Tenda "Time to go beyond the guidance..." (Buy) Costa

Research evidence excerpt

Tenda "Time to go beyond the guidance..." (Buy) Costa

Forecast returns

Forecast price appreciation 71.6%

Forecast dividend yield 0.0%

Forecast stock return 71.6%

Market return assumption 18.4%

Forecast excess return 53.2%

Company Description

Tenda is a Brazilian real estate company. Founded in Belo Horizonte, Minas Gerais in

1993, it is present in 10 Brazilian metropolitan regions. Focused on low-income projects,

it operates at the lowest level of the MCMV program (government housing financing

focused on the low-income segment).

Valuation Method and Risk Statement

We value Tenda based on PE methodology backed by a DCF (FCFE).

Main risks:

- FGTS available budget: FGTS (workers fund), the main fund of the social housing

program (MCMV), losing sustainability due to: 1) changes in the destination of resources

to address other sectors of the economy (such as sanitation and infrastructure); and 2) a

considerable increase in FGTS withdrawals. Both points could reduce the resources

available to the real estate sector, damaging the health of MCMV.

- MCMV housing program sustainability: The non-implementation, cancellation,

suspension or thinning out of MCMV by the government may affect the conduct of the

company's business and results, given the large exposure the company has to these

projects.

- Material cost increases: Since Tenda recognizes revenue from property sales according

to the accounting method of financial evolution of construction, an increase in the cost

of an incorporated project may reduce revenue and previously calculated profit. Thus,

increases in the prices of construction materials due to inflation can increase the cost of

projects and reduce the company's profit.

- Macro deterioration: Changing market conditions and a worsening Brazilian