The curious case of CSN: a high of 140% in 2016 no one foresaw

The best stock of one of the best performing stock markets in the world this year is a star whose rise no analyst predicted.

The Companhia Siderurgica Nacional, CSN (CSNA3), the largest steelmaker in Brazil by market value, more than doubled in price in the first 100 days since the start of negotiations in 2016.The increase was a shock to analysts who recommend selling the papers at the beginning of the year and to the holders of its debt, which undid the company’s notes.

Even now, on April 12th, the CSN is the worst company in the Ibovespa, the Brazilian stock Exchange, with 13 sales and no recommendations to purchase, according to data compiled by Bloomberg.

Many of the reasons why analysts are so pessimistic about the shares are the same that led the management of Octant assets to plunge headlong into the CSN, said Laszlo Lueska, company partner based in Sao Paulo, which was the largest buyer of shares the steelmaker in the first quarter.

A Octant background earned R$ 18.5 million (US$ 5 million) with the CSN, betting that the renegotiation of bank loans at the end of last year, will be enough to help the company avoid a broader debt restructuring.

“CSN improved its debt profile and we think the company will succeed in its plan to sell assets at a good price,” said Lueska, who helps manage three funds in Octant. “We are more comfortable with the outlook for the company. There was a mismatch between the risks and the potential gains of the steelmaker. ”

In September, CSN postpone the maturity of US$ 1.3 billion in debt to the Bank of Brazil and Caixa Economica Federal (Brazilian state banks), from 2016 and 2017 to 2022.

The company, which is the second largest producer of iron ore traded in Brazil, has hired investment banks such as Credit Suisse and Bradesco to help her in the sale of assets.

The refinancing may have convinced the shareholders that CSN is able to withstand a drop in demand amid the recession Brazil is crossing.

CSN’s notes for 2020, a total of US $ 1.2 billion, had still a little change from the beginning of the year, remaining at the level of 48.4 cents. Although the value is greater than the lowest price in a year, about 35 cents, registered on 17 February, it remains considered distressed.

On Tuesday 5th, the share raised 7 percent to R $ 9.6, taking its high for the year until yesterday to 140 percent – or nearly 170 percent in dollars. The result contrasts with the gain of 32 percent in dollars Ibovespa, the second highest among the major indexes in the world.

“The stock investors seem to be betting on the recovery of the company,” said Cassiano Leme, a partner at Constancia Investments, which acquired 27,700 shares in the third quarter of 2015 and since then did not sell papers. “Investors in debt securities are waiting to see a real improvement.”