Equity Weekly. Equity Research. Top company and macro news. Long weekend ahead. 13 April, 2017

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1 Equity Research 13 April, 2017 Equity Top company and macro news Tallink: Missing holidays Lithuania: Annual inflation accelerated to 3.1% and will not ease Long weekend ahead This week and next are shorter trading weeks, as all Baltic markets are closed on April 14 and 17. This week, activity remained high. The most-traded stocks in Tallinn were Olympic Entertainment Group (1.1% w/w) and Tallink Grupp (-0.3% w/w). Olympic released gaming revenue figures for Q on Thursday. Its Q1 revenues totaled EUR 47m (+2% y/y). Olympic contributed around EUR 1m to the week s turnover, while Tallink added more than EUR 0.5m. Olympic s share price ended the week at EUR 1.79 and Tallink closed at EUR All Baltic indexes finished the week in positive territory and the NASDAQ OMX Tallinn index rose to close at points on Thursday (+0.51% w/w). Tallinn s turnover amounted to EUR 2.6m for the week. The NASDAQ OMX Riga index closed at points on Thursday, which gave a w/w change in the index of 1.75%. The key companies did not release any significant news this week. The most actively traded share of the past week was Olainfarm with total weekly trading turnover of EUR 86,060. The company s share price moved 3.79% higher w/w and closed at a record EUR The NASDAQ OMX Vilnius index rose by 0.92% w/w with weekly turnover of EUR 2.33m. Siauliu Bankas s share price increased by 3.41% w/w, to EUR 0.455, including price changes after dividends and additional shares. Linas Agro Group s share price increased by 0.31% w/w, to EUR 0.651, with unusual weekly turnover of EUR 324,352. Klaipedos nafta announced that its preliminary revenue decreased by 10.0% q/q in Q1, while revenue fell by 13.9% y/y in March. Nevertheless, the company s share price rose by 1.35% from last week s low of EUR Investor Calendar: Date Issuer/Country Description Period 17 Apr Estonia, Latvia, Lithuania Trading holiday 18 Apr LHV Group Interim report, 3 months Q Apr Baltic Horizon Investors event 20 Apr Estonia PPI MoM / YoY March 20 Apr Olympic Entertainment Group Annual general meeting 21 Apr Lithuania Industrial production YoY March Source: Nasdaq OMX, Bloomberg Baltic Indices Jan 28-Jan 12-Feb 27-Feb 14-Mar 29-Mar 13-Apr Baltic Benchmark OMX Riga Index value OMX Tallinn OMX Vilnius, Swedbank OMX Tallinn 1, % 4.0% OMX Riga % 8.7% OMX Vilnius % 1.9% OMX Baltic Bench % 4.9% OMX Baltic % 2.8% S&P 500 2, % 4.7% STOXX Europe % 5.2% STOXX EU Enlarged % 13.0% RTS 1, % -6.0% Top gainers: Last Close ( ) Siauliu Bankas % Olainfarm % Zemaitijos Pienas % Tallinna Kaubamaja % Pieno Zvaigzdes % Top losers: Last Close ( ) Arco Vara % Baltika % SAF Tehnika % Grindeks % LHV Group % Most active: Last Close ( ) Siauliu Bankas % Olympic Entertainment Group % Tallinna Kaubamaja % Tallink % Tallinna Vesi % Equity Research Large Corporates & Institutions Swedbank YTD Turnover ( th) 1, Turnover ( th) Turnover ( th) 1,319 1, April 13, 2017 Please see important disclosures at the end of this document Page 1 of 8 Report was ready at :52 and published at :52

2 Macro news Annual consumer price growth in Lithuania accelerated to 3.1% in March, while average annual inflation picked up to 1.4%. Monthly inflation spike was caused by higher excise duties, which increased the prices of alcohol. Higher alcohol and fuel prices also contributed the most to annual inflation. Prices of goods rose 3.3% in a year, while price of services were 2.7% higher than a year ago. Decreasing prices of travel services and still cheaper compared with a year ago heating and electricity contributed negatively to inflation. Strengthening price pressures Prices of goods will rebound this year following the changing trends in the commodity markets despite shrinking base effects from oil price in the second half of this year. Growth of prices of services will accelerate as well due to strong wage growth and domestic demand. We expect average annual inflation to accelerate from 0.9% last year to 3.0% this year and to ease slightly to 2.5% in For more information about this report, please contact Ms. Vaiva Šečkutė, , Vaiva.Seckute@swedbank.lt April 13, 2017 Please see important disclosures at the end of this document Page 2 of 8

3 Volatility Snapshot Geopolitical fears have made investors more cautious and interested in safer assets. Volatility has broken out from its complacency levels with VIX at more than 16 (13 one week ago) and V2X at 23 (19). The OMXB10 Index was higher for the week, as most constituents finished in the black. Implied volatility in Baltic shares moved slightly higher along with heightened volatility on global markets as well as approaching ex-dividend dates OMXB10 Index 140 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Close (ls) 1m Realized Volatility (rs) 1m Implied Volatility (rs) 0 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Close (ls) 3m Realized Volatility (rs) 3m Implied Volatility (rs) Implied Volatility Overview (as of close on ) Volatility changes on Most Actively traded Options (as of close on ) YTD Implied Volatility (ATM, mid-market) Last Price Price vs Previous Week Close 1 month 3 months Eurostoxx 50 3, % 5.4% 11.5% -2.5% 18.4% 7.9% S&P 500 2, % 4.7% 8.9% 1.1% 12.4% 10.2% OMX 30 1, % 3.8% 10.7% -7.0% 16.2% 3.5% OMXB % 2.8% 18.3% 0.6% 18.2% 0.8% VIX % 12.3% Sources: Bloomberg, Swedbank AS estimates and calculations 1M ATM 1M ATM 1M 3M ATM 3M ATM 3M 3M Implied Vol Price Realized Implied ATM Imp. Realized Implied ATM Imp. divided by Vol Vol Vol Vol Vol Vol 3M Realized Vol c2 c5 c6 c7 c9 c11 c12 c14 sortcol APG1L -1.5% 17.0% 15.5% 0.0% 13.4% 15.5% 0.0% 1.16 TAL1T 0.5% 9.4% 17.5% 1.4% 14.0% 17.0% 1.5% 1.21 TKM1T 2.4% 35.3% 17.8% 0.0% 24.2% 18.0% 1.4% 0.74 OEG1T 0.0% 14.0% 17.0% -1.4% 11.8% 16.5% -1.5% 1.40 SFG1T 1.1% 20.9% 25.3% 1.0% 23.7% 23.8% 1.1% 1.00 Sources: Bloomberg, Swedbank AS estimates and calculations. Implied vols are all mid-market Note: Published OMXB10 Index implied volatilities are computed by Swedbank and are for informational purposes only. Swedbank has not traded the index in the past nor currently plans to do so in the future. April 13, 2017 Please see important disclosures at the end of this document Page 3 of 8

4 Company News Company & expected share impact Positive Neutral Negative Missing holidays Holiday season shifts lead to traffic decline in March Cargo volumes increase more space available for trucks EUR 1.10 (1.15) target price, Strong Buy recommendation Lack of holidays decreases volumes on Stockholm routes The ferry operator Tallink reported a 5% y/y decline in passenger volume for March, largely due to an 18% decline in the Sweden-Finland segment. We note that the March 2016 figures were heavily influenced by the Easter and school holidays falling in March, which resulted in 28% growth, to 259,000 passengers. We therefore expect the April 2017 figures to offset some of the decline in March. The 20% increase in Latvian volumes was explained by the addition of a vessel as of December. However, in 2014 and 2013 (the two previous years in which Tallink operated the route with two vessels), March passenger volumes stood at 60,000. We believe that the Latvian route was similarly affected by holidays. Tallink Recommend. ( ): Strong Buy Target Price ( ): 1.1 Price ( :33): 0.94 Analyst: Marek Randma Tel: % cargo volume growth in 2017e Tallink managed to significantly increase cargo volumes in all segments. We believe this is partly due to the higher capacity resulting from the shifts of vessels in Q and Q Moreover, due to less traffic from holiday passengers with cars, Tallink probably also had more space available for trucks and its marketing division was successful in converting the available space into higher cargo traffic. For 2017, we expect 5% growth in cargo volumes for Tallink. 11% EBITDA growth in 2017e In its latest Economic Outlook, Swedbank forecast average oil prices of USD 55/bbl in 2017 and USD 60/bbl in We therefore increase our 2018 oil-price assumption from EUR 51/bbl to EUR 54/bbl. We also decrease our traffic assumptions for the Latvia-Sweden segment and increase our cargo volume assumptions. We consequently lower 2017e and 2018e EBITDA to EUR 166m (169m) and EUR 160m (169m), respectively, resulting in a reduction in our target price to EUR 1.1 (1.15). We still regard Tallink as undervalued with good EPS growth prospects and we maintain our Strong Buy recommendation. April 13, 2017 Please see important disclosures at the end of this document Page 4 of 8

5 Baltic Equity Trading Statistics Swedbank Baltic Coverage Last* Reco. Return Name GICS Sector/ Sub-Industry Country Price ( ) Target ( ) Upside/ Downside Reco. Release Date Reco. Issuer** M.Cap, meur 1w 1m 6m YTD 52w 3m Avg. Daily Turnover th 52w Volatility Apranga Apparel Retail LT % Neutral LT 148-1% 0% 6% 5% 3% 14 12% Baltic Horizon Real Estate EE % Buy LT 74 1% -3% -3% -3% 22 LHV Group Diversified Banks EE % Neutral LT 238-1% -3% 28% -4% 37 Linas Agro Group Agricultural Products LT % Reduce LT 103 0% 0% 2% 2% -3% 8 Merko Ehitus Construction & Engineering EE % Reduce EE 164 0% 4% 11% 3% 2% 22 18% Nordecon International Construction & Engineering EE % Buy EE 43 2% 3% 6% 0% 28% 7 Olainfarm Pharmaceuticals LV % Buy LT 137 4% 7% 17% 16% 33% 9 Olympic Entertainment Group Casinos & Gaming EE % Neutral EE 269 1% -4% 1% 1% -8% % Siauliu Bankas Diversified Banks LT % Strong Buy LT 208 4% 8% 50% 22% 86% % Silvano Fashion Group Apparel Retail EE % Buy LT 106 0% 4% 36% -3% 92% 96 24% Tallink Marine EE % Strong Buy EE 635 0% -3% 3% 3% 7% 94 17% Tallinna Kaubamaja Food Retail EE % Neutral EE 365 2% -4% 17% 9% 23% 73 18% Tallinna Vesi Water Utilities EE % Sell EE 278 1% 1% 0% 1% -4% 48 12% *Date for prices: 13 April :33 Source: Swedbank LC&I, Bloomberg ** EE=Swedbank AS (Estonia), LT=Swedbank AB (Lithuania) Selection of Others Last* Return Price M.Cap, Name GICS Sector/ Sub-Industry Country ( ) meur 1w 1m 6m YTD 52w Arco Vara Diversified Real Estate Activi EE % 6% 21% 10% 26% 5 Baltika Apparel, Accessories & Luxury EE % 0% 1% 9% 10% 5 38% Ekspress Grupp Publishing EE % 2% -3% 1% 3% 2 Energijos Skirstymo Operatorius Gas Utilities LT % -6% 3% 1% 2% 24 11% Grigiskes Paper Products LT % 0% -6% -4% -4% 7 15% Grindeks Pharmaceuticals LV % 8% 26% 19% 8% 13 28% Harju Elekter Electrical Components & Equipm EE % 14% 53% 39% 54% 25 20% Invalda Multi-Sector Holdings LT % 4% 7% 9% 20% 1 Klaipedos Nafta Oil & Gas Storage & Transporta LT % -4% -20% -17% 0% 21 28% Latvian Shipping Company Oil & Gas Storage & Transporta LV % 3% -6% 0% 7% 3 PRFoods Packaged Foods & Meats EE % -1% 3% 6% 4% 9 25% Pieno Zvaigzdes Packaged Foods & Meats LT % 1% 3% 1% 6% 6 Panevezio Statybos Trestas Construction & Engineering LT % 0% 1% 3% 7% 5 Rokishkio Suris Packaged Foods & Meats LT % 9% 25% 6% 34% 4 SAF Tehnika Communications Equipment LV % 4% 15% 13% 23% 5 Telia Lietuva Integrated Telecommunication S LT % 0% 3% 1% 1% 14 11% Zemaitijos Pienas Packaged Foods & Meats LT % 10% 30% 21% 82% 2 3m avg. Daily Turnover th AVERAGE (both groups) % 2% 11% 6% 19% % MEDIAN (both groups) % 1% 5% 3% 7% % 52w Volatility *Date for prices: 13 April :33

6 Baltic Equity Fundamentals Swedbank Baltic Coverage Div. Div. Net Bloomberg EV P/E P/E P/E P/BV P/BV P/BV P/S P/S P/S EV/ EV/ DPS Yield Yield EBITDA Operating Debt to Name ticker meur F 2018F F 2018F F 2018F EBITDA Sales ROE ROA EUR F margin margin EBITDA Apranga APG1L LH % 19% % 6% 11% 8% -0.3 Baltic Horizon NHCBHFFT ET nm 11% 5% % 9% 76% 76% 9.9 LHV Group LHV1T ET % % 3% Linas Agro Group LNA1L LH % 2% % 1% 3% 1% 5.2 Merko Ehitus MRK1T ET % 3% % 5% 4% 3% 1.1 Nordecon International NCN1T ET % 5% % 5% 3% 2% 1.6 Olainfarm OLF1R LR % 7% % 6% 21% 16% 1.0 Olympic Entertainment Group OEG1T ET % 23% % 8% 19% 13% -1.0 Siauliu Bankas SAB1L LH % % 0% Silvano Fashion Group SFG1T ET % 32% % 5% 34% 30% -1.1 Tallink TAL1T ET 1, % 5% % 6% 16% 8% 3.2 Tallinna Kaubamaja TKM1T ET % 8% % 6% 8% 6% 1.5 Tallinna Vesi TVEAT ET % 12% % 6% 53% 42% 2.0 Source: Swedbank LC&I, Bloomberg Selection of Others Net Bloomberg EV EV/ EV/ DPS Div. EBITDA Operating Debt to Name ticker meur P/E P/BV P/S EBITDA Sales ROE ROA EUR Yield margin margin EBITDA Arco Vara ARC1T ET % -3% 6% 5% 23.5 Baltika BLT1T ET % 1% 4% 2% 3.2 Ekspress Grupp EEG1T ET % 6% % 14% 8% 1.8 Energijos Skirstymo Operatorius ESO1L LH Grigiskes GRG1L LH % 4% % 15% 5% 2.9 Grindeks GRD1R LR % 2% 18% 12% 1.3 Harju Elekter HAE1T ET % 5% % 8% 5% -0.3 Invalda IVL1L LH % 9% 68% 59% -1.6 Klaipedos Nafta KNF1L LH % 6% 27% 15% -0.4 Latvian Shipping Company LSC1R LR % PRFoods PRF1T ET % 2% 6% 4% 0.1 Pieno Zvaigzdes PZV1L LH % 3% % 8% 3% 2.1 Panevezio Statybos Trestas PTR1L LH % 3% 3% 2% -3.4 Rokishkio Suris RSU1L LH % 3% 6% 2% 1.1 SAF Tehnika SAF1R LR % 7% 10% 7% -4.2 Telia Lietuva TEL1L LH % 10% % 32% 14% 1.5 Zemaitijos Pienas ZMP1L LH AVERAGE (both groups) % 7% % 5% 18% 14% 2.0 MEDIAN (both groups) % 5% % 6% 11% 7% 1.2

7 Background Information: Recommendation structure Large Corporations & Institutions recommendation structure consists of six recommendations: Buy, Accumulate, Hold, Reduce, Sell and Avoid. The recommendations are based on an absolute return for the security 12 months forward. The absolute return includes share price appreciation and dividend yield combined. The recommendations for the securities mentioned in this report are based on risk and return considerations. The higher the risk category of the investment, the higher the required return. For equity investments, returns are defined as capital appreciation and dividends received over the investment horizon of 12 months forward. The expected capital appreciation is the ratio of a stock s target price over the current price. A company risk rating depends on its stock price volatility, liquidity and business outlook. The target price depends on a company s fundamentals as well as the market valuation of peer stocks, and can be changed at any time if the relevant changes occur within a company/market perception of the peer group. Buy, accumulate, hold, reduce, sell and avoid recommendations may be used in this report. The table below presents the relationship between recommendations and target prices compared to risk level of the stock. These are indicative ranges and actual recommendations may deviate from the indications if other relevant issues are considered. Strong Buy (SB) The absolute return is estimated to be in excess of 15% Buy (B) The absolute return is estimated to be between 5% and 25% Neutral (N) The absolute return is estimated to be between 0% and 10% Reduce (R) The absolute return is estimated to be between 5% and -10% Sell (S) The absolute return is estimated to be less than -5% Share price target Our expectations of the absolute return on a 12-month horizon The recommendation by Large Corporations & Institutions Equity Research department is based on a variety of standard valuation models. However, the base for the calculation of the target price is our DCF model (DCF = discounted cash flow) with the exception of financial and investment companies. The DCF model discounts future cash flow at present value. In preparation of this report different valuation methods have been used, including, but not limited to, discounted free cash-flow and comparative analysis. The selection of methods depends on the industry, the company, the nature of the stock and other circumstances. The target price (previous fair value) takes into account the DCF value, the relative valuation of the share versus others peers (national or international) and news that can have a positive or negative effect on the share price. Relative and absolute multiples that we consider are: EV/EBITDA, EV/EBIT, PE, PEG and Net Asset models for companies with liquid markets for their assets and other industry specific ratios when available. Break-up valuation models are also sometimes considered. For Swedbank s previous recommendations please follow the link: Recom mendations by the No of shares (*) Part of total Strong Buy 2 (1) 15% Buy 4 (1) 31% Reduce 15% Sell 8% Strong Buy 15% Buy 31% Neutral 4 (2) 31% Reduce 2 (1) 15% Sell 1 (1) 8% * Recommendations issued by Swedbank AS Neutral 31% April 13, 2017 Please see important disclosures at the end of this document Page 7 of 8

8 Information to the customer Issuer and recipients This research report contains previously published research (or excerpts from it) and recommendations that have been produced by two different Swedbank Group entities: Swedbank AS, under the supervision of the Estonian Financial Supervision Authority (Finantsinspektsioon), has issued research on: Merko Ehitus, Nordecon International, Olympic Entertainment Group, Tallink, Tallinna Kaubamaja, Tallinna Vesi; Swedbank AB, under the supervision of the Bank of Lithuania, has issued research on: Apranga, Baltic Horizon, Ekspress Grupp, LHV Group, Linas Agro Group, Olainfarm, Siauliu Bankas, Silvano Fashion Group. For full research on the relevant issuers, please contact your salesperson or the covering analyst. This report by Large Corporations & Institutions Equity Research is disseminated by Swedbank AS ( Swedbank ). Swedbank is under the supervision of the Estonian Financial Supervision Authority (Finantsinspektsioon). 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