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Itau BBA Cesp - In-Line 2Q12 Results CESP_20120812 Company Note Marcos Severine, CNPI Mariana Coelho, CNPI CESP - Companhia Energtica de So Paulo (BOVESPA:CESP6) Independent Power Producers and Energy Traders in line with our estimates for net revenue (Our take: Neutral. Cesps 2Q12 results were roughly 4.4%), EBITDA (+1.1%) and net income (-5.0%). Comparison with consensus expectations according to Bloomberg reveals even smaller differences with the reported figures: +1.6%, +2.1% and +0.4% for the top line, EBITDA and bottom line, respectively. We therefore expect a neutral market reaction tomorrow. The results: Cesps 2Q12 sales volume reached 10,150 GWh, up 2.2% YoY but short of our estimate by 3.2%, mostly on lower-than-expected spot market sales. As a result, the top line of BRL 875 million missed our estimate by BRL 40 million (-4.4%), also reflecting a 15% lower average price in the spot market. The reported EBITDA of BRL 569 million, however, beat our forecast by BRL 6 million, reflecting that operating expenses were BRL 47 million lower than we expected, particularly in: i) provisions for contingencies (BRL -27 million); ii) personnel (BRL -14 million); and iii) third-party services (BRL -11 million). The financial result came in at BRL -252 million, and was greatly affected by the effect of BRL depreciation on the companys debt, which caused a non-cash BRL 137 million loss in the quarter. The financial result was BRL 8 million higher than our forecast, but this was more than offset by the BRL 18 million higher income tax, so that the bottom line of BRL 81 million ended up missing our projection, although by only BRL 4 million. Investment implications: None. We have an outperform rating on CESP6, because we are quite optimistic about a short-term concession-renewal announcement by the Brazilian government (perhaps even by the end of this month), which would finally allow for the companys privatization. Assuming a BRL 65/MWh concession-renewal price cap, we estimate Cesps YE12 fair value in a privatization scenario at between BRL 46.6/share (with a 20-year concession extension) and BRL 55.0/share (with a 30-year extension), implying a strong upside potential range of 25% to 48%. The story is also attractive, Latin America and Caribbean Brazil English Company Update 8/12/2012 0:00

Itau BBA Cetip - July Operating Data Not Encouraging Yet CTIP_20120812 Company Note Alexandre Spada, CFA Regina Longo Sanchez, CNPI., Thiago Bovolenta Batista, CFA CETIP SA - Mercados Organizados (BOVESPA:CTIP3) Asset Management and Custody Banks were once again less than positive, even though the In our reading, Cetips July operating data numbers from the vehicle financing unit (GRV) improved from previous months. The traditional businesses repeated the mixed performance observed this year to date: transactions and custody remained the positive highlights, while registration and system utilization were weak. For GRV, we noted some improvement from previous months, but year-over-year volume growth remained weak, at 6%, when Liens and Contracts were accounted for together; in 2Q12, this figure was -10%. The July numbers point to top-line growth of some 7% in 3Q12, compared with 3Q11. It is important to note that the ~7% revenue growth we estimated already takes into account the discounts provided by Cetip since May 2012. These discounts apply to the registration of time deposits (CDB) and the transactions segment, but cannot be seen in the average prices observed for these lines because the changes in the average prices related to mix factors, not discounts. However, the discounts can be measured if we look at the line deductions, which are subtracted from gross revenue to arrive at net revenue. From 1Q11 through 1Q12, the discounts, which related mostly to taxes, were quite stable at 12.1% of gross revenues, but in 2Q12 they surged to 13.8%, 170 bps more than the historical average. We note that the discounts were only provided for two of the three months in that quarter, so it seems reasonable to expect the 170 bps to increase to some 250-260 bps in 3Q12. The forecasted 7% revenue growth implies downside to our current model forecast, which is in the mid-teens. Also, the 7% figure is preliminary and subject to change, since both volumes and prices are subject to volatility in certain lines, such as Deposit Registrations (DIs). Overall, Cetips legacy businesses presented mixed figures. The transactions segment once again reported encouraging volumes (+58% YoY). We also liked the performance of the custody business, particularly fund quotas (+29% YoY) and end investors, which resumed monthly growth (+4%). The Registration segment had a mixed performance, tilted to the negative side because of the poor volume recorded on the DI line. Letras Financeiras did not deviate much from the historical average. The

Latin America and Caribbean Brazil English Company Update 8/12/2012 0:00

Itau BBA Hypermarcas - Better Operating Results HYPE_20120812 Company Note Juliana Rozenbaum, CFA Vitor Paschoal Hypermarcas SA (BOVESPA:HYPE3) Personal Products

Our take: Results better on the EBITDA level, on the back of higher-than-anticipated expense dilution. Hypermarcas released 2Q12 results that were ahead of our expectations on the EBITDA line (BRL 225 million, +13.4% vs. our estimate of BRL 198 million) and that showed mixed trends for top-line growth while Pharma continues to evolve nicely (net sales growth of 21% YoY), the Consumer Goods division posted only modest 0.8% YoY growth, losing steam after its 9.3% growth in 1Q12. Although the 2Q12 results provided evidence that the company is on the right track with regard to its profitable growth strategy, we remain of the opinion that an optimistic scenario is already priced in. The results: Top-line growth roughly matched our forecasts, but with a different mix: Pharma thrived, registering 21% YoY growth, outpacing our forecast of 14%; but Consumer Goods disappointed, posting meager 0.8% YoY growth, well short of our 3.0% estimate. Management attributed Pharmas strength to the good performance of generics, particularly through Neo Qumica, and also to the strong sales levels obtained in OTC, as the marketing efforts directed to this category paid off. The explanation for the abrupt deceleration in Consumer Goods lies in the fact that the sell-in was anticipated by Hypermarcass customers (drugstores, supermarkets) during 1Q12, as they knew that prices would be raised in 2Q12. SG&A performance explained most of the difference between our EBITDA forecast and the 13% higher reported figure. The line that contributed most to beating our forecast was Other Operational Results (net gain of BRL 10.4 million, vs. our estimate of negative BRL 7.0 million), where the company booked acquisition-related credits amounting to BRL 32.8 million. There is enough evidence, though, to affirm that the company has been successful in keeping tight control of fixed expenses, achieving good results Latin America and Caribbean Brazil English Company Update 8/12/2010 0:00

Itau BBA Oil & Gas - Updating PRE And EC; PRE Remains Top Pick

OIL_GAS_20120810 Industry Report Paula Kovarsky, CNPI Diego Mendes, CNPI

OIL,revised our fair values for both PRE and EC to better reflect the recent production setbacks We GAS & PETROCHEMICALS caused by further delays in obtaining environmental licenses in Colombia, as well as the subsequent impact on production growth in the coming quarters. We also took the opportunity to roll over our models to YE13 and incorporate the quarterly results, Ita BBAs new macroeconomic assumptions and a small change in the oil-price forecast for the second half of the year, from USD 110/bbl to USD 105/bbl, following the global economic slowdown. The environmental license required to implement the new water treatment facilities in the Rubiales field was finally issued last Wednesday. Rubiales is by far the largest field in Colombia, and the delays in getting this permit affected both PRE and ECs numbers, leading to a quarter of flat production for PRE and limited growth for EC. While PRE management expressed more optimism during the quarterly conference call, and we expect the Colombian government to improve the licensing process over time, we took a more conservative stance on the impact of current and future delays in production growth over the next few years, given the backlog of some 200 licenses to be issued in the country. Our new YE13 fair value for PRE is CAD 42/PRE CN, from YE12 CAD 39/PRE CN. Our outperform recommendation remains unchanged. We reduced our production growth forecast to 12% yearly (96.6 kbpd net to the company), versus 16% previously, owing to an additional month of flat production in the Rubiales field and the year-end estimate for Sabanero of 2 kbpd (vs. 10 kbpd previously). We also revised our production forecasts for the next two years, under the assumption that licensing will remain an issue, delaying the developments of Quifa and CPE6. The production numbers include the contributions from Petromagdalena and BPZ. Despite the haircut in production, we still see PRE trading at a 4% discount to the 2P reserves valuation, including exploration capex and the cash burn related to the recent acquisitions. This supports our recommendation, namely relative to the other junior E&Ps we cover (OGX, QGEP, HRT). Furthermore, we expect the resumption of production growth in the coming Latin America and Caribbean Colombia English 8/12/2012 0:00