发帖
雷达卡
Brazilian Homebuilding
Best opportunity for growth is
low-income
Dan McGoey, CFA
Research Analyst
(52) 55 5201 8017
dan.mcgoey@db.com
Michelle Dorea
Research Associate
(52) 55 5201 8141
michelle.dorea@db.com
MRV and Tenda initiated with Buy; Tenda preferred for valuation discount
We are initiating coverage of Brazilian low-income homebuilders MRV Engenharia
and Tenda, both with Buy ratings and 12M PT’s of R$58.5/shr (+68% potential
upside) and R$24.0/shr (+118% potential upside), respectively. Tenda’s highly
discounted valuation more than offsets the increased risk associated with the
company’s business model, in our opinion, making it our top pick among lowincome
homebuilders in Brazil.
Deutsche Bank AG/London
All prices are those current at the end of the previous trading session unless otherwise indicated. Prices are sourced from
local exchanges via Reuters, Bloomberg and other vendors. Data is sourced from Deutsche Bank and subject companies.
Deutsche Bank does and seeks to do business with companies covered in its research reports. Thus, investors should
be aware that the firm may have a conflict of interest that could affect the objectivity of this report.
Investors should consider this report as only a single factor in making their investment decision.
Independent, third-party research (IR) on certain companies covered by DBSI's research is available to customers of
DBSI in the United States at no cost. Customers can access this IR at http://gm.db.com, or call 1-877-208-6300 to
request that a copy of the IR be sent to them.
DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1
Initiation of Coverage
Top picks
Tenda (TEND3.SA),BRL11.25 Buy
PDG Realty (PDGR3.SA),BRL24.30 Buy
MRV Engenharia (MRVE3.SA),BRL36.25 Buy
Global Markets Research Company
Sector under expansion – coverage universe increases to 15 builders
We expand coverage of the Latin American homebuilding sector with this report.
We initiate coverage of MRV Engenharia (Buy, R$58.5/shr PT) and Tenda (Buy,
R$24.0/shr PT), increasing the universe to 15 companies, including nine in Brazil,
five in Mexico and one in Chile with a combined market capitalization of US$27bn.
Cyclical rate hikes unlikely to deter home buying, particularly in low-income
Despite the tightening of the monetary policy in Brazil this year to counter
inflationary pressures, we do not believe the rate hikes will materially reduce the
demand for new housing in any demographic category. On the contrary, we
believe an anticipated cumulative 225bps increase in interest rates will not deter
first-time borrowers from taking out mortgage loans because longer terms imply
lower monthly payments. However, we remain more confident about the ability of
low-income housing developers to increase their top-line growth aggressively as
they address the huge pent-up demand in the segment where the purchase of a
home is more of a necessity than an upgrade.
P/E-to-growth valuation suggests compelling opportunities exist
Our valuation framework for the sector is based on P/E and P/E-to-growth (PEG)
multiples. A PEG ratio of 1.0 or less is a generally-accepted level for identifying
potentially attractive growth at a reasonable price. Our target PEG ratios for
Brazilian homebuilders range from 1.0 for blue-chips such as Cyrela, Gafisa and
MRV to 0.5 for small-caps such as Klabin Segall. Our discounted target PEG ratios
may reflect reduced share liquidity, limited track record of management execution
and/or exceptionally aggressive growth guidance.
Key risks surround availability of mortgage finance
Key industry risks include heavy reliance on the availability of mortgage finance
and the relatively short track record of this financial product in Brazil. Additional
risks include negative effects of rising inflation and tightening monetary policy on
the demand for housing and its affordability. Employment and wages are key
drivers of demand. Company-specific risks include managing rising raw material
and labor costs, diligent working capital management including land reserves and
accounts receivable, and overall execution.
Table of Contents
Industry outlook ................................................................................ 3
Secular growth in Brazil housing to outweigh cyclical headwinds ............................................3
Aggressive growth in low-income housing more sustainable...................................................3
Sector warrants a growth-based valuation framework .............................................................3
Industry overview.............................................................................. 4
Brazil Housing: a true secular growth story ..............................................................................4
We prefer affordable housing segment for growth and stability ..............................................6
Superior working capital cycle supports higher growth ..........................................................12
MRV Engenharia .............................................................................. 16
Tenda................................................................................................ 36
Industry outlook
Secular growth in Brazil housing to outweigh cyclical headwinds
We believe the Brazilian homebuilding industry is in the early stages of a powerful secular
growth trend. Constrained by Brazil's volatile macroeconomic history in recent times,
Brazilian homebuilders emerged from macroeconomic weakness in 2005 to follow a sharp
upward trajectory. The growth is occurring due to convergence of increased economic
activity, structurally declining interest rates (in contrast to the present monetary tightening
cycle) and a supportive government policy.
The initial market opportunity driving growth among Brazilian homebuilders appeared
somewhat narrow - catering primarily to the middle and upper income residents of Sao Paulo
and Rio de Janeiro. However, declining interest rates, increased mortgage accessibility and
strides in government policy are extending homeownership to a greater percentage of the
population, notably in the low-income segment.
Aggressive growth in low-income housing more sustainable
The Brazilian Central Bank raised interest rates twice recently to 12.25% to pre-empt inflation.
We expect an additional 125bps hike by the end of 2008. However, we do not believe this
tightening cycle in Brazil will materially reduce the demand for new housing in any of the
demographic categories as first-time access to mortgage credit and longer mortgage loan
terms will override concerns about higher monthly payments, in our opinion. Although
consumer credit growth in Brazil decelerated for the fourth consecutive month in May, it
remained robust at +21.6% YoY (specifically, mortgage lending +28.8% YoY).
However, given the sharp increase in supply of new middle and upper income residential
construction in select markets in Brazil over the last 12 months and the limited (<10%)
number of households that can afford such a purchase and the rising opportunity cost
represented by overnight rates, we believe the middle and upper income segments are at
greater risk of cyclical deceleration than the low-income housing segment. We are more
confident about the consistency of demand growth in the low-income housing segment
where pent-up demand is exponentially greater and the purchase of a home is more of a
necessity than an upgrade.
Sector warrants a growth-based valuation framework
Homebuilding in Latin America is a growth industry and our sector valuation framework is
based on P/E and P/E-to-growth (PEG) multiples. A PEG ratio of 1.0 or less is a generallyaccepted
level for identifying potentially attractive growth at a reasonable price. Our target
PEG ratios for Brazilian homebuilders range from 1.0 for blue-chips such as Cyrela, Gafisa and
MRV to 0.5 for small-caps such as Klabin Segall. Our discounted target PEG ratios may reflect
reduced share liquidity, limited track record of management execution and/or exceptionally
aggressive growth guidance.
Key industry risks include heavy reliance on mortgage finance availability and the relatively
short track record of this financial product in Brazil. Additional risks include the negative
effects of rising inflation and tightening monetary policy on the demand for housing and its
affordability. Employment and wages are the key drivers of housing demand. Companyspecific
risks include managing rising raw material and labor costs, diligent working capital
management including land reserves and accounts receivable, and overall execution.
Industry overview
Brazil Housing: a true secular growth story
The Brazilian housing industry is in the early stages of a potential long-term secular growth
trend, in our view. Years of historically high inflation and elevated real interest rates have
stifled new residential real estate development with expensive or inaccessible mortgage
financing. However, significant improvements in mortgage financing terms introduced
recently in Brazil have made home-ownership accessible to a wide spectrum of potential
buyers.
Favorable demographics include young, fast growing population
Brazil boasts of favorable demographics for a nascent homebuilding industry as do other
emerging economies, including a relatively young population, high household formation, and
a declining number of average occupants per household.
According to the national statistics agency, IBGE, the population increased at 1.4% per year
from 1991 to 2007. It touched 170m in 2000 and was estimated at 184m in 2007. At the
same time, the number of households with just one individual increased to 10.2% of the total
(from 7.5% in 1991), which represents increased demand for housing.
The relatively young population is another positive for the Brazilian housing industry. Almost
45% of the country’s population is between 15-39 years of age compared with 36% in the
U.S. and 29% in western Europe. Specifically, c. 15% of the Brazilian population is in the age
group of 25-35 years, which are considered to be prime first-time home buying years.
229925.pdf
(1.02 MB, 需要: 500 个论坛币)
提升卡
置顶卡
沉默卡
变色卡
抢沙发
千斤顶
显身卡
京公网安备 11010802022788号
