14 November 2012 Americas/Brazil Equity Research Homebuilding
Brazilian Homebuilders & Real Estate Brokers Research Analysts RESULTS Guilherme Rocha 55 11 3701 6321 [email protected] Smaller Players are the Winners Lia Carlos 55 11 3701 6308 Yesterday, five companies reported their 3Q12 results (Brookfield, Helbor, [email protected] Tecnisa, BR Brokers, and Lopes). Below we summarize our key conclusions Vanessa Quiroga, CFA and on the following pages provide more details on each company’s results. 52 55 5283 8939 [email protected] ■ Focus on cash generation: As we mentioned in our previous report, Eugenio Amador companies are holding off on launchings and focusing on selling inventory in 52 55 5283 8900 order to generate cash. Some companies are already succeeding, such as [email protected] Cyrela, Even, and Gafisa. Direcional almost broke even this quarter, as we Julian Bravo Lozano 52 55 5283 3821 expected. Nonetheless, other companies disappointed regarding cash [email protected] generation such as Tecnisa, Brookfield, and Helbor (despite good results overall). ■ Few exceptions: There were some exceptions, such as Helbor and Direcional, that continue their great performance. Other companies surprised positively, such as Even (with a better-than-expected gross margin) and Eztec (with the highest margin among peers). ■ Brokerage companies impacted: As expected, brokerage companies were affected by a lower level of launchings at HBs. Although Lopes’s results came in below our expectation, it was better in comparison to BBRK, probably due to greater client diversification.
Exhibit 1: 3Q12 Results vs. Estimates R$ million, unless otherwise stated Company Ticker CS View EPS 3Q12A CSe Consensus vs. Cse vs. IBES Homebuilders Helbor HBOR3 Positive 0.42 0.35 0.34 19.6% 22.9% Tecnisa TCSA3 Negative -0.30 0.14 0.25 -311.5% -221.4% Brookfield BISA3 Negative 0.07 0.08 0.11 -9.8% -37.5% Already Reported EZ Tec EZTC3 Positive 0.64 0.57 0.60 11.4% 7.4% Cyrela CYRE3 Neutral 0.36 0.43 0.43 -18.2% -17.1% Even EVEN3 Positive 0.28 0.27 0.27 4.8% 3.0% Gafisa GFSA3 Neutral 0.01 0.06 0.06 -79.9% -80.0% Direcional DIRR3 Neutral 0.36 0.36 0.36 -0.7% -1.3% MRV MRVE3 Neutral 0.31 0.29 0.32 9.0% -1.2% Brokers Brasil Brokers BBRK3 Neutral 0.09 0.09 0.11 4.8% -12.5% Lopes LPSB3 Neutral 0.29 0.35 0.46 -15.4% -36.8% Source: Company data, Credit Suisse estimates
DISCLOSURE APPENDIX CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, INFORMATION ON TRADE ALERTS, ANALYST MODEL PORTFOLIOS AND THE STATUS OF NON-U.S ANALYSTS. FOR OTHER IMPORTANT DISCLOSURES, visit www.credit-suisse.com/ researchdisclosures or call +1 (877) 291-2683. U.S. Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. 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 as only a single factor in making their investment decision. CREDIT SUISSE SECURITIES RESEARCH & ANALYTICS BEYOND INFORMATION™ Client-Driven Solutions, Insights, and Access
Exhibit 2: ROE LTM *Based on our estimate for PDG in 3Q12
Helbor 28%
EZTEC 23%
MRV 17%
Direcional 16%
Even 13%
Cyrela 12%
PDG -5%
Tecnisa -7%
Brookfield -10%
Gafisa -39%
Source: Companies data, Credit Suisse estimates
Exhibit 3: Net Margin in 3Q12 *Based on our estimate for PDG in 3Q12
EZTEC 44%
Helbor 21%
Direcional 15%
MRV 13%
Even 12%
Cyrela 11%
Brookfield 3%
Rossi 3%
Gafisa 0%
PDG -8%
Tecnisa -15%
Source: Companies data, Credit Suisse estimates
Exhibit 4: Net Debt-to-Equity Ratio in 3Q12 *Based on our estimate for PDG in 3Q12. **Pro forma: including announced capital injection.
122% 121% 107% 106% 92% 74% 64% 59% 57% 56% 52%
26%
-1% PDG MRV Even Gafisa Cyrela Helbor EZTEC Tecnisa Brookfield Direcional PDG pro-forma Rossi pro-forma Brookfield pro-forma
Source: Company data, Credit Suisse estimates
Exhibit 5: P/BV Ratio in 3Q12 *Based on our estimate for PDG in 3Q12
2.4x 2.2x
1.5x 1.4x 1.4x
1.1x 1.1x
0.7x 0.7x 0.6x 0.6x PDG MRV Even Rossi Cyrela Gafisa Helbor EZTEC Tecnisa Direcional Brookfield
Source: Company data, Credit Suisse estimates
Brookfield (BISA3) Revenue came in in line with our estimate, but bottom line was almost 10% below our estimate on the back of a worse net financial result. At first glance, revenue declined 23% yoy, but in 3Q11 there was an impact of R$130mn from the sale of Giroflex. The company surprised us with a better gross margin: 420bps above our estimate (although it represented a compression of 280 yoy). Selling expenses came in 19.2% below our estimate and declined vs. 2Q12 due to a change in accounting procedures. As mentioned in our previous report, the company surprised us with (i) a qoq improvement in launchings and contracted sales and (ii) healthy speed of sales (SoS) of 20.2%. Even though we think that Brookfield is at risk of not reaching its guidance for launchings, the company believes it is still possible to meet the low point as they expect a huge volume of launchings to take place in 4Q12 (especially due to three large projects). It is worth highlighting that the guidance (revised after 2Q12) is R$3bn–R$3.5bn and the company had reached only 41.6% of the mid-point by 9M12. Finally, on the negative side, cash burn was 213% higher than our estimate, even higher than in 2Q12, driven especially by a R$215mn increase in construction financing (corporate debt remained practically flat). The company has a net debt-to-equity ratio of 121.4% and expects to use the proceeds from the R$400mn capital injection to reach 92.4%. The new level will still be on the high side vs. peers. Even though we see improvements, we are still concerned with the high leverage and the difficulty in generating cash.
Exhibit 6: Brookfield financial results
R$ million, unless otherwise stated 3Q12A 3Q12E 2Q12A 3Q11A Q/Q Y/Y A/E Revenue was slightly above Net sales 921 901 669 1,198 37.6% -23.1% 2.2% COGS (666) (690) (763) (832) -12.7% -20.0% -3.4% our estimate. Gross Profit 255 212 (94) 365 -372.4% -30.2% 20.5% Gross margin was 420bps Gross margin 27.7% 23.5% -14.0% 30.5% 41.7 p.p. -2.8 p.p. 4.2 p.p. Operating expenses (98) (96) (118) (114) -16.3% -13.8% 2.2% above CSe but was 280bps Selling expenses (38) (47) (44) (55) -14.5% -31.3% -19.4% below 3Q11. Administrative expenses (43) (45) (37) (43) 15.1% -0.4% -5.2% Operational profit 95 71 (314) 189 -130.3% -49.8% 34.3% Net financial result (37) (8) (41) (44) -9.7% -17.1% 346.0% EBT 58 63 (355) 145 -116.4% -59.8% -6.9% Income tax (27) (28) (29) (37) -5.8% -27.2% -3.3% Minority interest - - - - n.a. n.a. n.a. Net income was 9.8% below Net income 31 35 (383) 108 -108.1% -71.0% -9.8% CSe, a decline of 71% yoy. Net Margin 3.4% 3.8% -57.3% 9.0% 60.7 p.p. -5.6 p.p. -0.5 p.p. EPS 0.07 0.08 (0.86) 0.23 -108.1% -70.1% -9.8% Ebitda margin declined D&A 4.7 4.7 4.7 0.7 0.1% 535.1% 0.0% 250bps yoy but was 420bps Adj. Ebitda 161 120 (207) 252 -178.1% -36.0% 34.3% above our estimate. EBITDA Margin 17.5% 13.3% -30.9% 21.0% 48.4 p.p. -3.5 p.p. 4.2 p.p. Cash Burn 325 104 311 36 4.7% 815.9% 213.4% Cash burn was 213% higher Source: Company data, Credit Suisse estimates than our expectation.
Helbor (HBOR3) In a nutshell, results were above our expectation. Top line was 9% above CSe, implying strong growth of 33.5% yoy. Gross margin also improved 250bps yoy and was 250 bps above CSe. SG&A and other expenses were above our estimate but increased less than revenue. Backlog margin was 36.5%, 180bps below 3Q11 and 80bps below 2Q12. On the negative side, cash burn came in higher than our expectation (that the company would be close to break-even this quarter). This cash burn was due to the payment of a debenture installment, the purchase of land, and the purchase of Certificate of Additional Construction Potential (CEPACs), as well as a lower volume of units delivered in 2Q12, which created a decline in pass-throughs in 3Q12 (lag of 60 to 90 days). Net financial result was better than our expectation due to an increase in financial revenue on the back of a monetary gain on construction contracts adjusted by the INCC index. Interest expenses also increased, but not enough to offset the increase in financial revenue. Net margin improved substantially (440bps yoy) and was 180bps above our expectation. Net income increased by almost 70% yoy and was ~20 above our expectation (driven by margin improvements).
Exhibit 7: Helbor Financial Results
R$ million, unless otherwise stated 3Q12A 3Q12E 2Q12A 3Q11A Q/Q Y/Y A/E Net revenue came in 9% Net sales 391.7 359.4 363.2 293.3 7.8% 33.5% 9.0% above our expectation. COGS (235.9) (225.4) (229.3) (183.9) 2.9% 28.3% 4.7% Gross Profit 155.8 134.0 134.0 109.4 16.3% 42.3% 16.2% Gross margin was 250bps Gross margin 39.8% 37.3% 36.9% 37.3% 2.9 p.p. 2.5 p.p. 2.5 p.p. Operating expenses (39.1) (29.4) (34.6) (33.0) 13.0% 18.2% 32.8% higher than 3Q11 and Selling expenses (21.8) (15.4) (20.2) (20.3) 7.8% 7.3% 41.2% 250bps above our estimate. Administrative expenses (17.0) (12.6) (14.0) (12.5) 21.1% 35.5% 35.1% Operational profit 95.8 85.9 78.9 54.6 21.3% 75.5% 11.5% Net income was 19.6% Net financial result 9.0 2.6 10.0 9.5 -9.9% -4.8% 247.0% above CSe. EBT 104.8 88.5 88.9 64.0 17.8% 63.6% 18.4% Income tax (14.1) (15.8) (14.7) (11.3) -4.1% 24.3% -10.9% Net margin improved Minority interest (9.1) (4.4) (3.6) (4.6) 153.2% 98.4% n.a. 440bps yoy and was 180bps Net income 81.6 68.3 70.7 48.1 15.5% 69.6% 19.6% above our estimate. Net Margin 20.8% 19.0% 19.5% 16.4% 1.4 p.p. 4.4 p.p. 1.8 p.p. EPS 0.42 0.35 0.36 0.74 15.5% -43.5% 19.6% Cash burn was higher than D&A 1.4 1.4 1.4 1.3 -0.8% 5.8% 0.0% CSe, but ~12% lower qoq Adj. Ebitda 118.1 106.0 100.8 77.7 17.1% 51.9% 11.4% and ~22% lower yoy. EBITDA Margin 30.2% 29.5% 27.8% 26.5% 2.4 p.p. 3.7 p.p. 0.7 p.p. Cash Burn 62.5 8.0 70.8 79.6 -11.8% -21.5% 679.8% Source: Company data, Credit Suisse estimates
Tecnisa (TCSA3) Results were very disappointing as the company posted a net loss of R$56mn in the 3Q12. Top line came in 7.5% below our estimate, negatively impacted by a non-recurring and non-cash R$25.1mn adjustment. The adjustment is related to the adoption of a new trade accounts receivable system. If we disregard this adjustment, net sales would have been R$402mn, in line with our estimate. The bottom line was negatively impact by two non-recurring expenses: (i) a R$25.2mn provision for indemnity payments to clients due to delayed construction, and (ii) a R$ 24.5mn provision for probable losses due to loans granted to partners. Nevertheless, even when adjusting for those non-recurring items, income would be still ~30% below our estimate. The company’s results were also impacted by a worse net financial result: (i) there was an increase in financial expenses due to reallocation of interest related to one particular project that it was previously recorded as cost of properties sold before it was delivered, (ii) decline in financial revenue due to the review of accounts receivables that caused a reduction in monetary gains and interest. Even more troublesome is the cash burn of around R$150mn, while we were expecting the company to be close to break-even this quarter. Backlog margin also declined to 35% (vs. 39.3% in 3Q11 and 36.4% in 2Q12). Investors will probably not receive this set of results well. Additionally, as previously reported, the company had shown a year-on-year decline in both launchings and contracted sales (55% and 40%, respectively) in 9M12. The launchings guidance is clearly at risk as the likelihood of the Telefonica Project being launched this year is very low.
Exhibit 8: Tecnisa Financial Results
R$ million, unless otherwise stated 3Q12A 3Q12E 2Q12A 3Q11A Q/Q Y/Y A/E Net revenue lower than our Net sales 377 408 374 397 0.9% -4.9% -7.5% COGS (281) (281) (272) (255) 3.6% 10.2% 0.0% expectation was impacted Gross Profit 96 127 102 141 -6.1% -32.0% -24.2% by a non-recurring Gross margin 25.5% 31.1% 27.4% 35.7% -1.9 p.p. -10.2 p.p. -5.6 p.p. adjustment. Operating expenses (110) (64) (69) (54) 58.4% 102.5% 72.5% Selling expenses (21.2) (22.4) (18.4) (17.1) 15.2% 24.0% -5.2% If we adjust gross margin, Administrative expenses (31.5) (35.4) (33.4) (27.8) -5.6% 13.1% -11.0% the margin would have been Operational profit (51) 31 (5) 57 906.6% -188.3% -263.5% Net financial result 3.4 11.3 20.7 7.5 -83.5% -54.4% -69.7% 30%, still showing a EBT (47) 42 16 65 -402.2% -172.8% -211.9% compression of 570bps. Income tax (10.1) (12.6) (11.9) (12.2) -14.6% -17.2% -19.9% Minority interest 1.0 (3.0) (1.2) (4.0) -182.1% -125.2% -134.3% If we take out the non- Net income (56) 27 3 49 -2294.1% -215.9% -311.5% recurring items, the net Net Margin -15.0% 6.5% 0.7% 12.3% -15.7 p.p. -27.2 p.p. -21.5 p.p. margin would have been EPS (0.30) 0.14 0.01 0.26 -2290.0% -215.4% -311.5% ~4.7%, below both our D&A 5.7 5.7 4.9 4.5 17.7% 25.6% 0.0% Adj. Ebitda (8) 69 38 92 -120.3% -108.4% -111.2% estimate and 3Q11 results. EBITDA Margin -2.1% 16.9% 10.2% 23.2% -12.2 p.p. -25.2 p.p. -19.0 p.p. Cash burn remained at the Cash Burn 150 4 156 92 -4.0% 62.3% 4097.2% same level of the previous Source: Company data, Credit Suisse estimates quarter and very high compared to our expectation.
BR Brokers (BBRK3) Top line came in in line with our expectation (only 2.5% lower). Net income surprised us positively: 4.8% above our estimate, on the back of lower income tax in the period. On the negative side, both launchings and contracted sales showed a strong yoy decline of 27.2% and 15.6% respectively. Although we were anticipating lower figures on the back of a tough year for homebuilders, the launchings figure was 11.6% below our estimate. Contracted sales came in line. Although the secondary market grew 14.2% yoy, we were expecting an even higher figure. We were already incorporating into our numbers a compression in ebitda margin. Nevertheless, the actual margin reported was even lower: 350bps below our estimate, implying a strong compression of 940bps yoy. Net income was 4.8% above our estimate due to lower income tax. On a yoy basis, it declined almost 46%, and the net margin compressed by 1090bps. In summary, even though net income came slightly above CSe, we remain cautious on the name due to the ebitda margin compression and the low level of launchings.
Exhibit 9: Brasil Brokers Financial Results
R$ million, unless otherwise stated 3Q12A 3Q12E 2Q12A 3Q11A Q/Q Y/Y A/E Revenue came slightly Net comission revenues 95.0 97.5 97.6 111.5 -2.6% -14.8% -2.5% below our expectation, Cash Opex (65.9) (64.2) (65.3) (66.9) 1.0% -1.4% 2.6% Comission EBITDA 29.1 33.3 32.3 44.7 -9.9% -34.8% -12.4% showing a 14.8% decline Comission EBITDA margin 30.6% 34.1% 33.1% 40.0% -2.5 p.p. -9.4 p.p. -3.5 p.p. yoy. D&A (3.9) (3.8) (3.7) (3.1) 4.3% 24.3% 0.7% Other expenses 0.6 - (0.4) (0.8) -250.6% -170.2% n.a. Operational profit 25.9 29.4 28.2 40.7 -8.4% -36.5% -12.1% Improvement in net margin, Net financial result 5.4 4.8 6.1 8.0 -10.2% -31.9% 13.4% EBT 31.3 34.2 34.3 48.7 -8.7% -35.7% -8.5% 130bps above our number Income tax (9.5) (12.9) (10.2) (13.1) -6.2% -27.0% -26.1% but still showing a yoy Minority interest (3.5) (3.9) (3.1) (2.1) 12.2% 65.2% -9.9% decline of 1090bps. Net income 18.2 17.4 21.0 33.5 -13.1% -45.6% 4.8% Net Margin 19.2% 17.8% 21.5% 30.0% -2.3 p.p. -10.9 p.p. 1.3 p.p. EPS 0.09 0.09 0.11 0.17 -13.1% -45.6% 4.8% Launchings were ~12% below our estimate, showing 3Q12A 3Q12E 2Q12A 3Q11A Q/Q Y/Y A/E a strong yoy decline. PSV launched 7,527 8,518 8,448 10,345 -10.9% -27.2% -11.6% Contracted sales 4,382 4,445 4,560 5,191 -3.9% -15.6% -1.4% Contracted sales for primary Primary 3,487 3,501 3,695 4,407 -5.6% -20.9% -0.4% market were in line but Secondary 895 944 865 784 3.4% 14.2% -5.2% secondary market numbers Source: Company data, Credit Suisse estimates were ~5% below our estimate.
Lopes (LPSB3) In a nutshell, results came in below our expectation due to a lower commission ebitda margin, driving EPS below market consensus and CSe. On the positive side, the company had strong yoy growth in both launchings and contracted sales (12.9% and 16.1%, respectively). Net revenue also increased by 24.8% yoy. The operational numbers (launchings and contracted sales) showed a yoy improvement: growth of 12.9% and 16.1%, respectively. As expected, the strongest growth was in the secondary market (albeit 4.4% below our estimate). SoS in 3Q12 was 20.9%, lower than the 22.8% in 2Q12. Regarding CrediPronto, the loans granted totaled R$362mn, practically flat yoy and 19% below our estimate. The company mentioned in the conference call the possibility of receiving the second earn-out installment from Itaú in 2Q13. The company showed that there is a trend towards client diversification as the 10 largest homebuilders represented 43% of sales in 3Q12 vs. 46% in 2Q12 and 51% in 2010. Lopes also showed that the secondary market increased its importance as it represented 24% of sales in 3Q12 vs. 22% in 3Q11. Looking at the primary market, non-listed homebuilders increased their share of contracted sales from 45% in 3Q11 to 52% in 3Q12. Thus, listed players decreased their share from 32% of total sales to 24% in 3Q12 and from 35% to 28% in 9M12. Net income declined ~44% yoy as commission Ebitda margin was 1040bps below 3Q11. However, we need to take into consideration that the numbers in 3Q11 cannot be compared directly since the company adopted the IFRS later. If we exclude the effect of IFRS adoption, net income actually increased 26% yoy. There was also a negative impact on cash expenses related to seven acquisitions by the company.
Exhibit 10: Lopes Financial Results
R$ million, unless otherwise stated 3Q12A 3Q12E 2Q12A 3Q11A Q/Q Y/Y A/E Top line came in 4% above Net comission revenues 107.9 103.8 105.6 86.5 2.2% 24.8% 4.0% our estimate, implying ~25% Cash Opex (70.2) (64.3) (66.7) (65.2) 5.2% 7.6% 9.2% Comission EBITDA 37.8 39.5 38.9 21.3 -2.9% 77.4% -4.4% yoy growth. Comission EBITDA margin 35.0% 38.1% 36.8% 24.6% -1.8 p.p. 10.4 p.p. -3.1 p.p. JV gains 3.6 4.1 3.6 3.6 0.0% 0.0% -12.5% Margin improved yoy but D&A (14.8) (11.1) (13.8) (12.0) 8.0% 23.3% 33.6% declined qoq and was Other expenses 0.8 - (0.2) 4.6 -447.5% -83.4% n.a. 310bps below our estimate. Operational profit 27.3 32.5 28.5 17.4 -4.3% 56.6% -16.1% Net financial result (0.7) 1.2 27.3 23.0 -102.7% -103.2% -160.1% EBT 26.6 33.8 55.8 40.4 -52.4% -34.2% -21.3% Income tax (6.9) (11.0) (13.9) (6.7) -50.2% 3.1% -36.8% Net income was 14.8% Minority interest (2.9) (3.2) (3.5) (4.0) -14.8% -25.7% -7.9% below our estimate and net Net income 16.7 19.6 38.4 29.7 -56.6% -43.8% -14.8% margin was 340bps lower. Net Margin 15.5% 18.9% 36.4% 34.4% -20.9 p.p. -18.9 p.p. -3.4 p.p. EPS 0.29 0.35 0.61 0.46 -52.0% -36.1% -14.8% Both launchings and 3Q12A 3Q12E 2Q12A 3Q11A Q/Q Y/Y A/E contracted sales came in in PSV launched 7,809 7,835 5,601 6,918 39.4% 12.9% -0.3% line with our numbers and Contracted sales 4,974 5,013 4,902 4,286 1.5% 16.1% -0.8% represented yoy growth of Primary 3,793 3,777 3,666 3,326 3.5% 14.0% 0.4% ~13% and 16%, Secondary 1,181 1,236 1,236 960 -4.4% 23.0% -4.4% respectively. Source: Company data, Credit Suisse estimates
14 November 2012
Exhibit 11: Brookfield Corporate Template R$ million, unless otherwise stated BASICS COMPANY DESCRIPTION Sector Real Estate Ticker BISA3 Brookfield is a Brazilian real estate company, focused on the construction and development of Price (R$) 3.4 residential and business units. It is controlled by Brookfield AM, with more than US$76bn invested Target (R$) 5.0Target (US$) 2.3 in real estate around the world. Recommendation NEUTRAL Mkt. cap. (R$ mn) 1,964 POSITIVES Free float (R$ mn) 774 One of the main developers of triple-A commercial projects Intelligence in the middle income segments SHAREHOLDING STRUCTURE ON % Leading market share in SP state and Mid West region; 4th largest share in RJ. Brookfield Brasil Ltda 186,927 40.6% Other shareholders under Shareholders Agreement 38,609 8.4% Treasury 7,731 1.7% NEGATIVES Free Float 226,917 49.3% Possible slowdown in demand Reduced credit availability / increase in financing costs TOTAL 460,184 100%
NET DEBT (R$mn) & NET DEBT / EQUITY LAUNCHINGS (R$ bn) PRE SALES (R$bn)
4.0 3.9 3.4 3.0 3.1 3.1 3.3 81% 83% 87% 2.9 71%
2011A 2012E 2013E 2014E
Net debt Net debt / Equity 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E
FINANCIAL METRICS (R$ m 2009A 2010A 2011A 2012E 2013E 2014E OP. METRICS 2009A 2010A 2011A 2012E 2013E 2014E Net revenues 1,754 2,576 3,604 3,244 3,691 3,615 Launches (PSV) 2,672 2,981 3,930 2,874 3,147 3,289 Gross Profit 589 869 1,057 592 1,006 1,032 PSV growth n.a. 11.6% 31.8% -26.9% 9.5% 4.5% Gross Margin 33.6% 33.7% 29.3% 18.3% 27.3% 28.5% Pre-sales 2,260 3,017 4,016 3,405 3,012 3,147 EBIT 308 472 647 128 607 628 Pre-sales growth n.a. 33.5% 33.1% -15.2% -11.6% 4.5% EBIT margin 18% 18% 18% 4% 16% 17% Change in WK (591) (895) (1,229) (138) (488) 102 EBITDA 326 500 666 146 626 646 Backlog margin 38.9% 40.7% 37.7% 35.7% 39.0% 40.4% EBITDA margin 19% 19% 18% 5% 17% 18% Results to be recognized 746 1,070 1,351 1,381 1,335 1,272 Adj. EBITDA 326 500 666 146 626 646 Net financial expenses (73) (103) (208) (309) (226) (205) LEVERAGE 2009A 2010A 2011A 2012E 2013E 2014E Taxes (33) (87) (113) (104) (114) (111) Net debt / Equity 29% 56% 81% 83% 87% 71% Net income 202 351 327 (285) 268 312 Net debt / Ebitda 2.1x 3.0x 3.7x 17.7x 4.6x 3.9x Net margin 12% 14% 9% -9% 7% 9% Capex / Operat.Cash Flow n.m. n.m. n.m. n.m. n.m. n.m. # shares ('000) 434 434 445 576 576 576 EPS (R$) 0.5 0.6 0.7 (0.6) 0.5 0.5 NOPAT 275 384 535 24 494 516 Depreciation 17 29 18 18 19 19 RETURN / YIELD 2009A 2010A 2011A 2012E 2013E 2014E Capex 22 40 39 16 19 19 ROIC 5.9% 9.4% 10.3% 9.9% 3.6% 7.5% FCFE (486) 356 164 131 (74) 423 WACC n.a. n.a. n.a. n.a. n.a. n.a. Dividends/ IOE 48 86 82 0 67 78 Cost of Equity (ke) 14.0% 14.0% 14.0% 14.0% 14.0% 14.0% Total assets 5,551 7,436 8,740 10,034 10,462 10,798 ROE 6.8% 10.3% 13.4% 11.1% -10.0% 8.9% Cash 486 814 959 1,397 1,256 1,601 FCF Yield n.m. 18.1% 8.4% 6.7% -3.7% 21.5% Inventory 2,679 2,433 2,924 3,241 3,385 3,513 Div. Yield n.m. 4.4% 4.2% 0.0% 3.4% 4.0% Minority Interest 0 0 0 0 0 0 Net debt 695 1,521 2,458 2,585 2,872 2,537 VALUATION 2009A 2010A 2011A 2012E 2013E 2014E Book value 2,417 2,702 3,018 3,118 3,319 3,552 EV / EBITDA 7.0x 6.6x 31.1x 7.7x 7.0x Market cap. 1,964 1,964 1,964 1,964 1,964 1,964 EV / IC 0.8x 0.8x 0.8x 0.8x 0.7x EV 2,659 3,484 4,422 4,549 4,836 4,501 P/E 5.3x 4.7x -5.7x 7.3x 6.3x Invested capital 3,112 4,222 5,476 5,703 6,191 6,089 P/B 0.7x 0.7x 0.6x 0.6x 0.6x PP&E 41 52 73 70 70 70 Launchings/Mkt Cap 1.5x 2.0x 1.5x 1.6x 1.7x Source: Company data, Credit Suisse estimates
Brazilian Homebuilders & Real Estate Brokers 9 14 November 2012
Exhibit 12: Helbor Corporate Template R$ million, unless otherwise stated BASICS COMPANY DESCRIPTION Sector Real Estate Ticker HBOR3 Helbor is one of the principal real estate developers in Brazil, present in 31 cities in 10 different Price (R$) 12.1 states. Helbor accumulated significant experience in the residential development and also develops Target (R$) 11.5 Target (US$) 6.2 commercial real estate projects. Recommendation OUTPERFORM Mkt. cap. (R$ mn) 2,353 POSITIVES Free float (R$ mn) 59 Pure developer. Outsourcing 100% of real estate activies and concentrating in developing projects Lean G&A structure granting margins above peers' level SHAREHOLDING STRUCTURE ON % Geographically diversified with exposure to richest cities of Brazil. Controlling Group 34,638 53.2% Above-average profitability Dynamo 5,807 8.9% CS Hedging Griffo 4,856 7.5% NEGATIVES Free Float 19,796 30.4% Executtion risks on relying growth on third-parties Possible slowdown in demand TOTAL 65,097 100% Reduced credit availability / increase in financing costs
NET DEBT (R$mn) & NET DEBT / EQUITY LAUNCHINGS (R$ bn) PRE SALES (R$bn) 2.0 1.9 676 1.7 1.7 597 547 685 1.7 1.5 1.5 1.3
65% 67% 59% 44%
2011A 2012E 2013E 2014E
Net debt Net debt / Equity 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E
FINANCIAL METRICS (R$ m 2009A 2010A 2011A 2012E 2013E 2014E OP. METRICS 2009A 2010A 2011A 2012E 2013E 2014E Net revenues 655 987 1,179 1,389 1,531 1,572 Launches (PSV) 891 1,140 1,548 1,715 1,893 1,978 Gross Profit 215 355 427 526 553 570 PSV growth n.a. 27.9% 35.8% 10.8% 10.3% 4.5% Gross Margin 32.7% 36.0% 36.2% 37.9% 36.1% 36.3% Pre-sales 1,056 1,411 1,331 1,500 1,722 1,728 EBIT 141 254 310 363 385 400 Pre-sales growth n.a. 33.6% -5.6% 12.6% 14.8% 0.3% EBIT margin 21% 26% 26% 26% 25% 25% Change in WK (217) (315) (471) (220) (176) (86) EBITDA 156 268 315 369 391 406 Backlog margin 34.5% 39.7% 41.1% 40.6% 40.6% 40.1% EBITDA margin 24% 27% 27% 27% 26% 26% Results to be recognized 381 647 802 817 850 856 Adj. EBITDA 156 268 315 369 391 406 Net financial expenses (16) (10) (33) (50) (36) (33) LEVERAGE 2009A 2010A 2011A 2012E 2013E 2014E Taxes (21) (36) (43) (60) (58) (64) Net debt / Equity 68% 38% 65% 67% 59% 44% Net income 79 182 213 233 271 282 Net debt / Ebitda 1.8x 1.0x 1.7x 1.8x 1.8x 1.5x Net margin 12% 18% 18% 17% 18% 18% Capex / Operat.Cash Flow n.m. n.m. n.m. n.m. n.m. n.m. # shares ('000) 53 65 65 195 195 195 EPS (R$) 1.8 3.0 3.3 1.2 1.4 1.4 NOPAT 120 218 267 302 327 336 Depreciation 15 14 5 6 6 6 RETURN / YIELD 2009A 2010A 2011A 2012E 2013E 2014E Capex 21 11 16 6 7 6 ROIC 14.3% 18.6% 25.0% 21.3% 18.3% 16.8% FCFE (10) 65 (80) 128 173 251 WACC n.a. n.a. n.a. n.a. n.a. n.a. Dividends/ IOE 22 65 71 82 108 113 Cost of Equity (ke) 13.0% 13.0% 13.0% 13.0% 13.0% 13.0% Total assets 1,163 2,099 2,630 3,002 3,320 3,614 ROE 13.2% 19.6% 28.1% 26.2% 24.1% 21.3% Cash 94 305 211 195 264 408 FCF Yield n.m. 2.8% -3.4% 5.4% 7.3% 10.7% Inventory 390 734 952 1,179 1,283 1,409 Div. Yield n.m. 2.8% 3.0% 3.5% 4.6% 4.8% Minority Interest 92763666666 Net debt 285 267 547 676 685 597 VALUATION 2009A 2010A 2011A 2012E 2013E 2014E Book value 421 701 846 1,003 1,170 1,345 EV / EBITDA 9.8x 9.2x 8.2x 7.8x 7.3x Market cap. 2,353 2,353 2,353 2,353 2,353 2,353 EV / IC 2.6x 2.0x 1.7x 1.6x 1.5x EV 2,639 2,620 2,900 3,030 3,039 2,950 P/E 4.0x 3.6x 10.0x 8.7x 8.4x Invested capital 715 995 1,456 1,745 1,922 2,008 P/B 3.4x 2.8x 2.3x 2.0x 1.8x PP&E 16 13 22 22 23 23 Launchings/Mkt Cap 0.5x 0.7x 0.7x 0.8x 0.8x Source: Company data, Credit Suisse estimates
Brazilian Homebuilders & Real Estate Brokers 10 14 November 2012
Exhibit 13: Tecnisa Corporate Template R$ million, unless otherwise stated BASICS COMPANY DESCRIPTION Sector Real Estate TCSA3 Tecnisa is a Brazilian real estate developer and builder. Focused on the middle and middle-high Price (R$) 8.1 residential development segment, mainly in the São Paulo metropolitan area. The company has Target (R$) 11.0Target (US$) 6.0 over 30 years of experience. Recommendation NEUTRAL Mkt. cap. (R$ mn) 1,503 POSITIVES Free float (R$ mn) 775 Over 30 years of experience in the sector Integrated business model including sales force SHAREHOLDING STRUCTURE ON % Widely known by its construction quality Controlling Group 89,483 48.3% Board Members 185 0.1% NEGATIVES Treasury - 0.0% Possible slowdown in demand Free Float 95,597 51.6% Reduced exposure to low-income segment
TOTAL 185,265 100%
NET DEBT (R$mn) & NET DEBT / EQUITY LAUNCHINGS (R$ bn) PRE SALES (R$bn)
101% 89% 73% 79% 2.2 2.2 2.3 2.2 2.0 2.1 2.1 1.8 1,806 1,601 1,418 1,098
2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E Net debt Net debt / Equity
FINANCIAL METRICS (R$ m 2009A 2010A 2011A 2012E 2013E 2014E OP. METRICS 2009A 2010A 2011A 2012E 2013E 2014E Net revenues 711 1,364 1,547 1,655 2,099 2,129 Launches (PSV) 352 2,045 2,116 2,056 2,156 2,253 Gross Profit 276 506 528 557 755 799 PSV growth n.a. 480.7% 3.5% -2.9% 4.9% 4.5% Gross Margin 38.8% 37.1% 34.1% 33.6% 35.9% 37.5% Pre-sales 905 1,512 1,831 1,980 2,173 2,220 EBIT 150 334 290 286 468 507 Pre-sales growth n.a. 67.0% 21.1% 8.2% 9.7% 2.2% EBIT margin 21% 24% 19% 17% 22% 24% Change in WK (388) (794) (460) (372) (562) (21) EBITDA 165 347 307 306 489 528 Backlog margin 44.5% 42.0% 40.0% 42.0% 43.3% 42.7% EBITDA margin 23% 25% 20% 18% 23% 25% Results to be recognized 520 628 774 950 990 992 Adj. EBITDA 165 347 307 306 489 528 Net financial expenses (4) (63) (77) (105) (110) (112) LEVERAGE 2009A 2010A 2011A 2012E 2013E 2014E Taxes (22) (43) (48) (52) (65) (66) Net debt / Equity 58% 102% 73% 89% 101% 79% Net income 111 200 144 111 264 297 Net debt / Ebitda 3.1x 3.0x 3.6x 4.6x 3.7x 3.0x Net margin 16% 15% 9% 7% 13% 14% Capex / Operat.Cash Flow n.m. n.m. n.m. n.m. n.m. n.m. # shares ('000) 145 145 185 185 185 185 EPS (R$) 0.7 1.4 0.8 0.6 1.4 1.6 NOPAT 128 291 241 234 403 442 Depreciation 15 13 17 19 20 21 RETURN / YIELD 2009A 2010A 2011A 2012E 2013E 2014E Capex 8 20 21 24 22 23 ROIC 6.3% 9.9% 15.0% 9.0% 6.9% 11.3% FCFE 330 (164) (143) (56) (109) 282 WACC n.a. n.a. n.a. n.a. n.a. n.a. Dividends/ IOE 26 48 34 28 66 74 Cost of Equity (ke) 13.8% 13.8% 13.8% 13.8% 13.8% 13.8% Total assets 2,248 3,135 3,944 4,458 4,846 5,093 ROE 10.5% 12.9% 20.3% 9.4% 7.2% 15.1% Cash 420 290 426 342 146 359 FCF Yield n.m. -10.9% -9.5% -3.7% -7.2% 18.7% Inventory 712 1,048 1,226 1,379 1,343 1,359 Div. Yield n.m. 3.2% 2.3% 1.8% 4.4% 4.9% Minority Interest 103 158 127 132 132 132 Net debt 512 1,054 1,098 1,418 1,806 1,601 VALUATION 2009A 2010A 2011A 2012E 2013E 2014E Book value 880 1,038 1,505 1,590 1,794 2,022 EV / EBITDA 7.4x 8.5x 9.6x 6.8x 5.9x Market cap. 1,503 1,503 1,503 1,503 1,503 1,503 EV / IC 1.1x 1.0x 0.9x 0.9x 0.8x EV 2,014 2,557 2,600 2,920 3,309 3,104 P/E 5.9x 10.4x 13.6x 5.7x 5.1x Invested capital 1,495 2,250 2,730 3,140 3,732 3,755 P/B 1.4x 1.0x 1.0x 0.9x 0.8x PP&E 29 36 40 44 46 48 Launchings/Mkt Cap 1.4x 1.4x 1.4x 1.4x 1.5x Source: Company data, Credit Suisse estimates
Brazilian Homebuilders & Real Estate Brokers 11 14 November 2012
Exhibit 14: BR Brokers Corporate Template R$ million, unless otherwise stated BASICS COMPANY DESCRIPTION Sector Real Estate Brokers Ticker BBRK3 Brasil Brokers is the largest real state brokerage group in Brazil, counting with over 17,000 Price (R$) 6.2 associated brokers and more than 1100 points-of-sales. The company is present in all five regions Target (R$) 8.5Target (US$) 4.6 in Brazil. Recommendation OUTPERFORM Mkt. cap. (R$ mn) 1,196 POSITIVES Free float (R$ mn) 744 Largest real estate broker in Brazil Ability to grow while generating cash SHAREHOLDING STRUCTURE ON % High operating leverage Controlling Group 70,965 36.8% Potential to unlock value through a mortgage deal Board of Directors 0 0.0% Treasury 1,832 1.0% NEGATIVES Free Float 120,043 62.3% Subject to developers ability to launch Expansion is getting costlier Potential divestment from founders TOTAL 192,840 100%
Ownership Structure LAUNCHINGS (R$ bn) CONTRACTED SALES (R$ bn)
41.5 25.5 24.3 1.0% 62.3% 20.0 0.0% 39.7 19.4
36.8% 37.9 37.9
Controlling Group Board of Directors Treasury Free Float 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E
FINANCIAL METRICS (R$ m 2009A 2010A 2011A 2012E 2013E 2013E OP. METRICS 2009A 2010A 2011A 2012E 2013E 2014E Net revenues 249 336 408 449 555 592 Launches 16,768 25,130 37,858 37,858 39,713 41,500 Gross Profit n.a. n.a. n.a. n.a. n.a. n.a. Launches growth n.a. 49.9% 50.7% 0.0% 4.9% 4.5% Gross Margin n.a. n.a. n.a. n.a. n.a. n.a. Sales (Primary) 9,351 13,235 16,187 16,206 18,819 18,549 EBIT 80 119 140 154 189 200 Sales growth (Primary) n.a. 41.5% 22.3% 0.1% 16.1% -1.4% EBIT margin 32.0% 35.4% 34.3% 34.2% 34.0% 33.8% Sales (Secondary) 1,839 2,290 3,165 3,828 5,479 7,000 EBITDA 89 128 152 170 212 228 Sales growth (Secondary) n.a. 24.5% 38.2% 21.0% 43.1% 27.8% EBITDA margin 35.6% 38.3% 37.2% 37.8% 38.1% 38.5% Change in WK 56 (18) (10) 3 (14) (4) Adj. EBITDA 89 128 152 170 212 228 Net financial expenses 3 7 27 27 26 32 LEVERAGE 2009A 2010A 2011A 2012E 2013E 2014E Taxes (30) (42) (49) (57) (73) (84) Net debt / Equity -0.2x -0.2x -0.3x -0.3x -0.3x -0.3x Net income 45 73 107 110 127 132 Net debt / Ebitda -0.7x -0.7x -1.6x -1.3x -1.2x -1.2x Net margin 18.0% 21.7% 26.1% 24.4% 22.9% 22.3% Net debt / Total assets -0.1x -0.2x -0.3x -0.2x -0.2x -0.2x # shares ('000) 169 169 193 193 193 193 Capex / Operat.Cash Flow n.m. n.m. n.m. n.m. n.m. n.m. EPS (R$) 0.27 0.43 0.55 0.57 0.66 0.69 Total Assets / Equity 1.2x 1.2x 1.3x 1.3x 1.3x 1.3x NOPAT 50779196116116 Depreciation (9) (10) (12) (16) (23) (28) RETURN / YIELD 2009A 2010A 2011A 2012E 2013E 2014E Capex 14 19 21 38 43 47 ROIC 12.9% 20.1% 20.5% 17.4% 18.0% 17.3% FCFE 11 49 (6) 44 53 72 WACC n.a. n.a. n.a. n.a. n.a. n.a. Dividends/ IOE 0 0 28 27 32 72 Cost of Equity (ke) 12.0% 12.0% 12.0% 12.0% 12.0% 12.0% Total assets 478 536 924 1,016 1,140 1,222 ROE 11.3% 16.1% 15.4% 13.4% 13.7% 12.8% Cash 71 91 294 296 333 351 FCF Yield 0.9% 4.1% -0.5% 3.6% 4.5% 6.0% Minority Interest 0 1 62 76 90 107 Net debt (66) (90) (237) (223) (260) (277) VALUATION 2009A 2010A 2011A 2012E 2013E 2014E Book value 415 451 695 778 874 935 EV / EBITDA 12.7x 8.6x 6.3x 5.7x 4.4x 4.0x Market cap. 1,196 1,196 1,196 1,196 1,196 1,196 EV / IC 3.2x 3.1x 1.8x 1.5x 1.3x 1.2x EV 1,130 1,105 958 973 936 918 P/E 23.3x 14.4x 11.2x 10.9x 9.4x 9.0x Invested capital 349 361 519 631 704 765 Cash Earnings P/E n.a. n.a. n.a. n.a. n.a. n.a. PP&E 31 40 49 71 91 109 P/BV 2.9x 2.7x 1.7x 1.5x 1.4x 1.3x Source: Company data, Credit Suisse estimates
Brazilian Homebuilders & Real Estate Brokers 12 14 November 2012
Exhibit 15: Lopes Corporate Template R$ million, unless otherwise stated BASICS COMPANY DESCRIPTION Sector Real Estate Brokers Ticker LPSB3 Lopes Brasil specializes in real estate brokerage and consulting services. It provides services to Price (R$) 36.8 developers and individuals in the low-, mid- and high-income segments in Brazil. Lopes has a Target (R$) 40.0Target (US$) 22.9 market experience of over 75 years. Recommendation NEUTRAL Mkt. cap. (R$ mn) 2,084 POSITIVES Free float (R$ mn) 859 Generates cash without being exposed to long construction cycles CrediPronto JV with Itau for mortgage financing adds incremental value and earnouts SHAREHOLDING STRUCTURE ON % Owner of strong brand name Lopes in brokerage business Rosediamond LLP 18,327 32.40% F.I.M. Crédito Privado 4,482 7.92% Management 10,413 18.41% NEGATIVES Free Float 23,343 41.27% Dependent on real estate developers for launchings Competition from developers building internal sales forces
TOTAL 56,562 100%
Ownership Structure LAUNCHINGS (R$ bn) CONTRACTED SALES (R$ bn)
36.1 25.5 22.9 34.5 19.9 32.40% 41.27% 18.2 32.9
31.3
18.41% 7.92%
Rosediamond LLP F.I.M. Crédito Privado Management Free Float 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E
FINANCIAL METRICS (R$ m 2009A 2010A 2011A 2012E 2013E 2013E OP. METRICS 2009A 2010A 2011A 2012E 2013E 2014E Net revenues 224 338 401 445 515 571 Launches 15,270 25,412 31,341 32,902 34,514 36,067 Gross Profit n.a. n.a. n.a. n.a. n.a. n.a. Launches growth n.a. 66.4% 23.3% 5.0% 4.9% 4.5% Gross Margin n.a. n.a. n.a. n.a. n.a. n.a. Sales (Primary) 8,658 13,078 14,350 15,071 15,553 15,587 EBIT 78 134 49 129 179 184 Sales growth (Primary) n.a. 51.1% 9.7% 5.0% 3.2% 0.2% EBIT margin 35.0% 39.7% 12.3% 28.9% 34.8% 32.3% Sales (Secondary) 598 1,231 3,842 4,859 7,340 9,924 EBITDA 89 156 96 183 230 255 Sales growth (Secondary) n.a. 105.9% 212.1% 26.5% 51.1% 35.2% EBITDA margin 39.6% 46.3% 24.0% 41.2% 44.6% 44.6% Change in WK (22) 63 (57) 25 1 (5) Adj. EBITDA 89 156 96 183 230 255 Net financial expenses 26 27 77 25 8 7 LEVERAGE 2009A 2010A 2011A 2012E 2013E 2014E Taxes (49) (41) (18) (45) (52) (58) Net debt / Equity -9.9x -0.4x -0.2x 0.1x 0.0x 0.0x Net income 47 120 132 105 176 144 Net debt / Ebitda -1.6x -0.7x -1.0x 0.2x 0.0x 0.0x Net margin 21.0% 35.4% 32.8% 23.7% 34.2% 25.2% Net debt / Total assets -0.4x -0.1x -0.1x 0.0x 0.0x 0.0x # shares ('000) 50 51 56 57 57 57 Capex / Operat.Cash Flow n.m. n.m. n.m. n.m. n.m. n.m. EPS (R$) 0.95 2.35 2.35 1.86 3.11 2.54 Total Assets / Equity 23.6x 3.4x 2.6x 2.3x 2.0x 1.8x NOPAT 29 93 32 83 127 126 Depreciation (10) (22) (47) (55) (50) (71) RETURN / YIELD 2009A 2010A 2011A 2012E 2013E 2014E Capex 8 40 53 128 159 184 ROIC -39.2% 51.5% 30.4% 16.1% 23.2% 16.4% FCFE 18 (54) (121) 3 38 (13) WACC n.a. n.a. n.a. n.a. n.a. n.a. Dividends/ IOE 0 0 0 26 38 36 Cost of Equity (ke) 12.0% 12.0% 12.0% 12.0% 12.0% 12.0% Total assets 333 889 1,133 1,153 1,273 1,354 ROE (tangible equity) n.m. 93.1% 28.3% 18.0% 24.8% 17.3% Cash 154 278 235 175 181 138 FCF Yield 0.9% -2.6% -5.8% 0.2% 1.8% -0.6% Minority Interest 6 73 100 109 115 121 Net debt (140) (102) (99) 42 6 10 VALUATION 2009A 2010A 2011A 2012E 2013E 2014E Book value 14 262 431 502 640 748 EV / EBITDA 21.9x 12.7x 20.6x 11.6x 9.1x 8.2x Market cap. 2,084 2,084 2,084 2,084 2,084 2,084 EV / IC -16.2x 8.5x 4.6x 3.3x 2.7x 2.4x EV 1,945 1,982 1,985 2,126 2,090 2,095 P/E 38.7x 15.7x 15.6x 19.8x 11.8x 14.5x Invested capital (120) 232 432 653 761 879 Cash Earnings P/E n.a. n.a. n.a. n.a. n.a. n.a. PP&E 25 43 49 74 110 148 P/BV 128.8x 7.2x 4.8x 4.2x 3.3x 2.8x Source: Company data, Credit Suisse estimates
Brazilian Homebuilders & Real Estate Brokers 13 14 November 2012
Exhibit 16: Comparison Sheet R$ million, unless otherwise stated
Brazil: Homebuilders (BRL) Brazil: Real Estate Brokers (BRL)
Sector PDG MRV Cyrela Brookfield Gafisa Tecnisa Even Direcional EZTEC Helbor Sector BR Brokers LPS Brasil Ticker PDGR3 MRVE3 CYRE3 BISA3 GFSA3 TCSA3 EVEN3 DIRR3 EZTC3 HBOR3 BBRK3 LPSB3 Price R$ 3.27 R$ 10.89 R$ 17.28 R$ 3.41 R$ 4.04 R$ 8.11 R$ 8.20 R$ 12.75 R$ 26.90 R$ 12.05 R$ 6.20 R$ 36.78 1 day performance 1.2% 5.3% -1.3% 0.6% 6.3% 2.7% -0.6% 0.0% 0.1% 0.2% 0.5% -0.9% 1 week performance -10.2% -0.9% -5.2% -6.8% 3.6% -4.4% -4.3% -1.9% -2.5% -2.7% -0.2% -0.9% 1 month performance -6.8% -12.0% -5.1% -11.0% -9.6% -9.1% 0.6% 6.3% -0.1% 5.5% -11.6% -3.7% 1 year performance -56.6% -5.7% 15.6% -41.9% -35.7% -23.1% 22.9% 39.8% 75.4% 64.3% -3.4% 29.1% YTD performance -44.6% 1.8% 16.4% -26.0% -1.9% -19.3% 32.7% 34.2% 70.4% 74.6% 11.1% 41.5% ADTV 30 days (US$mn) 144 36.7 21.4 18.6 7.2 22.9 2.0 7.0 4.7 5.5 1.8 6.3 2.3 Market Cap (local currency) 36,168 4,381 5,257 7,200 1,518 1,748 1,503 1,913 1,959 3,947 2,353 3,276 1,196 2,080 Rating N NONNNOONO O N Target Price R$ 4.50 R$ 12.50 R$ 20.50 R$ 5.00 R$ 4.50 R$ 11.00 R$ 9.50 R$ 13.00 R$ 25.50 R$ 11.50 R$ 8.50 R$ 40.00 Upside (%) 18% 38% 15% 19% 47% 11% 36% 16% 2% -5% -5% 23% 37% 9% Financials and Operating Data Net Earnings 2012E 2,636 315 603 821 -267 1 111 251 223 346 233 215 110 105 Net Earnings 2013E 4,249 463 711 1,023 289 152 264 290 240 546 271 303 127 176 Net Earnings 2014E 5,092 569 788 1,127 312 218 297 332 287 881 282 276 132 144 CAGR 11-14E 22% -7% 1% 31% -2% -161% 27% 14% 18% 39% 32% 5% 7% 3% Adj. EBITDA 2012E 5,536 945 942 1,368 161 404 306 422 280 340 369 342 173 170 Adj. EBITDA 2013E 6,870 968 1,048 1,586 645 459 489 431 294 560 391 430 215 215 Adj. EBITDA 2014E 7,666 982 1,146 1,712 650 507 528 472 340 924 406 472 232 241 CAGR 11-14E 9% -12% 6% 19% -1% -219% 20% 9% 16% 46% 29% 20% 15% 26% Gross Profit 2012E 9,550 1,679 1,428 2,267 594 946 557 687 419 449 526 n.a. n.a. n.a. Gross Profit 2013E 10,730 1,576 1,579 2,446 1,014 971 755 704 443 690 553 n.a. n.a. n.a. Gross Profit 2014E 11,554 1,523 1,716 2,596 1,022 984 799 770 510 1,063 570 n.a. n.a. n.a. CAGR 11-14E 4% -13% 8% 10% -1% 37% 15% 9% 15% 41% 34% n.a. n.a. n.a. Net Revenues 2012E 31,118 5,788 4,437 6,703 3,116 3,531 1,655 2,156 1,411 932 1,389 894 449 445 Net Revenues 2013E 32,466 4,818 4,719 7,141 3,769 3,210 2,099 2,118 1,539 1,522 1,531 1,070 555 515 Net Revenues 2014E 33,594 4,297 5,113 7,479 3,664 3,028 2,129 2,245 1,748 2,319 1,572 1,164 592 571 CAGR 11-14E 1% -14% 8% 7% 1% 1% 11% 6% 18% 46% 33% 13% 13% 12% Launches 2012E 30,498 4,003 5,122 6,384 2,893 2,712 2,056 2,430 1,876 1,307 1,715 70,760 37,858 32,902 Launches 2013E 32,464 4,003 5,593 6,726 3,167 2,845 2,156 2,642 2,010 1,428 1,893 74,227 39,713 34,514 Launches 2014E 34,250 4,183 6,069 7,029 3,310 2,973 2,253 2,761 2,145 1,549 1,978 77,567 41,500 36,067 CAGR 11-14E -5% -23% 9% 4% -6% -6% 2% 10% 18% 10% 28% 4% 3% 5% Contracted Sales 2012E 30,020 5,569 4,582 5,730 3,392 2,452 1,980 2,072 1,658 1,084 1,500 39,965 20,034 19,930 Contracted Sales 2013E 30,869 4,152 5,211 5,897 3,037 3,180 2,173 2,148 1,818 1,532 1,722 47,192 24,298 22,894 Contracted Sales 2014E 33,226 4,014 5,648 6,445 3,171 3,137 2,220 2,428 1,991 2,446 1,728 51,060 25,549 25,511 CAGR 11-14E -1% -19% 9% 7% -8% -2% 7% 14% 20% 40% 30% 11% 10% 12% Financial Ratios Net Margin 2012E 8.5% 5.4% 13.6% 12.3% -8.6% 0.0% 6.7% 11.6% 15.8% 37.1% 16.8% 24.0% 24.4% 23.7% Net Margin 2013E 13.1% 9.6% 15.1% 14.3% 7.7% 4.7% 12.6% 13.7% 15.6% 35.9% 17.7% 28.3% 22.9% 34.2% Net Margin 2014E 15.2% 13.2% 15.4% 15.1% 8.5% 7.2% 13.9% 14.8% 16.4% 38.0% 17.9% 23.7% 22.3% 25.2% EBITDA Margin 2012E 17.8% 16.3% 21.2% 20.4% 5.2% 11.4% 18.5% 19.6% 19.8% 36.5% 26.5% 38.3% 38.4% 38.1% EBITDA Margin 2013E 21.2% 20.1% 22.2% 22.2% 17.1% 14.3% 23.3% 20.4% 19.1% 36.8% 25.5% 40.2% 38.7% 41.8% EBITDA Margin 2014E 22.8% 22.8% 22.4% 22.9% 17.7% 16.7% 24.8% 21.0% 19.5% 39.8% 25.8% 40.6% 39.1% 42.1% Gross Margin 2012E 32.2% 29.0% 32.2% 33.8% 19.1% 26.8% 33.6% 31.8% 29.7% 48.1% 37.9% n.a. n.a. n.a. Gross Margin 2013E 33.7% 32.7% 33.5% 34.3% 26.9% 30.2% 35.9% 33.2% 28.8% 45.3% 36.1% n.a. n.a. n.a. Gross Margin 2014E 34.7% 35.4% 33.6% 34.7% 27.9% 32.5% 37.5% 34.3% 29.2% 45.9% 36.3% n.a. n.a. n.a. ROE 2012E 8.9% 4.5% 16.1% 16.6% -9.3% 0.0% 7.2% 14.7% 17.4% 21.8% 24.1% 17.9% 13.4% 18.0% ROE 2013E 13.6% 5.9% 16.6% 17.8% 8.7% 5.5% 15.1% 15.2% 16.5% 28.7% 23.6% 21.7% 13.7% 24.8% ROE 2014E 14.8% 6.9% 16.2% 17.4% 8.8% 7.5% 15.1% 15.6% 17.3% 35.0% 21.3% 17.3% 12.8% 17.3% Net Debt/Equity 2012E 58.9% 47.2% 46.4% 52.3% 77.4% 128.5% 89.2% 62.7% 29.5% 0.5% 67.4% n.m. n.m. n.m. Net Debt/Equity 2013E 50.8% 28.6% 41.7% 42.2% 87.4% 108.0% 100.7% 65.5% 12.8% 9.8% 58.6% n.m. n.m. n.m. Net Debt/Equity 2014E 39.7% 14.1% 35.7% 43.2% 71.4% 87.5% 79.2% 57.8% 4.6% -0.8% 44.4% n.m. n.m. n.m. Valuation Ratios P/BV Last Rep. 1.2x 0.7x 1.4x 1.5x 0.6x 0.7x 1.0x 1.1x 1.6x 2.5x 2.4x 2.9x 1.7x 4.8x P/BV 2012E 1.2x 0.6x 1.4x 1.5x 0.6x 0.7x 0.9x 1.2x 1.5x 2.6x 2.5x 2.7x 1.6x 4.5x P/BV 2013E 1.2x 0.6x 1.3x 1.3x 0.6x 0.6x 0.9x 1.0x 1.4x 2.1x 2.2x 2.3x 1.4x 3.6x P/BV 2014E 1.0x 0.5x 1.1x 1.2x 0.6x 0.6x 0.8x 0.9x 1.2x 1.6x 1.9x 2.0x 1.3x 3.0x P/E 2012E 13.7x 13.1x 8.7x 8.8x -6.1x 1436.1x 13.6x 7.6x 8.8x 11.5x 10.0x 15.2x 10.9x 19.8x P/E 2013E 8.5x 9.9x 7.4x 7.0x 6.8x 11.5x 5.7x 6.6x 8.1x 7.2x 8.7x 10.8x 9.4x 11.8x P/E 2014E 7.1x 8.0x 6.7x 6.4x 6.3x 8.0x 5.1x 5.8x 6.8x 4.5x 8.4x 11.9x 9.0x 14.5x EV/EBITDA 2012E 9.2x 8.4x 7.8x 7.6x 27.2x 13.0x 10.0x 7.2x 8.8x 11.8x 8.6x 10.7x 6.3x 15.2x EV/EBITDA 2013E 7.3x 6.9x 7.1x 6.4x 7.6x 10.5x 7.0x 7.5x 7.7x 7.5x 8.1x 8.2x 4.9x 11.5x EV/EBITDA 2014E 6.2x 5.7x 6.4x 6.0x 7.0x 8.6x 6.1x 6.8x 6.3x 4.3x 7.6x 7.4x 4.6x 10.1x Target P/BV 2012E 1.3x 0.9x 1.7x 1.8x 0.9x 0.7x 1.3x 1.3x 1.5x 2.4x 2.4x 3.2x 2.2x 4.9x Target P/BV 2013E 1.2x 0.8x 1.5x 1.5x 0.9x 0.7x 1.2x 1.2x 1.4x 2.0x 2.1x 2.8x 2.0x 4.0x Target P/BV 2014E 1.1x 0.7x 1.3x 1.4x 0.8x 0.7x 1.1x 1.1x 1.2x 1.6x 1.8x 2.4x 1.8x 3.3x Target P/E 2012E 14.0x 18.0x 10.0x 10.4x -8.9x 1599.7x 18.4x 8.8x 9.0x 10.9x 9.6x 18.1x 14.9x 25.6x Target P/E 2013E 8.7x 13.6x 8.4x 8.3x 10.0x 12.8x 7.7x 7.6x 8.3x 6.8x 8.3x 12.9x 12.9x 14.7x Target P/E 2014E 7.3x 11.1x 7.7x 7.6x 9.2x 8.9x 6.9x 6.7x 7.0x 4.2x 8.0x 14.1x 12.4x 20.1x Target EV/EBITDA 2012E 10.2x 10.1x 8.7x 8.6x 32.9x 13.4x 11.7x 7.9x 9.0x 11.2x 8.3x 12.6x 8.9x 16.3x Target EV/EBITDA 2013E 8.1x 8.6x 7.8x 7.3x 9.0x 10.9x 8.1x 8.2x 7.8x 7.1x 7.8x 9.7x 7.0x 12.3x Target EV/EBITDA 2014E 6.9x 7.3x 7.1x 6.8x 8.4x 9.0x 7.1x 7.4x 6.4x 4.1x 7.3x 8.7x 6.5x 10.9x Source: Company data, Credit Suisse estimates
Brazilian Homebuilders & Real Estate Brokers 14 14 November 2012
Companies Mentioned (Price as of 13 Nov 12) Brasil Brokers Participacoes (BBRK3, R$6.20, OUTPERFORM [V], TP R$8.50) Brookfield Incorporacoes S.A. (BISA3, R$3.41, NEUTRAL [V], TP R$4.66) Cyrela Brazil Realty (CYRE3, R$17.28, OUTPERFORM, TP R$20.50) Direcional Engenharia (DIRR3, R$12.75, OUTPERFORM, TP R$13.00) Even Construtora e Incorporadora (EVEN3, R$8.20, OUTPERFORM, TP R$9.50) EZ TEC Empreendimentos (EZTC3, R$26.90, NEUTRAL, TP R$25.50) Gafisa (GFSA3, R$4.04, NEUTRAL [V], TP R$4.50) Helbor (HBOR3, R$12.05, OUTPERFORM, TP R$11.50) Lopes (LPSB3, R$36.78, NEUTRAL, TP R$40.00) MRV Engenharia (MRVE3, R$10.89, NEUTRAL [V], TP R$12.50) PDG Realty (PDGR3, R$3.27, NEUTRAL [V], TP R$4.50) Rossi Residencial (RSID3, R$4.15, RESTRICTED [V]) Tecnisa (TCSA3, R$8.11, NEUTRAL, TP R$11.00)
Disclosure Appendix Important Global Disclosures I, Guilherme Rocha, certify that (1) the views expressed in this report accurately reflect my personal views about all of the subject companies and securities and (2) no part of my compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report. The analyst(s) responsible for preparing this research report received compensation that is based upon various factors including Credit Suisse's total revenues, a portion of which are generated by Credit Suisse's investment banking activities. As of October, 2 2012 Analysts’ stock rating are defined as follows: Outperform (O): The stock’s total return is expected to outperform the relevant benchmark* by at least 10-15% or more, (depending on perceived risk) over the next 12 months. Neutral (N): The stock’s total return is expected to be in line with the relevant benchmark* (range of ±10-15%) over the next 12 months. Underperform (U): The stock’s total return is expected to underperform the relevant benchmark* by 10-15% or more over the next 12 months. *Relevant benchmark by region: As of 2nd October 2012, U.S. and Canadian as well as European ratings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. For Latin American, Japanese, and non-Japan Asia stocks, ratings are based on a stock’s total return relative to the average total return of the relevant country or regional benchmark; Australia, New Zealand are, and prior to 2nd October 2012 U.S. and Canadian ratings were based on (1) a stock’s absolute total return potential to its current share price and (2) the relative attractiveness of a stock’s total return potential within an analyst’s coverage universe. For Australian and New Zealand stocks, 12-month rolling yield is incorporated in the absolute total return calculation and a 15% and a 7.5% threshold replace the 10- 15% level in the Outperform and Underperform stock rating definitions, respectively. The 15% and 7.5% thresholds replace the +10-15% and -10- 15% levels in the Neutral stock rating definition, respectively. Restricted (R): In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications, including an investment recommendation, during the course of Credit Suisse's engagement in an investment banking transaction and in certain other circumstances. Volatility Indicator [V]: A stock is defined as volatile if the stock price has moved up or down by 20% or more in a month in at least 8 of the past 24 months or the analyst expects significant volatility going forward.
Analysts’ sector weightings are distinct from analysts’ stock ratings and are based on the analyst’s expectations for the fundamentals and/or valuation of the sector* relative to the group’s historic fundamentals and/or valuation: Overweight: The analyst’s expectation for the sector’s fundamentals and/or valuation is favorable over the next 12 months. Market Weight: The analyst’s expectation for the sector’s fundamentals and/or valuation is neutral over the next 12 months. Underweight: The analyst’s expectation for the sector’s fundamentals and/or valuation is cautious over the next 12 months. *An analyst’s coverage sector consists of all companies covered by the analyst within the relevant sector. An analyst may cover multiple sectors. Credit Suisse’s distribution of stock ratings (and banking clients) is: Global Ratings Distribution Outperform/Buy* 42% (53% banking clients) Neutral/Hold* 40% (48% banking clients) Underperform/Sell* 15% (40% banking clients) Restricted 3%
Brazilian Homebuilders & Real Estate Brokers 15 14 November 2012
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Guilherme Rocha, Lia Carlos, Vanessa Quiroga, CFA, Eugenio Amador & Julian Bravo Lozano, each certify that (1) The views expressed in this report solely and exclusively reflect my personal opinions and have been prepared independently, including with respect to Banco de Investimentos Credit Suisse (Brasil) S.A. or its affiliates (“Credit Suisse”). (2) Part of my compensation is based on various factors, including the total revenues of Credit Suisse, but no part of my compensation has been, is, or will be related to the specific recommendations or views expressed in this report. In addition, Credit Suisse declares that: Credit Suisse has provided, and/or may in the future provide investment banking, brokerage, asset management, commercial banking and other financial services to the subject company/companies or its affiliates, for which they have received or may receive customary fees and commissions, and which constituted or may constitute relevant financial or commercial interests in relation to the subject company/companies or the subject securities. Guilherme Rocha, is the responsible analyst for this report according to Instruction CVM 483. CS may have issued a Trade Alert regarding this security. Trade Alerts are short term trading opportunities identified by an analyst on the basis of market events and catalysts, while stock ratings reflect an analyst's investment recommendations based on expected total return over a 12-month period relative to the relevant coverage universe. 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Brazilian Homebuilders & Real Estate Brokers 16 14 November 2012 Americas/Brazil Equity Research
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