E-commerce And Nearshoring Will Expand Mexico's Industrial Landscape

Key Takeaways

• Strategic portfolio moves and focus on industrial assets position FUNO for sustained rental growth, margin expansion, and long-term outperformance versus expectations.
  
• Leadership in ESG, internal development, and prime market exposure set FUNO apart, supporting premium tenant demand and stable, organically funded portfolio enhancement.
  
• Structural shifts in office use, e-commerce growth, rising rates, portfolio concentration, and currency volatility threaten occupancy, revenue stability, and earnings predictability.

Catalysts

Fibra UNO Trust was established as a Real Estate Investment Trust on January 12, 2011, by Fibra UNO Administración, SA de CV (the "Settlor") and Deutsche Bank México, SA, Institución de Banca Múltiple, División Fiduciaria (the "Trustee" or "Deutsche Bank").

• Analysts broadly agree the Fibra NEXT carve-out and joint venture will unlock value, but even they may be understating the positive impact: as management highlighted, this move positions FUNO to become not only Mexico's, but potentially one of the world's premier industrial REITs, capturing transformational scale, potential double-digit rate growth, and the ongoing 31% below-market rent gap, which could drive multi-year outperformance in net operating income and distributable earnings.
  
• While analyst consensus expects higher occupancy and leasing spreads to steadily drive NOI, recent disclosure suggests that approximately half of the industrial portfolio is set to be repriced over the next three years, allowing FUNO to rapidly capture market rents in logistics-anchored metro centers where demand dramatically overshoots supply, which could fuel outsized rental income and margin expansion far above current projections.
  
• The accelerating trend of nearshoring-particularly amplified by large US and global companies-in combination with FUNO's outsized exposure to prime metro Mexico City industrial and logistics assets, points to structural, multi-year uplifts in both rental rates and occupancy, with upside surprise potential for revenue stability and sustained growth.
  
• FUNO's prudent capital recycling and growing focus on high-yield logistics real estate, enabled by a robust internal development pipeline, positions the company to self-fund value-add projects, organically grow portfolio quality, and steadily enhance NAV and AFFO per CBFI with less reliance on external leverage.
  
• As the largest and most sophisticated player in a consolidating Mexican FIBRA landscape, FUNO's scale and first-mover execution on ESG and LEED certifications will allow it to capture premium tenants, drive higher asset values, and secure long-term, low-cost capital-directly supporting margin expansion, future cash flow resilience, and a potential sustained uplift in market valuation.

Fibra UNO Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Fibra UNO compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Fibra UNO's revenue will grow by 5.1% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 32.8% today to 39.8% in 3 years time.
• The bullish analysts expect earnings to reach MX$14.0 billion (and earnings per share of MX$3.6) by about August 2028, up from MX$9.9 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 16.5x on those 2028 earnings, up from 9.9x today. This future PE is greater than the current PE for the MX REITs industry at 5.7x.
• Analysts expect the number of shares outstanding to decline by 0.24% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 17.14%, as per the Simply Wall St company report.

Fibra UNO Future Earnings Per Share Growth

Risks

• Accelerating adoption of remote and hybrid work models could structurally reduce demand for office space, resulting in persistently lower occupancy and rental rates for Fibra UNO's significant office portfolio and, in turn, pressuring revenues and net margins.
  
• The outperformance of e-commerce relative to brick-and-mortar retail poses a long-term challenge for shopping centers, raising the risk of sustained higher vacancies and lower variable rents from retail tenants, thereby reducing cash flows and overall net operating income.
  
• Rising global interest rates in the coming years could materially increase Fibra UNO's debt service costs as its sizeable debt matures and refinances, potentially limiting capital access and leading to lower earnings and distributions if property values decline or margins compress.
  
• The company's high concentration in office and retail assets-segments particularly vulnerable to secular demand shifts-elevates occupancy risk and undermines rental revenue stability, as evidenced by recent quarterly declines in occupancy across all segments.
  
• Peso appreciation and ongoing currency volatility, especially in the context of significant dollar-denominated rents, may continue to negatively affect peso-reported results and future distribution payouts, complicating earnings predictability and increasing the risk of weaker net margins in periods of further FX swings.

Valuation

• The assumed bullish price target for Fibra UNO is MX$38.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Fibra UNO's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of MX$38.0, and the most bearish reporting a price target of just MX$21.0.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be MX$35.1 billion, earnings will come to MX$14.0 billion, and it would be trading on a PE ratio of 16.5x, assuming you use a discount rate of 17.1%.
• Given the current share price of MX$25.72, the bullish analyst price target of MX$38.0 is 32.3% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.