Real Estate & Construction
Sector Review January 14, 2008
Working Capital Management is King
We took the time to review our valuation models in Brazil’s real estate
Table 1 – Target Prices
sector and start the year with an update on target prices as well as on the
Last TP USD
strategy to play the sector going forward. We believe 2008 will be deeper Rating
Price YE08 Upside
in terms of how the market analyses Brazilian homebuilders and would R$33.90 R$54.00 51.0% BUY
R$23.93 R$29.00 14.9% NEUTRAL
like to present our views on how to look beyond growth guidance. R$30.10 R$37.00 16.5% NEUTRAL
R$12.39 R$33.50 156.3% BUY
R$34.50 R$55.00 51.1% BUY
Cash is king: deeper into Brazil’s real estate sector cash
• R$42.29 R$65.00 45.7% BUY
flows. Since we started to follow the real estate sector in Brazil, R$9.50 R$20.00 99.6% BUY
our main concern has neither been demand nor believing that
companies could launch, and sell, planned projects. Our actual
Table 2 – Price-Earnings Ratios
concern has always been working capital management and its PER08E PER09E
older brother, cash flow. The main challenge for companies is not 9.9x 7.8x
growing, but managing growth and the consequent capital needs. 17.3x 10.6x
Sky remains blue; now it is leveraging time. We are now
• 14.3x 10.3x
including construction financing for estimated launchings in order 9.4x 5.2x
Average 15.6x 9.2x
to get a better feeling on which companies will need further
funding to accomplish growth plans.
Table 3 – Launchings and Sales – R$MM
Launchings 08E Sales 08E
Back to fundamentals: growth stories at value prices. On a
• 1,500 1,149
different exercise, in order to try to find deep value in real estate 6,000 4,400
companies, instead of looking into the future, we decided to look 1,812 1,706
at what companies have accomplished so far and include in our 2,100 1,707
analysis a multiple which we consider almost a safety net when 1,778 1,387
choosing companies to invest on: Price-to-Adjusted Book Value. * Includes partners in developments
There is a clear liquidity premium out there. Although we
could argue this premium in unwarranted, as the concerns about
the global economy escalate, this aspect should be even more
relevant going forward. In that sense, we are increasing our cost
of equity for less liquid names by 100 bps.
We are placing Rossi and MRV as our top picks in the
sector. We are reiterating our BUY rating for both stocks and
placing them as our top picks based on: (i) both stories present
better-than-average cash flow outlooks, being MRV’s free cash
flow positive already from 2009 despite its aggressive growth
plan; (ii) clear “under-promise-to-over-deliver” strategy in place;
(iii) recent corrections on both stocks seem exaggerated,
therefore, creating a buying opportunity and; (iv) both are
among the most liquid names in the sector.
In addition, Klabin Segall and Tecnisa are our suggested
deep value plays. Based on high DCF-based upsides and both
forward PE ratio as well as price-to-adjusted book value analysis,
we see value in Klabin Segall and Tecnisa. Both stocks suffered
from fears of frustrating growth expectations which should
dissipate going forward.
Rafael C. de Pinho
55 11 3089-8748
See appendix B for Important Disclosures
This report has been prepared by Bulltick Brasil Consultoria e Assessoria Empresarial Ltda. which is not an FINRA member, it’s not registered under the
US Securities and exchange commission, and its not regulated by any US Securities or commodities exchange. Non-US research analysts who have
prepared this report are not registered/ qualified as research analysts with the FINRA or any other US securities exchange or regulatory body
Cash is king: deeper into Brazil’s real estate sector cash flows
Since we started to follow the real estate sector in Brazil, our main concern has neither
Our main concern regarding
been demand nor believing that companies could launch, and sell, planned projects. Our
the real estate sector has
always been working capital actual concern has always been working capital management and its older brother, cash
management. flow. The main challenge for companies is not growing, but managing growth and the
consequent capital needs.
As shown on Exhibit 1, typical working capital exposure to an average project should
hover between 20-30% of a project’s potential sales value (PSV). This is only possible
due to the use of construction financing, which allows companies to finance on average
70% of the cost of the building. So far, the return on newly developed projects has been
quite high on an IRR or NPV perspective. However, this return is only assured by the
project delivery, which is tied to managing correctly the cash flow.
Exhibit 1: Typical project cash exposure with SFH financing
Considering construction Potential Sales Value (PSV) 100,000
financing, typical cash flow Gross Margin 40%
exposure should hover Total Cost (60,000)
between 20-30% of a
project’s PSV. Land Cost (15% of PSV) (A) (15,000)
Building Costs (45,000)
SFH Financing = 70% of Building Costs 31,500
Building Cash Exposure (B) (13,500)
Total Cash Exposure (A) + (B) (28,500)
Our cash flow exposure exercise depends on the companies being able to get financing to
reduce their own cash exposure to projects. A substantial stake of the capital Brazilian
banks are obliged to invest in real estate projects goes in the form of construction
financing. On Exhibit 2, we show the difference between a typical project cash flow
leveraged by construction financing and another one without the line.
Exhibit 2: Typical project cash flows, SFH financing impact
Cash Exposure as % of PSV
With SFH leverage Without SFH leverage
Until now, the outlook for the Brazilian macroeconomic scenario suggests that the growth
As we assume the growth
cycle for homebuilders is cycle for homebuilders is sustainable. This opinion seems to be shared by the companies
sustainable, we included in the sector: the average growth in launchings estimates by company managements is
construction financing in
around 30% per year for the 2009-07 period.
Given this scenario, we have decided to include in our models the construction financing
…allowing us to better
evaluate those companies in for projects within the SFH scope in order to better evaluate those companies in which
which extra funding should extra cash will be needed to meet guidance going forward. If the financing conditions for
be needed, given current
real estate projects are unchanged, some of these companies may attempt to raise cash
either through debt or equity issues. In the case of equity issues, the potential EPS
dilution for shareholders is a concern.
Exhibit 3: Free cash flow-to-equity, 2008-2012
Cash Position Free Cash Flows-to-Equity
(R$ MM) 2008 2009 2010 2011 2012
Cyrela 800 (68) (1,225) (2,174) (2,678) 843
Tecnisa 156 (237) (419) (420) (237) 319
Klabin Segall* 238 37 (209) (222) 83 195
Rossi Residencial 377 (221) 74 (88) (161) 210
Company 128 (196) (379) (231) (234) 4
MRV 882 (164) 69 345 565 720
Gafisa 372 (447) (264) 309 327 410
* Cash adjusted for recently issued debentures
Back to fundamentals: growth stories at value prices
On a different exercise, in order to try to find deep value in real estate companies,
We included Price-to-
instead of looking into the future, we decided to look at what companies have
Adjusted Book Value
accomplished so far and include in our analysis a multiple which we consider almost a
multiples to our analysis in
safety net when choosing companies to invest on: Price-to-Adjusted Book Value.
order to find deep value
As the accounting for homebuilders does not help much our analysis, distorting financial
statements, especially given the high growth experienced over the last 2 years, we have
decided to make a simple adjustment to reported book value for the companies: we
added the backlog profits. The recognition of such profits is dependable only on building
and delivery. At this point, we think it is fair to assume sold apartments will be delivered.
Below, we present a table including the price-to-adjusted book value multiples for
companies under our coverage.
Exhibit 4: Adjusted price-to-book values
R$ Millions, unless noted Company Cyrela Gafisa Klabin MRV Rossi Tecnisa Average/Sum
Market Cap 1,221 8,511 3,867 731 4,666 3,335 1,381 23,710
3Q07 Reported Book Value 328 1,994 1,493 400 1,339 1,177 735 7,466
Price / Book 3.73x 4.27x 2.59x 1.83x 3.49x 2.83x 1.88x 3.18x
Premium / Discount to Average 17.3% 34.4% -18.5% -42.5% 9.7% -10.8% -40.8%
Revenues to recognize 337 2,099 1,209 386 327 853 150 5,361
Cost to recognize (206) (1,202) (744) (257) (145) (546) (92) (3,192)
Gross Profit to recognize 131 897 466 128 181 307 58 2,169
Net Profits to recognize 101 698 356 89 144 247 46 1,680
428 2,692 1,850 489 1,483 1,424 781 9,146
Adjusted Book Value - Backlog Profits
Price / Adj. Book Value 2.85x 3.16x 2.09x 1.50x 3.15x 2.34x 1.77x 2.59x
As with PE ratios, Price-to-Book value analysis in real estate also shows some
inconsistency. First, we assume that the average project return between different
companies is similar. In addition, we remind investors that entry barriers in real estate
are relatively low, thus, exaggerated premiums are not sustainable in the long run, even
when a liquidity premium/discount is considered.
For investors looking to buy value in the sector, departing from price-to-adjusted book
Departing from this simple
value, companies like Klabin Segall and Tecnisa call our attention, especially when this
metric, Klabin Segall and
analysis is coupled with SFH financing analysis and with forward PE multiples.
Tecnisa call our attention.
Exhibit 5: Price-to-Earnings 2009E
Even when considering a 10.7x
liquidity premium/discount, 10.3x
if the average project return 10.0x
is similar and entry barriers 8.9x
are inexistent, a 105% gap
between the extremes in 7.8x
our PER09E multiples range
seem exaggerated to us.
Tecnisa Klabin Company MRV Average Rossi Gafisa Cyrela
Exhibit 6: PE-to-growth multiples – 2009E
Tecnisa Klabin MRV Gafisa Company Rossi Average Cyrela
Rossi Residencial: TP-YE08 R$65.00, 45.7% upside potential in USD
As a consequence of one of the best cash flow outlooks going forward, we are placing
Rossi among our top picks in the sector, being the company our preferred name among
the most liquid stocks in the sector.
We are raising our TP to R$65.00 from R$59.00 on the back of higher launching
estimates, to which working capital needs are almost completely funded by construction
The stock’s recent 13% correction, which we perceive as linked to fears of an upcoming
follow-on offer by Rossi after Cyrela’s equity issue announcement, was unjustified.
However, should such a deal come up, investors should note the proceeds will probably
be invested in new projects, thus, with expectation to create value.
We currently see Rossi trading at a 10.3x PER09E vs. our average of 9.2x for the sector.
On top of being one of the most liquid names in the sector, and having a proven track
record as well as fair future cash flow outlook, we believe the stock deserves some
premium to both Cyrela and Gafisa.
Exhibit 7: Rossi’s Main Figures
Rossi Res. (R$ MM) 2006 2007E 2008E 2009E 2010E 2011E 2012E
Launchings 882 1,981 2,500 3,000 3,360 3,696 3,844
- Real Estate Sales 584 1,284 2,218 2,571 3,096 3,466 3,704
Net Revenues 411 701 1,380 1,998 2,565 3,075 3,474
Adj. EBITDA 61 137 297 464 626 753 851
Adj. Net income 54 137 233 325 424 520 598
Gross Margin 31.2% 35.3% 35.5% 35.6% 34.8% 34.3% 34.0%
Adj. EBITDA Margin 12.4% 19.6% 21.5% 23.2% 24.4% 24.5% 24.5%
Adj. Net Margin 10.6% 19.6% 16.9% 16.3% 16.5% 16.9% 17.2%
PER 62.0x 24.3x 14.3x 10.3x 7.9x 6.4x 5.6x
FV/EBITDA 51.3x 25.5x 13.6x 10.2x 8.2x 7.2x 6.5x
Adjusted for IPO costs
Source: Rossi Residencial and Bulltick
MRV: TP-YE08 R$55.00, 51.1% upside potential in USD
We are also placing MRV among our top picks in the sector on the back of an interesting
growth-adjusted valuation and, in our view, an attractive entry point created recently by
the 20% drop in stock price since early December.
We disagree with the criticisms out on the street about the company’s aggressive growth
plans. As MRV benefits from the use of special credit lines targeted to low-income
developers by Caixa Economica, the company enjoys a comfortable cash flow position
MRV shares currently trade at a 8.9x PER09E, a 7% discount over the first-tier group
composed by Rossi, Cyrela and Gafisa. On a growth-adjusted basis, MRV trades at PE09-
to-growth of 0.07x versus an average of 0.25x for Brazilian homebuilders.
We reiterate our positive view on the company and on the quality of its management,
which has potential to surprise the market going forward not only by over-delivering
results but also due to its search for innovative credit solutions to its clients. For example,
MRV recently led the pack in signing a MOU with Caixa Economica in order to gain scale in
low-income credit approval and grant financing for 12,000 units in 2008, a move quickly
followed by its competitors.
Main changes to our model were the inclusion of the revised launching estimates for 2008
and 2009 and modeling of the SFH financing. Besides, as this report was being written,
we had to stop the press in order to account for the fact that the company beat its 2007
estimates. Our DCF-model points to a Dec 08 TP of R$55.00/share, implying a 51.1%
potential upside in USD and therefore a BUY rating for the stock.
Exhibit 8: MRV’s main figures
MRV (R$ MM) 2006 2007E 2008E 2009E 2010E 2011E 2012E
Launchings 337 1,200 2,100 2,520 2,898 3,130 3,318
- Real Estate Sales 206 717 1,707 2,298 2,705 3,001 3,220
Net Revenues 140 399 1,046 1,811 2,371 2,745 3,019
Adj. EBITDA 22 100 291 579 762 886 960
Adj. Net income 17 114 297 523 685 792 855
Gross Margin 35% 40% 43% 43% 42% 41% 40%
Adj. EBITDA Margin 16% 25% 28% 32% 32% 32% 32%
Adj. Net Margin 12% 29% 28% 29% 29% 29% 28%
PER 274.2x 87.7x 15.7x 8.9x 6.8x 5.9x 5.5x
FV/EBITDA 209.8x 102.3x 16.3x 8.2x 6.3x 5.5x 5.1x
Adjusted for IPO costs
Source: MRV and Bulltick
Cyrela: TP-YE08 R$30.00, 14.9% upside potential in USD
After incorporating the most recent launchings guidance and including the SFH leverage
into our model, we are increasing our YE08 TP to R$29.00/share from R$26.00/share and
downgrading Cyrela to NEUTRAL from BUY. At this point we prefer to take a more
cautious stance concerning Cyrela, based on our estimates for the company’s cash flow
for the coming years.
Despite having a substantial amount of receivables, which could offset its funding needs,
our analysis suggests that the company should direct most of the resources from recently
announced debt and equity issues to comply with the working capital needs for the
intended R$13.5 billion in launchings over 2008 and 2009.
Besides the working capital management factor, the overhang created by the new equity
issue announcement, the third since September 2005, reinforce our view.
We see Cyrela shares, currently trading at 10.7x PER09E, at premium to both Rossi and
Gafisa. However, at this point we believe Rossi deserves a premium over Cyrela as it is in
better shape to face its working capital needs going forward.
Exhibit 9: Cyrela’s Main Figures
Cyrela (R$MM) 2006 2007E 2008E 2009E 2010E 2011E 2012E
Launchings 3,618 4,600 6,000 7,500 8,400 9,240 9,610
- Real Estate Sales 2,247 3,400 4,400 6,053 7,424 8,382 9,097
Net Revenues 1,064 1,561 2,040 3,727 5,430 6,905 8,146
Adj. EBITDA 196 403 539 1,075 1,582 1,998 2,351
Adj. Net Income 190 330 431 796 1,220 1,589 1,856
Gross Margin 39.4% 42.1% 42.8% 42.5% 41.8% 41.1% 40.8%
Adj. EBITDA Margin 18.4% 25.8% 26.4% 28.8% 29.1% 28.9% 28.9%
Adj. Net Margin 17.8% 21.1% 21.1% 21.4% 22.5% 23.0% 22.8%
PER 44.8x 19.3x 19.7x 10.7x 7.0x 5.4x 4.6x
FV/EBITDA 41.2x 21.0x 17.0x 9.5x 6.5x 5.3x 4.5x
Adjusted for non-recurring gains
Source: Cyrela and Bulltick
Gafisa: TP-YE08 R$37.00, 16.5% upside potential in USD
Our revised TP of R$37.00/share for Gafisa, up 12% from our previous TP of
R$33.00/share, is a result of increased launchings guidance and fine tuning to our model.
Nonetheless, we are downgrading Gafisa shares to NEUTRAL from BUY on the back of the
same conservative stance we applied to Cyrela. Our analysis indicates Gafisa should need
between R$350-R$450 million in additional funding, besides leveraging through SFH
construction financing, to provide for its working capital needs.
Additionally, we are still waiting to see concrete results arising from the company’s new
business lines Fit and Bairro Novo, added to Alphaville’s acquisition. We currently see
Gafisa stocks trading at a 10.6x PER09E, 15% above the average of the companies under
Exhibit 10: Gafisa’s Main Figures
Gafisa (R$MM) 2006 2007E 2008E 2009E 2010E 2011E 2012E
Launchings 1,005 1,900 3,000 3,360 3,695 3,846 3,999
- Real Estate Sales 995 1,625 2,627 3,086 3,505 3,729 3,908
Net Revenues 664 1,124 1,565 2,201 2,912 3,346 3,651
Adj. EBITDA 98 175 279 493 678 780 834
Adj. Net Income 76 122 225 368 495 575 613
Gross Margin 29.8% 30.4% 31.5% 32.3% 32.1% 31.7% 31.1%
Adj. EBITDA Margin 14.8% 15.6% 17.8% 22.4% 23.3% 23.3% 22.8%
Adj. Net Margin 11.4% 10.9% 14.4% 16.7% 17.0% 17.2% 16.8%
PER 84.3x 42.2x 17.3x 10.6x 7.8x 6.7x 6.3x
FV/EBITDA 57.3x 27.4x 15.6x 9.8x 7.4x 6.6x 6.3x
Adjusted for IPO costs
Source: Gafisa and Bulltick
Tecnisa: TP-YE08 R$20.00, 96.5% upside potential in USD
Tecnisa stocks continue to be among the most discounted within our coverage universe.
Against the market, the company was able to deliver 2007 launchings. This piece of news
came out at the very end of the year and we believe it was overlooked by most of the
market. The fact was also overshadowed by the pessimistic sentiment that has recently
pushed market indices downward.
As to the changes to our model, besides modeling of SFH construction financing, we
incorporated the latest launchings guidance provided by the company. We also raised our
discount rates to reflect the stock’s lower liquidity.
Despite the higher discount rate, we still see the shares trading at a 52% discount to our
Dec 08 target price of R$20.00/share. As described above, investing in Tecnisa is also
attractive if we think in terms of P/ Adjusted Book Value ratio, trading at 1.77x vs. an
average of 2.59x for the companies under our coverage. It is also important to mention
that the company has a substantial amount of receivables which could help to cover the
company’s capital needs. Therefore, we are maintaining our BUY rating for the stocks.
Exhibit 11: Tecnisa’s Main Figures
Tecnisa (R$ MM) 2006 2007E 2008E 2009E 2010E 2011E 2012E
Launchings 369 1,364 1,778 2,235 2,504 2,601 2,705
- Real Estate Sales 333 706 1,387 1,877 2,270 2,476 2,618
Net Revenues 203 364 740 1,430 1,942 2,304 2,518
Adj. EBITDA 47 80 199 418 572 678 753
Adj. Net Income 36 88 146 265 380 491 546
Gross Margin 40.0% 38.6% 39.3% 39.0% 38.5% 38.2% 38.0%
Adj. EBITDA Margin 23.1% 11.0% 26.9% 29.2% 29.4% 29.4% 29.9%
Adj. Net Margin 17.6% 13.2% 19.8% 18.5% 19.6% 21.3% 21.7%
PER 38.6x 15.8x 9.4x 5.2x 3.6x 2.8x 2.5x
FV/EBITDA 32.4x 17.6x 8.6x 5.0x 3.8x 3.4x 3.2x
Adjusted for IPO costs
Source: Tecnisa and Bulltick
Klabin Segall: TP-YE08 R$33.50, 148% upside potential in USD
Among the less liquid names, Klabin Segall is the most discounted stock under our
coverage universe. The company had its ups and downs to manage and deliver expected
launchings growth during 2007 and we believe current prices more than reflect those
issues. Nevertheless, we expect a more smooth string of launchings going forward,
increasing results visibility, which we expect to translate in some share price recovery.
Currently trading at 5.7x PER09E, a 38% discount to the sector average, stocks are
attractive not only on a PER basis. Investors looking for deep value, the shares are also
trading at almost without any premium to adjusted book value multiple, and 43%
discounted to the sector average.
In addition, we expect to see some more of the innovative projects Klabin Segall became
known for executing successfully. For example, during 2008 and 2009 the company plans
to develop an integrated complex of commercial and middle income residential project in
Santo André, besides applying its revitalization experience to launch a 2nd home project in
Buzios, Rio de Janiero state coast. We also look forward to see the initial results on the
“Olá” low income initiative.
Model review focused on increased launchings after Setin’s acquisition, including the
construction financing and fine tunning. Besides, we are also raising our discount rates to
reflect lower liquidity for the shares.
All in all, we reach a Dec. 08 TP of R$33.50/share, implying a 156% in USD and
reiterating our BUY rating for the shares.
Exhibit 12: Klabin Segall’s Main Figures
Klabin Segall (R$ MM) 2006 2007E 2008E 2009E 2010E 2011E 2012E
Launchings 773 1,775 1,812 2,084 2,334 2,567 2,670
- Real Estate Sales 400 875 1,706 1,832 2,199 2,358 2,535
Net Revenues 138 292 705 1,188 1,785 2,032 2,319
Adj. EBITDA 59 62 168 307 482 557 634
Adj. Net income 25 39 71 137 267 331 389
Gross Margin 41.9% 36.1% 36.5% 36.4% 36.2% 36.4% 36.1%
Adj. EBITDA Margin 27.4% 21.4% 23.8% 25.8% 27.0% 27.4% 27.3%
Adj. Net Margin 17.8% 13.5% 10.0% 11.6% 14.9% 16.3% 16.8%
PER 206.0x 19.9x 11.1x 5.7x 2.9x 2.4x 2.0x
FV/EBITDA 14.0x 13.8x 8.1x 5.5x 3.5x 3.1x 2.7x
Adjusted for IPO Costs
Source: Klabin Segall and Bulltick
Company: TP-YE08 R$54.00, 48.2% upside potential in USD
As part of our revision of Company’s valuation model, besides including higher launching
guidance for ’08 and ’09, we analyzed carefully its working capital management, not only
including SFH leverage but also the construction and sales speed curves.
Company trades at a 7.8x PER09E versus Tecnisa’s and Klabin Segall’s respective 5.2x
and 5.7x multiples and the average of 9.2x for homebuilders under our coverage. On a
Price-to-Adj Book Value basis, Company negotiates at 2.85x, slightly above the 2.59x
average for companies under our coverage.
Company shares are currently trading at premium to Tecnisa and Klabin Segall, where we
see more upside on a relative basis. Thus, despite a favorable valuation vis-à-vis the
more liquid names, at this point, we prefer to look for deep value and stick to Tecnisa and
Our DCF TP for Company is R$55.00/share for YE08. After roughly 21% decline in share
prices since early December, we are upgrading Company to BUY from NEUTRAL.
Exhibit 13: Company’s Main Figures
Company (R$ MM) 2006 2007E 2008E 2009E 2010E 2011E 2012E
Launchings 353 1,033 1,500 1,875 2,100 2,184 2,271
- Real Estate Sales 258 695 1,149 1,446 1,839 2,035 2,178
Net Revenues 289 451 742 997 1,442 1,806 2,064
Adj. EBITDA 69 90 166 233 327 398 439
Adj. Net income 56 64 123 157 230 281 311
Gross Margin 34.2% 30.7% 33.3% 34.4% 33.6% 33.0% 32.2%
Adj. EBITDA Margin 20.4% 19.8% 22.4% 23.4% 22.7% 22.0% 21.3%
Adj. Net Margin 15.8% 14.2% 16.6% 15.8% 15.9% 15.6% 15.1%
PER 21.9x 19.0x 9.9x 7.8x 5.3x 4.3x 3.9x
FV/EBITDA 17.8x 15.6x 9.8x 8.2x 6.1x 5.3x 4.9x
Adjusted for IPO costs
Source: Company and Bulltick
Bulltick Brasil Consultoria e Assessoria Empresarial Ltda. is an affiliate of Bulltick LLC (The Firm). Bulltick LLC may do
business with the companies covered in this report, as a result, 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 only as a single
factor in making their investment decision.
A. CONFLICTS OF INTEREST
From the companies covered in this report, Bulltick Brasil Consultoria e Assessoria Empresarial Ltda, or its affiliates,
currently has, or has had within the past 12 months, Tecnisa and MRV as client and/or received compensation for products
and services provided to this company.
From the companies covered in this report, Bulltick Brasil Consultoria e Assessoria Empresarial Ltda, or its affiliates,
managed or co-managed a public offering of securities for Tecnisa and MRV in the past 12 months, received
compensation for investment banking services from Tecnisa and MRV in the past 12 months.
Neither Bulltick Brasil Consultoria e Assessoria Empresarial Ltda nor any of its affiliates own equity securities of any of the
Analyst compensation is determined by Bulltick Brasil Consultoria e Assessoria Empresarial Ltda management and is not
linked to specific transactions or recommendations.
B. ANALYST CERTIFICATION
I, Rafael Pinho, author of this report, hereby certify that all of the views expressed in this report accurately reflect my
personal views about any and all of the subject issuer(s) or securities, no part of my compensation was, is , or will be
directly or indirectly related to the specific recommendation(s) or view(s) in this report. I have not received any
compensation from any of the subject companies in the past 12 months. I also certify that neither I nor any member of
my household serves as a director, officer, or advisory board member of any of the subject companies in this report.
C. INVESTMENT RATING
Investment ratings are determined by the ranges described below:
BUY: Total return of securities expected to be above 18% (in dollar terms) in the following 12 months
NEUTRAL: Total return of securities expected to be below 18% (in dollar terms) and above 8% (in dollar terms) in the
following 12 months.
SELL: Total return of securities expected to be below 8% (in dollar terms) in the following 12 months.
Price Target: The valuation method used to determine the price targets in this report were based on the discounted
cash flow methodology.
D. RISK RATINGS
Risks for the achievement of the target prices defined in this report include major change in our base case macro-
economic scenario, increase in interest rates and in the Brazil risk, reduction in the expectations for demand for real
estate in Brazil and impact on already listed stocks of new IPOs in Brazil´s real estate sector.
Based on last 6 months volatility of subject companies, and comparing them to the volatility of the Bovespa Index
(Ibovespa) in the same period, we define each subject company´s relative volatility in the following way: Company
High, Cyrela High, Gafisa High, Klabin Segall High, Rossi Residencial High and Tecnisa High
Bulltick Brasil Consultoria e Assessoria Empresarial Ltda and its subsidiaries, affiliates, shareholders, directors, officers,
employees, and licensors (“The Bulltick Parties”) will not be liable (individually, jointly, or severally) to you or any other
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