Download - 1Q07 Presentation
1st Quarter of 2007
Earnings Conference Call Presentation
Lopes – LPS Brasil PresentationPortugueseMarcos Lopes CEO - Roberto Amatuzzi CFO EnglishFrancisco Lopes COO - Roberto Amatuzzi CFO
Forward-looking Statements
This presentation does not constitute an offer, or invitation, or solicitation of an offer to subscribe for or purchase any securities neither does this presentation nor anything contained herein form the basis to any contract or commitment whatsoever.
The material that follows contains general business information about Lopes – LPS Brasil – Consultoria de Imóveis S.A
related to the quarter ended on March 31, 2007. It is not intended to be relied upon as advice to potential investors. The
information does not purport to be complete and is in summary form. No reliance should be placed on the accuracy,
fairness, or completeness of the information presented herein and no representation or warranty, express or implied, is
made concerning the accuracy, fairness, or completeness of the information presented herein.
This presentation contains statements that are forward-looking and are only predictions, not guarantees of future
performance. Investors are warned that these forward-looking statements are and will be subject to many risks,
uncertainties, and factors related to the operations and business environments of Lopes – LPS Brasil – Consultoria de
Imóveis S.A and its subsidiaries such as competitive pressures, the performance of the Brazilian economy and the industry,
changes on market conditions, among other factors disclosed in Lopes – LPS Brasil – Consultoria de Imóveis S.A filed
disclosure documents. Such risks may cause the actual results of the companies to be materially different from any future
results expressed or implied in such forward-looking statements.
Lopes – LPS Brasil – Consultoria de Imóveis S.A believes that based on information currently available to Lopes – LPS Brasil -
Consultoria de Imóveis S.A management, the expectations and assumptions reflected in the forward-looking statements
are reasonable. Lastly, Lopes – LPS Brasil – expressly refuses any duty to update any of the forward-looking statements
contained herein.
Agenda
I. Operating Highlights
II. Geographical Expansion
III. Real Estate Market
IV. 1Q07 Financial Performance
Operating Highlights
Operational Highlights
Record Sales Contracted Volume of R$719 million in the 1Q07, 43 % up on the 1Q06.
Record Sales Contracted of launches, amounted to R$ 641 million, 45% growth compared to 1Q06.
Net Revenue totaled R$ 21 million, a 45% increase over 1Q06.
Rio de Janeiro operations grows on an accelerated pace, reaching a future launch pipeline of R$ 2.0 billion.
Acquisition of 75% of DIRANI, the largest real estate broker in the South Region, as platform for entrance and leadership in that region, acting on Rio Grande do Sul, Paraná, and in the near future, in Santa Catarina.
Announcement of entry in the Salvador market, through the creation of a new business unit, LOPES NORDESTE, starting in August of 07’.
Lopes, consolidates its positioning as the largest player in the Brazilian real estate brokerage industry, stepping forward in the development of its geographic expansion strategy started with the Business Unit in Rio de Janeiro and the Gated Communities Unit in Alphaville (LIL).
Sales Contracted – Total Volume
43%
719
502
Total contracted GSV (R$ MM)
1Q06* 1Q07
Contracted GSV of Launches (R$ MM)
1,253
1,556
2003 2004 2005
CAGR: 28 %
CAGR: 28 %
1,853
850
591
1,166
20022000 2001 2006*
2,545
1Q06 1Q07
443
641
45%
59
78
641443
Launches* Secondary market* 2006 and previous information are managerial and unaudited.
Sales Contracted – By Market Segment
Launches (R$ MM) Secondary Market (R$ MM)
45%641
4437832%
59
1Q06 1Q07
1Q06* 1Q07
* 2006 and previous information are managerial and unaudited.
Sales Contracted by Income Segment (R$) 1Q07
Sales Contracted by Income Segment – Launches*
150k-350k
> 600k
43%
31%
14%
12%
0-150k 350k-600k919 Units
656 Units
306 Units
266 Units
Total Units Sold: 2,147
* Does not include LCI-RJ. Does not include parking slots; includes sales of lots.
Net Fee and Consulting Services
Lopes’ Net Fee
1Q06
3.27% 3.07% 3.09% 3.21% 3.22%
2Q06 3Q06 4Q06 1Q07Note: Net fee in the São Paulo Market. 2006 information are managerial. For 1Q07, accounting figures. Net Fee consists of the sum of Lopes’ net fee with premium and advisory services commission, when applicable.
LCI-RJ is the largest announcer on O GLOBO newspaper*
Rio de Janeiro Business Unit: Update
Lopes is already recognized as one of the major players in this market, which supports its pursuit for leadership
Concrete progress – launch pipeline expressive growth, reaching more than R$ 2.0 billion in only 8 months of operation.
Apr/07
671
Sales InventoriesSales InventoriesR$ MM
Dec/06 Apr/07
1,400
2,014
Sep/06
731
CAGR: 66 %
CAGR: 66 %
Launch PipelineLaunch Pipeline
R$ MM
Sales ForceSales Force
250
Nº of brokers
Apr/07Dec/06
146
Dec/06
463
* Sum of pages published in March and April in the largest newspaper in Rio de Janeiro.
Geographic Expansion: Southern Region
Geographic Expansion Opportunity
Lopes acquires 75% of the largest real estate broker in sales volume in the South Region of Brazil, entering simultaneously both in the Parana and Rio Grande do Sul markets.
DIRANI is recognized as one of the most respectful real estate brokers in the South Region of Brazil, having an important market share in Porto Alegre and operating in Curitiba, a market with total GSV of R$1.2 billion in 2006*, since late 2006.
Attractive acquisition model with significant discounts in relation to Lopes’P/E multiple.
The South Region market, except for Porto Alegre, is currently fragmented in the real estate brokerage business, which adds a significant growth potential to this transaction.
* Fonte: Secovi-RS, Secovi-PR
Dirani
2005 2006 2007*
61161
320160 %
100 %
* Internediation GSV estimated by Dirani for 2007. GSV contracted (in R$ MM)
12 years of operations and current leader in the contracted sales market.
Structured business model, operating with average gross commissions rate of4% plus premium (up to 1%).
Management widely recognized in the South Region of Brazil.
Consolidated operations:
– Very promising launch pipeline amounting to R$ 700 million in 2007.
– Awards: Top Marketing ADVB 2003 and Top Marketing ADVB 2006.
Markets
Porto Alegre Porto Alegre – Second largest launch market outside the Rio/São Paulo region.– Very similar market compared to São Paulo:
• Served by nationwide players (Gafisa, Rossi and Cyrela) and tending to be consolidated in large scale real estate brokers
• Highly liquid real estate products– Total GSV of R$688 million in 2006*.
CuritibaCuritiba– Fragmented launch market with an absence of large real estate brokers, despite the
significant volume of sold and launched GSV.– Recovering real estate market, with an improved realty supply/demand balance – GSV of R$494 million in 2006*.
Launches Show Rooms of DIRANI
* Source: Secovi-RS, Secovi-PR
Multiples
DIRANI ValuationEarn out with cap and floor aligns interests and takes the acquisition to a very accretive valuation range.
9.0x P/E 2008
7.5x P/E 2008
Acquisition P/E
Transaction Values
Initial payment of R$ 15.1 million (NPV) in five semi-annual installments until May 2009.
Remaining amount to be paid in two variable installments in May 2010, tied to the net income for the past 36 months.
Estimated value for the transaction base case scenario of R$ 28 million1.
1 relates to acquired 75%, based on cash flow projections with no guarantee of future performance.
Closing Remarks
Local expertiseRio Grande do Sul + ParanáLeading management and sales force Relationship with local and nationwide players
Consolidated relationship with national real estate developersProven product development capacityCorporate Governance ActionsIT Structure (SAP)Nationally relevant player with state-of-the-art practices
+ =Leading company to
serve nationwide real estate developers in the South and Southeast regions of the country.
High growth potential due to market fragmentation.
Consolidated platform to serve other cities in the region.
2Building where Dirani headquarter is located on the 5th floor
1Building where Dirani main sales office is locatedCuritiba2Porto Alegre1
Geographic Expansion: Lopes Nordeste
Lopes Nordeste
SalvadorSalvadorMigration of important nationwide real estate developers to the state of BahiaFragmented Launch Market with no relevant real estate brokers in the segment, despite the good intermediate and launched GSV2.247 units launched on 4Q06, twice the same period of 05’. 1.733 units sold in 1Q07, 60% above sales for 1Q06.
Lopes reaches the state of Bahia through a new business unit, 100% owned by the company, in an association with high qualified local professionals.
Beginning of operations in August of 07’
Based on the positive experience in Rio de Janeiro, operations will follow the same strategy to enter a new market
Hiring of two local managers widely recognized in the market
These executives were responsible for a GSV of R$131 million in the last two years in the state of Bahia
Real Estate Market
New Market Level
6901.268
2.456
4.499
2S 05 1S 06 2S 06 1S 07
Industry Capitalization
Source: Brazilian Stock and Exchange Commission (CVM). Net funds raised by Real Estate Developers through Primary Offerings and Debenture Issuances as of September 2005.
Financial Raising Volume - Developers(R$ MM)
Developers Developers raisedRraisedR$ 8.9 billion since Sep/05$ 8.9 billion since Sep/05
• Stronger professionalism
• More agile market
• Higher Scale
Positive Results
Lopes holds a key position to benefit from this growth, as the largest channel of distributionwith no conflict of interest.
1Q07 Financial Performance
Financial Highlights
Net Revenue Total Contracted GSV (R$ MM)
719
45%
14,486
20,943
1Q06*
(R$ 000)
43%502
1Q06* 1Q071Q07
*Managerial Numbers
Income Statement
Gross Revenue of Services
Gross Revenue Deductions
Net Revenue
Operating Expenses
Depreciation & Amortization
Financial Revenues, Net
Operating Income
Non-operating Income
Income Tax and Social Contribution
Net Income
1Q07
23,038
(2,094)
20,944
(13,082)
(464)
(114)
7,284
-
(1,751)
5,533
(R$ 000)
Financial Highlights – Cont’d
Net Income Cash Flow from Operations
(R$ 000)
7,2436,115 -21% 5,746-10% 5,533
1Q06 1Q07 1Q06 1Q07
Result Analysis
Net Income of R$ 5,5 million results from a combination of several factors:
1Q07 1Q06 Var %
607 443 37,0%I. GSV growth in São Paulo according to projections
(R$ Million):
II. Individual Results from the business units (R$ Milhões):
Unit Net Result Net Margin CommentLaunches - SP 6,1 35,0% Increase in costs reduced margin.
EBC (Secondary Market) (0,4) (18,9%) Negative contribution for Lopes’overall result.
LCI-RJ (Rio de Janeiro) (0,5) (49,8%) Negative contribution for Lopes’overall result.
LIL (Gated Communitites)
0,2 27,0% Margin Growth phase for the business. – Dillutes total margin.
26%LOPES Consolidated 5,5 Consolidation harmed by unitswith negative net results for theperiod.
Result Analysis (cont.)
III. New level of costs to the company 1Q07 vs. 1Q06:
Cost Levels stable over the year, capable of supporting an increase in the sales volume.
Intercompany Loans
Rent, Office Supplies, Consulting Services
According to Prospectus’ Info.
Includes provisioning and variable remuneration.
(LCI-RJ, LIL, LR)
13.660
6.934
2.060
2.317
1.517652 180
1Q06 New Companies Personnel -Reorganzation
Increase in G&A Financial(Income)/Expenses
Depreciation 1Q07
Aligned Costs and Expenses
Adequacy of costs to the new publicly-held status of the Company
Preparation for real estate market current growth levels
Investments in technology, geographical expansion and new business units
Costs and Expenses of LPS Brasil
(R$ 000)
Cost and expenses are in line with the Company’s expected annual production level
13.66012.526
13.903
3T06 4T06 1T07
Two seasonality components for the Company:• Natural sales variability during the year due to holidays. On 1Q, Summer and Carnival Holidays.• Variability resulting from the developers’ pipeline – launches subject to postponements due to legal approvals, generating important distortions between the quarters
Importance of long-term revenues analysis
37%
4T
21%17%
25%
3T1T 2T
29%
4T
31%
18%22%
3T1T 2T
Quarterly Contribution for Annual Sales Contracted
2005 2006% of Annual Contracted GSV
Unstable behavior of quarterly contributions for annual sales