MMAASSTTEERRSS IIINN FFIIINNAANNCCEE QUITY ESEARCH EEQUIITY RRESEARCH JERÓNIMO MARTINS, SGPS COMPANY REPORT

FOOD 06 JUNE 2011

STUDENT: MARGARIDA CARREIRA [email protected]

Premium position in leads to… Recommendation: HOLD Vs Previous Recommendation BUY

…positive results in the Portuguese stock market. Price Target FY11 (PT): 13.98 €

We’ve downgraded our PT from €14.31 to €13.98 driven by the Vs Previous Price Target 14.31 € riskier Portuguese profile and tougher macroeconomic Price (as of 3-Jun-11) 13.59 €

outlook. Both our sales and EBITDA margins estimates (2011E- Reuters: JMT.LS, Bloomberg: JMT PL 2013E) for all domestic business units suffered cuts, reflecting the 52-week range (€) 6.84-13.70 measures imposed by the Troika’s agreement. As a result, our Market Cap (€m) 8,552.09 valuation for was reduced in 10.80%, meaning -2.31% in Outstanding Shares (m) 629.293 Source: Bloomberg our PT and our recommendation has changed to HOLD. . Poland - Polish operations are the major source of JMT vs PSI20 70% value creation: We place our hope in whose LfL sales 60%

50% and EBITDA margin grew 11.7% and 60bp in 1Q11. We expect 40%

sales to grow at a CAGR of 10.8% in 2010 (local currency). 30%

20% Biedronka’s expansion plan will allow JMT to benefit from high 10%

growth rates as long as the food retail market converges to 0%

European standards and Biedronka enlarges its market share gap 2010 Jul Aug Sept Oct Nov Dec 2011 Feb Mar Apr May Jun to its direct competitors. Polish operations account for 78.6% of our JMT’s value. Source: financeyahoo.com

. Portugal - we expect the group to consolidate its (Values in € millions) 2010 2011E 2012E Revenues 8,691.0 9,528.0 10,197.1 positioning: Portuguese operations account for 21.4% of our EBITDA 653.1 672.27 719.67 enterprise value and we forecast sales and net income to increase EBITDA margin (%) 7.5% 7.1% 7.1% Net Profit 281.0 272.6 273.3 at a CAGR of 4.7% and 8.2% in the next 10 years, reflecting the EPS 0.446 0.433 0.434 deterioration in private consumption and the mature stage of the P/E 25.57 32.27 33.45 RoE (%) 24.8% 19.3% 17.0% food retail market. Nevertheless, the group was able to increase its EV/EBITDA 10.98 13.1 12.2 profits by 33.5% in 1Q2011 YoY thanks to Biedronka, Capital Expenditures 434.2 685.6 724.5

corresponding to €56.4Mn. Source:Company Company’s description reported Data and NOVA ER Team estimates Jerónimo Martins SGPS (JMT) is a Portuguese

. Going Abroad is a Top priority: JMT plans to enter a new company operating in the food retail market in the distribution, industry and services areas, in geography in 2012. The most likely format is discount and mass Portugal and Poland. In Portugal, it operates under the brands Pingo Doce and while markets should remain key. in Poland it operates with its hard discount model, Biedronka. JMT is also involved in the food industry and in the services area.

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Table of Contents

Company overview ...... 3

Company description...... 3 . Business Units description ...... 3 Shareholder structure ...... 4 Macroeconomic Analysis ...... 5

Portugal ...... 5

Poland ...... 6 Food Retail Sector Overview ...... 7

Food Retail Trends ...... 7

The Private Label’s Phenomenon...... 9 The Portuguese Food Retail Market ...... 10 The Polish Food Retail Market ...... 12 Valuation ...... 13 Operational Forecasts ...... 14 Investment Forecasts: Capex ...... 20 Financing Forecasts: Debt and NWC...... 21 Discounted Cash Flow model ...... 23 Sum of the Parts Approach ...... 24

Smooth Investment Scenario ...... 25 Multiples Comparison ...... 26 “Apteka Na Zdrowie” ...... 27 Further Internationalization ...... 28 Financial Ratios ...... 29 Financial Statements ...... 30 Appendix ...... 31 Disclosures and Disclaimer ...... 39

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Company overview

Company description

Jerónimo Martins SGPS (JMT) is a Portuguese company in the food sector operating in the distribution, industry and services areas. Currently, the company Exhibit 1 – JMT Net sales Breakdown in conducts activities in Portugal (mainland and ) and Poland. 2010 (%) Nevertheless, the group is searching for new markets to increase its international position. In Portugal, JMT maintains its recognition as the second largest portuguese food retail group, right after Sonae Distribuição. While in Portugal it operates with the brands Pingo Doce (retail) and Recheio (cash&carry), in Poland it stands with its hard discount model, Biedronka. JMT is also involved in the food industry over its joint-ventures with Gallo Worldwide and Unilever. In the Source: Company data service sector, it offers marketing services, food services and further represents international brands in Portugal. Brands like Olá, Hussel, Jeronymo, Chili’s, Ben & Jerry’s and Caterplus are also part of JMT’s portfolio. Exhibit 2 – PD’s Number of stores evolution . Business Units description

With a total of 353 stores in Portugal (340 in Portugal mainland and 13 in Madeira), Pingo Doce (PD) is leader in the segment with 12.1% market share1 (see Appendix 1). Relying on Portugal’s largest outlet network, PD has achieved a sales growth of 9.9% in 2010. Among the main differentiation factors are its every day low prices strategy, its strong private label (60% of PD total sales), its always fresh perishables and finally its ready to eat Meal Solutions. Unlike other retailers like , PD intends to be a price follower Source: Company data instead of a price leader. In specific product categories (around 500 references), PD is forced to offer the same prices as Lidl. Since 2010, the group no longer Exhibit 3 – Recheio’s type of clients in owns Feira Nova being all of those stores converted into PD ones. In Madeira, 2010 sales have grown 7.9%, suffering losses due to the storms occurred on 2010, which affected two of JMT’s most representative stores (Anadia and Dolce Vita).

Recheio is the leader in the food wholesale segment, with 39 cash&carry stores and 3 food service platforms, which posted a 4.6% sales growth in 2010. Mainly aiming at satisfying clients from the HoReCa (Hotels, Restaurants and Café’s) and traditional retail channels, its main differentiation efforts have been increasing perishables (14.9% of its total sales) and its private labels, Source: Company data MasterChef, Gourmês and Amanhecer (70% of its total sales). It presents a

1 According to Euromonitor International, PD became leader in 2008, surpassing Continente (8.2%) with a market share of 10.6%.

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market share of 38%.

In Poland, JMT occupies a relevant position in the food retail market with its solid Source: Company data hard discount format Biedronka. It is the leader in its segment with a market

Exhibit 4 – Biedronka’s number of stores share of 10.5% and has 1,649 stores. Its assortment is composed by 7% of non evolution food products, 56% exclusive brands and 37% corresponding to other brands. Due to the potential of the Polish market, Biedronka has grown rapidly in the last 5 years and constituted 55% of the company’s sales in 2010. It is present in 9 Polish regions out of 16 and is recognized by more than 92% of Poles.

In 1949, JMT entered the food industry through its joint-venture with Unilever. In 2007, with the merger of Fima VG, Lever Elida and Olá, a new company emerged, Unilever Jerónimo Martins (UJM). Today, UJM is the biggest manufacturer of the food mass market, home care and personal care products in Source: Company data Portugal. Regarding services, in 1972 Jerónimo Martins Distribuição de Produtos de Consumo (JMD) was born. Due to its knowledge of the Portuguese consumer and distinct markets, JMD’s core activities are the exclusive representation of a set of international brands in Portugal, mostly market leaders. Shareholder structure

Exhibit 5 – Shareholder Structure Currently, JMT’s capital is formed by 629,293,220 ordinary shares whose major shareholder, with 56.1%, is Sociedade Francisco Manuel Soares dos Santos which is controled by Alexandre Soares dos Santos, the Chairman of the Board of Directors of JMT, and his sons. Heerema Holding Company through Asteck S.A. owns 10%, Carmignac Gestión 3%, BNP Paribas Investment Partners owns 2.03% and the remaining 29% are free floating and own shares (see Appendix 2). This structure alows for a certain stability as Soares dos Santos guarantees the continuity of JMT’s strategy2. Nevertheless, despite having the majority of JMT, Soares dos Santos’ family cannot make decisions without

Source: Company data geeting the agreement of a substantial percentage of shareholders in issues like the dividends policy3 for instance. The shareholders’ structure also varies among business units. The company owns only 51% of PD while the remaining participation belongs to , a Dutch food retail group. In Madeira only 75.5% are owned by JMT. The remaining are detained by Lidosol and J. G. Camacho. Regarding industry, Unilever owns 55% of UJM similarly to Gallo Worlwide, that controls 55% of its own company. The remaining business units are entirely

2 Moreover, according to Código das Sociedades Comerciais, article 386º, nº3, JMT cannot merge, be sold or dissolved without the acceptance of 2/3 of the votes in general assembly. 3 According to Código das Sociedades Comerciais, section IV, article 294º, nº1, the payout ratio can only be changed by acceptance of at least 75% of the social capital in general assembly.

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owned by JMT. Macroeconomic Analysis

Portugal

Exhibit 6 – Portuguese real GDP Portugal is currently in a very delicate situation, dealing with a serious recession growth (%) particularly due to its high budget deficit (9.1% of GDP in 2010 and 10.1% in 2009), lack of competitiveness and the need of deep structural adjustments. According to the EU rules, the Portuguese deficit should be lower than 3% of its GDP, very distant from the ones achieved in the last decade. As a way of fighting its deficit, in 2011, the government increased VAT from 21% to 23% in the revenues side and it has also cut 5% on civil servant wages on the expenditure side. However, the obtained results were not enough. This fragility is even more obvious when examining public solvability4, resulting in high yields of sovereign debt and continuous downgrades on credit ratings (Portugal current rating is

Source: IMF for past and future values BBB-, according to S&P). Perceiving the high level of uncertainty and the Portuguese risky profile, international investors are speculating negatively, strongly conditioning access of Portuguese banks to funding and leaving the economy with tough liquidity problems. Moreover, with 10.638Mn of inhabitants, Portugal presented the highest unemployment rate of the last 10 years in 2010 (10.83%) and a poor GDP growth rate of 1.4%. Unable to turn around this Exhibit 7 – Portuguese unemployment th rates (% of total labor force) situation, on April 6 Portugal was forced to ask for external assistance to the Troika, following Ireland and Greece. €78Bn were agreed and interests of 3.25%- 4.25% and 5.5%-6.5% will be paid to the IMF and the EU, respectively. The event wasn’t, however, enough to calm down international markets and spreads on sovereign debt haven’t stopped growing, achieving values of 11.89% and 9.72% for 5 and 10-year treasury bonds, respectively, on May 2nd. Most concerns by the German Finance Minister about the eventual need to restructure Greece’s debt in June also jeopardized the very similar Portuguese case. It also led investors to speculate about a possible departure from the Euro by Greece, representing the Source: IMF for past and future values failure of the EU model. In fact, Portugal may not meet its financial obligations if interest rates prove to be higher than its growth potential. IMF forecasts include negative or low values of GDP growth rate in 2012 (-0.5%) and 2013 (0.9%). Measures imposed by the Troika’s agreement like the dismissal of 8,000 civil servants, cuts on pensions higher than €1,500, 50% reduction on overtime income, higher indirect taxes and higher VAT on electricity (from 6% to 13%-23%),

4 Portuguese sovereign debt corresponded to 93% of GDP in 2010.

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among others, are leading to a pessimistic evaluation from the Portuguese Exhibit 8 – Portuguese Food retail sales consumers and consequent decrease on families’ disposable income, with 61.3% and CPI YoY(%) believing its financial situation will worsen. 1Q11 already shows evidence that consumers are cutting back on spending, specially on non-basic purchases, with food retail sales decreasing by 1.6% YoY. As food inflation has been of 2.4% since 1Q10, the fall on food retail sales was, in fact, of 4% YoY, in real terms.

Hence, we’ve cut our JMT valuation for Portugal by 10.8%5, as we expect both retail and non retail activities to be affected by consumers’ retrenchment. Services and Industry (non retail) suffered higher cuts as consumers are trading down from manufacturer brands to private labels. Although less affected due to its based on food assortment, our PD and Recheio estimates were also reduced as we believe they’ll not be able to avoid the negative impact on consumption. However, as Source: Bloomberg JMT’s sales are mostly focused in Poland6 (55% of total sales) and its economy has been able to grow consistently, JMT performed positively as shown by the 1Q11 results (consolidated sales growth of 14.7%7 YoY). Exhibit 9 – Polish real GDP growth (%) Poland

Contrarily to Portugal, Poland, with a population of 38.200Mn inhabitants, has been one of the fastest growing countries in the EU. Further affected by the European economic crisis, Poland was the only country in the EU to maintain positive GDP growth during the economic downturn period (2008-2010). This performance was only possible thanks to 4 factors: i) Poland had access to structural funds given by the EU which contributed to boost the economy, ii) The zloty devaluation

Source: IMF for past and future values has supported Polish production by making polish goods more competitive and increasing exports, iii) imports decreased in 2009 by 9.3%, and finally iv) its Exhibit 10 – Polish unemployment rates conservatively managed banking system was little exposed to toxic assets. (% of total labor force) Moreover, Polish exports are highly dependent on the German economic growth, as Germany is by far its most significant trading partner (1/4 of polish exports). Polish exports are mainly natural resources like coal, silver, iron and salt and also automobiles, machinery, furniture and chemicals supported by a healthy industrial sector. This growth is sustainable as long as Poland still shows large differences from the European standards8. Last year, Poland’s economy was able to expand by 3.817% and IMF forecasts point a growth of 3.833% for this year. Triggered by

Source: IMF for past and future values this economic positivism, the zloty has appreciated, reaching 3.964 (Dec 2010)

5 The impact on JMT’s main inputs is explained later in the Operational Forecasts chapter. 6 As extremely dependent of the Polish economy, JMT is very exposed to zloty variations, supporting a high exchange rate risk. 7 In 1Q11, Biedronka, PD, Recheio, Madeira, Industry and Services presented sales growth rates of 21.8%, 4.6%, 3.7%, 15.9%, - 4.6% and - 4.8%, respectively. 8 In Poland, GDP per capita equaled $12,300.1 (2010) while in Germany it was of $40,831.7 (2010).

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Exhibit 11 – Polish Food retail sales and against 4.1006 (Dec 2009) per Euro. Nevertheless, rising demands to fund health CPI YoY(%) care, education and the state pension system caused the public sector budget deficit to rise to 7.9% of GDP in 2010, a number above the required European target of 3%. According to a report by S&P, Poland’s current rating of A- might be in danger of being lowered if structural reforms of its public finances are not implemented. The good growth news is deflecting attention from the country’s fast- growing debt9. It is important to mention that the Polish Euro adhesion was postponed indefinitely thanks to the European crisis.

Since 2010, food inflation has been increasing, reaching values of 5.5% in 1Q11. Despite the negative impact of the timing of Easter in 1Q1110, food retail sales were able to grow 0.6% YoY. Following this tendency, mainly due to its strong LfL sales growth (11.7%11) and its increase on selling area (13.0% when compared to 1Q10) Biedronka was able to present good results in 1Q11, with a sales growth of 21.8%. Source: Bloomberg Biedronka counts for 78.6% of our JMT’s PT and we expect sales to grow at 2

digits in 2011 (10.4%) and 2012 (11.1%). Food Retail Sector Overview

Exhibit 12 – Portuguese Householders’ Food Retail Trends food expenditure Traditionally, the percentage change of householders’ income is highly correlated to the GDP growth, which is converted into a correlation around 0.97. Nevertheless, even having a direct impact on general consumption, high variations in disposable income are not translated into high variations in food spending. As an essential good, demand for food is quite inelastic and food consumption does not grow exponentially when income experiences that behavior. That’s mainly why the industry is seen as a very defensive one against recessions. Instead, the variations that may occur relate to consumers’ choices, selecting cheaper products during a recession period or expensive ones otherwise. According to INE, in the last 10 years, Portuguese householders have been spending on average 14.1% of their incomes in food related goods. We believe Source: INE and IMF that this percentage will tend to decrease to 13.6% in 2020 at a CAGR of -0.65%,

mainly due to the increase of the PL’s share12 driven by the severe austerity measures implemented. Similarly, according to Eurostat, in 2006 Poles spent approximately 18.2% of their disposable income in food. This percentage has been

9 In 2010, public debt counted for 55% of GDP. th th 10 In 2010, Easter was on April 4 while in 2011, it was on April 24 . 11 Biedronka’s average basket inflation was 4%, meaning that Biedronka was able to raise prices below the market average (5.5%). 12 Having a current private label share of 33%, we believe that in 2020 Portugal will achieve a PL share of 45%, following the behavior of Switzerland (the European most developed country in terms of PL).

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decreasing at a CAGR of -1.5% since 2000, mainly due to consumers’ purchasing power increase and rising importance of non food categories, diversifying their consuming patterns. We believe this percentage will reach a value of 16.2%13 in 2020, following the same trend as Portugal.

Exhibit 13 – Changes in European Over the last years, the European ongoing economic crisis has been changing shopping patterns (October 2008) customers’ behavior. Following IGD, consumers have adjusted their priorities, becoming more value conscious, price sensitive and rational in their purchases. As a consequence, Private Labels (PL) and Eat-at-Home tend to evolve rapidly. According to JMT, in Portugal (1Q11), PD’s number of shopping trips increased, being however, somehow neutralized by a reduction in the value of the average ticket14, showing that consumers are already reducing their spending. Furthermore, they opt to shop around (proximity) and as more rational buyers, their time shopping has increased. On the other hand, in Portugal, there’s an aging population tendency, which together with a bigger concern with health is resulting in a higher demand for healthy products.

Source: The Institute of Grocery On the supply side, the change in consumers’ behavior has forced most retailers Distribution (IGD) data to optimize and reduce their assortments (simplifying their offer) as a way to reduce costs and achieve efficiency in stock management. For instance, PD’s positioning changed from a premium concept to an “every day low price” model, reducing its offer from 15,000 references to 5,500. Moreover, Portuguese retailers are holding higher costs due to higher raw materials’ prices and VAT, resulting in an EBITDA margins reduction. According to Deloitte, the retailers’ ability to limit their costs is the key to maintain lower prices and achieve profitability during an economic crisis. Retailers like JMT are investing in the rationalization of their logistics network, so they can increase their efficiency gains and maintain their Exhibit 14 – JMT sales by quarters in EBITDA margins. 2010, as a percentage of total sales The food retail market is a seasonal activity, selling progressively more from th 1Q 2Q 3Q 4Q quarter to quarter. Contrarily to the 4 quarter, people tend to buy less during the 2010 2010 2010 2010 1st quarter due to the already spent incomes during Christmas celebrations. 22.5% 24.0% 26.3% 27.1% rd nd Similarly, customers tend to spend more during the 3 quarter than in the 2 , as Source: Company data it corresponds to holidays when the vacation subsidy is granted. Additionally,

companies in this sector are characterized by high liquidity ratios since they receive from customers immediately and pay to suppliers later on, allowing for implementing ambitious investment plans.

13 Poland presented a PL share of 14% in 2009 and we believe it will reach the current Portuguese PL share (33%) in 2020. 14 In 2010, the value of the average ticket of PD was around €12 to €15.

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Private Labels’ Phenomenon

Since the 1970’s, the Private Label market has been suffering a vast

PLs are an option for 99% of transformation process. PLs that were previously perceived by customers as the Portuguese homes and cheap, of inconsistent quality and brand copies, are nowadays competing in 39% of the Polish householders. quality. According to AC Nielsen, PLs are an option in terms of quality against Manufacturer Brands (MBs) for 39% of the Polish householders and 99% of the Portuguese homes. Usually, customers acquiring these products reveal a high degree of satisfaction (87%) and only 3% presented some kind of complaint. In Even after the economy most cases, PLs are produced through partnerships with manufacturers. improves, 95% of the Portuguese people will Furthermore, TNS Worldpanel data reveals that, even after the economy improves, continue to purchase PLs. 95% of the Portuguese people will continue to purchase PLs. Following this, JMT has been making an effort to increase its PL portfolio, not only because of consumers’ changes but also as a way of differentiation and protection against the increased pressure from competition. In 2010, PLs corresponded to 38% of PD’s PLs are one of JMT’s major total sales and 17.1% of Recheio’s total sales (see Appendix 3). Furthermore, PD differentiation pillars. managed to increase its PL’s weight on sales to 42% in 1Q11 against 39% YoY. In Portugal, JMT shows a PL’s share of 33.7%, slightly higher than the 33% of the overall market, meaning PLs are one of the critical differentiation pillars of JMT’s distribution business models. Exhibit 15 – Relation between PLs’ share and Retailers Concentration (%) (2009) In fact, PLs are growing faster than MBs, representing currently a European market share of 35%15 (Europe is the region with the highest share of PLs). Apparently, this growing tendency is highly correlated with the growing presence of hard discounters16 and also the high level of retailer concentration measured by the sum of the 5 top retailers’ market share. All the 5 most developed countries regarding PLs have a retailer concentration of over 60%. Switzerland is the 1st ranked with a 46% PLs’ share and a concentration of 69%. Portugal presents a current retailer concentration of 54% (see Exhibit 19) and a PLs’ share of 33%17. The prevailing reasons behind this effect are the retailers’ aims for higher market shares, being able to create brand awareness which guarantees consumers’ loyalty. In contrast, emergent markets like Poland, which have a very fragmented Source: AC Nielsen and Planet Retail retail market, have a far less developed PLs market (15%15 in 2009). data

More important is to understand the PLs buyers’ profile and their motivations in the purchasing moment. Currently, as mentioned, price plays an important role at the moment of decision, which contributes to increase PLs’ sales against MBs’.

15 Source: AC Nielsen 16 Hard discounters as or Lidl that mostly sell PLs are expanding their presence. For instance, PLs count for 95% of Aldi’s sales. 17 Source: TNS Worldpanel data

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Following an AC Nielsen study, 81% of the householders admitted to compare 79% of the global prices between PLs and MBs so as to decide which product to purchase. Actually, consumers confess to 79% of the global consumers confess to change purchasing habits to reduce change purchasing habits to reduce expenses. expenses. Therefore, more than half agreed that PL products are not only consumed by people with lower incomes. For JMT, PLs play an important role in the assortment as in 2010 consumers’ demand for these products increased, Exhibit 16 – Average price differential regarding their level of quality. In Portugal the average price differential between PLs and MBs by country in 2005 (%) between PLs and MBs is around -42%18. In this sense, the PL market seems to be resistant to economic fluctuations since they maintained a steady and growing business throughout economic increases or decreases. When compared to other nations, the Portuguese is one of the most pessimistic, with a confidence index of 45, leading to the preference for cheaper alternatives. Thus, MBs have been losing sales for two successive years. When looking at the cumulative benefits for a range of 80 categories, customers in Europe can achieve an average saving of 37%15. The demand for competitive prices is a reality and while customers save, retailers can be presented with higher margins as they have more Source: AC Nielsen – “The Power of Private Label 2005” control on production costs and activities such as marketing or distribution.

The bottom PL value driver is the wide range of categories that this sector manages to offer. However, 35% of European consumers agreed that PLs are not suitable for products where quality really matters. Consumers may easily Regarding this PLs growing tendency, our adopt PLs when it comes to dog food, refrigerated food or home cleaning sales estimations for products among others, but when it comes to personal care, baby food, Portugal and Poland were lowered. cosmetics and alcoholic beverages they’re less convinced about their quality. Regarding this PLs growing tendency, our sales estimations for Portugal and Poland were lowered, believing that the percentage of householders’ income Exhibit 17 – Portuguese MGD market (€ Mn) spent in food related goods will decrease at a CAGR of -0.65% and -0.81% in

Portugal and Poland, respectively.

The Portuguese Retail Market

The food retail market in Portugal is currently achieving a certain level of maturity and will tend to stagnation, with companies heavily competing between each other. EBITDA margins will tend to be squeezed not only because of the fierce competition felt but also because of the low price strategies implemented. At this time, the Traditional Market (TM) accounts for 23% of the entire market, while Source: Euromonitor International Modern Grocery Distribution (MGD) corresponds to 77%, around €15,442.4Mn.

18 Source: AC Nielsen – “The Power of Private Label 2005”

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Exhibit 18 – Sales in Grocery Retailing In 2010, the 5 Portuguese top retailers accounted for 54% of the overall by format (€ Mn) market, suggesting a high retailers’ concentration. However, it still presents a small concentration comparing to other European countries like Germany or Switzerland, with 63% and 69%, respectively. According to Euromonitor, in Portugal had the highest growth rate over the past 5 years (CAGR of 10.7%) against hypermarkets (CAGR of 2.7%) and discounters (CAGR of 1.1%) (see Appendix 4). This trend shows that supermarkets have managed to bring together low prices and convenience. In contrast, discounters presented a stable behavior, which is not only related to the discounters’ slow down on new openings during 2009 and 2010, but also with Minipreço’s negative results during the same period. Source: Euromonitor International In the past, both Sonae and JMT, the two biggest players of the market, were Exhibit 19 – Portuguese retailers’ market shares (%) able to grow through organic expansion and M&A operations. In 2007, JMT

Retailers Market bought Plus in Portugal and Poland while Sonae bought , as a way of shares 2009 2010 reinforcing their positions in the market. Currently, due to its consistent negative Sonae Distribuição 16.4% 17.1% Jerónimo Martins 13.1% 13.7% results, Minipreço has been creating some speculation and rumors about a Os Mosqueteiros 10.0% 9.5% possible sale. Moreover, Carrefour has started to decrease its investment in Cia Portuguesa de 7.5% 7.9% Minipreço in 2009. Yet, there is no official buyer on the radar although Sonae Hipermercados SA Lidl 6.0% 5.8% and Group seem to be interested in it. However, we believe the Portugal 4.2% 4.0% competition authorities would not allow for a possible acquisition by Sonae Supermercados E Leclerq 2.7% 2.8% without some restrictions, regarding its current market share. Others 40.1% 39.2% Owning stores in similar locations, of similar dimension, also competing in price Source: Euromonitor International and offering a wide range of PLs, Minipreço and Lidl became PD’s main rivals.

Exhibit 20 – Portuguese MGD forecasts Sonae, instead, is more focused on hypermarkets and non food specialized retail outlets. Currently, Sonae is operating only under the brand Continente. Overall JMT MGD (Mn €) Market sales Fighting between each other, retailers are investing significantly in solid 2010 20,061 15,442 2,884 2011E 20,016 15,598 3,210 marketing campaigns and outlet design in order to increase their brand 2012E 20,018 15,791 3,276 awareness and attract more consumers than their peers. Both JMT and Sonae 2013E 20,338 16,241 3,391 have been largely investing in TV ads. While JMT reinforces its PD’s policy for 2014E 20,782 16,800 3,533 2015E 21,341 17,465 3,698 quality at low prices, Sonae promotes its brand Continente. The discount leader, 2016E 21,969 18,200 3,879 Lidl, so far not investing on TV ads in order to maintain its very low prices, is now 2017E 22,689 19,028 4,081

competing by using marketing tools and developing PL luxury products. 2018E 23,526 19,972 4,314 2019E 24,513 21,066 4,579 In the medium-term, we believe there is still a little room for growth due to 2020E 25,566 22,242 4,869 CAGR 2.5% 3.7% 5.4% the significant gap existing between Portugal and European countries. Source: Euromonitor International, Following Alisuper that went bankrupt (2011), we believe smaller players such as Company data and ER Team estimates Sampedro will go out of business without the ability to survive the fierce

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competition. Hence, further consolidation opportunities will occur. According to Euromonitor International, MGD was able to grow at a CAGR of 6.8% in the past 5 years. Believing traditional market will continue to shrink, we expect MGD to increase to 87% in 2020, growing at a CAGR of 3.8% in the next 10 years (see Appendix 5 for methodology).

We consider that PD was able to positively differentiate itself from its peers in the past through its strategic moves. Hence, despite the negative impact on householders’ consumption, we believe PD and Recheio will keep on increasing their market shares as they have been enlarging their PL offer.

Exhibit 21 – Portuguese MGD growth rate forecasts (%)

Portugal 2010 2011E 2012E 2013E 2014E 2015E 2020E GDP Growth rate 1.4% -1.5% -0.5% 0.9% 1.0% 1.2% 2.3% Inflation rate 1.4% 2.4% 1.4% 1.4% 1.4% 1.6% 1.9%

Confidence índex 0.4% 0.2% 0.3% 0.5% 1.0% 1.1% 1.5% Growth rate of a mature market 0.82% 0.72% 0.72% 0.72% 0.68% 0.68% 0.55% % spent in food related goods 14.5% 14.4% 14.3% 14.2% 14.1% 14.0% 13.6% MGD Growth rateT 3.40% 1.07% 1.30% 2.91% 3.50% 4.02% 5.64% Source: INE, IMF, Euromonitor International and Nova ER Team for estimates

Exhibit 22 – Polish MGD market (PLN Polish Food Retail Market Mn)

As developed economies evolve into stagnation, emergent economies play a crucial role for international retailers. In contrast to Portugal, currently, the grocery retail market in Poland is very fragmented and is in a development stage, just like it was in Portugal 10/15 years ago. MGD accounts only for 51% of the total market while the remaining relates to Traditional Market. Contrarily to TM (lost around 7,000 outlets in 2010), MGD was able to grow at a CAGR of 12.8% over the past 5 years. Following the same trend, we believe TM will lose Source: Euromonitor International to MGD, growing at a CAGR of 7.4% in the next 5 years and reaching a relation

of 70%-30% in 2020 (see Appendix 5 for methodology). Exhibit 23 – Polish MGD growth rate forecasts The three modern formats, i.e., hypermarkets, supermarkets and discount stores,

Exhibit 24 – Evolution of Polish Food retail market by formatsPoland (%) 2010 2011E 2012E 2013E 2014E 2015E 2020E (2005=100%) GDP Growth rate 3.8% 3.8% 3.6% 3.7% 3.7% 3.9% 4.2%

Inflation rate 2.6% 4.1% 2.9% 2.6% 2.5% 2.5% 2.5% Growth rate of an in development market 1.56% 1.56% 1.56% 1.56% 1.23% 1.23% 1.10% % spent in food related goods 17.6% 17.5% 17.3% 17.2% 17.0% 16.9% 16.2% Source:MGD GrowthEurostat, rateIMF, Euromonitor International and 7Nova.3% ER Team8.8% for estimates7.4% 7.3% 6.7% 6.9% 7.1%

have increased their market shares in the last 5 years. Nevertheless,

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independent small grocers still account for a large percentage in the market (25.3%) operating with 97,820 stores. Discounters presented the highest growth rate over the past 5 years (CAGR of 19.4%)19, resulting in an increase of 7.8% in market share. The format was able to perform successfully during the economic downturn mainly due to the wide selection of lower priced PL products. According to the Polish press, the number of customers buying from discounters has also increased from 16% in 2009, to 24%. The observed interest in this format results mainly from price sensitive consumers and a more positive attitude towards it among people of higher economic status.

The grocery retail market in Poland is mainly led by multinational companies as Source: Euromonitor International they possess additional market experience and larger budgets to invest. The 5

biggest chains of the market are Jerónimo Martins Dystrybucja, Polska, Carrefour Polska, Group Auchan and ZKIP Lewiatan which represent 29.9% of Exhibit 25 – Polish Retailers’ market shares the overall market, a concentration far below the European values and Retailers Market suggesting high growth opportunities. Holding almost 65% of the hard discount shares 2009 2010 Jeronimo Martins segment Biedronka is the leader in its segment with a market share of Dystrybucja 10.2% 10.9% 10.9%. Having a great advantage over its peers in terms of the number of stores Tesco Polska 5.8% 5.7% Carrefour Polska 4.9% 5.1% due to its Plus acquisition (1,649 stores against 400 from Lidl and 212 from Auchan Sp zoo 4.1% 4.2% ), Biedronka competes mainly against Netto, Lidl and Aldi. In 2009, the ZKiP Lewiatan '94 Holding 3.9% 4.0% Polish market showed signals of consolidation, with E Leclerc buying 25 Real 3.6% 3.4% supermarkets while JMT acquired 12 stores. 2.7% 3.1% According to PMR Research, Biedronka was considered the most often Lidl Polska 2.8% 2.7% Polska attended store in 2009 with 40% adhesion, followed by Real (36%). Consumers Markety 2.5% 2.7% not only mentioned its very low prices but also considered its brand as solid. JMT Grupa E Leclerc 1.5% 2.2% Netto 1.9% 1.8% has been aware about the possible growth opportunities of Biedronka and has Others 56.1% 54.2% drafted an ambitious stores’ expansion plan for the future, reaching the 3,000 Source: Euromonitor International stores in 2015.

Valuation

With the aim of discounting each cash flow with the appropriate cost of capital (WACC), we’ve divided our valuation of Jerónimo Martins SGPS into six business units, Retail Mainland (Pingo Doce), Recheio, Madeira, Biedronka, Industry and Services, according to two criterions: retail format and domestic or international operations. JMT’s value was computed by making use of the Discounted Cash Flow model, on a sum of the parts basis, with explicit

19 Followed by supermarkets (CAGR of 15.2%)

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Exhibit 24 – Valuation Approach

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Find out the value drivers forecasts up to 2020. Along our analysis we’ve come out with a conservative of each business unit point of view when performing forecasts as we have not included in our analytical

approach any scenario that could bring additional uncertainty to our analysis. Make Forecasts, including Thus, we’ve only considered current reliable scenarios aligned with the the JMT’s strategic plan and guidelines company’s guidelines. We took into account the IMF intervention in Portugal

given that it became a reality on April 7th. Additionally, some likely future Project FCF until 2020 and compute the terminal scenarios will be explored later in further chapters. value of JMT Operational Forecasts Discount FCF at the appropriate WACC With the aim of computing Free Cash Flows (FCF)20, value drivers of each

business unit were initially found for computing sales, Net Working Capital SOTP: Reach the total variation (∆NWC) and CAPEX. The key value drivers of our model are related value of JMT with the number of stores and their area, sales per sqm, EBITDA margins, activity ratios and costs of revamping and opening new stores. Our calculation of sales was based on the stores’ expansion plan (selling area in sqm) and sales/sqm evolution (measure of store performance) for all business units with the exception of industry and services, in which cases a constant selling area was assumed.

Retail Mainland

Analyzing PD’s past performance during the last 5 years, we realize PD Exhibit 27 – Retail Mainland new openings forecasts managed to increase its sales from €1,612Mn to €2,756Mn at a CAGR of 11.3%.

This performance was only possible thanks to its selling area expansion (CAGR of 19.2%) and rise in the sales/sqm ratio (CAGR of 2.8%). The high number of new openings in 2008 presented on Exhibit 25 is related to the Plus acquisition.

Having in mind that the Portuguese food retail market has achieved a mature stage, it will not allow for aggressive expansion plans. Therefore, according to information published during the investor’s day, we believe PD’s new openings will smoothly decrease during the next 10 years, converging into 2 openings in 2020 and contributing to a low selling area CAGR of 0.7% (see Exhibit 63 of Appendix 6). We highlight the fact that there’re still 18 Plus stores left to convert Source: Company data and Nova ER Team for forecasts which are expected to be concluded in 2012 (9 each year).

20 FCF = Operational Cash Flow + Cash Flow from Investing Operational Cash Flow = EBIT(1-t) + Depreciation – ∆NWC Cash Flow from Investing = Investment in non-current liabilities – Investment in non-current assets – CAPEX

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Regarding stores performance (sales/sqm growth rate), we expect it to evolve Exhibit 28 – Retail Mainland sales smoothly, at a CAGR of 2.6% in the next 5 years. After 2015 the majority of forecasts stores will be selling at full capacity. The sales/sqm growth rate was estimated based on i) the overall supermarkets’ sales growth rate and ii) the stores’ capacity to sell products, that is, a recently opened store does not sell the same as a mature one21. As stated before, in the past 5 years, supermarkets were able to grow at a higher CAGR than the overall Modern Grocery Distribution market, 10.7% against 6.8%. Believing PD will contribute to maintain this tendency, we forecast a CAGR of 3.2% for supermarkets’ sales for the next 5 years. 3.2% is far below the previous 10.7%, as we’ve cut our estimates for 2011, 2012 and 2013 to 1.73%, 1.96% and 3.59%, respectively, taking into account the negative Source: Company data and Nova impact on householders’ incomes and consumption given the Troika’s ER Team for forecasts agreement. Thus, we expect sales to grow at a modest CAGR of 5.5%22.

Regarding PD’s EBITDA margins, we evoke that PD’s EBITDA margin has Exhibit 29 – EBITDA margin of JMT’s suffered a contraction of 20bp last year (7.0% in 2009 to 6.8% to 2010). We peers (European Western countries) in 2010 believe this fall was related with high investments in advertising. For the future, we forecast a PD’s EBITDA margin increase to 7.0% until 2012, and a decrease thereafter, converging to values of 2010 (6.8%) and remaining constant afterwards.

We believe the EBITDA margins’ increase will be mainly driven by the total conversion of Feira Nova and Plus into PD stores. Feira Nova conversion will not only contribute to lower operating costs due to the reduction in selling area and more focused assortment in food, but also to increase sales’ productivity as all the investment of restructuring was already done in 2010. Similarly, in 2012, all Plus stores will be converted, 9 in 2011 and 9 in 2012, further contributing to increase EBITDA margins.

Source: Bloomberg From 2013 onwards, we believe EBITDA margin will decrease and remain constant at 6.8%. During the next 3 years, JMT will invest in restructuring and rationalizing its logistics network. This transformation will be translated in a reduction of 2 distribution centers from the current 7, as 40% of PD’s clients are mainly concentrated in Lisbon and Porto. JMT will only start benefiting from higher cost efficiency and consequent reduction in distribution costs after 2013. We suppose this supply chain restructure will contribute in part to fight against

21 We’ve assumed that a 1-year store only sells 55% of its capacity, a 2-year one sells 75% and a 3-year one sells at full capacity. 2 22 By adding the new openings’ selling area to the already existing selling area of the previous year (1,170m is the average area of a PD store), we achieved PD’s total selling area (sqm). By using the forecasted sales/sqm ratio, we were able to compute total sales.

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the fierce competition that characterizes a mature market as well as the increasing tendency on raw materials’ prices.

Exhibit 30 – Retail mainland Operational Forecasts € Mn 2010 2011E 2012E 2013E 2014E 2015E 2020E Sales 2,755.8 3,070.6 3,138.3 3,253.9 3,395.1 3,559.3 4,726.3 EBITDA 186.0 214.9 219.7 221.3 230.9 242.0 321.4 EBITDA margin (%) 6.8% 7.0% 7.0% 6.8% 6.8% 6.8% 6.8% Depreciation 88.52 89.75 90.71 91.31 91.83 92.37 96.31 EBIT 97.50 125.19 128.97 129.95 139.04 149.66 225.07 EBIT margin (%) 3.5% 4.1% 4.1% 4.0% 4.1% 4.2% 4.8%

Source: Company data and Nova ER Team for estimates

Recheio Exhibit 31 – Hotels’ total income in Portugal Currently, the wholesale market is in a mature stage, with the 5 top players of the market representing 82.3%23 of the consumption in 2009. The two main players in terms of dimension are Recheio and Makro with market shares of 38% and 21.7%, respectively. Over the past years, the wholesale market in Portugal has been declining mainly due to the TM’s decreasing tendency and the actual economic crisis. As mentioned before, in 2010, TM’s decreasing tendency persisted, with some traditional retailers leaving the market. This resulted in the loss of some clients, affecting significantly small wholesalers with less diversified clients’ portfolios. On the other hand, HoReCa channel was able to recover in 2010 from the crisis effects felt in 2009, mostly favoring the biggest wholesalers of the market. In 2010, according to INE, the accommodation and food service activities showed a positive growth rate of 1.4%, representing a Source: INE HoReCa growth rate of 4.5%. Nevertheless, we believe HoReCa channel will not be able to avoid the negative impact driven by the fall in householders’ disposable income. We think in the next 2 years (2011 and 2012) householders

Despite the actual will tend to cut on their vacations and restaurants spending (tendency to eat at economic adversities, home), contributing to the decrease of HoReCa’s sales. Despite the actual Recheio managed to present a sales growth rate economic adversities, Recheio’s sales did not present negative growth rates of 3.7% (0.4% LfL) in 1Q11. during the years of economic slowdown. Recheio has been able to increase its market share in the previous 5 years, with sales growing at a CAGR of 5.02%. Moreover, its effort on increasing its PL offer and the investment done in advertisement campaigns, mainly falling upon the beverages category, contributed to reach a sales’ growth rate of 3.7% (0.4% LfL) in 1Q11.

23 Source: Company data

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Since the wholesale market is already in a high stage of maturity, we believe Exhibit 32 – Recheio’s new openings there won’t be much room for further growth. We expect Recheio to open forecasts only 3 stores during the next 10 years, according to the company guidelines. We estimate sales area to reach 133.826m2 in 2020, growing at a modest CAGR of 0.8% (see Exhibit 64 of Appendix 6).

Because this business unit is more affected by the macroeconomic environment than the Retail Mainland unit, we’ve considered a sales growth rate based only on the GDP growth rate, inflation rate and the PLs effect24. In the previous 5 years, Recheio managed to present a sales’ productivity CAGR of 2.7% and a sales CAGR of 5.02%. Nevertheless, according to our forecasts, sales

Source: Company data and Nova productivity and sales are expected to grow at a modest CAGR of 2.0% in the ER Team for forecasts next 10 years, aligned with the inflation rate values between 2016 and 2020.

Currently, as a way of fighting against the difficulties in the TM’s segment, JMT focused on implementing a new project called Amanhecer. Its main objective is to increase Recheio’s sales through 40,000 already existent customers from this Exhibit 33 – Recheio’s sales forecasts segment. The main business idea is to create a franchising chain of traditional retailers under the name Amanhecer, whose products are obliged to be at least 80% from the current 130 references of products from the PL brand Amanhecer. On the other hand, JMT gives support to the store brand and helps on issues like the revamping diagnosis, logistics, transportation, marketing, advertisement and retailers’ formation. The group predicts to open between 20 and 25 stores until the end of this year and to achieve 220 references of products. As a recent project, it is still marginal at the moment and thus only limited data is available. However, we believe it will contribute to increase sales

Source: Company data and Nova ER and fight against the negative tendency on EBITDA margins regarding Team for forecasts competition. For the following years we expect EBITDA margins to decrease and remain stable at 6.1%. Exhibit 34 – Recheio Operational Forecasts

We believe Amanhecer will € Mn 2010 2011E 2012E 2013E 2014E 2015E 2020E contribute to increase sales Sales 719.1 721.7 727.3 725.2 728.7 744.6 861.4 and fight against the EBITDA 44.2 44.0 44.4 44.2 44.4 45.4 52.5 negative tendency on EBITDA margins regarding EBITDA margin (%) 6.2% 6.1% 6.1% 6.1% 6.1% 6.1% 6.1% competition. Depreciation 9.18 9.77 10.57 10.89 11.21 11.52 13.08 EBIT 35.04 34.25 33.79 33.35 33.24 33.90 39.47 EBIT margin (%) 4.9% 4.7% 4.6% 4.6% 4.6% 4.6% 4.6%

Source: Company data and Nova ER Team for estimates

24 Knowing that a recently opened store does not sell the same as a mature one, we’ve also incorporated that information in our model, assuming that a 1-year store will only sell 55% of its capacity, a 2-year one sells 75% and a 3-year one sells at full capacity.

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Madeira

The food retail market in Madeira is in a stage of high stability and we do not Exhibit 35 – Madeira sales forecasts expect JMT to open more stores in the next 10 years. Therefore, according to our predictions we expect JMT to maintain its current selling area of 14.300m2. Our sales forecasts are expected to grow at a 3.2% CAGR in the next 5 years, slightly below the 4.7% obtained in the past 5 years (see Exhibit 65 of Appendix 6).

Driven by the floods that occurred in Feb 2009, 2 of the most important PD of Madeira were affected, triggering a 10bp decrease in EBITDA margin in 2010, from 4.8% to 4.7%. However, as the reconstruction investment was done in 2010 and they are already operating in the market, we expect EBITDA margin to reach

Source: Company data and Nova ER 2009 values again and remain constant on the 10 following years. Team for forecasts Exhibit 36 – Madeira Operational Forecasts

€ Mn 2010 2011E 2012E 2013E 2014E 2015E 2020E Sales 128.7 142.2 142.6 145.0 147.6 150.8 174.4 EBITDA 6.0 6.8 6.8 7.0 7.1 7.2 8.4 EBITDA margin (%) 4.7% 4.8% 4.8% 4.8% 4.8% 4.8% 4.8% Depreciation 3.83 4.01 4.17 4.33 4.48 4.63 5.34 EBIT 2.15 2.82 2.67 2.63 2.60 2.61 3.03 EBIT margin (%) 1.7% 2.0% 1.9% 1.8% 1.8% 1.7% 1.7% Source: Company data and Nova ER Team for estimates

Bi edronka

Exhibit 37 – Biedronka’s new openings Biedronka is the most important business unit of JMT as it counted for 55.3% of the forecasts company’s total sales in 2010. Regarding the positive economic environment lived in Poland and the potential growth of the food retail market, JMT has established an ambitious plan of expansion for Biedronka. In 1Q11, Biedronka counted for 66% of the total stores opened by MGD in Poland. According to the group’s guidelines and information made available during its investor’s day presentation, 1,428 stores are expected to open until 2015 corresponding to 3,000 stores and 585 in the following 5 years, expecting to own 3,500 stores in 2020. Thus, a large increase in stores is expected until 2015, slowing down progressively thereafter until 2020. We expect the stores’ number to grow at a CAGR of 7.8% until 2020. Sales productivity will decrease until 2015 at a CAGR of -2.6% due to the high

Source: Company data and Nova ER number of openings and increase thereafter at a CAGR of 3.7%. Most of retailers Team for forecasts are concentrated on large and medium sized cities, where the number of new attractive locations is limited. In contrast, rural areas and small sized cities are far from saturation and mainly dominated by traditional retail. Hence, Biedronka

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might consider taking over some small and independent players in order to gain new locations to further expand its chain. Moreover, having an expansion team per each Polish region like Biedronka, responsible for searching for new locations, increases the capacity of growing organically and inorganically.

Beyond searching for growth opportunities, it is crucial to analyze the suppliers’ Exhibit 38 – Biedronka’s sales forecasts capacity to answer to this rapid growth. As local and small providers, they

cannot produce products for all Biedronka stores, not even if they were specialized in only one product. In 2010, around 90% of the food products sold by Biedronka were bought from local suppliers. Currently, the group pursues a tremendous bargaining power over suppliers as they’re market leaders and deal with 450 local providers in order to diversify the risk of failure and rapidly respond to market opportunities. Moreover, a procurement sustainability policy was established in 2010, which ensures a supplier selection process based on strict and demanding criteria, allowing lasting business relations to be built. Regarding the higher number of openings, we believe Biedronka will probably need to enlarge its suppliers’ portfolio. Nonetheless, following JMT past ability to accomplish its expansion plans, Source: Company data and Nova ER we believe the proposed objectives are perfectly reachable and so, we expect a Team for forecasts selling area CAGR of 7.7% for the next 10 years (see Exhibit 66 of Appendix 6). Hence, and believing there will be a significant improvement in families’ living standards of middle class as long as Poland converges to EU standards, we forecast a sales CAGR of 8.4% for the next 10 years.

Regarding EBITDA margins, we expect a smoothly decrease on margins to 6.8% until 2015, regarding the higher operational costs driven by the ambitious investment plan during this period. Afterwards we expect it to recover until it reaches 7.3% mainly due to the progressive increment on sales coming from mature stores. It is only forecasted a 50bp increase as competition is expected to be higher in the future. Aligned with our expectations, Biedronka’s EBITDA margin has increased 60bp from 6.5% to 7.1% in 1Q11 YoY. Exhibit 39 – Biedronka Operational Forecasts

€ Mn 2010 2011E 2012E 2013E 2014E 2015E 2020E Sales 4,805.9 5,311.5 5,906.1 6,324.6 7,141.2 7,677.6 10,729.0

EBITDA 386.9 377.1 419.3 436.4 492.7 522.1 783.2 EBITDA margin (%) 8.1% 7.1% 7.1% 6.9% 6.9% 6.8% 7.3% Depreciation 84.88 119.56 155.34 188.79 232.72 270.68 321.98

EBIT 301.99 257.56 264.00 247.61 260.02 251.40 461.24 EBIT margin (%) 6.3% 4.8% 4.5% 3.9% 3.6% 3.3% 4.3% Source: Company data and Nova ER Team for estimates

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Industry

When comparing to the previous business units, industry will be more affected by the current macroeconomic environment. As mentioned before, people are more price sensitive, opting more for PLs than MBs. Moreover, the purchasing power is expected to decrease in line with the wages restraints imposed by the Troika. Therefore, we expect sales to increase at a CAGR of 2.1%, aligned with the GDP expected behavior. In 1Q11, sales fell by 4.6% mainly due to the Easter negative impact. For 2011 our expectations include a 0.14% growth on sales. Regarding EBITDA margins, we believe in a fall of 0.3% until 2013, remaining stable at 14.3% thereafter. Exhibit 40 – Industry Operational Forecasts € Mn 2010 2011E 2012E 2013E 2014E 2015E 2020E

Sales 195.1 195.4 195.9 199.2 202.7 207.2 239.7 EBITDA 28.4 27.9 28.0 28.5 29.0 29.6 34.3 EBITDA margin (%) 14.5% 14.3% 14.3% 14.3% 14.3% 14.3% 14.3% Depreciation 3.09 3.16 3.24 3.32 3.40 3.47 3.88

EBIT 25.28 24.78 24.78 25.17 25.60 26.15 30.40 EBIT margin (%) 13.0% 12.7% 12.6% 12.6% 12.6% 12.6% 12.7%

Source: Company data and Nova ER Team for estimates

Services

We forecast a sales CAGR of 2.1% and we expect EBITDA margins to remain stable at 1.6%. The absence of Easter in 1Q11 had a direct and significant impact in Hussel’s sales, resulting in a sales’ fall of 4.8%.

Exhibit 41 – Services Operational Forecasts

€ Mn 2010 2011E 2012E 2013E 2014E 2015E 2020E Sales 86.5 86.6 86.9 88.3 89.9 91.9 106.3 EBITDA 1.4 1.4 1.4 1.4 1.5 1.5 1.7 EBITDA margin (%) 1.6% 1.6% 1.6% 1.6% 1.6% 1.6% 1.6% Depreciation 1.28 1.24 1.22 1.19 1.17 1.15 1.09 EBIT 0.14 0.18 0.21 0.26 0.31 0.36 0.65

Exhibit 42 – CAPEX breakdown (2010) EBIT margin (%) 0.2% 0.2% 0.2% 0.3% 0.3% 0.4% 0.6% Source: Company data and Nova ER Team for estimates

Investment Forecasts: CAPEX

With the aim of computing CAPEX, we’ve looked upon investments related to the opening stores, current stores’ revamping, Plus stores conversion and finally costs related with distribution centers. According to information released, JMT predicts to spend €1.7Bn during the next 3 years, from which 75% will be

Source: Company Data

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applied in Poland. Nevertheless, this goal seems to be very optimistic to us when compared to our CAPEX forecasts. For the same period we’ve considered a Exhibit 43 – Costs (€ Mn) CAPEX of around €2.2Bn from which 70.3% will be allocated to Poland. It is Retail Mainland important to mention that, in Poland, each distribution center is responsible New store 3.25 for supplying between 150 to 180 stores. Thus, distribution centers’ CAPEX is Revamping 2.88 Logistics 2.8 strongly related to the stores increment. In 2010 the company had 9 distribution Biedronka centers, covering 9 of the 16 Polish regions. We highlight the fact that New store 1.28 Biedronka’s new stores are cheaper than PD stores, not only due to cheaper Revamping 1.04 Distribution center 25 land but also because bakery, butchery and fishery are not included in Recheio Biedronka’s model, incurring in lower investment costs. We recall that Plus stores New store 3.79 Revamping 2.88 in Poland are totally converted and it will also happen in Portugal in 2012. Industry and Services Industry and Services’ CAPEX was considered to be stable, only changing with New store 1.2 inflation rate. As expected, CAPEX/Sales ratio increases until 2015 and Revamping 4.8 decreases gradually until it reaches 3.5% in 2020. It will never achieve a zero Source: Company data and ER Team for estimates value since, after some time, stores need to be modernized to continue attracting

clients. It seems reasonable to assume a percentage in terms of total stores: 7%, 7.9% and 5.5% of total stores of Biedronka, Retail Mainland and Recheio respectively are revamped every year. Exhibit 44 – CAPEX Forecasts € Mn 2010 2011E 2012E 2013E 2014E 2015E 2020E CAGR Distribution Centers 52.3 72.6 48.2 72.2 73.6 96.7 23.1 -7.8% Expansion 170.7 315.6 355,0 373.7 426.4 465.8 159.3 -0.7% Revamping 211.2 252.1 275.4 292.7 322.8 347.8 412.2 6.9% Conversion 45.2 45.9 - - - - Total Capex 434.2 685.6 724.5 738.6 822.9 910.3 594.6 3.2% Capex/Sales 5,0% 7.2% 7.1% 6.9% 7.1% 7.4% 3.6%

Source: Company data and Nova ER Team for estimates Exhibit 45 – CAPEX Breakdown

€ Mn 2010 2011E 2012E 2013E 2014E 2015E 2020E CAGR Retail Mainland 115.9 152.6 150.4 99.9 99.3 100.2 111.3 -0.4% Recheio 29.2 19.6 23.9 16.2 16.4 16.7 18.3 -4.6%

Madeira 12.4 5.9 6.0 6.1 6.2 6.3 6.8 -5.8% Biedronka 270.7 501.2 538,0 610.1 694.5 780.6 451.1 5.2% Industry and Services 6,0 6.1 6.2 6.3 6.4 6.5 7.1 1.7% Total Capex 434.2 685.6 724.5 738.6 822.9 910.3 594.6 3.2% Source: Company data and Nova ER Team for estimates

Financing Forecasts: Debt and NWC

To forecast Net Working Capital we’ve made use of 3 activity ratios: inventory turnover, accounts payable turnover and accounts receivable turnover. Over the past 5 years JMT was able to improve its days NWC in 8 days, mainly

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due to a reduction in days inventory and days receivables. We believe days Exhibit 46 – Peers’ comparison in 2010 (days) inventory will decrease to 18 in 2020 as currently JMT only operates with PD, which has a more food based assortment (high % of perishables which validation date is short) than Feira Nova. Regarding receivables, following the past tendency, we assume JMT will tend to receive progressively earlier from consumers reaching 6.0 days in 2020. Similarly, we believe JMT will tend to pay suppliers earlier, achieving 95.0 days in 10 years. As a result, JMT will maintain its past tendency of increasing its days NWC and so decrease its NWC needs. These demonstrate the higher company’s ability to finance its operational activities without current debt support. Moreover, JMT presented better results in 2010 than the majority of its peers. Exhibit 47 – Net Working Capital Progression Source: Bloomberg 2006 2007 2008 2009 2010 2020E

Days Inventory 26.4 26.0 25.2 20.6 19.1 18.0 Days Receivable 12.5 10.5 9.1 9.5 7.6 6.0

Days Payable 107.6 108.7 101.8 101.5 98.0 95.0 Days WC (46.2) (59.8) (49.3) (54.5) (53.9) (55.8) Exhibit 48 – Net Debt Evolution (€) Source: Company data and Nova ER Team for estimates

Cutting in debt is one of JMT’s top priorities for the future. The group has been Net Debt/EBITDA able to reduce its debt and, so, its debt to equity ratio in the previous 2 years 2008 1.42 2009 1.04 (1.13 in 2008, 0.83 in 2009 and 0.75 in 2010), paying a great part of its 2010 0.72 investments with generated cash flows. We’ve maintained the previous tendency 2011E 0.66 in our model as well, by considering a lower debt to equity target (0.625) for the 2012E 0.82 next 10 years. Nevertheless, according to our analysis, JMT’s net debt will 0.93 2013E highly increase during the next 5 years in order to answer to its polish 2014E 0.98 expansion plan, and decrease afterwards. These higher levels of debt will be in 2015E 1.06 part followed by capital increases, aligned with the considered D/E target. Since 2020E 0.67 56.1% of JMT is owned by only one shareholder, Sociedade Soares dos Santos, Source: Company data and Nova ER Team for estimates it is important that it has financial capacity to contribute to these capital

increases. Otherwise, the aggressive Polish expansion plan may not be accomplished and our JMT’s target would be affected26. As long as the company expansion plan becomes stable, debt and equity absolute values diminish. We forecast a Net Debt/EBITDA ratio of 1.06 to 2015, slightly higher than in 2010, and 0.67 to 2020. We highlight the fact that a great part of the investment will still be paid by generated cash flows during this period. In our analysis, 77% of the

25 Regarding the company’s public guidelines for the next years and its cutting in debt goal, we believe the 60% target is the most appropriate capital structure to be considered in our model. It is important to mention that any internationalization process or acquisition that may occur in 2012 or the next years, will forcibly have an impact on the debt structure of the company. Nevertheless, as these scenarios were not included in our valuation model, WACC values do not incorporated them as well. 26 This issue is further explained in our smooth investment scenario chapter

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total debt is long-term debt while the remaining 23% is short-term debt. Also because of the aggressive expansion plan we’ve assumed a 30% dividend payout ratio, that is, 30% of the generated profit will be given to shareholders while the remaining 70% will be used to finance the Polish investment. Discounted Cash Flow Model

In order to use the Discounted Cash Flow model, the appropriate discount rate must be addressed. Hence, a WACC for each one of the 6 business units has to Source: Company data and be computed to discount the already projected free cash flows. WACC27 is the Nova ER Team for estimates WACC takes into account 3 factors: most appropriate discount rate as it takes into account 3 factors: i) the

company’s financial structure (D/E) which is assumed to be constant at i) the company’s financial structure 60% in the next 10 years, ii) its cost of equity (re) and finally iii) its cost of ii) its cost of equity (re) debt (rd). To reach the cost of equity for each business unit, 3 inputs are needed: iii) its cost of debt (rd). risk-free rate, levered beta and market premium. Regarding the risk-free rate, we’ve made use of the 10-year German bonds for Portugal and the 10-year Polish bonds for Poland. As the most solid country in economic terms of the EU,

Exhibit 49 – Betas from comparable Germany presents the lowest risk of default. However, in contrast to Portugal, we companies cannot use German bonds for Poland because all the FCFs are computed in Beta Levered Beta Unlevered Sonae 0,89 0,39 their local currencies, that is, Portuguese FCF in Euros and Polish FCF in Carrefour 0,90 0,72 Tesco 0,64 0,49 Zlotys. To capture the industry’s systematic risk, we need to assess levered Ahold 0,50 0,40 Metro 1,04 0,82 beta. Firstly we selected a significant number of comparative companies (15) that Sainsbury 0,80 0,61 Wm Morrison 0,61 0,55 we divided in 2 groups, i) Western European Food retailers with low contact with Colruyt 0,27 0,17 Casino 0,87 0,53 emergent markets (mature markets) and ii) Central and Eastern European Food Eurocash 0,42 0,39 Emperia 0,41 0,37 retailers particularly exposed to emergent markets (see Appendix 7). The first Magnit 0,10 0,10 BIM 0,62 0,56 group was used to assess Portuguese operations while the last one was used for X5 Group 1,94 1,73 the Polish operations (Biedronka). Afterwards, we’ve made a regression28 based 0,54 0,43 Source: Bloomberg on the past 4 years, to find out levered betas of each company. Removing the levered effect29 from the beta of each comparable, we were able to compute the

industry unlevered beta by making an arithmetic average of the companies’ unlevered betas. Then, by applying JMT debt to equity ratio target, we were able to achieve JMT’s levered beta. Market premium30 addresses the risk inherent to an economy. The specific risk of each country where the company operates

퐸푞푢푖푡푦 퐷푒푏푡 27 WACC = * re + * rd *(1-tc) 퐸푞푢푖푡푦 +퐷푒푏푡 퐸푞푢푖푡푦 +퐷푒푏푡 28 CAPM model: Enterprise return = risk-free + β*(rm-rf) We’ve made use of Stoxx Europe 600 index as a market reference. ΒL 29 Βu = 퐷푒푏푡 (1+ 1−푡푐 ∗ ) 퐸푞푢푖푡푦 30 Market premium = mature market premium + country risk Mature market premium = market return – risk free, which we considered to be 4% following current financial theories

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Exhibit 50 – 5 years’ yields of (political and economic) was captured by adding an extra premium to the market Portuguese companies and JMT’s peers premium. The extra premium corresponds to the difference between the country’s respective Credit Default Swap (CDS) and the “risk-free” CDS, which is once again from Germany, compensated for the volatilities of both the equity index and the country’s 10-year bonds31. The country risk in Portugal is much higher than in Poland, regarding the Portuguese current macro environment and high risk profile. Finally, by using the CAPM model we got a cost of equity of 8.66%, 8.69% and 12.26% for Portugal, Madeira and Poland, respectively.

Regarding cost of debt, as JMT does not have a credit rating, we’ve searched Source: Bloomberg for debt yields of JMT’s peers, especially Sonae. Nevertheless, as Sonae doesn’t Exhibit 51 – 10 years’ yields of Portuguese companies and JMT’s peers have a credit rating as well, we’ve searched for other relevant Portuguese companies like PT and EDP. Concerning 10 years’ yields, JMT’s peers present values around 4% while PT and EDP show much higher values, between 6% and 7%. Being two of the biggest Portuguese companies of PSI20 whose market caps are 6.8 Bn and 9.4 Bn respectively, PT and EDP were affected by the Portuguese republic downgrades, presenting a credit rating of BBB- and BBB according to S&P. We believe JMT’ cost of debt will be aligned with PT and EDP values instead of its peers, since all Portuguese companies are being penalized Source: Bloomberg by the Portuguese macroeconomic environment. Hence, we’ve assumed a pre-

Exhibit 52 – DCF Assumptions 32 33

Portugal Madeira Poland tax cost of debt of 6.17% and 6.67% for Portugal and Poland, respectively. Rf 3,28% 3,28% 6,29% Beta U 0,519 0,519 0,596 Regarding terminal value growth rates, we assume that in 2020 both markets will Beta L 0,729 0,734 0,861 have reached a more mature stage such that the market will tend to stagnation Country premium 3,37% 3,37% 2,94% and JMT’s growth rate will be aligned with long-term inflation rate values. We Market premium 7,37% 7,37% 6,94% believe that in Portugal, JMT will grow 1.9% in perpetuity while in Poland the Cost of equity 8,66% 8,69% 12,26% Tax rate 0,265 0,25 0,19 market will allow for a 2.5% growth rate. Poland growth rate is much higher than Pre tax cost of 6,17% 6,17% 6,67% debt Portugal as we believe the Polish market will provide greater growth After tax cost of 4,53% 4,63% 5,40% opportunities. debt Target D/E 50% 50% 50% D/(E+D) 33% 33% 33% Sum of the Parts Approach WACC 7,28% 7,33% 9,98% Source: Bloomberg and Nova ER Team Finally, after discounting the FCFs of all business units we are able to compute

JMT’s enterprise value by using a sum of the parts approach. It is important to mention that, according to our analysis, Biedronka contributes to 78.6% of JMT’s value, which mean that JMT is very dependent on the Polish market.

31 Country risk premium = CDS spread * Equity index volatility / Bond holding returns volatility 32 JMT’s market cap (8.5 Bn) is closer to EDP than PT. Hence, we assumed a JMT’s cost of debt closer to the EDP one. Nevertheless, as JMT present a lower D/E ratio (0.87) than EDP, a slightly lower value was considered. 33 Since the Polish reference rate (WIBOR) is traditionally higher than EURIBOR (Portuguese reference rate), polish cost of debt should be higher than the Portuguese one as well. Thus, we’ve assumed a differential of 50 higher for the Polish Debt.

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Hence, we were very careful on establishing our DCF assumptions for Biedronka, as a small change on Biedronka’s WACC can highly affect our JMT’s price target (see Exhibit 66 of Appendix 7). The large exposition to the Polish market constitutes a high risk for JMT, as it is very exposed to zloty devaluations. Regarding Portugal, we believe the main risk is related to the possibility of Portugal leaving the Euro. Nevertheless, we believe this scenario is unlikely to happen, as it would represent the failure of the EU model. Exhibit 53 – Business Units’ ROICs WACC ROIC Comparing business units’ ROICs with its respective discount rates, we conclude Biedronka 9.98% 17.9% Pingo Doce 7.28% 11.3% that all the business units of the company are creating values (ROIC>WACC) Recheio 7.28% 11.4% Madeira 7.33% 6.3% with exception of Madeira and Services. Nevertheless, they do not represent a Industry 7.28% 10.7% Services 7.28% 4.3% relevant risk for JMT, as they only counts for 0.3% of the company’s value. Source: Nova ER Team Exhibit 54 – Valuation: Sum of the Parts Breakdown

Attributable to € Mn Stake Method EV JMT % Retail Mainland 51% DCF (WACC =7.28%; g=1.9%) 2692,8 1373,3 15,2% Recheio 100% DCF (WACC =7.28%; g=1.9%) 402,4 402,4 4,4% Madeira 75,5% DCF (WACC =7.33%; g=1.9%) 21,4 16,1 0,2% Biedronka 100% DCF (WACC =9.98%; g= 2.5%) 7120,3 7120,3 78,6% Industry 45% DCF (WACC =7.28%; g=1.9%) 314,8 141,6 1,6% Services 100% DCF (WACC =7.28%; g=1.9%) 8,0 8,0 0,1% Total Enterprise Value 9061,8 Consolidated Net Debt 439,7 Debt attributable to Minorities 174,3 Equity value 8796,5 # Shares (millions) 629,3 Price Target (€) 13,98 Source: Nova ER Team for estimates

Smooth investment scenario Exhibit 55 – Sociedade Soares dos Santos contribution to JMT’s capital As mentioned before, Sociedade Soares dos Santos is JMT’s major shareholder, increases (base model) Total Capital owning 56.1% of the company. Thus, and as it is assumed in our base model, in Capital Additional Increases Dividends € Mn Increases Money /Extraordinary (56.1%) (56.1%) (56.1%) the need of a capital reinforcement to finance the Polish expansion, JMT is Dividends 2011E 76.6 43.0 0.0 43.0 highly dependent on the financial capacity of this shareholder. Regarding our 2012E -34.1 0.0 46.0 0.0 2013E 100.0 56.1 44.2 11.8 predicted capital increments and the 30% payout ratio considered, there’s the 2014E 261.1 146.5 45.6 100.9 2015E 448.4 251.6 45.5 206.1 possibility of Sociedade Soares dos Santos not having the required capital to 2016E 442.1 248.0 53.6 194.4 2017E 378.2 212.2 60.3 151.8 invest. If that proves to be true, two scenarios are possible: i) it sells part of its 2018E 299.4 168.0 69.5 98.5 2019E 196.8 110.4 78.2 32.2 share and loses JMT’s control or, ii) maintaining the same goal of having 3500 2020E 64.1 36.0 88.5 0.0 Source: Nova ER Team for estimates stores in 2020, the number of Biedronka stores will gradually increase in contrast

to our base model. We believe the first scenario is very unlikely to occur and thus, only the latter scenario will be considered.

The difference to our base model is that the number of opening stores (Biedronka) per year was established so that the capital increments needed are

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lower or equal to the dividends paid (30% payout ratio), assuring that the shareholders have enough money to invest, specially Sociedade Soares dos Santos. Exhibit 56 – Biedronka’s total number of stores considered in both scenarios 2010 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E Basis Model 1,649 1,849 2,062 2,300 2,627 3,000 3,102 3,202 3,302 3,402 3,500 2nd Scenario 1,649 1,778 1,917 2,067 2,228 2,402 2,590 2,793 3,011 3,246 3,500 Source: Nova ER Team for estimates and company data Therefore, capital increments are distributed over time, even resulting in Exhibit 57 – Sociedade Soares dos Santos contribution to JMT’s capital extraordinary dividends paid in some years. Nevertheless, since a lower number of increases (smooth investment scenario) Total Capital opening stores is considered until 2015 and stores only sell at full capacity after 3 Capital (Dividends - Increases (+) Dividends € Mn Increases Capital /Extraordinary (56.1%) (56.1%) increases) years, within this scenario JMT would not take full advantage of the Polish growth Dividends (-) 2011E 22.6 12.7 0.0 -12.7 opportunity. Until 2015, sales would grow at a lower CAGR (6.2%) than the 2012E -162.2 -91.0 84.7 175.7 2013E -111.1 -62.3 84.1 146.4 previous predicted 7.4%, strongly affecting cash flows and our JMT’s price target. 2014E -48.2 -27.0 87.7 114.7 2015E 34.0 19.0 90.0 71.1 This would change our PT from the current €13.98 to €9.07. In this scenario, our 2016E 76.8 43.1 104.5 61.4 2017E 101.1 56.7 113.6 56.8 recommendation would change as well, to SELL. 2018E 120.8 67.8 126.7 58.9 2019E 133.6 75.0 139.1 64.1 2020E 129.1 72.4 154.0 81.6 Multiples Comparison Source: Nova ER Team for estimates

The multiples comparison is a widely accepted method which consists in comparing companies with the same characteristics as JMT (comparables), operating in the same markets, with our evaluation results. Nonetheless, no such

Different companies were company exists perfectly equal to JMT, operating only in Portugal and Poland. A chosen so as to diversify and significant part of JMT’s direct competitors are not even listed, like Intermarché, Lidl avoid a distorted analysis. or Netto. Even if it existed, companies can use different accounting methods to determine their operating earnings besides having different capital structures. Hence, EV/EBITDA and P/E are not the best choices, as the first one takes into account the impact of the rental income and companies own different weights of their property34 and, P/E takes into account the different capital structures of the companies, both leading to misleading results. With the aim of getting a rational average for the multiples, we think EV/EBITDAR multiple is the best choice as it adjusts EBITDA for the impact of the rental income. We’ve chosen 4 different companies so as to diversify and avoid a distorted analysis centered on only one of them. As Bloomberg consensus’ estimates are not available for EV/EBITDAR multiple, we’ve made our own estimates by assuming that future rents will maintain its 2010 weight over sales constant. Getting Bloomberg consensus estimates for EBITDA we were able to compute EBITDAR for each one of the selected

companies.

34 For instance, Sonae MC doesn’t own any property, renting everything, while JMT owns 50% of its stores’ properties in Portugal and 80% in Poland.

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From our EV/EBITDAR analysis, we conclude that our JMT EV/EBITDAR is significantly higher than its comparables’ average. We believe this difference is related with the lower values of EBITDA we estimate (4.2% CAGR 2010-2013E) when compared to its peers (10.1% CAGR 2010-2013E). These reduced EBITDA values are a result of our cut on EBITDA margins from 7.5% in 2010 to 6.9% in 2013, regarding the negative impact of Portugal’s austerity plan and also the polish aggressive expansion plan till 2015. In contrast, the Bloomberg consensus estimates improvements on EBITDA margins of all JMT’s peers. Exhibit 58 – Valuation per multiples (Mn)

Source: Bloomberg Consensus and Nova ER Team for estimates

Exhibit 59 – Consumer expenditure on “Apteka Na Zdrowie” health goods and medical services (2004-2009) In Poland, JMT maintains its pharmacy network under the brand Apteka Na Zdrowie, following its established partnership with the National Association of Pharmacies in Portugal (ANF). Currently, JMT owns 24 pharmacies. Although in separate and independent facilities in accordance with the Polish pharmaceutical law, the group’s idea is to take advantage of Biedronka’s locations. In 2010, the business performance was very positive, reaching a sales growth of 19.5% YoY. Following Euromonitor, in 2009, the growth rate of pharmaceuticals was about 5.4%. There has been a progressive increase on Polish senior citizens, whose numerous diseases are expected to create a greater demand for medicines. In 2009, GUS stated that about 19.4% of Poles have ages higher than 60 years old

Source: Official statistics and and the life expectancy was of 72 and 80 years old for males and females, Euromonitor International respectively. Furthermore, the expenditure on medicines per capita is still below

the Western countries’. We believe this gap will diminish at the same time as the differences on wages per capita get smoother and the purchasing power rises.

Exhibit 60 – Polish Pharmaceutical According to PMR publications, the Polish pharmaceutical market is very well market value (PLN) and growth rates developed and in 2009 it was considered the 6th largest in terms of sales value

in Europe. Following BMI’s latest Pharmaceuticals and Healthcare Business Environment Ratings (BERs) index, Poland was also considered the 2nd fastest growing market in Europe, with a score of 62.5/100, indicating a stable and favourable business environment. Following Euromonitor, for the future

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(2009-2014), the market is expected to continue expanding at a CAGR of 7.04%, that is, to an absolute value of 41.80 Bn zlotys. For the remaining period, until 2019, a lower CAGR is expected, of 3.3%. The pharmaceutical industry seems to be somehow resistant to economic downturns since the sales’ level of prescription drugs is not submitted to the market rules but linked to changes made to the list of reimbursed medicinal products established by the Polish Ministry of Health. It may eventually help to boost sales, as in difficult times the purchase of non-prescript drugs against stress and depression rises due to the fears of job dismissals.

Even being a marginal business at the moment, we have large expectations for Source: PharmaExpert and PMR the future given the potential of Apteka Na Zdrowie. Biedronka’s predictions publications Even being a marginal to achieve a total of 3,000 stores in 2015 and 3,500 in 2020, gives Apteka Na business at the moment, we have large expectations Zdrowie the chance to grow in number of stores as well. Not having sufficient on the future of Apteka Na data about Apteka Na Zdrowie to support concrete conclusions, we still believe it Zdrowie. can reach high profitability and contribute to increase our JMT’s price target. Further Internationalization

Because food retail is in a Because food retail is in a mature stage in western countries and the crisis mature stage in western countries, it becomes effects will be felt for at least 3 more years, these markets will face future lower crucial to operate in growth rates. Therefore, it becomes crucial to operate in emergent markets and emergent markets. take advantage of their potential. This is exactly what is happening with JMT. With the Polish opportunity almost exploited in 2015/2020 and the Portuguese position consolidated, it becomes a priority to join a new geography in 2012. In the previous years, JMT has been carefully analyzing many hypotheses, providing for successful projects to avoid committing repeated mistakes as the ones made when entering Brazil. To choose this new economy JMT established We believe Brazil or Russia some criteria about the market and the type of format suitable for implementation. areTo choosetwo probable the new geographiesgeography JMT according established to It is looking for a country of high dimension, with economic and institutional JMTsome’s criteriaperspective. about the structures and also offering basic supply infrastructures. It seeks the market and the type of format they should implementation of its business models regarding the food retail market, directed implement. to the mass market and with a local approach at competitive prices. JMT intends to announce its decision by 2H11. If no business plan is presented, JMT will probably increase its payout ratio. Because JMT possesses a vast experience in the Portuguese and Polish food retail sectors, countries located near Portugal or Poland, or having a cultural connection with them would make the integration process easier when compared to starting a business in a completely new country. JMT would make use of its detailed knowledge on

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customers’ consumption patterns as well as benefit from the use of some of its resources such as existent suppliers and distribution centres at the very beginning. In one of the “My Way” conferences at NOVA a year ago, JMT’s Chairman said that despite the first attempt not going well, Brazil is not completely out of their radar. Angola isn’t considered an option, as in an interview to “Expresso”, a Portuguese newspaper, JMT’s CEO said the Angolan market is too small to satisfy JMT’s perspectives. Not knowing which country JMT will choose, a 3rd geography was not included in our valuation model. Nevertheless, we believe pilot projects may arise, trying to explore the potential growth of JMT’s business models in new countries (see Appendix 9). Financial Ratios

2010 2011E 2012E 2013E 2014E 2015E 2020E Growth & Margins Revenues 18,8% 9,6% 7,0% 5,3% 9,0% 6,2% 7,1% EBITDA 23,7% 2,9% 7,1% 2,7% 9,0% 5,3% 7,1% EBITDA margin 7,5% 7,1% 7,1% 6,9% 6,9% 6,8% 7,1% EBIT margin 5,3% 4,7% 4,5% 4,1% 3,9% 3,7% 4,5% Profitability Gross Margin 18,8% 18,8% 18,8% 18,8% 18,8% 18,8% 18,8% Return on Capital Employed 23,9% 20,0% 18,2% 15,8% 14,9% 13,7% 21,6% ROE 24,8% 19,3% 17,0% 14,9% 13,7% 12,4% 23,3% ROA 6,7% 5,9% 5,4% 4,8% 4,5% 4,1% 7,0% Return on Sales 4,8% 3,8% 3,5% 3,2% 3,1% 2,9% 4,1% Liquidity Current Ratio 40,6% 40,6% 39,9% 39,6% 39,2% 38,9% 39,2% Cash Ratio 13,7% 13,9% 13,6% 13,6% 13,4% 13,3% 13,7% Quick Ratio 24,0% 23,9% 23,4% 23,1% 22,7% 22,5% 22,5% Working Capital (1.321,3) (1.426,4) (1.547,5) (1.637,6) (1.790,2) (1.905,3) (2.450,3) CFO/Debt 90,1% 83,2% 68,3% 61,2% 64,6% 58,5% 84,4% Leverage Debt/Assets 18,6% 16,8% 18,4% 19,1% 19,5% 20,0% 17,9% ST Debt/Debt 23,1% 22,2% 22,3% 22,4% 22,5% 22,5% 22,5% LT Debt/Debt 76,9% 77,8% 77,7% 77,6% 77,5% 77,5% 77,5% D/E 68,4% 54,8% 58,4% 59,7% 59,7% 59,7% 59,7% Net Debt/Equity 41,5% 31,1% 36,5% 38,8% 39,8% 40,7% 35,3% Debt/EBITDA 1,2 1,2 1,3 1,4 1,5 1,5 1,1 Interest Coverage Ratio 5,5 9,1 7,6 6,5 6,1 5,5 8,7 Activity Fixed Assets Turnover 3,9 3,6 3,4 3,2 3,1 3,0 3,5 Inventory Turnover 19,1 19,3 19,4 19,5 19,6 19,7 20,3 Inventory Turnover (days) 19,1 19,0 18,9 18,7 18,6 18,5 18,0 Receivables Turnover 47,8 49,0 50,2 51,4 52,6 53,9 60,8 Receivables Turnover (days) 7,6 7,5 7,3 7,1 6,9 6,8 6,0 CFO/Capex 1,6 0,9 0,9 0,9 0,9 0,8 1,9 Capex/Depreciation 2,3 3,0 2,7 2,5 2,4 2,4 1,3 Capex/Sales 5,0% 7,2% 7,1% 6,9% 7,0% 7,3% 3,5% Valuation EV/Revenues 0,95 0,89 0,84 0,77 0,73 0,54 EV/EBITDA 13,1 12,2 11,9 10,9 10,4 7,3 EV/EBIT 20,4 19,9 20,6 19,7 19,5 11,9 EV/Capital Employed 4,1 3,6 3,3 2,9 2,7 2,6

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Financial Statements (€ Mn)

BALANCE SHEET 2010 2011E 2012E 2013E 2014E 2015E 2020E Tangible Assets 2192,8 2611,6 2979,9 3314,0 3746,4 4122,4 4702,8 Intangible Assets 863,4 867,1 871,1 875,3 879,6 884,2 911,0 Other non current assets 139,1 169,3 200,0 228,4 264,2 296,1 347,0 Total Non-current assets 3255,6 3648,0 4051,0 4417,6 4890,3 5302,7 5960,8 Inventories 368,7 401,7 427,4 447,4 485,0 512,2 673,9 Accounts receivable 181,8 194,6 203,3 209,0 222,4 230,6 276,8 Cash and cash equivalents 303,9 334,9 351,5 367,4 393,3 414,8 551,5 Other current assets 48,9 44,4 47,0 49,3 53,5 56,8 76,9 Total Current assets 903,4 975,6 1029,2 1073,1 1154,3 1214,3 1579,1 Total assets 4159,0 4623,6 5080,3 5490,7 6044,6 6517,0 7539,9 Share capital 629,3 629,3 629,3 629,3 629,3 629,3 629,3 Share premium 22,5 22,5 22,5 22,5 22,5 22,5 22,5 Capital increase 77 0 100 261 448 64 Retained earnings 136,0 339,2 607,2 662,3 720,3 736,5 1198,6 Extraordinary Dividends -34,1 0,0 0 0 0 Minority Interests 286,7 286,7 286,7 286,7 286,7 286,7 286,7 Total Shareholders equity 1.131,8 1.412,6 1.603,9 1.759,0 1.978,1 2.181,6 2.259,4 Borrowings Long term 595,0 602,78 727,92 815,17 916,19 1009,97 1045,33 Total non current liabilities 802,4 825,7 950,8 1038,3 1139,6 1233,8 1271,8 Trade creditors, accrued costs and deferred income 1.895,4 2070,5 2208,9 2318,4 2519,7 2667,7 3556,8 Borrowings short term 179,2 171,8 208,8 234,9 265,2 293,4 303,7 Total Current Liabilities 2.224,8 2.402,0 2.576,8 2.710,7 2.944,5 3.119,6 4.029,4 Total Liabilities 3.027,2 3.210,5 3.510,5 3.731,7 4.066,4 4.335,4 5.280,5 Total Shareholders equity and liabilities 4.159,0 4.623,6 5.080,3 5.490,7 6.044,6 6.517,0 7.539,9 INCOME STATEMENT 2010 2011E 2012E 2013E 2014E 2015E 2020E Net Sales & Services 8.691,0 9.528,0 10.197,1 10.736,1 11.705,1 12.431,4 16.837,1 EBITDA 653,1 672,3 719,7 738,8 805,6 847,9 1.201,5 EBITDA margin 7,5% 7,1% 7,1% 6,9% 6,9% 6,8% 7,1% Depreciation (191) (227) (265) (300) (345) (384) (442) EBIT 462,1 444,8 454,4 439,0 460,8 464,1 759,9 EBIT margin 5,3% 4,7% 4,5% 4,1% 3,9% 3,7% 4,5% Total financial costs (84) (49) (60) (67) (76) (84) (87) EBT 378,6 395,8 394,8 371,8 384,9 380,0 672,7 Total income tax (79) (87) (87) (85) (88) (90) (165) Net Income 299,5 308,9 310,4 300,5 311,5 315,0 598,1 Minority Interests (19) (36) (37) (38) (41) (45) (72) Net Income attributable to JM 280,5 272,6 273,3 262,9 270,7 270,2 525,6 CASH FLOW STATEMENT 2009 2010 2011E 2012E 2013E 2014 2015 2020 Net Income 200,4 280,5 272,6 273,3 262,9 270,7 270,2 525,6 Depreciation 168,3 191,0 227,5 265,2 299,8 344,8 383,8 441,7 Var NWC (116,6) (226,1) (144,5) (100,8) (79,8) (148,2) (108,5) (171,2) Cash Flow from Operations 485,3 697,6 644,6 639,3 642,6 763,7 762,5 1138,5 Investments in non current assets 18,6 13,8 -26,4 34,7 32,6 40,2 36,4 15,4 Investments in non current liabilities 17,6 (7,5) 0,0 0,0 0,0 0,0 0,0 0,0 Capex 296,3 381,0 646,3 633,6 633,9 777,2 759,8 549,0 Cash Flow from Investments (297,3) (402,3) (619,9) (668,3) (666,4) (817,5) (796,2) (564,4) FCF 188,0 295,4 24,7 (28,9) (23,8) (53,8) (33,7) 574,1 Var equity (65,8) (214,4) 8,2 (81,9) (107,8) (51,6) (66,7) (534,2) Var debt (125,9) (0,6) 0,4 162,1 113,4 131,3 121,9 (5,4) Cash Flow from Financing activities (191,7) (215,0) 8,6 80,1 5,6 79,8 55,2 (539,6) Var Cash (3,7) 80,4 33,3 51,2 -18,2 26,0 21,5 34,5 Cash 223,5 303,9 334,9 351,5 367,4 393,3 414,8 551,5

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Appendix

1. Grocery Retailers Shares (%)

Exhibit 61 – Grocery Retailers Brand Shares (%) Source: Bloomberg

Brands 2007 2008 2009 2010 Pingo Doce 6.5% 10.6% 11.2% 12.1% Continente 6.5% 8.2% 8.5% 8.8% Intermarché Super - - - 7.7% Modelo 6.4% 6.5% 7.2% 7.6% Jumbo 6.0% 6.3% 6.6% 6.8% Lidl 5.9% 6.0% 6.0% 5.8% Minipreço 4.3% 4.4% 4.2% 4.0% E Leclerc 2.0% 2.6% 2.7% 2.8% Intermarché Contact - - - 1.8% Feira Nova 4.60% 2.00% 2% 1.60% Ulmar Supermercados 1.6% 1.5% 1.4% 1.3% Pão de Açúcar 0.3% 0.60% 1.00% 1.00% Others 62.4% 55.4% 53.6% 42.6% Source: Euromonitor International

2. Shareholders Description

Exhibit 62 – Shareholders Structure

% Voting Shareholders Number of shares held % Capital rights35 Sociedade Francisco Manuel dos Santos, SGPS, S.A. 353,119,573 56.114% 56.190% Directly Heerema Holding Company Inc. 62,929,500 10.0% 10.014% Through Asteck, S.A. Carmignac Gestión Directly 17,254,270 2.742 2.746% BNP Paribas Investment Partners, Limited Company36 12,793,488 2.033% 1.7322% Directly Source: Company data

35 % Voting rights = Number shares held /(Total nº JMT shares – Own shares)

nd 36 This number of shares indicated refers to 2 March, 2011, date of the last communication made by JMT

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Asteck is a Luxembourg company controlled by Heerema, a Dutch multinational responsible for building platforms and transportation to the oil and gas industries.

Carmignac Gestión is an investment fund company founded in 1989. For 20 years Carmignac Gestión has been developing international management experience across all asset classes.

BNP Paribas is a European leader in global banking and financial services, being one of the strongest banks in the world (Rated AA by Standard & Poor's).

3. PD’s and Recheio’s Private Labels

The existent difference between the PLs’ share of PD and Recheio is related to (both 38% and 17.1% PL shares do not include perishables):

i) Regarding PD, the 38% share of PLs reflects not only sales of food related products whose brand is “Pingo Doce”, but also other brands available in specific categories such as “Essentya” in shampoos and hair products, “Ultra Pro” in cleaning products and domestic hygiene, “Active Pet” in food for pets. ii) Regarding Recheio, three brands make part of the PL portfolio: Masterchef, Gourmês and Amanhecer. While the first two are focused on the HoReCa channel, the latter addresses Traditional Retail channel. Masterchef and Gourmês are recent brands and therefore have not yet achieved their full sales potential. Moreover, Recheio’s sales reflect a strong weight of the beverages category, where there are no private label products available, and Traditional retailers (40% of sales) purchase almost all products from manufacturer brands.

4. Supermarkets, Hypermarkets and Discount definitions

Supermarket

A supermarket is a grocery store where people can buy food, home care and personal care products. In general, in a supermarket we can find a bakery, a butcher and a perishables area. It is a type of self-service retail and its size can go from 200m2 to 5,000m2. To be able to practice lower prices, supermarkets

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limit their assortment of products with a high rotation and in general, do not offer home delivery service.

Hypermarket

Hypermarkets function in a self-service regime as well and are usually established in shopping centers or in the vicinity of large cities. With a sales area higher than 5,000m2, hypermarkets offer a wide range of products, including the ones offered by supermarkets and also electronics, audio and video products, appliances, toys, clothes, cars’ related products, etc. Since October 15th 2010, hypermarkets were allowed to open on Sundays just like supermarkets and discounters. Generally, hypermarkets offer home delivery services.

Discount/Hard discount

In general, a offers only food products which are in majority from its own brand, and is very similar to a supermarket in dimension. It does not have bakery, nor butcher areas and its main differentiation factors are the focus on prices and PLs. Discounters are more concerned with offering a wide range of PLs than paying attention to store design or customer service.

5. Methodology for MGD estimates

To estimate Modern Grocery Distribution growth rates for the next 10 years, we’ve built a model based on GDP growth rate, inflation rate, growth rate of the food retail market according to its life cycle stage, increasing tendency of the private labels and a confidence index. This methodology was used for both Portuguese and Polish forecasts.

The growth rate of the food retail market reflects the market stage, that is, we got a lower growth rate for Portugal than for Poland (0.82% against 1.56% in 2010), as the market is already in a mature stage while Poland is still in a development phase. To compute this rate, from the MGD growth rate of 2010 (Euromonitor International data), we’ve taken the GDP, inflation, confidence index and PLs effects in order to get the food market intrinsic growth rate of Portugal and Poland.

The increasing tendency of PLs was already explained in the “PLs phenomenon” chapter.

The confidence index plays an important role in Portugal, as the country is crossing a moment of high political and economical uncertainty and the market is

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highly influenced by an emotional and speculative feeling. This variable was not considered in the Polish model, as good growth expectations are expected regarding its economy.

Our MGD forecasts for Portugal (CAGR of 3.8% for the next 10 years) are much lower than past values as we took into account the negative macro outlook by incorporating GDP. Regarding Poland, lower values were estimated than the past ones as well (CAGR of 7.4% for the next 5 years against 12.8% of the previous 5), in believing that MGD growth will tend to slowdown as Poland converges to European standards.

6. Operational Forecasts

Exhibit 63 – Retail mainland Operational Forecasts

2010 2011E 2012E 2013E 2014E 2015E 2020E Store Openings 14 14 5 3 3 2 2

Total Stores 349 347 352 355 358 360 369 Sales area ('000 sqm) 437.3 444.7 450.0 453.1 455.9 458.2 467.9 Sales area growth 0.6% 1.7% 1.2% 0.7% 0.6% 0.5% 0.5%

Sales/sqm (000 €) 6.85 6.90 6.97 7.18 7.44 7.76 10.09 Sales (€ Mn) 2,755.8 3,070.6 3,138.3 3,253.9 3,395.1 3,559.3 4,726.3 Sales growth 9.9% 11.4% 2.2% 3.7% 4.3% 4.8% 6.5% Source: C ompany data and Nova ER Team for estimates Exhibit 64 – Recheio Operational Forecasts

2010 2011E 2012E 2013E 2014E 2015E 2020E Store Openings 3 1 2 0 0 0 0 Total Stores 36 37 39 39 39 39 39 Sales area ('000 sqm) 123.5 127.0 133.8 133.8 133.8 133.8 133.8 Sales area growth 8.0% 2.8% 5.4% 0.0% 0.0% 0.0% 0.0% Sales/sqm (000 €) 5.84 5.68 5.43 5.41 5.43 5.55 6.42 Sales (€ Mn) 719.1 721.7 727.3 725.2 728.7 744.6 861.4 Sales growth 4.6% 0.4% 0.8% -0.3% 0.5% 2.2% 3.5% Source: Company data and Nova ER Team for estimates Exhibit 65 – Madeira Operational Forecasts

2010 2011E 2012E 2013E 2014E 2015E 2020E Store Openings 0 0 0 0 0 0 0 Total Stores 15 15 15 15 15 15 15 Sales area ('000 sqm) 14.3 14.3 14.3 14.3 14.3 14.3 14.3 Sales area growth -0.3% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Sales/sqm (000 €) 9.96 9.98 10.00 10.17 10.35 10.58 12.24 Sales (€ Mn) 128.7 142.2 142.6 145.0 147.6 150.8 174.4 Sales growth 8.0% 10.5% 0.3% 1.7% 1.8% 2.2% 3.5% Source: Company data and Nova ER Team for estimates

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Exhibit 66 – Biedronka Operational Forecasts

2010 2011E 2012E 2013E 2014E 2015E 2020E Store Openings 197 215 230 256 348 393 113 Total Stores 1,649 1,849 2,062 2,300 2,627 3,000 3,500 Sales area ('000 sqm) 938.2 1,049.3 1,167.8 1,299.9 1,481.5 1,688.8 1,966.9 Sales area growth 15.2% 11.8% 11.3% 11.3% 14.0% 14.0% 2.8% Sales/sqm 5,122.37 5,042.76 5,022.13 4,816.86 4,756.59 4,472.02 5,345.11 Sales 4,805.9 5,311.5 5,906.1 6,324.6 7,141.2 7,677.6 10,729.0 Sales growth 29.0% 10.5% 11.2% 7.1% 12.9% 7.5% 7.9%

Source: Company data and Nova ER Team for estimates

7. Sensitivity Analysis: Biedronka DCF assumptions Exhibit 67 – JMT’s target vs Biedronka DCF assumptions WACC 9.4% 9.6% 9.8% 9.98% 10.2% 10.4% 10.6% Terminal Value growth 2.05% 14.10 13.84 13.59 13.38 13.12 12.91 12.70 2.2% 14.33 14.05 13.79 13.57 13.31 13.08 12.87 2.35% 14.56 14.27 14.00 13.77 13.50 13.26 13.04 2.5% 14.80 14.50 14.22 13.98 13.69 13.45 13.22 2.65% 15.05 14.74 14.44 14.19 13.90 13.64 13.40 2.8% 15.32 14.99 14.68 14.42 14.11 13.85 13.60 Source: Nova ER Team for estimates

8. Comparables Profiles

Sonae Distribuição is a sub-holding of Sonae Group, a Portuguese company, which operates exclusively in the retail market. Sonae Distribuição functions in Portugal since 1985 in both grocery and specialized (non grocery) retailing. Regarding food retail, the group is the market leader in Portugal, operating in the hypermarkets segment through the brand Continente and in the supermarkets segment with Modelo. Following a new strategy, this year the company has started to convert Modelo stores into Continente ones. The group intends to expand its food retail model abroad this year, to Angola and Turkey.

Carrefour Group is a French company, created in 1959 and is considered the world’s second largest grocery retailer and the largest in Europe. The company operates through 5 different formats, hypermarkets with the brands Carrefour and Atacadão, supermarkets mainly through and GS, hard discount with the brands Dia%, Minipreço and , convenience stores and finally, cash&carry through Promocash, Docks market and Gross. It operates in 34 countries in Europe, Latin America and Asia, with 57% of the group’s turnover coming from outside of France.

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Tesco plc is a British global retailer created in 1929. It is the world’s third largest retailer right after Wall-Mart and Carrefour, being leader in the grocery market in the UK as well. Its grocery business unit operates through 4 store formats, Express, Metro, Superstore and Extra. The group operates in 14 countries across Asia, Europe and North America.

Ahold is a Dutch supermarkets chain operating in Europe and the United States, whose main focus is on food retail and online grocery delivery. In the United States they own strong local supermarkets brands like Stop&Shop, and Martin’s Food Markets. It also owns the largest online grocery delivery service of the United States. In Europe, the group is market leader in Netherlands with the Albet Heijn supermarkets chain. It is also present in Czech Republic, Sweden, Norway, the Baltics and Slovakia. In total Ahold owns 2,919 stores.

Metro AG is a retailing group established in Dusseldorf, Germany. It is leader in the German grocery market and was established in 1964. Metro also operates in 33 countries in Europe, Africa and Asia (Germany, Poland, Romania, Russia, Turkey, etc.) through 2,100 outlets. Regarding grocery retailing, Metro is the world’s market leader in cash&carry through the Metro Cash & Carry outlet and it also owns the very well known Real hypermarkets.

J. Sainsbury plc is the third largest chain of supermarkets in the UK, founded in 1869, operates in a total of 890 stores from which 547 correspond to the Sainsbury’s supermarkets while the remaining 343 are convenience stores. The group is able to serve over 19 million UK customers a week and the largest stores can offer until 30,000 products. Its current market share equals 16%.

Right after J. Sainsbury plc, Wm Morrison Supermarkets plc is the fourth largest supermarkets chain of the UK. Established in 1899, the group started as an egg and butter stall in Bradford and today its main business is mainly food and grocery. Firstly more focused on northern England, however by taking over Safeway, it owns today 403 stores all across the UK.

Colruyt is a Belgian company, founded in 1925, which is one of the main players in its country. Besides Belgium, the group is present in France, Luxembourg and the Netherlands. It is mostly known by its discount supermarket chain called Colruyt, which competes directly against Aldi and Lidl. The company’s food retail brands also include the grocery store chain named Okay and its organic supermarket Bio-Planet. In France, Colruyt operates through Coccinelle chain of supermarkets too.

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Casino Group or Casino Guichard-Perrachon is a French multinational company who carries out its retail and distribution activity in hypermarkets and supermarkets in Europe, Southeast Asia, India and South America. The group consolidated net sales were €29.1Bn that came out from 11,663 stores worldwide, from which 9,461 are in France. From a vast portfolio of formats and brands, Casino’s most important brands are the hypermarkets Géant Casino, Casino Supermarkets and as convenient stores and in the discount format.

Besides other activities, Eurocash is a Polish company and works on the wholesale distribution market of the Fast Moving Consumer Goods (FMCG) only in Poland, being leader in its segment. The group main function concentrates on wholesale supply of these products to a broad range of traditional retailers across the country. The group owns a total of 117 discount cash&carry.

Similarly to Eurocash, Grupa Handlowa Emperia is a Polish retailer engaged in the retail and wholesale of food products, cosmetics, and household chemistry products. The company distributes FMCG products through a chain of cash&carry locations and distribution centers in Poland. They also own a chain of supermarkets offering a wide range of food products.

BIM is a Turkish company founded in 1995. The company’s main goal is to offer customers basic food items and consumer goods at the best prices and right quality. The group operates through its hard-discount model where it offers 600 different products. Besides its aggressive expansion throughout Turkey, the group has also invested in going abroad and it is now present in Morocco. BIM owns a total of 2,285 stores.

Magnit is a Russian retailer founded in 1994 and leader in the Russian market by number of stores. Magnit operates with 3,228 outlets in more than 974 Russian locations. Since 2006 the company’s main goal has been opening grocery stores in the hypermarket format in every city of the country.

X5 Group is a Russian company, founded in 1995, which operates under three formats: soft discounters, supermarkets and hypermarkets. The group is considered the largest retail company in terms of sales in Russia. Its main goal is to consolidate their market position in Russia and become the absolute leader in the food retail market in Russia. X5 Group is only inserted in the Russia and Ukraine food retail markets.

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Migros Ticaret is a Turkish supermarket chain that has been operating in the market for the last 56 years. The group was the pioneer of the modern retail sector in Turkey and today owns stores in Azerbaijan, Bulgaria, Kazakhstan, Kyrgyzstan and Macedonia.

9. Pilot Projects

As stated by Alexandre Soares dos Santos during the presentation of the 2010 results, JMT launched a new business concept on May 24th 2011, in Warsaw. The company opened a pilot store, in the drugstore sector, under the name Hebe which refers to the Greek goddess of eternal youth. This store will be offering services and products like body lotions, facial, hair and nail care products, makeup, jewelry, flowers, books and even pet products. According to JMT, the development of this business will be set according to the obtained results with this first store.

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Disclosures and Disclaimer

Research Recommendations

Buy Expected total return (including dividends) of more than 15% over a 12-month period.

Hold Expected total return (including dividends) between 0% and 15% over a 12-month period.

Sell Expected negative total return (including dividends) over a 12-month period.

This report was prepared by a Masters of Finance student, following the Equity Research – Field Lab Work Project, exclusively for academic purposes. Thus, the author, which is a Masters in Finance student, is the sole responsible for the information and estimates contained herein and for the opinions expressed, which reflect exclusively his/her own personal judgement. All opinions and estimates are subject to change without notice. NOVA SBE or its faculty accepts no responsibility whatsoever for the content of this report nor for any consequences of its use.

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