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Brandes Increases Stake in Mexican Construction Company
Posted by: Monica Wolfe (IP Logged)
Date: June 7, 2013 10:08AM
In the past week Charles Brandes of Brandes Investments doubled his stake in Homex Development Corp. (HXM). He increased his holdings in Homex 101.65%, adding an additional 405,409 shares. Brandes purchased these shares at an average price of $4.70 per share; since his buy, the price per share has decreased an additional 13% to $4.07 per share. The guru now holds 804,219 shares of Homex Development. Charles Brandes holding history of Homex Development:
Brandes increased his holdings in the company as the price has dwindled down to its lowest price to date.
About Homex Development:
Homex is a housing company based out of Mexico that focuses on vertically integrated home development in working and middle-class housing in Mexico. The company has recently expanded into three cities in Brazil and continues to expand across Mexico. Homex Development is currently split into four operating divisions: Mexico, International, Government and Tourism.
Homex Development is traded in the U.S. as well as in Germany.
Recent Happenings in Homex Development:
Recently there have been some problems in the Mexican construction sector. The construction sector is one of the largest in the Mexican economy, accounting for about 7% of the GDP as of 2012. The industry is lead by three companies, Homex being one of them. Shares of these companies have been under a lot of fire recently due to changes in public housing programs, which do not apply to land owned by the these companies.
The new leadership of Mexico has announced plans to build a housing system and improve the existing housing stock, which is located close to Mexico City. The state, through the mortgage agency, Infonavit, will provide loans for the renovation of existing housing. This policy will require a change in priorities from the industry leaders who have already purchased land for the development of large-scale suburban areas.
In order to try and adapt to these changes, Homex started selling off assets and is considering the issuance of junior debt. Understanding the problems that the new policy has caused, Infonavit has created a $246 million fund to provide mortgages in the housing projects which are half completed.
The Mexican homebuilding company recently hired JPMorgan as an advisor to help the struggling company get back on track.
Financials of Homex Development:
According to the most recent quarterly release from Homex:
· The company’s revenue dropped 46.2% from $6,187,003 million in the first quarter of 2012 to $3,330,005 million in the first quarter of 2013.
· The company had a net loss of $3,231,007 in the first quarter, due to an increase in taxes as well as an increase in construction and expansion costs resulting from the company’s project building a central prison in Morales, Mexico.
According to the Peter Lynch Valuation Chart of Homex Development, the company appears to be significantly undervalued:
The company’s P/B, P/S and P/E ratios are all sitting at lows:
Homex Development has a market cap of $243.6 million; its shares were traded at around $4.07 with a P/E ratio of 3.50 and a P/S ratio of 0.10. The company had an annual average earnings growth of 15.1% over the past ten years.
Charles Brandes, Chuck Royce and Jeremy Grantham all hold shares of Homex Development. To see the shares these gurus hold, click here.
You can see Brandes’ current portfolio here. Also check out his Undervalued Stocks, Top Growth Companies and High Yield Stocks.
Guru Discussed: Charles Brandes: Current Portfolio, Stock Picks
Chuck Royce: Current Portfolio, Stock Picks
Stocks Discussed: HXM,