12 December 2006

Cemex (and Salma) are World Class

The Pig, as well as this blog, spends a hugely disproportionate amount of time focusing on all things North of 49th Parallel. I read Canadian media too often, listen to too much Canadian rock, and know far too much about the differences between Harper, Dion, Layton, and Duceppe. So, in this post, I'm going to turn my attention southward. Let's take a look at Cemex (CX)...

but first, let's take a look at another fine Mexican offering, care of Goldenfiddle and Campari:

Now that things have perhaps solidified a bit, let's turn our, um, attention back onto the cement maker.

Fool.com has written up the stock, picking it as the "Best International Stock for 2007" and as a Motley Fool Stock Advisor recommendation. Cemex is also looking for growth opportunities, and is continuing its attempts to complete a hostile takeover of Rinker Group.

SmartMoney tells me that CX has a very low P/E of 9.3 compared to its competitors, and offers a 2% yield. Morningstar rates it a 5-star pick and was glowingly optimistic in Matthew Warren's analyst note from November 1:

We are raising our fair value estimate for Cemex CX to $45 per share from $33 for three reasons. The first is Cemex's attempt to acquire Rinker RIN for $12.8 billion in cash, which we expect to be additive to our valuation. This stems largely from the additional cash flows that we think Cemex can extract from Rinker's assets (relative to the price paid for those assets) versus what would be possible on a stand-alone basis. If Cemex were pressed to raise its bid 18%-20%, our fair value estimate would drop to about $41 per share. The second reason for the fair value increase is the cash that Cemex has earned since our last revision.

We now know that Rinker rebuffed Cemex on its first attempt, but with CX closing yesterday at $32.26, the stock is still significantly undervalued using Morningstar's admittedly conservative methods.

The subscription-only analyst note continues on, expressing some concerns with Rinker's exposure to the U.S. market and the slowdown on housing construction. That's good to know.

Cemex also yielded two mentions (1, 2) in the recent Economist survey on Mexico. The first piece counters the above-mentioned concern about the U.S slowdown with the growth in Mexican construction:

Until recently the banks did very little lending, but credit is now expanding. Mexicans are able to take out mortgages again and loan interest rates are coming down fast. Such is the boom in house construction that Cemex, Mexico's biggest cement company, in September announced its largest capacity expansion in a decade.

The second piece immediately links "world-class" with Cemex:

Mexico does have a handful of big world-class firms. Cemex has grown to become the world's third-biggest cement company, with factories in 50 countries, thanks to professional management, a highly efficient production system and a string of acquisitions.

Anecdotally, when I was down in the Mexican Riviera last year, I noticed the presence of Cemex throughout the region as it underwent post-hurricane reconstruction. I also noticed the Mega Superstore competing with Wal-Mart, but that's for an altogether different post.

The chart shows quite some volatility, but that comes with investing in Latin America. I would be more interested in CX if and when it gets closer to its 50 and 200-day moving averages, i.e. $.50 to $1.75 below its current share price.

And before we return to North of the Border, how about one more shot of Salma for the road:

11 December 2006

Haverford in Brooklyn

Lovely post this morning from one of the Pig's daily blog reads, according to Curbed, offering up the newest residents of Boerum Hill. Now, I know 'Fords that have moved to neighborhoods like Carroll Gardens, Prospect Heights, and yours truly in Brooklyn Heights, but it's good to see the revered mascot movin' on up.

For more photo action, here's the site to which Curbed linked.

06 December 2006

Scapegoating the green onions

Taco Bell is attempting to shift the focus away from the "processed meat food" in their gorditas and chalupas, and, according to Reuters, blaming green onions for the E. coli scare.

Taco Bell, a unit of Yum Brands Inc. (YUM.N: Quote, Profile , Research), said preliminary tests showed three samples of green onions were found to be "presumptive positive" for the E.coli 0157:H7 strain. Tests were not yet conclusive, the company said.

Amazing. I never would have suspected one of the few fresh ingredients on the Bell menu would make so many people sick.

On the YUM stock front, I noticed yesterday that the opportunity to buy on the bad news was a very brief one. Within ten minutes of the open, YUM dropped from about $61.60 to $60.98 before shooting up to the $63.25 range. YUM couldn't have picked a better time to release news that it was doubling its dividend.

However, the Great Green Onion Scare of '06 has pushed YUM back down to $62 as I write this.

05 December 2006

Yum, the reprise...

It's a ho-hum story about the Salvation Army closing a women's hotel/apartment house on the primest of prime real estate of Gramercy Park. But check out the sexy pose of the Belgian tv producer/hotel resident. It's pleasingly naughty stuff from the normally stuffy Gray Lady.


One of the top stories last night on channel 4, after I typically sorta enjoyed Studio 60, featured an E. coli break at Taco Bell restaurants throughout North Jersey and Long Island.

Here's an excerpt fron the AP story at the NY Times:

It is not immediately clear whether the New Jersey and Long Island
outbreaks are related. A Taco Bell restaurant in South Plainfield,
N.J., where 11 of the people who were sickened ate, has been closed
for inspection. Four Taco Bell outlets in Suffolk County were closed,
and Nassau County officials asked that another four of its locations
in their county be closed.

Nassau County Executive Tom Suozzi said the restaurant chain had yet
to respond to the request, but said company officials were cooperating
with the county health department. He said the closures were being
sought "out of an abundance of caution."

YUM is running like a bull in Pamplona.(Check out the chart below) Today's E. coli story didn't
trip up the toro one bit, but will the news take hold tomorrow? Or is the idea of Taco Bell serving tainted "meat" already priced into the stock?

I appreciate that Taco Bell responded immediately to the outbreak by closing stores.

I'm curious to see if this episode challenges the intestinal fortitude of YUM shareholders, and affects the stock today.