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We’ve downgraded our PT from €14.31 to €13.98 driven by the

riskier Portuguese profile and tougher macroeconomic

outlook. Both our sales and EBITDA margins estimates (2011E-

2013E) for all domestic business units suffered cuts, reflecting the

measures imposed by the Troika’s agreement. As a result, our

valuation for Portugal was reduced in 10.80%, meaning -2.31% in

our PT and our recommendation has changed to HOLD.

Poland - Polish operations are the major source of

value creation: We place our hope in Biedronka whose LfL sales

and EBITDA margin grew 11.7% and 60bp in 1Q11. We expect

sales to grow at a CAGR of 10.8% in 2010 (local currency).

Biedronka’s expansion plan will allow JMT to benefit from high

growth rates as long as the food retail market converges to

European standards and Biedronka enlarges its market share gap

to its direct competitors. Polish operations account for 78.6% of our

JMT’s value.

Portugal - we expect the group to consolidate its

positioning: Portuguese operations account for 21.4% of our

enterprise value and we forecast sales and net income to increase

at a CAGR of 4.7% and 8.2% in the next 10 years, reflecting the

deterioration in private consumption and the mature stage of the

food retail market. Nevertheless, the group was able to increase its

profits by 33.5% in 1Q2011 YoY thanks to Biedronka,

corresponding to €56.4Mn.

Going Abroad is a Top priority: JMT plans to enter a new

geography in 2012. The most likely format is discount and mass

markets should remain key.

JERÓNIMO MARTINS, SGPS COMPANY REPORT

FOOD RETAIL 06 JUNE 2011

STUDENT: MARGARIDA CARREIRA [email protected]

Premium position in Poland leads to…

…positive results in the Portuguese stock market.

Recommendation: HOLD

Vs Previous Recommendation BUY

Price Target FY11 (PT): 13.98 €

Vs Previous Price Target 14.31 €

Price (as of 3-Jun-11) 13.59 €

Reuters: JMT.LS, Bloomberg: JMT PL

52-week range (€) 6.84-13.70

Market Cap (€m) 8,552.09

Outstanding Shares (m) 629.293

Source: Bloomberg

Source: financeyahoo.com

(Values in € millions) 2010 2011E 2012E

Revenues 8,691.0 9,528.0 10,197.1

EBITDA 653.1 672.27 719.67

EBITDA margin (%) 7.5% 7.1% 7.1%

Net Profit 281.0 272.6 273.3

EPS 0.446 0.433 0.434

P/E 25.57 32.27 33.45

RoE (%) 24.8% 19.3% 17.0%

EV/EBITDA 10.98 13.1 12.2

Capital Expenditures 434.2 685.6 724.5

Source: Company’s reported Data and NOVA ER Team estimates

Company description Jerónimo Martins SGPS (JMT) is a Portuguese company operating in the food retail market in the distribution, industry and services areas, in Portugal and Poland. In Portugal, it operates under the brands Pingo Doce and Recheio while in Poland it operates with its hard discount model,

Biedronka. JMT is also involved in the food industry and in the services area.

JMT vs PSI20

2010 Jul Aug Sept Oct Nov Dec 2011 Feb Mar Apr May Jun

70%

60%

50%

40%

30%

20%

10%

0%



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PAGE 2/39

Table of Contents

Company overview ..................................................................................3

Company description..................................................................................... 3

Business Units description ...................................................... 3

Shareholder structure .................................................................................... 4

Macroeconomic Analysis ........................................................................5

Portugal .......................................................................................................... 5

Poland ............................................................................................................ 6

Food Retail Sector Overview ...................................................................7

Food Retail Trends ................................................................................ 7

The Private Label’s Phenomenon........................................................... 9

The Portuguese Food Retail Market ..................................................... 10

The Polish Food Retail Market ............................................................. 12

Valuation .................................................................................................13

Operational Forecasts ...........................................................................14

Investment Forecasts: Capex ...............................................................20

Financing Forecasts: Debt and NWC....................................................21

Discounted Cash Flow model ...............................................................23

Sum of the Parts Approach ...................................................................24

Smooth Investment Scenario ................................................................25

Multiples Comparison ............................................................................26

“Apteka Na Zdrowie” .............................................................................27

Further Internationalization ...................................................................28

Financial Ratios .....................................................................................29

Financial Statements .............................................................................30

Appendix ................................................................................................31

Disclosures and Disclaimer ..................................................................39




PAGE 3/39

Company overview

Company description

Jerónimo Martins SGPS (JMT) is a Portuguese company in the food sector

operating in the distribution, industry and services areas. Currently, the company

conducts activities in Portugal (mainland and Madeira) and Poland.

Nevertheless, the group is searching for new markets to increase its international

position. In Portugal, JMT maintains its recognition as the second largest

portuguese food retail group, right after Sonae Distribuição. While in Portugal it

operates with the brands Pingo Doce (retail) and Recheio (cash&carry), in

Poland it stands with its hard discount model, Biedronka. JMT is also involved in

the food industry over its joint-ventures with Gallo Worldwide and Unilever. In the

service sector, it offers marketing services, food services and further represents

international brands in Portugal. Brands like Olá, Hussel, Jeronymo, Chili’s, Ben

& Jerry’s and Caterplus are also part of JMT’s portfolio.

Business Units description

With a total of 353 stores in Portugal (340 in Portugal mainland and 13 in

Madeira), Pingo Doce (PD) is leader in the supermarket segment with 12.1%

market share1 (see Appendix 1). Relying on Portugal’s largest outlet network,

PD has achieved a sales growth of 9.9% in 2010. Among the main differentiation

factors are its every day low prices strategy, its strong private label (60% of PD

total sales), its always fresh perishables and finally its ready to eat Meal

Solutions. Unlike other retailers like Lidl, PD intends to be a price follower

instead of a price leader. In specific product categories (around 500 references),

PD is forced to offer the same prices as Lidl. Since 2010, the group no longer

owns Feira Nova being all of those stores converted into PD ones. In Madeira,

sales have grown 7.9%, suffering losses due to the storms occurred on 2010,

which affected two of JMT’s most representative stores (Anadia and Dolce Vita).

Recheio is the leader in the food wholesale segment, with 39 cash&carry

stores and 3 food service platforms, which posted a 4.6% sales growth in 2010.

Mainly aiming at satisfying clients from the HoReCa (Hotels, Restaurants and

Café’s) and traditional retail channels, its main differentiation efforts have been

increasing perishables (14.9% of its total sales) and its private labels,

MasterChef, Gourmês and Amanhecer (70% of its total sales). It presents a

1 According to Euromonitor International, PD became leader in 2008, surpassing Continente (8.2%) with a market share of 10.6%.

Source: Company data

Exhibit 1 – JMT Net sales Breakdown in

2010 (%)


Exhibit 2 – PD’s Number of stores

evolution


Exhibit 3 – Recheio’s type of clients in

2010




PAGE 4/39

market share of 38%.

In Poland, JMT occupies a relevant position in the food retail market with its solid

hard discount format Biedronka. It is the leader in its segment with a market

share of 10.5% and has 1,649 stores. Its assortment is composed by 7% of non

food products, 56% exclusive brands and 37% corresponding to other brands.

Due to the potential of the Polish market, Biedronka has grown rapidly in the last

5 years and constituted 55% of the company’s sales in 2010. It is present in 9

Polish regions out of 16 and is recognized by more than 92% of Poles.

In 1949, JMT entered the food industry through its joint-venture with Unilever. In

2007, with the merger of Fima VG, Lever Elida and Olá, a new company

emerged, Unilever Jerónimo Martins (UJM). Today, UJM is the biggest

manufacturer of the food mass market, home care and personal care products in

Portugal. Regarding services, in 1972 Jerónimo Martins Distribuição de

Produtos de Consumo (JMD) was born. Due to its knowledge of the Portuguese

consumer and distinct markets, JMD’s core activities are the exclusive

representation of a set of international brands in Portugal, mostly market leaders.

Shareholder structure

Currently, JMT’s capital is formed by 629,293,220 ordinary shares whose major

shareholder, with 56.1%, is Sociedade Francisco Manuel Soares dos Santos

which is controled by Alexandre Soares dos Santos, the Chairman of the Board

of Directors of JMT, and his sons. Heerema Holding Company through Asteck

S.A. owns 10%, Carmignac Gestión 3%, BNP Paribas Investment Partners

owns 2.03% and the remaining 29% are free floating and own shares (see

Appendix 2). This structure alows for a certain stability as Soares dos Santos

guarantees the continuity of JMT’s strategy2. Nevertheless, despite having the

majority of JMT, Soares dos Santos’ family cannot make decisions without

geeting the agreement of a substantial percentage of shareholders in issues like

the dividends policy3 for instance. The shareholders’ structure also varies among

business units. The company owns only 51% of PD while the remaining

participation belongs to Ahold, a Dutch food retail group. In Madeira only 75.5%

are owned by JMT. The remaining are detained by Lidosol and J. G. Camacho.

Regarding industry, Unilever owns 55% of UJM similarly to Gallo Worlwide, that

controls 55% of its own company. The remaining business units are entirely

2 Moreover, according to Código das Sociedades Comerciais, article 386º, nº3, JMT cannot merge, be sold or dissolved without the

acceptance of 2/3 of the votes in general assembly. 3 According to Código das Sociedades Comerciais, section IV, article 294º, nº1, the payout ratio can only be changed by acceptance of

at least 75% of the social capital in general assembly.


Exhibit 4 – Biedronka’s number of stores

evolution


Exhibit 5 – Shareholder Structure





PAGE 5/39

owned by JMT.

Macroeconomic Analysis

Portugal

Portugal is currently in a very delicate situation, dealing with a serious recession

particularly due to its high budget deficit (9.1% of GDP in 2010 and 10.1% in

2009), lack of competitiveness and the need of deep structural adjustments.

According to the EU rules, the Portuguese deficit should be lower than 3% of its

GDP, very distant from the ones achieved in the last decade. As a way of fighting

its deficit, in 2011, the government increased VAT from 21% to 23% in the

revenues side and it has also cut 5% on civil servant wages on the expenditure

side. However, the obtained results were not enough. This fragility is even more

obvious when examining public solvability4, resulting in high yields of sovereign

debt and continuous downgrades on credit ratings (Portugal current rating is

BBB-, according to S&P). Perceiving the high level of uncertainty and the

Portuguese risky profile, international investors are speculating negatively,

strongly conditioning access of Portuguese banks to funding and leaving the

economy with tough liquidity problems. Moreover, with 10.638Mn of inhabitants,

Portugal presented the highest unemployment rate of the last 10 years in

2010 (10.83%) and a poor GDP growth rate of 1.4%. Unable to turn around this

situation, on April 6th Portugal was forced to ask for external assistance to the

Troika, following Ireland and Greece. €78Bn were agreed and interests of 3.25%-

4.25% and 5.5%-6.5% will be paid to the IMF and the EU, respectively. The event

wasn’t, however, enough to calm down international markets and spreads on

sovereign debt haven’t stopped growing, achieving values of 11.89% and 9.72%

for 5 and 10-year treasury bonds, respectively, on May 2nd

. Most concerns by the

German Finance Minister about the eventual need to restructure Greece’s debt in

June also jeopardized the very similar Portuguese case. It also led investors to

speculate about a possible departure from the Euro by Greece, representing the

failure of the EU model. In fact, Portugal may not meet its financial obligations if

interest rates prove to be higher than its growth potential. IMF forecasts include

negative or low values of GDP growth rate in 2012 (-0.5%) and 2013 (0.9%).

Measures imposed by the Troika’s agreement like the dismissal of 8,000 civil

servants, cuts on pensions higher than €1,500, 50% reduction on overtime

income, higher indirect taxes and higher VAT on electricity (from 6% to 13%-23%),

4 Portuguese sovereign debt corresponded to 93% of GDP in 2010.

Exhibit 6 – Portuguese real GDP

growth (%)

Source: IMF for past and future values


Exhibit 7 – Portuguese unemployment

rates (% of total labor force)




PAGE 6/39

among others, are leading to a pessimistic evaluation from the Portuguese

consumers and consequent decrease on families’ disposable income, with 61.3%

believing its financial situation will worsen. 1Q11 already shows evidence that

consumers are cutting back on spending, specially on non-basic purchases,

with food retail sales decreasing by 1.6% YoY. As food inflation has been of 2.4%

since 1Q10, the fall on food retail sales was, in fact, of 4% YoY, in real terms.

Hence, we’ve cut our JMT valuation for Portugal by 10.8%5, as we expect both

retail and non retail activities to be affected by consumers’ retrenchment. Services

and Industry (non retail) suffered higher cuts as consumers are trading down from

manufacturer brands to private labels. Although less affected due to its based on

food assortment, our PD and Recheio estimates were also reduced as we believe

they’ll not be able to avoid the negative impact on consumption. However, as

JMT’s sales are mostly focused in Poland6 (55% of total sales) and its economy

has been able to grow consistently, JMT performed positively as shown by the

1Q11 results (consolidated sales growth of 14.7%7 YoY).

Poland

Contrarily to Portugal, Poland, with a population of 38.200Mn inhabitants, has been

one of the fastest growing countries in the EU. Further affected by the European

economic crisis, Poland was the only country in the EU to maintain positive

GDP growth during the economic downturn period (2008-2010). This performance

was only possible thanks to 4 factors: i) Poland had access to structural funds

given by the EU which contributed to boost the economy, ii) The zloty devaluation

has supported Polish production by making polish goods more competitive and

increasing exports, iii) imports decreased in 2009 by 9.3%, and finally iv) its

conservatively managed banking system was little exposed to toxic assets.

Moreover, Polish exports are highly dependent on the German economic growth,

as Germany is by far its most significant trading partner (1/4 of polish exports).

Polish exports are mainly natural resources like coal, silver, iron and salt and also

automobiles, machinery, furniture and chemicals supported by a healthy industrial

sector. This growth is sustainable as long as Poland still shows large differences

from the European standards8. Last year, Poland’s economy was able to expand

by 3.817% and IMF forecasts point a growth of 3.833% for this year. Triggered by

this economic positivism, the zloty has appreciated, reaching 3.964 (Dec 2010)

5 The impact on JMT’s main inputs is explained later in the Operational Forecasts chapter. 6 As extremely dependent of the Polish economy, JMT is very exposed to zloty variations, supporting a high exchange rate risk. 7 In 1Q11, Biedronka, PD, Recheio, Madeira, Industry and Services presented sales growth rates of 21.8%, 4.6%, 3.7%, 15.9%, - 4.6%

and - 4.8%, respectively. 8 In Poland, GDP per capita equaled $12,300.1 (2010) while in Germany it was of $40,831.7 (2010).


Exhibit 10 – Polish unemployment rates

(% of total labor force)


Exhibit 8 – Portuguese Food retail sales

and CPI YoY(%)

Exhibit 9 – Polish real GDP growth (%)

Source: Bloomberg




PAGE 7/39

against 4.1006 (Dec 2009) per Euro. Nevertheless, rising demands to fund health

care, education and the state pension system caused the public sector budget

deficit to rise to 7.9% of GDP in 2010, a number above the required European

target of 3%. According to a report by S&P, Poland’s current rating of A- might

be in danger of being lowered if structural reforms of its public finances are not

implemented. The good growth news is deflecting attention from the country’s fast-

growing debt9. It is important to mention that the Polish Euro adhesion was

postponed indefinitely thanks to the European crisis.

Since 2010, food inflation has been increasing, reaching values of 5.5% in 1Q11.

Despite the negative impact of the timing of Easter in 1Q1110

, food retail sales were

able to grow 0.6% YoY. Following this tendency, mainly due to its strong LfL sales

growth (11.7%11

) and its increase on selling area (13.0% when compared to 1Q10)

Biedronka was able to present good results in 1Q11, with a sales growth of 21.8%.

Biedronka counts for 78.6% of our JMT’s PT and we expect sales to grow at 2

digits in 2011 (10.4%) and 2012 (11.1%).

Food Retail Sector Overview

Food Retail Trends

Traditionally, the percentage change of householders’ income is highly correlated

to the GDP growth, which is converted into a correlation around 0.97.

Nevertheless, even having a direct impact on general consumption, high

variations in disposable income are not translated into high variations in

food spending. As an essential good, demand for food is quite inelastic and food

consumption does not grow exponentially when income experiences that behavior.

That’s mainly why the industry is seen as a very defensive one against recessions.

Instead, the variations that may occur relate to consumers’ choices, selecting

cheaper products during a recession period or expensive ones otherwise.

According to INE, in the last 10 years, Portuguese householders have been

spending on average 14.1% of their incomes in food related goods. We believe

that this percentage will tend to decrease to 13.6% in 2020 at a CAGR of -0.65%,

mainly due to the increase of the PL’s share12

driven by the severe austerity

measures implemented. Similarly, according to Eurostat, in 2006 Poles spent

approximately 18.2% of their disposable income in food. This percentage has been

9 In 2010, public debt counted for 55% of GDP. 10 In 2010, Easter was on April 4

th while in 2011, it was on April 24

th.

11 Biedronka’s average basket inflation was 4%, meaning that Biedronka was able to raise prices below the market average (5.5%).

12 Having a current private label share of 33%, we believe that in 2020 Portugal will achieve a PL share of 45%, following the behavior of

Switzerland (the European most developed country in terms of PL).

Exhibit 12 – Portuguese Householders’

food expenditure

Source: INE and IMF

Exhibit 11 – Polish Food retail sales and

CPI YoY(%)

Source: Bloomberg




PAGE 8/39

1Q

2010

2Q

2010

3Q

2010

4Q

2010

22.5% 24.0% 26.3% 27.1%

decreasing at a CAGR of -1.5% since 2000, mainly due to consumers’ purchasing

power increase and rising importance of non food categories, diversifying their

consuming patterns. We believe this percentage will reach a value of 16.2%13

in

2020, following the same trend as Portugal.

Over the last years, the European ongoing economic crisis has been changing

customers’ behavior. Following IGD, consumers have adjusted their priorities,

becoming more value conscious, price sensitive and rational in their purchases.

As a consequence, Private Labels (PL) and Eat-at-Home tend to evolve rapidly.

According to JMT, in Portugal (1Q11), PD’s number of shopping trips increased,

being however, somehow neutralized by a reduction in the value of the average

ticket14

, showing that consumers are already reducing their spending.

Furthermore, they opt to shop around (proximity) and as more rational buyers,

their time shopping has increased. On the other hand, in Portugal, there’s an

aging population tendency, which together with a bigger concern with health is

resulting in a higher demand for healthy products.

On the supply side, the change in consumers’ behavior has forced most retailers

to optimize and reduce their assortments (simplifying their offer) as a way to

reduce costs and achieve efficiency in stock management. For instance, PD’s

positioning changed from a premium concept to an “every day low price” model,

reducing its offer from 15,000 references to 5,500. Moreover, Portuguese retailers

are holding higher costs due to higher raw materials’ prices and VAT, resulting in

an EBITDA margins reduction. According to Deloitte, the retailers’ ability to limit

their costs is the key to maintain lower prices and achieve profitability during an

economic crisis. Retailers like JMT are investing in the rationalization of their

logistics network, so they can increase their efficiency gains and maintain their

EBITDA margins.

The food retail market is a seasonal activity, selling progressively more from

quarter to quarter. Contrarily to the 4th quarter, people tend to buy less during the

1st quarter due to the already spent incomes during Christmas celebrations.

Similarly, customers tend to spend more during the 3rd

quarter than in the 2nd

, as

it corresponds to holidays when the vacation subsidy is granted. Additionally,

companies in this sector are characterized by high liquidity ratios since they

receive from customers immediately and pay to suppliers later on, allowing for

implementing ambitious investment plans.

13 Poland presented a PL share of 14% in 2009 and we believe it will reach the current Portuguese PL share (33%) in 2020. 14 In 2010, the value of the average ticket of PD was around €12 to €15.

Exhibit 13 – Changes in European

shopping patterns (October 2008)

Exhibit 14 – JMT sales by quarters in 2010, as a percentage of total sales


Source: The Institute of Grocery

Distribution (IGD) data




PAGE 9/39

Private Labels’ Phenomenon

Since the 1970’s, the Private Label market has been suffering a vast

transformation process. PLs that were previously perceived by customers as

cheap, of inconsistent quality and brand copies, are nowadays competing in

quality. According to AC Nielsen, PLs are an option in terms of quality against

Manufacturer Brands (MBs) for 39% of the Polish householders and 99% of the

Portuguese homes. Usually, customers acquiring these products reveal a high

degree of satisfaction (87%) and only 3% presented some kind of complaint. In

most cases, PLs are produced through partnerships with manufacturers.

Furthermore, TNS Worldpanel data reveals that, even after the economy improves,

95% of the Portuguese people will continue to purchase PLs. Following this, JMT

has been making an effort to increase its PL portfolio, not only because of

consumers’ changes but also as a way of differentiation and protection against the

increased pressure from competition. In 2010, PLs corresponded to 38% of PD’s

total sales and 17.1% of Recheio’s total sales (see Appendix 3). Furthermore, PD

managed to increase its PL’s weight on sales to 42% in 1Q11 against 39% YoY. In

Portugal, JMT shows a PL’s share of 33.7%, slightly higher than the 33% of the

overall market, meaning PLs are one of the critical differentiation pillars of JMT’s

distribution business models.

In fact, PLs are growing faster than MBs, representing currently a European market

share of 35%15

(Europe is the region with the highest share of PLs). Apparently,

this growing tendency is highly correlated with the growing presence of hard

discounters16

and also the high level of retailer concentration measured by the

sum of the 5 top retailers’ market share. All the 5 most developed countries

regarding PLs have a retailer concentration of over 60%. Switzerland is the 1st

ranked with a 46% PLs’ share and a concentration of 69%. Portugal presents a

current retailer concentration of 54% (see Exhibit 19) and a PLs’ share of 33%17

.

The prevailing reasons behind this effect are the retailers’ aims for higher market

shares, being able to create brand awareness which guarantees consumers’

loyalty. In contrast, emergent markets like Poland, which have a very fragmented

retail market, have a far less developed PLs market (15%15

in 2009).

More important is to understand the PLs buyers’ profile and their motivations in the

purchasing moment. Currently, as mentioned, price plays an important role at the

moment of decision, which contributes to increase PLs’ sales against MBs’.

15 Source: AC Nielsen 16 Hard discounters as Aldi or Lidl that mostly sell PLs are expanding their presence. For instance, PLs count for 95% of Aldi’s sales. 17

Source: TNS Worldpanel data

PLs are an option for 99% of the Portuguese homes and 39% of the Polish householders.

Exhibit 15 – Relation between PLs’ share and Retailers Concentration (%) (2009)

Source: AC Nielsen and Planet Retail

data

PLs are one of JMT’s major differentiation pillars.

Even after the economy improves, 95% of the Portuguese people will

continue to purchase PLs.




PAGE 10/39

Following an AC Nielsen study, 81% of the householders admitted to compare

prices between PLs and MBs so as to decide which product to purchase. Actually,

79% of the global consumers confess to change purchasing habits to reduce

expenses. Therefore, more than half agreed that PL products are not only

consumed by people with lower incomes. For JMT, PLs play an important role in

the assortment as in 2010 consumers’ demand for these products increased,

regarding their level of quality. In Portugal the average price differential

between PLs and MBs is around -42%18

. In this sense, the PL market seems to

be resistant to economic fluctuations since they maintained a steady and

growing business throughout economic increases or decreases. When compared

to other nations, the Portuguese is one of the most pessimistic, with a confidence

index of 45, leading to the preference for cheaper alternatives. Thus, MBs have

been losing sales for two successive years. When looking at the cumulative

benefits for a range of 80 categories, customers in Europe can achieve an

average saving of 37%15

. The demand for competitive prices is a reality and while

customers save, retailers can be presented with higher margins as they have more

control on production costs and activities such as marketing or distribution.

The bottom PL value driver is the wide range of categories that this sector

manages to offer. However, 35% of European consumers agreed that PLs are

not suitable for products where quality really matters. Consumers may easily

adopt PLs when it comes to dog food, refrigerated food or home cleaning

products among others, but when it comes to personal care, baby food,

cosmetics and alcoholic beverages they’re less convinced about their quality.

Regarding this PLs growing tendency, our sales estimations for Portugal and

Poland were lowered, believing that the percentage of householders’ income

spent in food related goods will decrease at a CAGR of -0.65% and -0.81% in

Portugal and Poland, respectively.

The Portuguese Retail Market

The food retail market in Portugal is currently achieving a certain level of maturity

and will tend to stagnation, with companies heavily competing between each

other. EBITDA margins will tend to be squeezed not only because of the fierce

competition felt but also because of the low price strategies implemented. At this

time, the Traditional Market (TM) accounts for 23% of the entire market, while

Modern Grocery Distribution (MGD) corresponds to 77%, around €15,442.4Mn.

18 Source: AC Nielsen – “The Power of Private Label 2005”

Regarding this PLs growing tendency, our sales estimations for Portugal and Poland were

lowered.

Exhibit 17 – Portuguese MGD market

(€ Mn)

79% of the global consumers confess to change purchasing habits to reduce expenses.

Exhibit 16 – Average price differential between PLs and MBs by country in 2005 (%)

Source: AC Nielsen – “The Power of

Private Label 2005”

Source: Euromonitor International




PAGE 11/39

Retailers Market

shares 2009 2010

Sonae Distribuição 16.4% 17.1%

Jerónimo Martins 13.1% 13.7%

Os Mosqueteiros 10.0% 9.5%

Cia Portuguesa de

Hipermercados SA7.5% 7.9%

Lidl 6.0% 5.8%

Dia Portugal

Supermercados 4.2% 4.0%

E Leclerq 2.7% 2.8%

Others 40.1% 39.2%

(Mn €)

Overall

MarketMGD

JMT

sales

2010 20,061 15,442 2,884

2011E 20,016 15,598 3,210

2012E 20,018 15,791 3,276

2013E 20,338 16,241 3,391

2014E 20,782 16,800 3,533

2015E 21,341 17,465 3,698

2016E 21,969 18,200 3,879

2017E 22,689 19,028 4,081

2018E 23,526 19,972 4,314

2019E 24,513 21,066 4,579

2020E 25,566 22,242 4,869

CAGR 2.5% 3.7% 5.4%

In 2010, the 5 Portuguese top retailers accounted for 54% of the overall

market, suggesting a high retailers’ concentration. However, it still presents a

small concentration comparing to other European countries like Germany or

Switzerland, with 63% and 69%, respectively. According to Euromonitor,

supermarkets in Portugal had the highest growth rate over the past 5 years

(CAGR of 10.7%) against hypermarkets (CAGR of 2.7%) and discounters (CAGR

of 1.1%) (see Appendix 4). This trend shows that supermarkets have managed to

bring together low prices and convenience. In contrast, discounters presented a

stable behavior, which is not only related to the discounters’ slow down on new

openings during 2009 and 2010, but also with Minipreço’s negative results during

the same period.

In the past, both Sonae and JMT, the two biggest players of the market, were

able to grow through organic expansion and M&A operations. In 2007, JMT

bought Plus in Portugal and Poland while Sonae bought Carrefour, as a way of

reinforcing their positions in the market. Currently, due to its consistent negative

results, Minipreço has been creating some speculation and rumors about a

possible sale. Moreover, Carrefour has started to decrease its investment in

Minipreço in 2009. Yet, there is no official buyer on the radar although Sonae

and Group Auchan seem to be interested in it. However, we believe the

competition authorities would not allow for a possible acquisition by Sonae

without some restrictions, regarding its current market share.

Owning stores in similar locations, of similar dimension, also competing in price

and offering a wide range of PLs, Minipreço and Lidl became PD’s main rivals.

Sonae, instead, is more focused on hypermarkets and non food specialized retail

outlets. Currently, Sonae is operating only under the brand Continente.

Fighting between each other, retailers are investing significantly in solid

marketing campaigns and outlet design in order to increase their brand

awareness and attract more consumers than their peers. Both JMT and Sonae

have been largely investing in TV ads. While JMT reinforces its PD’s policy for

quality at low prices, Sonae promotes its brand Continente. The discount leader,

Lidl, so far not investing on TV ads in order to maintain its very low prices, is now

competing by using marketing tools and developing PL luxury products.

In the medium-term, we believe there is still a little room for growth due to

the significant gap existing between Portugal and European countries.

Following Alisuper that went bankrupt (2011), we believe smaller players such as

Sampedro will go out of business without the ability to survive the fierce

Exhibit 19 – Portuguese retailers’

market shares (%)



Source: Euromonitor International,

Company data and ER Team estimates

Exhibit 20 – Portuguese MGD forecasts

Exhibit 18 – Sales in Grocery Retailing

by format (€ Mn)




PAGE 12/39

competition. Hence, further consolidation opportunities will occur. According to

Euromonitor International, MGD was able to grow at a CAGR of 6.8% in the past

5 years. Believing traditional market will continue to shrink, we expect MGD to

increase to 87% in 2020, growing at a CAGR of 3.8% in the next 10 years (see

Appendix 5 for methodology).

We consider that PD was able to positively differentiate itself from its peers in the

past through its strategic moves. Hence, despite the negative impact on

householders’ consumption, we believe PD and Recheio will keep on increasing

their market shares as they have been enlarging their PL offer.

T

Polish Food Retail Market

As developed economies evolve into stagnation, emergent economies play a

crucial role for international retailers. In contrast to Portugal, currently, the

grocery retail market in Poland is very fragmented and is in a development

stage, just like it was in Portugal 10/15 years ago. MGD accounts only for 51%

of the total market while the remaining relates to Traditional Market. Contrarily to

TM (lost around 7,000 outlets in 2010), MGD was able to grow at a CAGR of

12.8% over the past 5 years. Following the same trend, we believe TM will lose

to MGD, growing at a CAGR of 7.4% in the next 5 years and reaching a relation

of 70%-30% in 2020 (see Appendix 5 for methodology).

The three modern formats, i.e., hypermarkets, supermarkets and discount stores,

have increased their market shares in the last 5 years. Nevertheless,

Portugal 2010 2011E 2012E 2013E 2014E 2015E 2020E

GDP Growth rate 1.4% -1.5% -0.5% 0.9% 1.0% 1.2% 2.3%

Inflation rate 1.4% 2.4% 1.4% 1.4% 1.4% 1.6% 1.9%

Confidence índex 0.4% 0.2% 0.3% 0.5% 1.0% 1.1% 1.5%

Growth rate of a mature market 0.82% 0.72% 0.72% 0.72% 0.68% 0.68% 0.55%

% spent in food related goods 14.5% 14.4% 14.3% 14.2% 14.1% 14.0% 13.6%

MGD Growth rate 3.40% 1.07% 1.30% 2.91% 3.50% 4.02% 5.64%

Poland 2010 2011E 2012E 2013E 2014E 2015E 2020E

GDP Growth rate 3.8% 3.8% 3.6% 3.7% 3.7% 3.9% 4.2%

Inflation rate 2.6% 4.1% 2.9% 2.6% 2.5% 2.5% 2.5%

Growth rate of an in development market 1.56% 1.56% 1.56% 1.56% 1.23% 1.23% 1.10%

% spent in food related goods 17.6% 17.5% 17.3% 17.2% 17.0% 16.9% 16.2%

MGD Growth rate 7.3% 8.8% 7.4% 7.3% 6.7% 6.9% 7.1%

Exhibit 24 – Evolution of Polish Food

retail market by formats (%)

(2005=100%)

Source: INE, IMF, Euromonitor International and Nova ER Team for estimates

Exhibit 22 – Polish MGD market (PLN

Mn)


Source: Eurostat, IMF, Euromonitor International and Nova ER Team for estimates

Exhibit 23 – Polish MGD growth rate forecasts

Exhibit 21 – Portuguese MGD growth rate forecasts (%)




PAGE 13/39

Retailers Market

shares 2009 2010

Jeronimo Martins

Dystrybucja 10.2% 10.9%

Tesco Polska 5.8% 5.7%

Carrefour Polska 4.9% 5.1%

Auchan Sp zoo 4.1% 4.2%

ZKiP Lewiatan '94

Holding 3.9% 4.0%

Real 3.6% 3.4%

Eurocash 2.7% 3.1%

Lidl Polska 2.8% 2.7%

Kaufland Polska

Markety 2.5% 2.7%

Grupa E Leclerc 1.5% 2.2%

Netto 1.9% 1.8%

Others 56.1% 54.2%

independent small grocers still account for a large percentage in the market

(25.3%) operating with 97,820 stores. Discounters presented the highest

growth rate over the past 5 years (CAGR of 19.4%)19

, resulting in an increase

of 7.8% in market share. The format was able to perform successfully during the

economic downturn mainly due to the wide selection of lower priced PL products.

According to the Polish press, the number of customers buying from discounters

has also increased from 16% in 2009, to 24%. The observed interest in this

format results mainly from price sensitive consumers and a more positive attitude

towards it among people of higher economic status.

The grocery retail market in Poland is mainly led by multinational companies as

they possess additional market experience and larger budgets to invest. The 5

biggest chains of the market are Jerónimo Martins Dystrybucja, Tesco Polska,

Carrefour Polska, Group Auchan and ZKIP Lewiatan which represent 29.9% of

the overall market, a concentration far below the European values and

suggesting high growth opportunities. Holding almost 65% of the hard discount

segment Biedronka is the leader in its segment with a market share of

10.9%. Having a great advantage over its peers in terms of the number of stores

due to its Plus acquisition (1,649 stores against 400 from Lidl and 212 from

Netto), Biedronka competes mainly against Netto, Lidl and Aldi. In 2009, the

Polish market showed signals of consolidation, with E Leclerc buying 25 Billa

supermarkets while JMT acquired 12 Carrefour Express stores.

According to PMR Research, Biedronka was considered the most often

attended store in 2009 with 40% adhesion, followed by Real (36%). Consumers

not only mentioned its very low prices but also considered its brand as solid. JMT

has been aware about the possible growth opportunities of Biedronka and has

drafted an ambitious stores’ expansion plan for the future, reaching the 3,000

stores in 2015.

Valuation

With the aim of discounting each cash flow with the appropriate cost of capital

(WACC), we’ve divided our valuation of Jerónimo Martins SGPS into six

business units, Retail Mainland (Pingo Doce), Recheio, Madeira, Biedronka,

Industry and Services, according to two criterions: retail format and domestic or

international operations. JMT’s value was computed by making use of the

Discounted Cash Flow model, on a sum of the parts basis, with explicit

19

Followed by supermarkets (CAGR of 15.2%)



Exhibit 24 – Valuation Approach

Exhibit 25 – Polish Retailers’ market

shares




PAGE 14/39

forecasts up to 2020. Along our analysis we’ve come out with a conservative

point of view when performing forecasts as we have not included in our analytical

approach any scenario that could bring additional uncertainty to our analysis.

Thus, we’ve only considered current reliable scenarios aligned with the

company’s guidelines. We took into account the IMF intervention in Portugal

given that it became a reality on April 7th. Additionally, some likely future

scenarios will be explored later in further chapters.

Operational Forecasts

With the aim of computing Free Cash Flows (FCF)20

, value drivers of each

business unit were initially found for computing sales, Net Working Capital

variation (∆NWC) and CAPEX. The key value drivers of our model are related

with the number of stores and their area, sales per sqm, EBITDA margins, activity

ratios and costs of revamping and opening new stores. Our calculation of sales

was based on the stores’ expansion plan (selling area in sqm) and sales/sqm

evolution (measure of store performance) for all business units with the exception

of industry and services, in which cases a constant selling area was assumed.

Retail Mainland

Analyzing PD’s past performance during the last 5 years, we realize PD

managed to increase its sales from €1,612Mn to €2,756Mn at a CAGR of 11.3%.

This performance was only possible thanks to its selling area expansion (CAGR

of 19.2%) and rise in the sales/sqm ratio (CAGR of 2.8%). The high number of

new openings in 2008 presented on Exhibit 25 is related to the Plus acquisition.

Having in mind that the Portuguese food retail market has achieved a mature

stage, it will not allow for aggressive expansion plans. Therefore, according to

information published during the investor’s day, we believe PD’s new openings

will smoothly decrease during the next 10 years, converging into 2 openings in

2020 and contributing to a low selling area CAGR of 0.7% (see Exhibit 63 of

Appendix 6). We highlight the fact that there’re still 18 Plus stores left to convert

which are expected to be concluded in 2012 (9 each year).

20

FCF = Operational Cash Flow + Cash Flow from Investing

Operational Cash Flow = EBIT(1-t) + Depreciation – ∆NWC Cash Flow from Investing = Investment in non-current liabilities – Investment in non-current assets – CAPEX

Find out the value drivers of each business unit

Project FCF until 2020 and compute the terminal

value of JMT

Discount FCF at the appropriate WACC

SOTP: Reach the total

value of JMT

Exhibit 26 – Valuation Approach

Make Forecasts, including the JMT’s strategic plan

and guidelines

Exhibit 27 – Retail Mainland new

openings forecasts

Source: Company data and Nova ER

Team for forecasts




PAGE 15/39

Regarding stores performance (sales/sqm growth rate), we expect it to evolve

smoothly, at a CAGR of 2.6% in the next 5 years. After 2015 the majority of

stores will be selling at full capacity. The sales/sqm growth rate was estimated

based on i) the overall supermarkets’ sales growth rate and ii) the stores’

capacity to sell products, that is, a recently opened store does not sell the same

as a mature one21

. As stated before, in the past 5 years, supermarkets were able

to grow at a higher CAGR than the overall Modern Grocery Distribution market,

10.7% against 6.8%. Believing PD will contribute to maintain this tendency, we

forecast a CAGR of 3.2% for supermarkets’ sales for the next 5 years. 3.2% is

far below the previous 10.7%, as we’ve cut our estimates for 2011, 2012 and

2013 to 1.73%, 1.96% and 3.59%, respectively, taking into account the negative

impact on householders’ incomes and consumption given the Troika’s

agreement. Thus, we expect sales to grow at a modest CAGR of 5.5%22

.

Regarding PD’s EBITDA margins, we evoke that PD’s EBITDA margin has

suffered a contraction of 20bp last year (7.0% in 2009 to 6.8% to 2010). We

believe this fall was related with high investments in advertising. For the future,

we forecast a PD’s EBITDA margin increase to 7.0% until 2012, and a

decrease thereafter, converging to values of 2010 (6.8%) and remaining constant

afterwards.

We believe the EBITDA margins’ increase will be mainly driven by the total

conversion of Feira Nova and Plus into PD stores. Feira Nova conversion will

not only contribute to lower operating costs due to the reduction in selling area

and more focused assortment in food, but also to increase sales’ productivity as

all the investment of restructuring was already done in 2010. Similarly, in 2012,

all Plus stores will be converted, 9 in 2011 and 9 in 2012, further contributing to

increase EBITDA margins.

From 2013 onwards, we believe EBITDA margin will decrease and remain

constant at 6.8%. During the next 3 years, JMT will invest in restructuring and

rationalizing its logistics network. This transformation will be translated in a

reduction of 2 distribution centers from the current 7, as 40% of PD’s clients are

mainly concentrated in Lisbon and Porto. JMT will only start benefiting from

higher cost efficiency and consequent reduction in distribution costs after 2013.

We suppose this supply chain restructure will contribute in part to fight against

21 We’ve assumed that a 1-year store only sells 55% of its capacity, a 2-year one sells 75% and a 3-year one sells at full capacity. 22 By adding the new openings’ selling area to the already existing selling area of the previous year (1,170m

2 is the average area of a PD

store), we achieved PD’s total selling area (sqm). By using the forecasted sales/sqm ratio, we were able to compute total sales.

Exhibit 28 – Retail Mainland sales

forecasts

Source: Company data and Nova

ER Team for forecasts

Exhibit 29 – EBITDA margin of JMT’s

peers (European Western countries) in

2010

Source: Bloomberg




PAGE 16/39

the fierce competition that characterizes a mature market as well as the

increasing tendency on raw materials’ prices.

Recheio

Currently, the wholesale market is in a mature stage, with the 5 top players of

the market representing 82.3%23

of the consumption in 2009. The two main

players in terms of dimension are Recheio and Makro with market shares of 38%

and 21.7%, respectively. Over the past years, the wholesale market in Portugal

has been declining mainly due to the TM’s decreasing tendency and the actual

economic crisis. As mentioned before, in 2010, TM’s decreasing tendency

persisted, with some traditional retailers leaving the market. This resulted in

the loss of some clients, affecting significantly small wholesalers with less

diversified clients’ portfolios. On the other hand, HoReCa channel was able to

recover in 2010 from the crisis effects felt in 2009, mostly favoring the biggest

wholesalers of the market. In 2010, according to INE, the accommodation and

food service activities showed a positive growth rate of 1.4%, representing a

HoReCa growth rate of 4.5%. Nevertheless, we believe HoReCa channel will not

be able to avoid the negative impact driven by the fall in householders’

disposable income. We think in the next 2 years (2011 and 2012) householders

will tend to cut on their vacations and restaurants spending (tendency to eat at

home), contributing to the decrease of HoReCa’s sales. Despite the actual

economic adversities, Recheio’s sales did not present negative growth rates

during the years of economic slowdown. Recheio has been able to increase its

market share in the previous 5 years, with sales growing at a CAGR of 5.02%.

Moreover, its effort on increasing its PL offer and the investment done in

advertisement campaigns, mainly falling upon the beverages category,

contributed to reach a sales’ growth rate of 3.7% (0.4% LfL) in 1Q11.

23 Source: Company data

€ Mn 2010 2011E 2012E 2013E 2014E 2015E 2020E

Sales 2,755.8 3,070.6 3,138.3 3,253.9 3,395.1 3,559.3 4,726.3

EBITDA 186.0 214.9 219.7 221.3 230.9 242.0 321.4

EBITDA margin (%) 6.8% 7.0% 7.0% 6.8% 6.8% 6.8% 6.8%

Depreciation 88.52 89.75 90.71 91.31 91.83 92.37 96.31

EBIT 97.50 125.19 128.97 129.95 139.04 149.66 225.07

EBIT margin (%) 3.5% 4.1% 4.1% 4.0% 4.1% 4.2% 4.8%

Exhibit 30 – Retail mainland Operational Forecasts

Source: Company data and Nova ER Team for estimates

Exhibit 31 – Hotels’ total income in

Portugal

Source: INE

Despite the actual economic adversities, Recheio managed to present a sales growth rate of 3.7% (0.4% LfL) in 1Q11.




PAGE 17/39

Since the wholesale market is already in a high stage of maturity, we believe

there won’t be much room for further growth. We expect Recheio to open

only 3 stores during the next 10 years, according to the company guidelines. We

estimate sales area to reach 133.826m2 in 2020, growing at a modest CAGR of

0.8% (see Exhibit 64 of Appendix 6).

Because this business unit is more affected by the macroeconomic environment

than the Retail Mainland unit, we’ve considered a sales growth rate based only

on the GDP growth rate, inflation rate and the PLs effect24

. In the previous 5

years, Recheio managed to present a sales’ productivity CAGR of 2.7% and a

sales CAGR of 5.02%. Nevertheless, according to our forecasts, sales

productivity and sales are expected to grow at a modest CAGR of 2.0% in the

next 10 years, aligned with the inflation rate values between 2016 and 2020.

Currently, as a way of fighting against the difficulties in the TM’s segment, JMT

focused on implementing a new project called Amanhecer. Its main objective is

to increase Recheio’s sales through 40,000 already existent customers from this

segment. The main business idea is to create a franchising chain of traditional

retailers under the name Amanhecer, whose products are obliged to be at least

80% from the current 130 references of products from the PL brand

Amanhecer. On the other hand, JMT gives support to the store brand and helps

on issues like the revamping diagnosis, logistics, transportation, marketing,

advertisement and retailers’ formation. The group predicts to open between 20

and 25 stores until the end of this year and to achieve 220 references of

products. As a recent project, it is still marginal at the moment and thus only

limited data is available. However, we believe it will contribute to increase sales

and fight against the negative tendency on EBITDA margins regarding

competition. For the following years we expect EBITDA margins to decrease and

remain stable at 6.1%.

24 Knowing that a recently opened store does not sell the same as a mature one, we’ve also incorporated that information in our model,

assuming that a 1-year store will only sell 55% of its capacity, a 2-year one sells 75% and a 3-year one sells at full capacity.

€ Mn 2010 2011E 2012E 2013E 2014E 2015E 2020E

Sales 719.1 721.7 727.3 725.2 728.7 744.6 861.4

EBITDA 44.2 44.0 44.4 44.2 44.4 45.4 52.5

EBITDA margin (%) 6.2% 6.1% 6.1% 6.1% 6.1% 6.1% 6.1%

Depreciation 9.18 9.77 10.57 10.89 11.21 11.52 13.08

EBIT 35.04 34.25 33.79 33.35 33.24 33.90 39.47

EBIT margin (%) 4.9% 4.7% 4.6% 4.6% 4.6% 4.6% 4.6%

We believe Amanhecer will contribute to increase sales and fight against the negative tendency on EBITDA margins regarding competition.

Exhibit 34 – Recheio Operational Forecasts

Exhibit 32 – Recheio’s new openings

forecasts

Exhibit 33 – Recheio’s sales forecasts


ER Team for forecasts


Team for forecasts





PAGE 18/39

Madeira

The food retail market in Madeira is in a stage of high stability and we do not

expect JMT to open more stores in the next 10 years. Therefore, according to our

predictions we expect JMT to maintain its current selling area of 14.300m2. Our

sales forecasts are expected to grow at a 3.2% CAGR in the next 5 years, slightly

below the 4.7% obtained in the past 5 years (see Exhibit 65 of Appendix 6).

Driven by the floods that occurred in Feb 2009, 2 of the most important PD of

Madeira were affected, triggering a 10bp decrease in EBITDA margin in 2010,

from 4.8% to 4.7%. However, as the reconstruction investment was done in 2010

and they are already operating in the market, we expect EBITDA margin to reach

2009 values again and remain constant on the 10 following years.

€ Mn 2010 2011E 2012E 2013E 2014E 2015E 2020E

Sales 128.7 142.2 142.6 145.0 147.6 150.8 174.4

EBITDA 6.0 6.8 6.8 7.0 7.1 7.2 8.4

EBITDA margin (%) 4.7% 4.8% 4.8% 4.8% 4.8% 4.8% 4.8%

Depreciation 3.83 4.01 4.17 4.33 4.48 4.63 5.34

EBIT 2.15 2.82 2.67 2.63 2.60 2.61 3.03

EBIT margin (%) 1.7% 2.0% 1.9% 1.8% 1.8% 1.7% 1.7%

Biedronka

Biedronka is the most important business unit of JMT as it counted for 55.3% of the

company’s total sales in 2010. Regarding the positive economic environment lived

in Poland and the potential growth of the food retail market, JMT has established

an ambitious plan of expansion for Biedronka. In 1Q11, Biedronka counted for

66% of the total stores opened by MGD in Poland. According to the group’s

guidelines and information made available during its investor’s day presentation,

1,428 stores are expected to open until 2015 corresponding to 3,000 stores and

585 in the following 5 years, expecting to own 3,500 stores in 2020. Thus, a large

increase in stores is expected until 2015, slowing down progressively thereafter

until 2020. We expect the stores’ number to grow at a CAGR of 7.8% until 2020.

Sales productivity will decrease until 2015 at a CAGR of -2.6% due to the high

number of openings and increase thereafter at a CAGR of 3.7%. Most of retailers

are concentrated on large and medium sized cities, where the number of new

attractive locations is limited. In contrast, rural areas and small sized cities are

far from saturation and mainly dominated by traditional retail. Hence, Biedronka

Exhibit 36 – Madeira Operational Forecasts


Exhibit 35 – Madeira sales forecasts


Team for forecasts

Exhibit 37 – Biedronka’s new openings

forecasts


Team for forecasts




PAGE 19/39

might consider taking over some small and independent players in order to gain

new locations to further expand its chain. Moreover, having an expansion team

per each Polish region like Biedronka, responsible for searching for new

locations, increases the capacity of growing organically and inorganically.

Beyond searching for growth opportunities, it is crucial to analyze the suppliers’

capacity to answer to this rapid growth. As local and small providers, they

cannot produce products for all Biedronka stores, not even if they were specialized

in only one product. In 2010, around 90% of the food products sold by Biedronka

were bought from local suppliers. Currently, the group pursues a tremendous

bargaining power over suppliers as they’re market leaders and deal with 450 local

providers in order to diversify the risk of failure and rapidly respond to market

opportunities. Moreover, a procurement sustainability policy was established in

2010, which ensures a supplier selection process based on strict and demanding

criteria, allowing lasting business relations to be built. Regarding the higher number

of openings, we believe Biedronka will probably need to enlarge its suppliers’

portfolio. Nonetheless, following JMT past ability to accomplish its expansion plans,

we believe the proposed objectives are perfectly reachable and so, we expect a

selling area CAGR of 7.7% for the next 10 years (see Exhibit 66 of Appendix 6).

Hence, and believing there will be a significant improvement in families’ living

standards of middle class as long as Poland converges to EU standards, we

forecast a sales CAGR of 8.4% for the next 10 years.

Regarding EBITDA margins, we expect a smoothly decrease on margins to 6.8%

until 2015, regarding the higher operational costs driven by the ambitious

investment plan during this period. Afterwards we expect it to recover until it

reaches 7.3% mainly due to the progressive increment on sales coming from

mature stores. It is only forecasted a 50bp increase as competition is expected to

be higher in the future. Aligned with our expectations, Biedronka’s EBITDA margin

has increased 60bp from 6.5% to 7.1% in 1Q11 YoY.

€ Mn 2010 2011E 2012E 2013E 2014E 2015E 2020E

Sales 4,805.9 5,311.5 5,906.1 6,324.6 7,141.2 7,677.6 10,729.0

EBITDA 386.9 377.1 419.3 436.4 492.7 522.1 783.2

EBITDA margin (%) 8.1% 7.1% 7.1% 6.9% 6.9% 6.8% 7.3%

Depreciation 84.88 119.56 155.34 188.79 232.72 270.68 321.98

EBIT 301.99 257.56 264.00 247.61 260.02 251.40 461.24

EBIT margin (%) 6.3% 4.8% 4.5% 3.9% 3.6% 3.3% 4.3%

Exhibit 39 – Biedronka Operational Forecasts


Exhibit 38 – Biedronka’s sales forecasts


Team for forecasts




PAGE 20/39

Industry

When comparing to the previous business units, industry will be more affected by

the current macroeconomic environment. As mentioned before, people are more

price sensitive, opting more for PLs than MBs. Moreover, the purchasing power is

expected to decrease in line with the wages restraints imposed by the Troika.

Therefore, we expect sales to increase at a CAGR of 2.1%, aligned with the

GDP expected behavior. In 1Q11, sales fell by 4.6% mainly due to the Easter

negative impact. For 2011 our expectations include a 0.14% growth on sales.

Regarding EBITDA margins, we believe in a fall of 0.3% until 2013, remaining

stable at 14.3% thereafter.

Services

We forecast a sales CAGR of 2.1% and we expect EBITDA margins to remain

stable at 1.6%. The absence of Easter in 1Q11 had a direct and significant

impact in Hussel’s sales, resulting in a sales’ fall of 4.8%.

€ Mn 2010 2011E 2012E 2013E 2014E 2015E 2020E

Sales 86.5 86.6 86.9 88.3 89.9 91.9 106.3

EBITDA 1.4 1.4 1.4 1.4 1.5 1.5 1.7

EBITDA margin (%) 1.6% 1.6% 1.6% 1.6% 1.6% 1.6% 1.6%

Depreciation 1.28 1.24 1.22 1.19 1.17 1.15 1.09

EBIT 0.14 0.18 0.21 0.26 0.31 0.36 0.65

EBIT margin (%) 0.2% 0.2% 0.2% 0.3% 0.3% 0.4% 0.6%

Investment Forecasts: CAPEX

With the aim of computing CAPEX, we’ve looked upon investments related to the

opening stores, current stores’ revamping, Plus stores conversion and

finally costs related with distribution centers. According to information released,

JMT predicts to spend €1.7Bn during the next 3 years, from which 75% will be

€ Mn 2010 2011E 2012E 2013E 2014E 2015E 2020E

Sales 195.1 195.4 195.9 199.2 202.7 207.2 239.7

EBITDA 28.4 27.9 28.0 28.5 29.0 29.6 34.3

EBITDA margin (%) 14.5% 14.3% 14.3% 14.3% 14.3% 14.3% 14.3%

Depreciation 3.09 3.16 3.24 3.32 3.40 3.47 3.88

EBIT 25.28 24.78 24.78 25.17 25.60 26.15 30.40

EBIT margin (%) 13.0% 12.7% 12.6% 12.6% 12.6% 12.6% 12.7%


Exhibit 40 – Industry Operational Forecasts


Exhibit 41 – Services Operational Forecasts

Source: Company Data

Exhibit 42 – CAPEX breakdown (2010)




PAGE 21/39

Retail Mainland

New store 3.25

Revamping 2.88

Logistics 2.8

Biedronka

New store 1.28

Revamping 1.04

Distribution center 25

Recheio

New store 3.79

Revamping 2.88

Industry and Services

New store 1.2

Revamping 4.8

€ Mn 2010 2011E 2012E 2013E 2014E 2015E 2020E CAGR

Distribution Centers 52.3 72.6 48.2 72.2 73.6 96.7 23.1 -7.8%

Expansion 170.7 315.6 355,0 373.7 426.4 465.8 159.3 -0.7%

Revamping 211.2 252.1 275.4 292.7 322.8 347.8 412.2 6.9%

Conversion 45.2 45.9 - - - -

Total Capex 434.2 685.6 724.5 738.6 822.9 910.3 594.6 3.2%

Capex/Sales 5,0% 7.2% 7.1% 6.9% 7.1% 7.4% 3.6%

€ Mn 2010 2011E 2012E 2013E 2014E 2015E 2020E CAGR

Retail Mainland 115.9 152.6 150.4 99.9 99.3 100.2 111.3 -0.4%

Recheio 29.2 19.6 23.9 16.2 16.4 16.7 18.3 -4.6%

Madeira 12.4 5.9 6.0 6.1 6.2 6.3 6.8 -5.8%

Biedronka 270.7 501.2 538,0 610.1 694.5 780.6 451.1 5.2%

Industry and Services 6,0 6.1 6.2 6.3 6.4 6.5 7.1 1.7%

Total Capex 434.2 685.6 724.5 738.6 822.9 910.3 594.6 3.2%

applied in Poland. Nevertheless, this goal seems to be very optimistic to us when

compared to our CAPEX forecasts. For the same period we’ve considered a

CAPEX of around €2.2Bn from which 70.3% will be allocated to Poland. It is

important to mention that, in Poland, each distribution center is responsible

for supplying between 150 to 180 stores. Thus, distribution centers’ CAPEX is

strongly related to the stores increment. In 2010 the company had 9 distribution

centers, covering 9 of the 16 Polish regions. We highlight the fact that

Biedronka’s new stores are cheaper than PD stores, not only due to cheaper

land but also because bakery, butchery and fishery are not included in

Biedronka’s model, incurring in lower investment costs. We recall that Plus stores

in Poland are totally converted and it will also happen in Portugal in 2012.

Industry and Services’ CAPEX was considered to be stable, only changing with

inflation rate. As expected, CAPEX/Sales ratio increases until 2015 and

decreases gradually until it reaches 3.5% in 2020. It will never achieve a zero

value since, after some time, stores need to be modernized to continue attracting

clients. It seems reasonable to assume a percentage in terms of total stores: 7%,

7.9% and 5.5% of total stores of Biedronka, Retail Mainland and Recheio

respectively are revamped every year.

Financing Forecasts: Debt and NWC

To forecast Net Working Capital we’ve made use of 3 activity ratios: inventory

turnover, accounts payable turnover and accounts receivable turnover.

Over the past 5 years JMT was able to improve its days NWC in 8 days, mainly

Source: Company data and ER

Team for estimates


Exhibit 43 – Costs (€ Mn)

Exhibit 45 – CAPEX Breakdown


Exhibit 44 – CAPEX Forecasts




PAGE 22/39

2006 2007 2008 2009 2010 2020E

Days Inventory 26.4 26.0 25.2 20.6 19.1 18.0

Days Receivable 12.5 10.5 9.1 9.5 7.6 6.0

Days Payable 107.6 108.7 101.8 101.5 98.0 95.0

Days WC (46.2) (59.8) (49.3) (54.5) (53.9) (55.8)

due to a reduction in days inventory and days receivables. We believe days

inventory will decrease to 18 in 2020 as currently JMT only operates with PD,

which has a more food based assortment (high % of perishables which validation

date is short) than Feira Nova. Regarding receivables, following the past

tendency, we assume JMT will tend to receive progressively earlier from

consumers reaching 6.0 days in 2020. Similarly, we believe JMT will tend to pay

suppliers earlier, achieving 95.0 days in 10 years. As a result, JMT will maintain

its past tendency of increasing its days NWC and so decrease its NWC

needs. These demonstrate the higher company’s ability to finance its operational

activities without current debt support. Moreover, JMT presented better results in

2010 than the majority of its peers.

Cutting in debt is one of JMT’s top priorities for the future. The group has been

able to reduce its debt and, so, its debt to equity ratio in the previous 2 years

(1.13 in 2008, 0.83 in 2009 and 0.75 in 2010), paying a great part of its

investments with generated cash flows. We’ve maintained the previous tendency

in our model as well, by considering a lower debt to equity target (0.625

) for the

next 10 years. Nevertheless, according to our analysis, JMT’s net debt will

highly increase during the next 5 years in order to answer to its polish

expansion plan, and decrease afterwards. These higher levels of debt will be in

part followed by capital increases, aligned with the considered D/E target. Since

56.1% of JMT is owned by only one shareholder, Sociedade Soares dos Santos,

it is important that it has financial capacity to contribute to these capital

increases. Otherwise, the aggressive Polish expansion plan may not be

accomplished and our JMT’s target would be affected26

. As long as the company

expansion plan becomes stable, debt and equity absolute values diminish. We

forecast a Net Debt/EBITDA ratio of 1.06 to 2015, slightly higher than in 2010,

and 0.67 to 2020. We highlight the fact that a great part of the investment will still

be paid by generated cash flows during this period. In our analysis, 77% of the

25 Regarding the company’s public guidelines for the next years and its cutting in debt goal, we believe the 60% target is the most

appropriate capital structure to be considered in our model. It is important to mention that any internationalization process or acquisition

that may occur in 2012 or the next years, will forcibly have an impact on the debt structure of the company. Nevertheless, as these

scenarios were not included in our valuation model, WACC values do not incorporated them as well. 26 This issue is further explained in our smooth investment scenario chapter

Net Debt/EBITDA

2008 1.42

2009 1.04

2010 0.72

2011E 0.66

2012E 0.82

2013E 0.93

2014E 0.98

2015E 1.06

2020E 0.67


Exhibit 48 – Net Debt Evolution (€)

Exhibit 46 – Peers’ comparison in 2010

(days)


ER Team for estimates

Exhibit 47 – Net Working Capital Progression Source: Bloomberg




PAGE 23/39

Beta Levered Beta Unlevered

Sonae 0,89 0,39

Carrefour 0,90 0,72

Tesco 0,64 0,49

Ahold 0,50 0,40

Metro 1,04 0,82

Sainsbury 0,80 0,61

Wm Morrison 0,61 0,55

Colruyt 0,27 0,17

Casino 0,87 0,53

Eurocash 0,42 0,39

Emperia 0,41 0,37

Magnit 0,10 0,10

BIM 0,62 0,56

X5 Group 1,94 1,73

Migros 0,54 0,43

total debt is long-term debt while the remaining 23% is short-term debt. Also

because of the aggressive expansion plan we’ve assumed a 30% dividend

payout ratio, that is, 30% of the generated profit will be given to shareholders

while the remaining 70% will be used to finance the Polish investment.

Discounted Cash Flow Model

In order to use the Discounted Cash Flow model, the appropriate discount rate

must be addressed. Hence, a WACC for each one of the 6 business units has to

be computed to discount the already projected free cash flows. WACC27

is the

most appropriate discount rate as it takes into account 3 factors: i) the

company’s financial structure (D/E) which is assumed to be constant at

60% in the next 10 years, ii) its cost of equity (re) and finally iii) its cost of

debt (rd). To reach the cost of equity for each business unit, 3 inputs are needed:

risk-free rate, levered beta and market premium. Regarding the risk-free rate,

we’ve made use of the 10-year German bonds for Portugal and the 10-year

Polish bonds for Poland. As the most solid country in economic terms of the EU,

Germany presents the lowest risk of default. However, in contrast to Portugal, we

cannot use German bonds for Poland because all the FCFs are computed in

their local currencies, that is, Portuguese FCF in Euros and Polish FCF in

Zlotys. To capture the industry’s systematic risk, we need to assess levered

beta. Firstly we selected a significant number of comparative companies (15) that

we divided in 2 groups, i) Western European Food retailers with low contact with

emergent markets (mature markets) and ii) Central and Eastern European Food

retailers particularly exposed to emergent markets (see Appendix 7). The first

group was used to assess Portuguese operations while the last one was used for

the Polish operations (Biedronka). Afterwards, we’ve made a regression28

based

on the past 4 years, to find out levered betas of each company. Removing the

levered effect29

from the beta of each comparable, we were able to compute the

industry unlevered beta by making an arithmetic average of the companies’

unlevered betas. Then, by applying JMT debt to equity ratio target, we were able

to achieve JMT’s levered beta. Market premium30

addresses the risk inherent to

an economy. The specific risk of each country where the company operates

27 WACC =

𝐸𝑞𝑢𝑖𝑡𝑦

𝐸𝑞𝑢𝑖𝑡𝑦 +𝐷𝑒𝑏𝑡 * re +

𝐷𝑒𝑏𝑡

𝐸𝑞𝑢𝑖𝑡𝑦 +𝐷𝑒𝑏𝑡* rd *(1-tc)

28 CAPM model: Enterprise return = risk-free + β*(rm-rf)

We’ve made use of Stoxx Europe 600 index as a market reference.

29 Βu = ΒL

(1+ 1−𝑡𝑐 ∗ 𝐷𝑒𝑏𝑡

𝐸𝑞𝑢𝑖𝑡𝑦 )

30 Market premium = mature market premium + country risk

Mature market premium = market return – risk free, which we considered to be 4% following current financial theories

Source: Company data and

Nova ER Team for estimates

WACC takes into account 3 factors: i) the company’s financial structure ii) its cost of equity (re) iii) its cost of debt (rd).

Exhibit 49 – Betas from comparable

companies

Source: Bloomberg




PAGE 24/39

Portugal Madeira Poland

Rf 3,28% 3,28% 6,29%

Beta U 0,519 0,519 0,596

Beta L 0,729 0,734 0,861

Country premium 3,37% 3,37% 2,94%

Market premium 7,37% 7,37% 6,94%

Cost of equity 8,66% 8,69% 12,26%

Tax rate 0,265 0,25 0,19

Pre tax cost of

debt6,17% 6,17% 6,67%

After tax cost of

debt4,53% 4,63% 5,40%

Target D/E 50% 50% 50%

D/(E+D) 33% 33% 33%

WACC 7,28% 7,33% 9,98%

(political and economic) was captured by adding an extra premium to the market

premium. The extra premium corresponds to the difference between the

country’s respective Credit Default Swap (CDS) and the “risk-free” CDS, which is

once again from Germany, compensated for the volatilities of both the equity

index and the country’s 10-year bonds31

. The country risk in Portugal is much

higher than in Poland, regarding the Portuguese current macro environment and

high risk profile. Finally, by using the CAPM model we got a cost of equity of

8.66%, 8.69% and 12.26% for Portugal, Madeira and Poland, respectively.

Regarding cost of debt, as JMT does not have a credit rating, we’ve searched

for debt yields of JMT’s peers, especially Sonae. Nevertheless, as Sonae doesn’t

have a credit rating as well, we’ve searched for other relevant Portuguese

companies like PT and EDP. Concerning 10 years’ yields, JMT’s peers present

values around 4% while PT and EDP show much higher values, between 6% and

7%. Being two of the biggest Portuguese companies of PSI20 whose market

caps are 6.8 Bn and 9.4 Bn respectively, PT and EDP were affected by the

Portuguese republic downgrades, presenting a credit rating of BBB- and BBB

according to S&P. We believe JMT’ cost of debt will be aligned with PT and EDP

values instead of its peers, since all Portuguese companies are being penalized

by the Portuguese macroeconomic environment. Hence, we’ve assumed a pre-

tax cost of debt of 6.17%32

and 6.67%33

for Portugal and Poland, respectively.

Regarding terminal value growth rates, we assume that in 2020 both markets will

have reached a more mature stage such that the market will tend to stagnation

and JMT’s growth rate will be aligned with long-term inflation rate values. We

believe that in Portugal, JMT will grow 1.9% in perpetuity while in Poland the

market will allow for a 2.5% growth rate. Poland growth rate is much higher than

Portugal as we believe the Polish market will provide greater growth

opportunities.

Sum of the Parts Approach

Finally, after discounting the FCFs of all business units we are able to compute

JMT’s enterprise value by using a sum of the parts approach. It is important to

mention that, according to our analysis, Biedronka contributes to 78.6% of

JMT’s value, which mean that JMT is very dependent on the Polish market.

31 Country risk premium = CDS spread * Equity index volatility / Bond holding returns volatility 32 JMT’s market cap (8.5 Bn) is closer to EDP than PT. Hence, we assumed a JMT’s cost of debt closer to the EDP one. Nevertheless,

as JMT present a lower D/E ratio (0.87) than EDP, a slightly lower value was considered.

33 Since the Polish reference rate (WIBOR) is traditionally higher than EURIBOR (Portuguese reference rate), polish cost of debt should be higher than the Portuguese one as well. Thus, we’ve assumed a differential of 50 bps higher for the Polish Debt.

Source: Bloomberg and Nova ER Team

Exhibit 52 – DCF Assumptions

Exhibit 51 – 10 years’ yields of Portuguese companies and JMT’s peers

Source: Bloomberg

Exhibit 50 – 5 years’ yields of Portuguese companies and JMT’s peers

Source: Bloomberg




PAGE 25/39

€ Mn Stake Method EV

Attributable to

JMT %

Retail Mainland 51% DCF (WACC =7.28%; g=1.9%) 2692,8 1373,3 15,2%

Recheio 100% DCF (WACC =7.28%; g=1.9%) 402,4 402,4 4,4%

Madeira 75,5% DCF (WACC =7.33%; g=1.9%) 21,4 16,1 0,2%

Biedronka 100% DCF (WACC =9.98%; g= 2.5%) 7120,3 7120,3 78,6%

Industry 45% DCF (WACC =7.28%; g=1.9%) 314,8 141,6 1,6%

Services 100% DCF (WACC =7.28%; g=1.9%) 8,0 8,0 0,1%

Total Enterprise Value 9061,8

Consolidated Net Debt 439,7

Debt attributable to Minorities 174,3

Equity value 8796,5

# Shares (millions) 629,3

Price Target (€) 13,98

€ Mn

Total Capital

Increases

/Extraordinary

Dividends

Capital

Increases

(56.1%)

Dividends

(56.1%)

Additional

Money

(56.1%)

2011E 76.6 43.0 0.0 43.0

2012E -34.1 0.0 46.0 0.0

2013E 100.0 56.1 44.2 11.8

2014E 261.1 146.5 45.6 100.9

2015E 448.4 251.6 45.5 206.1

2016E 442.1 248.0 53.6 194.4

2017E 378.2 212.2 60.3 151.8

2018E 299.4 168.0 69.5 98.5

2019E 196.8 110.4 78.2 32.2

2020E 64.1 36.0 88.5 0.0

WACC ROIC

Biedronka 9.98% 17.9%

Pingo Doce 7.28% 11.3%

Recheio 7.28% 11.4%

Madeira 7.33% 6.3%

Industry 7.28% 10.7%

Services 7.28% 4.3%

Hence, we were very careful on establishing our DCF assumptions for

Biedronka, as a small change on Biedronka’s WACC can highly affect our JMT’s

price target (see Exhibit 66 of Appendix 7). The large exposition to the Polish

market constitutes a high risk for JMT, as it is very exposed to zloty devaluations.

Regarding Portugal, we believe the main risk is related to the possibility of

Portugal leaving the Euro. Nevertheless, we believe this scenario is unlikely to

happen, as it would represent the failure of the EU model.

Comparing business units’ ROICs with its respective discount rates, we conclude

that all the business units of the company are creating values (ROIC>WACC)

with exception of Madeira and Services. Nevertheless, they do not represent a

relevant risk for JMT, as they only counts for 0.3% of the company’s value.

Smooth investment scenario

As mentioned before, Sociedade Soares dos Santos is JMT’s major shareholder,

owning 56.1% of the company. Thus, and as it is assumed in our base model, in

the need of a capital reinforcement to finance the Polish expansion, JMT is

highly dependent on the financial capacity of this shareholder. Regarding our

predicted capital increments and the 30% payout ratio considered, there’s the

possibility of Sociedade Soares dos Santos not having the required capital to

invest. If that proves to be true, two scenarios are possible: i) it sells part of its

share and loses JMT’s control or, ii) maintaining the same goal of having 3500

stores in 2020, the number of Biedronka stores will gradually increase in contrast

to our base model. We believe the first scenario is very unlikely to occur and

thus, only the latter scenario will be considered.

The difference to our base model is that the number of opening stores

(Biedronka) per year was established so that the capital increments needed are

Exhibit 54 – Valuation: Sum of the Parts Breakdown

Source: Nova ER Team for estimates

Exhibit 55 – Sociedade Soares dos

Santos contribution to JMT’s capital

increases (base model)


Exhibit 53 – Business Units’ ROICs

Source: Nova ER Team




PAGE 26/39

2010 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E

Basis Model 1,649 1,849 2,062 2,300 2,627 3,000 3,102 3,202 3,302 3,402 3,500

2nd Scenario 1,649 1,778 1,917 2,067 2,228 2,402 2,590 2,793 3,011 3,246 3,500

€ Mn

Total Capital

Increases (+)

/Extraordinary

Dividends (-)

Capital

Increases

(56.1%)

Dividends

(56.1%)

(Dividends -

Capital

increases)

2011E 22.6 12.7 0.0 -12.7

2012E -162.2 -91.0 84.7 175.7

2013E -111.1 -62.3 84.1 146.4

2014E -48.2 -27.0 87.7 114.7

2015E 34.0 19.0 90.0 71.1

2016E 76.8 43.1 104.5 61.4

2017E 101.1 56.7 113.6 56.8

2018E 120.8 67.8 126.7 58.9

2019E 133.6 75.0 139.1 64.1

2020E 129.1 72.4 154.0 81.6

lower or equal to the dividends paid (30% payout ratio), assuring that the

shareholders have enough money to invest, specially Sociedade Soares dos

Santos.

Therefore, capital increments are distributed over time, even resulting in

extraordinary dividends paid in some years. Nevertheless, since a lower number of

opening stores is considered until 2015 and stores only sell at full capacity after 3

years, within this scenario JMT would not take full advantage of the Polish growth

opportunity. Until 2015, sales would grow at a lower CAGR (6.2%) than the

previous predicted 7.4%, strongly affecting cash flows and our JMT’s price target.

This would change our PT from the current €13.98 to €9.07. In this scenario, our

recommendation would change as well, to SELL.

Multiples Comparison

The multiples comparison is a widely accepted method which consists in

comparing companies with the same characteristics as JMT (comparables),

operating in the same markets, with our evaluation results. Nonetheless, no such

company exists perfectly equal to JMT, operating only in Portugal and Poland. A

significant part of JMT’s direct competitors are not even listed, like Intermarché, Lidl

or Netto. Even if it existed, companies can use different accounting methods to

determine their operating earnings besides having different capital structures.

Hence, EV/EBITDA and P/E are not the best choices, as the first one takes into

account the impact of the rental income and companies own different weights of

their property34

and, P/E takes into account the different capital structures of the

companies, both leading to misleading results. With the aim of getting a rational

average for the multiples, we think EV/EBITDAR multiple is the best choice as it

adjusts EBITDA for the impact of the rental income. We’ve chosen 4 different

companies so as to diversify and avoid a distorted analysis centered on only one of

them. As Bloomberg consensus’ estimates are not available for EV/EBITDAR

multiple, we’ve made our own estimates by assuming that future rents will maintain

its 2010 weight over sales constant. Getting Bloomberg consensus estimates for

EBITDA we were able to compute EBITDAR for each one of the selected

companies.

34 For instance, Sonae MC doesn’t own any property, renting everything, while JMT owns 50% of its stores’ properties in Portugal and

80% in Poland.

Different companies were chosen so as to diversify and

avoid a distorted analysis.

Exhibit 56 – Biedronka’s total number of stores considered in both scenarios

Source: Nova ER Team for estimates and company data

Exhibit 57 – Sociedade Soares dos Santos contribution to JMT’s capital

increases (smooth investment scenario)





PAGE 27/39

From our EV/EBITDAR analysis, we conclude that our JMT EV/EBITDAR is

significantly higher than its comparables’ average. We believe this difference is

related with the lower values of EBITDA we estimate (4.2% CAGR 2010-2013E)

when compared to its peers (10.1% CAGR 2010-2013E). These reduced

EBITDA values are a result of our cut on EBITDA margins from 7.5% in 2010 to

6.9% in 2013, regarding the negative impact of Portugal’s austerity plan and also

the polish aggressive expansion plan till 2015. In contrast, the Bloomberg

consensus estimates improvements on EBITDA margins of all JMT’s peers.

“Apteka Na Zdrowie”

In Poland, JMT maintains its pharmacy network under the brand Apteka Na

Zdrowie, following its established partnership with the National Association of

Pharmacies in Portugal (ANF). Currently, JMT owns 24 pharmacies. Although in

separate and independent facilities in accordance with the Polish pharmaceutical

law, the group’s idea is to take advantage of Biedronka’s locations. In 2010, the

business performance was very positive, reaching a sales growth of 19.5% YoY.

Following Euromonitor, in 2009, the growth rate of pharmaceuticals was about

5.4%. There has been a progressive increase on Polish senior citizens, whose

numerous diseases are expected to create a greater demand for medicines. In

2009, GUS stated that about 19.4% of Poles have ages higher than 60 years old

and the life expectancy was of 72 and 80 years old for males and females,

respectively. Furthermore, the expenditure on medicines per capita is still below

the Western countries’. We believe this gap will diminish at the same time as the

differences on wages per capita get smoother and the purchasing power rises.

According to PMR publications, the Polish pharmaceutical market is very well

developed and in 2009 it was considered the 6th largest in terms of sales value

in Europe. Following BMI’s latest Pharmaceuticals and Healthcare Business

Environment Ratings (BERs) index, Poland was also considered the 2nd

fastest

growing market in Europe, with a score of 62.5/100, indicating a stable and

favourable business environment. Following Euromonitor, for the future

Exhibit 59 – Consumer expenditure on

health goods and medical services

(2004-2009)

Source: Official statistics and

Euromonitor International

Exhibit 60 – Polish Pharmaceutical

market value (PLN) and growth rates

Exhibit 58 – Valuation per multiples (Mn)

Source: Bloomberg Consensus and Nova ER Team for estimates




PAGE 28/39

Even being a marginal business at the moment, we have large expectations on the future of Apteka Na

Zdrowie.

(2009-2014), the market is expected to continue expanding at a CAGR of

7.04%, that is, to an absolute value of 41.80 Bn zlotys. For the remaining period,

until 2019, a lower CAGR is expected, of 3.3%. The pharmaceutical industry

seems to be somehow resistant to economic downturns since the sales’ level of

prescription drugs is not submitted to the market rules but linked to changes

made to the list of reimbursed medicinal products established by the Polish

Ministry of Health. It may eventually help to boost sales, as in difficult times the

purchase of non-prescript drugs against stress and depression rises due to the

fears of job dismissals.

Even being a marginal business at the moment, we have large expectations for

the future given the potential of Apteka Na Zdrowie. Biedronka’s predictions

to achieve a total of 3,000 stores in 2015 and 3,500 in 2020, gives Apteka Na

Zdrowie the chance to grow in number of stores as well. Not having sufficient

data about Apteka Na Zdrowie to support concrete conclusions, we still believe it

can reach high profitability and contribute to increase our JMT’s price target.

Further Internationalization

Because food retail is in a mature stage in western countries and the crisis

effects will be felt for at least 3 more years, these markets will face future lower

growth rates. Therefore, it becomes crucial to operate in emergent markets and

take advantage of their potential. This is exactly what is happening with JMT.

With the Polish opportunity almost exploited in 2015/2020 and the Portuguese

position consolidated, it becomes a priority to join a new geography in 2012. In

the previous years, JMT has been carefully analyzing many hypotheses,

providing for successful projects to avoid committing repeated mistakes as the

ones made when entering Brazil. To choose this new economy JMT established

some criteria about the market and the type of format suitable for implementation.

It is looking for a country of high dimension, with economic and institutional

structures and also offering basic supply infrastructures. It seeks the

implementation of its business models regarding the food retail market, directed

to the mass market and with a local approach at competitive prices. JMT

intends to announce its decision by 2H11. If no business plan is presented, JMT

will probably increase its payout ratio. Because JMT possesses a vast

experience in the Portuguese and Polish food retail sectors, countries located

near Portugal or Poland, or having a cultural connection with them would make

the integration process easier when compared to starting a business in a

completely new country. JMT would make use of its detailed knowledge on

Because food retail is in a mature stage in western countries, it becomes crucial to operate in emergent markets.

To choose the new geography JMT established some criteria about the market and the type of format they should implement.

We believe Brazil or Russia are two probable geographies according to JMT’s perspective.

Source: PharmaExpert and PMR

publications




PAGE 29/39

2010 2011E 2012E 2013E 2014E 2015E 2020E

Growth & Margins

Revenues 18,8% 9,6% 7,0% 5,3% 9,0% 6,2% 7,1%

EBITDA 23,7% 2,9% 7,1% 2,7% 9,0% 5,3% 7,1%

EBITDA margin 7,5% 7,1% 7,1% 6,9% 6,9% 6,8% 7,1%

EBIT margin 5,3% 4,7% 4,5% 4,1% 3,9% 3,7% 4,5%

Profitability

Gross Margin 18,8% 18,8% 18,8% 18,8% 18,8% 18,8% 18,8%

Return on Capital Employed 23,9% 20,0% 18,2% 15,8% 14,9% 13,7% 21,6%

ROE 24,8% 19,3% 17,0% 14,9% 13,7% 12,4% 23,3%

ROA 6,7% 5,9% 5,4% 4,8% 4,5% 4,1% 7,0%

Return on Sales 4,8% 3,8% 3,5% 3,2% 3,1% 2,9% 4,1%

Liquidity

Current Ratio 40,6% 40,6% 39,9% 39,6% 39,2% 38,9% 39,2%

Cash Ratio 13,7% 13,9% 13,6% 13,6% 13,4% 13,3% 13,7%

Quick Ratio 24,0% 23,9% 23,4% 23,1% 22,7% 22,5% 22,5%

Working Capital (1.321,3) (1.426,4) (1.547,5) (1.637,6) (1.790,2) (1.905,3) (2.450,3)

CFO/Debt 90,1% 83,2% 68,3% 61,2% 64,6% 58,5% 84,4%

Leverage

Debt/Assets 18,6% 16,8% 18,4% 19,1% 19,5% 20,0% 17,9%

ST Debt/Debt 23,1% 22,2% 22,3% 22,4% 22,5% 22,5% 22,5%

LT Debt/Debt 76,9% 77,8% 77,7% 77,6% 77,5% 77,5% 77,5%

D/E 68,4% 54,8% 58,4% 59,7% 59,7% 59,7% 59,7%

Net Debt/Equity 41,5% 31,1% 36,5% 38,8% 39,8% 40,7% 35,3%

Debt/EBITDA 1,2 1,2 1,3 1,4 1,5 1,5 1,1

Interest Coverage Ratio 5,5 9,1 7,6 6,5 6,1 5,5 8,7

Activity

Fixed Assets Turnover 3,9 3,6 3,4 3,2 3,1 3,0 3,5

Inventory Turnover 19,1 19,3 19,4 19,5 19,6 19,7 20,3

Inventory Turnover (days) 19,1 19,0 18,9 18,7 18,6 18,5 18,0

Receivables Turnover 47,8 49,0 50,2 51,4 52,6 53,9 60,8

Receivables Turnover (days) 7,6 7,5 7,3 7,1 6,9 6,8 6,0

CFO/Capex 1,6 0,9 0,9 0,9 0,9 0,8 1,9

Capex/Depreciation 2,3 3,0 2,7 2,5 2,4 2,4 1,3

Capex/Sales 5,0% 7,2% 7,1% 6,9% 7,0% 7,3% 3,5%

Valuation

EV/Revenues 0,95 0,89 0,84 0,77 0,73 0,54

EV/EBITDA 13,1 12,2 11,9 10,9 10,4 7,3

EV/EBIT 20,4 19,9 20,6 19,7 19,5 11,9

EV/Capital Employed 4,1 3,6 3,3 2,9 2,7 2,6

customers’ consumption patterns as well as benefit from the use of some of its

resources such as existent suppliers and distribution centres at the very

beginning. In one of the “My Way” conferences at NOVA a year ago, JMT’s

Chairman said that despite the first attempt not going well, Brazil is not

completely out of their radar. Angola isn’t considered an option, as in an interview

to “Expresso”, a Portuguese newspaper, JMT’s CEO said the Angolan market is

too small to satisfy JMT’s perspectives. Not knowing which country JMT will

choose, a 3rd

geography was not included in our valuation model. Nevertheless,

we believe pilot projects may arise, trying to explore the potential growth of JMT’s

business models in new countries (see Appendix 9).

Financial Ratios




PAGE 30/39

BALANCE SHEET 2010 2011E 2012E 2013E 2014E 2015E 2020E

Tangible Assets 2192,8 2611,6 2979,9 3314,0 3746,4 4122,4 4702,8

Intangible Assets 863,4 867,1 871,1 875,3 879,6 884,2 911,0

Other non current assets 139,1 169,3 200,0 228,4 264,2 296,1 347,0

Total Non-current assets 3255,6 3648,0 4051,0 4417,6 4890,3 5302,7 5960,8

Inventories 368,7 401,7 427,4 447,4 485,0 512,2 673,9

Accounts receivable 181,8 194,6 203,3 209,0 222,4 230,6 276,8

Cash and cash equivalents 303,9 334,9 351,5 367,4 393,3 414,8 551,5

Other current assets 48,9 44,4 47,0 49,3 53,5 56,8 76,9

Total Current assets 903,4 975,6 1029,2 1073,1 1154,3 1214,3 1579,1

Total assets 4159,0 4623,6 5080,3 5490,7 6044,6 6517,0 7539,9

Share capital 629,3 629,3 629,3 629,3 629,3 629,3 629,3

Share premium 22,5 22,5 22,5 22,5 22,5 22,5 22,5

Capital increase 77 0 100 261 448 64

Retained earnings 136,0 339,2 607,2 662,3 720,3 736,5 1198,6

Extraordinary Dividends -34,1 0,0 0 0 0

Minority Interests 286,7 286,7 286,7 286,7 286,7 286,7 286,7

Total Shareholders equity 1.131,8 1.412,6 1.603,9 1.759,0 1.978,1 2.181,6 2.259,4

Borrowings Long term 595,0 602,78 727,92 815,17 916,19 1009,97 1045,33

Total non current liabilities 802,4 825,7 950,8 1038,3 1139,6 1233,8 1271,8

Trade creditors, accrued costs and deferred income 1.895,4 2070,5 2208,9 2318,4 2519,7 2667,7 3556,8

Borrowings short term 179,2 171,8 208,8 234,9 265,2 293,4 303,7

Total Current Liabilities 2.224,8 2.402,0 2.576,8 2.710,7 2.944,5 3.119,6 4.029,4

Total Liabilities 3.027,2 3.210,5 3.510,5 3.731,7 4.066,4 4.335,4 5.280,5

Total Shareholders equity and liabilities 4.159,0 4.623,6 5.080,3 5.490,7 6.044,6 6.517,0 7.539,9

INCOME STATEMENT 2010 2011E 2012E 2013E 2014E 2015E 2020E

Net Sales & Services 8.691,0 9.528,0 10.197,1 10.736,1 11.705,1 12.431,4 16.837,1

EBITDA 653,1 672,3 719,7 738,8 805,6 847,9 1.201,5

EBITDA margin 7,5% 7,1% 7,1% 6,9% 6,9% 6,8% 7,1%

Depreciation (191) (227) (265) (300) (345) (384) (442)

EBIT 462,1 444,8 454,4 439,0 460,8 464,1 759,9

EBIT margin 5,3% 4,7% 4,5% 4,1% 3,9% 3,7% 4,5%

Total financial costs (84) (49) (60) (67) (76) (84) (87)

EBT 378,6 395,8 394,8 371,8 384,9 380,0 672,7

Total income tax (79) (87) (87) (85) (88) (90) (165)

Net Income 299,5 308,9 310,4 300,5 311,5 315,0 598,1

Minority Interests (19) (36) (37) (38) (41) (45) (72)

Net Income attributable to JM 280,5 272,6 273,3 262,9 270,7 270,2 525,6

CASH FLOW STATEMENT 2009 2010 2011E 2012E 2013E 2014 2015 2020

Net Income 200,4 280,5 272,6 273,3 262,9 270,7 270,2 525,6

Depreciation 168,3 191,0 227,5 265,2 299,8 344,8 383,8 441,7

Var NWC (116,6) (226,1) (144,5) (100,8) (79,8) (148,2) (108,5) (171,2)

Cash Flow from Operations 485,3 697,6 644,6 639,3 642,6 763,7 762,5 1138,5

Investments in non current assets 18,6 13,8 -26,4 34,7 32,6 40,2 36,4 15,4

Investments in non current liabilities 17,6 (7,5) 0,0 0,0 0,0 0,0 0,0 0,0

Capex 296,3 381,0 646,3 633,6 633,9 777,2 759,8 549,0

Cash Flow from Investments (297,3) (402,3) (619,9) (668,3) (666,4) (817,5) (796,2) (564,4)

FCF 188,0 295,4 24,7 (28,9) (23,8) (53,8) (33,7) 574,1

Var equity (65,8) (214,4) 8,2 (81,9) (107,8) (51,6) (66,7) (534,2)

Var debt (125,9) (0,6) 0,4 162,1 113,4 131,3 121,9 (5,4)

Cash Flow from Financing activities (191,7) (215,0) 8,6 80,1 5,6 79,8 55,2 (539,6)

Var Cash (3,7) 80,4 33,3 51,2 -18,2 26,0 21,5 34,5

Cash 223,5 303,9 334,9 351,5 367,4 393,3 414,8 551,5

Financial Statements (€ Mn)




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Appendix

1. Grocery Retailers Shares (%)

Brands 2007 2008 2009 2010

Pingo Doce 6.5% 10.6% 11.2% 12.1%

Continente 6.5% 8.2% 8.5% 8.8%

Intermarché Super - - - 7.7%

Modelo 6.4% 6.5% 7.2% 7.6%

Jumbo 6.0% 6.3% 6.6% 6.8%

Lidl 5.9% 6.0% 6.0% 5.8%

Minipreço 4.3% 4.4% 4.2% 4.0%

E Leclerc 2.0% 2.6% 2.7% 2.8%

Intermarché Contact - - - 1.8%

Feira Nova 4.60% 2.00% 2% 1.60%

Ulmar Supermercados 1.6% 1.5% 1.4% 1.3%

Pão de Açúcar 0.3% 0.60% 1.00% 1.00%

Others 62.4% 55.4% 53.6% 42.6%


2. Shareholders Description

Shareholders Number of shares held % Capital % Voting rights35

Sociedade Francisco Manuel dos Santos, SGPS, S.A. Directly

353,119,573 56.114% 56.190%

Heerema Holding Company Inc. Through Asteck, S.A.

62,929,500 10.0% 10.014%

Carmignac Gestión Directly

17,254,270 2.742 2.746%

BNP Paribas Investment Partners, Limited Company

36

Directly

12,793,488 2.033% 1.7322%

35 % Voting rights = Number shares held /(Total nº JMT shares – Own shares)

36 This number of shares indicated refers to 2nd

March, 2011, date of the last communication made by JMT

Source: Bloomberg Exhibit 61 – Grocery Retailers Brand Shares (%)

Exhibit 62 – Shareholders Structure





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Asteck is a Luxembourg company controlled by Heerema, a Dutch multinational

responsible for building platforms and transportation to the oil and gas industries.

Carmignac Gestión is an investment fund company founded in 1989. For 20

years Carmignac Gestión has been developing international management

experience across all asset classes.

BNP Paribas is a European leader in global banking and financial services, being

one of the strongest banks in the world (Rated AA by Standard & Poor's).

3. PD’s and Recheio’s Private Labels

The existent difference between the PLs’ share of PD and Recheio is related to

(both 38% and 17.1% PL shares do not include perishables):

i) Regarding PD, the 38% share of PLs reflects not only sales of food

related products whose brand is “Pingo Doce”, but also other brands

available in specific categories such as “Essentya” in shampoos and hair

products, “Ultra Pro” in cleaning products and domestic hygiene, “Active

Pet” in food for pets.

ii) Regarding Recheio, three brands make part of the PL portfolio:

Masterchef, Gourmês and Amanhecer. While the first two are focused on

the HoReCa channel, the latter addresses Traditional Retail channel.

Masterchef and Gourmês are recent brands and therefore have not yet

achieved their full sales potential. Moreover, Recheio’s sales reflect a

strong weight of the beverages category, where there are no private

label products available, and Traditional retailers (40% of sales)

purchase almost all products from manufacturer brands.

4. Supermarkets, Hypermarkets and Discount

definitions

Supermarket

A supermarket is a grocery store where people can buy food, home care and

personal care products. In general, in a supermarket we can find a bakery, a

butcher and a perishables area. It is a type of self-service retail and its size can

go from 200m2 to 5,000m

2. To be able to practice lower prices, supermarkets




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limit their assortment of products with a high rotation and in general, do not offer

home delivery service.

Hypermarket

Hypermarkets function in a self-service regime as well and are usually

established in shopping centers or in the vicinity of large cities. With a sales area

higher than 5,000m2, hypermarkets offer a wide range of products, including the

ones offered by supermarkets and also electronics, audio and video products,

appliances, toys, clothes, cars’ related products, etc. Since October 15th 2010,

hypermarkets were allowed to open on Sundays just like supermarkets and

discounters. Generally, hypermarkets offer home delivery services.

Discount/Hard discount

In general, a discount store offers only food products which are in majority from

its own brand, and is very similar to a supermarket in dimension. It does not have

bakery, nor butcher areas and its main differentiation factors are the focus on

prices and PLs. Discounters are more concerned with offering a wide range of

PLs than paying attention to store design or customer service.

5. Methodology for MGD estimates

To estimate Modern Grocery Distribution growth rates for the next 10 years,

we’ve built a model based on GDP growth rate, inflation rate, growth rate of

the food retail market according to its life cycle stage, increasing tendency of

the private labels and a confidence index. This methodology was used for

both Portuguese and Polish forecasts.

The growth rate of the food retail market reflects the market stage, that is, we got

a lower growth rate for Portugal than for Poland (0.82% against 1.56% in 2010),

as the market is already in a mature stage while Poland is still in a development

phase. To compute this rate, from the MGD growth rate of 2010 (Euromonitor

International data), we’ve taken the GDP, inflation, confidence index and PLs

effects in order to get the food market intrinsic growth rate of Portugal and

Poland.

The increasing tendency of PLs was already explained in the “PLs phenomenon”

chapter.

The confidence index plays an important role in Portugal, as the country is

crossing a moment of high political and economical uncertainty and the market is




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highly influenced by an emotional and speculative feeling. This variable was not

considered in the Polish model, as good growth expectations are expected

regarding its economy.

Our MGD forecasts for Portugal (CAGR of 3.8% for the next 10 years) are much

lower than past values as we took into account the negative macro outlook by

incorporating GDP. Regarding Poland, lower values were estimated than the past

ones as well (CAGR of 7.4% for the next 5 years against 12.8% of the previous

5), in believing that MGD growth will tend to slowdown as Poland converges to

European standards.

6. Operational Forecasts

2010 2011E 2012E 2013E 2014E 2015E 2020E

Store Openings 14 14 5 3 3 2 2

Total Stores 349 347 352 355 358 360 369

Sales area ('000 sqm) 437.3 444.7 450.0 453.1 455.9 458.2 467.9

Sales area growth 0.6% 1.7% 1.2% 0.7% 0.6% 0.5% 0.5%

Sales/sqm (000 €) 6.85 6.90 6.97 7.18 7.44 7.76 10.09

Sales (€ Mn) 2,755.8 3,070.6 3,138.3 3,253.9 3,395.1 3,559.3 4,726.3

Sales growth 9.9% 11.4% 2.2% 3.7% 4.3% 4.8% 6.5%

2010 2011E 2012E 2013E 2014E 2015E 2020E


Total Stores 36 37 39 39 39 39 39

Sales area ('000 sqm) 123.5 127.0 133.8 133.8 133.8 133.8 133.8


Sales/sqm (000 €) 5.84 5.68 5.43 5.41 5.43 5.55 6.42

Sales (€ Mn) 719.1 721.7 727.3 725.2 728.7 744.6 861.4

Sales growth 4.6% 0.4% 0.8% -0.3% 0.5% 2.2% 3.5%

2010 2011E 2012E 2013E 2014E 2015E 2020E


Total Stores 15 15 15 15 15 15 15

Sales area ('000 sqm) 14.3 14.3 14.3 14.3 14.3 14.3 14.3

Sales area growth -0.3% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Sales/sqm (000 €) 9.96 9.98 10.00 10.17 10.35 10.58 12.24

Sales (€ Mn) 128.7 142.2 142.6 145.0 147.6 150.8 174.4

Sales growth 8.0% 10.5% 0.3% 1.7% 1.8% 2.2% 3.5%

Exhibit 63 – Retail mainland Operational Forecasts


Exhibit 64 – Recheio Operational Forecasts


Exhibit 65 – Madeira Operational Forecasts





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WACC

Terminal Value growth

2.05% 14.10 13.84 13.59 13.38 13.12 12.91 12.70

2.2% 14.33 14.05 13.79 13.57 13.31 13.08 12.87

2.35% 14.56 14.27 14.00 13.77 13.50 13.26 13.04

2.5% 14.80 14.50 14.22 13.98 13.69 13.45 13.22

2.65% 15.05 14.74 14.44 14.19 13.90 13.64 13.40

2.8% 15.32 14.99 14.68 14.42 14.11 13.85 13.60

9.98% 10.2% 10.4% 10.6%9.4% 9.6% 9.8%

7. Sensitivity Analysis: Biedronka DCF assumptions

8. Comparables Profiles

Sonae Distribuição is a sub-holding of Sonae Group, a Portuguese company,

which operates exclusively in the retail market. Sonae Distribuição functions in

Portugal since 1985 in both grocery and specialized (non grocery) retailing.

Regarding food retail, the group is the market leader in Portugal, operating in the

hypermarkets segment through the brand Continente and in the supermarkets

segment with Modelo. Following a new strategy, this year the company has

started to convert Modelo stores into Continente ones. The group intends to

expand its food retail model abroad this year, to Angola and Turkey.

Carrefour Group is a French company, created in 1959 and is considered the

world’s second largest grocery retailer and the largest in Europe. The company

operates through 5 different formats, hypermarkets with the brands Carrefour

and Atacadão, supermarkets mainly through Champion and GS, hard discount

with the brands Dia%, Minipreço and Ed, convenience stores and finally,

cash&carry through Promocash, Docks market and Gross. It operates in 34

countries in Europe, Latin America and Asia, with 57% of the group’s turnover

coming from outside of France.

2010 2011E 2012E 2013E 2014E 2015E 2020E

Store Openings 197 215 230 256 348 393 113

Total Stores 1,649 1,849 2,062 2,300 2,627 3,000 3,500

Sales area ('000 sqm) 938.2 1,049.3 1,167.8 1,299.9 1,481.5 1,688.8 1,966.9


Sales/sqm 5,122.37 5,042.76 5,022.13 4,816.86 4,756.59 4,472.02 5,345.11

Sales 4,805.9 5,311.5 5,906.1 6,324.6 7,141.2 7,677.6 10,729.0

Sales growth 29.0% 10.5% 11.2% 7.1% 12.9% 7.5% 7.9%

Exhibit 66 – Biedronka Operational Forecasts



Exhibit 67 – JMT’s target vs Biedronka DCF assumptions




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Tesco plc is a British global retailer created in 1929. It is the world’s third largest

retailer right after Wall-Mart and Carrefour, being leader in the grocery market in

the UK as well. Its grocery business unit operates through 4 store formats,

Express, Metro, Superstore and Extra. The group operates in 14 countries

across Asia, Europe and North America.

Ahold is a Dutch supermarkets chain operating in Europe and the United States,

whose main focus is on food retail and online grocery delivery. In the United

States they own strong local supermarkets brands like Stop&Shop, Giant Food

and Martin’s Food Markets. It also owns the largest online grocery delivery

service of the United States. In Europe, the group is market leader in

Netherlands with the Albet Heijn supermarkets chain. It is also present in Czech

Republic, Sweden, Norway, the Baltics and Slovakia. In total Ahold owns 2,919

stores.

Metro AG is a retailing group established in Dusseldorf, Germany. It is leader in

the German grocery market and was established in 1964. Metro also operates in

33 countries in Europe, Africa and Asia (Germany, Poland, Romania, Russia,

Turkey, etc.) through 2,100 outlets. Regarding grocery retailing, Metro is the

world’s market leader in cash&carry through the Metro Cash & Carry outlet and it

also owns the very well known Real hypermarkets.

J. Sainsbury plc is the third largest chain of supermarkets in the UK, founded in

1869, operates in a total of 890 stores from which 547 correspond to the

Sainsbury’s supermarkets while the remaining 343 are convenience stores. The

group is able to serve over 19 million UK customers a week and the largest

stores can offer until 30,000 products. Its current market share equals 16%.

Right after J. Sainsbury plc, Wm Morrison Supermarkets plc is the fourth

largest supermarkets chain of the UK. Established in 1899, the group started as

an egg and butter stall in Bradford and today its main business is mainly food

and grocery. Firstly more focused on northern England, however by taking over

Safeway, it owns today 403 stores all across the UK.

Colruyt is a Belgian company, founded in 1925, which is one of the main players

in its country. Besides Belgium, the group is present in France, Luxembourg and

the Netherlands. It is mostly known by its discount supermarket chain called

Colruyt, which competes directly against Aldi and Lidl. The company’s food retail

brands also include the grocery store chain named Okay and its organic

supermarket Bio-Planet. In France, Colruyt operates through Coccinelle chain of

supermarkets too.




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Casino Group or Casino Guichard-Perrachon is a French multinational

company who carries out its retail and distribution activity in hypermarkets and

supermarkets in Europe, Southeast Asia, India and South America. The group

consolidated net sales were €29.1Bn that came out from 11,663 stores

worldwide, from which 9,461 are in France. From a vast portfolio of formats and

brands, Casino’s most important brands are the hypermarkets Géant Casino,

Casino Supermarkets and Monoprix as convenient stores and Leader price in the

discount format.

Besides other activities, Eurocash is a Polish company and works on the

wholesale distribution market of the Fast Moving Consumer Goods (FMCG) only

in Poland, being leader in its segment. The group main function concentrates on

wholesale supply of these products to a broad range of traditional retailers across

the country. The group owns a total of 117 discount cash&carry.

Similarly to Eurocash, Grupa Handlowa Emperia is a Polish retailer engaged in

the retail and wholesale of food products, cosmetics, and household chemistry

products. The company distributes FMCG products through a chain of

cash&carry locations and distribution centers in Poland. They also own a chain of

supermarkets offering a wide range of food products.

BIM is a Turkish company founded in 1995. The company’s main goal is to offer

customers basic food items and consumer goods at the best prices and right

quality. The group operates through its hard-discount model where it offers 600

different products. Besides its aggressive expansion throughout Turkey, the

group has also invested in going abroad and it is now present in Morocco. BIM

owns a total of 2,285 stores.

Magnit is a Russian retailer founded in 1994 and leader in the Russian market

by number of stores. Magnit operates with 3,228 outlets in more than 974

Russian locations. Since 2006 the company’s main goal has been opening

grocery stores in the hypermarket format in every city of the country.

X5 Group is a Russian company, founded in 1995, which operates under three

formats: soft discounters, supermarkets and hypermarkets. The group is

considered the largest retail company in terms of sales in Russia. Its main goal is

to consolidate their market position in Russia and become the absolute leader in

the food retail market in Russia. X5 Group is only inserted in the Russia and

Ukraine food retail markets.




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Migros Ticaret is a Turkish supermarket chain that has been operating in the

market for the last 56 years. The group was the pioneer of the modern retail

sector in Turkey and today owns stores in Azerbaijan, Bulgaria, Kazakhstan,

Kyrgyzstan and Macedonia.

9. Pilot Projects

As stated by Alexandre Soares dos Santos during the presentation of the 2010

results, JMT launched a new business concept on May 24th 2011, in Warsaw.

The company opened a pilot store, in the drugstore sector, under the name Hebe

which refers to the Greek goddess of eternal youth. This store will be offering

services and products like body lotions, facial, hair and nail care products,

makeup, jewelry, flowers, books and even pet products. According to JMT, the

development of this business will be set according to the obtained results with

this first store.




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Disclosures and Disclaimer

Research Recommendations

Buy Expected total return (including dividends) of more than 15% over a 12-month period.

Hold Expected total return (including dividends) between 0% and 15% over a 12-month period.

Sell Expected negative total return (including dividends) over a 12-month period.

This report was prepared by a Masters of Finance student, following the Equity Research – Field Lab Work Project, exclusively for academic purposes. Thus, the author, which is a Masters in Finance student, is the sole responsible for the information and estimates contained herein and for the opinions expressed, which reflect exclusively his/her own personal judgement. All opinions and estimates are subject to change without notice. NOVA SBE or its faculty accepts no responsibility whatsoever for the content of this report nor for any consequences of its use. The information contained herein has been compiled by students from public sources believed to be reliable, but NOVA SBE or the students make no representation that it is accurate or complete, and accept no liability whatsoever for any direct or indirect loss resulting from the use of this report or its content. The author hereby certifies that the views expressed in this report accurately reflect his/her personal opinion about the subject company and its securities. He/she has not received or been promised any direct or indirect compensation for expressing the opinions or recommendation included in this report. The author of this report may have a position, or otherwise be interested, in transactions in securities which are directly or indirectly the subject of this report. NOVA SBE may have received compensation from the subject company during the last 12 months related to its fund raising program. Nevertheless, no compensation eventually received by NOVA SBE is in any way related to or dependent on the opinions expressed in this report. The NOVA School of Business and Economics does not deal for or otherwise offers any investment or intermediation services to market counterparties, private or intermediate customers. This report is not an investment recommendation as defined by Article 12.º-A of the Código do Mercado de Valores Mobiliários. The students of NOVA School of Business and Economics are not registered with Comissão do Mercado de Valores Mobiliários as financial analysts, financial intermediaries or entities or persons offering any services of financial intermediation, to which Regulamento 3.º/2010 of CMVM would be applicable. This report may not be reproduced, distributed or published without the explicit previous consent of its author, unless when used by NOVA SBE for academic purposes only. At any time, NOVA SBE may decide to suspend this report reproduction or distribution without further notice.

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