In a recent note to clients, Itau BBA mentioned the management meeting it had with MRV’s CFO Leonardo Corrêa to discuss the recent 4Q11 results and the company’s prospects for 2012. Our takeaway was that it seemed like Caixa Economica remains full force in its 2012 goal to fund the real estate bubble  low-income housing segment (MCMV)…

Here are the highlights:

On the demand in the low-income housing segment…

The company reiterated that demand in the Brazilian low-income segment remains robust, and that it is posting higher-than-expected sales speed levels mainly in the smaller cities, where the competitive environment remains favorable. Mr. Corrêa also noted that, as usual, Caixa Econômica Federal (CEF) will host its traditional real estate show (Feirão da Caixa) during the first half of the year, and that the company could post a stronger 2Q12 in terms of launches relative to 1Q12, in order to take advantage of the event.

On the priority of its relationship with clients…

MRV, which started investing in client relationship management three years ago, says that the process is still a priority for the company. According to Mr. Corrêa, one important factor is to respond to the client in a fast and cheap manner, which is basically achieved via online help and call centers. The company has already provisioned for eventual repairs on its units (BRL 118 million as of 3Q11), which is basically constituted as 3% of the total construction cost.

On the expected increase in MCMV cap prices…

… timing and magnitude are uncertain. According to Corrêa, the Brazilian Finance Ministry has a tendency to avoid indexation in the Brazilian economy, which is the main reason that the program’s cap prices are not linked to the INCC. On a different note, the CEO also mentioned that the government is pushing for greater company participation in the 0-3-minimum wages segment of the MCMV program. The sector’s main players have already sent suggestions for improvement in the attractiveness of this segment of the program, but MRV will likely maintain limited exposure for now, with its presence limited to some specific regions.

Overall…

Itau BBA maintains its outperform rating on MRVE3 shares and reiterate the company as one of the top-picks in the sector… the bank also sees MRVE3 shares trading at 8.4x P/E 2012 and 7.5x P/E 2013.

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