Walmex Way Ahead
US-based mass grocery retailer Walmart 's Mexican unit Walmex is by some distance the country's largest retailer , with annual sales close to US $ 30bn. In Mexican peso terms, Walmex's annual sales of 381bn for the year to December 2011 represented about 43% of the market for organised food retailing , according to our data, which is head and shoulders above companies such as Commercial Mexicana - the next biggest retailer with an estimated market share of about 10%. While investigations into alleged bribery regarding store openings in the country are ongoing, the company's shares are up by about 12% so far in 2012 and are currently trading at a trailing 12 months price -to- earnings ratio of about 33, which is a significant premium to its more mature parent Walmart , at about 14 .
What we want to assess here is Walmex's growth prospects in Mexico over the next few years based on our fundamental take on the retail market.
In our view , the premium valuation Walmex's shares trade at can largely be attributed to three main factors: its comprehensive dominance of the market, a positive growth outlook and being owned by the world's leading retailer by annual sales . Indeed, parent company Walmart ' s scale and logistical/distributional knowledge and connections strongly affect its subsidiaries . To 2017, we see headline total mass grocery retail sales growing at a compound annual rate (CAR) of 5.4%, which provides Walmex with a good amount to work with. Between 2006 and 2011 the company has grown its annual sales at an average rate of 13.4% - compared with headline mass grocery retail sales growing at a CAR of 8.3% over the same period . Having grown quicker than the wider market, Walmex arguably ha s the tools to do so once more. In US dollar terms, a 43% share of the market in 2017 will be worth about US$45bn , based on our data.
|Walmex Stands Out With Double Digit ROA, Shares Trading Close To All Time Highs|
|Walmex Daily Share Price (MXN) and Return On Assets –- 2009-2011|