FEMSA Plugging Along, But Not Really In Favor

Investors haven’t really been all that eager to invest in Mexico this year, and as one of the leading plays on consumer spending, FEMSA (FMX) has likewise had a lackluster performance. The underlying operating performance has remained strong, though, and stripping out the Coca-Cola FEMSA (KOF) and Heineken (OTCQX:HEINY) suggests a multi-year low valuation for the core FEMSA retail operations that, though understandable in the context of reduced near-term confidence around Mexico’s economy, still looks relatively attractive on a long-term basis.

I thought FEMSA’s valuation was “okay, but not great” back in April, but the underperformance since then has the valuation looking more interesting to me today. With management showing prudence on capital deployment and the underlying OXXO business still performing quite well, I believe this is a good time to reconsider the shares as a long-term idea, though a weaker macro outlook for Mexico remains a key near-term risk.

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FEMSA Plugging Along, But Not Really In Favor