Homex Leads Mexico Homebuilder Drop on Goldman Sachs Outlook

Desarrolladora Homex SAB, Corp. Geo SAB and Urbi Desarrollos Urbanos SAB sank for an eighth day as reports from Goldman Sachs Group Inc. and Credit Suisse Group AG heightened concern about the homebuilders’ cash shortage.

Homex fell 15 percent to 20.91 pesos at the close of trading in Mexico City. Geo plunged 14 percent to 6.83 pesos, while Urbi fell 10 percent to 2.82 pesos. The Habita index of Mexican homebuilders declined 10 percent.

Goldman Sachs lowered its price targets for Urbi, Geo and Homex and cut its rating on Homex to sell from the equivalent of hold yesterday. Credit Suisse maintained its recommendation of the three companies at the equivalent of sell. Both banks cited unsustainable cash burn among the three homebuilders.

“We do not believe that a sustainable recovery in cash flow is likely to occur in the near term,” Goldman Sachs analysts led by Jason Mollin wrote in a report published yesterday.

Urbi has tumbled 65 percent in 2013 while Geo has fallen 55 percent and Homex lost 22 percent. The Habita index has dropped 35 percent.

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