1Q06 Presentation


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1Q06 Presentation

  1. 1. Gafisa Acquires AlphaVille Urbanismo Conference Call Sao Paulo, October 3rd, 2006 AlphaVille Developments AlphaVille Graciosa - PR AlphaVille Fortaleza - CE Vila dos Ingleses - MG AlphaVille Campinas - SP Investor Relations Contact: Gustavo Felizzola ir@gafisa.com.br Conference Call São Paulo October 3rd, 2006 12PM (Brasilia Time), 11AM (US-ET) 1 Phone: +1 (973) 935-8757 Code: 7947080 Webcast: http://www.gafisa.com.br/ir
  2. 2. AlphaVille Strengthens Gafisa’s Position as a Premier Growth Opportunity Industry Leadership and Strong Brand Recognition Professional Management Robust Housing Growth and Established Organization World-class Shareholders Geographic and the Highest Diversification Standards of Corporate Governance Efficient Business Model and Strategic Land Bank 2
  3. 3. AlphaVille Urbanismo AlphaVille Urbanismo is the largest and only nationwide community development company in Brazil, with no major competitors to date The Company transforms large rural acreage into urbanized lots, developing all required infrastructure (water, sewage, electricity, roads), as well as facilities such as sports club, high-rise monitored fences, for subsequent sale AlphaVille does not get involved in the construction of the houses, which is done by the buyers AlphaVille’s residential communities (lots) are targeted at upper and upper-middle class families in the outskirts of metropolitan regions throughout Brazil Characteristics of an AlphaVille Community1 Residential Area Parks Residential Area Business Area AlphaVille Club Business Area Residential Area Multi-family Area Golf Course Note (1): Based on AlphaVille Graciosa (located in Curitiba, Paraná) 3
  4. 4. Financing the Transaction Gafisa will acquire 100% of AlphaVille over the next 5 years The transaction involves the purchase of 100% of Alphaville’s shares for cash and stock divided in 3 phases as described below: Phase 1 – acquisition of 60% of Alphaville shares for R$20 million cash at the date of the closing; and issuance of 6,477,718 new Gafisa’s shares @R$28.05 valued at approximately R$181.7 million to current Alphaville shareholders; Phase 2 – acquisition of 20% of Alphaville shares in exchange for Gafisa’s shares 36 months after the closing of the transaction; Phase 3 – acquisition of the remaining 20% of Alphaville shares in exchange for Gafisa’s shares 60 months after the closing of the transaction; The share price Alphaville for the 2nd and 3rd phases will be calculated based on valuation done by an independent institution based on the Discounted Cash Flow Method. Alphaville shareholders are expected to own approximately 5.9% of Gafisa after the 1st phase of the transaction. 4
  5. 5. Attractive Valuation Multiples Analysis Gafisa's Financials (R$ million, as of June 30th 2006) # shares (mm) 102.6 Minority Interest 0.0 Net Debt (Net Cash) (147.0) Enterprise Value (EV) 2,744.1 EBITDA 2008E (1) 271.3 Earnings 2008E (1) 218.4 Note (1): Based on Analysts Consensus Estimates (Deutsche Bank, Itau, Merrill Lynch, UBS) EV / EBITDA Transaction EV / EBITDA 2008E 5.9x Gafisa's EV / EBITDA 2008E 10.1x Discount over Gafisa´s Multiple (2) 41.6% P/E Transaction P/E 2008E 7.6x Gafisa's P/E 2008E 13.2x Discount over Gafisa´s Multiple (2) 42.2% Note (2): Based on Gafisa's stock price of R$28.05 5
  6. 6. Attractive Economics The segment presents higher margins and lower cash exposure than that of residential buildings The Gold-SP Blue -RJ Side Park - SP Lorian - SP High-End Middle and Mid-High Affordable Entry Level Residential Lots Size 100 to 500 sq.m 70 to 150 sq.m 45 to 65 sq.m 100 to 1,000 sq.m # of Units up to 100 150 to 300 100 to 500 100 to 400 Price Range Above 400K R$ 150k to 400K R$ 70k to 130K Up to 300k Household Income¹ Above R$150,000 R$ 70,000 to R$150,000 R$ 32,000 to R$ 62,000 Diverse Commercial Banks and 100% CEF (directly to Financing Provided by Gafisa Provided by Gafisa CEF buyer) Average Price sq.m Above R$3,600 R$ 2,000 to R$ 3,600 R$ 1,800 to R$ 2,000 R$ 150 – R$ 800 % of Gafisa Launches in 19% 62% 2% 10% 2006² Typical Project Margin 37% 31% 28% 44% Cash exposure / Total Sales 30-35% 10-15% Notes: 6 ¹ Annual household income. ² Gafisa has commercial buildings which accounted for the remaining 7% of the 2006 Launches
  7. 7. Unparallel market positioning With its Strong Brand Recognition and Nationwide Presence, AlphaVille has no Comparable Competitor AlphaVille’s National Reach Leadership position: Alphaville is the uncontested leader in the segment Proven track record: The AlphaVille concept has been very well accepted throughout the country, present in 35 cities and 16 states Strong brand: A recognized high-quality infrastructure, high-quality after-sale customer service, and efforts to create a strong sense of loyalty and community between its clients are among the characteristics that the “AlphaVille” brand carries within its target markets. This strong brand allows it to charge a premium over its competitors in every market it competes and facilitates new partnerships. Some of AlphaVille’s Awards (2005) AlphaVille Gafisa Top de Master Superbrands FIABCI Pop List Marketing Imobiliário 2005 2005 2005 2005 2005 7
  8. 8. High Entry Barrier Segment The segment is characterized by a long approval process for new developments… Partnership / Approval Prospective / Marketing Land and Construction Occupation Strategic Analysis & Sales Acquisition Registration 3 years 1 years 2 years Prospective / Analysis involving legal, environmental, urban, technical and market aspects (e.g. price, Strategic Analysis demand, competition and adherence to concept) to opportunistically invest in Partnership / Land Signature of a Partnership Agreement with the land owner or a selective acquisition of Acquisition the land Development of a detailed Master Plan to be submitted to authorities for approval process Approval and Registration This process takes on average 3 years (compared to Gafisa’s 6 months) and involves interactions with Federal, State and Municipal authorities, thereafter the development is registered at the municipality and is ready for commercialization Marketing After the launching, AlphaVille starts pre-selling the units during the construction phase & Sales (similar to Gafisa) AlphaVille works as Construction Manager with the construction outsourced with third- Construction party companies In the last phase, clients are free to build their houses and AlphaVille support the Occupation establishment of the community’s “management council” It is unlikely that any competitor would be able to replicate AlphaVille’s current position and strength in the near future 8
  9. 9. High growth with relatively low risk AlphaVille has a sizable and virtually non-replicable land bank with a potential PSV of R$2billion Land Bank¹ % Usable Area Future Sales Potential Units acquired (sq.m) (R$000) by swap Southeast 4,926,325 9,213 1,138,151 93% Northeast 2,626.057 3,461 566,646 100% South 746,533 1,430 155,278 100% Mid-West 502,757 926 104,954 27% North 162,121 438 32,424 100% Total 8,963,794 15,467 1,997,452 92% ¹ As of 06/30/06 Between 2006 and 2010 the Company expects to launch 46 developments, of which 42 are already in the land bank 9
  10. 10. This combination offers attainable synergies We expect both companies to benefit from future synergies Cross-selling opportunities of Gafisa’s residential buildings in AlphaVille’s lots Utilization of AlphaVille’s wide experience with local authorities and business partners in over 35 cities in 16 states to further accelerate Gafisa’s geographical expansion AlphaVille will greatly benefit from Gafisa’s financial expertise, allowing it to optimize its capital structure and provide customers with better products 10
  11. 11. Selected Combined Operating Data (Pro-forma) Gafisa Alphaville Gafisa + Alphaville (Pro-forma) (R$ million, except when indicated) 2003A 2004A 2005A 2003A 2004A 2005A 2003A 2004A 2005A Number of Launches 20 11 21 3 4 4 23 15 25 Launches (R$ '000) 377.356 206.942 651.815 57.415 141.521 176.492 434.771 348.463 828.307 Usable Launched Area (m2) 179.437 133.393 514.068 656.720 1.151.898 1.170.096 836.157 1.285.291 1.684.164 Price per sq.m (1) 2.701,0 2.725,0 2.768,0 146,6 200,2 263,7 na na na Number of Units 1790 1132 2446 687 1089 1555 2477 2221 4001 Note: (1) Price per sq.m for Gafisa excludes lots 11
  12. 12. Governance at AlphaVille Alphaville’s capabilities will remain with the company after the transaction is complete. Nuno Luiz Alves and Renato Albuquerque will retain 40% of Alphaville going forward Nuno Luiz Alves will remain as CEO Alphaville will operate as a subsidiary of Gafisa Alphaville’s Board of Directors will be composed by 5 members of whom 3 will be indicated by Gafisa. Nuno and Renato will be the other two board members Gafisa will seek shareholder approval for the indication of Mr. Renato Albuquerque as a Board Member of Gafisa. Gafisa’s Pro-Forma Corporate Structure after Consummation of the Transaction (Phase 1) Gafisa S.A. 60% SPE A SPE B SPE C ... Gafisa Vendas Alphaville 12
  13. 13. AlphaVille Strengthens Gafisa’s Position as a Premier Growth Opportunity Industry Leadership and Strong Brand Recognition Professional Management Robust Housing Growth and Established Organization World-class Shareholders Geographic and the Highest Diversification Standards of Corporate Governance Efficient Business Model and Strategic Land Bank 13