Grupo TMM (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.
Despite the global recession in 2009, TMM recorded its highest EBITDA in five years. 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.
The firm’s industry position is quite unique in that it operates as a door-to-door provider of services, yet also at times enjoys niche markets and other times monopolistic markets. This leads to higher margins than the competition. Despite the different segments, the firm is primarily a shipping firm which is set to take advantage of deep water drilling opportunities.
Management has effectively steered the company. For example, it has kept its fleet of maritime assets modern with several purchases in 2009 as well as selling off inefficient equipment.
In our opinion, investors should be more concerned with the top-line and EBITDA numbers given the large amount of debt denominated in Mexican pesos. This adds the complexity of exchange gains and losses to the bottom line. We feel the firm should outperform the industry, and set a price target of $4.50 per share.
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