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Quarterly Earnings Forecast
BRE Bank Securities
BRE Bank Securities
BRE Bank Securities
1 February 2007 Periodic Report
Equity Market
Quarterly Earnings
Forecast
WIG 54 558
Average 2006 P/E 21.4
4Q 2006
Average 2007 P/E 19.4
Avg dialy trading volume (3M) PLN 1449m
EPS growth for of selected securities* Ze spółek
Banks. We expect strong fourth-quarter performance from banks across
AGO RA
the board. Sales will increase on the back of growing retail lending volumes.
PGF
The earnings figures will also reflect an uptrend in corporate loans which we
C O MARC H
ELEKTRO BUDO W A
expect to continue throughout FY2007. Millennium sets the tone for the
ELDO RADO
industry, with earnings figures above analysts’ expectations. Overall, market
EURO C AS H
expectations are so high that even if bank earnings are just-in-line, they will
AS S EC O PO LAND
still make for a great fourth quarter.
KĘTY
KGHM
Gas&Oil. From the standpoint of gas and oil companies, the macro-
FARMAC O L environment in Q4 2006 deteriorated dramatically, especially when it came
PRO S PER to average refining margins which plunged 46% YoY and 29% QoQ. PKN’s
PKN O RLEN and Lotos’s earnings figures will furthermore reflect the negative effects of
TO RFARM inventory revaluations after a 14% QoQ drop in crude prices.
PRO KO M
LO TO S Telecommunications. Looking at the weak Q4 performance of TPSA, we
-45% -35% -25% -15% -5% 5% 15% 25% 35% 45%
do not expect much from Netia. Asset impairments and growing losses gen-
erated by P4 will bring the net loss further down.
*calculated for: 1Q’06-4Q’06 / 4Q’05-3Q’06
Media. The fourth quarter is the best season for media companies. For Q4
2006, we expect the seasonality factors to be further underpinned by post-
ponement of advertising expenses from the weak Q3 later into the year.
Analysts:
Marta Jeżewska IT. The shortage of new IT contracts, especially prominent in the public sec-
(+48 22) 697 47 37 tor, affected most IT companies in Q4’06. Only ComArch and Asseco Po-
marta.jeżewska@dibre.com.pl land (f. Softbank) might show a year-over-year improvement in earnings;
Michał Marczak the rest will record a decline which, however, has already been discounted
(+48 22) 697 47 38 by investors. FY2007 is gearing up to be much better. We see a good
michal.marczak@dibre.com.pl chance that the government will finally start draining its project pipeline,
boosting the business of IT companies across the board.
Andrzej Lis
(+48 22) 697 47 42
andrzej.lis@dibre.com.pl Construction. We expect construction companies to post good Q4 results,
though not as good as the favorable weather factors would imply. Warm
Krzysztof Radojewski
temperatures were offset by increasing costs of contract delivery. We do not
(+48 22) 697 47 01
krzysztof.radojewski@dibre.com.pl expect the Q4 earnings news to trigger a further rally in construction stocks.
Kamil Kliszcz Pharmaceuticals. According to IMS, drug sales in Poland accelerated in
(+48 22) 697 47 06
the fourth quarter relative to the first nine months of the year, to over 4%.
kamil.kliszcz@dibre.com.pl
The earnings performance of pharmaceutical distributors should therefore
be in line with expectations. We predict that the Q4 earnings news will have
a neutral impact on pharmaceutical wholesaler stocks.
Retail. Robust sales news coming from foreign FMCG retailers suggests
that the last three months of FY2006 were equally successful for Polish
companies. Our focus is on Eldorado, which we expect to top analysts’ ex-
pectations.
BRE Bank Securities does not rule out offering brokerage services to an issuer of securities being the subject of a recommendation. Information concerning a conflict of interest arising in
1 February 2007
connection with issuing a recommendation (should such a conflict exist) is located on the final page of this report.
Quarterly Earnings Forecast
BRE Bank Securities
BRE Bank Securities
Financial Sector
BPH Accumulate
Banks
Analyst: P/E 2006 22.4 P/BV 2006 4.4 Current price PLN 1040
Marta Jeżewska P/E 2007 18.7 P/BV 2007 4.1 Target price PLN 1022
(PLN m) 4Q 2006F 4Q 2005 change 2006F 2005 change 2007F 2006F change
Net interest income 563 507 11.0% 2185 1981 10.3% 2375 2185 8.7%
Net interest margin 3.4% 3.4% 3.5% 3.6% 3.5% 3.5%
Rev. from bank. oper. 908 817 11.1% 3530 3084 14.5% 3829 3530 8.5%
Operating profit 597 452 31.9% 1974 1561 26.4% 2336 1974 18.3%
Gross profit 531 393 35.0% 1706 1294 31.8% 2032 1706 19.1%
Net profit 416 311 33.9% 1334 1027 29.8% 1601 1334 20.1%
We estimate that BPH’s consolidated Q4’06 bottom line will reach PLN 416m, well over the Q3 figure thanks to the impact of
bad debt sale on December 18th, 2006, expected to bring PLN 100m in pre-tax profit. Excluding this one-off, the Q4’06 profit
would amount to PLN 335m. The quarterly results will be strong and still unaffected by the merger pressures. The last quarter
of the year is always good for banks, and BPH will be no exception. That said, growth in Q4 was slower for several reasons:
First, the strong Q4 2005 earnings figures make for a high comparable base. Second, BPH has been selling exclusively zloty
mortgage loans for two quarters, which is gradually decreasing that segment’s income. The Q4 earnings figures will be better
than in Q3’06 in spite of the growing risk of volume and account losses. Growth drivers included a lower tax rate, and the lack
of losses in other net operating income (two factors that depressed the Q3 income figures – neither is a recurring event).
BZ WBK Accumulate
Banks
Analyst: P/E 2006 25.0 P/BV 2006 5.2 Current price PLN 267.5
Marta Jeżewska P/E 2007 21.7 P/BV 2007 4.8 Target price PLN 233.7
(PLN m) 4Q 2006F 4Q 2005 change 2006F 2005 change 2007F 2006F change
Net interest income 269 243 10.7% 1021 909 12.3% 1164 1021 14.0%
Net interest margin 3.4% 3.2% 3.3% 3.2% 3.5% 3.3%
Rev. from bank. oper. 590 497 18.8% 2347 1896 23.8% 2622 2347 11.7%
Operating profit 281 191 47.0% 1131 751 50.6% 1327 1131 17.4%
Gross profit 260 158 65.0% 1088 689 57.7% 1235 1088 13.5%
Net profit 187 104 80.7% 780 516 51.2% 900 780 15.3%
We predict that BZ WBK will net PLN 187m for Q4’06. Revenue from banking operations will increase on seasonally higher
consumer loan sales, income from asset management and securities brokerage which increased relative to Q3’06, the im-
pending upswing in corporate banking (mainly SMEs), and the growing popularity of zloty mortgage loans. On the cost side,
we predict a 3.6% rise on a QoQ basis, which is less than recorded a year earlier (over 9% QoQ increase). The actual income
figures might fall short of our estimates due to higher end-of-year expenses. BZ WBK will show much higher provision charges
in Q4’06 than in the preceding quarter, similar to Q4’05. We anticipate based on the low costs of risk demonstrated in the first
nine months of the year that an annual portfolio revision will lead to higher charge-offs in Q4.
1 February 2007 2
Quarterly Earnings Forecast
BRE Bank Securities
BRE Bank Securities
Handlowy Hold
Banks
Analyst: P/E 2006 18.5 P/BV 2006 2.2 Current price PLN 89.5
Marta Jeżewska P/E 2007 18.9 P/BV 2007 2.1 Target price PLN 91.5
(PLN m) 4Q 2006F 4Q 2005 change 2006F 2005 change 2007F 2006F change
Net interest income 269 258 4.3% 1 046 1 026 2.0% 1 171 1 046 11.9%
Net interest margin 2.9% 3.2% 3.0% 3.1% 3.1% 3.0%
Rev. from bank. oper. 541 541 0.1% 2 056 2 232 -7.9% 2 277 2 056 10.7%
Operating profit 185 163 13.4% 764 765 -0.2% 823 764 7.8%
Gross profit 173 160 8.4% 804 793 1.3% 765 804 -4.8%
Net profit 140 111 26.0% 631 616 2.3% 620 631 -1.7%
Our recurring Q4’06 net profit estimate for Bank Handlowy is PLN 140m. There will not be much change on a quarter on quar-
ter basis, but the quality of income will be better. In place of a positive figure under Provisions, we expect higher income from
the CitiFinancial network and other retail sales channels, as well as the first effects of the improvement in the Corporate seg-
ment (according to the bank’s CEO, an upswing in that department can already be felt). Aside from income, expenses will also
reflect positive trends, owing to a continued cost-control strategy successfully implemented in the first three quarters, and rela-
tive to the high Q4’05 comparable cost base which included a restructuring provision against severance pays.
ING BSK Accumulate
Banks
Analyst: P/E 2006 16.7 P/BV 2006 2.8 Current price PLN 835.0
Marta Jeżewska P/E 2007 18.2 P/BV 2007 2.7 Target price PLN 857.2
(PLN m) 4Q 2006F 4Q 2005 change 2006F 2005 change 2007F 2006F change
Net interest income 253 208 21.6% 944 721 30.9% 1 078 944 14.2%
Net interest margin 2.2% 2.0% 2.1% 1.9% 2.2% 2.1%
Rev. from bank. oper. 464 394 17.8% 1 759 1 641 7.2% 1 979 1 759 12.5%
Operating profit 154 111 38.7% 578 561 3.0% 747 578 29.1%
Gross profit 205 174 17.7% 805 706 14.0% 748 805 -7.0%
Net profit 163 131 24.1% 652 549 18.6% 596 652 -8.5%
We estimate that ING BSK will turn a consolidated net profit of PLN 163 million for Q4’06. Interest income was driven by the
growing corporate lending business, and possibly also seasonally higher sales of certain loan products. ING BSK’s positioning
in the segment is weaker, but the Christmas shopping season is usually very good for banks across the board. The YoY cost
growth in Q4’06 was slower than in the first nine months of the year and relative to Q4’05 (when severance pay provisions
were recognized). We believe that ING BSK recognized net recoveries instead of provision charge-offs in Q4’06, but those are
only estimates based on our own feeling, and the bank’s earlier declarations of continued, though smaller recoveries.
1 February 2007 3
Quarterly Earnings Forecast
BRE Bank Securities
BRE Bank Securities
Kredyt Bank Hold
Banks
Analyst: P/E 2006 13.1 P/BV 2006 2.8 Current price PLN 21.30
Marta Jeżewska P/E 2007 19.7 P/BV 2007 2.6 Target price PLN 21.66
(PLN m) 4Q 2006F 4Q 2005 change 2006F 2005 change 2007F 2006F change
Net interest income 193 214 -9.9% 773 753 2.6% 888 773 14.9%
Net interest margin 3.4% 4.1% 3.5% 3.6% 3.8% 3.5%
Rev. from bank. oper. 303 333 -9.0% 1 176 1 209 -2.7% 1 347 1 176 14.5%
Operating profit 72 103 -30.2% 436 329 32.3% 424 436 -2.7%
Gross profit 66 69 -4.7% 458 321 42.4% 362 458 -20.8%
Net profit 54 91 -40.8% 440 416 5.8% 293 440 -33.4%
We estimate that Kredyt Bank will earn a consolidated PLN 54 million net in Q4’06, marking a 40% plunge on a Q/Q and Y/Y
basis. We do not attribute the anticipated deterioration in the bottom line to the bank’s reduced activity or lower volume profit-
ability, but rather to the lack of the positive impact of deferred tax asset recognition (the tax rate will be 19%), and provision
reversals (we assume cost of risk at 0.2% of average loans). Going forward, we expect a sustained improvement in recurring
income and costs. The year-over-year decline in interest income was an effect of last year’s recognition of recovered penalty
interest on non-performing loans (ca. PLN 22m). The weakness of recurring interest income (net of the PLN 22m penalty inter-
est, Q4’05 interest income was PLN 192m) was also due to narrower interest margins. We predict that Kredyt Bank’s fee in-
come improved relative to the third quarter, driven by the seasonal upswing in banking product sales in the last quarter of the
year. On a year-over-year basis, fee income, like interest income, will have depreciated as a result of price competition forced
by the ongoing battle for market share, and of a different approach to accounting for loan-related fees. We anticipate a sea-
sonal upturn in expenses in Q4’06, similar to a year earlier. Expenses increased following ca. 20 new branch openings in
Q4’06. On a year-over-year basis, total FY2006 costs increased by an estimated 0.7%, proving Kredyt Bank’s potential to fi-
nance the enlargement of its sales network and operating scale with savings generated in the old cost base.
Pekao Accumulate
Banks
Analyst: P/E 2006 23.2 P/BV 2006 4.6 Current price PLN 250.0
Marta Jeżewska P/E 2007 20.2 P/BV 2007 4.3 Target price PLN 237.6
(PLN m) 4Q 2006F 4Q 2005 change 2006F 2005 change 2007F 2006F change
Net interest income 609 598 1.9% 2 345 2 350 -0.3% 2 613 2 345 11.4%
Net interest margin 3.5% 3.9% 3.5% 3.9% 3.6% 3.5%
Rev. from bank. oper. 1171 1106 5.8% 4 567 4 342 5.2% 5 012 4 567 9.7%
Operating profit 612 526 16.3% 2 330 2 067 12.7% 2 695 2 330 15.6%
Gross profit 584 488 19.7% 2 206 1 874 17.7% 2 550 2 206 15.6%
Net profit 474 406 16.8% 1 794 1 538 16.7% 2 065 1 794 15.1%
We estimate that Pekao will turn a consolidated net profit of PLN 474 million for 4Q’06. The bank was a beneficiary of the up-
swing in consumer demand for cash loans in the Christmas shopping season. Mortgage-loan sales volumes were also driven
by the increasing share of zloty loans in total sales, and the upturn in corporate borrowing which we expect to generate higher
income for the bank in FY2007. In Q3’06, PKO BP recorded excellent cost performance by renegotiating its supplier contracts.
Thanks to those savings, Q4’06 costs will be low. Pekao retained the robust profit growth rate observed in the first nine months
of FY2006. We predict a 17% improvement in the FY2006 income. Looking at its good quality, the upward trend is bound to
continue in the years ahead. We like that growth is generated through consistent income improvement and tight cost control.
For FY2006, we estimate that banking income will increase 5.1%.
1 February 2007 4
Quarterly Earnings Forecast
BRE Bank Securities
BRE Bank Securities
PKO BP Reduce
Banks
Analyst: P/E 2006 23.2 P/BV 2006 4.9 Current price PLN 49.5
Marta Jeżewska P/E 2007 21.2 P/BV 2007 4.3 Target price PLN 41.6
(PLN m) 4Q 2006F 4Q 2005 change 2006F 2005 change 2007F 2006F change
Net interest income 999 906 10.3% 3 792 3 544 7.0% 4 286 3 792 13.0%
Net interest margin 4.0% 3.9% 3.9% 4.0% 4.1% 3.9%
Rev. from bank. oper. 1614 1280 26.1% 6 050 5 699 6.2% 6 854 6 050 13.3%
Operating profit 703 401 75.4% 2 725 2 305 18.2% 3 297 2 725 21.0%
Gross profit 674 460 46.6% 2 678 2 167 23.6% 2 986 2 678 11.5%
Net profit 536 386 38.7% 2 102 1 735 21.2% 2 338 2 102 11.2%
Our Q4’06 profit estimate for PKO BP is PLN 536m. We think that net performance will be driven by robust interest income (up
10% YoY) and even more robust fee income (up 45% YoY). Growth rates will be higher than observed earlier in the year
(cumulative net interest income in Q3 increased 4.2% YoY, and fee income surged 42%). The springboard for that growth was
the strong momentum in the Retail segment, driving PKO BP’s sales (especially loan products) in the Christmas season. F/X
gains and financial income and capital gains will be much higher (see table above) relative to the low FY2005 comparable
base. We also expect positive trends in costs, and predict that they will fall 7.5% YoY. Looking at FY2005, we can say that
there is a seasonal uptrend in PKO BP’s costs in Q4. In their post-Q3 comments, the bank’s management also pointed out
seasonality effects (though without specifying the expected QoQ increase in expenses). Positive income and cost trends
pushed pre-provision operating income growth up over 75% YoY. As costs rose relative to the third quarter, operating income
took a 7% QoQ dip. Furthermore, expect that PKO BP will post provision charge-offs instead of recoveries. We estimate opti-
mistically that the cost of risk will be 0.2% of the average net loans. But our calculations might prove overly conservative look-
ing at the booming market and the historical quarterly impact of cost of risk on operating income. Summing up, we think that
the fourth quarter was very good for PKO BP, reflected primarily in higher income and lower costs, bringing about a consider-
able improvement in operating performance. The bank might show a net profit figure over our estimates provided that the pro-
vision balance was kept in “credit,” or that the Q4’06 costs were as low as in Q3.
1 February 2007 5
Quarterly Earnings Forecast
BRE Bank Securities
BRE Bank Securities
Oil and Gas
Lotos Accumulate
Oil and Gas
Analyst: P/E 2006 7.7 EV/EBITDA 2006 4.4 Current price PLN 45.05
Kamil Kliszcz P/E 2007 7.4 EV/EBITDA 2007 3.9 Target price PLN 59.30
(PLN m) 4Q 2006F 4Q 2005 change 2006F 2005 change 2007F 2006F change
Revenue 3 250 2 955 10.0% 12 907 9 646 33.8% 12 655 12 907 -2.0%
EBITDA 186 507 -63.4% 1 130 1 334 -15.3% 1 296 1 130 14.7%
margin 5.7% 17.2% -66.7% 8.8% 13.8% -36.7% 10.2% 8.8% 17.0%
EBIT 109 433 -74.9% 829 1 070 -22.5% 971 829 17.1%
gross profit 120 454 -73.6% 909 1 138 -20.1% 946 909 4.1%
net profit 81 408 -80.1% 662 915 -27.7% 691 662 4.4%
FY2006 targets will be met despite weak macro
Like PKN Orlen, Lotos was significantly affected by the deteriorating macro-environment in Q4, particularly by narrower refin-
ing margins and a $10 plunge in per-barrel prices of crude oil. We anticipate a 24% decline in EBIT relative to FY2005
(adjusted for one-time PLN 288m impact of asset revaluations), but expect the company to deliver on its FY2006 earnings
guidance which pegs EBIT at PLN 819m and net profit at PLN 657m.
PKN Orlen Buy
Oil and Gas
Analyst: P/E 2006 7.5 EV/EBITDA 2006 4.5 Current price PLN 46.96
Kamil Kliszcz P/E 2007 8.8 EV/EBITDA 2007 4.9 Target price PLN 66.00
(PLN m) 4Q 2006F 4Q 2005 change 2006F 2005 change 2007F* 2006F change
Revenue 11 288 12 969 -13.0% 50 949 41 188 23.7% 49 372 50 949 -3.1%
EBITDA 946 1 018 -7.0% 5 254 6 728 -21.9% 4 847 5 254 -7.8%
margin 8.4% 7.8% 6.8% 10.3% 16.3% -36.9% 9.8% 10.3% -4.8%
EBIT 444 400 11.0% 3 274 4 948 -33.8% 2 808 3 274 -14.2%
gross profit 537 445 20.7% 3 533 5 339 -33.8% 3 017 3 533 -14.6%
net profit 398 314 26.7% 2 670 4 585 -41.8% 2 285 2 670 -14.4%
*Excluding Mazeikiu Nafta
Weaker macro, downtime impact
The average refining margin recorded by PKN Orlen in Q4 was $2.7 a barrel, down over 46% on a YoY basis and 29% relative
to Q3. The Urals/Brent spread was 9% higher than in the corresponding period a year earlier, but 12% lower than in Q3 2006.
Considering the zloty’s appreciation against the dollar, PKN Orlen’s margin (calculated as spread+benchmark margin) plunged
a whopping 30% on a year-over-year basis. Another factor which likely depressed the Q4’06 earnings results was a 14% de-
crease in the price of Brent crude relative to Q3 2006, which, in our opinion, implies a LIFO charge of PLN 200m. The operat-
ing profit figures should also be adjusted for maintenance downtime at Unipetrol and PKN, estimated to cost the company a
combined PLN 117m. All in all, EBIT will have amounted to PLN 334m for the Refining segment (retail+wholesale), and PLN
218m for the Chemical segment (chemical+petrochemical products). Our EBIT estimate for the entire PKN Orlen group is PLN
444m, EBITDA will approximate PLN 946m, and net profit attributable to the parent’s shareholders will amount to PLN 398m.
When considering year-over-year changes in PKN’s earnings, remember that the Q4 2005 EBIT was reduced by one-time
costs of approximately PLN 282m.
1 February 2007 6
Quarterly Earnings Forecast
BRE Bank Securities
BRE Bank Securities
Telecommunications
Netia Sell
Telco
Analyst: P/E 2006 neg. EV/EBITDA 2006 7.4 Current price PLN 4.81
Michał Marczak P/E 2007 neg. EV/EBITDA 2007 6.6 Target price PLN 3.80
(PLN m) 4Q 2006F 4Q 2005 change 2006F 2005 change 2007F 2006F change
Revenue 227.5 237.1 -4.0% 879.5 908.6 -3.2% 971.7 879.5 10.5%
EBITDA 56.3 74.7 -24.7% 216.3 338.8 -36.2% 262.0 216.3 21.2%
margin 24.7% 38.9% -36.5% 24.6% 37.3% -34.0% 27.0% 24.6% 9.7%
EBIT -8.7 10.1 -186.0% -29.6 61.6 -148.1% 16.8 -29.6 -156.8%
gross profit -57.5 8.0 -820.3% -63.0 65.3 -196.5% -47.8 -63.0 -24.2%
net profit -58.7 -11.6 404.4% -64.2 36.8 -274.4% -53.1 -64.2 -17.3%
No help from any direction
We expect Netia’s operating profit to come close to the level recorded for Q3 2006. Like all other telecoms, Netia is feeling a
revenue and margin erosion in its POTS business which accounts for over half of its revenues. The operator did not carry out
any projects in the fourth quarter of 2006 that could have impacted sales in a major way (BSA was launched in Q1 2007, Wi-
Max sales were reduced). The Q4 EBITDA margin stayed below 25%, close to the full-year average. The net profit is hard to
estimate for several reasons. First, Netia will recognize one-time income from waived license payments (ca. PLN 15m), added
to net profit. On the other hand, P4, which is advanced in its market launch preparations, will probably post a larger loss.
Netia’s share in P4’s loss in Q3 was PLN 14m. This amount will increase to PLN 25m in Q4. Additionally, an impairment test
will lead to ca. PLN 40m write-offs. Note that our estimates have a wide margin of error.
1 February 2007 7
Quarterly Earnings Forecast
BRE Bank Securities
BRE Bank Securities
Media
Agora Accumulate
Media
Analyst: P/E 2006 70.3 EV/EBITDA 2006 18.2 Current price PLN 39.0
Michał Marczak P/E 2007 32.3 EV/EBITDA 2007 13.4 Target price PLN 41.6
(PLN m) 4Q 2006F 4Q 2005 change 2006F 2005 change 2007F 2006F change
Revenue 314.3 329.3 -4.5% 1 148.6 1 202.1 -4.5% 1 147.7 1 148.6 -0.1%
EBITDA 38.2 37.7 1.4% 113.6 252.1 -54.9% 152.4 113.6 34.2%
margin 12.2% 11.5% 6.2% 9.9% 21.0% -52.8% 13.3% 9.9% 34.3%
EBIT 19.2 12.3 56.2% 38.1 157.9 -75.9% 78.7 38.1 106.6%
gross profit 14.7 10.3 42.5% 38.9 153.8 -74.7% 84.7 38.9 117.5%
net profit 14.5 8.4 71.7% 31.5 125.0 -74.8% 68.5 31.5 117.5%
Still no breakthrough, but business is on the mend
The fourth quarter should bring a considerable improvement relative to the third quarter which was marked by a slump in the
advertising market. We predict that industries that disappointed as advertisers in the first three quarters, including telecoms
and car manufacturers, stepped up spending in Q4, boosting the advertising revenues of Gazeta Wyborcza (+5.3%). Agora’s
consolidated sales will be lower than a year earlier due to lower sales of Gazeta Wyborcza (-PLN 24m) and books (-PLN
14m). Other business segments increased sales: newspapers by 6%, AMS by 15%, radio by 7%. Operating profit figures will
be flat from Q4 2005. As a reminder, Agora posted a PLN 23m loss in Q4 2005 incurred on the Nowy Dzień flop. In Q4 2006,
the Gazeta Wyborcza price slash will have a similar negative impact.
1 February 2007 8
Quarterly Earnings Forecast
BRE Bank Securities
BRE Bank Securities
Information Technology
IT ABG Ster-Projekt Hold
Analyst: P/E 2006 52.8 EV/EBITDA 2006 27.7 Current price PLN 8.33
Andrzej Lis P/E 2007 22.3 EV/EBITDA 2007 12.3 Target price PLN 7.87
(PLN m) 4Q 2006F 4Q 2005 change 2006F 2005 change 2007F 2006F change
Revenue 54.9 126.8 -57% 262.0 407.3 -36% 379.1 262.0 45%
EBITDA 10.9 14.1 -23% 31.0 22.6 37% 37.0 31.0 19%
margin 19.8% 11.1% 11.8% 5.6% 9.8% 11.8%
EBIT 9.6 9.3 3% 25.8 14.5 78% 31.4 25.8 22%
Gross profit 10.0 12.3 -19% 27.7 24.3 14% 33.9 27.7 22%
Net profit 9.1 10.7 -16% 25.1 22.8 10% 27.4 25.1 9%
* - FY2006 multiples estimated based on ABG Ster-Projekt’s earnings adjusted for real-estate sale (PLN 8.7m) and reversal of a tax allowance (PLN 6.2m),
FY2007 multiples estimated based on pro-forma financial statements of the merged Spin and ABG Ster-Projekt
In-line
We predict that ABG Ster-Projekt’s FY’06 earnings will be in line with our expectations (PLN 262m in revenues, PLN 25.8m in
EBIT, PLN 25.1m net). For the fourth quarter, the company will generate sales of PLN 55m, and an EBIT of ca. PLN 9.6m,
PLN 6m of which will stem from a tax allowance reversal.
For FY2007, we anticipate that revenues will take off (+45% YoY) thanks to expected large contract awards from the Ministry
of Education, and launches of several projects moved back from last year. The headline story, however, is ABG Ster-Projekt’s
merger with Spin. We should learn the detailed merger plan by the end of February.
IT Asseco Poland Reduce
Analyst: P/E 2006 33.5 EV/EBITDA 2006 24.0 Current price PLN 64.6
Andrzej Lis P/E 2007 26.2 EV/EBITDA 2007 16.8 Target price PLN 49.14
(PLN m) 4Q 2006F 4Q 2005 change 2006F 2005 change 2007F 2006F change
Revenue 145.0 258.2 -44% 501.2 539.2 -7% 1227.6 501.2 145%
EBITDA 22.5 13.6 65% 64.2 63.6 1% 190.0 64.2 196%
margin 15.5% 5.3% 12.8% 11.8% 15.5% 12.8%
EBIT 18.5 10.1 83% 50.2 49.5 1% 156.9 50.2 213%
Gross profit 20.7 16.6 24% 62.9 50.6 24% 141.4 62.9 125%
Net profit 18.6 12.1 54% 64.5 42.1 53% 114.6 64.5 78%
** - multiples estimated based on pro-forma financial statements of the merger Softbank and Asseco Poland; - FY2006 multiples based on earnings adjusted for
Asseco Poland stock options (PLN 3.9m), divestment of Mediabank (PLN 4.1m), goodwill write-off on S2Koma (PLN 4.8m), and net profit of the “old” Asseco Po-
land consolidated with the equity method (PLN 12m), multiples estimated based on subsidiary earnings consolidated on a pro-rata basis
Weak sales, strong profitability
Asseco Poland will report a dramatic decline in revenues (-44% YoY), but also a big improvement in operating profitability rela-
tive to Q4 05 (12.7% vs. 3.9%) when the company recognized a one-time allowance against revaluations of long-term con-
tracts (-PLN 6m). In finance income, hedge contracts offset the charges recognized on Asseco stock options. In addition, con-
solidation of the profits of the “old” Asseco Poland will boost the Q4’06 bottom line by over PLN 2m. On a year-over-year basis,
FY2006 revenues will fall 7%, while EBIT will stay flat. Net profit will surge on consolidation of the “old” Asseco Poland (+PLN
12m) and divestment of Mediabank (+PLN 4.1m).
Our earnings projections for FY2007 (the merger year) are over PLN 1.2bn for revenues, PLN 157m for EBIT, and PLN 115m
for net profit. Note that our calculations do not factor in the planned foreign acquisitions (Czech Republic, the Balkans, Russia),
or the Polish M&A deals, some of which may take place still in Q1’07.
1 February 2007 9
Quarterly Earnings Forecast
BRE Bank Securities
BRE Bank Securities
IT ComArch Hold
Analyst: P/E 2006 33.2 EV/EBITDA 2006 24.8 Current price PLN 226.0
Andrzej Lis P/E 2007 26.5 EV/EBITDA 2007 20.4 Target price PLN 185.8
(PLN m) 4Q 2006F 4Q 2005 change 2006F 2005 change 2007F 2006F change
Revenue 146.1 198.0 -26% 455.0 444.0 2% 579.0 455.0 27%
EBITDA 20.3 17.3 17% 57.6 38.6 49% 76.5 57.6 33%
margin 13.9% 8.8% 12.7% 8.7% 13.2% 12.7%
EBIT 17.4 14.3 22% 45.5 27.4 66% 63.7 45.5 40%
Gross profit 16.4 13.6 20% 53.3 24.3 119% 65.0 53.3 22%
Net profit 20.1 12.0 67% 50.0 28.1 78% 63.7 50.0 27%
*- multiples estimated based on earnings adjusted for a deferred tax asset, gains from sale of Interia shares, and profits of subsidiaries accounted for by the equity
method (Interia)
Sustained trends
For another consecutive quarter, ComArch will post improved profitability (EBIT margin at 11.9%) in Q4’06 despite revenue
erosion (-26% YoY) caused by delays in school computerization contract awards by the Ministry of Education (MEN). The bot-
tom line will be boosted by recognition of a deferred tax asset (an estimated PLN 6m). On a full-year basis, ComArch’s reve-
nues will amount to PLN 455m (+2% YoY), EBIT will reach PLN 45.5m (+66% YoY), and profit will net PLN 50m (+78% YoY),
in line with our expectations and the company’s revised earnings guidance.
For FY2007, we expect strong revenue growth (+27% YoY), partly stemming from MEN contract awards, and an uptick in op-
erating profitability to 11% (from 10% in FY2006). We would like to point out the strong upward pressure on salaries which
might affect ComArch, with its increasing staff headcount, more than other IT companies.
IT Computerland Accumulate
Analyst: P/E 2006 74.4 EV/EBITDA 2006 20.0 Current price PLN 117.9
Andrzej Lis P/E 2007 19.1 EV/EBITDA 2007 11.6 Target price PLN 114.8
(PLN m) 4Q 2006F 4Q 2005 change 2006F 2005 change 2007F 2006F change
Revenue 307.5 362.9 -15% 814.4 858.1 -5% 1315.4 814.4 62%
EBITDA 34.6 15.1 129% 39.6 55.8 -29% 108.7 39.6 174%
margin 11.2% 4.1% 4.9% 6.5% 8.3% 4.9%
EBIT 23.2 9.0 157% 17.3 34.1 -49% 85.0 17.3 391%
Gross profit 16.1 5.4 197% 4.0 21.5 -82% 77.9 4.0 1864%
Net profit 14.8 0.4 3598% 2.8 11.5 -76% 65.2 2.8 2234%
* - multiples estimated based on pro-forma earnings of the merged ComputerLand and Emax
Missed targets
At the end of January, ComputerLand revised its net profit guidance for H2 2006 from PLN 20m to PLN 17m. The new guid-
ance does not factor in the consolidated earnings of the Emax group. This means that ComputerLand will net ca. PLN 14.5m
for Q4, and just under PLN 3m for FY2006. While this is not a big difference from our previous estimate of PLN 5.6m, inves-
tors, after being faced with another undelivered promise, will have to think about whether they believe in the much-advertised
benefits of the CoLorado project and the merger with Emax.
FY2007 will be much better financially for ComputerLand, although we believe that the H1 earnings figures will still reflect the
costs incurred on the restructuring program and the merger. The expected rebound in government contracts, which generate a
major portion of the company’s revenues, will probably also start as late as the second half of the year.
1 February 2007 10
Quarterly Earnings Forecast
BRE Bank Securities
BRE Bank Securities
IT Macrologic Buy
Analyst: P/E 2006 18.0 EV/EBITDA 2006 9.1 Current price PLN 47.5
Andrzej Lis P/E 2007 16.0 EV/EBITDA 2007 7.9 Target price PLN 51.81
(PLN m) 4Q 2006F 4Q 2005 change 2006F 2005 change 2007F 2006F change
Revenue 12.2 10.7 14% 38.4 32.6 18% 44.3 38.4 15%
EBITDA 3.4 3.2 6% 8.9 8.1 10% 10.7 8.9 20%
margin 28.0% 30.2% 23.1% 24.9% 24.1% 23.1%
EBIT 2.5 2.6 -1% 5.9 5.0 17% 7.3 5.9 24%
Gross profit 2.5 2.5 -2% 5.7 4.9 18% 7.1 5.7 24%
Net profit 2.0 2.2 -9% 4.5 3.7 21% 5.6 4.5 25%
Q4 slightly off, but FY2006 not bad
Macrologic will show an improvement in its Q4 revenues (+14% YoY), but a decline in EBIT (-1% YoY) and net profit (-9%
YoY). The respective full-year figures will be as follows: PLN 38.4m (+18% YoY), PLN 5.9m (+17% YoY), PLN 4.5m (+21%
YoY). Relative to our estimates (PLN 39.7m for revenues, PLN 6.4m for EBIT, PLN 5.0m net), the FY2006 results will be 4%,
8%, and 10% lower respectively. The differences stem from postponement of several contract settlements to the first half of
2007, and the growing salary pressure which demonstrated itself toward the end of 2006.
We believe that Macrologic’s revenues might increase by over 15% this year relative to FY2006, on the back of proprietary
product implementations and reorganization of the sales network. Offsetting the upward pressure on salaries, growing contract
prices will reflect positively on profitability.
IT Prokom Software Accumulate
Analyst: P/E 2006 28.4 EV/EBITDA 2006 18.0 Current price PLN 164.4
Andrzej Lis P/E 2007 20.5 EV/EBITDA 2007 11.8 Target price PLN 150.3
(PLN m) 4Q 2006F 4Q 2005 change 2006F 2005 change 2007F 2006F change
Revenue 513.7 701.0 -27% 1681.7 1854.8 -9% 2401.0 1681.7 43%
EBITDA 58.6 80.4 -27% 205.6 226.2 -9% 362.4 205.6 76%
margin 11.4% 11.5% 12.2% 12.2% 15.1% 12.2%
EBIT 43.7 58.3 -25% 146.6 151.1 -3% 270.5 146.6 85%
Gross profit 59.6 79.1 -25% 171.7 157.7 9% 268.7 171.7 57%
Net profit 24.1 36.3 -34% 80.5 80.3 0% 111.2 80.5 38%
*- multiples estimated based on subsidiary earnings consolidated on a pro-rata basis
Q4 weaker than a year earlier
Prokom Software’s consolidated earnings for the fourth quarter will be weak compared to Q4’05 both in revenues (down 27%),
EBIT (down 25%), and net profit (down 34%). For the full year, the Prokom group post ca. PLN 1.68 billion under revenues (-
9% YoY), PLN 147m under EBIT (-3% YoY), and PLN 80.5m under net profit (flat vs. FY2005). The deterioration in financial
performance relative to FY2005 was mainly caused by the shortage of contract awards from the public sector which is the
main market for most Prokom companies.
In FY2007, we expect the earnings performance to improve greatly owing to consolidation of the “old” Asseco Poland (which
merged with Softbank), acquisition of more interest in and full consolidation of Comp (probably in H2), and the expected revival
in public administration’s IT spending (which, however, will not influence earnings until later in the year). The first half of 2007
will see a continuation of the internal restructuring exercise (Spin/ABG Ster-Projekt, Comp/CSS mergers).
1 February 2007 11
Quarterly Earnings Forecast
BRE Bank Securities
BRE Bank Securities
IT Techmex Buy
Analyst: P/E 2006 26.7 EV/EBITDA 2006 9.5 Current price PLN 25.6
Andrzej Lis P/E 2007 17.9 EV/EBITDA 2007 7.4 Target price PLN 27.96
(PLN m) 4Q 2006F 4Q 2005 change 2006F 2005 change 2007F 2006F change
Revenue 126.9 140.2 -10% 368.5 360.6 2% 393.6 368.5 7%
EBITDA 14.9 12.4 20% 33.5 19.4 73% 40.9 33.5 22%
margin 11.7% 8.8% 9.1% 5.4% 10.4% 9.1%
EBIT 9.9 8.7 15% 15.9 11.2 42% 22.0 15.9 38%
Gross profit 8.2 7.1 15% 9.9 2.4 316% 14.8 9.9 50%
Net profit 6.5 7.8 -17% 8.0 4.6 74% 12.0 8.0 49%
* - multiples estimated based on pro-rata consolidation of the earnings of the subsidiary Karen Notebook
The best quarter
We expect that Techmex traditionally generated the bulk of its full-year profits in the fourth quarter. Granted, revenues will be
slightly lower than a year earlier, when a large portion of the company’s contracts were completed toward the end of the year.
But, considered year on year, earnings will be much better thanks to the growing GIS business and improving performance of
Karen Notebook. On a full-year basis, Techmex will not record much change in revenues (+2% YoY), but EBIT and the bottom
line will surge (42% and 74% respectively YoY) thanks to wider margins on GIS contracts.
Going forward, Techmex’s financial performance will be driven by the growing demand for GIS services (we predict a 30%
YoY increase in FY2007) and continued development of the portable device market. In the first half of the year, Techmex will
probably debut Karen Notebook on the Warsaw Stock Exchange.
1 February 2007 12
Quarterly Earnings Forecast
BRE Bank Securities
BRE Bank Securities
Metals
KGHM Accumulate
Metals
Analyst: P/E 2006 5.2 EV/EBITDA 2006 2.9 Current price PLN 92.0
Michał Marczak P/E 2007 5.8 EV/EBITDA 2007 3.7 Target price PLN 97.0
(PLN m) 4Q 2006F 4Q 2005 change 2006F 2005 change 2007F 2006F change
Revenue 2 674.7 2 420.6 10.5% 11 695.1 8 000.1 46.2% 9 436.5 11 695.1 -19.3%
EBITDA 905.8 935.8 -3.2% 4 631.5 2 800.0 65.4% 3 651.3 4 631.5 -21.2%
margin 33.9% 38.7% -12.4% 39.6% 35.0% 13.2% 38.7% 26.7% 44.9%
EBIT 819.4 862.4 -5.0% 4 310.8 2 508.7 71.8% 3 270.1 4 310.8 -24.1%
Gross profit 742.4 883.2 -15.9% 4 212.9 2 634.6 59.9% 3 439.1 4 212.9 -18.4%
Net profit 641.1 659.7 -2.8% 3 541.4 2 289.4 54.7% 3 189.4 3 541.4 -9.9%
Hedging and LME price slippage affected profits
KGHM will show a 20% QoQ slump in its earnings in Q4, caused mainly by price slippage on the LME. The three-month LME
copper traded at an average $7038/T in Q4’06, i.e. 8.2% less than in Q3‘06. Another factor which eroded revenues were lower
sales volumes, both for copper (133,000 tons), and silver (253 tons). We assumed in our projections that KGHM will not ex-
ceed its sales volume target for FY2006. Moreover, in H2’06, KGHM recorded higher sales volumes of copper (+10,000
tons/quarter) hedged at low prices (ca. $3,000/T). We expect the unit cost of production to amount to PLN 11,200/T in Q4, i.e.
PLN 300 less than in Q3, due to a decline in the cost of scrap metal, partially offset by an increase in salaries (bonuses).
Koelner Hold
Metals
Analyst: P/E 2006 37.6 EV/EBITDA 2006 22.8 Current price PLN 54.50
Kamil Kliszcz P/E 2007 26.7 EV/EBITDA 2007 16.0 Target price PLN 53.72
(PLN m) 4Q 2006F 4Q 2005 change 2006F 2005 change 2007F 2006F change
Revenue 104.4 72.6 44% 411.8 241.3 71% 590.9 411.8 43%
EBITDA 20.9 14.3 46% 71.1 45.9 55% 107.4 71.1 51%
margin 19.99% 19.65% - 17.26% 19.01% - 18.18% 17.26% -
EBIT 15.2 10.8 40% 54.3 34.3 58% 78.3 54.3 44%
Gross profit 13.7 9.6 42% 52.0 34.2 52% 72.1 52.0 39%
Net profit 9.1 5.6 62% 40.5 27.6 47% 61.9 40.5 53%
According to plan
We predict that the warm winter weather did not have much impact on Koelner’s consolidated revenues, as the company con-
ducted its stock-taking exercise in the fourth quarter (which usually entails suspension of business for almost a month). Our
estimates are PLN 9.1m net and PLN 15.2m in EBIT for Q4’06, and PLN 40.5m net and PLN 54.3m in EBIT for FY2006 (in our
January 29th Research Update, we revised our EBIT expectations down by PLN 2.7m due to higher-than-expected operating
expenses incurred in Q3 2006; we did not change our net profit estimate as we expect a positive impact of the zloty apprecia-
tion on financial income).
1 February 2007 13
Quarterly Earnings Forecast
BRE Bank Securities
BRE Bank Securities
Construction
Construction Budimex Hold
Analyst: P/E 2006 312.4 EV/EBITDA 2006 63.2 Current price PLN 104.0
Krzysztof Radojewski P/E 2007 61.6 EV/EBITDA 2007 28.2 Target price PLN 83.7
(PLN m) 4Q 2006F 4Q 2005 change 2006F 2005 change 2007F 2006F change
Revenue 907.2 783.2 15.8% 3039.7 2702.9 12.5% 3368.8 3039.7 10.8%
EBITDA 10.8 -29.6 - 37.5 23.1 61.9% 84.1 37.5 124.5%
margin 1.2% -3.8% - 1.2% 0.9% - 2.5% 1.2% -
EBIT 5.4 -34.1 - 16.5 2.0 740.7% 61.5 16.5 272.5%
Gross profit 3.3 8.1 - 12.5 7.3 70.9% 56.7 12.5 354.0%
Net profit 5.6 0.5 1074.3% 8.5 2.0 320.5% 43.1 8.5 405.1%
Weak despite warm temperatures
The marked improvement in the road construction industry, and the increasing contract prices signaled by the national road
and motorway administration (GDDKiA), will reflect positively on Budimex’s performance. A longer time will pass, however,
before that impact becomes noticeable in the company’s earnings figures, due to long contract deadlines. We expect Budi-
mex’s financial performance to start to mirror the market momentum at the earliest in FY2008. The FY2006 fourth-quarter re-
sults will be shaped by unprofitable contracts signed in preceding years, and will not display any improvement. That is why we
revised our FY2006 net profit estimate downward to PLN 8.5m. FY2007 earnings will be driven by Budimex’s real-estate busi-
ness and the soaring prices of homes in 2006.
Construction Elektrobudowa Accumulate
Analyst: P/E 2006 30.2 EV/EBITDA 2006 18.0 Current price PLN 120.0
Krzysztof Radojewski P/E 2007 23.2 EV/EBITDA 2007 14.0 Target price PLN 124.6
(PLN m) 4Q 2006F 4Q 2005 change 2006F 2005 change 2007F 2006F change
Revenue 174.3 116.1 50.2% 461.5 344.9 33.8% 531.6 461.5 15.2%
EBITDA 10.7 5.8 83.1% 29.1 18.0 61.2% 37.5 29.1 29.0%
margin 7.0% 5.0% - 6.3% 5.2% - 7.0% 6.3% -
EBIT 8.8 4.6 91.1% 23.7 13.0 83.2% 31.8 23.7 33.9%
Gross profit 9.3 4.7 96.3% 23.7 12.8 85.7% 31.1 23.7 31.1%
Net profit 6.7 4.2 58.3% 16.8 9.3 80.8% 21.8 16.8 29.9%
Another good quarter
The third and fourth quarter are usually when Elektrobudowa generates most of its revenues and profits. This year’s perform-
ance should be further boosted by favorable weather conditions. We expect that Elektrobudowa’s Q4 revenues will surge
50.2% YoY to PLN 174.3m, and the bottom line will climb an impressive 58.3% to PLN 6.7m. Such robust net profit growth
was owed to completions of more profitable contracts for power plants and energy distribution customers.
1 February 2007 14
Quarterly Earnings Forecast
BRE Bank Securities
BRE Bank Securities
Construction Hydrobudowa Śląsk Hold
Analyst: P/E 2006 85.8 EV/EBITDA 2006 47.3 Current price PLN 143.4
Krzysztof Radojewski P/E 2007 31.7 EV/EBITDA 2007 21.2 Target price PLN 115.0
(PLN m) 4Q 2006F 4Q 2005 change 2006F 2005 change 2007F 2006F change
Revenue 46.3 9.0 415.9% 137.0 111.2 23.2% 238.0 137.0 73.7%
EBITDA 5.9 -102.4 - 10.1 -112.3 -109.0% 22.7 10.1 123.4%
margin 8.0% - - 7.4% -101.0% - 9.5% 7.4% -
EBIT 4.0 -102.8 - 6.6 -114.2 -105.7% 19.1 6.6 190.9%
Gross profit 2.5 -103.8 - 5.6 -116.2 -104.8% 15.2 5.6 170.9%
Net profit 2.8 -102.6 - 5.6 -114.6 -104.9% 15.2 5.6 170.9%
FY2006 in line with expectations
We do not think that Hydrobudowa Śląsk’s quarterly earnings performance will influence how it is perceived by investors.
Given that the company is currently carrying out mostly low-margin contracts, the Q4 earnings will not bring a breakthrough.
The estimated PLN 2.3m sale of real estate in Katowice will add to the Q4 operating profit, increasing the chances that our
PLN 5.6m net profit forecast will be met. We predict a considerable improvement in financial performance going forward. Capi-
talizing on that improvement, however, will be “Hydrobudowa Polska” – the new company formed after Hydrobudowa Śląsk’s
merger with Hydrobudowa Włocławek.
Construction Polimex Mostostal Hold
Analyst: P/E 2006 45.5 EV/EBITDA 2006 23.0 Current price PLN 179.0
Krzysztof Radojewski P/E 2007 36.0 EV/EBITDA 2007 20.6 Target price PLN 154.5
(PLN m) 4Q 2006F 4Q 2005 change 2006F 2005 change 2007F 2006F change
Revenue 663.0 524.8 26.3% 2262.5 1849.9 22.3% 2860.6 2262.5 26.4%
EBITDA 21.6 7.4 191.3% 126.1 101.2 24.5% 172.2 126.1 36.5%
margin 3.3% 1.4% - 5.6% 5.5% - 6.0% 5.6% -
EBIT 14.6 0.4 3729.9% 97.9 73.2 33.7% 138.4 97.9 41.3%
Gross profit 9.5 5.2 84.7% 86.8 64.7 34.2% 127.7 86.8 47.0%
Net profit 7.7 7.2 6.8% 60.0 42.8 40.3% 93.5 60.0 55.8%
Higher revenues, lower profitability
Like construction companies across the board, Polimex will benefit from the favorable weather conditions in the fourth quarter
of 2006. However, margins might tighten due to growing costs of materials (incl. concrete steel) and subcontractors. Based on
those expectations, we are revising our FY2006 revenue estimate up by PLN 50m, and our net profit estimate down by
PLN 1.7m.
1 February 2007 15
Quarterly Earnings Forecast
BRE Bank Securities
BRE Bank Securities
Construction Rafako Reduce
Analyst: P/E 2006 39.0 EV/EBITDA 2006 21.3 Current price PLN 38.62
Krzysztof Radojewski P/E 2007 30.0 EV/EBITDA 2007 16.3 Target price PLN 34.00
(PLN m) 4Q 2006F 4Q 2005 change 2006F 2005 change 2007F 2006F change
Revenue 194.2 116.4 66.8% 682.9 500.8 36.4% 1249.5 682.9 83.0%
EBITDA 15.0 4.9 204.3% 33.1 24.5 34.8% 43.2 33.1 30.8%
margin 5.5% 4.2% - 4.8% 4.9% - 3.5% 4.8% -
EBIT 12.2 2.8 340.5% 22.2 14.4 53.7% 31.6 22.2 42.6%
Gross profit 12.0 1.7 599.8% 22.0 7.4 197.2% 28.6 22.0 30.0%
Net profit 10.5 0.2 6098.9% 17.2 5.2 230.4% 22.4 17.2 30.0%
Real estate sale will boost profit
Rafako will probably show continued revenue growth in Q4. In our opinion, the core business profitability will be low due to a
large share of subcontractor management contracts (FGD). The Q4 profit was most notably boosted by a one-time gain from
the sale of real estate in Gdańsk, on which the company grossed an estimated PLN 10m.
1 February 2007 16
Quarterly Earnings Forecast
BRE Bank Securities
BRE Bank Securities
Pharmaceutical manufacturers and distributors
Pharmaceuticals Farmacol Accumulate
Analyst: P/E 2006 15.1 EV/EBITDA 2006 10.8 Current price PLN 43.0
Krzysztof Radojewski P/E 2007 13.4 EV/EBITDA 2007 11.2 Target price PLN 45.6
(PLN m) 4Q 2006F 4Q 2005 change 2006F 2005 change 2007F* 2006F change
Revenue 878.6 813.5 8.0% 3394.1 3053.9 11.1% 3463.2 3394.1 2.0%
EBITDA 37.7 31.6 19.3% 88.1 91.2 -3.4% 98.2 88.1 11.4%
margin 4.3% 3.9% - 2.6% 3.0% - 2.8% 2.6% -
EBIT 35.5 32.1 10.6% 79.3 80.7 -1.7% 87.7 79.3 10.6%
Gross profit 38.0 34.8 9.2% 86.3 91.3 -5.4% 96.3 86.3 11.6%
Net profit 29.2 26.3 11.0% 66.6 68.6 -3.0% 75.2 66.6 12.9%
Annual bonuses
We predict that Farmacol continued its upward sales momentum in Q4, which is almost twice as high as the market average.
In line with the Management’s earlier announcements, the fourth quarter will be crucial to the full-year performance as a period
when Farmacol receives annual sales performance bonuses from producers. That is why we expect the Q4 profitability to top
the preceding quarters, and boost the full-year profitability performance.
Pharmaceuticals PGF Under Review
Analyst: P/E 2006 14.2 EV/EBITDA 2006 11.9 Current price PLN 75.7
Krzysztof Radojewski P/E 2007 13.8 EV/EBITDA 2007 12.4 Target price -
(PLN m) 4Q 2006F 4Q 2005 change 2006F 2005 change 2007F* 2006F change
Revenue 1059.1 1008.7 5.0% 4046.4 3891.5 4.0% 4342.8 4046.4 7.3%
EBITDA 38.0 31.1 22.0% 110.1 91.2 20.7% 105.2 110.1 -4.5%
margin 3.6% 3.1% - 2.7% 2.3% - 2.4% 2.7% -
EBIT 32.8 26.6 23.1% 88.8 74.4 19.3% 89.2 88.8 0.5%
Gross profit 35.0 24.5 42.8% 86.6 71.1 21.7% 88.5 86.6 2.2%
Net profit 28.0 16.7 67.7% 67.2 52.1 29.1% 69.1 67.2 2.8%
One-time sale/lease back gain
PGF’s Q4 sales growth rate will be slightly higher than the market average, at 5% YoY. We agree with the Management’s
promises that slower sales growth will go hand in hand with an acceleration in profitability. Operating profit will also be boosted
by a sale-and-leaseback transaction which grossed an estimated PLN 10m.
1 February 2007 17
Quarterly Earnings Forecast
BRE Bank Securities
BRE Bank Securities
Pharmaceuticals Prosper Accumulate
Analyst: P/E 2006 10.2 EV/EBITDA 2006 7.3 Current price PLN 17.6
Krzysztof Radojewski P/E 2007 9.3 EV/EBITDA 2007 7.2 Target price PLN 20.9
(PLN m) 4Q 2006F 4Q 2005 change 2006F 2005 change 2007F 2006F change
Revenue 464.2 444.0 4.6% 1820.1 1714.6 6.1% 1929.3 1820.1 6.0%
EBITDA 9.4 9.8 -4.5% 24.5 25.3 -3.5% 25.1 24.5 2.5%
margin 1.0% 2.2% - 1.3% 1.5% - 1.3% 1.3% -
EBIT 7.6 7.9 -4.4% 18.6 19.5 -4.7% 19.3 18.6 3.9%
Gross profit 6.0 6.9 -13.3% 15.1 15.5 -3.0% 16.1 15.1 6.8%
Net profit 4.8 4.3 11.7% 11.8 10.8 9.8% 13.0 11.8 10.4%
High comparable year results
Because of the large contribution of pre-wholesale (approximately 30%), Prosper’s sales growth will traditionally be slower
than generated by other distributors: we predict ca. 4.6% YoY. The Q4 2005 results were largely impacted by reversal of a bad
debt allowance (+PLN 4.8m) which distorted the comparability of the profitability indicators. In Q4’06, the lack of such one-offs
will be offset by growth in recurring business profitability. Because Prosper’s FY’06 third-quarter earnings came below our
expectations, we are revising our full-year guidance slightly downward.
Pharmaceuticals Torfarm Hold
Analyst: P/E 2006 19.2 EV/EBITDA 2006 13.9 Current price PLN 74.9
Krzysztof Radojewski P/E 2007 16.6 EV/EBITDA 2007 12.6 Target price PLN 63.7
(PLN m) 4Q 2006F 4Q 2005 change 2006F 2005 change 2007F* 2006F change
Revenue 479.4 368.8 30.0% 1687.3 1412.9 19.4% 1694.1 1687.3 0.4%
EBITDA 3.8 2.8 37.9% 15.9 11.5 38.0% 17.6 15.9 10.6%
margin 0.8% 0.8% - 0.9% 0.8% - 1.0% 0.9% -
EBIT 3.6 1.7 103.7% 12.2 7.7 57.4% 14.2 12.2 16.8%
Gross profit 2.6 2.7 -6.1% 13.0 12.0 8.4% 15.0 13.0 15.7%
Net profit 2.2 2.4 -6.1% 10.5 9.8 8.0% 12.2 10.5 15.7%
*- under revision
High revenue growth, no finance income
Torfarm expects to show sustained revenue growth in Q4’06, which we think was achieved at the cost of a flat, or even lower
profit margin. Two factors which boosted the Q4’05 earnings figures: extra bonuses from suppliers, and finance income from
loan receivables, were not repeated in Q4 2006. However, higher revenues should compensate for the lack of such one-offs,
mitigating the year-on-year profit erosion. FY2007 marks the start of consolidation of the newly acquired Galenica-Silfarm
which will help Torfarm expand the scale of its operations. We are preparing a revision of our FY2007 financial projections for
Torfarm to account for this acquisition.
1 February 2007 18
Quarterly Earnings Forecast
BRE Bank Securities
BRE Bank Securities
Retail
Retail Eldorado Hold
Analyst: P/E 2006 24.3 EV/EBITDA 2006 13.9 Current price PLN 95.35
Kamil Kliszcz P/E 2007 18.8 EV/EBITDA 2007 11.6 Target price PLN 83.78
(PLN m) 4Q 2006F 4Q 2005 change 2006F 2005 change 2007F 2006F change
Revenues 413.8 326.9 27% 1 433.0 1 280.1 12% 4 581.1 1 433.0 220%
EBITDA 13.4 7.9 69% 54.6 49.0 11% 126.6 54.6 132%
margin 3.24% 2.43% - 3.81% 3.83% - 2.76% 3.81% -
EBIT 8.1 3.5 130% 35.9 31.8 13% 95.6 35.9 166%
Gross profit 6.6 2.6 156% 31.5 26.8 17% 83.0 31.5 163%
Net profit 5.4 1.7 223% 25.5 20.9 22% 67.2 25.5 163%
Are we in for a pleasant surprise?
Eldorado has broad exposure to Retail (35% of total sales), plus, it managed to open nine new supermarkets before the start
of the heated end-of-year shopping season. We expect that the “Stokrotka” supermarket chain will show stronger earnings
figures in Q4’06 that a year earlier, being stronger in numbers (60 stores at the end of Q3 2006 vs. 52 at the end of 3Q 2005),
and owing to the general upturn in the FMCG segment (retail sales of food, drinks, and tobacco in December 2006 soared
24.7% vs. 4.1% a year earlier). Furthermore, the marked improvement in Distribution recorded in the third quarter of 2006
most likely continued into the fourth quarter. All in all, we estimate that Eldorado will net PLN 5.4m in Q4’06, and believe that
our raised full-year forecast of PLN 25.5m will be met.
Retail Eurocash Hold
Analyst: P/E 2006 26.8 EV/EBITDA 2006 12.0 Current price PLN 8.70
Kamil Kliszcz P/E 2007 19.6 EV/EBITDA 2007 10.0 Target price PLN 7.38
(PLN m) 4Q 2006F 4Q 2005 change 2006F 2005 change 2007F 2006F change
Revenues 920.0 420.4 119% 3 124.1 1 687.1 85% 4 011.4 3 124.1 28%
EBITDA 27.8 20.3 37% 85.8 70.2 22% 108.4 85.8 26%
margin 3.02% 4.84% - 2.75% 4.16% - 2.70% 2.75% -
EBIT 18.2 13.5 34% 52.3 44.7 17% 76.8 52.3 47%
Gross profit 17.2 12.1 42% 51.0 41.7 22% 69.8 51.0 37%
Net profit 13.2 9.0 47% 39.4 32.6 21% 56.6 39.4 44%
No surprises
Eurocash will show good Q4’06 earnings results, and will probably deliver our full-year profit forecast, lowered after the
weaker-than-expected third quarter. A year-over-year analysis of the company’s performance is difficult due to recent acquisi-
tions (KDWT, Carment). We anticipate that the two acquirees will add PLN 3.3m to Eurocash’s profit which will total an esti-
mated PLN 10.6m. This figure should be adjusted for costs that cannot be attributed to any business segment which we expect
to have amounted to PLN 0.7m in Q4’06 (stemming from franchise settlements related to the “Delikatesy Centrum” chain). As
a reminder, those charges in 3Q 2006 totaled a whopping PLN 2.5m (one-time expenses on the consolidation of Carment).
1 February 2007 19
Quarterly Earnings Forecast
BRE Bank Securities
BRE Bank Securities
Others
Energy Kogeneracja Hold
Analyst: P/E 2006 15.7 EV/EBITDA 2006 6.9 Current price PLN 53.5
Krzysztof Radojewski P/E 2007 14.9 EV/EBITDA 2007 7.0 Target price PLN 61.8
(PLN m) 4Q 2006F 4Q 2005 change 2006F 2005 change 2007F 2006F change
Revenues 197.4 234.2 -15.7% 800.9 780.2 2.6% 812.5 800.9 1.5%
EBITDA 58.5 54.0 8.4% 180.2 164.5 9.6% 178.8 180.2 -0.8%
margin 29.7% 23.1% - 22.5% 21.1% - 22.0% 22.5% -
EBIT 35.4 35.5 -0.3% 86.2 72.0 19.7% 88.0 86.2 2.1%
Gross profit 29.5 30.2 -2.5% 62.5 51.3 21.8% 66.3 62.5 6.0%
Net profit 27.5 20.6 33.3% 50.6 33.4 51.7% 53.7 50.6 6.0%
Will sales of CO2 emission credits make up for the warm winter?
The warm temperatures recorded in the final months of 2006 inevitably affected Kogeneracja’s Q4 earnings. We predict that
the company sold 10% less heat and proportionately less electricity than in the corresponding period of FY2005, hurting reve-
nues and profits on all levels. Notice, however, that, due to a number of one-time charges recorded in the fourth quarter of
2005 (PLN 7.5m higher costs of coal, PLN 5.3m in provisions against future electricity allowances for seniors), and due to the
fact that the accounts of the Zielona Góra CHP were not yet fully consolidated in Kogeneracja’s financial statements, the con-
solidated FY2006 fourth-quarter profit will top the Q4’05 figure by an estimated 30%. We did not take into account in our pro-
jections the income from sales of CO2 emission credits that the company might have sold in the final months of 2006.
Agricultural
Processing Provimi-Rolimpex Hold
Analyst: P/E 2006 19.9 EV/EBITDA 2006 12.7 Current price PLN 21.00
Kamil Kliszcz P/E 2007 13.7 EV/EBITDA 2007 9.7 Target price PLN 21.81
(PLN m) 4Q 2006F 4Q 2005 change 2006F 2005 change 2007F 2006F change
Revenues 320.5 336.1 -5% 1 315.9 1 015.5 30% 1 369.3 1 315.9 4%
EBITDA 13.8 19.8 -30% 70.8 57.1 24% 93.1 70.8 32%
margin 4.30% 5.88% - 5.38% 5.62% - 6.80% 5.38% -
EBIT 8.8 15.2 -42% 51.3 43.8 17% 73.3 51.3 43%
Gross profit 7.3 15.8 -54% 45.8 39.5 16% 66.4 45.8 45%
Net profit 5.6 13.1 -57% 36.5 38.4 -5% 53.1 36.5 45%
Grain prices still on the rise
Provimi-Rolimpex still struggled with the soaring prices of feed-grade wheat in the fourth quarter (prices went up a further 20%
from 3Q), which it was not able to transfer to breeders due to a sustained downtrend in meat prices (average poultry feed
prices only rose 4%). Because the hikes in grain prices exceeded our expectations, we revised our FY2006 earnings projec-
tions for Provimi-Rolimpex (net profit PLN 2.1m lower, EBIT down PLN 2.7m). For Q4 2006, we expect a PLN 16m plunge in
revenues relative to Q4’05 (stemming from divestiture of the subsidiary Rolimpex-Nasiona in October and gradual withdrawal
from the trade business), and a deep YoY erosion of the EBITDA margin. However, the impact of the 47% increase in feed-
grade wheat prices was probably partly offset against income from the sale of non-operating assets estimated at PLN 1.1m
net (sale of feed plant and Rolimpex-Nasiona). If the current trends in the grain and meat markets continue, we might revise
our earnings projections for FY2007.
1 February 2007 20
Quarterly Earnings Forecast
BRE Bank Securities
BRE Bank Securities
FY2006 Earnings Release Dates
Standalone Consolidated Consolidated
Company
4Q 2006 4Q 2006 FY2006
ABG STER-PROJEKT 26.02.07 26.02.07 30.03.07
AGORA 20.02.07 20.02.07 13.04.07
ASSECO POLAND 22.02.07 22.02.07 13.04.07
BPH 21.02.07 21.02.07 21.03.07
BUDIMEX 23.02.07 23.02.07 29.06.07
BZWBK 22.02.07 22.02.07 22.02.07
COMARCH 01.03.07 01.03.07 01.06.07
COMPUTERLAND 28.02.08 28.02.07 31.05.07
ELDORADO 01.03.07 01.03.07 27.04.07
ELEKTROBUDOWA 28.02.07 28.02.07 30.03.07
EUROCASH 01.03.07 01.03.07 25.04.07
FARMACOL 01.03.07 01.03.07 30.08.07
HANDLOWY 14.02.07 14.02.07 22.03.07
HYDROBUDOWA ŚLĄSK 07.02.07 17.04.07
ING BSK 15.02.07 15.02.07 30.03.07
KĘTY 01.02.07 01.02.07 12.04.07
KGHM 14.02.07 01.03.07 24.04.07
KOELNER 01.03.07 01.03.07 29.06.07
KOGENERACJA 14.02.07 01.03.07 31.05.07
KREDYT BANK 16.02.07 16.02.07 28.02.07
LOTOS 28.02.07 28.02.07 17.04.07
MACROLOGIC 12.02.07 12.02.07 30.05.07
MILLENNIUM 15.02.07 15.02.07 28.02.07
MONDI 31.01.07 31.01.07 23.02.07
NETIA 01.03.07 01.03.07 01.03.07
PEKAO 21.02.07 21.02.07 21.03.07
PGF 01.03.07 01.03.07 14.05.07
PGNiG 01.03.07 01.03.07 30.04.07
PKN ORLEN 01.03.07 01.03.07 19.04.07
PKO BP 23.02.07 23.02.07 03.04.07
POLIMEX MOSTOSTAL 28.02.07 28.02.07 31.05.07
PROKOM SOFTWARE 28.02.07 28.02.07 27.04.07
PROSPER 01.03.07 01.03.07 11.08.07
PROVIMI-ROLIMPEX 13.02.07 13.02.07 27.04.07
RAFAKO 15.02.07 15.02.07 02.04.07
TECHMEX 01.03.07 01.03.07 14.06.07
TELEKOMUNIKACJA POLSKA 30.01.07 30.01.07 16.02.07
TORFARM 14.02.07 31.05.07
Source: Parkiet
1 February 2007 21
Quarterly Earnings Forecast
BRE Bank Securities
BRE Bank Securities
Current recommendations by BRE Bank Securities
Company Recommendation Target Price Date Issued
ABG STER-PROJEKT Hold 7.87 2007-01-08
AGORA Accumulate 41.60 2007-01-08
ASSECO POLAND Reduce 49.14 2007-01-09
BPH Accumulate 1022.00 2007-01-09
BUDIMEX Hold 83.70 2007-01-09
BZWBK Accumulate 233.66 2007-01-09
COMARCH Hold 185.80 2007-01-09
COMPUTERLAND Accumulate 114.80 2006-12-01
ELDORADO Hold 83.78 2006-12-05
ELEKTROBUDOWA Accumulate 124.60 2007-01-09
EUROCASH Hold 7.38 2007-01-09
FARMACOL Accumulate 45.60 2006-11-07
HANDLOWY Hold 91.50 2007-01-09
HYDROBUDOWA ŚLĄSK Hold 115.00 2007-01-09
ING BSK Accumulate 857.22 2007-01-09
KĘTY Hold 180.50 2006-09-27
KGHM Accumulate 97.00 2007-01-09
KOELNER Hold 53.72 2007-01-29
KOGENERACJA Hold 61.80 2006-11-07
KREDYT BANK Hold 21.66 2007-01-09
LOTOS Accumulate 59.30 2006-08-24
MACROLOGIC Buy 51.81 2006-11-13
MILLENNIUM Hold 9.89 2007-01-29
MONDI Reduce 80.00 2006-12-05
NETIA Sell 3.80 2006-09-06
PEKAO Accumulate 237.56 2007-01-09
PGF under revision 2006-12-05
PGNiG Hold 3.44 2006-07-31
PKN ORLEN Buy 66.00 2006-08-24
PKO BP Reduce 41.62 2007-01-09
POLIMEX MOSTOSTAL Hold 154.50 2007-01-09
PROKOM SOFTWARE Accumulate 150.30 2007-01-09
PROSPER Accumulate 20.90 2006-11-07
PROVIMI-ROLIMPEX Hold 21.81 2006-12-05
RAFAKO Reduce 34.00 2007-01-09
TECHMEX Buy 27.96 2007-01-09
TELEKOMUNIKACJA POLSKA Reduce 20.60 2006-10-27
TORFARM Hold 63.7 2006-08-25
ZA PUŁAWY Buy 73.16 2006-10-30
1 February 2007 22
Quarterly Earnings Forecast
BRE Bank Securities
BRE Bank Securities
Recommendations issued in the last month
Company Recommendation Target Price Date Issued
ABG STER-PROJEKT Hold 7.87 2007-01-08
AGORA Accumulate 41.60 2007-01-08
ASSECO POLAND Reduce 49.14 2007-01-09
BPH Accumulate 1022.00 2007-01-09
BUDIMEX Hold 83.70 2007-01-09
BZWBK Accumulate 233.66 2007-01-09
COMARCH Hold 185.80 2007-01-09
ELEKTROBUDOWA Accumulate 124.60 2007-01-09
EUROCASH Hold 7.38 2007-01-09
HANDLOWY Hold 91.50 2007-01-09
HYDROBUDOWA ŚLĄSK Hold 115.00 2007-01-09
ING BSK Accumulate 857.22 2007-01-09
KGHM Accumulate 97.00 2007-01-09
KOELNER Hold 53.72 2007-01-29
KREDYT BANK Hold 21.66 2007-01-09
MILLENNIUM Hold 9.89 2007-01-29
PEKAO Accumulate 237.56 2007-01-09
PKO BP Reduce 41.62 2007-01-09
POLIMEX MOSTOSTAL Hold 154.50 2007-01-09
PROKOM SOFTWARE Accumulate 150.30 2007-01-09
RAFAKO Reduce 34.00 2007-01-09
TECHMEX Buy 27.96 2007-01-09
Recommendation Statistics
Issuers for which BRE Bank Securities S.A.
All
has rendered services
Statistics Sell Reduce Hold Accumulate Buy Sell Reduce Hold Accumulate Buy
number 1 5 16 12 4 0 2 5 6 1
percentage 2.6% 13.2% 42.1% 31.6% 10.5% 0.0% 14.3% 35.7% 42.9% 7.1%
1 February 2007 23
Quarterly Earnings Forecast
BRE Bank Securities
BRE Bank Securities
Research Department: Sales and Trading:
Michał Marczak tel. (+48 22) 697 47 38 Piotr Dudziński tel. (+48 22) 697 48 22
Director Director
michal.marczak@dibre.com.pl piotr.dudzinski@dibre.com.pl
Strategy, telco, mining, metals, media
Grzegorz Domagała tel. (+48 22) 697 48 03
Marta Jeżewska tel. (+48 22) 697 47 37 Deputy Director
Deputy Director grzegorz.domagala@dibre.com.pl
marta.jezewska@dibre.com.pl
Banks Salesmen:
Marzena Łempicka tel. (+48 22) 697 48 95
Analysts:
marzena.lempicka@dibre.com.pl
Andrzej Lis tel. (+48 22) 697 47 42
Krzysztof Solus tel. (+48 22) 697 47 31
andrzej.lis@dibre.com.pl
krzysztof.solus@dibre.com.pl
IT
Krzysztof Radojewski tel. (+48 22) 697 47 01 Traders:
krzysztof.radojewski@dibre.com.pl
Pharmaceuticals, construction, utilities Emil Onyszczuk tel. (+48 22) 697 49 63
emil.onyszczuk@dibre.com.pl
Kamil Kliszcz tel. (+48 22) 697 47 06
kamil.kliszcz@dibre.com.pl Grzegorz Stępien tel. (+48 22) 697 48 62
Retail, materials, other grzegorz.stepien@dibre.com.pl
Jacek Borawski tel. (+48 22) 697 48 88 Joanna Niedziela tel. (+48 22) 697 48 54
jacek.borawski@dibre.com.pl joanna.niedziela@dibre.com.pl
Technical analysis
Tomasz Dudź tel. (+48 22) 697 47 31
tomasz.dudz@dibre.com.pl
Dom Inwestycyjny
BRE Banku S.A.
ul. Wspólna 47/49
00-950 Warszawa
www.dibre.com.pl
1 February 2007 24
Quarterly Earnings Forecast
BRE Bank Securities
BRE Bank Securities
List of abbreviations and ratios contained in the report:
EV – net debt + market value
EBIT – Earnings Before Interest and Taxes
EBITDA – EBIT + Depreciation and Amortisation
P/CE – price to earnings with amortisation
MC/S – market capitalisation to sales
EBIT/EV – operating profit to economic value
P/E – (Price/Earnings) – price divided by annual net profit per share
ROE – (Return on Equity) – annual net profit divided by average equity
P/BV – (Price/Book Value) – price divided by book value per share
Net debt – credits + debt papers + interest bearing loans – cash and cash equivalents
EBITDA margin – EBITDA/Sales
Recommendations of BRE Bank Securities
A recommendation is valid for a period of 6-9 months, unless a subsequent recommendation is issued within this period. Expected
returns from individual recommendations are as follows:
BUY – we expect that the rate of return from an investment will be at least 15%
ACCUMULATE – we expect that the rate of return from an investment will range from 5% to 15%
HOLD – we expect that the rate of return from an investment will range from –5% to +5%
REDUCE – we expect that the rate of return from an investment will range from -5% to -15%
SELL – we expect that an investment will bear a loss greater than 15%
Recommendations are updated at least once every nine months.
This document has been created and published by BRE Bank Securities S.A. The present report expresses the knowledge as well as opinions
of the authors on day the report was prepared. The opinions and estimates contained herein constitute our best judgement at this date and
time, and are subject to change without notice. The present report was prepared with due care and attention, observing principles of methodo-
logical correctness and objectivity, on the basis of sources available to the public, which BRE Bank Securities S.A. considers reliable, including
information published by issuers, shares of which are subject to recommendations. However, BRE Bank Securities S.A., in no case, guaran-
tees the accuracy and completeness of the report, in particular should sources on the basis of which the report was prepared prove to be inac-
curate, incomplete or not fully consistent with the facts.
This report is for information purposes, it is not intended to be and should not be construed as a recommendation, offer or solicitation to ac-
quire, or dispose of, any of the securities mentioned in this report. BRE Bank Securities S.A. bears no responsibility for investment decisions
taken on the basis of the present report or for any damages incurred as a result of investment decisions taken on the basis of the present re-
port.
Recommendations are based on essential data from the entire history of a company being the subject of a recommendation, with particular
emphasis on the period since the previous recommendation. Investing in shares is connected with a number of risks including, but not limited
to, the macroeconomic situation of the country, changes in legal regulations as well as changes on commodity markets. Full elimination of
these risks is virtually impossible.
It is possible that BRE Bank Securities S.A. renders, will render or in the past has rendered services for companies and other entities men-
tioned in the present report.
BRE Bank Securities serves as animator for the securities of Bakalland, Millennium, Mondi, Polimex-Mostostal Siedlce, Mieszko, Pemug,
Skarbiec Nieruchomości certificates.
BRE Bank Securities received remuneration for its services from the following issuers: Agora, Computerland, Elektrobudowa, Kęty, Koelner,
PGNiG, Polimer-Mostostal Siedlce, Polmos Lublin, Prokom Software, Torfarm, ZA Puławy.
BRE Bank Securities S.A., its shareholders and employees may hold long or short positions in the issuer's shares or other financial instru-
ments related to the issuer's shares. BRE Bank Securities S.A., its affiliates and/or clients may conduct or may have conducted transactions
for their own account or for account of another with respect to the financial instruments mentioned in this report or related investments before
the recipient has received this report.
Copying or publishing the present report, in full or in part, or disseminating in any way information contained in the present report requires the
prior written agreement of BRE Bank Securities S.A.
Recommendations are addressed to all Clients of BRE Bank Securities S.A. This report is not for distribution to third parties.
The activity of BRE Bank Securities S.A. is subject to the supervision of the Polish Financial Supervision Commission.
Individuals who did not participate in the preparation of this recommendation, but had or could have had access to the recommendation prior
to its publication, are employees of BRE Bank Securities S.A. authorised to access the premises in which recommendations are prepared,
other than the analysts mentioned as the authors of the present recommendation.
Strong and weak points of valuation methods used in recommendations:
DCF – acknowledged as the most methodologically correct method of valuation; it is based in discounting financial flows generated by a com-
pany; its weak point is the significant susceptibility to a change of forecast assumptions in the model.
Comparative – based on a comparison of valuation multipliers of companies from a given sector; simple in construction, reflects the current
state of the market; weak points include substantial variability (fluctuations together with market indices) as well as difficulty in the selection of
the group of comparable companies.
1 February 2007 25
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