Focus Brazil Research provides independent equity research on small and mid-cap Brazilian companies. It focuses on generating new investment ideas by exploring unconventional sources and under-researched sectors and companies. Key themes include plays on Brazil's emerging middle class through healthcare, education, and financial sector exposure, as well as infrastructure opportunities from privatization efforts and inflation hedges through toll road operators. The firm differentiates itself through its focus on forward-thinking research of undercovered companies and sectors.

1. focus brazil research
INDEPENDENT RESEARCH AND ECONOMIC STRATEGY
Corporate overview

2. Disclaimer
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3. Table of contents
Page
Brazilian research opportunity 4
The investment opportunity 5
Brazil equity market overview 6
Why mid capitalisation stocks? 7
Research idea generation & subsequent analysis 8
Themes we are focusing on 9
Key Personnel & Contacts 10

4. Brazilian research opportunity
• Despite the current uncertainties surrounding the global macroeconomic
backdrop, Brazil is increasingly in the global spotlight, and the
international investment community are finding it harder to ignore for
asset allocation purposes
• Sao Paulo’s BM&F Bovespa index, founded back in 1890, is now one of
the most sophisticated exchanges in the world. In terms of listed
companies, it hosts nearly 400 firms with varied levels of research
coverage. There are >1000 firms with listing objectives, providing a
significant pipeline of upcoming research and investment opportunities
• With an increasing number of firms listed in Brazil, and with the
subsequent international investor attention, the demand for high quality
institutional Brazilian focused equity research will increase going forward
• Focus Brazil Research specialises on researching small and mid cap listed
companies with domestic focused business models where there is
limited existing research, whilst also putting these companies in an
international context for valuation purposes

5. The investment opportunity
• Consecutive annual events are set to place Brazil in the global spotlight over the
coming years, each requiring significant improvements in domestic infrastructure,
providing longer term benefits for the local and national economy
• Long term structural drivers are in place for the domestic economy including rising
income levels and the emerging middle class, lower interest rates, buoyant commodity
markets, and an evolving mortgage sector which is stimulating the real estate market
• Subsequently a number of pockets of thematic investment opportunities exist,
providing investors access to firms exposed to the underlying domestic economy,
backed by established business models with defensive growth characteristics
Copa America Olympic
World Cup Games
(2015) (2016)
(2014)
Confederation Cup
(2013)
Rio +20
(2012)

6. Brazil equity market overview
Brazil is ranked 28th in terms of the number of listed
• There are approximately 400 listed 7000 6408
stocks on its national exchange (2008)
6000
companies in Brazil, with massive 5179
5000
room for future growth 3700 3472
4000
3019 2792
3000 2335
• Low number of listed companies by 1966 1788
2000
international standards: Brazil is the 1000 386
28th largest index by number of listed 0
firms
• Brazil’s index is the most highly Largest 5 companies in each stock market (31/12/2010) - % of
total market capitalisation
concentrated of the BRIC’s, with the 60
Brazil Russia China India US
top 5 companies representing almost
50
50% of the market
40
• Active promotion of new IPO’s and 30
follow on capital raisings:
20
• 24 IPO’s and follow on’s in 2009
• 20 IPO’s and follow on’s in 2010 10
• 11 IPO’s in 2011 0

7. Why mid-capitalisation stocks?
• Ability to exploit structural inefficiencies in the asset class:
• Increasingly large choice of investment opportunities
• Broker coverage is often limited and of poor quality
• Lack of interest from large fund management groups due to lower liquidity
provides opportunities for focused managers
• Ability to exploit the advantages that smaller companies have:
• ‘Pure Plays’ on new and high growth areas of the domestic economy
(healthcare, education, infrastructure, consolidators in fragmented sectors)
• More nimble firms with fewer diseconomies of scale
• Opportunities of niche product markets or local geographical markets
• Less exposed to global macroeconomic shocks than their larger
counterparts
• Management and key employees often have linked interests with external
shareholders through equity ownership

8. Research idea generation
& subsequent analysis
• Idea Generation (how we find our companies)
• Seek ideas from unconventional sources
• Filter a large number of ideas to search for significant valuation anomalies, focusing
on companies with fair value over 30% higher than current share price
• Be alert to change at the company level (internal or external impacts)
• Competence of research – do I really understand this business?
• Subsequent Analysis (what we focus on at the company level)
• Quality of company based on a number of factors, both quantitative and qualitative
• Durable earnings power – look for companies with defensive growth prospects
• High operating margin and low asset intensity, including focus on cash flow
generation
• Strong competitive position
• Structural growth markets or winning market share
• Low level of debt, minimal working capital, conservative accounting policies
• Controlled organic growth with existing track record (avoid ‘jam to-morrow’ cases)
• Accessible, open and honest management with focus on face-to-face management
meetings

9. Themes we are focusing on
• Structural plays on the emerging middle class
• Increased private healthcare plan penetration (medical & dental)
• Credit availability and shift from paper to card based transactions
• Infrastructure development opportunities
• Airports, roads, ports, all seeing long term investment
• Privatisation efforts (most recently airports) allow investors access to
infrastructure plays through listed companies
• Inflation hedges
• Highway concession operators
• Asset backed investments and embedded value plays
• Niche operators with domestic focused business models
• Special situation companies with established business models
• Consolidators operating in highly fragmented sectors

10. Key Personnel & Contacts
Sebastian Davidson:
Sebastian has over 11 years experience in global equity research and fund management. Before founding
Focus Brazil Research, Sebastian was a Fund Manager at North Bridge Capital Partners, a boutique corporate
finance, alternative asset manager, and research advisory firm. Prior to North Bridge Capital Partners,
Sebastian worked as an equity analyst and investment manager at Polar Capital Partners, a London based
global asset manager running long only and long short funds (assets under management for the firm
>US$3bn).
About Focus Brazil Research:
Focus Brazil Research aims to be the leading independent research provider for small to mid capitalisation
companies listed in Brazil. We avoid unnecessary maintenance research and are in a distinct position of
being able to deliver forward-thinking, impartial, and timely equity research to our clients. We think like
Fund Managers and search for the most interesting companies to research across all sectors in our universe.
Contact information:
United Kingdom Brazil
T: + 44 (0) 207 193 5920 T:+55 (11) 7471-0337
T: + 44 (0) 7974 728 590
E: seb@focusbrazilresearch.com

11. www.focusbrazilresearch.com