M c I n t i r e I n v e s t m e n t I n s t i t u t e1

McIntire Investment InstituteAt the University of Virginia

Prepared by Garrett Hynson| 16 October 2012

Gafisa(NYSE: GFA)

M c I n t i r e I n v e s t m e n t I n s t i t u t e

• Business Overview• Stock Chart• Basic Numbers and Ratios• Thesis Points• Risks or Signs That Possibly Indicate We’re

Wrong• Trends to Monitor• Final Recommendation

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Agenda

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Business Overview

• Brazil’s second largest homebuilder• Owns stakes in Tenda, a low-income housing

developer, and Alphaville, a high-income subsidiary

• Continuously expanding into lower-income housing

• Proxy play on emerging markets

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Stock Summary

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• Price: $4.29 (as of closing 2/8/2012)• Market Cap: 925.6 million• Forward P/E: 11.7• P/B: 0.7• P/S: 0.6• Debt to Equity: 0.9

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Basic Numbers and Ratios

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• Leading Brazilian homebuilder – great emerging markets play

• Attractive valuation• High growth potential

– All areas of the market through Gafisa, Tenda, and Alphaville

– Increasingly targeting lower-income buyers

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Thesis Points

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• Brazil is one of the largest emerging markets and has a huge housing deficit

• Macro growth heavily tied to China – Brazil is flush with resources

• Exposure to all areas of the market – lower, middle, and high income

• World Cup in 2014 and Olympics in 2016 –huge catalysts for the Brazilian economy

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Thesis Point: Leading Brazilian homebuilder– great emerging markets play

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• Lost about 1/3 of market cap in the past year• P/B and P/S both below 1• Forward P/E: 11.9• Poorly timed acquisition of Tenda led to huge

write-offs, crushing the stock• Misperception: Gafisa will not be able to

rebound, as the Brazilian economy is seen as slowing

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Thesis Point: Attractive Valuation (Misperception)

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Thesis Point: High Growth Potential

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• Cornered the market with Alphaville and Tenda• Government has begun Minha Casa Minha Vida

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Thesis Point: High Growth Potential

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• Brazil’s economy continues to slow• New management proves to be incompetent• Spending for World Cup and Olympics diverts

social spending• Caixa Economica Federal could fail to approve

borrowers for Minha Casa Minha Vida loans• Slowing household growth

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Risks/Signs to Indicate We’re Wrong

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• How well Gafisa can continue to rebound –look for a return to strong profitability

• Overall health of Brazilian economy, including interest rates and foreign trade

• Brazilian government spending – investment for the World Cup, Olympics and Minha Casa Minha Vida

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Trends to Monitor

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• Initiate a purchase at 3%• Monitor the stock according to the important

trends to follow• Consider scaling up the position

– If more favorable conditions appear– If stock continues to appear undervalued

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Final Recommendation

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Questions?

• Full disclosure: I own a small position in Gafisa