Light Rises as Credit Suisse Says Buy Before Brazil Rate Review

Light SA (LIGT3), Brazil’s second-cheapest electric utility on a price-to-earnings basis, rose the most on the Ibovespa as Credit Suisse Group AG recommended buying the stock before a rate adjustment scheduled for November.

The shares added 2.9 percent to 15.86 reais at 1:02 p.m. in Sao Paulo. The benchmark stock gauge declined 2.5 percent. The stock trades at 6.2 times its estimated earnings, about one-third the average for Brazilian electricity companies, according to data compiled by Bloomberg.

Credit Suisse raised its recommendation on Light from the equivalent of hold, saying it is well positioned to make a case for financial losses and capital spending to be considered by regulators when they determine rate increases, according to a research note dated today.

“It now offers a combination of attractive valuation and more balanced risks,” Credit Suisse analysts Vinicius Canheu and Pedro Manfredini wrote in the note. “As newsflow on the tariff review should start in mid-July, we believe it is now a good time to start adding positions to the stock.”

The power company’s press office didn’t immediately respond to an e-mail and phone call seeking comment.

Light has dropped 29 percent this year, the third-worst performance on the Bovespa Electric Energy Index of 16 power companies, which fell 14 percent. Its price-to-earnings ratio among Brazilian utilities is higher only than that of Cia. Energetica de Sao Paulo, which is up 1.6 percent in 2013 and trades at a multiple of 5.3.

To contact the reporter on this story: Denyse Godoy in Sao Paulo at dgodoy2@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

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