Fibra Exi: Consolidating Mexican toll roads; Initiating FEXI at Buy, P$21 PO

Research evidence excerpt

Fibra Exi: Consolidating Mexican toll roads; Initiating FEXI at Buy, P$21 PO

Initiate with a Buy

Investment thesis

We initiate coverage of Fibra Exi (FEXI) with a Buy rating and a P$21 per share price

objective, which together with an estimated distribution yield of 7.3% by year-end 2027,

translates into an expected total return (ETR) of 28% over the next 18 months. FEXI is a

Mexican externally managed infrastructure investment trust (REIT or Fibra E) that owns

and operates six toll roads in Mexico. It is sponsored and managed by Mexico

Infrastructure Partners (MIP), the country’s largest domestic infrastructure sponsor with

US$12bn in assets under management (AUM).

Our positive investment thesis is driven by the following factors:

1. FEXI is positioned to lead Mexico’s toll road consolidation

2. Fibra E structure with tax advantages drives attractive distribution yields

3. Strong corporate governance with no controlling group

4. Positive Mexican toll road sector drivers

Risks to our investment case are higher interest rates and credit turbulence. Increased

rates coupled with limited availability in credit markets could limit the potential for

acquisitions and translate into a higher cost of equity. Moreover, the USMCA trade

treaty has not yet had have a favorable review resulting in continued volatility and

uncertainty regarding investments in Mexico.

Large acquisition pool

FEXI should be able to tap into the large potential acquisition pool in the privately held

Mexican toll road concession network. Mexico has more than 75 concession titles

covering 187 highway segments representing more than 11.3k km under concession, of

which more than half are operated by private companies. Mexican concession titles have