PINFRA Undervalued As Weak Mexican Economic Data Has Spooked Investors

As something of a proxy for Mexico itself, or at least its infrastructure, I can’t say that the weak performance of PINFRA (OTCPK:PUODY) (PINFRA.MX) shares, flat since my last update, is wholly unreasonable. Mexico’s economic growth has been feeble after all, with GDP declines in the last two quarters and the full year expected to finish out at barely above flat. That has translated directly into weaker traffic for this leading Mexican toll road operator, along with weaker revenue and EBITDA results (net of an acquisition).

While the short-term response may be understandable, I think it still undervalues the long-term potential of this company. Mexico’s government has shown definitively in my view that they will respect the rights and needs of concession operators in the country and work to create “win win” situations where Mexican citizens get access to the infrastructure they need, while the companies building and maintaining that infrastructure earn reasonable returns. With potentially billions in new road and projects on the way, and a chance for some improvement in Mexico's economy in 2020, I think the double-digit implied return potential here makes this a name worth considering.

Investors should note that PINFRA ADRs are not particularly liquid.

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PINFRA Undervalued As Weak Mexican Economic Data Has Spooked Investors