Published 11/16/24

Grupo BMV(BMV:BOLSAA): 2024 Annual Portfolio Review

It’s been a year now since adding Grupo BMV or Bolsa Mexicana de Valores SAB(BMV:BOLSAA) to my portfolio so it’s time for an update. Every year I review positions in my portfolio to keep track of their performance and see if I should continue to add or sell out of the position. In these review articles I’ve been highlighting 4 KPI’s that I track in the business to give me a sense of how the company is doing. For Grupo BMV Revenue, ADTV Equities, market data users, SIC Volume and ISR/Basis volumes in Chile. In total I picked 5 for Group BMV due to all the different segments they have which I’d like to boil down into a few metrics but 4 was too small. 

As for why I chose each metric, that is below

1. Revenue: The most basic of the metrics. Gives a general sense of how a company is doing. 
2. ADTV Equities: The average daily traded volume on the stock market. An increasing amount would be good as more volume should be more revenue which benefit numerous segments that group BMV operates in. Also one of the positives I listed for the company was that GDP/Market share was quite low compared to other countries, specifically the US and Brazil. If that metric is too low, then the amount of volume is likely to increase in the future.
3. Market Data Users: This measures that amount of customers using the information services of Group BMV. Information services is a large and the fastest growing segment for Grupo BMV so I want to track this very granularly.
4. SIC Volume: Custody and settlement of the SIC(International Quotations System) is a major source of revenue for the company so I wanted to track this.
5. ISR/Basis volumes in Chile: The interest rate swap in Chile is the largest instrument traded by SIF ICAP the joint venture inter-dealer broker owned by Grupo BMV which is a significant source of revenue. 

Below is the performance of the various KPI’s as of Q2 2024. 

Year	Q2 2024	Q2 2023	2023	2022
Revenue	1970	1980	3931	4100
ADTV Equities	15280	16321	15044	17804
Market Data Users	N/A	N/A	238	230
SIC Daily Volume	5865	9882	7866	10717
IRS/Basis volumes in Chile	N/A	N/A	3047	3099

Fiscal year 2023 was not a good time for Grupo BMV as revenue was down 4% the decline was mostly in the CSD segment due to a decline in SIC volume traded. BMV blamed the strong peso which appreciated 11% for the revenue decline.  As of Q2 2024 revenue YTD is about flat to Q2 2023 YTD though the peso has continued to appreciate. So If you look at the revenue in USD terms the company is actually growing not declining. The company’s information services segment which is about 20% of revenue is entirely priced in USD so a strong peso has a negative effect. Not to mention the cross border trades that are facilitated through the SIC is also affected by the peso. The strong Peso is probably due to the continuation of nearshoring or manufacturing relocating to Mexico from China and other places further from the US. So a strong Peso may continue to be a headwind for the company at least in Peso revenue.

Bad Things

• Since purchasing there hasn’t been any new listings to the Mexican exchange. However a Mexican company BBB Foods did an IPO and instead of listing in Mexico they decided to list in the US. Also a mexican real estate developer Vesta raised a bunch of money in equity markets but in the US not in Mexico.
• The IPO market in Mexico really started languishing after the election of AMLO in 2018 who was a populist leftist president who wasn’t super friendly to private business. The recent election of Claudia Sheinbaum who is in the same party of AMLO, so probably not great for the next 6 years of the stock market. From what I can gather she seems to be an exact copy of AMLO. 

Good Things

• The government may be helping out the stock market with a new reform being introduced at the end of 2023 and becoming effective as of 2024. The new reform seeks to simplify registration of small and medium sized companies to list on the stock market while also allowing the creation of hedge funds in Mexico. Both could enhance liquidity in the mexican exchange
• The number of retail investors continues to increase. The number of investment accounts increased 50% from 2022 to 2023. However the number is still small compared to the US so there’s still room for a lot of growth. AS this continues to grow hopefully volume will increase and maybe even some mexican meme stocks can appear.
• The competitor exchange BIVA seems to be struggling as it has yet to hit profitability even after 6 years of operations. Also LIV Capital which is the private equity fund that owns BIVA in one of its investment funds has that fund turning 10 soon. Usually after 10 years LIV would exit its investment so it’ll be interesting to see what happens in 2025.

Final Thoughts

Overall the results are kinda flat as in down in peso terms and up in dollar terms. Some good news, some bad. For the stock to really pop we need a boom in Mexico. The rise of retail, the new reforms to the stock market and nearshoring are the current potentially catalysts that could cause that boom. Shareholder yield is around 8-10% so I don’t mind holding until something happens.