Retail Sector

Industry Prospects and Target Prices In this report, we have updated the target prices of Cencosud, Falabella, Hites and Ripley, analyzing the Prospects of the retail sector along with each company’s drivers.

Cencosud Hites Ripley S.A.C.I Falabella

Target Prices A summary of our target prices calculated as of the end of 2013 is presented below.

2013-05-24 Retail Sector Analysts:

Cencosud Falabella

M. Josefina Güell Z. [email protected] T: +562 26603617

Ripley

3.050

6.000

485

540

Closing Price

2.600

5.454

429

480

Price Return

17,3%

10,0%

13,2%

12,5%

1,2%

0,9%

3,0%

1,7%

Dividend Yield Total Return

Vicente Meschi G. [email protected] T: +562 26603620

Hites

Target Price FY 2013

18,5%

10,9%

16,2%

14,2%

Recomendation

Hold

Hold

Hold

Hold

Risk

High

Medium

High

Medium

Source: Campany data, CorpResearch

Industry Prospects GDP Growth

Latin America’s retail industry stands out for having a low penetration. This is the reason why we have seen strong expansion plans among the industry’s different players.

GDP Growth %

This has come together with LATAM’s good economic health; with GDP grow rates between 0.9% and 6.3%, a trend we expect to continue. There is a strong correlation between each country’s per capita income and the development of the retail industry. This is why a greater development of the retail industry can be observed in Chile, Mexico and Brazil in contrast with the one observed in Argentina, Peru, and Colombia. We expect this gap to reduce as all countries reach a similar GDP.

Chile Colombia Perú Brazil Mexic o

15 12 9

An analysis with the main trends in Latin America’s retail industry is presented below. The income of the retail industry totaled to USD 321,495 million in 2012: 76.32% from Supermarkets, 21% from department stores and only 2.68% from Home Improvement.

6 3

Currently, Latam’s retail industry is not very developed. We have observed that the Supermarket segment is the industry’s most consolidated segment, setting up higher barriers to entry for new eventual competitors.

0 -3

2012

2010

2008

2006

2004

2002

2000

1998

1996

1994

1992

-6

Source: IMF, CorpResearch

Furthermore, Department Stores are a new format in most Latin American countries, except for Chile, Brazil, and Mexico, in which the main players are already consolidated. Finally, Chile is Latin America’s forerunner in the Home Improvement sector, since it is the country where this sector is most developed, being these same chain stores the ones that have been spreading out all over the region. This situation shows a developing sector with some room left to keep growing. Argentina

Retail – M. Josefina Güell – 2013-05-24 Please see important US Regulatory Disclosures on Subject Companies at the end of this document.

Argentina has 41 million inhabitants with a GDP per capita of USD 11,573. Within the retail industry, the Supermarket sector is the most developed, with a total income of USD 25,000 million in 2012, with 3,050 million M2. The main players are: Carrefour with 43% market share by income, then Cencosud with 33% and finally Walmart with 24%. The penetration of the modern distribution channel is 42%,therefore, we expect both income and square meters to keep increasing, since Argentina has 46 M2 per 1,000 inhabitants, under Latin America’s average of 63 M2 per 1,000 inhabitants, which implies there is still some room left to grow. Additionally, 85% of consumers prefer buying in Supermarkets or Hypermarkets. We should expect this trend to grow year by year, as economy also continues to grow.

Argentina M2 & Income by format USD Millons 25.000

Super.

20.000

Both the Department Store sector and the Home Improvement sector are not well developed in Argentina. Falabella is the only significant department store with an income adding up to USD 589 million in 2012. This is mainly due to consumers preferring to make their purchases at smaller shoe, apparel and appliance retailers, which are mainly specialized stores, not making it an attractive market to develop this format. In the case of Home Improvement; this business is being developed only by Chilean companies, with an income of USD 1,550 million and with 463 million M2 as of December 2012. Specifically, we have Cencosud through Easy with 83% market share and Falabella through Sodimac with 17% market share.

15.000

10.000

5.000

Dep. Store Home Imp.

-

1.000

2.000

3.000

M 2 Th

Source: Company data, CorpResearch

Home Improvement has a penetration of 11 M2 for every 1,000 people, whereas Latin America’s average is 24 M2 per 1,000 inhabitants, making this format more attractive to develop. In addition, we must consider that as the country’s GDP grows, informal and formal construction grows as well, being the latter the Home Improvement Sector’s main customers, making us expect good prospects in this business. It is important to mention that in spite of how attractive this growth can be, Argentina is going through important political and inflationary problems, which have led to the implementation of Supermarket price freezes this year. Additionally, the exchange rate has been fixed at ARS$5.2 per dollar, whereas the informal exchange rate is approximately ARS$10 per dollar, accompanied by foreign currency purchase restrictions in order to diminish capital flights out of the country. This makes entering this country not very attractive, despite their good long-term growth prospects. Brazil It is Latin America’s largest country, with 198 million inhabitants and a GDP per capita of USD 11.875. Brazil’s retail sector is the largest in Latin America, with a total income for Supermarkets of USD 120,672 million in 2012, making up 5.5% of the country’s GDP and showing a growth of 8.3% over 2011. According to Abras, its participation in Brazil’s GDP should go up to 6% in 2013, experiencing a 28% increase in income in 2014. This situation will make this sector to bill approximately USD 155,258 million, provided that the government agrees to reduce labor taxes and expands tax advantages for investments. The industry’s three main players concentrate 47.4% of sales. These players are: CBD (17.1%), Walmart (16.2%) and Carrefour (14.1%). In 2012, the modern distribution channel

Retail – M. Josefina Güell – 2013-05-24 Please see important US Regulatory Disclosures on Subject Companies at the end of this document.

represented only 42% of all sales, 70% of which is controlled by the four major food companies.

Brazil M2 & Income by format USD Millions

The Brazilian consumer is characterized by being a multichannel consumer, satisfying their purchase needs in different kinds of establishments. This is why a wide range of formats in the different chains has been observed, increasing their offer in order to satisfy their customers. It must be noted that these companies have had a poor performance when compared to the United States where sales of house brands are very high. We should expect an increase in sales for these products as the modern distribution channel continues to develop.

120.000

Super. 90.000

In Brazil, supermarkets have a penetration of 44 M2 per 1,000 inhabitants, not being greatly developed, which shows there is still plenty of room to continue growing, especially considering the industry average of 63 M2 per 1,000 inhabitants in Latin America. We expect a 15% GDP growth between 2013 and 2015.

60.000

30.000 Dep. Store

-

5.000

10.000

15.000

M 2 th. Source: Reporte Compañías, CorpResearch

Department Stores had an income of USD 54,007 million in 2012, experiencing a growth of 20% yoy. The main brands are Casa Bahía with 79% market share by income, Lojas Americanas 13%, Lojas Riachuelo, and Lojas Renner with 4%, respectively. This is not a greatly developed market with only 13 M2 per 1,000 inhabitants. We expect this market to grow steadily over time, in terms of sales area as well as sales per square meter. Mexico Mexico has 115 million in habitants with a GDP per capita of USD 15,311. The retail segment is composed of Supermarkets, being the second country in terms of penetration by square meter in Latin America after Chile, and Department Stores, with a lower level of penetration than Supermarkets but all the same second in the region after Chile. The food retail segment billed USD 72,400 million in 2012, a 12% increase over 2011. A greater consolidation of big chain stores has been observed, specifically Walmart, which opened 285 during the year. Hence, we should see higher purchase rates within the modern distribution channel. Walmart is the main food retailer with 67% market share; then, Soriana with 16%, Chendraui with 10% and finally Comerci with 7%. The modern distribution channel has a penetration of 52%, accompanied by a penetration of 109 M2 per 1,000 inhabitants, aboves Latin America’s average, but much lower than more mature economies like the United States, which has 600 M2 per 1,000 inhabitants. There is a clear opportunity to keep growing, offering more varied stores and more competitive prices. This is accompanied by a great number of locations with high population density, since there are over 304 cities with more than 15 thousand inhabitants, more than 65 cities with 100 to 200 thousand inhabitants, an amount of people necessary to open a supermarket and very attractive to develop the convenience store format. In addition, there are 11 cities with more than 1 million inhabitants, which is where most of the chain stores can be found today.

Retail – M. Josefina Güell – 2013-05-24 Please see important US Regulatory Disclosures on Subject Companies at the end of this document.

Department Stores billed USD 2,895 thousand million in 2012, a 14.5% increase over the previous year. The main chain stores are: Liverpool with 35% market share, Grupo Elektra with 30%, Grupo Sanborns with 20%, Grupo Puerta de Hierro with 9% and Grupo Famsa with 6%.

Mexico M2 & Income by format USD Millons 80.000

The penetration is 18 M2 per 1,000 inhabitants. A 16% increase in the GDP is expected in 2015, which will, in our opinion, considerably increase the sales area of Department Stores to reach levels of 25 M2 per 1,000 inhabitants.

Super.

60.000

Colombia The retail industry in Colombia is mainly made up by international issuers, and given its high growth potential we expect this to continue. In 2013, we expect GDP expansions above Latin America’s average, a controlled inflation, decreasing unemployment rates and a healthy financial system. This situation will attract foreign investment and good prospects for consumption growth.

40.000

20.000 Dep. Store

-

5.000

10.000 M 2 th Source: Company data, CorpResearch

15.000

The Supermarket segment is the country’s most developed retail area, with sales adding up to USD 15,800 million in 2012 and a penetration of 44 M2 per 1,000 inhabitants. 76% of the market is controlled by four chains, which are: Grupo Éxito (61.4% controlled by Grupo Francés Casino) with 36,9% market share, with sales over USD 5,700 millions in 2012, followed by Carrefour with 19.2% market share, acquired by the Chilean retailer Cencosud in October 2012, and then Olímpica with 15.1% and La 14 with 4.5%.

Colombia M2 & Income by format USD Millions 16.000 Super.

12.000

53% of all purchases are carried out through the modern distribution channel, therefore we should expect an increase in sales through this channel. Additionally, a new player has recently entered, the Portuguese Jerónimo Martins, through the brand Aras, expected to open 35 stores in 2013.

Home Imp. 8.000

Department Store sales added up to USD 650 million in 2012, divided into two issuers: Falabella with 90% market share and La Polar with 10%. In April 2013, Ripley opened its first store out of the 5 stores they have planned to open in 2013 expecting sales for USD 62,500 this year.

4.000 Dep. Store

-

-

1.000 M 2 Th

Growth prospects for Colombia are between 4.2% and 4.8% in 2013. Road as well as highway construction is expected to become the growth engine, which should mean a huge breakthrough in terms of infrastructure for the country. Thus, travel times between the country’s different regions will be shortened, making distribution more efficient for retailers, which in turn will lead to lowering their costs, making the industry more efficient.

2.000

3.000

Finally, Home Improvement is developed by Falabella and Cencosud, through their brands Sodimac and Easy, with sales adding up to USD 1,380 and 93% and 7% market share, respectively. We expect a 14% growth in income for this industry in 2013.

Source: Reporte Compañías, CorpResearch

Retail – M. Josefina Güell – 2013-05-24 Please see important US Regulatory Disclosures on Subject Companies at the end of this document.

Peru Peru M2 & Income by format USD Millions 5.000 Super.

4.000

Peru will be the country with the greatest GDP and private consumption growth in Latin America in 2013, with growth rates of 6.5% and 5.6% respectively, according to estimations issued by the International Monetary Fund. The average salary is also expected to experience a 5.7% increase, with inflation rates of 2.5%. Hence, the net increase of purchasing power will be 3.2%. This growth doubles the Latin American average, which is expected to be approximately 1.5%. This is accompanied by low square meter penetration rates in all retail formats. Supermarkets have 25 M2 per 1,000 inhabitants, 10 M2 for Department Stores and Home Improvement, way below the industry average. Thus, we expect high growth rates in all segments. According to our estimation based the GDP per capita, the penetration could reach up to 32 M2 per 1,000 inhabitants for Supermarkets,12,5 M2 for Department Stores and 13 M2 for Home Improvement.

3.000

2.000 Dep. Store

The three major players in the food industry by market share are: Cencosud, through Wong with 40% and 14.8% yoy increase in sales. Supermercados Peruanos with 33% and 14.6% yoy increase in sales and Falabella, through its brand Tottus with 27% and 30.1% increase in sales over 2011.

1.000 Home Imp. -

-

200

400 M 2 Th Source: Company data, CorpResearch

600

800

Peru has the highest proportion of sales through the traditional distribution channel with 90%. This is why we expect a decrease of sales through the traditional channel in 2013, considering that as a person’s income increases, it is more likely that they make their purchases in Supermarkets or Hypermarkets due to the greater commercial offer and the different means of payment implemented by these establishments. In addition, the entry of SMU, a new player, is expected this year. In the case of Department Stores and Home Improvement, the main companies are Chilean. In Department Stores, Falabella has 54% market share and Ripley 46%, with sales adding up to USD 1,650 millions in 2012. Likewise, in Home Improvement, the market leader is Falabella through Sodimac with 56% market share and in second place Maestro, a local company, with 44%. Chile Chile has just over more than 17.4 million inhabitants and a per capita income of USD 15,403. The country with the most developed retail industry in the region after Brazil and Mexico, with sales adding up to 25,633 million and 4.073 million M2. This sector has experienced a sharp growth in the past years, basically motivated by high GDP growth rates, which was 5.9% and 5.6% in 2011 and 2012, respectively. In addition, strong investment plans devised by retail companies have increased the total sales area in 30% between 2010 and 2012. Finally, a change of the consumer profile and a reduction of the country risk have facilitated access to credit, which increases purchases through the modern channel. Retail income increased 13% in the year. The three major retail segments are Supermarkets with 51% participation, Home Improvement with 31% and Department Stores with 18%.

Retail – M. Josefina Güell – 2013-05-24 Please see important US Regulatory Disclosures on Subject Companies at the end of this document.

Margins vary depending on the type of business. Supermarkets have an average EBITDA margin of 8%, whereas Department Stores have an EBITDA margin of 5%, and Home Improvement of 13%. This is due to several factors, such as the segment’s competition level, which affects the Gross Margin, the inventory turnover and the development of house brands; business lines with a greater proportion of these factors generate greater margins.

Chile M2 & Income by format USD Millions 16.000 Super.

Supermarkets are the retail format with most M2, about 1.4 million nationwide in 2012. This is closely followed by Home Improvement, with 1.0 million M2 and Department Stores with 1.2 M2.

12.000

Dep. Store

These three business lines have behaved differently in the face of different market shocks. Whereas Supermarkets have shown to resist high volatility periods, Department Stores and Home Improvement have shown behaviors similar to the trend of private consumption in the economy. This behavior is symmetrical during periods of high growth, i.e. during economic cycles with high growth of private consumption. The reaction of Supermarkets is more limited when compared to the other two business lines.

8.000

Home Imp.

4.000

-

500

1.000 1.500 M 2 Th

2.000

2.500

Source: Company data, CorpResearch

Supermarkets

Supermarkets Penetration Latam GDP per capita & area M 2 120

Supermarket income added up to CLP 6,2 billion in 2012, with 1.4 million M2. Supermarkets have a high level of concentration with 53.5% of the sector divided into four large chains: Walmart, Cencosud, Grupo SMU and Tottus.

Chile Méx ico

The main players by market share are: first, Walmart, with 44% market share and 12.4% sales growth over the previous year. Its sales area increased 5% and its EBITDA margin went down 17 bp. Cencosud comes in second place, with a 33% market share and 12.7% annual sales growth in 2012. Its sales area increased 13% and its EBITDA margin went down 90 bp when compared to 2011. It must be noted that the reduction of the EBITDA margin affected the entire industry and it’s associated to higher sales and administration expenses linked to logistical projects and salary costs.

Area M 2 per 1.000 people.

90

60

Argentina Colombia 30

0 5.000

This is why there has not been a symmetrical growth in the sales area among the different segments between 2010 and 2012, in order to equilibrate good and bad economic cycles, along with the businesses exhibiting greater margins, and in this way reducing company volatility. Supermarkets have experienced a 34.5% increase in their M2, followed by Department Stores and Home Improvement with 29.3% y 20.0%, respectively.

Brasil

Third, we have Grupo SMU, with 16% market share, 12.4% yoy sales growth and 22.3% yoy growth in sales area. Finally, we have Falabella with its Supermarket line Tottus, with 7% market share and 22% yoy sales growth. Its sales area in M2 increased 15% and its EBITDA margin improved 30 bp during the year.

Perú

10.000 15.000 GDP per capita (USD per capita)

20.000

Source: IMF; CorpResearch.

Retail – M. Josefina Güell – 2013-05-24 Please see important US Regulatory Disclosures on Subject Companies at the end of this document.

2012

Supermarkets EBITDA Margin & Area M2 10%

Walmart

8%

Cencosud

Tottus

Walmart

Market Share (%)

33,0%

7,0%

44,0%

Number of Stores

214

43

326

Sales Area (Th m2)

525

155

748

Sales Growth 2012

12,7%

22,3%

12,4%

Gross Margin 2012

23,8%

23,6%

25,5%

7,4%

3,6%

9,8%

EBITDA Margin

EBITDA Margin 6%

Source: Campany data, CorpResearch

Cencosud

We expect a steady increase in income for Supermarkets, based on the fact that Chile’s per capita expenditure on food is still 55% below the average level in developed economies such as the United States, Germany and France. Brazil exhibits the greatest potential in this matter, with a per capita expenditure 85% below the average of developed economies. Thus, we believe an increase in per capita income will lead to an increase in expenditure on Supermarkets and Hypermarkets.

4%

Tottus

2%

0%

0

200.000

400.000

600.000

800.000

Area M 2 Source: Companies data, CorpResearch

Supermarkets Gross Margin 25,5% 25,2%

23,7%

23,2%

25,1%

23,7%

23,5%

23,8%

23,6% Cencosud Tottus Walmart

2010

2011

2012

Source: Companies data, CorpResearch

Furthermore, we observe a more developed market in terms of square meters per inhabitant when compared to the rest of the region. Nevertheless, about 37% of sales are performed using traditional establishments. Consequently, there is still a clear opportunity for modern commercial formats to continue to grow within the country. At the same time, the modern format has low penetration in Colombia and Peru, where 47% and 80% of sales, respectively, are performed in traditional establishments whereas in developed countries like the United States this proportion drops to 9% and the modern channel captures practically the entire food market. As a consequence of the low penetration experienced by the Supermarket format, along with good economic prospects in Peru and Colombia, there is a great growth opportunity for Chilean Companies, given their high development level and business know-how. This situation is reinforced by a 14% expected growth in Colombia’s GDP between 2013-2015, going up to USD 8,909; and a 17% expected growth in Peru’s GDP during the same period, going up to USD 7,681. In addition, Supermarket penetration projections indicate that Colombia has an average of 44 M2 per 1,000 inhabitants and Peru 22 M2, whereas Latin America’s average is 63 M2, and Chile’s 117 M2. This allows us to project good growth in Chile as well as abroad. Nevertheless, we observe a smaller average growth of SSS, situation we expect will continue in the future. This is due to the cannibalism provoked by the same companies, and a significant sales area expansion, which lead companies to grow at decreasing rates. Likewise, in mature markets like Chile, customers prefer smaller and more convenient formats. Increasing urbanization, the incorporation of women into the labor market, and smaller house sizes help speed up this change. Regarding this issue, only Walmart Chile and Grupo SMU have a wide diversification in all different segments. Walmart has Supermarket Lider Express, Hypermarket Hipermercados Lider, the discount store Superbodega Acuenta and the convenience store Ekono. Grupo

Retail – M. Josefina Güell – 2013-05-24 Please see important US Regulatory Disclosures on Subject Companies at the end of this document.

SMU owns Supermarket Unimarc, discount stores Mayorista 10, Alvi and Dipac and convenience store OK Market. Neither Cencosud nor Falabella have a wide diversification within the segment. Cencosud is now slightly more diversified after buying Santa Isabel in 2005, which operates under the Supermarket format and Hypermarkets Jumbo. Finally, Falabella only operates under the Supermarket format with Tottus.

Supermarkets Sales / area M2, CLP Millions 1,04 1,02

2011 2012

0,76

0,91

0,94

0,79

Tottus

Cencosud

Walmart

Source: Companies data, CorpResearch

We can observe that there are economies of scale in the Supermarket business, as the greater the amount of square meters, the greater the EBITDA margin is. This is the case of Walmart, whose EBITDA margin was 9.8% with 750 thousand M2, whereas Tottus has an EBITDA margin of 3.6% with 154 thousand M2. This means that Walmart has a greater Gross margin than its competition, which has remained steady and, we expect, will continue over time. Home Improvement Home Improvement income in Chile totaled USD 4,653 million in 2012, with 1.14 million M2, having a high level of market concentration with only three big chains: Sodimac, Easy and Construmart. In Chile, this segment’s income experienced a growth of 40% between 2010 and 2012.

Home Improvement Penetration Latam GDP per capita & Area M 2 80

The main player by market share is Falabella, which through Sodimac, has 70% market share. It must be noted that Sodimac is the second most relevant business in terms of income for the company and the main contributor in EBITDA, with an EBITDA margin of 8.3% in 2012. This business experienced a growth of 17% in sales in 2012, with an increase in sales area of 12%. In second place we have Cencosud, through Easy, with 20% market share, sales growth of 9% annually in 2012 and an increase in sales area of 8.4%. The EBITDA margin for this company was 7.5% in 2012. Finally, we have Grupo SMU through Construmart, with 10% market share. Construmart experienced an increase in sales of 15% in 2012.

Chile 60 Area M 2 per 1.000 people.

This is the reason why Cencosud’s as well as Falabella’s investment plans are now focused on developing new formats, increasing capillarity in order to satisfy the needs of the customer. In this sense, we believe Falabella could increase 30% their sales area between 2013-2015. In addition, Falabella could buy 40 stores SMU will have to sell in August 2013, since it is the only big Supermarket chain that can do M&A due to the antitrust law that does not allow chains with market shares above 25% to acquire more stores. Cencosud would experience a smaller growth in Chile, only 20% in M2 between 2013-2015 due to the consolidation of the acquisition of Carrefour Colombia.

40

Brasil

20 Peru Colombia

0 0

5.000

Argentina Mex ico

10.000

15.000

20.000

GDP per capita (USD per capita)

This segment has been characterized by several acquisitions performed by the major players. This is how Falabella has grown (through the merger with Sodimac in 2003, purchase of Home Depot Chile and recently the acquisition of Ferretería Imperial in 2007), whereas Cencosud has grown organically, in opposition to what has occurred with their Supermarkets.

Source: IMF; CorpResearch.

Retail – M. Josefina Güell – 2013-05-24 Please see important US Regulatory Disclosures on Subject Companies at the end of this document.

2012

Home Improvement EBITDA Margin & Area M2

Market Share (%)

8,4%

Sodimac

8,2%

Sodimac

Easy

71,0%

18,0%

Number of Store

80

31

Sales Area (Th m2)

649

300

Sales Growth 2012

17,2%

9,0%

Gross Margin 2012

28,8%

28,7%

8,3%

7,6%

EBITDA Margin Source: Campany data, CorpResearch

EBITDA Margin

8,0%

We can observe that Chile is one of the countries in Latin America where Home Improvement is most developed, with a penetration of 67 M2 per 1,000 inhabitants. In developed countries, this figure goes up to 500 M2 per 1,000 inhabitants, still existing a lot of room to continue growing in this country.

7,8% Easy 7,6%

7,4% 0

200.000

400.000 Area M 2

600.000

800.000

Source: Companies data, CorpResearch

Home Improvement Gross Margin

29,0% 28,8%

28,8% 28,7%

28,3%

27,6%

Furthermore, there is great potential to continue developing this format in Latin America, given the low development this segment has in the region. This situation generates strong opportunities for national companies to expand at a regional level, given the vast know-how of the business along with the increasing GDP of the different economies, which creates even more opportunities to grow in the sector. It must be noted that the three conglomerates mentioned above are present abroad: Easy is present in Chile, Argentina and Colombia; Construmart in Chile and Peru; and Sodimac in Chile, Argentina, Colombia and Peru. We expect this segment to continue growing in terms of sales, as this sector’s income is strongly linked with the country’s construction sector, since most consumers are contractors and natural persons. We estimate that the construction sector will continue to grow at a rate of 5% in 2013, due to the country’s good economic prospects. We also forecast a 10% increase in income for the sector in 2013. A fundamental component of this business is the payment method, as this business’s target segment most of the time needs credit to finance the needs of the working capital. This is why Home Improvement is the segment with the second highest rate of credit card use. 32% of purchases made in Sodimac are made using credit cards, and 20% in Easy. This can be explained by the fact that most Home Improvement customers have limited access to traditional means of credit due to their high risk of default.

Sodimac

Soft lines or design and decoration are where these companies obtain their greatest margins. In this sense, Construmart only sells construction products whereas Sodimac and Cencosud have more diversified product lines. This is how 50% of Sodimac’s product mix is made up by construction products, whereas 60% of Easy’s product mix is devoted to decoration.

Easy

2010

2011

2012

Source: Companies data,, CorpResearch

We have observed a decreasing gap in the Gross Margin between Sodimac and Easy, as a consequence of the product mix present in the stores, in addition to more retail sales and the implementation of SAP systems in Easy. This difference should be in part counteracted by the recent entry of Sodimac’s affiliate HOMY, a store devoted to design and room

Retail – M. Josefina Güell – 2013-05-24 Please see important US Regulatory Disclosures on Subject Companies at the end of this document.

decoration. To date, HOMY has three stores and a fourth store is expected to open in 2013. Considering this scenario, we expect the Gross Margin gap to increase again.

Departament Store Penetration Latam GDP per capita & area M2

Furthermore, in this business line, house brands have become relevant, creating greater margins. House brands make up 25% to 30% of Sodimac sales, which is similar to other comparative international stores such as Kingfisher and Home Retail Group. In the case of Cencosud, house brands only make up 10% of their sales. We expect this figure to improve over time.

80

Chile Area M 2 per 1.000 people.

60

Department Stores The Department Store industry in Chile is very well developed, with a penetration of 64 M2 per 1,000 inhabitants, a level closer to developed economies such as the United States with a penetration of 100 M2 per 1,000 inhabitants. Given the fact that there is a large sales area for Department Stores in Chile, all major Chilean operators are allocating about 50% of their investments to open stores in Peru and Colombia, given the space of this format in those countries and the important room to continue growing, along with the steady growth of those countries’ GDP.

40

20

Mex ico

Perú

Brasil

Colombia 0 5.000

Argentina

10.000 15.000 GDP per capita (USD per cpita)

20.000

Source: IMF, CorpResearch.

Departament Store EBITDA Margin & Area M2 6%

The high penetration level of Department Stores in Chile can be partially explained by cultural differences, for example, specialized stores are the preferred format of Brazilian and Argentine consumers. In Chile there is a big amount to square meters of Department Stores, being above developed markets in terms of penetration of formal commercial establishments, such as European countries, for example, France, with 18M2 per 1,000 inhabitants. Nevertheless, sales per square meters of Chilean Department Stores are below other developed countries. Thus, we should expect productivity per square meter to improve over time, along with the increase of the GDP per capita and the behavior of Chilean people’s consumer loans.

Falabella 5% Cencosud

4%

EBITDA Margin

Department Stores overall sales in 2012 added up to approximately USD 7,825 thousand million, divided into seven companies, being 74% of this sector’s market share in hands of the three major players: Falabella, Cencosud and Ripley. Despite being the target market of these companies considerably different, target customers still overlap, given the limited size of Chile’s population (17 million people), which restricts the potential market for the different companies and the possibilities to increase their market share.

3%

2%

Ripley

1%

0% 200.000

250.000

300.000 Area M 2

350.000

400.000

Source: Companies data, CorpResearch

Retail – M. Josefina Güell – 2013-05-24 Please see important US Regulatory Disclosures on Subject Companies at the end of this document.

2012

Falabella Cencosud

Ripley

HITES

21,0%

5,0%

78

40

14

377

252

87

28,3%

10,1%

12,2%

27,1%

33,4%

25,8%

6,0%

4,5%

2,0%

4,6%

Departament Store Gross Margin

Market Share (%)

40%

Number of Stores

38

Sales Area (Th m2)

254

Sales Growth 2012

11,8%

Gross Margin 2012

28,8%

EBITDA Margin

30%

2012

20%

10% 2010

2011

2012

Falabella

Cencosud

Ripley

Hites

ABCDIN

La polar

Source: Companies data, CorpResearch

Departament Store Gross Margin

34,5%

34,4% Falabella

33,4%

Cencosud

Ripley

30,7% 28,9% 28,2%

27,7%

2011

24,0%

Forus

La Polar

ABCDIN

Average

Market Share (%)

3,0%

10,0%

8,0%

14,3%

Number of Stores

240

40

81

76

Sales Area (Th m2)

30

182

63

178

Sales Growth 2012

17,0%

-16,1%

11,4%

10,7%

Gross Margin 2012

59,7%

17,3%

28,3%

31,5%

EBITDA Margin

12,1%

-15,4%

2,0%

2,3%

Source: Campany data, CorpResearch

Falabella is the leader of this sector, with 29% market share and a 7% increase in income during 2012. Then, there is Cencosud, through their brands Paris and Johnson with an aggregate market share of 24%, and an increase in sales of 28% in 2012. The third place is held by Ripley, with 21% market share and an increase in sales of 8.6% during 2012. It must be noted that Falabella has 2/3 the sales area Cencosud has and a size similar to Ripley, nevertheless, it is able to achieve a greater EBITDA margin than its competition. This is associated to more productive and efficient operations, which is translated into lower costs. We expect Cencosud will consolidate their purchase of Johnson, which would improve its EBITDA margin at the end of 2013. House brands are an important factor within this format, since they generate a greater gross margin: about 20% higherr than traditional brands. This expleins why they have gradually become more relevant in these companies’ product mixes. House brands make up about 33% of the sales of Falabella retail, whereas it is 25% of the sales of Cencosud, 22% of the sales of Ripley and 21% of the sales of Hites. We expect house brand sales to increase even more, since brands have been differentiated according to their specific target market. To achieve this goal, the companies have developed aggressive marketing strategies, creating strong brands for the consumers of the segment each product is oriented for.

28,8%

27,1% 2010

29,0%

2012

Source: Companies data, CorpResearch

In addition to house brands, Department Stores have exclusive brands, most of them corresponding to representations of international brands. This helps increase the flow inside the stores and increase cross sales. We expect the amount of exclusive brands to increase, given the growth of the country’s GDP per capita. Finally, financial services have an important role for most Chilean Department Stores, since they are an essential tool to foster the customer’s loyalty. Falabella has about 2 million active credit cards, almost 57.5% of Department Store sales are carried out using the

Retail – M. Josefina Güell – 2013-05-24 Please see important US Regulatory Disclosures on Subject Companies at the end of this document.

store’s own credit card. It must be noted that Falabella has developed an association with Visa, creating CMR Visa, allowing their customers to use this card both inside and outside the store, and in this way strengthening the customer’s loyalty towards their brand. Cencosud has 1.3 million credit cards, with 49% of all sales being carried out using this way of payment. Ripley has 1.1 million active cards, with 50% of purchases in their stores made using this way of payment. Hites, La Polar and ABCDIN have 0.5 mn; 0.45 mn and 0.7 mn credit cards, respectively.

Departament Store Sales / Area M 2, CLP Millions 1,07 1,00

2011 2012 0,83

0,80

0,70 0,56

Falabella

Cencosud

Ripley

Source: Companies data, CorpResearch

Retail – M. Josefina Güell – 2013-05-24 Please see important US Regulatory Disclosures on Subject Companies at the end of this document.

Target Price Update

Cencosud S.A.

Our Target Price for Cencosud SA at the end of 2013 is CLP 3,050 per share, with a recommendation to hold with high risk. At the current closing price, our target price implies a potential growth of 17.3%. Additionally, we project a dividend yield of 1.2% as of December 2013, obtaining a total expected return of 18.5%.

Target price: CLP 3.050 Recomendation: Hold Risk: High 2013-05-24

Our thesis considers the strong inorganic growth the company has had in recent years and their capacity to successfully consolidate acquired operations.

Retail Sector Analyst: M. Josefina Güell Z.

Successfully consolidate short-term operations, acquisitions in Colombia (Carrefour) as well as those in Brazil (Prezunic) and Chile (Johnson), allowing the company to increase operating efficiencies.This has led to reduce margins due to increasing expenses associated with the integration of their operations. Nevertheless, in mid-2013, we expect to observe an improvement in efficiency as the implementation of SAP in Brazil and the consolidation of one common credit card for all store formats in Chile (Cencosud card) is finalized.

[email protected] T: +562 26603617 Company Information Bloomberg Ticker: CENCOSUD CI Closing Price (CLP per share):2.600

USD 731 million Investment Plan for2013, which will lead to increase the sales area in 10% yoy. 45% of this investment will be carried out in Chile, 21% in Brazil, and 15% in Peru and Colombia, respectively. In Argentina, we only consider a maintenance capex for stores. The announced capex will allow the company to return to their level of indebtedness NFD/EBITDA to 3.0x in order to keep their risk rating and comply with the conditions established by their bonds.

12M Price Range: 2.470,2-3.064,8 Daily Volume (CLP mn): 9.470 Shares (mn): 3.285 Market Cap (USD mn): 13.658,5 Shares / ADR: 3

High exposure in Argentina, this country is going through serious political and inflationary problems. We expect a devaluation of the Argentine Peso from AR$5.2 to AR$ 10, which would reduce Cencosud’s income. If we consider that 21% of the EBITDA comes from Argentina, and the eventual depreciation of the Argentine Peso, the company’s EBITDA would drop 10%. This is partially counteracted by the strong competitive position the company has especially in the supermarket business, which makes up 74% of income and 55% of the EBITDA.

Share Performance Cencosud Stock Price vs IPSA Base 1000 2012-04-24 1.100

1.000

Risks 900

Operation Consolidation: The execution of the plan could affect the company’s value either in a favorable or unfavorable way, inasmuch as that the company exceeds our expectations or not.

800

2013-04-24 2013-05-24

2013-02-24 2013-03-24

2013-01-24

2012-11-24 2012-12-24

2012-09-24 2012-10-24

2012-08-24

2012-06-24 2012-07-24

2012-04-24 2012-05-24

700

Country Risk: Political and economic changes that may arise in each country Cencosud operates. These changes include: changes of the estimated demand, foreign exchange fluctuations, interest rates, taxes, and minimum wage. All these factors could eventually affect the company’s value.

Source: Santiago Stock Exchange , CorpResearch

Retail – M. Josefina Güell – 2013-05-24 Please see important US Regulatory Disclosures on Subject Companies at the end of this document.

Target Price (CLP) Recom m endation:

Cencosud Com pany Description Cencosud is one of the major Latin American conglomerates, present in Chile, Argentina, Brazil, Colombia and Peru. It participates in the Supermarket, Home Improvement, Department Store, Shopping Mall and Financial Business. As of September 2012, 41% of their income comes from Chile, 25.5% from Argentina; 20.5% from Brazil, 8 % from Peru and 5% from Colombia. After the acquisition of Carrefour Colombia, w e expect said country to have a share of income of approximately 12% in 2013.

Profit & Loss Statem ent (CLP Million)

2011

2012

2013e

2014e

2015e

2016e

Income

7.569.196

9.149.077

10.851.905

11.734.106

12.718.763

13.536.760

Gross Margin

2.139.339

2.601.245

3.049.385

3.320.752

3.599.410

3.837.671

28,26%

28,43%

28,10%

28,30%

28,30%

Gross Margin (%)

Opera ti ng Ma rgi n

578.571

Opera ti ng Ma rgi n %

H.I 11%

Supermarkets 74%

7,28% 1.174.570

8,69%

7,94%

7,56%

8,23%

8,73%

8,68%

(161.705)

(184.041)

(249.829)

(225.571)

(225.867)

(210.095)

(198.161)

(269.322)

(245.480)

Net Income Controller´s

274.333

269.959

317.941

419.146

460.743

524.359

121

115

94

148

157

172

2011

2012

2013e

2014e

2015e

2016e

492.351

347.474

453.227

879.408

367.783

478.576

Fixed Assets

5.373.994

7.197.128

7.359.366

7.578.554

7.786.925

7.996.562

Total Assets

7.760.642

9.674.003

9.657.088

10.534.830

10.405.853

10.871.064

Financial Debt

2.143.174

2.888.633

3.231.680

3.819.266

3.549.610

3.449.610

Total Liabilities

4.374.951

6.261.789

6.144.140

6.598.119

6.246.622

6.344.782

Total Equity

2.969.634

3.112.214

4.162.947

4.736.711

5.059.711

5.059.231

882

882

882

882

882

882

2011

2012

2013e

2014e

2015e

2016e

Operating Result

578.571

607.866

658.531

789.340

919.717

985.055

Adjusted Taxes

(144.710)

(159.799)

(185.220)

(212.377)

(244.190)

(258.405)

121.107

118.495

183.379

176.012

190.781

189.515

Capex

(483.300)

(1.526.185)

(345.617)

(395.200)

(399.152)

(399.152)

Δ Working Capital

(253.834)

1.132.209

(820.503)

(263.866)

(44.310)

(36.810)

Free Cash Flow

(182.166)

172.586

(509.430)

93.909

422.846

480.203

Depreciation & Amortization

D.S 10%

7,23% 1.109.952

28,35% 985.055

(202.912)

Cash Flow (CLP Million)

F. Business Malls 3% 2%

6,73% 965.352

919.717

(161.403)

Minority Interest Revenues distributions

6,07% 841.911

789.340

(126.014)

Balance Sheet (CLP Million)

Controller 61%

726.361

658.531

Non-Opera ti ng Res ul t

Assest

Free Float 39%

6,64%

657.774

EBITDA Ma rgi n % Net Fi na nci a l Expens es

607.866

7,64%

EBITDA

EPS (CLP/a cc) Ow nership 2012

3.050 Hold

Equity Raised

0

652.392

770.647

0

0

0

Dividends

(54.338)

(86.922)

(87.856)

(95.382)

(138.223)

(157.308)

Debt Issuance

631.858

745.459

343.047

587.586

(269.655)

(100.000)

Ratios

Peers

P/ U

EV/EBITDA

2011

2012

2013e

2014e

2015e

2016e

Cencosud

22,8

13,0

Stock Price (CLP)

3.007

2.561

2.600

2.600

2.600

2.600

Falabella

33,4

25,9

P / E (x)

24,8

22,4

23,6

17,9

16,3

14,3

Hites

12,0

7,3

Liabilities / Equity (x)

1,5

2,0

1,5

1,4

1,2

1,2

Ripley

25,3

15,4

EV / EBITDA (x)

13,2

12,9

12,0

10,7

9,2

8,6

EBITDA / Financial Expenses (x)

4,8

3,4

4,0

5,1

4,3

5,2

Net Financial Debt / EBITDA (x)

2,9

4,5

3,4

3,1

2,7

2,2

ROA (%)

3,5%

2,8%

2,8%

4,0%

4,4%

4,8%

β (vs IPSA):

1,29

ROE (%)

9,2%

8,7%

7,6%

8,8%

9,1%

9,7%

WACC Average:

12,5

Dividend Yield (%)

0,8%

1,4%

1,0%

1,1%

1,8%

2,1%

Wacc average * Exchange rate at the end o f each quarter pro yected acco rding Latin A merica Co nsensus Fo recast

Retail – M. Josefina Güell – 2013-05-24 Please see important US Regulatory Disclosures on Subject Companies at the end of this document.

Valuation: Revenues Growth CLP billions

We have valued the company by means of the discounted cash flows (DCF) model. For Cencosud SA, given the good economic prospects for the region and the low development level of the retail business in Brazil, Colombia and Peru, we confirm that there are investment opportunities in said countries for Cencosud in its different formats.

14.000

12.000

To maintain the company’s investment grade and after the capital increase to pay for the acquisition of Carrefour Colombia, investment plans for 2013 have decreased and add up to USD 731 million, of which only USD 541 million will be destined to opening new stores. Additionally, we only consider the execution of 95% of the plan and a 5% delay in store openings. Anyway, we expect future investment plans to return to historical levels of USD 1,000 million per year.

10.000

8.000

6.000

We expect an income increase of 20% for 2013, which will not completely be reflected in the EBITDA, as margin pressures caused by the consolidation of the company’s recent acquisitions will still persist. We estimate SAG’s to increase 40 bp during the year, reaching an EBITDA margin of 8.0% in 2013. By mid 2013, we project that the implementation of the SAP system in Brazil will yield the desired results, thus SAG’s should tend to decrease by the end of 2013.

4.000

2.000

2011

2012

2013E

2014E

2015E

2016E

Source: Company data, CorpResearch

EBITDA Growth & Gross Margin CLP billions 1.400

29%

1.200

28%

1.000 28%

We believe that the consolidation of the operations in Brazil as well as those in Colombia and Chile will have finalized in mid-2014, which will lead to greater operating efficiency of the company, bringing their SG&A back to historical levels, allowing the company to gradually bring their EBITDA margin back to historical levels of 8.5%, generating a progressive increase of the company’s earnings, which could go up to CLP 543,896 million in 2016. Cencosud shares, shows a 2013E EV/EBITDA ratio of 13.6x in line with the historical average from the past three years of 12.2x and a 2013E P/E ratio of 27.7 also above the company’s historical average of 19.9x.

800 28% 600 28%

400 28%

200

-

28% 2011

2012

2013E 2014E 2015E 2016E

Source: Company data, CorpResearch

Retail – M. Josefina Güell – 2013-05-24 Please see important US Regulatory Disclosures on Subject Companies at the end of this document.

Target Price Update

SACI Falabella

We have updated our Target Price for FALABELLA at CLP 6,000 per share for year end 2013, with a recommendation to hold and medium risk. At the current closing price, our target implies a potential growth of 9.6%. Additionally, we project a dividend yield of 0.9% for 2013, obtaining a total expected return of 10.5%.

Target Price: CLP 6.000 Recomendation: Hold Risk: Medium 2013-05-24

Our investment thesis is based on the leadership shown by Falabella in the businesses it takes part in: department store, home improvement, supermarket, real estate, and financial business.

Sector: Retail Analyst: M. Josefina Güell Z. [email protected]

The update to the target price includes an investment plan for 2013-2017 of USD 3,923 million, whose main objective is increasing the sales area in 53% and 50% in shopping malls, compared to December 2012. We believe 90% of this plan will be executed. Additionally, based on historical information about the company, we consider a delay in store openings of 5% annually. This investment benefits mainly Chile, Peru and Colombia. In Argentina, we only consider the maintenance of already existing stores.

T: +562 26603617 Company Information Bloomberg Ticker: FALAB CI Equity Closing Price (CLP per share): 5.454,7 12M Price Range: 4.338,8-5.710

We estimate that 2013E operating income will show an increase in the EBITDA level, as a result of higher sales income and the maintenance of the Gross margin. At the same time, we consider a slight increase of the SG&A expenses caused by the great amount of openings during the year, which would be counteracted by a greater control over operating expenses.

Daily Volume (CLP mn): 4.879,33 Shares (mn): 2.418 Market Cap (USD mn): 27.580,3 Shares / ADR: N.A

Risks

Share Performance

Investment plan: The execution of the plan could affect the company’s value either in a favorable or unfavorable way, inasmuch as that the company exceeds our expectations or not.

Falabella Stock Price vs IPSA Base 1000 2012-04-24 1.300

Country Risk: Political and economic changes that may arise in each country Falabella operates. These changes include: changes of the estimated demand, foreign exchange fluctuations, interest rates, taxes, and minimum wage. All these factors could eventually affect the company’s value and in turn our target price and recommendation.

1.200 1.100

1.000 900

2013-04-24 2013-05-24

2013-02-24 2013-03-24

2013-01-24

2012-11-24 2012-12-24

2012-09-24 2012-10-24

2012-08-24

2012-06-24 2012-07-24

2012-04-24 2012-05-24

800

Source: Santiago Stock Exchange , CorpResearch

Retail – M. Josefina Güell – 2013-05-24 Please see important US Regulatory Disclosures on Subject Companies at the end of this document.

Target Price (CLP) Recom m endation:

Falabella Com pany Description

Falabella is one of Chile’s and Latin America’s largest retailers, present in Chile, Peru, Colombia and Argentina. It participates in the Department Store, Home Improvement, Supermarket, Real Estate and Financial Business. It is the retailer with the greatest amount of credit cards issued in Chile with more than 3,500,000 cards. 58% of its income comes from Chile. The company has a US$ 3,923 million investment plan for the 2013-2017 period that involves an expansion of the sales area of 53% when compared with December 2012.

Profit & Loss Statem ent (CLP Million)

2011

2012

Income

4.832.818

5.491.440

6.593.397

7.692.483

8.636.449

9.360.985

Gross Margin

1.635.007

1.800.123

2.203.740

2.596.213

2.627.756

3.201.457

33,8%

32,8%

33,4%

33,7%

30,4%

34,2%

607.612

568.481

776.635

980.745

981.964

1.170.123

Gross Margin (%)

Opera ti ng Ma rgi n Opera ti ng Ma rgi n % EBITDA

10,4%

11,8%

12,7%

11,4%

12,5%

900.084

1.092.421

1.228.789

1.374.801

14,7%

13,2%

13,7%

14,2%

14,2%

14,7%

(71.305)

(88.804)

(108.300)

(87.018)

(68.697)

Non-Opera ti ng Res ul t

(80.836)

(74.743)

(94.696)

(98.783)

(77.501)

(59.179)

Net Income

423.297

366.540

491.547

635.013

723.571

Banking Business Income

2011

2012

262.652

305.069

345.471

380.516

56.621

76.786

99.831

122.426

143.591

EBITDA

66.812

67.168

89.752

114.860

139.602

162.920

Net Income

44.375

42.813

58.162

75.527

92.553

108.502

1.467.337

1.712.831

1.994.152

2.292.755

2.595.574

2.819.762

423.046

347.950

467.252

582.643

669.221

708.537

8,4%

6,1%

6,8%

7,3%

7,5%

7,3%

176

145

189

231

266

2011

2013e

2014e

2015e

288 2016e

125.543

196.947

21.610

14.674

219.620

305.885

1.966.542

2.092.237

2.388.386

2.380.140

2.481.161

2.489.566

PP&E

1.360.179

1.483.181

1.715.214

1.985.710

2.099.927

2.255.420

Other Non-Current As s ets

2.192.582

2.377.274

2.432.583

2.432.583

2.432.583

2.432.583

Total Assets

5.866.992

6.333.604

7.047.878

7.227.224

7.698.225

7.987.393

Fi na nci a l Debt

1.780.148

2.003.068

2.059.439

1.759.439

1.659.439

1.259.439

Total Liabilities

2.922.487

3.254.470

3.419.400

3.111.196

3.121.487

2.806.141

Total Equity

3.298.892

3.470.512

3.637.930

3.842.019

4.059.437

4.258.883

44.626

44.626

44.626

44.626

44.626

Adjusted Taxes Depreciation & Amortization Capex Δ Working Capital Free Cash Flow Equity Raised

H.I 33%

2012

Other Current As s ets

Operating Result

Tottus 14%

799.880 2016e

212.064

Cash Flow (CLP Million)

D.S 35%

2015e

58.763

Mi nori ty Interes t

CMR 10%

2014e

183.271

Cash & Equivalents

Plaza 3%

2013e

Operating Margin

Balance Sheet (CLP Million)

Bank 5%

2016e

726.941

EPS (CLP/acc)

Revenues distributions

2015e

12,6%

Net Margin (Controller)%

Controller 69%

2014e

(57.834)

Net Fi na nci a l Expens es

Total Profit Controller´s

Free Float 31%

2013e

712.516

EBITDA Ma rgi n %

Loan Book

Ow nership 2012

6.000 Hold

Dividends Debt Issuance Ratios

Peers

P/ U

EV/EBITDA

Cencosud

22,8

12,95

Stock Price (CLP)

Falabella

33,43

25,85

P / E (x)

Hites

12,02

7,28

Liabilities / Equity (x)

Ripley

25,26

15,44

2011

2012

2013e

2014e

2015e

44.626 2016e

607.612

568.481

776.635

980.745

981.964

1.170.123

(127.598)

(142.799)

(179.235)

(226.048)

(233.353)

(277.580)

104.904

114.112

136.334

130.861

257.188

215.911

(177.483)

(426.240)

(425.760)

(418.080)

(386.880)

(371.405)

229.690

(65.143)

(239.300)

(77.732)

48.410

68.674

389.746

637.124

9.270 628.189

76.248 813.297

-

-

-

-

-

-

126.914

104.385

140.176

174.793

200.766

212.561

(1.971.452)

(342.832)

100.000

(300.000)

(100.000)

(400.000)

2011

2012

2013e

2014e

2015e

2016e

4.039

4.934

5.454

5.454

5.454

5.454

22,9

34,1

30,9

24,8

21,6

20,4

0,9

0,9

0,9

0,8

0,8

0,7

EV / EBITDA (x)

14,4

15,0

13,3

10,9

9,6

8,6

EBITDA / Financial Expenses (x)

13,5

11,1

11,1

11,1

15,7

22,4

2,1

2,3

2,0

1,5

1,1

0,6

ROA (%)

7,2%

5,5%

6,5%

8,1%

8,7%

8,9%

12,8%

10,0%

12,8%

15,2%

16,5%

16,6%

1,1%

1,1%

0,9%

1,2%

1,5%

1,7%

Net Financial Debt / EBITDA (x)

β (vs IPSA):

1,14

ROE (%)

WACC Average:

9,2%

Dividend Yield (%)

Wacc average * Exchange rate at the end o f each quarter pro yected acco rding Latin A merica Co nsensus Fo recast

Retail – M. Josefina Güell – 2013-05-24 Please see important US Regulatory Disclosures on Subject Companies at the end of this document.

Valuation Revenues Growth CLP billions

We have valued the company by means of a discounted cash flows (DCF) model for each country Falabella has operations in. Given the good economic prospects for the region and the low development level of the retail business in Colombia and Peru, we confirm that there are investment opportunities in said countries for Falabella in its different formats. This is why we have distributed 50% of the capex for the 2013-2017 period in both countries, being the department store and home improvement formats developed in greater proportion than supermarkets. In Chile, we consider an investment involving 48% of the capex. Finally, 2% of the capex will allocated for maintaining and remodeling the stores already in existence in Argentina.

10.000 9.000

8.000 7.000 6.000

With this, we expect the company’s retail sales to increase in 16.5% over December 2012, going up to CLP 6,396 thousand million in income and CLP 843,578 million of EBITDA as of December 2013. We expect these figures to steadily increase over time going up to an income of CLP 9,611 thousand million in 2017 and an EBITDA of CLP 1,371 thousand million.

5.000 4.000 3.000

2.000

We expect to continue observing improvements in the Gross margin during the year due to a better planning of purchases, which translates into greater seasonal sales. At the same time, we estimate pressure over the SG&A during 2013 yoy, due to a strong expansion plan that will imply greater pre-operating expenses, and due to the development of new logistical projects in Chile, particularly in the Home Improvement and Supermarket segments. This should be counteracted by the operating excellence the company has shown over time, having a strict control over expenses in order to continue showing operating efficiency, which in turn should increase its EBITDA margin around 60 bp during 2013.

1.000 2011

2012

2013E

2014E

2015E

2016E

Source: Company data, CorpResearch

EBITDA Growth & Gross Margin CLP billions 1.800

35%

1.600 34%

1.400 1.200

34% 1.000 800

33% 600 400

33%

200 -

32% 2011

2012

2013E

2014E

2015E

2016E

Source: Company data, CorpResearch

We project that by mid-2016 these projects will already be finalized, which will translate into a reduction of the SG&A, allowing the company to gradually bring their EBITDA margin back to its historical levels, producing a progressive increase of the Company’s earnings, going up to CLP 871,945 million in 2017. Furthermore, the growth rate of the loan book in Peru and Chile should continue to exhibit attractive growth levels, whereas in Colombia growth has come to a standstill in real terms. We expect the whole portfolio experiences a growth within the 15%-16% range in 2013 and 14%-15% in 2014, with a recovery of the Colombian market and a gradual deceleration in Chile as well as in Peru. In addition, we maintain our estimation regarding a decrease of commission margins in Peru and Colombia in the long to medium term, which moderates our expectations. Regarding changes to the Maximum Conventional Rate (TMC), we believe that in the case of Banco Falabella, these changes will have a limited effect. The loans granted to the riskiest customers are in average smaller in size than the average size of the entire portfolio, thus some of the changes here discussed will have a limited effect. With a maximum TMC of 38% only 2%-3% of all the loan book will be affected by the law, therefore the final effect would not represent a significant threat to Falabella’s financial business.

Retail – M. Josefina Güell – 2013-05-24 Please see important US Regulatory Disclosures on Subject Companies at the end of this document.

Finally, the level of risk Falabella’s portfolio continues showing worse ratios than in 2012. In Chile, write-offs as portfolio percentages went up 2 base points, in Peru went up 23 base points and in Colombia 103 base points. Each SACI Falabella share, as per its current price, shows a 2013E EV/EBITDA ratio of 15x in line with the historical average from the past three years of 14x and a 2013E P/E ratio of 30,9x, also in line with the company’s historical average of 25x.

Retail – M. Josefina Güell – 2013-05-24 Please see important US Regulatory Disclosures on Subject Companies at the end of this document.

Hites

Target Price Update Investment Thesis and Recommendation

Target Price: CLP 485

Our target price for Hites SA is CLP 485 per share for year-end 2013, with a Hold recommendation and High risk. Relative to current closing price, our target price implies a potential increase of 14.7%. In addition, we forecast a dividend yield of 3.1% for December 2013, therefore obtaining an expected 17.8% total return of investment.

Recommendation: Hold Risk: High 2013-05-24 Sector: Retail Analyst: M. Josefina Güell [email protected] T: +56 2 2660 3617

Our target price update includes a US$200 million investment plan for 2013-2015, which aims mainly at doubling the points of sale compared to December 2012. We expect 90% completion of this plan and we consider a 5% delay a year on the opening of the POS. This investment is aimed at increasing the department stores’ presence nationwide, opening 60% of the overall stores in regions other than Metropolitana Region, where most of Hites’ stores are located. Our thesis is supported by the vast leadership of the company in segments C3-D.

Company Information Bloomberg Ticker: HITES CI Equity Closing Price (CLP per share): 423 12M Price Range: 287,85 - 626

We expect favorable growth in Chile, with expansion rates of 4.5% to 5.0% of GDP during 2013-2015. Because of the difficulties in some economies in Asia and Europe, the economy is expected to slow down. Good economic health is expected although consumption growth should slow down. In our expected economic unemployment remains low in Chile, remaining around 6.5% throughout 2013.

Daily Volume (CLP mn): 471,4 Shares (mn): 377,124 Market Cap (USD mn): 336,7 Shares / ADR: N.A

Stabilization of loan book write-off levels. The company customers have presented high non-payment rates throughout 2012, with loans percentage acknowledged as unrecoverable increased 1920 basis points over the 2011 rate. The average period of debt is 254 days, which is significantly higher than Falabella’s, for example, which averages 141 days. This is due mostly to the fact that the other retailers are focused in segments ABC1 and C2, while Hites focuses in segments C3 and D.

Share Price Prices Hites & IPSA Base 100 2012-05-15 175

150

IPSA

Risks

Hites

Investment plan: The plan execution could either affect the company’s value favorably or unfavorably, depending on whether our expectations are exceeded or not.

125

Interest rate risk: The financial business depends on the spread that Hites can obtain among the finance rate and the placement rate. The company results are sensitive to this rate differential.

100

2013-03-15

2013-01-15

2012-11-15

2012-09-15

2012-07-15

2012-05-15

75

Commission risk: Recent interpretation from authorities, regarding readjustment systems of commission contract prices has increased the degree of uncertainty to investments.

Source: Bloomberg, CorpResearch

Retail – M. Josefina Güell – 2013-05-24 Please see important US Regulatory Disclosures on Subject Companies at the end of this document.

Company Description

Profit&Loss Statement (CLP Th)

Hi tes i s the fi fth l a rges t reta i l er i n Chi l e, hol di ng a 5% ma rket s ha re. It i s a i med a t ful fi l l i ng the cons umption a nd fi na nci a l needs of the a mpl e C3-D s egment of the popul a tion. To a ccompl i s h thi s , the compa ny ha s a product mi x focus ed on cl othi ng a nd el ectroni cs a nd offers credi t through the Hi tes ’ ca rd i n 14 depa rtment s tores throughout the country. Its a ggres s i ve USD 200 mi l l i on i nves tment pl a n for 2013-2015 a i ms pri ma ri l y a t doubl i ng the number of s tores .

Income Gros s Ma rgi n Gros s Ma rgi n % Opera ting Ma rgi n Opera ting Ma rgi n % EBITDA EBITDA Ma rgi n % Net Fi na nci a l Expens es

2011

85.314.737

37,4%

37,2%

37,2%

37,1%

37,2%

18.446.095

20.432.987

22.517.558

24.404.681

25.719.043

27.564.088

8,1%

8,0%

8,0%

7,9%

7,8%

8,0%

24.771.826

26.618.671

29.303.896

30.585.434

35.777.190

39.098.856

10,9%

10,5%

10,4%

9,9%

10,9%

11,3%

(3.006.008)

(3.291.340)

(3.061.894)

(2.852.794)

(5.056.195)

(3.268.819)

(3.579.098)

(3.371.452)

(3.182.219)

Net Income, Controller´s

12.292.854

13.489.895

16.323.166

18.144.656

19.831.600

21.501.850

5,4%

5,3%

5,8%

5,9%

6,0%

6,2%

33

36

43

48

53

Net Ma rgi n (Control l er)%

Other Non-Current As s ets Total Assets Fi na nci a l Debt Total Liabilities Total Equity Mi nori ty Interes t

Retail Business 65%

94.945.071 104.839.346 114.540.512 121.677.428 128.828.711

37,5%

(5.614.729)

PP&E

Financial Business 35%

2016E

(4.720.491)

Other Current As s ets

Revenue Distribution

2015E

(3.337.923)

Cash & Equivalents

Hites Family 60%

2014E

Non-Opera ting Res ul t

Balance Sheet (CLP Th)

Float 40%

2013E

227.512.020 253.830.651 281.554.477 308.279.828 328.193.951 346.342.187

EPS (CLP/a cc) Ownership

2012

2011

2012

2013E

2014E

2015E

57 2016E

14.536.808

40.333.935

8.610.187

8.590.675

14.301.036

5.413.255

2.682.070

2.682.070

2.682.070

2.682.070

20.541.452 2.682.070

30.668.131

29.061.175

69.061.175

79.061.175

87.396.852

96.193.470

19.112.751

27.571.755

27.571.755

27.571.755

27.571.755

27.571.755

210.042.693 241.968.228 270.950.213 282.344.103 307.012.461 331.729.880 61.967.229

77.731.632

86.197.743

87.587.557

88.996.881

88.996.881

112.179.517 135.036.126 146.656.745 138.867.779 142.666.337 144.843.705 97.863.176 106.932.102 124.293.468 143.476.324 164.346.124 186.886.174 19.151

22.066

22.066

22.066

22.066

22.066

Cash Flow (CLP Th)

2011

2012

2013E

2014E

2015E

2016E

Opera ting Res ul t

18.446.095

20.432.987

22.517.558

24.404.681

25.719.043

27.564.088

Adjus ted Ta xes

1.432.750 (1.876.515)

(1.887.374)

(1.642.727)

(1.477.792)

(1.841.819)

Depreci a tion & Amortiza tion

6.325.731

7.151.099

7.829.886

8.335.678

8.796.618

Ca pex

(291.376)

(4.097.810) (20.000.000) (20.000.000) (20.000.000)

(8.796.618)

6.066.667

Δ Worki ng Ca pi ta l

37.693.778

30.186.115

10.212.511

14.719.672

7.032.124

6.408.549

Free Cash Flow

63.606.978

50.711.444

17.993.794

25.311.512

19.609.053

32.130.818

Equi ty Ra i s ed Di vi dends Debt Is s ua nce Ratios

0

0

0

0

0

0

3.687.856

4.046.969

4.896.950

5.443.397

5.949.480

6.450.555

8.466.111

1.389.813

1.409.325

-

2013E

2014E

2015E

15.469.710

15.764.403

2011

2012

Peers

P/E

EV/EBITDA

Cencos ud

27,1

20,8

Stock Pri ce (CLP)

Fa l a bel l a

34,7

12,9

P/E (x)

9,9

11,5

9,8

8,8

8,0

7,4

Ri pl ey

26,7

15,4

Li a bi l i ties /Equi ty (x)

1,1

1,3

1,2

1,0

0,9

0,8

Hi tes

11,0

7,3

EV/EBITDA (x)

6,8

7,2

7,6

7,8

6,5

5,8

EBITDA/Interes t Expens es

7,4

4,7

9,7

9,3

11,7

13,7

Net Fi na nci a l Debt/EBITDA

1,9

1,4

2,2

2,6

2,1

1,8

β (vs IPSA): WACC:

1,3 9,5%

323

410

423

423

2016E

423

423

ROA (%)

5,9%

5,6%

6,0%

6,4%

6,5%

6,5%

ROE (%)

12,6%

12,6%

13,1%

12,6%

12,1%

11,5%

3,0%

2,6%

3,1%

3,4%

3,7%

4,0%

Di vi dend Yi el d (%)

Retail – M. Josefina Güell – 2013-05-24 Please see important US Regulatory Disclosures on Subject Companies at the end of this document.

Valuation Revenues Growth CLP billions

We have valued the company using the discounted cash flow (DCF) model. Given the positive economical perspectives for the country and the strong leadership of the company in the socioeconomic segments C3-D, we confirm the investment appeal for Hites. The company currently has a USD 200 million Capex from 2013 to 2015, which would double the number of stores by December 2015, in comparison to December 2012. Of the total investment, 40% will be allocated to the opening of new stores in the Metropolitan region and the remaining 60% for other regions inside Chile.

400.000

350.000 300.000

250.000

A 36% increase in company revenues is expected as a result of the expansion relative to December 2012, reaching CLP 346 billion by 2016. The sales per square meter should increase from CLP 1.9 million in 2012, as a cause of the 2-year maturity period of the stores and the economy’s dynamism, to CLP 2.2 million in 2016.

200.000

150.000 100.000

50.000 2011

2012

2013E

2014E

2015E

2016E

Source: Company data, CorpResearch

EBITDA Growth Gross Margin CLP billions 45.000

37,6%

40.000

37,5%

35.000

We expect that SG&As are raised in 50 base points throughout 2015, in comparison to December 2012, as a consequence of the opening of the mentioned 12 stores in the country. In addition to the development of new logistic projects aimed at increasing product repositioning, jointly with the new storage capacity enlargement. This means doubling warehousing size in order to reach the storage room level required for such an operation. This will cause slower growth of the EBITDA margin, which will rate 10% in 2013 and at the beginning of 2014; a situation that we hope will normalize gradually until it reaches EBITDA margin of 11.3% in 2016. All previous data will lead to an increase of earnings, which will reach CLP 21,500 million in 2018. According to current rating, Hites S.A shares display an EV/EBITDA 2013E multiple of 8.4x, in alignment with the historic average of the last three years: 7,5x, and a multiple of P/U 2013E of 11,2x, positioned above the historical average 10.2x of the company.

37,4%

30.000

37,3% 25.000 37,2% 20.000 37,1% 15.000

37,0%

10.000

36,9%

5.000 -

36,8% 2011

2012

2013E 2014E 2015E 2016E

Source: Company data, CorpResearch

Retail – M. Josefina Güell – 2013-05-24 Please see important US Regulatory Disclosures on Subject Companies at the end of this document.

Target Price (CLP) Recom m endation:

Ripley S.A Profit & Loss Statem ent (CLP Million)

Company Description Ripley Corp is one of Chile’s major retailers. It is also present in Peru and quite recently in Colombia. Ripley’s main line of business is the Department Store business with 60 stores, accompanied by a financial business through direct credit for their customers by means of the Ripley credit card, with more than 1.5 million active cards. In addition, Ripley operates Banco Ripley and has participation in Shopping Malls in Chile and Peru. Ripley has an investment plan for USD 350 million for the 2013-2015 period and expects to open 34 stores and 7 shopping malls.

Income Gross Margin Gross Margin (%)

Opera ti ng Ma rgi n Opera ti ng Ma rgi n % EBITDA EBITDA Ma rgi n %

2011

2012

2013E

2014E

2015E

2016E

1.062.255

1.153.999

1.120.615

1.343.248

1.439.142

1.552.207

365.425

380.692

377.933

456.704

489.308

529.303

34,4%

33,0%

33,7%

34,0%

34,0%

34,1%

51.252

32.709

48.620

58.631

67.134

73.960

4,8%

2,8%

4,3%

4,4%

4,7%

4,8%

77.821

64.335

74.395

89.525

100.234

109.661

7,3%

5,6%

6,6%

6,7%

7,0%

7,1%

(11.523)

(16.245)

(12.622)

(26.941)

(30.813)

(33.676)

Non-Opera ti ng Res ul t

(5.918)

(7.924)

(11.556)

(26.674)

(30.547)

(33.409)

Net Income

38.812

18.875

28.911

22.434

25.684

28.467

2011

2012

2013E

2014E

2015E

2016E

Net Fi na nci a l Expens es

Banking Business Income

90.538

98.982

99.327

102.838

106.829

111.236

Operating Margin

22.290

24.770

21.214

21.964

22.816

23.758

EBITDA

25.284

27.700

24.298

25.157

26.133

27.211

Net Income

16.484

18.148

16.814

17.571

18.253

19.006

Loan Book

408.574

416.293

429.775

445.899

463.545

483.083

55.296

37.023

45.725

40.005

43.937

47.473

4,8%

3,0%

3,7%

2,8%

2,8%

2,9%

29

19

24

21

23

Net Income Controller´s Net Margin (Controller)%

EPS (CLP/a cc) Ownership

Distribución ingresos 2012

Fi nancial Bus iness 11%

Reta il Bus iness 89%

Peers

P/U

2012

2013E

2014E

2015E

2016E

Assest

117.996

164.981

(115.259)

176.670

174.436

128.970

Fixed Assets

508.518

554.806

639.084

727.975

819.859

855.560

Total Assets

1.183.950

1.307.983

1.385.888

1.544.268

1.679.581

1.723.655

Financial Debt

238.697

256.589

567.720

498.898

601.132

650.509

Total Liabilities

558.394

656.530

719.242

859.426

973.906

994.890

Total Equity

625.556

651.453

666.646

684.842

705.675

728.765

Minority Interest

497

500

500

500

500

500

Cash Flow (CLP Million)

2011

2012

2013E

2014E

2015E

2016E

Operating Result

51.252

32.709

48.620

58.631

67.134

73.960

Adjusted Taxes

(22.683)

(20.248)

(16.367)

(19.696)

(22.051)

(24.125)

Depreciation & Amortization

51.853

59.326

25.774

30.895

33.100

35.701

Capex

(75.648)

(89.326)

(58.504)

(57.997)

(58.784)

(58.784)

Δ Working Capital

(32.410)

(65.517)

(59.601)

86.362

(268.242)

(189.092)

Free Cash Flow

(27.636)

(83.056)

(60.077)

98.195

(248.843)

(162.340)

-

Equity Raised

VE/EBITDA

25

2011

Balance Sheet (CLP Million)

Free Fl oat controller 42% 58%

540 Hold

-

-

-

-

-

Dividends

16.589

11.107

13.717

12.001

13.181

14.242

Debt Issuance

64.650

17.892

311.131 -

68.823

102.234

49.377

Ratios

2011

2012

2013E

2014E

2015E

Cencosud

22,8

13,0

Stock Price (CLP)

495

457

480

480

480

480

Falabella

33,4

25,9

P / E (x)

17,3

23,9

20,3

23,2

21,2

19,6

Hites

12,0

7,3

Liabilities / Equity (x)

0,9

1,0

1,1

1,3

1,4

1,4

Ripley

25,3

15,4

EV / EBITDA (x)

11,6

12,4

12,5

12,5

12,1

11,5

EBITDA / Financial Expenses (x)

8,9

5,7

7,8

4,3

4,1

4,1

Net Financial Debt / EBITDA (x)

2,3

2,8

3,1

4,4

4,8

4,8

β (vs IPSA): WACC: Wacc average

2016E

1,10

ROA (%)

4,7%

2,8%

3,3%

2,6%

2,6%

2,8%

11,02

ROE (%)

8,8%

5,7%

6,9%

5,8%

6,2%

6,5%

Dividend Yield (%)

1,7%

1,3%

1,5%

1,3%

1,4%

1,5%

* Exchange rate at the end o f each quarter pro yected acco rding Latin A merica Co nsensus Fo recast

Retail – M. Josefina Güell – 2013-05-24 Please see important US Regulatory Disclosures on Subject Companies at the end of this document.

Valuation: Revenues Growth CLP billions

We have valued the company by means of a discounted cash flows (DCF) model for each country Ripley has operations in. Given the good economic prospects for the region and the low development level of the retail business in Colombia and Peru, we confirm that there are investment opportunities in said countries for Ripley. This is why we have destined 42% of capex for the 2013-2015 period to Colombia and Peru. With this action we expect to expand the sales area by 50% relative to December 2012; incorporating 4 stores in Chile, 14 stores in Peru and 14 stores in Colombia in 2015, adding to a total number of 87 stores. We expect income to increase 14% yoy, going up to CLP 1,4 billion in 2013 and an EBITDA margin of 6.4% in the year, which, we expect, will experience a steady growth due to greater Gross margins and lower SG&A´s, which after entering Colombia should go back to their historical level of 30% en 2014, obtaining earnings for CLP 64,449 million in 2015.

2.500

2.000

1.500

1.000

Ripley is loan book experienced a low growth of only 1.9% in 2012. We expect that the opening of new stores as well as the growth of sales in the retail business will boost the use of banking products. Nevertheless, we maintain a lower growth projection for the loan book than in 2010 and 2011.

500

2011

2012

2013E

2014E

2015E

2016E

Fuente: Company Source: Reporte Compañía, data, CorpResearch CorpResearch

EBITDA Growth & Gross Margin CLP billions 180

35%

The amount of write-offs of the portfolio went up from 5.0% of total loans in 2011 to 6.1% in 2012. We expect this percentage to slightly go down, to 6.0%, during 2013 and 2014. The results of the financial business are sensitive to this variable. In addition, the amount of provisions went down from 8.5% to 8.0% in 2012, greatly affecting the level of provision coverage of the company. At the end of 2011, the provision/write-off ratio had gone down from 1.71 a 1.32, revealing a situation of greater exposure to a possible increase in the amount of write-offs.

160 35%

140

120

34%

100 34% 80

60

33%

40 33%

20

0

32% 2011

2012

2013E

2014E

2015E

2016E

Source: data, CorpResearch Fuente: Company Reporte Compañía, CorpResearch

Retail – M. Josefina Güell – 2013-05-24 Please see important US Regulatory Disclosures on Subject Companies at the end of this document.

Glossary Term

Definition / Translation

Calculation

EBITDA

Earnings Before Interests, Taxes, Depreciation and Amortization

Operational Income plus Depreciation and Amortization

EBITDAR

Earnings Before Interests, Taxes, Depreciation, Amortization and Rents

Operational Income plus Depreciation and Amortization plus rent of fixed assets. It is used the at transport industries to reverse the rent of airplanes or ships.

EV

Enterprise Value

Market capitalization plus Net Financial Debt plus Minority Interest

EV/EBITDA

Valuation multiple. While greater it is, more expensive it is EV divided by Ebitda the stock

FCF

Free Cash Flow

Operational Income plus Depreciation and Amortization minus tax minus capital expenditures plus (minus) working capital variation.

Free-float

Percentage of stocks that can be freely traded in the market

Percentage of stock that does not belong to controller’s shareholders.

Margin

Percentage of sales

Operational

Operational Income / Revenue

Ebitda

Ebitda / Revenue

Net

Net Income / Revenue

P/E

Price / Earnings

Market Price divided by EPS

P/B

Price to Book value ratio

Market price divided by the accounting value of the stock.

Dividend Yield

The return in terms of dividends of investing in equities

Dividends distributed in a year divided by the market price.

FCF yield

Free Cash Flow Return.

FCF / Market Price

ROA

Return on Assets

Net Income / Total Assets

ROE

Return on Equity

Net Income / Accounting capitalization

EPS

Earnings Per Share

Net Income / Shares outstanding

YtD

Year to Date

Percentage variation year to date

x

Times Stocks recommendations are established according to the stock yield relative to the IPSA Index. We recommend Hold when we expect the share to have a yield in line with the IPSA; Buy, when the yield expected for the share is above to that expected for the IPSA; and Sell, when the yield expected for the share is below to that expected for the IPSA. We define a yield to be “In line with the IPSA” when it is within a range whose scope is equivalent to a third of the variation expected for the index, with a 5% minimum.

Retail – M. Josefina Güell – 2013-05-24 Please see important US Regulatory Disclosures on Subject Companies at the end of this document.

CorpResearch

Álvaro Donoso Director CorpResearch [email protected] Economic Research Sebastián Cerda Executive Director CorpResearch & Economic Studies [email protected] Nicolás Birkner Chief Economic and Financial Analyst [email protected] Natalie Charles Senior Analyst Investment Strategies [email protected] Karla Flores Economic Analyst [email protected] Equities Research Cristobal Lyon Director of Strategies [email protected] Vicente Meschi Senior Analyst. Sectors: Banking, Forestry [email protected] Sergio Zapata Senior Analyst. Sector: Energy [email protected] Pedro Letelier Analyst. Sectors: Transport, Telecommunications and Food & Beverages [email protected] Josefina Guell Analyst. Sector: Retail [email protected] Patricio Acuña Analyst. [email protected]

Rosario Norte 660 17th floor, Las Condes, Santiago. Phone +56 2 2660 3600 www.corpbancainversiones.cl

Retail – M. Josefina Güell – 2013-05-24 Please see important US Regulatory Disclosures on Subject Companies at the end of this document.

This material was produced by CorpResearch, solely for information purposes and for the use of the recipient. It is not to be reproduced under any circumstances and is not to be copied or made available to any person other than the recipient. It is distributed in the United States of America by Enclave Capital LLC (19 West 44th Street, Suite 1700, New York, NY 10036) . Enclave is a broker-dealer registered with the SEC and a member of FINRA and the Securities Investor Protection Corporation, only to “major U.S. institutional investors”, as defined under Rule 15a-6 (a) (2) promulgated under the US Securities Exchange Act of 1934, as amended, and as interpreted by the staff of the US Securities and Exchange Commission. This document does not constitute an offer of, or an invitation by or on behalf of CorpResearch or its Head Office, Corpbanca or any other company to any person, to buy or sell any security. The information contained herein has been obtained from published information and other sources, which CorpResearch consider to be reliable. None of CorpResearch or its Head Office, Corpbanca, accepts any liability or responsibility whatsoever for the accuracy or completeness of any such information. All estimates, expressions of opinion and other subjective judgments contained herein are made as of the date of this document. Emerging securities markets may be subject to risks significantly higher than more established markets. In particular, the political and economic environment, company practices and market prices and volumes may be subject to significant variations. The ability to assess such risks may also be limited due to significantly lower information quantity and quality. By accepting this document, you agree to be bound by all the foregoing provisions. 1. CorpResearch or its Head Office, Corpbanca, may or may not have been beneficial owners of the securities mentioned in this report. 2. CorpResearch or its Head Office, Corpbanca, may have or not managed or co-managed a public offering of the securities mentioned in the report in the past 12 months. 3. CorpResearch or its Head Office, Corpbanca, may have or not received compensation for investment banking services from the issuer of these securities in the past 12 months and do not expect to receive compensation for investment banking services from the issuer of these securities within the next three months. 4. However, one or more of CorpResearch or its Head Office, Corpbanca may, from time to time, have a long or short position in any of the securities mentioned herein and may buy or sell those securities or options thereon either on their own account or on behalf of their clients. 5. As of the publication of this report CorpResearch does not make a market in the subject securities. 6. CorpResearch or its Head Office, Corpbanca, may or may not, to the extent permitted by law, act upon or use the above material or the conclusions stated above or the research or analysis on which they are based before the material is published to recipients and from time to time provide investment banking, investment management or other services for or solicit to seek to obtain investment banking, or other securities business from, any entity referred to in this report. Enclave Capital LLC. is distributing this document in the United States of America. CorpResearch accepts responsibility for its contents. Any US customer wishing to effect transactions in any securities referred to herein or options thereon should do so only by contacting a representative of Enclave Capital LLC. This investment research is not intended for use by any person or entity that is not a major U.S institutional investor. If you have received a copy of this research and are not a major U.S institutional investor, you are instructed not to read, rely on or reproduce the contents hereof, and to destroy this research or return it to CorpResearch or to Enclave. Analyst(s) preparing this report are employees of CorpResearch who are resident outside the United States and are not associated persons or employees of any US registered broker-dealer. Therefore, the analyst(s) are not be subject to Rule 2711 of the Financial Industry Regulatory Authority (FINRA) or to Regulation AC adopted by the U.S Securities and Exchange Commission (SEC) which among other things, restrict communications with a subject company, public appearances and personal trading in securities by a research analyst. Any major U.S Institutional investor wishing to effect transactions in any securities referred to herein or options thereon should do so by contacting a representative of Enclave Capital LLC.

Retail – M. Josefina Güell – 2013-05-24 Please see important US Regulatory Disclosures on Subject Companies at the end of this document.