1q06 presentation
TRANSCRIPT
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Gafisa Acquires AlphaVille Urbanismo
AlphaVille Developments
Conference Call
Sao Paulo, October 3rd, 2006
Vila dos Ingleses - MG AlphaVille Campinas - SP
AlphaVille Graciosa - PR AlphaVille Fortaleza - CE
Investor Relations Contact:Gustavo [email protected]
Conference CallSão Paulo October 3rd, 200612PM (Brasilia Time), 11AM (US-ET)Phone: +1 (973) 935-8757Code: 7947080Webcast: http://www.gafisa.com.br/ir
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AlphaVille Strengthens Gafisa’s Position as a Premier Growth Opportunity
GeographicDiversification
World-class Shareholdersand the Highest
Standards of CorporateGovernance
Efficient Business Modeland Strategic Land Bank
Robust Housing Growth
Industry Leadership and Strong Brand Recognition
Professional Managementand
Established Organization
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AlphaVille Urbanismo
Residential Area Parks
Business Area
Multi-family Area
AlphaVille Club
Golf Course
Business Area Residential Area
Residential Area
Characteristics of an AlphaVille Community1
Note (1): Based on AlphaVille Graciosa (located in Curitiba, Paraná)
AlphaVille Urbanismo is the largest and only nationwide community development company in Brazil, with no
major competitors to date
The Company transforms large rural acreage into urbanized lots, developing all required infrastructure
(water, sewage, electricity, roads), as well as facilities such as sports club, high-rise monitored fences, for
subsequent sale
AlphaVille does not get involved in the construction of the houses, which is done by the buyers
AlphaVille’s residential communities (lots) are targeted at upper and upper-middle class families in the
outskirts of metropolitan regions throughout Brazil
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Financing the Transaction
Gafisa will acquire 100% of AlphaVille over the next 5 years
The transaction involves the purchase of 100% of Alphaville’s shares for cash and stock divided in 3 phases as described below:
Phase 1 – acquisition of 60% of Alphaville shares for R$20 million cash at the date of the closing; and issuance of 6,477,718 new Gafisa’s shares @R$28.05 valued at approximately R$181.7 million to current Alphaville shareholders;
Phase 2 – acquisition of 20% of Alphaville shares in exchange for Gafisa’s shares 36 months after the closing of the transaction;
Phase 3 – acquisition of the remaining 20% of Alphaville shares in exchange for Gafisa’sshares 60 months after the closing of the transaction;
The share price Alphaville for the 2nd and 3rd phases will be calculated based on valuation done by an independent institution based on the Discounted Cash Flow Method.
Alphaville shareholders are expected to own approximately 5.9% of Gafisa after the 1st phase of the transaction.
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Note (2): Based on Gafisa's stock price of R$28.05
42.2% Discount over Gafisa´s Multiple (2)
13.2xGafisa's P/E 2008E
7.6xTransaction P/E 2008E
P / E
41.6% Discount over Gafisa´s Multiple (2)
10.1xGafisa's EV / EBITDA 2008E
5.9xTransaction EV / EBITDA 2008E
EV / EBITDA
Note (1): Based on Analysts Consensus Estimates (Deutsche Bank, Itau, Merrill Lynch, UBS)
218.4 Earnings 2008E (1)
271.3 EBITDA 2008E (1)
2,744.1 Enterprise Value (EV)
(147.0)Net Debt (Net Cash)
0.0 Minority Interest
102.6 # shares (mm)
Gafisa's Financials (R$ million, as of June 30th 2006)
Attractive Valuation
Multiples Analysis
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Attractive Economics
The segment presents higher margins and lower cash exposure than that of residential buildings
10%2%62%19%% of Gafisa Launches in 2006²
44%28%31%37%Typical Project Margin
100 to 400100 to 500150 to 300up to 100# of Units
R$ 1,800 to R$ 2,000
100% CEF (directly to buyer)
R$ 32,000 to R$ 62,000
R$ 70k to 130K
45 to 65 sq.m
Affordable Entry Level Residential LotsMiddle and Mid-HighHigh-End
R$ 2,000 to R$ 3,600
Commercial Banks and CEF
R$ 70,000 to R$150,000
R$ 150k to 400K
70 to 150 sq.m
10-15%30-35%Cash exposure / Total Sales
R$ 150 – R$ 800
Provided by Gafisa
Diverse
Up to 300k
100 to 1,000 sq.m
Above R$3,600
Provided by Gafisa
Above R$150,000
Above 400K
100 to 500 sq.m
Average Price sq.m
Financing
Household Income¹
Price Range
Size
Notes:¹ Annual household income. ² Gafisa has commercial buildings which accounted for the remaining 7% of the 2006 Launches
Lorian - SPBlue -RJ Side Park - SPThe Gold-SP
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Unparallel market positioning
With its Strong Brand Recognition and Nationwide Presence, AlphaVille has no Comparable Competitor
AlphaVille’s National Reach
AlphaVille
Gafisa
Leadership position: Alphaville is the uncontested leader in the segment
Proven track record: The AlphaVille concept has been very well accepted throughout the country, present in 35 cities and 16 states
Strong brand: A recognized high-quality infrastructure, high-quality after-sale customer service, and efforts to create a strong sense of loyalty and community between its clients are among the characteristics that the “AlphaVille” brand carries within its target markets. This strong brand allows it to charge a premium over its competitors in every market it competes and facilitates new partnerships.
2005
Top de Marketing
2005 2005
Superbrands
2005
FIABCI
2005
Pop ListMasterImobiliário
Some of AlphaVille’s Awards (2005)
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Prospective / Strategic Analysis
Partnership / Land
AcquisitionOccupation
Approval and
Registration
Marketing& Sales Construction
Analysis involving legal, environmental, urban, technical and market aspects (e.g. price, demand, competition and adherence to concept) to opportunistically invest in
Prospective / Strategic Analysis
Signature of a Partnership Agreement with the land owner or a selective acquisition of the land
Partnership / Land Acquisition
In the last phase, clients are free to build their houses and AlphaVille support the establishment of the community’s “management council”
AlphaVille works as Construction Manager with the construction outsourced with third-party companies
After the launching, AlphaVille starts pre-selling the units during the construction phase (similar to Gafisa)
Development of a detailed Master Plan to be submitted to authorities for approval process
This process takes on average 3 years (compared to Gafisa’s 6 months) and involves interactions with Federal, State and Municipal authorities, thereafter the development is registered at the municipality and is ready for commercialization
Occupation
Construction
Marketing& Sales
Approval andRegistration
High Entry Barrier Segment
The segment is characterized by a long approval process for new developments…
It is unlikely that any competitor would be able to replicate AlphaVille’scurrent position and strength in the near future
3 years 1 years 2 years
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High growth with relatively low risk
AlphaVille has a sizable and virtually non-replicable land bank with a potential PSV of R$2billion
100%155,2781,430746,533South
%acquiredby swap
Future Sales (R$000)Potential UnitsUsable Area
(sq.m)
100%566,6463,4612,626.057Northeast
8,963,794
162,121
502,757
4,926,325
15,467
438
926
9,213
1,997,452
32,424
104,954
1,138,151 93%Southeast
27%Mid-West
92%Total
100%North
Land Bank¹
¹ As of 06/30/06
Between 2006 and 2010 the Company expects to launch 46 developments, of which 42 are already in the land bank
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Cross-selling opportunities of Gafisa’s residential buildings in AlphaVille’s lots
Utilization of AlphaVille’s wide experience with local authorities and business partners inover 35 cities in 16 states to further accelerate Gafisa’s geographical expansion
AlphaVille will greatly benefit from Gafisa’s financial expertise, allowing it to optimize its capital structure and provide customers with better products
We expect both companies to benefit from future synergies
This combination offers attainable synergies
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Note: (1) Price per sq.m for Gafisa excludes lots
40012221247715551089687244611321790Number of Units
nanana263,7 200,2 146,6 2.768,0 2.725,0 2.701,0 Price per sq.m (1)
1.684.164 1.285.291 836.157 1.170.096 1.151.898 656.720 514.068 133.393 179.437 Usable Launched Area (m2)
828.307 348.463 434.771 176.492 141.521 57.415 651.815 206.942 377.356 Launches (R$ '000)
25 15 23 4 4 3 21 11 20 Number of Launches
2005A2004A2003A2005A2004A2003A2005A2004A2003A
Gafisa + Alphaville (Pro-forma)AlphavilleGafisa(R$ million, except when indicated)
Selected Combined Operating Data (Pro-forma)
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Governance at AlphaVille
Alphaville’s capabilities will remain with the company after the transaction is complete.
Nuno Luiz Alves and Renato Albuquerque will retain 40% of Alphaville going forward
Nuno Luiz Alves will remain as CEO
Alphaville will operate as a subsidiary of Gafisa
Alphaville’s Board of Directors will be composed by 5 members of whom 3 will be indicated by Gafisa. Nuno and Renato will be the other two board members
Gafisa will seek shareholder approval for the indication of Mr. Renato Albuquerque as a Board Member of Gafisa.
Gafisa S.A.
SPE A SPE B SPE C Gafisa Vendas Alphaville...60%
Gafisa’s Pro-Forma Corporate Structure after Consummation of the Transaction (Phase 1)
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AlphaVille Strengthens Gafisa’s Position as a Premier Growth Opportunity
GeographicDiversification
World-class Shareholdersand the Highest
Standards of CorporateGovernance
Efficient Business Modeland Strategic Land Bank
Robust Housing Growth
Industry Leadership and Strong Brand Recognition
Professional Managementand
Established Organization