While scanning through my watchlist and checking recent news, several Latin America based companies caught my attention. Here is some information on each:
- Banco Latinoamerica de Exportaciones SA (BLX), more commonly known as BLADEX. This Panama based financial institution facilitates trade throughout Latin America. The following quote from Carlos Yap, CFO during the most recent earnings conference call sums up the company’s growth prospects:
I would like to highlight the strong financial performance of the bank not only in 2007, but also during the last three years, which have validated our advanced business model and solid business strategy. Operating income increased 83% during 2007. From 2005 through 2007, operating income grew 58% per annum, driving operating ROE from 4.6% in 2005 to almost 12% in 2007. As Jaime mentioned, increasing our ROE remains the focus of our company. This operating earning’s growth was ruined by the steady increase of our commercial portfolio of close to 20% per annum, as seen as a strong demand and the expanded client based mostly in the corporate sector produced better spreads than lending to banks.
- Gafisa S.A. (GFA) This Brazilian home-builder is growing revenue at 80% per year, “new launches” at 120% per year and has an EBITA margin of 16%. This is in a market with a housing deficit of 8 million homes growing by 2 million per year. The company builds homes for all economic sectors and future growth looks promising. The limiting factor to their growth seems to be a commensurate growth of available mortgage solutions.
- Mercadolibre, Inc. (MELI) Argentina based on-line auction site is showing exponential growth throughout Latin America. They benefit from the trends of growing Internet access and affluence throughout the region. The stock price has gotten somewhat ahead of revenue and profitability, but the stock will be very attractive when the PE (about 110) is lower than the ongoing growth rate (about 80). Growing profitability or a lower stock price (preferably both) will bring this about. The stock raced to $80 a few months ago as the bandwagon filled up. A little more stagnation in the stock price would not surprise me, until stronger earnings start showing.
These are three Latin America stocks that I am keeping an eye on. Any general pullback by Latin America ADRs could make these very attractive investments.
Note: I currently do not have any position in BLX, GFA or MELI.