In this briefing:
- We revisit El Puerto de Liverpool SAB de (LIVEPOLC MM) which we highlighted in our thematic research piece Banking on Retail: A Primer on The Credit Operations of Leading LatAm Retailers as not only a leading Mexican department store chain but also the third largest credit card issuer in the country
- El Puerto de Liverpool SAB de (LIVEPOLC MM) shares have underperformed other major LatAm retailers, in part due to concerns about the Mexican macro-economic outlook and also the increase delinquency in its credit card portfolio
- We believe that El Puerto de Liverpool SAB de (LIVEPOLC MM) is not only attractive on its modest EV/EBITDA valuation, but that it offers EBITDA growth and that it has a relatively under-leveraged balanced sheet
- The shares are beginning to re-rate, as we see that negative revisions to consensus estimates are subsiding and the value versus the retail sector is, we believe, increasingly compelling to investors
- Risks include a worse-than-expected GDP growth outlook for Mexico, with lower consumer demand and worsening consumer credit quality as well as a tougher competitive climate in retail, especially in digital marketplace and other online sales venues
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