Bloomberg News

MRV Engenharia, Rossi Lead Builders’ Rout on Growth Concern

October 31, 2011

(Updates with closing prices in second and seventh paragraphs.)

Oct. 31 (Bloomberg) -- Rossi Residencial SA and MRV Engenharia & Participacoes SA led declines by homebuilders amid concern a slowdown in the Brazilian economy may hurt profits.

MRV tumbled 6.1 percent to 12.10 reais at the close of trading in Sao Paulo, the steepest drop since Sept. 20, while Rossi slumped 5.7 percent to 10.85 reais. The Bovespa index dropped 2 percent.

Economists covering Brazil cut their forecasts for growth in 2012 for a third straight week. Gross domestic product will expand 3.5 percent next year, according to the median forecast in an Oct. 28 central bank survey of about 100 economists published today, down from a projection of 3.51 percent the previous week.

“The companies in this industry are still relatively new, with no steady cash flow, so they are seen as riskier than the market’s average,” Armando Halfeld, an analyst at brokerage Ativa SA, said in a telephone interview from Rio de Janeiro. “That’s why those stocks tend to fall harder when concerns about the Brazilian economy arise.”

MRV was listed in the Sao Paulo exchange in 2007, when at least 16 Brazilian real estate companies sold shares on the Bovespa for the first time, according to data compiled by Bloomberg.

BR Malls Participacoes SA, Brazil’s biggest owner of shopping centers, defied the rout in real-estate companies after third-quarter revenue beat the forecast by analysts at Itau Unibanco Holding SA, overshadowing a drop in profit. Sales rose 67 percent from a year earlier to 219.3 million reais ($129.7 million), while net income plunged 90 percent to 9.33 million reais after the decline in Brazil’s currency sparked a financial loss, according to an Oct. 28 filing.

‘Positive Environment’

The stock gained 0.3 percent to 18.55 reais after earlier rising 2 percent.

“We continue to view BR Malls as one of the best-managed companies under our coverage, well positioned to take advantage of the positive environment for the Brazilian shopping mall industry,” David Lawant, an analyst at Itau in Sao Paulo, wrote in a report yesterday, reiterating his “outperform” rating on the stock.

--With assistance from Alexander Cuadros in Sao Paulo. Editors: Marie-France Han, Lester Pimentel

To contact the reporter on this story: Ney Hayashi in Sao Paulo at ncruz4@bloomberg.net

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


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