Cemex Research Report - Possible Upside
This report reflects the research and analysis I've performed on this company. It is provided for informational purposes only and does not constitute personalized financial advice nor an endorsement or solicitation to purchase stock in this or any other company. Please do your own due diligence or hire a financial advisor before making any investment decisions.- Download this report in PDF format
- Cemex Research Report pdf (right-click and "Save target as...")
- CX:US ADR research report posted: 2007, July 18
- Risk Detail
- Possible Upside
- Valuation and Assessment
- The regionalized nature of the industry and its heavy investment requirements are substantial barriers to entry. Cemex has strong operations in Mexico, parts of Europe and especially the U.S.
- The Rinker transaction will consolidate their position in the U.S, especially as it relates to 4 key growth states: California, Texas, Arizona & Florida
- They have dominant market position in their home market of Mexico.
- Strong results in Spain, Venezuela, Egypt, Colombia, parts of Asia.
- Lots of infrastructure and government spending budgeted:
- U.S - SAFETEA-LU, a $287 billion, 6-year federal highways and roads program
- Mexico – Calderon’s government is expected to spend $5 billion (pesos) on public works and infrastructure as well as committing to 6 million mortgages over the next 6 years
- Spain – federal infrastructure plan budgeted for $300 billion to 2020
- Colombia – pending free trade agreement with the US is expected to drive new construction growth
- California – Prop 1A – 1E. $30+ billion infrastructure bonds approved in November 2006.
- Other Upside Possibilities
- As long as humans are building things, there will be a market for cement, concrete and other building materials. Cemex is one of the top players in this industry: post-Rinker acquisition, Cemex will the world’s 3rd largest cement producer and the number-one producer of ready-mix and aggregates.
- Rinker acquisition gives them a foothold into Australia, which comprises around 30% of Rinker revenues (but less than 15% of income).
- Solid cash flow and balance sheet are results of a well-run company. If the Rinker integration comes off without too much trouble, this company should have the resources and discipline to make it through the cycle (and perhaps prosper by integrating lesser-weights). Long-term, this company will be in good shape.
Disclosure: Author has no position in this stock.
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