Fernando Pina of LIS Capital presented his in-depth investment thesis on São Carlos Empreendimentos (Brazil: SCAR3) at Best Ideas 2019.
São Carlos Empreendimentos is one of Brazil’s leading commercial property investment companies, controlled by the same partners as is the private equity firm 3G Capital. São Carlos, which commenced operations in 1989, owns and operates a premium portfolio of corporate buildings and convenience centers in Brazil’s two largest cities, São Paulo and Rio de Janeiro.
An investment in São Carlos is a way to partner with a “value investor” in the commercial property space. São Carlos acquires properties at relatively low valuations, pursues improvements, and then divests opportunistically, generating value in the process. The business model — rent revenue, coupled with active management of the properties portfolio — makes São Carlos one of the most profitable public companies in the Brazilian real estate sector.
At the recent market price, the shares have a margin of safety as they trade at a valuation approximating the original acquisition price of properties, i.e., significantly below replacement cost or market value, thereby ascribing no value to the company’s record of value creation. The idea combines quality (in light of the company’s proven capacity to compound value) and an attractive price (as the shares can be bought at a discount to NAV).
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About the instructor:
Fernando Pina is one of the founding partners at LIS Capital, a value investment firm based in Brazil that seeks investments in companies with a strong risk/return proposition. Previously, Fernando Pina worked at Orbe Investimentos and National Bank of Canada. Fernando graduated in Business Administration at Insper/SP.