Counter-Take: Even A Mild Petrobras Offering Is Good Enough (PBR, EWZ)

Petroleo Brasileiro (NYSE: PBR), or Petrobras, may finally soon get away from being such a drag on the Brazilian stock market measured by the BOVESPA.  With its mammoth stock offering just days away, the overhang and several other issues could be a boon for the business.

Thomson Reuters has an interesting in-house research take on this from analyst Mike Tarsala.  The research does not call the deal riskless, but the take-away is that even a mildly mediocre reception to the deal might be more than enough to bolster Brazil.

This could help the iShares MSCI Brazil Index (NYSE: EWZ) as well as Brazil’s best related ETF product.  At $73.50, its 52-week range is $57.18 to $80.93.  Petrobras makes up a large portion of this ETF, and Petrobras is at $ versus a 52-week range of $31.21 to $53.46.

Tarsala’s full research presentation is here, but here are some quick snippets…
Petrobras is # 2 by market cap weighting of the BOVESPA, but it is the fourth worst performer of the 68 BOVESPA components so far in 2010.  The index is in effect being sabotaged by Petrobras.  3 reasons more to consider the offering:
1) Unique deal for investors and this is the largest oil field investment in years
2) stability of Brazil and growing consumer class
3) scale is in its favor

FULL REPORT