BRF S.A. leniency pact may catch market ‘off-guard,’ says Morgan Stanley

After BRF S.A. announced that it entered into a leniency agreement with the Brazilian federal government to resolve past CarneFraca/Trapaca investigations and agreed to pay a total amount of R$584M, or about 7% of its current market cap, to the authorities in five annual installments starting next year, Morgan Stanley analyst Ricardo Alves called the news a "negative development" that was to some extent "under the radar of most investors." While he believes it is very important and a long-term positive to get past these older overhangs, given that there were no provisions for the matter, as confirmed by management, the "stock could take a toll," added Alves, who has an Underweight rating and R$13.50 price target on BRF shares.