UPDATE: Bradesco BBI Upgrades Fomento Economico Mexicano (FMX) to Outperform
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Bradesco BBI analyst Leandro Fontanesi upgraded Fomento Economico Mexicano (NYSE: FMX) from Neutral to Outperform with a price target of $90.00.
The analyst comments "FEMSA’s convenience store traffic is still ~15% below pre-pandemic levels, and we expect it to recover to a conservative ~5% below the pre-pandemic figure by YE23, following mask-down policies and a return to offices/schools, etc. In that context, we project FEMSA’s new convenience store openings should reach ~1k a year from 2022 vs. 869 in 2021. This scenario should also support EPS CAGR 2022-24 of ~20%, with our EPS 2022 being ~5% above consensus. FEMSA is trading at an attractive 1-yr fwd. P/E of 16x, below its historical ~25x, and we estimate an implied conglomerate discount of ~40% currently. Regarding this discount, even if corporate governance does not improve, a fair level would be closer to -20%, in line with similar LatAm structures. In our view, stronger FY22 results and possible moves to tackle corporate governance issues (unifying the share structure, increasing the number of independent board members, selling its Heineken stake), could lead the current holdco discount to compress."
Shares of Fomento Economico Mexicano closed at $74.84 yesterday.
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