BUY / TP: COP 22,620 Common Share - COP 22,480 Preferred Share May 25, 2015

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1 GRUPO ARGOS BUY / TP: COP 22,620 Common Share - COP 22,480 Preferred Share May 25, 2015 A Way to Play Infrastructure at a Discount Price We are updating our coverage of Grupo Argos after incorporating the company s recently acquired stake in Grupo Odinsa, which we value at COP 496 billion, and reviewing the value of the companies comprising Grupo Argos investment portfolio. The mix of these two elements delivers a new 2015YE Target Price of COP 22,620 per common share (COP 22,480 per preferred share), which implies a 6.9% reduction compared to our previous TP but offers a potential upside of 32.9% in the common share and 34.1% in the preferred share that leads us to maintain our BUY recommendation. With a COP 10, YE TP per share of Odinsa, according to our DCF model, the purchase of the 24.8% stake at an average price of COP 9,465 per share, plus an additional 20% - 25% share that the company plans to acquire at COP 9,500 makes perfect sense for Grupo Argos, as it not only is at a price below what we consider a fair value for 2015E but it also gives Grupo Argos an extra arm to gain exposure to infrastructure, a sector we believe will outperform the economy in the years to come. Paying 7.2x EV/2015E EBITDA (Construcciones El Condor trades at 9.8x and Constructora Conconcreto at 8.7x), Grupo Argos found a relatively inexpensive way to widen its diversified investment portfolio, this time with one of the most prominent players in the infrastructure boom occurring in Colombia, Central America and the Caribbean. Within the widely-publicized Fourth Generation Concessions Program (4G), Odinsa has been granted two big projects so far: the Pacifico 2 toll road concession (25% working interest -WI- on this US$390 million project) and the road Malla Vial del Meta, a privately-funded Private-Public-Partnership (PPP) that will require a US$500 million investment (Odinsa has a 51% share in this project). Furthermore, the company is close to obtaining several additional PPP projects, including the expansion of the runways at Bogota s El Dorado Airport (Capex of US$480 million, 100% WI), and the La Paila Cajamarca (US$425 million, 100% WI) and Vias del NUS (US$474 million, 22% WI) road projects. What's more, Odinsa is prequalified in two other projects of the Second Wave of 4G Roads ( Rumichaca-Pasto and Autopista al Mar 2 ), projects that altogether require over COP 3.2 trillion (US$1.3 billion) in investments. Taking all of this into account, we think Odinsa will not only be one of the most relevant players in the execution of several large-scale projects of the 4G program in the next 6 years, but it also is structuring different Private Initiatives which, despite requiring considerable investments, will become major cash-generating sources for the company in the long term. But regardless of the acquisition of the 24.8% to 49.8% stake in Odinsa, our investment thesis on Grupo Argos remains unchanged, as we continue supporting our BUY rating based on the good perspectives for growing income from the Group s mature businesses (Cementos Argos, Celsia), the high potential of its small business units, especially Situm (Real Estate), Compas (Ports) -and now Odinsa-, and a solid investment portfolio. (You can see more in our Coverage Initiation of February 9, 2015) In addition, Grupo Argos share price vs. the company s portfolio, when valued at market prices, continues to offer a discount that greatly exceeds historic averages. When we track historic values of Grupo Argos portfolio using market prices (and book value for non-listed companies), and subtract net debt and present value of the holding company s overhead expenses, we find that since May 2012, when Cementos Argos non-core assets were absorbed, Grupo Argos stock price has maintained an average premium of 0.1% against the market value of the portfolio. Today, Grupo Argos common share is offering an 11.5% discount (12.9% in the preferred), a sum equivalent to COP 1.82 trillion (US$720 million). The overhang from the company s planned share issuance this year could help explain this discount. However, since the issuance was aborted there is no longer a short-term justification for such a steep discount (COP 2,220 per common share / COP 2,480 per preferred share). Stock data Current Price (COP) (Pref) 16,760 Current Price (COP) (Common) 17,020 Fully Diluted Shares (mm) 818 Float 48% Market Cap. (US$ mm) 5,595 52wk range (COP) (Pref.) 15,760-24,000 52wk range (COP) (common) 15,960-24, d Avg. traded (Comm/Pref) Financial Information and Multiples* E 2015E 2016E ROE 2.4% 2.8% 2.7% 2.9% ROA 2.5% 2.3% 2.4% 2.6% ROIC 5.0% 4.4% 5.0% 5.3% P / E 51.8x 42.7x 36.8x 33.5x P / BV 1.2x 1.2x 1.0x 1.0x EV** / EBITDA 10.1x 11.6x 9.8x 9.0x Yield (common) 1.3% 1.3% 1.7% 1.8% Yield (Preferred) 1.3% 1.3% 1.7% 1.8% *Using consolidated financial statements **Investment Portfolio Adjusted Grupo Argos vs. Portfolio at mkt. prices 25,000 24,000 23,000 22,000 21,000 20,000 19,000 18,000 17,000 16,000 15,000 Portfolio value at market prices (minus Net Debt & Overhead) Grupo Argos (common) Grupo Argos (Preferred) Source: Bloomberg 2.3/2.2 (US$ mm) Alejandro Isaza Z Construction Equity Analyst ai@serfinco.com.co (574) Ext Jose F. Restrepo, CFA Equity Strategist jr@serfinco.com.co (574)

2 Positive Catalysts Acquisition of Odinsa gives Grupo Argos an extra arm to play the infrastructure boom in Colombia, Central America and the Caribbean. Stock price with unjustified discount vs. portfolio at market prices. Grupo Argos and Conconcreto alliance to become the largest Real Estate Portfolio in terms of GLA in Colombia. Grupo Argos would benefit from the infrastructure boom to come in Colombia through Cementos Argos, Compas, Odinsa and Situm. Table 1. Income Statement (Consolidated*) Negative Catalysts Last tax reform can impact dividend income from the Group s portfolio. Further declines in cement prices would diminish potential impact of 4G projects. As has been the rule in the local market, if the issuance process goes through we expect declines in the stock price to occur. Recent M&A activity could raise debt concerns. Table 2. Balance Sheet (Consolidated*) COP million E 2016E Revenues 6,681,155 7,629,359 8,919,558 9,864,255 10,922,887 Cost of Sales 4,900,511 5,536,545 6,484,800 7,109,728 7,865,956 Gross Profit 1,780,644 2,092,814 2,434,758 2,754,527 3,056,931 SG&A 692, , , ,000 1,064,661 Operating Profit 1,088,447 1,347,517 1,516,202 1,786,527 1,992,270 EBITDA 1,615,543 1,907,021 2,072,361 2,309,900 2,563,852 Other non-operating Income -195, , , , ,355 Earns Before Income Tax and MI 892,863 1,113,429 1,204,355 1,297,500 1,409,915 Income Tax -163, , , , ,943 Earning Before Minority Interest 729, , , , ,971 Minority Interest -385, , , , ,600 Net Income 343, , , , ,372 *Does not include potential consolidation of Odinsa nor expected impacts of IFRS implementation Source: Grupo Argos and Serfinco S.A. COP million E 2016E Cash 846, , ,961 1,020,806 1,130,358 Short Term Investments 621, , ,125 86, ,371 Trade Receivables 1,155,051 1,283,333 1,772,506 1,823,021 1,857,174 Inventories 467, , , , ,110 Permanent Investments 1,043,257 1,001, , , ,211 PPE 7,172,640 7,566,366 11,543,684 11,936,169 12,330,063 Appraisals 13,325,550 12,656,081 13,675,336 14,140,297 14,606,927 Total Assets 26,799,834 27,415,335 33,894,370 34,837,470 36,284,581 Short Term Debt 1,409, ,914 1,702,698 1,866,784 1,962,077 Long Term Debt 1,685,905 1,063,692 2,813,105 3,888,812 3,961,666 Shareholders' Equity 12,781,338 12,441,163 13,804,009 14,230,516 14,441,702 Minority interest 4,870,120 6,741,142 6,985,822 7,223,340 7,461,710 Liabilities + Shareholders' Equity + MI 26,799,834 27,415,335 33,894,370 34,837,470 36,284,581 *Does not include potential consolidation of Odinsa nor expected impacts of IFRS implementation Source: Grupo Argos and Serfinco S.A. Figure 1. Revenues Distribution Figure 2. EBITDA Distribution Figure 3. Value Contribution* Energy 32% Others 3% COP 8.9 trlln. US$ 3.7 bln. Cement 65% Energy 47% Others 2% COP 2.1 trlln. US$ 840 mlln. Cement 50% Celsia 9.9% Situm 17.3% Odinsa 2.5% Nutresa 4.9% Epsa 2.0% Compas 0.7% Sator 0.1% Bancolombia 1.8% COP 18.6 trlln. US$ 7.4 bln. Cementos Argos 33.8% Grupo Sura 26.3% Source: Grupo Argos; Bloomberg; Serfinco Calculations *At market prices Table 3. Financial Ratios Table 4. Stock Data and Multiples E 2016E ROE 2.7% 2.4% 2.8% 2.7% 2.9% ROA 2.7% 2.5% 2.3% 2.4% 2.6% ROIC 4.3% 5.0% 4.4% 5.0% 5.3% Net debt / EBITDA 2.57x 1.78x 3.83x 3.76x 3.51x EBITDA / Interests 3.4X 4.8X 4.5X 4.2X 4.2X Dividends / Holding expenses 1.7X 1.3X 1.2X 1.2X 1.2X EV / Sales 3.8X 3.3X 3.5X 3.0X 2.8X Equity / Assets 47.7% 45.4% 40.7% 40.8% 39.8% Gross margin 26.7% 27.4% 27.3% 27.9% 28.0% EBIT margin 16.3% 17.7% 17.0% 18.1% 18.2% EBITDA margin 24.2% 25.0% 23.2% 23.4% 23.5% Net margin 5.1% 3.9% 4.3% 3.9% 3.9% E 2016E Outstanding Shares EPS (COP) Book Value (COP) 16,319 15,832 17,425 17,386 17,644 P/E 47.8X 51.8x 42.7x 36.8x 33.5x P/BV 1.29X 1.2x 1.2x 1.0x 1.0x EV/EBITDA 11.8X 10.1x 11.6x 9.8x 9.0x Dividend (Common) Dividend (Pref) Payout Ratio 53% 67% 65% 61% 60% Dividend Yield (Comm) 1.1% 1.3% 1.3% 1.7% 1.8% Dividend Yield (Pref) 1.1% 1.3% 1.3% 1.7% 1.8% Source: Grupo Argos and Serfinco S.A. Source: Grupo Argos and Serfinco S.A. 2

3 What is Grupo Argos Buying? Odinsa is a Colombian company created by a group of construction and engineering companies, with a 23-year experience in the management, promotion and development of large-scale infrastructure projects. Currently, the COP 920 billion (US$370 million) in revenues (2014FY) are generated by five different sources: power generation (41%), concessions (27%), construction (19%), road toll operation (9.1%) and other services (3.7%). The company has grown its revenues and EBITDA at a CAGR of 13.4% and 22.8%, respectively, in the last five years. Assets of the power generation business include a 150 MW thermal power plant in Panama (9% of Panama s installed capacity) and a 96 MW plant in Chile. Meanwhile, the concessions portfolio is comprised by 11 concessions, eight of them in Colombia (Autopistas del Café, Santa Marta Paraguachón, Vía de las Américas, Hatovial, Conexión Pacifico 2, Vías de los Llanos, Bogota s El Dorado Airport and Santa Marta s port); other two in Dominican Republic (Autopistas del Nordeste and Boulevard Turistico del Atlántico) and one more in Aruba (The Green Corridor). Finally, the road toll operation business is a contract to operate 39 toll stations with 95 booths of stateowned roads in Colombia. The following is the current structure of Grupo Odinsa and its holdings: Figure 4. Grupo Odinsa s Structure Source: Grupo Odinsa On the other hand, we expect Odinsa to be one of the relevant players in the well-known Fourth Generation of Road Concessions Program. So far, within the First Wave of the 4G-Program, the company has been awarded the Pacifico 2 Concession (25% working interest of this COP 940 billion /US$380 million project) and the Public-Private Partnership (PPP) Malla Vial del Meta, which is a privately conceived and funded project worth COP 1.2 trillion (US$480 million) in which Odinsa participates with a 51% share. Apart from that, the company is prequalified in two projects belonging to the Second Wave of the 4G-Roads (COP 3.2 trillion/us$1.3 billion in Capex) and is working on at least another three PPP initiatives in Colombia worth COP 3.4 trillion/us$1.4 billion (Extension of the runways at El Dorado Airport, Vías del NUS and La Paila-Cajamarca highway). Other projects in the company s pipeline include an additional expansion of El Dorado Airport (US$450 million) and the construction of the Watty Vos Boulevard" road in Aruba (US$100 million). 3

4 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 Table 5. PPP and 4G-Projects in which Odinsa is Participating Project Capex Capex (COP billion) (US$ million) Working Interest Type Status Pacifico 2 Concession % 4G Toll-Road Concession - State-Funded Awarded on July 2014 Malla Vial Meta 1, % 4G Toll-Road Concession - Privately-Funded Awarded on April 2015 Rumichaca Pasto 1, % 4G Toll-Road Concession - State-Funded Bids scheduled for June Autopista Mar 2 1, % 4G Toll-Road Concession - State-Funded Bids scheduled for 06/05/15 La Paila - Cajamarca 1, % 4G Toll-Road Concession - Privately-Funded In Feasibility (Prefeasibility Approved) Vias del NUS (VINUS) 1, % Pubic-Private Partnership - Privately-Funded Prefeasibility Submitted Runway Extensions at El Dorado Airport 1, % 4G Toll-Road Concession - Privately-Funded Prefeasibility Submitted Expansion of El Dorado Airpot 1, % Defining Compensation mechanism Defining Compensation mechanism Watty Vos Boulevard (Aruba) % Public Project Prequialified Total 10,820 4,328 Source: National Infrastructure Agency (ANI), Grupo Odinsa and Serfinco For us, with a COP 10, YE TP per share of Odinsa, according to our DCF model, the purchase of the 24.8% stake at an average price of COP 9,465 per share, plus an additional 20% - 25% share that the company plans to acquire at COP 9,500 makes perfect sense for Grupo Argos, as it not only is slightly below of what we consider a fair price for 2015E but it also gives Grupo Argos an extra arm to gain exposure to infrastructure, a sector we consider will outperform the economy in the years to come. Paying 7.2x EV/2015E EBITDA (Construcciones El Condor trades at 9.8x and Constructora Conconcreto at 8.7x), Grupo Argos found a relatively inexpensive way to widen its infrastructure portfolio, this time with one of the most prominent players in the infrastructure boom happening in Colombia. But regardless of the acquisition of the 24.8% to 49.8% stake in Odinsa, our investment thesis on Grupo Argos remains unchanged, as we continue supporting our BUY recommendation based on the good perspectives for growing income from the Group s mature businesses (Cementos Argos, Celsia), the great potential of its small business units, especially Situm (Real Estate), Compas (Ports) -and now Odinsa-, and a solid portfolio of investments. (You can see more in our Coverage Initiation of February 9, 2015) In addition, Grupo Argos share price vs. the company s portfolio, when valued at market prices, continues to offer a discount that greatly exceeds historic averages. When we track historic values of Grupo Argos portfolio using market prices (and book value for non -listed companies), and subtract net debt and present value of the holding company s overhead expenses, we find that since May 2012, when Cementos Argos non-core assets were absorbed, Grupo Argos stock price has maintained an average premium of 0.1% against the market value of the portfolio. Today, Grupo Argos common share is offering an 11.5% discount (12.9% in the preferred), a sum equivalent to COP 1.82 trillion (US$720 million). The overhang from the company s planned share issuance this year could help explain this discount. However, since the issuance was aborted there is no longer a short-term justification for such a steep discount (COP 2,220 per common share / COP 2,480 per preferred share). Figure 5. Grupo Argos Portfolio at Market Prices vs. Common and Preferred Share Prices 25,000 24,000 23,000 22,000 21,000 20,000 19,000 18, % Historic premium 11.5% % Current Discount 17,000 16,000 15,000 Portfolio value at market prices (minus Net Debt & Overhead) Grupo Argos (common) Grupo Argos (Preferred) Average Portfolio value at market prices Average Grupo Argos Share Price 4

5 The following table shows the calculation for what we consider the Clean Value of Grupo Argos portfolio to be (subtracting net debt an present value of overhead expenses), which shows that the current price of Grupo Argos shares have an apparently unjustified discount. Table 6. Calculation of Clean Value of Grupo Argos Portfolio at Market Prices Clean Market Price of Grupo Argos' Porfolio Industry Market Cap / Book Value (COP) Stake held Value of Grupo Argos' stake Portfolio of Investments (COP million) Cementos Argos Cement 12,261,440 51% 6,296,248 Celsia Utilities (Electricity) 3,536,758 52% 1,851,501 Epsa Utilities (Electricity) 3,120,312 12% 370,210 Situm Real Estate 3,220,671** 100% 3,220,671 Compas Ports 270,141* 50% 135,071 Sator Coal 20,786* 100% 20,786 Grupo Sura (Common) Insurance, Pension Funds 16,366,171 29% 4,815,213 Grupo Sura (Preferred) Insurance, Pension Funds 3,668,556 2% 86,913 Bancolombia (common) Financial Services 13,201,349 2% 328,981 Nutresa Food and Beverages 11,042,963 8% 917,907 Other Various 128, ,216 Odinsa Infrastructure 1,740, % 461,886 Market price (and book value) of Grupo Argos' Portfolio 18,633,602 Cash and Equivalents (Dec-14) 181,030 Financial Obligations and Bonds (Dec-14) (1,539,196) Net Present Value of Overhead Expense (1,065,339) Debt acquired for paying 24.8% of Odinsa + Cash used (461,635) Clean Market Price of Grupo Argos' Porfolio after Net Debt and Overhead Expense 15,748,462 Outstanding Shares 2015E (million) 818 Market Price of Grupo Argos' Porfolio after Net Debt and Overhead Expense / Share (COP) 19,241 Current Price (Prederred) - May 22, 15 16,760 Current Market Discount Current Price (Common) - May 22, 15 17,020 Current Market Discount -11.5% *Book Value **Colliers' Apraissal -12.9% Source: Grupo Argos; Serfinco Calculations Net/Net: we see Grupo Argos as an adequate vehicle for an investor willing to bet on infrastructure in Colombia, as considering the recent steps the firm has taken, it shows us that is exactly the bet Grupo Argos is making. With the recent alliance made with Conconcreto, which aims to develop what could be the largest real estate portfolio in Colombia; the planned acquisition of Grupo Odinsa; the ongoing investments in ports; and the expansion by 24% of Cementos Argos installed capacity in Colombia, we conclude that the company is determined on getting benefit from the infrastructure boom occurring in the country through investments in companies with relevant presence in different areas of the infrastructure sector. All this, supported on the base of a solid investment portfolio (Grupo Sura, Grupo Nutresa, Grupo Bancolombia), and currently offered to investors at a discount price. 5

6 Valuation and Recommendation We valued Grupo Argos by a Sum of the Parts methodology. For Cementos Argos and Odinsa we are using Serfinco's 2015E target prices for each of the companies. For Situm, we included the last appraisal of the properties disclosed by the company, plus the value of undergoing projects considering estimated Net Operating Income for each of them with Cap Rates provided by Grupo Argos. Meanwhile, as we did with the other names comprising the Grupo Empresarial Antioqueño (GEA), Grupo Sura and Nutresa, we are valuing at market prices the crossholdings that these companies have in each other, then we take that value to December 2015 by adding the Cost of Capital estimated for each one of the companies. By doing this, we seek to avoid any circular references that could inflate the ending value of every company when using target prices. This change in our valuation methodology is responsible for a 6.5% reduction in our previous Target Price. Finally, we included book values of Compas and Sator. To get to what we consider the fair price of Grupo Argos, we subtracted Net debt and the Present Value of overhead expenses. The exercise resulted in a Target Price for 2015YE of 22,620 per common share (COP 22,480 per preferred share), equivalent to a 32.9% potential upside in the common share and 32.4% in the preferred share. Although our 2015E Target Price of Odinsa is 7.5% higher than the price Grupo Argos would pay for the additional 20% to 25% in the Tender Offer (COP 9,500 per share), we do not expect any additional value that could be translated to Grupo Argos share coming from the transaction, as that upside could be partially offset depending on the cash/debt mix (and its cost) that the company would use to fund the transaction. Table 7. Sum of the Parts Valuation Summary Sum of Parts Valuation Stake held 2015E Target Price Price / Methodology Used Value of Grupo Argos' Stake Value per share (COP) Portfolio of Investments (COP million) Cementos Argos 51.3% 11,850 Serfinco's 2015E Target Price 8,280, ,117 Celsia 52.4% 5,155 Mkt price+ (Ke) 2015e 1,941, ,373 Epsa 11.9% 9,000 Book Value 398, Situm and Real Estate-related 100% 3,220,671 Serfinco's 2015E estimate 3,220,671 3,935 Compas 50% 270,141 Book Value 135, Sator 100% 20,786 Book Value 20, Grupo Sura (Common) 29.4% 38,597 Mkt price+ (Ke) 2015e 5,326, ,508 Grupo Sura (Preferred) 8.3% 37,930 Mkt price+ (Ke) 2015e 95, Bancolombia 2.5% 28,512 Mkt price+ (Ke) 2015e 362, Nutresa 8.3% 25,695 Mkt price+ (Ke) 2015e 982,754 1,201 Odinsa 24.8% 10,210 Serfinco's 2015E Target Price 496, Other 128, Total Value of Grupo Argos' Portfolio 21,388,842 26,132 Cash and Equivalents (Dec-14) 181, Financial Obligations and Bonds (Dec-14) (1,539,196) (1,881) Net Present Value of Overhead Expense (1,065,339) (1,302) Debt acquired for paying 24.8% of Odinsa + Cash used (461,635) (564) Equity Value (COP million) 18,503,702 22,610 Outstanding Shares (million) 818 Target Price (COP Per Common Share) 22,610 Target Price (COP Per Preferred Share) 22,470 Current Price (Prederred) - May 22, 15 16,760 Upside Potential 34.1% Current Price (Common) - May 22, 15 17,020 Upside Potential 32.9% Table 8 and 9. Valuation of Odinsa COP million 2015 PV DCF 1,338,330 PV Terminal Value 1,068,005 Operational value 2,406,334 (+) Cash & marketable sec. 172,687 Firm value 2,579,021 (-) Debt and notes 518,405 (-) Minority Interest 190,515 Total liabilities 708,920 Total equity 1,870,101 Number of shares (million) Target Price (COP) 10,210 Market price (COP) 9,500 Upside potential 7.5% 2015 E/E+D 73% D/E+D 27% Tax rate 38% Leveraged Beta 1.25 Risk Premium 4.7% Risk Free Rate 2.3% Country Risk 2.2% ke (USD) 9.7% Devaluation LT 3.9% Ke (COP) 14.0% Kd 8.1% WACC 11.5% Source: Grupo Odinsa; Serfinco Calculations 6

7 Figure 6. Stock performance and Historical Recommendations Historical recommendations Date Recommendation Target Price BUY COP 24, BUY COP 22,620 / COP 22,480 (Pref.) 25,000 24,000 23,000 COP 22,260/ 22,480 (Pref.) 22,000 21,000 20,000 19,000 18,000 17,000 16, Grupo Argos (common) Grupo Argos (preferred) 7

8 About The Tender Offer Grupo Argos has published three of the Tender Offer notices so far. This Tender Offer, in which Grupo Argos expects to acquire a minimum of 20% of the outstanding shares of Odinsa, and a maximum of 25%, is directed to all current shareholders of the company. Acceptances must be submitted from 9:00 am on May 25, 2015 and until 1:00 pm on June 5, If acceptances are not presented or the number of securities included in the acceptances does not exceed the minimum limit (20% of the outstanding shares), and Grupo Argos does not modify the limit, the bid is declared void. If the number of acceptances exceeds the maximum amount of securities that the Tender Offer established (25%), acceptances will be prorated in direct proportion to the amounts presented by shareholders. You can find the Tender Offer Notice in the following link (Spanish): 8

9 International Equity Trading Desk Andres Jimenez Juan P. Vieira Andres Gomez Head of Equity Head of Trading Head of Electronic Trading (574) (574) (574) Daniel Marin Andres F. Sánchez Jose F. Restrepo, CFA Equity Trader FX Trader Equity Strategist (574) (574) (574) Research Team Rafael España Alejandro Isaza Natalia Casas Consumer Services and Holdings Cement and Construction Financial Services (571) Ext (574) Ext (571) Ext Bob Jenney Maurizio Mazzoti Energy and Mining Intern (574) Ext (574) Bogotá Centro de Negocios Andino Carrera 11 No Piso 6 Tel: (571) Medellín San Fernando Plaza Torre 1 Carrera 43A No Piso 10 Tel: (574) Cali Carrera 100 No Torre empresarial Oasis Of. 722B Tel: (572) Bucaramanga Metropolitan Bussiness Park Carrera 29 # of 910 Tel: (577) Cartagena Torre Empresarial Protección Carrera 3 No 6A 100 Of. 801 Tel: (575) Barranquilla Centro Empresarial Las Américas Calle 77B No Tel: (575) The analyst certifies that the opinions expressed in this report accurately reflect his personal opinion about the company of concern. Also, the analyst certifies that he has not received, is not receiving and will not receive any direct or indirect payment in exchange for expressing a specific recommendation in this report. Serfinco S.A. is committed to provide independent and objective research for all the companies in the coverage universe. During the normal course of business, Serfinco S.A. intends to obtain revenue for banking investment services from all the companies in the coverage universe. The remuneration for the analyst is based, in part, on the profitability of the firm, which includes investment banking and revenues from sales. The research analyst does not have a position in the fixed positions of this covered company and does not provide any kind of services to the company. The research analyst has not taken part in any investment banking transaction of the company in concern. Serfinco S.A. was not making a market in the titles of the company in concern when this report was published. In the last twelve months, Serfinco S.A. did not receive, nor it is authorized to receive, revenues for investment banking services, services related to the title of non investment banking, or non title services rendered to the company in concern. that could affect the objectivity of this report. Therefore, investors should consider this report only as a factor for their investment decision making. However, Serfinco S.A. intends to do business with the companies covered in this report. Consequently, investors should be aware that the firm might have an interest conflict. 9

The Consolidated EBITDA of Grupo Argos totaled COP 1,85 trillion (USD 594 million), a 29% increase in Colombian pesos. The EBITDA margin was 25%.

The Consolidated EBITDA of Grupo Argos totaled COP 1,85 trillion (USD 594 million), a 29% increase in Colombian pesos. The EBITDA margin was 25%. GRUPO ARGOS June 30, 2016 Report BVC: GRUPOARGOS, PFGRUPOARG EXECUTIVE SUMMARY At the close of the first semester, the consolidated revenue of Grupo Argos was nearly COP 7.5 trillion (USD 2,386 million),