Increase in Eletrobras shares exceeds FGTS yield; know what to expect

THE electrobras officially concluded its privatization process on June 13, when there was the debut after primary and secondary equity offerings that made the government stop being the majority shareholder. Since then, the share has appreciated just over 14%, going from R$40.10 to R$45.85 last Friday (1st).

According to a survey, the value is equivalent to more than one year of the income from the Severance Indemnity Fund (FGTS ), from where some people were able to withdraw values ​​to buy shares in the company.

To CNN Brasil Business experts point to a new favorable scenario for Eletrobras with the capitalization with the potential for shares to rise further.

Even so, a high yield in relation to the FGTS does not mean that investors should sell the actions as soon as possible, 12 months from now, and it is important to take a long-term view of the investment.

Causes for the high

Responsible for the survey, the founding partner of Casa do Investidor Michael Viriato points out that, at current values, the FGTS has yielded between 5% and 5.5% per year, but there are some additives that can make the yield reach the house of 9%.

Based on this value, and considering the increase of more than 14% in Eletrobras shares, a person who chose to use part of the amount they have in the FGTS to buy shares during the offering had a yield of more than a year and a half from the fund.

This result, according to Viriato, is important because “it really illustrates that, with privatization, investors are more confident that the company will become more efficient and deliver more results”.

Another issue is that an initial “success” of the investment is a positive point as it represents a diversification of the portfolio of people who had an amount invested in a modality with lower profitability.

Flavio Conde, a stock analyst at Levante Investimento, points out that the rise in Eletrobras occurred despite successive falls of the Ibovespa in recent weeks with the index hampered by a negative domestic and international scenario, of withdrawal of investments .

This indicates that Eletrobras started to produce specific facts that attracted investors with the capitalization. On the one hand, the market ceases to fear, and to price, possible interference from the government, which is no longer the majority shareholder.

In addition, Ricardo Teixeira, coordinator of the MBA in Financial Management at FGV, says that privatization indicates a trend towards growth in competitiveness and efficiency based on a reformulation of its business strategy and a change in management.

“Of course, if this happens, the tendency is for Eletrobras to have greater profitability, but it is not a guarantee”, he observes.

Still on the positive side, Teixeira believes that the Brazilian electricity sector has a positive outlook in the medium and long term, as Brazil must increasingly need energy, with demand growth.

“It’s a positive horizon, of increasing efficiency naturally happening in the sector, and probably leading to a higher return for investors”, he says.

The optimism with the company is also reflected in the target values ​​determined by investment consultants. Conde, for example, expects the common share (ELET3) to reach R$ 59.60 by the end of this year, an increase of 48%.

The bank UBS BB has a target price of BRL 70, citing short-term catalysts such as the definition of a new board and debt reduction.

“If the market continues at the level it is, or goes up towards 110,000 points, it has a chance of reaching that level”, says Conde about his current target price.

The problem, according to him, is that abroad has brought new risks of falling stocks due to the slowdown in the US economy which could lead to a halt in Eletrobras’ uptrend and prevent it from reaching the target.

Citing a Bloomberg projection, Viriato says that, in 12 months, the combination of share appreciation and other returns point to more than 30% return, equivalent to at least five years of FGTS yield.

long term view

But those who bought Eletrobras shares through the FGTS and want to withdraw the profits from this increase will have to wait. By rule, the sale of the share, with the value returning to the fund, can only occur after 12 months of privatization.

However, even when the deadline is confirmed, experts indicate that the moment would not be ideal for the sale.

“It is necessary to have a long-term vision, and every investor must have a horizon of what he wants to achieve when making an investment. If you have a rapid rise in the value of the shares and you have achieved what you wanted, the right thing is to reevaluate the strategy: sell and exit the position or set a new goal”, says Teixeira.

He notes that a stock that is promising today may not stay that way tomorrow. Even so, there is no “ideal time” for the sale, which depends on the context of each investor.

For example, if a person wants to avoid the risks linked to the stock market, make a profit with the purchase and seek an “easier” income, the return to the FGTS may be the most appropriate.

Teixeira observes that “most people who applied via FGTS want a higher income than what they would have, but they will not necessarily be playing with these actions, so you have to imagine a horizon, with what they would have with the FGTS, what would be a value of the actions that would leave you fully satisfied and follow from there”.

The definition of clear objectives in relation to the values ​​of the shares, time of investment and horizon for the asset are cited by the professor as essential elements when making decisions about investments, as well as the search for specialized help.

“Eletrobras should have an expected increase due to inflation, another due to increased efficiency and another due to demand for the asset. That analysis has to be done, and the average buyer probably needs some kind of advice,” he opines.

Conde says that the most important thing for these investors is to “think long term”. Risks such as the elections and the economic situation in the United States are short-term, and he believes that, in the long term, Eletrobras is a “great investment”.

“Those who used the FGTS are not only happy, but are calm thinking about the long term, which is ten years. It’s great to see the short-term rally on a falling stock, but you have to think about the long-term,” she points out.

For him, the investment via FGTS was a “unique opportunity to enter into an action that was going to be privatized and that has the prospect of very great improvement and in a sector much less risky than oil and mining”.

Viriato says that an investor who does not want to take more risks and intends to return to the FGTS after 12 months “will have already made a good deal”.

He points out that, even with the upward trend, Eletrobras shares can go through ups and downs, which often frighten individual investors, and there is no guarantee that the projections will materialize.

“One thing is the expectation 12 months from now and another is the road there, which can pass through mountains and valleys, moments of very positive euphoria, rising more than expected, and negative moments, falling more than expected”, he points out.

Even so, he says that people’s own behavior in relation to the FGTS and the shares ends up being different.

“Few people keep opening the Caixa app to see the FGTS balance, they will only see it when they leave or change jobs. The same vision should have with these actions now, not looking at it every day,” she advises.

The problem, in his view, is that investing in stocks ends up being more visible, making people more susceptible to buying or selling decisions at the moment that, in the future, may prove to be wrong.

He assesses that “there is no ideal time to sell shares. Eventually, some investor changes a plan, needs the money, then redeems it, but without it, there is no reason to redeem it in a year.”

From origin to privatization: understand the history of Eletrobras