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Wal-Mex - A growing behemoth from the South

Wal-Mart subsidiary offers double-digit net income growth

Ever wonder what your life would be like today if you or your parents had possessed the foresight to invest in Wal-Mart (NYSE: WMT) back when it was just a young, upstart company from Northwest Arkansas?

If so, you may be interested in Wal-Mart de Mexico, a little-known company to most U.S. residents that trades as an ADR in the over-the-counter market under the ticker symbol (PINK SHEETS: WMMVF).

Wal-Mart de Mexico, or WalMex as it is often called, is currently the largest private employer in Mexico, with 997 stores and over 150,000 employees.

As of Nov. 30, WMMVF had a market cap of nearly US $31 billion and yearly sales of $19.9 billion, equal to 1.75 percent of Mexico's gross domestic product (GDP). What's more, the company controls about 30% of all Mexican supermarket food sales and approximately 6% of all retail sales.

And, similar to its US counterpart, Wal-Mart de Mexico continues to expand and introduce new business segments, with 104 new store openings through November and in-store banking approved by the Mexican Banking Commission in October.

Unlike its older United States brother, however, WalMex has averaged double-digit net income growth of 33.7 percent over the past three fiscal years (WMT, by comparison, has averaged just 8.2). Even same store sales, which have been the Achilles' heel of US operations recently, grew at an impressive 9.8 percent rate 5.9 percent in real terms during the latest fiscal year (2006).

Yet, despite healthy net sales and net income increases again during the first three quarters of FY 2007 (totaling 10 and 14 percent respectively), WMMVF stock has plunged by more than 19 percent this year, as US investors have, undoubtedly, been scared away by enduring domestic economic woes.

Still, the future appears bright for Wal-Mart's Mexican subsidiary. 

Perhaps WMMVF investors of today won't need to wonder what might have been.
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