Equity Weekly

Equity Research - Monday, July 27, 2009

Index value Weekly Change,% Weekly Turnover

Baltic Indices
260
Estonia 302 5.15% €6,5m

Trading on Tallinn Stock Exchange continues to be calm. Volumes were high

245 last week due to big internal crosses in Tallink, Olympic, Eesti Telekom and
Tallinna Kaubamaja. Foreign investors were buying some Tallink and Tallinna
Kaubamaja. Local institutions are picking up such names as Merko Ehitus and
230 Tallinna Vesi.

215 Latvia 257 2.50% €0,2m

200 Positive mood was seen in Riga last week where OMX Riga index gained 2.5%
24-Apr 8-May 22-May 5-Jun 19-Jun 3-Jul 17-Jul to 257 points. Volumes were higher than usual and most of turnover came from
Baltic Benchmark OMX Tallinn*
Olainfarm which showed impressive growth by 16.67% to LVL 0.63 thanks to
OMX Riga* OMX Vilnius* some buying interest. The company posted information that its revenues
* Relativ e to Baltic Benchmark Source: Reuters, Swedbank increased by 6% in 6M2009, or 9.6% YoY in 2Q. SAF Tehnika plunged by
almost 14% to LVL 0.56 as one aggressive seller appeared at the end of week.

Last Weekly Weekly P/E P/BV

Estonia (in €) Close Change Volume Trail. 4Q 09F Last Q 09F
Lithuania 188 3.24% €3,4m
Arco Vara 0.13 0.0% 87171 -0.2 -1.6 0.3 0.3
Baltika 0.55  -8.3% 56564 -2.3 -2.0 0.7 0.7
Eesti Telekom 4.45  8.5% 192808 7.6 9.4 3.0 2.5 In Lithuania we saw increased institutional activity and quite a few blocks last
Ekspress Grupp 0.60  17.6% 40624 3.6 2.7 0.3 0.3 week. By far biggest demand was recorded in TEO LT, which closed at LTL 1.22
Harju Elekter 1.34  -0.7% 22210 11.2 28.9 0.9 0.9 with LTL 6.35m turnover, 8.93% up WoW. Several bigger blocks were crossed in
Järvevana 0.28  -3.4% 18994
Rokiskio Suris. Apranga was the biggest winner on VSE with share price up
Merko Ehitus 3.30  -0.6% 70442 5.2 -25.7 0.4 0.5
20.75% WoW to LTL 1.92 due to increased interest from institutions. Also
Nordecon International 0.89  -1.1% 17750 4.0 -16.8 0.6 0.6
Norma 2.55  2.0% 45711 5.6 9.1 0.5 0.5
Lietuvos Dujos appears to be the subject for institutional clients.
Olympic Entertainment Group 0.55  3.8% 2712286 -2.8 -26.0 0.7 0.6
Silvano Fashion Group 0.38  -2.6% 11334 -1.4 -28.0 0.4 0.4
Tallink
Tallinna Kaubamaja
0.32
2.60
 6.7%
 2.8%
6100909
706012
46.4
-45.4
-34.2
275.0
0.3
0.9
0.3
0.9 Estonia
Tallinna Vesi 8.45  -0.6% 16864 9.0 8.7 2.3 2.0
Viisnurk 0.50  -3.8% 24573 149.1 3.1 0.5 0.4

Last Weekly Weekly P/E P/BV Norcecon International (NCN) announced that its wholly owned subsidiary
Latvia (in LVL) Close Change Volume Trail. 4Q 09F Last Q 09F Nordecon Infra signed two road renovation contracts with Ida Regionaalne
Grindeks 3.70  8.8% 3635 3.9 5.4 0.7 0.7
Maaamet (structural division of Estonian Road Administration) in Eastern
Latvian Gas 4.01 0.0% 7.9 0.5
Latvian Shipping Company 0.46 0.0% 21227 1.7 1.3 0.2 0.2 Estonia. Renovation works take place in Sämi-Sonda-Kiviõli secondary road
Latvijas Balzams 1.19  4.4% 565 4.0 0.3 (10 kilometers) and in Põdruse-Kunda-Pada basic road (7km). Contracts
Liepajas Metalurgs 0.82 0.0% 4000 0.7 0.2
also include constructing of light traffic roads and renovation of bridges. The
Olainfarm 0.63  16.7% 129811 -7.8 25.3 0.6 0.5
SAF Tehnika 0.56  -13.8% 47704 -1.9 0.9 0.2 0.1
value of the contract is approximately €4.5m (excl. VAT) and the works
Valmiera Fibre Glass 0.32  3.2% 56965 0.6 0.3 should begin in July-August 2009 and end in 2Q 2010.
Ventspils Nafta 1.05  10.5% 10206 3.1 0.3 Also, NCN (as leading partner) and AS Napal as joint partners signed a
Last Weekly Weekly P/E P/BV
contract with AS Kohtla-Järve Soojus for the design and construction works
Lithuania (in LT L) Close Change Volume Trail. 4Q 09F Last Q 09F
Apranga 1.92  20.8% 480949 14.8 -2.9 0.8 0.7
of Ahtme’s peak load boiler plant. The works include supplying and installing
City Service 5.25  4.0% 70382 9.1 6.2 1.6 1.3 new furnaces of 80MW and relocation existing 20MW furnaces. The price of
Grigiskes 0.48  9.1% 207065 -6.3 0.4 the contract is €8.6m (excl. VAT) which will be divided equally between joint
 7.2%
Invalda
Klaipedos Nafta
1.49
0.99  -2.9%
152099
20055
-0.5
12.6
0.4
0.8
partners. Construction works will start in July 2009 and will be finished by
Lietuvos Dujos 1.24  5.1% 101766 14.6 9.3 0.3 0.3 December 2010.
Lietuvos Energija 2.08  8.9% 21403 -39.7 0.5
Lietuvos Juru Laivininkyste 0.39 0.0% 58140 -1.9 0.4 Arco Vara (ARC) announced that its 100% subsidiary Arco Investeeringute
Lifosa 25.80  6.0% 12439 3.4 0.6 AS increased its shareholding in Arco Development SIA from 80% to
Panevezio Statybos Trestas 2.55  6.7% 423804 1.4 0.4
99.99%. According to ARC it was a non-cash transaction because ARC
Pieno Zvaigzdes 2.17  -5.7% 11738 14.0 3.9 0.8 0.7
Rokishkio Suris 2.15  -0.9% 439338 -9.5 0.5
converted some of its subordinated loans to equity.
RST 1.55  0.6% 74024 -8.8 0.3
Sanitas 7.40  2.1% 38340 -9.1 0.9
Siauliu Bankas 0.70  1.4% 136245 2.8 0.4
Snaige
Snoras
0.51
0.57
 4.1%
0.0%
389375
311315
-0.5
0.8
0.3
0.2
Latvia
TEO LT 1.22  8.9% 5436797 6.0 6.4 0.9 0.9
Ukio Bankas 0.70 0.0% 315771 0.8 0.3 No Corporate News.
Source: Reuters, Swedbank

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

Equity Research – Swedbank Markets Page 1 of 5

 Equity Weekly – July 27, 2009

Lithuania
On Tuesday TEO LT reported 2Q 2009 results. The top line matched our forecast, while
the bottom line surprised with the upside. The revenues reached LTL 203.65m (EUR
58.98m), down 0.4% YoY. The trend of deteriorating income from voice telephony
continued further: a decrease of 10.9% compared to 2Q2008. In H1 2009, the residential
customers’ traffic increased by 3.9%, while business customers’ traffic dropped by 16.4%.
On the other hand, this was offset by Internet services income growth (up by 12.9% YoY).
The number of fiber technology (FTTH and FTTB) connections tripled compared to
1H2008. The increase in IP-TV revenues was strong, although it accounts for a minor part
from the top line. In 2Q 2009 EBITDA reached LTL 95.95m (EUR 27.79m), up by 4.8%
YoY. EBITDA margin stood at 47.1% (44.8% a year ago). Better than expected profitability
came from lower interconnection and personnel expense. The company succeeded to
decrease the employee related expenses in Q2 by 8.8% YoY. What is more, the
interconnection expenses came in 12.1% lower than in 2Q2008. Net profit increased by
9.8% YoY to LTL 48.43m (EUR 14m). To sum up, the Q2 results show TEO LT’s focus on
rigid cost control enables to cope with the economic downturn. We keep the target price at
LTL 1.55 and a BUY recommendation with the medium risk assessment.
According to pre-audited data, during 1H 2009 Siauliu Bankas incurred the loss of LTL
2.42m (€0.7m), namely due to special provisions in the amount of LTL 13.73m (€3.98m)
formed for the doubtful assets and due to decrease of net interest income caused by the
increase of the price of financial recourses.
The producer of alcoholic and soft drinks Vilniaus Degtine will start construction planning
for cogeneration power plant (installed electrical power – 1.5MW, thermal power – 1.66
MW), which will use stillage for biogas production. Biogas production from stillage will
supply company with thermal energy and electricity; excess of electricity will be sold to
distributive network. The value of the project is LTL 20m, of which LTL 9.99m (€2.89m) is
the EU structural funding.
In Q2 2009, Utenos Trikotazas consolidated sales dropped by 23% YoY to LTL 19.1m
(€5.5m), while the sales in Jan-June decreased by 34% YoY to LTL 39.4m (€11.4m).
On 20th of July, Dvarcioniu Keramika received a notice on mandatory takeover bid from
JSC “Misota“ to buy the remaining 767 935 ordinary registered shares of Dvarcioniu
Keramika which grant 7.75% of voting rights. The share price is not indicated.
Alita started the reconstruction of boiler-house, modernization of thermo-property and
thermo-stations. Throughout the reconstruction 210.4 MW total heating power water boiler
and 3 high efficiency 450 KW total power electrics generators will be assembled. The
support of up to LTL 3.47m (€1m) from the EU Structural Funds and the budget of
Lithuanian Republic was granted. The total value of the project is LTL 7m (€2m). The
project is planned to be finalized by January 2010.

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

Equity Research – Swedbank Markets Page 2 of 5

 Equity Weekly – July 27, 2009

Investor Calendar:
Date Description
Estonia
29.07.2009 BLT - Interim report Q2 2009

Latvia
28.07.2009 GZE1R - Dividend payment date
30.07.2009 VNF1R - Annual General Meeting
31.07.2009 TCB - 6M non-audited financial report

Lithuania
30.07.2009 LLK1L - Results for the 6M 2009
3.08.2009 APG1L - Retail turnover in July 2009

Source: NASDAQ OMX

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

Equity Research – Swedbank Markets Page 3 of 5

 Equity Weekly – July 27, 2009

Swedbank Markets Baltic Equity research & Institutional sales:

Energy, Materials & Utilities Industrials Equity Sales
Pavel Lupandin Estonia Risto Hunt Estonia Kristiina Vassilkova Baltic Institutional Sales
pavel.lupandin@swedbank.ee +372 6 131 535 risto.hunt@swedbank.ee +372 6 136 796 kristiina.vassilkova@swedbank.ee +372 6 131 663
Donatas Užkurėlis Lithuania Marko Daljajev Estonia Andres Suimets Head of Sales (Estonia)
donatas.uzkurelis@swedbank.lt +370 5 268 4395 marko.daljajev@swedbank.ee +372 6 131 246 andres.suimets@swedbank.ee +372 6 131 657
Svetlana Skutelska Head of Sales (Latvia)
Telecom Services Financials Svetlana.skutelska@swedbank.lv +371 6744 4154
Marko Daljajev Estonia Risto Hunt Estonia Simona Sileviciute Head of Sales (Lithuania)
marko.daljajev@swedbank.ee +372 6 131 246 risto.hunt@swedbank.ee +372 6 136 796 simona.sileviciute@swedbank.lt +370 5268 4513
Neringa Džiugelytė Lithuania Marko Daljajev Estonia
neringa.dziugelyte@swedbank.lt +370 5 268 4733 marko.daljajev@swedbank.ee +372 6 131 246 Equity Trading
Simmo Sommer Head of Baltic Trading
Consumers Healthcare simmo.sommer@swedbank.ee +372 6131 605
Pavel Lupandin Estonia Marko Daljajev Latvia
pavel.lupandin@swedbank.ee +372 6 131 535 marko.daljajev@swedbank.ee +372 6 131 246 Equity Capital Markets
Neringa Džiugelytė Lithuania Lauri Lind Head of Baltic Equity Capital Markets
neringa.dziugelyte@swedbank.lt +370 5 268 4733 lauri.lind@swedbank.ee +372 6 131 355
Donatas Užkurėlis Lithuania Mihkel Torim Baltic Equity Capital Markets
donatas.uzkurelis@swedbank.lt +370 5 268 4395 mihkel.torim@swedbank.ee +372 6 131 564

Swedbank Group Homepage: www.swedbank.com. For Research products on Bloomberg please type: HBMR <GO>.

Background Information:
Recommendation structure
Swedbank 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 appreciation
and dividend yield combined.
The recommendations for the securities mentioned in this report are based on risk and return considerations. The higher the risk category of
the investment, the higher the required return. For equity investments, returns are defined as capital appreciation and dividends received over
the investment horizon of 12 months forward. The expected capital appreciation is the ratio of a stock’s target price over the current price. A
company risk rating depends on its stock price volatility, liquidity and business outlook. The target price depends on a company’s
fundamentals as well as the market valuation of peer stocks, and can be changed at any time if the relevant changes occur within a
company/market perception of the peer group. “Buy”, “accumulate”, “hold”, “reduce”, “sell” and “avoid” recommendations may be used in this
report. The table below presents the relationship between recommendations and target prices compared to risk level of the stock. These are
indicative ranges and actual recommendations may deviate from the indications if other relevant issues are considered. For more detailed
information 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 security does not match the standards presented in SWB’s investment guidelines

The recommendation by Swedbank Markets Equity Research department is based on a variety of standard valuation models. However, the
base for the calculation of the target price is our DCF model (DCF = discounted cash flow) with the exception of financial and investment
companies. 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 and
comparative 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 or
international) 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 ratios
when available. Break-up valuation models are also sometimes considered.

Buy
Recommendations by the 27th July 2009 Under 45%
Rev iew
No of shares Part of Total 55%
Buy 10 45%
Under Review 12 55%

Equity Research – Swedbank Markets Page 4 of 5

 Equity Weekly – July 27, 2009

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