swb45equityweekly09.11

8/14/2019 SWB45EquityWeekly09.11

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Equity Research Swedbank Markets Page 1 of 5

Attention: Please note important background and customer information at the end of this report

EstoniaOlympic Entertainment Group published last week its Q3 numbers, stilltaking losses after 9M. Probably couple more difficult quarters ahead afterwhich we could see cost cutting measures make a noticeable impact on thebottom line. Overall outlook is more positive now than it was half a year ago.Loss in Q3 (continued operations) amounted to 5.4m from sales of 26.3m.Company continued closing inefficient casinos in order to meet the slump indemand. However we believe that the closures in future will be more limited.As an investment case the group is starting to look interesting again as itsbalance sheet has taken strong hits this year but company managed to keepreasonable cash reserves (net debt under 2m). Next year changes ingambling legislation in Estonia are not likely to give OEG any problems andwith operational risks subsiding we can be looking at a good recovery storyfor 2010-11.

Harju Elekter(HAE) posted Q3 2009 results last week. Total sales of HAEamounted to 7.7m in Q3 which was almost 47% less than in thecomparable period last year. as a result of the drop in demand, the companywent through the cost cutting process and succeeded very well. The drop inEBITDA (-37.4% to 0.7m in Q3 2009) was smaller than the decline insales. Thanks to this, the EBITDA margin increased from 7.7% in Q3 2008to 9.1% in Q3 2009. However, we saw a slight increase in the depreciationexpenses which caused a decline in the operating profit margin by 0.7percentage point year over year to 5% in Q3 2009. As no significantchanges were recorded in financial activity in Q3, the net profit decreased to

0.36m but again the net margin itself increased to 4.7% in Q3 2009. Ourtarget price is Under Review.

Ekspress Grupp (EEG) posted Q3 2009 results which were weaker than

expected. Total sales of the Group were 14.5m in Q3 2009, down 23.2%Y-o-Y. We saw few write-offs of which the most important was the write-off

Baltic Indices

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6-Aug 20-Aug 3-Sep 17-Sep 1-Oct 15-Oct 29-Oct

Baltic Benchmark OMX Tallinn*

OMX Riga* OMX Vilnius*Source: Reuters, Swedbank* Relativ e to Baltic Benchmark

Tra il. 4Q 0 9F La st Q 0 9F

Arco Vara 0.19 -13.6% 1013138 -0.3 9.0 0.4 0.4

Baltika 0.72 -2.7% 92990 -1.7 -1.9 1.1 1.1

Eesti Telekom 5.94 0.0% 14170 10.1 16.7 4.0 4.9

Ekspress Grupp 1.05 -11.0% 29408 -4.6 -20.8 0.6 0.6

Harju Elekter 2.38 -4.8% 13453 37.6 30.3 1.4 1.6

Jrvevana 0.38 -2.6% 24492

Merko Ehitus 5.17 -3.0% 36957 18.0 -74.0 0.7 0.7

N ord ec on Interna ti on al 1 .5 4 7.7% 116259 18.5 -29.1 1.0 1.0

Norma 3.87 1.0% 11850 37.6 -38.1 0.9 0.9

Olympic Entertainment Grou 0.67 -8.2% 320511 -1.8 -4.6 1.1 1.2

S il van o F as hi on Grou p 0 .6 8 -4.2% 18639 -2.4 -17.9 0.9 0.7

Tallink 0.39 2.6% 4418630 -32.1 7.7 0.4 0.4

Tallinn a Kau ba maja 3.7 4 -3.1% 147095 -44.7 -13.1 1.3 1.5

Tallinna Vesi 10.40 4.0% 81260 10.6 10.1 2.6 2.4

Viisnurk 0.81 -9.0% 2180 241.6 5.1 0.8 0.7


Grindeks 4.35 -4.0% 615 3.9 6.3 0.6 0.8

Latvian Gas 5.08 7.6% 985 10.0 0.7

Latvian Shipping Company 0.44 -2.2% 24254 1.7 1.3 0.2 0.2

Latvijas Balzams 1.80 -2.2% 1523 6.1 0.4

Liepajas Metalurgs 1.20 -5.5% 1342 1.1 0.3

Olainfarm 0.94 -5.1% 29091 95.5 8.7 0.9 0.8

SAF Tehnika 0.58 -3.3% 1030 -2.0 0.9 0.2 0.2

V almiera Fib re G lass 0.4 7 -4.1% 2650 0.9 0.4

Ventspils Nafta 1.35 10.7% 17615 3.9 0.4


Apranga 2.21 -3.1% 114106 17.0 -3.3 0.9 0.8

City Service 7.08 -5.0% 23518 12.3 8.4 2.2 1.7

Grigiskes 0.95 1.1% 31713 -12.5 0.9

Invalda 1.98 -7.5% 264254 -0.7 0.5

Klaipedos Nafta 0.95 -1.0% 162595 12.1 0.8

Lietuvos Dujos 2.38 0.0% 58553 28.0 17.8 0.6 0.6

Lietuvos Energija 2.85 -5.6% 7486 -54.4 0.7

Lietuvos Juru Laivininkyste 0.50 4.2% 33877 -2.5 0.5

Lifosa 26.10 -3.9% 11748 3.4 0.7

Panevezio Statybos Trestas 3.60 -10.0% 74256 2.0 0.5

Pieno Zvaigzdes 2.95 -1.7% 1728 19.0 5.3 1.1 1.0

Rokishkio Suris 2.95 1.4% 115815 -13.0 0.7

RST 2.06 -3.7% 34175 -11.6 0.4

Sanitas 9.60 1.1% 8022 -11.7 1.2

Siauliu Bankas 1.08 0.0% 61663 4.4 0.7

Snaige 0.68 0.0% 107392 -0.6 0.4

Snoras 1.09 -7.6% 400971 1.5 0.5

TEO LT 1.86 -3.6% 805780 8.8 8.7 1.5 1.4

Ukio Bankas 1.16 -4.1% 1523773 1.3 0.5

Source: Reuters, Swedbank

P/E P/BV

Estonia (in )

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Latvia (in LVL)

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Lithuania (in LTL)Last

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Equity Weekly

Index value Weekly Change,% Weekly Turnover

Estonia 411.2 -0.76% 4,1m

November start quietly on OMXT. The turnover was low on Tallinn StockExchange as retail was mostly on the market. A slight selling pressure byinstitutions was recorded in Tallinna Kaubamaja.

Latvia 303.3 2.46% 0,1m

November started with very slow trading in Riga as weekly market turnover

reached only LVL 80k last week. Despite OMX Riga index rise by 2.46%, thanksto Ventspils nafta and Latvijas Gaze share price growth, most of the othershares finished the week in the red territory as selling interest dominated in themost of names.

Lithuania 276.7 -2.68% 1,9m

As in other Baltic stock markets, OMXV remained quiet as well. The weeklyturnover reached 1.9m and the index ended the week at 276.7 points, which isalmost -2.7% W-o-W. Retail was mostly on the market.

Equity Research - Monday, November 09, 2009


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Equity Weekly 9 November 2009


of goodwill of Ekspress Hotline in amount of 2.2m. The total negative effect of the write-offs was 3.0m, pushing EBITDA into negative 2.6m in Q3 2009. As no significantchanges in the financial results were seen, the net loss of the Group reached 4.3m in Q32009. Our target price is Under Review.

Latvia

No Corporate News.

Lithuania

Apranga turnover (sales + VAT) comprised LTL 37.9m (EUR 11m) in October, down by22.8% yoy. In January through October 2009 the retail turnover of Apranga (including VAT)was LTL 328.6m (EUR 95.2m), down by 22.6% yoy.

For the first nine months Klaipedos baldai reported sales of LTL 130m (EUR 37.7m) or7.6% less compared with the same period last year. For the same period EBT decreasedby 7.4% to LTL 3m (EUR 0.87m).

For the three quarters VST delivered the net loss of LTL 7.3m (EUR 2.1m) while for thesame period last year the company reported LTL 20.8m (EUR 6m) in net profit. In Q3 thenet loss amounted to LTL 2.8m (EUR 0.8m), while last year the net loss was LTL 13.3m(EUR 3.9m).

Snoras as a bank for the 9 months delivered the net profit of LTL 4.17m (Euro 1.19m),while the group for the same period reported the net loss of LTL 28.1m (Euro 8.1m).

Ukio bankas group consolidated unaudited net profit of the nine months of year 2009 wasLTL 6.4m (EUR 1.8m). Ukio bankas unconsolidated unaudited net profit of the nine monthsof year 2009 was LTL 4.7m (EUR 1.4m).

In OctoberRokiskio suris reported sales of LTL 50.9m (EUR 14.7m), down 14.9% yoy.For the first ten months sales comprised LTL 477.7m (EUR 138.4m), down by 16.3% yoy.

During the nine months Sanitas earned LTL 7.15m (EUR 2.01m) in net profit or 2.6 timesless than for the same period last year. For the same period revenues contracted 19% to

LTL 229.7m (EUR 66.5m).


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Investor Calendar:

Date Description

Estonia

09.-13.11.2009 NCN - Interim report Q3 2009

12.11.2009 TVE - Extraordinary General Meeting

Latvia9.11.2009 GRD1R - 9M non-audited financial report

12.11.2009 SAF1R - Annual General Meeting

16.11.2009 OLK1R - 9M 2009 non-audited financial report

Lithuania

16.11.2009 LFO1L - Sales revenue in October 2009

16.11.2009 VBL1L - Consolidated financial statements for 9M 2009

Source: NASDAQ OMX


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Swedbank Markets Baltic Equity research & Institutional sales:

Energy, Materials & Utilities Industrials Equity Sales

Pavel [email protected]

Estonia+372 6 131 535

Risto [email protected]

Estonia+372 6 136 796

Kristiina [email protected]

Baltic Institutional Sales+372 6 131 663

Donatas [email protected]

Lithuania+370 5 268 4395

Marko [email protected]

Estonia+372 6 131 246

Andres [email protected]

Head of Sales (Estonia)+372 6 131 657

Telecom Services FinancialsSvetlana [email protected]

Head of Sales (Latvia)+371 6744 4154


Estonia+372 6 131 246

Risto [email protected]

Estonia+372 6 136 796

Simona [email protected]

Head of Sales (Lithuania)+370 5268 4513


Estonia+372 6 131 246 Equity Trading

Consumers HealthcareSimmo [email protected]

Head of Baltic Trading+372 6131 605

Pavel [email protected]

Estonia+372 6 131 535


Latvia+372 6 131 246 Equity Capital Markets

Donatas [email protected]

Lithuania+370 5 268 4395

Lauri [email protected]

Head of Baltic Equity Capital Markets+372 6 131 355

Mihkel [email protected]

Baltic Equity Capital Markets+372 6 131 564

Swedbank Group Homepage: www.swedbank.com. For Research products on Bloomberg please type: HBME .

Background Information:

Recommendation structureSwedbank Markets recommendation structure consists of six recommendations: Buy, Accumulate, Hold, Reduce, Sell and Avoid. The

recommendations are based on an absolute return for the security 12 months forward. The absolute return includes share price appreciationand dividend yield combined.

The recommendations for the securities mentioned in this report are based on risk and return considerations. The higher the risk category ofthe investment, the higher the required return. For equity investments, returns are defined as capital appreciation and dividends received overthe investment horizon of 12 months forward. The expected capital appreciation is the ratio of a stocks target price over the current price. Acompany risk rating depends on its stock price volatility, liquidity and business outlook. The target price depends on a companysfundamentals as well as the market valuation of peer stocks, and can be changed at any time if the relevant changes occur within acompany/market perception of the peer group. Buy, accumulate, hold, reduce, sell and avoid recommendations may be used in thisreport. The table below presents the relationship between recommendations and target prices compared to risk level of the stock. These areindicative ranges and actual recommendations may deviate from the indications if other relevant issues are considered. For more detailedinformation about the recommendation system please visit http://www.swedbank.ee/disclaimers/recommendation2007.pdf

Recommendation structure

Buy > +20% to target price

Accumulate +10% < target price < +20%Hold 0% < target price < +10%

Reduce -10% < target price < 0%

Sell < -10% to target price

Avoid used when securi ty does not match the standards presented in SWBs investment guidel ines

The recommendation by Swedbank Markets Equity Research department is based on a variety of standard valuation models. However, thebase for the calculation of the target price is our DCF model (DCF = discounted cash flow) with the exception of financial and investmentcompanies. The DCF model discounts future cash flow at present value.

In preparation of this report different valuation methods have been used, including, but not limited to, discounted free cash-flow andcomparative analysis. The selection of methods depends on the industry, the company, the nature of the stock and other circumstances.

The target price (previous fair value) takes into account the DCF value, the relative valuation of the share versus others peers (national orinternational) and news that can have a positive or negative effect on the share price. Relative and absolute multiples that we consider are:

EV/EBITDA, EV/EBIT, PE, PEG and Net Asset models for companies with liquid markets for their assets and other industry specific ratioswhen available. Break-up valuation models are also sometimes considered.

Recommendations by the 09 nov 2009

No of shares Part of total

Buy 10 45%

Accumulate 2 9%

Hold 3 14%

Reduce 1 5%

Under Review 6 27%


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Information to the customer:

General

Equity weekly is a compilation of news, corporate events,companies results and other similar information published in stockexchange notifications last week, an overview of Baltic stockexchanges of the same period and a weekly timeline of upcomingcorporate events of listed companies. No research is made here,

any resemblances to research are purely coincidental and shouldbe considered unintentional. Weekly may contain references toeffective price targets and investment recommendations ofcompanies mentioned in previously published research reportsand may update such price targets and recommendations on thebasis of important new information. Previous research reports areavailable athttps://www.swedbank.ee/private/investor/portfolio/analysis/equityInformation on how the price targets and investmentrecommendations are constructed in research reports is availableat http://www.swedbank.ee/disclaimers/recommendation2007.pdf.

Issuer and recipients

This report by Swedbank Markets Equity Research is issued bySwedbank Markets business area within Swedbank AB (publ)(Swedbank). Swedbank Markets is a registered secondary name

to Swedbank and is under the supervision of the SwedishFinancial Inspection Authority (Finansinspektionen) and otherfinancial supervisory bodies where Swedbank or SwedbankMarkets have offices. Swedbank is a public limited liabilitycompany and a member of the stock exchanges in Stockholm,Helsinki, Oslo and Reykjavik as well as being a member ofEUREX. Swedbank AS disseminates this report in Estonia.Swedbank AS is under the supervision of the Estonian FinancialSupervisory Authority (Finantsinspektsioon). Swedbank ABdisseminates the report in Lithuania. Swedbank AB is under thesupervision of the Lithuanian Financial Supervisory Authority(Lietuvos Respublikos vertybini popieri komisija) in Lithuania.Swedbank AS disseminates this report in Latvia. Swedbank AS isunder the supervision of the Latvian Financial SupervisoryAuthority (Finanu un kapitla tirgus komisija). In no instances isthe report altered before dissemination.

This research report is produced for the private information ofrecipients and Swedbank is not advisory nor soliciting any actionbased upon it. If you are not a client of ours, you are not entitled tothis research report. The Equity Research report is not, and shouldnot be construed as, an offer to sell or solicitation of an offer to buyany securities.Analysts certification

The analyst(s) responsible for the content of this weekly herebyconfirm that notwithstanding the existence of any potential conflictsof interest referred to herein, the views expressed in this weeklyaccurately reflect our personal views about the companies andsecurities covered. The analyst(s) further confirm not to havebeen, nor are or will be, receiving direct or indirect compensationin exchange for expressing any of the views or the specificrecommendation contained in the weekly.

Limitation of liabilityAll information, including statements of fact, contained in thisequity weekly have been obtained and compiled in good faith fromsources believed to be reliable. However, no representation orwarranty, express or implied, is made by Swedbank with respect tothe completeness or accuracy of its contents, and it is not to berelied upon as authoritative and should not be taken in substitutionfor the exercise of reasoned, independent judgment by you.Swedbank would like to point out that recipients of the weeklyshould note that investments in capital markets e.g. such as in thisdocument carry economic risks and statements regarding future

assessments are compounded with uncertainty. The recipientsand clients of Swedbank are responsible for such risks and theyare recommended to supplement their decision-makinginformation with that material which is assessed to be necessary,including but not limited to knowledge on the financial instrumentsin question and on the prevailing requirements as regards tradingin financial instruments. Opinions contained in the weeklyrepresent the analyst's present opinion only and may be subject tochange.To the extent permitted by applicable law, no liability whatsoever isaccepted by Swedbank for any direct, indirect or consequentialloss arising from the use of this weekly.

Conflicts of interestAll equity weeklies are produced by Swedbank Markets Researchdepartment, which is separated from the rest of its activities by aChinese wall; as such, equity weeklies are independent and basedsolely on publicly available information. The analysts at SwedbankMarkets may not own securities covered by the weekly, thatrepresent more than 5% of the total share capital or voting rights ofany company mentioned in this weekly.Internal guidelines are implemented in order to ensure the integrityand independence of research analysts. The guidelines includerules regarding, but not limited to, the identification, managementand avoidance of conflicts of interest.The remuneration of staff within the Research department mayinclude discretionary awards based on Swedbanks total earnings,including investment banking income; staff, however, shall notreceive remuneration based upon specific investment bankingtransactions.Swedbank shall not receive compensation from any companymentioned in the weekly for making an investmentrecommendation or enter into an agreement with the saidcompany to make an investment recommendation.

Company specific disclosures and potential conflicts ofinterestIn view of Swedbanks position in its markets, recipients of thisweekly should assume that it may currently (or may in the comingthree months and beyond) be providing or seeking to provideconfidential investment banking services to the companies referredto in this weekly and that an agreement regarding such services

may have been in effect over the previous 12 months, under whichSwedbank may have received payments.Recipients of this weekly should also note that it may happen thatSwedbank, its directors, its employees or its subsidiary companiesat various times have had, or have sought, positions, advisoryassignments in connection with corporate finance transactions,investment or merchant banking assignments and/or lending asregards companies and/or financial instruments covered by thisweekly. It may also occur that Swedbank may act as a liquidityprovider in trading with financial instruments covered by thisweekly.Swedbank has not been lead manager or co-lead manager overthe previous 12 months of any publicly disclosed offer of financialinstruments of any company mentioned in this weekly.

Reproduction and dissemination

This material may not be reproduced without permission fromSwedbank Markets. The weekly may not be disseminated tophysical or legal person who are citizens of, or have domicile in acountry in which dissemination is not permitted according toapplicable legislation or other decisions.Information contained in this weekly is confidential and is intendedto be used solely by the clients of Swedbank to whom this weeklywas addressed. By accepting this weekly you have accepted thedeclared restrictions.

Swedbank Group, 2009, All rights reserved.

The Swedbank does not have shareholdings exceeding 5 % in companies referred to in this report, but it may hold securities mentioned in thisreport on behalf of its clients, acting in custodial capacity. Companies mentioned in this report do not have shareholdings exceeding 5% inSwedbank. For information regarding the Bank and its internal organizational and administrative arrangements for the prevention and avoidanceof conflicts of interest, refer to the following websites:

Swedbank AS in Estonia: http://www.swedbank.eeSwedbank AS in Latvia: http://www.swedbank.lvSwedbank AB in Lithuania: http://www.swedbank.lt

swb45equityweekly09.11

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