Santander Latam Universe Book 2013

Important disclosures/certifications are in the Important Disclosures section of this report. U.S. investors inquiries should be directed to Santander Investment Securities Inc. at (212) 583-4629/ (212) 350-3918.

* Employed by a non-US affiliate of Santander Investment Securities, Inc. and is not registered/qualified as a research analyst under FINRA rules.

Latin American Equity Research

New York, January 2013

LATAM UNIVERSE BOOK 2013

Santander LatAm Team

Ignacio Mendive Jesus GomezHead of LatAm Equities Head of LatAm Equity Research, Strategy 1-212-350-3958 / [email protected] 1-212-350-3992 / [email protected]

LatAm Strategy Team EconomistsJesus Gomez LatAm 1-212-350-3992 [email protected] Juan Pablo Cabrera-Head of LatAm Macro 3491-257-2172 [email protected] Stefano Rizzi LatAm 1-212-350-3979 [email protected] Sergio Galvn Argentina 5411-4341-1728 [email protected] Walter Chiarvesio Argentina 5411-4341-1564 [email protected] Maurcio Molan Brazil 5511-3012-5724 [email protected] Marcelo Audi Brazil 5511-3012-5749 [email protected] Juan Pablo Castro Chile 5622-336-3389 [email protected] Daniel Gewehr Brazil 5511-3012-5787 [email protected] Hector Chavez Mexico 5255-5269-1925 [email protected] Joao Noronha, CFA Brazil 5511-3012-5734 [email protected] Francisco Errandonea Chile 5622-336-3357 [email protected] Gonzalo Fernndez Mexico 5255-5269-1931 [email protected] Andres Soto Andean 1-212-407-0976 [email protected]

Agribusiness Oil, Gas, and PetrochemicalsChristian Audi Sector Head 1-212-350-3991 [email protected] Christian Audi Sector Head 1-212-350-3991 [email protected]

Vicente Falanga Neto Brazil 5511-3012-6042 [email protected] Vicente Falanga Neto Brazil 5511-3012-6042 [email protected]

Capital Goods Eugenia F. Pouchan, CFA Argentina 5411-4341-1218 Daniel Gewehr Sector Head 5511-3012-5787 [email protected] [email protected]

Bruno Giardino, CFA Brazil 5511-3012-5914 [email protected] Pulp & Forest Products Luis Miranda, CFA Mexico 5255-5269-1926 [email protected] Felipe F. dos Reis Brazil 5511-3012-5758 [email protected] Ana Reynal Mexico 5255-5269-1900 [email protected] Alex Sciacio, CFA Brazil 5511-3012-5870 [email protected]

Cement, Construction, Infrastructure & Real Estate Rodrigo Ordonez Chile 5622-336-3358 [email protected] Eugenia F. Pouchan, CFA Argentina 5411-4341-1218 Retail & Consumer Goods [email protected] Tobias Stingelin, CFA Sector Head 5511-3553-0699 [email protected] Fabiola Gama Brazil 5511-3012-7414 [email protected] Ronaldo Kasinsky Brazil 5511-3553-2396 [email protected] Rodrigo Ordonez Chile 5622-336-3358 [email protected] Bruno Soares Taveira Brazil 5511- 3553-602 [email protected] Gonzalo Fernndez Mexico 5255-5269-1931 [email protected] Adoflo Ortuzar Chile 5622-336-3359 [email protected] Rogelio Urrutia Mexico 5255-5257-8172 [email protected] Reinaldo Santana Mexico 5255-5269-2102 [email protected] Marco Reyes Mexico 5255-5269-1921 [email protected] Ana Reynal Mexico 5255-5269-1900 [email protected]

Rodrigo Ordonez Chile 5622-336-3358 [email protected] Telecom, Media & TechnologyEducation Valder Nogueira Sector Head 5511-3012-5747 [email protected] Bruno Giardino, CFA Sector Head 5511-3012-5914 [email protected] Eugenia F. Pouchan, CFA Argentina 5411-4341-1218

Daniel Gewehr Brazil 5511-3012-5787 [email protected] [email protected]

Financial Services Bruno Mendona Brazil 5511-3012-5759 [email protected] Boris Molina Sector Head 1-212-350-3977 [email protected] Francisco Errandonea Chile 5622-336-3357 [email protected] Henrique Navarro Brazil 5511-3012-5756 [email protected] Nicols Khaliliyeh Chile 5622-336-3423 [email protected]

Renata F. Cabral Brazil 5511-3012-5731 [email protected] Rogelio Urrutia Mexico 5255-5257-8172 [email protected]

Luis Guzmn Mexico, Andean 1-212-297-1367 [email protected] Transportation Nicols Schild Chile 5622-336-3361 [email protected] Pedro Balco Reis Sector Head 5511-3012-5765 [email protected] Henrique Navarro Brazil 5511-3012-5756 [email protected] Bruno Amorim Brazil 5511-3012-6016 [email protected]

Food & Beverage Renan Manda Brazil 5511-3012-6535 [email protected] Luis Miranda, CFA Sector Head 5255-5269-1926 [email protected] Cristian Jadue Chile 5622-336-3323 [email protected] Francisco Errandonea Chile 5622-336-3357 [email protected] Rogelio Urrutia Mexico 5255-5257-8172 [email protected]

Ana Reynal Mexico 5255-5269-1900 [email protected] Utilities Healthcare Marcio Prado Sector Head 5511-3012-5751 [email protected] Daniel Gewehr Sector Head 5511-3012-5787 [email protected] Maria Carolina Carneiro Brazil 5511-3012-6682 [email protected] Bruno Giardino, CFA Brazil 5511-3012-5914 [email protected] Cristian Jadue Chile 5622-336-3323 [email protected]

Metals & Mining Eugenia F. Pouchan, CFA Argentina 5411-4341-1218 Walter Chiarvesio Argentina/Peru 5411-4341-1564 [email protected] [email protected] Felipe F. dos Reis Brazil 5511-3012-5758 [email protected] Alex Sciacio, CFA Brazil 5511-3012-5870 [email protected]

Rodrigo Ordonez Chile 5622-336-3358 [email protected] Fixed Income Research Quantitative Aaron Holsberg Head of Credit 1-212-350-0978 [email protected] Renata F. Cabral Brazil 5511-3012-5731 [email protected] Alejandro Estevez-Breton Head of Rates 1-212-350-3917 [email protected]

Sales Sales Trading New York New York Patryck Pimpao, Head of Equity Sales 1-212-350-0744 [email protected] Marcio Souza, Head Trading & Sales 1-212-756-9165 [email protected] Victoria Santaella 1-212-350-3919 [email protected] Darrin Cummings 1-212-756-9241 [email protected] Lola Wisener 1-212-407-0908 [email protected] Martin Yallop, CFA 1-212-756-9242 [email protected] Geoffrey Knoell, CFA, Hong Kong 852-3921-3080 [email protected] Tomas Lyon 1-212-756-9164 [email protected] London Maury Mischel 1-212-756-9166 [email protected] Fabio Faraggi 4420-7756-6602 [email protected] Nicolas Drohojowski 1-212-756-9164 [email protected] Luiz Franca 4420-7756-6608 [email protected] Alejandro Chavez 1-212-756-9240 [email protected] Alex Pallin 4420-7756-6601 [email protected] Benson OHara, London 4420-7756-6606 [email protected] Regina Rodriguez, Mexico 5255-5269-8760 [email protected] Fernando Sanchez, So Paulo 5511-3012-6330 [email protected] So Paulo Equity Derivatives New YorkEduardo Toledo 5511-3012-5302 [email protected] Jacobo Almuia 1-212-583-4602 [email protected] Caio Dias 5511-3012-5305 [email protected] Donna Sheehan 1-212-583-4635 [email protected] Mirella Borin 5511-3012-5303 [email protected] Isaac Prada 1-212-756-9243 [email protected] Harley Evans 1-212-583-4607 [email protected] Program Trading New York Jason Nardella 1-212-756-9160 [email protected] Yan Nuriyev 1-212-350-3659 [email protected]

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TABLE OF CONTENTS

ARGENTINA BRAZIL (ctd) BRAZIL (ctd) MEXICO Banco Macro 10 Fleury 112 Tegma 216 Alfa 314 BBVA Frances 12 Gafisa 114 Telefonica Brasil 218 Alsea 316 Cresud 14 Gerdau 116 TIM Participaes 220 Ara 318 GF Galicia 16 Gol 118 TOTVS 222 Arca 320 Irsa 18 GP Investments 120 Tractebel 224 Asur 322 Siderar 20 HRT 122 Transmissao Paulista 226 Banorte 324 Telecom Argentina 22 IMC 124 Ultrapar 228 Banregio 326 BRAZIL Iochpe-Maxion 126 Unicasa Mveis 230 Bolsa Mexicana de Valores 328 AES Tiete 24 Itausa 128 Usiminas 232 Cemex 330 ALL America Latina 26 Ita Unibanco 130 Vale 234 Chedraui 332 Ambev 28 JBS 132 Weg 236 Coca-Cola FEMSA 334 Anhanguera 30 JSL 134 Wilson, Sons 238 Comerci 336 Autometal 32 Klabin 136 CHILE Compartamos SAB 338 B2W 34 Kroton 138 AES Gener 240 FEMSA 340 Banco do Brasil 36 Light 140 Aguas Andinas 242 GAP 342 Banco Pine 38 LLX Logistica 142 Andina 244 Genomma Lab 344 BicBanco 40 Localiza 144 Banco de Chile 246 Geo 346 BM&F Bovespa 42 Log-In 146 BCI 248 GF Inbursa 348 BR Properties 44 Lojas Americanas 148 Besalco 250 Gruma 350 Bradesco 46 Lojas Renner 150 CAP 252 Grupo Bimbo 352 Brasil Foods 48 Lupatech 152 CCU 254 Grupo Famsa 354 Brasil Insurance 50 Magnesita 154 Cencosud 256 Grupo Herdez 356 Braskem 52 Marcopolo 156 CMPC 258 Grupo Mexico 358 Brookfield 54 MMX 158 Colbun 260 Homex 360 CBD 56 MPX Energia 160 Concha y Toro 262 ICA 362 CCR 58 MRV Engenharia 162 Copec 264 Kimberly Clark 364 Celesc 60 Multiplan 164 CorpBanca 266 Liverpool 366 Cemig 62 Multiplus 166 Cruz Blanca Salud 268 Mexichem 368 Cesp 64 Natura 168 E-CL 270 OHL Mexico 370 Cetip 66 OdontoPrev 170 Endesa 272 Oma 372 Cia. Hering 68 OGX 172 Enersis 274 Soriana 374 Cielo 70 OI 174 Entel 276 Sports World 376 Coelce 72 PDG Realty 176 Falabella 278 Urbi 378 Comgas 74 Petrobras 178 IAM 280 Vesta 380 Copasa 76 Porto Seguro 180 LATAM Airlines 282 Walmex 382 Copel 78 Positivo Informatica 182 Parque Arauco 284 PERU Cosan 80 Providencia 184 Ripley 286 Buenaventura 384 Cosan Limited 82 Qualicorp 186 Salfacorp 288 Copeinca 386 CPFL Energia 84 Queiroz Galvo E&P 188 Sonda 290 Credicorp 388 CSN 86 Randon 190 SQM 292 Ferreyros 390 Cyrela Brazil Realty 88 Renova Energia 192 Intercorp 392 DASA 90 Rodobens 194 COLOMBIA Pesquera Exalmar 394 Duratex 92 Romi 196 Almacenes Exito 294 Southern Copper 396 Ecorodovias 94 Sabesp 198 Bancolombia 296 Volcan 398 Eletrobras 96 Santos Brasil 200 Cementos Argos 298 Eletropaulo 98 So Carlos 202 Davivienda 300 MULTINATIONAL Embraer 100 So Martinho 204 Ecopetrol 302 Copa Holdings 400 Energias do Brasil 102 Saraiva 206 Grupo Argos 304 Tenaris 402 Estacio 104 Sul America 208 Grupo Aval 306 Ternium 404 Even 106 Suzano 210 Grupo Nutresa 308 EZ Tec 108 TAESA 212 Grupo Sura 310 Fibria 110 Tecnisa 214 Pacific Rubiales 312

2013 Latin American Universe Book

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Latin American Equities: Under-Valued, Under-Owned, Under-Recommended, and Under-Estimated

Jesus Gomez Head of Latin American Equity Research, LatAm Strategist

+1 212 350-3992 / [email protected] The 17th edition of our LatAm Universe Book aims to help investors navigate once more the investment cases,

most updated estimates, and valuation metrics of 198 companies. This flagship research, launched in 1996 with

29 companies, has been growing in tandem with the development of capital markets in our region. We believe this

Universe Book will prove to be a useful tool in helping investors make fruitful investment decisions in 2013 and

reap the benefits of participating in our XVII Annual Latin American CEO Conference. Our research teams

located in Brazil, Mexico, Chile, and Argentina, as well as New Yorkhave made it possible thanks to their skill

and effort.

The risk on, risk off debate dominated investment decisions in 2011-12. We believe that the appetite for Latin

American equities should return in 2013 after two consecutive years of underperformance. Today, Latin American

equity markets are under-valued, under-owned, under-recommended, and under-estimated, in our view. These

four key characteristics should support the outperformance of Latin America over the next 12 months, and

investors should reposition their portfolios accordingly.

Our central scenario calls for a more stable 2013, as early signs of economic acceleration will be visible not only

in emerging but also in developed economies, as leading indicators have been signaling lately. The central banks

have shown the world that they have the will and the capacity to avoid systemic risk (stemming either from the

financial sector or the sovereigns). On the other hand, political consensus finally has been reached to avoid the

most adverse scenarios from investors perspectives (the fiscal cliff in the U.S., default by large Mediterranean

countries, etc.). Economic, monetary, and institutional stability in the developed world should translate into more

supportive global conditions for equity investors.

This constructive global scenario should bode well for emerging markets, in our view. The improved levels of

confidence should refocus investors attention on the long-term fundamentals of emerging markets. We believe

that the global long-term trend will still be dominated by the need of developed economies to continue their

healing process: forging ahead with cuts in fiscal spending, reducing financial leverage (both public and private),

and strengthening the financial sector. At the same time, emerging economies have sound public finances, lower

financial leverage versus their developed economy counterparts, and strong financial systems, thus providing

them with a much better fundamental base to continue capturing global economic growth. In the next five years,

we estimate that emerging markets are likely to account for more than two-thirds of global economic growth and

that the combined nominal GDP of all emerging economies should surpass that of developed economies in 2013.

Investors portfolios do not reflect this scenario yet. Today, only 14% of global equity investment goes to emerging

markets, and the representation of Latin American equities barely surpasses the 2% mark.

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The stabilization of Chinas growth rate, the acceleration in other emerging economies, and better short-term

prospects for Latin America should take the limelight in 2013. In our view, after two years of disappointment,

investors, analysts, and economists have lowered their expectations regarding economic growth and corporate

earnings to the point that an inflection is likely to be reached in the first half of 2013. The fundamentals of Latin

America have been vindicated after a nearly six-year global financial crisis, but the equity market has overlooked

them.

The long-term picture should not be blurred by the short-term cloudiness that has affected financial markets so

badly over the last two years, in our opinion. We believe that when fear reigns in financial markets, financial

assets become correlated and investors become risk-averse, consequently seeking refuge in developed markets.

As fear recedes, fundamentals and growth should drive investment decisions. For 2013, more upside and less

risk should, in our opinion, direct investors back to LatAm.

Changes in recommendations and target prices. The Universe Book contains our changes in recommendations and target prices for our LatAm universe of coverage. We outline the most actionable changes

(upgrades to Buy and all downgrades) in Figure 1 and highlight the investment case in Figure 2 for 14 select

stocks based on their significance. Furthermore, Figure 3 outlines all the changes in ratings and target prices for

our universe of coverage.

Figure 1. Actionable Changes in Recommendation (Upgrades to Buy and All Downgrades)

UPGRADE DOWNGRADE To Buy To Hold To Underperform Brookfield ASUR Banco de Chile CEMEX Buenaventura Bolsa Mexicana de Valores CorpBanca Cementos Argos Cresud Credicorp Cia Hering E-CL Eletrobras (ELET6) Cruz Blanca Salud Embraer Fleury Estacio Irsa LLX Grupo Herdez Siderar Lojas Americanas Grupo Mexico Suzano Romi Grupo Nutresa Weg Grupo Sura Marcopolo Mexichem Multiplan Parque Arauco Positivo Informatica Renova Energia Rodobens Sao Carlos Unicasa Moveis Urbi

Source: Santander estimates.


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Figure 2. Select Recommendation Changes

Company Investment Case

Upgrade to Buy

CEMEX [Cement & Construction]

Given the successful refinancing agreement reached in mid-2012 and the use of proceeds from the IPO of Cemex LatAm Holdings (CLH) to reduce debt, the company does not have significant banking debt maturities until 2017. In addition, we think Cemex could benefit from the good momentum of the construction sector in Mexico and Latin America, and we saw initial signs of a turnaround in the U.S. in 2012.

CorpBanca [Financial Service]

CorpBanca is in the process of transforming itself into a one-of-a-kind Andean player, as it will become one-third Colombian and two-thirds Chilean in 2013E. We view the Colombian operation favorably, as it should create value, with ROI being above the cost of capital starting in 2014E.

We believe that the risk of an additional capital increase (after the one expected in 1Q13) should be significantly lower than we previously thought.

Credicorp [Financial Service]

In a country of robust loan and revenue penetration potential, we believe that Credicorp is in a good position to capture the 6% GDP growth rate in years ahead thanks to its dominant position in banking, insurance, and pension funds. We view favorably the banks proactive approach in expanding to new growth areas in Peru (e.g., consumer finance) via organic expansion and corporate finance in neighboring countries via M&A.

Eletrobras (ELET6) [Utilities]

We believe preferred stock (ELET6) shareholders will continue receiving their bylaws guaranteed annual dividend per share of approximately R$1.48 (15% yield).

If Eletrobrass estimates of an indemnification value of R$20 billion is correct (we think it is), we estimate an asset write-off of R$10-15 billion for Eletrobras. This write-off will not wipe out Eletrobrass R$20 billion profit reserves. Therefore, the company should continue paying ELET6 mandatory dividends. If the write-off wipes out profit reserves, the dividend payment could be interrupted.

Lojas Americanas [Retail & Consumer]

We believe that the company is still one of the best-positioned Brazilian retailers to capture the expected growth in the industry due to its (1) proven track record in opening stores of different sizes across Brazil, (2) product diversification (no single category represents more than 10% of sales), (3) limited credit exposure, (4) resilient business (average ticket ~ R$40), and (5) high returns (36% at B&M level).

Downgrade to Hold

ASUR [Transportation]

We are downgrading based on the stocks rich valuation levels. In our view, current passenger traffic trends at Cancun airportAsurs largest operating unitare not sustainable in the short term, particularly after factoring in that hotel room capacity in the Mayan Riviera has not expanded at the same pace as passenger traffic, and due to the still limited seat capacity of domestic airlines. Regarding the LMM airport lease agreement, we believe that the value contribution to Asur will not be significant during the concessions first year of operation.

Cementos Argos [Cement & Construction]

As much as we like Cementos Argoss investment case, its current valuation already reflects the companys strong fundamentals, in our view. Moreover, we see some downside risk at current price levels if the expected growth or margin improvement does not materialize in 2013.

Cia Hering [Retail & Consumer]

We expect share volatility to persist in the near term as the Street works to incorporate more bearish assumptions. (Our 2013 EPS estimate is 12% below consensus.) We continue to believe that Herings business model is strong as evidenced by (1) decent near-term earnings growth (10% EPS CAGR in 2012E-14E), (2) high returns (ROIC 52% in 2013E), (3) solid cash flow generation (4% FCFE in 2013E) and dividend outlook (4% dividend yield 2013E), and (4) no credit exposure.

Sources: Santander estimates.

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Figure 2. (Continued) Recommendation Change Highlights Company Investment Case

Downgrade to Hold

Grupo Mexico [Metals & Mining]

The current discount to NAV takes away from the attractiveness of the stock. We also believe that it is fairly priced versus its controlled subsidiary Southern Copper. We expect EBITDA to decline 2.0% owing to a 5% YoY lower copper price and cost pressures at Southern Copper. We expect volume at the ITM division to grow 3.5%, in-line with the Mexican economy.

Grupo Sura [Financial Services]

We are downgrading our rating due to the unattractive upside potential to our new YE2013 target price, and after the strong performance in Suras shares toward year-end 2012. The stock is currently trading at a 4% premium to its NAV at current prices, which we believe is a fair value for the shares, given the nil holding company discount the shares historically trade at, due to the low holding company overheads and low taxation of investment vehicles in Colombia.

Mexichem [Capital Goods]

We view Mexichem as an attractive company for 2013, as we believe that the companys current operations and business will lead to attractive growth rates despite the challenging economic outlook. Also, the company is currently working on projects that we believe could result in additional profitable growth in the chlorine-PVC or fluorite chains. However, after the 76% rally in 2012, we see limited upside potential from current levels.

Downgrade to Underperform

Banco de Chile [Financial Services]

In the last 12 months, Banco de Chile has outperformed the market by 10% and other large-cap Chilean banks by 23% thanks to its strong loan growth while continuing to deliver low twenties adjusted ROEs. However, we believe the banks solid outlook is fully priced-in, and we recommend that investors seek less expensive vehicles to gain exposure to the Chilean banking industry, such as other large- or small-cap banks.

Bolsa Mexicana de Valores

[Financial Services]

We see limited upside in derivatives and SIF-ICAP, whose growth outlook is less than desirable, in our view. Furthermore, the stock is trading at a 2013E FV/EBITDA of 17.1x, which is a record high and significantly higher than its three-year average of 12x. Hence, we see limited upside in the stock.

Weg [Capital Goods]

We believe that WEGs deserved premium investment case is already reflected in the current share price, and we recommend investors take profits after the rally caused by the stocks inclusion in the MSCI LatAm Standard Index. The shares are trading at 24.1x our 2013E P/E estimate (14.1x FV/EBITDA), respectively, about 35% higher than its five-year historical multiples and 40% higher than its international peers.

Sources: Santander estimates.


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Figure 3. Rating & Target Price Changes Inv. Code YE2013 Target Price

Company Sector Ticker Current Previous Current Previous Argentina Banco Macro Financial Svcs BMA US Uperf Uperf 17.50 16.10 BBVA Frances Financial Svcs BFR US Uperf Uperf 4.90 4.40 Cresud Cement, Constru, Infra & RE CRESY US Uperf B 9.90 -- GF Galicia Financial Svcs GGAL US Uperf Uperf 5.60 5.10 Irsa Cement, Constru, Infra & RE IRS US Uperf B 8.50 -- Siderar Metals & Mining ERAR AR Uperf B 2.31 -- Brazil Ambev Food & Beverage ABV US H H 45.00 -- Autometal Capital Goods AUTM3 BZ B B 24.00 20.00 B2W Retail & Consumer Goods BTOW3 BZ Uperf Uperf 15.00 -- Banco do Brasil Financial Svcs BBAS3 BZ Uperf Uperf 24.00 22.00 Banco Pine Financial Svcs PINE4 BZ B B 16.70 -- BicBanco Financial Svcs BICB4 BZ H H 6.30 8.30 BM&F Bovespa Financial Svcs BVMF3 BZ Uperf Uperf 12.30 12.40 BR Properties Cement, Constru, Infra & RE BRPR3 BZ B B 31.50 28.00 Bradesco Financial Svcs BBD US B B 21.20 19.30 Brasil Foods Food & Beverage BRFS3 BZ B B 47.00 -- Brookfield Cement, Constru, Infra & RE BISA3 BZ B H 4.90 4.50 CBD Retail & Consumer Goods PCAR4 BZ B B 108.00 -- CCR Transportation CCRO3 BZ B B 21.00 -- Celesc Utilities CLSC4 BZ H Uperf 25.30 -- Cemig Utilities CMIG4 BZ B B 27.70 30.60 Cetip Financial Svcs CTIP3 BZ B B 34.70 36.50 Cia Hering Retail & Consumer Goods HGTX3 BZ H B 50.00 52.00 Cielo Financial Svcs CIEL3 BZ H H 64.00 62.60 Coelce Utilities COCE5 BZ H H 46.94 -- Comgas Utilities CGAS5 BZ B B 63.38 -- Copasa Utilities CSMG3 BZ H H 49.53 -- Cosan Agribusiness CSAN3 BZ B B 49.00 -- Cosan Limited Agribusiness CZZ US B B 22.00 -- CPFL Energia Utilities CPFE3 BZ B B 27.40 27.80 Cyrela Brazil Realty Cement, Constru, Infra & RE CYRE3 BZ H H 19.50 18.50 DASA Health Care DASA3 BZ B B 16.50 17.50 Eletrobras Utilities ELET6 BZ B Uperf 16.69 9.69 Eletropaulo Utilities ELPL4 BZ Uperf Uperf 9.29 -- Embraer Transportation ERJ US Uperf H 27.50 -- Energias do Brasil Utilities ENBR3 BZ B B 14.30 -- Estacio Part Education ESTC3 BZ H B 44.00 44.00 Even Cement, Constru, Infra & RE EVEN3 BZ B B 11.80 10.30 Fleury Health Care FLRY3 BZ B H 28.00 28.00 Gafisa Cement, Constru, Infra & RE GFA US H H 5.30 -- Gol Transportation GOL US H Uperf 7.00 -- GP Investments Financial Svcs GPIV11 BZ B B 7.40 -- HRT Oil, Gas & Petrochemicals HRTP3 BZ H H 5.80 4.60 IMC Retail & Consumer IMCH3 BZ B B 31.00 -- Iochpe Maxion Capital Goods MYPK3 BZ B B 34.00 36.00 Ita Unibanco Financial Svcs ITUB US H H 19.35 16.90 Itausa Financial Svcs ITSA4 BZ B B 13.00 --

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Figure 3. Rating & Target Price Changes (continued) Rating YE2013 Target Price

Company Sector Ticker Current Previous Current Previous Brazil (continued) JBS Food & Beverage JBSS3 BZ H H 7.00 -- Klabin Pulp & Forest Products KLBN4 BZ H H 12.60 10.20 Kroton Education KROT3 BZ B B 51.00 50.00 Light Utilities LIGT3 BZ H H 24.42 -- LLX Logistica Transportation LLXL3 BZ B H 3.50 -- Log-In Transportation LOGN3 BZ H H 9.00 -- Lojas Americanas Retail & Consumer Goods LAME4 BZ B H 22.00 -- Lojas Renner Retail & Consumer Goods LREN3 BZ H H 92.00 83.00 Lupatech Oil, Gas & Petrochemicals LUPA3 BZ Uperf Uperf 1.80 3.50 Marcopolo Capital Goods POMO4 BZ H B 14.50 12.00 MMX Metals & Mining MMXM3 BZ H H 4.70 5.00 MPX Energia Utilities MPXE3 BZ H H 12.69 13.07 Multiplan Cement, Constru, Infra & RE MULT3 BZ H B 63.60 -- Multiplus Financial Svcs MPLU3 BZ B B 56.00 53.00 Natura Retail & Consumer Goods NATU3 BZ H H 65.00 61.00 OdontoPrev Health Care ODPV3 BZ Uperf Uperf 11.50 10.50 OGX Oil, Gas & Petrochemicals OGXP3 BZ H H 5.40 9.50 Porto Seguro Financial Svcs PSSA3 BZ B B 26.50 23.00 Positivo Informatica Telecom, Media & Tech POSI3 BZ H B 6.00 -- Providencia Retail & Consumer Goods PRVI3 BZ B B 10.30 -- Qualicorp Health Care QUAL3 BZ B B 25.50 24.50 Queiroz Galvo E&P Oil, Gas & Petrochemicals QGEP3 BZ B B 15.00 13.50 Renova Energia Utilities RNEW11 BZ H B 34.27 -- Rodobens Cement, Constru, Infra & RE RDNI3 BZ H B 13.50 13.50 Romi Capital Goods ROMI3 BZ B H 6.00 7.00 So Carlos Cement, Constru, Infra & RE SCAR3 BZ H B 49.70 -- Saraiva Retail & Consumer Goods SLED4 BZ B B 41.00 -- Sul America Financial Svcs SULA11 BZ B B 20.00 16.30 Suzano Pulp & Forest Products SUZB5 BZ Uperf H 6.30 5.50 Tegma Transportation TGMA3 BZ B B 39.00 -- Trans. Paulista Utilities TRPL4 BZ B B 37.77 37.31 Ultrapar Oil, Gas & Petrochemicals UGP US B B 27.50 29.00 Unicasa Mveis Retail & Consumer Goods UCAS3 BZ H B 13.00 -- Usiminas Metals & Mining USIM5 BZ Uperf Uperf 7.00 -- WEG Capital Goods WEGE3 BZ Uperf H 28.00 -- Wilson Sons Transportation WSON11 BZ H H 36.00 -- Chile AES Gener Utilities AESGENER CI B B 370.00 -- Aguas Andinas Utilities AGUAS/A CI H H 365.00 -- Banco de Chile Financial Svcs CHILE CI Uperf B 84.00 -- BCI Financial Svcs BCI CI B B 39,000.00 -- Besalco Cement, Constru, Infra & RE BESALCO CI B B 1,050.00 1,000.00 CCU Food & Beverage CCU CI B B 8,700.00 7,850.00 Cencosud Retail & Consumer Goods CENCOSUD CI B B 3,300.00 -- CMPC Pulp & Forest Products CMPC CI H H 2,000.00 -- Colbun Utilities COLBUN CL H Uperf 155.00 -- Concha y Toro Food & Beverage CONCHA CI H H 1,050.00 1,100.00 Copec Pulp & Forest Products COPEC CI H H 7,700.00 8,000.00


8

Figure 3. Rating & Target Price Changes (continued) Rating YE2013 Target Price

Company Sector Ticker Current Previous Current Previous Chile (Continued) CorpBanca Pulp & Forest Products CORPBANC CI B H 8.10 6.85 Cruz Blanca Salud Health Care CRUZBLAN CI H B 690.00 -- E-CL Utilities ECL CI Uperf H 1,160.00 -- Enersis Utilities ENI US B B 23.50 23.00 Entel Telecom, Media & Tech ENTEL CI H H 11,000.00 -- Falabella Retail & Consumer Goods FALAB CI H H 5,450.00 -- IAM Utilities IAM CI H H 1,000.00 -- LATAM Airlines Transportation LFL US H Uperf 25.50 28.20 Parque Arauco Cement, Constru, Infra & RE PARAUCO CI H B 1,350.00 -- Salfacorp Cement, Constru, Infra & RE SALFACOR CI Uperf Uperf 1,050.00 1,000.00 Sonda Telecom, Media & Tech SONDA CI B B 1,750.00 -- Colombia Almacenes Exito Retail & Consumer Goods EXITO CB B B 40,500.00 -- Bancolombia Financial Svcs CIB US B B 79.00 -- Cementos Argos Cement, Constru, Infra & RE CEMARGOS CB H B 11,200.00 -- Davivienda Financial Svcs PFDAVVND CB B B 31,300.00 -- Grupo Argos Capital Goods INVERARG CB H H 22,600.00 -- Grupo Aval Financial Svcs PFAVAL CB Uperf Uperf 1,350.00 1,250.00 Grupo Sura Financial Svcs PFGRUPSU CB H B 42,300.00 -- Nutresa Food & Beverage NUTRESA CB H B 27,100.00 -- Mexico Alsea Retail & Consumer Goods ALSEA* MM B B 31.00 24.50 Ara Cement, Constru, Infra & RE ARA* MM H H 4.75 5.00 Arca Food & Beverage AC* MM H H 106.00 95.00 Asur Transportation ASR US H B 129.00 -- Banorte Financial Svcs GFNORTEO MM B B 100.00 90.00 Bolsa Mexicana Financial Svcs BOLSAA MM Uperf B 33.00 30.00 Cemex Cement, Constru, Infra & RE CX US B H 12.00 -- Chedraui Retail & Consumer Goods CHDRAUIB MM B B 48.00 46.00 Coca-Cola FEMSA Food & Beverage KOF US H H 160.00 140.00 Comerci Retail & Consumer Goods COMERUBC MM H H 46.00 42.00 Compartamos Financial Svcs COMPARC* MM H Uperf 21.50 16.00 FEMSA Food & Beverage FMX US H H 110.00 103.00 GAP Transportation PAC US Uperf Uperf 55.00 -- GF Inbursa Financial Svcs GFINBURO MM Uperf Uperf 30.00 25.00 Gruma Food & Beverage GRUMAB MM H H 48.00 -- Grupo Bimbo Food & Beverage BIMBOA MM H H 36.00 -- Grupo Famsa Retail & Consumer Goods GFAMSAA MM H H 17.00 --

9

Figure 3. Rating & Target Price Changes (continued)

Rating YE2013 Target Price

Company Sector Ticker Current Previous Current Previous Mexico (Continued) Grupo Herdez Food & Beverage HERDEZ* MM H B 44.00 -- Grupo Mexico Metals & Mining GMEXICOB MM H B 51.00 51.00 Homex Cement, Constru, Infra & RE HXM US B B 16.90 24.00 ICA Cement, Constru, Infra & RE ICA US B B 12.20 -- Kimberly Clark Retail & Consumer Goods KIMBERA MM H H 37.00 -- Liverpool Retail & Consumer Goods LIVEPOLC MM B B 154.00 146.00 Mexichem Capital Goods MEXCHEM* MM H B 83.00 80.00 OHL Mexico Transportation OHLMEX* MM B B 33.00 32.00 OMA Transportation OMAB US H H 25.50 -- Soriana Retail & Consumer Goods SORIANAB MM Uperf Uperf 50.00 -- Sports World Retail & Consumer Goods SPORTS MM B B 23.00 -- Urbi Cement, Constru, Infra & RE URBI* MM H B 9.50 20.00 Vesta Cement, Constru, Infra & RE VESTA* MM B B 25.75 -- Walmex Retail & Consumer Goods WALMEXV MM H H 44.00 40.00

Peru Buenaventura Metals & Mining BVN US H B 38.00 -- Copeinca Food & Beverage COP NO B B 54.00 -- Credicorp Financial Svcs BAP US B H 176.00 -- Exalmar Fishmeal EXALMC1 PE B B 2.48 -- Ferreyros Capital Goods FERREYC1 PE B B 3.40 -- Intercorp Financial Svcs IFS PE B B 42.50 -- Pesquera Exalmar Fishmeal EXALMC1 PE B B 2.48 --

Multinational Copa Holdings Transportation CPA US B B 115.00 -- Tenaris Oil, Gas & Petrochemicals TS US B B 50 -- Ternium Metals & Mining TX US B B 27.80 25.80

Source: Santander


10

ARGENTINAFINANCIAL SERVICES

BANCO MACRO UNDERPERFORM CURRENT PRICE: US$18.67

TARGET PRICE: US$17.50

RAISING YE2013 TARGET PRICE TO US$17.50 FROM US$16.10

Investment Case: We remain cautious on Banco Macro, as the

harsher capital requirements introduced in Argentina in 2012 led

Banco Macros capital surplus to be much smaller than before,

hurting adjusted profitability and causing us to lower our valuation.

We continue to monitor the macroeconomic and regulatory situation

for any developments that could unleash strong hidden value at

Banco Macro.

2013 Outlook: Loan growth should largely track inflation projections,

in our view, with little if any growth in real terms and a slowdown from

previous years. We expect asset quality to start deteriorating, leading

to higher NPL provisions and lower operating profitability.

Asset quality: better than expected in 2012 but could suffer in

2013. We expect NPLs to end 2012 at 1.7%, which is much better

than our previous estimate of 2.1%. However, the ongoing slowdown

in the Argentine economy should lead to higher NPLs in 2013 and

thereafter, hurting profitability, in our view. Nevertheless, we still

believe Macros exposure to those regional economies that are

largely agricultural should allow it to fare better than the Argentine

banking system as a whole in terms of asset quality.

Capital surplus shrinks under regulatory pressure. We have

adapted our estimates of the banks CT1 capital ratio to reflect the

impact of tough operating risk capital requirements (which do not get

reflected in RWA under Argentine rules). These requirements have

led to lower capital surpluses and lower adjusted ROE (due to the

higher capital required), negatively affecting our valuation of Banco

Macro.

Stock fully priced in. We maintain our target YE2013 adjusted P/BV

at 1.0x; however, the stock has recently rallied slightly above that to

1.1x in US$ where we find little room for multiple expansion or

potential upside and reiterate our Underperform rating on the stock.

Boris Molina

New York: Santander Investment Securities Inc.

+1-212-350-3977 | [email protected]

Luis Guzmn



Company Statistics

Price Performance (US$)

Sources: FactSet, Santander estimates and company reports.

Bloomberg BMA US / BMA AR

Current Price (01/03/13) US$ 18.67 / Ar$ 12.70

Target Price (YE 2013) US$ 17.50 / Ar$ 13.10

52-Week Range (US$) 11.56 - 26.37

Market Capitalization (US$ Mn) 1,110

Float (%) 30.9

3-Mth Avg. Daily Vol (US$ Mn) 1.4

Shares Outstanding - Mn 59

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Banco Macro Merval

11

BANCO MACRO Financial Highlights: P&L and Balance Sheet, 201114E in Millions

Company Description

Banco Macro is one of the leading banks in Argentina, with the largest distribution network (427 branches) and a strong capital base. From its origins as a wholesale bank, the company has expanded via acquisitions of smaller regional banks in areas with low penetration of financial products. The bank is focused on retail banking for low-to-middle income individuals, SMEs, and servicing provincial governments. Its shares trade in the Buenos Aires Stock Exchange and in ADR form on the NYSE.

Key Personnel: Jorge Horacio Brito (CEO and Chairman), Jorge Pablo Brito (CFO) and Jorge Scarinci (IRO) Web: www.macro.com.ar

Loan Portfolio, 2013E

Revenue Breakdown, 2013E

Shareholder Structure, 3Q12

Sources for all charts and tables: Company reports and Santander estimates.

INCOME STATEMENT 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E

Net Interest Income 2,562 3,634 4,439 5,437 582 615 635 654

NPL Provisions (273) (489) (882) (1,085) (62) (83) (126) (131)

Adj Net Interest Income 2,289 3,145 3,556 4,351 520 532 509 523

Non-Interest Income 1,964 2,365 2,763 3,399 447 400 395 409

Total Operating Revenue 4,253 5,510 6,319 7,751 967 932 904 932

Non-Interest Expense (2,489) (3,136) (3,903) (4,858) (566) (531) (559) (584)

Profit Before Taxes 1,844 2,410 2,472 2,953 419 408 354 355

Taxes (658) (938) (865) (1,034) (150) (159) (124) (124)

Net Profit 1,176 1,458 1,592 1,902 267 247 228 229

Adjusted Net Profit 1,075 1,462 1,572 1,821 244 247 225 219

BALANCE SHEET 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E

Cash and Equivalents 6,172 7,624 9,009 10,974 1,271 1,173 1,205 1,199

Securities 4,397 5,205 6,346 7,786 905 801 849 850

Loans (net) 24,302 30,008 37,143 45,959 5,002 4,617 4,969 5,020

Intangible Assets 298 202 169 140 61 31 23 15

Total Assets 41,442 49,568 60,434 74,153 8,531 7,626 8,085 8,099

Core Deposits 22,521 26,759 34,252 42,898 4,636 4,117 4,582 4,685

Other Financial Liabilities 5,732 5,076 5,857 7,863 1,180 781 784 859

Subordinated Debt 648 975 1,121 1,373 133 150 150 150

Technical Provisions 0 0 0 0 0 0 0 0

Equity 4,720 6,164 7,756 9,658 971 948 1,038 1,055

Adjusted Equity 4,698 6,179 7,905 9,950 967 951 1,058 1,087

LOAN BOOK 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E

Companies 10,336 13,395 17,360 22,499 2,128 2,061 2,322 2,457

Total Consumer 12,759 15,648 19,266 23,433 2,626 2,407 2,577 2,559

Mortgages 1,143 1,129 1,129 1,129 235 174 151 123

Other Loans 336 330 330 330 69 51 44 36

Gross Loans 24,574 30,503 38,086 47,392 5,058 4,693 5,095 5,176

Loan Grow th (%) 51.0 24.1 24.9 24.4 10.5 3.7 3.3 2.7

NPL 388 532 864 1,232 80 82 116 135

Provisions (605) (797) (1,297) (1,847) (125) (123) (173) (202)

KEY RATIOS 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E

NIM 7.8 8.6 9.0 9.0 7.8 8.6 9.0 9.0

Risk Charge 1.6 1.7 2.3 2.6 1.6 1.7 2.3 2.6

Operating Revenue / ATAs 11.4 11.9 11.6 11.6 11.4 11.9 11.6 11.6

Cost / ATAs 6.7 6.8 7.2 7.3 6.7 6.8 7.2 7.3

Adj Eff iciency 55.9 51.7 52.4 52.8 55.9 51.7 52.4 52.8

Effective Taxes 35.7 38.9 35.0 35.0 35.7 38.9 35.0 35.0

Reported ROE (%) 26.9 27.0 22.8 21.8 26.9 27.0 22.8 21.8

Adj ROE (%) 39.7 35.3 27.6 25.3 39.7 35.3 27.6 25.3

NPL Ratio 1.6 1.7 2.3 2.6 1.6 1.7 2.3 2.6

Adj NPL Ratio 2.3 2.7 3.2 3.7 2.3 2.7 3.2 3.7

Loans / Total Assets 59.3 61.5 63.0 63.9 59.3 61.5 63.0 63.9

Loans / Core Deposits 109.1 114.0 111.2 110.5 109.1 114.0 111.2 110.5

RWA % Total Assets 85.8 102.7 104.2 105.3 85.8 102.7 104.2 105.3

Core Tier I Ratio (%) 13.3 12.2 12.6 12.8 13.3 12.2 12.6 12.8

Dividend Payout (%) 43.0 0.0 0.0 0.0 43.0 0.0 0.0 0.0

MARKET RATIOS 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E

Adj P/E 5.9 4.4 3.8 3.1 3.6 3.8 4.0 4.1

Adj P/BV 1.8 1.3 0.9 0.7 1.2 1.2 1.1 1.0

Div Yield (%) 66.9 0.0 0.0 0.0 103.5 0.0 0.0 0.0

PER SHARE DATA 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E

EPS 19.78 24.53 26.78 31.99 44.96 41.50 38.33 38.47

BVPS 79.39 103.68 130.46 162.45 163.42 159.51 174.53 177.43

DPS 8.50 0.00 0.00 0.00 19.32 0.00 0.00 0.00

Adj EPS 1.81 2.46 2.65 3.06 4.11 4.16 3.79 3.68

Adj BVPS 7.90 10.39 13.30 16.74 16.27 15.99 17.79 18.28

Surplus Capital per Share 1.98 1.95 2.68 3.26 4.07 3.00 3.59 3.56

Unrealized Cap. Gains/Shr 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Ar$ US$

Companies45.6%

Personal Loans35.1%

Credit Cards13.8%

Mortgages3.0%

Other2.5%

NII56.3%

Fees38.7%

Trading4.9% Others

0.1%

Free Float30.9%

ANSES30.7%

Jorge Brito19.6%

Delfin Ezequiel Carvallo18.8%


12


BBVA FRANCES UNDERPERFORM CURRENT PRICE: US$5.21



Investment Case: We reiterate our Underperform rating on BBVA

Frances, as the stock price still shows downside to our target price.

While we believe that Frances is a low-risk franchise, any upside to

the shares would, in our opinion, require an improvement in the

macroeconomic or regulatory environment, which we believe is

unlikely.

2013 Outlook: We expect Frances to continue its cautious loan

growth policy, as we think the bank will continue to favor asset quality

over market share. That trend started in 2012, leading us to estimate

2013 loan growth below expected inflation for the second year

running. However, we expect the bank will also suffer some asset

quality deterioration and inflation-driven cost increases, which should

pressure earnings, in our view.

Decline in NPL coverage ratio close to an end. In our view, BBVA

Frances still has some room to support reported earnings by using its

excess NPL provisions in 2013 via a lower NPL coverage ratio. Even

so, we expect the bank to post the best NPL ratios in our universe of

Argentine banks.

Higher capital requirements hurt our valuation. Our valuation of

Frances has been affected by the sharp increase in noncredit

(market and operating) risk capital requirements. Adjusting RWA to

reflect the new capital regime results in less surplus capital and lower

adjusted profitability due to higher capital consumption. While we

believe the current requirements are probably stricter than in other

countries, in our view there is little scope for relaxation of the rules in

the near future.

Our new target price reflects stronger nominal growth from our

expectations of high inflation for the near term (as opposed to our

previous normalization scenario) with our cost of equity estimate

remaining unchanged. This offsets Francess weaker capital position

after tighter capital regulations took effect in 2012, which depressed

adjusted profitability.

Boris Molina



Luis Guzmn



Company Statistics



Bloomberg BFR US / FRAN AR



52-Week Range (US$) 3.09 - 6.53

Market Capitalization (US$ Mn) 932

Float (%) 16.9



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BBVA Frances Merval

13

BBVA FRANCES Financial Highlights: P&L and Balance Sheet, 201114E in Millions

Company Description

BBVA Frances is one of Argentinas leading financial institutions, with a market share of 7% in loans to the private sector and 9% in deposits . The bank was acquired by BBVA in 1996, with the Spanish banking group currently owning approximately 76% of total capital. The bank focuses on corporate and SME lending and retail operations. The shares are listed on the Buenos Aires stock exchange and trade in ADR form in the NYSE.

Key Personnel: Jorge Carlos Bledel (Chairman), Ricardo Enrique Moreno (CEO), Ignacio Sanz y Arcelus (CFO) and Cecilia Acua (IRO) Web: www.bancofrances.com.ar

Loan Portfolio, 2013E






NPL Provisions (133) (198) (574) (502) (30) (34) (82) (60)



Total Operating Revenue 3,863 5,229 5,629 7,116 878 885 806 856

Non-Interest Expense (2,288) (2,992) (3,701) (4,580) (520) (506) (530) (551)


Taxes (550) (850) (682) (894) (125) (144) (98) (108)

Net Profit 1,007 1,317 1,235 1,620 229 223 177 195

Adjusted Net Profit 868 1,206 1,210 1,446 197 204 173 174



Securities 5,548 5,761 7,209 9,315 1,142 886 964 1,017

Loans (net) 21,830 25,993 31,407 39,291 4,494 3,999 4,202 4,291

Intangible Assets 0 0 0 0 0 0 0 0

Total Assets 38,981 44,312 53,400 66,534 8,024 6,817 7,144 7,267

Core Deposits 28,479 33,463 42,121 52,736 5,862 5,148 5,635 5,760

Other Financial Liabilities 4,268 3,154 2,154 2,833 879 485 288 309

Subordinated Debt 0 0 0 0 0 0 0 0


Equity 3,868 5,189 6,445 8,085 796 798 862 883

Adjusted Equity 4,089 5,361 6,721 8,399 842 825 899 917


Companies 12,007 14,168 17,222 21,335 2,472 2,180 2,304 2,330

Total Consumer 8,862 11,518 14,210 18,197 1,824 1,772 1,901 1,987

Mortgages 915 750 721 692 188 115 96 76

Other Loans 46 33 33 33 9 5 4 4

Gross Loans 21,830 26,470 32,186 40,258 4,494 4,072 4,306 4,397

Loan Grow th (%) 46.8 21.3 21.6 25.1 9.6 3.3 2.9 2.7

NPL 105 212 354 483 22 33 47 53

Provisions (445) (476) (779) (966) (92) (73) (104) (106)


NIM 6.5 8.3 8.0 7.9 6.5 8.3 8.0 7.9

Risk Charge 0.5 0.8 1.1 1.2 0.5 0.8 1.1 1.2


Cost / ATAs 6.7 7.4 7.6 7.7 6.7 7.4 7.6 7.7

Adj Eff iciency 57.1 53.8 55.5 55.9 57.1 53.8 55.5 55.9

Effective Taxes 34.9 38.6 35.0 35.0 34.9 38.6 35.0 35.0

Reported ROE (%) 29.9 29.4 21.2 22.3 29.9 29.4 21.2 22.3

Adj ROE (%) 33.9 35.4 26.1 25.5 33.9 35.4 26.1 25.5

NPL Ratio 0.5 0.8 1.1 1.2 0.5 0.8 1.1 1.2

Adj NPL Ratio 0.9 1.4 1.9 2.0 0.9 1.4 1.9 2.0



RWA % Total Assets 76.4 97.7 98.3 98.9 76.4 97.7 98.3 98.9

Core Tier I Ratio (%) 13.7 12.4 12.8 12.8 13.7 12.4 12.8 12.8

Dividend Payout (%) 79.8 0.0 0.0 0.0 79.8 0.0 0.0 0.0


Adj P/E 5.9 4.3 3.8 2.9 3.5 3.7 4.0 4.0

Adj P/BV 1.8 1.2 0.9 0.7 1.2 1.2 1.0 1.0

Div Yield (%) 4.2 0.0 0.0 0.0 6.5 0.0 0.0 0.0


EPS 5.63 7.36 6.90 9.05 3.84 3.73 2.96 3.27

BVPS 21.62 29.00 36.01 45.18 13.35 13.38 14.45 14.80

DPS 0.50 0.00 0.00 0.00 0.34 0.00 0.00 0.00

Adj EPS 1.62 2.25 2.25 2.69 1.10 1.14 0.97 0.97

Adj BVPS 7.62 9.99 12.52 15.64 4.70 4.61 5.02 5.13

Surplus Capital per Share 2.25 2.07 3.23 4.00 1.39 0.96 1.30 1.31


Ar$ US$

Companies53.5%

Personal Loans18.4%

Credit Card16.5%

Car Loans9.2%

Others2.3%

NII54.8%

Fees39.2%

Trading4.1%

Others2.0%

BBVA75.9%

Free Float16.9%

ANSES7.3%


14

ARGENTINACEMENT, CONSTRUCTION, INFRA & RE

CRESUD UNDERPERFORM CURRENT PRICE: US$8.87


DOWNGRADING RATING TO UNDERPERFORM FROM BUY INTRODUCING YE2013 TARGET PRICE OF US$9.90; REPLACING YE2012 TARGET PRICE OF US$15.40

Investment Case: The implied value of Cresuds real assets in the

stock price indicates its strong undervaluation, which we believe is

justified by increasing regulatory and macroeconomic risk in

Argentina. We do not expect investors perception to change in the

short term, with strong valuation discounts on the stock versus

LatAm real estate peers to continue.

2013 Outlook: We expect Cresuds consolidated operating profits to

be sustained by IRSAs operations, led by its shopping mall

operations that should post top-line nominal growth in the middle

20s.

Shopping should continue to be the source of cash flow for

Cresud. As malls rental income is tied to tenants sales revenue, the

shopping malls segment provides some hedge to inflation and

currency depreciation. However, with the current sluggish economic

growth, we expect revenue to remain flat in real terms. We are less

constructive regarding cash flow generation from office rental and

development segments in the short term due to delicate

macroeconomic conditions, although the former may maintain their

valuations owing to corporate demand as a shelter against inflation.

We do not expect improvements in the agricultural segment. It

will be difficult for the sector to improve from the current tight or

negative margins in beef, milk, and grain production. At this point,

only a substantial increase in grain prices, which we do not expect,

could lead to an improvement. In addition, the currency real

appreciation is hurting the segments profitability. Finally, although

the price of land should remain stable, as it is considered a safe

investment in the country, we do not think that the minority investor

will benefit from this in the short term.

M. Eugenia Fernndez Pouchan*, CFA

Argentina: Santander Rio Sociedad de Bolsa S.A.

+5411-4341-1218 | [email protected]

Walter Chiarvesio*



Company Statistics



Bloomberg CRESY US / CRES AR



52-Week Range (US$) 6.94 - 13.53


Float (%) 65.8



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15

CRESUD Financial Highlights: P&L, Balance Sheet and CF Statement, 201114E in Millions

Company Description

Cresud is one of the main real estate firms in Argentina, and it has agricultural and urban real estate assets within its main assets. The company operates in the urban real estate segment through its controlled company IRSA (63.2% stake), which has four lines of business: (1) shopping centers with a total GLA of 307,000 m

2; (2)

office rentals with a total GLA of 150,000 m2; (3) 3 hotels

with 710 rooms (Sheraton, Intercontinental, and Llao Llao); (4) urban property developments and land reserves and (5) 30% stake in Banco Hipotecario. In the agricultural segment, it has 470,000 hectares of land reserves in Argentina and Bolivia. The firm owns equity in a controlling participation in the Brazilian agribusiness fund BrasilAgro (35.8%). Cresud is controlled by the holding firm IFISA, which has a 34.20% stake in the company. IFISA is, in turn, controlled by Argentine businessman Eduardo Elsztain.

Key Personnel: Eduardo Elsztain (Chairman), Alejandro Elsztain (CEO) and Matias Gaivironsky (CFO) Web: www.cresud.com.ar

Sales by Segment, 2012E

EBITDA by Segment, 2012E

Shareholder Structure, 2012E


P&L ACCOUNT 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E

Total Revenue 2,522 2,896 3,169 3,732 611 507 440 467

YoY change (%) 37.6 14.8 9.4 17.8 30.5 (17.0) (13.3) 6.3

Gross Profit 988 964 1,337 1,599 239 169 186 200

YoY change (%) 4.9 (2.4) 38.7 19.6 (0.5) (29.5) 9.9 7.9

EBITDA 1,018 828 960 1,110 247 145 133 139

YoY change (%) 29.8 (18.7) 16.0 15.6 23.1 (41.3) (8.1) 4.4

As % of Revenue 40.4 28.6 30.3 29.7 40.4 28.6 30.3 29.7

Operating Income 741 598 834 992 179 105 116 124

YoY change (%) 22.6 (19.3) 39.6 19.0 16.4 (41.7) 10.7 7.4

As % of Revenue 29.4 20.6 26.3 26.6 29.4 20.6 26.3 26.6

Financial Results (549) (584) (630) (700) (133) (102) (87) (88)

Taxes (100) 21 (119) (149) (24) 4 (16) (19)

Net Profit 163 69 220 278 40 12 31 35

YoY change (%) 37.9 (57.5) 216.9 26.1 30.9 (69.3) 151.1 13.8

As % of Revenue 6.5 2.4 6.9 7.4 6.5 2.4 6.9 7.4

CASH FLOW 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E

Depreciation & Amortization 278 230 126 118 67 40 17 15

Other Noncash Items 61 (209) (71) (146) 15 (37) (10) (18)

Changes in Working Capital (240) 69 (69) (143) (58) 12 (10) (18)

Operating Cash Flow 262 160 206 107 64 28 29 13

Capital Expenditures (2,024) (568) (200) (200) (491) (99) (28) (25)

Free Cash Flow (1,762) (408) 6 (93) (427) (72) 1 (12)

Other Invest./(Divestments) - - - - - - - -

Change in Debt 723 248 0 0 175 43 0 0

Dividends (281) (119) (72) (124) (68) (21) (10) (16)

Capital Increases/Other 0 0 0 0 0 0 0 0


Cash and Equivalents 609 270 204 (14) 141 40 27 (2)

Current Assets 2,081 1,653 1,717 1,768 483 243 226 211

Fixed Assets 5,212 1,958 1,832 1,714 1,211 288 241 205

Total Assets 9,614 10,040 10,120 10,345 2,234 1,475 1,331 1,237

Current Liabilities 2,467 1,776 1,578 1,407 573 261 207 168

Long-Term Liabilities 2,921 3,687 4,597 5,612 679 541 605 671

Shareholders' Equity 2,133 4,577 3,945 3,326 496 672 519 398

Total Financial Debt 3,709 4,064 4,644 5,217 862 597 611 624

ST Debt 1,497 1,177 922 636 348 173 121 76

LT Debt 2,212 2,887 3,722 4,581 514 424 489 548

FINANCIAL RATIOS 2011A 2012E 2013E 2014E 2011A 2012E 2013E 2014E

Net Debt 3,100 3,794 4,441 5,231 720 557 584 625

Capital Employed 8,156 7,622 7,566 7,591 1,895 1,119 995 908

Net Debt/EBITDA 3.0 4.6 4.6 4.7 2.9 3.8 4.4 4.5

Net Debt/Equity 1.5 0.8 1.1 1.6 1.5 0.9 1.1 1.6

Capex/Revenue (%) 80.3 19.6 6.3 5.4 80.3 19.6 6.3 5.4

Int Cover (%) 2.8 1.9 2.0 2.0 2.8 1.9 2.0 2.0

Dividend Payout (%) 237.7 73.0 104.2 56.5 225.2 66.3 96.3 56.5

ROCE (%) 7.9 8.1 9.5 11.1 8.2 8.7 9.5 11.1

ROE (%) 7.7 1.5 5.6 8.3 8.0 1.6 5.6 8.3


P/E 15.1 40.9 15.4 13.4 14.4 34.3 14.6 12.8

P/CE (21.5) (17.7) 35.8 23.3 (20.6) (14.8) 33.9 22.2

FV/EBITDA 7.8 8.0 8.2 8.1 7.5 6.7 7.7 7.7

FV/EBIT 10.8 11.1 9.4 9.0 10.3 9.3 8.9 8.6

FV/Revenue 3.2 2.3 2.5 2.4 3.0 1.9 2.3 2.3

P/BV 1.2 0.6 0.9 1.1 1.2 0.6 0.9 1.1

FCF Yield (%) (71.6) (14.4) 0.2 (2.5) (74.7) (17.1) 0.2 (2.6)

Div Yield (%) 11.4 4.2 2.1 3.3 11.9 5.0 2.3 3.5


EPS 0.33 0.14 0.44 0.50 0.66 0.28 0.89 1.12

DPS 0.56 0.24 0.14 0.23 0.28 0.08 0.04 0.06

BVPS 4.25 9.12 7.86 6.03 8.62 18.51 15.95 13.45

US$Ar$

Urban Real Estate61.0%

Agricultural39.0%

Urban Real Estate100.0%

Agricultural0.0%

Free Float65.8%

IFISA34.2%


16


GF GALICIA UNDERPERFORM CURRENT PRICE: US$6.97



Investment Case: We continue to see downside risk to Galicias

share price. Weaker GDP growth leads us to expect further

deterioration in asset quality in consumer loans, which represent

approximately 60% of the groups loan book. With an adjusted ROE

in the mid-teens, below the cost of equity, we expect to see the

shares trade at an adjusted P/BV multiple lower than 1x.

2013 Outlook: We expect Grupo Financiero Galicia to continue to

post the strongest rates of loan growth in our universe of Argentine

banks, despite high inflation rates expected over the next two years.

However, rising provisions for consumer delinquencies and inflation-

driven cost pressures should limit the scope for ROE to expand from

2012s 15%

We are cutting our adjusted EPS estimates in US$ by 36% for

2012, 45% for 2013, and 53% for 2014, owing to a combination of

lower adjusted earnings in local currency (reduced an average 20%)

and a weaker Argentine peso. Our EPS estimate cuts are largely

driven by deteriorating efficiency and higher provisions for NPLs.

Capital ratios back under pressure from increasing capital

consumption for operating risks. Our estimate of the banks Core Tier

1 capital for 2013 is 8.5%, below the 11.8% level we consider for

valuation purposes, opening a capital deficit and leading us to apply

a 22% valuation discount to the shares.

Cheap valuation could get cheaper. GF Galicia is trading at an

adjusted P/BV of 1.1x. However, we believe that profitability could

remain weak into the future owing to cost pressures and weak asset

quality, leading us to expect adjusted ROE to be materially below the

cost of equity. Our target price implies a 2013E adjusted P/BV of

0.9x, indicating that the share price has downside risks.

Boris Molina



Luis Guzmn



Company Statistics



Bloomberg GGAL US / GGAL AR



52-Week Range (US$) 4.21 - 8.20


Float (%) 49.1



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GF Galicia Merval

17

GF GALICIA Financial Highlights: P&L and Balance Sheet, 201114E in Millions

Company Description

Grupo Financiero Galicia (GGAL) is one of the leading private financial groups in Argentina, with market share of approximately 11% in loans and 6% in deposits. The bank has a strong position in credit cards, which represent 43% of total loans, largely thanks to its Tarjetas Regionales subsidiary, which has a strong presence outside the Greater Buenos Aires region where the core bank franchise is present. GGAL has a shareholding structure with dual voting rights, with the Escasany, Ayerza, and Brown families controlling 33% of the capital and 65% of votes. The bank's shares trade in the Buenos Aires Stock Exchange and in ADR form on the NYSE.

Key Personnel: Eduardo J. Escasany (Chairman), Pedro A. Richards (CEO), Jos Luis Gentile (CFO) and Pablo Firvida (IRO) Web: www.gfgsa.com

Loan Portfolio Breakdown, 2013E






NPL Provisions (799) (1,226) (1,487) (2,088) (182) (207) (213) (251)



Total Operating Revenue 5,619 7,110 8,789 10,455 1,277 1,203 1,258 1,257

Non-Interest Expense (4,205) (5,510) (6,805) (8,403) (956) (932) (974) (1,010)


Taxes (754) (788) (934) (982) (171) (133) (134) (118)

Net Profit 1,107 1,264 1,495 1,571 252 214 214 189

Adjusted Net Profit 1,060 782 1,076 1,247 241 132 154 150



Securities 5,231 6,978 8,715 10,659 1,077 1,074 1,166 1,164

Loans (net) 30,578 39,624 50,779 63,342 6,294 6,096 6,793 6,918

Intangible Assets 723 990 1,004 1,014 149 152 134 111

Total Assets 51,193 64,601 80,683 98,678 10,538 9,939 10,794 10,777

Core Deposits 27,608 35,744 45,047 56,315 5,683 5,499 6,026 6,151

Other Financial Liabilities 13,927 16,728 21,568 26,063 2,867 2,573 2,885 2,847

Subordinated Debt 984 1,950 2,243 2,747 203 300 300 300


Equity 3,552 4,797 6,292 7,863 731 738 842 859

Adjusted Equity 3,715 4,503 5,786 7,342 765 693 774 802


Companies 12,110 15,382 19,515 25,199 2,493 2,366 2,611 2,752

Total Consumer 19,380 25,047 32,464 40,094 3,989 3,853 4,343 4,379

Mortgages 960 970 970 970 198 149 130 106

Other Loans 1 0 0 0 0 0 0 0

Gross Loans 32,450 41,400 52,950 66,264 6,680 6,369 7,084 7,237

Loan Grow th (%) 42.7 27.6 27.9 25.1 8.8 4.2 3.7 2.7

NPL 845 1,615 2,171 2,783 174 248 290 304

Provisions (1,291) (1,776) (2,171) (2,922) (266) (273) (290) (319)


NIM 8.9 9.2 8.8 8.5 8.9 9.2 8.8 8.5

Risk Charge 2.6 3.9 4.1 4.2 2.6 3.9 4.1 4.2


Cost / ATAs 9.7 9.8 9.4 9.4 9.7 9.8 9.4 9.4

Adj Eff iciency 60.2 61.0 60.8 61.5 60.2 61.0 60.8 61.5

Effective Taxes 37.1 35.1 35.0 35.0 37.1 35.1 35.0 35.0

Reported ROE (%) 37.4 30.3 27.3 22.3 37.4 30.3 27.3 22.3

Adj ROE (%) 31.3 15.7 15.0 13.6 31.3 15.7 15.0 13.6

NPL Ratio 2.6 3.9 4.1 4.2 2.6 3.9 4.1 4.2

Adj NPL Ratio 4.2 5.6 6.0 6.0 4.2 5.6 6.0 6.0



RWA % Total Assets 68.8 82.2 85.5 87.1 68.8 82.2 85.5 87.1

Core Tier I Ratio (%) 10.6 8.5 8.5 8.6 10.6 8.5 8.5 8.6

Dividend Payout (%) 2.2 0.0 0.0 0.0 2.2 0.0 0.0 0.0


Adj P/E 6.0 9.6 7.6 6.9 4.0 8.4 7.6 7.7

Adj P/BV 3.0 2.2 2.0 1.6 2.2 2.2 2.1 2.0

Div Yield (%) 4.2 0.0 0.0 0.0 6.5 0.0 0.0 0.0


EPS 8.92 10.18 12.04 12.65 20.27 17.22 17.23 15.22

BVPS 1.62 1.65 1.69 1.74 3.32 2.54 2.26 1.90

DPS 0.20 0.00 0.00 0.00 0.45 0.00 0.00 0.00

Adj EPS 0.85 0.63 0.87 1.00 1.94 1.07 1.24 1.21

Adj BVPS 1.35 1.41 1.48 2.04 2.77 2.17 1.98 2.23

Surplus Capital per Share (0.34) (1.28) (1.81) (2.17) (0.70) (1.97) (2.42) (2.37)


Ar$ US$

Credit Cards42.5%

Companies35.3%

Personal Loans18.1%

Others4.0%

NII52.1%

Fees45.2%

Trading1.4%

Other1.3%

Free Float49.1%

EBA Holding 33.3%

ANSES 17.6%


18

ARGENTINACEMENT, CONSTRUCTION, INFRA & RE

IRSA UNDERPERFORM

CURRENT PRICE: US$7.45 TARGET PRICE: US$8.50


Investment Case: Although the implied value of real assets in

IRSAs stock price indicates its strong undervaluation, this, in our

view, is justified by increasing regulatory and macroeconomic risk in

Argentina. We do not expect the stocks strong valuation discounts

versus LatAm real estate peers to change in the short term.

2013 Outlook: We expect IRSAs revenue and operating profit to

grow in the mid-20s in local currency, although to remain flat in real

terms. Consumption in shopping malls should be the main driver of

top-line growth.

Shopping malls should provide sales growth. As malls rental

income is tied to tenants sales revenue, the shopping mall segment

provides some hedge to inflation and currency depreciation.

However, with sluggish economic growth, we expect revenue to

remain flat in real terms.

Office space value could be resilient. Anecdotal evidence

suggests that corporate investors with strong cash positions prefer to

allocate their cash to real assets, under dividend payment

restrictions, sustaining office space demand and price/m2. However,

we see little room for short-term rental rates to improve in hard

currency.

Developments on hold under current macro conditions. The

governments restrictions on FX access negatively affected

operations in the real estate segment, as most transactions are in

U.S. dollars. We do not expect this situation to change soon.

Therefore, room for development growth is limited, in our opinion.




Walter Chiarvesio*



Company Statistics



Bloomberg IRS US / IRSA AR



52-Week Range (US$) 6.48 - 11.24


Float (%) 35.5



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Irsa Merval

19

IRSA Financial Highlights: P&L, Balance Sheet and CF Statement, 201114E in Millions

Company Description

IRSA is the largest and most diversified real estate company in Argentina. Its main assets are:

(1) shopping centers with a total GLA of approximately 307,000 m

2; (2) premium office rentals with an

approximated total GLA of 142,000 m2; (3) 3 hotels with

710 rooms (Sheraton, Intercontinental, and Llao Llao); (4) property developments and land reserves; and (5) 30% stake in Banco Hipotecario."

Key Personnel: Eduardo Elsztain (Chairman and CEO), Matias Gaivironsky (CFO) and Santiago Donato (IR) Web: www.irsa.com.ar

Sales by Segment, 2012E

EBITDA by Segment, 2012E




Total Revenue 1,484 1,718 2,137 2,516 360 301 297 315

YoY change (%) 8.6 15.7 24.4 17.7 3.0 (16.4) (1.4) 6.2

Gross Profit 897 964 1,280 1,534 217 169 178 192

YoY change (%) 3.4 7.5 32.7 19.8 (1.9) (22.3) 5.2 8.1

EBITDA 789 847 1,044 1,226 191 148 145 154

YoY change (%) 19.1 7.3 23.3 17.4 13.0 (22.5) (2.3) 5.9

As % of Revenue 53.2 49.3 48.9 48.7 53.2 49.3 48.9 48.7

Operating Income 606 657 880 1,066 147 115 122 133

YoY change (%) 19.2 8.3 34.0 21.1 13.1 (21.7) 6.2 9.3

As % of Revenue 40.9 38.2 41.2 42.4 40.9 38.2 41.2 42.4

Financial Results (417) (427) (448) (446) (101) (75) (62) (56)

Taxes (121) (88) (166) (233) (29) (15) (23) (29)

Net Profit 246 224 307 432 60 39 43 54

YoY change (%) (4.6) (8.8) 37.0 40.6 (9.5) (34.1) 8.6 26.9

As % of Revenue 16.6 13.1 14.4 17.2 16.6 13.1 14.4 17.2


Depreciation & Amortization 183 190 164 160 44 33 23 20

Other Noncash Items 619 (591) 0 0 150 (103) 0 0


Operating Cash Flow 1,029 182 469 590 249 32 65 74

Capital Expenditures (844) (177) (79) (47) (205) (31) (11) (6)

Free Cash Flow 185 5 389 543 45 1 54 68

Other Invest./(Divestments) - - - - - - - -

Change in Debt 166 9 0 0 40 1 0 0

Dividends (340) (179) (154) (216) (82) (31) (21) (27)



Cash and Equivalents 388 185 421 748 90 27 55 89

Current Assets 1,068 809 1,196 1,661 248 119 157 199

Fixed Assets 3,372 3,359 3,274 3,160 783 493 431 378

Total Assets 6,423 5,771 6,106 6,490 1,492 848 803 776



Shareholders' Equity 2,430 1,305 1,108 870 565 192 146 104


ST Debt 792 667 745 819 184 98 98 98

LT Debt 1,841 2,392 2,672 2,939 428 351 351 351


Net Debt 2,245 2,874 2,995 3,010 522 422 394 360

Capital Employed 5,364 5,322 4,907 4,827 1,246 782 645 577

Net Debt/EBITDA 2.8 3.4 2.9 2.5 2.7 2.8 2.7 2.3

Net Debt/Equity 0.9 2.2 2.7 3.5 1.0 2.4 2.7 3.5

Capex/Revenue (%) 56.9 10.3 3.7 1.8 56.9 10.3 3.7 1.8

Int Cover (%) 3.0 2.8 3.1 3.3 3.0 2.8 3.1 3.3

Dividend Payout (%) 131.8 72.6 68.5 70.3 124.8 65.9 63.3 70.2

ROCE (%) 9.1 10.7 14.6 17.3 9.5 11.7 14.6 17.3

ROE (%) 10.1 17.2 27.7 49.7 10.6 18.6 27.8 49.7


P/E 10.5 12.2 10.7 8.3 10.1 10.3 10.1 8.0

P/CE 40.8 79.7 22.9 13.3 39.1 66.8 21.7 12.6

FV/EBITDA 6.5 6.6 6.0 5.4 6.3 5.6 5.7 5.2

FV/EBIT 8.5 8.6 7.1 6.2 8.2 7.2 6.8 5.9

FV/Revenue 3.5 3.3 2.9 2.6 3.3 2.7 2.8 2.5

P/BV 1.1 2.1 3.0 4.1 1.1 2.1 3.0 4.1

FCF Yield (%) 7.2 0.2 11.9 15.1 7.5 0.2 12.5 15.8

Div Yield (%) 13.2 6.5 4.7 6.0 13.7 7.7 4.9 6.3


EPS 0.43 0.39 0.53 0.75 0.86 0.79 1.08 1.52

DPS 0.59 0.31 0.27 0.37 0.29 0.11 0.07 0.09

BVPS 4.20 2.25 1.91 1.50 8.52 4.57 3.88 3.05

US$Ar$

Shopping Centers62.8%

Development

18.0%

Office Rentals12.9%

Hotels Operation

6.3%

Shopping Centers74.1%

Office Rentals16.8%

Development10.9%

Hotels Operation

-1.8%

CRESUD64.5%

Free Float35.5%


20

ARGENTINAMETALS & MINING

SIDERAR UNDERPERFORM CURRENT PRICE: US$0.33



Investment Case: Although we expect Siderar to post stable

EBITDA in the short term, we believe that the company faces high

regulatory and macroeconomic risk. Therefore, we expect its strong

discount against peers to persist.

2013 Outlook: We expect Siderars volume to improve by 10%,

helped by the scheduled start-up of its new continuous casting line in

2H13 that should enable it to export to TXs operations in Mexico. We

expect average revenue/tonne to decline 14% due to the new slab

component in the sale mix. EBITDA should recover 12%, owing to

lower production costs next year, mainly in coking coal and iron ore,

the result of accounting methods. Argentine government restrictions

on imports of cars and home appliances should continue to help

Siderar to sustain its domestic volumes sold to these industries,

offsetting the reduced steel demand stemming from construction

sector contraction. Dividend payments continue to be uncertain and

depend on the governments decision to allow the company to pay in

2013.

New steel capacity to start operations in 2H13. Although the new

slabs line has lower margins than finished steel, it should allow

Siderar to begin integrating with its Controller TX subsidiarys

facilities in Mexico. New 500,000 tonnes of slabs capacity are

expected to be added to Siderar facilities at a cost of US$360/tonne.

In addition, a new vacuum degassing facility that will produce 1.2

million tonnes of ultra-low-carbon steel to meet automotive industry

requirements should help the company to improve margins. We

estimate the total investment to be US$50 million, or US$42/tonne.

Start-up is scheduled for 2Q13.

Walter Chiarvesio*



Company Statistics

Price Performance (Ar$)


Bloomberg ERAR AR

Current Price (01/03/13) Ar$ 1.63 / US$ 0.33

Target Price (YE 2013) Ar$ 2.31 / US$ 0.30

52-Week Range (Ar$) 1.21 - 2.05


Float (%) 11.0


Shares Outstanding - Mn 4,517

40

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Siderar Merval

21

SIDERAR Financial Highlights: P&L, Balance Sheet and CF Statement, 201114E in Millions

Company Description

Siderar is Argentinas largest steel company and has an installed capacity of 2.8 million tons per year. Siderar manufactures hot-rolled, cold-rolled, hot-dip galvanized, electrogalvanized, pre-painted, and tinplate steel sheet products. Siderar is part of Ternium (a Luxembourg holding company that encompasses Siderar in Argentina and Ternium Mexico). Ternium holds 61% of Siderar, employees hold a 3.0% stake in the company, Government Social Security Agency (ANSES) holds 26%, and 10% is traded on the stock market. In addition, Siderar directly owns 28.7% of Ternium Mexico (Hylsamex and Imsa). The company is listed on the Buenos Aires Stock Exchange.

Key Personnel: Daniel Novegil (Chairman), Martn Berardi (CEO), Silvia Sanchez (CFO) and Guillermo Etchepareborda Web: www.ternium.com/siderar

Sales Volumes by Product, 2012E

Sales by Region, 2012E




Total Revenue 12,145 12,186 17,746 21,512 2,934 2,194 2,462 2,694

YoY change (%) 27.1 0.3 45.6 21.2 19.4 (25.2) 12.2 9.4

Gross Profit 2,663 2,448 3,927 4,288 643 441 545 537

YoY change (%) 16.0 (8.1) 60.4 9.2 9.0 (31.5) 23.6 (1.5)

EBITDA 1,936 1,686 2,909 3,158 468 303 404 396

YoY change (%) 13.6 (12.9) 72.6 8.6 6.7 (35.1) 33.0 (2.0)

As % of Revenue 15.9 13.8 16.4 14.7 15.9 13.8 16.4 14.7

Operating Income 1,585 1,154 2,045 2,118 383 208 284 265

YoY change (%) 12.0 (27.2) 77.1 3.6 5.2 (45.7) 36.5 (6.5)

As % of Revenue 13.0 9.5 11.5 9.8 13.0 9.5 11.5 9.8

Financial Results 124 (233) (152) (210) 30 (42) (21) (26)

Taxes (651) (404) (842) (871) (157) (73) (117) (109)

Net Profit 1,339 933 1,710 1,775 323 168 237 222

YoY change (%) (25.1) (30.3) 83.2 3.9 (29.6) (48.0) 41.2 (6.3)

As % of Revenue 11.0 7.7 9.6 8.3 11.0 7.7 9.6 8.3


Depreciation & Amortization 351 531 865 1,040 85 96 120 130

Other Noncash Items 775 (526) (7) (8) 187 (95) (1) (1)

Changes in Working Capital (1,979) 388 210 (501) (478) 70 29 (63)

Operating Cash Flow 486 1,327 2,777 2,307 117 239 385 289

Capital Expenditures (860) (1,048) (1,605) (1,198) (208) (189) (223) (150)

Free Cash Flow (374) 279 1,172 1,109 (90) 50 163 139

Other Invest./(Divestments) 523 (2,482) 0 0 126 (447) 0 0

Change in Debt 2,211 (100) 0 0 534 (18) 0 0

Dividends (1,512) (180) (216) (240) (365) (32) (30) (30)



Cash and Equivalents 3,305 742 2,145 3,271 769 109 282 391

Current Assets 7,502 4,694 7,913 10,344 1,745 689 1,041 1,237

Fixed Assets 4,280 5,914 9,839 10,988 995 868 1,294 1,314

Total Assets 14,832 17,046 27,761 32,505 3,449 2,503 3,651 3,886


Long-Term Liabilities 938 1,578 2,417 2,659 218 232 318 318

Shareholders' Equity 10,351 11,877 19,907 23,663 2,407 1,744 2,618 2,829


ST Debt 2,196 2,101 3,218 3,540 511 309 423 423

LT Debt 34 42 65 71 8 6 9 9


Net Debt (1,076) 1,401 1,138 341 (250) 206 150 41

Capital Employed 10,323 15,076 23,800 27,034 2,401 2,214 3,130 3,232

Net Debt/EBITDA (0.6) 0.8 0.4 0.1 (0.5) 0.7 0.4 0.1

Net Debt/Equity (0.1) 0.1 0.1 0.0 (0.1) 0.1 0.1 0.0

Capex/Revenue (%) 7.1 8.6 9.0 5.6 7.1 8.6 9.0 5.6

Int Cover (%) 37.3 38.0 41.2 85.7 37.3 38.0 41.2 85.7

Dividend Payout (%) 84.6 13.4 23.2 14.0 80.1 12.2 21.4 14.0

ROCE (%) 9.0 5.0 5.1 4.6 9.7 5.6 5.1 4.6

ROE (%) 12.9 7.9 8.6 7.5 13.5 8.5 8.6 7.5


P/E 5.8 7.6 4.3 4.1 5.6 6.2 4.1 4.0

P/CE 7.9 17.7 8.7 10.0 7.6 14.5 8.3 9.6

FV/EBITDA 3.5 5.1 2.9 2.4 3.4 4.1 2.8 2.3

FV/EBIT 4.3 7.4 4.2 3.6 4.1 6.0 3.9 3.5

FV/Revenue 0.6 0.7 0.5 0.4 0.5 0.6 0.5 0.3

P/BV 0.8 0.6 0.4 0.3 0.8 0.6 0.4 0.3

FCF Yield (%) (4.8) 3.9 15.9 15.1 (5.0) 4.8 16.8 15.8

Div Yield (%) 19.3 2.5 2.9 3.3 20.1 3.1 3.1 3.4


EPS 0.30 0.21 0.38 0.39 0.07 0.04 0.05 0.05

DPS 0.33 0.04 0.05 0.05 0.08 0.01 0.01 0.01

BVPS 2.29 2.63 4.41 5.24 0.53 0.39 0.58 0.63

US$Ar$

Hot Rolled

39.3%Coated &

Others

35.3%

Cold Rolled

25.4%

Domestic

89.5%

Exports

10.5%

Ternium

61.0%

ANSES

26.0%

Free Float

11.0%Employees

2.0%


22

ARGENTINATELECOM, MEDIA & TECHNOLOGY

TELECOM ARGENTINA UNDERPERFORM CURRENT PRICE: US$12.36


Investment Case: Our Underperform rating for Telecom Argentina is

based mainly on increasing regulatory and macroeconomic risks,

which, we believe, more than outweigh the companys cash-flow-

generation ability.

2013 Outlook: We expect mobile subscribers to grow 3%, with U.S.

dollar-ARPU declining 12% on FX depreciation impact. Furthermore,

we expect EBITDA to decline 6% in U.S. dollar terms. Despite TEOs

strong cash position, we remain uncertain as to whether the

company will be able to pay dividends in 2013.

Increasing regulatory and macroeconomic risks. Although TEO

is trading at 65% P/E and FV/EBITDA discounts versus its LatAm

peers, we believe these discounts are justified due to increasing

regulatory and macro risks in the telecommunications sector. In

addition, rising costs that have eroded margins also support our

Underperform rating.

Cash flow generation is sound, but dividends are uncertain.

Although we estimate that TEO will generate free operating cash flow

of Ar$2.5 billion per year on average, we are uncertain of TEOs

ability to distribute dividends in the short to medium term due to the

current implicit restrictions. However, this risk is partially mitigated by

the low percentage of TEOs share capital owned by ADR holders

(approximately 15%).

Network capacity utilization possibly at the limit; risk of higher-

than-expected capex. Although data on telco network capacity

utilization is not available, anecdotal evidence of poor service quality

suggests that network depletion is high. Therefore, we believe telcos

may need to increase their capex to meet increasing demand,

especially in value-added services.




Walter Chiarvesio*



Valder Nogueira*

Brazil: Banco Santander S.A.


Company Statistics



Bloomberg TEO US / TECO2 AR



52-Week Range (US$) 9.37 - 21.94


Float (%) 44.6



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Telecom Argentina Merval

23

TELECOM ARGENTINA Financial Highlights: P&L, Balance Sheet and CF Statement, 201114E in Millions

Company Description

Telecom Argentina is one of the two main players in Argentinas telecommunications industry. As of 2Q12, the company had 4.15 million fixed lines in service (47% of the countrys total), 18.7 million mobile subscribers (a 33.7% market share) through its brand name Telecom Personal, and 1.59 million Internet subscribers (35% of market share) through its brand name ARNET. The main shareholder of the firm is Nortel Inversora (with a 54.7% economic stake), a holding company controlled by Sofora (78%), which is owned by Telecom Italia (68%) and the local W de Argentina Group (32%).

Key Personnel: Enrique Garrido (Chairman), Franco Bertone (CEO), Adrian Calaza (CFO), Solange Barthe Dennin (IR) and Pedro Insusarry (Finance Director) Web: www.telecom.com.ar

Sales by Segment, 1H12

EBITDA by Segment, 1H12

Shareholder Structure, 1H12



Total Revenue 18,671 22,274 24,928 27,310 4,525 3,900 3,462 3,420

YoY change (%) 27.2 19.3 11.9 9.6 20.8 (13.8) (11.2) (1.2)

Gross Profit 9,516 3,834 4,831 6,261 2,306 671 671 784

YoY change (%) 29.9 (59.7) 26.0 29.6 23.3 (70.9) (0.0) 16.9

EBITDA 5,619 6,418 7,646 9,220 1,362 1,124 1,062 1,155

YoY change (%) 23.4 14.2 19.1 20.6 17.1 (17.5) (5.5) 8.7

As % of Revenue 30.1 28.8 30.7 33.8 30.1 28.8 30.7 33.8

Operating Income 4,040 3,834 4,831 6,261 979 671 671 784

YoY change (%) 26.2 (5.1) 26.0 29.6 19.8 (31.4) (0.0) 16.9

As % of Revenue 21.6 17.2 19.4 22.9 21.6 17.2 19.4 22.9

Financial Results 203 252 606 409 49 44 84 51

Taxes (1,324) (1,432) (1,903) (2,335) (321) (251) (264) (292)

Net Profit 2,422 2,653 3,535 4,336 587 465 491 543

YoY change (%) 32.6 9.5 33.2 22.7 25.9 (20.9) 5.7 10.6

As % of Revenue 13.0 11.9 14.2 15.9 13.0 11.9 14.2 15.9


Depreciation & Amortization 1,579 2,584 2,814 2,958 383 452 391 371

Other Noncash Items (550) (904) (247) (608) (133) (158) (34) (76)


Operating Cash Flow 4,861 5,287 6,632 7,951 1,178 926 921 996

Capital Expenditures (2,220) (3,116) (4,487) (4,916) (538) (546) (623) (616)

Free Cash Flow 2,641 2,172 2,145 3,035 640 380 298 380

Other Invest./(Divestments) 0 0 0 0 0 0 0 0

Change in Debt (29) 9 20 0 (7) 2 3 0

Dividends (916) (807) 0 0 (222) (141) 0 0

Capital Increases/Other - - - - - - - -


Cash and Equivalents 2,818 3,852 6,017 9,052 655 566 791 1,082

Current Assets 5,430 7,248 9,667 13,063 1,263 1,064 1,271 1,562

Fixed Assets 8,402 8,713 10,015 11,626 1,954 1,280 1,317 1,390

Total Assets 14,825 17,737 21,596 26,701 3,448 2,605 2,840 3,192

Current Liabilities 5,425 5,833 6,259 7,104 1,262 857 823 849


Shareholders' Equity 7,786 9,842 13,117 17,180 1,811 1,445 1,725 2,054

Total Financial Debt 134 146 177 177 31 22 23 21

ST Debt 19 43 67 67 4 6 9 8

LT Debt 115 103 110 110 27 15 14 13


Net Debt (2,684) (3,705) (5,839) (8,875) (624) (544) (768) (1,061)

Capital Employed 7,931 9,808 11,195 12,830 1,844 1,440 1,472 1,534

Net Debt/EBITDA (0.5) (0.6) (0.8) (1.0) (0.5) (0.5) (0.7) (0.9)

Net Debt/Equity (0.3) (0.4) (0.4) (0.5) (0.4) (0.4) (0.4) (0.5)

Capex/Revenue (%) 11.9 14.0 18.0 18.0 11.9 14.0 18.0 18.0

Int Cover (%) 224.8 69.2 84.7 578.3 224.8 69.2 84.7 578.3

Dividend Payout (%) 50.1 33.3 0.0 0.0 47.5 30.2 0.0 0.0

ROCE (%) 34.2 24.5 26.2 30.6 36.4 27.6 26.2 30.6

ROE (%) 31.1 27.0 26.9 25.2 32.4 29.1 27.0 25.2


P/E 6.2 5.8 5.2 4.7 6.0 4.8 5.0 4.5

P/CE 18.0 221.6 25.7 14.8 17.2 185.8 24.3 14.1

FV/EBITDA 2.3 1.8 1.7 1.3 2.2 1.5 1.6 1.2

FV/EBIT 3.2 3.1 2.7 1.9 3.0 2.6 2.5 1.8

FV/Revenue 0.7 0.5 0.5 0.4 0.7 0.4 0.5 0.4

P/BV 1.9 1.6 1.4 1.2 1.9 1.6 1.4 1.2

FCF Yield (%) 17.4 14.2 11.6 14.9 18.2 17.0 12.2 15.6

Div Yield (%) 6.0 5.3 0.0 0.0 6.3 6.3 0.0 0.0


EPS 2.46 2.70 3.59 4.40 0.60 0.48 0.51 0.56

DPS 0.93 0.82 0 0 0.23 0.15 0 0

BVPS 7.91 10.00 13.33 17.45 1.87 1.49 1.78 2.12

US$Ar$

Mobile72.2%

Internet14.3%

Fixed Telephony

13.4%

Mobile73.9%

Fixed Telephony & Internet

26.1%

NORTEL54.7%

Free Float44.6%

ESOP Program

0.6%


24

BRAZILUTILITIES

AES TIETE HOLD CURRENT PRICE: R$23.01

TARGET PRICE: R$23.30

Marcio Prado*



Maria Carolina Carneiro*



Company Statistics

Price Performance (R$)


Investment Case: We see AES Tiet as a top dividend player in the

sector, with an estimated dividend yield of 11.8% for 2013 for the PN

shares, with the company having predictable results, low capex

needs, and a sound balance sheet. The main drawbacks include the

lack of ex

Documents

Santander Latam Universe Book 2013