Assaí Hit With R$1.3B Tax Assessment, Stock Tumbles 4.8%
Date
9/30/2024 7:00:20 PM
(MENAFN- The Rio Times) Assaí, a major Brazilian retailer, confronts a significant challenge as the federal Revenue Service issues a R$1.3 billion ($238 million) tax assessment.
This development has sent shockwaves through the stock market, causing Assaí's shares to plummet. The company's market value has already decreased by R$38 billion ($6.97 billion) this year.
The tax assessment relates to liabilities from Assaí's spin-off from GPA four years ago. Despite the alarming figure, Assaí will not immediately pay this amount or have its properties blocked.
The Revenue Service uses this measure to monitor asset transfers of potential tax debtors. This action ensures the company maintains sufficient assets to settle disputed liabilities.
Assaí can still sell or transfer assets but must notify the Revenue Service. GPA has already provisioned for all related liabilities.
The stock's sharp decline stems from market uncertainty rather than immediate financial impact. Bradesco BBI analysts note that this news introduces volatility and uncertainty to Assaí's investment thesis.
Assaí's Volatility and Future Outlook
They expect no visible impact on Assaí 's fundamentals in the short term. Tax issues typically take years to resolve. Any potential provisioning or cash flow impacts would likely occur several years from now.
This would happen only if Assaí loses its appeal. The company could have used asset sales to accelerate its deleveraging process.
Genial, a financial services firm, attributes the stock's high volatility to a worsening macroeconomic scenario. Rising interest rates in Brazil directly impact Assaí's estimated future profits due to its high financial leverage.
Despite these challenges, Genial believes the recent selling pressure seems somewhat exaggerated. Assaí currently trades at 10.5x P/E for 2025, 43% below its four-year historical average.
The company has options to reduce its financial leverage. Genial maintains a buy recommendation with a target price of R$10, suggesting a 24% upside potential.
As this situation unfolds, investors and market watchers will closely monitor Assaí's response and the broader implications for Brazil's retail sector.
In short, the company's ability to navigate these challenges will be crucial for its future performance and market position.
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