Thursday, October 3, 2013

Seeking Alpha: Not Much Hope Left For Homex

In the steel cage match between hope and despair in the Mexican home building industry, hope got in a headbutt in back in the middle of April, but despair has pretty much had the industry in a figure four leglock ever since. None of the major publicly-traded builders - Homex (HXM), GEO (CVGFY.PK), Urbi (URBDY.PK) or Ara (CNRFF.PK) - are doing well, and the middle two (GEO and Urbi) have been halted since midsummer after postponing their second quarter releases indefinitely.

There are a range of issues impacting this industry. Not unlike what happened in the U.S., many Mexican homebuilders took on debt thinking the building boom could only continue, but housing starts have plunged over the last five years on a combination of economic concerns and policy changes. More recently, proposed tax changes threaten to shrink the new housing market even further, while government policy appears to clearly favor urban development over the suburban developments the homebuilders have preferred.

While Ara is the largest (by market cap) and healthiest of the big four, Homex is the more familiar and liquid stock in the U.S., and that is the focus of my attention. I do believe that Homex, as a company, will survive, but at this point it seems like equity investors will need a minor miracle for this stock to work out as an investment.

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Not Much Hope Left For Homex

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