Citi Research: Urbanization - Big Cities Getting Bigger

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Urbanization
Big Cities Getting Bigger
 A tipping point — The percentage of the world’s population in urban locations
now exceeds that in rural areas. In general, urban residents are better educated
and more productive than their rural counterparts, and have higher incomes.

 Some big cities are getting wealthier — Cities are typically ranked in size
according to population. However, to assess relative importance in economic
terms, per capita incomes also need to be taken into account. 12 big cities are
forecast to experience meaningful GDP growth through 2025, with all but two
(London, Hong Kong) in emerging markets.
 The comparative advantages of emerging market cities — Starting with “a
clean slate,” cities in emerging economies can move up the value chain, shifting
towards higher value-added services and more knowledge-based activities.
 The comparative advantages of old cities — Many developed economy cities
have well-established comparative advantages in certain sectors, including
financial services, entertainment, fashion, transportation and tourism.
Urbanization will result in a larger global market for these services.
 Investment implications — We highlight 47 stocks with direct exposure to those
mega cities that are forecast to experience material GDP growth. These
companies are forecast to have an average EPS CAGR of 24% for 2010-2012.
They are trading on an average 2012 P/E multiple of 13x.