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Citi Investment Research is a division of Citigroup Global Markets Inc. (the "Firm"), which 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. Non-US research analysts who have prepared this report are not registered/qualified as research analysts with the NYSE and/or NASD. Such research analysts may not be associated persons of the member organization and therefore may not be subject to the NYSE Rule 472 and NASD Rule 2711 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account. Customers of the Firm in the United States can receive independent third-party research on the company or companies covered in this report, at no cost to them, where such research is available. Customers can access this independent research at http://www.smithbarney.com (for retail clients) or http://www.citigroupgeo.com (for institutional clients) or can call (866) 836-9542 to request a copy of this research.
Citigroup Global Markets Equity Research
Citi Latin America Equity Research Recommendations
Sector Recommendation Market Recommendation
Materials Overweight Mexico OverweightFinancials Overweight Brazil OverweightTelecom Overweight Colombia NeutralCons. Staples Overweight Chile UnderweightConsumer Discr. Underweight Peru UnderweightEnergy Underweight Argentina UnderweightIndustrials UnderweightUtilities Underweight
Source: Citi Investment Research
Latin America Equity Strategy (Citi)
Strategy Focus
10 September 2008 60 pages
Latin America Strategy Chartbook September 2008
A Question of Timing — We are definitely buyers for the medium- and long-term given attractive valuations and expectations for improving fundamentals globally (fundamentals within the region remain supportive). However, negative market momentum and sentiment complicate the process of choosing an entry point.
Valuations: "Buy" — Although we acknowledge that valuations themselves are rarely a catalyst, the region is now becoming very attractive: Latin America is trading below its historical average on both a forward P/E (9.9x) and EV/EBITDA (5.1x).
Momentum and Sentiment: "Wait" — Investors are skittish given negative share price momentum and poor sentiment. Both of these, however, can be viewed as contrarian indicators. We focus on the percentage of stocks trading above their 200-day moving averages (down to 17%), regional redemptions of US$4.3bn, the "low" percentage of Buys (57%), and our collapsing advance-decline monitor.
Catalysts — We see many potential catalysts for a new, sustainable rally: (1) US dollar stabilization, (2) a rebound in commodity prices, (3) better-than-expected US macro/labor market data, (4) improving fundamentals also in Europe/China, and (5) reduced worries about global inflation—all are exogenous.
Stock Screens — Growth: Buy-rated stocks with the highest 3-year earnings CAGR: Rodobens, Vivo, GP Investments, Gafisa, PDG, CTEEP, Marfrig. Laggards: Buy-rated stocks that have fallen the most since the May 19 regional peak: Usiminas, Vale, Datasul, Rossi, CSN, Irsa, Petrobras, Gerdau, VCP, Antofagasta.
Geoffrey Dennis
Jason Press
See Appendix A-1 for Analyst Certification and important disclosures.
Latin America Strategy Chartbook
10 September 2008
Citigroup Global Markets Equity Research 2
Contents Chartbook Round-Up 3
Citi Latin America Model Portfolio 4 Citi Latin America Focus List 6
Regional Performance and Valuations 7 Market Performance 9 Equity Markets 10 Earnings Growth Forecasts and Valuations 11 Sector Valuations 12 Enterprise Value / EBITDA 13 Implied Cost of Equity Model 14 Earnings Momentum 15 Dividend Screen 16 Growth Stock Screen 17
Fund Flows, Volumes and Sentiment 18 Breadth of Gains/Losses 20
Macro Analysis 21 Global Drivers 22 Fixed Income 23 Currencies 24 Commodities 25
Country Pages 26 Brazil 27 Mexico 31 Chile 34 Argentina 37 Peru 39 Colombia 41
Sector Pages 43 Energy 44 Materials 45 Industrials 46 Financials 47 Consumer Discretionary 48 Consumer Staples 49 Telecom Services 50 Utilities 51
MSCI Disclosure 52 Appendix A-1 56
Analyst Certification 56
Latin America Strategy Chartbook
10 September 2008
Citigroup Global Markets Equity Research 3
This is the toughest investment environment that we have seen in six years.
MSCI Latin America is down 35.2% from the May 19 peak—the biggest decline since the bull market began in September 2002. Whether this is another, more painful, correction in a series of corrections endured over the past six years or a "new" bear market is only partly a question of semantics. It is also a question of longevity. We are definitely buyers for the medium- and long-term given attractive valuations and expectations for improving fundamentals globally (fundamentals within the region remain supportive). However, negative market momentum and sentiment complicate the process of choosing an entry point.
Valuations: "Buy". Although we acknowledge that valuations themselves are rarely a catalyst, the region is now becoming very attractive on this basis:
– The regional forward P/E of 9.9x is 0.8 standard deviations below the historical average of 11.3x, despite a still-low cost of capital. Mexico and Chile appear most attractive, but all markets except Peru are now trading below their own P/E averages. Further, regional earnings momentum surprisingly remains positive (18.7% forward EPS growth, up from 16.6% last month), driven by Brazil;
– The forward EV/EBITDA of 5.1x is 0.5 standard deviations below the historical average of 5.3x. On this metric, Brazil (4.9x) is more attractive than Mexico (6.4x) in both absolute terms and relative to their averages;
– On a P/B basis, while Latin America trades at 2.43x, still a 17% premium to the historical average, this ratio is down 26% from its May peak of 3.30x. Mexico and Colombia are most attractive; Peru remains expensive.
Momentum and Sentiment: "Wait". Despite a strong rally on September 10, investors are skittish given negative share price momentum and poor sentiment. Both of these, however, can be viewed as contrarian indicators.
– The percentage of stocks trading above their 200-day moving averages for the region has declined to 17%, down from 72% in early June. Brazil (7%) and Argentina (0%) have seen the broadest market declines, while more defensive Chile (48%) and Mexico (31%) are doing better.
– Fund flows for Latin America have seen an unprecedented 13 successive weeks of outflows, totaling US$4.3bn of redemptions (7.5% of assets).
– Volumes are down across the region, the percentage of sell-side "Buys" is down to 57%—probably still too high but the lowest we have seen since we started tracking the data in 2006, and our advance-decline monitor has halved since the beginning of 2008.
We see many potential catalysts for a new, sustainable rally: (1) US dollar stabilization, (2) a rebound in commodity prices, (3) better-than-expected US macro/labor market data, (4) improving fundamentals also in Europe/China, and (5) reduced worries about global inflation—all of these are exogenous.
High Growth: "Buy" rated stocks with the highest 3-year earnings CAGR: Rodobens, Vivo, GP Investments, Gafisa, PDG, CTEEP, Marfrig.
Biggest Laggards: "Buy" rated stocks that have fallen the most since May 19: Usiminas, Vale, Datasul, Rossi, CSN, Irsa, Petrobras, Gerdau, VCP, Antofagasta.
Chartbook Round-Up
Latin America is trading below its
historical average on both a forward P/E
and EV/EBITDA basis.
Figure 1. Targets and Expected Total Return
Target Currency ETR
Brazil 66,000 1.60 52.1%Mexico 32,000 10.25 29.6%Chile 3,000 500 17.0%Argentina 2,100 3.15 28.3%Peru 14,000 2.70 28.6%Colombia 10,500 1,750 30.7%Region 43.8%
Local index and currency targets for end-2008
Source: Citi Investment Research
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Citi Latin America Model Portfolio
Figure 2. Citi Model Portfolio: MSCI Latin America Weights and Citi Recommendations by Market and Sector
Brazil Mexico Chile Argentina Peru Colombia Total [a]Weights MSCI CIR (+)/(-) MSCI CIR (+)/(-) MSCI CIR (+)/(-) MSCI CIR (+)/(-) MSCI CIR (+)/(-) MSCI CIR (+)/(-) MSCI CIR (+)/(-)
Consumer Disc. 2.3% 2.3% 0.0% 3.0% 3.7% 0.7% 0.2% 0.1% 0.0% n/a n/a n/a n/a n/a n/a n/a n/a n/a 5.5% 6.1% 0.6%Cons. Staples 3.4% 3.9% 0.6% 4.9% 5.1% 0.2% 0.6% 0.6% 0.0% n/a n/a n/a n/a n/a n/a n/a n/a n/a 8.9% 9.6% 0.7%Energy 16.2% 15.8% -0.4% n/a n/a n/a n/a n/a n/a 1.8% 0.0% -1.8% n/a n/a n/a 0.8% 2.4% 1.6% 18.8% 18.2% -0.6%Financials 13.5% 16.2% 2.7% 1.5% 1.1% -0.4% 0.5% 0.4% -0.1% 0.2% 0.3% 0.2% 0.8% 0.4% -0.4% 0.9% 0.0% -0.9% 17.4% 18.4% 1.0%Industrials 2.3% 1.3% -1.0% 1.2% 1.3% 0.1% 1.0% 0.8% -0.2% n/a n/a n/a n/a n/a n/a 0.0% n/a n/a 4.4% 3.3% -1.2%Technology 0.68% 0.3% -0.4% n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a 0.0% n/a n/a 0.7% 0.3% -0.4%Materials 18.7% 20.9% 2.2% 3.3% 4.5% 1.2% 1.3% 0.8% -0.4% 0.2% 0.0% -0.1% 1.8% 0.8% -1.0% 0.4% 0.0% -0.4% 25.6% 27.0% 1.4%Telecom 2.9% 3.1% 0.2% 9.7% 10.6% 0.9% 0.4% 0.2% -0.1% 0.2% 0.0% -0.1% n/a n/a n/a 0.0% n/a n/a 13.1% 13.9% 0.8%Utilities 3.6% 2.3% -1.3% n/a n/a n/a 1.7% 1.3% -0.4% n/a n/a n/a n/a n/a n/a 0.2% 0.0% -0.2% 5.5% 3.6% -2.0%Total 63.6% 65.8% 2.4% 23.6% 26.3% 2.6% 5.5% 4.2% -1.3% 2.3% 0.4% -1.9% 2.6% 1.2% -1.4% 2.4% 2.4% 0.0% 100% 100% 0%
Source: MSCI, FactSet and Citi Investment Research
Figure 3. Citi Recommended Market Weight Relative to MSCI Benchmark Figure 4. Citi Recommended Sector Weight Relative to MSCI Benchmark
-3.0%
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
Mexico Brazil Colombia Chile Peru Argentina
Neutral
-2.5%
-2.0%
-1.5%
-1.0%
-0.5%
0.0%
0.5%
1.0%
1.5%
2.0%
Materials Financials Telecom Cons.Staples
ConsumerDiscr.
LatinAmerica
Energy Industrials Utilities
Source: MSCI, FactSet and Citi Investment Research Source: MSCI, FactSet and Citi Investment Research
Latin America Strategy Chartbook
10 September 2008
Citigroup Global Markets Equity Research 5
Figure 5. MSCI Latin America Constituents and Citi Focus List
Brazil Mexico Chile Argentina Peru Colombia CIR Focus List
Consumer CYRELA BRAZIL REALTY GRUPO TELEVISA CPO FALABELLA Homex
Discretionary ULTRAPAR PART PN GRUPO ELEKTRA
LOJAS RENNER DESARROLLADORA HOMEX
B2W CORPORACION GEO B
NET SERV DE COM PN URBI DESARROLLOS URBANOS
LOJAS AMERICANAS PN
GAFISA
MRV ENGENHARIA
Consumer AMBEV PN WALMART MEXICO V CENCOSUD AmBev
Staples PERDIGAO ON FEMSA UNIT UBD D & S DISTRIBUCION SERV Walmex
SADIA PN GRUPO MODELO C CERVEZAS Comerci
SOUZA CRUZ ON KIMBERLY-CLARK MEXICO A Femsa
PAO DE ACUCAR PN GRUPO BIMBO A
JBS COCA-COLA FEMSA L
NATURA COSMETICOS ON CONTROLADORA COM MEX UBC
COSAN ON
Energy PETROBRAS PN TENARIS ECOPETROL Lupatech
PETROBRAS ON PETROBRAS ENERGIA PART B
OGX PETROLEO
Financials BANCO BRADESCO PN GRUPO FIN BANORTE O BCO SANTANDER CHILE (NEW CREDICORP (USD) BANCOLOMBIA PREF Itau
BANCO ITAU HLDG FIN. PN GRUPO FIN INBURSA O BANCO DE CREDITO E INV. BANCOLOMBIA ORD Unibanco
UNIBANCO UNIT BANCO COMPARTAMOS SURAMERICANA INVERSIONES Credicorp
ITAUSA PN
BANCO BRASIL
BRADESPAR PN
BOVESPA HOLDING
BOLSA DE MERCADORIAS
BANRISUL PNB
Health Care
Industrials ALL AMER LAT UNIT GRUPO CARSO EMPRESAS COPEC ALL
EMBRAER EMPRESAS ICA LAN AIRLINES ASUR
CCR RODOVIAS ON ALFA
TAM PN GRUPO AEROP PACIFICO B
DURATEX PN
LOCALIZA RENT A CAR
GOL PN
LLX LOGISTICA ON
Info Technology
Materials VALE DO RIO DOCE PNA CEMEX CPO CMPC (EMPRESAS) SIDERAR A SOUTHERN COPPER C(USD INVERSIONES ARGOS Usiminas
VALE DO RIO DOCE ON GRUPO MEXICO B SOQUIMICH B BUENAVENTURA (MINAS) CEMENTOS ARGOS (NEW) Cemex
CSN SIDERURGICA NAC'L ON CAP CIA MINERA MILPO Aracruz
GERDAU PN MASISA (NEW) MINSUR I CMPC
USIMINAS PNA VOLCAN COMPANIA MINERA B Ternium
GERDAU METALURGICA PN Vale
ARACRUZ CELULOSE PNB
GERDAU ON
VOTORANTIM CELULOSE PN
USIMINAS ON
IRONX MINERACAO ON
SUZANO PAPEL E CELUL PNA
FOSFERTIL PN
BRASKEM PNA
KLABIN PN
MMX MINERACAO METALICOS
Telecom VIVO PART. PN AMERICA MOVIL L ENTEL TELECOM ARGENTINA B
Services GVT HOLDING TELEFONOS MEXICO L CTC TELECOM. CHILE(CIA)A
TIM PART. PN TELMEX INTERNACIONAL L
CARSO GLOBAL TELECOM A1
AXTEL CPO
Utilities CEMIG PN ENDESA (CHILE) EDB
ELETROBRAS ON ENERSIS
ELETROBRAS PNB
CESP PNB
SABESP ON
CPFL ENERGIA ON
ELETROPAULO METROPOL.PNB
COPEL PNB
TRACTEBEL ENERGIA ON
EDP ENERGIAS DO BRASIL
Total 63.6% 23.6% 5.5% 2.3% 2.6% 2.4% 100.0%
Note: Not all Focus List companies are necessarily in the MSCI Latin America index, although most are constituents.
Source: MSCI, FactSet and Citi Investment Research
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MSCI Price 52-wk 52-wk Price ETR EPS/EPADR P/E EV/EBITDA P/BV Div. Mkt CapIndustry Company NASD Rating 10-Sep Low High Target (%) 07x 08(E)x 09(E)x 07x 08(E)x 09(E)x 07x 08(E)x 09(E)x 07 07 Yld. US$ MN
BrazilCons. Staples Ambev ABV 1M $57.01 $56.26 $88.77 $88.00 61% $2.31 $2.90 $3.08 24.6 19.7 18.5 8.8 7.2 6.7 3.58 $2.5 6.9% $34,987Energy Lupatech LUPA3 1H R$53.00 R$42.93 R$64.99 R$84.00 58% ($0.36) R$1.98 R$3.25 N/A 26.7 16.3 27.5 11.2 8.7 9.44 R$0.1 0.0% $1,369Financials Itau ITAU4 1M R$30.10 R$29.33 R$52.37 R$44.00 50% R$2.39 R$2.82 R$3.17 12.6 10.7 9.5 N/A N/A N/A 3.11 $0.8 3.8% $50,398Financials Unibanco UBBR11 1M R$18.29 R$18.00 R$28.00 R$24.50 38% R$2.34 R$2.08 R$2.32 7.8 8.8 7.9 N/A N/A N/A 2.16 R$0.9 4.4% $14,422Industrials ALL ALLL11 1M R$16.57 R$15.86 R$28.39 R$32.00 94% R$0.37 R$0.79 R$0.77 45.1 21.0 21.4 10.7 7.9 6.6 3.76 R$0.1 0.8% $5,396Materials Vale RIO_p 1M $18.76 $18.55 $35.96 $39.00 113% $2.39 $2.99 $4.07 7.8 6.3 4.6 7.1 4.5 2.9 2.72 $0.6 5.3% $90,656Materials Usiminas USIM5 1H R$43.20 R$43.00 R$95.80 R$99.00 134% R$6.43 R$7.83 R$8.89 6.7 5.5 4.9 3.9 2.9 2.5 1.72 $2.0 4.6% $12,040Materials Aracruz ARA 1M R$51.08 R$49.75 R$92.22 R$92.00 86% R$4.09 R$4.07 R$4.33 12.5 12.6 11.8 7.7 8.4 7.9 2.97 R$2.3 5.8% $5,266Utilities EDB ENBR 1M $24.75 $21.82 $35.50 $41.10 73% $2.67 $3.53 $3.69 9.3 7.0 6.7 4.8 4.7 4.5 1.04 $0.8 7.3% $2,306MexicoConsumer Disc Homex HOMEX 1M P$86.70 P$81.00 P$122.00 P$135.00 56% P$6.53 P$8.38 P$9.17 13.3 10.3 9.5 N/A N/A N/A 3.04 P$0.0 0.0% $2,756Cons. Staples Comerci COMEUBC 1M P$24.40 P$23.90 P$35.20 P$36.50 50% P$2.35 P$1.92 P$2.13 10.4 12.7 11.5 6.8 6.6 6.2 1.19 P$0.2 0.7% $2,508Cons. Staples Walmex WALMEXV 1L P$38.46 P$34.26 P$47.19 P$50.00 32% P$1.68 P$1.83 P$2.22 22.9 21.0 17.4 14.0 12.9 10.8 4.89 P$0.5 1.8% $30,751Cons. Staples Femsa FMX 1M $45.85 $29.40 $49.83 $60.00 32% $2.83 $2.65 $2.72 16.2 17.3 16.8 8.4 7.1 6.6 2.77 $0.4 1.1% $16,406Materials Cemex CX 1H $20.42 $19.45 $33.40 $37.00 88% $3.22 $2.88 $3.05 6.3 7.1 6.7 3.8 3.2 2.4 1.03 $0.7 7% $15,874Industrials ASUR ASURB 1H $49.50 $43.57 $63.54 $75.00 55% $1.60 $3.30 $3.74 31.0 15.0 13.2 5.4 4.7 4.5 1.12 $0.7 3% $1,485ChileMaterials CMPC CAR 1M C$15,001 C$15,000 C$20,800 C$22,000 49% C$1,211 C$1,049 C$1,500 12.4 14.3 10.0 8.6 8.8 6.7 1.10 C$343 2.8% $5,669PeruFinancials Credicorp BAP 1M $72.65 $58.65 $86.91 $110.00 55% 4.40NS$ 5.75NS$ 6.89NS$ 16.5 12.6 10.5 N/A N/A N/A 3.46 1.54NS$ 3.3% $5,795ArgentinaMaterials Ternium TX 1H $25.08 $25.00 $45.99 $47.00 89% $3.89 $5.92 $5.96 6.4 4.2 4.2 3.9 3.3 2.4 1.13 N/A 2.0% $5,028Portfolio (Market-Cap Weighted) 41% 13.5 11.8 10.4 5.5 4.8 4.1 2.11 2.5%
Return MSCI RelativeIndustry Company NASD Added US$ LatAm Perform. Investment Thesis
Cons. Staples Ambev ABV 2/11/08 -25.8% -19.4% -6.4% Good operating momentum and hedged protection against grain price/FX fluctuation; strong balance sheet; Macro risk; diluted EM exposure.Energy Lupatech LUPA3 5/19/08 -20.8% -35.2% 14.3% Strong organic growth, acquisitions and exposure to E&P spending; aggressive growth program does entail risk.Financials Itau ITAU4 12/1/06 3.2% 21.2% -17.9% Compelling volume growth at attractive margins; synergies from BankBoston acquisition; Risk in loan growth/asset quality sensitive to economy.Financials Unibanco UBBR11 8/26/08 -10.8% -13.1% 2.3% High loan growth should prove sustainable, untapped residential mortgage market, sustainable ROEs; Interest rate risk, asset quality.Industrials ALL ALLL11 5/30/08 -37.2% -34.6% -2.6% Value investment with growth prospects; monopoly rights; quality advantage over trucking; Regulatory risk, commodity price risk.Materials Vale RIO_p 10/1/07 -38.8% -21.3% -17.5% We see further upside on rising iron ore prices, near-term earnings growth and underappreciated long-term value; Risk in global economy.Materials Usiminas USIM5 5/19/08 -57.4% -35.2% -22.3% Steel prices likely to rise again in 2H; valuations are logcal assuming earnngs are sustainable; Macro and commodity price risk.Materials Aracruz ARA 5/30/08 -43.7% -34.6% -9.1% Outlook for 2009-10 remains positive, limited market pulp capacity additions, attractive valuation; Risk in cyclical nature of pulp prices. Utilities EDB ENBR 7/14/08 -31.9% -23.2% -8.6% Compelling valuations, new management / strategy, expected compelling dividend policy, strong cash generation; Risk in low rainfall and rationing.Consumer Disc Homex HOMEX 1/28/08 -10% -16.0% 6.1% Homex should balance strong growth rates with profitability though 2012, and, at the same time, maintain a solid financial situation; Risk in sentiment.Cons. Staples Comerci COMEUBC 4/18/08 -17.7% -29.1% 11.4% Attractive valuation, consistent results (although comps will become difficult), sunergies in sales floor expansion; Macro and execution risk.Cons. Staples Walmex WALMEXV 6/8/07 -2.9% -6.4% 3.5% Expectations of improving consumption at yearend; consolidating its leadership position while expanding; Macro risks and banking rollout risk.Cons. Staples Femsa FMX 7/25/08 5.1% -19.2% 24.3% Double digit EBITDA growth, rational competition, strong balance sheet and financial disciplinet, attractive valuation; Risk in raw material prices.Materials Cemex CX 4/1/05 16.8% 121.6% -104.9% Low double-digit FCF growth; Pent-up demand in Mexican housing industry; U.S. cement market is poised to grow.Industrials ASUR ASURB 10/25/07 -17.5% -23.2% 5.7% Most attractive valuation among Mexican airports, good profits, hurricane season turns to holiday season; Risks in global economy, secondary airport.Materials CMPC CAR 2/25/08 -28.0% -25.9% -2.1% Outlook for pulp prices remains supportive; attractive valuations; Risk in commodity prices and lack of liquidityFinancials Credicorp BAP 5/19/08 -11.1% -35.2% 24.1% Peruvian banking sector offers stellar loan growth and superior profitability, strong in consumer/retail sector; macro and execution risk.Materials Ternium TX 12/14/07 -36.2% -22.2% -14.0% Strong fundamental outlook for regional steel, competitors focused on Brazil, attractive valuation; Venezuela political risk, macro slowdown.
Source: Citi Investment Research
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10 September 2008
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Regional Performance and Valuations
Latin America Strategy Chartbook
10 September 2008
Citigroup Global Markets Equity Research 8
Figure 6. Performance of Latin American and Global Equity Indices
Market Data Performance (Local Currency, %) Performance (USD, %)
Ticker Index 52w High 52w Low 1Wk 1Mo 3Mo YTD 1Yr 1Wk 1Mo 3Mo YTD 1Yr
Global Indices
MSCI AC World MXWD 316 428 316 (4.3) (5.2) (12.6) (19.8) (18.1) (5.0) (7.4) (16.3) (21.5) (18.3) S&P 500 Index SPX 1,225 1,576 1,200 (4.2) (5.5) (10.1) (16.6) (15.8) (4.2) (5.5) (10.1) (16.6) (15.8) DJ Euro Stoxx 50 SX5E 3,261 4,503 3,090 (4.5) (4.3) (9.3) (25.9) (21.7) (7.1) (10.0) (18.5) (28.3) (19.5) Japan Nikkei 225 NKY 12,401 17,489 11,691 (1.7) (5.8) (12.6) (19.0) (23.1) (0.4) (3.4) (13.7) (15.8) (18.8) MSCI Emrg Mkts MXEF 869 1,338 869 (5.3) (8.6) (22.4) (27.6) (19.8) (6.5) (12.3) (25.6) (30.3) (20.2) MSCI Latin America MXLA 3,369 5,195 3,369 (8.6) (10.7) (27.6) (24.6) (15.4) (12.5) (16.5) (32.1) (23.4) (8.4) MSCI EM EMEA MXEE 325 474 325 (8.3) (8.6) (23.5) (26.1) (16.2) (9.8) (11.4) (26.1) (29.2) (15.8) MSCI EM Asia MXMS 343 572 335 (2.2) (7.7) (19.2) (29.3) (22.7) (1.8) (10.7) (22.2) (33.3) (26.2) MSCI Indices - Asia
Korea MXKR 289 491 271 3.5 (6.6) (19.2) (22.2) (21.2) 6.6 (12.8) (24.4) (33.9) (32.8) Taiwan MSEUSTW 223 339 218 (3.0) (10.9) (24.4) (25.5) (28.6) (3.2) (12.9) (28.2) (24.2) (26.0) China MXCN 54 104 53 (5.9) (9.3) (22.8) (36.8) (27.8) (5.8) (9.1) (22.7) (36.8) (27.9) India MEEUSIA 408 694 361 (1.6) (2.0) (3.4) (30.6) (5.6) (2.5) (8.0) (7.6) (38.9) (14.3) Malaysia MXMY 284 438 283 (1.6) (4.5) (13.2) (27.6) (20.0) (2.2) (8.6) (17.9) (30.5) (18.7) Indonesia 475 737 475 (11.4) (12.5) (22.3) (30.4) (11.0) (12.5) (13.9) (22.4) (29.9) (10.2) Thailand MSEUTHF 200 293 193 0.7 (3.9) (16.8) (23.4) (15.3) 0.6 (6.2) (19.9) (25.3) (15.9) Philippines MSEUSPHF 241 377 208 0.6 1.5 0.7 (24.9) (21.1) 0.1 (3.9) (5.0) (33.8) (21.6) MSCI Indices - CEEMEA
South Africa MSEUSSA 397 578 392 (3.3) (2.4) (14.7) (9.4) (6.6) (5.1) (5.1) (14.9) (21.8) (14.5) Russia MSELTRUS 881 1,642 881 (17.4) (18.3) (41.3) (41.9) (25.8) (18.0) (19.5) (42.5) (42.6) (26.1) Poland MSEUSPO 1,132 1,672 1,129 (4.2) (2.2) (8.3) (25.0) (27.2) (9.7) (13.0) (19.4) (24.6) (17.5) Hungary MSELTHG 882 1,221 850 (3.0) (3.6) (7.3) (24.1) (25.5) (5.9) (10.3) (14.0) (22.4) (17.9) Czech Republic MSEUSCZ 701 929 658 (6.6) (5.1) (12.4) (18.4) (7.8) (9.5) (12.3) (22.0) (15.5) 5.3 Turkey MSEUSTK 498 790 414 (0.8) (2.2) 1.7 (30.4) (21.2) (3.9) (5.7) 2.5 (33.7) (16.6) Israel MSEUSIS 243 284 234 (2.8) (3.1) (7.3) (13.5) (9.2) (2.9) (3.8) (13.8) (8.0) 3.0 Egypt MSILEG 1,042 1,469 955 0.2 (6.6) (19.5) (20.3) 3.5 (0.2) (8.3) (20.6) (18.8) 7.9 MSCI Indices - Latin America
Brazil MXBR 2,785 4,728 2,779 (10.9) (13.5) (32.5) (29.0) (13.4) (15.9) (20.4) (37.5) (28.0) (3.7) Mexico MXMX 5,217 6,742 5,217 (3.0) (3.6) (15.5) (16.2) (18.6) (4.2) (7.1) (16.7) (12.9) (13.7) Chile MXCL 1,549 2,058 1,549 (5.0) (8.3) (9.0) (8.4) (11.2) (7.8) (10.8) (17.4) (14.1) (12.8) Argentina MXAR 2,514 4,188 2,482 (13.6) (18.9) (34.6) (16.4) (17.7) (14.4) (19.0) (34.6) (13.9) (14.8) Peru MXPE 892 1,488 892 (10.2) (8.6) (33.7) (28.9) (22.9) (10.3) (10.2) (34.9) (28.6) (21.1) Colombia MXCO 603 734 520 (0.5) 9.1 1.2 0.1 0.6 (5.3) (4.7) (17.8) (2.7) 6.4 Local Indices - Latin America
Brazil Bovespa IBOV 48,435 73,920 48,419 (11.0) (14.4) (30.1) (24.2) (11.2) (16.0) (21.3) (35.3) (23.1) (1.3) Mexico IPC/Bolsa MEXBOL 25,630 32,851 25,299 (3.4) (5.5) (17.1) (13.2) (15.3) (4.6) (8.9) (18.3) (9.8) (10.2) Chile IPSA IGPA 2,734 3,496 2,525 (4.7) (7.8) (9.4) (10.4) (14.6) (7.5) (10.3) (17.7) (16.0) (16.1) Argentina Merval MERVAL 1,595 2,355 1,591 (8.8) (10.2) (26.2) (25.9) (21.9) (9.6) (10.4) (26.2) (23.6) (19.1) Peru BVL General IGBVL 12,144 22,684 11,716 (8.7) (4.5) (28.1) (30.7) (38.2) (9.1) (8.9) (31.7) (30.2) (34.3) Colombia IBB Gen IGBC 9,559 11,439 8,561 (0.9) 7.0 (3.1) (10.6) (10.9) (5.7) (6.5) (21.3) (13.1) (5.8) Sectors - Latin America
Consumer Discretion MXLA0CD 493 657 493 (3.8) (8.5) (16.4) (16.5) (21.7) (6.9) (13.5) (20.1) (14.4) (15.3) Consumer Staples MXLA0CS 317 385 304 (1.9) (5.5) (8.1) (6.9) (6.4) (4.9) (10.5) (12.1) (4.5) 1.1 Energy MXLA0EN 923 1,780 784 (14.9) (16.7) (40.0) (33.9) 3.9 (19.3) (22.9) (44.4) (33.0) 14.2 Financials MXLA0FN 626 900 626 (4.4) (7.2) (19.7) (22.8) (14.2) (9.1) (14.0) (25.5) (21.9) (6.2) Industrials MXLA0IN 214 331 214 (3.9) (5.3) (16.1) (28.1) (29.2) (7.7) (10.8) (21.4) (28.0) (24.8) Materials MXLA0MT 768 1,415 768 (12.1) (13.5) (37.2) (28.9) (22.1) (16.1) (19.4) (41.3) (28.1) (15.4) Telecom Services MXLA0TC 337 450 337 (5.4) (4.3) (14.0) (20.0) (20.7) (7.6) (8.7) (16.6) (17.6) (15.5) Utilities MXLA0UT 223 293 212 (7.9) (13.3) (15.1) (6.4) (11.1) (12.4) (19.1) (22.2) (7.5) (5.1)
Source: MSCI, FactSet and Citi Investment Research
Latin America Strategy Chartbook
10 September 2008
Citigroup Global Markets Equity Research 9
Market Performance
Figure 7. MSCI Index Performance (U.S. Dollar, 1 Month) Figure 8. MSCI Index Performance (U.S. Dollar, YTD)
(25)
(20)
(15)
(10)
(5)
-
5
Colombia Mexico Peru Chile MSCI LatinAmerica
Argentina Brazil
%
(35)
(30)
(25)
(20)
(15)
(10)
(5)
-
5
Colombia Mexico Argentina Chile MSCI LatinAmerica
Brazil Peru
%
Source: MSCI, Factset and Citi Investment Research Source: MSCI, Factset and Citi Investment Research
Figure 9. MSCI Sector Performance (U.S. Dollar, 1 Month) Figure 10. MSCI Sector Performance (U.S. Dollar, YTD)
(25)
(20)
(15)
(10)
(5)
-
5
Telecom Cons.Staples
Industrials ConsumerDiscr.
Financials MSCI LatinAmerica
Utilities Materials Energy
%
(35)
(30)
(25)
(20)
(15)
(10)
(5)
-
5
Cons.Staples
Utilities ConsumerDiscr.
Telecom Financials MSCI LatinAmerica
Industrials Materials Energy
%
Source: MSCI, Factset and Citi Investment Research Source: MSCI, Factset and Citi Investment Research
Latin America Strategy Chartbook
10 September 2008
Citigroup Global Markets Equity Research 10
Equity Markets
Figure 11. MSCI Index Performance (Index, 50- and 200-day MA) Figure 12. Brazilian Bovespa (Index, 50- and 200-day MA and Relative Perf.)
2,000
2,500
3,000
3,500
4,000
4,500
5,000
5,500
Sep-06 Mar-07 Sep-07 Mar-08 Sep-08
MSCI Latin America 50-day Moving Average 200-day
Correction:Nov 2007-Jan 2008
Correction:July/Aug 2007
Pullback
Current Correction:May 2008-??
20,000
30,000
40,000
50,000
60,000
70,000
80,000
Sep-06 Mar-07 Sep-07 Mar-08 Sep-08
75
100
125
150
175
200
225
Brazilian Bovespa 50-day Moving Average 200-day MSCI Rel to LatAm
Outperformance Underperformance
Source: MSCI, Factset and Citi Investment Research Source: Datastream and Citi Investment Research
Figure 13. Mexican Bolsa (Index, 50- and 200-day MA and Relative Perf.) Figure 14. Chilean IPSA (Index, 50- and 200-day MA and Relative Perf.)
15,000
17,000
19,000
21,000
23,000
25,000
27,000
29,000
31,000
33,000
35,000
Sep-06 Mar-07 Sep-07 Mar-08 Sep-08
60
100
140
180
220
260
Bolsa 50-day Moving Average 200-day MSCI Rel to LatAm
Underperformance
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
Sep-06 Mar-07 Sep-07 Mar-08 Sep-08
40
60
80
100
120
140
160
180
200
IPSA 50-day Moving Average 200-day MSCI Rel to LatAm
Underperformance
Source: Datastream and Citi Investment Research Source: Datastream and Citi Investment Research
Latin America Strategy Chartbook
10 September 2008
Citigroup Global Markets Equity Research 11
Earnings Growth Forecasts and Valuations
Figure 15. Latin America Growth Forecasts and Valuations by Market
EPS Growth P/E Consensus EPS Growth Consensus P/E
07A 08E 09E 07A 08E 09E 08E 09E 08E 09E
Brazil 38.2% 32.2% 19.7% 11.7x 8.8x 7.4x 16.1% 18.3% 10.7x 9.1xMexico 20.4% -0.3% 16.0% 12.8x 12.9x 11.1x 8.1% 14.1% 11.1x 9.8xChile 21.2% 17.7% 16.9% 18.9x 16.1x 13.8x 17.3% 21.1% 16.5x 13.6xArgentina 40.6% 26.7% 5.4% 9.7x 7.6x 7.2x 9.1% 3.8% 13.6x 13.1xPeru 18.9% -0.2% 31.0% 9.6x 9.7x 7.4x -7.3% 15.5% 14.4x 12.5xColombia n/a 25.7% 18.3% 35.6x 28.3x 24.0x 23.3% 14.8% 13.3x 11.6xLatin America 29.6% 23.2% 18.5% 12.3x 10.0x 8.5x 14.2% 17.0% 11.2x 9.6x
EBITDA Growth FV/EBITDA Div
07A 08E 09E 07A 08E 09E ROE P/BV Yld
Brazil 29.3% 40.9% 18.3% 5.0x 3.7x 2.9x 18.9% 2.33x 2.7%Mexico 13.2% 15.8% 13.8% 9.1x 7.8x 6.9x 20.7% 2.77x 2.2%Chile 12.7% 8.7% 16.3% 6.0x 5.5x 4.7x 10.6% 2.20x 2.3%Argentina 5.8% 17.7% 11.6% 5.7x 4.8x 4.3x 25.7% 2.68x 1.5%Peru 16.0% -6.5% 32.5% 8.2x 5.7x 5.6x 35.0% 4.42x 4.3%Colombia 35.9% 8.2% 32.2% 16.6x 15.4x 11.6x 8.9% 1.82x 2.0%Latin America 23.5% 32.0% 17.6% 5.6x 4.2x 3.4x 18.9% 2.43x 2.5%
Source: Citi Investment Research
Figure 16. MSCI Latin American Forward P/E and Performance Figure 17. Latin American Trailing Price-to-Book
6X
8X
10X
12X
14X
16X
18X
95 96 97 98 99 00 01 02 03 04 05 06 07 08
-60%
-40%
-20%
0%
20%
40%
60%
80%
12-mth MSCI Return P/E +1 S.D. P/E -1 S.D. P/E
Average since '99
0.5
1.0
1.5
2.0
2.5
3.0
3.5
2001 2002 2003 2004 2005 2006 2007 2008
Latin America Historical Average
(x)
+1 St Dev
-1 St Dev
Source: IBES consensus, MSCI, Datastream, Factset and Citi Investment Research Source: MSCI, Factset and Citi Investment Research
Latin America Strategy Chartbook
10 September 2008
Citigroup Global Markets Equity Research 12
Sector Valuations
Figure 18. Latin America: Consensus Forward P/E (Current vs. Month Ago) Figure 19. Latin America: Consensus Forward P/E over Time
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
20.0
Energy Materials Industrials ConsumerDisc.
Cons.Staples
Financials Tech Telecom Utilities
Aug-08 Sep-08
(x)
Energy
Materials
Industrials
Consumer Disc.
Cons. Staples
Financials
Telecom
Utilities
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
20.0
22.0
2004 2005 2006 2007 2008
Source: MSCI, Factset and Citi Investment Research Source: MSCI, Factset and Citi Investment Research
Figure 20. Latin America: Trailing P/B (Current vs. Month Ago) Figure 21. Latin America: Trailing P/B over Time
-
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
Energy Materials Industrials ConsumerDiscr
Staples Financials Telecom Utilities
Aug-08 Sep-08
(x)
Energy
MaterialsIndustrials
Consumer Discr
Staples
Financials
Telecom
Utilities
-
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
2004 2005 2006 2007 2008
(x)
Source: MSCI, Factset and Citi Investment Research Source: MSCI, Factset and Citi Investment Research
Latin America Strategy Chartbook
10 September 2008
Citigroup Global Markets Equity Research 13
Enterprise Value / EBITDA
Figure 22. Brazil: Forward EV/EBITDA Figure 23. Mexico: Forward EV/EBITDA
2.0
3.0
4.0
5.0
6.0
7.0
8.0
2002 2003 2004 2005 2006 2007 2008
+1 St Dev
-1 St Dev
(x)
3.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
7.5
8.0
2002 2003 2004 2005 2006 2007 2008
+1 St Dev
-1 St Dev
(x)
Source: dataCentral Source: dataCentral
Figure 24. Latin America: Forward EV/EBITDA
3.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
7.5
8.0
2002 2003 2004 2005 2006 2007 2008
+1 St Dev
-1 St Dev
(x)
Source: Citi Investment Research
Latin America Strategy Chartbook
10 September 2008
Citigroup Global Markets Equity Research 14
Implied Cost of Equity Model
Figure 25. Current Implied Cost of Equity compared with Citi Fair Value Cost of Equity
Citigroup Fair Value Cost of Equity (%) Implied Current Cost of Equity (%) Upside/(Downside) ifNominal
COE LT InflationFair Value Real COE
Risk Free (Local Cy) ERP
Nominal COE
Implied Real COE ERP
Current Real COE Reverts to Fair Value COE (%)
Brazil Bovespa 15.0 3.8 11.2 7.7 7.3 14.2 10.4 6.5 -6Mexico IPC (Bolsa) 13.6 3.1 10.5 6.5 7.1 12.8 9.7 6.3 -6Chile IPSA 10.8 3.0 7.8 4.8 6.0 10.4 7.4 5.6 -3Peru General 15.2 3.0 12.2 6.6 8.6 11.3 8.3 4.7 -24Latin America 14.2 3.5 10.7 7.0 7.1 13.3 9.8 6.3 -6
Source: Citi Investment Research
Figure 26. Latin American Equity Risk Premia Figure 27. Latin American Cost of Equity and Implied Total Return
4.7
6.5 6.3 6.3
5.6
8.6
7.3 7.1 7.1
6.0
-
1
2
3
4
5
6
7
8
9
10
Peru Brazil LatAm Mexico Chile
Implied Current ERP Fair Value (Appropriate) ERP
%
10
11
12
13
14
15
Current Appropriate
-7
-6
-5
-4
-3
-2
-1
0
Current Implied Cost of Equity Implied USD Return (R.H. Scale)
COE (%)
Source: Datastream and Citi Investment Research Source: Datastream and Citi Investment Research
Latin America Strategy Chartbook
10 September 2008
Citigroup Global Markets Equity Research 15
Earnings Momentum
Figure 28. Latin America: Evolution of CIR Annual Earnings Figure 29. Latin America: Rolling Forward 12m IBES EPS Growth Forecast
-10%
0%
10%
20%
30%
40%
50%
60%
Jan-04 Jan-05 Jan-06 Jan-07 Jan-08
20042005
2006 2007
2008
2009
-
4
8
12
16
20
24
28
32
36
40
44
48
2000 2001 2002 2003 2004 2005 2006 2007 2008
Avg. 12m Forward EPS GrowthF
Positive earnings
momentum, still
(%)
Note: Companies under coverage; Source: Citi Investment Research Note: IBES, 3m average; Source: MSCI, Datastream and Citi Investment Research
Figure 30. Stocks with Positive IBES Earnings Momentum Figure 31. Stocks with Negative IBES Earnings Momentum
Positive Momentum
EPS Growth Change in Price
Company Sector '09/'08 [1] Estimate [2] Perf [3]Brazil
1 MMX MINER MATERIALS 116% 23% -4%
2 EMBRAER ON INDUSTRIALS 32% 22% 25%
3 LOJAS AMER CONSUMER DISCRETI 102% 21% -6%
4 TAM PN - F INDUSTRIALS 60% 15% 41%
5 TELEMAR NR TELECOMMUNICATION 12% 14% -5%
6 BRADESPAR FINANCIALS 52% 13% -28%
7 VIVO PN - TELECOMMUNICATION 119% 12% -22%
8 ITAUSA PN FINANCIALS 54% 12% -5%
9 B2W VAREJO CONSUMER DISCRETI 95% 11% -5%
10 MRV ON - F CONSUMER DISCRETI 72% 8% -8%
Mexico
1 ICA - FUR INDUSTRIALS 72% 16% -28%
2 CEMEX 'CPO MATERIALS 11% 6% -12%
3 GMEXICO 'B MATERIALS 19% 4% -39%
4 TELMEX 'L' TELECOMMUNICATION 9% 1% 4%
5 TLEVISA 'C CONSUMER DISCRETI 17% 1% 5%
Chile
1 COPEC - FU INDUSTRIALS 33% 6% -9%
2 ENDESA - F UTILITIES 14% 3% 9%
3 ENERSIS - UTILITIES 11% 2% 9%
4 D & S - FU CONSUMER STAPLES 26% 2% -3%
5 FALABELLA CONSUMER DISCRETI 26% 1% -5%
Negative Momentum
EPS Growth Change in Price
Company Sector '09/'08 [1] Estimate [2] Perf [3]Brazil
1 PERDIGAO O CONSUMER STAPLES 28% -17% 3%
2 VCP PN - F MATERIALS 46% -16% -18%
3 ELETROPAUL UTILITIES -8% -13% -29%
4 BRASKEM PN MATERIALS -103% -8% -12%
5 KLABIN SA MATERIALS -20% -8% -18%
6 METALURGIC MATERIALS -4% -7% -30%
7 ELETROBRAS UTILITIES 19% -6% -6%
8 SABESP ON UTILITIES 1% -6% -17%
9 SUZANO PAP MATERIALS 14% -5% -22%
10 ULTRAPAR P CONSUMER DISCRETI 31% -5% 2%
Mexico
1 AXTEL 'CPO TELECOMMUNICATION 24% -37% -23%
2 GFINBUR 'O FINANCIALS 10% -7% 4%
3 GAP 'B' - INDUSTRIALS 8% -4% -7%
4 HOMEX - FU CONSUMER DISCRETI 17% -3% -15%
5 URBI - FUR CONSUMER DISCRETI 23% -2% -25%
Chile
1 ENTEL - FU TELECOMMUNICATION -6% -5% -3%
2 CENCOSUD - CONSUMER STAPLES 25% -2% -4%
3 CMPC - FUR MATERIALS 42% -1% -7%
[1] Latest IBES growth estimate for MSCI LatAm constituent securities
[2] 2-month average month-on-month percentage change
[3] 2-month stock price performance
Source: IBES, MSCI, Datastream and Citi Investment Research
[1] Latest IBES growth estimate for MSCI LatAm constituent securities
[2] 2-month average month-on-month percentage change
[3] 2-month stock price performance
Source: IBES, MSCI, Datastream and Citi Investment Research
Latin America Strategy Chartbook
10 September 2008
Citigroup Global Markets Equity Research 16
Dividend Screen
Figure 32. Top 40 Dividend Yielding Stocks under Coverage
Tickers 10-Sep Price ETR EPS Growth EPS Growth P/BV (x) DivCompany Country NASD Rating Price Target (%) 08E 09E 08E 09E 07 Yld
1 CTEEP Brazil TRPL4 1M R$40.00 R$57.00 59% -5% -4% 7.3 7.6 1.51 16.45%2 Eletropaulo Brazil ELPL6 2M R$25.75 R$42.00 76% -18% 16% 7.4 6.3 1.30 12.93%3 Terna Brazil TRNA11 2M R$24.00 R$35.20 58% 17% 4% 8.4 8.1 1.53 11.46%4 AES Tietê Brazil GETI4 1M R$14.85 R$22.70 64% 6% 13% 8.8 7.8 11.30 10.98%5 Southern Copper Peru PCU 3H $20.42 $19.00 3% -8% 38% 8.8 6.3 4.68 9.79%6 Tractebel Brazil TBLE3 2M R$18.45 R$26.70 54% 14% 0% 10.1 10.1 4.28 9.49%7 Grupo Continental Mexico CONTAL 2M P$25.00 P$28.50 23% 5% 7% 11.1 10.4 2.25 8.52%8 CPFL Brazil CPFE3 2M R$30.80 R$40.40 40% -20% 4% 11.2 10.7 2.98 8.51%9 Cemig Brazil CMIG4 1M R$31.40 R$49.60 66% -1% 4% 8.9 8.6 1.82 7.93%10 Embotelladora Andina Chile AKOa 2M $15.23 $19.00 32% 4% 18% 11.3 9.6 3.42 7.29%11 EDP Brazil ENBR3 1M R$24.75 R$41.10 73% 32% 5% 7.0 6.7 1.04 7.27%12 Ecopetrol Colombia ECO 1H CP$2,600 CP$3,200 30% 120% 25% 9.2 7.4 3.93 7.08%13 Cemex Mexico CX 1H $20.59 $37.00 86% -10% 6% 7.1 6.8 1.03 6.80%14 AmBev Brazil ABV 1M $58.15 $88.00 58% 25% 6% 20.1 18.9 3.66 6.72%15 Embotelladoras Arca Mexico ARCA 1M P$35.50 P$48.00 42% 12% 9% 10.2 9.4 2.28 6.70%16 Sabesp Brazil SBSP3 2H R$32.89 R$53.50 69% 39% -12% 5.2 5.8 0.77 6.15%17 Natura Cosmeticos Brazil NATU3 2H R$16.77 R$23.00 43% 3% 15% 15.1 13.1 10.60 5.96%18 Copel Brazil CPLE6 2M R$24.60 R$35.00 48% -18% -8% 7.5 8.1 0.93 5.77%19 OMA (Centro Norte) Mexico OMAB 1S $14.14 $22.00 61% n/m 4% 11.7 11.2 1.03 5.66%20 Aracruz Celulose Brazil ARA 1M $52.79 $92.00 80% -1% 6% 13.0 12.2 3.07 5.61%21 Gerdau Brazil GGBR4 1H R$23.11 R$39.00 74% 40% -5% 6.2 6.5 2.41 5.41%22 Vale Brazil RIO_p 1M $19.31 $39.00 107% 25% 36% 6.5 4.7 2.80 5.18%23 Antofagasta Chile ANTO 1M 4.91£ 8.00£ 68% 7% 29% 5.8 4.5 2.10 5.09%24 GAP (Pacifico) Mexico PAC 3S $27.46 $30.00 14% -11% -17% 13.4 16.2 nm 5.03%25 Nossa Caixa Brazil BNCA3 2S R$35.20 R$48.00 41% n/m n/m 120.2 15.6 1.36 5.00%26 Suzano Papel Brazil SUZB5 1H R$19.38 R$37.00 96% 12% -13% 10.1 11.6 1.39 4.85%27 CSN Brazil CSNA3 1H R$42.70 R$92.00 120% 42% 24% 8.0 6.4 4.37 4.68%28 Usiminas Brazil USIM5 1H R$43.20 R$99.00 134% 22% 14% 5.5 4.9 1.72 4.63%29 Cementos Lima Peru CEL 2H $11.94 $18.05 56% 10% 8% 12.5 11.6 2.94 4.58%30 Klabin Brazil KLBN4 3H R$4.38 R$6.50 53% -33% -14% 9.6 11.1 1.47 4.57%31 CCR Brazil CCRO3 2M R$27.57 R$36.00 35% 29% 21% 14.7 12.1 6.87 4.50%32 Grupo Modelo Mexico GMODELOC 2L $4.57 $5.30 20% -1% 15% 17.2 14.9 2.56 4.38%33 Unibanco Brazil UBBR11 1M R$18.29 R$24.50 38% -11% 11% 8.8 7.9 2.16 4.37%34 Duratex Brazil DURA4 1H R$25.00 R$51.00 108% 32% 13% 7.2 6.4 2.11 4.36%35 Petroleo Brasileiro Brazil PETR4 1M R$32.55 R$50.00 58% 66% 29% 7.0 5.4 2.18 4.30%36 Banco do Brasil Brazil BBAS3 1M R$21.49 R$28.00 34% 10% 12% 8.5 7.5 2.19 4.14%37 CCU (Co. Cervec) Chile CU 2L $33.77 $38.00 17% 9% -9% 12.4 13.6 2.67 4.09%38 Braskem Brazil BAK 2H $12.01 $16.00 37% -31% n/m NA NA 0.81 3.97%39 Unipar Brazil UNIP6 3S R$1.32 R$1.55 21% 127% n/m 3.3 NA 0.90 3.79%40 Corp Moctezuma Mexico CMOCTEZ 1M P$25.50 P$30.00 21% 4% 8% 12.5 11.7 2.54 3.79%
Source: Citi Investment Research
Latin America Strategy Chartbook
10 September 2008
Citigroup Global Markets Equity Research 17
Growth Stock Screen
Figure 33. Top 40 Earnings Growth Stocks under Coverage
Tickers 10-Sep Price ETR P/E (x) EPS Growth 3yr EV/EBITDA (x) EBITDA GrowthCompany Country NASD Rating Price Target (%) 08E 09E 08E 09E CAGR 08E 09E 08E 09E
1 Rodobens Brazil RDNI3 1S R$18.80 R$30.00 62% 11.3 8.8 115% 29% 278% 11.1 9.5 265% 60%2 Vivo ON Brazil VIVO3 1M R$8.89 R$11.60 31% 41.7 23.5 n/m 77% 245% 3.6 2.8 45% 15%3 Vivo PN Brazil VIVO4 1M R$7.66 R$11.00 44% 35.9 20.3 n/m 77% 245% 3.1 2.4 45% 15%4 GP Investments Brazil GPIV11 1H R$14.30 R$15.00 5% 14.9 3.9 -56% 279% 143% n/m n/m n/m n/m5 Gafisa Brazil GFSA3 1H R$23.26 R$57.00 145% 13.6 8.7 49% 57% 110% 12.4 8.5 63% 53%6 G. Pão De Acucar (CBD)Brazil PCAR4 2M R$33.20 R$45.00 37% 18.6 12.3 93% 52% 109% 6.9 5.8 42% 14%7 PDG Brazil PDGR3 1S R$17.00 R$40.00 136% 14.4 8.1 103% 78% 106% 7.2 4.5 114% 70%8 CTEEP Brazil TRPL4 1M R$40.00 R$57.00 59% 7.3 7.6 -5% -4% 102% 5.0 4.8 58% 3%9 Marfrig Brazil MRFG3 1H R$15.35 R$27.00 77% 14.9 9.5 147% 57% 99% 6.0 5.2 102% 33%10 Promotora Ambiental Mexico PASAB 2S P$21.60 P$32.00 48% 23.0 9.7 35% 138% 97% 7.1 4.5 3% 60%11 All Americana Latina Brazil ALLL11 1M R$16.57 R$32.00 94% 21.0 21.4 115% -2% 95% 8.5 7.0 57% 15%12 Irsa Argentina IRS 1M $8.36 $26.00 211% 19.4 2.2 -28% n/m 91% 5.7 4.3 25% 14%13 Cosan Brazil CSAN3 2H R$18.39 R$28.00 52% 59.2 NA -89% n/m 90% 34.7 16.2 -78% 146%14 Lupatech Brazil LUPA3 1H R$53.00 R$84.00 58% 26.7 16.3 n/m 64% 83% 11.2 8.7 196% 27%15 Perdigao Brazil PRGA3 2H R$39.40 R$59.00 51% 19.9 14.8 14% 35% 79% 7.8 6.4 62% 20%16 Totvs Brazil TOTS3 1H R$51.00 R$74.00 47% 29.1 18.7 26% 56% 76% 10.3 8.1 36% 17%17 CSN Brazil CSNA3 1H R$42.70 R$92.00 120% 8.0 6.4 42% 24% 76% 5.2 4.0 69% 24%18 Ecopetrol Colombia ECO 1H CP$2,600 CP$3,200 30% 9.2 7.4 120% 25% 68% 4.0 3.7 94% 1%19 Mexichem Mexico MEXCHEM 1S P$23.50 P$42.33 81% 12.1 7.5 46% 61% 67% 6.4 4.7 81% 48%20 Cementos Lima Peru CEL 2H $11.94 $18.05 56% 12.5 11.6 10% 8% 66% 5.9 5.6 19% 5%21 JBS Brazil JBSS3 1H R$5.23 R$12.00 131% 16.4 11.4 n/m 44% 64% 6.0 3.9 162% 41%22 Gigante Mexico GIGANTE 2S P$15.00 P$20.50 37% 6.2 14.1 -50% -56% 60% 8.3 5.2 0% 17%23 Eletrobrás Brazil ELET6 2H R$22.56 R$29.10 32% 9.1 7.0 81% 29% 56% 8.0 7.0 32% 16%24 Rossi Brazil RSID3 1S R$7.45 R$23.00 212% 6.1 4.3 46% 42% 53% 7.5 5.0 57% 55%25 Cementos Argos Colombia CCB 2H CP$8,010 CP$9,200 15% 31.1 20.2 40% 54% 50% 6.8 5.2 8% 32%26 Cyrela Brazil CYRE3 1M R$18.84 R$35.00 87% 16.1 10.3 -1% 56% 49% 12.9 8.6 23% 46%27 Dufry Brazil DUFB11 1H R$26.98 R$54.00 101% 10.9 9.2 37% 18% 47% 6.7 5.1 32% 18%28 Lojas Renner Brazil LREN3 1H R$26.78 R$42.00 60% 17.2 13.1 22% 31% 45% 8.6 7.0 41% 17%29 B2W Brazil BTOW3 2S R$52.01 R$76.00 46% 56.8 29.0 64% 96% 44% 13.2 10.4 71% 34%30 Masisa Chile MSS 1H C$82 C$130 60% 12.7 9.9 67% 28% 44% 7.4 6.5 17% 11%31 BR Malls Brazil BRML3 1S R$12.70 R$22.00 73% 40.2 28.3 n/m 42% 43% 11.1 8.8 94% 37%32 Duratex Brazil DURA4 1H R$25.00 R$51.00 108% 7.2 6.4 32% 13% 40% 4.5 4.0 49% 9%33 Empresas CMPC Chile CAR 1M C$15,001 C$22,000 49% 14.3 10.0 -13% 43% 40% 9.0 6.9 2% 17%34 Datasul Brazil DSUL3 1H R$8.05 R$11.40 42% 5.2 4.7 22% 10% 39% 1.1 0.6 56% 2%35 Banco Itaú Brazil ITAU4 1M R$30.10 R$44.00 50% 10.7 9.5 18% 13% 39% NA NA n/m n/m36 Ultrapar Partic Brazil UGP 1M $30.50 $91.00 201% 15.3 12.3 84% 24% 37% 8.1 6.2 51% 34%37 Intergroup Peru IFS 2M $18.90 $21.19 15% 14.8 12.2 18% 21% 35% n/a n/a n/m n/m38 Lojas Americanas Brazil LAME4 1S R$9.25 R$16.00 74% 59.7 27.9 10% 114% 34% 9.1 7.3 53% 33%39 Credicorp Peru BAP 1M $73.50 $110.00 53% 12.8 10.7 31% 20% 34% n/a n/a n/m n/m40 Unibanco Brazil UBBR11 1M R$18.29 R$24.50 38% 8.8 7.9 -11% 11% 33% NA NA n/m n/m
Source: Citi Investment Research
Latin America Strategy Chartbook
10 September 2008
Citigroup Global Markets Equity Research 18
Fund Flows, Volumes and Sentiment
Figure 34. Emerging Market Fund Flows by Region (weekly) Figure 35. Emerging Market Annual and Weekly Fund Flows (US$, mn)
(12)
(10)
(8)
(6)
(4)
(2)
-
2
4
6
8
Jun-07 Aug-07 Nov-07 Feb-08 May-08 Jul-08
Wee
kly F
lows
(US$
bn)
-6.0%
-5.0%
-4.0%
-3.0%
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
% o
f ass
ets
GEMS Latam EMEA Asia ex Total (RHS)
GEMS Latam EMEA Asia ex Total2005 2,037 4,022 5,821 8,390 20,270 2006 4,209 3,319 (1,877) 16,790 22,441 2007 15,223 10,153 (953) 16,405 40,827 YTD 2008 (10,739) (2,427) (103) (13,115) (26,384) % of assets -4.4% -5.0% -0.2% -6.3% -4.7%
Aug-13 (925) (520) (444) 23 (1,866) Aug-20 (758) (509) (198) (451) (1,916) Aug-27 (441) (198) (290) (359) (1,288) Sep-3 (130) (89) (330) 56 (493)
% of assetsAug-13 -0.5% -1.1% -0.8% 0.0% -0.43%Aug-20 -0.4% -1.1% -0.4% -0.3% -0.42%Aug-27 -0.2% -0.4% -0.5% -0.2% -0.29%Sep-3 -0.1% -0.2% -0.6% 0.0% -0.11%
Source: Emerging Portfolio.com Fund Research and Citi Investment Research Source: Emerging Portfolio.com Fund Research and Citi Investment Research
Figure 36. Volumes – Mexico (No. of Shares) Figure 37. Volumes – Chile and Argentina (No. of Shares)
300
400
500
600
700
800
900
Sep-05 Feb-06 Jul-06 Dec-06 Jun-07 Nov-07 Apr-08 Sep-08
Mexican Bolsa
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
Sep-05 Feb-06 Jul-06 Dec-06 Jun-07 Nov-07 Apr-08 Sep-08-
10
20
30
40
50
60
70
80
90
100
Chilean IPSA Argentine Merval (R.H. Scale)
Source: Bloomberg and Citi Investment Research Note: 4-week moving average number of shares traded on local index
Source: Bloomberg and Citi Investment Research
Latin America Strategy Chartbook
10 September 2008
Citigroup Global Markets Equity Research 19
Figure 38. Advance-Decline Monitor Figure 39. MSCI LatAm: Percentage of Stocks Trading above 200-day MA
BrazilMexico
Chile
Peru
Latin America
9,800
10,200
10,600
11,000
11,400
11,800
Aug-05 Dec-05 Apr-06 Aug-06 Dec-06 Apr-07 Aug-07 Dec-07 Apr-08 Aug-08
17%
66%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2000 2001 2002 2003 2004 2005 2006 2007 2008
Note: Weekly stocks advancing (+) or declining (-) on local indices
Source: Bloomberg and Citi Investment Research
Source: MSCI, Datastream and Citi Investment Research
Figure 40. Wall Street Sentiment of Latin America (% of Buys ) Figure 41. Percentage of Buys less Percentage of Sells
52%
54%
56%
58%
60%
62%
64%
66%
68%
Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08
30%
35%
40%
45%
50%
55%
60%
65%
Energy ConsumerDiscr.
Materials Industrials Financials Utilities LatinAmerica
Cons.Staples
Telecom
Aug-08 Sep-08
Bottom-up percentage of 'Buy' recommendations for MSCI Latin America
Source: MSCI, Bloomberg and Citi Investment Research
'Buy' minus 'Sell' recommendations
Source: MSCI, Bloomberg and Citi Investment Research
Latin America Strategy Chartbook
10 September 2008
Citigroup Global Markets Equity Research 20
Breadth of Gains/Losses
Figure 42. MSCI Brazil: Percentage of Stocks Trading above 200-day MA Figure 43. MSCI Mexico: Percentage of Stocks Trading above 200-day MA
7%
46%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2000 2001 2002 2003 2004 2005 2006 2007 2008
31%
67%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2000 2001 2002 2003 2004 2005 2006 2007 2008
Source: MSCI, Datastream and Citi Investment Research Source: MSCI, Datastream and Citi Investment Research
Figure 44. MSCI Chile: Percentage of Stocks Trading above 200-day MA Figure 45. MSCI Argentina: Percentage of Stocks Trading above 200-day MA
46%
61%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2000 2001 2002 2003 2004 2005 2006 2007 2008
0%
61%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2000 2001 2002 2003 2004 2005 2006 2007 2008
Source: MSCI, Datastream and Citi Investment Research Source: MSCI, Datastream and Citi Investment Research
Latin America Strategy Chartbook
10 September 2008
Citigroup Global Markets Equity Research 21
Macro Analysis
Latin America Strategy Chartbook
10 September 2008
Citigroup Global Markets Equity Research 22
Global Drivers
Figure 46. G7 Leading Economic Indicator and MSCI Latin America Figure 47. G7 LEI (Actual and Forecasted) and MSCI GEMs Index
(6)
(4)
(2)
-
2
4
6
8
10
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
400
800
1,200
1,600
2,000
2,400
2,800
3,200
3,600
4,000
4,400
4,800
5,200
G7 LEI (YoY, %) MSCI Latin America (R.H. Scale)
-6%
-4%
-2%
0%
2%
4%
6%
8%
95 96 97 98 99 00 01 02 03 04 05 06 07 08
200
400
600
800
1,000
1,200
1,400
G7 LEI, Actual (Y/Y) G7 LEI, CIR Forecast (Y/Y) MSCI GEMs (R.H. Scale)
Encouraging forecast
Discouraging LEI
Source: Datastream and Citi Investment Research Note: Forecasted G7 LEI using proprietary global monetary growth model.
Source: Datastream and Citi Investment Research
Figure 48. Latin American Economic Forecasts
Real GDP Growth (%) Inflation (%) Fiscal Balance (% of GDP) Current Balance (% of GDP) Exchange Rates
2007 2008E 2009E 2007 2008E 2009E 2007 2008E 2009E 2007E 2008E 2009E 2007A 2008E 2009E
Real GDP Growth (%)
Brazil 5.4 5.2 3.5 4.5 6.6 4.8 (1.7) (1.5) (1.2) 0.1 (1.9) (2.5) 1.77 1.60 1.70 Mexico 3.2 2.2 2.8 3.8 5.5 3.7 - - - (0.5) (0.6) (0.7) 10.85 10.25 10.45 Chile 5.1 4.3 4.4 7.8 7.8 4.4 8.6 6.5 4.8 3.8 (0.3) (3.2) 499 500 550 Argentina 8.7 6.6 2.5 8.5 9.9 12.2 0.2 1.0 (0.5) 2.8 3.0 3.1 3.15 3.15 3.65 Peru 8.5 9.3 6.5 3.9 6.0 3.6 - - - 1.5 (0.8) (1.2) 3.00 2.70 2.50 Colombia 8.2 5.0 4.5 5.7 7.0 5.5 (3.0) (2.8) (2.7) (3.0) (2.6) (2.9) 2,015 1,850 1,950 Latin America 5.3 4.4 3.4 4.8 6.6 5.1 (0.5) (0.4) (0.5) 0.2 (1.0) (1.5) n/a n/a n/a
Source: Citi Economic and Market Analysis
Latin America Strategy Chartbook
10 September 2008
Citigroup Global Markets Equity Research 23
Fixed Income
Figure 49. MSCI-Weighted EMBI+ Latin America Spread over Treasuries Figure 50. Sovereign Debt Spreads
243
6/1/2007, 122 -
200
400
600
800
1,000
1,200
1,400
2001 2002 2003 2004 2005 2006 2007 2008
Markets
EMBI
Plus
Latin
America Argentina Brazil Colombia Mexico Peru
Rating (S&P) B BBB- BB+ BBB+ BBB-Current spread 329 359 743 268 248 201 231
Widening in Spring Sell-Offs (Bps)
Feb 22-Mar 5, 2007 28 28 38 26 30 19 19 Spring 2006 56 56 75 58 80 40 24 Spring 2005 74 88 580 102 100 58 73 Spring 2004 153 188 53 272 244 86 214
Recent Widening (Contraction)
1 Week 22 26 64 21 18 11 16 1 Month 42 43 74 42 33 36 47 3 months prior 73 91 200 73 75 62 76
Minimum 149 162 185 138 95 71 95 Avg since 2001 332 397 2,521 412 307 163 246
Source: JP Morgan, Datastream and Citi Investment Research Source: JP Morgan, Datastream and Citi Investment Research
Figure 51. Latin America: MSCI Earnings Yield and MSCI Wtd Bond Yield Figure 52. U.S. 10-year Treasury and EMBI+ LatAm Bond Yields
6.09%
7.79%
4%
5%
6%
7%
8%
9%
10%
11%
12%
13%
14%
2001 2002 2003 2004 2005 2006 2007 2008
MSCI-Weighted LatAm USD Sov Yield MSCI LatAm Earnings Yield
7.34
3.57
2
4
6
8
10
12
14
2003 2004 2005 2006 2007 2008
(%)
EMBI+ Latin America Blended Yield
US 10-year
Source: MSCI, JP Morgan, Datastream and Citi Investment Research Source: MSCI, JP Morgan, Datastream and Citi Investment Research
Latin America Strategy Chartbook
10 September 2008
Citigroup Global Markets Equity Research 24
Currencies
Figure 53. Brazilian Real (Spot, 50- and 200-day Moving Average) Figure 54. Mexican Peso (Spot, 50- and 200-day Moving Average)
1.50
1.60
1.70
1.80
1.90
2.00
2.10
2.20
2.30
Sep-06 Mar-07 Sep-07 Mar-08 Sep-08
BRL Spot 50-day Moving Average 200-day
9.8
10.0
10.2
10.4
10.6
10.8
11.0
11.2
11.4
Sep-06 Mar-07 Sep-07 Mar-08 Sep-08
MXN Spot 50-day Moving Average 200-day
Source: Datastream and Citi Investment Research Source: Datastream and Citi Investment Research
Figure 55. Chilean Peso (Spot, 50- and 200-day Moving Average) Figure 56. Colombian Peso (Spot, 50- and 200-day Moving Average)
410
430
450
470
490
510
530
550
570
Sep-06 Mar-07 Sep-07 Mar-08 Sep-08
CLP Spot 50-day Moving Average 200-day
1,500
1,600
1,700
1,800
1,900
2,000
2,100
2,200
2,300
2,400
2,500
Sep-06 Mar-07 Sep-07 Mar-08 Sep-08
COP Spot 50-day Moving Average 200-day
Colombia imposes capital controls (May '07)
Colombia removes capital controls (Sept '08)
Source: Datastream and Citi Investment Research Source: Datastream and Citi Investment Research
Latin America Strategy Chartbook
10 September 2008
Citigroup Global Markets Equity Research 25
Commodities
Figure 57. CRB Index (Spot, 50- and 200-day Moving Average) Figure 58. Oil (Spot, Forecast, 50- and 200-day Moving Average)
240
280
320
360
400
440
480
520
560
600
640
2004 2005 2006 2007 2008CRB Index 50-day Moving Average 200-day
-
20
40
60
80
100
120
140
160
2004 2005 2006 2007 2008
Brent Oil, $/bbl, spot Citi 12m forecast 50-day Moving Average 200-day
Source: Datastream and Citi Investment Research Source: Datastream and Citi Investment Research
Figure 59. Copper (Spot, Forecast, 50- and 200-day Moving Average) Figure 60. Gold (Spot, Forecast, 50- and 200-day Moving Average)
-
1.0
2.0
3.0
4.0
5.0
6.0
2004 2005 2006 2007 2008
Copper, $/lb, spot Citigroup 12m forecast 50-day Moving Average 200-day
300
400
500
600
700
800
900
1,000
2004 2005 2006 2007 2008
Gold, $/oz, spot Citigroup 12m forecast 50-day Moving Average 200-day
Source: Datastream and Citi Investment Research Source: Datastream and Citi Investment Research
Latin America Strategy Chartbook
10 September 2008
Citigroup Global Markets Equity Research 26
Country Pages
Latin America Strategy Chartbook
10 September 2008
Citigroup Global Markets Equity Research 27
Brazil
Figure 61. Brazil: Nominal and Real Interest Rates and Inflation Figure 62. Brazil: Private Sector Inflation Expectations
2
6
10
14
18
22
26
30
2000 2001 2002 2003 2004 2005 2006 2007 2008
2
6
10
14
18
22
26
30
Inflation Real Interest Rate Brazil Selic Target Rate
+1
-1
%
3.4
3.8
4.2
4.6
5.0
5.4
5.8
6.2
6.6
7.0
2006 2007 2008
2008 Inflation Expectations 2009 Forecast
%
Source: Datastream and Citi Investment Research Source: Datastream and Citi Investment Research
Figure 63. Brazil: Industrial Production and Retail Sales Figure 64. Brazil: Trade Balance, Imports and Exports
-15%
-10%
-5%
0%
5%
10%
15%
2001 2002 2003 2004 2005 2006 2007 2008
Industrial Production (Y/Y, 3m MA) Retail Sales (Y/Y, 3m MA)
-2000
-1000
0
1000
2000
3000
4000
5000
6000
7000
98 99 00 01 02 03 04 05 06 07 08-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
60%
70%
Trade Balance Exports (3mo MA Y/Y) Import Growth (3mo MA Y/Y)
USD mn
Source: Datastream and Citi Investment Research Source: Datastream and Citi Investment Research
Latin America Strategy Chartbook
10 September 2008
Citigroup Global Markets Equity Research 28
Brazil – Valuations
Figure 65. Forward Price-to-Earnings Figure 66. Trailing Price-to-Book
4x
6x
8x
10x
12x
14x
16x
18x
99 00 01 02 03 04 05 06 07 08-80%
-40%
0%
40%
80%
120%
12mth MSCI Return P/E +1 S.D. -1 S.D.
-
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
2001 2002 2003 2004 2005 2006 2007 2008
Brazil Latin America
(x)
Source: MSCI, Datastream and Citi Investment Research Source: MSCI, FactSet and Citi Investment Research
Figure 67. Local Equity Yield and Bond Yield Compared Figure 68. Equity Yield (USD) and EMBI+ Bond Yield Compared
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
2001 2002 2003 2004 2005 2006 2007 2008
Bovespa Trailing Earnings Yield 3yr Swap Pre x DI
Small / Negative Earnings
0%
5%
10%
15%
20%
25%
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
EMBI+ Brazil Bond Yield (USD) IFC/S&P Brazil Earnings Yield (USD)
Source: Bloomberg and Citi Investment Research Source: Bloomberg, JP Morgan, Datastream and Citi Investment Research
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Brazil – Stocks
Figure 69. Brazilian Companies' Ratings, Valuations, Performance and Expected Total Returns
Tickers 10-Sep 52-week Total Return Price ETR EPS/EPADR EPS Growth P/E (x) EBITDA Growth EV/EBITDA (x) P/BV (x) Div Mkt CapIndustry Company NASD Rating Price Low High 4 Week YTD Target (%) 07A 08E 07A 08E 07A 08E 07A 08E 07A 08E 07A Yld US$, mnBrazil (77)Energy Petroleo Brasileiro PETR4 1M R$28.35 R$26.69 R$53.68 -20% -36% R$50.00 81% R$2.45 R$4.07 -17% 66% 11.6 7.0 10% 53% 5.4 4.1 2.18 4.3% $140,455
Petroleo Brasileiro PETR3 1M R$34.32 R$31.16 R$63.90 -21% -34% R$59.00 75% R$2.45 R$4.07 -17% 66% 14.0 8.4 10% 53% 6.4 4.9 2.64 3.6% $170,032Lupatech LUPA3 1H R$53.00 R$42.93 R$64.99 -1% -12% R$84.00 58% ($0.36) R$1.98 n/m n/m NA 26.7 84% 196% 27.5 11.2 9.44 0.0% $1,369
Renewable EnergyCosan CSAN3 2H R$18.39 R$18.39 R$34.15 -33% -12% R$28.00 52% R$2.77 R$0.31 n/m -89% 6.6 59.2 90% -78% 6.6 34.7 2.12 0.0% $2,820Sao Martinho SMTO3 2H R$20.01 R$18.62 R$30.29 -21% -1% R$26.00 30% R$0.59 ($0.42) -73% n/m 33.7 NA 15% -37% 10.9 21.5 1.35 0.0% $1,277Ecodiesel ECOD3 2S R$1.95 R$1.55 R$13.15 7% -72% R$4.00 105% ($0.30) ($0.31) n/m n/m nmf NA n/m n/m nmf 23.2 0.80 0.0% $139
Financials Bradesco BBDC4 2M R$29.75 R$28.76 R$41.63 -1% -19% R$33.50 16% R$2.39 R$2.72 12% 14% 12.4 10.9 n/m n/m NA NA 2.97 3.5% $51,569Banco Itaú ITAU4 1M R$30.10 R$29.33 R$52.37 -4% -32% R$44.00 50% R$2.39 R$2.82 9% 18% 12.6 10.7 n/m n/m NA NA 3.11 3.8% $50,398Unibanco UBBR11 1M R$18.29 R$18.00 R$28.00 -4% -23% R$24.50 38% R$2.34 R$2.08 93% -11% 7.8 8.8 n/m n/m NA NA 2.16 4.4% $14,422Banco do Brasil BBAS3 1M R$21.49 R$21.16 R$32.78 -8% -27% R$28.00 34% R$2.30 R$2.54 54% 10% 9.3 8.5 n/m n/m NA NA 2.19 4.1% $30,848Nossa Caixa BNCA3 2S R$35.20 R$20.78 R$46.00 -12% 52% R$48.00 41% ($0.71) R$0.29 n/m n/m NA 120.2 n/m n/m NA NA 1.36 5.0% $2,127GP Investments GBIV11 1H R$14.30 R$12.45 R$21.74 -3% -25% R$15.00 5% R$1.24 R$0.54 307% -56% 6.5 14.9 n/m n/m NA NA 2.12 0.0% $1,468
Cons. Staples AmBev ABV 1M $57.01 $56.26 $88.77 -8% -17% $88.00 61% $2.31 $2.90 16% 25% 24.6 19.7 30% 27% 8.8 7.2 3.58 6.9% $34,987G. Pão De Acucar PCAR4 2M R$33.20 R$26.50 R$41.72 -2% -2% R$45.00 37% R$0.93 R$1.78 23% 93% 35.9 18.6 30% 42% 8.0 6.9 1.51 1.3% $4,282Natura Cosmeticos NATU3 2H R$16.77 R$14.44 R$25.91 -17% 4% R$23.00 43% R$1.08 R$1.11 0% 3% 15.5 15.1 20% 25% 10.3 9.5 10.60 6.0% $4,060Hypermarcas HYPE3 1M R$15.10 R$14.00 R$24.95 -3% n/a R$32.00 112% R$0.48 R$0.06 n/m -87% 31.5 248.4 327% 121% 9.6 2.3 2.68 0.0% $1,048Perdigao PRGA3 2H R$39.40 R$34.02 R$54.98 -2% -9% R$59.00 51% R$1.73 R$1.98 145% 14% 22.8 19.9 170% 62% 11.1 7.8 2.27 1.5% $4,595Sadia SDIA4 1H R$10.24 R$8.48 R$14.39 -4% 3% R$16.00 59% R$1.01 R$1.03 82% 2% 10.1 10.0 87% 32% 8.2 7.6 2.40 3.1% $3,947JBS JBSS3 1H R$5.23 R$4.26 R$10.30 -24% -13% R$12.00 131% ($0.15) R$0.32 n/m n/m NA 16.4 17% 162% 15.0 6.0 1.84 1.5% $3,856Marfrig MRFG3 1H R$15.35 R$12.85 R$24.30 -14% 1% R$27.00 77% R$0.42 R$1.03 30% 147% 36.9 14.9 72% 102% 9.7 6.0 2.44 1.6% $1,768Minerva BEEF3 1H R$6.90 R$6.80 R$19.75 -9% -36% R$14.00 106% R$0.46 R$0.85 -35% 83% 14.9 8.1 11% 64% 6.6 5.0 0.98 2.9% $292
Consumer Disc. Lojas Americanas LAME4 1S R$9.25 R$9.10 R$20.50 -9% -40% R$16.00 74% R$0.14 R$0.15 -16% 10% 65.4 59.7 77% 53% 10.5 9.1 23.28 0.5% $3,800Lojas Renner LREN3 1H R$26.78 R$26.01 R$46.48 -9% -24% R$42.00 60% R$1.28 R$1.56 57% 22% 20.9 17.2 74% 41% 10.6 8.6 5.59 3.4% $1,838Guararapes GUAR3 2H R$30.89 R$30.39 R$94.60 -17% -50% R$62.00 104% R$3.79 R$3.85 7% 2% 8.2 8.0 17% 26% 5.0 4.5 1.54 3.0% $1,088Springs Global SGPS3 2S R$8.00 R$7.47 R$26.00 -13% -64% R$21.70 171% ($3.98) ($0.04) n/m n/m NA NA -48% 165% 14.3 5.5 0.37 0.0% $391Dufry DUFB11 1H R$26.98 R$21.00 R$57.40 12% -40% R$54.00 101% R$1.02 R$1.40 95% 37% 14.9 10.9 86% 32% 9.4 6.7 1.65 0.8% $990
Homebuilding Rodobens RDNI3 1S R$18.80 R$17.50 R$25.35 2% -11% R$30.00 62% R$0.77 R$1.66 n/m 115% 24.3 11.3 336% 265% 31.5 11.1 1.68 2.2% $516Gafisa GFSA3 1H R$23.26 R$21.28 R$42.00 -4% -29% R$57.00 145% R$1.15 R$1.71 149% 49% 20.2 13.6 113% 63% 16.9 12.4 1.95 0.0% $1,690Cyrela CYRE3 1M R$18.84 R$17.40 R$32.00 -13% -22% R$35.00 87% R$1.19 R$1.17 60% -1% 15.8 16.1 123% 23% 13.3 12.9 3.24 1.6% $3,783Rossi RSID3 1S R$7.45 R$7.39 R$30.05 -32% -66% R$23.00 212% R$0.84 R$1.23 15% 46% 8.8 6.1 191% 57% 8.8 7.5 1.10 3.2% $663Brascan BISA3 1S R$6.00 R$5.85 R$14.45 -11% -44% R$19.00 221% R$0.84 R$0.90 210% 8% 7.2 6.6 36% 64% 5.0 4.7 0.94 3.9% $627PDG PDGR3 1S R$17.00 R$16.20 R$28.70 -15% -32% R$40.00 136% R$0.58 R$1.18 0% 103% 29.3 14.4 241% 114% 13.8 7.2 1.84 0.7% $1,401
Bldg Materials Duratex DURA4 1H R$25.00 R$22.07 R$60.99 5% -41% R$51.00 108% R$2.62 R$3.46 18% 32% 9.5 7.2 34% 49% 5.8 4.5 2.11 4.4% $1,831Satipel SATI3 1S R$8.50 R$8.00 R$13.99 -7% -28% R$17.00 101% R$0.52 R$1.12 n/m 116% 16.3 7.6 86% 110% 8.3 4.5 1.93 1.4% $526
Real Estate BR Malls BRML3 1S R$12.70 R$11.15 R$27.20 -5% -47% R$22.00 73% ($0.41) R$0.32 n/m n/m NA 40.2 166% 94% 16.3 11.1 1.22 0.0% $1,228Media Universo Online UOLL4 2S R$6.60 R$6.20 R$14.79 -7% -45% R$11.50 74% R$0.91 R$0.81 18% -11% 7.2 8.1 26% 4% 2.4 2.3 1.24 0.0% $448Internet Retail B2W BTOW3 2S R$52.01 R$49.46 R$94.90 n/a -27% R$76.00 46% R$0.56 R$0.92 -68% 64% 93.2 56.8 n/m 71% 17.1 13.2 18.06 0.0% $3,245Chemicals Braskem BAK 2H $11.60 $11.45 $20.25 -23% -24% $16.00 42% $1.21 $0.84 122% -31% 8.5 NA 60% -10% 3.4 4.6 0.81 4.0% $2,522
Ultrapar Partic UGP 1M $53.69 $52.19 $75.98 -9% -11% $91.00 72% $1.91 $3.51 -45% 84% 28.1 15.3 71% 51% 10.1 8.1 1.59 2.4% $4,124Unipar UNIP6 3S R$1.32 R$1.32 R$2.24 -8% -24% R$1.55 21% R$0.17 R$0.39 60% 127% 7.6 3.3 44% -1% 6.2 10.2 0.90 3.8% $623
Source: Citi Investment Research
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Figure 70. Brazilian Companies' Ratings, Valuations, Performance and Expected Total Returns
Tickers 10-Sep 52-week Total Return Price ETR EPS/EPADR EPS Growth P/E (x) EPS Growth EV/EBITDA (x) P/BV (x) Div Mkt CapIndustry Company NASD Rating Price Low High 4 Week YTD Target (%) 07E 08E 07E 08E 07E 08(E)x 07E 08E 07E 08(E)x 06 Yld US$ MNMetals Vale (Pref) RIO_p 1M $18.76 $18.55 $35.96 -22% -32% $39.00 113% $2.39 $2.99 76% 25% 7.8 6.3 72% 48% 6.9 4.4 2.72 5.3% $90,656
Vale (Ord) RIO 1M $20.96 $20.85 $44.10 -24% -35% $46.00 124% $2.39 $2.99 76% 25% 8.8 7.0 72% 48% 7.6 4.8 3.04 4.8% $101,287Metals Usiminas USIM5 1H R$43.20 R$43.00 R$95.80 -22% -17% R$99.00 134% R$6.43 R$7.83 26% 22% 6.7 5.5 28% 46% 4.0 2.9 1.72 4.6% $12,040
CSN CSNA3 1H R$42.70 R$37.33 R$86.30 -22% -15% R$92.00 120% R$3.78 R$5.36 150% 42% 11.3 8.0 73% 69% 7.8 5.2 4.37 4.7% $19,390Gerdau GGBR4 1H R$23.11 R$20.61 R$42.65 -23% -8% R$39.00 74% R$2.68 R$3.75 23% 40% 8.6 6.2 34% 73% 6.8 4.9 2.41 5.4% $18,535
Paper & Pulp Aracruz Celulose ARA 1M $51.08 $49.75 $92.22 -12% -28% $92.00 86% $4.09 $4.07 -7% -1% 12.5 12.6 8% 5% 7.6 7.6 2.97 5.8% $5,266Klabin KLBN4 3H R$4.38 R$4.28 R$7.75 -9% -30% R$6.50 53% R$0.68 R$0.46 31% -33% 6.5 9.6 17% 36% 7.4 7.2 1.47 4.6% $2,270Suzano Papel SUZB5 1H R$19.38 R$19.01 R$31.00 -12% -33% R$37.00 96% R$1.72 R$1.92 22% 12% 11.3 10.1 24% 45% 8.8 6.9 1.39 4.9% $3,439VCP VCP 1H $19.34 $19.32 $35.06 -11% -35% $41.00 116% $2.44 $1.49 34% -39% 7.9 12.9 -5% 5% 10.7 10.8 1.35 3.5% $3,948
Industrials ALL ALLL11 1M R$16.57 R$15.86 R$28.39 -13% -28% R$32.00 94% R$0.37 R$0.79 179% 115% 45.1 21.0 39% 57% 11.7 8.5 3.76 0.8% $5,396OHL Brasil OHLB3 2S R$24.29 R$16.22 R$38.58 -6% 9% R$31.00 30% R$1.09 R$2.11 -24% 94% 22.3 11.5 54% 43% 5.2 5.3 2.34 2.1% $945CCR CCRO3 2M R$27.57 R$21.70 R$39.90 -5% 6% R$36.00 35% R$1.45 R$1.87 7% 29% 19.0 14.7 35% 35% 8.4 7.1 6.87 4.5% $6,275Embraer ERJ 1S $31.05 $24.32 $50.41 -5% -30% $55.00 81% $2.64 $2.78 26% 5% 11.8 11.2 48% 7% 9.7 8.6 2.56 3.8% $5,694Gol Linhas Aereas GOL 3S $8.13 $7.62 $28.16 -6% -67% $8.50 5% $0.26 ($0.41) -81% n/m 31.5 NA -86% n/m 24.3 n/m 1.21 0.0% $1,643Tam TAM 1H $20.39 $14.75 $30.04 4% -14% $40.00 100% $1.76 $2.19 -30% 24% 11.6 9.3 -40% 62% 11.5 8.1 2.78 3.6% $3,070
Technology Totvs TOTS3 1H R$51.00 R$39.00 R$68.90 -3% -12% R$74.00 47% R$1.40 R$1.75 128% 26% 36.6 29.1 137% 36% 12.7 10.3 3.81 2.2% $769Datasul DSUL3 1H R$8.05 R$7.45 R$24.75 4% -45% R$11.40 42% R$1.27 R$1.54 63% 22% 6.4 5.2 108% 56% 1.5 1.1 1.06 0.0% $132Positivo POSI3 2S R$9.39 R$9.05 R$49.50 -24% -77% R$17.00 84% R$2.89 R$3.01 66% 4% 3.2 3.1 79% 13% 2.7 2.9 1.56 3.4% $463
Telecom TIM Partic. ON TCSL3 1H R$6.05 R$4.80 R$12.05 9% -28% R$8.10 34% R$0.30 R$0.24 120% -17% 20.4 24.7 32% 16% 5.3 5.4 1.82 0.2% $8,007TIM Partic. PN TCSL4 1H R$3.52 R$3.41 R$8.18 -1% -40% R$4.90 40% R$0.30 R$0.24 120% -17% 11.9 14.4 32% 16% 3.3 3.4 1.06 0.3% $4,659Vivo ON VIVO3 1M R$8.89 R$8.31 R$15.50 1% -34% R$11.60 31% ($0.07) R$0.21 n/m n/m NA 41.7 35% 45% 4.9 3.6 1.55 0.3% $7,400Vivo PN VIVO4 1M R$7.66 R$7.40 R$13.20 -2% -19% R$11.00 44% ($0.07) R$0.21 n/m n/m NA 35.9 35% 45% 4.4 3.1 1.33 0.4% $6,376
Utilities Eletrobrás ELET6 2H R$22.56 R$20.65 R$28.10 -7% 5% R$29.10 32% R$1.37 R$2.48 -33% 81% 16.5 9.1 8% 32% 9.6 8.0 0.36 3.2% $14,425Cemig CMIG4 1M R$31.40 R$27.31 R$42.15 -13% 2% R$49.60 66% R$3.57 R$3.52 1% -1% 8.8 8.9 29% 4% 5.9 6.3 1.82 7.9% $8,625Eletropaulo ELPL6 2M R$25.75 R$25.60 R$40.75 -17% -20% R$42.00 76% R$4.28 R$3.50 92% -18% 6.0 7.4 -10% -2% 3.7 4.0 1.30 12.9% $2,433Copel CPLE6 2M R$24.60 R$23.80 R$34.63 -17% -4% R$35.00 48% R$4.04 R$3.30 -11% -18% 6.1 7.5 43% -11% 3.9 4.8 0.93 5.8% $3,801Cesp CESP6 1M R$19.50 R$19.50 R$49.78 -29% -55% R$40.50 108% R$0.55 R$1.03 n/m 90% 35.8 18.8 16% 19% 9.9 9.0 0.62 0.0% $3,606AES Tietê GETI4 1M R$14.85 R$13.26 R$18.84 -7% -3% R$22.70 64% R$1.59 R$1.69 -1% 6% 9.3 8.8 16% 18% 5.5 5.2 11.30 11.0% $3,197CTEEP TRPL4 1M R$40.00 R$35.50 R$55.99 -14% 12% R$57.00 59% R$5.73 R$5.46 n/m -5% 7.0 7.3 56% 58% 6.7 5.0 1.51 16.5% $3,372Tractebel TBLE3 2M R$18.45 R$18.20 R$26.00 -7% -6% R$26.70 54% R$1.60 R$1.83 7% 14% 11.5 10.1 41% 33% 7.2 6.3 4.28 9.5% $6,800EDP ENBR3 1M R$24.75 R$21.82 R$35.50 -19% -10% R$41.10 73% R$2.67 R$3.53 12% 32% 9.3 7.0 27% 12% 4.8 4.7 1.04 7.3% $2,306Terna TRNA11 2M R$24.00 R$23.00 R$37.30 -17% -17% R$35.20 58% R$2.44 R$2.85 47% 17% 9.8 8.4 15% 38% 6.8 5.7 1.53 11.5% $1,189CPFL CPFE3 2M R$30.80 R$28.95 R$42.98 -10% 0% R$40.40 40% R$3.43 R$2.76 17% -20% 9.0 11.2 41% -1% 4.7 5.5 2.98 8.5% $8,344Equatorial EQTL3 1M R$13.25 R$13.24 R$19.70 n/a n/a R$26.80 119% R$2.30 R$2.24 23% -3% 5.8 5.9 45% 14% 4.5 3.8 1.23 16.5% $790
Enviro. Services Sabesp SBSP3 2H R$32.89 R$32.88 R$50.45 -14% -18% R$53.50 69% R$4.60 R$6.38 -83% 39% 7.1 5.2 31% 22% 5.0 4.6 0.77 6.2% $4,231Copasa CSMG3 1H R$21.95 R$21.41 R$34.90 -13% -8% R$40.00 87% R$2.86 R$3.83 -8% 34% 7.7 5.7 8% -25% 3.9 3.4 0.72 4.4% $1,427
Source: Citi Investment Research
Latin America Strategy Chartbook
10 September 2008
Citigroup Global Markets Equity Research 31
Mexico
Figure 71. Mexico: Retail Sales, Industrial Production and Exports Figure 72. Mexico: U.S. Imports from Mexico, China, Canada and Japan
-15%
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-5%
0%
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10%
15%
20%
25%
30%
2001 2002 2003 2004 2005 2006 2007 2008
Industrial Production (Y/Y, 3mo MA) Retail Sales (Y/Y, 3mo MA) Exports (Y/Y, 3m MA)
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4%
6%
8%
10%
12%
14%
16%
18%
20%
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08
% of US Imports from China (12mo MA) % of US Imports from Mexico (12mo MA)
% of US Imports from Canada (12mo MA) % of US Imports from Japan (12mo MA)
Source: Datastream and Citi Investment Research Source: Datastream and Citi Investment Research
Figure 73. Oil Prices: Mexican Crude Mix vs. WTI Figure 74. Mexico: 28-day Cetes Interest Rates and Inflation
0
20
40
60
80
100
120
140
160
2001 2002 2003 2004 2005 2006 2007 2008
Mexican Crude Mix Price WTI Spot Difference (WTI - Mexican Mix)
Average Discount: WTI - Mexico: US$10Correlation: 0.99 absolute; 0.77 daily change
US$
Budget forecast
2009
0
5
10
15
20
25
30
35
40
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
28-day Cetes Inflation (YoY % Change) 6mo Inflation (YoY % Change Annualized)
%
Source: Bloomberg, Datastream and Citi Investment Research Source: Datastream and Citi Investment Research
Latin America Strategy Chartbook
10 September 2008
Citigroup Global Markets Equity Research 32
Mexico – Valuations
Figure 75. Forward Price-to-Earnings Figure 76. Trailing Price-to-Book
6x
8x
10x
12x
14x
16x
18x
95 96 97 98 99 00 01 02 03 04 05 06 07 08-100%
-75%
-50%
-25%
0%
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50%
75%
100%
12mth MSCI Returns P/E Avg. P/E +1 S.D. -1 S.D.
-
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
2001 2002 2003 2004 2005 2006 2007 2008
Mexico Latin America
(x)
Source: MSCI, Datastream and Citi Investment Research Source: MSCI, FactSet and Citi Investment Research
Figure 77. Local Equity Yield and Bond Yield Compared Figure 78. Equity Yield (USD) and EMBI+ Bond Yield Compared
0%
2%
4%
6%
8%
10%
12%
2002 2003 2004 2005 2006 2007 2008
Bolsa Earnings Yield Mex 28-day Cetes
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5%
6%
7%
8%
9%
10%
11%
12%
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
EMBI+ Market Bond Yield (USD) IFC/S&P Market Earnings Yield (USD)
Source: Bloomberg and Citi Investment Research Source: Bloomberg, JP Morgan, Datastream and Citi Investment Research
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Mexico – Stocks
Figure 79. Mexican Companies' Ratings, Valuations, Performance and Expected Total Returns
Tickers 10-Sep 52-week Total Return Price ETR EPS/EPADR EPS Growth P/E (x) EBITDA Growth EV/EBITDA (x) P/BV (x) Div Mkt CapIndustry Company NASD Rating Price Low High 4 Week YTD Target (%) 07A 08E 07A 08E 07A 08E 07A 08E 07A 08E 07A Yld US$, mnMexico (35)Financials G. Financiero Banorte GFNORTEO 3M P$40.13 P$39.51 P$52.29 -4% -11% P$47.00 19% P$3.37 P$3.68 14% 9% 11.9 10.9 n/m n/m NA NA 2.44 1.4% $7,666Cons. Staples Alsea SA de CV ALSEA 1H P$11.00 P$10.40 P$18.91 -4% -27% P$16.50 51% P$0.77 P$0.36 -48% -53% 14.3 30.5 17% -2% 6.5 7.4 2.29 0.6% $649
Coca-Cola Femsa KOF 2M $59.04 $38.40 $63.77 -4% 21% $66.00 13% $3.43 $4.39 40% 28% 17.2 13.5 17% 21% 9.2 7.5 2.42 1.1% $10,902Embotelladoras Arca ARCA 1M P$35.50 P$32.50 P$42.75 0% -2% P$48.00 42% P$3.10 P$3.49 12% 12% 11.5 10.2 11% 13% 6.2 5.7 2.28 6.7% $2,708Femsa FMX 1M $45.85 $29.40 $49.83 -3% 21% $60.00 32% $2.83 $2.65 66% -6% 16.2 17.3 9% 20% 8.4 7.1 2.77 1.1% $16,406Gruma GRUMAB 1H $28.19 $24.56 $39.54 -5% -22% $41.00 48% $4.49 $2.67 46% -41% 6.3 10.5 3% 43% 7.6 5.4 0.86 2.7% $1,503Grupo Bimbo BIMBOA 2M P$66.50 P$54.80 P$71.98 -1% 3% P$76.00 15% P$3.23 P$3.92 9% 21% 20.6 17.0 11% 14% 9.3 8.2 2.80 0.7% $7,401Grupo Continental CONTAL 2M P$25.00 P$22.22 P$29.10 -3% 4% P$28.50 23% P$2.14 P$2.24 0% 5% 11.7 11.1 6% 14% 6.3 5.5 2.25 8.5% $1,775G. Industrial Maseca MASECAB 3H P$9.00 P$8.00 P$10.75 1% -13% P$8.50 -2% P$0.61 P$0.64 -3% 4% 14.7 14.2 -3% 5% 7.7 7.4 1.21 3.7% $782Grupo Modelo GMODELOC 2L $4.56 $4.01 $5.69 -5% -2% $5.30 21% $0.27 $0.27 9% -1% 17.0 17.2 25% 2% 9.0 9.0 2.56 4.4% $14,767Industrias Bachoco IBA 3S $27.70 $25.26 $33.50 -4% -11% $30.00 10% $2.46 $0.93 49% -62% 11.2 29.8 8% -38% 5.8 9.9 1.01 1.3% $1,385
Retail Walmex WALMEXV 1L P$38.46 P$34.26 P$47.19 1% n/m P$50.00 32% P$1.68 P$1.83 16% 9% 22.9 21.0 15% 15% 14.0 12.9 4.89 1.8% $30,751Comerci COMEUBC 1M P$24.40 P$23.90 P$35.20 -16% -11% P$36.50 50% P$2.35 P$1.92 38% -18% 10.4 12.7 15% 16% 6.8 6.6 1.19 0.7% $2,508Grupo Famsa GFAMSAA 1H P$27.25 P$25.60 P$50.50 -3% -20% P$51.00 87% P$1.58 P$2.10 1% 33% 17.3 13.0 9% 17% 8.2 7.9 1.39 0.0% $852Soriana SORIANAB 2M P$30.25 P$23.69 P$40.00 -14% 6% P$44.00 46% P$1.74 P$1.64 17% -6% 17.4 18.4 16% 36% 9.6 8.4 1.99 0.6% $5,154Gigante GIGANTE 2S P$15.00 P$15.00 P$32.01 -6% -14% P$20.50 37% P$4.79 P$2.40 n/m -50% 3.1 6.2 -19% 0% 10.7 8.3 0.81 0.0% $1,403Elektra ELEKTRA 3H P$390.00 P$205.2 P$493.7 -3% 19% P$335.0 -14% P$27.08 P$22.98 42% -15% 14.4 17.0 4% 30% 16.6 12.8 4.92 0.5% $9,063
Cement & Const. Consorcio Ara ARA 3S P$7.90 P$7.50 P$16.35 -2% -33% P$10.00 29% P$1.02 P$1.11 0% 9% 7.8 7.1 8% 10% 4.4 4.5 1.21 2.2% $980Corporacion Geo GEOB 1H P$30.26 P$26.40 P$59.99 -3% -4% P$48.00 59% P$2.70 P$3.21 -3% 19% 11.2 9.4 17% 25% 4.5 3.9 2.07 0.0% $1,540Desarrolladora Homex HOMEX 1M P$86.70 P$81.00 P$122.00 1% -4% P$135.0 56% P$6.53 P$8.38 64% 28% 13.3 10.3 29% 24% 7.9 6.9 3.04 0.0% $2,756Sare Holding SAREB 2S P$7.75 P$7.40 P$19.20 -9% -48% P$10.00 29% P$1.27 P$1.41 26% 11% 6.1 5.5 26% 14% 4.8 4.6 0.88 0.0% $280Urbi Des. Urbanos URBI 1M P$25.97 P$25.50 P$43.21 -6% -31% P$40.00 54% P$1.95 P$2.25 26% 15% 13.3 11.5 27% 21% 7.9 6.8 1.90 0.0% $2,400G. Cementos Chihuahua GCC 3H P$44.40 P$41.99 P$72.00 -11% -35% P$46.00 5% P$5.22 P$4.40 117% -16% 8.5 10.1 15% 2% 7.0 7.5 1.39 1.0% $1,376Corporacion Moctezuma CMOCTEZ 1M P$25.50 P$21.39 P$36.00 6% -1% P$30.00 21% P$1.96 P$2.03 8% 4% 13.0 12.5 7% 5% 7.2 6.9 2.54 3.8% $2,134Cemex CX 1H $20.42 $19.45 $33.40 n/a n/a $37.00 88% $3.22 $2.88 -3% -10% 6.3 7.1 11% 12% 8.8 7.2 1.03 6.9% $15,874Empresas ICA ICA 2H $46.00 $45.25 $76.00 -1% -36% $67.00 46% ($1.94) $0.76 n/m n/m NA 60.8 -7% 37% 14.3 11.4 1.58 0.0% $2,167
Media Televisa TV 1M $23.40 $19.57 $28.11 -4% 0% $30.00 30% $1.31 $1.45 -5% 10% 17.8 16.2 7% 18% 8.2 6.7 3.91 2.1% $13,185TV Azteca TVAZTCACPO 2H P$6.70 P$5.64 P$7.00 -1% 2% P$8.0 21% P$0.35 P$0.25 -52% -29% 19.2 27.0 -5% 3% 6.2 6.0 4.56 1.3% $1,863Grupo Radio Centro RC 3S $11.35 $8.57 $14.30 2% -7% $14.00 27% $0.56 $0.32 n/m -43% 22.8 40.2 -36% -24% 8.9 12.2 1.48 3.5% $196
Chemicals Mexichem MEXCHEM 1S P$23.60 P$11.33 P$30.08 11% 63% P$42.3 80% P$1.33 P$1.94 71% 46% 17.7 12.1 83% 81% 9.7 6.4 4.03 1.0% $3,678Industrials Asur (Sureste) ASURB 1H $49.50 $43.57 $63.54 1% -16% $75.00 55% $1.60 $3.30 -2% 107% 31.0 15.0 28% 21% 5.4 4.7 1.12 3.1% $1,485
GAP (Pacifico) PAC 3S $27.30 $24.62 $58.02 -4% -36% $30.00 15% $2.29 $2.05 55% -11% 11.9 13.3 18% 5% 8.5 8.3 nm 5.1% $1,532OMA (Centro Norte) OMAB 1S $14.14 $14.01 $31.45 -12% -40% $22.00 61% $0.06 $1.21 -93% n/m 246.9 11.7 19% 11% 1.0 0.5 1.03 5.7% $700IDEAL (Impulsora del Des IDEAL1 3S P$14.20 P$12.00 P$18.60 5% -1% P$13.00 -8% P$0.32 P$0.25 n/m -23% 44.5 57.9 47% 14% 34.8 35.6 4.29 0.0% $4,032
Enviro. Services Promotora Ambiental PASAB 2S P$21.60 P$20.30 P$38.76 -4% -36% P$32.00 48% P$0.70 P$0.94 131% 35% 31.0 23.0 61% 3% 6.6 7.1 1.72 0.0% $274
Source: Citi Investment Research
Latin America Strategy Chartbook
10 September 2008
Citigroup Global Markets Equity Research 34
Chile
Figure 80. Chile: Interest Rates and Inflation Figure 81. Chile: Economic Indicators (Y/Y)
-2%
0%
2%
4%
6%
8%
10%
12%
14%
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Inflation (YoY % Change) Chile Target O/N Rate Fed Funds Target
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
14%
2002 2003 2004 2005 2006 2007 2008
-20%
-10%
0%
10%
20%
30%
40%
50%
60%
70%
IMACEC (Econ. Activity) Retail Sales Exports (R.H. Scale)
Source: Datastream and Citi Investment Research Source: Datastream and Citi Investment Research
Figure 82. Chile: Terms of Trade Proxy: Copper Price / Oil Price Figure 83. Chile: Trade Balance and Current Account Balance
40
60
80
100
120
140
160
180
200
2002 2003 2004 2005 2006 2007 2008Copper Price / Oil Price
(5,000)
-
5,000
10,000
15,000
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
-3.0%
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
Fiscal Balance (US$, mn) Fiscal Balance (% of GDP)
CIRForecasts
Source: Bloomberg, Datastream and Citi Investment Research Source: Datastream and Citi Investment Research
Latin America Strategy Chartbook
10 September 2008
Citigroup Global Markets Equity Research 35
Chile – Valuations
Figure 84. Forward Price-to-Earnings Figure 85. Trailing Price-to-Book
6x
10x
14x
18x
22x
26x
95 96 97 98 99 00 01 02 03 04 05 06 07 08-75%
-50%
-25%
0%
25%
50%
75%
100%
12mth MSCI Returns P/E Avg. P/E +1 S.D. -1 S.D.
-
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
2001 2002 2003 2004 2005 2006 2007 2008
Chile Latin America
(x)
Source: MSCI, Datastream and Citi Investment Research Source: MSCI, FactSet and Citi Investment Research
Figure 86. Dividend Yield Figure 87. Equity Yield (USD) and Bond Yield Compared
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
2000 2001 2002 2003 2004 2005 2006 2007 2008
(%)
0%
2%
4%
6%
8%
10%
12%
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
ESBI+ Market Bond Yield (USD) IFC/S&P Market Earnings Yield (USD)
Source: S&P/IFC, FactSet and Citi Investment Research Note: ESBI+ Chile until August 2006, ML USD Chile sovereign yield thereafter
Source: JP Morgan, Merrill Lynch, Datastream and Citi Investment Research
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Figure 88. Chilean Companies' Ratings, Valuations, Performance and Expected Total Returns
Tickers 10-Sep 52-week Total Return Price ETR EPS/EPADR EPS Growth P/E (x) EBITDA Growth EV/EBITDA (x) P/BV (x) Div Mkt CapIndustry Company NASD Rating Price Low High 4 Week YTD Target (%) 07A 08E 07A 08E 07A 08E 07A 08E 07A 08E 07A Yld US$, mnChile (6)Cons. StaplesEmbot. Andina AKOa 2M $15.23 $13.57 $21.25 -7% -3% $19.00 32% $1.29 $1.35 18% 4% 11.8 11.3 24% 13% 6.6 5.5 3.42 7.3% $1,930
CCU CU 2L $34.04 $27.87 $44.93 -1% 0% $38.00 16% $2.50 $2.72 52% 9% 13.6 12.5 29% 19% 7.5 6.3 2.69 4.1% $2,168Materials Masisa MSS 1H C$82 C$79 C$134 2% -17% C$130 60% C$0 C$0 34% 67% 21.3 12.7 15% 17% 8.5 7.4 0.69 1.5% $877Metals & Min Antofagasta ANTO 1M 4.91£ 4.84£ 8.86£ -14% -28% 8.00£ 68% $139.89 $149.56 4% 7% 6.2 5.8 -4% 11% 2.7 2.3 2.10 5.1% $8,529Paper & Pulp Empresas CMPC CAR 1M C$15,001 C$15,000 C$20,800 -1% -17% C$22,000 49% C$1,211 C$1,049 121% -13% 12.4 14.3 61% 2% 8.8 9.0 1.10 2.8% $5,669Industrials Empresas Copec COP 2M C$5,980 C$5,980 C$9,400 -2% -32% C$7,500 28% C$387 C$404 15% 5% 15.5 14.8 20% 5% 10.6 10.3 2.07 2.7% $14,687
LAN Airlines LFL 2H $12.07 $8.71 $17.58 8% -5% $14.25 22% $0.91 $1.17 20% 28% 13.3 10.4 25% 7% 11.4 10.8 4.14 3.7% $4,089
Source: Citi Investment Research
Latin America Strategy Chartbook
10 September 2008
Citigroup Global Markets Equity Research 37
Argentina
Figure 89. Forward Price-to-Earnings Figure 90. Trailing Price-to-Book
2x
7x
12x
17x
22x
27x
32x
95 96 97 98 99 00 01 02 03 04 05 06 07 08-100%
-50%
0%
50%
100%
150%
200%
250%
12-mth MSCI Retrun P/E Avg. P/E +1 S.D. P/E -1 S.D. P/E
-
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
2001 2002 2003 2004 2005 2006 2007 2008
Argentina Latin America
(x)
Source: MSCI, Datastream and Citi Investment Research Source: MSCI, FactSet and Citi Investment Research
Figure 91. Dividend Yield Figure 92. Equity Yield (USD) and EMBI+ Bond Yield Compared
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
2000 2001 2002 2003 2004 2005 2006 2007 2008
(%)
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
EMBI+ Market Bond Yield (USD) IFC/S&P Market Earnings Yield (USD)
Argentine Default
Source: FactSet and Citi Investment Research Source: Bloomberg, JP Morgan, Datastream and Citi Investment Research
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Figure 93. Argentina Companies' Ratings, Valuations, Performance and Expected Total Returns
Tickers 10-Sep 52-week Total Return Price ETR EPS/EPADR EPS Growth P/E (x) EBITDA Growth EV/EBITDA (x) P/BV (x) Div Mkt CapIndustry Company NASD Rating Price Low High 4 Week YTD Target (%) 07A 08E 07A 08E 07A 08E 07A 08E 07A 08E 07A Yld US$, mnArgentina (5)Oil & Gas Tenaris TS 1H $41.87 $34.91 $36.96 -23% -5% $69.00 68% $3.26 $4.59 -1% 41% 12.8 9.1 14% 11% 7.7 6.8 3.53 2.7% $24,715
Petrobras Energia PZE 2S $9.71 $9.02 $9.20 -6% -28% $13.00 38% $0.86 $1.55 -47% 80% 11.3 6.2 -17% 23% 5.4 4.4 0.98 3.7% $2,073Materials Ternium TX 1H $25.08 $25.00 $26.55 -28% -36% $47.00 89% $3.89 $5.92 -2% 52% 6.4 4.2 5% 25% 3.9 3.3 1.13 2.0% $5,028Real Estate Irsa IRS 1M $8.11 $7.83 $8.25 -10% -44% $26.00 221% $0.60 $0.43 9% -28% 13.5 18.9 7% 25% 5.8 5.6 0.71 0.0% $469Utilities Edenor EDN 2S $9.45 $8.94 $9.57 -6% -57% $16.90 79% $0.86 $0.67 -59% -22% 11.0 14.1 80% 15% 5.3 4.3 0.68 0.0% $428
Source: Citi Investment Research
Latin America Strategy Chartbook
10 September 2008
Citigroup Global Markets Equity Research 39
Peru
Figure 94. Forward Price-to-Earnings Figure 95. Trailing Price-to-Book
2x
4x
6x
8x
10x
12x
14x
16x
18x
20x
95 96 97 98 99 00 01 02 03 04 05 06 07 08-130%
-80%
-30%
20%
70%
120%
170%
220%
12mth MSCI Returns P/E Avg. P/E +1 S.D. -1 S.D.
-
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
2001 2002 2003 2004 2005 2006 2007 2008
Peru Latin America
(x)
Source: MSCI, Datastream and Citi Investment Research Source: MSCI, FactSet and Citi Investment Research
Figure 96. Dividend Yield Figure 97. Equity Yield (USD) and EMBI+ Bond Yield Compared
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
2000 2001 2002 2003 2004 2005 2006 2007 2008
(%)
0%
2%
4%
6%
8%
10%
12%
14%
16%
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
EMBI+ Market Bond Yield (USD) IFC/S&P Market Earnings Yield (USD)
Source: FactSet and Citi Investment Research Source: Bloomberg, JP Morgan, Datastream and Citi Investment Research
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Figure 98. Peruvian Companies' Ratings, Valuations, Performance and Expected Total Returns
Tickers 10-Sep 52-week Total Return Price ETR EPS/EPADR EPS Growth P/E (x) EBITDA Growth EV/EBITDA (x) P/BV (x) Div Mkt CapIndustry Company NASD Rating Price Low High 4 Week YTD Target (%) 07A 08E 07A 08E 07A 08E 07A 08E 07A 08E 07A Yld US$, mnPeru (5)Financials Credicorp BAP 1M $72.65 $58.65 $86.91 5% -3% $110.00 55% $4.40 $5.75 49% 31% 16.5 12.6 n/m n/m n/a n/a 3.46 3.3% $5,795
Intergroup IFS 2M $18.90 $14.80 $23.00 -2% n/a $21.19 15% 3.22NS$ 3.80NS$ 41% 18% 17.4 14.8 n/m n/m n/a n/a 3.91 2.7% $1,741Metals & Mining Southern Copper PCU 3H $19.84 $19.84 $47.75 -25% -39% $19.00 6% $2.52 $2.33 9% -8% 7.9 8.5 15% -10% 4.6 5.1 4.55 10.1% $17,525Cement & Const. Cementos Lima CEL 2H $11.94 $10.87 $17.48 6% -12% $18.05 56% $0.87 $0.96 355% 10% 13.8 12.5 27% 19% 7.4 5.9 2.94 4.6% $1,021
Hochschild HOC 2M 2.19£ 2.01£ 5.12£ -15% -48% 3.00£ 39% $0.29 $0.26 149% -8% 13.4 14.6 43% 74% 7.0 5.5 2.09 1.4% $1,184
Source: Citi Investment Research
Latin America Strategy Chartbook
10 September 2008
Citigroup Global Markets Equity Research 41
Colombia
Figure 99. Colombia: Economic Activity (3m MA of Y/Y Changes) Figure 100. Colombia: Annual Inflation and Interest Rates
-10%
-5%
0%
5%
10%
15%
20%
2001 2002 2003 2004 2005 2006 2007 2008
-20%
-10%
0%
10%
20%
30%
40%
50%
60%
Ind Prod (Y/Y, 3m MA) Retail Sales (Y/Y, 3m MA) Export Growth (Y/Y, 3m MA; RHS)
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08
Colombia Interbank O/N Market Rate CPI (YoY % Change) Central Bank Target Rate
Source: Datastream and Citi Investment Research Source: Datastream and Citi Investment Research
Figure 101. Trailing P/E Figure 102. Trailing P/B
-
5
10
15
20
25
30
35
2002 2003 2004 2005 2006 2007 2008
Colombia Latin America
(x)
-
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
2001 2002 2003 2004 2005 2006 2007 2008
Colombia Latin America
(x)
Source: MSCI, FactSet and Citi Investment Research Source: MSCI, FactSet and Citi Investment Research
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Pan-Latin America – Stocks
Figure 103. Companies' Ratings, Valuations, Performance and Expected Total Returns
Tickers 10-Sep 52-week Total Return Price ETR EPS/EPADR EPS Growth P/E (x) EBITDA Growth EV/EBITDA (x) P/BV (x) Div Mkt CapIndustry Company NASD Rating Price Low High 4 Week YTD Target (%) 07A 08E 07A 08E 07A 08E 07A 08E 07A 08E 07A Yld US$, mnLatin America (3)Transportation Copa Airlines CPA 1M $37.49 $24.69 $48.50 2% 1% $57.00 53% $3.69 $3.21 19% -13% 10.2 11.7 17% -7% 9.2 10.3 3.07 1.0% $1,629Energy Ecopetrol ECO 1H CP$2,600 CP$1,500 CP$2,980 4% 32% CP$3,200 30% CP$128 CP$282 53% 120% 20.3 9.2 87% 94% 7.5 4.0 3.93 7.1% $50,836
Source: Citi Investment Research
Latin America Strategy Chartbook 10 September 2008
Citigroup Global Markets Equity Research 43
Sector Pages
Latin America Strategy Chartbook 10 September 2008
Citigroup Global Markets Equity Research 44
Energy
Figure 104. Price Performance: Absolute and Relative to Latin America Figure 105. Price Targets: Citi vs. Consensus
0
200
400
600
800
1000
1200
1400
1600
1800
2000
9/08/2006 1/09/2007 5/09/2007 9/06/2007 1/04/2008 5/05/2008 9/02/2008
50
70
90
110
130
150
170
190
210
230
250
MSCI LatAm - Energy (USD) Relative to MSCI LatAm (R.H. Scale)
Energy outperformance
Underperformance
Citigroup I/B/E/S [1] Citi Target vsRating Target ETR Target 1mo Ch Consensus
EnergyEcodiesel 2S R$4.00 105% R$2.50 -44% 60%Lupatech 1H R$84.00 58% R$67.95 -11% 24%Petroleo Brasileiro 1M $59.00 57% $62.23 -26% -5%Tenaris 1H $69.00 67% $73.67 4% -6%Petrobras Energia 2S $13.00 38% $14.20 2% -8%Petroleo Brasileiro (a) 1M $50.00 62% $81.93 -1% -39%
Source: MSCI, FactSet and Citi Investment Research [1] I/B/E/S where available, otherwise Bloomberg
Source: Datastream, Bloomberg and Citi Investment Research
Figure 106. Brazil Gasoline Historical Premium (Discount) vs. U.S. Prices Figure 107. Comparative Valuation - EVDACF/ROCE 2008
-
20
40
60
80
100
120
140
160
2002 2003 2004 2005 2006 2007 2008
US$
/bbl
Gasoline (Brazil) Gasoline (U.S.)
Brazilian Gasoline
Historical Premium (Discount)
to US Gasoline to Brent
2004 (9.81) 2.35
2005 (7.64) 4.86
2006 (5.85) 7.62
2007 (7.71) 8.52
YTD (20.31) (12.71)
13-Aug-08 (16.47) (0.20) Occidental petr.
Hess Corp
Marathon BP
Total
PetroChina
RD Shell ENIRepsol
Petrobras
Lukoil
Statoil
PEPSA
-
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
0% 5% 10% 15% 20% 25% 30%
ROCE
EV/D
AC
F
Global Integrated Oils
Source: Bloomberg and Citi Investment Research Source: Citi Investment Research
Latin America Strategy Chartbook 10 September 2008
Citigroup Global Markets Equity Research 45
Materials
Figure 108. Price Performance: Absolute and Relative to Latin America Figure 109. Price Targets: Citi vs. Consensus
200
400
600
800
1000
1200
1400
1600
9/08/2006 1/09/2007 5/09/2007 9/06/2007 1/04/2008 5/05/2008 9/02/2008
90
100
110
120
130
140
150
160
MSCI LatAm - Materials (USD) Relative to MSCI LatAm (R.H. Scale)
Underperformance
Citigroup I/B/E/S [1] Citi Target vsRating Target ETR Target 1mo Ch Consensus
MaterialsCemex 1H $37.00 88% $31.00 -7% 19%Empresas CMPC 1M C$22,000 49% C$18,742 -3% 17%Aracruz Celulose 1M $92.00 86% $81.46 -10% 13%Votorantim Celulose e Papel 1H $41.00 115% $37.56 -2% 9%Masisa 1H C$130.0 60% C$122 -3% 7%Ultrapar Participacoes 1M R$91.00 208% R$86.59 3% 5%CSN 1H R$92.00 120% R$87.78 -5% 5%Brascan 1S R$19.00 221% R$18.31 2% 4%Moctezuma 1M P$30.00 10% P$29.50 n/m 2%Usiminas 1H R$99.00 134% R$97.44 -4% 2%Suzano Papel 1H R$37.00 96% R$36.80 -1% 1%Duratex 1H R$51.00 108% R$51.21 -14% 0%Ternium 1H $47.00 89% $49.55 3% -5%Klabin 3H R$6.50 53% R$6.91 -4% -6%Satipel 1S R$17.00 101% R$18.50 20% -8%Braskem 2H $16.00 42% $18.16 -4% -12%Vale 1M $39.00 113% $44.60 31% -13%Unipar 3S R$1.55 21% R$1.78 1% -13%Gerdau 1H R$39.00 74% R$48.31 7% -19%GCC 3H P$46.00 -1% P$60.90 -7% -24%
Source: MSCI, FactSet and Citi Investment Research [1] I/B/E/S where available, otherwise Bloomberg; not exhaustive of coverage list.
Source: Datastream, Bloomberg and Citi Investment Research
Figure 110. Chemicals Valuation – Forward EV/EBITDA (2009e) Figure 111. Pulp & Paper Valuation – Forward EV/EBITDA
5.8
6.5 6.67.0
7.5 7.6
8.8
-
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
Ave
rage
Com
mod
ity
Ave
rage
Div
ersi
fied
Ultr
apar
Bra
skem
Bra
zilia
n A
vera
ge
Ave
rage
Spe
cial
ty
Un
ipar
EV/
EB
ITD
A 2
009
E
4.3 4.34.5
4.8
5.85.6
4.3
6.1
4.5
4.8
5.8
3.7
0
1
2
3
4
5
6
7
ARA CMPC VCP Suzano Klabin Copec
20
10
EV/E
BIT
DA
EV/EBITDA (ex Growth Capex) EV/EBITDA
Source: Citi Investment Research Source: Citi Investment Research
Latin America Strategy Chartbook 10 September 2008
Citigroup Global Markets Equity Research 46
Industrials
Figure 112. Price Performance: Absolute and Relative to Latin America Figure 113. Price Targets: Citi vs. Consensus
100
150
200
250
300
350
9/08/2006 1/09/2007 5/09/2007 9/06/2007 1/04/2008 5/05/2008 9/02/2008
50
75
100
125
150
175
MSCI LatAm - Industrials (USD) Relative to MSCI LatAm (R.H. Scale)
Citigroup I/B/E/S [1] Citi Target vsRating Target ETR Target 1mo Ch Consensus
IndustrialsMexichem 1S P$42.33 19% P$35.30 -68% 20%Embraer 1S $55.00 81% $45.94 -3% 20%Copa Airlines 1M $57.00 53% $48.43 -3% 18%Asur 1H $75.00 55% $67.00 0% 12%OMAB 1S $22.00 61% $21.50 -17% 2%IDEAL 3S $13.00 29% P$12.75 -4% 2%OHL Brasil 2S R$31.00 30% R$31.94 -6% -3%Empresas ICA 2H $67.00 46% $69.34 -6% -3%CCR 2M $36.00 35% R$38.18 -1% -6%LAN Airlines 2H $14.25 22% $15.26 -9% -7%Empresas Copec 2M C$7,500 28% C$8,070 -14% -7%Promotora Ambiental 2S P$32.00 48% P$35.85 -7% -11%Tam 1H $40.00 100% $47.06 -9% -15%GAP 3S $30.00 15% $39.80 -8% -25%All Americana Latina 1M $32.00 94% $44.11 -2% -27%Gol 3S $8.50 5% $12.64 -18% -33%
Source: MSCI, FactSet and Citi Investment Research 1] I/B/E/S where available, otherwise Bloomberg; not exhaustive of coverage list.
Source: Datastream, Bloomberg and Citi Investment Research
Figure 114. Airline Passenger Traffic Growth (RPK's) (Y/Y) Figure 115. Comparative Valuation - Forward P/E (08E)
0%
10%
20%
30%
40%
50%
GOL TAM LAN Airlines Copa Airlines (1)6
7
8
9
10
11
12
13
GOL TAM Copa Airlines LAN Airlines
(1) Including Varig
(2)RPM growth
Source: Company Reports and Citi Investment Research
Source: Datastream and CIR
Latin America Strategy Chartbook 10 September 2008
Citigroup Global Markets Equity Research 47
Financials
Figure 116. Price Performance: Absolute and Relative to Latin America Figure 117. Price Targets: Citi vs. Consensus
200
300
400
500
600
700
800
900
1000
9/08/2006 1/09/2007 5/09/2007 9/06/2007 1/04/2008 5/05/2008 9/02/2008
70
80
90
100
110
120
130
140
150
MSCI LatAm - Financials (USD) Relative to MSCI LatAm (R.H. Scale)
Citigroup I/B/E/S [1] Citi Target vsRating Target ETR Target 1mo Ch Consensus
FinancialsIrsa (Real Estate) 1M $26.00 221% $16.43 -4% 58%Credicorp 1M $110.00 55% $96.63 -3% 14%Nossa Caixa 2S R$48.00 41% R$45.75 10% 5%Banco Itaú 1M R$44.00 50% R$43.24 1% 2%BR Malls 1S R$22.00 73% R$24.00 -19% -8%Intergroup 2M $21.19 15% $24.06 -3% -12%Unibanco 1M R$24.50 38% R$28.77 -6% -15%Banco do Brasil 1M R$28.00 34% R$34.24 -3% -18%Banorte 3M P$47.00 19% P$58.88 1% -20%Bradesco 2M R$33.50 16% R$45.01 0% -26%
Source: MSCI, FactSet and Citi Investment Research 1] I/B/E/S where available, otherwise Bloomberg; not exhaustive of coverage list.
Source: Datastream, Bloomberg and Citi Investment Research
Figure 118. Fundamental Indictors – Brazilian Financial Sector Data Figure 119. Comparative Valuation – Latin American Financials
2007 2008 (E) 2009 (E) 2010 (E)
Annual credit growth * 30.6% 27.2% 21.9% 22.2%
NIM (annual average) ** 7.5% 7.0% 6.9% 7.0%
Annual fee income growth * 13.3% 5.6% 7.7% 8.5%
Annual operating expense growth * 8.3% 10.9% 10.7% 10.5%
NPL ratio ** 3.8% 3.7% 3.9% 3.9%
UnitPrice
(09-09-08)
BVPS
(last reported) *
P/B
Ratio
Brazil Itaú R$ 30.10 10.23 2.9
Bradesco R$ 29.75 10.98 2.7
Banco do Brasil R$ 21.49 10.37 2.1
Unibanco R$ 18.29 9.09 2.0
Nossa Caixa R$ 35.20 29.89 1.2
Mexico Banorte P$ 40.13 18.12 2.2
Peru Credicorp US$ 72.65 22.46 3.2
Intergroup S/. 56.20 14.66 3.8
*Calculated as weighted average of Itaú, Bradesco, Banco do Brasil, Unibanco.
**Calculated as the average of Itaú, Bradesco, Banco do Brasil and Unibanco.
Source: Citi Investment Research
'* Based on last reported book value.
Source: Citi Investment Research
Latin America Strategy Chartbook 10 September 2008
Citigroup Global Markets Equity Research 48
Consumer Discretionary
Figure 120. Price Performance: Absolute and Relative to Latin America Figure 121. Price Targets: Citi vs. Consensus
250
300
350
400
450
500
550
600
650
700
9/08/2006 1/09/2007 5/09/2007 9/06/2007 1/04/2008 5/05/2008 9/02/2008
60
70
80
90
100
110
120
130
140
150
MSCI LatAm - Consumer Discretionary (USD) Relative to MSCI LatAm (R.H. Scale)
Citigroup I/B/E/S [1] Citi Target vsRating Target ETR Target 1mo Ch Consensus
Consumer DiscretionaryGafisa 1H R$57.00 145% R$36.75 -8% 55%PDG 1S R$40.00 136% R$35.14 -5% 14%Cyrela 1M R$35.00 87% R$32.38 -1% 8%Dufry 1H R$54.00 101% R$50.15 8% 8%Television Azteca 2H P$8.00 21% P$7.46 0% 7%Lojas Americanas 1S R$16.00 74% R$15.39 -3% 4%Desarrolladora Homex 1M P$135.00 56% P$131.02 -2% 3%Totvs 1H R$74.00 47% R$72.67 2% 2%Grupo Televisa 1M $30.00 30% $30.00 -1% 0%Springs Global 2S R$21.70 171% R$21.70 0% 0%Corporacion Geo 1H P$48.00 59% P$48.01 2% 0%Rodobens 1S R$30.00 62% R$30.31 0% -1%Guararapes 2H R$62.00 104% R$64.69 -10% -4%Lojas Renner 1H R$42.00 60% R$46.65 1% -10%Universo Online 2S R$11.50 74% R$13.16 -4% -13%Urbi Desarrollos Urbanos 1M P$40.00 54% P$46.40 -6% -14%B2W 2S R$76.00 46% R$91.44 -1% -17%Consorcio Ara 3S P$10.00 29% P$13.19 -11% -24%Sare Holding 2S P$10.00 29% P$14.11 -11% -29%
Source: MSCI, FactSet and Citi Investment Research 1] I/B/E/S where available, otherwise Bloomberg; not exhaustive of coverage list.
Source: Datastream, Bloomberg and Citi Investment Research
Figure 122. Latin America – Total Advertising Expenditures by Market Figure 123. Comparative Valuation – EV/EBITDA and P/E
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
2003 2004 2005 2006 2007E 2008E 2009E 2010E 2011E 2012E 2013E 2014E 2015E
3yr N
omin
al G
rowt
h in
Ad
Reve
nue
Brazil Mexico
Media/Internet/Tech 2007 2008E 2009E 2007 2008E 2009E
Brazil & Mexico
TOTVS 14.6x 10.3x 8.5x 41.5x 29.0x 19.4xDatasul 1.9x 1.1x 0.6x 7.0x 5.0x 4.7xPositivo 3.0x 2.7x 2.5x 3.5x 3.0x 3.2xUOL 3.0x 2.3x 2.3x 8.1x 7.9x 11.9xB2W 19.2x 12.9x 10.6x 104.3x 55.7x 29.6xTelevisa 8.3x 6.8x 5.8x 18.0x 16.3x 13.5xTV Azteca 6.4x 6.0x 5.4x 20.1x 27.1x 13.7xTotal/Median Latam Software 6.4x 6.0x 5.4x 18.0x 16.3x 13.5x
EVEBITDA PE
Source: Citi Investment Research Source: Datastream and Citi Investment Research
Latin America Strategy Chartbook 10 September 2008
Citigroup Global Markets Equity Research 49
Consumer Staples
Figure 124. Price Performance: Absolute and Relative to Latin America Figure 125. Price Targets: Citi vs. Consensus
50
100
150
200
250
300
350
400
9/08/2006 1/09/2007 5/09/2007 9/06/2007 1/04/2008 5/05/2008 9/02/2008
70
80
90
100
110
120
130
140
150
160
MSCI LatAm - Consumer Staples (USD) Relative to MSCI LatAm (R.H. Scale)
Citigroup I/B/E/S [1] Citi Target vsRating Target ETR Target 1mo Ch Consensus
Consumer StaplesSoriana 2M P$44.00 46% P$39.12 -1% 12%Gigante 2S P$20.50 37% P$18.48 0% 11%Sadia 1H R$16.00 59% R$14.64 0% 9%JBS 1H R$12.00 131% R$11.00 0% 9%Embotelladoras Arca 1M P$48.00 42% P$44.20 2% 9%Perdigao 2H R$59.00 51% R$55.44 0% 6%Sao Martinho 2H R$26.00 30% R$24.62 0% 6%Grupo Bimbo 1M P$80.00 21% P$75.76 -2% 6%G. Pão De Acucar (CBD) 2M R$45.00 37% R$43.00 1% 5%Grupo Famsa 1H P$51.00 87% P$49.07 1% 4%Elektra 3H P$335.00 -14% P$322.50 0% 4%Minerva 1H R$14.00 106% R$13.72 3% 2%Coca-Cola Femsa 2M $66.00 13% $64.71 4% 2%Hypermarcas 1M R$32.00 112% R$31.45 -3% 2%Gruma 1H P$41.00 48% P$40.55 6% 1%Ambev 1M $88.00 61% $87.13 -5% 1%Industrias Bachoco 3S $30.00 10% $30.00 -19% 0%Walmex 1L P$50.00 32% P$50.04 -2% 0%Comerci 1M P$36.50 50% P$37.17 1% -2%Natura Cosmeticos 2H R$23.00 43% R$23.72 -3% -3%Grupo Continental 2M P$28.50 22% P$29.58 1% -4%Alsea SA de CV 1H P$16.50 51% P$17.28 -10% -5%Marfrig 1H R$27.00 77% R$28.33 3% -5%Femsa 1M $60.00 32% $64.00 12% -6%Grupo Modelo 2L $5.30 20% $5.69 0% -7%Embotelladora Andina 2M $19.00 32% $21.00 2% -10%CCU (Co. Cervec. Unidas) 2L $38.00 16% $45.67 1% -17%Cosan 2H R$28.00 52% R$36.81 2% -24%
Source: MSCI, FactSet and Citi Investment Research 1] I/B/E/S where available, otherwise Bloomberg; not exhaustive of coverage list.
Source: Datastream, Bloomberg and Citi Investment Research
Figure 126. Micro Indicator – Beverage Volume Growth Estimates Figure 127. Comparative Valuation – Forward EV/EBITDA
0%
2%
4%
6%
8%
Am
Bev
Bra
zil B
eer
Am
Bev
Tot
al
An
dina
Tot
al
Arc
a T
otal
CC
U B
eer
Ch
ile
Cok
e F
EM
SAM
exic
o
Cok
e F
EMSA
Tot
al
CO
NTA
L T
otal
FEM
SA M
exic
oB
eer
FEM
SA T
otal
Mod
elo
Mex
ico
Bee
r
Mod
elo
Tot
al
2008E 2009E
EV/EBITDA
Company 2007 2008E 2009E 2010E
AmBev 8.2x 7.6x 7.0x 6.5xGrupo Modelo* 9.1x 9.0x 8.2x 7.3xFEMSA 9.6x 8.2x 7.6x 7.1xCCU 8.7x 7.5x 6.7x 6.2xLatin America Average 8.9x 8.1x 7.4x 6.8x
North America Average 11.4x 11.1x 10.5x 8.9xEurope Average 10.1x 8.7x 7.7x 6.9xAsia Average 9.0x 8.9x 7.8x 6.9x
Embotelladora Andina SA 7.1x 6.5x 5.5x 4.8xEmbotelladoras Arca 6.3x 5.7x 5.0x 4.5xGrupo Continental 7.0x 6.1x 5.4x 4.9xCoca-Cola FEMSA 9.3x 7.8x 6.8x 5.9xLatin America Bottler Avg 7.4x 6.5x 5.7x 5.0x
Other Regions Bottler Avg 9.4x 7.5x 6.8x 6.2x
Source: Citi Investment Research *EBITDA uses the sum of each year's four quarters
**Excluding Anheuser-Busch and InBev
Source: Datastream and Citi Investment Research
Latin America Strategy Chartbook 10 September 2008
Citigroup Global Markets Equity Research 50
Telecom Services
Figure 128. Price Performance: Absolute and Relative to Latin America Figure 129. Price Targets: Citi vs. Consensus
50
100
150
200
250
300
350
400
450
500
9/08/2006 1/09/2007 5/09/2007 9/06/2007 1/04/2008 5/05/2008 9/02/2008
68
80
93
105
118
130
143
155
168
180
MSCI LatAm - Telecom Services (USD) Relative to MSCI LatAm (R.H. Scale)
Citigroup I/B/E/S [1] Citi Target vsRating Target ETR Target 1mo Ch Consensus
TelecomTIM Partic. ON 1H R$8.10 34% R$8.56 n/a -5%Vivo PN 1M R$11.00 44% R$12.77 n/a -14%Vivo ON 1M R$11.60 31% R$14.56 n/a -20%TIM Partic. PN 1H R$4.90 40% R$6.73 n/a -27%
Source: MSCI, FactSet and Citi Investment Research 1] I/B/E/S where available, otherwise Bloomberg; not exhaustive of coverage list.
Source: Datastream, Bloomberg and Citi Investment Research
Figure 130. Latin America Telecoms – Mobile Penetrations Figure 131. Comparative Valuation – EV/EBITDA and P/E
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
110%
2002 2003 2004 2005 2006 2007
Argentina Brazil Chile Colombia Mexico Peru
Telecom 2007 2008E 2009E 2007 2008E 2009E
Brazil
TIM Participações SA 5.9x 5.2x 4.2x 22.5x 23.9x 25.4xTIM Participações SA 3.6x 3.3x 2.7x 13.2x 14.1x 14.9xVivo Participações SA 5.5x 3.5x 2.9x N/A 41.4x 24.3xVivo Participações SA 4.7x 3.1x 2.5x N/A 35.1x 20.7xTotal/Median Brazil Telecom 5.1x 3.4x 2.8x N/A 29.5x 22.5x
EVEBITDA PE
Source: MSCI, FactSet and Citi Investment Research Source: Citi Investment Research
Latin America Strategy Chartbook 10 September 2008
Citigroup Global Markets Equity Research 51
Utilities
Figure 132. Price Performance: Absolute and Relative to Latin America Figure 133. Price Targets: Citi vs. Consensus
100
125
150
175
200
225
250
275
300
9/08/2006 1/09/2007 5/09/2007 9/06/2007 1/04/2008 5/05/2008 9/02/2008
70
80
90
100
110
120
130
140
150
MSCI LatAm - Utilities (USD) Relative to MSCI LatAm (R.H. Scale)
Citigroup I/B/E/S [1] Citi Target vsRating Target ETR Target 1mo Ch Consensus
UtilitiesEquatorial 1M R$26.80 119% R$23.03 0% 16%Cesp 1M R$40.50 108% R$36.42 0% 11%EDP 1M R$41.10 73% R$38.35 7% 7%Eletropaulo 2M R$42.00 76% R$42.49 0% -1%Cemig 1M R$49.60 66% R$50.37 -1% -2%Sabesp 2H $53.50 69% $55.33 24% -3%CPFL 2M R$40.40 40% R$42.00 -1% -4%Copel 2M R$35.00 48% R$37.57 -1% -7%Tractebel 2M R$26.70 55% R$28.71 -1% -7%AES Tietê 1M R$22.70 64% R$24.60 7% -8%Electrobrás 2H R$29.10 32% R$31.75 2% -8%Terna 2M R$35.20 58% R$39.01 1% -10%Edenor 2S $16.90 79% $19.13 -17% -12%
Source: MSCI, FactSet and Citi Investment Research 1] I/B/E/S where available, otherwise Bloomberg; not exhaustive of coverage list.
Source: Datastream, Bloomberg and Citi Investment Research
Figure 134. Electricity Supply and Demand in Argentina Figure 135. Brazilian Utility Companies – EV/EBITDA (2009e)
55,000
65,000
75,000
85,000
95,000
105,000
115,000
1996A 1998A 2000A 2002A 2004A 2006A 2008E 2010E
GW
h
Demand Supply
0
1
2
3
4
5
6
7
Cop
asa
EDB
Eq
uato
rial
Sabe
sp
Cop
el
Ele
trop
aulo
AES
Tie
tê
Avg
. B
razi
l
CT
EEP
Cem
ig
Elet
robr
ás
Tern
a
CP
FL
Tra
cteb
el
Ces
p
Source: Citi Investment Research Source: Citi Investment Research
Latin America Strategy Chartbook 10 September 2008
Citigroup Global Markets Equity Research 52
MSCI Disclosure
Morgan Stanley Capital International Inc.’s (“MSCI”) MSCI Standard Index Series section of the MSCI Web Site
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Latin America Strategy Chartbook 10 September 2008
Citigroup Global Markets Equity Research 53
Latin America Strategy Chartbook 10 September 2008
Citigroup Global Markets Equity Research 54
Latin America Strategy Chartbook 10 September 2008
Citigroup Global Markets Equity Research 55
LA091318
Latin America Strategy Chartbook 10 September 2008
Citigroup Global Markets Equity Research 56
Appendix A-1 Analyst Certification
Each research analyst(s) principally responsible for the preparation and content of all or any identified portion of this research report hereby certifies that, with respect to each issuer or security or any identified portion of the report with respect to an issuer or security that the research analyst covers in this research report, all of the views expressed in this research report accurately reflect their personal views about those issuer(s) or securities. Each research analyst(s) also certify that no part of their compensation was, is, or will be, directly or indirectly, related to the specific recommendation(s) or view(s) expressed by that research analyst in this research report.
IMPORTANT DISCLOSURES Customers of the Firm in the United States can receive independent third-party research on the company or companies covered in this report, at no cost to them, where such research is available. Customers can access this independent research at http://www.smithbarney.com (for retail clients) or http://www.citigroupgeo.com (for institutional clients) or can call (866) 836-9542 to request a copy of this research.
A director of COCA-COLA FEMSA, S.A. de C.V. is a member of the board of directors of an affilliate of Citigroup Global Markets Inc.
A director of Citi serves as a director of Gruma S.A. de C.V.
A director of FOMENTO ECONOMICO MEXICANO, S.A. de C.V. is a member of the board of directors of an affilliate of Citigroup Global Markets Inc.
A director of GRUPO AEROPORTUARIO DEL PACIFICO, S.A. de C.V. is a member of the board of directors of an affilliate of Citigroup Global Markets Inc.
A director of GRUPO CEMENTOS DE CHIHUAHUA, S.A. de C.V. is a member of the board of directors of an affilliate of Citigroup Global Markets Inc.
A director of Grupo Aeroportuario Del Sureste, S.A. de C.V. is a member of the board of directors of an affilliate of Citigroup Global Markets Inc.
A director of Grupo Aeroportuario del Centro Norte, S.A.B. de C.V. is a member of the board of directors of an affiliate of Citigroup Global Markets Inc.
A director of Grupo Bimbo, S.A. de C.V. is a member of the board of directors of an affiliate of Citigroup Global Markets Inc.
A director of Urbi Desarrollos Urbanos, S.A. C.V. is a member of the board of directors of an affilliate of Citigroup Global Markets Inc.
A seat on the board of directors of Corporacion GEO is held by a director of an affiliate of Citigroup Global Markets Inc.
A seat on the board of directors of Empresas Ica SA is held by one or more members of the board of directors of Citigroup Global Markets Inc. or its affilliates.
An officer or director of Grupo Televisa SA serves as a director on Citi's board.
Citi is acting as financial advisor to Lojas Americanas in the proposed merger with Submarino.
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Citigroup Global Markets Inc. is acting as a financial advisor to Hypermarcas S.A. in its proposed acquisition of Laboratorio Americano de Farmacoterapia S.A. ("Farmasa")
Citigroup Global Markets Inc. is advising the State of São Paolo in the proposed sale of its equity interest in Companhia Energética de São Paulo.
One or more directors of Cemex, S.A. de C.V. is a member of the board of directors of an affilliate of Citigroup Global Markets Inc. A director of Cemex, S.A de C.V. serves as a director on Citi's International Advisory Board. CEMEX, S.A.B. de C.V. Citigroup Global Markets Inc. is acting as a as financial advisor to Cemex, S.A.B. de C.V.
One or more directors of Grupo Modelo, S.A. de C.V. is a member of the board of directors of an affiliate of Citigroup Global Markets Inc.
One or more directors of MEXICHEM, S.A. de C.V. is a member of the board of directors of an affiliate of Citigroup Global Markets Inc.
One or more officers or directors of Gigante are members of the board of directors of an affiliate of Citigroup Global Markets Inc.
Citigroup Global Markets Inc. or its affiliates beneficially owns 1% or more of any class of common equity securities of Cementos Chihuahua, Cemex, Comercial Mexicana, Corporacion GEO SAB de CV, Gafisa SA, Gruma, Promotora Ambiental SAB de CV, Vale and Vale (Preferred). This position reflects information available as of the prior business day.
Within the past 12 months, Citigroup Global Markets Inc. or its affiliates has acted as manager or co-manager of an offering of securities of Banco do Brasil SA, Banco Nossa Caixa SA, BR Malls Participacoes SA, Brasil Ecodiesel S.A., Braskem S.A., Cemex, Cemig, Cesp, Copasa, CPFL Energia SA, Ecopetrol S.A., Edenor SA, EDP - Energias do Brasil SA, Eletrobras, Eletropaulo, Empresas Ica SAB de CV, Equatorial Energia SA, Gerdau SA, Hypermarcas, Intergroup, Lojas Americanas SA, Lupatech SA, MARFRIG, Mexichem SAB de CV, Minerva SA, Petrobras Energia Participaciones SA, Petróleo Brasileiro - Petrobrás, Sabesp, Soriana, Springs Global, Terna Participacoes SA, Urbi Desarrollos Urbanos, SA de CV, Vale and Vale (Preferred).
Citigroup Global Markets Inc. or its affiliates has received compensation for investment banking services provided within the past 12 months from , Aes Tiete S/A, AmBev, Banco Bradesco SA, Banco do Brasil SA, Banco Itau Holding Financeira SA, Banco Nossa Caixa SA, Banorte, Bimbo, BR Malls Participacoes SA, Brascan Residential Properties SA, Brasil Ecodiesel S.A., Braskem S.A., Cemex, Cemig, Cesp, Companhia Siderurgica Nacional, Copasa, CPFL Energia SA, Duratex SA, Ecopetrol S.A., Edenor SA, EDP - Energias do Brasil SA, Eletrobras, Embotelladora Andina S.A., Embraer, Empresas Ica SAB de CV, Equatorial Energia SA, Gerdau SA, Gigante, Gol Linhas Aéreas S.A., GP Investments, Grupo Famsa SAB de CV, Grupo Televisa, Hypermarcas, Intergroup, IRSA, JBS SA, Lupatech SA, Mexichem SAB de CV, OHL Brasil, Petróleo Brasileiro - Petrobrás, Soriana, Southern Copper Company, TAM S.A., Tenaris S.A., Terna Participacoes SA, Ternium SA, Tractebel Energia SA, UNIBANCO - Uniao de Bancos Brasileiros S, Urbi Desarrollos Urbanos, SA de CV, Vale, Vale (Preferred) and Votorantim Celulose e Papel S.A.
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Citigroup Global Markets Inc. or its affiliates expects to receive or intends to seek, within the next three months, compensation for investment banking services from , Aes Tiete S/A, Aracruz Celulose S.A., Banco do Brasil SA, Banco Nossa Caixa SA, Banorte, Bimbo, Brascan Residential Properties SA, Cemex, Cesp, Copa Airlines, Credicorp, Ecopetrol S.A., Edenor SA, Eletrobras, Embotelladora Andina S.A., Empresas Ica SAB de CV, Equatorial Energia SA, Gigante, GP Investments, Mexichem SAB de CV, Petróleo Brasileiro - Petrobrás, Soriana, Terna Participacoes SA, Tractebel Energia SA and Votorantim Celulose e Papel S.A.
Citigroup Global Markets Inc. or an affiliate received compensation for products and services other than investment banking services from , Aes Tiete S/A, Alsea, AmBev, Antofagasta, Aracruz Celulose S.A., B2W, Bachoco, Banco Bradesco SA, Banco do Brasil SA, Banco Itau Holding Financeira SA, Banorte, Bimbo, BR Malls Participacoes SA, Brascan Residential Properties SA, Brasil Ecodiesel S.A., Braskem S.A., Cementos Chihuahua, Cementos Lima S.A., Cemex, Cemig, Coca-Cola FEMSA, Comercial Mexicana, Companhia Siderurgica Nacional, Consorcio ARA, SAB de CV, Copa Airlines, Copasa, Copel, Corporacion GEO SAB de CV, Corporacion Moctezuma SAB de CV, CPFL Energia SA, Credicorp, CTEEP, Datasul SA, Desarrolladora Homex, S.A.B. de C.V., Duratex SA, Ecopetrol S.A., Edenor SA, EDP - Energias do Brasil SA, Eletrobras, Eletropaulo, Embotelladora Andina S.A., Embotelladoras Arca, Embraer, Empresas CMPC S.A., Empresas Copec SA, Empresas Ica SAB de CV, Equatorial Energia SA, FEMSA, Gafisa SA, Gerdau SA, Gigante, Gol Linhas Aéreas S.A., GP Investments, Gruma, Grupo Aeroportuario del Centro Norte S A, Grupo Aeroportuario del Pacifico SA de C, Grupo Aeroportuario del Sureste,SAB de C, Grupo Continental, Grupo Elektra SA de CV, Grupo Famsa SAB de CV, Grupo Modelo, Grupo Pão De Acucar, Grupo Televisa, Hochschild Mining, Hypermarcas, Impulsora del Desarrollo y el Empleo en, Intergroup, IRSA, JBS SA, Klabin S.A., Lan Airlines, Lojas Americanas SA, Lojas Renner SA, Lupatech SA, MARFRIG, Maseca, Masisa, Mexichem SAB de CV, Minerva SA, OHL Brasil, Perdigao SA, Petróleo Brasileiro - Petrobrás, Positivo Informatica SA, Promotora Ambiental SAB de CV, Radio Centro, Sabesp, Sadia SA, Sao Martinho SA, Sare Holding, SAB de CV, Satipel Industrial SA, Soriana, Southern Copper Company, Springs Global, Suzano Papel e Celulose S.A., TAM S.A., Tenaris S.A., Terna Participacoes SA, Ternium SA, TIM Participações SA, Tractebel Energia SA, TV Azteca SA, Ultrapar Participacoes S.A., UNIBANCO - Uniao de Bancos Brasileiros S, Urbi Desarrollos Urbanos, SA de CV, Usinas Siderurgicas de Minas Gerais SA, Vale, Vale (Preferred), Vivo Participações SA, Votorantim Celulose e Papel S.A. and Walmex in the past 12 months.
Citigroup Global Markets Inc. currently has, or had within the past 12 months, the following company(ies) as investment banking client(s): , Aes Tiete S/A, AmBev, Aracruz Celulose S.A., Banco Bradesco SA, Banco do Brasil SA, Banco Itau Holding Financeira SA, Banco Nossa Caixa SA, Banorte, Bimbo, BR Malls Participacoes SA, Brascan Residential Properties SA, Brasil Ecodiesel S.A., Braskem S.A., Cemex, Cemig, Cesp, Companhia Siderurgica Nacional, Copa Airlines, Copasa, CPFL Energia SA, Credicorp, Desarrolladora Homex, S.A.B. de C.V., Duratex SA, Ecopetrol S.A., Edenor SA, EDP - Energias do Brasil SA, Eletrobras, Embotelladora Andina S.A., Embotelladoras Arca, Embraer, Empresas CMPC S.A., Empresas Copec SA, Empresas Ica SAB de CV, Equatorial Energia SA, FEMSA, Gafisa SA, Gerdau SA, Gigante, Gol Linhas Aéreas S.A., GP Investments, Grupo Aeroportuario del Centro Norte S A, Grupo Famsa SAB de CV, Grupo Televisa, Hypermarcas, Intergroup, IRSA, JBS SA, Lupatech SA, MARFRIG, Mexichem SAB de CV, Minerva SA, OHL Brasil, Petróleo Brasileiro - Petrobrás, Promotora Ambiental SAB de CV, Sao Martinho SA, Sare Holding, SAB de CV, Soriana, Southern Copper Company, Springs Global, Suzano Papel e Celulose S.A., TAM S.A., Tenaris S.A., Terna Participacoes SA, Ternium SA, Tractebel Energia SA, Ultrapar Participacoes S.A., UNIBANCO - Uniao de Bancos Brasileiros S, Urbi Desarrollos Urbanos, SA de CV, Usinas Siderurgicas de Minas Gerais SA, Vale, Vale (Preferred) and Votorantim Celulose e Papel S.A.
Citigroup Global Markets Inc. 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: , Aes Tiete S/A, Alsea, AmBev, Aracruz Celulose S.A., Bachoco, Banco Bradesco SA, Banco do Brasil SA, Banco Itau Holding Financeira SA, Banorte, Bimbo, BR Malls Participacoes SA, Brascan Residential Properties SA, Brasil Ecodiesel S.A., Braskem S.A., Cementos Chihuahua, Cementos Lima S.A., Cemex, Cemig, Coca-Cola FEMSA, Comercial Mexicana, Companhia Siderurgica Nacional, Consorcio ARA, SAB de CV, Copa Airlines, Copasa, Corporacion GEO SAB de CV, Corporacion Moctezuma SAB de CV, CPFL Energia SA, Credicorp, CTEEP, Datasul SA, Desarrolladora Homex, S.A.B. de C.V., Duratex SA, Ecopetrol S.A., Edenor SA, EDP - Energias do Brasil SA, Eletrobras, Embotelladora Andina S.A., Embotelladoras Arca, Embraer, Empresas CMPC S.A., Empresas Copec SA, Empresas Ica SAB de CV, Equatorial Energia SA, FEMSA, Gerdau SA, Gigante, Gol Linhas Aéreas S.A., GP Investments, Gruma, Grupo Aeroportuario del Centro Norte S A, Grupo Aeroportuario del Pacifico SA de C, Grupo Aeroportuario del Sureste,SAB de C, Grupo Continental, Grupo Elektra SA de CV, Grupo Famsa SAB de CV, Grupo Modelo, Grupo Televisa, Hochschild Mining, Hypermarcas, Impulsora del Desarrollo y el Empleo en, Intergroup, IRSA, JBS SA, Klabin S.A., Lan Airlines, Lupatech SA, MARFRIG, Maseca, Masisa, Mexichem SAB de CV, Minerva SA, OHL Brasil, Perdigao SA, Petróleo Brasileiro - Petrobrás, Positivo Informatica SA, Promotora Ambiental SAB de CV, Radio Centro, Sadia SA, Sao Martinho SA, Sare Holding, SAB de CV, Soriana, Southern Copper Company, Springs Global, Suzano Papel e Celulose S.A., TAM S.A., Tenaris S.A., Terna Participacoes SA, Ternium SA, TIM Participações SA, Tractebel Energia SA, TV Azteca SA, Ultrapar Participacoes S.A., UNIBANCO - Uniao de Bancos Brasileiros S, Urbi Desarrollos Urbanos, SA de CV, Usinas Siderurgicas de Minas Gerais SA, Vale, Vale (Preferred), Vivo Participações SA, Votorantim Celulose e Papel S.A. and Walmex.
Citigroup Global Markets Inc. currently has, or had within the past 12 months, the following company(ies) as clients, and the services provided were non-investment-banking, non-securities-related: , Aes Tiete S/A, Alsea, AmBev, Antofagasta, Aracruz Celulose S.A., B2W, Bachoco, Banco Bradesco SA, Banco do Brasil SA, Banco Itau Holding Financeira SA, Banorte, Bimbo, BR Malls Participacoes SA, Brascan Residential Properties SA, Brasil Ecodiesel S.A., Braskem S.A., Cementos Chihuahua, Cementos Lima S.A., Cemex, Cemig, Coca-Cola FEMSA, Comercial Mexicana, Companhia Siderurgica Nacional, Consorcio ARA, SAB de CV, Copa Airlines, Copasa, Copel, Corporacion GEO SAB de CV, Corporacion Moctezuma SAB de CV, CPFL Energia SA, Credicorp, CTEEP, Datasul SA, Desarrolladora Homex, S.A.B. de C.V., Duratex SA, Ecopetrol S.A., Edenor SA, EDP - Energias do Brasil SA, Eletrobras, Eletropaulo, Embotelladora Andina S.A., Embotelladoras Arca, Embraer, Empresas CMPC S.A., Empresas Copec SA, Empresas Ica SAB de CV, Equatorial Energia SA, FEMSA, Gafisa SA, Gerdau SA, Gigante, Gol Linhas Aéreas S.A., GP Investments, Gruma, Grupo Aeroportuario del Centro Norte S A, Grupo Aeroportuario del Pacifico SA de C, Grupo Aeroportuario del Sureste,SAB de C, Grupo Continental, Grupo Elektra SA de CV, Grupo Famsa SAB de CV, Grupo Modelo, Grupo Pão De Acucar, Grupo Televisa, Hochschild Mining, Hypermarcas, Impulsora del Desarrollo y el Empleo en, Intergroup, IRSA, JBS SA, Klabin S.A., Lan Airlines, Lojas Americanas SA, Lojas Renner SA, Lupatech SA, MARFRIG, Maseca, Masisa, Mexichem SAB de CV, Minerva SA, OHL Brasil, Perdigao SA, Petróleo Brasileiro - Petrobrás, Positivo Informatica SA, Promotora Ambiental SAB de CV, Radio Centro, Sabesp, Sadia SA, Sao Martinho SA, Sare Holding, SAB de CV, Satipel Industrial SA, Soriana, Southern Copper Company, Springs Global, Suzano Papel e Celulose S.A., TAM S.A., Tenaris S.A., Terna Participacoes SA, Ternium SA, TIM Participações SA, Tractebel Energia SA, TV Azteca SA, Ultrapar Participacoes S.A., UNIBANCO - Uniao de Bancos Brasileiros S, Urbi Desarrollos Urbanos, SA de CV, Usinas Siderurgicas de Minas Gerais SA, Vale, Vale (Preferred), Vivo Participações SA, Votorantim Celulose e Papel S.A. and Walmex.
Citigroup Global Markets Inc. or an affiliate received compensation in the past 12 months from Alsea, Aracruz Celulose S.A., Bimbo, BR Malls Participacoes SA, Brasil Ecodiesel S.A., Braskem S.A., Cementos Chihuahua, Cemex, Comercial Mexicana, Consorcio ARA, SAB de CV, Copa Airlines, Copasa, Corporacion GEO SAB de CV, Desarrolladora Homex, S.A.B. de C.V., Edenor SA, Empresas CMPC S.A., Empresas Copec SA, Empresas Ica SAB de CV, Equatorial Energia SA, Gigante, Gol Linhas Aéreas S.A., GP Investments, Grupo Aeroportuario del Centro Norte S A, Hypermarcas, Klabin S.A., Lupatech SA, MARFRIG, Mexichem SAB de CV, Minerva SA, Petróleo Brasileiro - Petrobrás, Sao Martinho SA, Soriana, Springs Global, Suzano Papel e Celulose S.A., TAM S.A., Tenaris S.A., Ultrapar Participacoes S.A., Urbi Desarrollos Urbanos, SA de CV, Vale, Vale (Preferred), Votorantim Celulose e Papel S.A. and Walmex.
Analysts' compensation is determined based upon activities and services intended to benefit the investor clients of Citigroup Global Markets Inc. and its affiliates ("the Firm"). Like all Firm employees, analysts receive compensation that is impacted by overall firm profitability, which includes revenues from, among other business units, the Private Client Division, Institutional Sales and Trading, and Investment Banking.
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The Firm is a market maker in the publicly traded equity securities of Companhia Siderurgica Nacional, Eletrobras, Grupo Aeroportuario del Centro Norte S A and Walmex.
For important disclosures (including copies of historical disclosures) regarding the companies that are the subject of this Citi Investment Research product ("the Product"), please contact Citi Investment Research, 388 Greenwich Street, 29th Floor, New York, NY, 10013, Attention: Legal/Compliance. In addition, the same important disclosures, with the exception of the Valuation and Risk assessments and historical disclosures, are contained on the Firm's disclosure website at www.citigroupgeo.com. Private Client Division clients should refer to www.smithbarney.com/research. Valuation and Risk assessments can be found in the text of the most recent research note/report regarding the subject company. Historical disclosures (for up to the past three years) will be provided upon request.
Citi Investment Research Ratings Distribution Data current as of 30 June 2008 Buy Hold SellCiti Investment Research Global Fundamental Coverage (3096) 50% 36% 14%
% of companies in each rating category that are investment banking clients 53% 52% 42%Guide to Fundamental Research Investment Ratings: Citi Investment Research's stock recommendations include a risk rating and an investment rating. Risk ratings, which take into account both price volatility and fundamental criteria, are: Low (L), Medium (M), High (H), and Speculative (S). Investment ratings are a function of Citi Investment Research's expectation of total return (forecast price appreciation and dividend yield within the next 12 months) and risk rating. For securities in developed markets (US, UK, Europe, Japan, and Australia/New Zealand), investment ratings are: Buy (1) (expected total return of 10% or more for Low-Risk stocks, 15% or more for Medium-Risk stocks, 20% or more for High-Risk stocks, and 35% or more for Speculative stocks); Hold (2) (0%-10% for Low-Risk stocks, 0%-15% for Medium-Risk stocks, 0%-20% for High-Risk stocks, and 0%-35% for Speculative stocks); and Sell (3) (negative total return). For securities in emerging markets (Asia Pacific, Emerging Europe/Middle East/Africa, and Latin America), investment ratings are: Buy (1) (expected total return of 15% or more for Low-Risk stocks, 20% or more for Medium-Risk stocks, 30% or more for High-Risk stocks, and 40% or more for Speculative stocks); Hold (2) (5%-15% for Low-Risk stocks, 10%-20% for Medium-Risk stocks, 15%-30% for High-Risk stocks, and 20%-40% for Speculative stocks); and Sell (3) (5% or less for Low-Risk stocks, 10% or less for Medium-Risk stocks, 15% or less for High-Risk stocks, and 20% or less for Speculative stocks). Investment ratings are determined by the ranges described above at the time of initiation of coverage, a change in investment and/or risk rating, or a change in target price (subject to limited management discretion). At other times, the expected total returns may fall outside of these ranges because of market price movements and/or other short-term volatility or trading patterns. Such interim deviations from specified ranges will be permitted but will become subject to review by Research Management. Your decision to buy or sell a security should be based upon your personal investment objectives and should be made only after evaluating the stock's expected performance and risk.
Guide to Corporate Bond Research Credit Opinions and Investment Ratings: Citi Investment Research's corporate bond research issuer publications include a fundamental credit opinion of Improving, Stable or Deteriorating and a complementary risk rating of Low (L), Medium (M), High (H) or Speculative (S) regarding the credit risk of the company featured in the report. The fundamental credit opinion reflects the CIR analyst's opinion of the direction of credit fundamentals of the issuer without respect to securities market vagaries. The fundamental credit opinion is not geared to, but should be viewed in the context of, debt ratings issued by major public debt ratings companies such as Moody's Investors Service, Standard and Poor's, and Fitch Ratings. CBR risk ratings are approximately equivalent to the following matrix: Low Risk -- Triple A to Low Double A; Low to Medium Risk -- High Single A through High Triple B; Medium to High Risk -- Mid Triple B through High Double B; High to Speculative Risk -- Mid Double B and Below. The risk rating element illustrates the analyst's opinion of the relative likelihood of loss of principal when a fixed income security issued by a company is held to maturity, based upon both fundamental and market risk factors. Certain reports published by Citi Investment Research will also include investment ratings on specific issues of companies under coverage which have been assigned fundamental credit opinions and risk ratings. Investment ratings are a function of Citi Investment Research's expectations for total return, relative return (relative to the performance of relevant Citi bond indices), and risk rating. These investment ratings are: Buy/Overweight -- the bond is expected to outperform the relevant Citigroup bond market sector index (Broad Investment Grade, High Yield Market or Emerging Market); Hold/Neutral Weight -- the bond is expected to perform in line with the relevant Citigroup bond market sector index; or Sell/Underweight -- the bond is expected to underperform the relevant Citigroup bond market sector index. Performance data for Citi bond indices are updated monthly, are available upon request and can also be viewed at http://sd.ny.ssmb.com/ using the "Indexes" tab.
OTHER DISCLOSURES Citigroup Global Markets Inc. and/or its affiliates has a significant financial interest in relation to , Banco Bradesco SA, Banco Itau Holding Financeira SA, Bimbo, Braskem S.A., Cementos Lima S.A., Cemex, Coca-Cola FEMSA, Desarrolladora Homex, S.A.B. de C.V., Eletrobras, Gafisa SA, Gerdau SA, Gruma, Grupo Televisa, Hochschild Mining, Petrobras Energia Participaciones SA, Petróleo Brasileiro - Petrobrás, Terna Participacoes SA, Urbi Desarrollos Urbanos, SA de CV, Usinas Siderurgicas de Minas Gerais SA, Vale and Vale (Preferred). (For an explanation of the determination of significant financial interest, please refer to the policy for managing conflicts of interest which can be found at www.citigroupgeo.com.)
Citigroup Global Markets Inc. or its affiliates beneficially owns 2% or more of any class of common equity securities of Cementos Chihuahua, Cemex, Corporacion GEO SAB de CV, Promotora Ambiental SAB de CV, Vale and Vale (Preferred).
Citigroup Global Markets Inc. or its affiliates beneficially owns 5% or more of any class of common equity securities of Comercial Mexicana.
For securities recommended in the Product in which the Firm is not a market maker, the Firm is a liquidity provider in the issuers' financial instruments and may act as principal in connection with such transactions. The Firm is a regular issuer of traded financial instruments linked to securities that may have been recommended in the Product. The Firm regularly trades in the securities of the subject company(ies) discussed in the Product. The Firm may engage in securities transactions in a manner inconsistent with the Product and, with respect to securities covered by the Product, will buy or sell from customers on a principal basis.
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