Every year, LATIN TRADE crunches the numbers on the biggest public companies doing business in Latin America. This year, to our exclusive annual forecast of corporate revenues and income, we have added two new views of the market: An exclusive earnings per share forecast through 2005 for the LATIN TRADE Top 100 Companies, and a look back at which companies investors favored must during the past year. Where relevant, the earnings forecast is based on returns per American Depositary. Receipt; if not, then it is calculated on shares in each domestic market. In either case, growth (or decline) is expressed in U.S. dollars in order to provide a direct comparison. Numbers can be compelling: If stuck prices following earnings, as long-term investors hold, then you know which companies the experts--the analysts and economists at the biggest financial institutions covering the region--think will prosper in the months ahead.
Also, working with research company Economatica, we now provide an exclusive look at the best investments of 2003. The LATIN TRADE Winners and Losers scorecard traditionally measures sales, income and assets performance during 2003. The new Investor Best Bets ranking looks deeper into the market of investor opinion.
Culled from data on hundreds of companies in the seven major capital markets--Brazil, Argentina, Chile, Colombia, Mexico, Peru and Venezuela--the Best Bets list measures three major factors: return on equity, how heavily a stock is traded, and price. Adjustments were made for inflation, monetary differences and dividend payments. The result is a cross-section of which companies investors bought most in 2003. (Hint: It was a good year to be a Brazilian dealer in just about any commodity.)
At first glance, our sales and income outlook in 2004 and 2005 for many of Latin America's biggest companies seems absurdly positive. Revenue jumps of 50% are coupled, in some cases, with profit rises of more than 800%. Sounds like great news, but big numbers were easy to come by. Too easy.
Driving all that is a simple fact: The last few years in Latin America were hard times. Most companies lost money, and many nearly shut their doors. Some, however, particularly big conglomerates in Mexico, took steps to clean up the books. Restructuring is tough medicine, but it pays off.
Grupo Desc, the Mexican manufacturer of auto parts, chemicals and flood products, for instance, leads our consensus projection on net income in 2005, up 363% over the previous year. It should post US$5.4 million in profits this year, then jump to almost $25 million in 2005. Desc's auto parts division operates 19 plants and distributes in Mexico and in the United States, employing more than 7,000. It exports 65% of its production and 75% of its products are sold as original equipment in new cars and trucks. Clients include most of the biggest car companies in the world, as well as truck makers like Kenworth and Freightliner and tractor company John Deere.
Analysts project improving margins for Desc on auto parts sales as the U.S. and Mexican economies recover. Most important, however, was a $243 million capitalization in mid-April. In January, the company said it had restructured 70% of its total debt of $1.02 billion. The cash raised on the market comes close to covering the difference, strengthening Desc's outlook.
An improved business can turn into a winning stock. Returns are expected to double over 2004 to $0.12 per share, falling back in 2005 to $0.06.
Setting the stage. Similar stories abound: High copper prices, supported by demand from the United States and China, will keep Mexican miner Grupo Minero de Mexico in the black. Analysts believe the company will see a 37% rise in its sales, a 396% rise in income, and a 412% rise in earnings per share in 2004. But it was a $879 million restructuring of its mining unit in 2002 that set the stage for the recovery.
Spanish-owned Chilean energy holding company Enersis, which controls generator Endesa Chile, is looking forward too to a new lease on life after cleaning up its heavily leveraged assets. Enersis should see a sharp rise in its earnings in 2004 and 2005, to $0.29 then $0.38 per share, respectively, according to our forecast.
"Endesa has been able to reissue and refinance the company at incredibly low interest rates, and the big problem it had was its big debt," says Richard Kosche, head of international markets for the Chilean brokerage EuroAmerica Corredores de Bolsa.
The company reduced debt some $340 million in dollar terms in 2003 while improving its balance sheet by selling some assets. It also issued flesh debt.
Kosche says Endesa could make a major push this year since economic growth projections for its markets across the region are solid. "It is a big opportunity for companies like Endesa that are very big. They can solve the supply problem," he says. "But I don't know if they want to be more exposed in Latin America."
Indeed, boosting capacity entails significant risks for Endesa since many variables are out of its hands. "Endesa depends mostly on external factors--they can't do much about rain, the situation of the gas supply from Argentina or interest rates," says Gabriel Salas, equity research analyst of global emerging markets in New York for Bear Stearns. Just over 70% of Endesa's installed capacity is hydroelectric.
Article source:- http://findarticles.com/p/articles/mi_m0BEK/is_7_12/ai_n6167223/
0 Comments:
Post a Comment