The 2014 Latin America Research Team: Agribusiness, No. 2: Fernando Ferreira, Isabella Simonato & team
Fernando Ferreira, Isabella Simonato & team Bank of America Merrill Lynch First-place appearances: 1
Total appearances: 6
Team debut: 2009 Fernando Ferreira and Isabella Simonato guide the Bank of America Merrill Lynch team that rises from third place to No. 2; they also direct the firm’s second-place group in Food & Beverages. In this sector their trio of São Paulo–based analysts monitors 20 Latin American agribusiness stocks, preaching selectivity and advising investors that company specifics dictate sector performance. “On a top-down view, we continue to be more optimistic on the sugar- and ethanol-exposed names relative to other areas like grains and fertilizers,” says Ferreira, “based on expectations of higher sugar prices going forward, as the global markets should enter a period of undersupply, following four years of oversupply.” Against this backdrop, the researchers have assigned buy ratings to Brazilian producers Cosan, São Martinho and SLC Agrícola. Highlighting São Martinho, he notes that earnings momentum is also benefiting from increased ethanol prices and that recent management announcements have spurred the share price. In early May, Martinho reported that it would acquire an additional 56 percent stake in sugar and ethanol mill Santa Cruz for 315.8 million reais ($141.9 million), raising its total shareholding to more than 92 percent. At the same time, it advised the markets that New York–based auditor Deloitte Touche Tohmatsu’s reappraisal of the company’s undeveloped land holdings indicated a value of R3.1 billion for the portfolio, not far off Martinho’s market cap of R3.6 billion at the time. By late July the stock had rallied 22.4 percent, climbing to 39.80 reais and besting the broader market by 15.8 percentage points. The researchers predict that the next catalysts could be an increase of the blend of ethanol in gasoline from 25 percent to 27.5 percent, the sale of biomass energy at spot prices in Brazil and the potential sale of part of Martinho’s land portfolio.