Corporate Presentation_Dragon Capital_Estimates of market capitalization before an IPO

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Estimates of market capitalization before an IPO

March 2008



Dragon Capital Highlights

Dragon Capital is Ukraine’s largest securities brokerage, investment banking, private equity and assetmanagement firm, offering a full range of services to institutional, corporate and private clients across the globe

sta s e n , t e company ex sts as an n epen ent partners p contro e y management, w t aminority stake held by Goldman Sachs

Dragon Capital has more than 130 of the nation’s most talented investment and research professionals offeringin ‐ depth knowledge of all major sectors of the local economy and the international investment community

Five ‐ time winner of the coveted Euromoney award for “Best Equity House in Ukraine” (2002, 2004 ‐ 07)

INVESTMENT BANKING

More than 50 completed ECM and M&A transactions, including 23 IPOs and private placements for Ukrainian

Dragon Capital is the largest broker on the Ukrainian stock market, with approximately 30% market share overthe past three years and ranked as the #1 broker on the PFTS by volume over 1996 ‐ 2007

BROKERAGE AND RESEARCH

ASSET MANAGEMENT

More than $1bn under management in a diverse mix of products that includes the London AIM ‐ listed Dragon ‐

Ukrainian Properties & Development plc, offshore investment funds, land acquisition vehicles and local mutual

PRINCIPAL INVESTMENTS

A lucrative portfolio of investments focused on DIY retail and real estate

2



Business Units Overview

Buy‐ outsIPOs Equity sales and trading Property development fund

Principal InvestmentsInvestment Banking Asset ManagementBrokerage and Research

Growth equity financing

Start ‐ ups

Mezzanine/ quasi ‐ equity

Real estate investments

Private placements

Sell/buy ‐ side acquisitions and

mergers

Privatizations

Debt sales and trading

Research

Proprietary tradingShare bu outs

Hedge fund

Pre ‐ IPO funds

Land acquisition and holding

vehicles

Business restructuring

Company valuation

Due diligence

Depositary receipts

Share custody

Investor relations and client

Mutual funds

Pension fund

One of Eastern Europe’s leading investment firms The country’s leading global distribution platform

Bond issuance

Dragon Capital offers its clients unmatched access to theinternational investment community, with distribution in theUnited States, Great Britain and Ukraine

An agreement with Auerbach, Grayson & Company of New Yorkmakes Dragon the only Ukrainian investment bank with access

ragon ap ta as ecome nown as ra ne s ea nginvestment house by building a solid reputation for integrity,client focus, hard work and professionalism

In 2002, Dragon Capital established a representative office inthe Czech Republic in order to expand its successful M&A

to a wide range of U.S. institutional investors

The company’s growing international reputation means London,New York and other financial circles look to Dragon as theleader on Ukraine’s financial markets and as one of the most

advisory business to Central Europe and to promote investmentopportunities in Ukraine to multinationals operating in the CEE

Influential local business magazine Komp@nion named DragonCapital to its list of “10 Companies That Inspire” for 2007

3



4



Across the Board Dominance

Since start ‐ up Dragon has completed more than 50 deals,including IPOs and private placements for major Ukrainian

‐

Transaction highlights (2007)Ukraine’s top investment bank

banking, agriculture, real estate, manufacturing, media, foodprocessing, pharmaceuticals and more

Dragon Capital has successfully raised equity and debt for someof the highest profile names in major sectors of the localeconomy:

• #7 ‐ ranked Nadra Bank• #1 ‐ ranked insurance company Oranta• Top nationwide grocers Furshet and Velyka Kyshenya

’ ,•

World‐

renowned engine manufacturer Motor Sich• Ukraine’s only public media holding, KP Media

Two of Dragon’s biggest equity market deals to date include the208m IPO for Dra on ‐ Ukrainian Pro erties & Develo ment and

its subsequent $100m secondary offering on the London AIM

Dragon has also completed buy ‐ and sell ‐ side M&A deals for avariety of local and western clients, including Austrian Erste Bank,Piraeus Bank of Greece and Ukrinbank (to Israel’s Bank Hapoalim)

The firm has considerable experience in acquisitions of variousother enterprises ranging from blocking minority stakes andprivatizations to controlling stakes in public companies

5



ECM Market Leadership

Ukrainian companies raised a record $1.8bn via IPOs and privateplacements in 2007 – up from under $0.5bn in 2006. In all, 20new companies entered the public market: in agriculture, real

The Ukrainian equity market Top ten equity deals on the Ukrainian market in 2007 (by deal size)# Date Company Sector Deal 1 Total ($m) Listing Market

1 Jun ‐ 07 Ferrexpo Metallurgy IPO 420 London SE

2 Nov‐ 07 Kernel Group Agriculture IPO 218 Warsaw SE

estate, insurance, machine ‐ building and pharmaceuticals

Despite global liquidity tightening, international investors areincreasingly focused on Ukrainian corporates. New equity

capital in 2007 gave rise to the largest investment banking dealsin Ukraine’s history, including its largest real estate deal: the

un ‐ ea s a e on on

4 Dec‐ 07 Kyiv‐ Donbas Real Estate IPO 130 London AIM

5 Nov‐ 07 Landkom Int’l. Agriculture IPO 111 London AIM

6 May ‐ 07 TMM Real Estate PP 105 Frankfurt SE

7 Nov‐ 07 DUPD Real Estate SPO 100 London AIM

8 May ‐ 07 IMB Group Banking PP 100 Vienna SE208m IPO for Dragon ‐ Ukrainian Properties & Development on

AIM in June (with a secondary offering of $100m in November)

The 2008 deal pipeline looks to be even more impressive, withmany more IPOs, SPOs and anticipated international listings formajor domestic industrial groups SCM and Interpipe

9 May ‐ 07 Karavan Real Estate PP 55 Not listed

10 Oct ‐ 07 Darnytsia Pharmaceuticals PP 48 Frankfurt SE

IPO: Initial Public Offering; SPO: Secondary Public Offering; PP: Private PlacementDeals by Dragon Capital highlighted in green

Sources: News reports and other publicly available sources

Total deals in Ukraine over 2005 ‐ 08 (IPO/private placements) Total new equity capital raised in Ukraine (2005 ‐ 08)Dragon Capital

23

20

25

1000

1200 Dragon CapitalConcorde Capital

JPMorgan/Deutsche BankConcorde

Capital14

Others10

15

600

800RenCap

ING Bank

HSBC

Others

ING Bank4 RenCap

2 JPMorgan1

Deutsche

Bank1

HSBC1

6

0

5

0

200

6

Source: news reports and other publicly available sourcesSource: news reports and other publicly available sources



Strong Post-placement SupportPost ‐ IPO/private placement share price growth (as at 21 March 2008)

75%80%

55%

59%

60%

70%

32% 33%36%

41%40%

50%

13%15%

10%

20%

0%

KP Media Laona VK Dev't Furshet Motor Sich Nadra LuAZ Rodovid IMB

Dragon Capital’s brokerage and research division offers proven support to sustain a high growth rate for share

prices post ‐ IPO/private placement. This support provides excellent opportunities for attracting additional

funds in the future and exit opportunities for shareholders

7



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Valuation Methods

DCF analysis is based on financial

Based on peer analysis

Method based on a comparative Based on actual M&A deal multiples

Based on DCF analysis Based on historical deals

orecasts

Major assumptions: sales growth,

cost of sales, profit margin, capital

expenditures and working capital

ana ys s o s m ar, pu c y tra e

companies and is commonly used to

reflect current market value

Key multiples: Enterprise Value/Sales,

Allows for deals in different countries

to be used for comparison purposes

Often reflects the value of the

WACC change (discount factor)

Advantages

n erpr se a ue an

Advantages

con ro ng s a e

Advantages

Reflects the company’s fair value

Disadvantages

Implies current market value

Disadvantages

Based on projections

Sensitivity to the terminal growth

rate

calculations

and

WACC

It is difficult to find perfectly similar

peer companies

I nores com an ’s s ecific stren ths

that might distort the valuation

To some extent disregards the

company’s long ‐ term growth prospects

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Valuation MethodsDCF

Year 2006E 2007F 2008F 2009F 2010FEarnings Before Interest and Taxes (EBIT) 4,770 9,283 16,589 28,517 45,431

Tax on EBIT (680) (1,392) (2,488) (4,278) (6,815)Depreciation 637 1,144 2,013 2,396 2,819

(Increase) / Decrease in Net Working Capital (12,642) (11,047) (14,212) (17,400) (19,282)Capital Expenditures (CAPEX) (5,375) (4,140) (4,550) (6,960) (6,275)Free Cash Flow (13,291) (6,153) (2,649) 2,276 15,879 Weighted Average Cost of Capital 14.1% 12.5% 12.3% 12.1% 12.2%

, , , , ,

Present Value of Forecast Period Free Cash Flows (8,002)FCF in 2010 ($ mil.) 15,879

FCF Growth Rate Beyond 2010 (%) 3.0%

Discount rate beyond 2010 (%) 12.2%

Terminal Value in 2010 ($ mil.) 172,595

PV of Terminal Value ($ mil.) 97,065

Enterprise Value ($ mil.) 89,064

Net Debt (2006 end; $ mil.) 27,467

Equity Value ($ mil.) 61,596

, Equity per Share 6,099

Year 2006E 2007F 2008F 2009F 2010FRisk Free Rate (1 year US T‐ bill rate) 5.5% 5.5% 5.5% 5.5% 5.5%

Equity Premium 10.0% 9.5% 9.0% 8.5% 8.0%

. . . . .

Borrowing Rate 14.0% 13.5% 13.0% 12.5% 12.0%

Corporate Tax Rate 3.8% 15.0% 15.0% 15.0% 15.0%

After ‐ Tax Cost of Debt 13.5% 11.5% 11.1% 10.6% 10.2%

Equity Weight 32.3% 29.7% 35.9% 44.4% 60.2%

Debt Weight 67.7% 70.3% 64.1% 55.6% 39.8%

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. . . . .



Valuation MethodsPeer analysis

CompanyEV/Sales

2006EV/Sales

2007EEV/EBITDA

2006EV/EBITDA

2007E P/E 2007E P/E 2008FIn order to determine possible value of the Company when

trying to enter international capital markets, the Peers’ TradingMultiples principle can be used. It employs the following

Best Buy 0.53 0.48 7.54 6.86 16.51 14.57Radioshack 0.70 0.78 10.19 7.11 19.01 16.31Circuit City 0.14 0.13 6.26 5.34 98.25 26.14Conn's 0.64 0.59 6.70 1.54 13.56 12.36Rex Stores 0.43 0.63 12.15 n/a 15.67 7.86

methodology:

I. A group of companies that operate in a similar line of

business with that of the company is selected and evaluated.II. One should determine the peers’ enterprise value (EV), . . . . . .

DSG 0.34 0.32 6.52 5.79 78.45 12.55Kesa 0.40 0.38 7.06 6.77 15.51 15.08Alba 0.37 0.40 n/a 11.76 ‐ 1.97 12.50Expert 0.60 0.53 12.88 10.52 21.79 19.20

which is calculated as market capitalization of the peer company,plus indebtedness and minus any cash remaining in the companyaccounts. EV = MC + (short term debt + long ‐ term debt) – (cash+ equivalents). The figure received reflects the entire value of the company, without taking its financing structure into

. . . . . .

Yamada Denki 0.80 0.67 17.36 12.50 30.34 21.96Edion Corporation 0.33 0.28 14.09 n/a 18.36 15.32Kojima 0.22 0.21 n/a 17.63 24.46 21.16BIC Camera 0.35 0.31 12.11 n/a 16.86 15.84K'S Holdin s Cor . 0.47 0.34 20.86 8.61 19.71 14.67

.III. The next step is to obtain financial forecasts for thecompany’s main lines of business activity looking several yearsahead. Usually, mean values are taken into consideration,provided by the I/B/E/S (Institutional Brokers' Estimate System),a system that tracks forecasts of the leading analysts covering

Best Denki Company 0.37 0.33 24.00 n/a 36.27 31.49Joshin Denki Company 0.25 0.24 10.25 n/a 15.88 14.07Nojima 0.06 n/a 3.97 n/a 13.99 n/aAverages (Japan w/o

Nojima) 0.40 0.34 16.44 12.91 23.13 19.22

each company.IV. Based on the company’s market capitalization andestimated value, analysts work out valuation multipliers such asEV/Sales, EV/EBITDA and others.V. The multiples, once obtained, are applied to the historical

AVERAGES 0.44 0.42 11.28 8.94 28.06 16.50an est mate nanc a orecasts o t e operat ng act v ty o t ecompany. As a result, the indicative value of the company isobtained. Suppose the value of all peer companies is 10 х EBITDA2006. Then if the EBITDA of the company being valued equals$20m, its EV at the moment is $200m. After subtracting the

’ ’

11

,market value.



Valuation Methods

Company AcquirerType of Investor

Country of Target Date

EV/Sales

2006EV/Sales

2007EEV/EBITDA

2006EV/EBITDA

2007E P/E 2006 P/E 2007E

Based on historical transactions

Electrodomesticos Kesa Electricals Strategic Spain Jul ‐ 07 0.49 n/a 7.76 n/a n/a n/a

DBL Distributing Ingram Micro Strategic US Jun ‐ 07 0.32 n/a n/a n/a n/a n/a

Kotsovolos DSG International Strategic Greece May ‐ 07 0.85 0.76 n/a n/a n/a n/a

xper e msen nanc a orway ay ‐ . . . . . .

Denkodo K'S Holdings Strategic Japan Dec ‐ 06 0.29 n/a 12.68 n/a 25.98 n/a

Shinden Nojima Strategic Japan Oct ‐ 06 0.21 n/a n/a n/a n/a n/a

F‐ Group DSG International Strategic Denmark Sep ‐ 06 0.23 n/a n/a n/a n/a n/a

Fotov sta DSG Internat ona Strateg c France Apr ‐ 06 0.75 n a n a n a n a n a

Markantalo (Elkjop) DSG International Strategic Finland Jan ‐ 06 0.41 n/a n/a n/a n/a n/a

Averages 0.48 0.74 12.64 14.27 28.81 25.88

max 0.85 0.76 17.46 14.27 31.65 25.88

min 0.21 0.72 12.68 14.27 25.98 25.88

Target

Valuation

Multiples

(Deals

in

Developed

Markets)

Implied Enterprise Value 35.14 58.98 n/a n/a n/a n/aAlternative 1 year forward 38.69 71.72 n/a 13.84 n/a n/a

Less: Net Debt (incl. minorities) 29.64 29.64 29.64 29.64 29.64 29.64Implied Market Value of Equity 5.50 29.35 n/a n/a n/a n/a

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IPOs vs. Private PlacementsNot listed

$471mWarsaw$742mOnly 17 “real” IPOs to date; $1,507m

raised in total (31.5% of all Ukrainian The “quick and easy” private

Vienna

(technical

listing of warrants)

$1,068mLSE AIM

deals to date)Listings on LSE (incl. AIM) andWarsaw Stock Exchange with a

wide investor base

placement has been the prevalentchoice of Ukrainian companies inraising equity: 32 deals; $1,481m

in equity raisedTechnical listin s on PFTS or

PFTS$2,801m

LSE$420m

, m,regulatory requirementsUkrainian companies becomeincreasingly capable of raisingequity through a full ‐ fledged IPO.

other stock exchanges (Viennaand Frankfurt), often throughDRs – do not sufficientlyqualify as a “true” IPO

Frankfurt (technical

listing of DRs)

DUPD ($208m; AIM)KernelGroup ($218m; Warsaw)Ferrexpo ($420m; LSE)

a big boost to Ukrainian ECMs:Establishing and educatinga strong investor basePreparing local companies

, or go ng pu cEssentially every companyhaving conducted a privateplacement makes a good

candidate for a full ‐ fledged IPO

Private placements have been a prevalent choice for ECM deals in Ukraine so far. We see a

w t n ‐ years or sooner

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Thank ou!

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Corporate Presentation_Dragon Capital_Estimates of market capitalization before an IPO