PINFRA Punished As A Proxy For Mexico's Economy

As a bond proxy for Mexico, PINFRA (OTCPK:PUODY) (PINFRA.MX) hasn’t had a very good run since my last update on the company in January. Although the local shares have modestly outperformed the broader Mexican market, the Mexican market has been weak overall on worries about the upcoming presidential election and the renegotiation of NAFTA. Add in foreign exchange weakness, and the PINFRA ADRs have posted a nasty 17% drop since that last article.

At the risk of doubling down on a bad call, I still think PINFRA is worth a closer look. Although PINFRA doesn’t have the tariff revision mechanism that benefits airport operators like Grupo Aeroportuario del Sureste (ASR) or Grupo Aeroportuario del Pacifico (PAC), it does have a strong track record of building and operating toll roads, a deep portfolio of long-lived concessions, and a strong cash flow-generating model. The risk of a sharp turn in Mexico’s economic policy is real, but I think the current discount to fair value more than compensates for that risk, and PINFRA could be a beneficiary of the leading candidate’s pledges for greater infrastructure spending.

Readers should note that the ADRs offer lousy liquidity, and may want to consider purchasing/holding the much more liquid local shares.

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PINFRA Punished As A Proxy For Mexico's Economy