UBS Downgrades Gol

UBS Pactual has downgraded equity in Brazilian airline Gol to neutral after upgrading it to buy in December. “Not only has the stock significantly underperformed the broader tape since, fourth quarter results and the subsequent capital increase announcement point to poorer that expected prospects for equity holders,” the shop says. Gol’s board has approved a capital increase of BRL204m through the issuance of 26m new shares at BRL7.80 per share. The company’s cash balance dropped to BRL592m, the lowest since Q1 2004, of which BRL177m is restricted. “Unrestricted cash now corresponds to less than one month’s worth of operating costs, which is not ideal considering the seasonal lull that is just around the corner. The cash infusion does underscore the family’s commitment to the business, but it also implies earnings per share dilution that could reach 13%,” the shop says. UBS cut its price target for the stock to BRL9.00 from BRL13.00. On March 23, it closed at BRL7.25.