We are keeping our Hold recommendation on Brazilian low-fare airline Gol Linhas Aereas Inteligentes SA (GOL) with a target price of US$3.75. The company has been enjoying impressive growth in the Brazilian domestic airline industry for the last few years, and the short-term growth outlook remains encouraging.

Third-quarter 2008 results were not that encouraging. Total operating revenue was R$1,788.3 million (US$1,077.3 million), a 37.2% increase over the same period of 2007, representing a 35.5% year-over-year increase in passenger revenues and a 55.0% year-over-year rise in cargo revenues. Moreover, the credit crunch and the tight monetary policy in Brazil are matters of huge concern in the very short term.

Currently, Gol is trading at 5.6x our 2009 estimated EPS. It is important to note that 2007 earnings were highly affected by the infrastructure crisis in the Brazilian airports, a problem that showed a slightly improvement in the first half of 2008.

However, Gol remains one of the fastest growing airlines in the world, and with the merger of VRG and GTA the short-term growth outlook seems positive. However, we do not consider the current valuation particularly attractive, even considering that earnings will be more reasonable in 2009 thanks to a better situation in the Brazilian airports and the huge decline in oil prices.