Carlos Slim's America Movil (AMX) Slides as Increased Regulation Looms
Shares of America Movil (AMX: Analysis), the fourth largest telecom provider in the world, plunged last week after a lower house congressional committee in Mexico passed a bill that threatens to break up the empire founded by Carlos Slim, the richest man in the world. Slim currently controls roughly 70% of Mexico's mobile market and 80% of landlines. Daily Chart
The bill is the largest sweeping reform of Mexico's telecom and television market in several decades, and is targeted at blocking monopolies and foreign competition.
If passed, the bill will give regulators the right to force companies to sell assets if they claim 50% of their primary market. The move is similar to the U.S. antitrust decision to split AT&T (T: Analysis
) three decades ago - which led to increased competition in the telecom industry. Banorte IXE Grupo Financiero analyst Manuel Jimenez echoed the sentiment, stating, "It will mean more competition." However, he remained neutral on America Movil, noting that "the stock could stay at these levels for several months." Other analysts, such as HSBC analysts Richard Dineen and Sean Glickenhaus, were not as forgiving. "Enforcing a 50 percent market share cap on America Movil would likely drive significant cuts in revenue and Ebitda growth," they stated in a report. Dineen and Glickenhaus also lowered their forward top and bottom line estimates on the stock. Although the bill has passed the lower house, it still must pass a vote on the house floor next week, as well as a Senate vote before it becomes law. Members of President Enrique Pena Nieto's PRI party have expressed confidence that the bill will pass before April. Both Slim and Emilio Azcarraga, who controls two-thirds of the TV broadcasting market with Grupo Televisa (TV: Analysis
), are expected to take the heaviest losses if the bill passes. Grupo Televisa and its industry rival TV Azteca both slid, although not as much as America Movil, at the end of last week. America Movil plunged to its lowest point since April 2009, and the stock is down more than 20% over the past twelve months. However, the company appears to think that its stock is undervalued at current prices, and has repurchased 150 million shares for a total of 1.837 billion Mexican pesos ($147.71 million) according to filings with the Mexican stock exchange. Despite its recent slide, America Movil remains Mexico's largest company, with a market cap of nearly $75 million. The drop has wiped out roughly $7 billion of the Slim family's net worth. Forbes has estimated the family to be worth approximately $73 billion earlier this month. Although America Movil faces some steep challenges in the year ahead if the bill passes, the stock is fundamentally undervalued. It currently trades at 8.66 times forward earnings with a PEG ratio of 0.71. The stock also pays a quarterly dividend of $0.15 per share - a 2.32% yield at current prices. Other News About AMX America Movil S.A.B. De C.V Stock Falls On Unusually High Volume
America Movil drops as investors fear a breakup of Slim's empire. Slim's America Movil Slumps as Mexico Advances With Reform
Will Mexico's telecom and television industries be sliced and diced? Other Stocks in the News Will This Airline Soar in 2013?
Will Spirit Airlines soar higher than its rivals in 2013? Is Zynga Next on Yahoo's Shopping List?
Will Yahoo acquire Yahoo to widen its defensive moat? Copyright 2013 by InvestorGuide.com, Inc. InvestorGuide has no control over the sites we link to, is not affiliated with these sites, and cannot take responsibility for their quality or suitability. The news, analysis, commentary and profile information is not meant to be comprehensive, and the data provided is not guaranteed to be accurate. WebFinance Inc., the publisher of this newsletter, is not a registered investment advisor or a broker/dealer. This is not a stock recommendation newsletter but rather a source for investment ideas, and we encourage you to fully research any company before considering investing. The opinions expressed herein are those of the author and do not necessarily represent the views of nor are they endorsed by WebFinance Inc. No employee of WebFinance has owned or currently owns any shares in the company described above. The above is neither an offer nor solicitation to buy or sell any securities. The trading of securities may not be suitable for all potential readers of this newsletter, and the purchase of stocks mentioned in this newsletter may result in the loss of some or all of any investment made. We recommend that you consult a stockbroker or financial advisor before buying or selling securities or making investment decisions. We are not responsible for claims made by advertisers and sponsors. Anyone who makes decisions based on what they read here does so at their own risk and cannot hold WebFinance Inc. (DBA InvestorGuide.com, Inc.) or its employees responsible.
Published on Mar 18, 2013
By Leo Sun