The Brazilian utility performed strongly, with the stock price reaching our target price. Given rising inflation reducing Brazil's ability to cut interest rates, we saw no reason to upgrade, hence the sale.
Cia de Transmissao has an effective monopoly on the transmission of electricity in Sao Paulo. Privatised in June 2006, the company's new management announced in December that it was laying off a massive 65% of its staff. This rationalisation is will lead to a large improvement in profits, after an initial charge in 2006 for redundancies. The company is working with the regional government to extend electricity coverage of the city - providing a further source of revenue growth. As an additional benefit, it has a policy of paying out the majority of free cash flow as a dividend - leading to a 10%+ yield.
| Sedol |
Type |
Price |
Date |
| 2440972 |
Sell |
BRL 37.467 |
02/01/2008 |
| 2440972 |
Buy |
BRL 28.00 |
20/03/2007 | |
