Itau Raises Target On Brazil's Eletrobras ADRs To $31.00
SAO PAULO (Dow Jones)--Itau Securities raised the level it considers fair value on shares of Brazil energy company Centrais Eletricas Brasileiras (EBR), or Eletrobras, for the year ending 2010, Itau said in a report Thursday.
The new target price for Eletrobras' American Depositary Receipts is $31 each and the new target for the local shares (ELET3.BR) was raised to 53.40 Brazilian reals ($30) from a previous fair value price of BRL41.50.
Itau cited provisional measure MP 466, which finally became law on Dec. 9 and provides new subsidies to the company's northern electric power operations, coupled with the recent BRL12 billion capitalization of Eletrobras' subsidiaries like Furnas and Chesf.
Another plus is continued talks between Eletrobras and the government for the payment of billions in back dividends from the 1970s.
'The company has been dishing out over a billion reals a year for many years to account for these back payments. Once these debts are paid, it clears the company from having to account for that money on its balance sheet and improves greatly Eletrobras' corporate governance,' said Eduardo Cancian, one of the report's authors.
Eletrobras alleged that it could not pay dividend payments decades ago because its dollar debts surpassed its cash position, and therefore it did not have the money to pay investors.
Itau said it expects 'positive news flow throughout 2010 to keep boosting the stocks.'
The bank also said it suspected Eletrobras would 'strengthen...independent of who the winner' will be in Brazil's 2010 presidential elections between opposition candidate and Sao Paulo state governor Jose Serra and President Luiz Inacio Lula da Silva's chosen successor, Dilma Rousseff, currently chief of staff.
Eletrobras is a federal holding company operating 39% of Brazil's total installed capacity. The company produces more than 39,000 megawatts. It operates the massive Itaipu hydroelectric power station, the largest in Brazil.
On Thursday, Eletrobras shares were trading up 2.26% to BRL37.53. Its preferred shares (ELET6.BR) were up 1.3% to BRL31.30. Both were outperforming the Ibovespa stock index, down 1.03% to 67,497 points in the early afternoon hours.
In New York, Eletrobras' ADRs were up 1.68% to $21.16.
-By Kenneth Rapoza, Dow Jones Newswires, 5511-2847-4541, kenneth.rapoza@dowjones.com"
About Me
- Waldemar Jezler
- For over 30 years, Brazilian-American investment banker Waldemar Jezler has worked in the finance sector. Jezler earned his Bachelor's degree in Civil Engineering from the University of São Paulo in Brazil and then went on to attend Harvard Business School for his MBA. While at Harvard, Jezler was highly involved in extracurricular activities, including a term as President of the Ibero American Club.