Urbi Desarrollos Urbanos SAB (URBI*), Mexico’s third-largest homebuilder by sales, plunged to a record low after reporting a loss and forecasting neutral cash flow for the next six quarters.
Shares fell 22 percent to 8.92 pesos at the close of trading in Mexico City, the lowest level since the company started trading in 2004. The stock is down 44 percent this year.
Urbi posted a second-quarter loss of 125 million pesos ($9.4 million), according to a July 27 statement. The company projected no increase to free cash flow for the next six quarters as it shifts toward constructing apartment buildings, which require larger initial investments, to take advantage of government subsidies.
“From the second half of 2013, we hope the company will begin gradual growth of free cash flow through the end of 2015,” Urbi wrote in the filing.
Mexican homebuilders have been stepping up construction of apartments under a government program designed to provide housing for about 8.9 million families without homes or living in substandard dwellings.
For Urbi, “it’s not possible to grow quickly and have free cash flow,” Esteban Polidura, an analyst at Deutsche Bank AG in Mexico City, said in a telephone interview. Polidura cut the stock to the equivalent of sell and reduced his 12-month price target on the shares 28 percent to 13 pesos.
Urbi also was cut to the equivalent of sell at Scotia Capital, Banco BTG Pactual, and HSBC Plc.
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