Brazil's PDG Realty Expects New Index Listing; Earnings Up
November 13 2009 - 3:06PM
Dow Jones News
PDG Realty SA (RSID3.BR) will likely get added to the Ibovespa
stock index in early 2010, following its recent addition to the
MSCI Emerging Markets index this week, the company's chief
financial officer said Friday.
"The addition into the MSCI index and all that entails will
bring more visibility and, eventually, more liquidity to our
stocks. It's a positive and I see it mainly as a recognition of the
companies big position in the government's housing program," said
Michel Wurnan.
PDG Realty was one of 11 Brazilian companies, many of them small
to mid-cap firms, to be added to the MSCI Emerging Markets index.
The changes take place after the market closes on Nov. 30.
The addition to the MSCI Emerging Markets could add increasing
liquidity to the stock, especially if BlackRock's iShares MSCI
Emerging Markets exchange traded fund (EEM) includes it when it
rebalances the fund to match the index. There is no guarantee that
PDG will be part of the ETF, however, which is one of the most
actively traded ETFs around, trading over 30 million shares
daily.
PDG is currently part of the Market Vectors Brazil Small Cap
(BRF) ETF, accounting for 3.5% of the fund's net assets as of Nov.
12.
One of the likely reasons for the addition of PDG Realty to MSCI
Emerging Markets, along with larger homebuilders Gafisa SA (GFA,
GFSA3.B, INHA4-BR) and Rossi Residencial SA (RSRZY, RSID3.BR), is
the multi-billion dollar middle- to low-income housing program "My
Home, My Life" announced by the federal government earlier this
year.
Wurnan said that PDG estimates it will build around 35,000 units
costing up to 200,000 Brazilian reals ($115.6 million), or 70% of
the total in that price range under the government program.
"We are mostly dominant in the southeast, but are moving into
the central-west and south of Brazil because of the housing
initiative," he said.
PDG Realty went public in January 2007. Its shares have been
outperforming the market all year, especially since the
announcement that it will be included in the MSCI Emerging Markets
index. PDG shares were up 4.15% at BRL16.55 late Friday, beating
the Ibovespa index, which has risen around 1.4%. PDG's shares have
risen 192% so far this year, while the Ibovespa is up 71%.
Low interest rates and a relatively stable local economy have
been a boost to PDG's third-quarter results. The company reported a
net profit of BRL113.7 million for the third quarter, up 93% from
the same period last year. Net revenue rose 64% to BRL550
million.
Over the last 12 months, PDG has been one of Brazil's most
active product launchers in the housing market. The company
launched around BRL910 million of residential properties for
working-class incomes, with sales contracted on BRL788 million.
Wurnan said 53% of the new properties already have sold.
"It's a healthy market for us. Those sales are mostly from the
'My Home, My Life' program, but around 45% has come from
middle-class to higher-end properties, as well," he said.
"We are getting better revenue growth because we are gaining in
scale and have more available properties on the market," said
Wurnan.
-By Kenneth Rapoza, Dow Jones Newswires; 55-11-2847-4541;
kenneth.rapoza@dowjones.com