Brazil’s Best-Performing Stock Has Credit Suisse Predicting More Gains

RIO DE JANEIRO, BRAZIL – (Bloomberg) The rally in Via Varejo SA shares still has some juice left as the Brazilian retailer’s turnaround initiatives start to bear fruit, according to Credit Suisse.

Fourth-quarter adjusted Ebitda margin will expand to 4.6 percent from 3.7 percent a year earlier, analysts Victor Saragiotto and Pedro Pinto wrote in a report dated Feb. 21. They increased their price target on the stock to R$21 reais from R$7. The shares closed at R$16.64 on Friday.

Numbers will likely show an earlier-than-expected recovery in profitability and improvement in the company’s online channel, they said. The results will be announced March 25.

Turnaround hopes and an increasing number of mom-and-pop investors have boosted the company’s stock by 49 percent this year, the best performer in Brazil’s benchmark Ibovespa index.

The stock has more than tripled since June 14, when a group of funds partnered with retail mogul Michael Klein and bought shares at the auction of a stake owned by Cia Brasileira de Distribuicao.

The new owners replaced management, while executives from rivals were hired, including chief digital officer Helisson Lemos from MercadoLibre Inc. and marketing director Ilca Sierra from Magazine Luiza SA.

Via Varejo “has laid the groundwork for delivering healthy numbers throughout 2020,” the analysts said. “The outlook is still favorable enough to justify further share appreciation.”

Via Varejo is a Brazilian retail company founded in 2010 through the merger of retail companies Casas Bahia, owned by the Klein family, and Ponto Frio, owned by Grupo Pão de Açúcar.

In June 2019, it was announced that the Klein family became the largest shareholder of Via Varejo with a 27 percent stake, after GPA sold its entire stake. Currently, Via Varejo is owned by the Klein family (27.54 percent stake), XP Asset Management (6.43 percent), treasury stock (0.02 percent), and public float (66.01 percent).