Beruflich Dokumente
Kultur Dokumente
Initiation
Overweight
InRetail
INR.LM, INRETC1 PE
Price: $19.50
(1-212) 622-6735
andrea.f.teixeira@jpmorgan.com
J.P. Morgan Securities LLC
23
21
19
Nov-11
Feb-12
May-12
Aug-12
Nov-12
Abs
Rel
YTD
-3.0%
-10.5%
1m
-3.5%
-1.4%
3m
-3.0%
-9.6%
12m
-3.0%
-13.7%
2012E
2013E
2014E
1.57
17.6
32.5
419
4,839
2.00
14.7
25.5
543
5,842
2.63
11.3
19.4
736
7,079
Company Data
Price ($)
Date Of Price
52-week Range ($)
Mkt Cap ($ mn)
Fiscal Year End
Shares O/S (mn)
Price Target ($)
Price Target End Date
19.50
12-Nov-12
21.90 - 19.10
2,004.74
Dec
103
24.00
31 Dec 13
See page 25 for analyst certification and important disclosures, including non-US analyst disclosures.
J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that
the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single
factor in making their investment decision.
www.morganmarkets.com
This document is being provided for the exclusive use of GIANCARLO CHANG at BANCO CENTRAL DE
RESERVA DEL PERU
Andrea Teixeira, CFA
(1-212) 622-6735
andrea.f.teixeira@jpmorgan.com
Table of Contents
Investment Thesis ....................................................................3
Risks to Rating and Price Target ............................................4
Company Description ..............................................................4
Company Outlook: A Diversified Retailer ..............................5
Food Retail: 80% of Market Up for Grabs...............................6
Drugstores: Sizable Opportunity ..........................................11
Real Estate: KeyCompetitive Advantage..............................16
Financial Outlook ...................................................................19
Valuation .................................................................................20
This document is being provided for the exclusive use of GIANCARLO CHANG at BANCO CENTRAL DE
RESERVA DEL PERU
Andrea Teixeira, CFA
(1-212) 622-6735
andrea.f.teixeira@jpmorgan.com
Investment Thesis
InRetail (INRETC1 PE)
Overweight
Scarcity value at the leading retailer in the fastest growing market in LatAm
InRetail is the only publicly traded retailer and a pure-play in the Peruvian market.
The company includes: (1) the second largest supermarket chain (Supermercados
Peruanos, 47% of EBITDA13E) in Peru, (2) the biggest drugstore chain (InkaFarma,
29% of EBITDA13E), and (3) a complementary shopping center business (Real
Plaza, 24% of EBITDA13E).
Only local food retailer, which allows for on-the-ground expertise and faster
decision process on new locations
InRetail is the only pure local retail chain in Peru, competing with Chilean retailers
Falabella and Cencosud in supermarkets. InRetail is a subsidiary of Intercorp, the
second largest consumer bank in Peru, and third largest in Peru overall, which gives
it access to capital markets and also allows for management talent exchange.
Intercorp also has several other consumer businesses that were not part of the IPO,
including department store Oeschle, credit division Financiera Uno, home
improvement chain Promart, and real estate broker Milenia. Its private equity arm,
Nexxus Group, also owns quick service restaurants and movie theaters.
Location, location, location.InRetail/related entities own two-thirds of real
estate on which it operates
InRetail offers a unique position in valuable areas in Lima and the rest of Peru as it
and related companies own two-thirds of the real estate on which the supermarkets
operate, as well as 10 of the 13 malls. All rents that the parent charges are at market
prices of c2-2.5% of sales, and are audited frequently. Also, the planned expansion of
supermarkets for 2013 and part of 2014 is already set. InRetail started as a real estate
developer in 2001 and was later broadened with the acquisition of Supermercados
Peruanos in 2003. Approximately 90% of the proceeds from the IPO will be used to
expand operations of five existing malls, as well opening of four new shopping
centers.
Largest network of pharmacies with highly recognized brand
InkaFarma has the vastest network of stores among all retailers in Peru. The
company has one of the most recognized brands in Peru. The presence of a
pharmacist in each store allows for first aid for many Peruvians who do not have
health insurance and likely would not get healthcare otherwise, increasing loyalty.
Economic backdrop remains solid
Peruvian GDP grew 6.5% in the last five years and our economics and debt strategy
team in the Andeans, led by Benjamin Ramsey, expects GDP in Peru to grow at 6%
in 2013 and 2014, respectively, with inflation within target range and a positive FX
outlook for further appreciation of the Peruvian soles. The main driver of the strong
performance has been domestic consumption. Recent delays of the Conga mining
project has not spilled over into the other foreign direct investments in the country.
Stock should retain current premium against peers, supporting our OW rating
InRetail is trading at a 19% premium to peers based on a P/E13E of 24.7, due to the
29% expected CAGR in EPS over next three years vs 21% for peers. We
This document is being provided for the exclusive use of GIANCARLO CHANG at BANCO CENTRAL DE
RESERVA DEL PERU
Andrea Teixeira, CFA
(1-212) 622-6735
andrea.f.teixeira@jpmorgan.com
acknowledge that growth is back-end loaded but its dominant presence and scarcity
value in Peru is worth the risk-reward balance, in our view.
Company Description
InRetail is a multi-format retailer operating exclusively in Peru with nationwide
presence and leading market positions in three business segments: supermarkets
(57% of 2011 EBITDA), drugstores (25% of 2011 EBITDA) and shopping centers
(18% of 2011 EBITDA). We expect an EBITDA CAGR of 29% in the next three
years. In supermarkets, InRetail is the second largest with 33% share, only behind
Cencosuds 44% share, while in drugstores it is the leader with 23% share. We
expect InRetail to have net sales of US$1.8bn in 2012 and EBITDA of US$156m.
InRetail had its initial public offering on October 3rd (solely primary), raising
US$460m for $20 per share. J.P. Morgan acted as global coordinator and joint
bookrunner in the transaction. It trades on the Lima Stock Exchange under the ticker
INRETC1 PE and the price is quoted in US dollars.
This document is being provided for the exclusive use of GIANCARLO CHANG at BANCO CENTRAL DE
RESERVA DEL PERU
Andrea Teixeira, CFA
(1-212) 622-6735
andrea.f.teixeira@jpmorgan.com
Market Position
Sales area GLA m2
# Stores/Properties
Net sales
Adjusted EBITDA*
EBITDA margin (%)
Sales % of total
EBITDA % of total
Supermarkts
Pharmacy
Shopping Centers
Combined
Supermarcados
Peruanos SA
2nd
207,407sqm
78
735.1
38.3
5.2%
62.1%
39.0%
Inkafarma
InRetail
1st
N/A
505
413.1
37
9.0%
34.9%
37.7%
1st
274,744 sqm
15
38.8
23.8
61.3%
3.3%
24.2%
1184.6
98.2
8.3%
This document is being provided for the exclusive use of GIANCARLO CHANG at BANCO CENTRAL DE
RESERVA DEL PERU
Andrea Teixeira, CFA
(1-212) 622-6735
andrea.f.teixeira@jpmorgan.com
Inteligo Bank,
9.8%
Free Float,
22.4%
NG Capital
Partners,
8.1%
NG Capital
Partners, 6.3%
Intercorp,
79.0%
Intercorp and
Subsidiaries,
71.3%
This document is being provided for the exclusive use of GIANCARLO CHANG at BANCO CENTRAL DE
RESERVA DEL PERU
Andrea Teixeira, CFA
(1-212) 622-6735
andrea.f.teixeira@jpmorgan.com
Vivanda
EconoMax
2005
2005
2011
42
15
3,960
1,290
1,117
1,380
54
13
10
NA
14.3
9.7
8.5
NA
2006
67.2%
8.1%
11.4%
NA
2009
74.5%
13.5%
9.4%
NA
2011
76.7%
12.4%
8.6%
1.2%
2006
5,1%
NA
2.5%
NA
2009
5.6%
8.6%
8.3%
NA
2011
6.0%
10.4%
10.4%
-7.2%
EBITDA Margin
2001
# of stores (1Q12)
Percentage Sales
Plaza Vea
Mom & pops represent more than 2/3 of market. We foresee sizable opportunity
on the back of a decline in market informality with the reduction of mom & pop
players. This opens a market for the larger players that have good funding,
negotiating power with suppliers and a national footprint. In Peru, the formal market
accounts for 28% of the total market, compared to 46% in Brazil, 43% in Colombia,
41% in Argentina and 50% in Mexico. As we will discuss below, we believe
Supermercados Peruanos is well positioned to gain share from mom & pops and
informal as it decentralizes its logistic network and is better able to supply regions
outside of Lima.
This document is being provided for the exclusive use of GIANCARLO CHANG at BANCO CENTRAL DE
RESERVA DEL PERU
Latin America Equity Research
13 November 2012
Figure 3: 72% of Market Still Up for Grabs Mom & Pops dominate
70%
46%
41%
43%
Argentina
Colombia
50%
28%
Peru
Brazil
Mexico
Chile
SPSA is the second largest player and a pure Peruvian chain. As discussed
above, Supermercados Peruanos is the second largest food retail chain in Peru, with
33% market share. Also, it is the only pure Peruvian player among the top three.
Cencosud (Chilean retailer) is the leader with 44% market share, while Chilean
retailer Falabella (through Tottus) has 23% share and is the third largest player. It is
also interesting to note that Supermercados Peruanoss market share in Lima is much
lower than outside Lima, and therefore there should be a lot of opportunity to
increase its presence in Lima. We believe it has a competitive advantage on this front
as it is well penetrated in regions outside Lima while competitors are more focused in
Lima. With the decentralization of its logistics network that we will discuss further,
we believe Supermercados Peruanos may even accelerate market share outside Lima,
especially gaining share from mom & pops and informal players.
58%
27%
28%
13%
14%
45%
44%
34%
33%
21%
23%
25,5%
11,0%
Lima
2006
2007
SPSA
2010
Cencosud
2011
Tottus
Market Share
9,2%
Outside Lima
Avg. Store EBITAR Margin
Real estate is key. Owned and group related real estate represents 64% of
Supermercados Peruanoss stores and 70% of selling floor. Owning real estate allows
for faster expansion to capture market opportunities and is an important hedge
against any significant hike in land prices driven by the development of the region or
This document is being provided for the exclusive use of GIANCARLO CHANG at BANCO CENTRAL DE
RESERVA DEL PERU
Andrea Teixeira, CFA
(1-212) 622-6735
andrea.f.teixeira@jpmorgan.com
neighborhood. We believe it also gives the company a good competitive position and
can protect it against rental pricing wars as contracts mature.
42%
37%
22%
33%
39%
36%
30%
% of sales
# of stores
Square Meters
28%
Third Paties
Group Related
Own
Secured locations for 2013 sales floor growth. InRetail already has secured 92% of
its 25 stores openings in 2013 and already has 13 secured lands for openings beyond
2014. The company appears to be on track to deliver the remaining 2012 planned
openings.
Table 3: 2013 Spots Availability Secured
Secured in 000 Sqm
Secured Land spots
Target Openings
% secured
2012
19.3
10
10
100%
2013
44.3
23
25
92%
2014 Onwards
32.8
13
NA
NA
This document is being provided for the exclusive use of GIANCARLO CHANG at BANCO CENTRAL DE
RESERVA DEL PERU
Andrea Teixeira, CFA
(1-212) 622-6735
andrea.f.teixeira@jpmorgan.com
Private label brands should continue supporting healthy gross margin. The
penetration of private label brands at supermarkets have been gradually increasing as
the company extends its private label products portfolio.
Figure 7: Private Label increasing penetration and boosting gross margin
7,5%
5,5%
2006
4,9%
2007
6,4%
6,4%
2009
2010
5,6%
2008
10
Hypermarkets
3,000
Supermarkets
1,200
2,280
1,700
3,280
2,550
8 years
5 years
4 years
270,000
NA
5 years
3 years
130,000
8.9%
5.8%
7.2%
5.3%
6.3%
8.3%
2011
This document is being provided for the exclusive use of GIANCARLO CHANG at BANCO CENTRAL DE
RESERVA DEL PERU
Latin America Equity Research
13 November 2012
1.525
1.465
2008
2009
1.708
1.858
2010
2011
1.225
2007
863
855
9.4%
8.2%
581
7.3%
7.2%
6.1%
451
4.9%
256
Brazil
Chile
Argentina
Mexico
Colombia
Peru
Brazil
Chile
Argentina
Mexico
Colombia
Peru
11
This document is being provided for the exclusive use of GIANCARLO CHANG at BANCO CENTRAL DE
RESERVA DEL PERU
Latin America Equity Research
13 November 2012
2.8
2.2
16%
1.8
20%
18%
22%
1.3
2000
2005
2010
2015
2000
2005
2010
2015
Source: INEI
Source: INEI
Mom & pops account for 60% of the market. The drugstore market in Peru is
highly fragmented, with mom & pops accounting for 60% of sales and 83% of total
stores. As larger chains have higher sales per store and better purchasing, we believe
it should continue gaining share over mom & pops and expect the market to
gradually consolidate.
Figure 13:Modern chains account for 40% of total market sales but less on a store base
60%
7.749
40%
1.543
Stores
Sales Share
Modern Chains
Mom&pops
InkaFarma is the leading player and looks well positioned to continue gaining
share. InkaFarma has 47% share of the modern drugstore market and 28.3% of total
market, making it the leader. The second largest player is FASA, which has 23%
market share followed by Arcangel with 14% share. InkaFarma represented 35% of
sales and 38% of InRetails EBITDA in the last 12 months ended September 30,
2012.
12
This document is being provided for the exclusive use of GIANCARLO CHANG at BANCO CENTRAL DE
RESERVA DEL PERU
Latin America Equity Research
13 November 2012
Pharmace
utical
Market
Mom&pops,
40%
Modern Retail,
60%
600
Modern
Retail
InkaFarma,
47.1%
Others, 52.9%
100
Others
23%
Fasa, BTL, Mif arma
Source:IMS
14%
Arcangel
8%
Boticas&Salud
Felicidad
5% 3%
Others
Mom&pops
Other chains
InkaFarma
13
This document is being provided for the exclusive use of GIANCARLO CHANG at BANCO CENTRAL DE
RESERVA DEL PERU
Andrea Teixeira, CFA
(1-212) 622-6735
andrea.f.teixeira@jpmorgan.com
Figure 17: Private Label accounts for 76% of gross profit and 29% of
sales
24%
25.5%
26.9%
27.0%
2010
2011
29.6%
22.4%
71%
18.9%
76%
29%
Sales
Private Labels
Gross Profit
2007
Non-Private Label
2008
2009
Jun 12
0%
2%
4%
5%
5M
6M
8%
10%
-4%
-14%
1M
2M
3M
4M
12M
24M
36M
EBITDA margin
Source: Company reports
This document is being provided for the exclusive use of GIANCARLO CHANG at BANCO CENTRAL DE
RESERVA DEL PERU
Andrea Teixeira, CFA
(1-212) 622-6735
andrea.f.teixeira@jpmorgan.com
currently), which is a negative. However, it reduces the expenses for security and
inventory shrinkage. Management does not plan to change the layout of the stores.
Below we detail a mature InkaFarma store profit & loss statement. While InkaFarma
sells one-fourth of a Brazilian drugstores average sales, the cost of setting up is just
about 15% of the CAPEX to open a drugstore in Brazil.
Table 5: InkaFarma Store Economics
US$ '000, unless otherwise noted
Mature Store P&L
Sales
Gross Profit
Payroll
Rent
Other store expenses
EBITDA
CAPEX
Maintenance CAPEX
US$ '000
1,235
333
(101)
(31)
(28)
174
60
3.7
% of sales
100.0%
27.0%
-8.2%
-2.5%
-2.3%
14.1%
4.9%
0.3%
15
This document is being provided for the exclusive use of GIANCARLO CHANG at BANCO CENTRAL DE
RESERVA DEL PERU
Latin America Equity Research
13 November 2012
# of Malls
27
23
17
19
2008
2009
2010
Provinces
18
2011
964
450
463
2010
2011
764
644
15
912
229
229
2008
2009
Lima
Provinces
Lima
18%
20%
2,2
13%
Peru
2,9
21%
2,4
1,5
Brazil
Colombia
Chile
Peru
Brazil
Argentina
Chile
Colombia
Source: ACCEP
3,2
Source: ACCEP
InRetail looks well positioned to continue growing its real estate business.
Operating through its Real Plaza brand, InRetail is the leading shopping center
operator in Peru. Currently, InRetail operates nine owned shopping centers, related
parties own four shopping centers and it has two owned stand-alone stores. The real
estate division represented 3% of sales and 24% of adjusted EBITDA in the last 12
months ended September 30, 2012.
16
This document is being provided for the exclusive use of GIANCARLO CHANG at BANCO CENTRAL DE
RESERVA DEL PERU
Latin America Equity Research
13 November 2012
222
193
143
75
Others; 47%
88
Open Plaza;
20%
44
2006
2007
2008
2009
2010
2011
2012
Profitable portfolio of malls. InRetail has highly profitable locations in its portfolio,
with highly successful assets as was the case with Chiclayo. We expect InRetail to
close 2012 with 275k square meters of gross leasable areas.
Table 6: Assets Portfolio Breakdown
Property Type
GLA ('000)
Yield
M
M
PC
PC
M
M
M
M
PC
SA
SA
29
13
18
13
33
3
25
28
7
11
14
20.9%
13.1%
12.2%
12.0%
11.6%
11.4%
11.0%
8.9%
4.2%
10.5%
8.8%
SA
M
PC
PC
2
29
10
15
222
27.3%
16.7%
8.9%
7.1%
Commercial Properties
Chiclayo
Juliaca
Pro
Santa Clara
Primavera N/C/S
Trujillo
Arequipa
Huancayo
Nuevo Chimbote
San Juan
Jr Union
Related Party Malls
E. Central
Centro Civico
Piura
Chorrillos
Total GLA 2011
Source: Company reports. M=Mall, PC=Power Center; SA=Stand Alone retail store.
20.9%
15.4%
12.2%
8.9%
8.4%
9.3%
8.3%
8.0%
Year 1
Year 2
11.4%
10.3%
Year 3
Chiclayo
Year 4
Pro
Year 5
Trujillo
This document is being provided for the exclusive use of GIANCARLO CHANG at BANCO CENTRAL DE
RESERVA DEL PERU
Latin America Equity Research
13 November 2012
275
222
193
143
88
75
44
2006
2007
2008
2009
2010
2011
2012
Margins have been under pressure in real estate due to strong launches and preoperating expenses. Real estate business EBITDA margin (including real estate
revaluation) has declined from 91% to 81.6% in 2011, mostly explained by the
aggressive addition of GLA over past years that is not fully matured and also by the
pre-operating expenses related to malls under development that should be diluted as
opened malls mature. As 60-85% of GLA is leased to anchors, the maturation
process is faster than in other regions, such as Brazil, where anchor stores account for
40-60%. We believe that when the market develops further with smaller satellite
brands coming to Peru and anchor stores percentage of total GLA decreases, we
should see an improvement in margins as satellite stores typically carry higher
margins for the mall developer.
Figure 28: Net Sales
In US$m
%
28,3
89.6%
20,9
15,7
11,4
2008
88.8%
2009
2010
2011
2010
Revenues (US$mn)
18
2011
EBITDA Margin
This document is being provided for the exclusive use of GIANCARLO CHANG at BANCO CENTRAL DE
RESERVA DEL PERU
Andrea Teixeira, CFA
(1-212) 622-6735
andrea.f.teixeira@jpmorgan.com
Financial Outlook
We expect InRetails sales to grow at a 21% CAGR, EBITDA to increase at a 29%
CAGR and EPS at 29%, over the FY12E-15E period. Our key assumptions are:
Floor space: We expect floor space to expand by 23% and 21% in 2013 for
SPSA and InkaFarma, respectively. This should come from a more aggressive
store opening plan.
Same store sales: We expect low to mid-single digits SSS for supermarkets in
2012-2013 and low to mid-teens SSS for drugstores.
EBITDA margin: on the consolidated level, we expect a 70bps improvement in
the EBITDA margin in 2013, followed by 130bps in 2014. Management has
engaged in several initiatives that should lead to around 100bp improvement in
the EBITDA margin for the supermarket division by 2015, as detailed below:
(1) Elimination of a non-recurring negative impact from the San Borja
store closing in 2012. This store was closed for remodeling and had
negatively impacted the EBITDA margin by 30bp as it was one of
the top selling locations.
(2) Private label credit card agreement with parent Interbank allows
for 1% cash rebate on sales on the private label card within
Supermercados Peruanos stores. The private label card accounts
for 30% of sales, so there should be a 0.3% positive impact on
margins.
(3) Logistics supply chain efficiencies should lead to a 10bp
improvement in EBITDA margin in 2013. The company is
improving distribution to 90% direct from 75% of merchandise
previously at the supermarkets distribution and handling.
(4) Opening stores have a positive impact on margin, as preoperational expenses surpass the maturation curve impact.
Other initiatives to improve store level efficiencies include:
(1) Multi-functional employees at the store level consultant Mr. Eric
Skog, who helped N-rated Almacenes Exito previously. We
believe this initiative should lead to a 20bp improvement in
EBITDA margin by 2013.
(2) Centralized food processing facility that is scheduled to be full
scale next year will lead to a redefined layout of stores and
increased selling area and productivity from 800 to 200 bakers,
for instance. The main impact of centralization of the food
processing facility are twofold: (1) free up space at stores for
additional selling; and (2) reduce the number of store employees.
SAP implementation at the front end is done for both SPSA and InkaFarma,
so the initial negative impact of stockouts in same stores sales is behind the
company. InRetail is currently working on the financial and accounting modules
implementation.
EPS: We expect an EPS CAGR of 29% for 2015E-2012.
19
This document is being provided for the exclusive use of GIANCARLO CHANG at BANCO CENTRAL DE
RESERVA DEL PERU
Andrea Teixeira, CFA
(1-212) 622-6735
andrea.f.teixeira@jpmorgan.com
Valuation
We are initiating on InRetail with an Overweight rating and a US$24 endDecember 2013 price target. Our price target implies 23% upside and is based on a
blended valuation of: (1) comparable peer multiples, (2) sum of the parts (SOP) of
supermarkets, drugstores and mall businesses, and (3) discounted cash flow analysis.
The valuation based on similar companies indicates a fair P/E 12-month forward of
21.4x, which is based on the median that LatAm retailers are trading at, as shown
below. This method implies a $20 fair price for InRetail shares.
Table 7: Valuation Based on Peer Multiples
Fair P/E 12-M FWD
2014 EPS
Fair Value (PEN$)
2013 PEN$
Dec-13 Fair Price
21.4
2.63
56.3
2.78
20.0
Total Upside
2.6%
Source: JPM estimates
28.9
21.3
25.6
21.5
16.7
18.3
21.4
Source: JPM estimates for companies except Cencosud, which are from BBG consensus
We also assessed a sum-of-the parts valuation using EV/EBITDA 13E at the median
of comparable companies in each segment (supermarkets, drugstores, and malls) and
applying a conglomerate discount of 15%, as investors can't buy each business
separately, and do not have visibility of separate balance sheets, we derive a fair
price of $25 per share, as detailed below:
Table 1: Sum of the parts - Median Multiples
EV/EBITDA 13E
Supermarkets
PCAR4
WALMEXV MM
EXITO CB
CENCOSUD CI*
FALAB CI
Median
10.8
13.8
13.7
9.9
13.1
13.1
Drugs
HYPE3 BZ
RADL3 BZ*
BPHA3 BZ*
CFR CI*
Median
10.7
15.6
13.7
9.8
12.2
Malls
BRML3 BZ*
MULT3 BZ*
IGTA3 BZ*
SSBR3 BZ*
Median
Source: JPMorgan estimates and Bloomberg consensus for companies noted with *
20
14.6
16.0
14.6
11.7
14.6
This document is being provided for the exclusive use of GIANCARLO CHANG at BANCO CENTRAL DE
RESERVA DEL PERU
Andrea Teixeira, CFA
(1-212) 622-6735
andrea.f.teixeira@jpmorgan.com
325
13.1
4,250
(B) INKAFARMA
EBITDA 2014E (PEN mn)
Drugstores EV/EBITDA 2013E
Enterprise Value (PEN mn)
186
12.1
2,278
(C) MALLS
EBITDA 2014E (PEN mn)
Malls EV/EBITDA 2013E
Enterprise Value (PEN mn)
224
14.6
3,273
CONTROLLING COMPANY (A + B + C)
Enterprise Value (PEN mn)
(-) Net Debt 2014E (PEN mn)
(=) Equity Value (PEN mn)
(-) Conglomerate Discount
(=) Fair Equity Value (PEN mn)
Fair Equity Value (USD mn)
Price per Share in US$
9,801
1,872
7,928
15%
6739
2577
25
DCF shows additional value that may be unlocked after high growth phase
As normally happens in high growth companies, valuation of InRetail based on
discounted cash flows shows the highest potential upside among the three methods
used. However, we do acknowledge the high execution risk and lack of visibility to
predict real estate prices and construction costs of the malls. Also, we highlight that
the company will remain free cash flow negative until 2015, and may need further
funding.
Table 3: DCF Derivation Implies Fair Price of $27
Peruvian Soles in Millions, unless otherwise noted
Equity Value (PEN mn)
Total Number of Shares (Million)
Fair Price (PEN) per share
Fair Price (US$) per share
7,628
103
74
27
We averaged the three valuation methods described above to derive the PT,
including: (1) peer valuation of similar retailers in the region, (2) SOP, and (3) DCF.
The blended Dec-13 price target is $24, implying 23% upside.
Table 4: Blended Price Target of $24, assumes equal weight to DCF, Multiples and SOP
Price per Share
Blended PT
DCF Weight
P/E Weight
SOP Weight
Dec-13 PT (rounded)
Potential Upside
33%
33%
33%
26.7
20.2
25.1
24.0
23%
21
This document is being provided for the exclusive use of GIANCARLO CHANG at BANCO CENTRAL DE
RESERVA DEL PERU
Latin America Equity Research
13 November 2012
2012E
4,839
(3,510)
1,329
(1,022)
307
(56)
(89)
161
112
273
167
(1,158)
(718)
6.0%
(165)
2013E
5,842
(4,222)
1,619
(1,220)
400
(90)
(104)
205
144
349
158
(1,125)
(618)
2014E
7,079
(5,070)
2,008
(1,446)
562
(228)
(108)
226
173
399
136
(940)
350
(55)
2015E
8,547
(6,123)
2,425
(1,730)
694
(238)
(146)
311
210
520
169
(913)
150
(74)
2016E
9,685
(6,949)
2,737
(1,950)
787
(191)
(188)
408
236
643
84
(708)
20
2017E
10,847
(7,796)
3,052
(2,155)
896
(171)
(227)
498
245
744
102
(590)
256
2018E
12,043
(8,659)
3,384
(2,400)
984
(139)
(259)
586
264
850
111
(586)
(100)
275
2019E
12,840
(9,234)
3,606
(2,544)
1,062
(123)
(287)
651
265
917
85
(291)
(100)
610
2020E
13,674
(9,836)
3,838
(2,692)
1,145
(102)
(319)
724
264
989
89
(303)
(100)
675
2021E
14,549
(10,468)
4,081
(2,849)
1,232
(81)
(352)
799
264
1,063
93
(315)
(50)
791
2022E
15,466
(11,131)
4,336
(3,013)
1,322
(78)
(381)
863
265
1,128
98
(328)
898
(618)
1.0
(49)
2.0
(59)
3.0
14
4.0
165
5.0
159
6.0
316
7.0
313
8.0
329
9.0
335
2023E
16,429
(11,826)
4,603
(3,186)
1,417
(74)
(411)
932
266
1,198
47
(333)
912
17,336
10.0
6,103
High EPS CAGR of 29% and scarcity value justify the 19% premium to peers
InRetail is trading at 25.5x P/E13E, a premium of 23% to peers that we believe is
explained by higher expected growth of 29% against 21% for peers. ROE is low at
6.8% vs. peers 9.8% but we believe is explained by ownership of a land bank that is
yet to generate returns. On a growth adjusted basis we think InRetail looks attractive,
trading at 1x vs. 1.1 for peers.
Table 9: Trading at to peers premium on 2013 multiples
MKT CAP
VOLUME
P/E
InRetail
InRetail @ PT
US$ mn
2,005
2,467
3M US$mn
NA
NA
12E
32.6
40.1
13E
25.5
31.4
LatAm Peers
Exito
Falabella
Walmex
CBD
Cencosud
Soriana
Median
8,378
24,052
51,735
11,600
12,363
5,913
12,363
3.2
6.8
46.9
21.4
17.0
2.6
17.0
32.3
26.6
28.8
26.8
21.1
19.7
26.8
28.4
20.5
25.2
20.8
16.0
18.1
20.8
EV/EBITDA
Adj.
EV/EBITDA
EBITDA
CAGR
12-15E
29.0%
29.0%
13E
12.4
14.7
14E
9.7
11.3
13E
8.1
9.4
14E
7.2
8.4
12-15E
29.2%
29.2%
9.5%
21.2%
14.7%
22.9%
30.7%
8.9%
21.2%
13.7
13.1
13.8
10.8
9.9
9.1
13.1
12.2
11.2
12.2
9.4
8.6
8.3
11.2
9.6
9.1
9.7
7.6
6.9
6.3
9.1
8.5
7.8
8.5
6.6
6.0
5.8
7.8
15.6%
17.6%
13.7%
15.7%
15.8%
7.7%
15.7%
PEG
ROE
EPS CAGR
14E
19.4
23.9
13E
0.8
1.0
12E
6.9%
6.9%
26.6
17.2
21.9
17.4
13.3
16.5
17.4
4.3
1.0
1.7
1.1
0.8
1.9
1.1
6.4%
15.1%
17.7%
9.8%
9.6%
9.9%
9.8%
Source: JPM estimates, except Cencosud, which are from BBG. Adj./ EBITDA adjusts for different corporate tax rate across regions.
22
Analyst
Andrea Teixeira
Andrea Teixeira
Andrea Teixeira
Andrea Teixeira
Andrea Teixeira
Andrea Teixeira
BBG Estimates
Andrea Teixeira
This document is being provided for the exclusive use of GIANCARLO CHANG at BANCO CENTRAL DE
RESERVA DEL PERU
Andrea Teixeira, CFA
(1-212) 622-6735
andrea.f.teixeira@jpmorgan.com
Financial Outlook
Table 10: Income Statement
Total revenue
Net Sales - SPSA
Net Sales - InkaFarma
Net Sales - Real Estate
Intercompany Revenues Adjustments
(-) Total COGS
Gross Profit
Gross Margin
Cash SG&A Expenses
Depreciation & Amortization
Other Operating Expenses (Income)
InRetail Real Estate Mark-to-Market Holdco Elimination
Combined Mark-to-Market Adjustment
Operating profit (EBIT)
EBIT Margin
Net Financial Result
Income Taxes at Subs
InRetail Holdco Taxes on Dividends from Subs
Net Income
EBITDA (Nominal PEN$mm) - Accounting
EBITDA Margin
Adj. EBITDA
Adj. EBITDA Margin
2011
4,241
2,820
1,333
114
(27)
(3,086)
1,155
27.2%
(812)
(101)
(21)
(10)
51
262
6.2%
(77)
(63)
122
363
8.6%
312
7.3%
2012E
4,839
3,081
1,635
152
(29)
(3,510)
1,329
27.5%
(895)
(112)
(16)
307
6.3%
(56)
(89)
161
419
8.7%
419
8.7%
2013E
5,842
3,746
1,908
228
(40)
(4,222)
1,619
27.7%
(1,066)
(144)
(10)
400
6.8%
(90)
(104)
205
543
9.3%
543
9.3%
2014E
7,079
4,590
2,158
382
(52)
(5,070)
2,008
28.4%
(1,261)
(173)
(12)
562
7.9%
(162)
(130)
270
736
10.4%
736
10.4%
2015E
8,547
5,701
2,423
490
(67)
(6,123)
2,425
28.4%
(1,508)
(210)
(13)
694
8.1%
(187)
(162)
346
904
10.6%
904
10.6%
2012E
2013E
2014E
2015E
47
615
105
1,190
1,515
1,891
3,407
4,596
44
532
119
1,504
2,561
2,078
4,640
6,143
53
587
144
975
3,543
2,078
5,621
6,596
64
705
175
1,124
4,309
2,078
6,388
7,512
77
851
211
1,281
5,013
2,078
7,091
8,373
Payables to Suppliers
Other Current Liabilities
Current liabilities
Total Debt
Deferred Taxes
Other Long-Term Liabilities
Stockholders' Equity
Total Liabilities
153
1,119
1,561
167
18
1,732
4,596
175
1,215
1,703
174
28
3,024
6,143
211
1,462
1,703
174
28
3,229
6,596
256
1,758
2,053
174
28
3,499
7,512
309
2,123
2,203
174
28
3,845
8,373
Net Debt
1,138
895
1,512
1,872
2,061
23
This document is being provided for the exclusive use of GIANCARLO CHANG at BANCO CENTRAL DE
RESERVA DEL PERU
Andrea Teixeira, CFA
(1-212) 622-6735
andrea.f.teixeira@jpmorgan.com
FY11A
4,241
(3,086)
1,155
(812)
262
312
(77)
(21)
185
FY12E
4,839
(3,510)
1,329
(895)
307
419
(56)
(16)
250
FY13E
5,842
(4,222)
1,619
(1,066)
400
543
(90)
(10)
310
FY14E
7,079
(5,070)
2,008
(1,261)
562
736
(162)
(12)
400
Income taxes
Tax rate
(63)
(33.9%)
(89)
(35.7%)
(104)
(33.7%)
(130)
(32.4%)
122
103
1.19
FY11A
101
161
103
1.57
FY12E
112
205
103
2.00
FY13E
144
270
103
2.63
FY14E
173
67
296
167
270
158
507
136
580
Capex
Free cash flow
Free cash flow / share
367
-
1,158
-
1,125
-
940
-
Dividends
Balance Sheet
Cash and cash equivalents
Accounts receivable
Current assets
PP&E
Goodwill
Total assets
Short-term Debt
Current liabilities
FY11A
424
47
1,190
1,515
4,596
1,119
FY12E
808
44
1,504
2,561
6,143
1,215
FY13E
191
53
975
3,543
6,596
1,462
FY14E
181
64
1,124
4,309
7,512
1,758
Long-term Debt
Total liabilities
4,596
6,143
6,596
7,512
Shareholders' equity
1,732
3,024
3,229
3,499
FY11A
15.4%
5.2%
7.5%
7.5%
(30.0%)
FY12E
14.1%
7.0%
34.4%
17.0%
31.6%
FY13E
20.7%
6.6%
29.8%
30.2%
27.5%
FY14E
21.2%
5.6%
35.4%
40.7%
31.6%
27.2%
6.2%
7.3%
27.5%
6.3%
8.7%
27.7%
6.8%
9.3%
28.4%
7.9%
10.4%
5.0
1.5
42.8
4.1
1.3
17.6
32.5
3.1
1.1
14.7
25.5
2.8
1.0
11.3
19.4
Ratio Analysis
Sales growth
Same store sales growth
EBITDA growth
EBIT growth
EPS growth - operating
Gross margin
EBIT margin
EBITDA margin
Inventory growth
Debt / EBITDA
Enterprise value / Revenues
Enterprise value / EBITDA
P/E
24
This document is being provided for the exclusive use of GIANCARLO CHANG at BANCO CENTRAL DE
RESERVA DEL PERU
Latin America Equity Research
13 November 2012
Analyst Certification: The research analyst(s) denoted by an AC on the cover of this report certifies (or, where multiple research
analysts are primarily responsible for this report, the research analyst denoted by an AC on the cover or within the document
individually certifies, with respect to each security or issuer that the research analyst covers in this research) that: (1) all of the views
expressed in this report accurately reflect his or her personal views about any and all of the subject securities or issuers; and (2) no part of
any of the research analyst's compensation was, is, or will be directly or indirectly related to the specific recommendations or views
expressed by the research analyst(s) in this report.
Important Disclosures
Lead or Co-manager: J.P. Morgan acted as lead or co-manager in a public offering of equity and/or debt securities for InRetail within
the past 12 months.
Client: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as clients: InRetail.
Client/Investment Banking: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as investment
banking clients: InRetail.
Client/Non-Investment Banking, Securities-Related: J.P. Morgan currently has, or had within the past 12 months, the following
company(ies) as clients, and the services provided were non-investment-banking, securities-related: InRetail.
Client/Non-Securities-Related: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as clients,
and the services provided were non-securities-related: InRetail.
Investment Banking (past 12 months): J.P. Morgan received in the past 12 months compensation for investment banking InRetail.
Investment Banking (next 3 months): J.P. Morgan expects to receive, or intends to seek, compensation for investment banking
services in the next three months from InRetail.
Non-Investment Banking Compensation: J.P. Morgan has received compensation in the past 12 months for products or services
other than investment banking from InRetail.
Company-Specific Disclosures: Important disclosures, including price charts, are available for compendium reports and all J.P. Morgan
covered companies by visiting https://mm.jpmorgan.com/disclosures/company, calling 1-800-477-0406, or emailing
research.disclosure.inquiries@jpmorgan.com with your request.
InRetail (INR.LM, INRETC1 PE) Price Chart
36
30
24
Price($) 18
12
0
Oct
12
Oct
12
Oct
12
Nov
12
Nov
12
Nov
12
Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.
The chart(s) show J.P. Morgan's continuing coverage of the stocks; the current analysts may or may not have covered it over the entire
period.
J.P. Morgan ratings or designations: OW = Overweight, N= Neutral, UW = Underweight, NR = Not Rated
Explanation of Equity Research Ratings, Designations and Analyst(s) Coverage Universe:
J.P. Morgan uses the following rating system: Overweight [Over the next six to twelve months, we expect this stock will outperform the
average total return of the stocks in the analysts (or the analysts teams) coverage universe.] Neutral [Over the next six to twelve
25
This document is being provided for the exclusive use of GIANCARLO CHANG at BANCO CENTRAL DE
RESERVA DEL PERU
Andrea Teixeira, CFA
(1-212) 622-6735
andrea.f.teixeira@jpmorgan.com
months, we expect this stock will perform in line with the average total return of the stocks in the analysts (or the analysts teams)
coverage universe.] Underweight [Over the next six to twelve months, we expect this stock will underperform the average total return of
the stocks in the analysts (or the analysts teams) coverage universe.] Not Rated (NR): J.P. Morgan has removed the rating and, if
applicable, the price target, for this stock because of either a lack of a sufficient fundamental basis or for legal, regulatory or policy
reasons. The previous rating and, if applicable, the price target, no longer should be relied upon. An NR designation is not a
recommendation or a rating. In our Asia (ex-Australia) and U.K. small- and mid-cap equity research, each stocks expected total return is
compared to the expected total return of a benchmark country market index, not to those analysts coverage universe. If it does not appear
in the Important Disclosures section of this report, the certifying analysts coverage universe can be found on J.P. Morgans research
website, www.morganmarkets.com.
Coverage Universe: Teixeira, Andrea: Almacenes Exito (IMI.CN), AmilPar (AMIL3.SA), B2W Compania Global do Varejo
(BTOW3.SA), CBD (PCAR4.SA), CBD ADR (CBD), CFR Pharmaceuticals (CFR.SN), Cencosud (CEN.SN), Comerci
(COMEUBC.MX), DASA (DASA3.SA), Falabella (FAL.SN), Fleury (FLRY3.SA), Guararapes Confeccoes (GUAR3.SA), Hering
(HGTX3.SA), Lojas Americanas (Non-Voting) (LAME4.SA), Lojas Americanas (Voting) (LAME3.SA), Lojas Renner (LREN3.SA),
OdontoPrev (ODPV3.SA), Organizacion Soriana (SORIANAB.MX), Restoque (LLIS3.SA), Wal-Mart de Mexico (WALMEXV.MX)
J.P. Morgan Equity Research Ratings Distribution, as of September 28, 2012
J.P. Morgan Global Equity Research Coverage
IB clients*
JPMS Equity Research Coverage
IB clients*
Overweight
(buy)
44%
52%
42%
69%
Neutral
(hold)
44%
46%
48%
61%
Underweight
(sell)
12%
34%
10%
53%
Equity Valuation and Risks: For valuation methodology and risks associated with covered companies or price targets for covered
companies, please see the most recent company-specific research report at http://www.morganmarkets.com , contact the primary analyst
or your J.P. Morgan representative, or email research.disclosure.inquiries@jpmorgan.com.
Equity Analysts' Compensation: The equity research analysts responsible for the preparation of this report receive compensation based
upon various factors, including the quality and accuracy of research, client feedback, competitive factors, and overall firm revenues.
Registration of non-US Analysts: Unless otherwise noted, the non-US analysts listed on the front of this report are employees of non-US
affiliates of JPMS, are not registered/qualified as research analysts under NASD/NYSE rules, may not be associated persons of JPMS,
and may not be subject to FINRA Rule 2711 and NYSE Rule 472 restrictions on communications with covered companies, public
appearances, and trading securities held by a research analyst account.
Other Disclosures
J.P. Morgan ("JPM") is the global brand name for J.P. Morgan Securities LLC ("JPMS") and its affiliates worldwide. J.P. Morgan Cazenove is a marketing
name for the U.K. investment banking businesses and EMEA cash equities and equity research businesses of JPMorgan Chase & Co. and its subsidiaries.
Options related research: If the information contained herein regards options related research, such information is available only to persons who have
received the proper option risk disclosure documents. For a copy of the Option Clearing Corporation's Characteristics and Risks of Standardized Options,
please contact your J.P. Morgan Representative or visit the OCC's website at http://www.optionsclearing.com/publications/risks/riskstoc.pdf
Legal Entities Disclosures
U.S.: JPMS is a member of NYSE, FINRA, SIPC and the NFA. JPMorgan Chase Bank, N.A. is a member of FDIC and is authorized and regulated in the
UK by the Financial Services Authority. U.K.: J.P. Morgan Securities plc (JPMS plc) is a member of the London Stock Exchange and is authorized and
regulated by the Financial Services Authority. Registered in England & Wales No. 2711006. Registered Office 25 Bank Street, London, E14 5JP. South
Africa: J.P. Morgan Equities Limited is a member of the Johannesburg Securities Exchange and is regulated by the FSB. Hong Kong: J.P. Morgan
Securities (Asia Pacific) Limited (CE number AAJ321) is regulated by the Hong Kong Monetary Authority and the Securities and Futures Commission in
Hong Kong. Korea: J.P. Morgan Securities (Far East) Ltd, Seoul Branch, is regulated by the Korea Financial Supervisory Service. Australia: J.P. Morgan
Australia Limited (ABN 52 002 888 011/AFS Licence No: 238188) is regulated by ASIC and J.P. Morgan Securities Australia Limited (ABN 61 003 245
234/AFS Licence No: 238066) is a Market Participant with the ASX and regulated by ASIC. Taiwan: J.P.Morgan Securities (Taiwan) Limited is a
participant of the Taiwan Stock Exchange (company-type) and regulated by the Taiwan Securities and Futures Bureau. India: J.P. Morgan India Private
Limited, having its registered office at J.P. Morgan Tower, Off. C.S.T. Road, Kalina, Santacruz East, Mumbai - 400098, is a member of the National Stock
Exchange of India Limited (SEBI Registration Number - INB 230675231/INF 230675231/INE 230675231) and Bombay Stock Exchange Limited (SEBI
Registration Number - INB 010675237/INF 010675237) and is regulated by Securities and Exchange Board of India. Thailand: JPMorgan Securities
(Thailand) Limited is a member of the Stock Exchange of Thailand and is regulated by the Ministry of Finance and the Securities and Exchange
Commission. Indonesia: PT J.P. Morgan Securities Indonesia is a member of the Indonesia Stock Exchange and is regulated by the BAPEPAM LK.
26
This document is being provided for the exclusive use of GIANCARLO CHANG at BANCO CENTRAL DE
RESERVA DEL PERU
Andrea Teixeira, CFA
(1-212) 622-6735
andrea.f.teixeira@jpmorgan.com
Philippines: J.P. Morgan Securities Philippines Inc. is a member of the Philippine Stock Exchange and is regulated by the Securities and Exchange
Commission. Brazil: Banco J.P. Morgan S.A. is regulated by the Comissao de Valores Mobiliarios (CVM) and by the Central Bank of Brazil. Mexico: J.P.
Morgan Casa de Bolsa, S.A. de C.V., J.P. Morgan Grupo Financiero is a member of the Mexican Stock Exchange and authorized to act as a broker dealer
by the National Banking and Securities Exchange Commission. Singapore: This material is issued and distributed in Singapore by J.P. Morgan Securities
Singapore Private Limited (JPMSS) [MICA (P) 088/04/2012 and Co. Reg. No.: 199405335R] which is a member of the Singapore Exchange Securities
Trading Limited and is regulated by the Monetary Authority of Singapore (MAS) and/or JPMorgan Chase Bank, N.A., Singapore branch (JPMCB
Singapore) which is regulated by the MAS. Malaysia: This material is issued and distributed in Malaysia by JPMorgan Securities (Malaysia) Sdn Bhd
(18146-X) which is a Participating Organization of Bursa Malaysia Berhad and a holder of Capital Markets Services License issued by the Securities
Commission in Malaysia. Pakistan: J. P. Morgan Pakistan Broking (Pvt.) Ltd is a member of the Karachi Stock Exchange and regulated by the Securities
and Exchange Commission of Pakistan. Saudi Arabia: J.P. Morgan Saudi Arabia Ltd. is authorized by the Capital Market Authority of the Kingdom of
Saudi Arabia (CMA) to carry out dealing as an agent, arranging, advising and custody, with respect to securities business under licence number 35-07079
and its registered address is at 8th Floor, Al-Faisaliyah Tower, King Fahad Road, P.O. Box 51907, Riyadh 11553, Kingdom of Saudi Arabia. Dubai:
JPMorgan Chase Bank, N.A., Dubai Branch is regulated by the Dubai Financial Services Authority (DFSA) and its registered address is Dubai
International Financial Centre - Building 3, Level 7, PO Box 506551, Dubai, UAE.
Country and Region Specific Disclosures
U.K. and European Economic Area (EEA): Unless specified to the contrary, issued and approved for distribution in the U.K. and the EEA by JPMS plc.
Investment research issued by JPMS plc has been prepared in accordance with JPMS plc's policies for managing conflicts of interest arising as a result of
publication and distribution of investment research. Many European regulators require a firm to establish, implement and maintain such a policy. This
report has been issued in the U.K. only to persons of a kind described in Article 19 (5), 38, 47 and 49 of the Financial Services and Markets Act 2000
(Financial Promotion) Order 2005 (all such persons being referred to as "relevant persons"). This document must not be acted on or relied on by persons
who are not relevant persons. Any investment or investment activity to which this document relates is only available to relevant persons and will be
engaged in only with relevant persons. In other EEA countries, the report has been issued to persons regarded as professional investors (or equivalent) in
their home jurisdiction. Australia: This material is issued and distributed by JPMSAL in Australia to "wholesale clients" only. JPMSAL does not issue or
distribute this material to "retail clients". The recipient of this material must not distribute it to any third party or outside Australia without the prior written
consent of JPMSAL. For the purposes of this paragraph the terms "wholesale client" and "retail client" have the meanings given to them in section 761G of
the Corporations Act 2001. Germany: This material is distributed in Germany by J.P. Morgan Securities plc, Frankfurt Branch and J.P.Morgan Chase
Bank, N.A., Frankfurt Branch which are regulated by the Bundesanstalt fr Finanzdienstleistungsaufsicht. Hong Kong: The 1% ownership disclosure as of
the previous month end satisfies the requirements under Paragraph 16.5(a) of the Hong Kong Code of Conduct for Persons Licensed by or Registered with
the Securities and Futures Commission. (For research published within the first ten days of the month, the disclosure may be based on the month end data
from two months prior.) J.P. Morgan Broking (Hong Kong) Limited is the liquidity provider/market maker for derivative warrants, callable bull bear
contracts and stock options listed on the Stock Exchange of Hong Kong Limited. An updated list can be found on HKEx website: http://www.hkex.com.hk.
Japan: There is a risk that a loss may occur due to a change in the price of the shares in the case of share trading, and that a loss may occur due to the
exchange rate in the case of foreign share trading. In the case of share trading, JPMorgan Securities Japan Co., Ltd., will be receiving a brokerage fee and
consumption tax (shouhizei) calculated by multiplying the executed price by the commission rate which was individually agreed between JPMorgan
Securities Japan Co., Ltd., and the customer in advance. Financial Instruments Firms: JPMorgan Securities Japan Co., Ltd., Kanto Local Finance Bureau
(kinsho) No. 82 Participating Association / Japan Securities Dealers Association, The Financial Futures Association of Japan, Type II Financial
Instruments Firms Association and Japan Investment Advisers Association. Korea: This report may have been edited or contributed to from time to time
by affiliates of J.P. Morgan Securities (Far East) Ltd, Seoul Branch. Singapore: JPMSS and/or its affiliates may have a holding in any of the securities
discussed in this report; for securities where the holding is 1% or greater, the specific holding is disclosed in the Important Disclosures section above.
India: For private circulation only, not for sale. Pakistan: For private circulation only, not for sale. New Zealand: This material is issued and distributed
by JPMSAL in New Zealand only to persons whose principal business is the investment of money or who, in the course of and for the purposes of their
business, habitually invest money. JPMSAL does not issue or distribute this material to members of "the public" as determined in accordance with section
3 of the Securities Act 1978. The recipient of this material must not distribute it to any third party or outside New Zealand without the prior written consent
of JPMSAL. Canada: The information contained herein is not, and under no circumstances is to be construed as, a prospectus, an advertisement, a public
offering, an offer to sell securities described herein, or solicitation of an offer to buy securities described herein, in Canada or any province or territory
thereof. Any offer or sale of the securities described herein in Canada will be made only under an exemption from the requirements to file a prospectus
with the relevant Canadian securities regulators and only by a dealer properly registered under applicable securities laws or, alternatively, pursuant to an
exemption from the dealer registration requirement in the relevant province or territory of Canada in which such offer or sale is made. The information
contained herein is under no circumstances to be construed as investment advice in any province or territory of Canada and is not tailored to the needs of
the recipient. To the extent that the information contained herein references securities of an issuer incorporated, formed or created under the laws of
Canada or a province or territory of Canada, any trades in such securities must be conducted through a dealer registered in Canada. No securities
commission or similar regulatory authority in Canada has reviewed or in any way passed judgment upon these materials, the information contained herein
or the merits of the securities described herein, and any representation to the contrary is an offence. Dubai: This report has been issued to persons regarded
as professional clients as defined under the DFSA rules.
General: Additional information is available upon request. Information has been obtained from sources believed to be reliable but JPMorgan Chase & Co.
or its affiliates and/or subsidiaries (collectively J.P. Morgan) do not warrant its completeness or accuracy except with respect to any disclosures relative to
JPMS and/or its affiliates and the analyst's involvement with the issuer that is the subject of the research. All pricing is as of the close of market for the
securities discussed, unless otherwise stated. Opinions and estimates constitute our judgment as of the date of this material and are subject to change
without notice. Past performance is not indicative of future results. This material is not intended as an offer or solicitation for the purchase or sale of any
financial instrument. The opinions and recommendations herein do not take into account individual client circumstances, objectives, or needs and are not
intended as recommendations of particular securities, financial instruments or strategies to particular clients. The recipient of this report must make its own
independent decisions regarding any securities or financial instruments mentioned herein. JPMS distributes in the U.S. research published by non-U.S.
affiliates and accepts responsibility for its contents. Periodic updates may be provided on companies/industries based on company specific developments or
announcements, market conditions or any other publicly available information. Clients should contact analysts and execute transactions through a J.P.
Morgan subsidiary or affiliate in their home jurisdiction unless governing law permits otherwise.
27
This document is being provided for the exclusive use of GIANCARLO CHANG at BANCO CENTRAL DE
RESERVA DEL PERU
Andrea Teixeira, CFA
(1-212) 622-6735
andrea.f.teixeira@jpmorgan.com
Copyright 2012 JPMorgan Chase & Co. All rights reserved. This report or any portion hereof may not be reprinted, sold or
redistributed without the written consent of J.P. Morgan. #$J&098$#*P
28