Fomento Económico Mexicano S.A.B. de C.V., also known by its acronym as FEMSA, is a powerful Mexican conglomerate and quite a solid stock with robust upside potential to be added in one’s portfolio. Beginning in the late 1800s after its foundation as a brewery in Monterrey, Mexico known as Cervecería Cuauhtémoc S.A. along with a packaging wholly-owned subsidiary by prominent Mexican entrepreneurs including the distinguished and late controlling industrialist Isaac Garza Garza, this splendid Mexican multinational and publicly-traded conglomerate keeps on growing organically while expanding across the whole Latin American subcontinent aggressively. Likewise, with three wholly-owned subsidiaries, one controlled publicly-traded subsidiary and a 20% economic interest in Heineken International N.V. valued at $ 5 billion now while employing an impressive 220,000 workers in Latin America, FEMSA seems well positioned to grow throughout the region in years to come. In fact, with $ 22 billion worth of assets, debt at the conglomerate stands at roughly $ 3 billion which implies light use of leverage. Moreover, the crown-jewel of this thriving conglomerate is the Coke bottler known as Coca-Cola FEMSA S.A.B. de C.V., listed here in the US as an ADR on the NYSE under the ticker symbol (KOF), which comprises a web of 48 bottling plants, roughly 100,000 employees, presence in 10 countries including the Philippines, selling around 3 billion unit cases a year, reporting approximately $ 10 billion a year in sales and currently fetching $ 20 billion in market value. Accordingly, FEMSA’s shareholding in Coca-Cola FEMSA is valued at $ 10 billion. Altogether, the conglomerate is currently valued at $ 35 billion after trading within a range of $ 30 billion and $ 40 billion during the last 52 weeks. As a consequence, this amount gives the three wholly-owned subsidiaries a market value of around $ 20 billion which in my opinion is fully justified after accounting for the fundamentals of the wholly-owned subsidiaries. In fact, with total consolidated sales expected to surpass $ 20 billion this year and the bottom line expected to exceed $ 2 billion this year as well, the conglomerate attains a price/earnings multiple of 17.5 which is not a high number after comparing it with its peers in the carbonated soft drinks bottling industry. Furthermore, the three wholly-owned subsidiaries include Latin America’s largest chain of convenience stores with presence in Mexico along with Colombia known as “OXXO” and containing approximately 12,000 stores throughout the two countries while employing around 100,000 workers. They also comprise a packaging business supplying Coca-Cola FEMSA with PET bottles and the like while employing some 10,000 workers and a logistics wholly-owned subsidiary servicing both “OXXO” and Coca-Cola FEMSA comprising a network of warehouses as well as a fleet of trucks while employing around 10,000 associates.
To conclude and like I said before, the multinational and publicly-traded conglomerate is well positioned to expand throughout the region after having employed light use of leverage until now. By the same token, this feature translates into upward stock price movement after taking into account the conglomerate is trailing its peers and that profits at the entity will certainly go up substantially when factoring the fundamentals as well as current finances FEMSA possesses. In addition, being led by the current CEO José Antonio Fernández Carbajal who was handpicked by the current beneficial controllers of the stock who are Eva Gonda de Rivera and the Calderón Rojas brothers, there is harmony and efficiency along the way among the top management of the conglomerate and hence enabling it to aggressively pursue expansion into new territories as well as engagement in additional lucrative ventures in the future.