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Trade: Buy GFA
Rating: 3.00 (1 votes)
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Gafisa S.A. (NYSE:GFA) is one of largest homebuilders & developers in Brazil. They develop land subdivisions, commercial buildings, and have recently started building entry-level housing. The stable growth pattern of Brazil and good fiscal management has dramatically declined inflation and interest rates (into single digits down from 20%+) in the last few years. The fast growing middle class and the cheaper availability of home financing (no subprime!) has created a significant demand for affordable housing. In response Gafisa, which started out as a high end builder, is now focusses on the affordable segment of the market. Gafisa will also benefit from increasing leverage as external bank financing for longer term mortgages becomes available. 2007 actuals: Analysts based in Brazil expect EPS for 2008 to be around $2.5/ADR share (I computed this average of 15 analysts by converting to USD and adjusting for ADR ratio). This translates into 2008 PE of around 15 and since I expect annual growth to exceed 30% for the next few years, it seems cheap at PEG of < 0.5. A near term catalyst is the stock's recent inclusion in EEM & Bovespa indexes. I think GFA is a good way to bet on Brazil.
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Comments (1)
I have liked this stock since about mid Feb. It should do well for you. Nice pick.
Uncle John
Posted by Uncle John | April 9, 2008 3:17 PM