JPM 18-Jul

www.morganmarkets.com

Latin America Equity Research18 July 2011

Equity Ratings and Price Targets

Mkt Cap Rating Price TargetCompany Symbol (R$ mn) Price (R$) Cur Prev Cur PrevBR Malls BRML3.SA 7,733.90 17.21 OW NC 24.00Multiplan MULT3.SA 5,999.52 33.48 N NC 43.00Iguatemi IGTA3.SA 2,773.96 35.00 N NC 49.00Source: Company data, Bloomberg, J.P.Morgan estimates. n/c = no change.All prices as of 15 Jul 11.

Brazilian MallsInitiating on the Three Larger Caps - BR Malls (OW), Multiplan (N) and Iguatemi (N)

Shopping Malls

Marcelo Motta AC

(55 11) 3048-6712

[email protected]

Banco J.P. Morgan S.A.

Adrian E Huerta *

(52-81) 8152-8720

[email protected]

J.P. Morgan Casa de Bolsa, S.A. de C.V., J.P. Morgan Grupo Financiero

Marina Mansur

(55-11) 3048 3893

[email protected]

Banco J.P. Morgan S.A.

* Registered/qualified as a research analyst under NYSE/FINRA rules.

See page 81 for analyst certification and important disclosures, including non-US analyst disclosures.J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.

We are initiating coverage on the 3 largest mall companies in Brazil, rating BR Malls OW, with 39% upside potential to its Dec-12 price target, and rating both Multiplan and Iguatemi N, with 30-40% upside potential to their Dec-12 price targets. In the last 30 days, Iguatemi was down 13% vs a contraction of 6-7% for peers, explaining the attractive upside despite our Neutral rating. Although we believe decreasing inflation expectations and lower GDP growth this year remove part of the strong momentum we saw in 2010, we are positive on the sector given attractive valuation vs international peers’, strong growth and attractive potential upside. Our top picks are BR Malls and Sonae Sierra Brasil, while among our Neutral-rated stocks Aliansce and Iguatemi are our preferred names. In this report we differentiate the 3 large caps based on growth strategy, margins, leverage, room for potential upside and asset quality. Please click here to see our June-10th report initiating on the sector and Sonae Sierra Brasil and assuming coverage of Aliansce.

Valuation is not cheap for the large caps but remains attractive. The sector is trading at 15.9x P/FFO 12 months forward, 17% below its peak of 19.0x reached in Nov-2010, with BR Malls trading at the top of the range at 17.7x, a premium justified by its superior growth. When compared with American, European and Asian names, the sector trades at a discount of 5-15% on P/FFO 12e with superior growth: we expect aggregated revenues for the large caps to grow 27% this year and 28% in 2012 vs 2-7% for international peers.

Why should investors buy BR Malls? We believe the company’s premium valuation is justified by superior growth and execution. BR Malls has multiplied by 4x its total gross leasable area (GLA) since 2006, reaching 1.2mn m2 of total GLA as of 1Q11, making it now the largest company in the sector, with superior margins. Moreover, we see attractive potential upside of 39% in the name and believe the company will post superior growth over the next 3 years, supported by its pipeline of acquisitions that should reach R$1.9bn in greenfields and expansions.

Neutral on Iguatemi and Multiplan: Our ratings of Iguatemi and Multiplan are warranted by the relatively smaller potential upside, based on our DCF models, and the companies’ lower growth vs BR Malls; however, we recognize that the two companies have room to surprise positively given their unleveraged balance sheets. We prefer Iguatemi vs Multiplan on the back of slightly higher potential upside of40% vs 29% for Multiplan, higher FFO growth and lower 2012e multiples, withIguatemi trading at 14.1x P/FFO, a 6% discount to Multiplan.

Risks to the sector: Higher- (lower)-than-expected interest rates and/or lower-(higher)-than-expected GDP growth, impacting companies’ occupancy rates, rental growth and margins. In addition, construction bottlenecks and access to capital can impact the pipeline and returns of greenfields and expansions.

Figure 1: P/FFO 2012e

Source: J.P. Morgan estimates.

Table 1: Dec-2012 Price Targets

JPM PT Pot.Rating R$ Upside

BRML3 OW 24.00 39%MULT3 N 43.00 29%IGTA3 N 49.00 40%ALSC3 N 19.00 36%SSBR3 OW 35.00 47%


15.7x

15.0x 15.0x

14.1x

12.8x

BRML ALSC MULT IGTA SSBR

https://mm.jpmorgan.com/PubServlet?action=open&doc=GPS-605882-0.pdf


2


Marcelo Motta(55 11) [email protected]

Table of ContentsSummary of Estimates.............................................................5

Industry Overview ....................................................................6

What differentiates the 3 largest shopping mall companies in Brazil? .......................7

Why are the Brazilian companies underleveraged?.................................................12

With higher leverage we could see another 35-65% growth in GLA after 2013.......14

Earnings growth – Main driver for share performance............................................16

Sector already trading more than US$30mn daily...................................................17

Compelling Macro Scenario ..................................................21

Regional consumer analysis...................................................................................22

Sector Valuation .....................................................................25

Company Snapshots..............................................................28

BR Malls ..............................................................................................................28

Multiplan ..............................................................................................................29

Iguatemi................................................................................................................30

BR Malls ..................................................................................31

Ready to keep growing with premium execution. We initiate with an Overweight rating and 39% potential upside.............................................................................31

Investment Thesis .................................................................................................31

Risks to Rating and Price Target............................................................................37

Financial Outlook..................................................................................................38

Valuation ..............................................................................................................40

BR Malls Management Team and Controlling Shareholders...................................41

Recent Events .......................................................................................................42

Multiplan..................................................................................44

Multiple growth opportunities, but limited upside and FFO growth. Initiate with Neutral..................................................................................................................44




Valuation ..............................................................................................................51

Multiplan Management Team and Controlling Shareholders ..................................52

Recent Events .......................................................................................................53

Iguatemi...................................................................................55

A good story, fairly valued. Initiate with Neutral....................................................55




Valuation ..............................................................................................................62

Iguatemi Management Team and Controlling Shareholders....................................63

Recent Events .......................................................................................................65

3



Appendix I – 5 Things to Know about Brazilian Malls.........66

Appendix II – Main Sector Metrics ........................................67

Appendix III – Pipeline of Projects........................................68

Appendix IV – Listed Companies’ Portfolios .......................70

Appendix V – Company Financials .......................................75

Pricing in this report is as of the close on July 15th, 2011, unless otherwise indicated.

Table 2: Shopping Malls valuation summary

JPM Leading Price (LC) Mkt Cap P/BV EV/EBITDA P/FFO CAGR* Avg. Vol.Country Rating Analyst 15-Jul-11 US$ MM Curr 11e 12e 11e 12e 10e-12e US$ MM

Brazil px_last px_lastAliansce Brazil N Motta 13.98 1,239 1.9 12.9 10.5 19.1 15.0 22% 2.3 Sonae Sierra Brasil Brazil OW Motta 23.80 1,156 1.4 13.4 8.5 15.2 12.8 25% 2.6 BR Malls Brazil OW Motta 17.25 4,925 1.5 14.4 10.7 20.2 15.7 43% 23.8 Multiplan Brazil N Motta 33.28 3,789 2.0 13.4 10.2 15.8 15.0 13% 6.0 Iguatemi Brazil N Motta 35.00 1,762 1.9 12.6 9.8 16.7 14.1 21% 3.9 General Shop (BBG) Brazil 12.70 407 1.6 9.8 8.3 n/a n/a 25% 1.2 Brazil avg. 2,213 1.7 12.7 9.7 17.4 14.5 25% 6.6 U.S.Simon Property Group U.S. OW Mueller 118.79 34,841 7.3 16.5 16.0 17.7 16.7 5% 147.3 Kimco Realty U.S. N Mueller 19.35 7,874 1.9 19.6 19.0 16.1 15.4 4% 74.0 The Macerich Company U.S. OW Mueller 53.92 7,058 2.5 23.6 22.3 18.7 17.2 1% 31.2 Federal Realty U.S. OW Mueller 88.47 5,506 4.7 21.7 20.8 22.2 21.2 3% 30.0 Taubman Centers U.S. OW Mueller 61.76 3,559 NM 17.2 16.1 22.5 20.4 3% 31.6 Regency Centers U.S. N Mueller 46.55 4,185 2.6 18.8 17.8 19.4 18.3 4% 36.1 CBL & Associates U.S. N Mueller 18.39 2,728 2.1 11.2 11.2 8.7 9.1 -1% 24.4 U.S. avg. 9,393 3.5 18.4 17.6 17.9 16.9 2% 53.5 AsiaWestfield Group Australia N Rob Stanton 8.42 20,727 1.2 16.5 14.7 12.4 11.9 -7% 100.9 Link REIT HK N Luk 27.25 7,803 1.1 18.9 17.4 21.5 19.7 7% 18.3 CFS Retail Property Trust Australia UW Stanton 1.77 5,343 0.9 14.8 13.9 14.7 14.7 8% 7.3 Fortune REIT (in HKD) Singapore OW Luk 3.88 5,337 0.6 15.2 14.9 18.5 16.9 6% 0.2 CapitaMall Trust Singapore NR 1.92 5,002 1.2 21.2 19.6 21.3 19.2 7% 11.1 SM Prime Philippines N Lopez 11.60 3,745 2.7 10.8 9.5 n/a n/a 14% 2.2 Central Pattana Bangkok NR 33.50 2,526 3.8 16.6 12.8 n/a n/a 19% 2.6 Macquarie Count. Trust Australia NR 3.14 1,012 0.9 12.3 12.5 11.2 10.8 1% 4.3 CapitaRetail China Singapore NR 1.23 692 1.0 15.7 14.3 n/a n/a 10% 0.5 Asia avg. 5,799 1.5 15.8 14.4 16.6 15.5 7% 16.4 EuropeUnibail-Rodamco France OW Meijer 152.90 19,898 1.3 19.8 19.2 17.2 16.5 2% 43.2 Klepierre France N Meijer 27.39 7,354 2.1 15.9 15.2 12.8 11.9 4% 6.4 Corio Netherlands N Meijer 43.29 5,657 0.9 18.3 16.8 14.8 14.0 5% 7.9 Hammerson UK OW Meijer 4.69 5,390 1.0 20.7 20.0 23.0 22.7 4% 47.2 Eurocommercial Pr Netherlands OW Meijer 34.01 1,963 1.0 17.0 16.6 17.9 16.6 6% 1.0 Vastned Retail Netherlands N Meijer 48.03 1,266 0.9 14.8 13.8 13.1 12.2 3% 0.9 Europe avg. 6,921 1.2 17.8 16.9 16.5 15.6 4% 17.8

Source: J.P. Morgan estimates, company data and Bloomberg consensus for noncovered companies. Priced as of Jul-15th. *Revenues CAGR 2010e-2012e.

4



Table 3: Shopping Malls score card

SSBR Aliansce BR Malls Multiplan Iguatemi General ShoppingTicker SSBR3 ALSC3 BRML3 MULT3 IGTA3 GSHP3Rating OW N OW N NPrice target Dec-12 (R$) 35.00 19.00 24.00 43.00 49.00 Current Market Cap (R$ mn) 1,819 1,950 7,752 5,569 2,774 641 Current Price (15/Jul/11) 23.80 13.98 17.25 33.28 35.00 12.70 2010 NM 52% 59% 14% 22% 53%3M 4% 2% 2% -3% -14% 2%Since IPO 25% 55% 130% 33% 17% -9%Free Float 32% 53% 89% 42% 36% 41%

Main Shareholders

33% DDR33% Sonae

Sierra 3% Enplanta

Shopping

31% GGP14% Pershing

Square 13% Rique2% Gavea

9% HSBC Investments5% Dyl Empreen. S.A.5% Richard Matheson3% Equity International

33% Multiplan Planejamento, 24% Ontario

Inc

53% Jereissati Participações10% Petros1% La Fonte

Telecom

59% Founding partners

Avg. Liq. (last 30D in USD mn) 2.6 2.3 23.4 5.9 4.0 1.2 # of shopping malls (current port.) 10 15 40 13 15 13

Geographical presence SP, AM, DFSP, RJ, BA, PB,

DF, PA

RJ, PE, PR, SP, MT, AM, MG, MA, MS, AL, SC, GO, PA, RN, RS

SP, RJ, MG, PR, RS, DF

SP, RJ, PR, SC, RS

SP, PR, RS

Total GLA (as of 1Q11 - '000 m2) 351 477 1,219 551 432 225Own GLA (as of 1Q11 - '000 m2) 204 265 634 372 233 190Avg. own GLA per Mall ('000 m2) 20 18 16 29 16 15Average Stake 58.0% 55.5% 52.0% 67.4% 53.8% 84.3%Financial highlights – 2010Gross Revenues 202 223 596 663 294 127

Rent revenues 158 159 424 421 213 99Others 43 64 171 241 81 27

Net Revenues 185 207 546 604 264 116NOI 115 163 448 425 203 101EBITDA 140 138 428 357 185 82

EBITDA margin 75.8% 66.9% 78.3% 59.1% 70.2% 70.4%Net Income 122 71 268 218 152 -11

Net margin 66.2% 34.1% 49.1% 36.1% 57.5% -9.8%FFO 130 92 285 368 172 -1

FFO margin 70.5% 44.7% 52.2% 60.9% 65.2% -1.3%Balance Sheet – 1Q11Total Assets 2,821 1,928 11,087 4,041 2,751 1,091 Cash 415 315 748 785 1,004 195 Debt 212 695 2,624 403 907 545 Net Debt (202) 380 1,876 (382) (98) 350 Minorities 409 71 298 119 0 0 Equity 1,789 1,013 5,863 3,121 1,519 375 Ratios – 1Q11Net Debt/Equity -11% 37% 32% -12% -6% 93%Net Debt/EBITDA* -1.8 2.5 2.1 -0.7 -0.6 6.4Multiples – Current P/BV current 1.4x 1.9x 1.5x 2.0x 1.9x 1.6xEV/EBITDA 2011e 13.4x 12.9x 14.4x 13.4x 12.6x 9.8xEV/EBITDA 2012e 8.5x 10.5x 10.7x 10.2x 9.8x 8.3xP/FFO 2011e 15.2x 19.1x 20.3x 15.9x 16.7x n/aP/FFO 2012e 12.8x 15.0x 15.7x 15.7x 14.2x n/aCap rates (1Q11) 8.1% 8.6% 6.6% 8.3% 7.9% 10.9%Cap rates (2012e) 11.3% 11.2% 10.6% 11.0% 11.7% NA

Source: J.P. Morgan, Bloomberg and company reports. Cap rate = Net operating income – NOI / EV. *Considering BR Malls follow-on.

5



Summary of Estimates

Table 4: Shopping Malls estimates summary

Financial Info (R$ mn) BRML MULT IGTA ALSC SSBR

Net revenues 10 546 604 264 207 185 Net revenues 11e 827 649 315 258 223 Net revenues 12e 1,121 778 386 306 289 Net revenues 13e 1,322 965 478 367 367 CAGR 10-13e 34% 17% 22% 21% 26%NOI 10 448 425 203 163 150 NOI 11e 687 481 249 216 187 NOI 12e 943 611 312 261 245 NOI 13e 1,126 837 393 314 315 CAGR 10-13e 36% 25% 25% 24% 28%EBITDA 10 428 357 185 138 140 EBITDA 11e 656 426 219 181 171 EBITDA 12e 895 532 272 223 227 EBITDA 13e 1,057 711 337 271 295 CAGR 10-13e 35% 26% 22% 25% 28%Net income 10 268 218 152 71 122 Net income 11e 374 256 143 74 161 Net income 12e 476 278 168 99 183 Net income 13e 599 369 198 137 231 CAGR 10-13e 31% 19% 9% 25% 24%FFO 10 285 368 172 92 130 FFO 11e 383 377 166 102 120 FFO 12e 493 398 196 130 142 FFO 13e 619 498 233 171 184 CAGR 10-13e 29% 11% 11% 23% 12%Margins, Leverage and ProfitabilityNOI margin 10 88.2% 86.6% 78.6% 78.8% 81.2%NOI margin 11e 89.3% 87.6% 80.2% 83.8% 83.7%NOI margin 12e 89.8% 90.7% 81.4% 85.2% 84.6%NOI margin 13e 90.0% 95.4% 82.0% 85.6% 85.8%EBITDA margin 10 78.3% 59.1% 70.2% 66.9% 75.8%EBITDA margin 11e 79.4% 65.6% 69.5% 70.0% 76.5%EBITDA margin 12e 79.8% 68.4% 70.5% 72.8% 78.4%EBITDA margin 13e 80.0% 73.7% 70.4% 73.8% 80.5%FFO margin 10 52.2% 43.5% 65.2% 44.7% 110.3%FFO margin 11e 46.4% 47.9% 52.7% 39.4% 78.8%FFO margin 12e 44.0% 43.8% 50.8% 42.4% 63.9%FFO margin 13e 46.8% 45.7% 48.8% 46.5% 63.3%Net Debt/EBITDA 10 2.9x (1.1x) (0.7x) 2.7x 3.4x Net Debt/EBITDA 11e 3.3x 0.3x 0.4x 2.5x (0.3x)Net Debt/EBITDA 12e 3.0x 0.8x 1.1x 2.2x 0.5x Net Debt/EBITDA 13e 1.8x 0.4x 1.0x 1.4x 0.4x ValuationP/BV curr 1.3x 1.8x 1.8x 1.9x 2.7x P/FFO 11e 20.2x 15.8x 16.7x 19.1x 15.2x P/FFO 12e 15.7x 15.0x 14.1x 15.0x 12.8x EV/EBITDA 11e 14.4x 13.4x 12.6x 12.9x 13.4x EV/EBITDA 12e 10.7x 10.2x 9.8x 10.5x 8.5x

Source: J.P. Morgan estimates and company reports. *Net income adjusted by nonrecurring expenses.

6



Industry Overview

The sector is composed of 6 listed companies with a combined market cap of US$14bn and a daily liquidity of more than US$30mn. BR Malls is the most liquid name, trading more than US$20mn daily. None of the companies is part of the IBOV index, but we believe that BR Malls, because of its size and liquidity, could be added to Ibovespa as soon as the next index revision, in September, with a participation of around 0.5pp. BR Malls, Multiplan and Iguatemi represent 25% of the IMOB index, with participation of 15.3%, 6.3% and 3.8% respectively.

The shopping mall industry offers exposure to growing retail consumption in Brazil and to potential appreciation in property values, on the back of a compression in cap rates and lower interest rates long term. Also, it offers inflation protection though its rent structure, as retailers (both anchors and satellites) are subjected to monthly payments, represented by the maximum of a percentage of sales or a minimal rent adjusted by inflation (IGP-M or IPCA). On the other hand, the properties side has the benefit of stable and predictable cash flows, hedging investors against inflation via 5-to 10-year contracts with retailers.

We are positive on Brazilian shopping malls despite the sector’s outperformance ofthe IBOV YTD of 8pp, down 7% on average, led by BR Malls (+3%), with the sector’s valuation multiples trading at 15.9x based on FFO for the next 12 months, 17% below their top. The main reasons for our optimism are the following:

i) Attractive organic and inorganic growth. We have seen the sector grow strongly over the last 3 years, with listed malls increasing revenues by 28% CAGR in 07-10, coming from 50% GLA growth in the period (~ 17% per year). We believe that going forward we will continue to see companies adding new greenfield/expansion projects and also making acquisitions, especially BR Malls, which has been the most active name to date. Going forward, we expect a 25% CAGR (10-13e) in sector revenues, led by a 60% increase in own GLA by 2013.

ii) Simple value proposition and increasing share liquidity. Since 2008 the aggregate volume traded has multiplied eightfold, reaching over US$30mn daily, helped by 2 IPOs (ALSC and SSBR), which increasedthe number of listed players in the segment to 6 names, and by 5follow-on offers (3 from BR Malls) that have amounted to R$2.9bn since 2008. In addition, the value proposition from malls is simple, easy to model and has multiple growth sources.

iii) Valuation remains attractive vs international peers’. The sector is trading at 14.7x P/FFO 2012e vs ~16.0x for American, European and Asian names, but, more importantly, growth prospects are much stronger with healthy balance sheets.

iv) Value creation in the long term, when interest rates decline and assets revalue. In our view this driver is largely overlooked by investors given the recent tightening in monetary policy; however, we believe this will one of the main drivers of future sector performance as lower interest rates will lead to cap rate compression and a consequent

Figure 2: P/FFO 2012e


Table 5: Dec-2012 Price Targets

JPM PT Pot.Rating R$ Upside

BRML3 OW 24.00 39%MULT3 N 43.00 29%IGTA3 N 49.00 40%ALSC3 N 19.00 36%SSBR3 OW 35.00 47%


Figure 3: Brazil is cheaper then other regions, with higher growthprojectedP/FFO 2012 Rev. growth

Source: J.P. Morgan estimates and Bloomberg

estimates.

15.7x

15.0x 15.0x

14.1x

12.8x

BRML ALSC MULT IGTA SSBR

16.9x

15.6x 15.5x

14.5x

1%4%

9%

25%

US Europe Asia Brazil

7



increase in property values. Also, companies will be able in the long term to leverage their balance sheets at lower interest costs.

Malls offer indirect exposure to the secular trend of consumer expansion in Brazil, given their unique rent structure, in which rents are represented by the larger of a minimum rent adjusted by inflation or a percentage of sales. Over the last 10 years GDP per capita has almost tripled in Brazil, to US$10,814 in 2010 vs US$3,766 in 2000. Unemployment is running at record-low levels – 6.4% as of April – with wage mass growing 12.7% over the last 12 months, given the reduction in unemployment and growth of 10% in real wages in the last 12 months, and reaching R$35bn as of March 2011.

However, we are relatively more optimistic about Brazilian homebuilders vs the malls, on the back of:

i) Cheaper valuation for Brazilian homebuilders, which are trading at 6.5x 12 months forward P/E, only 1% above their trough, while malls are trading at 15.9x P/FFO 12 months forward P/E, 17% below theirpeak;

ii) Mall outperformance YTD vs IBOV and IMOB, with malls outperforming the IBOV by 8pp, led by BR Malls, up 3% in the period,and excluding SSBR, which IPO’d this year and is up 19%. On the other hand, homebuilders are down 30% and underperforming the IBOV by 15pp;

iii) Positive momentum as inflation expectations continue to decrease:we believe that, given their higher beta, homebuilders should benefit more than malls from the recent decrease in inflation expectations and a stabilization in interest rates, as most investors see malls as a defensive sector; however, we recognize that 2Q results are not likely to be a trigger for the Brazilian homebuilders.

In this report we initiate coverage of the 3 largest shopping mall companies in Brazil, BR Malls (BRML3, OW), Multiplan (MULT3, Neutral) and Iguatemi (IGTA3, Neutral). Our ratings are based on price target and potential upside, current valuation, efficiency, revenue growth and leverage. Within our universe of coverage, BR Malls and Sonae Sierra Brasil, both rated OW, are our top picks. Among our Neutral-rated stocks, Aliansce is our preferred name, given discounted valuation, followed by Iguatemi and Multiplan. For more details on Aliansce and SSBR, please click herefor our initiation of coverage, published June-10th, 2011.

What differentiates the 3 largest shopping mall companies in Brazil?

(1) Growth strategy – Some prefer acquisitions, others prefer greenfields

Companies have grown through different strategies in the past. In the last 3 years the large cap. companies increased their own GLA by 50%, or 400k m2, according to our calculations, with around 50% represented by acquisitions, with the leading acquirerBR Malls, followed by 35% of greenfields and 15% in expansions. Multiplan is the shopping mall company that has opened the most new malls. Going forward, we expect this growth to continue. The three large mall operators expect to add around 730k m2 in the next 3 years, including acquisitions, and representing annual growth


8



of 17% based on projects announced as of 4Q10, with BR Malls growing at a faster pace based on acquisitions. Also, we believe BR Malls could accelerate the development of greenfields from around 2 per year to 3-4 going forward, as BR Malls has so far opted for a consolidation strategy given the early stages of the mall industry in Brazil.

Greenfields represent most of the GLA expected to be added by Iguatemi, Multiplan and Sonae Sierra Brasil, at around 160-170k m2 per company over the next 3 years. Given Iguatemi’s and Multiplan’s relatively unleveraged balance sheet, we see upside risk in their project pipelines.

Figure 4: Companies should invest R$6bn over the next 3 yearsR$ in millions

Source: J.P. Morgan and company estimates. As of 4Q10.

Figure 5: Companies will add around 1mn in own GLA Own GLA (‘000) m2

Source: J.P. Morgan and company estimates. As of 4Q10.

BR Malls – Playing the consolidation game: We expect BR Malls to invest morethan R$1.9bn into acquisitions over the next 3 years and see upside potential to this; however, it is also important to flag that BR Malls also expects to invest R$330mn in greenfield and R$350mn in expansions, for a total capex of R$2.6bn to be disbursed over the next 3 years. BR Malls is the only company for which we includeacquisitions in our estimates given its track record with this growth strategy. Since its IPO in 2007, BR Malls made acquisitions for R$3.8bn, which included 33 deals. BR Malls already tracked 75 malls, totaling an R$18bn investment considering an entry cap rate of 10.0% for possible acquisitions.

Iguatemi – Greenfield developer: The company expects to open 6 new malls, adding 169k m2 to its own GLA over the next 3 years, including the recently openedShopping Alphaville. It has the largest pipeline of greenfields, followed by Sonae Sierra Brasil (GLA of 162k m2 in 3 greenfields) and Multiplan (GLA of 160k m2 in 5greenfields). Early this year the company issued a R$330mn debenture, which is expected to be invested in opportunistic acquisitions not included in our estimates. YTD the company has invested only R$12mn in the acquisition of a small stake in Shopping Esplanada.

Multiplan – Multiuse company: The company expects to invest more than R$530mn into greenfield projects over the next years, but most of it will be for commercial towers representing a total GLA of 90k m2 that it will rent and a smaller portion for

330

950 899595

198

352

4399

150

1,900

536

2,582

1,501

942694

348

BRML MULT IGTA SSBR ALSC

Greenfields Expansions

Acquisitions Multiuse projects

87160 162 169

92

57

9226

40

194

11

339

251

188 180

132

BRML MULT SSBR IGTA ALSC

Greenfields Expansions

Acquisitions Multiuse projects

9



projects to be sold. Cristal Tower and Centro Profissional Ribeirão, which are almost completely sold, will have a potential sales value (PSV) of R$145mn.

While we are not considering future expansions in our estimates for Multiplan, werecognize that there is significant potential to be developed inside its current portfolio. This is not included in our estimates given the lack of information on capex and timing to develop the potential projects. To exemplify this potential, the new master plan for Shopping Ribeirão that includes 32k m2 in expansions and a Residential and Medical Center tower with an expected PSV of up to R$600mn according to our calculations, based on the price/m2 obtained on Centro Profissional Ribeirão, representing upside risk to our numbers.

For Iguatemi we are not including the second phase of Shopping Votorantim expected to be opened in Sep-2018 as we are not including expansions for any of the other malls post 2014. We are including only announced projects as of 4Q10 in our estimates for all companies and therefore not including the remaining 100k m2

Iguatemi expects to launch by 2014 to reach own GLA of 520k m2.

Figure 6: Greenfields and Expansion plans for the next 3 years

Own GLA (‘000) m2

Source: J.P. Morgan estimates, company data. Based on 4Q10. Excluding multiuse projects

and developments for sale.

Figure 7: Listed Malls increased their GLA by 120% in the last 4 years

Total GLA (‘000) m2

Source: BR Malls, company data. Including acquisitions.

(2) Why does BR Malls have higher margins?

In 2010 BR Malls posted a 78% EBITDA margin vs 70% from Iguatemi and 59% from Multiplan. As can be seen in the figures below, BR Malls has a lower COGS as % of revenues at 10.6% in 1Q11 vs 16-21% for peers; however, it is important to flag that Multiplan includes construction costs from its multiuse projects to be sold, which explains its higher cash COGS as % of revenues. In 1Q11 Iguatemi had nonrecurring expenses of R$4mn represented by a legal action against “Nossa Caixa Nosso Banco” and a strategic consultancy.

On administrative expenses as % of revenues, BR Malls and Iguatemi are more efficient than Multiplan, reporting around 10% of administrative expenses as % of revenues; however, it is important to flag that Iguatemi hires a third party for commercialization expenses and those expenses are recognized in COGS, which leads to a relative understatement of its administrative expanses vs BR Malls and

604

366237 204 264

190

143

155

183188 89

115

747

521

420 392353

306

BR Malls Multiplan Iguatemi SSBR Aliansce GSB

237

373

201271 292

89

1,197

551477 432

351225

BRML MUTL ALSC IGTA SSBR GSHP

2006 1Q11

+24% +42% +77% +92% +34% +61% +404% +48% +138% +60% +20% +153%

10



Multiplan. Of the three companies we are initiating on, Multiplan had the highest level of administrative expenses as % of revenues at around 15% in 1Q11 and 16.3% in 2010.

Excluding nonrecurring expanses, Iguatemi EBITDA would be at R$45mn, with a margin of 65% in 1Q11, vs 70% for full-year 2010. In the case of Multiplan in 1Q11,excluding the real estate revenues and costs from EBITDA, margin would be at 70.7%, based on J.P. Morgan calculations.

In the figures below, we show the companies’ 1Q11 and 2010 EBITDA margin above the columns representing the breakdown between COGS, administrative expenses and other expenses as percentage of revenues.

Figure 8: Companies’ EBITDA margin decomposition as of 1Q11

% of Revenues

Source: J.P. Morgan and company estimates. All costs as a % of revenues.

Figure 9: Companies’ EBITDA margin decomposition as of 2010

% of Revenues

Source: J.P. Morgan and company estimates. All costs as a % of revenues.

Figure 10: We expect BR Malls to continue to have superior margins

Percentage

Source: Bloomberg and J.P. Morgan estimates.

20.9 18.610.6

10.3 14.6

10.2

8.9 2.4

1.0

IGTA MULT BRML

COGS Adm exp. Others exp. EBITDA margin

16.220.9

11.0

16.3 8.6

9.9

8.3

0.4

0.8

MULT IGTA BRML

COGS Adm exp. Others exp. EBITDA margin

81.478.3 79.4 79.8 80.0

68.1

60.4

69.770.9

73.7

69.1 70.2 69.5 70.5 70.4

2009 2010 2011e 2012e 2013e

BRML MULT IGTA

EBITDA margin: 60.0% 64.4% 78.2%

EBITDA margin: 59.1% 70.2% 78.3%

11



(3) Asset quality and operational figures

Iguatemi stands out as the company having a higher-income asset portfolio among peers, with average monthly sales/m2 at R$1,300 and monthly rent/m2 at R$105.

Figure 11: 2010 Sales/m2 (R$)

Source: J.P. Morgan and company estimates.

Figure 12: 2010 Rents/m2 (R$)


Although not all companies release sales and rent per m2, based on the information available in 4Q press releases, we rank individual malls by sales/m2 and rent/m2, as can be seen in the figures below. Among the top 10 malls in terms of sales/m2

Multiplan stands out, with 6 malls on the list, having the top 3 malls, followed by BR Malls with 3 malls on the list. Regarding rent/m2 Multiplan also has 6 malls on the list, followed by Iguatemi with 3 malls. We would like to highlight Iguatemi Salvador (45% stake Aliansce) sales and rent per m2 as the mall is ranked among the top 5 malls on rent/m2 and among the top 6 on sales/m2.

Figure 13: Sales/m2 – Top 10 Malls – MULT as 6 names on the list

R$/m2


Figure 14: Rent/m2 – Top 10 Malls – MULT has 6 names on the list

R$/m2

Source: Company data.

Iguatemi has lower same store sales (SSS) and same store rents (SSR) vs peers as SSS have ranged from -3% to 10% since 1Q08 vs 5% to 15% for BR Malls and Multiplan. On SSR, Multiplan and BR Malls have similar performance while Iguatemi’s numbers are also lower than peers, though relatively more stable,suffering a lower contraction vs Multiplan during the 1H10 and averaging since 1Q08 8.1% vs 10.2% for BR Malls and 9.3% for Multiplan.

1,293

1,194

1,072

914 904

1,208

1,066

938

822 832

Iguatemi Multiplan BR Malls Aliansce SSBR

2010 2009105 102

79

5449

97 96

69

5045


2010 2009

1,738 1,6811,624

1,371 1,343 1,294

1,5991,502

1,326

1,490

Mor

umbi

Dia

mon

dM

all

Bar

raS

hopp

ing

Vill

a-Lo

bos

Sho

ppin

gR

ecife

Igua

tem

iS

alva

dor

Pát

ioS

avas

si

BH

S

hopp

ing

Met

rô

San

ta C

ruz

Par

k B

arig

üi

Multiplan BR Malls Aliansce

116

179155

131108 99 95

216

108 100

Igua

tem

iS

ão P

aulo

Mor

umbi

S

hopp

ing

Bar

ra

Sho

ppin

g

Dia

mon

d M

all

Igua

tem

i S

alva

dor

BH

Sho

ppin

g

Igua

tem

i P

orto

Ale

gre

Esp

lana

da

Aná

lia

Fra

nco

Pát

io

Sav

assi

Aliansce Multiplan Iguatemi

12



Figure 15: SSS for Iguatemi is on average, since 2008, below

Multiplan’s and BR Malls’


Figure 16: SSR for BR Malls has averaged 10.2% since 1Q08 vs 8.1%

for Iguatemi and 9.3% for Multiplan


BR Malls also stands out by having the lowest occupancy cost as percentage of sales at 10.5% in 1Q11 vs 12.2% and 13.7% from Iguatemi and Multiplan, respectively. Regarding occupancy rates, given the quality of its portfolio Multiplan has the lowest vacancy rates among the large caps, at only 1.6% in 1Q11, based on Multiplanhistorical information since 1985. Its vacancy rate was as high as 9.3% in 1999. According to our conversations with the companies, vacancy rates above 10% are considering potentially harmful for margins and assets.

Figure 17: Occupancy cost – BRML has the lowest level among the 3

companies


Figure 18: Occupancy rate – All companies have occupancy rates

above 95%


Why are the Brazilian companies underleveraged?

Compared to international peers, mall operators in Brazil have unleveraged balance sheets, with some companies even having net cash positions as of 1Q11, such asMultiplan and Iguatemi. We believe that the main reasons for this conservative use of the balance sheet are cultural factors, with Brazil having lived through a prolonged high-inflation period in the ’80s and ’90s and the fact that interest rates are still high at 12.25% per year. Long term, we believe that companies will be willing to add leverage once interest rates, currently at around 6% real rate, one of the highest among EMs, decline in Brazil.

We expected Multiplan and Iguatemi to end the year with a net debt position as a result of their investments throughout the year in greenfields/expansions. According

-5%

0%

5%

10%

15%

20%

1Q08

2Q08

3Q08

4Q08

1Q09

2Q09

3Q09

4Q09

1Q10

2Q10

3Q10

4Q10

1Q11

BR Malls Multiplan Iguatemi

3%

5%

7%

9%

11%

13%

15%

1Q08

2Q08

3Q08

4Q08

1Q09

2Q09

3Q09

4Q09

1Q10

2Q10

3Q10

4Q10

1Q11


5%

7%

9%

11%

13%

15%

17%

1Q07

2Q07

3Q07

4Q07

1Q08

2Q08

3Q08

4Q08

1Q09

2Q09

3Q09

4Q09

1Q10

2Q10

3Q10

4Q10

1Q11

BR Malls Iguatemi Multiplan

88%

90%

92%

94%

96%

98%

100%

1Q07

2Q07

3Q07

4Q07

1Q08

2Q08

3Q08

4Q08

1Q09

2Q09

3Q09

4Q09

1Q10

2Q10

3Q10

4Q10

1Q11

BR Malls Iguatemi Multiplan

13



to our estimates Multiplan will invest R$850mn this year, Iguatemi R$235mn and BR Malls R$1.5bn (75% on acquisitions).

We expect leverage to increase in the coming years given large investments by 2013 of more than R$5.0bn for the 3 large caps for the next 3 years. We expect average net debt to equity to be at 1.0x by 2013 for these companies compared to 2.1-2.5x for BR Malls and Aliansce and net cash of 0.6x-1.8x for Multiplan, Iguatemi and SSBRnow. While companies will likely announce new projects in the coming years that will require investments post 2013, in our models we are not assuming any further organic or inorganic growth.

Figure 19: Net Debt to EBITDA – Companies will start to deleverage in 2013e

Source: J.P. Morgan and company estimates. If we exclude BR Malls’ US$ debt of around R$670mn as of 1Q11 that is not included in BR Malls’ covenant, net debt to EBITDA would peak at 2.3x rather than 3.3x in 2011.

Debt cost remains high in Brazil

Regarding companies’ cost of debt, it is worth highlighting that Multiplan’s cost of debt in 1Q was below Selic at 11.9%, while BR Malls reported a debt cost of 12.5% (IGP-M+6.7%) and Iguatemi had a debt cost of 12.7% (104.1% of CDI). On a company basis we would like to highlight the following:

BR Malls has two US dollar perpetual bonds on its balance sheet, totaling US$405mn. The first was issued in 2007 at US$+9.75% totaling US$175mn callable in 2015; given a swap agreement. The second was issued in 2011 at US$+8.5% totaling US$230mn, callable in 2016. Considering the hedges involved in those operations, the cost of debt is around 100% of CDI for the first bond and 99.5% for the second. BR Malls has a diversified debt portfolio, with Taxa Referencial (TR)representing 54% of its total debt. The company’s weighted average cost was at around 12.5% in 1Q11, based on the company’s IGP-M curve, though IGP-Mreached almost 10% in 1Q11.

Iguatemi’s debt is 100% Brazilian, with TR and TJLP (BNDES’s long-term interest rate) exposure totaling 40% of Iguatemi’s debt. Iguatemi is the only large company, among the large caps allowed to raise debt from BNDES linked to TJLP given its shareholder structure (controlled by local players). The company ended 1Q11 with a weighted average cost of debt at 104.1% of CDI, or around 12.7%, and a duration of 3.7 years.

Multiplan’s aggregate cost of debt was below the Selic (12.25%) in 1Q11 at 11.9%, as most of it is linked to TR (48%), with a cost of debt of 10.6%. Multiplan’s most

2.1x

(0.9)x(0.6)x

2.5x

(1.8)x

3.3x

0.3x 0.4x

2.5x

(0.3)x

3.0x

0.8x 1.1x

2.2x

0.5x

1.8x

0.4x1.0x

1.4x

0.4x

BRML MULT IGTA ALSC SSBR

1Q11 2011 2012 2013

14



expensive debt was a 2-year debenture issued on June-2009 at 117% of CDI, totaling R$100mn and representing 19% of Multiplan’s debt outstanding. This debt will be paid down in June this year.

With higher leverage we could see another 35-65% growth in GLA after 2013

Based on our views and on companies’ guidance on what could be their maximum leverage, we calculated what could be the additional potential growth post 2013 using companies’ FCF generation and additional leverage. BR Malls and Multiplan stand out as the companies with higher room for growth, which could reach 66% and 64% of their expected own GLA for 2013, adding another 612k m2 and 399k m2

respectively. For BR Malls’ maximum leverage, we consider its 3.8x net debt toEBITDA excluding the perpetual bonds.

Table 6: Going forward, BR Malls’ strong cash generation and Multiplan’s unleveraged balance sheet should allow superior growth

R$ in millions

Leverage BRML MULT IGTA ALSC SSBRNet Debt to EBITDA - 2013 1.2x 0.4x 1.0x 1.4x 0.4xMax leverage* 3.8x 2.8x 2.8x 3.5x 3.0xAdditional leverage 2,750 1,694 576 571 660Average Capex/m2 5,500 5,500 5,500 5,500 5,500Potential GLA (‘000 m2) 500 308 105 104 120

FFO 2013 618 498 233 171 184Average Capex/m2 5,500 5,500 5,500 5,500 5,500Potential GLA (‘000 m2) 112 90 42 31 34

Total GLA upside (‘000 m2) 612 399 147 135 154as % of 2013e owned GLA 66% 64% 35% 34% 43%

Source: J.P. Morgan estimates, company data. *Excluding US$ perpetual bonds for BR Malls.

Figure 20: Company’s Expected Capex

R$ in millions

Source: Bloomberg and J.P. Morgan estimates.

Why are the companies’ effective tax rates below 34%?

None of the listed malls is paying an effective tax rate of 34%, represented by 25% income tax and the 9% social contribution. BR Malls has the lowest tax rate as % of revenues, considering all taxes paid (on revenues and on pretax net income and excluding deferred taxes), at around 13% of its net revenues on average, in the last 3

1,489

855

262

1,084

633

406

32110

222


2011 2012 2013

BR Malls and Multiplan stand out

with higher potential own GLA

growth after 2013 vs peers’, given their unleveraged balance

sheets and FFO generation.

While BR Malls and Multiplan

will concentrate their capex in the next 2 years, Iguatemi has a

softer schedule over the next 2

years.

15



years, on the back of significant amortization of goodwill from acquisitions which have totaled R$3.8bn since 2007.

In the case of Multiplan the company has a significant amount of deferred taxes, leading to an effective tax rate of around 13% also, or 28% excluding deferred taxes, given goodwill on past acquisitions that should last for the next year or two. For this reason, in our model we consider a reduction in deferred taxes, leading to an effective tax rate of approximately 30%.

Iguatemi’s effective tax rate is around 22%, the highest among the large caps, and we believe its taxes will remain at this level, given its tax structure, as 50% of itsstructure is based on “Lucro Real” and 50% on “Lucro Pressumido.”

Table 7: BR Malls Tax disbursementsR$ in millions

BRML 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11Top line taxes (8) (8) (8) (12) (10) (11) (12) (17) (15)Bottom line taxes (3) (8) 4 (431) (1) (10) (10) (219) 4

Taxes (4) (8) 4 (5) (6) (10) (10) (14) (11)Differed 0 0 0 (426) 5 0 0 (206) 14

Total taxes (11) (17) (5) (443) (11) (21) (21) (236) (11)Total taxes (ex diff.) (11) (17) (5) (17) (16) (21) (21) (31) (26)As % of revenuesTotal taxes 12.4% 16.3% 4.4% 313% 9.2% 15.7% 14.9% 116% 5.7%Total taxes (ex diff.) 12.9% 16.3% 4.4% 12.2% 13.5% 15.7% 14.9% 15.1% 13.2%

Source: J.P. Morgan estimates, company data.

Table 8: Multiplan Tax disbursementsR$ in millions

MULT 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11Top line taxes (10) (12) (13) (16) (14) (14) (13) (17) (15)Bottom line taxes (1) (2) (25) (60) (33) (26) (28) (31) (34)

Taxes (1) (2) (2) (10) (1) (2) (2) (10) (9)Differed 1 0 (23) (50) (32) (25) (27) (21) (25)

Total taxes (10) (14) (38) (76) (47) (41) (42) (48) (49)Total taxes (ex diff.) (11) (15) (15) (26) (15) (16) (15) (27) (24)As % of revenuesTotal taxes 10.4% 13.4% 32.7% 48.2% 34.3% 28.4% 28.5% 27.0% 31.0%Total taxes (ex diff.) 11.2% 13.6% 13.3% 16.3% 11.0% 11.0% 10.3% 15.3% 15.2%


Table 9: Iguatemi Tax disbursements

R$ in millions

IGTA 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11Top line taxes (6) (7) (7) (8) (6) (8) (8) (9) (8)Bottom line taxes (5) (6) (6) (8) (8) (5) (10) 6 (10)

Taxes (6) (6) (7) (6) (7) (4) (9) 6 (9)Differed 0 0 1 (1) (1) (1) (1) 0 (1)

Total taxes (11) (12) (13) (15) (15) (13) (18) (2) (18)Total taxes (ex diff.) (12) (13) (14) (14) (14) (12) (17) (2) (17)As % of revenuesTotal taxes 23.9% 23.8% 24.8% 23.5% 25.8% 20.2% 26.0% 3.3% 25.5%Total taxes (ex diff.) 24.2% 24.3% 26.7% 21.7% 24.6% 18.5% 24.7% 3.3% 24.7%


BR Malls’ low effective tax rate is a consequence of the

amortization of goodwill on

acquisitions. As of 2010 the company still had ~R$279mn to

be amortized, representing a tax

benefit of approximately R$95mn with 7.5 years’ duration.

Multiplan’s effective tax rate

should start to increase given a

reduction on deferred taxes. As of 1Q11 Multiplan had around

R$80mn of goodwill to be

amortized, but we expect a reduction in the amount of

deferred taxes in coming

quarters.

As of 1Q11 Iguatemi had no goodwill to be amortized. Its tax

plan is 50% under “Lucro

Pressumido” and 50% under “Lucro Real.”

16



Earnings growth – Main driver for share performance

As can be seen in the figures below, stock performance had been driven by EPS growth, even though we believe FFO (funds from operations) is more relevant than net income to analyze malls. We used 2011 consensus EPS estimates given the lack of FFO consensus on Bloomberg. Since early 2010, EPS expectations for 2011 for BR Malls have increased 52% vs -31% for Multiplan and +6% for Iguatemi.

Figure 21: BR Malls – BEst EPS adj.

Source: Bloomberg.

Figure 22: Multiplan – BEst 2011 EPS adj.

Source: Bloomberg.

Figure 23: Iguatemi – BEst 2011 EPS adj.

Source: Bloomberg.

Table 10: J.P. Morgan vs Bloomberg consensus

BRML MULT IGTA ALSC SSBRRevenues 11 2% -1% -1% 0% 2%Revenues 12 4% -4% -4% -3% 2%Revenues 13 -3% -12% -4% -7% -1%EBITDA 11 3% -2% 1% -2% 5%EBITDA 12 3% -5% -3% -7% 8%EBITDA 13 -3% -6% -6% -8% 3%

Net income 11 7% -10% 3% -6% NANet income 12 -2% -15% 0% -7% 10%Net income 13 -4% NA -6% -12% 5%

FFO 11 0% 13% 0% -18% -10%FFO 12 -8% -4% -3% -19% NAFFO 13 NA NA NA NA NA

Source: Company data, Bloomberg and J.P. Morgan estimates.

0.40

0.60

0.80

1.00

1.20

1.40

0

5

10

15

20

Apr

-09

Jun-

09

Aug

-09

Oct

-09

Dec

-09

Feb

-10

Apr

-10

Jun-

10

Aug

-10

Oct

-10

Dec

-10

Feb

-11

Apr

-11

Jun-

11

Price EPS Adj. 2011 EPS Adj. 2012

1.40

1.60

1.80

2.00

2.20

15

20

25

30

35

40

45

Jan-

09

Mar

-09

May

-09

Jul-0

9

Sep

-09

Nov

-09

Jan-

10

Mar

-10

May

-10

Jul-1

0

Sep

-10

Nov

-10

Jan-

11

Mar

-11

May

-11

Jul-1

1


1.30

1.50

1.70

1.90

2.10

2.30

2.50

5

10

15

20

25

30

35

40

45

May

-09

Jul-0

9

Sep

-09

Nov

-09

Jan-

10

Mar

-10

May

-10

Jul-1

0

Sep

-10

Nov

-10

Jan-

11

Mar

-11

May

-11


Overall we are slightly above

consensus on BR Malls, though we are not sure of the amount

consensus expects to be

invested in acquisitions. ForMultiplan, the main difference vs

consensus depends on the

amount of deferred taxes.

We are not sure how the market

calculates the companies’

EBITDA and FFO, and therefore we are not sure if those lines are

comparable with our estimates.

+52% -31%

+6%

17



Not a dividend yield play yet

In 2010, BR Malls’ and Iguatemi’s net income payout stood at 25%, whileMultiplan’s payout was 50%, representing a dividend yield of almost 2.0%. Despite their lower payout, the dividend yields for BR Malls and Iguatemi were also around 2.0% in 2010. In our models we forecast a payout of 25% for the next 3 years, representing an average dividend yield of around 1.5% in both 2011 and 2012, based on current prices. However we believe this payout should increase as the companies’portfolios mature and capex decelerates.

Iguatemi stated that from 2011 to 2014 the company will distribute at least R$0.63/share of dividend and/or interest on own capital, representing a yield of more than 1.5% based on current prices.

Sector already trading more than US$30mn daily

None of the malls is included on the Ibovespa index yet, though we believe BR Mallsis quite likely to enter the index in September, during the next rebalance, with a weight of up to 0.5pp given its strong average daily liquidity of US$20mn. However, BR Malls, Multiplan and Iguatemi are already part of the IMOBBV index, with combined participation of 25% (BR Malls 15%, Multiplan 6% and Iguatemi 4%). Multiplan and Iguatemi trade on average US$6mn and US$4mn daily, respectively.

Figure 24: Aggregate avg. volume traded

US$ million

Source: Bloomberg and J.P. Morgan. *Average YTD.

Figure 25: Company’s liquidity on the last 30 days

US$ million

Source: Bloomberg and J.P. Morgan.

10

5

10

23

32

2007 2008 2009 2010 2011*

22.7

6.0

4.0

2.72.3

1.4

BRML3 MULT3 IGUA3 SSBR3 ALSC3 GSHP3

18



Figure 26: Company Volume Traded/Free Float

Percentage

Source: Bloomberg and J.P. Morgan. Priced as Jul-14th.

Stock performance – A defensive sector

We see the malls sector as defensive given its rent structure, which provides a hedge against inflation with potential upside to consumption expansion in Brazil. Large caps have outperformed the Bovespa in almost all periods, led by BR Malls. YTD the sector is down 7% (BR Malls +3%), outperforming the Ibovespa by 8pp and the IMOB (Bovespa real estate index) by 13pp. Last year the large caps were up 14-59% led by BR Malls (+59%). In the last month we’ve seen a significant correction in the sector, with large caps down 6-13% vs -3% from the IBOV. In our view this performance is explained by Bovespa outflows, risk aversion in emerging markets and lower inflation expectations and tighter monetary policy.

Since 2007 malls have outperformed the IBOV index on average 5pp during bear markets, except from November-07 to March-08, when the sector underperformed the IBOV, down 27% vs a contraction of 17% in the index. In Bovespa’s bullish periods, the sector on average outperformed by 24pp, helped by a strong outperformance of 130pp during Nov-08 to April-2010; excluding this period, on average malls underperformed the IBOV by 2pp, though during the last rally (Jul/Nov-2010) the sector outperformed the IBOV by 27pp. It is noteworthy that in the current bearish markets malls have outperformed the Ibovespa by 12pp since November 2010.

2.11.9 1.9

1.4

0.9

0.60.5 0.5 0.4 0.4 0.3

0.2 0.1

RSID GFSA GFSA MRVE PDGR BRML ALSC BBAS IGTA SSBR MULT VALE PETR

Brazilian mall companies trade

around 0.3-0.6% of their free float daily vs 1.0-2.0% from

Brazilian homebuilders and less

than 0.5% for Petrobras and Vale.

19



Figure 27: Malls relative to Ibov – Peaks and troughs (Feb-2007 = 100)

Source: J.P. Morgan and Bloomberg. Priced as of Jul-14th.

Table 11: Malls vs Ibov – During bear markets, the sector outperformed by 5pp on average

Period Malls IBOV Relative performance

Bearmarket

Bullmarket

Mar/Jul 07 46% 41% 5pp 5pp Jul/Aug 07 -13% -17% 4pp 4pp Aug/Nov 07 15% 35% (20)pp (20)ppNov/Jan 08 -27% -17% (10)pp (10)ppJan/May 08 17% 37% (20)pp (20)ppMay/Nov 08 -57% -57% 0pp 0pp Nov/Apr 10 260% 130% 130pp 130pp Apr/Jul 10 1% -18% 18pp 18pp Jul/Nov 10 50% 23% 27pp 27pp Nov/Now -6% -18% 12pp 12pp Avg. 5pp 24pp

Source: J.P. Morgan and Bloomberg. Priced as of Jul-14th.

In the table below, we can see the mall operators’ performance since each IPO and follow-on offer in the segment. Since 2007 we’ve had 6 IPOs and 5 follow-ons, totaling more than R$5bn (~US$3bn) raised. Stocks outperformed the IBOV by 34pp on average, with BR Malls outperforming the sector most of the time.

Table 12: Sector stocks’ relative performance after IPOs and Follow-ons

Stocks performance Outperformance vs IBOVDate BRML MULT IGTA IBOV BRML MULT IGTA

IGTA – IPO 6-Feb-07 NA NA 17% 32% NA NA (15)ppBRML – IPO 3-Apr-07 134% NA 10% 29% 105 pp NA (19)ppMULT – IPO 26-Jul-07 49% 34% 12% 11% 38 pp 23 pp 1 ppGSHP – IPO 26-Jul-07 49% 34% 12% 11% 38 pp 23 pp 1 ppBRML – Follow-on 18-Oct-07 37% 37% 25% -6% 43 pp 42 pp 31 ppBRML – Follow-on 1-Jul-09 130% 69% 90% 16% 114 pp 53 pp 74 ppMUTL – Follow-on 24-Sep-09 70% 24% 32% -1% 71 pp 25 pp 33 ppIGTA – Follow-on 22-Oct-09 65% 14% 21% -10% 75 pp 24 pp 30 ppALSC – IPO 27-Jan-10 67% 11% 21% -8% 76 pp 20 pp 29 ppSSBR – IPO 2-Feb-11 19% 8% -3% -11% 29 pp 19 pp 8 ppBRML – Follow -on 10-May-11 2% -3% -13% -8% 10 pp 5 pp (5)pp

Source: Bloomberg and BR Malls. Priced as of Jul-14th.

30

80

130

180

230

Feb

-07

Apr

-07

Jun-

07

Aug

-07

Oct

-07

Dec

-07

Feb

-08

Apr

-08

Jun-

08

Aug

-08

Oct

-08

Dec

-08

Feb

-09

Apr

-09

Jun-

09

Aug

-09

Oct

-09

Dec

-09

Feb

-10

Apr

-10

Jun-

10

Aug

-10

Oct

-10

Dec

-10

Feb

-11

Apr

-11

Jun-

11

BZ Malls IBOV

Since 2007 the sector has

outperformed the Ibovespa by

more than 100pp, and most of the companies are trading above

their IPO prices.

BR Malls is 134% above its IPO price, Multiplan +34%, Iguatemi

+17%, Aliansce +55% and SSBR

+19%. GSB is the only company below its IPO price, down 9%.

Malls have outperformed the

IBOV by 34pp on average or

21pp excluding BR Malls that outperformed its peers by 39pp

on average, pushing the sector

performance given its superior market cap.

20



BR Malls and Multiplan performance has been relatively similar since 2008, with stocks up 50-60% and outperforming the Ibovespa by 60-70pp, however, BR Malls has outperformed the segment since 2010, up 63% vs 3% from Iguatemi and 3% for Multiplan.

Figure 28: Stock performance has been very close since 2008 . . . .

Source: Bloomberg, priced as of Jul-14th.

Figure 29: . . . but BRML has significantly outperformed since 2010

Source: Bloomberg, priced as of Jul-14th.

Table 13: Stocks are trading 12-49% above their 52-week lows.

BRML MULT IGTA ALSC SSBR GSHP IBOV IMOB

Price performanceCurrent price 17.53 33.50 35.00 13.94 23.81 12.65 59,679 83752 weeks High 19.45 40.75 44.00 14.55 26.05 13.43 72,996 1,14452 weeks Low 11.95 30.00 31.16 11.15 19.45 8.50 59,679 836vs HIGH -10% -18% -20% -4% -9% -6% -18% -27%vs LOW 47% 12% 12% 25% 22% 49% 0% 0%Performance2009 136% 164% 162% NA NA 277% 83% 205%2010 59% 14% 22% 52% NA 53% 1% 10%YTD 5% -8% -17% 0% 19% 1% -15% -19%

Source: Bloomberg. Priced as of Jul-14th.

Malls have also outperformed traditional defensive sectors such as telcos and utilities, based on the Bloomberg benchmark indexes for those segments, ITEL Indexand IBOVIEE Index respectively. As can be seen in the figures below, since 2007malls have outperformed telcos and utilities by 65pp and 21pp respectively.

Figure 30: Malls performance since 2007 vs Telcos and Utilities


Figure 31: Malls performance since 2010 vs Telcos and Utilities


0

50

100

150

200

250

Jan-

08

Apr

-08

Jul-0

8

Oct

-08

Jan-

09

Apr

-09

Jul-0

9

Oct

-09

Jan-

10

Apr

-10

Jul-1

0

Oct

-10

Jan-

11

Apr

-11

BRML MULT IGTA IBOV

50

70

90

110

130

150

170

190

Jan-

10

Feb

-10

Mar

-10

Apr

-10

May

-10

Jun-

10

Jul-1

0

Aug

-10

Sep

-10

Oct

-10

Nov

-10

Dec

-10

Jan-

11

Feb

-11

Mar

-11

Apr

-11

May

-11

Jun-

11

BRML MULT IGTA IBOV

0

50

100

150

200

250

300

Feb

-07

May

-07

Aug

-07

Nov

-07

Feb

-08

May

-08

Aug

-08

Nov

-08

Feb

-09

May

-09

Aug

-09

Nov

-09

Feb

-10

May

-10

Aug

-10

Nov

-10

Feb

-11

May

-11

Malls Utilities Telco IBOV

70

90

110

130

150

170

Jan-

10

Feb

-10

Mar

-10

Apr

-10

May

-10

Jun-

10

Jul-1

0

Aug

-10

Sep

-10

Oct

-10

Nov

-10

Dec

-10

Jan-

11

Feb

-11

Mar

-11

Apr

-11

May

-11

Jun-

11

Jul-1

1

Malls Utilities Telco IBOV

Although companies are trading

4-20% below their 52-week

highs, they are outperforming the IBOV, year to date, by 6pp on

average.

21



Compelling Macro Scenario

Despite an expected deceleration in GPD growth this year, to 4.0% vs 7.5% in 2010, and a reduction in inflation expectations, we believe the macroeconomic scenario remains positive given low unemployment rates and healthy growth in wage mass in the last years.

According to IBGE (the Brazilian Bureau of Statistics), retail sales volume in Brazil increased 10% in 2010 and is up 69% since its bottom in 2003. This index reached 173 points in March-2011, representing 4% growth yoy. Moreover, unemployment is running at record-low levels of 6.4% as of May, with wage mass growing 13% over the last 12 months, given the reduction in unemployment and growth of 10% in real wages in the last 12 months, and reaching R$35bn as of May 2011.

Figure 32: Wage Mass and Unemployment

Unemployment Wage mass growth

Source: IBGE.

Figure 33: Retails sales (Jan-00 = 100) – Trend remains positive

(Jan-2003 = 100)

Source: Bloomberg.

Figure 34: Loans to individuals’ growth yoy

Source: Central Bank.

-15%

-10%

-5%

0%

5%

10%

15%

4%

6%

8%

10%

12%

14%

Mar

-03

Oct

-03

May

-04

Dec

-04

Jul-0

5

Feb

-06

Sep

-06

Apr

-07

Nov

-07

Jun-

08

Jan-

09

Aug

-09

Mar

-10

Oct

-10

Unemployment Wage Mass

70

90

110

130

150

170

190

210

230

250

Jan-

00

Jan-

01

Jan-

02

Jan-

03

Jan-

04

Jan-

05

Jan-

06

Jan-

07

Jan-

08

Jan-

09

Jan-

10

Jan-

11

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Jan-

02

Jun-

02

Nov

-02

Apr

-03

Sep

-03

Feb

-04

Jul-0

4

Dec

-04

May

-05

Oct

-05

Mar

-06

Aug

-06

Jan-

07

Jun-

07

Nov

-07

Apr

-08

Sep

-08

Feb

-09

Jul-0

9

Dec

-09

May

-10

Oct

-10

Mar

-11

Over the last 5 years credit to

individuals almost doubled,growing 163% and reaching

R$460bn in May. Over the last 12

months growth has averaged 27% yoy; moreover, NPLs for

individuals of 91 days or more

have been below 7.0% since March-2010.

22



Regional consumer analysis

Brazil secular growth in consumption is based on: i) Consumer credit growth, which has being growing above 10% since Jan-2010, reaching R$164bn in May vs only R$38bn in May-04, representing a CAGR of almost 30%; ii) Decrease in unemployment rates, 6.4% as of May; and iii) Market formalization, with 52% of occupied individuals having formal jobs, on average, for the large cities, vs 44% in 2002.

Although IBGE does not provide aggregate information regarding labor markets by region, looking to the main states of each region we can see that real wage growth in Rio de Janeiro and Recife grew 16% and 11% in the last 36 months.

Figure 35: Real Wage growth – Selected cities

Percentage

Source: Central Bank of Brazil.

Figure 36: Labor market formalization since April 2009

Percentage


Retail sales – North and Northeast posting superior growthIn the last 36 months, retail sales in Brazil have increased significantly. Northern and Northeastern retail sales increased 38% and 35% respectively, above the national average of 27%. The higher growth in the North and Northeast could be partially explained by government social programs such as Bolsa Família and other conditional cash transfer programs that were mainly focused on the North and Northeast. However, in the past 12 months, the South posted the second-strongest growth in retail sales, at 9.4% behind only the Northeast.

Figure 37: Retail Sales growth by regionPercentage


7.2

1.5

15.6

9.010.7

6.2

(1.0)

8.7

0.9

12.6

5.3

(0.5)

5.3

0.9

7.7

Porto Alegre São Paulo Rio de Janeiro Salvador Recife

36M Growth

24M Growth

12M Growth

56 56

4950 49

5554

48 47

44

52 53

45

47

43

Porto Alegre São Paulo Rio de Janeiro Salvador Recife

Apr-11 Apr-10 Apr-09

24.1 22.5 22.0

34.937.9

16.620.8 20.0

25.5

41.2

9.44.9 6.4

13.1

4.5

South Southeast Mid West Northeast North

Retail Sales Growth 36M Retail Sales Growth 24M Retail Sales Growth 12M

23



Is this growth sustainable? The regions with higher retail growth are also the regions with higher delinquency ratios for loans to individuals. As of April 2011, the Northern and Northeastern regions had respectively 4.7% and 4.6% nonperforming loans (NPLs) for loans to individuals versus 3.8% in the Southeast and Mid-West and 3.1% in the South. However, we note that NPLs have been decreasing and getting close to the lowest levels since October 2008.

Figure 38: Delinquency Loans to Individuals are higher in Regions with higher Retail growth


In addition, malls continue to capture a higher percentage of retail consumption as the sales growth in malls is running above traditional retail sales by around 4pp over the last 5 years, reaching 17% in 2010 vs 11% from traditional retail. In 2010, according to company releases, same store sales (SSS) ranged from 7% to 14% while SSS for retailers were at 6-10%. In 1Q11 companies reported 5-10% SSS yoy, with Aliansce and SSBR at the top of the range with 10.2% and 9.8% respectively.

Figure 39: Sales growth – Shopping Malls vs Traditional Retail

Source: Multiplan.

Resilient sector

The sector has also proved to be resilient during crises, as can be observed in the figure below. During the credit crisis of 2008-09, when average GDP growth was at 2.4%, sales grew 10%. Another good example is the Russian crisis and the real depreciation (1998-2000); in that period, GDP growth averaged 1.5%, with the average Selic over 21%. But mall sales grew 20%.

2

3

4

5

6

7

8

9

10

Jan-

04

May

-04

Sep

-04

Jan-

05

May

-05

Sep

-05

Jan-

06

May

-06

Sep

-06

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

South Southeast Mid West Northeast North

-4%

9%

5%6%

10% 9%

6%

11%13%

15%

9% 10%

16%

11%10%

17%

2003 2004 2005 2006 2007 2008 2009 2010

Retail Shopping Malls

24



Figure 40: Resilient mall sales during past crises

Source: BR Malls and J.P. Morgan estimates.

10 12 14 16 1823

2632

3642

4650

5865

71

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Avg. inflation (1995-2009): 7.6%

Avg. GDP (1995-2009): 2.9%

Sales CAGR (1995-2009): 15.0%

Mexican Crisis (94) &Asian Crisis (97)

Avg. GDP (95-97): 3.3%Avg. Inflation (95-97 ): 12.4%Avg. Int. rate (95-97): 34.5%Sales growth (95-97): 18.3%

Russian Crisis (98) &Real Depreciation (99)

Avg. GDP (98-00): 1.5%Avg. Inflation (98-00): 5.5%Avg. Int. rate (98-00): 21.3%Sales growth (98-00): 20.0%

2002 Crisis Lula Election


Sub prime Crisis (2008 and on)


25



Sector Valuation

Not a bargain, but potential upside remains attractive

In aggregate terms, including 5 of the 6 listed companies (there is no consensus for General Shopping), malls are trading at 16.0x P/FFO 12 months forward, a 16%discount to the peak (excluding the credit crisis period) reached on Nov-10, when the sector was trading at 19.1x and at a 1% premium to its average multiple since 2010. In terms of FFO yield, the sector is trading at 6.3%, 100bps above its low. During the credit crisis malls traded as low as 4.1x P/FFO in Oct-08. From a company perspective, at the bottom of the range we have SSBR trading at 13.9x and at the top BR Malls at 17.7x.

Figure 41: Historical P/FFO – Since 2010

Source: J.P. Morgan estimates, company data. Priced as of Jul-14th.

Figure 42: Historical FFO Yield – Since 2010

Source: J.P. Morgan estimates, company data. Priced as of Jul-14th.

While BR Malls has traded at a premium to its historical multiple since 2010, Multiplan and Iguatemi are trading at small discounts: In the charts below we compare companies’ historical FFO multiples and yields based on their 12 months forward figures. While BR Malls has traded at a premium of 8% to its average multiple since 2010, Multiplan is in line with its average at 14.9x, and Iguatemi is trading at a discount of 8%. In our view, BR Malls’ premium is warranted by thecompany’s superior execution and higher growth.

Figure 43: BR Malls Historical P/FFO

Source: Company reports, Bloomberg, and J.P. Morgan estimates. Jul-14th.

Figure 44: BR Malls Historical FFO Yield

Source: Company reports, Bloomberg, and J.P. Morgan estimates Jul-14th.

12

13

14

15

16

17

18

19

20

Jan-

10

Mar

-10

May

-10

Jul-1

0

Sep

-10

Nov

-10

Jan-

11

Mar

-11

May

-11

Jul-1

1

Avg 10-Now

4.0%

4.5%

5.0%

5.5%

6.0%

6.5%

7.0%

7.5%

8.0%

Jan-

10

Mar

-10

May

-10

Jul-1

0

Sep

-10

Nov

-10

Jan-

11

Mar

-11

May

-11

Jul-1

1

Avg 10-Now

12131415161718192021

Jan-

10

Mar

-10

May

-10

Jul-1

0

Sep

-10

Nov

-10

Jan-

11

Mar

-11

May

-11

Jul-1

1

Avg 10-Now

4.5%

5.0%

5.5%

6.0%

6.5%

7.0%

7.5%

8.0%

Jan-

10

Mar

-10

May

-10

Jul-1

0

Sep

-10

Nov

-10

Jan-

11

Mar

-11

May

-11

Jul-1

1

Avg 10-Now

26



Figure 45: Multiplan Historical P/FFO


Figure 46: Multiplan Historical FFO Yield


Figure 47: Iguatemi Historical P/FFO


Figure 48: Iguatemi Historical FFO Yield


12

13

14

15

16

17

18

19

Jan-

10

Mar

-10

May

-10

Jul-1

0

Sep

-10

Nov

-10

Jan-

11

Mar

-11

May

-11

Jul-1

1

Avg 10-Now

5.0%

5.5%

6.0%

6.5%

7.0%

7.5%

8.0%

8.5%

Jan-

10

Mar

-10

May

-10

Jul-1

0

Sep

-10

Nov

-10

Jan-

11

Mar

-11

May

-11

Jul-1

1

Avg 10-Now

12

14

16

18

20

22

Jan-

10

Mar

-10

May

-10

Jul-1

0

Sep

-10

Nov

-10

Jan-

11

Mar

-11

May

-11

Jul-1

1

Avg 10-Now

4.5%

5.0%

5.5%

6.0%

6.5%

7.0%

7.5%

8.0%

8.5%

Jan-

10

Mar

-10

May

-10

Jul-1

0

Sep

-10

Nov

-10

Jan-

11

Mar

-11

May

-11

Jul-1

1

Avg 10-Now

27



Sector risks

Deceleration/acceleration in consumer and domestic growth

Given the structure of rent contracts, a deceleration/acceleration in consumption growth and/or domestic GDP can affect companies, influencing rent readjustment and affecting our growth forecasts.

Higher- or lower-than-expected inflation

While malls provide a hedge against inflation given their rent contracts, which are adjusted annually by inflation, high/low inflation can impact consumption and domestic growth, impacting consumers’ disposable income and therefore impacting occupancy rates and reducing/increasing same store sales and margins. Higher-(lower)-than-expected inflation can also lead to higher- (lower)-than-expected interest rates slowing down/speeding up economic growth.

Higher- or lower-than-expected returns from greenfields, expansions, acquisitions

Although we have a conservative approach in our models, we rely on company estimates regarding capex, expected rents, opening schedules and project returns. It is important to flag that lower- or higher-than-expected construction and/or financial costs, delays in or faster-than-expected mall openings and higher- or lower-than-expected rents can impact our estimates and company’s returns. Acquisitions are, in our view, the most difficult item to forecast given all the uncertainties related to pricing and timing of transactions, and, given the difficulties in forecasting this item, we are not incorporating any expansion of GLA through acquisitions for Iguatemi and Multiplan but some for BR Malls given the company’s premium execution.

Higher- or lower-than-expected interest rates

Although on the leverage side the impact from higher interest rates is limited as part of each company’s debt is linked to TR (Taxa Referencial), which has a small correlation with the Selic, it can impact consumption and GDP growth for better or worse. Currently our economists forecast a year-end Selic of 12.75% vs 12.25% currently; for end-2012, we expect the Selic at 12.75%. Higher interest rates increase the attractiveness of fixed income assets such as government bonds.

E-commerce may take retail market share from malls

Despite being an underpenetrated market in Brazil, with an average of 49m2 in total GLA for each 1,000 inhabitants vs 81m2 for Mexico and 2,180m2 for the US, companies can lose market share to E-commerce given the services offered by those companies and the agility with which they allow consumers to compare prices.

Change in rent contract structure

Any change to the current contract structure can impact the expected return on future and current malls. In our view, these changes could include the removal of the “step up” clauses and the percentage-of-sales rent.

Mismatch between demand and supply

Though we don’t expect a short-term mismatch between demand and supply of GLA, an excess of GLA can impact companies’ bargaining power and, consequently, the amount of key money received, impacting the future returns. An imbalance couldalso cause a reduction in expected rents. Too little GLA could enhance returns.

Figure 49: Real GDP growth

Percentage


Figure 50: Inflation

Percentage


Figure 51: Target Selic rate

Percentage


(0.2)

7.5

4.0 3.8

2009 2010 2011E 2012E

4.3

5.9 6.5

5.0

2009 2010 2011E 2012E

8.8

10.8

12.8 12.8

2009 2010 2011E 2012E

28



Company Snapshots

BR Malls

Ready to keep growing. Premium execution. Initiate at Overweight

We initiate coverage of BR Malls with an Overweight rating and a Dec-12 price target of R$24.00/share, based on DCF valuation and representing potential upside of 39% from current levels despite the strong YTD performance of +3% vs -15% from IBOV. The company has a portfolio of 40 malls, mostly focused on economic classes B and C, with 634k m2 of owned GLA. BR Malls is the most diversified player in the sector, present in all the regions. The company has the best margins in the sector, reporting an EBITDA margin of 78.3% in 2010, and the best track record regarding acquisitions, which have totaled R$3.8bn since its IPO, with 33 transactions at an average cap rate of 10.3%. BR Malls is our top pick among the large caps.

Strong execution: In our view BR Malls has one of the best execution capabilities in the sector given its superior margins. In 1Q11 the company reported a 78.2% EBITDA margin, 18pp and 13pp above Iguatemi and Multiplan respectively. In addition, BR Malls has multiplied its GLA 4x since 2006 vs increases of 20-150% from peers. We also expect BR Malls to have the highest FFO in the sector by 2013,with more than R$600mn giving it resources to keep growing ahead of peers.

Consolidation player: Although BR Malls also has exposure to greenfields, expansions and multiuse projects, we believe the main growth drivers for the company are acquisitions, and given BR Malls’ track record and Brazil’s fragmented industry, we feel comfortable with our estimates, even considering the pipeline of R$1.9bn to be invested in the next 2 years.

Leverage is not an issue: We don’t expect BR Malls’ leverage to be a bottleneck for future growth given its strong cash generation by 2013 and comfortable leverage as we expect net debt to EBITDA to pick up to 3.3x by year end, or 2.3x if we exclude the perpetual bond not included in the BR Malls covenant. Considering BR Malls’cash generation by 2013 and its leverage levels, we believe the company can add up to 600k m2 to its own GLA by 2013, an increase of 66%, based on an average capex of R$5.5k/m2.

Liquidity: BR Malls is the most liquid name to play the sector, trading more than US$20mn daily vs US$3-6mn from peers. BR Malls’ liquidity is helped by its 100% free float and by its 3 follow-ons that amounted to R$1.6bn.

Valuation: Even though BR Malls trades at a premium to the other large caps of 5-10 % at 15.7x P/FFO 2012e, we believe this is justified by its higher projected growth as we expect the company to report growth of 51% in revenues this year and 36% in 2012 vs 7% and 20% from Iguatemi and Multiplan respectively.

Risks: The main risks to our price target and OW rating for BR Malls, in addition to changes in the macroeconomic scenario that would impact mall performance (such ashigher-than-expected interest rates and GDP contraction) are delays and lower-than-expected returns on acquisitions, which represent more than 70% of our estimatedcapex for the next 2 years.

Table 14: BR Malls

Market Cap (US$ mn) 4,928 Free Float 100%

Liquidity (US$ mn) 23

Target Price R$ (Dec-12) 24.00Upside 39%

P/FFO 2012e 15.7x

# of Malls 40


29



Multiplan

Multiple growth opportunities but limited upside. Initiate with Neutral

We initiate coverage of Multiplan with a Neutral rating and a Dec-12 price target of R$43.00/share, based on DCF valuation, representing potential upside of 29% from current levels. The company has a portfolio of 13malls, with 372k m2 of owned GLA, concentrated in the South and Southeast regions (10 of 13 malls) and focused on the higher-income classes. Multiplan has the best assets in the market, with 6 malls between the top-10 in rent and sales/m2. The company also has significant exposure to multiuse projects that will represent an additional 92k m2 in own GLA. Multiplan trades at 15.0x P/FFO 12e a vs 14.1x for Iguatemi and 15.7x for BR Malls. On a relative basis, it is our least-preferred Neutral stock given its exposure to multiuse projects

Premium portfolio: Based on the information released by listed companies in their 4Q10 releases, in terms of sales/m2, Multiplan has 6 malls in the top-10 list with Shopping at the top of the list with R$1.7k/m2, followed by Diamond Mall and Barra Shopping. In terms of rent/m2 Multiplan also has 6 malls on the top-10 list, withShopping Iguatemi São Paulo on top of the list and Shopping Morumbi in the 2ndposition, followed by Barra Shopping and Diamond Mall.

Strong balance sheet: Even though we expect Multiplan to end 2011 with a net debt position, the company ended the 1Q11 with net cash of R$382mn, or -0.9x net debt to EBITDA, the lowest leverage level among peers. According to our estimates andconsidering capex of R$1.5bn, leverage should peak at 0.8x net debt to EBITDA in 2012e. Moreover, considering the company’s leverage in 2013e and its significant cash generation, Multiplan could add up to 400k m2 in own GLA that year, representing a 64% increase to its own GLA in 2013.

Multiuse company: Multiplan’s exposure to multiuse projects is noteworthy given the company’s potential land bank of more than 500k m2. Multiplan will invest more than R$530mn into multiuse projects over the next years – R$500mn on commercial towers for rent, totaling own GLA of 92k m2, and R$30mn on projects to be sold, Cristal Tower and Centro Profissional Ribeirão, which are almost completely sold, generating a potential sales value (PSV) of R$145mn to Multiplan. It is important to flag that in our estimates we are not incorporating any value from projects to be developed from this land bank. Although we believe multiuse projects represent potential upside to our estimates, those projects, especially the one for sale, could result in lower-than-expected margins, given the risks involved in construction,leading to lower-than-expected results.

Valuation: Multiplan is trading at a premium to Iguatemi of 6% and at a 5% discount to BR Malls at 15.0x P/FFO 2012e. In our view, the premium to Iguatemi is not warranted given similar growth and higher execution risk from multiuse projects.

Risks: The main upside risk to our estimates for Multiplan is higher-than-expected GLA expansion given the company’s strong balance sheet, as in our estimates we consider only projects already announced by the company. On the other hand, lower-than-expected margins and/or lower-than-expected returns on greenfields and multiuse projects are the main downside risks to our estimates.

Table 15: Multiplan


Liquidity (US$ mn) 6


P/FFO 2012e 15.0x

# of Malls 13


30



Iguatemi

Strong pipeline of new projects fairly valued. Initiate with Neutral

We are initiating coverage of Iguatemi with a Neutral rating and a Dec-12 price target of R$49.00/share, based on DCF valuation and representing potential upside of 40% from current levels. The company has a portfolio of 13 malls, with 238 m2 of owned GLA, concentrated in the state of São Paulo (9 malls) and in the South region (4 malls), focused on the middle- and higher-income segments. The company’s portfolio also includes 2 commercial towers totaling GLA of 29k m2. Iguatemi is our preferred Neutral-rated stock given what we see as its relatively higher potential upside and lower execution risks. The company holds a 51% stake in Shopping Iguatemi São Paulo, the first mall opened in the country in 1966, and has the highest rent/m2 in the country at around R$210/m2. The company is trading at 15.7x P/FFO 2012e, a 5-11% discount to Multiplan and BR Malls.

Greenfields are main driver: Iguatemi will add more than 169k m2 in own GLA over the next years, through 6 greenfields, including Shopping Iguatemi Alphaville,opened on April with a 95% occupancy rate. The company has the largest pipeline of greenfield projects among the listed companies. Iguatemi expansion will continue to focus on the wealthiest regions of the state of São Paulo, such as Ribeirão, Jundiaíand São José do Rio Preto. We also recognize Iguatemi has a differentiated relationship with international brands vs peers and premium services in its malls,given its focus on higher-income segments. In our estimates we are not including an additional 100k m2 scheduled to be opened by 2014 in order to reach company guidance of 520k m2 in own GLA by 2014.

Strong balance sheet supports future growth: We expect Iguatemi to invest more than R$940mn over the next 3 years; however, given the company’s comfortable balance sheet, with a net cash position of R$98mn as of 1Q11, leverage should peak at 1.1x net debt to EBITDA by 2012, in our view, leaving room for additional GLA growth. According to our estimates, based on Iguatemi’s 2013e leverage and its FFO generation, the company has the potential to add up to 150k m2 in own GLA that year, representing a 35% increase to its own GLA in 2013e. In addition to greenfields, Iguatemi issued at the beginning of this year a R$330mn debenture, expected to be invested in opportunistic acquisitions not included in our estimates.YTD the company has already invested R$12mn for acquisition of a small stake in Shopping Esplanada.

Valuation and rating: Iguatemi trades at 14.1xP/FFO 2012e, a 6% discount to Multiplan and a 10% discount vs BR Malls. It is our preferred Neutral-rated stock after Aliansce given the relatively higher potential upside and cheaper valuation, though we recognize investors are concerned about Iguatemi’s execution capacity given the company’s delay on greenfield projects such as Shopping JK. However, we believe its execution risks are lower than Multiplan’s given its lower exposure to multiuse projects.

Risks: The main risks to our price target and Neutral rating on Iguatemi – in addition to potential changes in the macroeconomic scenario that would impact mall performance, such as higher-than-expected interest rates and GDP contraction – are higher-than-expected costs and/or delays on greenfield projects.

Table 16: Iguatemi


Liquidity (US$ mn) 4.0


P/FFO 2012e 14.1x

# of Malls 15


31



BR Malls

Ready to keep growing with premium execution. We initiatewith an Overweight rating and 39% potential upside

Overweight

Company DataPrice (R$) 17.21Date Of Price 15 Jul 1152-week Range (R$) 19.69 - 11.07Mkt Cap (R$ mn) 7,733.90Fiscal Year End DecShares O/S (mn) 449Price Target (R$) 24.00Price Target End Date 31 Dec 12

BR Malls (BRML3.SA;BRML3 BZ)

FYE Dec 2010A 2011E 2012E 2013EEPS Reported (R$)FY 0.66 0.83 1.06 1.33EPS Reported FY (R$) 0.66 0.83 1.06 1.33Revenues FY (R$ mn) 546 827 1,121 1,322EBITDA FY (R$ mn) 428 656 895 1,057Net Income - GAAP FY (R$ mn)

495 374 476 599

Bloomberg EPS FY (R$) 0.67 0.82 1.11 1.35Source: Company data, Bloomberg, J.P. Morgan estimates.

We are initiating coverage of BR Malls with an Overweight rating and a Dec-12 DCF-based price target of R$24.00/share, which represents potential upside of 39%.The company has the largest portfolio, with 40 malls and 634k m2 of owned GLA. It is also the most diversified player, with presence in all the regions and 12% market share. Moreover, BR Malls has the best margins and the best track record, havinggrown its total GLA more than 4x in the last 4 years vs 0.2-1.5x for peers. We see BR Malls as the main consolidator, investing close to R$2.0bn in acquisitions in the next 2 years. Since its IPO, BR Malls has invested R$3.8bn in acquisitions in 33 deals. BR Malls is our top pick among the large caps despite its relatively higher multiples as we believe they are justified by lower execution risk and higher growth.

Investment Thesis

Solid track record behind, strong pipeline ahead

We expect BR Malls to continue to grow aggressively, adding 300k m2 in own GLA over the next 3 years and growing its GLA by 60% in the period through acquisitions, greenfields and expansions, with 60% of this volume represented by acquisitions assuming an entry cap rate of 10%, in line with past acquisitions. For 2011 we expect an additional investment of R$1.9mn in this line.

Figure 52: Expansion pipeline (owned GLA in ‘000 m2)

Source: Company reports and J.P. Morgan estimates.

4

9

30

25

47

634

782

906 935

118

68

1Q11

Exp

ansi

ons

Gre

enfie

lds

Acq

uisi

ton

2011

E

Exp

ansi

ons

Gre

enfie

lds

Acq

uisi

ton

2012

E

Exp

ansi

ons

2013

E

Table 17: BR Malls




P/FFO 2012e 15.7x

# of Malls 40


BR Malls expects to open 1 greenfield this year and 2 in

2012. The company also has

announced 8 expansions ofexisting malls for the coming 2

years.

Including acquisitions, we believe BR Malls could have a

market share of 15% by 2013.

32



BR Malls has the largest track record of acquisitions, with 33 transactions over the last 4 years for R$3.8bn. During this period entry cap rates were between 8.5% and 11.6%. During its 2010 BR Malls day, the company stated that there are 75 malls that could be potential targets for BR Malls, totaling potential investment of R$18bn.

Figure 53: Capex on Acquisitions – Solid track recordR$mn Cap rate

Source: Company reports. *YTD as of May-2011.

Table 18: Expansion pipeline

Location GLA m2

Shopping State BR Malls 100% % Part. Opening

Campo Grande MS 3,811 5,515 69% 4Q11Plaza Niterói RJ 11,517 11,517 100% 2013Top Shopping RJ 7,668 15,336 50% 2013Osasco Shopping SP 4,297 10,852 40% 2012Shopping Recife PE 2,344 7,538 31% 2012Natal Shopping RN 4,344 8,688 50% 2013Independencia Shopping MG 6,031 7,231 83% 2013Norteshopping RJ 2,172 2,172 100% 2012Total Expansions 42,184 68,849 61.3%Mooca SP 25,178 41,963 60% 4Q11Estacao BH MG 21,790 36,317 60% 1Q12São Bernardo SP 25,403 42,338 60% 4Q12Total Greenfields 72,371 120,618 60.0%Paralela 2Q11 37,810 39,800 95% 2Q11Acquisition I TBA 39,800 39,800 100% 3Q11Acquisition II TBA 40,742 40,742 100% 4Q11Acquisition III TBA 17,015 17,015 100% 1Q12Acquisition IV TBA 17,015 17,015 100% 2Q12Acquisition V TBA 17,015 17,015 100% 3Q12Acquisition VI TBA 17,015 17,015 100% 4Q12Total Acquisitions 148,602 148,602 100.0%


Although BR Malls also has exposure to multiuse investments, in our numbers we are not considering the R$167mn expected to be obtained from those projects over the next 5 years.

Successful casesIn the figures below, from a BR Malls presentation, the company shows for selected projects the entry cap rate and the current cap rate, based on 2010 NOI. In most cases BR Malls suppressed its minimum threshold required of 12% after 3 years. Although the entry cap rate is below 10% for the select cases, it is important to focus on the returns obtained by the company, given BR Malls’ ability to improve mall results.

1,507

3,800

366232

1,301394

9.0%

8.5%

11.6%

9.9%10.3%

9.6%

2007 2008 2009 2010 2011* Total

Since 2007 BR Malls has

acquired stakes in 33 malls at

entry cap rates of 8.5% to 11.6%, investing more than R$3.8bn in

the period.

33



That upside and improvement are part of the company’s expertise and include: i) Revenue increases, given its relationship with retailers negotiating with national advertisers and merchandising campaigns, reductions in vacancy rates, contract renewals, among others; ii) Cost reduction, given economies of scale when hiring third parties and services; and iii) Cost synergies on the back of centralization of back office operations.

Figure 54: NOI growth for selected Malls


Figure 55: Cap rate evolution

Source: Company data. Considering the NPV of Campinas acquisition R$138mn.

Attractive acquisition prices

As can be seen in the table below, cap rates (net operating income or NOI/enterprise value) in Brazil remained constant over the last 12-18 months (above 10%) despite all the money raised by companies in this period, more than R$3bn (5 follow-ons and 2 IPOs), which could have led to a compression in cap rates given higher competition. Although Aliansce and Sonae Sierra Brasil have invested in acquisitions in the past, we consider BR Malls to be the company with the highest expertise in this type of transaction (it acquired more than R$1.0bn during 2010). Based on select BR Malls acquisitions, the IRRs of acquisitions were at 16.1% real and unleveraged vs the company’s initial expectation of 13.4%, given better-than-expected revenue growth and cost reductions.

41

65

1321

12

2416

34

2007 2010 2007 2010 2008 2010 2007 2010

Plaza Niterói Estação Campinas Tamboré

7.4%

12.2%8.8%

7.0%

11.9%

19.3%17.2%

15.3%

12.0%

2007 2010 2007 2010 2008 2010 2007 2010

Plaza Niterói Estação Campinas Tamboré

Entry Stabilized Min. stab. cap rate+61%

+58% +95%+119%

34



Table 19: BR Malls’ main recent acquisitions

Company Shopping Date:GLA total(’000 m2)

Stake acquired

Price(R$ mn)

Cap rate Details

BR Malls Via Brasil Shopping May-10 29.0 49% 103 11.9%* Greenfield development, opened in April-11.

BR Malls Independência Shopping Jun-10 23.5 75% 110 12.0%*Shopping was developed and inaugurated by BR Malls in April-08.

BR Malls Center Crystal Plaza Sep-10 12.3 40% 6011.7% (2011)

13.2%*

Acquisition paid in 2 installments, the first when the transaction was closed and the 2nd 365 days later, adjusted by the IGP-M.

BR Malls Center Shopping Uberlândia Sep-10 50.7 51% 20410.7% (2011)

13.1%* (stable)Expansion opened in April-10, totaling 19k m2.

BR Malls Tijuca Nov-10 35.4 100% 80010.6% (2011)12.2% (2015)

Includes 3 commercial towers for 11k m2.

BR Malls Shopping Campo Grande Nov-10 33.8 4% 9 10.9% (2011)Occupancy rate of 100%. Expansion of 5.3k m2 to be opened in 2011.

Aliansce Campo Grande Nov-10 17.4 6% 5 10.2% (2011)Cap rate not including a 3.6k m2 expansion to be opened in 2011.

BR Malls Crystal Plaza Jan-11 12.3 30% 43 11.5% (2011)IRR unleveraged of 13.4%, R$4.4mn additional NOI for 2011.

BR Malls Piracicaba Jan-11 27.8 19% 31 10.9% (2011)IRR unleveraged of 13.7%, R$3.4mn additional NOI for 2011.

BR Malls Curitiba Jan-11 23.1 14% 35 IRR unleveraged of 12.1%, stable NOI of R$27.4mn.

BR Malls Shopping Paralela Apr-11 39.8 95% 248 10.1% (2011)IRR real and unleveraged of 15.4%. Cap rate based on 12 months forward NOI.

Source: Company reports. * Based on NOI post improvements, usually reached in 2-3 years.

Worst-case scenario, no additional acquisitions: The FFO multiple is not very sensitive to acquisitions as fewer-than-expected acquisitions would have a positive impact on financial results. According to our estimates, considering no acquisitions,BR Malls’ price target would be R$22/share, which implies the company will be able to generate R$2/share investing its follow-on proceeds (R$716mn) at an entry cap rate of 10%.

Lower-than-expected cap rates: We ran a sensitivity analysis, considering that acquisitions would happen at an entry cap rate of 9% instead of the company’s guided rate of 10%. According to our estimates, this reduction of 1.0pp in the entry cap rate would mean a R$1.00 reduction in our price target to R$23.00.

Comfortable balance sheet to support acquisitions

Although BR Malls’ leverage is above industry average, we see this as a good bad thing, as in our view the company is making full use of its balance sheet, without compromising liquidity, having funded its above-average growth in the last 3 years.

After it raised R$731mn in its follow-on offer concluded in May this year, the company reduced its net debt to EBITDA by 1.2pp to 2.1x. According to our estimates, BR Malls' leverage should peak at 3.3x net debt to EBITDA, or 2.3x excluding its US$ perpetual bond, in 2011, significantly below its covenant of 3.8x. Based on our calculations, this comfortable leverage position leaves room for BR Malls to add over R$2.8bn in debt by 2013 before reaching its covenant, and this in turn represents a potential additional 600k m2 in own GLA, representing a 66% increase in BR Malls’ own GLA by in 2013.

In the table below we provide the breakdown of BR Malls’ leverage. We believe it is worth mentioning its US$-linked debt, which represents 26% of its debt portfolio. The company has two US dollar perpetual bonds on its balance sheet, totaling US$405mn. The first was issued in 2007 at US$+9.75%, totaling US$175mn callable in 2015; given a swap agreement. The second was issued in 2011 at US$+8.5%,

35



totaling US$230mn callable in 2016. Considering the hedges involved in those operations, the cost of debt is around 100% of CDI for the first bond and 99.5% for the second. BR Malls has a diversified debt portfolio, with TR (Taxa Referencial) representing 54% of its total debt. The company’s weighted average cost of debt was 12.5% in 1Q11.

Table 20: BR Malls debt structure as of 1Q11

Due date Index Rate per year Amount % of total

Unibanco - CCB Feb-19 IGP-M 9.7% 13 0.5%Itaú - CCB Feb-19 IGP-M 9.8% 14 0.6%Itaú - CRI Mar-20 TR 10.2% 66 2.5%Debentures Jul-14 CDI 0.5% 5 0.2%Debentures Jul-16 IPCA 7.9% 18 0.7%HSBC - Finame Feb-12 TJLP 3.7% 0 0.0%Santander Oct-19 TR 11.0% 5 0.2%Santander Dec-19 TR 10.0% 2 0.1%Itaú Oct-21 TR 11.2% 5 0.2%Itaú Feb-23 TR 11.0% 3 0.1%Banco do Brasil - Finame Aug-12 TJLP 3.8% 3 0.1%Bradesco - Finame Jun-12 TJLP 4.0% 1 0.0%Banco do Brasil May-13 DI 2.9% 3 0.1%Foreign currency USD 10 0.4%Total Current 148 5.6%Unibanco - CCB Feb-19 IGP-M 9.7% 56 2.1%Itaú - CCB Feb-19 IGP-M 9.8% 72 2.8%Itaú - CRI Feb-20 TR 10.2% 440 16.8%Bradesco Mar-25 TR 10.7% 504 19.2%Bradesco Jun-22 TR 9.8% 36 1.4%Debentures Jul-14 DI 0.5% 15 0.6%Debentures Jul-16 IPCA 7.9% 330 12.6%Santander Oct-19 TR 11.0% 88 3.4%Santander 43820 TR 10.0% 28 1.1%Itaú Oct-21 TR 11.2% 104 3.9%Itaú Feb-23 TR 11.0% 133 5.1%Bradesco - Finame Nov-12 TJLP 3,7% a.a. 0 0.0%Banco do Brasil Finame Nov-14 TJLP 4.5% 6 0.2%Banco do Brasil May-13 DI 2.9% 2 0.1%Foreign currency USD 661 25.2%Total Non-current 2,476 94.4%Total Debt 2,624

Source: Company reports.

Figure 56: Debt profile as of 1Q11


BR Malls’ debt includes 2

perpetual bonds, totaling US$405mn, for which it pays

around 100% of CDI including

hedges and swaps.

54%

1%6%

13%

26%

TR CDI TJLP

IGPM IPCA USD

36



Figure 57: BR Malls Amortization schedule

R$ in millions

Source: Company estimates.

Liquidity of more than US$20mn daily

BR Malls is the most liquid name in the segment, trading approximately US$20mn daily, more than 4x peers, which trade around US$2-5mn daily. The superior liquidity is explained by its superior free float, technically 100%, or 74.3% if we exclude the 4 largest shareholders, and its 3 follow-on offers, which amountedR$1.6bn, moreover. The company trades 0.6% of its free float daily vs 0.3-0.5% from peers.

Figure 58: BR Malls liquidity is 4x above peers’

R$ in millions

Source: Bloomberg and J.P. Morgan.

114 127

237 239 231 231150 151 142

94 76 69

861

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023+

23.5

5.6

3.63.0 3.0

1.9

BRML3 MULT3 IGUA3 ALSC3 SSBR3 GSHP3

37



Risks to Rating and Price Target

Acquisitions are the main downside risk: Even though the company has a significant and positive track record in M&A transactions, we cannot predict eitherthe implied cap rate on acquisitions or the time and returns on those projects. In our model we assume the company will invest R$1.9bn in acquisitions over the next 2 years at a 10% cap rate.

Deceleration in consumer and domestic growth can impact future growth

Given the structure of rent contracts, a deceleration in consumption growth and/or domestic GDP can affect BR Malls, influencing rent readjustment and affecting our growth forecast.

Higher-than-expected inflation can hurt consumption

While malls provide a hedge against inflation given their rent contract structure, in which contracts are annually adjusted by inflation, high inflation can impact consumption and domestic growth, impacting consumers’ disposable income and thereby impacting occupancy rates and reducing same store sales and margins. Higher-than-expected inflation can also lead to higher-than-expected interest rates slowing down economic growth.

Expected returns on greenfields, expansions and acquisitions might be lower than expected

Although we have a conservative approach in our models, we rely on company estimates regarding capex, expected rents, opening schedules and project returns. It is important to flag that higher-than-expected construction and/or financial costs, delays in mall opening and lower-than-expected rents can impact our estimates and the company’s returns.

BR Malls is the only company for which we include acquisitions in our estimates, given its track record. Even though execution risks are reduced on acquisitions vsgreenfields, we recognize there are some uncertainties related to pricing and timing on those transactions that make it difficult to forecast the contribution of this line to our results.

Higher-than-expected interest rates

Although on the leverage side the impact from higher interest rates is limited as part of company’s debt is linked to TR (Taxa Referencial), which has a small correlation with the Selic, it can impact consumption and GDP growth. Currently our economists forecast a year-end Selic of 12.75% vs 12.25% currently; for 2012 we expect the Selic to be at 12.75%. Higher interest rates increase the attractiveness of fixed income assets such as government bonds.


Despite being an under penetrated market in Brazil, with average of 49m2 in total GLA for each 1,000 inhabitants vs 81m2 for Mexico and 2,180m2 for a developedmarket like the US, companies can lose market share to E-commerce given the services offered by those companies and the agility with which they allow customers to compare prices on line.


Percentage



Percentage



Percentage


(0.2)

7.5

4.0 3.8

2009 2010 2011E 2012E

4.3

5.9 6.5

5.0

2009 2010 2011E 2012E

8.8

10.8

12.8 12.8

2009 2010 2011E 2012E

38



Change in rent contract structure

Any change to the contract structure can impact the expected return on future and current malls. In our view these changes could include the removal of the “step up” clauses and the percentage-of-sales rent.


Although we don’t expect a short-term mismatch between demand and supply of GLA, an excess of GLA could impact BR Malls’ bargaining power and,consequently, the amount of key money received, thereby impacting future returns.Furthermore, an imbalance can cause a reduction in expected rents.

Company Description

BR Malls is the largest integrated shopping mall company in Brazil. Its portfolio of 40 malls comprises 1.2mn m² of total GLA, of which 634k m2 are owned, foraverage participation of 52.0%. The company has the best geographic distribution in the sector, present in all regions and in 15 states. BR Malls also has the best margins in the segment, reporting an EBITDA margin of 78.3% in 2010. The growth drivers of the company are acquisitions, greenfields and expansions. The company has a proven track record in acquisitions, having invested R$3.8bn in them since 2007, in 33 transactions.

Financial Outlook

We expect BR Malls’ 2011 FFO (adjusted by properties’ fair value) to grow 34%(+29% next year) on the back of a 51% increase in revenues (+31% in GLA) that will come mainly from the opening of 2 expansions, Tambore and Campo Grande,and 2 greenfields, Via Brasil and Mooca. In 2012, we expect a 36% expansion in revenues, given the opening of the expansion of Osasco, Recife and Norteshopping as well as the opening of Estação BH and São Bernardo greenfields.

We expect the EBITDA margin to expand 110bps in 2011 and 40bps in 2012 to reach 79.8%, on the back of higher dilution of cash COGS and G&A. We expect cash COGS to represent 10.0% of revenues in 2011, a small improvement vs 1Q11and 2010. In 2012 we expect a further dilution, with cash COGS representing 9.5% of revenues. We also consider a dilution in G&A that should represent 9.2% of revenues this year vs 9.9% in 2010. In the long term, we expect BR Malls to have an80% EBITDA margin.

39



Figure 62: Net revenues growth


Figure 63: FFO growth


Figure 64: Cash COGS and G&A dilution


Figure 65: Capex and Net Debt to EBITDA


546

827

1,121

1,322

39%

51%

36%

18%

2010 2011E 2012E 2013E

285

383

493

619

31% 34%29% 25%

2010 2011E 2012E 2013E

11.0%10.0% 9.5% 9.5%9.9%

9.2% 8.8% 8.6%

2010 2011E 2012E 2013E

Cash Cogs as % of revenues G&A as % of revenues

1,6301,489

1,084

32

2.9x3.3x 3.0x

1.8x

2010 2011E 2012E 2013E

Capex Net Debt/EBITDA

Given BR Malls’ strong cash

generation, we expect net debt

to EBITDA to be at only 1.8x in 2013e as we are not assuming

acquisitions after 2012 in our

model.

40



Table 21: BR Malls Estimates SummaryR$ in million

2010 2011E 2012E 2013E 2014ECAGR

2010-2013EOperationalTotal GLA (eop) (k m2) 1,197 1,416 1,583 1,626 1,626 11%Owned GLA (eop) (k m2) 593 778 902 932 932 16%Average Stake % 50% 55% 57% 57% 57%Income StatementNet Revenues 546 827 1,121 1,322 1,450 34% cash costs (60) (83) (107) (126) (138) 28% depreciation (0) 0 0 0 0 -100%COGS (60) (83) (107) (126) (138) 28%Gross profit 486 744 1,015 1,197 1,312 35%NOI 448 687 943 1,126 1,241 36%Adm. expenses (54) (76) (99) (114) (125) 28%EBITDA 428 656 895 1,057 1,160 35%

Margin 78% 79% 80% 80% 80%Net financial result (94) (203) (301) (319) (241) 50%FFO 285 383 493 619 767 29%

Margin 52% 46% 44% 47% 53%Net Income 268 374 476 599 745 31%Balance SheetDebt 1,566 2,816 3,250 3,266 3,266Cash 318 623 551 1,331 2,329Net debt 1,248 2,193 2,699 1,935 937Equity 5,482 6,531 6,914 7,394 7,989RatiosDebt / Equity 29% 43% 47% 44% 41%Net Debt / Equity 23% 34% 39% 26% 12%Net Debt / EBITDA 2.9x 3.3x 3.0x 1.8x 0.8x


Valuation

BR Malls trades at premiums of 5% to Multiplan and 11% to Iguatemi based on P/FFO 2012e, and we believe these premiums are warranted by its superior growth. We see potential upside of 39% for BR Malls shares, based on our DCF-derived R$24.00/share price target for December 2012. Our DCF analysis assumes a WACC of 9.4% derived from a 3.4% risk-free rate, a 0.85 beta, 1.9% country risk and a 5.0%equity premium risk, and an assumption of 4.0% long-term growth. It currently trades at 15.7x. Our target price implies a target P/FFO 2013e of 17.4x.

Table 22: Shopping Malls Valuation

Share Mkt Cap Avg. Vol. P/BV EV/EBITDA P / FFO Cap ratePrice (R$) US$ mn US$ MM Current 11e 12e 11e 12e Curr

BR Malls 17.25 4,925 23.8 1.5 14.4 10.7 20.2 15.7 6.6%Multiplan 33.28 3,789 6.0 2.0 13.4 10.2 15.8 15.0 8.3%Iguatemi 35.00 1,762 3.9 1.9 12.6 9.8 16.7 14.1 7.9%Sonae Sierra Brasil 23.80 1,156 2.6 1.4 13.4 8.5 15.2 12.8 8.1%Aliansce 13.98 1,239 2.3 1.9 12.9 10.5 19.1 15.0 8.6%General Shopping (BBG cons) 12.70 407 1.2 1.6 9.8 8.3 n/a n/a 10.9%Average 6.6 1.7 12.7 9.7 17.4 14.5 8.4%

Source: J.P. Morgan estimates, Bloomberg, company data.

41



Table 23: BR Malls’ Premium/discount to peers

P/BV EV/EBITDA P / FFO Cap rateCurrent 11e 12e 11e 12e Curr*

to Multiplan -27% 7% 4% 28% 5% -1.7ppto Iguatemi -23% 14% 9% 21% 11% -1.3ppto SSBR 4% 7% 26% 33% 23% -1.5ppto Aliansce -24% 12% 2% 6% 5% -2.0ppto Average -15% 13% 11% 16% 8% -1.8pp


BR Malls Management Team and Controlling Shareholders

BR Malls was created in 2006, as the 5th-largest company in the segment, and was the result of a merge of ECISA (created in 1949), EGEC and Dacom (both companies created during the ’90s to provide services for ECISA), originated by GP Investments and Equity International.

Figure 66: BR Malls shareholder structure

Source: J.P. Morgan and company reports.

In theory BR Malls has a free float of 100% as it is a full corporation; however, Dyl Empreendimentos and Richard Paul Matheson, the founder of ECISA, have a combined stake of 10.3%, according to the company’s website. Other relevant shareholders include HSBC, Fidelity and Dogde & Cox with more than 5%. We believe it is worth highlighting Equity International’s 2.4% participation in BR Malls’ capital structure as the fund, owned by Sam Zell, was one of the main shareholders with a 27.5% stake pre-IPO on 2007.

BR Malls’ board of directors is composed of seven members, elected in shareholders’ meetings for two-year terms in office and with the possibility of re-election.

Free Float

5.3% 0.7%5.0%

Dyl Emp. e Part. S.A.Richard Paul

MathesonTreasury Free Float

89.0%

BR Malls

42



Table 24: Board members

Name Position Background

Richard Paul Matheson ChairmanJoined ECISA in 1960 and achieved the positions of chief financial officer and chief executive officer of the companyHolds a bachelor’s degree in economics from University Gama Filho

Carlos Medeiros Vice-Chairman

GP partner since 2002Member of the board of GP Investments, Gafisa, Tele Norte Leste Participações and Contax ParticipaçõesHolds a degree in Finance and Foreign Trade from New York University and has completed the TGPM Program at Harvard Business School

Fersen Lamas Lambranho Director

Co-chairman and co-CEO of GPFormer CEO of Lojas AmericanasAlso on the board of BR Properties, Magnesita, Allis, San Antonio, Estácio and Invest TurBachelor’s degree in engineering and master’s in business administration from Universidade Federal do Rio de Janeiro, also completing Owner President Management Program at Harvard Business School

Thomas Joseph McDonald DirectorDirector of Equity International and alternate director at Homex Development Corp.Graduated in international relations from the University of Notre Dame

David J. Contis DirectorReal estate president of Equity Group since 2006Former COO and executive vice president of Macerich CompanyHolds a bachelor's degree in law and finance from DePaul University in Chicago

José Écio Pereira da Costa Junior

Independent Director

Former auditing partner of Arthur Andersen & Co and Deloitte Touche Tohmatsu in BrazilFounder of the consulting company JEPereira Consultoria em Gestão de NegóciosGraduate in business administration from Escola de Administração de Empresas de São Paulo of Fundação Getulio Vargas and bachelor’s degree in accountancy from Faculdade São Judas Tadeu

José Marcio Camargo Independent Director

Worked as a consultant for The World Bank, The Interamerican Development Bank, The International Labor Organization and The United Nations UniversityGraduate in economics from Universidade Federal de Minas Gerais and Ph.D. in economics from Massachusetts Institute of Technology


Table 25: Management team


Carlos Medeiros Chief Executive Officer

GP partner since 2002Member of the board of GP Investments, Gafisa, Tele Norte Leste Participações and Contax ParticipaçõesHolds a degree in finance and foreign trade from New York University and has completed the TGPM Program at Harvard Business School

Leandro Bousquet VianaChief Financial Officer and Investor Relations

Officer

Joined BR Malls in 2006More than 15 years’ experience in the real estate sectorWorked for UBS Pactual, CR2 Bank and BBM BankGraduated in economics from Pontifícia Universidade Católica do Rio de Janeiro and holds an EP degree from Stanford University

Ruy Kameyama Operations DirectorFormer investment bankerBachelor’s degree in economics from IBMEC-Rio de Janeiro, master’s from Harvard Business School

Luiz Alberto QuintaCommercial and

Developments Director

22 years of experience in shopping malls administrationHeld the position of COO in Multiplan Group before joining BR MallsBachelor’s in engineering from Universidade Federal de Goiás, graduated in administration from Ibmec – Rio de Janeiro and in business management in FGV – Rio de Janeiro, with post-graduate work at the University of California Irvine, and concluded the EDP Program at the University of Pennsylvania’sWharton School of Business Administration


Recent Events

In December 2010, the company completed the acquisition of the remaining 50% itdidn’t own in Tijuca for R$375mn, for a total 100% stake in this mall and adding 17.7k m2 in own GLA to its portfolio. According to the company, the entry cap rate for Tijuca was 10.0% and is expected to reach 12.2% when stabilized. Tijuca has 287 stores (5 anchors) and 1,300 parking slots. The two commercial towers of the complex represent 10.7k m² of GLA and R$25mn of the total value paid.

43



In January 2011, BR Malls increased its interest in Shopping Center Crystal Plaza, by 30pp for R$43mn, after acquiring 40% in September 2010. The transaction adds 3.6k m² of own GLA, with an initial cap rate of 11.5%. Situated in Curitiba, Crystal Plaza has 147 stores and 600 parking slots.

Also in January, the company acquired for R$31mn an additional 15.3% stake of Shopping Piracicaba, achieving 34.4% participation. It had an entry cap rate of 11.5% and added 4.3k m² of own GLA to BR Malls portfolio, totaling 9.5k m² in this mall. According to the company, an expansion is already planned for the mall due to high demand. Currently, it has 27.8k m² of total GLA, with 145 stores (9 anchors) and 2,000 parking slots.

In the same month, BR Malls paid R$34.6mn for an additional 3.2k m² of own GLA in Shopping Curitiba, representing a 14% stake. The mall has currently 0% vacancy, with 150 stores and 1,000 parking spaces.

Also in January, BR Malls sold its stake of 3.4% (815m²) on Esplanada Shopping for R$11.8mn to Iguatemi. This stake was acquired in November 2007 for R$7mn. According to company calculations, the investment generated a 16.7% IRR. Located in Sorocaba, the mall has 180 stores and 2,000 parking slots.

April 2011 marked the opening of Via Brasil Shopping, in which the company has a 49% stake acquired in 2010, adding 15.0k m² to its own GLA. The mall is located in Rio de Janeiro and had 95% of its GLA leased at opening. It has 189 stores and 2,850 parking slots, with a small expansion (1.1k m²) expected to be finished in the second half of the year, when it will reach 31.8k m² of total GLA.

Also in April, BR Malls inaugurated the expansion of Shopping Tamboré, adding 15.1k m² to the company’s own GLA. Acquired by BR Malls in 2007, Tamboré has 3 anchors, 3 megastores and 68 satellites, in 46.8m² of total GLA. The expansion began in October 2009, also adding parking spaces and a retrofit of the common areas, totaling R$124mn capex. The company financed the project with R$92.5mn of debt, due in 12 years, at a rate of IGP-M+7.75%.

In May 2011, the company acquired a 95% stake in Shopping Paralela for R$285mn (R$237.5mn for the mall and R$47.5mn for parking operations), representing a 10.1% initial cap rate. This mall is located in Salvador and has a total GLA of 39.8k m2; the occupancy rate is 91.5%, below BR Malls’ average 98.1%. Shopping Paralela has 350 stores (4 anchors and 9 megastores) and more than 2,400 parking spaces.

Also in May, BR Malls announced a follow-on offer, finished in June, totaling R$731mn, through the issuance of 42.5mn shares at R$17.20 per share. The main focus of these funds will be acquisitions of stakes in shopping malls.

44



Multiplan

Multiple growth opportunities, but limited upside and FFO growth. Initiate with Neutral

Neutral


Multiplan (MULT3.SA;MULT3 BZ)

FYE Dec 2010A 2011E 2012E 2013EEPS Reported (R$)FY 1.22 1.43 1.55 2.06EPS Reported FY (R$) 1.22 1.43 1.55 2.06Revenues FY (R$ mn) 604 649 778 965EBITDA FY (R$ mn) 357 426 532 711Net Income - GAAP FY (R$ mn)

218 256 278 369


We are initiating coverage of Multiplan with a Neutral rating and a Dec-12 DCF-based price target of R$43.00/share, which represents potential upside of 29%. The company has a portfolio of 13malls, with 372k m2 of owned GLA, and is concentrated in the South and Southeast regions (10 of 13 malls), with a focus on higher-income segments. Multiplan has the best assets in the market, with 6 malls between the top-10 in rent and sales per square meter. In addition to its pipeline of greenfields, the company has significant exposure to multiuse projects that will represent an additional 92k m2 in own GLA, or 37% of our expected GLA growth by2013. Multiplan is trading at a 5% discount to BR Malls and at a 6% premium to Iguatemi on P/FFO 12e. On a relative basis, we prefer Iguatemi vs Multiplan as we see lower execution risk in Iguatemi given Multiplan’s exposure to multiuse projects.

Investment Thesis

Strong and solid balance sheet to support future growth

In our view, Multiplan is the company likeliest to post higher-than-expected growth in its GLA given its comfortable leverage. According to our calculations, the company can add 399k m2, or around 64% of its expected own GLA in 2013, based on its FFO generation and leverage position in Dec-2013. This is a consequence of the company’s comfortable cash position as Multiplan ended 1Q11 with a net cash position of R$382mn or -0.9x net debt to EBITDA, the lowest leverage among the listed companies. Based on Multiplan’s current capex schedule of R$1.5bn over the next 3 years, leverage should be only 0.8x net debt to EBITDA in 2012.

Table 26: Multiplan




P/FFO 2012e 15.0x

# of Malls 13


45



Figure 67: Expansion PipelineOwn GLA ‘000 m2

Source: J.P. Morgan and company reports.

Over the next 2 years Multiplan expects to open 5 greenfield projects, with the opening of Park Shopping São Caetano expected for 4Q11 and the other 4 malls –Village Mall, Jundiaí, Park Shopping Campo Grande and Maceió – expected to be opened by 2012YE. Based in 1Q11 information, all the malls under construction (only Maceio has not started yet) had more than 50% of their stores leased, with São Caetano Mall expected to be opened this year 86% leased.

Regarding multiuse, Multiplan also has 3 commercial towers in the pipeline, adding 92k m2 to its own GLA over the next 3 years and adding around R$120mn inrevenues in 2014e. In our estimates we consider monthly rent/m2 of R$90-95, adjusted by inflation, for those projects.


Location GLA m2

Shopping State Multiplan 100% % Part. Opening

Park Shopping São Caetano SP 38,661 38,661 100% 4Q11Village Mall RJ 25,580 25,580 100% 4Q12Jundiaí Shopping SP 35,655 35,655 100% 3Q12Park Shopping Campo Grande RJ 37,690 41,878 90% 4Q12Shopping Maceió AL 18,203 36,405 50% 4Q12Total Greenfields 155,789 178,179 87.4%Morumbi Business Center SP 10,635 10,635 100% 1Q12Park Shopping Corporate DF 6,680 13,360 50% 4Q12Morumbi Corporate SP 74,198 74,198 100% 3Q13Commercial Real Estate for Lease 91,513 98,193 93.2%


Multiuse projects – Interesting way to extract value from land bankOver the last years Multiplan has developed more than 800k m2 of multiuse projects in more than 50 developments, including residential and commercial buildings such as Centro Profissional Morumbi Shopping and Chácara Santa Helena in SP andBarra office towers, Golden Green, Royal Green Península in Rio de Janeiro.

Currently the company has 5 multiuse projects under development and expects to invest more than R$530mn in these projects, with R$500mn for 3 commercial towers for rent – Morumbi Business Center, ParkShopping Corporate and Morumbi Corporate – adding more than 90k m2 to company’s GLA. Multiplan should investthe R$30mn in the short term to conclude two real estate assets to be sold, named Cristal Tower and Centro Profissional Ribeirão, which are almost completely sold

39

117

372410

527 545

619

17

74

1Q11 Greenfield 2011E Greenfield 2012E Multiuse 2013E Multiuse 2014E

Multiplan should open 1

greenfield this year, Park São Caetano, located in SP, and 4 in

2012, with 2 projects located

outside the Southeast region at Maceio and Alagoas, both in the

Northeast region.

46



(more than 90% as 1Q11), generating potential sales value (PSV) of R$145mn to Multiplan. Most of this revenue will flow to Multiplan’s income statement in the coming years as Centro Profissional Ribeirão construction started in 1Q11.

In our view, multiuse projects – especially those for sale, which need to have theirrevenues and costs flowing through the income statement and balance sheet, thereby distorting company results and margins as this segment has lower margins when compared with Multiplan’s core business – represent an opportunistic approach to developing excess construction capacity available in the company’s land bank, increasing the flow and demand for its malls and developing the surrounding areas.


Mall Multiplan stake Project Land size m2

Barra Shopping Sul 100% Residential, Hotel 12.1Campo Grande 90% Residential, Commercial 71.5Maceió 50% Residential, Commercial, Hotel 140.0Jundiaí 100% Commercial 4.5Park Shopping Barigüi 84% Apart-Hotel 0.8Park Shopping Barigüi 94% Commercial 27.4Pátio Savassi 96% Commercial 2.6Ribeirão Shopping 100% Residential, Commercial, Medical Center 195.9São Caetano 100% Commercial 24.9Shopping Anália Franco 36% Residential 29.8Total 81% 509.5


To give one example of the potential from multiuse projects, last month Multiplan announced its new master plan for Ribeirao Shopping (46.8k m2, Multiplan stake 76%) that includes 3 expansions, adding up to 32k m2 in total GLA (+45% vs current GLA). The master plan also includes a parking deck with 1,200 parking slots, 1 hotel and an apart-hotel with 19.2k m2 and 4 residential towers with 86k m2. According the company, further details on expected capex and on timing for this development will be announced in the future. We’ll wait for the details before including these projects in our estimates. In a back-of-the-envelope calculation, if we assume a price/m2 of R$6,000, in line with the prices obtained in Centro Profissional Ribeirão, Multiplanwould generate around R$630mn of PSV on those projects.

FFO growth in the short term is not a trigger

We believe Multiplan will report a lower-than-peers’ FFO growth over the next 2 years at 2/5% vs 10-30% from peers. This is a consequence of lower revenues growth, higher financial costs and higher taxes. Regarding revenues, we have a CAGR (10-13e) of 17% vs 34% for BR Malls and 22% for Iguatemi. In addition,Multiplan’s and Iguatemi’s FFO will be impacted by higher financial expenses as the companies will end 2011e with a net debt position. In the case of Multiplan, the company also expects it effective tax rate (excluding deferred taxes) to increase in the coming quarters.

Despite our expected growth of 12% in revenues from the current portfolio this year, we expect Multiplan net revenues to grow only 7%, on the back of a contraction in real estate revenues and key money of 12% and 11% yoy respectively. Moreover, we expect weak growth in services of 4% yoy, and, given this, we expect 2% growth in FFO in 2011 despite the expected improvement in EBITDA margin, which weexpect to rise 890bps this year to 69.3%. For 2012, we expect 20% growth in

It is important to flag that in this

table, land bank and projects are

illustrative and only suggest the types of investments that may

be made. Moreover the land size

does not represent potential construction capacity.

47



revenues and 6% growth in FFO, on the back of an increase in financial expenses resulting on a loss of R$35mn vs a gain of R$21mn in 2011e.

Why do we prefer Iguatemi vs Multiplan?

We believe Multiplan is likelier to deliver growth above expectations; however, we believe Multiplan’s slower growth in the short term and intensive development of multiuse projects could mean that the real estate assets to be sold end up reducing the company’s margins and exposing investors to a different type of risk.

Multiplan’s debt structure – Current debt cost is below Selic

In addition to Multiplan’s comfortable leverage position, mentioned before, its cost of debt is also relatively cheap. In 1Q11 the company had an aggregate debt cost of 11.9%, below the Selic rate (12.25%), as most of its debt is linked to fixed rates plus TR (48%), resulting in an average cost for this line of 10.6%. Multiplan’s most expensive debt was a 2-year debenture, issued in June-2009 at 117% of CDI and totaling R$100mn, representing 19% of Multiplan’s debt outstanding, but paid on June this year.

Table 29: Multiplan Debt structure as of 1Q11

Due date Index Rate per year Amount (R$mn) % of totalBNDES TJLP and UMBNDES 5.2% 1 0%Real TR 10.0% 19 6%Itaú TR 10.0% 2 1%IBM CDI 0.8% 1 0%IBM CDI 1.5% 2 1%BNDES TJLP 3.5% 9 3%Real TR 10.0% 11 4%Others (0) 0%Current 46 15%

Real TR 10.0% 81 27%Itaú TR 9.8% 56 19%Itaú TR 10.0% 9 3%IBM CDI 0.8% 1 0%IBM CDI 1.5% 5 2%BNDES TJLP 3.5% 22 7%Real TR 10.0% 84 28%Others (5) -2%Non-current 254 85%Total Debt 299 100%


Figure 69: Multiplan Amortization schedule


173

7589

6551

2718

40

2011 2012 2013 2014 2015 2016 2017 2018+

Figure 68: Debt Breakdown by index


Multiplan amortization of

R$173mn is mostly represented

by the payment of interest and principal of its 2-year debenture

issued in June-2009 and paid on

June this year.

48%

21%

6%

13%

12%

TR CDI TLJP IGPM IPCA

48




Expansions and multiuse projects are the main upside risk to our estimates: As we are incorporating only already-announced projects in our GLA growth estimates, we believe Multiplan could surprise on the upside given its significant land bank, its potential to leverage its balance sheet and its track record developing multiuse projects. On the other hand, lower-than-expected margins and returns on those projects are the main downside risks to our thesis, as weak returns on the real estate side could compromise mall returns.

Deceleration/acceleration in consumer and domestic growth

Given the structure of rent contracts, deceleration or acceleration in consumption growth and/or domestic GDP can affect Multiplan, influencing rent adjustment and affecting our growth forecast.


While malls provide a hedge against inflation given their rent contracts, in which contracts are annually adjusted by inflation, high inflation can impact consumption and domestic growth, thereby impacting consumers’ disposable income and, thus,same store sales and margins. Higher-than-expected inflation can also lead to higher-than-expected interest rates slowing down economic growth. Conversely, the less inflation there is, the more money there is for everyone to spend at the mall.

Expected returns from greenfields, expansions and acquisitions

Although we have a conservative approach in our models, we rely on company estimates regarding capex, expected rents, opening schedule and project returns. It is important to flag that higher- or lower-than-expected construction and/or financial costs, unexpected delays or advances in mall openings and higher- or lower-than-expected rents can impact our estimates and the company’s returns.

Interest rates

Although on the leverage side the impact from higher interest rates is limited as part of company’s debt is linked to TR (Taxa Referencial), which has a small correlation with the Selic rate, higher interest rates can impact consumption and GDP growth. Currently our economists forecast a year-end Selic of 12.75% vs 12.25% currently, and for 2012 we expect the Selic to be at 12.75%. Moreover, higher interest rates increase the attractiveness of fixed income assets such as government bonds.


Despite malls being an underpenetrated market in Brazil, with an average of 49m2 in total GLA for each 1,000 inhabitants vs 81m2 for Mexico and 2,180m2 for the US, companies can lose market share to E-commerce given the services offered by those companies and the agility with which they allow customers to compare prices on line.

Changes in contract structure

Any change to the current contracts structure can impact the expected return on future and current malls. In our view, these changes could include the removal of the “step up” clauses and the percentage-of-sales rent.


Percentage



Percentage



Percentage


(0.2)

7.5

4.0 3.8

2009 2010 2011E 2012E

4.3

5.9 6.5

5.0

2009 2010 2011E 2012E

8.8

10.8

12.8 12.8

2009 2010 2011E 2012E

49



Company Description

Multiplan holds a premium portfolio, with 6 malls in the top ten lists of rent/m2 and sales/m2, given the company’s focus on higher-income segments. It owns an average share of 67.4%, for the highest overall participation among the large caps. From a total 551k m² GLA, it possesses 372k m² in 13 malls, of which 77% are situated in Brazil’s Southeast region. In addition to shopping malls, Multiplan has investments in residential and commercial real estate assets, searching to attain synergies with its core business. In our view these multiuse projects help to leverage company’s growth and portfolio. Multiplan was founded and is controlled by the Peres family, which holds a 32% stake in the company.

Financial Outlook

We expect timid growth in net revenues this year, only 7% vs 20-50% from peers,mainly as a result of lower real estate revenues (-12% yoy) and lower key money revenues (-9%). We expect 12% growth in its current portfolio and 4% in revenues from services. This translates to only 2% growth in FFO (adjusted by deferred taxes), the lowest growth among its peers.

For 2012 we expect a 20% increase in revenues as we expect the company to open Shopping São Caetano (39k m2) in 4Q11 and the Morumbi Business Center (11k m2) in 1Q12. However, FFO should grow only 6% given the increase in leverage as company debt should peak in 2012e at 0.8x net debt to EBITDA, resulting in a net financial loss of R$35mn vs a projected gain of R$21mn in the previous year.

For 2013 we expect strong growth of 23% in revenues given the opening of 4 greenfields in 4Q12 – Village Mall (26k m²), Jundiaí Shopping (36k m²), Park Shopping Campo Grande (42k m²) and Maceió (36k m²). These shopping malls should increase the company’s year-end GLA by 29%.

To compensate for the lower revenue growth, we expect EBITDA margins to expand 890bps in 2011 and 160bps in 2012, on the back of higher dilution of cash COGS and G&A as there were one-offs in 2010. We expect cash COGS (including real estate for sale) to represent 16.8% of revenues in 2011, an improvement vs the 18.6% reported in 1Q11 but in line with 2010. For 2012 we expect further dilution, to 14.4%, as the participation of real estate for sale starts to decline in the Multiplan revenue mix. The significant improvement in EBITDA margin in 2011e is mainly the result of a contraction in SG&A that was negatively impacted in 2010 by Multiplan’s 35th anniversary advertising campaign and elections, reaching 23.5% of revenues vs our expectation of 17.3% for 2011.

50











604 649

778

965

25%

7%

20%24%

2010 2011E 2012E 2013E

368 377 398

498

6%

2%

6%

25%

2010 2011E 2012E 2013E

14.6%16.2% 16.8%

14.4%

10.0%

19.0%16.3%

14.3% 14.0% 14.0%

2009 2010 2011E 2012E 2013E


442

855

635

113

(1.1x)

0.3x

0.8x

0.4x

2010 2011E 2012E 2013E

Capex Net Debt/EBITDAOf the R$850mn expected to be

invested this year, Multiplan

disbursed R$104mn in 1Q11.

51



Table 30: Multiplan Estimates SummaryR$ in million

2010 2011E 2012E 2013E 2014ECAGR

2010-2013OperationalTotal GLA (eop) (k m2) 552 590 754 828 828 14%Owned GLA (eop) (k m2) 372 410 545 619 619 19%Average Stake % 67% 69% 72% 75% 75%Income StatementNet Revenues 604 649 778 965 1,109 17% cash costs (98) (109) (112) (96) (122) -1% depreciation (45) (55) (62) (72) (78) 18%COGS (143) (164) (174) (169) (200) 6%Gross profit 462 485 604 796 909 20%NOI 425 481 611 837 966 25%Adm. expenses (99) (93) (109) (135) (155) 11%EBITDA 357 426 532 711 823 26%

Margin 59% 66% 68% 74% 74%Net financial result 44 21 (35) (67) (39) -216%FFO 368 377 398 498 559 11%

Margin 44% 48% 44% 46% 48%Net Income 218 256 278 369 458 19%Balance SheetDebt 409 509 809 959 959Cash 795 396 358 699 1053Net debt (386) 113 450 260 (94)Equity 2,965 3,267 3,494 3,808 4,189RatiosDebt / Equity 14% 16% 23% 25% 23%Net Debt / Equity -13% 3% 13% 7% -2%Net Debt / EBITDA (1.1x) 0.3x 0.8x 0.4x (0.1x)


Valuation

Multiplan is trading at 15.0x P/FFO 2012e, a 6% premium to Iguatemi and a 5%discount to BR Malls. We see potential upside of 29% for Multiplan shares, based on our DCF-derived R$43.00 price target for end-December 2012. Our DCF analysis assumes a WACC of 9.3% derived from a 3.4% risk-free rate, 0.9 beta, 1.9% country risk and an assumption of 4% long-term growth. Our target price implies a target P/FFO 2013e of 15.5x.



Multiplan 33.28 3,789 6.0 2.0 13.4 10.2 15.8 15.0 8.3%BR Malls 17.25 4,925 23.8 1.5 14.4 10.7 20.2 15.7 6.6%Iguatemi 35.00 1,762 3.9 1.9 12.6 9.8 16.7 14.1 7.9%Sonae Sierra Brasil 23.80 1,156 2.6 1.4 13.4 8.5 15.2 12.8 8.1%Aliansce 13.98 1,239 2.3 1.9 12.9 10.5 19.1 15.0 8.6%General Shopping (BBG cons) 12.70 407 1.2 1.6 9.8 8.3 n/a n/a 10.9%Average 6.6 1.7 12.7 9.7 17.4 14.5 8.4%


52



Table 32: Multiplan Premium/discount to peers


to BR Malls 38% -7% -4% -22% -5% 1.7ppto Iguatemi 6% 7% 5% -5% 6% 0.4ppto SSBR 43% 0% 21% 4% 17% 0.2ppto Aliansce 5% 4% -2% -17% 0% -0.3ppto Average 17% 5% 6% -9% 3% -0.1pp


Multiplan Management Team and Controlling Shareholders

Multiplan was found in 1975 by the Peres family and has more than 35 years of experience in the segment, having developed top-ranked malls such as Shopping Morumbi in São Paulo (opened in 1982), Barra in Rio de Janeiro (1981) and BH Shopping in Belo Horizonte (1979). The company is controlled by Multiplan Participações e Administração S.A (31.3%), which belongs to the Peres family and Ontario Teachers’ Pension Plan – OTPP (29.1%) – which acquired its stake in Multiplan in July-2006. OTPP has assets under management of more than US$100bn, and also owns Cadillac Fairview, one of the largest mall developers in North America, with over 4.6mn m2 of GLA.

Figure 77: Multiplan’s shareholder structure


Multiplan Plan. Part. e Adm. S.A.

Ontario Teachers’ Pension Plan

Treasury Free Float

31.5% 29.1% 0.7% 38.7%

Multiplan

53





José Isaac Peres ChairmanElected in 2010, his term of office ends in 2012Founding member of ABRASCE and the Association of Managers of Real Estate CompaniesHolds a degree in economics from Faculdade Nacional de Economia da Universidade do Brasil

Eduardo Kaminitz Peres Vice ChairmanJoined the company in 1988Graduated in business administration from Universidade Cândido Mendes

Leonard Peter Sharpe Member

Member of the International Council of Shopping Centers and of Building Owners and Managers AssociationCurrently Cadillac Fairview's chief executive officerGraduate in economics and business administration from Waterloo Lutheran University in Canada

Andrea Mary Stephen MemberCurrent executive vice president of investments at Cadillac FairviewGraduate in business from St. Francis Xavier University and chartered accountant

Edson de Godoy Bueno Member

Member of the board since 2007Founder of the Amil group (healthcare), for which he is currently chairman of the board of directorsGraduate in business administration from Pontifícia Universidade Católica do Rio de Janeiro and Harvard Business School and in medicine from Faculdade Nacional de Medicina da Praia Vermelha

José Carlos de A. S. Barata MemberFormer CEO of Furnas Centrais Elétricas S.A. and Grupo BozanoGraduate in civil and economic engineering from the Universidade do Brasil

Manoel Joaquim R. Mendes Member

Joined the company in 1976Served as technical director for Veplan Residência Empreendimentos e Construções S.A. and Iod-Bauen de São Paulo Construções S.A.Graduate in civil engineering from the Escola Nacional de Engenharia do Rio de Janeiro




José Isaac Peres Chief Executive OfficerElected in 2010, his term of office ends in 2012Founding member of ABRASCE and the Association of Managers of Real Estate CompaniesHolds a degree in economics from Faculdade Nacional de Economia da Universidade do Brasil

Eduardo Kaminitz PeresVice Chief Executive

OfficerJoined the company in 1988Graduated in business administration at Universidade Cândido Mendes

Armando d'Almeida Neto Investor Relations Officer

More than 25 years of experience in the financial marketFormer director at Santander Investment Securities in New York and at Banco Bozano Simonsen. He also was chief executive officer of BullTick Brasil and member of the board of directors of BullTick Capital MarketsGraduate in business administration from Faculdade Cândido Mendes; also has certificates from the National Association of Securities Dealers

Alberto José dos Santos Director

Joined the company in 1975Currently responsible for accounting, administrative, information technology and human resources areas of MultiplanGraduate in accounting from Universidade Cândido Mendes in Rio de Janeiro and human resources from Instituto Superior de Estudos Pedagógicos

Marcello Kaminitz Barnes Chief Development OfficerJoined Multiplan in 1990Currently responsible for the real estate area and for the development of new projectsGraduate from Pontifícia Universiade Católica


Recent Events

In November 2010, Multiplan acquired for R$45mn an additional 25% interest in Shopping Santa Ursula, bringing its stake to 62.5%, following its first acquisition in 2008. Recently renovated, Santa Ursula has 23.1k m² of total GLA, 121 stores and 872 parking slots. Aliansce holds a 37.5% stake in this mall also.

In February 2011, the company approved a share buyback program to acquire up to 3.6mn shares (5.2% of free float), or around R$110mn (12 days of trading). The program is open for 365 days until Feb-23rd 2012. As of 1Q11 Multiplan had a net cash position of R$382mn, with total cash at R$785mn.

54



Also in February, Multiplan announced the development of Morumbi Corporate, two high-end commercial towers, for leasing, with total GLA of 73.4k m² in the city of São Paulo, with inauguration expected in the second half of 2013. Total capex is expected to be R$444mn.

In April 2011, the company announced the acquisition of a 11.2k m² land plot in Ribeirão Preto for R$33mn (of which 86.4% will be financed in 60 months). The purpose of the transaction is to use the area for Ribeirão Shopping’s expansion, as it has a potential construction area of 56k m².

In July 2011, Multiplan announced its new master plan for Ribeirao Shopping (46.8k m2, Multiplan stake 76%) that includes 3 expansions, adding up to 32k m2 in total GLA (+45% vs current GLA). The master plan also includes a parking deck with 1,200k slots, 1 hotel and an apart-hotel with 19.2k m2, and 4 residential towers with 86k m2. According to Multiplan, further details on expected capex and on timing for this development will be announced in the future.

55



Iguatemi

A good story, fairly valued. Initiate with Neutral

Neutral


Iguatemi (IGTA3.SA;IGTA3 BZ)

FYE Dec 2010A 2011E 2012E 2013EEPS Reported (R$)FY 1.91 1.80 2.11 2.49EPS Reported FY (R$) 1.91 1.80 2.11 2.49Revenues FY (R$ mn) 264 315 386 478EBITDA FY (R$ mn) 185 219 272 337Net Income - GAAP FY (R$ mn)

152 143 168 198


We are initiating coverage of Iguatemi with a Neutral rating and a Dec-12 price target of R$49.00/share, based on DCF valuation that represents potential upside of 40% from current levels. The company has a portfolio of 13 malls, with a 238 m2 of owned GLA, concentrated in the state of São Paulo (9 malls) and in the South region (4 malls) and focused on the middle- and higher-income segments. The company’s portfolio also includes 2 commercial towers, located in SP, totaling GLA of 29k m2. Iguatemi is our preferred Neutral-rated stock among the large caps given its relatively higher upside vs peers and superior growth, with lower execution risk, in our view. The company holds a 51% stake in Shopping Iguatemi São Paulo, the first mall opened in the country, in 1966, which has the highest rent/m2 in the country at around R$210. The company is trading at 14.1x P/FFO 2012e, discounts of 6% and 10% to Multiplan and BR Malls, respectively.

Investment Thesis

Strong pipeline of greenfields ahead; debentures issued in 1Q11 represent an upside risk on acquisitions

Iguatemi has the largest pipeline of greenfield projects among the peers, totaling 169k m2 in own GLA to be opened in the next 4 years and including the recently opened (April 2011) Iguatemi Alphaville (25k m2 own GLA). In the coming yearsthe company expects to add another 154k m2 in own GLA, with 144k m2 from 5greenfield projects in the state of São Paulo – JK, Ribeirão Preto, Jundiaí, Votorantim and São José do Rio Preto – and 11k m2 from already-announced expansions in Praia de Belas Mall and Galleria, representing capex of more than R$890mn in the next 3 years. Moreover, it is important to flag that Iguatemi has officially guided to 520km2 of own GLA by 2015, which is not included in our estimates.

Table 35: Iguatemi




P/FFO 2012e 14.1x

# of Malls 15


56



Figure 78: Expansion pipelineOwn GLA ‘000 m2


In 1Q11 the company also issued R$330mn in 5-year debentures, to finance possible acquisitions, which are not included in our estimates. According to Iguatemi, thoseacquisitions should offset the delay on Iguatemi JK, expected initially for 2H11 and postponed to the end of 1Q12, allowing the company to reach its 25-30% guidance on revenue growth vs our estimate excluding potential acquisitions of 20%.

Looking at current greenfields under development, it is worth mentioning that Iguatemi JK has an occupancy rate of 70% despite the delay. Iguatemi expects to obtain a real and unleveraged IRR of 20.5% on this development, and the company is already at work on the final details for this mall. Regarding the other greenfields Iguatemi is looking for contractors for Iguatemi Ribeirão, while the company is obtaining the final approvals on Jundiai Mall. Regarding Iguatemi S.J.R.P. the company should send its project proposal to the municipality soon.

When looking to Iguatemi capex it is important to flag that the expected figures announced by the company are net of key money and thus not directly comparable to peers’. To make capex comparable, we assumed that key money represents, on average, 10% of capex. Although Iguatemi has 2 commercial towers in its portfolio, we are not considering any multiuse projects in our estimates. Although Iguatemi hasnot been aggressive in terms of development of multiuse projects, the company is constantly doing swap agreements with its excess land bank, and in 2010 those agreements contributed more than R$20mn on the other revenues line.


Location GLA m2

Shopping State Iguatemi 100% % Part. OpeningPraia de Belas RS 5,047 13,424 37.6% 4Q11Praia de Belas RS 1,579 4,200 37.6% 2Q11Galleria SP 4,099 8,198 50.0% 2Q12Total Expansions 10,726 25,822 41.5%Alphaville SP 24,905 31,930 78% 2Q11JK SP 17,623 35,246 50% 1Q12Ribeirão Preto SP 28,600 32,500 88% 2012Jundiai SP 23,700 30,000 79% 2013Votorantim - Fase 1 SP 43,853 43,853 100% 2013São Jose do Rio Preto SP 30,448 34,600 88% 2014Total Greenfields 144,224 176,199 81.9%


7425

46

68 30

238270

320

388 418

2010

Exp

ansi

ons

Gre

enfie

ld

2011

E

Exp

ansi

ons

Gre

enfie

ld

2012

E

Gre

enfie

ld

2013

E

Gre

enfie

ld

2014

E

The company opened Iguatemi Alphaville in April-2011, with a

95% occupancy rate. We expect

the opening of 2 greenfields in 2012 and 1 in 2014.

+13%+19%

+21% +8%

57



Healthy balance sheet, should not limit growth

Although we expect Iguatemi to invest more than R$850mn over the next 3 years, we don’t believe current leverage expectations should limit the company’s growth. According to our estimates, net debt to EBITDA should peak at only 1.1x in 2012.Based on Iguatemi’s leverage and FFO in 2013e, we believe the company can add around 150k m2, or around 35% of its expected own GLA in 2013. This compares with potential GLA expansion in 2013 of 66% for BR Malls and 64% for Multiplan.

The company ended the 1Q11 with R$1.0bn in cash and a net cash position of R$98mn, having a weighted average cost of debt at 104.1% of CDI, or around 12.7%, and duration of 3.7 years. Iguatemi’s debt is 100% Brazilian, with TR and TJLP (BNDES long-term interest rate) exposure totaling 40% of Iguatemi’s debt. Iguatemi is the only company allowed to raise debt linked to TJPL given its shareholder structure controlled by local players.

Iguatemi has 2 debenture programs, the first issued in 2007 and totaling R$200mn at 110% of CDI due 2014, the second issued this year and totaling R$300mn at CDI+1.35% due 2016. As mentioned before, Iguatemi expects to use the proceeds of this second issuance for opportunistic acquisitions of third-party malls and/or to increase its stakes in Malls in which it already participates.

Table 37: Iguatemi Debt Breakdown as of 1Q11

Due date Index Rate per year Amount (R$mn) % of totalBNDES May-11 TJLP 4.4% 0 0.0%BNDES Feb-11 TJLP 2.9% 4 0.4%BNDES Jun-17 TJLP 3.5% 90 9.9%BNDES Oct-17 TJLP 3.8% 28 3.1%BNDES Jun-17 - 4.5% 2 0.2%BNDES Jun-17 - 5.5% 2 0.2%Santander Aug-16 CDI 99% of CDI 4 0.5%Santander Aug-16 TR 9.5% 13 1.4%Santander Oct-16 TR 9.5% 11 1.2%Santander Jan-19 TR 12.0% 90 9.9%Bradesco Sep-19 TR 10.5% 84 9.2%Itaú Mar-20 TR 10.0% 40 4.4%Other lines IGP-DI 2 0.2%Debentures Dec-14 CDI 110% of CDI 207 22.9%Debentures Mar-16 CDI 1.4% 330 36.4%Short term 28 3.1%Long term 887 97.9%Total Debt 907 100.0%


Figure 79: Expansion pipeline


26%

60%

13%0%

TR CDI TLJP IGPM

58



Figure 80: Iguatemi Amortization schedule

R$ in millions

Source: Company estimates.

Why is Iguatemi our preferred Neutral-rated stock?

Iguatemi is our preferred Neutral-rated stock among the large caps given its attractive valuation. Based on P/FFO 2012e, the company is trading at discounts of 10% to BR Malls and 6% to Multiplan; moreover, we see higher potential upside from current levels for Iguatemi of 40% vs 29% for Multiplan.

Although we recognize that Multiplan has slightly superior liquidity vs Iguatemi,trading US$6mn daily vs US$4mn for Iguatemi, and has more room on its balance sheet for additional debt, we believe the development of Multiplan’s multiuse projects for sale will continue to impact the company’s margins and bring volatility to its balance sheet and income statement, exposing the company to real estate risk and volatility that could lead to lower-than-average consolidated margins. In our view, not having such risks is an advantage for mall companies. Thus our preference for Iguatemi over Multiplan.

28

97118 124

222 220

4328 25

2

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Iguatemi has significant amortization in 2015-16 given the

debenture programs from 2007

and 2011.

59




Expected returns on greenfields, expansions

Although we have a conservative approach in our models, we rely on company estimates regarding capex, expected rents, opening schedule and project returns. It is important to flag that higher- or lower-than-expected construction and/or financial costs, delays or advances in mall openings and lower- or higher-than-expected rents can impact our estimates and the company’s returns.

Given Iguatemi’s significant exposure to greenfields, which should represent 93% of its portfolio growth, any deceleration or acceleration in market demand for new projects or lower- or higher-than-expected costs can significantly impact our forecasts.

Acceleration or deceleration in consumer and domestic growth

Given the current structure of rent contracts, a deceleration or acceleration in consumption growth and/or domestic GDP can affect Iguatemi by influencing the annual rent adjustments and affecting our growth forecast.


While malls provide a hedge against inflation given current rent contracts, withcontracts adjusted annually for inflation, high inflation can impact consumption and domestic growth, impacting consumers’ disposable income and thereby impacting occupancy rates and reducing same store sales and margins. Higher-than-expected inflation can also lead to higher-than-expected interest rates slowing down economic growth. Conversely, the less inflation there is, the more money there is for everyone to spend at the mall.

Interest rates

Although on the leverage side the impact from higher interest rates is limited as part of company’s debt is linked to TR (Taxa Referencial), which has little correlation with the Selic, they can impact consumption and GDP growth. Currently our economists forecast a year-end Selic of 12.75% vs 12.25% currently; for 2012 we expect the Selic to be at 12.75%. Moreover, higher interest rates increase the attractiveness of fixed income assets such as government bonds.


Despite malls being an underpenetrated market in Brazil, with average of 49m2 in total GLA for each 1,000 inhabitants vs 81m2 for Mexico and 2,180m2 for the US, companies can lose market share to E-commerce given the services offered by those companies and the agility with which customers can compare prices on line.

Changes in rent contract structure

Any changes to the rent contract structure can impact the expected return on future and current malls. In our view, these changes could include the removal of the “step up” clauses and the percentage-of-sales rent.


Although we don’t expect a short-term mismatch between demand and supply of GLA, an excess of GLA can impact Iguatemi’s bargaining power, and, consequently,the amount of key money received, thereby impacting future returns. Furthermore, an


Percentage



Percentage



Percentage


(0.2)

7.5

4.0 3.8

2009 2010 2011E 2012E

4.3

5.9 6.5

5.0

2009 2010 2011E 2012E

8.8

10.8

12.8 12.8

2009 2010 2011E 2012E

60



such an imbalance could cause a reduction in expected rents. On the other hand, too little supply could move rents upward.

Company Description

Iguatemi has 431k m² of total GLA, with ownership of 238k m², for an average stake of 55.2%. The company has 15 malls under operation and also owns 2 commercial buildings with total GLA of 29k m2. The company is focused on the higher-income segments and has its portfolio concentrated in the South and Southeast regions, with 10 malls in the region and with all greenfields located on the state of São Paulo, where it already has 60% of its operations. Iguatemi was founded and is controlled by the Jereissati family, which has a 54% holding in the company.

Financial Outlook

We expect net revenues to grow 20% in 2011 (slightly below company guidance of 25-30% given the delay in the JK opening), 22% in 2012 and 24% in 2013. In 2011 revenues should be positively impacted by the opening of Alphaville in April and the expansion of Praia de Belas. In 2012 we expect Iguatemi to inaugurate JK and Ribeirão; we expect the expansions of Galleria and the second phase of the Praia de Belas expansion, adding 52k m2 to its GLA. For this year we expect parking revenues, the second most important revenue line for Iguatemi, to represent 22% of rental revenues in 2011 vs 21% in 2010, meaning 25% growth yoy, slightly below the 32% growth yoy reported in 1Q11.

Despite the healthy increase in revenues that we expect for Iguatemi this year, we expect a 6% contraction in net income and 3% in FFO as the result of a net financial loss and a higher effective tax rate. For 2012 we expect growth of 17% in net income and 18% in FFO.

We expect the EBITDA margin to contract 70bps in 2011 and to be below company guidance of 70-72%. This is a consequence of a lower-than-expected margin in 1Q11, only 60.0%, which was impacted by nonrecurring items. For 2012 we expect an expansion of 100bps on the back of higher cost dilution. We expect cash COGS to represent 19.5% of revenues in 2011 and G&A 10.0%. For 2012 we expect further dilution of COGS and G&A to 18.5% and 9.5% respectively.

It is important to flag that Iguatemi’s EBITDA margins are positively impacted by land swap, which amounted to almost R$25mn in 2010. According to Iguatemi, this line should continue to impact margins positively going forward as the company has a significant potential for swaps in its land bank.

Iguatemi stated that from 2011 to 2014 the company will distribute at least R$0.63/share of dividend and/or interest on own capital, representing a yield ofaround 1.6% based on current prices.

61











264315

386

478

21% 20% 22% 24%

2010 2011E 2012E 2013E

172 166

196

233

46%

-3%18% 19%

2010 2011E 2012E 2013E

19.7%20.9%

19.5% 18.5% 18.0%

7.4%8.6%

10.0% 9.5% 9.0%

2009 2010 2011E 2012E 2013E


173

262

406

222

(0.7x)

0.4x

1.1x 1.0x

2010 2011E 2012E 2013E

Capex Net Debt/EBITDA

We expect Iguatemi capex to

remain high in 2013 as the company expects to open two

greenfields, Jundiai and

Votorantim, adding 68k m2

of own GLA that year.

62



Table 38: Iguatemi Estimates SummaryR$ in million

2010 2011E 2012E 2013E 2014ECAGR

2010-2013OperationalTotal GLA (eop) (k m2) 433 469 523 567 601 9%Owned GLA (eop) (k m2) 237 264 319 387 417 18%Average Stake % 55% 56% 61% 68% 69%Income StatementNet Revenues 264 315 386 478 596 22% cash costs (55) (62) (71) (86) (104) 16% depreciation (15) (18) (22) (27) (34) 23%COGS (70) (79) (93) (114) (139) 18%Gross profit 194 236 293 365 457 23%NOI 203 249 312 393 496 25%Adm. expenses (23) (32) (37) (43) (54) 24%

(7) (9) (12) (21) (31) 46%EBITDA 185 219 272 337 417 22%

Margin 70% 69% 71% 70% 70%Net financial result 9 (13) (29) (48) (48) -275%FFO 172 166 196 233 298 11%

Margin 65% 53% 51% 49% 50%Net Income 152 143 168 198 254 9%Balance SheetDebt 498 998 1169 1264 1264Cash 628 905 862 915 1021Net debt (130) 94 307 349 243Equity 1488 1592 1724 1880 2084RatiosDebt / Equity 33% 63% 68% 67% 61%Net Debt / Equity -9% 6% 18% 19% 12%Net Debt / EBITDA (0.7x) 0.4x 1.1x 1.0x 0.6x


Valuation

Iguatemi is trading at a 10% discount to BR Malls and a 6% discount to Multiplan based on P/FFO 2012e at 14.1x. Though the company is trading at a 6% premium to Multiplan based on P/FFO 11e, we believe this premium is justified given higher revenue growth in 2011e of 20% vs 7% for Multiplan. According to our calculations, the company trades at a 7.1% yield for 2012e, which compares to 6.4-6.7% for peers.

We see potential upside of 40% for Iguatemi’s shares, based on our DCF-derived R$49.00/share price target for December 2012. Our DCF analysis assumes a WACC of 9.5% derived from a 3.4% risk-free rate, a 0.9 beta, 1.9% country risk and a 5.0% equity premium risk, and an assumption of 4.0% long-term growth. Our target price implies that the company will be trading at 16.6x 2013e P/FFO.



Iguatemi 35.00 1,762 3.9 1.9 12.6 9.8 16.7 14.1 7.9%BR Malls 17.25 4,925 23.8 1.5 14.4 10.7 20.2 15.7 6.6%Multiplan 33.28 3,789 6.0 2.0 13.4 10.2 15.8 15.0 8.3%Sonae Sierra Brasil 23.80 1,156 2.6 1.4 13.4 8.5 15.2 12.8 8.1%Aliansce 13.98 1,239 2.3 1.9 12.9 10.5 19.1 15.0 8.6%General Shopping (BBG cons) 12.70 407 1.2 1.6 9.8 8.3 n/a n/a 10.9%Average 6.6 1.7 12.7 9.7 17.4 14.5 8.4%


63



Table 40: Iguatemi Premium/discount to peers


to BR Malls 30% -13% -9% -18% -10% 1.3ppto Multiplan -6% -6% -5% 6% -6% -0.4ppto SSBR 35% -7% 15% 10% 11% -0.2ppto Aliansce -1% -2% -7% -13% -6% -0.7ppto Average 11% -1% 1% -4% -3% -0.5pp


Iguatemi Management Team and Controlling Shareholders

Iguatemi was created in 1979 by Jereissati Participações ,which belongs to the Jereissati family that current holds a 54% stake in the company and has 3 members on the board, Mr. Carlos Francisco Ribeiro Jereissati, chairman; Carlos Jereissati Filho; and Pedro Jereissati. According to company presentations, its main shareholders include Petros (the pension fund of Petrobras employees) with a 10.3% stake and Fidelity with 10.6%.

Figure 88: Iguatemi’s shareholder structure

Source: Company reports. La Fonte Telecom also belongs to the Jeiressati family.

Iguatemi’s board is elected in shareholders’ meetings. Each member of the board iselected for a two-year term, and there are no restrictions on re-election. The board meets quarterly or when convened by the chairman or by the majority of its members. The members of the Executive Board are elected by the board of directors for three-year terms.

Jereissati Participações La Fonte Telecom Free Float

52.9% 0.9% 46.2%

Iguatemi

64





Carlos Francisco Ribeiro Jereissati Chairman

In this position since 2006Held positions such as membership in the board of trustees of ABRASCE, in the advisory board of SECOVI and in the board od directors of BovespaCurrent director of Telemar Participações S.A. and Tele Norte Leste Participações S.A.Holds a degree in economics from Universidade Mackenzie de São Paulo

Fernando Magalhães Portella Independent Director

Has been an independent director since 2007Experience in the marketing and communications area as president of the Brazilian Association of Marketing and Business, member of the board of Brazilian National Association of Newspapers and CEO of O Dia Media GroupHolds a degree in agronomic engineering from Universidade do Estado de São Paulo, completed a MBA at Columbia University and a general management course at Harvard Business School

Luís Carlos Fernandes Afonso Independent Director

Former secretary of finance of the cities of São Paulo, Campinas and Santo AndréCurrent financial director of PETROSHolds degrees in economics from Pontifícia Universidade Católica and from Universidade Federal do Rio Grande do Sul

Sidnei Nunes Director

Joined the company in 1989, director since 2006Current CFO of Grande Moinho Cearense S.A.Holds a degree in business administration from Faculdade de Administração e Economia Paulo Eiró and an MBA from Universidade de São Paulo

Carlos Jereissati Filho Director

Joined the company in 1994 and occupied different positions until becoming CEO in 2005President of ABRASCE from 2002 to 2004Current member of the Urban Land Institute and advisor of the SECOVICompleted the CEAG program of Fundação Getulio Vargas São Paulo

Pedro Jereissati Director

Alternate board member of companies such as Telemar Participações S.A., Contax Participações and Telemar Norte Leste S.A.In 2003 was nominated by the President Luiz Inacio Lula da Silva a member of the Brazilian Council for Economic and Social DevelopmentGraduate in business administration from Fundação Armando Álvares Penteado and completed an MBA from Kellogg School of Management of Northwestern University

Rossano Maranhão Pinto Independent Director

Banco do Brasil’s CEO from 2004 until 2006Current executive officer at Banco SafraHolds a degree in economics from AEUDF – Brasilia and a master's degree in political economics from the University of Illinois at Urbana-Champaign


65





Carlos Jereissati Filho Chief Executive Officer

Joined the company in 1994 and occupied different positions until becoming CEO in 2005President of ABRASCE from 2002 to 2004Current member of the Urban Land Institute and advisor of the SECOVICompleted the CEAG program of Fundação Getulio Vargas São Paulo

Charles William Krell Chief Operational OfficerJoined the company in 2000 and has occupied this position since 2005Experienced executive in the hotel and real estate businessesHolds a degree in business administration from Cornell University

Cristina Anne BettsChief Financial and

Investor Relations Officer

Worked for companies such as PriceWaterhouseCoopers, Banco Garantia, Bain Consulting and TAM Linhas Aéreas, where she was investor relations officerGraduated in business administration from Fundação Getulio Vargas São Paulo and did anMBA in INSEAD

Dilene Rodrigues TeixeiraChief Financial and

Investor Relations Officer

Has worked for the Iguatemi Group since 1997 and has occupied her position since 2005Was a senior lawyer at two offices and at Banco Bandeirantes S.A.Member of the board of directors of ABRASCE since 2004Holds degrees in law and languages from Universidade of São Paulo and also completed courses in law from the Legal School of ICSC and Faculdade Autônoma de Direito

Rodolpho Freitas Neto Chief Commercial Officer

Built his career mainly in the retail sector, working for Unilever, BomPreço/Royal Ahold and Grupo Pão de AçúcarHold a degree in business administration from the University of São Paulo and an MBA focused on retail from the same university together with University of Manchester

Wilson Marques SpinelliChief New Business

Officer

Started in the shopping malls sector in 1980Worked for Multiplan and Racional, being responsible for the construction, expansion and management of several shopping mallsJoined the Iguatemi Group in 2005Graduated in engineering at Fundação Armando Álvares Penteado


Recent Events

In October 2010, the company signed a BNDES financing line for the construction of Shopping JK Iguatemi, with a rate of TJLP+3.8%, to be amortized in 60 monthly installments starting after a 24-month grace period. Iguatemi holds a 50% stake in JK that will have 35.2k m² of total GLA and 188 stores. The total capex estimated for this greenfield is R$270mn. Opening is expected for 1Q12.

In January 2011, Iguatemi acquired for R$12mn a 3.4% stake in Shopping Center Esplanada, located in Sorocaba-SP. With this acquisition, the company achieved 14.7k m² of own GLA in this mall (33.1% of participation in the ownership). The mall has a total GLA of 44.5k m², 180 stores and 2,000 parking spaces.

Also in January, the company announced a greenfield project in front of Shopping Center Esplanada (Sorocaba-SP). The project encompass a new mall that will be called Iguatemi Votorantim (100% Iguatemi) and 4 additional towers, with a total capex of around R$426mn. The first phase of the project will represent an additional 43.8k m² of total GLA, with the opening expected for the second half of 2013. The second phase, planned to be delivered in 2018, will have 57.6k m² of total GLA, 425 stores and 2,959 parking slots.

In March 2011, Iguatemi raised R$330mn through its second debenture issue, paying the CDI rate+1.4%. This amount will be used to finance growth opportunities such as the acquisition of additional interests in malls.

In April 2011, Iguatemi Alphaville Mall opened. The company holds a 78% stake of its total GLA of 30.1k m², and the capex invested in this mall was around R$200mn. The project was financed with a BNDES line of TJLP+3.45% per year, to be amortized in 60 months after a 24-month grace period from the signing date.

66



Appendix I – 5 Things to Know about Brazilian Malls

1) High exposure to consumption due to structure of rent contracts: In Brazil retailers (both anchors and satellite stores) pay the maximum of a fixed rent adjusted by inflation (IGP-M or IPCA) or a percentage of sales that ranges from 2% up to 7% in some cases. Retailers also pay 2 months of rent in December. Thus, malls benefit directly from an increase in consumption. Rents paid as a percentage of sales represented 5-10% of total rent revenues in 2010.

2) Key money and “step up” clause: Another important feature of Brazilian malls is the “key money,” which is an up-front rent payment to enter the malls and is typically paid by the satellite stores. This reduces the investment by the mall developer as it represents up to 10% of the total capex (excluding land). These revenues in most cases are capitalized and recognized during the life of the contract, which is usually 5 years long. Less standardized base contracts usually include a “step up” clause that adjusts the minimum rent, usually in the 3rd and 5th year or 2nd and 4th year, by a “real factor” of up to 10pp above inflation.

3) An underpenetrated industry with healthy growth: Despite the expansion in GLA over the last years – from 2005 to 2010, total GLA grew 46% to 9.5mn m2 –penetration remains one of the lowest in the world, with total GLA in Brazil per 1,000 inhabitants at 49m2 vs 81m2 in Mexico, 163m2 in Germany, 297m2 in Portugal and 2,180m2 in the US. In our view, this explains why Brazil is posting strong growth rates. Listed players should continue to gain market share from their current 30% (22% share for the largest three vs 56% in the US); we believe this market share will come from organic and inorganic growth. In the next 3 years the listed companies expect to add 0.8 mn m2 of GLA, a 10% CAGR vs 7-8% for the industry. Bear in mind that real GDP has increased 7.5% in the last year and is expected to grow 4.0% over this year and next. Moreover, occupancy rates are at historical highs in Brazil, at 97-99% for the listed players, and with occupancy costs at a low 9-11% vs 15% in 1Q109.

4) Sector has raised more than R$4.5bn since 2007: The Brazilian mall sector has raised R$4.5bn through 5 follow-ons (3 from BR Malls) and 6 IPOs; this compares to the R$23bn raised by Homebuilders in 18 follow-ons and 22 IPOs. Despite all this money raised, cap rates (net operating income – NOI/EV) for acquisitions remained stable at around 10-11%.

5) Liquidity improving: Currently the sector has a trading volume above US$30mndaily, representing an increase of 30% vs 2010 volume, with BR Malls the most liquid name at more than US$20mn daily. This compares with US$260mn traded daily by the large homebuilders.

67



Appendix II – Main Sector Metrics

Figure 89: 2010 Sales/m2 (R$)


Figure 90: 2010 Rents/m2 (R$)


Figure 91: Occupancy cost as % of sales


Figure 92: Occupancy rate


Figure 93: Same store sales growth – SSS


Figure 94: Same store rent growth – SSR


1,293

1,194

1,072

914 904

1,208

1,066

938

822 832


2010 2009105 102

79

5449

97 96

69

5045


2010 2009

9.0%9.3%

9.9%

11.3% 11.4%

9.0%

9.7%

10.3%

11.6%11.9%

SSBR BR Malls Aliansce Iguatemi Multiplan

2010 200998.6%

98.3%98.0% 97.9%

97.1%96.9%

97.3% 97.2%

98.1%

96.7%

Multiplan BR Malls SSBR Aliansce Iguatemi

2010 2009

14.1% 14.1%

12.4%

9.5%

6.7%7.0% 6.8% 7.2%

NA

2.2%

BR Malls Aliansce Multiplan SSBR Iguatemi

2010 2009

9.3%

8.7%8.2% 8.0%

6.9%

10.5%

8.6%

9.8%9.4%

BR Malls Iguatemi Aliansce SSBR Multiplan

2010 2009

NA

68



Appendix III – Pipeline of Projects

Table 43: Opening schedule for 2011

Shopping City UF Total GLAe OpeningNorte Sul Shopping Campo Grande MS 38,000 Mar-11Unique Shopping Parauapebas PA 14,500 Mar-11Shopping Iguatemi Alphaville Jandira SP 31,930 Apr-11Blumenau Norte Shopping Blumenau SC 34,000 Apr-11Boulevard Shopping Campos Campos RJ 18,000 Apr-11Via Brasil Shopping Iraja RJ 34,000 Apr-11Golden Square Shopping Center São Bernardo do Campo SP 27,998 Apr-11Shopping Patio Pinda Pindamonhagaba SP 17,000 Apr-11Polo Shopping Indaiatuba Indaiatuba SP 31,000 Apr-11Shopping Premio Aracaju SE 15,000 Jun-11Shopping Metro Tucuruvi Sao Paulo SP 27,700 Jul-11Via Verde Shopping Rio Branco AC 26,960 Aug-11JK Iguatemi Shopping Sao Paulo SP 35,246 Sep-11Shopping da Ilha Sao Luis MA 41,000 Oct-11Shopping Mester Alvaro Serra ES 29,275 Oct-11Shopping Mark Europeu Blumenau SC 32,000 Nov-11Shopping Jardim Guadalupe Rio de Janeiro RJ 34,800 Nov-11Park Shopping São Caetano Sao Caetano SP 38,889 Nov-11Barra Sol Shopping Vila Velha ES 51,724 Dec-11Mooca Plaza Shopping Sao Paulo SP 41,942 4Q11Bourboun Shopping Walling Porto Alegre RS NA 2H11Uberlandia Shopping Urberlandia MG 43,600 2H11Shopping Hortolandia Campinas SP 12,300 2H11Shopping Moxuara Cariacica ES 32,000 2011Shopping Metropolitano Rio de Janeiro RJ 42,500 2011Total 2011 751,364

Source: ABRASCE as of 4Q10. JK Iguatemi was already postponed for 1Q12. Uberlandia Shopping is expected for 4Q11/1Q12.

69



Table 44: Opening schedule for 2012

Shopping City UF Total GLAe Opening

Shopping Bosque dos Ipes Campo Grande MT 35,000 2012Shopping Cidade Nova Manaus AM NA 2012Parque Ponta Negra Shopping Manaus AM 38,000 2012Shopping Londrina Norte Londrina PR 29,000 2012Boulevard Londrina Shopping Londrina PR 48,500 2012Parque Shopping Sulacap Rio de Janeiro RJ 32,000 2012Park Shopping Campo Grande Rio de Janeiro RJ NA 2012Parque Shopping Barueri Barueri SP 25,000 2012Shopping Iguatemi Jundiai Jundiai SP 30,000 2012Shopping Patio Mogi Mogi Mirim SP 21,943 2012Bandeiras Parque Shopping Campinas SP 42,000 2012SerraMar Parque Shopping Caraguatatuba SP 20,336 2012guatemi Ribeirão Preto Ribeirão Preto SP 32,500 2012Amapa Garden Shopping Macapa AP 29,101 Apr-12Porto Shopping Pelotas Pelotas RS 24,400 Apr-12Venda Nova Shopping Belo Horizonte MG 36,188 Apr-12Continente Park Shopping Florianopolis SC 40,000 Apr-12Shopping Bela Vista Salvador BA 48,800 1H12Parque Shopping Belem Belem PA 23,000 1H12Itaborai Palza Itaborai RJ NA 1H12Shopping Cidade Morena Campo Grande MT 21,000 Aug-12Jundiai Shopping Jundiai SP 35,418 Sep-12Giardino Shopping Contagem MG NA Oct-12Rio Mar Shopping Recife PE NA Nov-12Via Vale Garden Shopping Taubate SP 33,375 Sep-12Parc Etoile Shopping Belo Horizonte MG 10,685 Nov-12Metropolitan Garden Betim MG 53,368 2H12São Bernardo Shopping Sao Bernardo SP 42,586 2H12Village Mall Rio de Janeiro RJ 25,653 2H12Park Lago Cabo Frio RJ NA 2H12Total 2012 777,853

Source: ABRASCE as of 4Q10.

70



Appendix IV – Listed Companies’ Portfolios

Table 45: Sonae Sierra Brasil Portfolio as of 1Q11

Location GLA m2

Shopping State Sonae 100% Stake Opening

Parque Dom Pedro SP 61,936 121,444 51% 2002Manauara AM 46,775 46,775 100% 2009Penha SP 22,463 30,674 73% 1992Metropole SP 24,495 24,495 100% 1980Boavista SP 16,041 16,041 100% 2004Franca SP 11,710 18,152 65% 1993Plaza Sul SP 6,921 23,071 30% 1994Tivoli SP 6,536 21,788 30% 1998Campo Limpo SP 3,977 19,885 20% 2005Patio Brasil DF 3,008 28,923 10% 1997Total Current 203,862 351,248 58.0%


Table 46: Aliansce Portfolio as of 1Q11

Location GLA m2

Shopping State Aliansce 100% Stake Opening

Bangu RJ 52,189 52,189 100% 2009Via Parque RJ 37,528 53,904 70% 1995Boulevard Belo Horizonte MG 30,111 43,016 70% 2010Iguatemi Salvador BA 27,825 61,342 45% 1993Boulevard Belém PA 25,493 33,991 75% 2004Taboão SP 13,528 35,601 38% 2007Santana Parque SP 13,250 26,499 50% 2009Caxias RJ 10,224 25,559 40% 1985Carioca RJ 9,522 23,805 40% 2005Grande Rio RJ 9,193 36,770 25% 1999Santa Ursula SP 8,703 23,208 38% 1999Boulevard Brasilia DF 8,463 16,925 50% 2000Campina Grande PB 6,331 17,335 37% 2001Super Shop. Osasco SP 5,891 17,542 34% 2008C&A Iguatemi BA 2,339 5,246 45% 1975C&A Feira de Santana BA 2,108 2,108 100% 2002C&A Grande Rio RJ 2,108 2,108 100% 2007Total Current 264,804 477,148 55.5%


Table 47: Multiplan Portfolio as of 1Q11

Location GLA m2

Shopping State Multiplan 100% Stake OpeningBarra Shopping Sul RS 68,407 68,407 100% 2008Park Shopping Barigüi PR 41,945 49,934 84% 2003BH Shopping MG 38,038 47,547 80% 1979Morumbi Shopping SP 36,225 55,085 66% 1982Ribeirão Shopping SP 35,635 46,784 76% 1981Barra Shopping RJ 35,398 69,313 51% 1981Park Shopping DF 30,725 51,526 60% 1983Diamond Mall MG 19,250 21,388 90% 1996Pátio Savassi MG 16,646 17,254 96% 2004Shopping Anália Franco SP 15,113 50,377 30% 1999New York City Center RJ 11,136 22,271 50% 1999Shopping Santa Úrsula SP 14,505 23,208 63% 1999Shopping Vila Olímpia SP 8,482 28,274 30% 2009Total Current 371,504 551,368 67.4%


71



Table 48: BR Malls Portfolio as of 1Q11

Location GLA m2

Shopping State BR Malls 100% Stake Opening

Norteshopping RJ 58,041 77,908 74% 2000Shopping Estação PR 54,716 54,716 100% 4Q10Shopping Tijuca RJ 35,055 35,055 100% 1994Plaza Shopping RJ 33,196 33,196 100% 1992Shopping Tamboré SP 46,776 46,776 100% 1994Campinas Shopping SP 30,769 30,769 100% 2010Center Shopping Uberlândia MG 26,732 52,415 51% 1994Shopping Del Rey MG 24,161 37,171 65% 1991Shopping Campo Grande MS 23,792 33,415 71% 2001Granja Vianna SP 23,188 29,813 78% 1993Ilha Plaza Shopping RJ 21,614 21,614 100% 1994Independência Shopping MG 19,360 23,214 83% 1989Shopping Metrô Santa Cruz SP 19,248 19,248 100% 1997Shopping Recife PE 18,968 61,079 31% 1996Fashion Mall RJ 14,886 14,886 100% 1996Shopping Iguatemi Caxias do Sul RS 13,241 29,101 46% 1999West Shopping RJ 11,544 38,481 30% 1995Maceió Shopping AL 11,892 34,742 34% 1986Shopping Sete Lagoas MG 11,515 16,451 70% 1991Shopping Curitiba PR 11,456 23,379 49% 1989Araguaia Shopping GO 11,039 22,078 50% 2001Goiânia Shopping GO 10,983 22,692 48% 1986Shopping Villa-Lobos SP 10,733 27,023 40% 1995Shopping Piracicaba SP 9,587 27,870 34% 2001Shopping Crystal Plaza PR 8,880 12,686 70% 1997Natal Shopping RN 8,845 17,690 50% 1987Rio Plaza Shopping RJ 6,955 6,955 100% 1996Top Shopping RJ 6,359 18,168 35% 2005Amazonas Shopping AM 6,124 34,214 18% 1997Osasco Plaza Shopping SP 5,689 14,367 40% 1991São Luís Shopping MA 5,118 34,123 15% 1992Pantanal Shopping MT 4,319 43,187 10% 1980Center Shopping RJ 4,288 14,294 30% 2001Shopping Mueller Joinville SC 2,855 27,453 10% 1995Shopping Pátio Belém PA 2,744 20,631 13% 1982Big Shopping MG 2,282 17,555 13% 1994Shopping Metrô Tatuapé SP 982 32,718 3% 1996Minas Shopping MG 747 35,120 2% 1992Shopping ABC SP 602 46,285 1% 2004Via Parque Brasil RJ 15,033 30,680 49% 2011Total Current 634,314 1,219,218 52.0%


Table 49: Iguatemi Portfolio as of 1Q11

Location GLA m2

Shopping State Iguatemi 100% Stake OpeningIguatemi Campinas SP 35,818 55,105 65% 1980Market Place SP 26,017 26,017 100% 1995Alphaville SP 23,539 30,178 78% 2011Boulevard SP 22,466 29,176 77% 1980Iguatemi Brasilia DF 21,632 33,800 64% 2010Iguatemi São Paulo SP 20,393 40,303 51% 1966Boulevard Rio de Janeiro RJ 15,905 26,203 61% 1996Iguatemi Porto Alegre RS 14,152 39,310 36% 1983Galleria SP 11,992 23,983 50% 1992Praia de Belas RS 10,847 28,695 38% 1991Esplanada SP 9,156 27,663 33% 1991Iguatemi São Carlos SP 8,559 19,020 45% 1997Iguatemi Florianopolis SC 6,054 20,180 30% 2007Area proprietaria SP 3,678 3,678 100% 1991Iguatemi Caxias RS 2,444 29,101 8% 1996Total Current 232,652 432,412 53.8%


72



Table 50: General Shopping Portfolio as of 1Q11

Location GLA m2

Shopping State General 100% Stake Opening

Internacional Shopping Guarulhos SP 75,958 75,958 100%Suzano Shopping SP 19,583 19,583 100%Shopping do Vale RS 13,913 16,487 84%Santana Parque Shopping SP 13,269 26,538 50%Auto Shopping SP 11,477 11,477 100%Shop. Americanas Pres. Prudente SP 10,276 10,276 100%Shopping Unimart SP 10,233 10,233 100%Outlet Premium São Paulo SP 8,858 17,716 50%Cascavel JL Shopping PR 7,590 8,877 86%Shopping Light SP 7,092 14,140 50%Top Center Shopping São Paulo SP 6,369 6,369 100%Shopping Americanas Osasco SP 3,218 3,218 100%Poli Shopping SP 2,264 4,527 50%Total Current 190,100 225,399 84.3%


Companies’ regional diversificationBR Malls has the most diversified portfolio among the listed companies, with 40 shopping malls in 15 states and 27 cities as of 1Q11; it is the only company present in all regions of the country, with almost 40% of its total GLA located outside the Southeast region, which represents 69-89% of other listed players’ portfolios,especially the states of São Paulo and Rio. Also noteworthy is Aliansce’s regional diversification, as the company has a presence in 4 regions, excluding the Southern. Iguatemi and Multiplan have significant exposure to the South and Southeast regions, which represent 92% and 91% of their own GLA respectively.

Table 51: Geographical diversification

BRML MULT IGTA ALSC SSBR GSHPTotal GLA ('000 m2) 1,219 551 432 477 349 225States 15 6 6 9 3 3Cities 27 7 13 13 7 9# Malls per regionNorthern 3 0 0 0 1 0Northeastern 3 0 0 5 0 0Mid Western 4 1 1 1 1 0Southern 5 2 3 0 0 2Southeastern 25 10 11 11 8 11% of total GLANorthern 7% 0% 0% 0% 13% 0%Northeastern 9% 0% 0% 25% 0% 0%Mid Western 10% 9% 8% 4% 8% 0%Southern 12% 21% 20% 0% 0% 11%Southeastern 61% 69% 72% 71% 78% 89%


73



Figure 95: BR Malls regional diversification


Figure 96: Multiplan regional diversification


Figure 97: Iguatemi regional diversification


Figure 98: Aliansce regional diversification


Figure 99: SSBR regional diversification


Figure 100: GSHP regional diversification


7%

9%

10%

12%61%

North Northeast Mid West

South Southeast

9%

21%

69%


South Southeast

8%

20%

72%


South Southeast

7%

18%

4%

71%


South Southeast

13%

8%

78%


South Southeast

11%

89%


South Southeast

74



Figure 101: Map of Brazil by Region

Source: J.P. Morgan.

Espirito Santo

Alagoas

Sergipe

Piaui

Sao PauloRio de Janeiro

Mato Grosso do Sul

Distrito Federal

Rio Grande do Norte

Acre

Amapa

Amazonas

Bahia

CearaMaranhao

Mato Grosso

Minas Gerais

Para

Paraiba

Parana

Rio Grande do Sul

Rondonia

Roraima

Santa Catarina

Goias

Pernambuco

Tocantins

Southern

# of cities: 1,188

Population: 26.7mn

% of total GPD: 16.3%

GPD per capital R$14.2k

Northeastern

# of cities: 1,793

Population: 14.1mn



Mid Western

# of cities: 466

Population: 13.2mn



Northern

# of cities: 449

Population: 14.6mn



Southeastern

# of cities: 1,668

Population: 77.9mn



Espirito Santo

Alagoas

Sergipe

Piaui


Mato Grosso do Sul

Distrito Federal

Rio Grande do Norte

Acre

Amapa

Amazonas

Bahia

CearaMaranhao

Mato Grosso

Minas Gerais

Para

Paraiba

Parana

Rio Grande do Sul

Rondonia

Roraima

Santa Catarina

Goias

Pernambuco

Tocantins

Espirito Santo

Alagoas

Sergipe

Piaui


Mato Grosso do Sul

Distrito Federal

Rio Grande do Norte

Acre

Amapa

Amazonas

Bahia

CearaMaranhao

Mato Grosso

Minas Gerais

Para

Paraiba

Parana

Rio Grande do Sul

Rondonia

Roraima

Santa Catarina

Goias

Pernambuco

Tocantins

Southern

# of cities: 1,188

Population: 26.7mn



Northeastern

# of cities: 1,793

Population: 14.1mn



Mid Western

# of cities: 466

Population: 13.2mn



Northern

# of cities: 449

Population: 14.6mn



Southeastern

# of cities: 1,668

Population: 77.9mn



75



Appendix V – Company Financials

Table 52: BR Malls – Income StatementR$ in millions

2010 2011e 2012e 2013e 2014eGross Revenues 596 898 1,219 1,437 1,576 Net Revenues 546 827 1,121 1,322 1,450

Cash COGS (60) (83) (107) (126) (138)Total COGS (60) (83) (107) (126) (138)Gross Profit 486 744 1,015 1,197 1,312 G&A Expenses (54) (76) (99) (114) (125)Commercial Expenses (13) (13) (14) (15) (16)Services (9) (12) (15) (19) (21)Other Operating expenses 12 8 2 2 2

Depreciation & amortization (11) (12) (17) (20) (22)EBIT 411 638 872 1,031 1,131

Other adjustments 5 5 6 6 6 EBITDA 428 656 895 1,057 1,160 Financial Result (94) (203) (301) (319) (241)Non-operating result 556 - - - -EBT 874 435 571 712 890 Income Tax (40) (50) (69) (85) (116)Deferred Income Tax (201) 14 - - -Minorities (139) (25) (26) (28) (29)Net Income 495 374 476 599 745 FFO (fund from operations) 285 383 493 619 767 NOI (net operating income) 448 687 943 1,126 1,241

Source: J.P. Morgan estimates and company reports.

Table 53: BR Malls – Balance SheetR$ in millions

2010 2011e 2012e 2013e 2014eCash 318 623 551 1,331 2,329 Accounts Receivable 155 190 258 304 334 Other Assets ST 108 147 158 169 182 Accounts Receivables LT 81 127 172 203 222 Other Assets LT 9,896 11,377 12,441 12,484 12,511 Fixed Assets 12 7 (1) (10) (21)TOTAL ASSETS 10,570 12,471 13,579 14,481 15,558 Financing ST 127 159 183 184 184 Accounts payable ST+LT 28 45 58 69 75 Other Liabilities ST 877 365 389 414 441 Financing LT 1,439 2,657 3,066 3,081 3,081 Other Liabilities LT 2,310 2,396 2,624 2,967 3,386 Minority interest 307 318 344 372 401 SHAREHOLDERS' EQUITY 5,482 6,531 6,914 7,394 7,989 TOTAL LIABILITIES & EQUITY 10,570 12,471 13,579 14,481 15,558

Source: J.P. Morgan estimates and company reports.

Table 54: BR Malls – Cash Flow StatementR$ in millions

2010 2011e 2012e 2013e 2014eNOPLAT 358 558 759 898 980 Net Investment (1,684) (1,507) (1,135) (77) (35)(Inc.) in WC (98) (64) (100) (67) (42)Capex (1,597) (1,456) (1,052) (30) (14)Depreciation 11 12 17 20 22 FCF - Firm (1,186) (924) (350) 849 974 FCF - Equity (1,519) (1,283) (729) 458 582


76



Table 55: Multiplan – Income Statement

R$ in millions

2010 2011e 2012e 2013e 2014eGross revenues 663 713 855 1,060 1,219 Net Revenues 604 649 778 965 1,109 Total COGS (ex-depreciation) (98) (109) (112) (96) (122)Depreciation & amortization (45) (55) (62) (72) (78)Total COGS (143) (164) (174) (169) (200)Gross Profit 462 485 604 796 909 Admistrative expenses (99) (93) (109) (135) (155)Commercial expenses (43) (19) (27) (24) (11)Other Operating expenses (10) 2 2 2 2 Non recurring expenses - - - - -EBIT 309 375 470 639 745 Depreciation & amortization (45) (55) (62) (72) (78)Other adjustment (4) 4 - - -EBITDA 357 426 532 711 823 Financial Result 44 21 (35) (67) (39)

Equity Income (4) 4 - - -EBT 349 400 435 572 707 Income Tax (120) (132) (143) (189) (233)

Income Tax (15) (66) (86) (132) (210)Deferred Income Tax (105) (66) (57) (57) (23)

Minorities (11) (12) (13) (14) (16)Net Income 218 256 278 369 458 FFO (fund from operations) 263 311 340 441 535 NOI (net operating income) 425 481 611 837 966


Table 56: Multiplan – Balance Sheet

R$ in millions

2010 2011e 2012e 2013e 2014eCash 795 396 358 699 1,053 Accounts Receivable 180 171 205 254 292 Other Assets ST 62 67 72 77 83 Accounts Receivables LT 36 43 51 63 73 Other Assets LT 416 422 425 429 433 Fixed Assets 2,497 3,218 3,754 3,795 3,759 TOTAL ASSETS 3,986 4,315 4,865 5,317 5,693 Financing ST 62 85 196 252 252 Accounts payable ST+LT 79 55 63 78 99 Other Liabilities ST 610 549 562 534 507 Financing LT 246 320 509 603 603 Other Liabilities LT 23 39 40 42 43 Minotiry interest 22 128 141 155 170 SHAREHOLDERS' EQUITY 2,943 3,139 3,354 3,653 4,019 TOTAL LIABILITIES & EQUITY 3,986 4,315 4,865 5,317 5,693


Table 57: Multiplan – Cash Flow Statement

R$ in millions

2010 2011e 2012e 2013e 2014e

NOPLAT 301 312 378 497 530 Net Investment (401) (708) (508) (15) 86 (Inc.) in WC (71) (21) (35) (46) (27) Capex (419) (797) (598) (113) (42) Depreciation 45 55 62 72 78 FCF - Firm (134) (440) (179) 424 554 FCF - Equity (179) (504) (261) 313 434


77



Table 58: Iguatemi – Income Statement

R$ in millions

2010 2011e 2012e 2013e 2014eGross Revenues 294 352 431 534 666 Net Revenues 264 315 386 478 596

Cash COGS (55) (62) (71) (86) (104)Depreciation on COGS (15) (18) (22) (27) (34)

Total COGS (70) (79) (93) (114) (139)Gross Profit 194 236 293 365 457 Admistrative expenses (23) (32) (37) (43) (54)Services (22) (24) (27) (33) (42)Other Operating expenses (11) (4) (4) (4) (4)Depreciation & amortization (6) (5) (7) (8) (10)Others 32 25 25 25 25 EBIT 164 196 244 301 373 Depreciation & amortization (20) (23) (29) (36) (45)EBITDA 185 219 272 337 417 Financial Result 9 (13) (29) (48) (48)

Financial Income 63 66 90 86 92 Financial Expenses (54) (79) (119) (134) (139)

Non-operating result - - - - -EBT 173 183 215 253 325 Income Tax (22) (40) (47) (56) (72)Minorities (0) (0) (0) (0) (0)Net Income 152 143 168 198 254 FFO (fund from operations) 172 166 196 233 298 NOI (net operating income) 203 249 312 393 496


Table 59: Iguatemi – Balance Sheet

R$ in millions

2010 2011e 2012e 2013e 2014eCash 628 905 862 915 1,021 Accounts Receivable ST 71 83 101 126 157 Inventories 0 0 0 0 0 Other Assets ST 24 26 28 30 33 Accounts Receivables LT 22 21 25 31 39 Other Assets LT 135 154 163 173 184 Fixed Assets 1,414 1,694 2,053 2,244 2,318 TOTAL ASSETS 2,294 2,882 3,233 3,520 3,751 Financing ST 21 24 29 32 32 Accounts payable ST+LT 29 25 29 35 43 Other Liabilities ST 103 81 87 93 100 Financing LT 276 438 603 695 695 Other Liabilities LT 376 722 761 785 797 Minotiry interest 0 0 0 0 0 SHAREHOLDERS' EQUITY 1,488 1,592 1,724 1,880 2,084 TOTAL LIABILITIES & EQUITY 2,294 2,882 3,233 3,520 3,751


Table 60: Iguatemi – Cash Flow Statement

R$ in millions

2010 2011e 2012e 2013e 2014eNOPLAT 144 154 192 238 294 Net investment (188) (245) (378) (216) (104) Depreciation 6 5 7 8 10 Change in WC (38) (15) (19) (24) (31) Capex (156) (235) (365) (200) (83)FCF - Firm (44) (91) (186) 22 190 FCF - Equity (98) (169) (305) (111) 51


78



BR Malls: Summary of FinancialsIncome Statement FY09A FY10A FY11E FY12E Balance Sheet FY09A FY10A FY11E FY12E

Net Revenues 393 546 827 1,121 Cash 1,141 318 623 551

Cash COGS (32) (60) (83) (107) Accounts receivable 130 236 317 430Total COGS (32) (60) (83) (107) Inventories - - - -Gross Profit 360 486 744 1,015 Other current assets 87 108 147 158

Gross Margin 91.8% 88.9% 90.0% 90.5% Net PP&E 6,958 9,688 11,145 12,179SG&A (42) (67) (89) (113) Other assets 147 220 240 261Depreciation (12) (11) (12) (17) Total assets 8,463 10,570 12,471 13,579

EBITDA 319 428 656 895EBITDA margin 81.4% 78.3% 79.4% 79.8% Short-term debt 106 127 159 183Financial income 355 245 155 78 Accounts payable 20 28 45 58

Financial expense (361) (333) (359) (379) Other current liabilities 238 877 365 389Other Non Operarting income 1,244 556 0 0 Long-term debt 1,347 1,439 2,657 3,066

EBT 1,542 874 435 571 Deferred taxes 70 128 83 77Taxes (447) (240) (36) (69) Other liabilities 1,614 2,181 2,313 2,547Minority interest (4) (139) (25) (26) Total liabilities 3,395 4,780 5,622 6,321

Extraordinary (818) (226) 0 0 Minority interest 68 307 318 344Net income 1,091 495 374 476 Shareholders' equity 5,068 5,789 6,849 7,258Net income margin 69.6% 49.1% 45.3% 42.5% Liabilities + Equity 8,463 10,570 12,471 13,579

FFO 217 285 383 493EPS 1.35 0.66 0.83 1.06

Net Revenue growth 23.1% 39.2% 51.3% 35.7% Net debt 312 1,248 2,193 2,699EBITDA growth 33.3% 33.9% 53.4% 36.4% Net Debt/Equity 6.2% 21.6% 32.0% 37.2%

Net income growth 104.1% (54.6%) (24.3%) 27.3% Debt/Equity 28.7% 27.0% 41.1% 44.8%FFO growth 95.0% 31.2% 34.4% 28.7% Net Debt/EBITDA 1.0 2.9 3.3 3.0

Operating Data, Ratios FY09A FY10A FY11E FY12E Valuation, Macro FY09A FY10A FY11E FY12E

Change in working capital (49) (98) (64) (100) EV/EBITDA 4.5 3.7 4.3 3.6

FCF - Firm 133 (1,186) (924) (350) P/E 12.7 26.1 20.7 16.2Dividends 0 68 67 94 P/BV - - - -Dividend % of net income 0.0% 25.0% 25.0% 25.0% P/FFO 16.0 24.5 20.2 15.7

Total GLA (m2) 1,036 1,197 1,416 1,583 FCF yield 2.0% (17.5%) (13.6%) (5.2%)Average stake (%) 45% 50% 55% 57% Dividend yield 0.0% 1.0% 0.9% 1.2%Owned GLA (m2) 467 593 778 902 Capex/Revenues 35.4% 298.2% 180.1% 96.7%

Vacancy rate - - - - Cash Earnings 376.9% 68.1% (14.7%) 23.6%Rent/m2 69 79 78 87 Assets/Equity 1.7 1.8 1.8 1.9

Capex 139 1,630 1,489 1,084 Coverage (EBIT/Interest) 0.8 1.2 1.8 2.3ROE 8.1% 9.8% 11.5% 13.8% Shares 202 406 449 449ROIC - - - -

WACC 0.0% 0.0% 9.4% 0.0%Days receivable 121 158 140 140 Perpetual Growth 0.0% 0.0% 4.0% 0.0%Days inventory - - - - Cost of equity 0.0% 0.0% 9.3% 0.0%

Days payable 224 169 200 200 Cost of debt 0.0% 0.0% 9.6% 0.0%

Source: Company reports and J.P. Morgan estimates.Note: R$ in millions (except per-share data).Fiscal year ends Dec

79



Multiplan: Summary of FinancialsIncome Statement FY10A FY11E FY12E FY13E Balance Sheet FY10A FY11E FY12E FY13E

Net Revenues 604 649 778 965 Cash 795 396 358 699

Cash COGS (98) (109) (112) (96) Accounts receivable 180 171 205 254Total COGS (143) (164) (174) (169) Inventories - - - -Gross Profit 462 485 604 796 Other current assets 62 67 72 77



Financial expense (46) (64) (82) (110) Other current liabilities 469 403 410 376Other Non Operarting income (4) 4 0 0 Long-term debt 246 320 509 603

EBT 349 400 435 572 Deferred taxes 184 216 222 186Taxes (120) (132) (143) (189) Other liabilities 23 39 40 42Minority interest (11) (12) (13) (14) Total liabilities 1,021 1,048 1,370 1,509

Extraordinary 0 0 0 0 Minority interest 22 128 141 155Net income 218 256 278 369 Shareholders' equity 2,943 3,139 3,354 3,653Net income margin 36.1% 39.4% 35.8% 38.2% Liabilities + Equity 3,986 4,315 4,865 5,317

FFO 368 377 398 498EPS 1.22 1.43 1.55 2.06

Net Revenue growth 25.2% 7.4% 19.8% 24.1% Net debt (386) 113 450 260EBITDA growth 10.3% 19.2% 24.9% 33.8% Net Debt/Equity (13.1%) 3.6% 13.4% 7.1%

Net income growth 33.7% 17.2% 8.7% 32.6% Debt/Equity 13.9% 16.2% 24.1% 26.2%FFO growth - - - - Net Debt/EBITDA (1.1) 0.3 0.8 0.4

Operating Data, Ratios FY10A FY11E FY12E FY13E Valuation, Macro FY10A FY11E FY12E FY13E

Change in working capital (71) (21) (35) (46) EV/EBITDA 17.7 16.0 12.8 9.6FCF - Firm (40) (522) (273) 260 P/E 27.5 23.4 21.6 16.3

Dividends (41) (55) (64) (70) P/BV - - - -Dividend % of net income 23.6% 20.1% 18.5% 13.9% P/FFO 22.8 19.3 17.6 13.6Total GLA (m2) 552 590 754 828 FCF yield 843.5% (340.7%) 289.6% 145.1%

Average stake (%) 67% 69% 72% 75% Dividend yield 0.7% 0.9% 1.1% 1.2%Owned GLA (m2) 372 410 545 619 Capex/Revenues (15.1%) (5.4%) (3.8%) (4.0%)Vacancy rate - - - - Cash Earnings 12.1% 103.7% 782.9% 384.4%

Rent/m2 1,134 1,155 1,076 1,244 Assets/Equity 1.4 1.4 1.5 1.5Capex (92) (35) (29) (39) Coverage (EBIT/Interest) (6.9) (15.8) (11.6) (2.5)ROE 7.6% 8.4% 8.6% 10.5% Shares 179 179 179 179

ROIC - - - -WACC 8.8% 8.8% 8.8% 8.8%

Days receivable 131 120 120 120 Perpetual Growth 4.0% 4.0% 4.0% 4.0%

Days inventory - - - - Cost of equity 0.0% 0.0% 0.0% 0.0%Days payable 295 295 295 295 Cost of debt 0.0% 0.0% 0.0% 0.0%


80



Iguatemi: Summary of FinancialsIncome Statement FY10A FY11E FY12E FY13E Balance Sheet FY10A FY11E FY12E FY13E

Net Revenues 264 315 386 478 Cash 628 905 862 915

Cash COGS (55) (62) (71) (86) Accounts receivable 71 83 101 126Total COGS (70) (79) (93) (114) Inventories - - - -Gross Profit 194 236 293 365 Other current assets 24 26 28 30



Financial expense (54) (79) (119) (134) Other current liabilities 103 81 87 93Other Non Operarting income 0 0 0 0 Long-term debt 276 438 603 695

EBT 186 236 291 357 Deferred taxes 54 82 118 137Taxes (22) (40) (47) (56) Other liabilities 322 640 643 648Minority interest (0) (0) (0) (0) Total liabilities 806 1,290 1,509 1,640

Extraordinary 0 0 0 0 Minority interest 0 0 0 0Net income 152 143 168 198 Shareholders' equity 1,488 1,592 1,724 1,880Net income margin 57.5% 45.3% 43.4% 41.3% Liabilities + Equity 2,294 2,882 3,233 3,520

FFO 172 166 196 233EPS 1.91 1.80 2.11 2.49

Net Revenue growth 21.2% 19.7% 22.3% 23.9% Net debt (130) 94 307 349EBITDA growth 23.2% 18.5% 24.2% 23.7% Net Debt/Equity (8.7%) 5.9% 17.8% 18.5%

Net income growth 75.8% (5.6%) 17.2% 18.0% Debt/Equity 20.0% 29.0% 36.7% 38.7%FFO growth 46.0% (3.4%) 18.0% 19.0% Net Debt/EBITDA (0.7) 0.4 1.1 1.0

Operating Data, Ratios FY10A FY11E FY12E FY13E Valuation, Macro FY10A FY11E FY12E FY13E

Change in working capital (38) (15) (19) (24) EV/EBITDA 15.4 14.0 11.3 9.1FCF - Firm 27 (188) (177) 0 P/E 18.3 19.4 16.6 14.0

Dividends 22 38 36 42 P/BV - - - -Dividend % of net income 14.2% 26.5% 21.3% 21.2% P/FFO 16.1 16.7 14.1 11.9Total GLA (m2) 433 469 523 567 FCF yield 0.8% (5.5%) (5.2%) 0.0%

Average stake (%) 55% 56% 61% 68% Dividend yield 0.8% 1.4% 1.3% 1.5%Owned GLA (m2) 237 264 319 387 Capex/Revenues 65.6% 82.9% 105.2% 46.4%Vacancy rate - - - - Cash Earnings 65.5% (16.3%) 30.4% 19.3%

Rent/m2 898 965 984 1,015 Assets/Equity 1.5 1.8 1.9 1.9Capex 173 262 406 222 Coverage (EBIT/Interest) 3.0 2.5 2.0 2.2ROE 10.6% 9.3% 10.1% 11.0% Shares 79 79 79 79

ROIC - - - -WACC 9.5% 9.5% 9.5% 9.5%

Days receivable 129 120 120 120 Perpetual Growth 4.0% 4.0% 4.0% 4.0%

Days inventory - - - - Cost of equity 9.6% 9.6% 9.6% 9.6%Days payable 153 150 150 150 Cost of debt 9.4% 9.4% 9.4% 9.4%


81



Other Companies Recommended in This Report (all prices in this report as of market close on 15 July 2011)Aliansce (ALSC3.SA/R$13.88/Neutral), Sonae Sierra Brasil (SSBR3.SA/R$23.85/Overweight)

Analyst Certification: The research analyst(s) denoted by an “AC” on the cover of this report certifies (or, where multiple research analysts are primarily responsible for this report, the research analyst denoted by an “AC” on the cover or within the document individually certifies, with respect to each security or issuer that the research analyst covers in this research) that: (1) all of the views expressed in this report accurately reflect his or her personal views about any and all of the subject securities or issuers; and (2) no part of any of the research analyst's compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the research analyst(s) in this report.

In compliance with Instruction 483 issued by Comissao de Valores Mobiliarios (the Brazilian securities commission) on July 6, 2010, the Brazilian primary analyst signing this report declares: (1) that all the views expressed herein accurately reflect his or her personal views about the securities and issuers; (2) that all recommendations issued by him or her were independently produced, including from the entity in which he or she is an employee; and (3) that he or she will set forth any situation or conflict of interest believed to impact the impartiality of the recommendations herein, as per article 17, II of Instruction 483.

Important Disclosures

Lead or Co-manager: J.P. Morgan acted as lead or co-manager in a public offering of equity and/or debt securities for Sonae Sierra Brasil within the past 12 months.

Client:J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as clients: BR Malls, Sonae Sierra Brasil, Aliansce.

Client/Investment Banking: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as investment banking clients: Sonae Sierra Brasil, Aliansce.

Client/Non-Investment Banking, Securities-Related: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as clients, and the services provided were non-investment-banking, securities-related: BR Malls.

Investment Banking (past 12 months): J.P. Morgan received in the past 12 months compensation for investment banking Sonae Sierra Brasil, Aliansce.

Investment Banking (next 3 months): J.P. Morgan expect to receive, or intend to seek, compensation for investment banking services in the next three months from Sonae Sierra Brasil, Aliansce.

Non-Investment Banking Compensation:J.P. Morgan has received compensation in the past 12 months for products or services other than investment banking from BR Malls.

0

9

18

27

36

Price(R$)

Sep07

Jun08

Mar09

Dec09

Sep10

Jun11

BR Malls (BRML3.SA) Price Chart

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

82



0

14

28

42

56

70

Price(R$)

Nov07

Aug08

May09

Feb10

Nov10

Multiplan (MULT3.SA) Price Chart


0

15

30

45

60

75

Price(R$)

Nov07

Aug08

May09

Feb10

Nov10

Iguatemi (IGTA3.SA) Price Chart


83



Date Rating Share Price (R$)

Price Target (R$)

10-Jun-11 OW 25.44 35.00

Date Rating Share Price (R$)

Price Target (R$)

10-Jun-10 OW 10.39 15.00

10-Jun-11 N 14.15 19.00

The chart(s) show J.P. Morgan's continuing coverage of the stocks; the current analysts may or may not have covered it over the entire period. J.P. Morgan ratings: OW = Overweight, N= Neutral, UW = Underweight

Explanation of Equity Research Ratings and Analyst(s) Coverage Universe: J.P. Morgan uses the following rating system: Overweight [Over the next six to twelve months, we expect this stock will outperform the average total return of the stocks in the analyst's (or the analyst's team's) coverage universe.] Neutral [Over the next six to twelve months, we expect this stock will perform in line with the average total return of the stocks in the analyst's (or the analyst's team's) coverage universe.] Underweight [Over the next six to twelve months, we expect this stock will underperform the average total return of the stocks in the analyst's (or the analyst's team's) coverage universe.] The analyst or analyst's team's coverage universe is the sector and/or country shown on the cover of each publication. See below for the specific stocks in the certifying analyst(s) coverage universe.

Coverage Universe: Motta, Marcelo Garaldi: Sonae Sierra Brasil (SSBR3.SA)

0

7

14

21

28

35

42

Price(R$)

Feb11

Feb11

Mar11

Apr11

May11

Jun11

Jul11

Sonae Sierra Brasil (SSBR3.SA) Price Chart

OW R$35


Initiated coverage Jun 10, 2011.

0

6

12

18

24

Price(R$)

Feb10

May10

Sep10

Dec10

Apr11

Aliansce (ALSC3.SA) Price Chart

OW R$15 N R$19


Initiated coverage Jun 10, 2010.

84



J.P. Morgan Equity Research Ratings Distribution, as of June 30, 2011

Overweight(buy)

Neutral(hold)

Underweight(sell)

J.P. Morgan Global Equity Research Coverage 47% 42% 11%IB clients* 50% 46% 32%

JPMS Equity Research Coverage 45% 47% 8%IB clients* 70% 64% 52%

*Percentage of investment banking clients in each rating category.For purposes only of FINRA/NYSE ratings distribution rules, our Overweight rating falls into a buy rating category; our Neutral rating falls into a hold rating category; and our Underweight rating falls into a sell rating category.

Equity Valuation and Risks: Please see the most recent company-specific research report for an analysis of valuation methodology and risks on any securities recommended herein. Research is available at http://www.morganmarkets.com , or you can contact the analyst named on the front of this note or your J.P. Morgan representative.

Equity Analysts' Compensation: The equity research analysts responsible for the preparation of this report receive compensation based upon various factors, including the quality and accuracy of research, client feedback, competitive factors, and overall firm revenues, which include revenues from, among other business units, Institutional Equities and Investment Banking.

Registration of non-US Analysts: Unless otherwise noted, the non-US analysts listed on the front of this report are employees of non-US affiliates of JPMS, are not registered/qualified as research analysts under NASD/NYSE rules, may not be associated persons of JPMS, and may not be subject to FINRA Rule 2711 and NYSE Rule 472 restrictions on communications with covered companies, public appearances, and trading securities held by a research analyst account.

Other Disclosures

J.P. Morgan ("JPM") is the global brand name for J.P. Morgan Securities LLC ("JPMS") and its affiliates worldwide. J.P. Morgan Cazenove is a marketing name for the U.K. investment banking businesses and EMEA cash equities and equity research businesses of JPMorgan Chase & Co. and its subsidiaries.

Options related research: If the information contained herein regards options related research, such information is available only to persons who have received the proper option risk disclosure documents. For a copy of the Option Clearing Corporation's Characteristics and Risks of Standardized Options, please contact your J.P. Morgan Representative or visit the OCC's website at http://www.optionsclearing.com/publications/risks/riskstoc.pdf

Legal Entities Disclosures U.S.: JPMS is a member of NYSE, FINRA,SIPC and the NFA. JPMorgan Chase Bank, N.A. is a member of FDIC and is authorized and regulated in the UK by the Financial Services Authority. U.K.: J.P. Morgan Securities Ltd. (JPMSL) is a member of the London Stock Exchange and is authorized and regulated by the Financial Services Authority. Registered in England & Wales No. 2711006. Registered Office 125 London Wall, London EC2Y 5AJ. South Africa: J.P. Morgan Equities Limited is a member of the Johannesburg Securities Exchange and is regulated by the FSB. Hong Kong: J.P. Morgan Securities (Asia Pacific) Limited (CE number AAJ321) is regulated by the Hong Kong Monetary Authority and the Securities and Futures Commission in Hong Kong. Korea: J.P. Morgan Securities (Far East) Ltd, Seoul Branch, is regulated by the Korea Financial Supervisory Service. Australia: J.P. Morgan Australia Limited (ABN 52 002 888 011/AFS Licence No: 238188) is regulated by ASIC and J.P. Morgan Securities Australia Limited (ABN 61 003 245 234/AFS Licence No: 238066) is a Market Participant with the ASX and regulated by ASIC. Taiwan: J.P.Morgan Securities (Taiwan) Limited is a participant of the Taiwan Stock Exchange (company-type) and regulated by the Taiwan Securities and Futures Bureau. India: J.P. Morgan India Private Limited, having its registered office at J.P. Morgan Tower, Off. C.S.T. Road, Kalina, Santacruz East, Mumbai - 400098, is a member of the National Stock Exchange of India Limited (SEBI Registration Number - INB 230675231/INF 230675231/INE 230675231) and Bombay Stock Exchange Limited (SEBI Registration Number - INB 010675237/INF 010675237) and is regulated by Securities and Exchange Board of India. Thailand: JPMorgan Securities (Thailand) Limited is a member of the Stock Exchange of Thailand and is regulated by the Ministry of Finance and the Securities and Exchange Commission. Indonesia: PT J.P. Morgan Securities Indonesia is a member of the Indonesia Stock Exchange and is regulated by the BAPEPAM LK. Philippines: J.P. Morgan Securities Philippines Inc. is a member of the Philippine Stock Exchange and is regulated by the Securities and Exchange Commission. Brazil: Banco J.P. Morgan S.A. is regulated by the Comissao de Valores Mobiliarios (CVM) and by the Central Bank of Brazil. Mexico: J.P. Morgan Casa de Bolsa, S.A. de C.V., J.P. Morgan Grupo Financiero is a member of the Mexican Stock Exchange and authorized to act as a broker dealer by the National Banking and Securities Exchange Commission. Singapore: This material is issued and distributed in Singapore by J.P. Morgan Securities Singapore Private Limited (JPMSS) [MICA (P) 025/01/2011 and Co. Reg. No.: 199405335R] which is a member of the Singapore Exchange Securities Trading Limited and is regulated by the Monetary Authority of Singapore (MAS) and/or JPMorgan Chase Bank, N.A., Singapore branch (JPMCB Singapore) which is regulated by the MAS. Malaysia: This material is issued and distributed in Malaysia by JPMorgan Securities (Malaysia) Sdn Bhd (18146-X) which is a Participating Organization of Bursa Malaysia Berhad and a holder of Capital Markets Services License issued by the Securities Commission in Malaysia. Pakistan: J. P. Morgan Pakistan Broking (Pvt.) Ltd is a member of the Karachi Stock Exchange and regulated by the Securities and Exchange Commission of Pakistan. Saudi Arabia: J.P. Morgan Saudi Arabia Ltd. is authorized by the Capital Market Authority of the Kingdom of Saudi Arabia (CMA) to carry out dealing as an agent, arranging, advising and custody, with respect to securities business under licence number 35-07079 and its registered address is at 8th Floor, Al-Faisaliyah Tower, King Fahad Road, P.O. Box 51907, Riyadh 11553, Kingdom of Saudi Arabia. Dubai: JPMorgan Chase Bank, N.A., Dubai Branch is regulated by the Dubai Financial Services Authority (DFSA) and its registered address is Dubai International Financial Centre - Building 3, Level 7, PO Box 506551, Dubai, UAE.

Country and Region Specific Disclosures U.K. and European Economic Area (EEA): Unless specified to the contrary, issued and approved for distribution in the U.K. and the EEA by JPMSL. Investment research issued by JPMSL has been prepared in accordance with JPMSL's policies for managing conflicts of interest arising as a result of

http://www.optionsclearing.com/publications/risks/riskstoc.pdf

http://www.morganmarkets.com/

85



publication and distribution of investment research. Many European regulators require a firm to establish, implement and maintain such a policy. This report has been issued in the U.K. only to persons of a kind described in Article 19 (5), 38, 47 and 49 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (all such persons being referred to as "relevant persons"). This document must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this document relates is only available to relevant persons and will be engaged in only with relevant persons. In other EEA countries, the report has been issued to persons regarded as professional investors (or equivalent) in their home jurisdiction. Australia: This material is issued and distributed by JPMSAL in Australia to "wholesale clients" only. JPMSAL does not issue or distribute this material to "retail clients". The recipient of this material must not distribute it to any third party or outside Australia without the prior written consent of JPMSAL. For the purposes of this paragraph the terms "wholesale client" and "retail client" have the meanings given to them in section 761G of the Corporations Act 2001. Germany: This material is distributed in Germany by J.P. Morgan Securities Ltd., Frankfurt Branch and J.P.Morgan Chase Bank, N.A., Frankfurt Branch which are regulated by the Bundesanstalt für Finanzdienstleistungsaufsicht. Hong Kong: The 1% ownership disclosure as of the previous month end satisfies the requirements under Paragraph 16.5(a) of the Hong Kong Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission. (For research published within the first ten days of the month, the disclosure may be based on the month end data from two months prior.) J.P. Morgan Broking (Hong Kong) Limited is the liquidity provider/market maker for derivative warrants, callable bull bear contracts and stock options listed on the Stock Exchange of Hong Kong Limited. An updated list can be found on HKEx website: http://www.hkex.com.hk. Japan: There is a risk that a loss may occur due to a change in the price of the shares in the case of share trading, and that a loss may occur due to the exchange rate in the case of foreign share trading. In the case of share trading, JPMorgan Securities Japan Co., Ltd., will be receiving a brokerage fee and consumption tax (shouhizei) calculated by multiplying the executed price by the commission rate which was individually agreed between JPMorgan Securities Japan Co., Ltd., and the customer in advance. Financial Instruments Firms: JPMorgan Securities Japan Co., Ltd., Kanto Local Finance Bureau (kinsho) No. 82 Participating Association / Japan Securities Dealers Association, The Financial Futures Association of Japan. Korea: This report may have been edited or contributed to from time to time by affiliates of J.P. Morgan Securities (Far East) Ltd, Seoul Branch. Singapore: JPMSS and/or its affiliates may have a holding in any of the securities discussed in this report; for securities where the holding is 1% or greater, the specific holding is disclosed in the Important Disclosures section above. India: For private circulation only, not for sale. Pakistan: For private circulation only, not for sale. New Zealand: This material is issued and distributed by JPMSAL in New Zealand only to persons whose principal business is the investment of money or who, in the course of and for the purposes of their business, habitually invest money. JPMSAL does not issue or distribute this material to members of "the public" as determined in accordance with section 3 of the Securities Act 1978. The recipient of this material must not distribute it to any third party or outside New Zealand without the prior written consent of JPMSAL. Canada: The information contained herein is not, and under no circumstances is to be construed as, a prospectus, an advertisement, a public offering, an offer to sell securities described herein, or solicitation of an offer to buy securities described herein, in Canada or any province or territory thereof. Any offer or sale of the securities described herein in Canada will be made only under an exemption from the requirements to file a prospectus with the relevant Canadian securities regulators and only by a dealer properly registered under applicable securities laws or, alternatively, pursuant to an exemption from the dealer registration requirement in the relevant province or territory of Canada in which such offer or sale is made. The information contained herein is under no circumstances to be construed as investment advice in any province or territory of Canada and is not tailored to the needs of the recipient. To the extent that the information contained herein references securities of an issuer incorporated, formed or created under the laws of Canada or a province or territory of Canada, any trades in such securities must be conducted through a dealer registered in Canada. No securities commission or similar regulatory authority in Canada has reviewed or in any way passed judgment upon these materials, the information contained herein or the merits of the securities described herein, and any representation to the contrary is an offence. Dubai: This report has been issued to persons regarded as professional clients as defined under the DFSA rules.

General: Additional information is available upon request. Information has been obtained from sources believed to be reliable but JPMorgan Chase & Co. or its affiliates and/or subsidiaries (collectively J.P. Morgan) do not warrant its completeness or accuracy except with respect to any disclosures relative to JPMS and/or its affiliates and the analyst's involvement with the issuer that is the subject of the research. All pricing is as of the close of market for the securities discussed, unless otherwise stated. Opinions and estimates constitute our judgment as of the date of this material and are subject to change without notice. Past performance is not indicative of future results. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The opinions and recommendations herein do not take into account individual client circumstances, objectives, or needs and are not intended as recommendations of particular securities, financial instruments or strategies to particular clients. The recipient of this report must make its own independent decisions regarding any securities or financial instruments mentioned herein. JPMS distributes in the U.S. research published by non-U.S. affiliates and accepts responsibility for its contents. Periodic updates may be provided on companies/industries based on company specific developments or announcements, market conditions or any other publicly available information. Clients should contact analysts and execute transactions through a J.P. Morgan subsidiary or affiliate in their home jurisdiction unless governing law permits otherwise.

"Other Disclosures" last revised June 13, 2011.

Copyright 2011 JPMorgan Chase & Co. All rights reserved. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of J.P. Morgan. #$J&098$#*P

Documents

JPM 18-Jul