TOP STORIES WEEKLY - Particulares - Millenniumbcp · was approved by KPN shareholders last October and in December the EU Commission opened an in-depth probe into this deal. This

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

António Seladas, CFA

Equity Analyst

+351 21 003 7826

[email protected]

TOP STORIES

Portugal Telecom dropped 16% this week and an accumulated 20% since news emerged last week on a €900 mn investment in RioForte commercial paper. Market is already incorporating a 100% default, since Oi’s market capitalization is down circa €1,000 mn since June 26th . PT market cap is down over €500 mn in the same period, so the market is incorporating PT shareholders will be more penalized that their 37% holding in Oi, i.e. that merger terms may be revised (page 5).

This week, BES held a CC to clarify some topics related to the exposure to the Espírito Santo Group companies. In addition, there were some news that the new BES’ CEO should be Vitor Bento, a well known Portuguese economist who is independent from the family (page 4).

OUT THIS WEEK Snapshot/Reports – Portugal Telecom

Price Target/Recommendation Changes – Altri

Other News – BES, Telefónica, PT & TEF, Utilities Sector, EDP

WEEK AHEAD Nothing to register

PORTFOLIOS This week, Mib Aggressive Portfolio went down 3.50%, underperforming the PSI20 by 3.17pp. Excluding BES and Sonae, all stocks contributed for this underperformance (page 9). This week, Mib Liquidity Portfolio went down 3.50%, underperforming the PSI20 by 3.17pp. Excluding BES and Sonae, all stocks contributed for this underperformance (page 10).

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

PSI 20 6,832 -0.3% 4.16% 15.98% PSI 20 301 192 160 108

IBEX 35 11,009 0.5% 11.02% 21.42% IBEX 35 4,296 3,578 3,035 2,570

Euro Stoxx 50 3,270 1.3% 5.19% 17.95% Euro Stoxx 50 8,908 8,578 8,574 7,456

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

EUR/USD 1.36 -0.2% -1.47% 4.46% Euribor 6m 0.30% 0.30% 0bp 0.38%

EUR/GBP 0.79 -0.9% -4.93% 2.49% 10Y Bond PT 3.59% 3.57% 2bp 5.66%

EUR/BRL 3.01 0.2% -7.64% 20.33% 10Y Bond SP 2.67% 2.64% 3bp 3.90%

-34.7

-27.2

-19.9

-17.1

-9.9

28.9

32.6

33.2

34.5

41.2

-75 -50 -25 0 25 50 75

Sonaecom

Portugal Telecom

BES

Jerónimo Martins

Zon Optimus

BPI

EDP

Semapa

Novabase

EDP Renováveis

Best & Worse Performers - YTD (%)

-15.6

-8.5

-7.3

-3.8

-3.5

1.9

3.3

3.6

4.3

5.6

-25 -15 -5 5 15

Portugal Telecom

ES Saúde

Sonaecom

EDP

Novabase

Inditex

Zon Optimus

Altri

BES

Semapa

Best & Worse Performers -1 Week (%)

IBERIA

July

4

201

4

WE

EK

LY

EQUITY RESEARCH

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Millennium investment banking Weekly Ju ly 4 , 2014

CHANGES

EARNINGS

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DIVIDENDS

Page 4 of 13


FINANCIALS BES Buy – High Risk (Target YE14: €1.25)

News this week

Vanda Mesquita

António Seladas, CFA

Equity Analysts

BES last Monday at 3h30pm held a CC to clarify some topics related to the exposure to the Espírito Santo Group companies. The CC was hosted by the current CFO Amilcar M. Pires and by the board member Joaquim Goes; the board members started the CC explaining the structure of the group. Espírito Santo International (ESI) is the top holding that aggregates the financial and the non-financial businesses of the Espírito Santo Group. Analyzing the shareholder structure of the companies of the group, Espírito Santo Financial Group (ESFG), in which the 25% stake in BES and the 100% stake in Tranquilidade (insurance company) is included, is held 0.15% by ESI and 49.3% held by Espírito Santo Irmãos (which in turn is 100% held by Rioforte that is 100% held by ESI). In addition, the non-financial business held 100% by Rioforte comprises Tivoli Hóteis, Comporta and other businesses. Under the CC, BES balance sheet exposure to all Espírito Santo Group companies amounts to roughly €1bn, €200mn of which is exposure to Rioforte (BES mentioned that it holds guarantees) and that €780mn of which is exposure to ESFG. As for the exposure to customers, BES stated that the exposure of BES retail customers to Espirito Santo Group companies amounts to €650mn (vis-à-vis €1.4bn at YE13), €255mn of which related to ESI (top holding), roughly €340mn related to Rioforte and the remaining amount related to other companies of the group. Apparently part of this exposure of retail customers is covered by the €700mn guarantee issued by ESFG. In addition, BES mentioned that the exposure of institutional customers to the Espírito Santo Group companies amounts to €1.94bn (vis-à-vis €1.5bn at YE13). This exposure is not covered by any guarantee and BES stated that it does not consider it as a direct liability.

Still under the CC, BES’ management said that the restructuring plan of Espírito Santo International (ESI) should be announced soon. This restructuring plan aims to solve the capital problems of the Espírito Santo group and should comprise the sale of assets. Over the last weeks, there were some news that Espírito Santo International’s needs of funding amounted to €2.5bn. During this week, there were some pieces of news that some assets held by the Espírito Santo Group are for sale, namely Tivoli Hóteis (12 hotels in Portugal) and Tranquilidade (insurance company). According to the press, the sale of the Tivoli Hóteis would yield between €300mn-350mn and the sale of Tranquilidade would yield €358mn (which is the Tranquilidade’s book value at YE13). In addition, Espirito Santo Group may chose to sell the stake in Espirito Santo Saúde (54.38% is held by the group and the yesterday’s market cap amounts to €348.6mn, meaning that the group can capture €190mn more). Concerning Herdade da Comporta, since is a real estate asset is more difficult to assess the value. Having said that, and comparing with Troia Resort, a 466ha resort project not far away from Comporta, our valuation through Sonae Capital points to an EV of roughly €156Mn or €0.32Mn/ha (please see our last report released on March, 26). So if apply the same ratio to Comporta (according to the site there will be 958ha available, Comporta Links, Comporta Dunes, Casas da Encosta, Casas da Ilha and Casas da Peninsula), it would mean roughly €307Mn. The comparison is not straight forward, since Comporta is more exclusive so more expensive however Troia Resort project is already in place an partially built. To sum up, apparently the main GES assets are BES and Tranquilidade stakes through ESFG; ESS stake through Rio Forte and ESFG and the Tivoli Hoteis and Comporta through Rio Forte.

BES’ management concluded the CC, stating the Angolan State Guarantee covers 70% of BESA’s loan portfolio (€4.2bn of credits). This guarantee was issued at YE13 and is valid for one and a half year. The new management is working closely with the Angolan authorities to trigger the execution mechanism, which may start in the 2H14. The execution of the guarantee could involve the issue of public debt or the delivery of cash. Today, there were some news that a rights issue at BESA is being prepared and that it will be totally subscribed by the Angolan shareholders, meaning that BES’ stake will be diluted.

This week, there were also some news that the proposal from the ESFG to the General Shareholder meeting announced two weeks ago may be amended. According to the news, the Bank of Portugal did not approve the name of Amilcar Pires (the current CFO) for next BES’ CEO and that the new BES’ CEO should be Vitor Bento, a well known Portuguese economist who is independent from the family.

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All in all, the visibility is still too low and more important is not clear the potential impairments in BES if the GES fails, so a clear statement concerning this item would be for sure welcome by investors. However, the choice of an independent CEO is obviously positive for the stock.

TELECOMS Telefónica Buy – Medium Risk (Target YE14: €14.40)

EU Commission approves merger of Telefónica Deutschland and KPN’s E-Plus

Alexandra Delgado, CFA

Equity Analyst

The EU Commission approved this week the merger of Telefónica Deutschland and KPN’s E-Plus, saying that Telefónica had provided sufficient guarantees to allow the deal to go ahead. The merger was approved by KPN shareholders last October and in December the EU Commission opened an in-depth probe into this deal. This deal reduces the number of mobile players (excluding virtual players) in the German market to three from four.

E-Plus will be integrated into Telefónica Deutschland. In exchange, KPN will receive €5.0 bn in cash and will hold a 20.5% stake in Telefónica Deutschland. Telefónica will hold 62.1% of Telefónica Deutschland. The terms imply a €8.55 billion valuation for E-Plus, i.e. 9.5x EBITDA 2013. Additionally, Telefónica will enter into a call option agreement with KPN that will entitle Telefónica to acquire from KPN an additional stake of up to 2.9% in Telefónica Deutschland for a strike price of up to €510 mn (1 year after call option agreement).

Telefónica will finance this deal with a significant equity financing component, which will enable to minimize impact on leverage ratio. Of the €5 bn initial cash consideration to be received by KPN, Telefónica will finance €4.14 bn (77% of Telefónica Deutschland’s capital increase plus €1.3 bn). Impact of this transaction on net debt (IFRS standards) is limited: between €0.4 and €0.8. Considering credit agencies’ standards (hybrid bonds classified as 50% equity, 50% debt), transaction will increase net debt between €1.5 and €2.2 bn, i.e. circa 2.0x incremental OIBDA excluding synergies, so leverage ratio is not impacted. For further detail, please refer to our Snapshot: Telefónica - America Movil backs E-Plus sale - Improved offer increases chances of closing deal in Germany, published on August 26th, 2013.

To guarantee regulatory clearance, Telefónica Deutschland agreed to the following remedies: sell upfront 20% of its mobile network capacity to an MVNO and give the opportunity to acquire up to 10% additional network capacity (deal that has already been sign with Drillisch); make available a package of 2.1 and 2.6 GHz frequencies, mobile sites and national roaming to a potential new player in the market; extend existing contracts with wholesale partners until 2025.

Telefónica Deutschland merger with E-Plus will generate the largest mobile operator in Germany by subscribers (43 mn subscribers, 38% market share) and the third by mobile revenue (31.6% share). The resulting company will have combined revenues of €8.3 billion and a total 49 million accesses (mobile and fixed broadband).

Telefónica estimates the transaction will generate synergies of more than €5 bn, net of integration costs (NPV), which stands for c. €800 mn in run-rate synergies. Two thirds of operating synergies should come from opex savings and one third from capex savings. Closing of E-Plus acquisition should happen in 3Q14.

This merger is very important for the competitiveness of Telefónica in the German market. We remind revenue dropped 8.8% YoY in 1Q14 and that OIBDA margin was low, at 22.3% (-1.5pp YoY), which shows the need to gain scale and increase efficiency.

This deal was considered as crucial for the telecom sector to assess the EU’s attitude toward consolidation. Telcos say consolidation is required to compensate for lower returns and higher investment needs, and today’s decision should bring more consolidation ahead.

This acquisition is not included in our figures, as we were waiting for the regulatory review outcome.

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But impact is not material (circa €0.05/ share increase of our price target, considering €5.0 bn synergies). We therefore maintain the price target for Telefónica at €14.40 (YE14), with a Buy, Medium Risk recommendation.

Portugal Telecom Buy – Medium Risk (Target YE14: €3.80)

RioForte commercial paper – More than €0.9 bn already in Oi’s price; what now for merger?

Alexandra Delgado, CFA

Equity Analyst

Portuguese newspapers reported on June 26th that Portugal Telecom bought €0.9 bn in commercial paper issued by RioForte, a holding company of Portugal's Espirito Santo family. PT confirmed it has subscribed a total of €897 mn in commercial paper that will mature on July 15th and 17th. There have been rumours recently related to the financial shape of Grupo Espirito Santo (GES) holdings, namely RioForte.

As part of the merger with PT, Oi performed a capital increase in the beginning of May, raising gross proceeds of R$14 bn, R$8.25 bn in cash. PT participated in the capital increase through the contribution of company’s assets (excluding stakes in Oi and Contax), valued at R$5.71 bn. This means the €0.9 bn treasury application has been handed over to Oi in the capital increase.

In the event that the €0.9 bn are not fully reimbursed, then Oi will take the hit and PT’s shareholders will only absorb 37% (their holding in Oi). Facts that came to light have clearly created stress (to say the very least) between PT and its Brazilian partners in Oi: Andrade Gutierrez and Jereissati group. And Oi issued a statement yesterday saying it will take any actions necessary to protect its interests. If it is true that merger terms have now been fixed, we find hard to believe that things will run smoothly from now on, in case the money is not recovered. Merger can suffer, maybe delayed, deferring synergies.

In the scenario of a 50% haircut our PT price target is reduced by €0.20/ share and a 100% haircut decreases our PT price target by €0.45/ share. If we assume there would be a way (which, is not clear...) to review the merger terms to make PT shareholders absorb fully the impact, then a 50% haircut would decrease our PT price target by €0.50/ share and a 100% haircut would decrease our PT price target by €1.05/ share.

Since first news emerged on this topic, PT lost €540 mn in market capitalization and Oi lost €1,000 mn. This means the market has more than incorporated the impact of a RioForte default on Oi’s price, and PT has suffered the impact of 54% of Oi’s variation, higher than its 37% holding. We highlight that after yesterday’s closing, Oi had an accumulated impact of €900 mn in market capitalization, while PT had suffered a drop of 42% of that value. Does today’s session indicate that the market starts to incorporate that PT shareholders will be more penalized that the 37%? Next days will tell us more...

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

Portugal Telecom Telefónica

Buy – Medium Risk (Target YE14: €3.80)

Buy – Medium Risk (Target YE14: €14.40)

Fixed Broadband in Brazil – Penetration surpasses 35% of households Alexandra Delgado, CFA

Equity Analyst

The Brazilian regulator released May Fixed Broadband subscribers’ numbers. The market grew 0.8% MoM in the month to 23.1 million subscribers, which stands for 35.4% penetration of households. Subscribers grew 9.8% vs. May 2013.

May registered 183k net adds, -13% vs. May 2013. Net adds YTD are 23% below same period last year, which shows the growth deceleration.

Oi added 12k clients in May, losing 0.17pp market share in the month (to 28.50% from 28.67%). Oi

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has been losing market share steadily: it lost 2.6% market share in the last 12 months, share that was grabbed by Telmex (+1.5%) and GVT (+1.0%). The good performance of Pay TV should help retain broadband customers, but it is still a long way before Oi can stabilize market share.

Telefónica added 15k clients in the month, losing 0.08pp market share in the month (to 18.88% from 18.96%). Telefónica’s performance in this segment has been good in 2H13 (282k accumulated net adds, +0.45pp market share), but first months of 2014 have been far from impressive. May & April have delivered higher net adds, but still not enough to avoid market share loss.

Net/ Embratel (Telmex) has led the market since December 2013, and now has a subscribers’ market share of 30.23% (+0.13pp MoM). GVT continues to increase market share: +0.07pp in May, to 11.80%.

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

UTILITIES Utilities Sector

Electricity consumption rose for the second consecutive month in Portugal Vanda Mesquita,

Equity Analyst

Monthly electricity consumption (adjusted for temperature and working days) rose by 0.5% YoY in

Portugal in June (please see Iberian indicators table presented below). Electricity consumption in

Portugal rose for two months in a row, after falling for two consecutive months. In Spain, monthly

electricity consumption remained stable YoY.

-12%

-8%

-4%

0%

4%

8%

Jan-

09A

pr-0

9Ju

l-09

Oct

-09

Jan-

10A

pr-1

0Ju

l-10

Oct

-10

Jan-

11A

pr-1

1Ju

l-11

Oct

-11

Jan-

12A

pr-1

2Ju

l-12

Oct

-12

Jan-

13A

pr-1

3Ju

l-13

Oct

-13

Jan-

14A

pr-1

4

Electricity Consumption YoY adjusted to temperature and working days

Portugal Spain

Source: REN (Rede Eléctrica Nacional), REE (Red Electrica España)

In the case of EDP, earnings from the distribution business in Portugal are not significantly affected by the changes in volumes (as the bulk of the distribution model has a fixed component), meaning that the aforesaid increase does not have a very meaningful impact. At the same time, in terms of liberalized activities, the effect of the increase of consumption in Portugal together with the stabilization of consumption is Spain is minimized, since liberalized activities in Iberia only accounted for 10% of 2013 EBITDA.

In the case of Iberdrola, given the aforesaid stabilization of consumption in Span, we do not expect a meaningful impact (Spanish liberalized activities represented about 19% of 2013 EBITDA).

EDP Sell – Low Risk (Target YE14: €3.10)

Fitch revised EDP’s outlook from negative to stable Vanda Mesquita,

Equity Analyst

EDP announced that Fitch kept its long term rating at BBB- unchanged and that it has revised its Outlook from negative to stable. Fitch mentions that this change reflects the announcement of the regulatory

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changes in Spain and also the announcement of the company’s 2014-2017 business plan which includes targets for deleveraging. Fitch adds that this change also reflects the execution of the tariff deficit securitizations, the sale of minority stakes to China Three Gorges and also the improvement of EBITDA due to the increase of the installed capacity. We consider that this outlook revision from negative to stable is positive and is a consequence of a more stable regulatory environment.

EDP announced that it has completed the sale of 50% stake in Jari and Cachoeira Caldeirão hydro plants

EDP announced that it has completed the sale of 50% stake in the company holding the rights to develop the Jari power plant (373MW) and 50% stake in the company holding the rights to develop the Cachoeira Caldeirão power plant (219MW) to CWEI Participações Ltda. which is the Brazilian subsidiary of China Three Gorges. EDP announced that the total amount paid by CWEI to EDP Brazil was R$420.6 million, R$420.2 of which related to the sale of 50% of Jary hydro power plant and R$0.4 million of which related to the sale of 50% of Cachoeira Caldeirão hydro power plant.

We remind that this deal was announced in December 2013, under the strategic partnership with CTG. As previously mentioned, the aforesaid sales will allow the company to reduce its net debt.

SECTOR PERFORMANCE

* includes Jeronimo Martins and Sonae

-22.5

-8.0

-1.9

13.0

14.1

16.7

34.2

4.2

-30 -10 10 30

Telecoms & IT

Retail *

Financials

Media

Oil & Gas

Industrials & Other

Electric Utilities

PSI20

Sector Performance - YTD (%)

-2.7

-0.5

0.0

0.1

1.4

6.1

-0.3

-5 -1 3 7 11 15

Telecoms & IT

Electric Utilities

Media

Retail *

Industrials & Other

Oil & Gas

Financials

PSI20

Sector Performance -1 Week (%)

-22.5

-8.0

-1.9

13.0

14.1

16.7

34.2

4.2

-40 -20 0 20 40

Telecoms & IT

Retail *

Financials

Media

Oil & Gas

Industrials & Other

Electric Utilities

PSI20

Sector Performance - YTD (%)

-7.8

-2.7

-0.5

0.0

0.1

1.4

6.1

-0.3

-10 -5 0 5 10

Telecoms & IT

Electric Utilities

Media

Retail *

Industrials & Other

Oil & Gas

Financials

PSI20

Sector Performance -1 Week (%)

This week, the PSI20 went down 0.3%. The best performing sector was Financials, plus 6.1% and the worst was Telecoms & IT, minus 7.8%.

On a Ytd basis, the PSI20 went up 4.2%. The best performing sector was Electric Utilities, plus 34.2% and the worst was Telecoms & IT, minus 22.5%.

AGGRESSIVE PORTFOLIO This week, Mib Aggressive Portfolio went down 3.50%, underperforming the PSI20 by

3.17pp. Excluding BES and Sonae, all stocks contributed for this underperformance.

We highlight that the portfolio is composed by the five stocks with the highest upside potential of our coverage universe. It is equal weighted and rebalanced on a weekly basis.

LIQUIDITY PORTFOLIO This week, Mib Liquidity Portfolio went down 3.50%, underperforming the PSI20 by

3.17pp. Excluding BES and Sonae, all stocks contributed for this underperformance.

We highlight that the portfolio is composed by the five stocks with the highest upside potential of our coverage universe, excluding the less liquid stocks. It is equal weighted and rebalanced on a weekly basis.

Page 9 of 13

Millennium investment banking Weekly July 4, 2014

8 3 4 13 8Portfolio weekly return

PerformanceContribution Deviation

BES High 0.75 1.25 66% 4.3% 0.86pp 0.93ppSonaecom High 1.68 2.80 67% -7.3% -1.46pp -1.39pp

Portugal Telecom Medium 2.30 3.80 65% -15.6% -3.12pp -2.04pp

Jerónimo Martins Medium 11.78 16.45 40% -0.6% -0.12pp -0.05pp

Sonae Medium 1.23 1.55 26% 1.7% 0.35pp 0.32ppPortfolio -3.50%PSI 20 -0.33%Gain/loss -3.17pp Explained by the portfolio -2.24pp Explained by being underweight in the remaining PSI20 stocks -0.93pp

Next week Portfolio Changes in Portfolio

CompanyRisk

RatingMarket

Price (€)Price

Target (€)Upside

PotentialIn Out

Sonaecom High 1.68 2.80 67% Novabase Sonae

BES High 0.75 1.25 66%

Portugal Telecom Medium 2.30 3.80 65%

Jerónimo Martins Medium 11.78 16.45 40%

Novabase High 3.51 4.65 32%

Return vs. PSI 20

2008 2009 2010 2011 2012 2013 YTD 1 Month 1 Week

Portfolio -43.6% 71.9% -7.30% -36.6% 22.1% 47.1% 5.1% -12.1% -3.5%PSI20 -51.3% 33.5% -10.30% -27.6% 2.9% 16.0% 4.2% -7.0% -0.3%Gain/loss 7.7pp 38.5pp 3.0pp -9.0pp 19.2pp 31.1pp 0.9pp -5.1pp -3.2pp

Source: Bloomberg; Millennium investment banking

"Mib Aggressive Portfolio" is composed by the five stocks with a higher upside potential of our coverage universe.

"Mib Aggressive Portfolio" is equal-weighted and its composition changes at the end of the last trading day of each week.

The portfolio YTD return was recalculated on the week of March 15.

Upside Potential

Weekly Return

Company Risk Rating

Market Price (€)

Price Target (€)

Mib AGGRESSIVE PORTFOLIO

95.00

99.00

103.00

107.00

111.00

115.00

119.00

123.00

31/Dec 23/Jan 15/Feb 10/Mar 02/Apr 25/Apr 18/May 10/Jun 03/Jul

Ytd Return

Portfolio PSI20

50.00

100.00

150.00

200.00

250.00

300.00

23/Jul 20/Mar 15/Nov 12/Jul 09/Mar 03/Nov 01/Jul

Return since inception (30th July 2004)

Portfolio PSI20

Page 10 of 13


8 3 4 13 8Portfolio weekly return

PerformanceContribution Deviation

BES High 0.75 1.25 66% 4.3% 0.86pp 0.93ppSonaecom High 1.68 2.80 67% -7.3% -1.46pp -1.39pp

Portugal Telecom Medium 2.30 3.80 65% -15.6% -3.12pp -2.04pp

Jerónimo Martins Medium 11.78 16.45 40% -0.6% -0.12pp -0.05pp

Sonae Medium 1.23 1.55 26% 1.7% 0.35pp 0.32ppPortfolio -3.50%PSI 20 -0.33%Gain/loss -3.17pp Explained by the portfolio -2.24pp Explained by being underweight in the remaining PSI20 stocks -0.93pp

Next week Portfolio Changes in Portfolio

CompanyRisk

RatingMarket Price (€)

Price Target (€)

Upside Potential

In Out

Sonaecom High 1.68 2.80 67% - -

BES High 0.75 1.25 66%

Portugal Telecom Medium 2.30 3.80 65%

Jerónimo Martins Medium 11.78 16.45 40%

Sonae Medium 1.23 1.55 26%

Return vs. PSI 20

2011 2012 2013 YTD 1 Month 1 Week

Portfolio - 22.6% 41.2% -2.7% -12.0% -3.5%PSI20 - 2.9% 16.0% 4.2% -7.0% -0.3%Gain/loss - 19.7pp 25.2pp -6.9pp -4.9pp -3.2pp

Source: Bloomberg; Millennium investment banking

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

"Mib Liquidity Portfolio" is equal-weighted and its composition changes at the end of the last trading day of each week.The portfolio YTD return was recalculated on the week of March 15.

Upside Potential

Weekly Return

Company Risk Rating

Market Price (€) Price Target (€)

Mib LIQUIDITY PORTFOLIO

95.00

99.00

103.00

107.00

111.00

115.00

119.00

31/Dec 23/Jan 15/Feb 10/Mar 02/Apr 25/Apr 18/May 10/Jun 03/Jul

Ytd Return

Portfolio PSI20

75.00

95.00

115.00

135.00

155.00

175.00

195.00

30/Dec 30/May 29/Oct 30/Mar 29/Aug 28/Jan 29/Jun

Return since inception (31th December 2011)

Portfolio PSI20

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Risk Trnvr (€mn) M Cap EPS P / E EV / Sales P/BVRating 3m 6m (€ mn) Week 1M 3M 12M YTD 2013 2014E 2015E 2013 2014E 2015E 2013 2014E 2015E 2013 2014E 2015E 2013 2014E 2014E

PSI 20 6,832 - - 66,278 -0.3 -4.7 -10.9 25.8 4.2IBEX 11,009 - - 577,937 0.5 2.4 3.1 37.6 11.0Financials 192.2 202.4 12,768 5.7 -12.5 -27.7 78.1 3.9 - - - - - - - - - - - - - - -BCP (1) 0.12 - - - - 36.6 35.5 6,254 9.4 1.5 -15.7 123.4 19.5 - - - - - - - - - - - - - - -BES 0.75 1.25 66.2% Buy High 29.7 27.5 4,230 4.3 -28.0 -42.6 37.5 -19.9 -0.13 -0.02 0.04 loss loss 18.2 - - - - - - 0.0% 0.0% 0.5BPI 1.57 1.60 2.0% Neutral High 4.4 4.2 2,284 -1.2 -10.6 -20.6 76.4 28.9 0.05 -0.07 0.11 25.3 loss 14.0 - - - - - - 0.0% 0.0% 1.0Telecoms 626.7 465.5 62,548 -0.2 2.7 5.2 23.1 3.8 - - - 11.4 16.9 14.9 2.1 2.3 2.2 6.2 6.9 6.9 5.9% 5.8% 2.0Telefónica 12.63 14.40 14.1% Buy Medium 597.6 438.9 57,457 0.4 3.7 8.2 25.4 6.7 1.02 0.78 0.88 11.6 16.1 14.3 2.1 2.3 2.3 6.2 7.1 7.1 6.3% 6.0% 2.3Portugal Telecom 2.30 3.80 65.1% Buy Medium 25.4 21.6 2,063 -15.6 -12.7 -28.1 -19.5 -27.2 0.55 0.01 0.06 5.8 289.7 39.9 1.8 1.7 1.7 5.4 5.7 5.5 3.2% 4.3% 0.6Zon Optimus 4.87 5.65 16.1% Buy Medium 3.4 4.3 2,506 3.3 -1.7 -10.6 30.1 -9.9 0.24 0.23 0.26 22.4 21.3 18.5 2.7 2.5 2.4 7.2 6.7 6.2 2.2% 4.7% 2.4Sonaecom 1.68 2.80 67.0% Buy High 0.3 0.6 522 -7.3 -12.3 -23.1 9.3 -34.7 0.28 0.09 0.12 9.1 18.3 14.2 6.5 3.0 2.9 10.9 11.9 9.4 0.0% 5.7% 0.5Media 0.3 1.1 422 -21.2 -23.9 -24.3 85.9 26.9 - - - 18.9 1.4 - - 10.2 - - 2.8% - -Impresa (2) 1.55 - - - - 0.2 0.7 260 -0.5 -8.7 -16.8 141.7 41.9 0.01 - - 90.8 - - 1.8 - - 16.2 - - 0.0% - -Media Capital (2) 1.25 - - - - 0.0 0.0 106 -50.8 -49.0 -37.5 37.4 7.8 0.12 - - 9.4 - - 1.0 - - 5.7 - - 8.5% - -

Cofina (2) 0.55 - - - - 0.1 0.4 56 -5.2 -9.9 -25.8 32.6 9.6 0.05 - - 10.0 - - 1.2 - - 9.1 - - 2.2% - -TechnologyIndra 13.00 14.10 8.5% Neutral High 11.1 12.8 2,133 -0.5 -2.6 -11.7 25.1 6.9 0.88 0.81 0.90 13.9 16.1 14.4 0.9 0.9 0.9 9.5 9.7 8.7 2.8% 2.8% 1.8

Novabase 3.51 4.65 32.5% Buy High 0.1 0.1 110 -3.5 -8.4 -10.0 49.4 34.5 0.24 0.17 0.21 10.9 20.2 17.0 0.3 0.5 0.4 5.0 6.7 6.1 7.5% 4.4% 1.2Utilities 239.8 220.8 52,996 -2.7 2.8 8.9 42.0 24.2 - - - 11.2 16.4 14.9- 1.9 2.1 2.0 7.9 9.4 8.8 4.0% 3.3% 1.0Iberdrola 5.43 4.80 -11.6% Sell Low 211.8 195.2 33,883 -2.8 2.8 8.8 40.3 19.6 0.42 0.32 0.33 11.14 16.9 16.5 1.7 1.9 1.8 7.8 9.3 8.8 6.5% 5.5% 0.9

EDP 3.54 3.10 -12.4% Sell Low 22.7 20.8 12,944 -3.8 1.4 10.1 49.5 32.6 0.27 0.26 0.29 9.71 13.8 12.4 1.9 2.1 2.0 8.4 9.8 9.3 6.9% 5.2% 1.5

EDP Renováveis 5.45 5.60 2.8% Neutral Low 2.9 3.2 4,754 0.3 8.7 11.6 41.9 41.2 0.15 0.13 0.25 24.9 41.2 22.0 5.7 6.5 5.5 8.2 9.3 7.7 1.0% 0.7% 0.8

REN 2.65 2.90 9.5% Neutral Low 2.4 1.6 1,415 -1.4 -3.7 -7.1 21.0 18.4 0.23 0.20 0.20 9.8 13.4 13.4 4.5 4.9 4.9 6.9 7.8 7.7 7.6% 6.5% 1.3

Conglomerates 5.5 6.2 3,843 3.0 -2.1 -7.5 - - - - - - - - - - - - - - - - -

Sonae 1.23 1.55 25.8% Buy Medium 4.7 5.3 2,464 1.7 -3.4 -12.3 76.0 17.4 0.16 0.06 0.05 6.6 20.4 24.9 0.8 0.9 0.8 10.5 11.4 10.8 3.3% 2.8% 1.5

Semapa 10.85 8.70 -19.8% Sell High 0.6 0.6 1,284 5.6 0.5 3.2 63.6 33.2 0.68 0.58 0.62 12.0 18.7 17.6 1.5 1.6 1.5 7.0 7.0 6.6 3.0% 2.3% 1.5

Sonae Capital 0.38 0.48 26.8% Buy High 0.1 0.2 96 -2.1 -7.7 -23.6 138.8 15.8 -0.05 -0.02 0.03 loss loss 12.7 2.2 1.9 1.7 70.2 16.0 11.4 0.0% 0.0% 0.3

Retail 246.3 196.4 78,753.2 1.3 3.2 -1.3 -10.5 -21.6 - - - 30.3 28.1 24.8- 2.8 2.5 2.2 17.1 15.3 13.6 1.9% 2.2% 6.7

Inditex 114.45 120.00 4.8% Neutral Medium 236.2 184.2 71,340 1.9 8.4 0.8 16.1 -4.5 3.81 3.89 4.41 6.3 29.4 25.9 4.2 3.8 3.4 18.0 16.3 14.5 1.8% 2.1% 7.0

Jerónimo Martins 11.78 16.45 39.6% Buy Medium 10.1 12.2 7,413 -0.6 -5.2 -2.1 -26.7 -17.1 0.61 0.59 0.68 4.6 19.8 17.4 0.8 0.6 0.6 12.6 10.2 9.0 2.1% 2.5% 4.7

Industrials 6.6 2.4 4,263.6 1.6 -5.5 - - 19.2 - - - - - - - - - - - - - - -

CTT 6.86 7.95 15.9% Buy Medium 4.4 - 1,029 -3.2 -7.3 - - 22.7 0.41 0.44 0.46 - 15.6 14.8 - 1.4 1.3 - 7.5 7.3 - 6.0% 3.6

Sonae Industria (3) 0.41 - - - - 0.2 0.5 57 2.3 -10.1 -43.2 -13.9 -27.4 -0.56 - - loss - - 0.7 - - 24.6 - - 0.0% - -

Altri 2.26 2.25 -0.1% Reduce High 0.7 0.9 463 3.6 0.7 -13.7 32 0.7 0.27 0.28 0.29 8.4 8.1 7.7 1.9 1.7 1.6 7.7 6.7 6.2 1.1% 1.1% 1.6

Portucel 3.44 2.75 -20.0% Sell Medium 1.3 1.0 2,639 0.4 -8.3 3.1 47.7 20.0 0.26 0.22 0.21 11.3 15.5 16.0 1.8 2.1 2.0 7.8 8.8 8.6 9.0% 6.3% 1.8

Construction 4.3 4.0 1,207 - - - - - - - - - - - - - - -

Mota-Engil (3) 5.62 - - - - 4.3 3.9 1,150 -0.9 3.4 0.4 151.0 30.0 0.25 - - 17.5 - - 1.1 - - 7.6 - - 2.5% - -

Oil & Gas .

Galp Energia 13.55 15.60 15.1% Buy High 15.4 15.9 11,236 1.4 4.9 6.9 17.3 13.7 0.37 0.34 0.35 31.9 39.6 38.3 0.7 1.1 1.1 12.7 14.6 13.4 2.4% 2.6% 2.2

HealthCare

ES Saúde 3.56 4.45 25.0% Buy High - - 340 -8.5 -6.5 - - 11.3 0.16 0.20 0.20 - - 17.5 - - 1.3 - - 8.2 - - -

(1) We do not have a recommendation on BCP, as Mib is a registered trademark of BCP; (2) Not Covered; (3) Restricted

Change (%) EV / EBITDA Div Yield2014-07-04

Latest Pr (€)

Target YE14

RatingUpsd

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

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

Buy means more than 10% absolute return; Neutral means between 0% and +10% absolute return; Reduce means between -10% and 0% absolute return; Sell means less than -10% absolute return.

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

report. The views expressed above, accurately reflect personal views of the authors. They have not and will not receive any compensation for

providing a specific recommendation or view in this report. There were not any agreements between the companies covered and the analysts regarding the recommendation. This report did not have any specific recipient.

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

Analysts are paid in part based on the profitability of BCP group, which includes investment banking revenues. BCP group has more than 2% of EDP. BCP group was chosen to evaluate EDP regarding the 8th stage of the privatization process. BCP group was chosen to evaluate REN regarding the 2nd stage of the privatization process. A member of the Executive Board of Directors of Millennium BCP is member of the General and Supervisory Board of EDP - Energias de

Portugal, SA. Millennium BCP through its investment banking department is providing investment banking services to Tagus Holdings S.a.r.l. (“Offeror” in

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

place on December 2013. The Board of directors of Mota Engil has appointed Banco Comercial Português as joint-book runner concerning the offering of 34 300 000

ordinary shares of Mota Engil through an accelerated book building according to the announcement released on 25th of February 2014. Banco Comercial Português, S.A. (also known as Millennium BCP) was chosen as a Co-leader of the Initial Public Offering of ES Saúde,

that took place on February 2014. Millennium investment banking acted as Joint Bookrunner in the private offering, launched by José de Mello SA, through an accelerated

bookbuilding, concerning the sale of 94 787 697 EDP shares, according to the announcement released on the 3rd of April 2014. According to the announcement released on the 8th April 2014, Millennium BCP acted as Joint Bookrunner in the Eurobond “EDP Finance

BV 5-year” in the total amount of €650,000,000. Millennium BCP is involved in Sonae Industria capital increase announced at the beginning of May 2014. Millennium investment banking a registered trademark of Banco Comercial Português, S.A. was chosen as Joint Bookrunner of the

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

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

the 5-year revolving credit facility in the amount of €3,150,000,000 that was granted to EDP-Energias de Portugal (June 2014). Recommendations on Millennium BCP covered companies (%)

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

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

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

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

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

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

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

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

DISCLAIMER This information is not an offer to sell or a solicitation to enter into any particular deal or contract. It consists of data compiled by or of opinions or estimates from Banco Comercial Português, S.A. and no representation or warranty is made as to its accuracy or completeness. This information is merely an auxiliary means of analysis to be used by its recipients, who will be solely responsible for its use, including for any losses or damages that may, directly or indirectly, derive from it. Its reproduction is not allowed without permission from the BCP group. The data herein disclosed are merely indicative and reflect the market conditions prevailing on the date they have been collected. Thus, its accuracy and timing must absolutely be confirmed before its usage. Any alteration in the market conditions shall imply the introduction of changes in this report. This information / these opinions may be altered without prior notice and may differ or be contrary to opinions expressed by other business areas of BCP group as a result of using different assumptions and criteria. The analysis contained herein is based on numerous assumptions. Different assumptions could result in materially different results.

OFFICE LOCATIONSMillennium investment banking Av. Prof. Dr. Cavaco Silva (Tagus Park)

Edif 2 - Piso 2 B

Porto Salvo

2744-002 Porto Salvo

Portugal

Telephone +351 21 113 2103

Equity Team

Luis Feria - Head of Equities

Equity Research +351 21 003 7820

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

Alexandra Delgado, CFA (Telecoms and IT)

João Flores (Retail, Industrials and HealthCare)

Vanda Mesquita (Banks, Utilities and Oil&Gas)

Ramiro Loureiro (Market Analysis)

Sónia Primo (Publishing)

Prime Brokerage +351 21 003 7855

Vitor Almeida

Equity Sales/Trading +351 21 003 7850

Paulo Cruz - Head

Gonçalo Lima

Jorge Caldeira

Nuno Sousa

Paulo Santos

Pedro Ferreira Cruz

Pedro Gonçalves

Pedro Lalanda

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

Ana Lagarelhos

Diogo Justino

Marco Barata

Documents

TOP STORIES WEEKLY - Particulares - Millenniumbcp · was approved by KPN shareholders last October and in December the EU Commission opened an in-depth probe into this deal. This