PRVI3 - Companhia Providência Indústria e Comércio

I took a look at the main numbers of 2011 results of Providência, a leader in the manufacture and sale of nonwovens in Brazil with a significant presence in the Americas, and operating globally:

• Cash from operations averaged 65 mi in the last 3 years (13.5% of mkt value)
• Company will pay 39.5 mi in dividends, 100% of adjusted 2011 earnings (yield of 8.2%)
• An increase in 40% is expected for 2012 with the entry into operation in the 2nd quarter of the production line in Pouso Alegre (MG) and in the 4th quarter the production line in Statesville (NC).
• Its products, nonwovens, used in  the  manufacturing of  hygienic  and  personal  care  products, it's a consumer good, so the demand is more stable.

FRIO3 - Metalfrio

I took a quick look at Metalfrio, one of the world’s largest manufacturers of plug-in commercial refrigeration equipment, particularly ice cold merchandiser (ICM) equipment, because its yield is currently high.

Average FCF in the last 3 years is 55.5 millions, which yields 22.2%. This may sound to good to be true. And it really is:

• 27.6 millions of FCF was due to assets/liabilities changes. This is not expected to be recurrent and/or sustainable.
• 30.0 millions was due to tax incentives on ICMS in MS, due in 2025.

Middle Banks - Bic Banco versus Daycoval

Below is a comparison table between this 2 banks. I wish to draw attention to:

• Financial operations expenses increased a lot, specially in Bic Banco, due to increase in provisions for loan losses (+98%)
• Loan Portfolio of Daycoval has been increasing a great deal: 42% in 2011 and more than doubled since the end of 2009.
• Daycoval seems to have a more diversified portfolio service: exchanges bureaus, Daypag and Asset Management (1.4 billion under management)
• Daycoval also looks more profitable: better NIM, ROE, efficiency ratio...

Comgas Cash Flow

Here, I think, it's the cash flow of Comgas either by prior accountancy and by IFRS.

In either one, dividends paid exceed free cash flow generated. That can explain why net debt grew 35% over 2010.

Banco do Brasil adjusted net income: believe it or not!

In the release of its results for 2011, Banco do Brasil publishes the recurring net income, that is the net income adjusted by one-off items, such as Additional Allowance for Loan Losses, Contingent Liabilities, Reversal of Labor Liabilities...

So far so good. But as they say, the devil is in the details. In this case, it's in the notes to the financial statements: adjustments of actuarial assets/liabilities.

So if we exclude this "earnings" under Other Operating Income, real adjusted net income would be:

BRL Millions	2010	2011	Avrg
Account Net Income	11.703	12.126	11.915
(-) One-Off Items	1.039	375	707
Recurring Net Income Published	10.664	11.751	11.208
(-) Adjustment of actuarial assets/liabilities	4.299	2.981	3.640
Real Recurring Net Income	6.365	8.770	7.568

Largest Banks x Banrisul

I put Banrisul (BRSR6) at the side of the largest banks and the comparison is just amazing!

(click to enlarge)

Banco do Brasil, Bradesco and Itau - 2011 Results Compared

I'll show a bunch of selected metrics of the largest brazilian banks in order to take a more clear picture of 2011 results. My comments are as follow:

Banco do Brasil (BBAS) 

• Has the lowest ratio Net Income/Portfolio, so to have the similar ROE as the other 2 has to be more leveraged (lowest Capital Adequacy Ratio).
• On the other hand, BBAS has the lowest Delinquency Ratio over 90 days: 2.1%

CIEL3 x RDCD3 - Final Comparison

I'm very sorry that an exceptional asset like Redecard will leave Bovespa. But while it don't go away, we have time for a final comparison. In short, 4Q2011 x 4Q2010:

• Redecard lost market share but kept MDR margin constant. Costs was under control, so EBITDA grew 29%.
• Cielo increased in volume but lost MDR margin. Costs and expenses blew up, so EBITDA grew only 16%.

I think that the Oscar goes to Redecard!