top stories weekly - particulares - millenniumbcp · banks are now required to increase specific...

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All prices are those of the end of the trading session unless otherwise indicated. For important Disclosure and Disclaimer go to the second last page.

António Seladas, CFA

+351 21 003 7826

[email protected]

Av. José Malhoa, Lote 27

1099-010 Lisboa

Tel / Fax: +351 21 003 7800 / 09

TOP STORIES

Banking Sector - The ECB decided to adopt additional temporary measures relating refinancing

operations and eligibility of collateral which will widen the scope of credit claims to be accepted as

collateral. Although the broadening of collaterals comes as no surprise, it is a positive piece of news as

banks will now have the ability to tap for a bigger amount of fresh money at the next ECB’s LTRO on the

29th February (page 4).

Bank of Portugal (BoP) has approved recapitalization plans that banks have presented as a solution to fill

in for EBA’s capital shortfalls. These plans should not be known until the end of March/beginning of April.

Although the remuneration for these instruments is not yet known, we believe that 8% is the most likely

scenario (page 5).

OUT THIS WEEK � Earnings Comment – BES, Semapa, Galp Energia

� Snapshots / Company Reports – Sector Overview, Model Portfolio

� Price Target / Recommendation Changes – Semapa, Jerónimo Martins

� Other News – Telefónica, Telecom Sector, Bankinter, Banking Sector, BES, Portugal

Telecom, Retail Sector, Media Sector, Sonae

WEEK AHEAD � Tuesday – Media Capital’s 4Q11 Earnings

PORTFOLIOS

� This week, Mib Aggressive Portfolio went up 5.08%, outperforming the PSI20 by 2.72pp.

All stocks contributed for this outperformance (page 16).

� This week, Mib Liquidity Portfolio went up 6.01%, outperforming the PSI20 by 3.64pp.

Excluding Telefónica, all stocks contributed for this outperformance (page 17).

Stock Market Last 1W YTD 2 011 Daily Vol. (€mn) 1W 1M 6M 2011

PSI 20 5,6 20 2.36% 2.3 0% -27.60% PSI 20 146 96 84 148

IBEX 35 8,7 97 -0.72% 2.6 9% -13.11% IBEX 35 2,270 2,497 2,809 4,925

Euro St oxx 50 2,4 81 -1.37% 7.0 9% -5.56% Euro Stoxx 5 0 8,189 8,617 8,903 14,831

Forex Rates Last 1W YTD 2 011 In terest Rates Last 1W Chg YE11

EUR/USD 1 .32 0.22% 1.9 3% -3.17% Eurib or 6m 1.37% 1. 40% -3bp 1.62%

EUR/GBP 0 .84 0.49% 0.1 2% -2.96% 10Y Bo nd PT 12.48% 13. 43% -94bp 13.36%

EUR/BRL 2 .28 0.86% -5.6 9% 8.86% 10Y Bo nd SP 5.30% 4. 99% 32bp 5.09%

-14.8

-14.5

-6 .6

-6 .3

-6 .2

12.6

14.1

17.2

17.7

30.9

-30 -20 -10 0 10 20 30 40

Sonae Cap i ta l

Cofina

EDP

Portugal Te lecom

EDP Renováveis

Zon Multimedia

BES

Mota-Eng il

BP I

BCP

Best & Worse Performers - YTD (%)

-3 .3

-2.8

-2.6

-2.3

-2.2

7.0

9.6

15.8

19.2

25.4

-15 - 5 5 15 25

Galp E nerg ia

Mota-E ng i l

Bankinter

T elefónica

Br isa

Portucel

S emapa

BES

BPI

BCP

Best & Worse Per formers -1 Week (%)

IBERIA

10 February 20

12

WEEKLY

EQUITY RESEARCH

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Millennium investment banking Weekly 10 February 2012

CHANGES

Rating Target Rating Target

Semapa Buy 8.80 Buy 9.35 Valuation Update

Jerónimo Martins Buy 15.10 Buy 15.85 Valuation Update

MotivePreviousNew

EARNINGS

Jerónimo Martins * 10-01 AM n.a. n.a. n.a.

Bankinter 19-01 BM n.a. n.a. n.a.

Sonae * 25-01 n.a. n.a. n.a.Galp Energia ** 27-01 BM 13-04 BM 13-07 BM 12-10 BM

Portucel 30-01 AM 23-04 AM 19-07 AM 22-10 AM

Banco Popular 01-02 BM n.a. n.a. n.a.

BPI 02-02 AM n.a. n.a. n.a.

Novabase 02-02 AM 09-05 AM 26-07 AM 30-10 AMBCP 03-02 AM 01-05 AM 25-07 AM 31-10 AM

BES 03-02 AM 03-05 AM 30-07 AM 06-11 AM

Semapa 07-02 AM 08-05 AM 30-08 AM 30-10 AM

Galp Energia 10-02 BM 27-04 BM 27-07 BM 26-10 BM 06-03-2012

Media Capital 14-02 AM n.a. n.a. n.a.

Indra 23-02 AM n.a. n.a. n.a.Telefónica 24-02 BM 11-05 BM 26-07 BM 07-11 BM

Cimpor 28-02 08-05 31-07 13-11

Sonae Indústria 29-02 09-05 26-07 08-11

EDP Renováveis 29-02 BM n.a. n.a. n.a.

Sonae Capital 29-02 AM 24-05 AM 21-08 AM 15-11 AMMartifer 01-03 AM n.a. n.a. n.a.

Zon Multimedia 01-03 BM 08-05 BM n.a. n.a.

REN 01-03 AM n.a. n.a. n.a.

Jerónimo Martins 07-03 n.a. n.a. n.a.

Brisa 07-03 AM 04-05 AM 27-07 AM 31-10 AM 23-11-2012

Sonaecom 07-03 AM n.a. n.a. n.a.EDP 08-03 AM n.a. n.a. n.a.

Mota-Engil 14-03 AM n.a. n.a. n.a.

Sonae 14-03 n.a. n.a. n.a.

Impresa 14-03 AM n.a. n.a. n.a.

Portugal Telecom 22-03 BM 10-05 BM 02-08 BM 08-11 BMGlintt n.a. n.a. n.a. n.a.

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

Company 4Q2011 1Q2012 2Q2012 3Q2012 Investor Day

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DIVIDENDS

Gross Payment Ex-Div Last Year

DPS Date Date Pay Date Gross DPS

Portugal Telecom 0.215 6-May-11 4-Jan-12 30-Dec-11 Approved - 0.000

Approved: Dividend already approved by AGM

Company AGM Obs

NEXT WEEK RESULTS

Media Capital No recommendation (Target YE12: €2.70)

4Q11 Earnings Preview João Flores,

Equity Analyst

Sales YoY EBITDA YoY EBIT YoY Net Profit YoY

73.0 -4% 22.0 nm 18.9 nm 11.5 nm

Media Capital will release its 4Q11 Earnings on February 14 (Tuesday), after market close.

Attentions will be focused on advertising market (pace of decline in 4Q11), given MCP`s low free

float.

SECTOR OVERVIEW

Sector Overview

Spotting turning points - Indicators heading north

� US economic data has proven so far to be quite resilient and the equity market has built

upon these encouraging signs (S&P500 +7% YtD; EuroStoxx +9% YtD). Also, since the end

of September, small caps (Russell 2000) have over performed big caps (S&P500) while

Value stocks have over performed Growth stocks. Coincidently the economic activity,

measured by the ISM’s, has also registered a pickup during this last quarter. The US

earnings season has, however, not been very positive thus far.

� About half of S&P’s companies have posted their quarterly results. S&P 500 earnings have

grown 23.5% by 4Q11 slightly below the 24% value indicated by the end of 3Q11, before

companies began to report their quarterly earnings, which translates into a negative surprise

level of 0.5pb. However, 1Q12 quarterly earnings growth has been revised downwards

(58pb), to 2.4% YoY (vs. 10.2% estimated in early October) as well as 2Q12 earnings down

by 44pb to 9.1% YoY.

� Cement sales in Portugal came 19% lower YoY in December and 15.6% lower YoY in the

FY11, the fourth consecutive YoY fall since 2008. Cement consumption in Spain also

continued falling to a 21.9% YoY lower December, reaching a 17.5% YoY fall in the FY11.

For the FY12, we estimate further 8% and 9% YoY falls in Portugal and Spain.

� The Portuguese Pay TV market reached 2,976k subscribers in the end of 4Q11, with 69k

net adds in the quarter. By the end of 4Q11 circa 51.7% of households had Pay TV service.

Growth has accelerated in 4Q11 (+7.2% YoY) despite challenging macroeconomic

environment, reversing the slowdown trend we had been observing since 3Q10. This

reflects the impact of the analogue switch-off happening in January in some regions which

led some households to opt for Pay TV services. FTTH was the technology adding more

new clients (+41k), followed by cable (+15k) and DTH (+13k).

� Retail sales in Portugal kept negative trend in December, reflecting an increasing tough

environment. We highlight decline in food retail is closing to high single digit numbers.

Retail sales (overall) declined an annual 10.3% YoY, after dropped 9.2% YoY in November.

On a monthly basis, sales were up 2.3% YoY, benefiting from Xmas effect (-2.6% in

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November).

� Monthly electricity consumption (adjusted for temperature and working days) in Iberia has

been decreasing in recent months. In January, monthly electricity consumption in Portugal

dropped by 7% YoY (Source: Rede Eléctrica Nacional) and in Spain it decreased by 2.4%

YoY .

(For further details, please refer to our report out this week)

FINANCIALS

Banking Sector

New measures for the Spanish Banking System

Rita Silva;


Equity Analyst

As part of the Spanish financial reform, banks have to increase provisions against real estate exposures

and build a capital buffer against capital ratios. The new measures are designed to clean up institutions’

problematic exposures to construction and real estate developers from their balance sheets as well as to

consider potential migrations from normal to problematic portfolios. The impact of the measures is a one-

off: the objective is to eliminate uncertainty regarding banks’ balance sheets, and particularly the value of

land related assets value. In our opinion, the increased clarity and reinforcement of provisions regarding

RE assets should be viewed as positive news.

Banks are now required to increase specific provision coverage (substandard, NPL and foreclosed) plus

a capital buffer that add up to 80%, 65% and 35% to land, assets under construction and finished

building respectively. Regarding performing loans from real estate developers, a 7% generic provision

will be demanded that can be build up through retained earnings, capital increases or debt conversion.

FROB can provide funds to facilitate the processes: the new law opens the possibility for the FROB to

instrument the funds through Cocos convertible in shares in 5 years. Banks have to comply with new

rules by YE 2012. Exception made for banks that are merging that will have an extra year until YE2013.

New rules:

Current

coverage

Additional

provisionsTotal (P&L)

Capital buffer

(Equity)

Total including

buffer

Troubled assets

Land 31% 29% 60% 20% 80%

Housing under development 27% 23% 50% 15% 65%

Other than the above 25% 10% 35% 0% 35%

Performing loans

Construction and RE developers 7% 0% 7%

Source: Banco de España, Ministerio de Economia Y Competitividad, Mib

Broader collaterals for ECB’s liquidity programs

The ECB decided to adopt additional temporary measures relating refinancing operations and eligibility of

collateral which will widen the scope of credit claims to be accepted as collateral. In Portugal the new

pool of assets that are accepted include: (1) individual credit claims with a probability of default not

exceeding 1.5%; (2) portfolios of credit claims relating to mortgage-backed loans to households;

consumer credit to households; and loans to enterprises other than financial corporations. In Spain,

Banco de España will accept performing corporate and Public Sector Entity credit claims, other than

mortgages and whose estimated credit risk has a probability of default equal to or lower than 1%.

Although the broadening of collaterals comes as no surprise, it is a positive piece of news as banks will

now have the ability to tap for a bigger amount of fresh money at the next ECB’s LTRO on the 29th

February.

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What will banks do under EBA and Bank of Portugal (BoP)

Bank of Portugal (BoP) has approved recapitalization plans that banks have presented as a solution to fill

in for EBA’s capital shortfalls. These plans should not be known until the end of March/beginning of April.

Until June 2012 banks have to comply with a 9% CT1 in which a mark to market of sovereign debt (as of

30 Sep. 11) is mandatory. Alternatives include capital increases, dividend payout reduction/elimination

and issuance of CoCo’s (that are eligible for BoP purposes since Jan 2012). For EBA capital

requirements banks may draw on the Bank Solvency Support Facility (BSSF - total amount under this

program currently stands at €12bn). Although the remuneration for these instruments is not yet known

(as it has not been approved by regulators) the whisper number points to a figure of about 8% - a number

that makes sense considering comments of the Portuguese Finance Minister that costs should not be

inferior to what the State is paying under Troika’s help (between 3.5%-4%) and to what is considered to

be an informal rule of not being above twice this value. All in all, we believe that 8% is the most likely

scenario. This is also consistent with what Spanish banks pay for FROB Securities set at a minimum of

7.75%.

There is also some uncertainty regarding the use of the €12bn government life line as it is not known if it

can be used towards the reinforcement of capital ratios also under BoP rules that demand a 10% CT1

until YE12 (Basel 2 rues meaning that no MtM of sovereign debt is needed). If not, undercapitalized

banks will have to raise capital by other means, such as preference shares (probably much more

expensive – remuneration cannot be inferior to 5yrs treasury bonds+ CDS for subordinated debt +300bp

– as laid down in the decision passed by the European Commission in Mar 2010) or capital increases

that are potentially dilutive for shareholders.

It is also possible that BoP could postpone this deadline for an extra year allowing banks for more time to

cover any capital shortfalls through retained earnings. However, we consider this unlikely as it could

create a wrong message to the market of a more permissive regulator on a matter that has been

recurrently prioritized as essential.

For now, one thing is certain: the use of this facility to comply with EBA’s shortfalls will have to be made

directly by banks and not by financial holdings, which would mean, for example, that ESFG would not

draw on BSSF but BES could.

According to our estimates BES’s CT1 would stand at 8.8% after deducting for pension fund effects,

Troika’s provisions and MtM of sovereign debt, i.e., a €137mn shortfall to achieve 9% EBA’s target by

June 2012. Furthermore, the capital shortfall to achieve the 10% CT1 demanded by BoP would be

€570mn. As such, we believe that if BoP does not postpone its 10% CT1 target by 2012 and if the

issuance of “cheap” CoCo’s is not permitted, BES will probably increase its capital until the end of the

year.

Bankinter Reduce – High Risk (Target YE12: €5.10)

Bankinter’s impact of the new RE provisioning law


Rita Silva,

Equity Analysts

Bankinter’s impact of the new RE provisioning law stands at €146mn, of which €56mn correspond to the

generic provision that is required for developers (performing loans) and the remaining €90mn are specific

provisions related to asset quality. Bankinter stated that the amount of provisions now required will be

totally covered by expected earnings (before provisions) in 2012. Our valuation incorporates generics of

€50mn and specif provisions (and others) of €188mn - values that we consider appropriate in light of the

new legislation. Additionally, Bankinter has a generic cushion of €115mn that can be used to absorb

some of the impacts of the extraordinary provisions now required. Bankinter also notes that the impact of

the law in CT1 ratio is 16bp - a relatively low ratio compared to the CT1 at the end of 2011, which stood

at 9.2%.

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BES Buy - High Risk (Target YE12: €2.25)

4Q11 Earnings Highlights – One-offs hampered earnings

Rita Silva;


Equity Analysts

� BES disclosed its quarterly earnings this week. No major surprises at an operational level

(ex-trading). Domestic NII deteriorated above our expectations as asset repricing was not

able to compensate for higher deposit costs. NIM fell from 1.88% to 1.71% (-17bp since last

quarter). We liked commission’s positive trend as well as cost containment (domestic).

Several one-off charges led to a negative NI (€280mn) related to: (1) transfer of the pension

fund to social security €107mn; (2) BES Vida goodwill impairment €193mn; (3) sale of

international portfolio at discount €78mn; (4) Troika’s extra provisioning €43mn. Both (1)

and (3) had a negative impact on trading income.

� Consolidated NII came in line with our estimates (worst on domestic activity and better at an

international level). On an annual basis, it is noteworthy that NIM improved by 7bp as asset

repricing efforts took place (BES benefits from the fact that 2/3 of its portfolio are

corporate). In our opinion, this effort along with possible ECB carry trade opportunities and

swapping more expensive liabilities by ECB funding should help to support margins in the

future despite the high deposit spreads. Domestic staff costs fell 6% in 2011 (please see

footnote inside) which we consider to be positive.

� NPL ratio increased from 2.6% to 2.74% and cost at risk from 6.2% to 6.6%. However,

excluding Troika’s €43mn, credit provisioning improved (excluding that effect, cost of credit

risk would fall to 82bp (vs. 114bp in 3Q11). However, in our opinion this quarterly

improvement should not be seen with great optimism as 2012 will most likely surprise on the

downside rather than on the upside in what economic growth and unemployment are

concerned.

� LtD ratio improved from 147% to 143%. Deposits +1% (qoq), +11% yoy, while loans to

customers -2% qoq, -4% yoy. CT1 improved to 9.2% driven by (1) debt to equity swaps, (2)

RWA (-2% qoq) – deleveraging at banking book+trading book, (3) DTA due to the

recognition of negative actuarial deviations. ECB funding decreased €600mn to €8.7bn in

spite of having tapped for ECB funds in December’s 3yr LTRO. BES eligible assets eligible

for rediscount stands at €18.9bn. Debt maturing in 2012 stands at €3.6bn totally covered by

assets ECB eligible. BES does not intend to use the State’s recapitalization program – also

not a surprise.

� Following this earnings season, we continue to feel comfortable with our Buy (high risk)

recommendation.

(For further details, please refer to our snapshot out this week)

4Q11 Earnings Comment – One-offs hampered earnings (II)

� Following BES’s 4Q11 CC we highlight the outlook for 2012:

- NII - management believes it will be a year very similar to 2011 (vs. our estimates

of +2% growth);

- Cost of credit risk also similar to 2011, i.e., 117bp (vs. our estimates of 110bp);

plans to continue with cost cutting program;

- Angola: focus will be on reducing LtD ratio rather than growing its loan portfolio;

- 120% LtD ratio by 2014, in line with our expectations.

� CT1 improved to 9.2% by YE11. According to our estimates CT1 would stand at 8.8% after

deducting for pension fund effects, Troika’s provisions and MtM of sovereign debt, i.e., a

€137mn shortfall to achieve 9% EBA’s target by June 2012. Furthermore, by YE12 BoP

demands a 10% CT1. According to our estimates, the capital shortfall in this case would be

€570mn. BES has stated that any capital shortfalls will be filled by “market approach, i.e.,

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deleveraging and capital increase and not by the use of the government lines”. If we assume

that 25% exchange of hybrid instruments, a capital call of €500mn would still be needed.

Additionally, if deleveraging is more aggressive than our expectations (by €1.5bn) the

amount of a capital call would be reduced to €370mn. RWA would have to fall by 8% to

make a capital call unnecessary. As such, we believe that if BoP does not postpone its 10%

CT1 target by 2012, BES will probably increase its capital until the end of the year.

(For further details, please refer to our snapshot out this week)

BES signs a cooperation agreement with China Development Bank

According to the press, BES and China Development Bank signed a cooperation agreement which

defines some common principles, in particular as regards to the establishment of lines of credit,

exchange and training of staff and support of mutual interest projects. Impact: neutral / positive as it fits

BES’s geographical diversification strategy.

TELECOMS

Telecom Sector

France Telecom sells stake in Orange Austria Alexandra Delgado, CFA

Equity Analyst

Hutchison Whampoa agreed to buy Orange Austria for €1.3 bn. Orange Austria is held by private equity

firm Mid Europa Partners (65%) and by France Telecom (35%). Orange Austria is the third-largest mobile

operator in the country with circa 20% market share. Operator “3” held by Hutchison Whampoa has circa

2% of market share. Hutchison Whampoa estimates this deal will generate circa €500 mn in synergies

(cost and capex) and also announced that it will divest assets to Telekom Austria for €390 mn

(frequencies, base station sites and discount operator Yesss!). This deal values Orange Austria at a 6.9x

EV/EBITDA 2011 multiple.

France Telecom announced last year the intention to divest from some European markets and focus on

Africa and the Middle East. The French telco sold in December 2011 Swiss unit Orange Switzerland to

private equity firm Apax Partners for €1.6 bn (6.5x EV/EBITDA 2011).

France Telecom said numerous times it wants to sell the 20% stake in Portuguese operator Sonaecom.

Considering the 6.9x EV/EBITDA 2011 multiple we obtain a value of €2.60 per Sonaecom share. This

compares with our €2.10 price target for Sonaecom (6.0x EV/EBITDA 2011). Given it will be difficult to

find a buyer for the 20% stake in Sonaecom on current context, we believe France Telecom will wait for

the possible merger between Sonaecom and Zon Multimédia and divest from Portugal only afterwards.

Vodafone announces fourth quarter 2011 results

Vodafone group disclosed today third quarter 2011/2012 results, which stands for the fourth

quarter of 2011 (calendar year).

Vodafone added 133k new clients in Spain during the quarter and 38k in Portugal. ARPU

(average revenue per user) trend in Portugal has worsened this quarter (-9.2% YoY in 4Q vs. -

6.7% YoY in 3Q, -7.4% YoY in 2Q and -12.0% in 1Q). ARPU trend in Spain improved slightly vs.

previous quarter (-11.8% YoY in 4Q vs. -12.7% YoY in 3Q, -12.8% YoY in 2Q and -10.1% in 1Q).

Vodafone registered in 4Q an ARPU of €13.9 in Portugal and €21.6 in Spain. Given ARPU’s

evolution in the quarter, service revenue in Portugal (in Euros) dropped 6.0% YoY while in Spain

service revenue fell 8.5% YoY in Spain.

Vodafone abandons Greek merger plans

Vodafone said in a statement this week that it terminated discussions with Wind Hellas relating to a

potential merger. We remind that Vodafone is second-largest mobile player in Greece and that Wind

Hellas is third-largest, and that the two operators were in talks over a merger of their Greek units since

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last September. This business was being followed closely since it would create the first duopoly in a

European mobile market. We remind that the Swiss Watchdog rejected the merger between Orange

Switzerland and Sunrise (second and third mobile player) back in 2010.

Vodafone and Wind Hellas did not justify the end of the discussions, but the two players probably came

to the conclusion they could not get regulation approval. Vodafone and Wind Hellas may now seek other

ways to cooperate and achieve cost cutting like for example through mobile network sharing agreements.

Telefónica Buy – Medium Risk (Target YE12: €21.00)

Spanish watchdog accelerates MTRs decline Alexandra Delgado, CFA

Equity Analyst

CMT, Spanish telecom watchdog, has announced its final decision on mobile termination rates glide

path: rates will decline to €1.09 cents/ minute in January 2014 (preliminary decision set October 2014)

from current €4 cents/ minute, i.e. a 73% drop in two years. CMT also approved the end in one year and

a half of the asymmetry enjoyed by operator Yoigo, meaning Yoigo will receive the same tariff as other

operators in October 2013 (preliminary decision set April 2013). CMT’s final decision maintains target

price (€1.09 cents/ minute), but anticipates by 9 months the moment that rate will be reached and

postpones the end of the asymmetry that favours Yoigo by 6 months.

The MTRs decline impact on Telefónica is not materially relevant because it benefits from being an

integrated player (wireline+ mobile): lower mobile revenue is compensated by lower interconnection

costs in mobile and in wireline.

Mobile termination rates’ cut is expected in every European country; the EU Commission recommends

that a cost model is used as the basis for mobile termination rate calculation. The usage of cost models

has resulted in the following MTRs in other European countries: €1.20 cents in the Netherlands, €1.08

cents in Belgium, €0.80 cents in France, €0.81 cents in the UK and €0.98 cents in Italy.

We remind that Portuguese watchdog Anacom disclosed in the beginning of October its preliminary

decision on mobile termination rates glide path, proposing a drop to €1.25 cents / minute in November

2012, from current €3.5 cents/ minute. This stands for a 64% drop in little over a year. Anacom’s

preliminary decision was open for public consultation until November 22nd, but no final decision emerged

from Anacom.

The €1.25 cents rate in Portugal is in line with values by countries with similar size, but implementation

timeline is shorter. Anacom’s preliminary decision set the rate should decline to €2.75 cents/ minute on

February 1st; as the final decision has been delayed, so should the beginning of the glide path

implementation.

Telefónica issues €1,500 mn bonds

Telefónica announced this week the issuance of €1,500 mn in bonds, maturing in February 2018 (6

years), with a spread of 300bp over Mid-swap and a coupon of 4.797%.

Last bond issue from Telefónica was in October, in the amount of €1,000 mn, with a maturity of 4

years, spread of 296bp over Mid-swap and a coupon of 4.967%.

Telefónica has followed several Spanish banks (Santander, Sabadell, BBVA and Banesto) that

have taken advantage of the market improvement in the last few days to issue debt.

Portugal Telecom Buy – Medium Risk (Target YE12: €6.30)

Portugal Telecom launches new service, Meo Kanal Alexandra Delgado, CFA

Equity Analyst

Portugal Telecom has launched a new service for the subscribers of Pay TV service Meo (on IPTV

platform), Meo Kanal. This new service allows clients to produce and share multimedia content via TV,

thus creating a television-based social network. The channels created by customers can be public or

private; if they’re private they can only be viewed by users that the client chooses.

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This service differentiates PT’s offer from the others in the market, which is positive. It creates a

community among Meo clients which leverages the network effect that already exists in mobile service.

For now the service targets residential customers, but the company admits that it can evolve to a

business model at the service of corporations and brands.

Anacom publishes preliminary decision on fibre broadband access

Anacom, the Portuguese regulator, has published this week a preliminary decision on wholesale access

to fixed network and wholesale broadband access. This goal is to update decision approved on January

2009. The project will be on public consultation in the next 30 weekdays.

In January 2009, Anacom has defined that the fixed broadband access market was divided into

competitive areas and non-competitive areas. Competitive areas were defined as areas where there is at

least one alternative operator installed and at least one cable operator. These competitive areas defined

by the regulator included at the time 47% of telephone and 61% of Broadband accesses and PT had

26% of market share in these areas combined. Back in 2009 it was decided that in competitive areas,

where the regulator considered having sufficient competition, PT would no longer have to obey regulatory

ruling on broadband wholesale offering and pricing. This decision was obviously positive for Portugal

telecom that gained broadband pricing flexibility in a significant part of its network and could increase its

commercial aggressiveness in those areas.

The preliminary decision published this week by Anacom applies a similar methodology to fibre. Instead

of using the geographic segmentation between competitive and non-competitive areas, Anacom chose

17 municipalities where the market is competitive; in the remaining districts PT will have to guarantee

virtual access to fibre (bitstreaming). Fibre unbundling is not requested because the regulator concluded

it would not be technically possible. The remaining obligations pertaining access to conducts and copper

unbundled local loop were maintained.

PT has invested in the last years in its FTTH network (circa 1.6 mn houses passed); houses passed with

fibre are located in the vast majority in the municipalities defined by Anacom, so there should not be a

material number of houses PT will have to open access to competitors.

MEDIA

Media Sector

TV Audience Shares Feb12 (Mtd): Cable kept 1st place João Flores;

Equity Analyst

Cable channels kept 1st place in audience shares as expected, increasing gap to 2nd place

(TVI/Media Capital).

� State-owned RTP1 shows lacklustre audience shares (close to 20%) while showing a small

recovery.

� RTP Informação returned to 2nd place in cable news channels (TVI24 is back to 3rd place in

early February).

All-Day SIC TVI RTP1 2: Others

Mtd Fev12* 22.9% 25.8% 20.2% 3.9% 27.3%Jan-12 23.0% 26.6% 19.8% 3.8% 26.9%Chg (pp) MoM -0.1pp -0.8pp 0.4pp 0.1pp 0.4pp

Feb-11 22.9% 26.9% 22.9% 3.9% 23.4%Chg (pp) YoY 0.0pp -1.1pp -2.7pp 0.0pp 3.9pp

*last data February 09th

Source: Marktest; numbers are simple average of monthly data

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14%

18%

22%

26%

30%

34%

Feb

-01

Feb

-03

Feb

-05

Feb

-07

Feb

-09

Feb

-11

Feb

-13

Feb

-15

Feb

-17

Feb

-19

Feb

-21

Feb

-23

Feb

-25

Feb

-27

Feb

-29

Audience Share - all-day (daily)

Wkds SIC TVI RTP1 Others

Source: Millennium investment banking

Increasing difficulties in Media Sector

According to the news, Portuguese Media Groups are postponing/cancelling reality shows next

season, following strong declines in advertising market: i) TVI/Media Capital reality show “Secret

Story” return was postponed from March to September, and now company does not know if it will

return; ii) SIC/Impresa apparently cancelled “The Biggest Loser” 3rd season; iii) state-owned

RTP1 cancelled “MasterChef” 2nd season.

CONGLOMERATE

Sonae Buy – Medium Risk (Target YE12: €0.92)

Sonae targets long term in Spain João Flores;

Equity Analyst

According Sonae`s SR CEO, Mr. Miguel Mota Freitas in an interview to the Spanish press (Cinco

Dias), company targets long term in the Spanish market, thus current tough environment will not

make Sonae SR leaving the country.

Highlights:

i) Openings in 2011: 8 SportZone; 17 Zippy.

ii) Total 124 stores by YE11.

iii) Reached Top3 in Spanish consumer electronics

iv) SR Spanish sales above €300mn in 2011, thus reached 25% (from 20% in

2010) of total SR sales (€1.235mn). Recall SR International (including

sales to franchisees) reached €321mn in 2011.

v) Growing options: Organic; M&A or franchising

vi) Difficult to estimate store openings in 2012

No surprises from SR CEO statements, since company disclosed 2011 Preliminary retail sales

on January 25th. We appreciate Sonae kept focused on Spanish market while increasing scale.

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Number of Stores

2008 2009 2010 2011Net

Openings2011E Dev. 2012E

Food Retail 290 378 415 432 17 439 -7 460

Continente 37 39 40 40 0 40 0 41Modelo 117 125 130 131 1 133 -2 138Health Area 88 115 133 138 5 143 -5 150Bombocado 43 80 87 96 9 97 -1 103Book.it 4 14 17 18 1 20 -2 22Outlet 1 5 8 9 1 6 3 6Specialized Retail 389 454 498 541 43 550 -9 588

Worten Portugal 125 132 132 134 2 135 -1 138Worten Spain 10 14 25 40 15 37 3 42Vobis 20 17 9 6 -3 6 0 6Worten Mobile 41 48 47 47 0 48 -1 50Sportzone Portugal 66 75 74 74 0 77 -3 81Sportzone Spain 6 14 28 36 8 36 0 43Modalfa 87 99 105 107 2 109 -2 113Zippy Portugal 29 34 36 40 4 40 0 44Zippy Spain 0 10 31 45 14 49 -4 56Loop 5 11 11 10 -1 12 -2 14Food + Specialized Retail 679 832 913 973 60 989 -16 1048

Source: Company data and Millennium investment banking

Sales Area (`000 m2)

2008 2009 2010 2011Net sales

area2011E Dev. 2012E

Food Retail 491 528 544 547 3 552 -5 562

Continente 273 284 288 288 0 288 0 288Modelo 206 218 228 230 2 234 -4 242Health Area 7 11 12 12 0 13 -1 14Bombocado 3 4 5 5 0 5 0 5Book.it 1 5 5 6 1 6 0 7Outlet 2 5 6 6 0 5 1 5Specialized Retail 248 304 362 415 53 422 -7 461

Worten 124 147 181 214 33 215 -1 230Vobis 9 8 5 4 -1 3 1 3Worten Mobile 1 1 1 2 1 1 1 2Sportzone 60 78 94 108 14 112 -4 128Modalfa 41 51 55 58 3 57 1 59Zippy 11 16 24 29 5 33 -4 37Loop 1 2 2 1 -1 2 -1 3Food + Specialized Retail 739 832 907 962 55 974 -12 1,023

Source: Company data and Millennium investment banking

Semapa Buy – High Risk (Target YE12: €8.80)

Valuation Update - Latest figures on Portucel, cement consumption and

country risks

João Mateus;

Equity Analyst

� We updated our valuation from €9.35 to €8.80 per share, for the YE12, with a recommendation of

Buy, High Risk. We included our updated estimates of Portucel, our latest estimates for cement

consumption in Portugal and updated country risk and risk free rates on latest sovereign rate

developments. The group will release the 4Q11 earnings later today, after the market close.

� EBITDAP of Semapa in the 4Q11 may have come 10.4% lower YoY and 4.1% higher QoQ, on the

shown YoY fall and QoQ increase in Portucel. Secil’s EBITDAP should have followed the direction

and relative size of the YoY fall in Portucel, but on a QoQ basis, seasonality added to the negative

trend in cement consumption in Portugal and must have partially offset the positive impact of

Portucel. The over 3pp YoY fall in margin may have been mostly influenced by the increase in

Portucel’s operating costs, but also by the efficiency loss of lower operating rates in cement

production. On a QoQ basis, EBITDAP margin may remain relatively in line. All in all, we believe

that consolidated EBITDAP margin has room to increase about 3pp in the coming years, as long as

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special tariffs for cogeneration are maintained.

� Latest figures on cement consumption in Portugal show a 15.6% YoY fall in domestic sales of

Cimpor and Secil (GPEARI) in the FY11. We expect a further fall of 8% for 2012. With this, our

estimated reductions for the top-line of Secil are of 4% YoY and 13% QoQ in the 4Q11, not enough

to offset increases in Portucel resulting in an almost 2% YoY increase and an over 5.5% QoQ

increase at the consolidated level. Our estimates update had a positive impact of €0.15 per share in

our valuation, especially driven by Portucel.

� We increased the country risk of Portugal, following the increase in expected sovereign debt, from

10% to 11% and reduced the risk free from 3% to 2.5%, implying a reduction of 0.5pp in expected

long term inflation. These changes had a negative impact of €0.70 per share in our valuation, also

specially driven by the change in Portucel.

� Semapa should continue to keep an acceptable leverage level at expected 2.6x and 2.15x net-debt-

to-EBITDA ratios, respectively for the YE11 and YE12.

(For further details, please refer to our Company Update out this week)

Earnings Highlights - All hopes on emerging markets in cement

� Semapa released this week the 4Q11 earnings. We maintain our valuation of Semapa at €8.80 per

share for the YE12, with a buy, high-risk recommendation.

� EBITDAP came slightly over our estimate (+1.7%) for the 4Q11, 8.9% lower YoY and 5.9% higher

QoQ. The YoY reduction came on lower margins in both Portucel and Secil (-4.4pp and –1.6pp).

The YoY fall in the cement business (-16%) came mainly on lower sales in Portugal and Tunisia,

higher energy costs, lower exports to Líbia and higher low margin exports from Portugal. The QoQ

improvement followed growth in Portucel, hampered but not offset by the strong reduction in Secil’s

EBITDAP (-17%). To the YoY margin reduction contributed lower operating rates, higher energy

costs, higher low margin exports (from Portugal) and lower high margin exports (to Líbia).

� The top line came broadly in line with our estimate (-0.6%) for the 4Q11. Revenues came 1.1%

higher YoY, in the 4Q11, mainly following growth in Portucel (+2.7%) but hampered by the 9.8% fall

in Secil. In the FY11, cement sales in Portugal decreased 5.4% YoY, in Tunisia decreased 14%, in

Lebanon increased 5.2% and in Angola grew 9.6%, despite the plunge in prices. Despite lower

activity in the market, the top-line of ETSA grew 13.2% YoY, but fell 13% QoQ, in the 4Q11.

� The next quarters of Secil will depend on the development of energy costs and cement markets

mainly in Portugal and Tunisia. While the negative demand trend in Portugal continues into 2012,

the situation in Tunisia may bring some positive surprises. Domestic demand strength in Angola

may continue to offset competition from Chinese imports. We still do not consider any cement

capacity increase in this country, since stated investments remain delayed.

� Net financial costs decreased 22% YoY and 60% QoQ, in the 4Q11, on Net Debt reduction,

improved returns on cash invested, and other effects, despite the increase in interest rates. All in

all, stated consolidated Net Debt decreased 15% YoY and Net Debt to EBITDA will be at

comfortable 2.5x at the YE11 and 2x at the YE12.


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RETAIL

Retail Sector

Retail Sales in Poland João Flores,

Equity Analyst

Expected positive numbers

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

Jan-07

May-07

Sep

-07

Jan-08

May-08

Sep

-08

Jan-09

May-09

Sep

-09

Jan-10

May-10

Sep

-10

Jan-11

May-11

Sep

-11

Retail Sales YoY Retail Food YoY

Source: Source: Bloomberg, Millennium investment banking

Survey January* Dec-11 Nov-11 Jan-11 Chg MoM Chg YoY

MoM -24.9% 20.8% -5.5% -28.6% 26.3pp 49.4pp

YoY 12.7% 8.6% 12.6% 5.8% -4.0pp 2.8pp

Food

MoM na 30.6% -6.9% -31.1% 37.5pp 61.7pp

YoY na 1.7% 4.1% 0.0% -2.4pp 1.7pp

*Bloomberg

Source: Source: Bloomberg, Millennium investment banking

According to Bloomberg`s early estimates, Polish Retail Sales are expected to rise 12.7% YoY in

January 2012, following 8.6% YoY increase in December 2011.

Recall retail sales increased 5.8% YoY In January 2011, penalized by decline in Motor vehicles

& Parts (-4.1% YoY) and lackluster number in Food retail (0% YoY).

Polish retail sales will be disclosed on February 23th (09 am).

Jerónimo Martins Buy – Medium Risk (Target YE12: €15.10)

Valuation Update - Room to pay a special dividend João Flores,

Equity Analyst

� We updated our JM`s valuation. Our price target YE12 was revised downwards to €15.10 from

€15.85, while recommendation kept unchanged Buy (Medium Risk), meaning a 17% upside vs

current price. Changes in Polish estimates had a €0.90 negative effect while changes in Portuguese

estimates had a €0.20 positive effect, reflecting fine-tune in Capex (upwards revised in Poland /

downwards revised in Portugal). We fine-tuned overall sales numbers (revised downwards both

Poland and Portugal) and EBITDA margins (Poland kept unchanged / revised downwards

Portugal). Changes in Euro/Zloty Fx rate (from 4.48 to 4.46) had a minor €0.05 positive effect.

Changes in WACC (Por) had a €0.10 negative effect.

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� We highlight JM kept trading at premium compared to Europeans mature peers, but we believe it’s

justifiable given Biedronka`s growth potential, strong cash flow generation and solid strategy

(consistent business plan: growing in Poland, resilience in Portugal, starting in Colombia). Company

keep showing strong fundamentals (could improve shareholders return), however it increased its

risk profile: i) unknown effects from changes in management (replacing Chairman and declining role

from Mr. Palha da Sillva), given its responsibility in JM`s recovery from difficult times in early century

and strong charisma in stock market; ii) returning to South America, Colombia (following exit from

Brazil some years ago) is an opportunity to grow in a non-mature market with riskier profile

� JM shows a strong balance (net Debt/EBITDA multiple 0.3x, including Colombia conservative

investment program) which allows company to pay a special dividend in 2013 (scenario: payout

150%, DPS €0.88) even considering investment needed to reach Top 3 in Colombia`s retail market

(€400mn + €400mn). The reason not to do it would be cash need for a possible M&A in Colombia

(which seems likely in order to reach Top 3 in Colombia`s food retail market) or a sharp worsening

of Portuguese and/or Polish environment.

� JM will disclose its 4Q11 Earnings on March 7th (BM). Sales numbers were already disclosed, thus

attentions will be focused on EBITDA (estimated 7.8%).


OIL & GAS

Galp Energia Buy – High Risk (Target YE12: €18.15)

4Q11 Earnings Highlights - Earnings hampered by R&M Vanda Mesquita,

Equity Analyst

� Galp disclosed its 4Q11 earnings today, before the market opening. A conference call will be

held today at 14:00, Lisbon and UK Time. All in all, the results surprised on the upside due

to the better-than expected performance from G&P business, however the weak

performance from R&M (worse-than expected) offset part of that positive effect. Contrary to

the usual, Galp did not announce the revision of its reserves and contingent resources,

which should be announced in its Capital Markets Day on March 6th 2012 in London. � Adjusted EBITDA for 4Q11 rose by 20% YoY (4% below our estimates) benefiting from a

better performance in the E&P and G&P businesses, but impacted by a more difficult

environment in the R&M business.

� Regarding E&P, rising oil prices helped boost Adjusted EBITDA E&P by 17% YoY. Figures

came 16% below our estimates, as we were more upbeat on net entitlement production for

this quarter. This quarter, production from Brazil accounted for 50% of the net entitlement

production, meaning that rising production from Brazil is offsetting the production drop from

Angola.

� Adjusted EBITDA R&M dropped by 23%YoY mainly due to a lower refining margin per barrel

(close to zero in 4Q11 vis-à-vis to $2.3/bbl in 4Q10) and also lower volumes sold to direct

clients. Figures came 26% below our estimates, as we were more upbeat on crude

processed for the quarter, more optimistic regarding refining margin and refinery cash costs.

� G&P Adjusted EBITDA for 4Q11 rose by 74% YoY to €87mn (vs our estimates of €71mn)

mostly driven by better margins and higher volumes (+6% YoY).

� Adjusted Net income for 4Q11 jumped from €40mn to €79mn. Net income came substantially

higher than our estimates mainly due to lower figures of D&A (D&A from E&P business

dropped, as the rate for amortization assets in Angola was revised downwards) and taxes

paid.

� Capex in the YE11 amounted to € 1.000mn (vs our estimates of €1.284mn), 42% of which

was spent in the conversion of refineries (Matosinhos and Sines).

� Net debt by YE11 stood at €3.504 mn (vs our estimates of €3.800mn).

� Following this set of results, we feel comfortable with our estimates.

(For further details, please refer to our snapshot out today)

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SEC OR PERFORMANCE

* includes Jeronimo Martins and Sonae

-6.1

-4.3

-2.3

2.3

3.4

11.8

20.1

2.3

-15 -5 5 15 25

Electric Utilities

Motorways

Telecoms

Retail *

Industrials & Other

Oil & Gas

Financials

PSI20

Sector Performance - YTD (%)

-3.3

-1.6

0.4

1.4

3.3

3.9

19.7

2.4

-10 -5 0 5 10 15 20 25

Oil & Gas

Motorways

Retail *

Electric Utilities

Industrials & Other

Telecoms

Financials

PSI20

Sector Performance -1 Week (%)

� This week, the PSI20 went up 2.4%. The best performing sector was Financials with a

19.7% growth and the worst was Oil & Gas with a 3.3% fall.

� On a Ytd basis, the PSI20 went up 2.3%. The best performing sector was Financials with a

20.1% growth and the worst was Electric Utilities with a 6.1% fall.

AGGRESSIVE PORTFOLIO

� This week, Mib Aggressive Portfolio went up 5.08%, outperforming the PSI20 by 2.72pp. All

stocks contributed for this outperformance.

� We highlight that the portfolio is composed by the five stocks with the highest upside

potential of our coverage universe. It is equal weighted and rebalanced on a weekly basis.

LIQUIDITY PORTFOLIO

� This week, Mib Liquidity Portfolio went up 6.01%, outperforming the PSI20 by 3.64pp.

Excluding Telefónica, all stocks contributed for this outperformance.

� We highlight that the portfolio is composed by the five stocks with the highest upside

potential of our coverage universe, excluding the less liquid stocks. It is equal weighted and

rebalanced on a weekly basis

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8 3 4 13 8

Portfolio weekly return

Performance

Contribution Deviation

Sonae Medium 0.46 0.92 102% 3.1% 0.63pp 0.14pp

BES High 1.54 2.25 46% 15.8% 3.16pp 2.69pp

Semapa High 5.88 8.80 50% 9.6% 1.92pp 1.32pp

Portugal Telecom Medium 4.17 6.30 51% 3.8% 0.77pp 0.14pp

Telefónica Medium 13.16 21.00 60% -2.3% -0.47pp -0.94pp

Portfolio 6.01%

PSI 20 2.36%

Gain/loss 3.64pp

Explained by the portfolio 2.56pp

Explained by being underweight in the remaining PSI20 stocks 1.09pp

Next week Portfolio Changes in Portfolio

CompanyRisk

Rating

Market

Pr ice (€)

Price

Target (€)

Upside

PotentialIn Out

Sonae Medium 0.46 0.92 102% - -

Telefónica Medium 13.16 21.00 60%

Portugal Telecom Medium 4.17 6.30 51%

Semapa High 5.88 8.80 50%

BES High 1.54 2.25 46%

Return vs. PSI 20

2011 YTD 1 Month 1 Week

Portfolio - 4.2% - 6.0%

PSI20 -27.6% 2.3% - 2.4%

Gain/loss - - 1.9pp - 3.6pp

Source: Bloomberg; Millennium investment banking

"Mib Liqu idity Portfolio" is composed by the five stocks with a higher upside potential, excluding less liquid stocks.

"Mib Liqu idity Portfolio" is equal-weigh ted and its composition changes at the end o f the last t rading day of each week.

Upside

Potential

Weekly

ReturnCompany

Risk

Rating

Market

Pr ice (€)

Price

Target (€)

96.0

98.0

100.0

102.0

104.0

106.0

30-Dec-11 09-Jan-12 19-Jan-12 29-Jan-12 08-Feb-12

Ytd Return (since inception)

Por tfolio PSI20

Mib LIQUIDITY PORTFOLIO

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Risk Trnvr (€mn) M Cap EPS P / E EV / Sales P/BV

Rati ng 3m 6m (€ mn) Week 1M 3M 1 2M YTD 20 10 2 011E 2012E 2010 2011E 2012E 2010 2011E 2012E 2010 2 011E 2012E 201 0 2011E 201 1E

PSI 20 5,6 20 - - 50,30 0 2.36 2.0 -0 .5 -2 9.4 2.3

Financials 49.0 46.7 12,20 5 5.8 13.5 23 .1 -3 7.6 8.8 - - - - - - - - - - - - - - -

Banco Popular (3) 3 .57 - - - - 17.6 19.8 5,05 1 1.7 5.6 18 .8 -1 7.1 1.4 0. 41 0 .35 0.31 9.5 - - - - - - - - 3.9% - -

Bankinter 5 .19 5 .10 -1.7% Reduce H igh 6.1 6.4 2,47 5 -2.6 9.2 29 .3 1 1.9 9.3 0. 32 0 .38 0.30 13.1 12.7 17 .0 - - - - - - 3.0% 3.2% 0.8

BCP (1) 0 .18 - - - - 15.2 12.4 1,28 3 25.4 35.9 78 .0 -6 8.5 30.9 - - - - - - - - - - - - - - -

BES 1 .54 2 .25 46.1% Bu y H igh 8.6 6.8 2,25 0 15.8 29.4 23 .2 -4 9.0 14.1 0. 41 -0 .06 0.14 7.0 loss 10 .7 - - - - - - 4.4% 0.0% 0.4

BPI (3) 0 .57 - - - - 0.6 0.8 56 0 19.2 15.5 43 .3 -5 6.5 17.7 0. 19 0 .13 0.15 6.7 - - - - - - - - 0.0% - -

Telecoms 598.4 760.3 65,06 1 -1.9 -1.7 -5 .8 -3 0.0 -1.8 - - - 5.4 14.2 9 .0 2.6 2.2 2.2 7.2 7 .1 6.2 8.7% 9.9% 2.4

Telefó nica 13 .16 21 .00 59.6% Bu y Med ium 585.5 747.2 60,03 9 -2.3 -1.7 -5 .6 -2 8.5 -1.7 2. 25 0 .90 1.50 7.5 14.9 8 .8 2.6 2.2 2.2 7.3 7 .3 6.3 8.3% 9.7% 2.8

Portu gal Telecom 4 .17 6 .30 51.1% Bu y Med ium 11.8 11.8 3,73 8 3.8 -3.7 -14 .9 -4 8.8 -6.3 6. 60 0 .51 0.44 1.2 8.7 9 .4 2.7 2.0 1.8 6.9 5 .5 5.3 16.5% 14.6% 1.0

Zon Multim edia 2 .62 3 .70 41.5% Bu y Med ium 0.9 1.0 80 8 4.1 6.3 34 .3 -3 0.3 12.6 0. 12 0 .10 0.10 28.9 23.1 27 .0 2.2 1.9 1.9 6.3 5 .2 5.1 4.7% 6.9% 3.6

Sonaecom 1 .30 2 .10 62.0% Bu y H igh 0.2 0.3 47 5 4.9 2.0 2 .9 -5.1 6.7 0. 11 0 .17 0.13 12.0 7.3 10 .0 0.9 1.0 1.0 4.3 4 .4 4.2 3.7% 4.8% 0.5

Media 0.0 0.1 26 3 0.4 -14.6 16 .0 -5 0.1 -11.2 - - - 21.4 5.4 5 .3 1.7 1.0 0.9 11.0 5 .6 5.3 1.1% 7.2% 0.8

Impresa 0 .48 0 .38 -21.0% Sell H igh 0.0 0.0 8 1 0.0 -15.8 14 .3 -5 2.5 2.1 - - - - - - - - - - - - - - -

Media Cap ital (2) 1 .37 2 .70 97.1% - - 0.0 0.0 11 6 0.0 -17.0 2 .2 -6 0.9 -17.0 0. 15 0 .24 0.25 27.3 5.6 0 .0 1.8 0.8 0.7 11.1 3 .8 3.6 1.9% 14.3% 0.8

Cofina 0 .65 0 .48 -26.5% Sell H igh 0.0 0.0 6 7 1.6 -8.5 54 .8 8.3 -14.5 0. 05 0 .09 0.07 14.1 7.0 9 .6 1.6 1.2 1.2 9.6 7 .5 9.0 1.4% 3.6% 4.2

Technology

Indra 10 .55 13 .90 31.8% Bu y H igh 10.6 10.9 1,73 2 -0.9 4.4 -9 .1 -2 5.5 7.2 1. 15 1 .13 1.10 11.1 nm 9 .6 0.9 0.9 0.8 7.4 7 .3 6.8 5.3% 5.7% 1.6

Novabase 2 .17 4 .10 88.9% Bu y H igh 0.0 0.0 6 8 4.8 6.9 10 .7 -2 5.9 3.8 0. 42 0 .05 0.20 7.0 nm 10 .6 0.3 0.2 0.2 3.6 3 .7 3.2 4.5% 3.8% 0.7

Utilities 16.4 18.5 13,16 7 1.5 -4.1 -0 .7 -1 5.9 -5.9 - - - 11.8 9.8 9 .8- 2.5 2.4 2.3 8.5 8 .1 7.6 - 5.0% 5.7% 0.9

EDP 2 .23 3 .05 36.5% Bu y Low 13.6 15.7 8,16 9 1.1 -4.7 -2 .9 -2 1.2 -6.6 0. 28 0 .30 0.29 8.87 8.0 7 .8 2.0 2.0 1.8 8.0 7 .7 7.3 6.9% 7.7% 1.0

EDP Re nováveis 4 .44 6 .00 35.3% Bu y Low 2.4 2.5 3,87 0 2.9 -4.5 2 .2 -1.4 -6.2 0. 09 0 .14 0.18 47.2 33.1 24 .4 8.2 7.5 6.6 11.0 10 .4 9.0 0.0% 0.0% 0.7

REN 2 .11 2 .40 13.5% Bu y Low 0.3 0.3 1,12 9 -0.7 2.4 5 .7 -1 7.3 0.2 0. 21 0 .23 0.27 12.5 9.3 8 .0 3.7 3.8 4.4 8.3 7 .7 7.6 6.5% 6.4% 1.1

Motorways

Brisa 2 .42 3 .35 38.2% Bu y Low 2.5 2.9 1,45 2 -2.2 -5.2 8 .0 -5 3.6 -4.9 1. 30 0 .24 0.20 4.0 10.6 12 .3 8.1 5.8 5.9 11.5 8 .4 8.4 5.4% 10.2% 0.7

Conglomerates 1.2 1.4 1,67 1 5.8 5.1 -1 .2 - - - - - - - - - - - - - - - - -

Sonae 0 .46 0 .92 101.5% Bu y Med ium 0.8 0.9 91 8 3.1 0.4 -6 .5 -4 4.4 0.0 0. 08 0 .05 0.05 9.3 8.7 8 .8 0.9 0.7 0.7 11.1 9 .2 6.2 4.2% 7.2% 0.6

Semapa 5 .88 8 .80 49.8% Bu y H igh 0.3 0.4 69 5 9.6 12.1 6 .7 -3 6.1 9.4 1. 07 1 .02 1.00 7.7 5.2 5 .9 1.6 1.1 1.0 5.8 4 .7 4.2 3.0% 4.6% 0.7

Sonae Capita l 0 .23 0 .28 21.7% Bu y H igh 0.1 0.0 5 8 4.5 4.5 0 .0 -4 5.2 -14.8 -0. 02 0 .03 -0.07 loss 8.0 loss 2.1 2.2 2.3 60.0 601 .3 loss 0.0% 0.0% 0.2

Retail

Jerónimo Ma rtins 13 .13 15 .10 15.0% Bu y Med ium 7.2 9.8 8,25 9 0.1 1.9 1 .9 1 3.4 2.6 0. 47 0 .56 0.62 4.8 23.0 21 .1 0.9 0.9 0.8 12.6 12 .7 11.2 0.0% 2.2% 7.8

Industrials 1.7 2.2 5,31 5 1.4 2.6 1 .6 -9.2 -0.1 - - - - - - - - - - - - 4.4% - -

Sonae Ind ustr ia 0 .68 1 .95 188.5% Bu y H igh 0.1 0.1 9 5 2.9 0.9 12 .5 -6 3.4 6.5 -0. 53 -0 .50 -0.29 loss loss loss 0.8 0.6 0.7 14.6 12 .7 8.9 0.0% 0.0% 0.4

Altri 1 .17 1 .20 2.5% Neutra l H igh 0.1 0.2 24 0 1.0 -0.4 -4 .4 -30 -2.4 0. 65 0 .12 0.04 2.6 10.3 30 .6 2.2 2.1 2.3 6.8 8 .4 9.8 0.0% 1.7% 1.7

Portu cel 2 .02 2 .45 21.2% Bu y Med ium 0.4 0.5 1,55 2 7.0 8.6 11 .7 -2 0.6 10.0 0. 27 0 .24 0.25 8.3 7.6 8 .2 1.8 1.4 1.3 6.3 5 .6 5.1 6.9% 7.8% 1.0

Cimpor 5 .08 6 .10 20.1% Bu y Med ium 1.1 1.4 3,41 2 -1.4 -0.1 -2 .7 3.5 -4.5 0. 36 0 .33 0.33 13.9 16.2 15 .2 2.3 2.2 2.2 8.2 8 .5 8.0 4.1% 3.8% 1.5

Cons truction 0.2 0.2 35 8 -2.0 10.3 12 .0 -3 6.5 12.0 - - - - - - - - - - - - - - -

Mota-Engil 1 .21 1 .45 19.6% Bu y H igh 0.2 0.2 24 8 -2.8 16.6 17 .2 -4 0.7 17.2 0. 18 0 .16 0.15 9.7 6.5 8 .3 0.8 0.8 0.8 8.2 6 .7 6.5 6.0% 7.7% 0.5

Martifer (3) 1 .10 - - - - 0.0 0.0 11 0 0.0 -1.8 1 .9 -2 4.1 1.9 -0. 55 - - loss - - 1.0 - - 10.0 - - 0.0% - -

Oil & Gas

Galp Energia 12 .72 18 .15 42.7% Bu y H igh 16.7 17.6 10,54 8 -3.3 2.0 -14 .3 -1 3.9 11.8 0. 37 0 .27 0.36 38.9 42.3 35 .3 1.1 1.0 0.8 17.4 18 .2 13.3 1.4% 1.8% 3.9

(1 ) We do not h ave a recommendat ion on BCP, as Mib is a registered trademark of BCP; (2) Un rated due to low free-flo at; (3) Under Revision

2012/02 /10Lates t

Pr (€ )

Targe t

YE12RatingUpsd

Change (%) EV / EB ITDA Di v Yield

of 20

Millennium investment banking Weekly 10 Feb ruary 2012

DISCLOSURES � This report has been prepared on behalf of Millennium investment banking (Mib), a registered trademark of Banco

Comercial Português, S.A. (Millennium bcp).

� Millennium bcp is regulated by Comissão de Mercado de Valores Mobiliários.

� Recommendations:

Buy means more than 10% absolute return;

Neutral means between 0% and +10% absolute return;

Reduce means between -10% and 0% absolute return;

Sell means less than -10% absolute return.

� Unless otherwise specified, the time frame for price targets included in this report is current year-end or next year-end.

� Risk is defined by the analyst’s view in a qualitative way (High, Medium, Low).

� Usually we update our models and price targets in between 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 2009.

� Recommendations on Millennium bcp covered companies (%)

Recommendation 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 71% 68% 93% 76% 79% 79% 77% 78% 63% 54% 41% 37% 30% 63%

Neutral 4% 11% 0% 14% 14% 7% 7% 4% 15% 4% 27% 11% 40% 6%

Reduce 4% 0% 0% 0% 0% 0% 0% 7% 7% 0% 0% 21% 5% 6%

Sell 7% 7% 0% 0% 4% 4% 3% 0% 4% 0% 14% 16% 5% 0%

Unrated/Under Revision 14% 14% 7% 10% 4% 11% 13% 11% 11% 42% 18% 16% 20% 25%

Performance -3% -7% -20% -6% 2% 7% -11% -6% 33% -51% 16% 30% 13% na

PSI 20 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.

OFFICE LOCATIONS Millennium investment banking

Av. José Malhoa, Lote 27 - 5

1099-010 Lisboa

Portugal

Telephone +351 21 003 7811

Fax +351 21 003 7819 / 39

Equity Team

Luis Feria (Head of Equities)

Equity Research +351 21 115 6220

António Seladas, CFA (Head)

Fundamental Analysis

Alexandra Delgado, CFA (Telecoms and IT)

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 +351 21 003 7855

Vitor Almeida (Head)

Hugo Ferreira Pinto

Paula Val

Institutional Equity Sales +351 21 115 6279

Karsten Sommer (Head)

Manuel Lança Lopes

Equity Trading +351 21 003 7850

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 +351 21 003 7890 Jorge Pina (Head)

Ana Lagarelhos

Diogo Justino

Marco Barata

Maria Cardoso Baptista, CFA

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