Bloomberg News

Marfrig Gains as BTG Says Buy on Debt Reduction, Units IPOs Plan

June 27, 2014

Marfrig Global Foods SA (MRFG3), Brazil’s third-biggest meatpacker by market value, rallied after Grupo BTG Pactual (BBTG11) recommended buying the stock as the company reduces debt and plans to take two units public.

Shares of the Barretos, Brazil-based meatpacker, which supplies McDonald’s Corp. (MCD:US) and Burger King Worldwide Inc. (BKW:US), climbed 5.2 percent to 5.89 reais at the close of trade in Sao Paulo, the biggest advance since June 9. It was the best performer on the benchmark Ibovespa, which declined 0.7 percent.

BTG raised its recommendation on the stock from the equivalent of hold, saying Marfrig’s efforts to better manage its debt burden and the potential IPO of its international units could “kick-start a much needed balance sheet deleveraging,” according to a research note from analysts Thiago Duarte and Enrico Grimaldi today.

“Given Marfrig’s high leverage, we believe these initiatives could have a major impact on its equity story from a risk-reward perspective,” the analysts wrote.

Marfrig trades at 7.3 times its enterprise value over estimated 2014 earnings before interest, taxes, depreciation and amortization, while international peers are trading at ratios of at least 10 times, according to BTG’s report.

The company’s debt-to-assets ratio is at 58 percent, compared with the average of 23 percent among its global peers, data compiled by Bloomberg show.

The Brazilian meatpacker in May raised 200 million pounds ($340 million) selling seven-year notes at 6.25 percent through its Moy Park Ltda. unit. That measure will help the parent company reduce financial costs, according to BTG’s analysts.

Marfrig also announced in March a plan to sell shares equivalent to 25 percent to 30 percent stakes in U.S. unit Keystone Foods Llc and the Ireland-based Moy Park as part of a plan to cut key debt ratios by a third and accelerate expansion.

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

To contact the editors responsible for this story: Brendan Walsh at bwalsh8@bloomberg.net Rita Nazareth


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Companies Mentioned

  • MCD
    (McDonald's Corp)
    • $93.22 USD
    • -0.45
    • -0.48%
  • BKW
    (Burger King Worldwide Inc)
    • $35.5 USD
    • -1.16
    • -3.27%
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