First of all, the lowered guidance, as much as 30 to 50%, is because the company is launching 50% fewer units in 2013 as they did in 2012.
An IPO of Alphaville spins-off 40% of GFA's revenues. Because shareholders will own an equitable piece of that (assuming the company plays fair to us), current shareholders might get one share of Alphaville for every 2.5 to 3 shares of GFA that we own. After a spin-off, shareholders retain their original GFA shares plus some Alphaville shares too.
GFA has plenty of operating cash to run the business for the next 16 months. But a spin-off Alphaville, & it's a different company - their proven economic engine is GONE. They go back to their roots and start over.
History: the old GFA expanded (over-reached) all over Brazil for 7 years; added AlphaV and Tenda. Alphaville was the only division that was successful in the new markets they entered; Gafisa and Tenda got burned (badly). If the spin-off proceeds in April, the AlphaV-less GFA will then only build in 2-3 cities, the cities they once specialized in - Rio and SP.
There they will build high-rises for middle-class and low-income families. No more suburbia. It's a little like a nationally recognized builder in the states saying, "We're going to sell all our suburban outfits (operating in 32 states) and go back to what we do best: residential skyscrapers in NY and Boston."
So there is a lot of potential here, but a lot of uncertainty too. Tenda is a good idea that has yet to segue from vaporware (a nice idea) to hardware (something real), and turn a profit. In 5 years they haven't been able to do this. Now they say they can/will with their aluminum mold product. Bu the market has a wait and see attitude about this, mostly wait, and the share price seems to indicate a lot of doubt.
New Management? The only new person is Andre Bergstein, the young CFO. All the other officers have simply changed hats, and were in the room when every bad decision was made (2006-11).
2013 midpoint guidance for launches is R$3b; 2012 actual was R$2.95b. Launches are flat. Where they are guiding down is revenue. They are managing inventory IMO. if they hit their guidance figures, inventory will grow 5% to R$2.25b, but there is more than enough in the pipeline to benefit from an uptick in sales. We could very easily see a new CAIXA effort to expand credits for low as well as middle income. I am starting to think they are simply going to float Alphaville shares which will be highly constructive for the share price.
Nice buy point at the open today. Every investor in GFA's recovery for the last 7 months was then in the red. Every one. It appears to me that someone is trying to manipulate this company in order to force a sale of Alphaville at fire-sale prices. The trading looks so planned; so methodical.
Someone on February 1 leaks information about upcoming earnings. Stock goes down relentlessly for a month...consolidates...earnings come out...drops another 15%, exactly down - to the penny - at the support level at 3.59. This morning - everyone who has sat on the sidelines and watched GFA - could now buy without the previous unknowns that other investors (like us) took the risk on. If the turnaround story is real, today should be the bottom. This is how Wall street works. Let someone else take the risk first. Then buy when all the unknowns are on the table.
As far as value goes, GFA is now trading at about 1/3 book value. If they can execute successfully over the next 4 quarters, resolve Alphaville and create a profitable re-emergence of Gafisa and Tenda, then the new GFA will probably rise to its true value - somewhere between $10 to $12. So that's nice reward, but this is speculative and risky. They have to execute or they'll be gone. I could tell from the conference call that the analysts were frustrated with the company and did not seem to trust their ability to execute.
A couple of the analysts who phoned in asked for an estimate of GFA's cash generation for 2013, because they know that that's critical for paying off the 2014 debt payment. The company wouldn't give guidance like it did in 2012, thus only raising the insecurity bar a little higher. We all know GFA needs the cash from unit sales and receivables to the tune of $800ML in 2013 or they won't be able to pay their 12/2014 debt payment. So free cash flow is going to be a big deal in the upcoming conference calls.
ABC, you really don't see them being able to issue new debt to roll the 2014 debentures? both JBSS and BEEF3 placed global bonds at under 6%. the 2014 debenture has a 11% coupon. i have no idea what it's yielding today but it's got to be way under 11%? heck, i bet they could place twice that and roll the 2017 bank notes that have a CDI+2.2% coupon.