Goldman Says Batista Exit Makes MPX a Buy as EON Takes OverJulia Leite
Billionaire Eike Batista’s loss of control of MPX Energia SA to Germany’s EON SE is making the Brazilian power producer a buy to Goldman Sachs Group Inc.
Goldman, which had not rated Rio de Janeiro-based MPX’s shares since March, set its price target for the utility at 10 reais. The stock rose 1.2 percent to 6.99 reais at the close of trading in Sao Paulo. The shares have fallen 31 percent in the past year, the least among the six publicly traded companies founded by Batista, which have declined as much as 91 percent.
Batista, who rode a surge in Brazilian stocks to become the world’s eighth-richest person in March 2012, quit as MPX’s chairman earlier this month after EON increased its stake to 36 percent. A selloff of shares in Batista’s energy, commodities and cargo companies erased more than $30 billion of his fortune after they failed to meet output targets.
“We expect a gradual de-risking of MPX shares,” Bruno Pascon, the Goldman Sachs analyst who took over primary coverage from Felipe Mattar, wrote in a research note dated yesterday. “EON’s controlling stake and MPX’s contracted revenues should meaningfully reduce any overhang related to concerns over the EBX Group.” EBX is Batista’s holding company.
A credibility crisis that started with his flagship oil producer OGX Petroleo & Gas Participacoes SA is obscuring the achievements of companies like MPX, Batista wrote in an opinion piece published in the newspaper Valor Economico today. MPX’s current market value “is not compatible” with what the company has to offer, he said. MPX’s market value is $2.2 billion, according to data compiled by Bloomberg.
“MPX has the biggest portfolio of licensed projects in the country,” he wrote. The company “has become a model” for thermal power producers along the coast, and generates enough electricity to power the city of Rio de Janeiro, according to Batista.
Goldman’s Pascon said MPX has a “solid” balance sheet and will have “above average” free cash flow starting in 2014.
MPX has five buy recommendations from analysts, four holds and one sell, according to data compiled by Bloomberg.
Goldman had rated MPX a buy from May 2012 through March, when it changed the stock’s designation to “not rated.” The New York-based investment bank includes stocks on that list when it’s “acting in an advisory capacity in a merger or strategic transaction involving this company and in certain other circumstances,” according to the report.