Equity Weekly

Equity Research - Monday, August 10, 2009

Index value Weekly Change,% Weekly Turnover

Baltic Indices
280 Estonia 321.6 7.95% €2,5m

265 Last week the OMXT index improved by 7.95% W-o-W and ended the week at
321.6 points. The weekly turnover, which was mostly the result of retail activity,
reached €2.5m. Interest in Ekspress Grupp (+34.4% W-o-W) and Tallinna
250
Kaubamaja (+23.6% W-o-W) was stronger than usually. Somewhat higher
activity was seen in Olympic Entertainment Group (+15.1% W-o-W), Baltika
235 AS (0% W-o-W) and Norcedon International AS (+7.1% W-o-W) as well.

220
Latvia 268.5 3.80% €94,5k
205
7-May 21-May 4-Jun 18-Jun 2-Jul 16-Jul 30-Jul
Market remained quiet as total weekly turnover amounted just LVL 66k, however
Baltic Benchmark OMX Tallinn* market finished week on positive note, OMX Riga index adding 3.80% to 268.46
OMX Riga* OMX Vilnius* points. The most actively traded share and biggest gainer was Liepajas
* Relativ e to Baltic Benchmark Source: Reuters, Swedbank Metalurgs which rose by 21.43% to LVL 1.02 thanks to some buying interest
from retail and a bigger buyer. Other shares had smaller turnover.

Last Weekly Weekly P/E P/BV

Estonia (in €) Close Change Volume Trail. 4Q 09F Last Q 09F
Lithuania 209.5 8.17% €3,3m
Arco Vara 0.15  15.4% 470684 -0.2 -1.9 0.3 0.4
Baltika 0.55 0.0% 315831 -1.3 -2.0 0.8 0.7
Eesti Telekom 4.51  4.9% 84564 7.7 9.5 3.0 2.5 The OMXV performed well last week also. The index improved by 8.17% W-o-W
Ekspress Grupp 0.82  34.4% 41120 4.9 3.6 0.4 0.3 and closed at 209.5 points on Friday.
Harju Elekter 1.70  8.3% 24332 21.1 21.6 1.1 1.1 Reporting season of 2Q results on the way. Again, TEO LT was by far the most
Järvevana 0.28  7.7% 34597
liquid stock in the Baltics: the stock gained 5.6% W-o-W and closed at LTL 1.32.
Merko Ehitus 3.80  13.4% 66754 13.2 -29.6 0.5 0.5
Financial stocks were popular as well: Ukio Bankas closed 1.43% up at LTL
Nordecon International 0.91  7.1% 170923 4.1 -17.2 0.6 0.6
Norma 2.67  2.7% 2794 9.0 -26.3 0.6 0.6
0.71, while Snoras closed flat at LTL 0.59.
Olympic Entertainment Group 0.61  15.1% 128394 -3.2 -28.9 0.8 0.7
Silvano Fashion Group 0.42  20.0% 261163 -1.5 -31.0 0.5 0.4
Tallink
Tallinna Kaubamaja
0.34
3.51
 9.7%
 23.6%
1375729
83800
49.3
-61.3
-36.3
371.3
0.4
1.3
0.3
1.2 Estonia
Tallinna Vesi 8.35  -0.6% 41897 8.9 9.0 2.2 1.9
Viisnurk 0.46  4.5% 163794 137.2 2.9 0.5 0.4

Last Weekly Weekly P/E P/BV Olympic Entertainment Group published Q2 figures, notably the revenue
Latvia (in LVL) Close Change Volume Trail. 4Q 09F Last Q 09F fall has stabilized after sharp drop in Q1, but the Baltic gaming market still
Grindeks 3.73  0.8%
 6.4%
2210 4.0 5.4 0.8 0.7
looks problematic, which limits upside potential as nearly 2/3 sales comes
Latvian Gas 4.31 2566 8.5 0.6
Latvian Shipping Company 0.49  4.3% 12484 1.9 1.4 0.2 0.2 from that region. Sales reached € 30.4m, down 31.7% Y-o-Y, and net loss in
Latvijas Balzams 1.30 0.0% 1004 4.4 0.3 Q2 amounted to €16m. Losses from liquidating of Ukraine business are
Liepajas Metalurgs 1.02  21.4% 14427 0.9 0.2
booked at around €13m after 1H09. We do not exclude possibility of smaller
Olainfarm 0.62 0.0% 11428 -7.7 24.9 0.6 0.5
SAF Tehnika 0.60  -13.0% 5310 -2.0 0.9 0.2 0.2
write downs related to equipment disposal/sale in 2H.
Valmiera Fibre Glass 0.36  5.9% 10390 0.7 0.3
Ventspils Nafta 0.97  -3.0% 4502 2.8 0.3
Harju Elekter (HAE) published its Q2 2009 results which were mostly in line
Last Weekly Weekly P/E P/BV with our forecasts. Total sales declined by 27.2% Y-o-Y to €11m in Q2. In
Lithuania (in LT L) Close Change Volume Trail. 4Q 09F Last Q 09F 1H the revenue amounted to €22.6m, down by 19.6% Y-o-Y. The net profit
Apranga
City Service
2.05
5.37
 8.5%
0.0%
176316
22876
15.8
9.4
-3.1
6.4
0.8
1.6
0.8
1.3
reached €0.5m in Q2 (-60% Y-o-Y) and the respective margin declined from
Grigiskes 0.57  -1.7% 363456 -7.5 0.5 7.4% in Q2 2008 to 4.1% in Q2 2009.
Invalda 1.47  0.7% 87943 -0.5 0.4
Klaipedos Nafta 0.97  2.1% 282884 12.3 0.8 Ekspress Grupp (EEG) published its Q2 2009 results which were weaker
Lietuvos Dujos 1.55  17.4% 367490 18.2 11.6 0.4 0.4 than expected. Group sales fell over 22% Y-o-Y to €17.2m in Q2 and by
Lietuvos Energija 2.10  2.4% 122913 -40.1 0.5 20.2% to €34.1m in H1 2009. EEG ended the Q2 in profit in amount of
Lietuvos Juru Laivininkyste
Lifosa
0.38 0.0%
27.30  4.2%
78513
8845
-1.9
3.6
0.4
0.7
€262k (-80.7% Y-o-Y). The half-year result ended in the red (€-862k, -142%
Panevezio Statybos Trestas 2.57  2.8% 162750 1.4 0.4 Y-o-Y) due to a higher loss recorded in Q1 2009.
Pieno Zvaigzdes 2.41  -3.6% 14990 15.5 4.3 0.9 0.8
Rokishkio Suris 2.20  -0.9% 9154 -9.7 0.5 Merko Ehitus (MRK) posted its Q2 2009 figures which were better than
RST 2.02  22.4% 193673 -11.4 0.4 expected both in terms of top and bottom line. Total sales of the company
Sanitas 7.50  -2.6% 3326 -9.2 0.9
amounted to €53.6m in Q2 2009, down by 33.1% Y-o-Y. Due to the difficult
Siauliu Bankas 0.73  4.3% 475114 3.0 0.5
Snaige 0.45  12.5% 1304141 -0.4 0.2
market situation, we saw a strong pressure on the margins. The gross
Snoras 0.59  3.5% 1690193 0.8 0.3 margin declined from 17.9% in Q2 2008 to 9.6% in Q2 2009. Sharp decline
TEO LT 1.32  4.8% 3409322 6.5 6.9 0.9 1.0 was seen both in EBITDA margin and Operating margin as well, which
Ukio Bankas 0.71  1.4% 1643643 0.8 0.3
declined to 4.9% and 4.1% in Q2 2009 (13.4% and 12.8% in Q2 2008).
Source: Reuters, Swedbank

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Equity Research – Swedbank Markets Page 1 of 6

 Equity Weekly – August 10, 2009

Profits for the quarter reached € 2.6m (-70.1% Y-o-Y in Q2) with the margin of 4.8%, down
from the 10.8% in Q2 2008.
Last week Nordecon International AS (NCN) made several announcements of new
construction contracts signed. The first one was agreed by NCN subsidiaries Nordecon
Infra AS with Nordecon Infra SIA as a joint bidders and AS Pärnu Vesi. The contract is for
the reconstruction and expansion of Pärnu town water and sewage network. The price of
the contract is approx. €4.2m (excl. VAT) and the construction works will start in September
2009 and end in November 2011.
Second contract was signed also between Nordecon Infra AS with AS Napal as a joint
bidders and OÜ Paikre to design and build Rääma waste disposal site in Pärnu town. The
price of the contract is approx. €3.5m (excl. VAT) and the construction works start in
August 2009 and will end by September 2011.
The last construction contract announced made was agreed in Latvia between Nordecon
Infra SIA’s subsidiary P/S BRT and SIA Talsu Namu Parvalde for the construction and
building of water-supply, waste water system networks and waste water treatment plant. In
total 31 kilometers of water networks and 21 kilometers of waste water networks are being
reconstructed or expanded. The price of the contract is approx. €4.1m. The construction
works are estimated to last from August 2009 to July 2011.
Tallink posted July traffic volumes. Total number of passengers shipped increased by
16.3% YoY and exceeded million passengers for the first time in company’s history
(1.054m). Cargo volumes dropped by 21.5% YoY and drop was evidenced on all routes. As
current results were broadly in line with our expectations, it didn’t have an impact on the
valuation.

Latvia
Grindeks posted 6m 2009results, which were better than we expected. 2Q sales were 5%
up at LVL15.6m, EBITDA was LVL3.3m (+32% YoY), quarterly net profit was LVL2.2m
(+46.5% YoY).

Lithuania
In July 2009, the retail turnover (including VAT) of Apranga decreased 20.5% YoY to LTL
31.7m (€9.2m): 22% down in Lithuania and 28% in Latvia, and an increase of 8% in
Estonia. During January-July the retail turnover (including VAT) made LTL 219.4m
(€63.5m), a drop of 20% YoY. Currently Apranga operates 118 stores in Baltic States: 78 in
Lithuania, 31 in Latvia, and 9 in Estonia.
In July Rokiskio Suris’ consolidated sales made LTL 51.6m (€14.9m), i.e. 19% less than a
year ago. In January-July, sales totaled LTL 325.2m (€94.2m), i.e. 14.5% down YoY.
Siauliu Bankas was granted a convertible loan of up to €30 m from the European Bank for
Reconstruction and Development (EBRD).
Ukio Bankas’ consolidated pre-audited net profit in 1H2009 made LTL 6.2m (€1.8m). The
unconsolidated net profit of Ukio Bankas totaled LTL 4.6m (€1.3m).
In 1H2009, the operating income of Rytu Skirstomieji Tinklai remained flat YoY at LTL
612.2m (€177.3m). Preliminary pre-audited operating result is a net loss of LTL 6.5m
(€1.9m), compared to net profit of LTL 8.4m (€2.4m). The loss occurred due to the
unplanned temporary stop of Ignalina nuclear power plant which led to increase of
purchased electricity cost.
In 1H2009, sales of Klaipedos Nafta dropped 15% YoY to LTL 55.7m (€16.1m). Pre-
audited profit was down 21% to LTL 16.5m (€4.8m). The transshipment result for July was
634.6k tons of oil products, which adds to 4378.6k tons of oil products in January-July.
Preliminary earnings make LTL 11.4m (€3.3m) in July and LTL 67.1m (€19.4m) during 7
months of 2009.
Panevezio Statybos Trestas convenes the extraordinary general meeting on September
11, 2009.

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Equity Research – Swedbank Markets Page 2 of 6

 Equity Weekly – August 10, 2009

Investor Calendar:
Date Description
Estonia
10.-14.08.2009 NCN - Interim report Q2 2009

Latvia
10.08.2009 RRR1R - Extraordinary General Meeting
14.08.2009 DPK1R - Extraordinary General Meeting
17.08.2009 OLK1R - 6M non audited financial report

Lithuania
13.08.2009 GUB1L - Repeated Annual General Meeting
14.08.2009 VBL1L - 6M sales figures. Consolidated interim report 6M 2009
17.08.2009 LFO1L - Sales revenue in July 2009

Source: NASDAQ OMX

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Equity Research – Swedbank Markets Page 3 of 6

 Equity Weekly – August 10, 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
Under 41%
Recommendations by the 10 aug 2009 Rev iew
No of shares Part of Total 49%
Accum
Buy 9 41% ulate
Accumulate 1 5% 5%
Hold 1 5%
Under Review 11 50% Hold
5%

Equity Research – Swedbank Markets Page 4 of 5

 Equity Weekly – August 10, 2009

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