IBERIA. Best & Worse Performers -1 Week (%) Bankinter Indra

Transcription

1 IBERIA 2 March 2012 EQUITY RESEARCH TOP STORIES W EEKLY António Seladas, CFA antonio.seladas@millenniumbcp.pt Banking Sector - Loan to deposit ratio of 120% is no longer mandatory but is still recommended. According to the press, the target of 120% of the loan to deposit ratio in 2014 is no longer mandatory, albeit still recommended. The intention of regulators is to slow the pace of deleveraging and increase the funding to the economy. Impact: neutral / positive (page 7). OUT THIS WEEK Earnings Comment Zon Multimedia, EDP Renováveis, REN, Sonae Capital, Sonae Industria, Cimpor Other Snapshots / Company Reports Media Sector Price Target / Recommendation Changes Impresa, Cofina, Media Capital, Sonae Industria, Cimpor, Novabase, EDP Other News Banking Setor, Bankinter, BES, Telecom Sector, Telefónica, Portugal Telecom, Novabase, Retail Sector, Mota-Engil, Semapa, PSI20 WEEK AHEAD Wednesday Jerónimo Martins 4Q11 Earnings; Brisa s 4Q11 Earnings; Sonaecom s 4Q11 Earnings Thursday EDP s 4Q11 Earnings PORTFOLIOS This week, Mib Aggressive Portfolio went up 1.34%, underperforming the PSI20 by -0.59pp. Excluding Sonae, all stocks contributed for this underperformance (page 22). This week, Mib Liquidity Portfolio went down -1.18%, underperforming the PSI20 by -3.11pp. Excluding Sonae, all stocks contributed for this underperformance (page 23). Stock Market Last 1W YTD Daily Vol. ( mn) 1 W 1M 6M 2011 PSI 20 5, % 3.1 1% % PSI IBEX 35 8, % -0.03% % IBEX 35 2,089 2,091 2,780 4,925 Euro Stoxx 50 2, % 9.91% -5.56% Euro Stoxx 50 7,388 7,474 8,538 14,831 Forex Rates Last 1W YTD Interest Rates Last 1W Chg YE11 EUR /USD % 2.15% -3.17% Euribor 6m 1.25% 1. 30% -5bp 1.62% EUR /GBP % -0.31% -2.96% 10Y Bond PT 13.81% % 1 04bp 13.36% EUR /BRL % -5.60% 8.86% 10Y Bond SP 4.90% 5. 05% -14bp 5.09% Best & Worse Performers -1 Week (%) Best & Worse Performers - YTD (%) Br isa 7.5 BCP 24.3 Impresa 5.7 B ES 20.7 Av. José Malhoa, Lote 27 E DP 5.6 Impresa Lisboa Tel / Fax: / 09 B CP Sonae Sonae Capital Galp Energia BP I Portugal Telecom S em apa -4.8 Banco Popular Bankinter -6.7 EDP Renováveis Indra Sonae Capital Cofina -9.1 Cofina 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. Page 1 of 26

2 CHANGES New Previous Rating Target Rating Target Motive Impresa Sell 0.31 Sell 0.38 Valuation Update Cofina Reduce 0.49 Sell 0.48 Valuation Update Media Capital Unrated 2.1 Under Revision Valuation Update Sonae Industria Buy 1.60 Buy 1.95 Valuation Update Cimpor Buy 6.05 Buy 6.10 Valuation Update Novabase Buy 4.00 Buy 4.10 Valuation Update EDP Buy 3.10 Buy 3.05 Valuation Update Bankinter Buy 5.10 Neutral 5.10 Price Performance Page 2 of 26

3 EARNINGS Company 4Q2011 1Q2012 2Q2012 3Q2012 Investor Day Jerónimo Martins * AM n.a. n.a. n.a. Bankinter BM n.a. n.a. n.a. Sonae * n.a. n.a. n.a. Galp Energia ** BM BM BM BM Portucel AM AM AM AM Banco Popular BM n.a. n.a. n.a. BPI AM n.a. n.a. n.a. Novabase AM AM AM AM BCP AM AM AM AM BES AM AM AM AM Semapa AM AM AM AM Galp Energia BM BM BM BM Media Capital AM n.a. n.a. n.a. Iberdrola BM BM BM BM Indra AM n.a. n.a. n.a. Telefónica BM BM BM BM Cimpor BM BM BM BM Sonae Indústria AM EDP Renováveis BM n.a. n.a. n.a. Sonae Capital AM AM AM AM Martifer AM AM AM AM Zon Multimedia BM BM n.a. n.a. REN AM n.a. n.a. n.a. Jerónimo Martins n.a. n.a. n.a. Brisa AM AM AM AM Sonaecom AM n.a. n.a. n.a. EDP AM n.a. n.a. n.a. Mota-Engil AM AM AM AM Sonae n.a. n.a. n.a. Impresa AM n.a. n.a. n.a. Glintt Portugal Telecom BM BM BM BM Altri n.a. n.a. n.a. n.a. Cofina n.a. n.a. n.a. n.a. Sonae Sierra n.a. n.a. n.a. n.a. Ibersol n.a. n.a. n.a. n.a. SAG n.a. n.a. n.a. n.a. Soares da Costa n.a. n.a. n.a. n.a. ESFG n.a. n.a. n.a. n.a. AM - After market; BM - Before market; n.a. - Not available; (e) Expected; *Trading Statement 2011 FY ** Trading update Page 3 of 26

4 DIVIDENDS Company Gross Payment Ex-Div Last Year AGM Obs DPS Date Date Pay Date Gross DPS Banco Popular* (1) Oct Jul-11 1x May-11 1x Jan Bankinter * Jan-12 Approved 28-Sep Apr-12 Approved 2-Jul Jan BCP Apr BES Mar Estimate 11-Apr BPI Apr Estimate - - Banif Mar ESFG Jun Portugal Telecom** Jun-12 - Estimate 3-Jun Dec-12 - Estimate 4-Jan Sonaecom May-12 - Estimate 25-May Zon Multimedia Apr-12 1-May-12 - Estimate 6-May Telefónica** May-12 - Estimate 6-May Nov-12 - Estimate 7-Nov Indra Jul-12 - Estimate 4-Jul Novabase May-12 1-Jun-12 - Proposed 6-Jun Jul Glintt - 22-May Iberdrola** Estimate 5-Aug Estimate 13-Jul EDP Estimate 13-May EDP Renováveis Estimate REN Mar Apr Apr-12 Estimate 12-May Brisa Apr Apr Apr-12 Estimate 5-May Nov Dec Portucel Apr-12 4-May-12 1-May-12 Estimated - - Altri Estimated 21-Jun F Ramada Jun Inapa Sonae Industria Estimated Sonae Capital Mar Estimate Cimpor Apr May May-12 Proposed 6-May Semapa May Jun Jun-12 Proposed Mota-Engil Apr Estimate 13-May Martifer - 10-Apr Galp Energia May Estimate 30-May Sep na - Not available Estimate: Estimated by the Millennium investment banking Proposed: Announced by the company to be proposed in AGM Approved: Dividend already approved by AGM (1) Due to the merger with Banco Pastor, the second dividend relative to 2011 accounts was not paid in January as usual and should occur in 1Q12 * Company pays dividends four times a year ** Company pays dividends twice a year. Galp's interim dividend (2011) hasn't been announced. Page 4 of 26

5 NEXT WEEK RESULTS Sonaecom Buy High Risk (Target YE12: 2.10) 4Q11 Earnings Preview Alexandra Delgado;CFA Sales YoY EBITDA YoY EBIT YoY Net Profit YoY % % % % Sonaecom will disclose its 4Q11 Earnings on March 7th 2012, after the market close. A conference call will be held the next day, at 3.00 pm (GMT). We're estimating revenues to decrease 7.8% YoY in 4Q11 to mn, and EBITDA to grow 1.3% to 45.6 mn. Consolidated EBITDA margin should increase by 1.8 pp vs. 4Q10, to 20.6%. We re expecting the mobile segment to continue to show decreasing YoY turnover (-5.5%) driven by decreasing operator revenues impacted by mobile termination rates (MTRs) drop and also weak equipment sales. We re also expecting consumer revenues YoY growth to turn negative this quarter, on the back of austerity measures impact. The wireline segment should continue to experience accesses loss and decreasing revenues, due to extreme competition in the residential segment. We are forecasting an 11.6% YoY turnover drop, with a 8.7% EBITDA margin. In the media segment, topline should remain quite pressured due to challenging market conditions and thus we forecast top line to drop by 13.1%; EBITDA should continue to be negative. At SSI unit, turnover should continue to drop (-21.8% YoY), with equipment sales (E-initiatives programme) sharp decline; services should grow YoY at 6.0%. Cofina Reduce High Risk (TargetYE12: 0.49) 4Q11 Earnings Preview João Flores, Sales YoY EBITDA YoY EBIT YoY Net Profit YoY % % % % Cofina will disclose 4Q11 Earnings next week. We expect operational revenues will show resilience in a very tough media market, reflecting costs control policy.overall numbers are expected to decline, penalized by falling numbers both in circulation and advertising. EDP Buy Low Risk (Target YE12: 3.10) 4Q11 Earnings Preview Vanda Mesquita, Gross Profit YoY EBITDA YoY EBIT YoY Net Profit YoY 1,408 0% 954-1% 533-5% % EDP will release its 4Q11 on March, 8th after market closing. According to our expectations, Gross Margin 4Q11 should remained stable YoY and EBITDA 4Q11 should decrease slightly by 1% YoY. Wind and Regulated activities should be the main contributors to EBITDA. Page 5 of 26

6 Brisa Buy - Low Risk (Target YE12: 3.15) 4Q11 Earnings Preview António Seladas, CFA; Sales YoY EBITDA YoY EBIT YoY Net Profit YoY % 96 nm 51 nm 18 nm Brisa should release 4Q11 earnings Wednesday, 7 of March, after the market close. A conference call will be held immediately. The major point will be the traffic performance in the 4Q. We are expecting roughly minus 7%YoY in BCR, however there is clearly some uncertainty, as some discretionary items recorded strong adjustments in the 4Q. We believe that minus 7% is consistent with minus 7% for the full year 2012 (our estimates), however lower figures will place our 2012 estimates at risk. Jerónimo Martins Buy Medium Risk (Target YE12: 15.10) 4Q11 Earnings Preview João Flores, Sales YoY EBITDA YoY EBIT YoY Net Profit YoY % % % % JM will disclose its 4Q11 Earnings on March 7th, before market opens. We estimate JM will face an increasing tough scenario in Portugal, reflecting declining consumer`s confidence / austerity measures while increasing inflationary pressure could partially offset declining basket (consumer`s preference for cheaper store brands). In Poland, we believe Biedronka lower margin will reflect costs associated to strong net openings in the last quarter together with lower LfL sales number. Sales numbers were disclosed on January 10th, thus attentions will be focused on operational numbers. We estimate JM`s consolidated EBITDA margin will reach 7.8% (vs 8.1% in 4Q10, 7.8% in 4Q10 restated) while in Biedronka we estimate 8.4% (vs 9.1% released in 4Q10; 8.5% restated in 4Q10). Altri Neutral High Risk (Target YE12: 1.20) 4Q11 Earnings Preview João Mateus, Equity A alyst Sales YoY EBITDA YoY EBIT YoY Net Profit YoY % % % % Altri will release the 4Q11 earnings next week. EBITDA should have come more than 20% lower YoY and 16% lower QoQ, especially on a lower price mix from lower market prices and higher energy costs. The top-line came also close to 20% lower, mostly on lower prices with some volume resilience. We maintain our valuation at 1.20 per share, with a neutral, high risk recommendantion. Page 6 of 26

7 PSI20 PSI20 ndex Annual Revision João Mateus, NYSE Euronext announced the entry of Espirito Santo Financial Group in the PSI20 index portfolio, by exit of Banif. The change will be effective in 19 March. The compiler revealed the new composition of the portfolio and the preliminary figures for the number of shares and free float factors. The final free-float and capping factors and definite number of shares will be published after the market close of 14 March. The new divisor will be published after the market close of 16 March. FINANCIALS Banking Sector BES taps ECB for 5bn and BPI for 2bn Rita Silva; António Seladas, CFA According to the press, BES tapped the ECB 3 yr LTRO for 5bn, primarily to renew shorter term maturities and thus not increasing its exposure to the central bank substantially ( 8.7bn at YE11). This amount is similar to the one the bank asked for in December. On the other hand, BPI has tapped the ECB 3 yr LTRO for 2bn, rising the exposure to the central bank to 4.3bn. Impact: positive / neutral. This type of funding not only allows access to funds at a very low cost (1%) but also allows the swap of shorter term maturities for longer periods and replaces other more expensive liabilities. Loan to deposit ratio of 120% is no longer mandatory but is still recommended According to the press, the target of 120% of the loan to deposit ratio in 2014 is no longer mandatory, albeit still recommended. The intention of regulators is to slow the pace of deleveraging and increase the funding to the economy. Impact: neutral / positive. In our opinion, regardless it being mandatory, there is a clear need to reduce this ratio that is equivalent to a reduction of the exposure of banks on wholesale funding markets, which are dysfunctional for some years. Therefore, banks have less pressure on deposit gathering and less pressure on loan reduction. As we have been saying, the relaxation of this rule, combined with the extra liquidity provided by the ECB, leads to a lower pressure in attracting deposits, lower pressure to reduce lending and lower the need for asset sale, often made at a discount. All these effects would have a positive effect on net interest income over the next year. BPI has already a consolidated loan to deposit ratio below 120% (118% in 2011), benefiting from the low ratio of its international activities (Angola). BES has a ratio of 143%. Our estimates indicate that BES will reach 120% in 2014, reflecting an average increase of 5% of deposits (consistent with the priority set by BES to increase deposits) and credit contraction of 1%. Conclusion of the Special Inspections Program (SIP) The Bank of Portugal announced the results of the SIP whose aim was to evaluate the adequacy of the parameters and methods used in the realization of financial projections that support the assessment of future solvency, under the exercise of the "stress tests". In the cases of BES and BPI it was concluded that parameters and methodologies were clearly adequate and adequate, respectively, and that there is a need for improvements in specific areas, which will be presented in the short term to the Bank of Portugal. Impact: neutral. Plans to meet the needs for recapitalization should be submitted until the end of March. BES s intends to use market solutions rather than capitalization mechanisms supported by the State. According to our estimates, the capital shortfall needed to reach a 10% of Core Tier 1 required by the Bank of Portugal is about 500mn that may be partly filled by the swap of debt instruments for capital. On the other hand, BPI intends to use the hybrid instruments (CoCo's) endorsed by the state. Page 7 of 26

8 Bankinter Buy High Risk (Target YE12: 5.10) Bankinter took 2.5bn in ECB s 3 yr LTRO António Seladas, CFA Rita Silva, s Bankinter has taken 2.5bn in ECB s 3 yr LTRO rising total ECB exposure to 9.5bn. In December Bankinter had built a sovereign debt portfolio benefiting from December s LTRO with the intention to profit from this extra liquidity line. The funds tapped in Februarys LTRO will be used mainly to cover the next 2 years of maturities and also to buy back some of liabilities that were issued with higher yields. Lunch with Bankinter Today we hosted a meeting with investors and Bankinter. It was quite interesting as it reinforced our view that Bankinter is a bank with some unique features among the Spanish banking system. Besides having one of the lowest NPL ratios and lowest exposure to real estate it has been pursuing a strategy of revenue diversification through the exposure to the insurance segment (through Linea Directa and more recently through a JV with Mapfre) and margin protection by having built a Spanish sovereign portfolio using ECB funding. Linea Directa now accounts for slightly more than 20% of its total banking income. Bankinter also intends to reduce its exposure to mortgages and increase corporate lending as spreads are more attractive and because the mortgage business in Spain is quickly fading away. New mortgage production has a bps spread and corporate bps. Revenue diversification through acquisitions should be cherry picked as it does not want to worsen its risk profile by losing its position of low NPL s and low exposure to troubled assets. We recall that last year, Bankinter was not successful at the bidding for KBL (KBC s private banking unit) despite the support from its main shareholders. Therefore, we believe that if another opportunity in this market niche were to appear, participation from shareholders would again be asked for. Another important issue that was highlighted was the loan to deposit ratio, which has been quite high at Bankinter. Management has recently established a MLT target of 166% Loan-to-Deposit (L/D) ratio, i.e., a reduction from current 176%. Compared to what is happening in Portugal, Bankinter does not feel the need for deleveraging as wholesale markets in Spain are gradually opening and because it wants to increase its profitability through corporate lending. BES Buy - High Risk (Target YE12: 2.25) BES increases its presence in Spain Rita Silva; António Seladas, CFA s According to the Spanish press, BES has bought 25 branches in Spain from NovaGalicia aiming to double the number of branches in Spain, taking advantage of the financial sector restructuring in the country, particularly in the area of Madrid. Impact: neutral. This news comes in line with recent comments from BES s management in which the intention to double its presence in Spain was stated, where it already has 25 branches and eight business centers. The presence of BES in Spain is felt by not only in the retail banking business (very focused on companies with business relationships with Portugal), as well as in investment banking and asset management, so the increase of its exposure to these areas seems interesting. Page 8 of 26

9 TELECOMS Telecom Sector Anacom discloses Fixed Broadband accesses by the end of 4Q11 Alexandra Delgado, CFA The Portuguese Fixed Broadband market reached 2,240k accesses in the end of 4Q11, with 23k net adds in the quarter. By the end of 4Q11 there were 21.1 broadband accesses per 100 inhabitants. FTTH/B accesses reached 237k (10.6% market share), with 35k net adds in the period. Cable added 13k net accesses while ADSL lost 7k; we highlight that the Other caption was impacted by the fact that ArTelecom (based on FWA technology) has left the market. Market growth has slowed down in the last quarter: +5.3% YoY in 4Q11 vs. +7.0% YoY in 3Q11, +7.1% YoY in 2Q11 and +8.3% YoY in 1Q11. Portugal Telecom increased its market share in the quarter to 49.4% (+1.0%), while Zon gained 0.3% to 33.0%. Cabovisão lost 0.1%, to 7.2%, Optimus lost 0.3% to 5.4% and Vodafone increased its share to 4.2% (+0.1%). 4Q10 1Q11 2Q11 3Q11 4Q11 Fixed Broadband accesses (k) 2,127 2,149 2,170 2,217 2,240 ADSL 1,112 1,100 1,093 1,106 1,099 Cable FTTH Other Fixed Broadband (YoY growth) 11.2% 8.6% 7.1% 7.0% 5.3% ADSL 1.6% -0.4% -1.5% -0.4% -1.2% Cable 13.0% 10.0% 8.3% 7.0% 5.0% FTTH 324.2% 179.6% 122.1% 94.5% 81.4% Other -4.6% -8.8% -13.6% -21.0% -93.7% Source: Anacom, Millennium investment banking Source: Anacom, Millennium investment banking Cogaco Cable sells Cabovisão to Altice group for 45 miliion Canadian operator Cogeco Cable announced it sold Portuguese cable unit Cabovisão to Altice Grup for 45 million. The sale was expected since Cocego cable wrote off its entire investment in the Portuguese unit last summer. Cabovisão has struggled in the market in the last years, on the back of a weak economy and increased competition. Cabovisão had by the end of 2011 circa 256k Pay TV clients (8.6% market share) and circa Page 9 of 26

10 162k clients of Broadband (7.2% market share). Cabovisão generated an EBITDA of 21 million Canadian Dollars ( 15 mn) in Considering that the 45 mn acquisition price is enterprise value, then this transaction values Cabovisão at a 3.0x EV/EBITDA 2011 multiple. Altice Group has stakes in media and telecom companies. It holds a 30% stake in main French cable operator Numericable that has over 3.5 mn Pay TV subscribers and over 1 million Broadband subscribers. Altice Group also controls Hot Telecommunications Systems (64.7% stake), leading cable operator in Israel. Telefónica Buy Medium Risk (Target YE12: 21.00) Telefónica announces end of mobile phone subsidisation in Spain as of March 1st Alexandra Delgado, CFA Telefónica announced this week it would stop subsidizing mobile phones in Spain as of March 1 st. The decision was announced in the Mobile World Congress that took place in Barcelona. The announcement caused a stir and is set to impact the market significantly. Clients will have the option to buy mobile devices in up to 18 monthly instalments, without charging interest. The company will also buyback used mobile devices, giving the client a discount of up to 240 on the purchase of a new mobile device. Customers who hand in a Blackberry or Sony Ericsson smartphone will receive an additional discount of 30. These equipments will be repaired if necessary and will be sold by Telefónica at lower prices in Spain, Asia, Latin America or Africa. Vodafone Spain chairman was cautious, saying they will analyse carefully Telefónica s announcement before taking any decision. According to Vodafone, retention & acquisition costs in Spain are circa 26% of revenues, while in the rest of Europe are circa 15-16%. He also added that it may be preferable to reduce monthly tariffs to contracts that exclude a mobile phone or to increase permanence contracts to 24 months from 18 months when they include a phone. So, Vodafone may opt for a different strategy, but recognizes current subsidisation policy is not sustainable in the present market conditions. Yoigo (4 th mobile player) has said that Telefónica s announcement is natural given increased maturity of the market, and that they already follow a similar policy, giving clients the option to buy equipment in instalments. The arrival of smartphones has increased subsidization costs and subsidization of equipment is very significant in the Spanish market: in 2011 circa 97% of mobile phones were sold through operators. With the end of subsidisation, Telefónica will have more leeway to be more aggressive on pricing. The impact of Telefónica s change in commercial policy remains to be seen; it will depend on pricing changes and on reaction from other players. Telefónica issues 700 mn bonds Telefónica announced this week the issuance of 700 mn in bonds, with an 8-year maturity, a spread of 385bp over Gilt and a coupon of 5.597%. Last bond issue from Telefónica was in the beginning of October, in the amount of 1,500 mn, with a maturity of 6 years, spread of 300bp over Mid-swap and a coupon of 4.797%. Portugal Telecom Buy Medium Risk (Target YE12: 6.30) Oi shareholders approve corporate reorganization Alexandra Delgado, CFA Equity Anal st Oi group companies (Tele Norte Leste, Telemar Norte Leste, Coari Participações and Brasil Telecom) shareholders have approved this week the corporate reorganization in an extraordinary shareholder meeting. We remind that Brasil Telecom, which will change its name to Oi S.A, will incorporate the other companies and will be the only company traded on the stock exchange (vs. current three). The corporate reorganization should be finalized by the end of March. The process was supposed to be completed by the end of 2011, but there were some delays. PT s Page 10 of 26

11 final stake in Oi will be established after the exercise of withdrawal rights by shareholders entitled to such. It is possible that Brasil Telecom minority shareholders try to obtain an injunction to stop the reorganization process, but this should be difficult since securities watchdog CVM rejected minority shareholders complaints last week. Simplifying Oi s corporate structure was the most immediate goal of Portugal Telecom after it finalized the acquisition of 25% of Oi in the end of March It will increase the liquidity of shares and reduce operational and administrative costs. Consolidating Oi companies balance sheets will improve capital structure and access to capital markets and allow the definition of a long term dividend policy. For all these reasons, the fact that this operation is moving forward is positive for Oi, and for Portugal Telecom. Zon Multimedia Buy Medium Risk (Target YE12: 3.70) 4Q11 Earnings Comment - Neutral earnings, good subs Alexandra Delgado, CFA Zon Multimédia disclosed its 4Q11 earnings this week. Revenues and EBITDA were broadly in line with consensus. Topline remains pressured, showing the impact of challenging macroeconomic environment, but EBITDA keeps resilience. Revenues dropped 2.5% YoY in 4Q11 reaching mn (-2.0% in FY11). EBITDA was flat in 4Q11 (+0.4% YoY) and grew 2.9% in FY11. Triple play revenues fell 2.8% YoY in 4Q11, slightly worse than previous quarter. In FY11 revenues dropped 1.7% YoY, on the back of premium revenue weakness and lower advertising revenues. Subscriber net adds were quite positive in 4Q, impacted by the analogue switch-off. Management believes 2012 will be similar to 2011: pressure on top line, but some opportunities to streamline costs and reduce capex. In terms of competitive pressures they do not expect major changes. Capex for 2012 should be 125 mn for full-year (minus 25 mn than FY10); this is below our 140 mn estimate. Zon will start consolidating its 30% stake in Angolan operator Zap in 2012: above 20 mn in revenues and residual EBITDA impact (mg around 10%). Zap ended 2011 with circa 200k subscribers; net adds of 65k in the last quarter; ARPU over $30. Maintain target that operational breakeven should be achieved in Regarding dividend, proposal will be decided on next Board s meeting in the end of March; AGM will take place in April. We maintain the price target for Zon Multimédia at 3.70 (YE12), with a Buy, Medium Risk recommendation. (For further details, please refer to our snapshot out this week) MEDIA Media Sector Audience Shares Feb12 No surprises in Marktest`s farewell João Flores; Cable channels kept 1st place in audience shares as expected, increasing gap to 2nd place (TVI/Media Capital), benefiting from Mardi Gras school holidays. TVI /Media Capital kept 2nd place in audience shares. All-Day 25.8% (-0.8pp MoM, -1.1pp YoY) and prime-time 28.8% (-0.7pp MoM, -2.7pp YoY). We highlight Sunday`s prime-time show premiered in January is a major success. Page 11 of 26

12 SIC/Impresa kept third place, benefiting from state-owned RTP1 negative trend. All-day 22.7% (-0.3pp MoM, -0.2pp YoY); Prime-time: 24.8% (+0.5pp MoM, +0.7pp YoY). State-owned RTP1 kept showing lackluster audience shares (close to 20%). We believe instability/uncertainty in company regarding its next future (privatized / not privatized / effects from cost cutting measures in programming grid) partially explains negative trend. Audience shares in cable: SIC Noticias (9.6% -0.4pp) slightly declined while RTP Informação recovered (4.1% +0.3pp). TVI24 kept unchanged (3.8%). We highlight RTP Informação returned to 2nd place in cable news channels. We have a YE12 price target of 0.31 for Impresa (Sell, High Risk), a YE12 price target of 2.10 for Media Capital (no recommendation) and a YE12 price target of 0.49 for Cofina (Reduce, High Risk). New technology to measure audience shares: GfK replaces Marktest from March 1st On behalf of the Portuguese Advertising and Broadcasting industry, the Portuguese Commission for Media Study Analysis (CAEM) invited at the end of 2010 several companies to submit a proposal for implementing a new Television Audience Measurement (TAM) system in Portugal to replace current audience metering technology from Marktest (used since 1998). GfK won TV Audience Measurement contract. New technology will be used in the next 5 years (runs for ), being the 4th evolution in Portuguese audience shares measurements since the 80`s. GfK will start disclosing audience shares from March 1st. After winning the bid to measure TV ratings in Portugal, GfK will introduce a new people meter system using innovative technology from GfK Telecontrol AG and form a new and broader panel of households. GfK increased younger generations weigh in new households panel, thus audience shares from FTA channels with a older profile will be penalized (RTP1, TVI) while SIC and Cable will benefit. In Cable, cable news channel are expected to decline (SIC Noticias, RTP Informação, TVI24) while channels focused on younger generation may take the lead (Disney, AXN, FOX). Recall Impresa has youth channels on cable (SIC K, SIC Radical), thus its will be an overall neutral effect, minimizing the possible negative effect on SIC Noticias. (For further details, please refer to our snapshot out this week) Media Sector Update - Keep focused on costs control We fine-tuned our valuations in Portuguese Media players (Impresa / SIC, Media Capital / TVI and Cofina), based on latest figures and updated (revised downwards) media market estimates. We highlight downwards revision in Media player s price targets reflects an (estimated) very tough and challenging environment to the next years. Impresa price target was revised downwards from 0.38 YE12 to 0.31YE12, keeping Sell recommendation, High Risk, reflecting a very tough environment (both in advertising and circulation). Company will need a strong costs control policy to recover operational numbers as we expect, which will lead to higher margins in a depressed top line environment. We reinitiated Media Capital with a price target of 2.10 YE12 (keeping no recommendation, given low free-float: 0.26%). We expect company will keep facing a tough environment in advertising market while Audiovisual and Entertainment units will reflect overall decline in activity. Our Cofina`s price target was slightly revised upwards to 0.49 YE12 from 0.48 YE12 (Reduce recommendation, High Risk). Cofina`s profile is focused on costs side, thus we expect company will keep showing resilience in margins, even in an increasing adverse scenario. Overall, Portuguese Media players are facing a very tough environment, thus we believe current market prices are not buying opportunities. Companies are overvalued at current Page 12 of 26

13 market prices, reflecting changes in shareholder structure (increasing stakes from emerging media group Newshold, from Angolan investors according to the news). We revised downwards our advertising growth estimates in Portugal (CAGR from 0.4% to minus 1.5%; from minus 3.5% to minus 10% in 2011; from minus 6.2% to minus 9% in 2012), reflecting an increasing tough/uncertain environment (negative effects on economic growth from Government s austherity measures). We estimate a small recovery in 2013 (+3%). Media sector is facing strong downside risks which will be followed by government decision to privatize a state-owned channel (RTP1?) which will increase advertising minutes per hour offered in TV by circa 20% from We highlight this scenario is embedded in our Media`s valuations. Cost cutting measures are essential to face a possible tougher environment. We believe the best option in the near future to Media players will be keeping capital spending at low levels while focused on costs control given strong downside risks (i) privatization of state-owned RTP1 could led to increasing avaliable minutes in TV advertising (+20%), thus prices in advertising (tv, press, radio) will decline; ii) strong macro economic downside risks. At longer term, Pay-tv and Internet TV (Google TV, Apple TV) are increasing threats, although we believe Media players will find alternative revenues. We estimated an alternative scenario, postponing to 2018 state-owned channel privatization, given RTP privatization business model is becoming less attractive. In this scenario, media players valuations are revised upwards: Impresa price target is revised upwards to 0.51 from 0.31 (+63%), Media Capital to 2.55 from 2.10 (+21%) and Cofina to 0.57 from 0.49 (+17%). (For further details, please refer to our sector report out this week) TECHNOLOGY Novabase Buy High Risk (TargetYE12: 4.00 Government pays 4.5 mn to Novabase to resolve dispute on Electronic School Card project cancellation Alexandra Delgado, CFA According to the Ministers Council resolution published on Tuesday, the Ministry of Education is authorized to spend up to 4.5 million to resolve the dispute between the Portuguese State and Novabase. The dispute arose after the Ministry of Education decided to unilaterally terminate the contract with Novabase Consulting to supply goods and services necessary to the Electronic School Card project. This contract was worth 18 million. We ll have to wait for details of final agreement for more information, but since costs related to this project were already recognized in previous years, the resolution of this process should have a positive, though small, impact on Novabase s 2012 results. Valuation Update - Cash protection despite tough domestic We have fine-tuned our estimates for Novabase. We value Novabase at 4.00 per share (YE12), downwards revised from our previous calculation of 4.10 (YE12), meaning a 2.4% downward revision. Given the 86.0% upside on the stock we rate it as Buy (High Risk). A higher Portuguese sovereign yield that led to a higher WACC applied to the period was the main driver behind a negative impact of 0.25/share on our price target. Finally, the upward revision of revenue and EBITDA estimates triggered by FY12 guidance led to a positive impact of 0.15/share on our price target, despite higher investment on Working Capital in the next few years. The macroeconomic environment in Portugal is proving to be quite challenging, with revenues falling 16% between 2008 and Economic downturn should still bring lower domestic revenues in both 2012 and 2013 (-2.0% and -1.0% respectively in our estimates). International business has in the meantime partially offset this difficult context and now accounts for 20% of consolidated revenues. Management expects business abroad to reach 25% of revenues in 2012, which implies Page 13 of 26

14 a growth rate of over 30% in Working Capital has increased last year and we expect to further increase in 2012 (17.0% of revenues vs. 16.1% of revenues in FY11), given difficult macroeconomic context. However, we expect WC growth to be lower than in More demanding Working Capital has degraded net cash position in FY11, but estimated FCF for 2012 covers dividend commitment. Net cash position should increase this year on the back of higher EBITDA, lower WC consumption and lower dividend distribution. Last news flow gave us comfort on Novabase investment case. Restructuring of domestic business was executed rapidly. Management feels current pipeline gives confidence regarding next months. Net cash position should increase again this year. And finally, FY12 guidance announced by the company was slightly better than we estimated. (For further details, please refer to our Company Update out today) UTILITIES EDP Buy Low Risk (Target YE12: 3.10) Vanda Mesquita, Valuation Update - Waiting for the new business plan We fine-tuned our estimates. We value EDP at 3.10 per share (YE12) revised upwards from our previous calculations of 3.05 per share, keeping our buy recommendation. Changes in our price target come from the upward revision of regulated businesses (+5 cents), from the downward revision of the liberalized businesses (-15 cents). Additionally, we also updated some WACC parameters (+15 cents) namely the risk free rate for the Euro-Zone (German 10-year sovereign yield) to 2,5% from 3%, the risk free rate for the USD-Zone (the US 10-year sovereign yield) to 2,5% from 3% and the Portuguese 10-year sovereign yield to 11% from 10%, keeping all other parameters constant. EDP is preparing its business plan (it should be presented in the second quarter of the year, probably before June) that in our point of view will be strongly influenced by the partnership with China Three Gorges (CTG) plans for EDP. Indeed, if this partnership didn t exist, we believe that the company would be focused in the control of debt in the coming times (CAGR of debt was approximately 8.48%). However, this partnership may enhance opportunities of growth. Despite the renewable business being under stress, we believe that the company will continue to bet on wind energy and also hydro, but at a slower pace versus historical data. Therefore, we consider that this new business plan will have not only in mind the strategic partnership with CTG, but also a slower pace of growth (we estimate an average capex per year of 1.8bn from 2012 to 2015 vs an average per year of 2.6bn from 2008 to 2011) and a more conservative dividend policy (lower dividends or a more flexible dividend policy based on a scrip dividend). As far as dividends are concerned, we see a general trend of strengthening balance sheet not only in utilities, but also in other sectors. Indeed, pressured by the rating agencies, some companies are cutting dividends or choosing other means of payments to the shareholders. In our valuation, we still consider that the company will pay a dividend of 18,5 cents (fiscal year of 2011) and a dividend of 20 cents (fiscal year of 2012). From 2013 onwards, we assume a 50% of payout ratio. However, we would not be very surprised, if the company announces a more conservative policy, in which a dividend cut or a scrip dividend could be included. (For further details, please refer to our Company Update out today) Page 14 of 26

15 EDP Renováveis Buy Low Risk (Target YE12: 6.00) Vanda Mesquita, 4Q11 Earnings Highlights - EBITDA lifted by one-offs EDPR disclosed its 4Q11 earnings this week. All in all, we consider that this set of results is not very impressive, with Gross profit and EBITDA excluding one-offs coming below our expectations. This year, the company mentioned that it intends to install 500MW (vis-à-vis 808MW in 2011), a lower figure than the 2012 deployments included in our valuation (668MW). Having said this, it is clear that the company is reducing the pace of growth. Gross profit for 4Q11 rose by 5% YoY, 6% below our estimates as we were more upbeat regarding prices. EBITDA for 4Q11 went up 5% YoY (6% above our estimates). Excluding one-offs ( 36mn), EBITDA stood at 216mn (10% below our estimates). This quarter s EBITDA was influenced by two one-offs: one related to the revaluation of some of EDPR s Italian Assets and Liabilities (reduction of the expected value to be paid to EDPR s Italian minority shareholder) that helped to lift EBITDA by 52m and another related to write-offs due to a downward adjustment of EDPR s pipeline in the US that hampered EBITDA by 15mn. By country, EBITDA for 4Q11 figures came below our expectations in all countries. Main differences were recorded in Spain (13% below our estimates mainly due to lower prices) and in the US (18% below our estimates mainly due to lower prices and higher costs). D&A came higher than our expectations mainly due to the effect of the aforesaid revaluation of some EDPR s Italian Assets and Liabilities in terms of D&A (+ 41mn). Net income for 4Q11 stood at 26mn, down 55% YoY (45% below our expectations). This year the company is not going to pay dividend (like in the previous years), in line with our estimates. Net debt including institutional partnership at YE11 stood at 4.4bn, in line with our estimates. The company mentioned that it intends to reduce its capex level and deploy 500MW vs 668MW in our valuation. If we were to exclude the difference (168MW) from our valuation (considering that deployments will be lower in the US), our price target would drop by 5 cents. All in all, we feel comfortable with our estimates, keeping our Buy recommendation. (For further details, please refer to our snapshot out this week) 4Q11 Earnings Comment - EBITDA lifted by one-offs (II) The company mentioned that it intends to install 500MW (vis-à-vis 806MW in 2011) in 2012, a lower figure than the 2012 deployments included in our valuation (688MW). Regarding 2012 projects, the company gave guidance disclosing a breakdown per country. Comparing to our estimates, it seems that deployments might be lower in the Rest of Europe. As far as deployments in 2012 are concerned, 90% of deployments will be concentrated in the second half of the year and its contribution for the 2012 results will be lower than 10% (vs 15% included in our valuation). Electricity output may post a single growth digit in 2012 (we assumed a 9.6% growth, which may indicate that our estimates may be optimistic). In addition, the company mentioned that it expects a sustainable improvement in terms of average selling price of the portfolio. Joao Manso Neto (the new EDPR s CEO) joined the Conference Call and talked about EDPR s future. The company is going to update its strategic plan during the 1st half of the year. This new business plan will have in mind the strategic partnership with CTG and at the same time the growth prospects. Concerning this matter, there is a slowdown and uncertainty in some matured markets (namely in Spain, in Portugal and in the US) and still good opportunities in Poland, Romania and Brazil. (For further details, please refer to our snapshot out this week) Page 15 of 26

16 REN Buy Low Risk (Target YE12: 2.40) 4Q11 earnings comment - Improved opex but lower capex João Mateus, Vanda Mesquita s REN released this week the 4Q11 earnings. We maintained our valuation at 2.40 per share, with a buy, low risk recommendation. Overall, we consider this a neutral set or earnings, with improvements in opex performance and an asset base growth within expected values. In the 4Q11, EBITDA came much in line with our estimate (0.6% under) and 2.6% higher YoY, on the RAB growth and average rate of return improvement, on the higher return for land assets and an improved opex efficiency. Total capex in the 4Q11 was of mn (-49% YoY and +35% QoQ), for a net increase in average RAB of 7.8% YoY and 4.2% QoQ. The expansion of the Sines terminal supported a 4.8% YoY (2.4% QoQ) growth in the average RAB of gas. The average RAB for electricity assets placed after the YE08 was at a proportion of 33% of the total average electricity RAB at the YE11. Total average electricity RAB increased 9.4% YoY and 5% QoQ. The top line came 12% under our estimate and 23% lower YoY in the 4Q11, translating improved opex efficiency and YoY reduction in capex. Net financial costs climbed 40% YoY and 27% QoQ, mainly on the increase in debt spreads for new and old financing, much as a consequence of the rating downgrades that REN suffered following the same downgrades applied to the Portuguese sovereign debt. In the FY11, Net Debt has increased 10% YoY, according to management s figures, and the average cost of debt should have been of 4.7% Last year, REN paid an 89.7mn dividend that implied an over 80% pay-out and a 6.5% yield. Keeping the promise of a minimum 60% pay-out, given present market cap, would imply maintaining almost the same 6.5% yield for 2011 but would imply reducing the nominal per share value from to 0.14 (a total 72.7mn). (For further details, please refer to our snapshot out this week) CONGLOMERATE Semapa Buy High Risk (Target YE12: 8.80) Dividends proposal João Mateus; Semapa released the FY11 report this week and proposed a per share dividend that may be paid until 18 June This nominal per share dividend has been stable for the last 5 years and is in line with our estimate. Last year, no dividend was paid because the payment relative to 2010 was anticipated in 10 December. Sonae Capital Buy High Risk (Target YE12: 0.28) 4Q11 Earnings Comment - Poor figures António Seladas, CFA; Sonae Capital released 4Q11 figures today, after the market close. Overall poor figures clearly showing a very tough environment. Top line went down 17% YoY and 5% below our estimates. Selfrio was the major disappointment, -27% YoY partially offset by a better performance in the Energy and Environment (Colombo cogeneration facility started operations in July) and SC Assets (it was sold a plot of land). The revenues at the Tourism Operations and Others, which consolidate the hotels and fitness business, went down 34% YoY, 7% lower than our estimates. It was sold one unit at Troia resort vs, our estimate of nil sales; Page 16 of 26

17 Regarding the operating figures, the major problem keeps on Sonae Turismo, as we were expecting minus 2.5Mn vs. minus 4.1Mn released. The Hotel Business is the main responsible, minus 2.5Mn, however all the other business units showed negative figures, Fitness included; Below the operating line a higher level of provisions than our estimates, roughly 3Mn, mainly related with a net impairment on the fair value of Troia Resort assets; Regarding the level of debt, as we measured, it finishes the year with 271Mn vs. our estimate of 255Mn and roughly minus 10Mn than one year ago, however the sale of TP generated a cash in of 37Mn. So clearly a bad performance in terms of cash flow generation; Last but not least Imosede, the real estate fund that owns Sonae Companies Business park, was valued at 71Mn, roughly 20Mn above our own valuation and it was created a second real estate fund owning the Boavista Complex (WTC Fund) valued at 70.6Mn belonging 99.84% to Sonae Capital. We have to say that these assets where the Oporto hotel was included are valued on our model on the Hotels business. Still CW produced a new report, available on SC website, that values SC assets at 379Mn (market value); All in all we feel comfortable with our valuation, despite some adjustments would need to be done, namely the level of net debt. We should highlight that we just assume a meaningful recovery in 2017/18. So we keep our valuation of 0.28YE12, buy recommendation High risk. (For further details, please refer to our snapshot out this week) RETAIL Retail Sector Portuguese retail-sales João Flores, Portuguese retail numbers eased negative trend in January, probably reflecting: i) Increasing after-christmas sales (consumer`s prefer to buy Christmas presents in after-christmas sales); ii) consumer`s negative over-reaction in December to austerity measures Retail sales (overall) declined an annual 8.5% YoY, after dropped 10.3% YoY in December. On a monthly basis, sales were down 2.7% YoY as expected (+2.2% in December). Food Retail sales dropped 5.8% YoY in January (-6.5% YoY in December). Non-food retail sales fell 11.0% YoY in January (-14.0% in December). 5 Retail Sales in Portugal Mar-07 Jul-07 Nov-07 Mar-08 Jul-08 Nov-08 Mar-09 Jul-09 Nov-09 Mar-10 Jul-10 Nov-10 Mar-11 Jul-11 Nov-11 Retail Sales YoY Retail Sales MoM Source: Source: Bloomberg, Millennium investment banking Page 17 of 26

18 Portugal Retail Sales Survey* Jan-12 Dec-11 Jan-11 Chg MoM Chg YoY MoM na -2.7% 2.2% -4.7% -4.9pp 2.0pp YoY na -8.5% -10.3% -7.0% 1.8pp -1.5pp *Bloomberg Source: Source: Bloomberg, Millennium investment banking 8% 3% -2% -7% -12% -17% Mar-07 Jul-07 Nov-07 Mar-08 Jul-08 Nov-08 Mar-09 Jul-09 Nov-09 Mar-10 Jul-10 Nov-10 Mar-11 Jul-11 Nov-11 Retail non-food YoY Retail Food YoY Source: Source: Bloomberg, Millennium investment banking Portugal Retail Sales Food & Non-Food Non-Food Survey* Jan-12 Dec-11 Jan-11 Chg MoM Chg YoY MoM na -1.7% 0.9% -5.0% -2.6pp 3.3pp YoY na -11.0% -14.0% -11.2% 3.0pp 0.2pp Food MoM na -3.6% 3.5% -4.3% -7.1pp 0.7pp YoY na -5.8% -6.5% -2.2% 0.7pp -3.6pp *Bloomberg Source: Source: Bloomberg, Millennium investment banking Portugal light vehicles sales declined 48% in February 30,000 25,000 20,000 15,000 10,000 5, % 53% 87% 33% 47% 63% 18% -23% -34% -9% -13% -11% -23% -30% -48% -48% Jan Feb Mar Apr Mar Jun Jul 1% 15% 14% 19% 62% -32% -34% -40% -49% -60% Aug Sep Oct Nov Dec Source: Source: ACAP, Millennium investment banking Page 18 of 26

19 Portugal light vehicles sales declined 48% in February (6.932 vehicles). Strong negative numbers reflect (very) tough macro-environment (declining consumer`s confidence, lower available income, raising taxes in auto sector, ). Including light commercials, sales declined 52% YoY (47% Ytd). INDUSTRIALS Sonae Industria Buy High Risk (Target YE12: 1.60) 4Q11 earnings and valuation update - Debt reduction probably only in 2014 João Mateus, Sonae Industria (SI) released this week the 4Q11 earnings. We updated our valuation from 1.95 to 1.60 per share, for the YE12, with a recommendation of Buy, High Risk. We revised our estimates and updated our WACC parameters. EBITDA in the 4Q11 came 2.3mn over our estimate, in comparable terms. On a YoY basis, consolidated EBITDA has recovered 98% YoY to 23.1mn in the 4Q11. In Iberia, wood and energy costs increased and volume sales decreased mostly for seasonality reasons, while chemical costs hiked. In Central Europe output price and volume sales increased and efficiency improved from the restructuring of capacity. In the ROW, turnover improved but margin decreased for higher chemical costs. The top line came 8.2% under our estimate, 3.1% higher YoY and 1.4% higher QoQ. On a YoY basis, Iberia was the only region where sales did not grow, mostly on lower volume sales, but on a QoQ perspective, this region showed a clear recovery in a contrarian movement to normal seasonality. The ROW recovered also despite seasonality and Central Europe showed a normal slightly seasonal retraction. Our estimates revision had a negative impact of 0.05 per share, while our WACC and Euro inflation update had a negative impact of 0.30 per share in our valuation. SI will most probably not pay any dividends before 2016 and may reach an under 3x Net Debt to EBITDA only in SI is still a highly indebted company and will most probably be able to start reducing debt only in We still believe that a capital increase would be advisable to reduce leverage risk to more acceptable levels. SI will have to refinance a total 135mn until the YE12, with at least 50mn already assured. (For further details, please refer to our Company Update out this week) Cimpor Buy Medium Risk (TargetYE12: 6.05) 4Q11 earnings comment - Relatively protected by emerging markets João Mateus, Cimpor released this week the 4Q11 earnings. We maintain our valuation of 6.05 per share for the YE12, with a recommendation of Buy, Medium Risk. In the 4Q11, EBITDAP came 1% over our estimates, 11.6% lower YoY and 16.4% lower QoQ. The YoY fall was mainly influenced by the plunges in Portugal, China and Egypt, followed by reductions in Brazil and Spain. Earnings came influenced by a general increase in energy costs, partially offset by the cost reduction program (BEST) that has stately saved over 40mn in With a possible return to lower fuel costs in the future, this program may lead consolidated margin to improved levels. The top line came 1.1% under our estimate, in the 4Q11, 4.3% lower YoY and 9.7% lower QoQ. The YoY reduction resulted mainly from turnover decreases in Portugal, Egypt, Turkey, Spain and China. Net Financial costs came 152% higher YoY and 2.1% lower QoQ. The YoY increase reflects the increase in funding costs but also the appreciation of the USD, since broadly 20% of loans may be Page 19 of 26

20 in USD. As stated by Cimpor itself, the fact that S&P kept Cimpor s rating from falling under investment grade is not preventing the company s financing costs from increasing with South European country risks. Cimpor s management compromised to propose a dividend per share that, with maintenance of the pay-out, will also be the lowest nominal dividend since (For further details, please refer to our snapshot out this week) Valuation Update - Updating WACC inputs and inflation and fine-tuning estimates We updated our valuation from 6.10 to 6.05 per share, for the YE12, with a recommendation of Buy, Medium Risk. We revised our estimates, updated the WACC and our Euro inflation forecasts. We are now less positive for Brazil, admit the continuation of exports support to domestic capacity use, anticipate improved margins from operational restructurings implemented in Spain and confirm recovery in South Africa and Mozambique. Our estimates revision resulted in a 0.20 per share reduction in our price target. We updated assumed risk parameters in the calculation of the WACC, namely the Portuguese estimated sovereign rate from 10% to 11%, together with the risk-free benchmark (German) from 3% to 2.5%. As previously, we kept these levels until 2015 and assumed a linear convergence of local sovereign risk to historic levels until We also adjusted our Euro inflation forecasts from 2% to 1.5%. These changes resulted in a positive per share impact of 0.15 in our valuation. Cimpor will release the 4Q11 earnings next Tuesday. EBITDA should have come 12% lower YoY, in the 4Q11, mainly on increased weakness in Portugal s margins from the impact of export sales, higher energy costs in Egypt, operational problems in China and Tunisia and cement imports in Brazil, despite margin improvements in Spain, Mozambique, South Africa and Turkey. The top line may come 3.3% lower YoY, in the 4Q11, on lower turnover from sales in Iberia and China and on the local currency devaluation effect in Egypt and Turkey. We estimate that the per-share dividend to be distributed next year will be of After a probable 2.6x Net Debt to EBITDA ratio for the YE11, Cimpor will most probably reduce leverage down to close to 2x Net Debt to EBITDA at the YE14. (For further details, please refer to our company update out this week) CONSTRUCTION Mota-Engil Buy High Risk (TargetYE12: 1.45) Management change in Mota Engil António Seladas, CFA Mota Engil announced this week that its current board (2010/13) has changed including two new members, Mr. Carlos Mota Santos, roughly 35 years old (nephew of Mr. Antonio Mota, Chairman of Mota Engil) and Mr Pedro Antelo (ex CFO of Mota Engil Construction). This way the Board kept the old number of 15 elements (it lost 2 elements in the last 2 years). The Executive Committee also changed: it has now 6 members, instead of 7, as Mr. Luis Silva the ex CFO was replaced Mr. Gonçalo Moura Martins, already board member and ex CEO of Ascendi and Environment & Services and Mrs. Maria Mota de Meireles was replaced by Mr. Carlos Mota Santos. On this change we would like to highlight the entrance on the board of a member of the new generation of Mota s family and the move of Mr. Gonçalo Moura Martins to CFO of Mota-Engil. We believe that more changes should be announced in brief, namely the person in charge of Ascendi and Environment & Services as both areas have their own issues. Ascendi, the concessionaire operator owns several concessions in Portugal where revenues are supported on availability however Government is complaining about higher rents difficult to justify, so we believe that a strong profile is needed to run Ascendi in order to avoid any deal that prejudices Page 20 of 26

21 ME shareholders. Regarding Env & Services, some rationalization is probably needed as the business area consolidates several different businesses and some recent bets are not producing the expected results, namely the railway cargo company and the recent acquisition in Brazil, Geovision. SECTOR PERFORMANCE Sector Performance -1 Week (%) Sector Performance - YTD (%) PSI PSI Motorways 7.5 Financials 20.6 Electric Utilities 3.8 Oil & Gas 18.0 Retail * 3.8 Retail * 6.5 Financials 1.5 Industrials & Other 1.4 Oil & Gas 1.3 Motorways -0.7 Industrials & Other -0.9 Electric Utilities -6.3 Telecoms -2.2 Telecoms * includes Jeronimo Martins and Sonae This week, the PSI20 went up 1.9%. The best performing sector was Motorways with a 7.5% growth and the worst was Telecoms with a 2.2% fall. On a Ytd basis, the PSI20 went up 3.1%. The best performing sector was Financials with a 20.6% growth and the worst was Telecoms with a 8.9% fall. AGGRESSIVE PORTFOLIO This week, Mib Aggressive Portfolio went up 1.34%, underperforming the PSI20 by -0.59pp. Excluding Sonae, all stocks contributed for this underperformance (page ). 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 down -1.18%, underperforming the PSI20 by pp. Excluding Sonae, all stocks contributed for this underperformance 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 Page 21 of 26

22 Page 22 of 26

23 Page 23 of 26

24 Lates t Pr ( ) Targe t YE12 Risk Trnvr ( mn) M Cap Change (%) EPS P / E EV / Sales EV / EBITDA Di v Yield P/BV Upsd Rating Rating 3m 6m ( mn) Week 1M 3 M 1 2M YTD E 2012E E 2012E E 2012E E 2012E E 201 1E PSI 20 5, , Financials , Banco Popular (3) , % - - Bankinter % Bu y High , % 3.2 % 0.7 BCP (1) , BES % Bu y High , loss % 0.0 % 0.4 BPI (3) % - - Telecoms , % 10.2% 2.4 Telefó nica % Bu y Med ium , % 9.7 % 2.7 Portu gal Telecom % Bu y Med ium , % 14.6 % 1.0 Zon Multim edia % Bu y Med ium % 6.9 % 3.3 Sonaecom % Bu y High % 4.8 % 0.5 Media loss % 2.9% 1.0 Impresa % Sell High loss % 0.0 % - Media Cap ital (2) % % 4.6 % - Cofina % Reduce High % 4.1 % 3.5 Technology Indra % Bu y High , nm % 5.7 % 1.5 Novabase % Bu y High nm % 1.4 % 0.7 Utilities , % 5.7% 0.9 Iberdrola % Bu y Low , % 6.8 % 0.8 EDP % Bu y Low , % 7.7 % 1.0 EDP Re nováveis % Bu y Low , % 0.0 % 0.6 REN % Bu y Low , % 6.4 % 1.1 Motorways Brisa % Bu y Low , % 11.2 % 0.7 Conglomerates , Sonae % Bu y Med ium % 7.2 % 0.6 Semapa % Bu y High % 4.6 % 0.6 Sonae Capita l % Bu y High loss 8.0 loss loss 0.0% 0.0 % 0.2 Retail Jerónimo Martins % Bu y Med ium , % 2.2 % 8.2 Industrials , % - - Sonae Ind ustria % Bu y High loss loss loss % 0.0 % 0.4 Altri % Neutra l High % 1.7 % 1.7 Portu cel % Bu y Med ium , % 7.8 % 1.1 Cimpor % Bu y Med ium , % 3.8 % 1.5 Cons truction Mota-Engil % Bu y High % 7.7 % 0.5 Martifer (3) loss % - - Oil & Gas Galp Energia % Bu y High , % 1.8 % 4.1 (1 ) We do not h ave a recommendat ion on BCP, as Mib is a registered tradem ark of BCP; (2) Un rated due to low free-flo at; (3) Under Revision Page 24 of 26

25 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 6 and 18 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 Cimpor. 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 Recommendations on Millennium bcp covered companies (%) Recommendation Feb-12 Jan-12 Dec-11 Sep-11 Jun-11 Mar-11 Dec-10 Jun-10 Jan-10 Dec-09 Dec-08 Dec-07 Dec-06 Dec-05 Dec-04 Buy 69% 71% 68% 93% 76% 79% 79% 77% 78% 63% 54% 41% 37% 30% 63% Neutral 10% 4% 11% 0% 14% 14% 7% 7% 4% 15% 4% 27% 11% 40% 6% Reduce 3% 4% 0% 0% 0% 0% 0% 0% 7% 7% 0% 0% 21% 5% 6% Sell 3% 7% 7% 0% 0% 4% 4% 3% 0% 4% 0% 14% 16% 5% 0% Unrated/Under Revision 14% 14% 14% 7% 10% 4% 11% 13% 11% 11% 42% 18% 16% 20% 25% Performance 5% -3% -7% -20% -6% 2% 7% -11% -6% 33% -51% 16% 30% 13% na PSI 20 5,581 5,325 5,494 5,891 7,324 7,753 7,588 7,066 7,927 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. Page 25 of 26

26 OFFICE LOCATIONS Millennium investment banking Av. José Malhoa, Lote Lisboa Portugal Telephone Fax / 39 Equity Team Luis Feria (Head of Equities) Equity Research António Seladas, CFA (Head) Fundamental Analysis Alexandra Delgado, CFA (Telecoms and IT) João Flores (Media and Retail) João Mateus (Industrials and Utilities) Rita Silva (Banks) Vanda Mesquita (Utilities and Oil&Gas) Market Analysis Ramiro Loureiro Sónia Martins Telma Santos Publishing Sónia Primo Prime Brokerage Vitor Almeida (Head) Hugo Ferreira Pinto Paula Val Institutional Equity Sales Karsten Sommer (Head) Manuel Lança Lopes Equity Trading Paulo Cruz (Head) Diogo Palma Gonçalo Lima Jorge Caldeira Nuno Sousa Paulo Sousa Pedro Ferreira Cruz Pedro Gonçalves Pedro Lalanda Rodrigo Roque Pinho Equity Derivatives Jorge Pina (Head) Ana Lagarelhos Diogo Justino Marco Barata Maria Cardoso Baptista, CFA