top story weekly - millenniumbcp · page 5 of 12 millennium investment banking weekly september 12,...

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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

Equity Analyst

+351 21 003 7826

[email protected]

Top Story

Altri rose 8.5% this week. Ence announced the closure of Pulp production at Huelva mill, Spain, which is clearly positive for Altri and Portucel not just because it will be less capacity available but more important because it should reduce the pricing pressure over eucalyptus wood in the Iberian Peninsula. Also positive for Altri and Portucel was the pulp price stabilization over the summer (usually a weak period) and some rebound more recently (page 5).

ES Saúde advanced 6.2% this week, reflecting counteroffer launched by José de Mello Saúde at €4.40 per share for the acquisition of ES Saúde (2.3% above Ángeles tender offer at €4.30 per share). We believe it will not be a surprise if a new bid from Ángeles happens, since the €4.30 was a fair price, however a control premium was not being paid (page 5).

Out This Week

Other Snapshots / Company Reports – Telefónica, Portugal Telecom

Price Target / Recommendation Changes – ES Saúde

Other News – Model Portfolio, Industrials

Week Ahead

Wednesday – Inditex’ s 2Q14 Earnings

Portfolios This week, Mib Aggressive Portfolio went down 1.91%, outperforming the PSI20 by 0.70pp. Excluding Jerónimo Martins, all stocks contributed for this outperformance (page 8). This week, Mib Liquidity Portfolio went down 2.18%, outperforming the PSI20 by 0.43pp. Excluding Sonae and Jerónimo Martins, all stocks contributed for this outperformance (page 9).

Stock Market Last 1W YTD 2013 Daily Vol. (€mn) 1W 1M 6M 2013

PSI 20 5,896 -2.6% -10.10% 15.98% PSI 20 120 100 131 108

IBEX 35 10,889 -2.3% 9.80% 21.42% IBEX 35 2,872 2,014 3,005 2,570Euro Stoxx 50 3,235 -1.2% 4.06% 17.95% Euro Stoxx 50 6,875 6,536 8,294 7,456

Forex Rates Last 1W YTD 2013 Interest Rates Last 1W Chg YE13

EUR/USD 1.29 -0.1% -6.24% 4.46% Euribor 6m 0.19% 0.20% -2bp 0.38%EUR/GBP 0.80 0.3% -4.45% 2.49% 10Y Bond PT 3.23% 3.06% 18bp 5.66%EUR/BRL 3.02 4.2% -7.18% 20.33% 10Y Bond SP 2.35% 2.04% 31bp 3.90%

-45.4

-37.5

-32.3

-15.7

-5.8

27.1

30.8

33.1

43.7

43.9

-80 -55 -30 -5 20 45 70

Portugal Telecom

Sonaecom

Jerónimo Martins

NOS

Indra

EDP

Semapa

CTT

EDP Renováveis

ES Saúde

Best & Worse Performers - YTD (%)

-7.5

-5.8

-3.8

-3.4

-2.6

0.5

0.7

1.0

6.2

8.5

-15 -10 -5 0 5 10 15

EDP

Jerónimo Martins

Telefónica

Iberdrola

Indra

EDP Renováveis

CTT

Semapa

ES Saúde

Altri

Best & Worse Performers -1 Week (%)

IBERIA

Sept

embe

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2

014

WE

EK

LY

EQUITY RESEARCH

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Millennium investment banking Weekly September 12 , 2014

Changes

Rating Target Rating Target

Iberdrola Buy 6.30 Neutral 6.30 Price PerformanceEDP Reduce 3.10 Sell 3.10 Price PerformanceES Saúde Reduce 4.50 Neutral 4.45 Valuation Update

MotivePreviousNew

Earnings

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Dividends

Next Week Results

Inditex Buy – Medium Risk (Target YE15: €26.75)

2Q14 Earnings Preview João Flores,

Equity Analyst

Sales YoY EBITDA YoY EBIT YoY Net Profit YoY

4305 6.0% 862 -2.0% 631.0 -4.0% 488.0 -5.0%

(Period between 1st May to 31th July 2014). Inditex will disclose 2Q14 Earnings on September 17th before market opens. We expect sales will rose by 6.0% YoY to €4.305Mn: i) c7% space contribution; ii) LFL sales is expected to reach c4%; iii) c4% negative currency effect, reflecting strong Yen devaluation; iv) c. 1% negative effect from consolidation of Tempe according to the Equity method. We highlight company disclosed on 1Q14CC that store sales in local currencies rose 11% YoY from Feb 1st to June 8th. Gross margin is expected to decline 60pb YoY to 57.1% (partially reflecting negative Fx effects) while EBITDA margin is estimated to decline 150bp to 20.0%. We estimate EBIT will decline 4% YoY to €631mn. Tax rate is expected to reach 23%.

Equity Markets

Equity Markets

Model Portfolio September 2014 - No major threats from the US

market...

António Seladas, CFA;

Equity Analyst

Summing up the US economy rebounded strongly from a very weak 1Q14 and qualitative macroeconomic indicators are showing that current momentum should be kept over the next few quarters. So the FED should finish by October its current programme of assets purchase and the first interest rate move should occur by the 1H15. Meanwhile, this year in the US the profile of the earnings growth rate has surprised, as usually as the year goes on the estimate growth rate decreases, which was not the case until now, as, since March, the growth rate has been stable between 9% and 9.5%. So and taking in consideration that the US market is trading at roughly 15.6x; while earnings growth rate for the next 12 months is roughly 10%, the PEG is close to 1.5x a figure that we consider reasonable and doesn’t raise major concerns.

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

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Telecoms

Telefónica Buy – Medium Risk (Target YE15: €13.75)

Telefónica issues €1.5 bn 3-year convertible bonds and Telefónica

Deutschland launches €3.6 bn rights issue to finance E-Plus

acquisition

Alexandra Delgado, CFA

Equity Analyst

Telefónica announced yesterday the issue of €1.5 bn in 3-year mandatorily convertible bonds. These will accrue a nominal interest rate of 4.9% per annum, payable annually. The minimum conversion price of the bonds will be equal to €11.90 per share and the maximum conversion price will be equal to €14.5775 per share, resulting in a premium of 22.5% over the minimum conversion price. Bonds will be mandatorily converted in 3 years; however, they could be converted at the option of the bondholders or the issuer at anytime from the 41st day after the issue date up to the 25th trading day prior to the maturity date.

In addition, Telefónica Deutschland launched this week a €3.6 bn rights issue, planning to sell 1,117 million shares at €3.24/ share. This price stands for a 28% discount vs. theoretical ex-rights price.

Both operations aim to raise funds to finance the acquisition of German operator E-Plus, which was approved by the EU in July. E-Plus will be integrated into Telefónica Deutschland, and KPN will receive €5.0 bn in cash in exchange for E-Plus and will hold a 20.5% stake in Telefónica Deutschland. Telefónica SA will finance €4.2 billion out of the €5.0 cash consideration, by subscribing Telefónica Deutschland’s capital increase (Telefónica has 77% of Telefónica Deutschland’s capital) and delivering the difference between the €5.0 bn and the capital increase.

Portugal Telecom Buy – Medium Risk (Target YE15: €2.20)

PT shareholders approve new merger terms with Oi; America Movil

CFO confirms talks on joint bid for TIM Brasil

Alexandra Delgado, CFA

Equity Analyst

� Portugal Telecom shareholders approved this week the proposal submitted by the Board of Directors that sets the new terms of merger with Oi, following RioForte’s failure to pay € 0.9 bn commercial paper.

� The single point in the agenda was approved by a majority of 98.25% of the votes present or represented, being present or represented 46% of the voting share capital. As clarified by the Chairman of the General Meeting of Shareholders last Thursday, Oi was not allowed to vote.

� PT will now receive RioForte debt from Oi, in exchange for 474.3 mn Oi ordinary shares (ON) plus 948.7 mn preferential shares (PN). PT will be granted an America-type call to repurchase those Oi shares at strike prices of R$2.0104 ON and R$1.8529 PN, which will be adjusted by the Brazilian CDI plus 1.5% per year. This call has a 6-year maturity (starting at the date the exchange is effective) and the percentage of Oi shares that PT has the right to call will be reduced by 10% at the end of the 1st year and by 18% per year thereafter.

� Following this approval, the agreements that execute the Memorandum of Understanding disclosed on 16 July 2014 were signed yesterday. The merger of Oi with its holdings to form CorpCo is expected to occur by the end of the first quarter of 2015.

� PT shareholders will receive all shares of CorpCo held by PT SGPS, corresponding to the ownership interest in CorpCo of 25.6%: 2.10 CorpCo shares per each PT SGPS share. PT SGPS is to remain listed with the interest in RioForte debt and the call on Oi shares as its only material assets.

� In related news, America Movil CFO confirmed yesterday that they are having talks to make a joint bid with Oi for TIM Brasil. He added that no formal agreement has been reached and he declined to confirm if there were other companies involved in the talks. We remind Oi issued a statement on Aug 27th saying it had engaged Banco BTG Pactual to review alternatives for the acquisition of Telecom Italia’s stake in TIM Brasil. It is expected that Telefónica also joins these talks, as it would be easier to get the deal approved (and financed) if the three operators are involved. Telefónica is in exclusive negotiations with Vivendi for the acquisition of GVT, after outbidding Telecom Italia.

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� The potential for further consolidation should continue to agitate the Brazilian telecom market. We remind the 700 MHz auction in Brazil is scheduled for September 30th (bids to be delivered on September 23rd). This auction will require a significant investment by the operators (total minimum price for lots and cost of cleaning those frequencies amount to R$11.3 bn or €3.8 bn). Strategy on the consolidation game is closely linked with strategy for that auction, and so important moves are to be made in the weeks ahead.

Industrials

Pulp & Paper Sector

Ence announced the closure of Pulp production at Huelva mill,

Spain, which is clearly positive for Altri and Portucel

António Seladas, CFA

Equity Analyst

Ence the Spanish pulp company, announced yesterday the closure of the pulp production at Huelva pulp mill, Spain, 410 000 tones/yr of BEKP (bleached euacalyptus kraft pulp), the same kind of pulp produced by Altri and Portucel. The decision, which is still not dated, according to the firm, was mainly due to the lack of competiveness. “It added that a shortage of eucalyptus wood in the vicinity of Huelva had made it necessary to transport wood from northern Spain or to import it engendering significant cost overruns”.

The vice president Mr. Kurt Schaefer said: “The new hardwood mills have an average capacity of 1.5-2 million tones/yr, while global pulp demand is growing by an average rate of 1.3-1.5 million tones/yr. At the same time, we have capacity leaving the market. That in itself is just a natural phenomenon, especially in the northern hemisphere, where all of the older mills are start shutting down for profitability reasons. The results of that vary , but let’s say that it averages up to 500 000 tonnes/yr. With that in mind, I’d say that you can have a sustainable situation in the market when you have one of these startups every four or five quarters.

This announcement is clearly positive for Portucel and Altri, not just because it will be less capacity available but more important because it should reduce the pricing pressure over eucalyptus wood in the Iberian Peninsula. We recall that according to our data eucalyptus wood prices went up strongly for the last 2 years (roughly 10%), despite some adjustment in the 2Q14.

Also positive for Altri and Portucel was the pulp price stabilization over the summer (usually a weak period) and some rebound more recently.

Health Care

ES Saúde Reduce – High Risk (Target YE15: €4.50)

Company Update - Takeover newsflow rules João Flores,

Equity Analyst

� Based on 2Q14 Earnings and latest newsflow, we updated ES Saúde`s valuation. Furthermore, we moved reference year to YE15 from YE14. Our price target was slightly revised upwards to €4.50 YE15 from €4.45 YE14 (Neutral recommendation, High Risk), meaning a 4% upside vs current price. Recall Mexican healthcare group Ángeles launched on August 19th a tender offer at €4.30 per share for the acquisition of ES Saúde. According to the Portuguese press, Ángeles already delivered on September 03rd to CMVM the draft offer document.

� Overall, the offered price is slightly below (-4.6%) ES Saúde price target (€4.50 /share YE15), which seems fair, however a control premium is not being paid. Apparently there are other groups interested to buy ES Saúde (private equities Apax Partners and TPG; Portuguese insurer Fidelidade; Brazilian healthcare group Amil and Portuguese José de Mello Saúde), thus it will not be a surprise if a counteroffer happens (higher price would come from a group which could benefit from synergies, which is not the case from Ángeles). A counteroffer can be made up 5 days before the last day of the offer. Counteroffer price has to be minimum 2% above takeover price. In case

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Ángeles takeover is confirmed at €4.30 share, a counteroffer has to be minimum €4.386 share.

� Breakdown of changes in price target:

i) Updated estimates (€0.10 negative effect on ES Saúde`s price target): Overall, downwards revision in Private Healthcare segment (to reflect lower than expected numbers in 1H14) was partially offset by upwards revision in Public Healthcare segment (to reflect an estimated better scenario and additional revenues).

ii) Year-end rollover to YE15 from YE14 had a €0.15 positive effect on ES Saúde`s price target.

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

ES Saúde Takeover bid - A friendly takeover

� ES Saúde management has ruled on Tuesday in favor of the takeover bid launched by Mexican healthcare group Ángeles for the acquisition of ES Saúde, but admits that the €4.30 per share may "not reflect the full potential of a controlling premium."

� Overall, the offered price is slightly below (-4.6%) ES Saúde price target (€4.50 /share YE15), which seems fair, however a control premium is not being paid. Apparently there are other groups interested to buy ES Saúde (private equities Apax Partners and TPG; Portuguese insurer Fidelidade; Brazilian healthcare group Amil and Portuguese José de Mello Saúde), thus it will not be a surprise if a counteroffer happens (higher price would come from a group which could benefits from synergies, which is not the case from Ángeles).

� A counteroffer can be made up 5 days before the last day of the offer. Counteroffer price has to be minimum 2% above takeover price. In case Ángeles takeover is confirmed at €4.30 share, a counteroffer has to be minimum €4.386 share. Recall Portuguese stock market watchdog has 8 days to analyze and approve the offer, once CMVM considers all documents required have been presented.

� We highlight ES Saúde disclosed Tuesday it received the draft offer document on September 1st, thus CMVM is expected to disclose at any moment its decision to approve or not the takeover (considering all documents required have been presented).

� Furthermore, Government has 30 days (from August 19th) to accept transfer to the new shareholder the Public-Private Partnership programme for Hospital Beatriz Ângelo which is another condition to the offer.

� We highlight this offer is subject to buy a minimum 50,01% stake in ES Saúde, thus Ángels will have to buy totally/partially ESHCI 51% stake in ES Saúde. ESHCI is 55% held by Rio Forte (requested creditor protection) while Rio Forte is 100% held by Espírito Santo International (requested creditor protection). Furthermore, ESFG also requested creditor protection. This tender offer follows ES Group interest to reduce its stake in ES Saúde following problems in ES Group (shareholders requested creditor protection).

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

ES Saúde Takeover bid - A counteroffer from José de Mello Saúde

� According to a CMVM filling, Portuguese José de Mello Saúde launched a counteroffer at €4.40 per share for the acquisition of ES Saúde. The price is 2.3% above Ángeles tender offer at €4.30 per share (recall counteroffer price has to be minimum 2% above takeover price).

� Following JMS counteroffer, Mexican Group Ángeles has four working days to launch a new bid, which has to be minimum 2% above José de Mello Saúde offer (it has to be minimum €4.488). We believe it will not be a surprise if a new bid from Ángeles happens (probably at €4.50) since the

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€4.30 was a fair price, however a control premium was not being paid.

� Recall ES Saúde management has ruled in favor of the takeover bid launched by Mexican healthcare group Ángeles for the acquisition of ES Saúde, but admitted that the €4.30 per share may "not reflect the full potential of a controlling premium."

� Overall, this counteroffer is not a surprise (according to the press, private equities Apax Partners and TPG; Portuguese insurer Fidelidade and Brazilian healthcare group Amil are interested in ES Saúde) while JMS is a group which could benefit from synergies.

� Recall Portuguese stock market watchdog has 8 days to analyze and approve the offer, once CMVM considers all documents required have been presented. Apparently CMVM wants to receive approval from Finance and Health ministers (ministers have 30 days, from August 19th, to accept transfer to the new shareholder the Public-Private Partnership programme for Hospital Beatriz Ângelo which is another condition to the offer) an then CMVM will have 8 days to approve (or not) the offer.

� We highlight this offer is also subject to buy a minimum 50,01% stake in ES Saúde, thus José de Mello Saúde will have to buy totally/partially ESHCI 51% stake in ES Saúde. ESHCI is 55% held by Rio Forte (requested creditor protection) while Rio Forte is 100% held by Espírito Santo International (requested creditor protection). Furthermore, ESFG also requested creditor protection. This tender offer follows ES Group interest to reduce its stake in ES Saúde following problems in ES Group (shareholders requested creditor protection).

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

Aggressive Portfolio

� This week, Mib Aggressive Portfolio down 1.91%, outperforming the PSI20 by 0.70pp. Excluding Jerónimo Martins, 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 down 2.18%, outperforming the PSI20 by 0.43pp. Excluding Sonae and Jerónimo Martins, 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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Millennium investment banking Weekly September 12, 2014

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Millennium investment banking Weekly September 12, 2014

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

Rating 3m 6m (€ mn) Week 1M 3M 12M YTD 2013 2014E 2015E 2013 2014E 2015E 2013 2014E 2015E 2013 2014E 2015E 2013 2014E 2014E

PSI 20 5,896 - - 58,194 -2.6 8.2 -18.7 -3.0 -10.1IBEX 10,889 - - 572,708 -2.3 5.7 -1.8 22.0 9.8Financials 147.3 152.8 8,249 -1.6 20.3 1.9 86.9 17.8 - - - - - - - - - - - - - - -

BCP (1) 0.11 - - - - 37.3 35.4 6,016 -1.5 20.0 7.0 97.2 15.0 - - - - - - - - - - - - - - -BPI 1.53 1.60 4.4% Neutral High 4.8 4.4 2,233 -1.9 21.3 -9.8 64.0 26.1 0.05 -0.07 0.11 25.3 loss 13.7 - - - - - - 0.0% 0.0% 1.0Telecoms 285.9 444.8 58,640 -3.6 2.3 -6.2 3.9 -2.7 - - - 11.5 15.7 15.5 2.1 2.2 2.1 6.3 6.8 6.7 5.9% 6.2% 2.1

Telefónica (4) 11.92 13.75 15.4% Buy Medium 257.6 417.4 54,248 -3.8 1.4 -4.4 6.9 0.7 1.02 0.79 0.79 11.6 15.2 15.1 2.1 2.2 2.1 6.2 6.9 6.8 6.3% 6.3% 2.2Portugal Telecom (4) 1.73 2.20 27.5% Buy Medium 24.8 23.7 1,546 -1.4 22.1 -40.5 -47.0 -45.4 0.52 0.05 0.05 6.1 35.2 37.5 2.8 2.4 2.4 7.1 6.1 6.2 3.2% 5.8% 1.0NOS 4.55 5.65 24.1% Buy Medium 3.2 3.5 2,346 -0.1 11.1 -11.1 8.1 -15.7 0.24 0.23 0.26 22.4 19.9 17.3 2.7 2.4 2.3 7.2 6.4 5.9 2.2% 5.1% 2.2Sonaecom 1.61 2.80 74.5% Buy High 0.2 0.3 500 -0.6 11.2 -11.5 -18.4 -37.5 0.28 0.09 0.12 9.1 17.5 13.6 6.5 2.8 2.7 10.9 11.1 8.8 0.0% 5.9% 0.5Media 0.3 0.4 497 1.4 7.6 -11.8 101.9 49.4 - - - 18.9 1.4 - - 10.2 - - 2.8% - -

Impresa (2) 1.38 - - - - 0.2 0.3 232 7.0 22.1 -19.3 100.0 26.6 0.01 - - 90.8 - - 1.8 - - 16.2 - - 0.0% - -Media Capital (2) 2.35 - - - - 0.0 0.0 203 -6.0 -6.0 -5.5 140.0 106.9 0.12 - - 9.4 - - 1.0 - - 5.7 - - 8.5% - -Cofina (2) 0.61 - - - - 0.1 0.2 62 7.8 10.6 1.2 36.2 21.0 0.05 - - 10.0 - - 1.2 - - 9.1 - - 2.2% - -Technology

Indra 11.45 14.10 23.2% Buy High 13.7 13.6 1,878 -2.6 3.8 -14.7 0.1 -5.8 0.88 0.81 0.90 13.9 14.2 12.7 0.9 0.9 0.8 9.5 8.8 7.9 2.8% 3.1% 1.6Novabase 3.00 4.65 55.0% Buy High 0.1 0.1 94 -0.5 0.0 -24.1 3.4 14.9 0.24 0.17 0.21 10.9 17.3 14.5 0.3 0.4 0.4 5.0 5.5 5.0 7.5% 5.2% 1.1Utilities 192.4 216.2 53,716 -4.0 3.7 1.4 31.6 25.0 - - - 11.2 15.5 14.4- 2.0 2.2 2.1 8.3 9.3 8.8 2.7% 3.1% 1.0

Iberdrola (4) 5.56 6.30 13.4% Buy Low 169.5 191.3 35,037 -3.4 2.9 4.2 33.8 22.4 0.41 0.37 0.38 11.20 15.0 14.7 1.8 2.0 1.9 8.4 9.3 8.9 6.5% 4.9% 0.9EDP 3.39 3.10 -8.6% Reduce Low 17.4 20.0 12,407 -7.5 3.0 -7.2 25.1 27.1 0.27 0.26 0.29 9.71 13.2 11.9 1.9 2.1 2.0 8.4 9.6 9.1 6.9% 5.5% 1.4EDP Renováveis 5.55 5.60 0.9% Neutral Low 3.1 3.0 4,840 0.5 12.4 5.9 37.7 43.7 0.15 0.13 0.25 24.9 41.9 22.4 5.7 6.5 5.5 8.2 9.4 7.8 1.0% 0.7% 0.8REN 2.68 2.90 8.0% Neutral Low 2.5 2.0 1,433 -2.2 2.5 -0.2 21.2 19.9 0.23 0.20 0.20 9.8 13.6 13.6 4.5 4.9 4.9 6.9 7.8 7.7 7.6% 6.4% 1.3Conglomerates 4.7 5.6 3,758 -0.3 9.1 -5.8 - - - - - - - - - - - - - - - - -

Sonae (4) 1.21 1.70 41.1% Buy Medium 4.1 4.8 2,410 -1.0 13.1 -6.7 32.0 14.9 0.16 0.06 0.05 6.6 19.9 22.8 0.8 0.9 0.8 10.5 11.3 10.7 3.3% 2.9% 1.5Semapa 10.65 8.70 -18.3% Sell High 0.5 0.6 1,260 1.0 2.0 -4.1 52.4 30.8 0.68 0.58 0.62 12.0 18.4 17.3 1.5 1.6 1.5 7.0 7.0 6.6 3.0% 2.4% 1.5Sonae Capital 0.35 0.48 38.4% Buy High 0.0 0.1 88 -1.7 18.6 -15.0 59.1 6.1 -0.05 -0.02 0.03 loss loss 11.7 2.2 1.9 1.7 70.2 16.0 11.4 0.0% 0.0% 0.3Retail 123.2 187.8 78,300.9 -5.8 3.4 -18.9 -30.8 -35.5 - - - 30.3 28.6 25.5- 2.8 2.5 2.3 17.1 15.6 14.0 1.9% 2.1% 6.7

Inditex (4) 23.18 26.75 15.4% Buy Medium 114.2 177.5 72,244 0.0 8.0 4.2 8.0 -3.3 0.76 0.78 0.88 6.3 29.8 26.3 4.2 3.8 3.5 18.0 16.7 14.9 1.8% 2.1% 7.1Jerónimo Martins (4) 9.63 13.35 38.7% Buy Medium 9.0 10.2 6,057 -5.8 -4.6 -23.1 -38.8 -32.3 0.61 0.50 0.51 4.6 19.2 18.8 0.8 0.6 0.5 12.6 9.4 8.9 2.1% 2.6% 4.0Industrials 7.1 7.2 4,280.7 2.5 5.2 -8.2 - 19.7 - - - - - - - - - - - - - - -

CTT (4) 7.44 8.60 15.6% Buy Medium 5.3 5.2 1,116 0.7 -0.1 -3.7 - 33.1 0.41 0.46 0.48 - 16.2 15.6 1.1 1.5 1.5 6.4 8.1 7.9 - 5.5% 3.8Sonae Industria (3) 0.41 - - - - 0.1 0.2 58 -1.2 14.8 -10.8 -28.5 -27.0 -0.56 - - loss - - 0.7 - - 24.6 - - 0.0% - -Altri 2.55 1.95 -23.6% Sell High 0.8 0.9 523 8.5 24.3 8.8 41 13.8 0.27 0.11 0.14 8.3 23.9 18.2 1.9 2.1 2.0 7.8 11.5 10.5 1.1% 1.6% 2.1Portucel 3.28 2.75 -16.0% Sell Medium 0.9 1.0 2,514 -0.6 1.4 -6.8 30.7 14.3 0.26 0.22 0.21 11.3 14.7 15.3 1.8 2.0 1.9 7.8 8.5 8.3 9.0% 6.6% 1.7Construction 3.7 4.1 1,029 - - - - - - - - - - - - - - -

Mota-Engil (3) 4.82 - - - - 3.6 4.1 986 -3.1 20.5 -19.8 70.9 11.4 0.25 - - 17.5 - - 1.1 - - 7.6 - - 2.5% - -Oil & Gas .

Galp Energia 13.49 15.60 15.6% Buy High 12.6 14.7 11,187 -1.5 10.0 1.8 3.4 13.2 0.37 0.34 0.35 31.9 39.5 38.1 0.7 1.1 1.1 12.7 14.5 13.3 2.4% 2.6% 2.1HealthCare

ES Saúde (4) 4.60 4.50 -2.3% Reduce High 1.3 - 440 6.2 22.0 17.7 - 43.9 0.16 0.19 0.20 - - 23.0 - - 1.5 - - 10.1 - - -(1) We do not have a recommendation on BCP, as Mib is a registered trademark of BCP; (2) Not Covered; (3) Restricted; (4) Target YE15

Change (%) EV / EBITDA Div Yield12/09/2014

Latest

Pr (€)

Target

YE14RatingUpsd

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Disclosures 1) This report has been prepared on behalf of Millennium investment banking (Mib), a registered trademark of Banco Comercial Português,

S.A. (Millennium BCP). 2) Millennium BCP is regulated and supervised by Comissão do Mercado de Valores Mobiliários (CMVM). 3) 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.

4) Unless otherwise specified, the time frame for price targets included in this report is current year-end or next year-end. 5) Risk is defined by the analyst’s view in a qualitative way (High, Medium, Low). 6) Usually we update our models and price targets in between 3 and 9 months. 7) Millennium BCP prohibits its analysts and members of their households to own any shares of the companies covered by them. 8) BCP group may have business relationships with the companies mentioned in this report. 9) Millennium BCP expects to receive or intends to seek compensations for investment banking services from the companies mentioned in

this report. 10) 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. This report did not have any specific recipient.

11) Millennium BCP Analysts do not participate in meetings to prepare BCP’s involvement in placing or assisting in public offers of securities issued by the company that is subject of the recommendation, except when disclosed in the report.

12) Analysts are paid in part based on the profitability of BCP group, which includes investment banking revenues. 13) BCP group has more than 2% of EDP. 14) BCP group was chosen to evaluate EDP regarding the 8th stage of the privatization process. 15) BCP group was chosen to evaluate REN regarding the 2nd stage of the privatization process. 16) 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. 17) Millennium BCP through its investment banking department is providing investment banking services to Tagus Holdings S.a.r.l. (“Offeror”

in the launch of a tender offer over Brisa - Autoestradas de Portugal, S.A. shares). 18) Banco Comercial Português, S.A. (also known as Millennium BCP) was chosen as a Co-leader of the Initial Public Offering of CTT that

took place on December 2013. 19) The Board of directors of Mota Engil has appointed Banco Comercial Português as joint-book runner concerning the offering of 34 300

000 ordinary shares of Mota Engil through an accelerated book building according to the announcement released on 25th of February 2014.

20) Banco Comercial Português, S.A. (also known as Millennium BCP) was chosen as a Co-leader of the Initial Public Offering of ES Saúde, that took place on February 2014.

21) Millennium investment banking acted as Joint Bookrunner in the private offering, launched by José de Mello SA, through an accelerated bookbuilding, concerning the sale of 94 787 697 EDP shares, according to the announcement released on the 3rd of April 2014.

22) According to the announcement released on the 8th April 2014, Millennium BCP acted as Joint Bookrunner in the Eurobond “EDP Finance BV 5-year” in the total amount of €650,000,000.

23) Millennium BCP is involved in Sonae Industria capital increase announced at the beginning of May 2014. 24) Millennium investment banking a registered trademark of Banco Comercial Português, S.A. was chosen as Joint Bookrunner of the

Preferential Offer and Co-Lead Manager of the Institutional Offer of Mota-Engil Africa that is taking place. 25) Banco Comercial Português, S.A. (also known as Millennium BCP) was chosen as a Co-leader of the Public Offering of REN that took

place in June 2014. 26) Banco Comercial Português, S.A. (also known as Millennium BCP) was chosen as one of the Bookrunners & Mandated Lead Arrangers on

the 5-year revolving credit facility in the amount of €3,150,000,000 that was granted to EDP-Energias de Portugal (June 2014). 27) Banco Comercial Português, S.A. (also known as Millennium BCP) was chosen as one of the Joint-Bookrunners on the issuance of Euro

Medium Term amounting to €500,000,000 (maturing in January 2021) by Galp Energia (July 2014). 28) Banco Comercial Português, S.A. (also known as Millennium BCP) was chosen as one of the Joint-Bookrunners on the 7-year Eurobond

in the amount of €1,000,000,000 that was issued by EDP Finance, fully owned by EDP-Energias de Portugal (September 2014). 29) Recommendations on Millennium BCP covered companies (%)

Recommendation Aug-14 Jul-14 Jun-14 Mar-14 Dec-13 Sep-13 Jun-13 Dec-12 Dec-11 Dec-10 Dec-09 Dec-08 Dec-07 Dec-06 Dec-05 Dec-04

Buy 57% 67% 50% 25% 55% 59% 77% 77% 68% 79% 63% 54% 41% 37% 30% 63%

Neutral 24% 14% 32% 13% 23% 9% 9% 12% 11% 7% 15% 4% 27% 11% 40% 6%

Reduce 0% 5% 0% 33% 18% 18% 14% 4% 0% 0% 7% 0% 0% 21% 5% 6%

Sell 19% 10% 18% 29% 5% 14% 0% 4% 7% 4% 4% 0% 14% 16% 5% 0%

Unrated/Under Revision 0% 5% 0% 0% 0% 0% 0% 4% 14% 11% 11% 42% 18% 16% 20% 25%

Performance -0.6% -12.1% -10.6% 16.0% 10.2% 7.1% -1.7% 2.9% -28% -10% 33% -51% 16% 30% 13% na

PSI 20 5,943 5,979 6,802 7,608 6,559 5,954 5,557 5,655 5,494 7,588 8,464 6,341 13,019 11,198 8,619 7,600 30) The Politics of Conflict of Interests Millennium BCP is available at www.millenniumbcp.pt or sent to customers when requested.

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. Prof. Dr. Cavaco Silva (Tagus Park)

Edif 2 - Piso 2 B

Porto Salvo

2744-002 Porto Salvo

Portugal

Telephone +351 21 113 2103

Equity Team

Luis Feria - Head of Equities

Equity Research +351 21 003 7820

António Seladas, CFA - Head (Industrials and Small Caps)

Alexandra Delgado, CFA (Telecoms and IT)

João Flores (Retail, Industrials and HealthCare)

Vanda Mesquita (Banks, Utilities and Oil&Gas)

Ramiro Loureiro (Market Analysis)

Sónia Primo (Publishing)

Prime Brokerage +351 21 003 7855

Vitor Almeida

Equity Sales/Trading +351 21 003 7850

Paulo Cruz - Head

Gonçalo Lima

Jorge Caldeira

Nuno Sousa

Paulo Santos

Pedro Ferreira Cruz

Pedro Gonçalves

Pedro Lalanda

Equity Derivatives +351 21 003 7890 Maria Cardoso Baptista, CFA – Head

Ana Lagarelhos

Diogo Justino

Marco Barata

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