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Quarterly Results: Grupo Argos (HOLD) - New business units starting to take-off and positive surprises in Celsia

Price: COP 21,300; Target Price: COP 24,460

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May 6, 2014 ( newswire) Revenues in line with our estimations. Positive surprises in EBITDA came from new business units (ports and real estate namely) and Celsia, while Cemargos' results were below our estimates.

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Please read Quarterly Results: Celsia (released Apr-29).

Cemargos showed double-digit growth throughout its P&L (+12.3% y/y), however, results in terms of EBITDA came below our estimates due to lower margins in Honduras related to price controls from authorities and previous drops in purchases from construction and specialized stores, which according to the company, were pursuing this price-related-policy.

Situm's (Real Estate) revenues stood at COP 29 bn, 6.3x higher than those reported in 1Q13, while EBITDA grew 214% y/y. In the urbanism front, the company obtained licenses for the Lago Alto project (with a potential to build 1,127 housing units) and filed deeds in the Palmas Río project (valued at COP 28.1 bn). In the property business unit, the holding acquired an important set of stores in the Aventura Shopping Mall located in Medellin for USD 17 mn. Situm will continue searching for commercial projects with an IRR in the 10.5%-11.5% range and a hurdle rate of 12.5%-13% in terms of ROE which we deem as positive. Compas' (Ports) revenues were 31% higher (COP 31 bn) than in 1Q13 and EBITDA grew 81% y/y as a result of positive operating figures and cost efficiency. CAPEX for 2014 stands at COP 100 bn to be funded by equity (30%) and debt (70%).

With no relevant surprises in results or perspectives, we maintain our T.P. and rating unchanged.

Credicorp Capital

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