April 12 (Bloomberg) -- PDG Realty SA dropped the most in a week as Citigroup Inc. cut its recommendation on the Brazilian homebuilder to the equivalent of hold, citing higher than projected costs and an increase in new projects.
Shares slumped 4.3 percent to 2.70 reais at the close of trading in Sao Paulo, the most since April 3. The benchmark Bovespa index declined 0.8 percent.
Citigroup cut its recommendation from the equivalent of buy as PDG’s costs in the fourth quarter “exceeded probably even the most pessimistic expectations,” according to a note to clients today by Dan McGoey and Paola Mello. The homebuilder also has a goal to start new projects in 2015 that amount to between 5 billion reais ($2.5 billion) and 6 billion reais, “which implies heavier reinvestment in land and working capital,” the analysts wrote.
The Rio de Janeiro-based homebuilder said in a March 27 regulatory filing that new projects fell 80 percent to 1.7 billion reais in 2012 from 2011 and that there was a 1.4 billion real cost overrun in the fourth quarter of last year to resume projects that were previously entrusted to outsourced partners.
PDG has slid 18 percent this year while the Bovespa has declined 9.8 percent.
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