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Brazil's MRV puts plan for US unit funding process on hold

October 09, 2022 00:00:00

SAO PAULO, Oct 8 (Reuters): Shares in Brazilian homebuilder MRV fell on Friday after it announced that plans for a private equity funding process for its US unit Resia were put on hold due to unfavourable market conditions.

MRV Engenharia e Participacoes SA, as the company is formally known, said on Thursday that even though Resia is set to gradually increase its built units by 2030, it would no longer go through a capitalization round.

The company mentioned deteriorating US capital market conditions as a drag, adding that the process would be resumed in the future in a more favorable scenario.

Shares in MRV dropped more than 4% in morning trading, making it the biggest faller on Brazil's Bovespa stock index, which was roughly flat.

Credit Suisse analysts said the company's expansion plan would now take place at a slower pace, cutting their target price for MRV shares by 1.00 real to 15.00 reais in light of the announcement.

"The market is likely to react negatively," they said, "but it does not change our view that MRV is well positioned to recover its core business in Brazil's low-income segment."

In a securities filing, MRV noted Resia has helped its results due to high demand for properties and elevated margins.

Resia is known for building multi-family rental units, and MRV said rising U.S. interest rates and inflation had boosted rental demand, especially in the Sun Belt region.

In the first half of 2022, Resia's net profit reached $62.72 million, almost the same level seen in the full year of 2021, the Brazilian company said, making room for a growth plan that will see the U.S. unit gradually increasing the number of units built and sold until it reaches 12,000 per year in 2030.

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