STXNEWS LATAM-BofA says rout in Brazil property stocks 'overdone'
Analysts at Bank of America Merrill Lynch led by Guilherme Vilazante said on Thursday that a recent correction in Brazilian commercial real estate shares is overdone, saying the impact of rising interest rates, a potential renewal of lease contract at lower rents, and higher vacancy rates are being overestimated.
Shares of Brazilian property companies are down an average 30 percent from their October peak, reflecting concern that rent growth would suffer with flagging economic growth. "However, we believe the sector's contract framework is much more protective and tested than the market is pricing, while internal growth is, arguably, much less important than the market is pricing," Vilazante said in a client note.
Vilazante and his team cut the price target for BR Properties SA to 26 reais from 30.5 reais; Multiplan Emprendimentos SA to 64 reais from 75 reais; Iguatemi Shopping Centers SA to 32 reais from 34 reais; Alliansce Shopping Centers SA to 25 reais from 29 reais. The analysts raised their target for General Shopping Brasil SA to 16 reais from 12.5 reais. Vilazante initiated coverage of Sonae Sierra Brasil SA with a 29 reais a share target and an "underperform" recommendation.
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