The two-day fall of more than 7% of the shares of Cemig (CMIG4) is a reminder that an eventual privatization of the company is a complex process and may not advance even in a so-called pro-market management.
On Monday (5) the company shot up 10% on the stock market, fueled by optimism with the reelection of the governor of Minas Gerais (MG), Romeu Zema (Novo), the day before. State-owned companies, in general, performed well on the trading floor.
Genial Investimentos analyst Vitor Sousa says he is “skeptical” about a complete privatization of Cemig – which is a holding company with businesses and assets in distribution, generation, transmission, gas, among others.
“A possible privatization must be deferred in relation to that of the cup (CSMG3) [estatal de saneamento de Minas Gerais]which should be much simpler compared to Cemig”, he highlights.
An analyst at Lumi Research, Leonardo Linhares recalls that privatization also depends on the Legislature. He says the process has already “met a lot of resistance” in parliament during Zema’s first term.
The pandemic, according to the analyst, also imposed an agenda that implied putting privatization aside.
For Linhares, Cemig’s action is not a bad deal. “The company pays dividends”, he points out. “But there are better opportunities on the stock market”.
The Lumi analyst recalls that it is a risk to buy a company’s share to take advantage of the upward movement with the expectation of privatization.
The analyst at Nova Futura Investimentos, Matheus Jaconeli, highlights that another The risk of investing in the entire sector is that the Brazilian economy will grow less next year, which would make the population demand less electricity.
Effects of privatization
Linhares, from Lumi, says that he does not see benefits in privatization beyond the traditional ones, but highlights the possible cost reduction, with “fewer employees for the same process”.
For him, there are two options for a company to increase its market value: increasing revenue or reducing costs.
“A company that focuses on reducing costs and improving efficiency will generate a lot of value for shareholders”, he points out. Linhares does not see Cemig increasing revenue.
Sousa, from Genial, predicts that Cemig will sell assets, such as the participation in Taesa (TAEE11), Gasmig and non-strategic assets. Jaconeli, an analyst at Nova Futura, also mentions the sale of shares.
Cemig confirmed that it is interested in selling minority stakes in Santo Antônio and Belo Monte and that it is optimistic about closing a sale agreement with Eletrobras (ELET3), according to BTG.
For the bank’s analysts, the company has presented good operating results, with costs under control and a much lighter balance sheet.
“However, some costs, such as those related to pension and health plans, are still undermining the company’s potential”, pointed out BTG.
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Source: Moneytimes
I am a journalist with over 6 years of experience working in the news industry. I currently work as an author for Global Happenings, and my coverage focuses on Technology news. I have written for various publications, including Reuters, The New York Times and The Guardian.
