Latin America is one of the regions of the world investors based in developed countries look at with envy, due to its tremendous growth potential. If you’re interested in tapping into this potential, London-listed companies Banco Santander (LSE: BNC), SABMiller (LSE: SAB) and Ocean Wilsons (LSE: OCN) all have substantial exposure to Latin American markets.
Banco Santander
Banco Santander was founded in the port city of Santander on Spain’s northern coast in 1857. Today, the bank is a global giant, and a familiar name on the UK high street.
However, we have to look beyond Europe to find Santander’s biggest market. Last year, 46% of the group’s net operating income was generated in Latin America, breaking down as: Brazil (30%), Mexico (8%), Chile (6%) and other (3%).
Santander has recently bulked up its capital with a €7.5bn share placing and a rebasing of this year’s dividend to one third of last year’s (giving a safe, if modest, 2.9% yield). On a current-year forecast P/E of 12.7, and with mid-teens earnings growth expected this year and next, the shares seem to offer good value.
SABMiller
World number two beer company SABMiller was formed in 2002 when South African Breweries acquired Miller Brewing Company of the USA. The combined group has subsequently gained substantial exposure to Latin America with major acquisitions and joint ventures.
In its latest results, for the six months to September 2015, SABMiller reported that 22% of group revenue and 47% of operating profit come from Latin America. The money rolls in from Argentina, Chile, Colombia, Ecuador, El Salvador, Honduras, Panama, Paraguay and Peru.
SABMiller’s shares — like those of other top drinks groups — are highly rated: the forecast P/E for the company’s fiscal year just ended (31 March) is 23, falling to 21.5 for the upcoming year, and 20 for the year after. However, earnings are forecast to grow by high single digits annually, so the rating is not totally bonkers.
Ocean Wilsons
Ocean Wilsons will be less familiar to most investors than Santander and SABMiller. However, this £300m company has more exposure to Latin America — albeit that exposure is concentrated entirely on Brazil.
Ocean Wilsons’ principal subsidiary Wilson Sons Limited is a Brazilian maritime services company (container terminals, towage, shipyards and so forth), and accounts for 78% of Ocean Wilsons’ assets. The other subsidiary is simply an investment fund, holding global equities, bonds and other assets.
Ocean Wilsons’ shares are trading at a good discount to the combined net asset value of the two subsidiaries, suggesting there is decent value in the shares.
The substantial exposure of all three companies to the potential strong, long-term economic growth in Latin America could pay off for investors. Businesses with powerful consumer goods brands — such as SABMiller — are among my personal favourites as buy-and-hold investments. As such, I’d be inclined to have a larger weighting in the beer group than in Santander, and perhaps a lower weighting still in Ocean Wilsons, with its riskier single-country focus.