The shares advanced 4.9 percent to 2.78 reais at 11:52 a.m. in Sao Paulo, heading for the biggest one-day gain since June 25. That was the second-best performance on the Ibovespa stock benchmark, which slumped 1.9 percent.
After the plunge in the past month, Gafisa is trading at 0.25 times its tangible book value when considering its remaining stake in Alphaville Urbanismo, a builder of higher-end homes that it sold control of on June 7, Marcello Milman and Gustavo Cambauva, analysts at BTG Pactual, wrote in a note to clients today. That’s “too cheap even for a company whose earnings power remains a question mark,” they wrote.
The homebuilder has the potential to break ground on more projects, improve profit margins and cut costs, which could “translate into substantial upside in the medium-term,” the analysts wrote. Sao Paulo-based Gafisa posted unexpected losses in the past two quarters as the company overestimated demand for government-subsidized homes for low-income families.
Gafisa agreed last month to sell a 70 percent stake in Alphaville to a unit of Blackstone Group LP (BX) and a local partner for 1.4 billion reais ($620 million). Proceeds will be used to reduce Gafisa’s net debt as a percentage of assets to 53 percent from 94 percent at the end of the first quarter, Chief Financial Officer Andre Bergstein said in a telephone interview on June 7.
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