Ken Nagy, CFA

From a Technical and Fundamental standpoint Grupo TMM looks Attractive

TMM seems to have broken out of its 50 and 200 day moving averages of $2.47 and $2.52 respectively.  By definition Moving average is a technical analysis term meaning the average price of a security over a specified time period  (say 50, 100 or 200 days), is  used in order to spot trends. This data is used to create charts that show whether a stock’s price is trending up or down.  It is generally considered a bullish trend when a stock’s current price breaks above its average price for the past 50 days. This is bullish because it means that every new buyer of the stock is willing to pay more than the average price paid for the past 50 days.

Grupo TMM is one of the largest integrated logistics and transportation companies in Mexico. The firm, through its subsidiaries provides maritime services, land transportation services, integrated logistics services, and ports and terminals management to international and domestic clients throughout Mexico.  As part of its 5-year growth strategy, the firm is committed to modernizing its fleet which will in turn maximize margins. TMM’s offshore and product tanker fleet generally work with long and medium-term contracts which has the effect of predictable cash flows. We feel the firm should outperform the industry and set a price target of $4.50     

Keys to investment
 

 

  • The firm’s Maritime division is the dominant business at TMM. The fleet has been updated. In 2008 and 2009 alone the firm added 10 offshore vessels and 3 tankers. The division enjoys higher than average utilization.
  • Increased demand for exploration and distribution services within Mexico requires new generation of higher-rated and deeper-water capabilities
  • TMM prefers to compete for margin rich niche business and employs long to medium -term contracts.
  • Improved debt profile through debt restructure
  • Approximately 90% of the Company total debt is peso denominated, non recourse to the Company and for a 20-year term.

For a copy of the full report, please email scr@zacks.com with TMM as the subject.

 
GRUPO TMM SAB (TMM): Free Stock Analysis Report
 
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