IBERIA
EQUITY RESEARCH 21 December 2012
TOP STORIES
Telecoms - Zon announced that the Board of Directors had met and decided to initiate formal negotiations with a view to approving the merger project with Optimus. The board of Optimus also informed that it fully supports, without reservations, the convenience and opportunity of a merger between Zon and Optimus Both statements were pretty much as expected. The questions that really matter are, in one side the exchange ratio, 1.5 now, but we would not be surprised if this ratio changed in favor of Zon shareholders
and in the other side the answer from the CMVM (the Portuguese security and exchange commission) to the idea of a creation of a vehicle owned by Isabel dos Santos and Sonaecom with a control stake in Zon of 50.01% (page 4). OUT THIS WEEK Snapshots/Company Reports – PT & TEF, Sonaecom & Zon Multimedia, EDPR, Sonae Price Target / Recommendation Changes – Iberdrola, Zon Multimedia, Jerónimo Martins, Mota- Engil Other News – Zon Multimedia, EDP, Retail Sector, Jerónimo Martins, Galp Energia, PT & Zon Multimedia
WEEK AHEAD Monday – JM ex-date special dividend (gross €0.239 per share) Friday – Retail sales Spain PORTFOLIOS
This week, Mib Aggressive Portfolio went up 2.96%, outperforming the PSI20 by 1.75pp. Novabase and Semapa were the contributors for this outperformance (page 10). This week, Mib Liquidity Portfolio went up 4.14%, outperforming the PSI20 by 2.94pp. Sonae and Semapa were the contributors for this outperformance (page 11).
Stock Market Last 1W YTD 2011 Daily Vol. (€mn) 1W 1M 6M 2011
PSI 20 5,693 1.21% 3.62% -27.60% PSI 20 106 94 60 148
WEEKLY IBEX 35 8,291 3.33% -3.21% -13.11% IBEX 35 3,210 2,446 2,400 4,925 Euro Stox x 50 2,651 0.78% 14.44% -5.56% Euro Stox x 50 7,358 6,524 7,325 14,831
Forex Rates Last 1W YTD 2011 Interest Rates Last 1W C hg YE11 António Seladas, CFA EU R/U SD 1.32 0.98% 2.09% -3.17% Euribor 6m 0.32% 0.32% 0bp 1.62% +351 21 003 7826 EU R/GBP 0.81 0.33% -2.53% -2.96% 10Y Bond PT 6.98% 7.09% -11bp 13.36% EU R/BRL 2.74 -0.31% 13.28% 8.86% 10Y Bond SP 5.25% 5.39% -14bp 5.09% [email protected]
Best & Worse Performers -1 Week (%) Best & Worse Performers - YTD (%)
Banco Popular 12.3 BPI 106.3 Indra 11.5 Sonae 56.6 Semapa 11.2 Mota-Engil 51.7 Av. José Malhoa, Lote 27 Bankinter 10.4 Altri 37.4 1099-010 Lisboa Mota-Engil 10.2 Zon Multimedia 29.2 Sonae Capital 0.0 Impresa -34.0 Tel / Fax: +351 21 003 7800 / 09 Sonae Industria -1.0 Cimpor -36.4
Cofina -2.7 Sonae Capital -44.4
Jerónimo Martins -2.8 Martifer -46.3 EDP Renováveis -5.5 Banco Popular-67.1
-15 -5 5 15 -100 -50 0 50 100 150
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All prices are those of the end of the trading session unless otherwise indicated. For important Disclosure and Disclaimer go to the second last page.
Millennium investment banking Weekly 21 December 2012
CHANGES New Previous Motive Rating Target Rating Target
Zon Multimedia Neutral 3.20 Buy 3.20 Price Performance
Iberdrola Buy 5.00 Buy 4.95 Moving Valuation to YE13
Jerónimo Martins Buy 16.50 Neutral 16.50 Price Performance
Mota-Engil Reduce 1.50 Neutral 1.50 Price Performance
EARNINGS
Company 4Q2012 Investor Day
Galp Energia * 21-01 BM Bankinter (e) 24-01 BM BCP 08-02 AM Galp Energia 11-02 BM 05-03-2013 Sonaecom 07-03 BM Glintt 26-03 Jerónimo Martins n.a. Portucel n.a. BPI n.a. Iberdrola n.a. Banco Popular n.a. Media Capital n.a. Novabase n.a. Semapa n.a. Impresa n.a. Brisa n.a. EDP n.a. Sonae Sierra n.a. EDP Renováveis n.a. Telefónica n.a. Altri n.a. REN n.a. Cofina n.a. Zon Multimedia n.a. BES n.a. Cimpor n.a. Sonae n.a. Indra n.a. Martifer n.a. Sonae Capital n.a. Sonae Indústria n.a. Ibersol n.a. Mota-Engil n.a. Portugal Telecom n.a. ESFG n.a. Soares da Costa n.a. SAG n.a. AM - After market; BM - Before market; n.a. - Not available; (e) Expected; * Trading Update
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Millennium investment banking Weekly 21 December 2012
TELECOMS Portugal Telecom Buy – Medium Risk (Target YE13: €5.30) Zon Multimedia Neutral– Medium Risk (Target YE13: €3.20) Alexandra Delgado, CFA Pt and Zon Agreement on Sport TV António Seladas, CFA Equity Analysts PT announced yesterday night that is going to acquire 25% stake in Sport TV a new entity that combines Sport TV Portugal, Sportinveste Multimedia (exploits multimedia sport rights for internet and mobile platforms) and PPTV (owns the exclusive TV rights for the vast majority of Portuguese Football clubs until the end of 2017/18 season). PT will contribute its 50% stake in Sportinveste Multimedia and €21Mn through a rights issue in Sport TV. Zon also announced that on this deal will reduce its stake in Sport TV from 50% to 25%, receiving a cash in around €46Mn (equity and shareholders loans). The new entity, owned 25% by PT; 25% by Zon and 50% by Sportinveste (the prior owner of PPTV), will have a cleaner structure than before as the exclusive TV rights of the Portuguese Football clubs are now under the umbrella of Sport TV, which was not the case before and will be the main acquirer of sports rights for the Portuguese market. It is not clear if Zon and PT will proportionally consolidate the new company, however Zon to be consistent will probably consolidate, while PT have both options.
Portugal Telecom Buy – Medium Risk (Target YE13: €5.30) Telefónica Buy – Medium Risk (Target YE13: €17.35) Alexandra Delgado, CFA Brazilian Mobile Market MoM - Mobile market slowing down... Equity Analyst . The Brazilian regulator released this week night mobile subscribers’ numbers. . The Brazilian mobile market reached 260.0 million clients in November 2012, which stands for 131.9% penetration of the population. Net additions during the month were 746k, which compares to 4,450k net adds in November 2011 (-83.2%). Subscriber growth in the Brazilian market has decelerated significantly in the last months, on the back of higher penetration. Subscribers grew 10.1% YoY in the last 12 months, the lowest rate on our data base (since December 2004). . Vivo subscribers were down by 295k in the month which resulted in the loss of 0.2pp market share, to 29.2%. . Oi captured a very positive 523k net adds in the month, raising its market share by almost 0.2pp to 18.98%. (For further details, please refer to our snapshot out this week)
Sonaecom Buy – High Risk (Target YE13: €2.40) Zon Multimedia Neutral – Medium Risk (Target YE13: €3.20) Alexandra Delgado, CFA Merger proposal – The ball’s in Zon’s court Equity Analyst . Sonaecom SGPS and Isabel dos Santos announced last Friday they have reached an agreement to recommend to the Boards of Zon Multimédia and Optimus SGPS a merger between the two companies, based on the incorporation of Optimus SGPS into Zon. Sonaecom will host a conference call next Monday, December 17th, at 10:00 (GMT time). . The proposed ratio values Zon as being 150% of Optimus. This exchange ratio gives 60.0% of merger synergies to Zon shareholders and 40.0% to Sonaecom shareholders. The ratio proposed is close to current market value. . We have for long defended this merger because we believe it creates significant value (our estimate
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Millennium investment banking Weekly 21 December 2012
is €317 mn in synergies), and therefore this first step towards a potential merger is positive. Sonaecom becomes the leading shareholder in the new company with a 32% stake. Isabel dos Santos will hold 25%. The decision is now on Zon shareholders’ side, assuming Zon’s Board approves the deal. . However, the structure announced is more complex than a merger between Sonaecom and Zon Multimédia and penalizes Sonaecom shareholders. Sonaecom will become a holding with an economic interest of 32% in Zon Optimus plus SSI and Público, therefore trading at a discount vs. the new company. (For further details, please refer to our snapshot out this week)
Zon Optimus Merger Zon announced that the Board of Directors had met this week and decided to initiate formal negotiations with a view to approving the merger project with Optimus. For this purpose the board deliberated: (1) to delegate in the executive committee the management and orientation of the negotiation process with the Board of Directors of OPTIMUS; (2) to appoint an Ad-hoc Committee to oversee the negotiations, consisting of Non-Executive Members of the Board of Directors and (3) to hire BESI and Caixa BI as financial advisors to the company for the merger process. Lately, the board of Optimus also informed that it fully supports, without reservations, the convenience and opportunity of a merger between Zon and Optimus and is entirely available to negotiate with Zon the preparation of a a merger project, to be submitted to the Shareholder Meetings of Zon and Optimus. Both statements were pretty much as expected. The questions that really matter are, in one side the exchange ratio, 1.5 now, but we would not be surprised if this ratio changed in favor of Zon shareholders and in the other side the answer from the CMVM (the Portuguese security and exchange commission) to the idea of a creation of a vehicle owned by Isabel dos Santos and Sonaecom with a control stake in Zon of 50.01%
UTILITIES Iberdrola Buy – Low Risk (Target YE13: €5.00) Vanda Mesquita, Shrinking debt to ensure a healthier future Equity Analyst . Following estimates fine-tuning, we value IBE at €5.00 per share (YE13), slightly revised upwards from our previous calculations (€4.95 YE12), keeping our buy recommendation (low risk) unchanged. The positive impact from the roll over to 2013 (35 cents) was more than offset by the cut in estimates (-55 cents). The update of debt spread over risk free rate from 400 bps to 350 bps led to a positive adjustment of 25 cents. . Over the last decade, there were clearly two cycles of investment. The first cycle (from 2001 to 2006) was based on the growth of renewable energies and generation mainly in Spain, Mexico and Brazil and the second cycle (beginning in 2007) was based on growth via internationalization with a strong bet on renewable and regulated networks. Forced by the current very tough environment, the company is clearly initiating a third cycle more focused on deleveraging (goal to reduce debt by €6bn from €32bn to €26bn until 2014 and Net Debt to EBITDA of 3.2x) and lower investment growth (€10.5bn from 2012 to 2014 vis-à-vis €16.7bn from 2009 to 2011). In spite of this change of direction, IBE’s story will continue to be focused on networks and renewable energies and less on generation, which we consider a right decision, as these activities are by nature more volatile. . The company’s view of a flattish EBITDA 2014 vis-à-vis 2011 appears to be conservative, comparing to our estimate of EBITDA 2014 to stand 4% above 2011 levels (CAGR 11-14E of 1.3%). In our point of view, IBE gave this cautious guidance, perhaps to ensure that it will meet its debt reduction plan successfully. In fact, IBE appears to be well prepared to strengthen its balance sheet and, at the same time, to assure a stable shareholder’s remuneration policy (approximately 30 cents per share from 2012 to 2014).
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. According to our estimates, Net debt to EBITDA will reach 3.2x by 2014 (in line with the company’s target). We assume no divestments, a decrease of €3bn in terms of tariff deficit and a dividend of 30 cents in the coming two years (50% payment through cash and 50% through the issuance of new shares). Therefore, bearing in mind that the company will divest assets (€2bn of core assets in non-core countries, approximately €350mn of which were already sold), we consider that the target of Net Debt to EBITDA of 3.2x is attainable. (For further details, please refer to our company update out this week)
EDP Buy – Low Risk (Target YE13: €2.80) Vanda Mesquita, A new concession in Brazil Equity Analyst EDP – Energias do Brasil announced that it obtained the concession for the Cachoeira Caldeirão hydro plant on the A-5 auction carried out on Friday by the Brazilian Electricity Regulatory Agency (ANEEL). The hydro plant with an installed capacity of 219 MW will be built in the Amapá Brazilian state, in the Araguari river. The conditions of the contracted PPA in the electricity auction include the sale of 129.7 average MW for a 30-year term starting in January 2017. The investment will amount to R$1.1 bn. This new plant will allow EDP to reinforce its presence in the generation market, the most profitable business in Brazil. As we value EDP Brazil through its market value, there is no impact valuation wise. We recall the EDP owns a 51% stake in Energias do Brasil.
Erse unveiled the final document regarding the tariffs and prices for the year 2013 The Portuguese Energy Services Regulatory Authority published the final proposal for tariffs and prices for energy for the year 2013 (the draft proposal was available on December, 15). Regulated tariff will increase by 2.8% in 2013 (in line with the rise announced in October). EDP’s 2013 allowed revenues for the electricity distribution grid were set at €1.274mn and for the last resource supply were set at €93mn. The document also unveils the components that allow the calculation of the increase in regulatory receivables in 2013. According to our understanding, the company’s regulatory receivables will increase by approximately €444 million (it was expected that the variation could be between €400 million and €500 million). If we exclude the component that was sold last week (namely the right to receive €147 million plus interest related to tariff adjustments for CMEC referring to the year 2010 to be received in 2013), the increase in regulatory receivables is smaller. Overall, the final version of the document does not differ very much from the draft, so the impact is neutral valuation wise. As far as allowed revenues are concerned, there are no relevant differences vis-à-vis what we consider in our valuation, since we assume allowed revenues for 2013 distribution activities amounting to € 1,283 million (vis-à-vis € 1,274 million announced by ERSE) and for 2013 the last resort supply amounting to €82 million (vis-à-vis €93 million announced by ERSE). As for regulatory receivables, we consider an increase of €400mn (less than the aforesaid €444 million). Following the sale announced last week, this figure should be smaller. This difference does not have a meaningful impact in terms of our valuation, as the lower regulatory receivables are compensated by lower debt.
EDP Renováveis Buy – Low Risk (Target YE13: €5.30) Vanda Mesquita, First sale of minority stake to CTG - Positive deal will help debt reduction Equity Analyst . EDPR has announced that it has reached an agreement with China Three Gorges (CTG) to sell 49% of the equity shareholding and 25% of the shareholders loans in EDPR Portugal for €359mn. This deal covers 615MW of the wind parks in operation in Portugal and also 29MW that are ready-to-build. Comparing to our valuation, there is a positive impact of €89mn (+10 cents/ share). The transaction is subject to regulatory approval and is expected to be
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Millennium investment banking Weekly 21 December 2012
completed until the end of the first half of 2013. We consider this a positive deal, since it helps to crystallize the value of wind parks under operation and at the same time to reduce net debt. However, from a strategic point of view, this kind of deal reduces EDPR’s stake over its core assets, increasing minority stakes. . Enterprise value (EV) implied in the deal amounts to €1.011mn, €513mn of which are related to equity, €478mn related to shareholder loans and external debt (this figure includes the capex to be spent with the aforesaid 29MW ready to built) and €20mn related to minority stakes. Under this deal, CTG bought 49% of the equity shareholding (€251mn) and 25% of the shareholder loans (€108mn) for €359mn.The company said that the EV/MW implied in the deal amounts to €1.57mn per MW. . We valued those 615MW wind parks (using a DCF approach) at an EV/MW of $1.13mn, meaning an estimated EV of €697mn. If we were to include the 29MW ready to build (those MW are not included in our valuation) and assuming a capex per MW of €1.3mn, EV would rise to €735mn. Considering that 50% of the assets are financed through debt and the remaining part by equity (the capital structure considered in the calculation of WACC) and at the same time replicating the capital structure implied in the deal (49% equity and 25% debt), the deal would be valued at €272mn (lower figure than the €359mn paid by CTG), meaning that there will be a positive impact of €87mn (+10 cents/ share). Please refer to tables inside. (For further details, please refer to our snapshot out this week)
CONGLOMERATE Sonae Buy – Medium Risk (Target YE13: €1.00) João Flores; Sonaecom & Zon Multimedia merger proposal – Prevents deconsolidation? Equity Analyst . Sonaecom SGPS and Isabel dos Santos disclosed last Friday after market close a long-awaited merger proposal between Zon Multimedia and Optimus SGPS (held by Sonaecom). . Please refer to our” Telecom Sector: Sonaecom and Zon finally tying the knot? (II), published on October 23rd 2012”, Telecoms & Conglomerate: M&A scenario in Telecoms – How to play the merger published on December 07th 2012 and Snapshot: Zon Multimedia & Sonaecom: Merger proposal that was published on December 16th” for further details. . Apparently the structure announced is more complex than a merger between Sonaemcom and Zon Multimedia, since it’s based on the incorporation of Optimus SGPS into ZonMultimedia. . Recall we were expecting a €0.05 positive impact on Sonae`s price target from synergies and a further €0.10 positive impact on Sonae`s price target from the removal of the holding discount (10%) that we currently apply to our Sonae`s valuation (Sonaecom would be deconsolidated from Sonae). Overall, the impact of this merger on our Sonae`s valuation was expected to be €0.15 (€0.05+ €0.10), thus it would raise Sonae`s price target to €1.15 from €1.00YE13. . Overall, the deal is more complex than expected and not so positive for Sonae as it was expected to be: i) apparently Sonae will not deconsolidate Sonaecom (Sonae will keep a stake above 50% in a new Sonaecom holding trading a discount or will Sonae reduce its stake in new holding?); ii) merger it`s not via Sonaecom but via a vehicle held at 50% by Sonaecom, thus we will keep our Holding discount (10%); iii) the announced deal excludes Publico SSI, while our analysis considered a merger between Sonaecom and ZonMultimedia; iv) Sonae misses an opportunity to became an almost fully comparable retailer to its peers (at operational level) following the merger in Telecoms unit. (For further details, please refer to our snapshot out this week)
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Millennium investment banking Weekly 21 December 2012
RETAIL Retail Sector João Flores, Polish retail sales slows to 2.4% in November Equity Analyst . Food: There was a 2.4% YoY gain in retail sales of food, beverages and tobacco products (from 1.3% in October), thus YTD average declined to 5.1% from 5.4%. Following polish numbers, we keep confident with our JM`s numbers (recall we estimate Biedronka`s LfL sales in 2012 will reach 6%, keeping outperformance to the market). . Retail sales in Poland: increased 2.4% on an annual basis in November (2.9% consensus), lower than the 3.3% growth seen in October. On a monthly basis, retail sales declined 6.4% during the month (-5.9% consensus), following 4.3% increase in October. . Recall new car sales in Poland increased pace of decline in November to -8% YoY from -3% YoY in October, not benefiting from an increasing favorable comparison basis (market strongly accelerated pace of decline from September 2011). . The unemployment rate rose to 12.9% in November from 12.5% in October (12.8% estimated).
Jerónimo Martins Buy – Medium Risk (Target YE13: €16.50) João Flores, Special dividend approved Equity Analyst Company approved at an Extraordinary General Meeting held on December 18th the distribution of €150mn on the December 31st (€0.239/share) from free reserves (Ex-Date December 24th). Recall our JM`s valuation has embedded this dividend.
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Millennium investment banking Weekly 21 December 2012
OIL & GAS Galp Energia Buy – High Risk (Target YE13: €17.05) Vanda Mesquita, Galp issued a €110mn bond issue Equity Analyst This week, Galp has announced that it completed the issue of notes amounting to €110mn, maturing in 2018 and with a floating rate indexed to 3-month Euribor plus a spread of 4.25%. The transaction Lead Manager was Deutsche Bank AG, London Branch. We recall that on December, 7th, the company had announced that it had completed the issue of notes amounting to €80mn, with a term of 5 years and a floating rate indexed to 6-month Euribor plus a spread of 4.75%. The transaction Lead Manager was Caixa Económica Montepio Geral. While this issue was led by a national bank, the most recently announced was led by an international bank. The spread of the issue led by the international bank is lower than the one implied in the issue led by the national bank. This may mean that the wholesale market is opening in a more notorious way and that the costs associated with this type of emissions are dropping. If we were to compare with the average cost of debt (4.4% at the end of the third quarter), the cost of debt associated to the most recent issue is broadly in line.
SECTOR PERFORMANCE
Sector Performance -1 Week (%) Sector Performance - YTD (%)
PSI20 1.2 PSI20 3.6
Industrials & Other 4.9 Financials 49.9
Financials 3.9 Telecoms 41.2
Telecoms 1.5 Retail * 7.2
Electric Utilities 0.8 Electric Utilities -7.1
Oil & Gas 0.7 Oil & Gas -7.3
Retail * -1.0 Industrials & Other -24.2
-202468 -50-30-1010305070
* includes Jeronimo Martins and Sonae
. This week, the PSI20 went up 1.2%. The best performing sector was Industrials & Other with a 4.9% growth and the worst was Retail with a 1.0% fall. . On a Ytd basis, the PSI20 went up 3.6%. The best performing sector was Financials with a 49.9% growth and the worst was Industrials & Other with a 24.2% fall.
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Millennium investment banking Weekly 21 December 2012
AGGRESSIVE PORTFOLIO . This week, Mib Aggressive Portfolio went up 2.96%, outperforming the PSI20 by 1.75pp. Novabase and Semapa were the contributors for this outperformance. . We highlight that the portfolio is composed by the five stocks with the highest upside potential of our coverage universe. It is equal weighted and rebalanced on a weekly basis.
LIQUIDITY PORTFOLIO . This week, Mib Liquidity Portfolio went up 4.14%, outperforming the PSI20 by 2.94pp. Sonae and Semapa were the contributors for this outperformance. . We highlight that the portfolio is composed by the five stocks with the highest upside potential of our coverage universe, excluding the less liquid stocks. It is equal weighted and rebalanced on a weekly basis.
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Millennium investment banking Weekly 21 December 2012
Mib AGGRESSIVE PORTFOLIO 834 13 8 Portfolio weekly return 300 Return since inception (27Jul04) Risk Market Price Upside Weekly Performance Company 270 Rating Price (€) Target (€) Potential Return Contribution Deviation Portfolio PSI20 Novabase High 2.28 4.10 80% 2.2% 0.45pp 0.21pp 240 Impresa High 0.31 0.55 77% 0.0% 0.00pp -0.24pp 210 Telefónica Medium 10.25 17.35 69% 0.6% 0.12pp -0.12pp 180 Semapa High 5.80 8.20 41% 11.2% 2.23pp 1.81pp 150 Sonaecom High 1.55 2.40 55% 0.8% 0.16pp -0.08pp Portfolio 2.96% 120 PSI 20 1.21% 90 Gain/loss 1.75pp 60 Explained by the portfolio 1.57pp 23/07/04 17/12/05 13/05/07 06/10/08 02/03/10 27/07/11 20/12/12 Explained by being underweight in the remaining PSI20 stocks 0.18pp
Next week Portfolio Changes in Portfolio Ytd Return Risk Market Price Upside Company In Out 125.0 Rating Price (€) Target (€) Potential 120.0 Portfolio PSI20 Novabase High 2.28 4.10 80% Galp Energia Semapa 115.0 Impresa High 0.31 0.55 77% 110.0 105.0 Telefónica Medium 10.25 17.35 69% 100.0 Sonaecom High 1.55 2.40 55% 95.0 Galp Energia High 11.85 17.05 44% 90.0 85.0 Return vs. PSI 20 80.0 75.0 2007 2008 2009 2010 2011 YTD 1 Month 1 Week 30/12/11 28/03/12 25/06/12 22/09/12 20/12/12 Portfolio -2.4% -43.6% 71.9% -7.30% -36.6% 23.8% 6.6% 3.0% PSI20 16.3% -51.3% 33.5% -10.30% -27.6% 3.6% 6.9% 1.2% Gain/loss -18.7pp 7.7pp 38.5pp 3.0pp -9.0pp 20.2pp -0.4pp 1.7pp
Source: Bloomberg; Millennium investment banking "Mib Aggressive Portfolio" is composed by the five stocks with a higher upside potential of our coverage universe. "Mib Aggressive Portfolio" is equal-weighted and its composition changes at the end of the last trading day of each week.
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Millennium investment banking Weekly 21 December 2012
Mib LIQUIDITY PORTFOLIO 834138 Ytd Return (since inception) Portfolio weekly return 125.0 Risk Price Upside Weekly Performance Company Market Price (€) 120.0 Portfolio PSI20 Rating Target (€) Potential Return Contribution Deviation Telefónica Medium 10.25 17.35 69% 0.6% 0.12pp -0.12pp 115.0 Semapa High 5.80 8.20 41% 11.2% 2.23pp 1.81pp 110.0 Sonae Medium 0.72 1.00 39% 7.8% 1.56pp 1.06pp 105.0 Galp Energia High 11.85 17.05 44% 0.7% 0.14pp -0.03pp 100.0 Portugal Telecom Medium 3.84 5.30 38% 0.4% 0.09pp -0.03pp 95.0 Portfolio 4.14% 90.0 PSI 20 1.21% Gain/loss 2.94pp 85.0 Explained by the portfolio 1.57pp 80.0 Explained by being underweight in the remaining PSI20 stocks 1.37pp 75.0 30/12/11 28/03/12 25/06/12 22/09/12 20/12/12 Next week Portfolio Changes in Portfolio Risk Price Upside Company Market Price (€) In Out Rating Target (€) Potential Telefónica Medium 10.25 17.35 69% -- Galp Energia High 11.85 17.05 44% Semapa High 5.80 8.20 41% Sonae Medium 0.72 1.00 39% Portugal Telecom Medium 3.84 5.30 38%
Return vs. PSI 20
2011 YTD 1 Month 1 Week Portfolio - 25.1% 7.2% 4.1% PSI20 -27.6% 3.6% 6.9% 1.2% Gain/loss - - 21.5pp 0.3pp 2.9pp
Source: Bloomberg; Millennium investment banking "Mib Liquidity Portfolio" is composed by the five stocks with a higher upside potential, excluding less liquid stocks. "Mib Liquidity Portfolio" is equal-weighted and its composition changes at the end of the last trading day of each week.
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Millennium investment banking Weekly 21 December 2012
Latest Target Risk Trnvr (€mn) M Cap Change (%) EPS P / E EV / Sales EV / EBITDA Div Yield P/BV 2012/12/21 Upsd Rating Pr (€) YE13 Rating 3m 6m (€ mn) Week 1M 3M 12M YTD 2011 2012E 2013E 2011 2012E 2013E 2011 2012E 2013E 2011 2012E 2013E 2011 2012E 2012E PSI 20 5,693 - - 49,666 1.21 7.4 4.9 7.8 3.6 Financials 67.2 50.3 14,727 7.7 13.7 -10.5 -39.6 -42.2------Banco Popular 0.63 0.75 19.0% Buy High 36.0 26.3 5,297 12.3 13.9 -36.9 -67.2 -67.1 0.05 -0.29 0.04 36.2 loss 16.4 ------0.2% 0.0% 2.0 Bankinter 3.31 3.70 11.7% Buy High 7.1 6.0 1,867 10.4 12.6 -2.5 -28.3 -30.3 0.32 0.21 0.27 14.8 15.9 12.4 ------2.8% 2.5% 0.6 BCP (1) 0.08 -- --7.44.9 1,498 4.1 8.6 26.78.2-13.3------BES 0.90 0.95 5.2% Neutral High 15.3 11.9 3,628 4.3 19.6 36.8 41.6 10.9 -0.05 0.01 0.03 loss 65.4 30.1 ------0.0% 0.0% 0.5 BPI 0.97 1.10 13.3% Buy High 1.0 0.9 1,350 7.9 18.8 17.0 130.8 106.3 -0.28 0.10 0.02 loss 9.8 39.6 ------0.0% 0.0% 1.0 Telecoms 294.2 280.2 51,586 0.7 1.4 -8.7 -18.2 -20.4 - - - 11.3 9.2 9.2 2.1 1.8 1.8 6.1 5.4 5.4 9.7% 12.0% 2.0 Telefónica 10.25 17.35 69.3% Buy Medium 280.1 266.4 46,648 0.6 0.9 -9.7 -19.5 -21.8 1.20 1.17 1.16 11.2 8.7 8.8 2.2 1.8 1.8 6.1 5.4 5.4 9.7% 12.8% 2.2 Portugal Telecom 3.84 5.30 38.0% Buy Medium 12.1 12.3 3,444 0.4 4.4 -4.5 -14.8 -13.7 0.42 0.31 0.25 10.6 12.3 15.2 1.9 1.8 1.8 5.6 5.2 5.4 14.6% 8.5% 1.2 Zon Multimedia 3.00 3.20 6.7% Neutral Medium 1.5 1.1 927 6.6 13.9 25.8 44.9 29.2 0.11 0.13 0.14 20.4 22.7 22.2 1.8 2.0 1.9 4.8 5.5 5.3 6.9% 5.3% 4.3 Sonaecom 1.55 2.40 55.0% Buy High 0.6 0.4 567 0.8 8.3 10.6 34.5 27.4 0.17 0.14 0.13 7.1 11.4 11.8 0.9 1.1 1.1 3.5 3.9 3.7 5.6% 4.4% 0.5 Media 0.1 0.1 200 -3.7 10.6 3.2 -15.3 -32.6 ---loss 11.7 12.5 1.2 1.1 1.1 9.8 8.0 8.9 2.3% 4.3% 0.7 Impresa 0.31 0.55 77.4% Buy High 0.0 0.0 52 0.0 6.9 -6.1 -20.5 -34.0 -0.17 0.01 -0.01 loss 51.6 loss 1.2 1.2 1.2 12.4 11.9 14.6 0.0% 0.0% - Media Capital (2) 1.28 2.15 68.0% - - 0.0 0.0 85 -6.6 -6.6 1.0 -27.0 -39.4 0.01 0.10 0.13 119.7 9.8 7.5 1.1 1.0 1.0 8.6 5.1 5.4 4.2% 8.1% - Cofina 0.62 0.51 -16.4% Sell High 0.1 0.1 63 -2.7 52.2 16.0 16.0 -19.1 0.05 0.07 0.07 16.2 8.5 9.2 1.3 1.3 1.3 8.4 8.3 9.0 1.3% 2.6% 3.6 Technology Indra 10.40 12.40 19.2% Buy High 4.8 6.6 1,707 11.5 12.2 30.1 6.6 5.7 1.10 0.97 1.03 8.9 10.7 10.1 0.8 0.8 0.8 6.9 8.0 7.1 6.9% 1.9% 1.6 Nov abase 2.28 4.10 79.8% Buy High 0.0 0.0 72 2.2 5.6 14.6 14.6 9.1 0.05 0.22 0.22 41.8 10.4 10.2 0.3 0.3 0.2 4.3 3.3 2.8 1.4% 3.9% 0.7 Utilities 143.3 203.3 38,821 4.4 7.6 8.8 -6.0 -9.1 - - - 10.4 9.3 10.3- 2.1 2.0 1.9 8.0 7.7 7.4 - 4.5% 4.4% 0.7 Iberdrola 4.22 5.00 18.5% Buy Low 129.9 191.1 25,906 6.4 5.5 11.7 -8.0 -9.8 0.47 0.48 0.40 10.32 8.9 10.7 1.9 1.8 1.6 7.9 7.4 7.0 6.8% 7.1% 0.6 EDP 2.31 2.80 21.2% Buy Low 10.3 9.5 8,450 3.0 17.9 3.3 2.9 -3.3 0.30 0.28 0.26 7.85 8.3 8.9 1.9 2.0 1.9 7.8 8.1 8.0 7.8% 8.0% 1.0 EDP Renov áv eis 3.87 5.30 36.9% Buy Low 2.1 2.1 3,378 -5.5 2.4 4.4 -14.1 -18.1 0.10 0.14 0.17 46.6 28.0 22.8 8.0 6.2 5.7 10.8 8.7 7.9 0.0% 0.7% 0.6 REN 2.04 2.60 27.7% Buy Low 1.0 0.6 1,087 2.4 2.3 1.0 8.9 -3.5 0.23 0.24 0.26 9.3 8.7 7.9 3.8 4.3 4.3 7.5 6.9 6.6 8.0% 8.3% 1.0 Motorways Brisa (3) 2.10 - - - - 0.3 1.3 1,260 2.4 8.8 14.8 -15.1 -17.5 0.14 - - 18.1 - - 6.1 - - 8.8 - - 11.2% - - Conglomerates 1.8 1.3 2,162 8.9 20.8 22.8 ------Sonae 0.72 1.00 39.1% Buy Medium 1.5 1.1 1,438 7.8 24.4 30.7 61.6 56.6 0.05 0.04 0.04 8.9 17.8 16.8 0.7 0.7 0.7 5.9 6.4 6.4 7.2% 4.6% 1.0 Semapa 5.80 8.20 41.3% Buy High 0.2 0.2 687 11.2 13.9 9.0 8.5 8.1 1.05 1.08 1.00 5.1 5.4 5.8 1.1 1.2 1.1 4.7 5.0 4.8 4.5% 4.2% 0.6 Sonae Capital 0.15 0.19 24.9% Buy High 0.1 0.0 38 0.0 7.1 -11.8 -25.0 -44.4 0.01 -0.08 -0.07 22.5 loss loss 2.2 2.8 3.2 loss loss loss 0.0% 0.0% 0.1 Retail Jerónimo Martins 14.58 16.50 13.2% Buy Medium 8.4 8.5 9,175 -2.8 2.8 9.1 15.2 14.0 0.56 0.62 0.73 4.5 23.5 19.9 0.9 0.9 0.8 12.3 12.9 10.9 2.1% 3.7% 6.9 Industrials 1.3 2.1 4,451 2.0 8.7 4.7 -11.6 -16.3 ------5.7% - - Sonae Industria 0.50 0.70 41.4% Buy High 0.1 0.1 69 -1.0 9.0 -19.1 -16.4 -22.0 -0.41 -0.28 -0.26 loss loss loss 0.6 0.6 0.6 10.9 9.1 9.2 0.0% 0.0% 0.5 Altri 1.65 1.65 0.1% Neutral High 0.4 0.3 338 4.4 21.2 18.7 43 37.4 0.12 0.20 0.19 9.8 8.2 8.8 2.0 1.9 1.9 8.7 8.1 7.3 1.7% 1.2% 1.9 Portucel 2.29 2.55 11.5% Buy Medium 0.4 0.7 1,755 0.0 9.6 7.6 31.4 24.3 0.26 0.28 0.28 7.2 8.1 8.2 1.3 1.4 1.4 5.0 5.5 5.2 11.7% 7.4% 1.1 Cimpor (3) 3.38 - - - - 0.3 1.0 2,271 2.4 5.6 0.9 -32.8 -36.4 0.31 - - 17.0 - - 2.4 - - 8.9 - - 3.8% - - Construction 0.2 0.2 379 9.7 13.9 23.7 17.1 18.6 ------Mota-Engil 1.57 1.50 -4.2% Reduce High 0.2 0.2 321 10.2 15.6 28.7 51.7 51.7 0.16 0.21 0.26 6.3 7.4 6.1 0.7 0.8 0.8 6.4 6.6 6.0 10.1% 6.6% 0.9 Oil & Gas Galp Energia 11.85 17.05 43.9% Buy High 15.3 13.5 9,822 0.7 -4.3 -9.0 2.3 4.1 0.30 0.43 0.42 37.6 27.4 27.9 0.8 0.7 0.6 16.5 12.3 12.0 1.8% 2.0% 1.8 (1) We do not have a recommendation on BCP, as Mib is a registered trademark of BCP; (2) Unrated due to low free-float; (3) Not Covered
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Millennium investment banking Weekly 21 December 2012
DISCLOSURES . This report has been prepared on behalf of Millennium investment banking (Mib), a registered trademark of Banco Comercial Português, S.A. (Millennium bcp). . Millennium bcp is regulated by Comissão de Mercado de Valores Mobiliários. . Recommendations: Buy means more than 10% absolute return; Neutral means between 0% and +10% absolute return; Reduce means between -10% and 0% absolute return; Sell means less than -10% absolute return. . Unless otherwise specified, the time frame for price targets included in this report is current year-end or next year-end. . Risk is defined by the analyst’s view in a qualitative way (High, Medium, Low). . Usually we update our models and price targets in between 3 and 9 months. . Millennium bcp prohibits its analysts and members of their households to own any shares of the companies covered by them. . BCP group may have business relationships with the companies mentioned in this report. . Millennium bcp, expects to receive or intends to seek compensations for investment banking services from the companies mentioned in this report. . The views expressed above, accurately reflect personal views of the authors. They have not and will not receive any compensation for providing a specific recommendation or view in this report. There were not any agreements between the companies covered and the analysts regarding the recommendation. . Analysts are paid in part based on the profitability of BCP group, which includes investment banking revenues. . BCP group has more than 2% of EDP. . BCP group has more than 2% of Sonaecom. . BCP group was chosen to evaluate EDP regarding the 8th stage of the privatization process. . BCP group was chosen to evaluate REN regarding the 2nd stage of the privatization process. . A member of the Executive Board of Directors of Millennium bcp is member of the General and Supervisory Board of EDP - Energias de Portugal, SA. . Banco Millennium bcp Investimento, S.A. (merged into Millennium bcp) was chosen as a joint global coordinator of the Initial Public Offering of EDP Renováveis. . Banco Millennium bcp Investimento, S.A. (merged into Millennium bcp) was part of the consortium, as a Co-Leader, of BES rights issue, done in April 2009. . Millennium bcp was part of the consortium, as Co-Manager, of BES rights issue completed in May 2012. . Millenniumbcp through its investment banking department is providing investment banking services to Tagus Holdings S.a.r.l. (“Offeror” in the launch of a tender offer over Brisa - Autoestradas de Portugal, S.A. shares). . Recommendations on Millennium bcp covered companies (%) Recommendation Nov-12 Oct-12 Sep-12 Jun-12 Mar-12 Dec-11 Jun-11 Dec-10 Dec-09 Dec-08 Dec-07 Dec-06 Dec-05 Dec-04 Buy 92% 85% 65% 78% 72% 68% 76% 79% 63% 54% 41% 37% 30% 63% Neutral 0% 8% 19% 4% 7% 11% 14% 7% 15% 4% 27% 11% 40% 6% Reduce 0% 0% 4% 0% 3% 0% 0% 0% 7% 0% 0% 21% 5% 6% Sell 4% 4% 8% 7% 3% 7% 0% 4% 4% 0% 14% 16% 5% 0% Unrated/Under Revision 4% 4% 4% 11% 14% 14% 10% 11% 11% 42% 18% 16% 20% 25% Performance -1.9% 2.9% 10.7% -15% 1% -25% -3% -10% 33% -51% 16% 30% 13% na
PSI 20 5,256 5,356 5,203 4,698 5,557 5,494 7,324 7,588 8,464 6,341 13,019 11,198 8,619 7,600 DISCLAIMER This information is not an offer to sell or a solicitation to enter into any particular deal or contract. It consists of data compiled by or of opinions or estimates from Banco Comercial Português, S.A. and no representation or warranty is made as to its accuracy or completeness. This information is merely an auxiliary means of analysis to be used by its recipients, who will be solely responsible for its use, including for any losses or damages that may, directly or indirectly, derive from it. Its reproduction is not allowed without permission from the BCP group. The data herein disclosed are merely indicative and reflect the market conditions prevailing on the date they have been collected. Thus, its accuracy and timing must absolutely be confirmed before its usage. Any alteration in the market conditions shall imply the introduction of changes in this report. This information / these opinions may be altered without prior notice and may differ or be contrary to opinions expressed by other business areas of BCP group as a result of using different assumptions and criteria. The analysis contained herein is based on numerous assumptions. Different assumptions could result in materially different results.
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OFFICE LOCATIONS
Millennium investment banking Av. José Malhoa, Lote 27 - 5 1099-010 Lisboa Portugal Telephone +351 21 003 7811 Fax +351 21 003 7819 / 39
Equity Team Luis Feria (Head of Equities)
Equity Research +351 21 115 6220 António Seladas, CFA (Head) Fundamental Analysis Alexandra Delgado, CFA (Telecoms and IT) António Seladas (Industrials & Small caps) João Flores (Media and Retail) Rita Silva (Banks) Vanda Mesquita (Utilities and Oil&Gas) Market Analysis Ramiro Loureiro Sónia Martins Telma Santos Publishing Sónia Primo
Prime Brokerage +351 21 003 7855 Vitor Almeida (Head)
Equity Trading +351 21 003 7850 Paulo Cruz (Head) Gonçalo Lima Jorge Caldeira Nuno Sousa Paulo Sousa Pedro Ferreira Cruz Pedro Gonçalves Pedro Lalanda Rodrigo Roque Pinho
Equity Derivatives +351 21 003 7890 Jorge Pina (Head) Ana Lagarelhos Diogo Justino Marco Barata Maria Cardoso Baptista, CFA