Annual Inflation in Mexico: 4.63%, short term interest rates: 3.5%, not expected to rise.
Annual Inflation in Brazil: 5.8%, short term interest rates: 10.5%, expected to rise further.
Real short term interest rate in Mexico: -1.13%, in Brazil : +4.7%
Clearly, one of these two countries has the wrong interest rate policy, and I'd say it's Brazil.
Brazil's CB chief Tombini tries to reduce inflation by killing the economy with extremely high real interest rates. That has never worked well and usually results in high economic costs. Maybe he wants to teach the government a lesson. He also tries to stabilize the currency, with little success. The resulting slowing economy increases the budget deficit and the risk of ratings downgrades with a negative impact on the exchange rate. High costs of capital also have an inflationary impact.
What Brazil really needs is increasing productivity through more investments in public infrastructure and the private sector, to compensate for rising labor costs as a result of full employment, while controlling private consumption. Sure, you need the right government policy for that, but you also need reasonable costs of capital.
Did the buyback take place in one action or was it accumulated over time?
In the past the company did the buyback through Tenda. Is that still the case?
Sentiment: Strong Sell
"if the stock price is then adjusted down to reflect that payment what is the point of that payment?" Good question and no absolute answer. In the case of regular small dividends, the stock can recover quite rapidly, depending on market conditions. By contrast, I am not sure if a one time payment really creates extra wealth. Sure, if the company has excess cash, than better return that to shareholders, but, in the current situation, I would have preferred more buybacks instead of that disbursement. Your personal tax condition can also play a role (capital gains vs dividends)....
In normal days, the ADR price closely follows GFA's Bovespa quote (much higher trading volume there). Deviations typically are marginal and don't last. But today, the ADR had it's own life, ignoring Brazil.
Closing in Brazil R$ 3.53 == US$ 3.0, but closing in the US: US$ 3.19. Let's see how long that lasts before arbitrage starts hitting.
@homerunguy: To get the dividend/interest payment, you had to own the stock last Friday after hours at latest.
Many people didn't realize that the stock is ex-Interest today. I was able to sell some 40k at an average of 3.35 in the first minutes. The stock continues to trade right now - 1h into the opening - at a significant premium to the quote in Brazil (parity is below $3.10)
Well, from the answers to my question asked on Dec 23, it appears that everybody else on this board is also confused or unsure. While the Bovespa is closed today, 24 Dec, the US Market's initial reaction suggest that some traders think that today is the ex day, while other participants don't seem to know.
That's what I have quoted in my initial message, except that the company had added the word "including" at the end.
The issue is that, normally, Ex dates precede record dates. Not the other way round.
What you say implies: when you buy the stock on 12/27, you will get the interest payment (otherwise, the stock would trade ex Interest on 12/27). But when you buy on 12/27, you are not a shareholder of record on 12/30. Odd isn't it?
The company says:
"The interest on capital shall be paid according to the shareholder basis of December 27, 2013. The shares traded on the BMF & BOVESPA and NYSE will be negotiated ex-interest on capital as of December 30, 2013, including.
But normally, according to the SEC, regarding dividends, "The ex-dividend date is normally set for stocks two business days before the record date." That's in my view December 24, not December 30.
There is a pdf file of the presentation on GFA's web page.
2014 Sales GFA 1500M-1700M, Tenda 600-800M.
Big surge in launches and sales in Q4 - nearly as much as in the previous 3 quarters combined.
Sentiment: Strong Buy
"He can#$%$ tied to share prices trading for a period significantly above current prices."
Strange. I never posted the above message. Must be from somebody else. YMB oddities!
My suggested buyback idea represents only about ¼ of next year's cashflow. An that cashflow will grow significantly over the following years as a result of scheduled debt repayments and the new ships.
The major part of company's debt is fixed. An average increase of the libor rate by 2% starting in 2016 will increase the total amount of interest to be paid by some $32M until 2019, when the last term loan is repaid, taking account of the libor flour. That means an average of $8M/ year. The effect on EPs or book value of a 10% share buyback is much more significant longer term.
Assuming no further investments in ships after 2016, the company will become net cash positive in 2022 and generate cash from operations exceeding $600M/year (assuming ship day rates fluctuating between 550k/d and 600k/d and an operating efficiency of 95%). In that whole context, the interest rate risk is negligible.
Sentiment: Strong Buy
Badtroy, thanks for the update.
Instead of using a major part of the cashflow for early debt repayment, the company should use part of the cash for BUYBACKS, as long as shares trade at current levels. For example a tender for 30M shares at $2,20/sh or somewhat more. That would create more long term value per share than an early debt repayment. VTG is becoming such a cash machine that by all usual metrics like expected EV/Ebitda or PE, the stock is deeply undervalued.
Sentiment: Strong Buy