Order Books Fill for Brazil Homebuilders

PDG Realty and Rossi Residencial will today price follow-on offerings worth up to BRL1.11bn and BRL1.06bn, respectively, using Wednesday’s closing prices as a guide. While the companies operate in the same sector and are bringing similarly-sized offerings, there is a substantial difference in market appetite. PDG Realty is heard already fully subscribed and likely to price at a small discount, according to sellsiders close to the trade. Investors are generally drawn to its strong performance since its 2007 IPO – the stock has more than doubled – as well as strong, financial-minded management and a mix of high, middle and low-income strategy, say bankers and investors. Rossi, on the other hand, is heard having to work harder to bring buyers in. A banker off the deal says rumors early Wednesday suggest the book was less than half full and that the company runs the risk of having to offer a bigger discount. Rossi’s stock is around 17% above its 2006 IPO price, according to Dealogic and analysts say the stock has been punished because of inconsistent communications with the market over the past 2 years. Barclays, for one, has Rossi as its top pick among the more liquid names in the sector. In a recent report it notes the company’s poor trading performance is not warranted. “We believe Rossi is a leading, competitive, capitalized and healthy company, with no solvency concerns or any material issue that provides a fundamental basis for the paper to be trading at such a discount to liquid peers,” says analyst Guilherme Vilazante. “Additionally, the management is aware of this situation and seems to be focused on improving communications with the market,” he adds, noting that Ebitda margins are in line or above peers. PDG Realty is offering 56.0m shares which can be raised by an additional 8.4m units in a greenshoe and 11.2m in a so-called hot issue. It is led by BTG Pactual, Itau BBA, Goldman Sachs and BofA Merrill. Rossi is offering 55.0m shares, which can be increased by