Gafisa Prices Global Offering – Analyst Blog

Gafisa S.A. (GFA), one of Brazil’s leading diversified national homebuilders, has recently priced the global offering of its 74 million common shares and ADS (American Depository Shares). The ADSs were offered at US$14.03 each and the shares were offered at R$12.50 each. Each ADS equals two common shares.

 

The proceeds are expected to be used to acquire land and for strategic joint ventures and acquisitions, working capital and new developments.

 

Gafisa is extremely well positioned in the Brazilian market. The company is a recognized brand that has been growing by acquiring lesser rivals in order to consolidate its leading position in the Brazilian market.

 

Despite some challenging short-term conditions, we remain optimistic about the medium-term outlook of the construction business in Brazil based on the steps being taken by the Brazilian government in order to stimulate the sector. The government housing program will help Gafisa expand its business in the lower income sector.

 

Undeniably, Brazil had a great economic performance in 2009, surprising the market by its quick recovery from the economic crisis. The bad news at this point is that Brazil will probably follow other economies that successfully managed the crisis and will increase its domestic interest rates sooner than later. In fact, we expect Brazilian rates to be again over 10% by the end of 2010.

 

Despite this short-term concern, we believe the Brazilian real estate market will experience continued growth in the medium-to-long term. There has been a tremendous expansion in the construction business in Brazil in the recent years. We believe Gafisa has a distinct competitive advantage, which will help it to grow even in challenging situations.