1Q18 1Q19e Var. % 1Q18 1Q19e Var. % 1Q18 1Q19e Var. % 1Q18 1Q19e Var. %
Creal 2,415 2,830 17.2% 1,570 1,770 12.7% 490 501 2.2% 423 464 9.8%
Gentera 5,016 5,457 8.8% 4,641 4,964 7.0% 1,050 1,110 5.7% 726 792 9.0%
Subtotal 7,430 8,287 11.5% 6,211 6,733 8.4% 1,540 1,611 4.6% 1,149 1,256 9.3%
Total 1,031,012 1,065,014 3.3% 207,298 207,873 0.3% 122,490 125,696 2.6% 60,857 62,943 3.4%
Source: Banorte, MSE.
EBITDA NOIRevenue Net Income
EBITDARevenue Operating Income Net Income
Interest Income Financial Margin Operating Income Net Income
Estimates by sector
In this section we present the stocks we have under coverage grouped by sectors.
With this information, we observe that the strongest reports in terms of EBITDA
are related to the Transportation, Infrastructure and Retail sectors. On the
negative side, weaker reports are expected in the Auto Parts, Industrials and
Petrochemicals sectors.
Revenue 1Q19e Ebitda 1Q19e
Operating Income 1Q19e Net Income 1Q19e
7.9%
-7.9%
2.6% 0.8%
8.4%
20.1% 28.4%
16.3% 11.5%
2.0% 1.0% 3.3%
13.3% 14.9%
-0.1%
-40%
-20%
0%
20%
40%
Airp
orts
Aut
o P
arts
Bev
erag
es
Cem
ent
Ret
ail
Ene
rgy
Infr
astr
uctu
re
Fib
ras/
Rea
l Est
ate
Fin
anci
als
Indu
stria
ls
Min
ing
Pet
roch
emic
als
Ser
vice
s
Tra
nspo
rtat
ion
Tel
ecom
mun
icat
ions
5.8%
-16.1%
6.6%
-2.9%
7.3% 6.6% 11.4%
-4.3% -8.2%
-0.7%
-7.9%
2.7%
22.1%
-1.9%
-20%
0%
20%
40%
Airp
orts
Aut
o P
arts
Bev
erag
es
Cem
ent
Ret
ail
Ene
rgy
Infr
astr
uctu
re
Fib
ras/
Rea
l Est
ate
Indu
stria
ls
Min
ing
Pet
roch
emic
als
Ser
vice
s
Tra
nspo
rtat
ion
Tel
ecom
mun
icat
ions
4.5%
-8.1%
4.2% 3.6% 11.3%
-2.2%
4.6%
-13.8%
-2.0%
-13.4%
0.4%
63.0%
10.5%
-30%
20%
70%
Aut
o P
arts
Bev
erag
es
Cem
ent
Ret
ail
Ene
rgy
Infr
astr
uctu
re
Fib
ras/
Rea
l Est
ate
Fin
anci
als
Indu
stria
ls
Min
ing
Pet
roch
emic
als
Ser
vice
s
Tra
nspo
rtat
ion
Tel
ecom
mun
icat
ions
5.2%
-41.5%
93.5%
202.7%
3.5%
-7.7%
12.4%
-45.5%
9.3%
-46.1%
1.9%
-10.5%
-52.8%
71.5%
-6.6%
-70%
-20%
30%
80%
130%
180%
230%
Airp
orts
Aut
o P
arts
Bev
erag
es
Cem
ent
Ret
ail
Ene
rgy
Infr
astr
uctu
re
Fib
ras/
Rea
l Est
ate
Fin
anci
als
Indu
stria
ls
Min
ing
Pet
roch
emic
als
Ser
vice
s
Tra
nspo
rtat
ion
Tel
ecom
mun
icat
ions
Quarterly Estimates for 1Q19MXN, million pesos
1Q18 1Q19e Var. % 1Q18 1Q19e Var. % 1Q18 1Q19e Var. % 1Q18 1Q19e Var. %
Airports 9,256 9,989 7.9% 5,973 6,317 5.8% 4,988 5,225 4.8% 3,177 3,343 5.2%
Auto Parts 23,163 21,323 -7.9% 3,695 3,100 -16.1% 2,032 1,323 -34.9% 1,287 753 -41.5%
Beverages 165,050 169,374 2.6% 21,712 23,141 6.6% 14,295 14,932 4.5% 3,890 7,528 93.5%
Cement 66,344 66,905 0.8% 10,797 10,479 -2.9% 6,677 6,133 -8.1% 694 2,101 202.7%
Retail 247,417 268,250 8.4% 23,330 25,024 7.3% 17,352 18,073 4.2% 11,505 11,912 3.5%
Energy 5,390 6,473 20.1% 3,957 4,220 6.6% 2,809 2,910 3.6% 2,387 2,202 -7.7%
Infraestructure 2,340 3,006 28.4% 1,686 1,878 11.4% 1,582 1,761 11.3% 876 985 12.4%
Fibras/ Real Estate 2,058 2,395 16.3% 1,248 1,195 -4.3% 1,258 1,231 -2.2% 585 319 -45.5%
Financials 7,430 8,287 11.5% #DIV/0! 1,540 1,611 4.6% 1,149 1,256 9.3%
Industrials 85,850 87,578 2.0% 11,787 10,826 -8.2% 7,046 6,071 -13.8% 3,554 1,917 -46.1%
Mining 49,936 50,426 1.0% 23,574 23,419 -0.7% 18,115 17,754 -2.0% 6,776 6,905 1.9%
Petrochemicals 61,612 63,651 3.3% 9,564 8,809 -7.9% 6,937 6,008 -13.4% 3,029 2,711 -10.5%
Services 1,025 1,161 13.3% 285 293 2.7% 180 181 0.4% 147 70 -52.8%
Transportation 16,032 18,423 14.9% 5,019 6,129 22.1% 1,585 2,583 63.0% 748 1,282 71.5%
Telecommunications 288,109 287,773 -0.1% 84,673 83,042 -1.9% 36,252 40,063 10.5% 21,053 19,661 -6.6%
Total 1,031,012 1,065,014 3.3% 207,298 207,873 0.3% 122,647 125,859 2.6% 60,857 62,943 3.4%
Source: Banorte, MSE. Note: in Transportation we include GMXT and Volar. In the latter the figures are +EBITDAR
EBITDARevenue Operating Income Net Income
Companies Under Coverage
ALFA A Alfa
ALPEK A Alpek
ALSEA * Alsea
AMX L América Móvil
ASUR B Grupo Aeroportuario del Sureste
AXTEL CPO Axtel
CEMEX CPO Cemex
CHDRAUI Grupo Comercial Chedraui
CREAL * Crédito Real
FEMSA Fomento Económico Mexicano
FIHO 12 Fibra Hotel
GAP B Grupo Aeroportuario del Pacífico
GCC * Grupo Cementos de Chihuahua
GENTERA * Compartamos
GICSA B Grupo Gicsa
GMEXICO B Grupo México
GMXT * Grupo México Transportes
HOTEL * Grupo Hotelero Santa Fe
IENOVA * Infraestructura Energética Nova
KOF L Coca Cola Femsa
LAB B Genomma Lab Internacional
LACOMER UBC La Comer
LIVEPOL C1 El Puerto de Liverpool
MEGA CPO Megacable Holdings
MEXCHEM * Mexichem
NEMAK A Nemak
OMA B Grupo Aeroportuario del Centro del Norte
PINFRA * Promotora y Operadora de Infraestructura
SORIANA B Organización Soriana
SPORT S Grupo Sports World
TLEVISA CPO Grupo Televisa
VOLAR A Controladora Vuela Compañía de Aviación
WALMEX * Walmart de México y Centroamérica
ALFA A (Buy, PT2019 MXN$29.50)
Marissa Garza Ostos
ALFA – Preview 1Q19 MXN, million
Revenue & EBITDA Margin MXN, million
Concept 1Q18 1Q19e Chg %
Revenue 85,850 87,578 2.0%
Operating Income 7,046 6,071 -13.8%
Ebitda 11,787 10,826 -8.2%
Net Income 3,554 1,917 -46.1%
Margins
Operating Margin 8.2% 6.9% -1.3pp
EBITDA Margin 13.7% 12.4% -1.3pp
Net Margin 4.1% 2.2% -1.9pp
EPS $0.69 $0.37 -46.1%
Source: Banorte
Alfa, a weak quarter. The company is scheduled to report 1Q19
earnings on Tuesday, April 23rd, after the bell. We anticipate a
quarter with pressures in profitability in every subsidiary, except
Sigma. In this sense, in the consolidated balance, we expect a 2.0%
year-on-year increase in revenue , but an 8.2% decline in EBITDA,
to stand at MXN$87.5 billion and MXN$10.8 billion, respectively.
We expect MXN$1.9 billion in net income, down 46.1% year-on-
year given operating weakness and a less favorable FX effect, as
gains reported in 1Q18 were considerably higher than those
expected for 1Q19. We should remember that during the quarter,
the peso appreciated just 2.3% vs. 7.5% the previous year.
In Alpek, contribution from Suape and Citepe Petrochemical
operations should boost revenue and marginally offset expected
pressures amid a less favorable price context. The recovery
observed in the price of Brent crude this quarter vs the significant
decline seen by year-end 2018, will not be enough to completely
outweigh the effect of lower margins, particularly in the Polyester
segment, in view of global-wide normalization thereof (See Alpek’s
preliminary report).
In Nemak, we anticipate a quarter strongly affected by lower
aluminum prices and a drop in vehicle production in all regions.
Consequently, profitability will be affected given a lower operating
leverage (See Nemak’s preliminary).
In Axtel, the quarter should reflect downturns, resulting from the
sale of the residential fiber-to-the-home business (Massive
Business) in December. Excluding this effect, earnings will reflect
pressures in profitability derived from the slowdown in government
spending. (See Axtel’s preliminary report).
In Sigma, we expect a positive quarter, given a favorable price
environment.
Net Income & ROE
MXN, million
Net Debt & Net Debt to EBITDA
MXN, million
13.7% 14.0%
13.5%
19.0%
12.4%
0.0%
5.0%
10.0%
15.0%
20.0%
80,000
82,000
84,000
86,000
88,000
90,000
92,000
94,000
96,000
1Q18 2Q18 3Q18 4Q18 1Q19e
Revenue EBITDA Margin
-2.4%
0.9%
11.7%
17.9%
16.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
0
1,000
2,000
3,000
4,000
5,000
1Q18 2Q18 3Q18 4Q18 1Q19e
Net Income ROE
3.2x 3.3x
2.7x
2.4x
2.6x
0.0x
0.5x
1.0x
1.5x
2.0x
2.5x
3.0x
3.5x
115,000
120,000
125,000
130,000
135,000
140,000
145,000
1Q18 2Q18 3Q18 4Q18 1Q19e
Net Debt Net Debt to EBITDA
ALPEK A (Buy, PT2019 MXN$35.00)
Marissa Garza Ostos
ALPEK – Preview 1Q19 MXN, million
Revenue & EBITDA Margin MXN, million
Concept 1Q18 1Q19e Chg %
Revenue 28,746 30,241 5.2%
Operating Income 2,695 2,368 -12.1%
Ebitda 3,391 3,151 -7.1%
Net Income 1,550 1,179 -23.9%
Margins
Operating Margin 9.4% 7.8% -1.6pp
EBITDA Margin 11.8% 10.4% -1.4pp
Net Margin 5.4% 3.9% -1.5pp
EPS $0.73 $0.56 -23.9%
Source: Banorte
ALPEK, a weak quarter, yet already priced-into the stock.
Alpek is set to report 1Q19 earnings on Tuesday April 23rd, after
the closing bell. We anticipate weak figures, impacted by lower
prices of oil and commodities, although we believe this should
already be discounted in the price of the stock.
Margin pressures given a less favorable price context. For this
quarter, our estimates assume MXN$30.2 billion (US$1.5
billion,+19.2% yoy) in revenue and MXN$3.1 billion (US$164
million, -8.9% yoy) in EBITDA, representing a 5.2% rise and a
7.1% decline, respectively. Consequently, the consolidated
EBITDA margin should adjust by 140bps to levels of 10.4%. In
peso-terms, the conversion effect is marginally favorable,
considering a 1.8% average MXN depreciation yoy and taking into
account that company operations are dollarized.
The incorporation of Brazil will mitigate the downturn of the
Polyester segment. Although in 1Q19 the price of Brent crude
recovered from the considerable drop seen by year-end, this was not
enough to completely cancel out the effect of lower margins,
particularly in the Polyester segment, in view of global-wide
normalization thereof. However, we expect the contributions of the
Suape and Citepe Petrochemical operations in Brazil to help boost
revenue and marginally offset expected pressures amid a less
favorable price environment. In Plastics and Chemicals, we expect
margin stability in propylene and slight pressures on demand
following weak prices reported in the beginning of the year.
Ahead of news on the development of M&G México and the
sale conclusion of the co-generation plants. The most relevant
highlight this quarter will be news notes related to the restructuring
process in M&G México and confirmation that everything is set to
close the sale of the co-generation plants by 2Q19.
Net Income & ROE
MXN, million
Net Debt & Net Debt to EBITDA
MXN, million
11.8% 13.7% 14.1%
21.1%
10.4%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
1Q18 2Q18 3Q18 4Q18 1Q19e
Revenue EBITDA Margin
-21.3%
-11.9%
17.8%
35.8% 36.3%
-30.0%
-20.0%
-10.0%
0.0%
10.0%
20.0%
30.0%
40.0%
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
1Q18 2Q18 3Q18 4Q18 1Q19e
Net Income ROE
3.2x 3.1x
1.9x 1.8x 1.8x
0.0x
0.5x
1.0x
1.5x
2.0x
2.5x
3.0x
3.5x
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
1Q18 2Q18 3Q18 4Q18 1Q19e
Net Debt Net Debt to EBITDA
ALSEA * (Hold, PT2019 MXN$ 60.00)
Valentín III Mendoza Balderas
ALSEA – Preview 1Q19 MXN, million pesos
Revenue & EBITDA Margin MXN, million
Concept 1Q18 1Q19e Chg %
Revenue 11,012 13,644 23.9%
Operating Income 672 749 11.4%
Ebitda 1,426 1,599 12.1%
Net Income 212 159 -24.8%
Margins
Operating Margin 6.1% 5.5% -0.6pp
EBITDA Margin 13.0% 11.7% -1.3pp
Net Margin 1.9% 1.2% -0.7pp
EPS $0.25 $0.19 -24.6%
Source: Banorte
This first quarter of the year would reflect the effects of the
acquisitions in Europe and the implementation of IFRS16.
Alsea is scheduled to report 1Q19 earnings on Tuesday, April 30th,
after market close. This would be the first quarter to incorporate the
effects from the acquisition of Grupo Vips in Spain and Starbucks
operations in France and Benelux. Furthermore, the implementation
of IFRS16 may affect the comparability of results vs. our estimates.
Grupo Vips and Starbucks Benelux would practically double
the company’s revenue in Europe, boosting TS 23.9% yoy. We
expect the acquisitions in Europe to translate into a 94.2% sales
increase in said region (MXN$4.8 billion), boosting consolidated
revenue 23.9% yoy to MXN$13.6 billion. Moreover, a 5.6% jump
in Mexico to MXN$6.3 billion, explained by a 2% LfL upturn and
the opening of 131 units in the L12M, should compensate the 1.7%
drop of such indicator in South America. (MXN$2.4 billion).
Lower profitability of acquired businesses would pressure the
consolidated EBITDA margin by 130bps. We expect Alsea’s
EBITDA to grow 12.1% yoy to total MXN$1.5 billion, below the
sales rhythm, which would result in a 130bps decline of the
corresponding margin to 11.7%, as we project new consolidations
in Europe would pressure the indicator of such region by 520bps to
14.8%. Hence, EBITDA would raise 43.8% yoy to MXN$715
million. In addition, we forecast a 5.8% EBITDA surge in Mexico,
to close at MXN$1.4 billion and a 9.1% drop in Latam to
MXN$304 million.
Higher interest payment would impact net profit. We anticipate
Alsea’s net income may reach MXN$159 million in 1Q19 (-24.8%
yoy), as a 76.5% higher Net Interest Expense, 26.9% from higher
interest payments (+54.4%e), would offset the positive effect of a
lower effective tax rate (33%e vs the previous 37.9%).
Net Income & ROE
MXN, million
Net Debt & Net Debt to EBITDA
MXN, million
13.0% 14.0% 13.7%
14.7%
11.7%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
1Q18 2Q18 3Q18 4Q18 1Q19e
Revenue EBITDA Margin
11.3%
14.4% 15.3%
8.1% 7.1%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
0
50
100
150
200
250
300
350
1Q18 2Q18 3Q18 4Q18 1Q19e
Net Income ROE
2.1x 2.1x 2.1x
3.7x 3.7x
0.0x
0.5x
1.0x
1.5x
2.0x
2.5x
3.0x
3.5x
4.0x
0
5,000
10,000
15,000
20,000
25,000
30,000
1Q18 2Q18 3Q18 4Q18 1Q19e
Net Debt Net Debt to EBITDA
AMX L (Buy, PT2019 MXN$17.00)
Manuel Jiménez Zaldivar
AMX – Preview 1Q19 MXN, million
Revenue & EBITDA Margin MXN, million
Concept 1Q18 1Q19e Chg %
Revenue 253,422 253,037 -0.2%
Operating Income 30,408 34,787 14.4%
Ebitda 71,820 70,623 -1.7%
Net Income 18,087 18,369 1.6%
Margins
Operating Margin 12.0% 13.7% 1.7pp
EBITDA Margin 28.3% 27.9% -0.4pp
Net Margin 7.1% 7.3% 0.1pp
EPS $0.27 $0.28 1.6%
Source: Banorte
Results reflect a negative FX conversion effect and the
acquisition in Guatemala. Based on our estimates, América
Móvil’s quarterly earnings will be neutral. In 1Q19, the company’s
numbers will reflect the acquisitions of Telefónica operations in
Guatemala for US$333 million. In this country, Telefónica had a
roughly 20% market share, that is to say, a 4.1 million mobile
subscriber base. Moreover, we anticipate the company’s earnings
will be negatively impacted by the fluctuation of Latin American
currencies against the U.S. dollar.
We expect a marginal variation in revenue. We forecast the
company will close the quarter with 364 Revenue Generating Units
(RGUs), up an annual 0.5% and equaling 4 million net additions
resulting mainly from the above-mentioned acquisition. During the
first quarter of the year, we expect AMX to report consolidated
revenue totaling MXN$253.0 billion, a -0.2% variation vs 1Q18.
Breaking down this item, we anticipate a 2.1% yoy drop in revenue
from services to MXN$210.7 billion due to a negative FX
conversion effect and greater competition that would impact
ARPU. In addition, we estimate a 11.1% increase in revenue from
equipment sales to MXN$42.2 billion, due to the migration of
subscribers towards value-added services and to lower subsidies on
equipment.
Slight pressure on profitability and higher financial expenses.
We forecast an annual 1.7% decline in EBITDA to MXN$70.6
billion, sending the corresponding margin to stand at 27.9%
(-40bps yoy). At a Net Interest Expense level, we expect a total of
MXN$5.9 billion, far exceeding the year-ago period’s MXN$913
million, derived from lower FX gains. Finally, we anticipate an
annual 1.6% net profit increase to MXN$18.3 billion, higher
financial expenses would be partially offset by a lower tax rate.
Net Income & ROE
MXN, million
Net Debt & Net Debt to EBITDA
MXN, million
28.3% 28.7% 29.1%
27.5% 27.9%
18%
20%
22%
24%
26%
28%
30%
175,000
200,000
225,000
250,000
275,000
1Q18 2Q18 3Q18 4Q18 1Q19e
Revenue EBITDA Margin
6.1%
-1.2%
18.2%
26.9% 25.5%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
0
5,000
10,000
15,000
20,000
1Q18 2Q18 3Q18 4Q18 1Q19e
Net Income ROE
2.4x 2.4x
2.1x 2.0x 2.0x
1.0x
1.5x
2.0x
2.5x
3.0x
400,000
600,000
800,000
1Q18 2Q18 3Q18 4Q18 1Q19e
Net Debt Net Debt to EBITDA
ASUR B (Buy, 2019 PT MXN$ 380.10)
José Itzamna Espitia Hernández
ASUR – Preview 1Q19 MXN, million
Revenue & EBITDA Margin MXN, million
Concept 1Q18 1Q19e Chg %
Revenue 3,917 4,327 10.5%
Operating Income 2,197 2,169 -1.3%
Ebitda 2,670 2,675 0.2%
Net Income 1,455 1,340 -7.9%
Margins
Operating Margin 56.1% 50.1% -6.0pp
Ebitda Margin 68.2% 61.8% -6.3pp
Net Margin 37.1% 31.0% -6.2pp
EPS $4.85 $4.47 -7.9%
Source: Banorte
Operations in Puerto Rico and Colombia (Airplan) boost sales,
but EBITDA reports slight variation in the consolidated
balance. Asur will report a 10.5% increase in sales in 1Q19 (up
12.2% combining aeronautic and non-aeronautic revenue), and a
slight +0.2% variation in EBITDA, to close at MXN$4.3 billion
and MXN$2.7 billion, respectively. For the 9 airports operated by
the group in Mexico, we expect a surge of 7.8% and 8.1% in
operating revenue and EBITDA, respectively.
7.9% yoy increase in total passengers in the 16 airports
operated by the group. In 1Q19, total passenger traffic for Asur
rose 7.9% vs. 1Q18, including a 12.2% surge in domestic and a
2.3% increase in international traffic. The 9 airports operated by the
group in Mexico reported a low 2.4% passenger growth (due to an
adverse calendar effect from an Easter Week shift, from March in
2018 to April in 2019), while the Aeropuerto Luis Muñoz Marín in
San Juan, Puerto Rico (LMM), posted a sharp 23.8% upturn (solid
passenger recovery considering that the island was hit by Hurricane
Maria in September of 2017). Passengers in Colombia underwent a
solid 15.1% expansion, driven mainly by international (+16.5%)
yoy, followed by domestic traffic (+7.7%).
Drop in EBITDA margin yoy without accounting changes. We
forecast the operating margin will stand at 50.1%, and the EBITDA
margin will fall 6.3pp, to stand at 61.8%. The group’s margins,
without considering construction costs and revenue, would close as
follows: operating at 53.7% and EBITDA at 66.2% (-7.9pp). This
results from practically flat margins from operations in Mexico and
Puerto Rico, and lower profitability in Colombia, as well as from
greater weight from the consolidated balance of Puerto Rico and
Colombia, which have a lower margin vs. Mexico. We expect
majority net profit to drop 7.9% yoy.
Net Income & ROE
MXN, million
Net Debt & Net debt to EBITDA ratio
MXN, million
68.2%
60.7% 61.9% 62.7%
61.8%
56.0%
58.0%
60.0%
62.0%
64.0%
66.0%
68.0%
70.0%
3,200
3,400
3,600
3,800
4,000
4,200
4,400
1Q18 2Q18 3Q18 4Q18 1Q19e
Revenue EBITDA Margin
21.8% 21.9% 21.1%
17.1% 16.2%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
0
200
400
600
800
1,000
1,200
1,400
1,600
1Q18 2Q18 3Q18 4Q18 1Q19e
Net Income ROE
1.3x 1.4x
1.2x 1.1x
0.9x
0.0x
0.2x
0.4x
0.6x
0.8x
1.0x
1.2x
1.4x
1.6x
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
1Q18 2Q18 3Q18 4Q18 1Q19e
Net Debt Net Debt to EBITDA
AXTEL CPO (Buy, PT2019 MXN$3.55)
Manuel Jiménez Zaldivar
AXTEL – Preview 1Q19 MXN, million
Revenue & EBITDA Margin MXN, million
Concept 1Q18 1Q19e Chg %
Revenue 3,753 3,197 -14.8%
Operating Income 343 186 -45.9%
Ebitda 1,379 1,084 -21.4%
Net Income 960 -141 N.A.
Margins
Operating Margin 9.1% 5.8% -3.3pp
EBITDA Margin 36.7% 33.9% -2.8pp
Net Margin 25.6% -4.4% -30.0pp
EPS $0.33 -$0.05 N.A.
Source: Banorte
Slowdown in revenue from government cut in
telecommunications spending. It should be mentioned that 1Q18
figures include operations from the residential fiber-to-the-home
business which was sold to Grupo Televisa by the end of 4Q18,
therefore, figures are not compared on an equal basis. With this,
Axtel has concentrated on the corporate segment, its core business.
During this quarter, we anticipate lower government spending in
telecommunications as a result of a new administration in office.
Mid-single digit increase in revenue within a comparable base.
In 1Q19, Axtel may report revenue totaling MXN$3.1 billion,
which would represent a 14.8% drop yoy. However, by excluding
massive segment revenue from the comparative base, consolidated
revenue would surge 5.2% yoy. The corporate segment would be
boosted by the dynamism of the network management and IT
solutions business. This segment would produce MXN$2.6 billion
in revenue (+6.7% yoy) contributing with 84% of total revenue. As
for Government revenue, we estimate a 2% dip due to lower
spending from federal and state government entities.
However, profitability drops. At an EBITDA level, we estimate
MXN$1.0 billion, representing a 21.4% decline and a 2.8pp
contraction in the corresponding margin to 33.9%. We anticipate
lower operating leverage due to the slowdown of government
spending. It is worth mentioning that in 1Q18, Axtel reported
MXN$122 million in net revenue from the sale of
telecommunications towers. Excluding such extraordinary revenue,
EBITDA would decrease 13.8% yoy.
Interests reflect leverage reduction. Although the comparative
base is difficult at a Net Interest Expense level due to the
MXN$942 million FX gain, in this first period we estimate a 14%
reduction in interest expense. In this context, in terms of net profit,
we estimate a MXN$141 million loss vs. a MXN$960 million gain.
Net Income & ROE
MXN, million
Net Debt & Net Debt to EBITDA
MXN, million
36.7% 36.8%
34.2%
31.8%
33.9%
30%
32%
34%
36%
38%
40%
2,500
3,000
3,500
4,000
1Q18 2Q18 3Q18 4Q18 1Q19e
Revenue EBITDA margin
0.1%
-42.6% -46.5%
30.2%
-0.2%
-60%
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
(1,000)
(500)
0
500
1,000
1,500
1Q18 2Q18 3Q18 4Q18 1Q19e
Net Income ROE
3.3x
3.6x
3.5x
3.0x 3.1x
2.6x
2.8x
3.0x
3.2x
3.4x
3.6x
11,000
13,000
15,000
17,000
19,000
21,000
1Q18 2Q18 3Q18 4Q18 1Q19e
Net Debt Net Debt EBITDA
CEMEX CPO (Buy, 2019 PT MXN$ 12.70)
José Itzamna Espitia Hernández
CEMEX – Preview 1Q19 USD, million
Revenue & EBITDA Margin MXN, million
Concept 1Q18 1Q19e Chg %
Revenue 3,381 3,308 -2.2%
Operating Income 334 297 -11.1%
Ebitda 535 505 -5.6%
Net Income 26 99 281.5%
Margins
Operating Margin 9.9% 9.0% -0.9pp
EBITDA Margin 15.8% 15.3% -0.6pp
Net Margin 0.8% 3.0% 2.2pp
EPS $0.00 $0.01 284.2%
Source: Banorte / Historic and estimated figures excluding IFRS 16.
We expect Cemex to report a drop in sales and EBITDA in
1Q19 yoy. We anticipate a decline of 2.2% yoy in sales (in dollars)
and 5.6% in EBITDA. Moreover, the company would surge
281.5% in majority net profit vs 1Q18.
We project volumes to report a slight set back in the
consolidated balance. We foresee an average growth in volume in
the U.S. (1.6%), Europe (2.5%), Asia, Middle East and Africa
(0.8%) and Central America, South America and the Caribbean
(1.2%). Conversely, we expect an average 3.3% decline in Mexico
derived from the market’s lower dynamism. It is worth mentioning
that volume in the U.S. was partially impacted by an adverse
climate, while in Europe, weather conditions improved in
comparison to 1Q18.
We estimate better prices yoy in local currency and increments
in dollars in most regions. Cemex’s efforts to improve its price
strategy continue; thus, we estimate price improvement in local
currency in all regions where the company is present. Along the
same line, we expect growth in dollars in most of the regions where
Cemex operates. We must remember that the exchange rate plays a
relevant role.
We forecast lower profitability in EBITDA. We estimate a 0.9pp
and 0.6pp downturn in operating margin and EBITDA to 9.0% and
15.3%, respectively. In addition to weaker sales, we believe energy
prices will continue to pressure the company’s costs. By region, we
expect the following expansion in EBITDA margin yoy: U.S.
(+0.2pp) and Europe (+0.2pp); on the other hand, we forecast the
following declines: Mexico (-1.3pp), Asia, Middle East and Africa
(-1.7pp), and Central America, South America and the Caribbean (-
0.5pp).
Majority net profit would total US$99 million (+281.5% yoy)
given lower comprehensive financing cost (-40%) which would
more than compensate the company’s loss in operating profit.
Net Income & ROE
MXN, million
Net Debt & Net Debt to EBITDA
MXN, million
15.8%
18.8% 18.8%
17.5% 15.3%
0.0%
5.0%
10.0%
15.0%
20.0%
56,000
58,000
60,000
62,000
64,000
66,000
68,000
70,000
72,000
74,000
76,000
1Q18 2Q18 3Q18 4Q18 1Q19e
Revenue EBITDA Margin
5.2% 5.9%
5.0% 5.5%
6.3%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
(2,000)
0
2,000
4,000
6,000
8,000
1Q18 2Q18 3Q18 4Q18 1Q19e
Net Income ROE
4.1x
4.2x
3.8x 3.8x
3.7x
3.4x
3.5x
3.6x
3.7x
3.8x
3.9x
4.0x
4.1x
4.2x
4.3x
165,000
170,000
175,000
180,000
185,000
190,000
195,000
200,000
205,000
1Q18 2Q18 3Q18 4Q18 1Q19e
Net Debt Net Debt to EBITDA
CHDRAUI B (Buy, PT2019 $49.00)
Valentín III Mendoza Balderas
CHDRAUI – Preview 1Q19 MXN, million pesos
Revenue & EBITDA Margin MXN, million
Concept 1Q18 1Q19e Chg %
Revenue 23,289 32,030 37.5%
Operating Income 1,174 1,202 2.4%
Ebitda 1,594 1,867 17.2%
Net Income 573 648 13.1%
Margins
Operating Margin 5.0% 3.8% -1.3pp
EBITDA Margin 6.8% 5.8% -1.0pp
Net Margin 2.5% 2.0% -0.4pp
EPS $0.59 $0.67 13.1%
Source: Banorte
Positive year-start. Grupo Comercial Chedraui is scheduled to
report corresponding 1Q19 earnings on Tuesday, April 30th, after
the bell. We anticipate a good 2019 start, highlighting the
dynamism of SSS in Mexico, exceeding the performance of
Walmex. Meanwhile, although the consolidation of Fiesta Mart
would pressure margins, in such operations we should observe a
sequential improvement in profitability as a result of the first
synergies.
We expect consolidated revenue to grow 37.5%. We anticipate
that the consolidation of Fiesta Mart will give revenue a strong
push, in view of a 21.7% sales floor increase (+134.6% in the U.S.),
to which we would have to add a positive 260bps FX conversion
effect over the operations of Bodega Latina. Meanwhile, in Mexico,
we project that SSS would exceed the performance of Walmex by
growing 5.4% yoy, in El Super format we forecast a 2.5% rally and
in Fiesta, a 0.2% contraction. Hence, TS would reach MXN$32.0
billion (+37.5%) resulting from a 10.8% increase in Mexico
(MXN$18.3 billion), 107% in the U.S. (MXN$13.4 billion) and
2.2% in Real Estate.
The consolidation of Fiesta Mart would pressure the EBITDA
margin by 100bps. We expect CHEDRAUI’s EBITDA to grow
17.2% yoy to MXN$1.8 billion, resulting from a 10.7% rally in
such indicator in Mexico (MXN$1.2 billion) and a 10.1% increase
in that of the U.S. (MXN$422 million), while real estate would
contribute with MXN$167 million. Thus, the consolidated EBITDA
margin would fall 100bps to 5.8%, due to the Fiesta Mart
consolidation effect.
A lower tax effective rate would boost net profit. We project a
13.1% net income growth to MXN$648 million, supported by a
lower tax rate (30% vs the previous 34%), added to a practically flat
Net Interest Expense (-0.4%) – in view of MXN$2 million in FX
gains, which favorably compares to last year’s MXN$12 million
loss, offsetting a 29% increase in interest payments.
Net Income & ROE
MXN, million
Net Debt & Net Debt to EBITDA
MXN, million
6.8%
5.5% 5.6% 5.0%
5.8%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
1Q18 2Q18 3Q18 4Q18 1Q19e
Revenue EBITDA Margin
7.7%
7.4% 7.3%
7.0% 7.0%
6.6%
6.8%
7.0%
7.2%
7.4%
7.6%
7.8%
0
100
200
300
400
500
600
700
1Q18 2Q18 3Q18 4Q18 1Q19e
Net Income ROE
0.5x
1.4x
1.2x 1.3x
1.2x
0.0x
0.2x
0.4x
0.6x
0.8x
1.0x
1.2x
1.4x
1.6x
0
2,000
4,000
6,000
8,000
10,000
1Q18 2Q18 3Q18 4Q18 1Q19e
Net Debt Net Debt to EBITDA
CREAL * (Buy, PT2019 MXN$22.50) Marissa Garza Ostos
CREAL – Preview 1Q19 MXN, million
Interest Income & NIM MXN, million
Concept 1Q18 1Q19e Chg %
Interest Income 2,415 2,830 17.2%
Financial Margin 1,570 1,770 12.7%
Operating Income 490 501 2.2%
Net Income 423 464 9.8%
Margins
ROE 12.3% 13.0% 0.7pp
NIM 14.0% 13.1% 0.9pp
NPL 2.1% 1.8% -0.3pp
Provisions/TL 183.1% 159.0% -23.2pp
Source: Banorte
CREAL, maintains growth inertia. Crédito Real is scheduled to
release 1Q19 earnings on Wednesday April 24th after the bell. We
anticipate a positive quarter, where the strategy will continue to
focus on growth in Mexico and in the U.S.
SMEs, Payroll and Automobile Mexico will continue to boost
the portfolio. This quarter, we anticipate an annual 23.6% increase
in the total credit portfolio, to stand at roughly MXN$38.7 billion.
Such growth is explained mainly by the favorable performance in
SMEs with the launching of a new pure leasing product, Payroll
favored by greater origination, and Automobiles, driven primarily
by a sound growth in Mexico.
Financial Margin reflects perpetual bond accounting
adjustments. Growth in portfolio and adjustments related to
Instacredit commissions with the implementation of NIIF 9 (all
origination revenue and expenses must be integrated into the FM)
should boost financial revenue, which we anticipate will grow
17.2% yoy to reach MXN$2.8 billion. It should be noted that as of
July of 2018, perpetual bond interests are directly registered in
equity when the coupon is paid. Moreover, we expect a 25.6%
increase in financial expenses due to greater funding costs. Thus,
the Financial Margin should stand at MXN$1.7 billion, up an
annual 12.7%. As for provisions, these should rise 3.1% yoy to
MXN$434 million, with which we anticipate a Net Interest Margin
of 13.1% vs 14.0% in 1Q18.
Net profit to increase on a par with Margin. This quarter, we
expect MXN$464 million in net profit, which would represent a
9.8% yoy increase. Accordingly, we anticipate ROE at 13.0%, flat
vs. 4Q18, but should stand at levels of 1.8% considering the NPL
ratio (vs. 1.9 in 1Q18).
Net Income & ROE
MXN, million
Coverage Ratio & NPL
MXN, million
14.0% 14.5%
14.2%
16.6%
13.1%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
2,200
2,300
2,400
2,500
2,600
2,700
2,800
2,900
1T18 2T18 3T18 4T18 1T19e
Interest Income NIM
12.3%
12.1%
12.7%
13.1%
13.0%
11.6%
11.8%
12.0%
12.2%
12.4%
12.6%
12.8%
13.0%
13.2%
0
100
200
300
400
500
600
1Q18 2Q18 3Q18 4Q18 1Q19e
Net Income ROE
1.9% 1.9% 2.1%
1.7% 1.8%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
0%
50%
100%
150%
200%
1Q18 2Q18 3Q18 4Q18 1Q19e
Coverage ratio NPL
FEMSA (Hold, PT2019 MXN$192.00)
Manuel Jiménez Zaldivar
Valentín Mendoza Jorge Izquierdo
FEMSA – Preview 1Q19 MXN, million
Revenue & EBITDA Margin MXN, million
Concept 1Q18 1Q19e Chg %
Revenue 115,337 121,096 5.0%
Operating Income 8,412 8.778 4.4%
Ebitda 13,006 13,790 6.0%
Net Income 1,476 4,337 193.9%
Margins
Operating Margin 7.3% 7.2% -0.1pp
EBITDA Margin 11.3% 11.4% 0.1pp
Net Margin 1.3% 3.6% 2.3pp
EPS $0.08 $0.24 193.9%
Source: Banorte
KOF would offset cost pressures incurred by FEMSA
Comercio. We anticipate a neutral report. Higher operating
expenses from FEMSA Comercio would be outweighed by the
positive deconsolidation effect of the Philippines in KOF.
FEMSA Comercio: solid growth in revenue. We expect revenue
from the proximity division to grow 10.4%, driven by a 5.5%
increase in same store sales and the opening of 190 new OXXO
locations. In the health division, revenue would gain 9% yoy
derived from a 5.4% increment in LfL sales and the opening of 62
pharmacies. Furthermore, revenue from the fuel division would
grow 17% yoy, driven by a 3.9% increase in the average price per
liter and the opening of 20 new stations. Finally, KOF’s revenue
would fall 2.9% yoy to MXN$48.2 billion.
Marginal improvement in profitability. We forecast a 5.3% yoy
increase in operating expenses given pressures of the FEMSA
Comercio division. These are explained by the change implemented
in the employment scheme, cash management and the opening of
new OXXO format stores, as well as by the pharmacy opening
effect in South America and the implementation of new vapor
recovery systems and the opening of OXXO GAS stations. Hence,
EBITDA from the proximity division would stand at MXN$3.2
billion (+2.8%) with a margin at 7.6%. Meanwhile the health
division would contribute with MXN$508 in EBITDA (-4.3%) and
a 3.7% margin. Finally, the fuel division would add MXN$190
million (+9%) with a 1.5% margin. However, the deconsolidation
of KOF operations in the Philippines would have a positive effect
on profitability by growing 6% yoy to MXN$13.7 billion.
Profit benefited by an FX effect and the participation in
Heineken. We expect FX losses to fall 89% yoy during 1Q19. In
addition, a higher contribution from FEMSA’s participation
(14.8%in Heineken would boost net earnings to MXN$4.3 billion.
Net Income & ROE
MXN, million
Net Debt & Net Debt to EBITDA
MXN, million
11.3%
12.6% 12.7%
14.5%
11.4%
8%
10%
12%
14%
16%
18%
100,000
105,000
110,000
115,000
120,000
125,000
130,000
1Q18 2Q18 3Q18 4Q18 1Q19e
Revenue EBITDA margin
17.3% 18.4%
6.9%
9.9% 10.9%
0%
5%
10%
15%
20%
0
2,000
4,000
6,000
8,000
10,000
12,000
1Q18 2Q18 3Q18 4Q18 1Q19e
Net Income ROE
0.9x
1.5x
1.4x
1.1x 1.0x
0.0x
0.5x
1.0x
1.5x
2.0x
25,000
35,000
45,000
55,000
65,000
75,000
1Q18 2Q18 3Q18 4Q18 1Q19e
Net Debt Net Debt EBITDA
FIHO12 (Hold, 2019 PT MXN$ 11.80)
José Itzamna Espitia Hernández
FIHO – Preview 1Q19 MXN, million
Revenue & EBITDA Margin MXN, million
Concept 1Q18 1Q19e Chg %
Revenue 1,009 1,057 4.8%
NOI 368 346 -6.1%
Ebitda 314 294 -6.4%
Net Income 175 95 -45.8%
Margins
NOI Margin 36.5% 32.7% -3.8pp
Ebitda Margin 31.1% 27.8% -3.3pp
Net Margin 17.4% 9.0% -8.4pp
Distribution payment $0.30 $0.27 -9.2%
Source: Banorte
Complicated beginning of the year impacts operating results. In
1Q19, we expect the REIT to report a 4.8% yoy increase in sales, a
6.1% drop in NOI and a 6.4% decline in EBITDA to close at
MXN$1.1 billion, MXN$346 million and MXN$294 million,
respectively. In addition, net profit would post a considerable
45.8% annual downturn.
More hotel rooms under operation and a higher rate would
more than offset a decline in occupancy, thus boosting revenue.
In 1Q19, the REIT would close with 3.1% more rooms vs. 1Q18.
Considering the total number of hotel rooms under operations and
under development, FIHO would close this quarter with a similar
number to that of the year-ago period. We estimate the REIT’s
stabilized hotel occupancy (74) to stand at 64.0% (-0.4pp).
Furthermore, we expect the average rate to stand at P$1,185,
whereby the effective rate would be P$758 (+1.3% vs. 1T18).
We foresee a drop in profitability. We expect the NOI’s margin
to stand at 32.7% and the EBITDA margin at 27.8%, representing
3.8pp and 3.3pp declines, respectively. The latter is due to a lower
operating leverage resulting from lower market demand, mainly in
beach destinations and, specifically for FIHO, in the Fiesta
Americana Condesa Cancún (FACC), as well as in business hotels
due to the current uncertain climate that affects projects and travel
plans.
We project a 45.8% net profit decline vs. 1Q18, which would
stand at MXN$95 million due to lower operating earnings and
higher comprehensive financing cost (+140.9% vs. 1Q18), mainly
resulting from higher paid interests (no longer capitalizing).
We forecast cash distribution to stand at MXN$ 0.268 per
CBFI, which would represent an approximate 2.8% yield based on
the current price level.
NOI & NOI Margin
MXN, million
AFFO / Distribution payment
MXN, million
31.1% 29.8%
25.6% 26.0%
27.8%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
920
940
960
980
1,000
1,020
1,040
1,060
1,080
1,100
1Q18 2Q18 3Q18 4Q18 1Q19e
Revenue EBITDA Margin
36.5%
34.9%
31.0%
32.2% 32.7%
28.0%
29.0%
30.0%
31.0%
32.0%
33.0%
34.0%
35.0%
36.0%
37.0%
0
50
100
150
200
250
300
350
400
1Q18 2Q18 3Q18 4Q18 1Q19e
NOI NOI Margin
0.295 0.290
0.207
0.262 0.268
0.000
0.050
0.100
0.150
0.200
0.250
0.300
0.350
0
50
100
150
200
250
300
1Q18 2Q18 3Q18 4Q18 1Q19e
AFFO Distribution payment
GAP B (Buy, 2019 PT MXN$ 206.70)
José Itzamna Espitia Hernández
GAP – Preview 1Q19 MXN, million
Revenue & EBITDA Margin MXN, million
Concept 1Q18 1Q19e Chg %
Revenue 3,408 3,811 11.8%
Operating Income 1,845 2,035 10.3%
Ebitda 2,230 2,469 10.7%
Net Income 1,114 1,312 17.7%
Margins
Operating Margin 54.2% 53.4% -0.8pp
Ebitda Margin 65.4% 64.8% -0.7pp
Net Margin 32.7% 34.4% 1.7pp
EPS $1.99 $2.34 17.7%
Source: Banorte
We expect Gap to continue to post double-digit growth in 1Q19.
We estimate the airport group to report 1Q19 earnings, including an
11.8% growth in sales and a 10.7% increase in EBITDA, to close at
MXN$3.8 billion and MXN$2.5 billion, respectively.
Mid single-digit passenger growth during the quarter. We
expect the sum of aeronautic and non-aeronautic revenue
(including MBJ) to total a 12.7% growth and considering only the
12 airports that operate in Mexico, such expansion is estimated at
12.0%. This would result from a 5.2% yoy total passenger traffic
increase, constituted by a 3.9% domestic and 6.7% international
traffic surge. Additionally, excluding MBJ (only the 12 airports that
operate in Mexico), total passengers climbed 4.4%. It should be
mentioned that there was an adverse calendar effect due to an
Easter Week shift this year, from March in 2018 to April in 2019.
We expect a slight increase in the group’s EBITDA margin
(without accounting changes). We anticipate the group will post
operating and EBITDA margin contractions of 0.8pp and 0.7pp to
stand at 53.4% and 64.8%, respectively. It must be stated that such
margins, without considering accounting changes (not representing
outflow), would come in as follows: 58.0% for operating (-1.3pp)
and 70.4% for EBITDA (-1.3pp). We expect profitability of the
airports that operate in Mexico to remain stable (+0.2pp in
EBITDA margin), as well as a lower margin for the MBJ Airport (-
14.0pp).
We project that as at 1Q19, Gap’s majority net profit would
total MXN$1.3 billion (+17.7% vs. 1Q18), due to increments in
operating earnings, lower taxes (-7%) and a less negative number
from FX conversion difference, partially offset by comprehensive
financing cost (vs. a gain in 1Q18).
Net Income & ROE
MXN, million
Net Debt & Net debt to EBITDA ratio
MXN, million
65.4%
62.3%
61.5% 60.6%
64.8%
58.0%
59.0%
60.0%
61.0%
62.0%
63.0%
64.0%
65.0%
66.0%
3,200
3,300
3,400
3,500
3,600
3,700
3,800
3,900
1Q18 2Q18 3Q18 4Q18 1Q19e
Revenue EBITDA Margin
20.3%
27.0% 24.8% 23.8%
27.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
0
200
400
600
800
1,000
1,200
1,400
1,600
1Q18 2Q18 3Q18 4Q18 1Q19e
Net Income ROE
0.5x 0.6x
0.7x
0.8x
0.7x
0.0x
0.1x
0.2x
0.3x
0.4x
0.5x
0.6x
0.7x
0.8x
0.9x
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
1Q18 2Q18 3Q18 4Q18 1Q19e
Net Debt Net Debt to EBITDA
GCC * (Buy 2019 PT MXN$ 124.50) José Itzamna Espitia Hernández
GCC – Preview 1Q19 USD, million
Revenue & EBITDA Margin USD, million
Concept 1Q18 1Q19e Chg %
Revenue 189 176 -6.9%
Operating Income 25 22 -11.5%
Ebitda 46 41 -11.0%
Net Income 11 10 -8.6%
Margins
Operating Margin 13.4% 12.7% -0.7pp
EBITDA Margin 24.3% 23.2% -1.1pp
Net Margin 6.0% 5.9% -0.1pp
EPS $0.03 $0.03 -8.6%
Source: Banorte / Historic and estimated figures excluding IFRS 16.
We forecast setbacks in GCC’s 1Q19 earnings. In 1Q19, we
expect GCC to report a 6.9% decrease in sales (in dollars), as well
as an 11.0% drop in EBITDA, to come in at US$176 million and
US$41 million, respectively.
We expect a low-single digit volume decline, on average, in the
consolidated balance. In the U.S., adverse weather conditions
affected company volumes. In addition, the comparative base is
high, as 1Q18 was GCC’s all-time strongest performing quarter.
Hence, we forecast a mid-single digit drop in product volume. On
the other hand, for operations in Mexico, unlike the rest of the
country, we consider the favorable market dynamic in Chihuahua
had a positive effect on cement and concrete volumes. Thus, we
estimate an average +3.5% increase in volume.
Improved prices yoy in local currency and in U.S. dollars, on
average. GCC continues the implement its price strategy, which we
expect will be reflected on figures this quarter. We estimate a mid-
single digit improvement in product prices, on average, in local
currency and a low-single digit improvement in dollars.
Operating margin reduction. We forecast GCC will present a
0.7pp drop in operating margin, to stand at 12.7%, and a 1.1%
EBITDA margin contraction to 23.2%. This would result from
lower sales which would have a negative impact on the company’s
operating leverage.
We foresee an 8.6% yoy downturn in GCC’s majority net
profit, given lower operating profit, partially offset by lower
comprehensive financing cost (-12% yoy), as well as by lower taxes
(-11%). On the other hand, the company will continue to report
financial strength, with the Net Debt/EBITDA indicator at 1.6x vs.
1.6x in 4Q18.
Net Income & ROE
USD, million
Net Debt & Net Debt to EBITDA
USD, million
24.3%
29.9% 30.0% 27.9%
23.2%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
0
50
100
150
200
250
300
1Q18 2Q18 3Q18 4Q18 1Q19e
Revenue EBITDA Margin
9.7%
6.5% 7.3%
6.4% 6.1%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
(20)
(10)
0
10
20
30
40
50
1Q18 2Q18 3Q18 4Q18 1Q19e
Net Income ROE
1.8x 1.8x
1.6x 1.6x
1.6x
1.4x
1.5x
1.5x
1.6x
1.6x
1.7x
1.7x
1.8x
1.8x
1.9x
360
380
400
420
440
460
480
500
1Q18 2Q18 3Q18 4Q18 1Q19e
Net Debt Net Debt to EBITDA
GENTERA * (Buy, PT2019 MXN$20.00)
Marissa Garza Ostos
GENTERA – Preview 1Q19 MXN, million
Interest Income & NIM MXN, million
Concept 1Q18 1Q19e Chg %
Interest Income 5,016 5,457 8.8%
Financial Margin 4,641 4,964 7.0%
Operating Income 1,050 1,110 5.7%
Net Income 726 792 9.0%
Margins
ROE 15.3% 16.0% 0.7pp
NIM 45.5% 38.2% -7.3pp
NPL 4.1% 2.9% -1.2pp
Provisions/TL 174.7% 214.5% 39.8pp
Source: Banorte
Gentera, a good year-start. The company is set to report 1Q19
earnings on Wednesday April 24th, after the bell. We anticipate a
favorable quarter, moving forward with the recovery momentum of
previous periods.
Gentera’s portfolio maintains double-digit growth. For this first
quarter of the year, we expect positive figures which should reflect
favorable dynamics that were implemented as well as the
company’s aggressive commercial strategy, especially to boost
growth in Mexico. In this sense, we expect Gentera’s total portfolio
to expand 12.9% yoy to stand at MXN$35.6 billion. In any case, it
should be mentioned that we anticipate a marginal qoq contraction,
not only resulting from the business’s cyclical nature, but also due
to an adverse calendar effect due to an Easter-week shift from
March in 2018 (1Q18) to April in 2019 (2Q19).
Financial Margin reflects rate-reduction strategy in order to
boost growth. Although growth in portfolio should boost financial
revenue, this will be tempered by a lower active rate, related to the
company’s strategy to boost growth, whereby we anticipate an
8.8% yoy increase in such item. This, coupled with higher interest
expenditures, resulting from a hike in Mexico’s reference rate and
higher liquidity levels, will reflect in a 7.0% Financial Margin
increase to MXN$4.9 billion. Growth of provisions below that of
the portfolio will translate into a Risk Adjusted Financial Margin of
MXN$4.2 billion, up 7.7% yoy. Consequently, the Net Interest
Margin (NIM) will go from 45.5% in 1Q18 and 40.7% in 4Q18 to
38.2% in 1Q19.
Net profit reflects a favorable strategy. The company’s operating
performance coupled with cost efficiencies will reflect on a
MXN$792 million net profit, posting a 9.0% yoy increase. ROE
should stand at 16.0% and the NPL ratio should erode slightly to
2.9% qoq.
Net Income & ROE
MXN, million
Coverage Ratio & NPL
MXN, million
45.5%
41.5%
44.6%
40.7%
38.2%
34.0%
36.0%
38.0%
40.0%
42.0%
44.0%
46.0%
48.0%
4,700
4,800
4,900
5,000
5,100
5,200
5,300
5,400
5,500
5,600
5,700
1Q18 2Q18 3Q18 4Q18 1Q19e
Interest Income NIM
15.3% 15.5%
15.0%
16.4%
16.0%
14.0%
14.5%
15.0%
15.5%
16.0%
16.5%
17.0%
640
660
680
700
720
740
760
780
800
820
840
1Q18 2Q18 3Q18 4Q18 1Q19e
Net Income ROE
4.1%
2.9% 2.6% 2.7% 2.9%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
0%
50%
100%
150%
200%
250%
1Q18 2Q18 3Q18 4Q18 1Q19e
Coverage Ratio NPL
GICSA B (Buy, PT2019 MXN$9.00) Valentín III Mendoza Balderas
GICSA – Preview 1Q19 MXN, million pesos
Revenue & EBITDA Margin MXN, million
Concept 1Q18 1Q19e Chg %
Revenue 1,050 1,337 27.4%
Operating Income 890 885 -0.6%
Ebitda 934 901 -3.6%
Net Income 410 224 -45.4%
Margins
Operating Margin 84.8% 66.2% -18.6pp
EBITDA Margin 89.0% 67.4% -21.6pp
Net Margin 39.1% 16.7% -22.3pp
EPS $0.27 $0.15 -45.4%
Source: Banorte
Recent openings should begin to offset the effects from the
assets swap. GICSA is set to report 1Q19 earnings on Monday
April 29th, after the closing bell. We anticipate a quarter with
moderate declines, as recent openings should start to offset part of
the effects from the assets swap. However, said effect would also
pressure profitability given the lower occupancy.
GLA would grow 8.8% yoy. The recent openings of La Isla
Mérida, La Explanada Puebla, Paseo Querétaro and Masaryk 169
would add 68,316m2 to the company’s portfolio, therefore totaling
840,477m2 of GLA (+8.8%). Meanwhile, we expect occupation to
reach 91.2% for the stabilized portfolio and 82.8% in assets that are
under process of stabilization.
9.7% average rent and GLA increase would support a 27.4%
net revenue expansion. We expect net revenue to reach MXN$1.3
billion in 1Q19, up 27.4% from the year-ago period, due to a 9.7%
surge in average rent, explained by a 7% lease-spread and the
positive effect from the peso’s depreciation against the U.S. dollar
(260bps) of the company’s office space portfolio – which is
dollarized-, also adding an 8.8% increase in GLA.
We anticipate a low one-digit drop in NOI and EBITDA. We
expect Gicsa’s net operating income (NOI) to fall 0.6% yoy to
MXN$885 million, as the first contributions of recently opened
properties should partially offset the assets swap effect.
Furthermore, service companies are expected to subtract some
growth from the company’s EBITDA, thus reaching MXN$901
million during the first quarter of the year (-3.6% yoy).
Sharp interest expenses growth would pressure net income. We
anticipate net income to slump 45.4% to MXN$224 million, in
view of MXN$428 million in Net Interest Expense, which would
unfavorably compare to a MXN$164 million income in 1Q18.
Net Income & ROE
MXN, million
Net Debt & Net Debt to EBITDA
MXN, million
89.0% 88.1%
76.9%
56.5%
67.4%
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
0
500
1,000
1,500
2,000
2,500
1Q18 2Q18 3Q18 4Q18 1Q19e
Revenue EBITDA Margin
0.9%
10.0%
3.2%
22.3% 20.2%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
(2,000)
(1,000)
0
1,000
2,000
3,000
4,000
5,000
1Q18 2Q18 3Q18 4Q18 1Q19e
Net Income ROE
6.5x
4.8x 5.0x 5.4x 5.3x
0.0x
1.0x
2.0x
3.0x
4.0x
5.0x
6.0x
7.0x
20,000
20,200
20,400
20,600
20,800
21,000
21,200
21,400
21,600
21,800
1Q18 2Q18 3Q18 4Q18 1Q19e
Net Debt Net Debt to EBITDA
GMEXICO B (Buy, PT2019 MXN$53.00)
Marissa Garza Ostos
GMEXICO – Preview 1Q19 USD, million
Revenue & EBITDA Margin USD, million
Concept 1Q18 1Q19e Chg %
Revenue 2,668 2,625 -1.6%
Operating Income 968 924 -4.5%
Ebitda 1,259 1,219 -3.2%
Net Income 362 359 -0.7%
Margins
Operating Margin 36.3% 35.2% -1.1pp
EBITDA Margin 47.2% 46.4% -0.8pp
Net Margin 13.6% 13.7% 0.1pp
EPS $0.05 $0.05 -0.7%
Source: Banorte
GMEXICO, a neutral quarter. Grupo México will be releasing
1Q19 figures after April 23rd. The adverse comparative base for the
price of copper will be undermined by a significant recovery in
volumes. Hence, according to our projections model, we anticipate
a quarter where revenue may drop 1.6% and EBITDA, 3.2% yoy, in
dollars. Lower profitability in Mining operations, in view of lower
metal prices will be partially offset by higher margins of the
Transport division (GMXT). Thus, despite efficiencies in costs and
expenses that have been implemented, we expect a 0.8pp EBITDA
margin year-on-year contraction, to close at 46.4%. We expect
stable figures with US$359 million in net income (-0.7% yoy).
The new concentrator in Toquepala will begin to boost volumes.
This quarter, both the price of copper and that of by-products will
face an adverse annual comparative base. In 1Q19, the average
price of copper posted a year-on-year decline above 10%, going
from US$3.14 per pound in 1Q18 to US$2.80 in 1Q19. Moreover,
the price of silver fell a little over 6% yoy, while that of zinc
dropped nearly 21% yoy and molybdenum adjusted almost 30%
yoy. All the foregoing will be partially outweighed by growing
volumes, particularly in the case of copper, we anticipate a 10.0%
yoy increase mainly due to the operational start- up of the new
concentrator in Toquepala and higher volumes of by-products.
GMXT posts double-digit growth. The momentum of solid
earnings in the Transportation division will continue this quarter,
supported both by higher volumes and by prices in general. In
dollar-terms, we expect increments of 10.0% in revenue and 12.8%
in EBITDA yoy (See GMXT’s preliminary report).
Expected dividend of MXN$0.80 per share, similar to the
previous one and which represents a 1.5% return over current
prices.
Net Income & ROE
USD, million
Net Debt & Net Debt to EBITDA
USD, million
47.2%
49.4%
44.6% 45.2%
46.4%
42.0%
43.0%
44.0%
45.0%
46.0%
47.0%
48.0%
49.0%
50.0%
2,500
2,520
2,540
2,560
2,580
2,600
2,620
2,640
2,660
2,680
1Q18 2Q18 3Q18 4Q18 1Q19e
Revenue EBITDA Margin
11.3%
11.9%
10.2% 10.0%
11.3%
8.5%
9.0%
9.5%
10.0%
10.5%
11.0%
11.5%
12.0%
12.5%
0
100
200
300
400
500
1Q18 2Q18 3Q18 4Q18 1Q19e
Net Income ROE
1.4x 1.3x 1.3x
1.4x
1.6x
0.0x
0.2x
0.4x
0.6x
0.8x
1.0x
1.2x
1.4x
1.6x
1.8x
6,000
6,500
7,000
7,500
8,000
1Q18 2Q18 3Q18 4Q18 1Q19e
Net Debt Net Debt to EBITDA
GMXT * (Buy, PT2019 MXN$31.70)
Marissa Garza Ostos
GMXT – Preview 1Q19 MXN, million
Revenue & EBITDA Margin MXN, million
Concept 1Q18 1Q19e Chg %
Revenue 10,182 11,472 12.7%
Operating Income 2,491 3,036 21.9%
Ebitda 4,196 4,857 15.7%
Net Income 1,866 1,604 -14.0%
Margins
Operating Margin 24.5% 26.5% 2.0pp
EBITDA Margin 41.2% 42.3% 1.1pp
Net Margin 18.3% 14.0% -4.3pp
EPS $0.45 $0.39 -14.0%
Source: Banorte
GMXT, a positive year-start. Grupo México Transportes is
scheduled to release its 1Q19 figures after April 23rd. We anticipate
another positive quarter, moving forward with the momentum of
organic growth and higher profitability.
Increase in volume continues mainly driven by the Energy,
Agriculture, Metal and Intermodal segments. According to our
estimates, this quarter we anticipate a 12.7% yoy increase in
consolidated revenue, to stand at MXN$11.4 billion. Such growth
will be fueled by a 5.0% increase in transported volume, measured
in tons/kilometers, being the Energy, Agriculture, Metals and
Intermodal segments those that present the most improvement.
Additionally, we expect considerable improvement, in annual
terms, on average consolidated prices per ton (+7.3% A/A),
although these will marginally drop on a sequential basis. (-0.6%
T/T).
Profitability improvement continues, driven by higher revenue
and especially by efficiencies obtained in view of ongoing
investments, the organizational restructuring of FEC (Florida East
Coast Railway) and the new plan to increase the subsidiary’s
productivity, at EBITDA level, we anticipate a 15.7% increase yoy
to MXN$4.8 billion. Consequently, the consolidated EBITDA
margin should expand 1.1pp to stand at 42.3%
Net profit hit by a less favorable FX effect. Despite the solid
operating performance, a less favorable qoq FX conversion effect
vs. the year-ago period would produce a 14.0% yoy drop in net
profit to close at MXN$1.6 billion.
Expected dividend of P$0.30 per share. We expect the company
to issue a dividend of P$0.30, similar to the previous one which
represents a 1.1% return over current prices.
Net Income & ROE
MXN, million
Net Debt & Net Debt to EBITDA
MXN, million
41.2%
44.4% 43.9%
41.8% 42.3%
39.0%
40.0%
41.0%
42.0%
43.0%
44.0%
45.0%
9,000
9,500
10,000
10,500
11,000
11,500
12,000
12,500
1Q18 2Q18 3Q18 4Q18 1Q19e
Revenue EBITDA Margin
14.0%
13.2%
14.1%
13.7%
13.0%
12.4%
12.6%
12.8%
13.0%
13.2%
13.4%
13.6%
13.8%
14.0%
14.2%
1,450
1,500
1,550
1,600
1,650
1,700
1,750
1,800
1,850
1,900
1Q18 2Q18 3Q18 4Q18 1Q19e
Net Income ROE
1.4x
1.3x 1.3x 1.3x
1.2x
1.1x
1.2x
1.2x
1.3x
1.3x
1.4x
1.4x
1.5x
22,500
23,000
23,500
24,000
24,500
25,000
1Q18 2Q18 3Q18 4Q18 1Q19e
Net Debt Net Debt to EBITDA
HOTEL * (Buy, 2019 PT MXN$ 10.00)
José Itzamna Espitia Hernández
HOTEL – Preview 1Q19 MXN, million
Revenue & EBITDA Margin MXN, million
Concept 1Q18 1Q19e Chg %
Revenue 575 627 9.0%
Operating Income 171 161 -6.3%
Adjusted Ebitda 226 217 -3.9%
Net Income 152 70 -53.8%
Margins
Operating Margin 29.8% 25.6% -4.2pp
Adjusted EBITDA Margin 39.2% 34.6% -4.6pp
Net Margin 26.3% 11.2% -15.2pp
EPS $0.31 $0.14 -53.8%
Source: Banorte
Weak 1Q19 report. We expect the company to report a 9.0% yoy
increase in sales, but a 6.3% and 3.9% decline in operating profit
and Adjusted EBITDA, to stand at MXN$627 million, MXN$161
million and MXN$217 million, respectively. We anticipate the
company’s majority net profit will drop 53.8%, to MXN$70
million.
An increase in the number of rooms yoy supports growth in
revenue which is partially offset by a lower effective rate. We
project a 2.4% downturn in occupation of self-owned rooms vs. the
year-ago period, standing at 66.3%. Moreover, we expect the
average daily rate in 1Q19 to be MXN$1,508 (+1.0% yoy). Thus,
we estimate the effective daily rate will post a 2.5% setback, to
MXN$627.
Ongoing inorganic growth. HOTEL sales are favored by a higher
number of self-owned rooms this quarter, +9.6% more vs. 1Q18.
The company has an interesting growth outlook and has the
resources to continue to integrate new assets to its portfolio.
We expect the company’s EBITDA margin to post a yoy
reduction. We forecast a 4.2pp profit margin drop to stand at
25.6%. Along the same line, we project Hotel’s Adjusted EBITDA
margin will report a 4.6pp reduction, coming in at 34.6%. The latter
would be explained by lower operating leverage due to several
elements that had an adverse effect during the quarter, such as: a
difficult comparative base, including Easter week in 1Q18, which
this year falls in April, a slowdown in tourism due to safety
concerns, lower demand of urban hotels (current uncertainty) and a
longer than expected wait time for Reflect hotels to mature.
We project MXN$70 million in majority net profit, down
53.8% from 1Q18, due to lower operating profit and a
comprehensive financing cost, in comparison to a gain in 1Q18,
from lower FX profits.
Net Income & ROE
MXN, million
Net Debt & Net Debt to EBITDA
MXN, million
39.2%
28.2% 30.3% 31.9%
34.6%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
0
100
200
300
400
500
600
700
1Q18 2Q18 3Q18 4Q18 1Q19e
Revenue EBITDA Margin
4.9%
3.0%
3.9%
5.8%
4.2%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
(50)
0
50
100
150
200
1Q18 2Q18 3Q18 4Q18 1Q19e
Net Income ROE
3.2x 3.4x 3.5x
4.1x
3.5x
0.0x
0.5x
1.0x
1.5x
2.0x
2.5x
3.0x
3.5x
4.0x
4.5x
0
500
1,000
1,500
2,000
2,500
3,000
1Q18 2Q18 3Q18 4Q18 1Q19e
Net Debt Net Debt to EBITDA
IENOVA * (Buy, PT2019 MXN$92.80)
Marissa Garza Ostos
IENOVA – Preview 1Q19 USD, million
Revenue & EBITDA Margin USD, million
Concept 1Q18 1Q19e Chg %
Revenue 288 337 17.0%
Operating Income 150 152 1.0%
Ebitda 211 220 3.9%
Net Income 128 115 -10.1%
Margins
Operating Margin 52.1% 45.0% -7.1pp
EBITDA Margin 73.4% 65.2% -8.2pp
Net Margin 44.3% 34.0% -10.3pp
EPS $0.11 $0.10 -10.1%
Source: Banorte
Ienova, a neutral quarter. The company is set to release 1Q19
earnings on Monday April 29th, after market close. According to
our estimates, Ienova should start the year with modest growth in
Adjusted EBITDA. This quarter, the main catalyst will be the solid
performance of the Thermoelectric plant in Mexicali (whose
operations were once again integrated as of 2Q18) and the
beginning of operations of the Prima and Rumorosa Solar projects.
We will closely monitor comments related to possible contract
reviews with the CFE and any progress on pending projects such as
the sea-bed pipeline (Texas-Tuxpan) expected to begin operations
in 2Q19.
Sustained growth supported by solid base contracts. According
to our estimates, we anticipate a 17.0% yoy increase in the
company’s consolidated revenue to reach US$337 million and a
3.9% expansion in adjusted EBITDA to stand at US$220 million.
The latter results from higher sales volume, mitigated by lower
natural gas prices.
Gas Segment. In this segment, we expect a neutral quarter, where
lower natural gas prices and some adjustments in Ecogas will
impact growth. Accordingly, we expect US$145 million in
EBITDA, practically stable vs. 1Q18.
Electricity Segment. Higher sales volumes from the
Thermoelectric plant in Mexicali, coupled with the incorporation of
the Prima and Rumorosa Solar projects will reflect in US$35
million worth of EBITDA (+137.6% yoy).
Net profit boosted by lower taxes. The favorable operating
performance will be partially offset by a less favorable yoy FX
effect. Accordingly, the company’s net profit should fall 10.1% to
US$115 million.
Net Income & ROE
USD, million
Net Debt & Net Debt to EBITDA
USD, million
73.4% 71.2%
58.4% 60.1% 65.2%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
0
50
100
150
200
250
300
350
400
450
1Q18 2Q18 3Q18 4Q18 1Q19e
Revenue Adjusted EBITDA Margin
7.2%
8.2% 8.1%
9.1% 8.6%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
0
20
40
60
80
100
120
140
1Q18 2Q18 3Q18 4Q18 1Q19e
Net Income ROE
3.6x
3.4x
3.5x 3.5x
3.9x
3.1x
3.2x
3.3x
3.4x
3.5x
3.6x
3.7x
3.8x
3.9x
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
1Q18 2Q18 3Q18 4Q18 1Q19e
Net Debt Net Debt to EBITDA
KOF L (Hold, PT2019 MXN$137.00)
Manuel Jimenez Zaldivar
Jorge Izquierdo
KOF – Preview 1Q19 MXN, million
Revenue & EBITDA Margin MXN, million
Concept 1Q18 1Q19e Chg %
Revenue 49,713 48,278 -2.9%
Operating Income 5,833 6,154 4.6%
Ebitda 8,706 9,351 7.4%
Net Income 2,414 3,190 32.2%
Margins
Operating Margin 11.8% 12.7% 0.9pp
EBITDA Margin 17.5% 19.4% 1.9pp
Net Margin 4.9% 6.6% 1.7pp
EPS $1.15 $1.52 32.2%
Source: Banorte
Solid beginning of the year for KOF. We anticipate a positive
report. The deconsolidation effect from operations in the
Philippines would offset a drop in volume in Colombia, due to the
new valued added tax imposed on the production chain of sugary
beverages and beer in said country, as well as to macroeconomic
conditions in Argentina.
In this context, we assume a 2.9% yoy revenue reduction and a
7.4% year-on-year EBITDA increment. It should be mentioned that
our figures do not incorporate the recently announced changes in
IFRS 16 and data released by the company could vary significantly.
In a comparable base, we anticipate solid growth. By re
expressing 2018 figures excluding the results from the Philippines,
revenue and EBITDA would be growing 9.4% and 14.5%,
respectively. Moreover, we expect increments in average prices in
line with inflation and year-on-year volume growth in Mexico and
Central America (+2.7%) and Brazil (+1.7%). Furthermore, we
anticipate an increase of roughly 5% on the average price per unit
case in Colombia to face an estimated 4.7% volume drop. Finally,
we expect volume in Argentina to fall 14% yoy.
Improvement in profitability. In a comparable base, we expect
the margin to post an 86bp expansion to 19.4% in 1Q19. This as a
result of the termination of the operations in the Philippines,
efficiencies in hedging main raw materials and a more favorable
environment for the price of sugar at an international level.
Net profit benefited by lower interest payments. During 4Q18,
the leverage level dropped. Due to the latter, we expect interest
payments to fall nearly 15% yoy in 1Q19. In this sense, net profit
would increase 32% to stand at MXN$3.1 billion.
Net Income & ROE
MXN, million
Net Debt & Net Debt to EBITDA
MXN, million
17.5% 18.3%
19.2% 20.4%
19.4%
15%
17%
19%
21%
23%
25%
40,000
42,000
44,000
46,000
48,000
50,000
52,000
54,000
1Q18 2Q18 3Q18 4Q18 1Q19
Revenue EBITDA Margin
-14.6% -13.7% -13.7%
11.2% 11.5%
-18.0%
-13.0%
-8.0%
-3.0%
2.0%
7.0%
12.0%
0
1,000
2,000
3,000
4,000
5,000
6,000
1Q18 2Q18 3Q18 4Q18 1Q19
Net Income ROE
1.6x
1.8x
1.9x
1.6x
1.5x
1.2x
1.3x
1.4x
1.5x
1.6x
1.7x
1.8x
1.9x
2.0x
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
1Q18 2Q18 3Q18 4Q18 1Q19
Net Debt Net Debt to EBITDA
LAB B (Hold, 2019 PT MXN$ 15.50)
Valentín III Mendoza Balderas
LAB – Preview 1Q19 MXN, million pesos
Revenue & EBITDA Margin MXN, million
Concept 1Q18 1Q19e Chg %
Revenue 3,025 3,177 5.0%
Operating Income 667 626 -6.2%
Ebitda 684 655 -4.3%
Net Income 379 336 -11.2%
Margins
Operating Margin 22.1% 19.7% -2.4pp
EBITDA Margin 22.6% 20.6% -2.0pp
Net Margin 12.5% 10.6% -1.9pp
EPS $0.36 $0.32 -11.2%
Source: Banorte
Investments in advertising to boost sales should put pressure on
margins. Lab is scheduled to report 1Q19 earnings on Monday
April 29th after the closing bell. We anticipate that higher
advertising expenses would support revenue growth but would, in
turn, pressure profitability.
Sales would grow 5.0% by year-start. We expect consolidated
revenue to come in at MXN$3.2 billion in 1Q19 (+5.0% yoy). Such
performance would be explained by a 3.8% rally in Mexico, in
view of 3.5% and 4.2% increments in OTC and PC, respectively,
anticipating that higher spending in advertising would have
streamlined the sell-out and made room for sell-in growth. In
addition, a 12.2% OTC expansion in Latin America would offset a
1.3% contraction in personal care products in said region. Thus,
such consolidated indicator would advance 3.9% yoy. Finally, in
the U.S., we consider the double-digit growth dynamic could
continue, which coupled with an increase in points of sale and a
260bps favorable FX conversion effect would result in TS
escalating 13%, due to a 13.2% gain in OTC and a 12.8%
expansion in PC.
Advertising expenses would undermine the EBITDA margin by
200bps. In line with the strategy implemented as of 4Q18, we
expect higher investments in advertising with the purpose of
boosting sell-out would increase the expense to sales ratio by 2pp.
Hence, these would grow by double-digits year-on-year (10.3%),
eroding the EBITDA margin by 200bps to stand at 20.6% and
translate into a 4.3% yoy EBITDA reduction for LAB to MXN$655
million.
Higher tax effective rate would impact the company’s net
profit. We expect Lab’s net income to drop 11.2% to MXN$336
million, as a higher tax effective rate (30%E vs a previous 24.1%)
would offset a 12.4% lower Net Interest Expense related to lower
FX losses in comparison to 1Q18.
Net Income & ROE
MXN, million
Net Debt & Net Debt to EBITDA
MXN, million
22.6% 20.6% 20.6%
18.5% 20.6%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
2,900
2,950
3,000
3,050
3,100
3,150
3,200
1Q18 2Q18 3Q18 4Q18 1Q19e
Revenue EBITDA Margin
16.9% 16.2% 16.2% 16.4%
13.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
0
50
100
150
200
250
300
350
400
1Q18 2Q18 3Q18 4Q18 1Q19e
Net Income ROE
1.4x 1.4x
1.6x 1.8x 1.8x
0.0x
0.5x
1.0x
1.5x
2.0x
0
1,000
2,000
3,000
4,000
5,000
1Q18 2Q18 3Q18 4Q18 1Q19e
Net Debt Net Debt to EBITDA
LACOMER UBC (Buy, PT2019 MXN$ 25.00)
Valentín III Mendoza Balderas
LACOMER – Preview 1Q19 MXN, million pesos
Revenue & EBITDA Margin MXN, million
Concept 1Q18 1Q19e Chg %
Revenue 4,287 4,886 14.0%
Operating Income 207 235 13.5%
Ebitda 369 432 17.1%
Net Income 172 199 15.7%
Margins
Operating Margin 4.8% 4.8% 0.0pp
EBITDA Margin 8.6% 8.8% 0.2pp
Net Margin 4.0% 4.1% 0.1pp
EPS $0.16 $0.18 15.7%
Source: Banorte
Ongoing profitability improvement La Comer is set to report
1Q19 earnings on Tuesday, April 30th, after the bell. During the
quarter, we expect dynamism in revenue to continue, coupled with
the most aggressive SSS and sales floor increments within the retail
sector in Mexico (5.5% and 12.0%, respectively). Meanwhile, in
terms of profitability, a more favorable sales mix should offset an
increase in expenses resulting from higher electricity prices and
pre-operating expenses.
We continue to expect the best LfL growth within the retail
sector. We project La Comer’s SSS may report a 5.5% yoy
increase in 1Q19, once again topping Chedraui (5.4%e), Walmex
(5.1%) and Soriana (+1.3%e). Meanwhile, a 12% yoy sales floor
expansion, following the opening of 5 new locations during the last
year, may boost total sales +14.0% year-on-year to MXN$4.9
billion.
Despite pressures from higher electricity costs and pre-
operating expenses, the company’s EBITDA margin could
expand 20bps. We project that a more favorable sales mix may
boost the gross margin by 50bps to 27.6%, thanks to a greater
contribution from Fresko and City Market towards consolidated
sales. This, in turn, should outweigh certain pressures on expenses
(+17.9%) in view of higher electricity prices and some pre-
operating expenditures due to the opening of new units. Thus,
EBITDA would grow 17.1% yoy to MXN$432 million, thereby
translating into a 20bps EBITDA margin expansion to 8.8%.
Net profit could grow 15.7% yoy. We expect La Comer’s net
income to reach MXN$199 million in 1Q19, increasing 15.7% over
the year-ago period. In addition to operating growth, a 94.7%
higher Net Interest Income, resulting from greater interest income
and lower FX losses, should offset a higher tax effective rate (30%e
vs a previous 25.9%)..
Net Income & ROE
MXN, million
Net Debt & Net Debt to EBITDA
MXN, million
8.6% 8.1%
12.6%
7.3%
8.8%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
3,800
4,000
4,200
4,400
4,600
4,800
5,000
5,200
1Q18 2Q18 3Q18 4Q18 1Q19e
Revenue EBITDA Margin
4.1% 4.2%
5.0% 5.0% 4.9%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
0
50
100
150
200
250
300
350
400
450
1Q18 2Q18 3Q18 4Q18 1Q19e
Net Income ROE
-1.6x
-1.8x
-1.4x -1.5x
-1.7x
-2.0x
-1.5x
-1.0x
-0.5x
0.0x
(3,500)
(3,000)
(2,500)
(2,000)
(1,500)
(1,000)
(500)
0
1Q18 2Q18 3Q18 4Q18 1Q19e
Net Debt Net Debt to EBITDA
LIVEPOL C (Hold, PT2019 MXN$ 151.00)
Valentín III Mendoza Balderas
LIVEPTL – Preview 1Q19 MXN, million pesos
Revenue & EBITDA Margin MXN, million
Concept 1Q18 1Q19e Chg %
Revenue 25,262 27,716 9.7%
Operating Income 1,547 1,984 28.2%
Ebitda 2,373 2,929 23.4%
Net Income 1,003 1,311 30.7%
Margins
Operating Margin 6.1% 7.2% 1.0pp
EBITDA Margin 9.4% 10.6% 1.2pp
Net Margin 4.0% 4.7% 0.8pp
EPS $0.75 $0.98 30.7%
Source: Banorte
Solid growth and improved profitability given an easy
comparative base. Liverpool is set to report 1Q19 earnings on
Tuesday April 23rd, after the closing bell. We anticipate a quarter
with double-digit growth in EBITDA and net profit, facing an easy
comparative base as a result of several extraordinary charges
reported in 1Q18, which hit profitability.
Revenue would grow 9.7% yoy. We expect Liverpool’s
consolidated revenue to reach MXN$27.7 billion in 1Q19 (+9.7%
yoy), explained by a 7.8% surge in Liverpool and FdF sales
(SSS+6.6%e), in addition to a 12.4% increment in Suburbia sales
(SSS +8.4%e) and a 15.5% increase in interest income, given a
6.7% portfolio upturn due to the launching of the Suburbia credit
card. Furthermore, we expect revenue from rent to grow 14.1%,
thanks to GLA expansions in Perisur and Satélite. Finally, other
revenue and services would add MXN$219 million.
Double-digit EBITDA growth. We project that revenue growth
from the financial business should change Liverpool’s sales mix
towards a more favorable combination, boosting the gross margin
by 90bps to 41.8%. Meanwhile, the absence of extraordinary
charges- like those acknowledged in 1Q19-, coupled with a 0.1pp
yoy lower NPL rate (5%e), should offset the effect of pre-operating
expenses from the 13 department stores that were opened in the
LTM. Hence, we estimate expenses will grow practically in line
with sales (9.9%e), translating into a 23.4% EBITDA increase to
MXN$2.9 billion and a 120bps EBITDA margin expansion to
10.6%.
Sharp net income growth. We consider that a 20.3% lower Net
Interest Expense- from 8.7% lower interest payments- would
compensate a higher tax rate (27%e vs a previous 19.4%),
bolstering the company’s net profit by 30.7% to MXN$1.3 billion.
Net Income & ROE
MXN, million
Net Debt & Net Debt to EBITDA
MXN, million
9.4%
14.9% 12.7%
19.2%
10.6%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
0
10,000
20,000
30,000
40,000
50,000
60,000
1Q18 2Q18 3Q18 4Q18 1Q19e
Revenue EBITDA Margin
11.5% 11.5%
12.1%
11.6% 11.5%
11.0%
11.2%
11.4%
11.6%
11.8%
12.0%
12.2%
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
1Q18 2Q18 3Q18 4Q18 1Q19e
Net Income ROE
1.4x 1.2x
1.3x
0.9x 0.9x
0.0x
0.2x
0.4x
0.6x
0.8x
1.0x
1.2x
1.4x
1.6x
0
5,000
10,000
15,000
20,000
25,000
30,000
1Q18 2Q18 3Q18 4Q18 1Q19e
Net Debt Net Debt to EBITDA
MEGA CPO (Buy, PT2019 MXN$108.50)
Manuel Jiménez Zaldivar
MEGA – Preview 1Q19 MXN, million
Revenue & EBITDA Margin MXN, million
Concept 1Q18 1Q19e Chg %
Revenue 4,695 5,132 9.3%
Operating Income 1,613 1,688 4.6%
Ebitda 2,374 2,499 5.3%
Net Income 1,155 1,232 6.6%
Margins
Operating Margin 34.4% 32.9% -1.5pp
EBITDA Margin 50.6% 48.7% -1.9pp
Net Margin 24.6% 24.0% -0.6pp
EPS $1.34 $1.43 6.6%
Source: Banorte
Recovering from the cyber-attack. We should recall that last
November the company fell victim to a cyber-attack that disturbed
its collection capacity and generated costs and additional expenses
due to the implementation of safety measures in 4Q18. We consider
that during the first quarter of the year, the aftermath of such attack
will be limited. Furthermore, the company continues to run the trial
phase of the mobile telephone service under the MVNO system
which it will operate under the “Megafon” brand in seven cities of
the Mexican Republic.
Mega maintains double-digit growth in terms of RGUs. We
estimate a 10.6% increase in Megacable’s Revenue- Generating
Unit base (RGUs) to 8.18 million, which would represent 221
thousand net additions. Breaking down RGUs by type of service,
we observe the following variations: +5.4% in video, +10.5% in
internet access and +21.3% in telephone service. Moreover, we
anticipate a 2.1% drop in ARPU due to the Triple play service
bundling package, effect which would be partially offset by the
addition of value-added services (X-view). However, revenue per
single subscriber would grow 2.7% vs 1Q18.
Solid growth rhythm in the corporate segment and pressure on
margins from the MVNO system. We estimate MXN$5.1 billion
in consolidated revenue, up an annual 9.3%. As for revenue in the
corporate segment, we anticipate a 12.3% increase vs. 1Q18, driven
mainly by Metrocarrier operations. Revenue from the corporate
segment would contribute with 17.5% of total revenue. The
company could produce MXN$2.4 billion in EBITDA (+5.3% yoy),
which would equal a 48.7% margin (-190bps vs 1Q18). We expect
profitability to drop due to higher IT costs as well as to additional
expenses from the “Megafon” trial phase. Finally, in terms of net
profit, we forecast a 6.6% surge yoy given the absence of
significant financial expenses.
Net Income & ROE
MXN, million
Net Debt & Net Debt to EBITDA
MXN, million
50.6% 50.2%
47.8%
45.1%
48.7%
40%
42%
44%
46%
48%
50%
52%
3,300
3,550
3,800
4,050
4,300
4,550
4,800
5,050
5,300
1Q18 2Q18 3Q18 4Q18 1Q19e
Revenue EBITDA Margin
15.1%
16.4% 16.2% 16.6% 16.4%
14%
15%
16%
17%
0
200
400
600
800
1,000
1,200
1,400
1Q18 2Q18 3Q18 4Q18 1Q19e
Net Income ROE
0.0x
0.1x 0.1x 0.1x
0.0x
-0.1x
0.0x
0.1x
0.2x
(400)
(200)
0
200
400
600
800
1,000
1,200
1Q18 2Q18 3Q18 4Q18 1Q19e
Net Debt Net Debt to EBITDA
MEXCHEM * (Buy, PT2019 MXN$64.00)
Marissa Garza Ostos
MEXCHEM – Preview 1Q19 USD, million
Revenue & EBITDA Margin USD, million
Concept 1Q18 1Q19e Chg %
Revenue 1,756 1,739 -0.9%
Operating Income 227 190 -16.4%
Ebitda 330 295 -10.7%
Net Income 79 80 0.9%
Margins
Operating Margin 12.9% 10.9% -2.0pp
EBITDA Margin 18.8% 16.9% -1.9pp
Net Margin 4.5% 4.6% 0.1pp
EPS $0.04 $0.04 0.9%
Source: Banorte
Mexchem, a sluggish year-start. The company is set to release
1Q19 earnings on Wednesday April 24th, after the bell. This
quarter, the weak performance of Vinyl should continue, impacting
operation profitability.
Netafim will soon become more comparable, yet challenges
faced by Vinyl continue. It should be mentioned that as of this
quarter, Netafim is soon reaching a comparable basis, as 2 months
of operations were consolidated during 1Q18. Therefore, we expect
year-on-year reductions of 0.9% in sales to US$1.7 million and
10.7% in EBITDA to US$295 million. Hence, we project a 1.9pp
EBITDA margin contraction to 16.9%. Finally, net profit should be
stable yoy, with estimated profit at US$80 million given a less
adverse FX effect.
Vinyl, this quarter will continue to be affected by PVC adverse
market conditions and challenges in terms of ethane distribution in
the U.S. following the shutdown of several plants in Europe and
Asia, due to environmental restrictions, and even despite the
reopening of Vestolit operations since mid-January. These adverse
conditions are expected to continue in upcoming months, thus the
most relevant highlight this quarter, in our opinion, will be news
related to measures that would help mitigate the impact of a
conflicting environment.
Fluent, Netafim will begin to reflect organic growth, expecting to
observe some benefits related to synergies, coupled with a good
performance of operations in Europe and the U.S./Canada, which
we hope will continue.
Flúor, will continue to face an environment of less favorable prices
yoy, given the significant rally that took place particularly during
the first half of the previous year, with more stable figures qoq.
Net Income & ROE
USD, million
Net Debt & Net Debt to EBITDA
USD, million
18.8%
21.5% 21.0%
15.9% 16.9%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
1,500
1,550
1,600
1,650
1,700
1,750
1,800
1,850
1,900
1,950
2,000
1Q18 2Q18 3Q18 4Q18 1Q19e
Revenue EBITDA Margin
8.3%
11.7% 12.9%
14.7% 14.3%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
0
20
40
60
80
100
120
140
160
180
1Q18 2Q18 3Q18 4Q18 1Q19e
Net Income ROE
3.2x
2.7x 2.5x 2.6x
2.8x
0.0x
0.5x
1.0x
1.5x
2.0x
2.5x
3.0x
3.5x
3,300
3,400
3,500
3,600
3,700
3,800
3,900
4,000
4,100
1Q18 2Q18 3Q18 4Q18 1Q19e
Net Debt Net Debt to EBITDA
NEMAK A (Sell, PT2019 MXN$13.00) Valentín III Mendoza Balderas
NEMAK – Preview 1Q19 MXN, million pesos
Revenue & EBITDA Margin MXN, million
Concept 1Q18 1Q19e Chg%
Revenue 23,163 21,323 -7.9%
Operating Income 2,032 1,323 -34.9%
Ebitda 3,695 3,100 -16.1%
Net Income 1,287 753 -41.5%
Margins
Operating Margin 8.8% 6.2% -2.6pp
EBITDA Margin 16.0% 14.5% -1.4pp
Net Margin 5.6% 3.5% -2.0pp
EPS $0.42 $0.24 -41.5%
Source: Banorte
A very negative year-start. Nemak is set to report corresponding
1Q19 earnings on Tuesday, April 23rd, after the bell. We anticipate
a very sluggish quarter, affected not only by a drop in vehicle
production but also by lower aluminum prices and an adverse FX
effect in Europe
Sharp drop in volume. We expect the consolidated volume to fall
7.8% year-on-year to 12.1 million equivalent units, hit by an 8.8%
setback in NAFTA, 5% in Europe and 11.7% in the Rest of the
World, which would be attributed to a decline in vehicle production
of 0.8% in North America, 5.4% in Europe, 12.1% in China and
2.3% in Latin America, from which it is worth noting that Detroit’s
Big Three would observe a 5% contraction.
Lower aluminum prices would exacerbate revenue contraction.
We project sales to drop 10.1% yoy to US$1.1 billion, due to the
fact that in addition to lower volume, we expect a 2.4% contraction
in the price per unit, in view of a 12.8% decline in the price of
aluminum and due to a negative effect from the Euro’s depreciation
(7.6%). By region, we anticipate drops of 8.6% in Nafta, 11.9% in
Europe and 11.6% in the Rest of the World.
Lower operating leverage would pressure the EBITDA margin
by 150bps. According to our projection model, Nemak’s EBITDA
would fall 18.0% yoy to US$161 million during 1Q19, as a result of
a lower operating leverage in all regions where it operates, due to a
decline in volume. Hence, the EBITDA margin would contract
150bps to stand at 14.5%.
A higher tax effective rate would pressure the bottom line even
further. We consider that Nemak’s net profit could reach US$39
m, which equals a 43.5% yoy reduction, as a higher tax effective
rate (28% vs. a previous 18.3%) would also build on the company’s
reported operating weakness.
Net Income & ROE
MXN, million
Net Debt & Net Debt to EBITDA
MXN, million
16.0% 16.7%
13.0%
15.8%
14.5%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
17,000
18,000
19,000
20,000
21,000
22,000
23,000
24,000
25,000
1Q18 2Q18 3Q18 4Q18 1Q19e
Revenue EBITDA Margin
10.2%
7.1%
9.7% 9.6%
8.2%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
0
200
400
600
800
1,000
1,200
1,400
1Q18 2Q18 3Q18 4Q18 1Q19e
Net Income ROE
2.0x
2.0x
1.9x
1.8x
2.1x
1.7x
1.8x
1.8x
1.9x
1.9x
2.0x
2.0x
2.1x
2.1x
2.2x
24,000
24,500
25,000
25,500
26,000
26,500
27,000
27,500
28,000
28,500
1Q18 2Q18 3Q18 4Q18 1Q19e
Net Debt Net Debt to EBITDA
OMA B (Buy, 2019 PT MXN$ 118.80)
José Itzamna Espitia Hernández
OMA – Preview 1Q19 MXN, million
Revenue & Adjusted EBITDA Margin MXN, million
Concept 1Q18 1Q19e Chg %
Revenue 1,932 1,852 -4.2%
Operating Income 945 1,020 8.0%
Adjusted Ebitda 1,072 1,173 9.4%
Net Income 608 691 13.6%
Margins
Operating Margin 48.9% 55.1% 6.2pp
Adjusted EBITDA Margin 67.9% 68.1% 0.2pp
Net Margin 31.5% 37.3% 5.8pp
EPS $1.52 $1.76 15.4%
Source: Banorte
Solid growth in 1Q19. We expect Oma to report 1Q19 earnings
with an increase of 9.0% in operating revenue (sum of aeronautic
and non-aeronautic revenue), 8.0% in operating profit, 9.4% in
Adjusted EBITDA and 13.6% in majority net profit, to settle at
MXN$1.7 billion, MXN$1.0 billion, MXN$1.2 billion and
MXN$691 million, respectively.
Passenger traffic spikes by one and a half digit in 1Q19.
During the first quarter of the year, the airport group’s total traffic
closed with a 4.3% increase vs. 1Q18, constituted by a 5.0%
domestic and 0.8% international traffic surge. It should be
mentioned that there was an adverse calendar effect due to an
Easter Week shift this year, from March in 2018 to April in 2019.
The company continues to focus on the diversification of non-
aeronautic revenue through the development of new businesses.
We expect revenue per passenger (sum of aeronautic and non-
aeronautic/ total traffic) to have a positive 2.3% variation over
1Q18.
We expect the group’s Adjusted EBITDA margin to remain
practically flat yoy. We forecast a 6.2pp increase in Oma’s
operating margin, closing at 55.1%. Moreover, we anticipate the
group’s Adjusted EBITDA margin (Adjusted EBITDA/ Sum of
aeronautic and non-aeronautic revenue) would remain stable and
present a marginal +0.2pp variation, to stand at 68.1%, reflecting
economies of scale, as well as control and efficiencies under costs
and company spending.
Oma’s majority net profit would rise 13.6% vs. 1Q18, mainly
due to higher operating results and lower comprehensive financing
cost (-63% yoy), partially offset by a higher amount of income
taxes (+22.0%).
Net Income & ROE
MXN, million
Net Debt & Net debt to Adjusted EBITDA ratio MXN, million
67.9%
70.5%
71.4%
69.9%
68.1%
66.0%
67.0%
68.0%
69.0%
70.0%
71.0%
72.0%
1,750
1,800
1,850
1,900
1,950
2,000
2,050
1Q18 2Q18 3Q18 4Q18 1Q19e
Revenue Adjusted EBITDA Margin
30.2%
37.0% 35.4% 34.2% 34.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
0
100
200
300
400
500
600
700
800
900
1Q18 2Q18 3Q18 4Q18 1Q19e
Net Income ROE
0.5x
0.7x
0.5x
0.3x 0.4x
0.0x
0.1x
0.2x
0.3x
0.4x
0.5x
0.6x
0.7x
0.8x
0
500
1,000
1,500
2,000
2,500
3,000
3,500
1Q18 2Q18 3Q18 4Q18 1Q19e
Net Debt Net Debt to Adjusted EBITDA
PINFRA * (Buy, 2019 PT MXN$ 215.30)
José Itzamna Espitia Hernández
PINFRA – Preview 1Q19 MXN, million
Revenue & EBITDA Margin MXN, million
Concept 1Q18 1Q19e Chg %
Revenue 2,340 3,006 28.4%
Operating Income 1,582 1,761 11.3%
Ebitda 1,686 1,878 11.4%
Net Income 876 985 12.4%
Margins
Operating Margin 67.6% 58.6% -9.0pp
EBITDA Margin 72.1% 62.5% -9.6pp
Net Margin 37.4% 32.8% -4.7pp
EPS $2.04 $2.29 12.4%
Source: Banorte
Pinfra would present double-digit growth in 1Q19 earnings. We
expect the company to report a 28.4% increase in sales and 11.4%
in EBITDA, to MXN$3.0 billion and MXN$1.9 billion,
respectively.
Higher revenue in Concessions and Construction would more
than offset losses in Plants. Pinfra’s main segment, Concessions-
—67.1% of sales in the last 12 months- would post a 7.6% rally
due to the solid vehicle capacity performance in the company’s
expressways and the increase in tolls. Furthermore, we foresee a
142.7% increase in Construction (27.3% contribution), and
conversely, a 3.5% decline in Plants (5.5% weight).
The company has some assets under development and there lies the
heavy pondering of construction revenue. Such assets are the
following: the second stage of the Pirámides-Texcoco toll road, the
Monterrey – Nuevo Laredo toll road and the Siglo XXI
expressway.
Considerable drop in profitability expected from lower margins
forecasted for the company’s three business segments and
greater weight from Construction (the least profitable
segment). We expect operating profit to grow 11.3% and EBITDA,
11.4%. We anticipate the Concessions segment (the most profitable
business) will post a lower EBITDA margin (-0.8pp), Plants, a
1.5pp drop and Construction profitability to fall 5.9pp. Thus, in the
consolidated balance, we expect margins to post a decline: 9.0pp in
operating and 9.6pp in EBITDA, to 58.6% and 62.5%, respectively.
We project a 12.4% increase in majority net profit vs. 1Q18,
standing at MXN$985 million, as increments in operating earnings
would be partially offset by higher taxes (+57% A/A).
Net Income & ROE
MXN, million
Net Debt & Net Debt to EBITDA
MXN, million
72.1%
64.0% 58.5% 55.5%
62.5%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
0
500
1,000
1,500
2,000
2,500
3,000
3,500
1Q18 2Q18 3Q18 4Q18 1Q19e
Revenue EBITDA Margin
11.4%
13.5% 13.2%
12.8% 12.7%
10.0%
10.5%
11.0%
11.5%
12.0%
12.5%
13.0%
13.5%
14.0%
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
1Q18 2Q18 3Q18 4Q18 1Q19e
Net Income ROE
-2.5x
-2.7x
-2.6x
-2.7x
-2.6x
-2.8x
-2.7x
-2.7x
-2.6x
-2.6x
-2.5x
-2.5x
-2.4x
(20,000)
(19,000)
(18,000)
(17,000)
(16,000)
(15,000)
(14,000)
1Q18 2Q18 3Q18 4Q18 1Q19e
Deuda Neta Deuda Neta EBITDA
SORIANA B (Hold, PT2019 $33.00)
Valentín III Mendoza Balderas
SORIANA – Preview 1Q19 MXN, million pesos
Revenue & EBITDA Margin MXN, million
Concept 1Q18 1Q19e Chg %
Revenue 35,487 35,112 -1.1%
Operating Income 1,751 1,554 -11.2%
Ebitda 2,505 2,349 -6.3%
Net Income 817 633 -22.6%
Margins
Operating Margin 4.9% 4.4% -0.5pp
EBITDA Margin 7.1% 6.7% -0.4pp
Net Margin 2.3% 1.8% -0.5pp
EPS $0.45 $0.35 -22.6%
Source: Banorte
Still a weak quarter. Soriana will report 1Q19 results on Friday,
April 26th, during the MSE trading session. Though we expect a
mild recovery in sales performance among Soriana’s formats,
weakness in Mega should still impact consolidated results.
Moreover aggressive commercial promotions could put some
pressure on gross margin, while higher energy prices and salaries
would offset efficiencies in other expenses, impacting profitability.
Stable LfL. We estimate that SSS may have remained stable in
1Q19, after finally having normalized the supply of merchandise in
stores and having launched aggressive promotions to boost traffic.
Moreover, a 130bps sales floor contraction, following the closing of
9 units in the LTM, may lead total sales fall 1.1% (MXN$35.1
billion).
We expect the company to have sacrificed 10bps of gross
margin to recover customers. We consider Soriana may have
begun aggressive promotion campaigns with the purpose of
recovering the preference of lost customers during the 2018 supply
shortage issue. Hence, we estimate a 10bp- gross margin
contraction, standing at 22.5%.
Despite expense control, higher energy prices and salary
increases would erode EBITDA margin. We anticipate that in
spite of a strict cost control, pressures from higher electricity prices
and salary increases may translate into a 30bps increase in the
proportion of expenses to sales, which added to our expected gross
margin contraction, should translate into a 40bps lower EBITDA
margin to stand at 6.7%. As such, operating cash flow would fall
6.3% yoy to MXN$2.3 billion.
Losses in Soriban and Sodimac would impact net level
performance We expect the company’s net profit to fall 22.6% to
MXN$633 million, hit by a MXN$149 million loss in non-
consolidated subsidiaries (vs –MXN$49 million in 1Q18).
Net Income & ROE
MXN, million
Net Debt & Net Debt to EBITDA
MXN, million
7.1% 7.2%
6.1%
7.9%
6.7%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
32,000
34,000
36,000
38,000
40,000
42,000
1Q18 2Q18 3Q18 4Q18 1Q19e
Revenue EBITDA Margin
7.8% 7.1%
6.5% 5.8%
5.4%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
0
200
400
600
800
1,000
1,200
1,400
1Q18 2Q18 3Q18 4Q18 1Q19e
Net Income ROE
1.8x 1.7x
2.2x
1.9x
2.2x
0.0x
0.5x
1.0x
1.5x
2.0x
2.5x
0
5,000
10,000
15,000
20,000
25,000
30,000
1Q18 2Q18 3Q18 4Q18 1Q19e
Net Debt Net Debt to EBITDA
SPORT S (Hold, PT 2019 MXN$24.00)
Valentín III Mendoza Balderas
SPORT – Preview 1Q19 MXN, million pesos
Revenue & EBITDA Margin MXN, million
Concept 1Q18 1Q19e Chg %
Revenue 450 535 18.8%
Operating Income 9 21 126.5%
Ebitda 59 76 27.8%
Net Income -4 -1 N.A.
Margins
Operating Margin 2.0% 3.9% 1.8pp
EBITDA Margin 13.2% 14.2% 1.0pp
Net Margin -0.9% -0.1% 0.8pp
EPS -$0.05 -$0.01 N.A.
Source: Banorte
Solid year-start. Sports World expects to report 1Q19 earnings on
Friday April 26th, after the bell. We anticipate a solid quarter, one in
which revenue would be driven by the opening of new clubs, while
a higher operating leverage and cost control should offset pressure
on growth, allowing profitability to continue improving.
The opening of 5 new clubs in the LTM would boost active
members. Following the net opening of 5 clubs during the year (3
in this quarter alone), we expect active members to climb 11.1% to
90,540, thanks to the contribution of 7,021 members of new
locations, while for same-clubs, we estimate a 2.5% yoy increase
with a 10bps higher churn rate yoy (5.2%).
Double-digit revenue growth. We project SW sales will post an
11.1% year-on-year expansion, to stand at MXN$535 million in
1Q19. Such figure is explained by an 11.3% surge in revenue from
maintenance and membership fees, while we anticipate other
revenue to increase 63.6% yoy.
Higher operating leverage and corporate cost control would
translate into profitability expansion We consider that an
increment of only 7% in corporate spending, coupled with a higher
leverage of operating expenses- growing 18.1% yoy, below the
sales rhythm, would compensate an 18.8% rally in sales costs.
Thus, EBITDA could grow 27.8% to MXN$76 million, resulting in
a 100bp corresponding margin improvement to 14.2%.
Higher interest payments would pressure the company’s net
profit. We project that SPORT will report MXN$1 million in net
loss, mainly explained by an expected 50.1% higher Net Interest
Expense yoy resulting from 42.8% higher interest payments.
Net Income & ROE
MXN, million
Net Debt & Net Debt to EBITDA
MXN, million
13.2%
15.8%
19.3% 20.1% 14.2%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
400
420
440
460
480
500
520
540
560
1Q18 2Q18 3Q18 4Q18 1Q19e
Revenue EBITDA Margin
5.1% 5.7% 5.6%
4.9%
4.2%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
(10)
(5)
0
5
10
15
20
25
1Q18 2Q18 3Q18 4Q18 1Q19e
Net Income ROE
1.5x 1.7x
1.9x 1.7x
1.6x
0.0x
0.5x
1.0x
1.5x
2.0x
0
100
200
300
400
500
600
700
1Q18 2Q18 3Q18 4Q18 1Q19e
Net Debt Net Debt to EBITDA
TLEVISA CPO (Hold, PT2019 MXN$57.00)
Manuel Jiménez Zaldivar
TLEVISA – Preview 1Q19 MXN, million
Revenue & EBITDA Margin MXN, million
Concept 1Q18 1Q19e Chg %
Revenue 22,812 23,291 2.1%
Operating Income 3,624 3,312 -8.6%
Ebitda 8,579 8,530 -0.6%
Net Income 678 614 -9.5%
Margins
Operating Margin 15.9% 14.2% -1.7pp
EBITDA Margin 37.6% 36.6% -1.0pp
Net Margin 3.0% 2.6% -0.3pp
EPS $0.23 $0.21 -9.3%
Source: Banorte
Inorganic growth would offset plunge in advertising. In the
Content segment, 1Q19 results will reflect the impact of lower
government spending and the effect of an economic slowdown over
advertiser spending. From our standpoint, this may fuel concerns
among investors. At a consolidated level, we may observe moderate
operating variations derived from the acquisition of the residential
fiber-to-the-home Business from Axtel during 4Q18.
Cable would be the only business with sales growth. Televisa
could report MXN$23.2 billion in consolidated earnings, up 2.1%
vs. 1Q18. For the Content division, we estimate a 3.3% slump in
revenue due to an 8% reduction of advertising sales, which would
be partially offset by the sale of programing and licenses (+1.3%)
and the sale of channels (+4.5%). For SKY, we expect a 1.9% drop
in revenue due to a 3.5% downturn in subscribers. In Cable, the
consolidation of Axtel’s massive business and the demand of value-
added services would push sales 12.4%.
We expect pressure on margins in view of lower operating
leverage. We estimate MXN$8.5 billion in EBITDA, down 0.6%
yoy, equaling a margin of -36.6% (-1pp vs 1Q18). We estimate
margin erosion in all business segments, highlighting that of the
Content division due to a lower operating leverage. In this segment,
we expect a 1.7pp decline to 34%. For Sky, we expect a 2.6pp
reduction to 42% from the start of Blue Telecomm operations and
higher advertising expenses. In cable, we estimate a 60bp margin
deterioration due to the consolidation of Axtel’s operations.
And an annual 9.5% downturn in net profit. Lower operating
leverage, a 5% increase in depreciation and amortization coupled
with stable financial expenses would result in a net profit of
MXN$614 million.
Net Income & ROE
MXN, million
Net Debt & Net Debt to EBITDA
MXN, million
37.6%
38.3%
39.2%
37.0% 36.6%
34.0%
36.0%
38.0%
40.0%
20,000
21,000
22,000
23,000
24,000
25,000
26,000
27,000
28,000
1Q18 2Q18 3Q18 4Q18 1Q9e
Revenue EBITDA Margin
4.3%
7.4% 7.2%
6.7% 6.6%
3%
4%
5%
6%
7%
8%
0
1,000
2,000
3,000
4,000
5,000
1Q18 2Q18 3Q18 4Q18 1Q9e
Net Income ROE
2.5x 2.4x
2.2x
2.6x 2.5x
1.0x
1.5x
2.0x
2.5x
3.0x
75,000
80,000
85,000
90,000
95,000
100,000
105,000
1Q18 2Q18 3Q18 4Q18 1Q9e
Net Debt Net Debt to EBITDA
VOLAR A (Hold, 2019 PT MXN$ 18.00)
José Itzamna Espitia Hernández
VOLAR – Preview 1Q19 MXN, million
Revenue & EBITDAR Margin MXN, million
Concept 1Q18 1Q19e Chg %
Revenue 5,850 6,951 18.8%
Operating Income -906 -453 N.A.
Ebitdar 823 1,273 54.7%
Net Income -1,118 -322 N.A.
Margins
Operating Margin -15.5% -6.5% 9.0pp
Ebitdar Margin 14.1% 18.3% 4.2pp
Net Margin -19.1% -4.6% 14.5pp
EPS -$1.11 -$0.32 -N.A.
Source: Banorte / Historic and estimated figures excluding IFRS 16
Sales and EBITDAR would advance in 1Q19. This quarter, we
expect Volar to report 18.8% yoy growth in sales and 54.7% in
EBITDAR. Furthermore, the company is estimated to report a lower
net loss (-MXN$322 million) given lower operating and FX losses.
Sharp 16.4% yoy growth in total passengers. A greater rise in
demand vs. capacity was reported, thus increasing passenger
load factor. In 1Q19, Volar reported a 16.4% major surge in
passenger traffic, comprised of an 18.3% domestic and 9.0%
international traffic upturn. The company expanded its total
capacity, measured in terms of available seat miles (ASMs) by
12.8% and total demand, measured by revenue passenger miles
(RPMs), rose 14.2%. Hence, passenger load factor stood at 83.2%
(+1.0pp vs. 1Q18). We should mention that there was an adverse
calendar effect due to an Easter week shift to April, from March,
this year. We foresee a slight drop in the average fare yoy and
double-digit growth in other revenue per passenger. We estimate a
5.3% rise in total revenue per available seat mile (TRASM) and a
1.1% climb in revenue per available seat mile (RASM). Finally, we
do not project changes in passenger revenue per RPM (yield).
Volar’s profitability jumps. We expect the airline to post lower
operating and EBITDA losses. Furthermore, we estimate a 54.7%
EBITDAR increment, to MXN$1.2 billion. Consequently, the
company’s EBITDAR margin would expand 4.2pp, to 18.3%,
mainly explained by operating efficiencies and lower cost of fuel,
partially offset by the depreciation of the exchange rate (~60% of
costs in dlls.). We project operating costs per available seat mile
(CASM) without fuel to drop 4% yoy.
Net Income & ROE
MXN, million
Net Debt & Adjusted Net debt to EBITDAR ratio
MXN, million
Adjusted Net Debt = Net Debt + (Aircraft and engine rent expense) * 7
14.1% 16.9%
26.7% 26.6%
18.3%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
1Q18 2Q18 3Q18 4Q18 1Q19e
Revenue EBITDAR Margin
-5.1%
1.0%
-8.4% -7.5%
1.2%
-10.0%
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
(1,200)
(1,000)
(800)
(600)
(400)
(200)
0
200
400
600
1Q18 2Q18 3Q18 4Q18 1Q19e
Net Income ROE
6.0x
6.8x 7.4x
7.1x 6.7x
0.0x
1.0x
2.0x
3.0x
4.0x
5.0x
6.0x
7.0x
8.0x
(4,500)
(4,000)
(3,500)
(3,000)
(2,500)
(2,000)
(1,500)
(1,000)
(500)
0
1Q18 2Q18 3Q18 4Q18 1Q19e
Net Debt Net Debt to EBITDAR
WALMEX * (Buy, PT2019 MXN$58.00)
Valentín III Mendoza Balderas
WALMEX – Preview 1Q19 MXN, million pesos
Revenue & EBITDA Margin MXN, million
Concept 1Q18 1Q19e Chg %
Revenue 145,054 151,685 4.6%
Operating Income 11,334 11,724 3.4%
Ebitda 14,378 15,193 5.7%
Net Income 8,349 8,625 3.3%
Margins
Operating Margin 7.8% 7.7% -0.1pp
EBITDA Margin 9.9% 10.0% 0.1pp
Net Margin 5.8% 5.7% -0.1pp
EPS $0.48 $0.49 3.3%
Source: Banorte
Positive year-start. Walmex will report 1Q19 earnings on
Thursday, April 25th after the bell. We anticipate a good beginning
of the year, one in which the solid performance in Mexico would
offset weakness in Central America, translating into a 10bps
expansion in EBITDA margin.
Consolidated revenue would grow 4.6% yoy. Walmex pre
reported a 3.3% consolidated SSS increase, resulting from a 5.1%
increment in Mexico and a 2.7% decline in Central America.
Meanwhile, the sales floor would have risen 1.6% (1.2% in our
country and 5.4% in CA) with the opening of 120 new stores in the
LTM. Thus, consolidated revenue would reach MXN$151.7 billion
(+4.6%).
We expect the gross margin to remain stable. We expect that
during the first quarter of the year, improved commercial conditions
would have allowed the expansion of Walmex’s price gap vs the
competition without pressuring the gross margin. With this in mind,
we expect the latter margin to remain stable at 22.9%.
Double-digit EBITDA margin by year-start. According to our
projections model, the company’s EBITDA could grow 5.7% yoy
to MXN$15.2 billion, resulting in a 10bps EBITDA margin
expansion to 10%, as a 6.1% increase in Mexico’s metric
(MXN$12.7 billion) should offset a 2.1% decline in that of Central
America.
78.4% Net Interest Expense, given lower FX gains, would curb
the company’s net profit growth. We project that net income for
Walmart de Mexico and Central America will reach MXN$8.6
billion in 1Q19, which equals a 3.3% year-on-year growth. It
should be noted that we consider lower FX gains (MXN$12 million
vs previous MXN$92 million) would pressure Net Interest
Expenses by 78.4% yoy, curbing the company’s net profit growth.
Net Income & ROE
MXN, million
Net Debt & Net Debt to EBITDA
MXN, million
9.9%
9.2%
10.1%
10.7%
10.0%
8.0%
8.5%
9.0%
9.5%
10.0%
10.5%
11.0%
0
50,000
100,000
150,000
200,000
1Q18 2Q18 3Q18 4Q18 1Q19e
Revenue EBITDA Margin
30.6%
23.9% 23.3% 22.3% 22.2%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
1Q18 2Q18 3Q18 4Q18 1Q19e
Net Income ROE
-0.3x -0.3x
-0.3x -0.4x
-0.8x -0.9x
-0.8x
-0.7x
-0.6x
-0.5x
-0.4x
-0.3x
-0.2x
-0.1x
0.0x
(60,000)
(50,000)
(40,000)
(30,000)
(20,000)
(10,000)
0
1Q18 2Q18 3Q18 4Q18 1Q19e
Net Debt Net Debt to EBITDA
Certification of Analysts. We, Gabriel Casillas Olvera, Delia Maria Paredes Mier, Alejandro Padilla Santana, Manuel Jiménez Zaldívar, Tania Abdul Massih Jacobo, Katia Celina Goya Ostos, Juan Carlos Alderete Macal, Víctor Hugo Cortes Castro, Marissa Garza Ostos, Miguel Alejandro Calvo Domínguez, Hugo Armando Gómez Solís, Gerardo Daniel Valle Trujillo, José Itzamna Espitia Hernández, Valentín III Mendoza Balderas, Santiago Leal Singer, Francisco José Flores Serrano, Francisco Duarte Alcocer, Jorge Antonio Izquierdo Lobato and Leslie Thalía Orozco Vélez, certify that the points of view expressed in this document are a faithful reflection of our personal opinion on the company (s) or firm (s) within this report, along with its affiliates and/or securities issued. Moreover, we also state that we have not received, nor receive, or will receive compensation other than that of Grupo Financiero Banorte S.A.B. of C.V for the provision of our services.
Relevant statements. In accordance with current laws and internal procedures manuals, analysts are allowed to hold long or short positions in shares or securities issued by companies that are listed on the Mexican Stock Exchange and may be the subject of this report; nonetheless, equity analysts have to adhere to certain rules that regulate their participation in the market in order to prevent, among other things, the use of private information for their benefit and to avoid conflicts of interest. Analysts shall refrain from investing and holding transactions with securities or derivative instruments directly or through an intermediary person, with Securities subject to research reports, from 30 calendar days prior to the issuance date of the report in question, and up to 10 calendar days after its distribution date.
Compensation of Analysts.
Analysts’ compensation is based on activities and services that are aimed at benefiting the investment clients of Casa de Bolsa Banorte Ixe and its subsidiaries. Such compensation is determined based on the general profitability of the Brokerage House and the Financial Group and on the individual performance of each analyst. However, investors should note that analysts do not receive direct payment or compensation for any specific transaction in investment banking or in other business areas.
Last-twelve-month activities of the business areas.
Grupo Financiero Banorte S.A.B. de C.V., through its business areas, provides services that include, among others, those corresponding to investment banking and corporate banking, to a large number of companies in Mexico and abroad. It may have provided, is providing or, in the future, will provide a service such as those mentioned to the companies or firms that are the subject of this report. Casa de Bolsa Banorte or its affiliates receive compensation from such corporations in consideration of the aforementioned services.
Over the course of the last twelve months, Grupo Financiero Banorte S.A.B. C.V., has not obtained compensation for services rendered by the investment bank or by any of its other business areas of the following companies or their subsidiaries, some of which could be analyzed within this report.
Activities of the business areas during the next three months.
Casa de Bolsa Banorte, Grupo Financiero Banorte or its subsidiaries expect to receive or intend to obtain revenue from the services provided by investment banking or any other of its business areas, by issuers or their subsidiaries, some of which could be analyzed in this report.
Securities holdings and other disclosures.
As of the end of last quarter, Grupo Financiero Banorte S.A.B. of C.V. has not held investments, directly or indirectly, in securities or derivative financial instruments, whose underlying securities are the subject of recommendations, representing 1% or more of its investment portfolio of outstanding securities or 1 % of the issuance or underlying of the securities issued.
None of the members of the Board of Grupo Financiero Banorte and Casa de Bolsa Banorte, along general managers and executives of an immediately below level, have any charges in the issuers that may be analyzed in this document.
The Analysts of Grupo Financiero Banorte S.A.B. of C.V. do not maintain direct investments or through an intermediary person, in the securities or derivative instruments object of this analysis report.
Guide for investment recommendations.
Reference
BUY When the share expected performance is greater than the MEXBOL estimated performance.
HOLD When the share expected performance is similar to the MEXBOL estimated performance.
SELL When the share expected performance is lower than the MEXBOL estimated performance.
Even though this document offers a general criterion of investment, we urge readers to seek advice from their own Consultants or Financial Advisors, in order to consider whether any of the values mentioned in this report are in line with their investment goals, risk and financial position.
Determination of Target Prices
For the calculation of estimated target prices for securities, analysts use a combination of methodologies generally accepted among financial analysts, including, but not limited to, multiples analysis, discounted cash flows, sum-of-the-parts or any other method that could be applicable in each specific case according to the current regulation. No guarantee can be given that the target prices calculated for the securities will be achieved by the analysts of Grupo Financiero Banorte S.A.B. C.V, since this depends on a large number of various endogenous and exogenous factors that affect the performance of the issuing company, the environment in which it performs, along with the influence of trends of the stock market, in which it is listed. Moreover, the investor must consider that the price of the securities or instruments can fluctuate against their interest and cause the partial and even total loss of the invested capital.
The information contained hereby has been obtained from sources that we consider to be reliable, but we make no representation as to its accuracy or completeness. The information, estimations and recommendations included in this document are valid as of the issue date, but are subject to modifications and changes without prior notice; Grupo Financiero Banorte S.A.B. of C.V. does not commit to communicate the changes and also to keep the content of this document updated. Grupo Financiero Banorte S.A.B. of C.V. takes no responsibility for any loss arising from the use of this report or its content. This document may not be photocopied, quoted, disclosed, used, or reproduced in whole or in part without prior written authorization from Grupo Financiero Banorte S.A.B. of C.V.
GRUPO FINANCIERO BANORTE S.A.B. de C.V.
Research and Strategy
Gabriel Casillas Olvera Chief Economist and Head of Research gabriel.casillas@banorte.com (55) 4433 - 4695
Raquel Vázquez Godinez Assistant raquel.vazquez@banorte.com (55) 1670 - 2967
Delia María Paredes Mier Executive Director of Economic Analysis delia.paredes@banorte.com (55) 5268 - 1694
Katia Celina Goya Ostos Senior, Global Economist katia.goya@banorte.com (55) 1670 - 1821
Juan Carlos Alderete Macal, CFA Senior Economist, Mexico juan.alderete.macal@banorte.com (55) 1103 - 4046
Miguel Alejandro Calvo Domínguez
Economist, Regional miguel.calvo@banorte.com (55) 1670 - 2220
Francisco José Flores Serrano Economist, Mexico francisco.flores.serrano@banorte.com (55) 1670 - 2957
Francisco Duarte Alcocer Analyst, Global Economist francisco.duarte.alcocer@banorte.com (55) 1670 - 2707
Lourdes Calvo Fernández Analyst (Edition) lourdes.calvo@banorte.com (55) 1103 - 4000 x 2611
Alejandro Padilla Santana Head Strategist – Fixed income and FX alejandro.padilla@banorte.com (55) 1103 - 4043
Santiago Leal Singer FX Senior Strategist santiago.leal@banorte.com (55) 1670 - 2144
Leslie Thalía Orozco Vélez Fixed Income and FX Strategist leslie.orozco.velez@banorte.com (55) 1670 - 1698
Manuel Jiménez Zaldivar Director Equity Research —Telecommunications / Media
manuel.jimenez@banorte.com (55) 5268 - 1671
Victor Hugo Cortes Castro Technical Analysis victorh.cortes@banorte.com (55) 1670 - 1800
Marissa Garza Ostos Equity Research – Conglomerates / Financials/ Mining / Petrochemicals
marissa.garza@banorte.com (55) 1670 - 1719
José Itzamna Espitia Hernández Equity Research – Airlines / Airports / Cement / Infrastructure / REITs
jose.espitia@banorte.com (55) 1670 - 2249
Valentín III Mendoza Balderas Equity Research – Auto Parts/ Consumer Discretionary / Real Estate / Retail
valentin.mendoza@banorte.com (55) 1670 - 2250
Jorge Antonio Izquierdo Lobato Analyst jorge.izquierdo.lobato@banorte.com (55) 1670 - 1746
Itzel Martínez Rojas Analyst itzel.martinez.rojas@banorte.com (55) 1670 - 2251
Corporate Debt
Tania Abdul Massih Jacobo Director Corporate Debt tania.abdul@banorte.com (55) 5268 - 1672
Hugo Armando Gómez Solís Senior, Corporate Debt hugoa.gomez@banorte.com (55) 1670 - 2247
Gerardo Daniel Valle Trujillo Analyst, Corporate Debt gerardo.valle.trujillo@banorte.com (55) 1670 - 2248
Armando Rodal Espinosa Head of Wholesale Banking armando.rodal@banorte.com (55) 1670 - 1889
Alejandro Eric Faesi Puente Head of Global Markets and Institutional Sales alejandro.faesi@banorte.com (55) 5268 - 1640
Alejandro Aguilar Ceballos Head of Asset Management alejandro.aguilar.ceballos@banorte.com (55) 5268 - 9996
Arturo Monroy Ballesteros Head of Investment Banking and Structured Finance
arturo.monroy.ballesteros@banorte.com (55) 5004 - 1002
Gerardo Zamora Nanez Head of Transactional Banking, Leasing and Factoring
gerardo.zamora@banorte.com (81) 8318 - 5071
Jorge de la Vega Grajales Head of Government Banking jorge.delavega@banorte.com (55) 5004 - 5121
Luis Pietrini Sheridan Head of Private Banking luis.pietrini@banorte.com (55) 5004 - 1453
René Gerardo Pimentel Ibarrola Head of Asset Management pimentelr@banorte.com (55) 5268 - 9004
Ricardo Velázquez Rodríguez Head of International Banking rvelazquez@banorte.com (55) 5004 - 5279
Víctor Antonio Roldan Ferrer Head of Corporate Banking victor.roldan.ferrer@banorte.com (55) 5004 - 1454
Economic Analysis
Fixed income and FX Strategy
Equity Strategy
Wholesale Banking
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