News Column

Fitch: Brazilian Shopping Malls, Top-Players' Operational Performance to Remain Stable During 2014

June 17, 2014



NEW YORK--(BUSINESS WIRE)-- Fitch Ratings believes the operational performance of leading mall operators (BR Malls, Multiplan, Iguatemi, General Shopping Brasil, Aliansce and Sonae Sierra Brasil) should remain stable despite weak economic growth, increasing domestic inflation and deceleration of retail consumption. The structure of the leases and the shortage of high quality malls continues to give operators a strong position. This should enable them to have high EBITDA margins and strong cash flow generation in 2014.

The sector's leading companies have healthy levels of occupancy rates at 97%. Late payments are also manageable at only 2%. Same store sales (SSS) and same store rents (SSR) have slowed toward the end of 2013 and in the first-quarter 2014 vis-a-vis 2011-2012 but remains at adequate levels of 8%-9%. Fitch expects to see some retraction in SSS and SSR during the World-Cup soccer event, but it should not have a material impact upon 2014 results.

The sector's gross leasable area (GLA) has increased at a compound annual growth rate (CAGR) of 8.5% during the last five years ending Dec. 31, 2013, and the number of shopping malls increased to 495 in 2013 from 392 in 2009. During the next two years, growth should moderate due to less greenfields and a more cautious approach to investments during a period of slow economic growth.

Over the medium term, expansion in the average income of Brazilians and favorable population demographics should continue to benefit the growth of the shopping mall industry. The sector's low penetration - around 60 square meters per 1,000 inhabitants for the country - also supports continued growth of GLA.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Brazilian Homebuilders Dashboard' (May 2014);

--'Brazilian Corporates Dashboard' (March 2014).

Applicable Criteria and Related Research: Brazilian Shopping Malls Dashboard 1H14

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=750270

Brazilian Homebuilders Dashboard

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=749556

Brazilian Corporates Dashboard

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=738856

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.



Fitch Ratings

Jose Vertiz, +1 212-908-0641

Director

Fitch Ratings, Inc.

33 Whitehall Street

New York, NY 10004

or

Jose Romero, +11-55-11-4504 2600

Director

Sao Paulo

or

Media Relations:

Elizabeth Fogerty, +1 212-908-0526

elizabeth.fogerty@fitchratings.com

Source: Fitch Ratings


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