Update TVN. Surfing High

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1 7 March 2008 Update BRE Bank Securities Media Polska Poland N.WA;.PW Hold (Reiterated) Cena Current bieżąca price PLN 22.4 Cena Target docelowa price Kapitalizacja Market cap Free float Średni Average dzienny daily trading obrót (3M) mies.) Shareholder structure PLN 22.9 PLN 8.37bn PLN 2.76bn PLN 25.2m Strateurop International B.V % N-Vision B.V % Others 37.84% Sector Outlook The advertising market, the main factor influencing media industry earnings, is growing at a double-digit rate, and television stations are garnering a sustained share of the advertising budgets. These growth trends are expected to continue for at least 2-3 more years. As for the TV broadcasting industry, it has tough times ahead of it as competitive pressure increases. Company Profile, launched ten years ago, is Poland s leading television broadcaster next to public stations and Polsat, with a 21.2% audience share. In addition to TV broadcasting, TV is also active in the market of Internet services, and owns Poland s most popular Web portal, Onet.pl. Important dates May 13, Q report August 12, Q report vs. WIG PLN 33 Surfing High The advertising market is growing very fast. Despite the tightening competition in the TV market, this boom allows to consistently increase both sales and margins. This is happening even as the key channel () is losing viewership and as the Company s share of the target audience is going down. We believe that with the market booming, should be able to at least partially overcome the threats and the negative trends we wrote about in our previous report, i.e. increasing competition, decreasing market share and falling margins in the TV segment. Our rating is hold. Rapid Growth of the Advertising Market The advertising market grew at a fast rate that exceeded the expectations of most market watchers. An 18% increase translates into additional PLN 200m in the market on top of what was forecasted for last year. As a result of high demand, there was much interest in 's advertising airtime, even though the competitive pressure was increasing, the viewership was decreasing and the prices went up. Bearing in mind that the positive trends in the advertising market will naturally weaken, we have decided to increase our forecasts as regards this market's growth and 's revenues. A Positive Impact on Margins With revenues growing faster than we previously assumed, will be able to take advantage of its operational leverage, which will in turn allow operating margins to increase. Along with higher revenues, this will be boosting operating income in the next few years. Market Standing Still Threatened Although the advertising market as a whole is doing well, the threats we discussed in our previous report remain. The growth of satellite platforms and the upcoming launch of digital terrestrial television will further reduce signal coverage differences between stations. Moreover, Polsat's altered strategy and reorientation towards the same target demographic as forces the Company to compete harder for viewership and to spend more on programming. The new transmitters of TV Puls will significantly expand its signal coverage, but without further investment in programming the station will not be able to successfully compete with the biggest players in the market WIG Piotr Grzybowski (48 22) piotr.grzybowski@dibre.com.pl (PLN m) F 2009F 2010F Revenue EBITDA EBITDA margin 34.3% 35.6% 36.4% 36.6% 37.0% EBIT Net profit DPS P/E P/CE P/BV EV/EBITDA BRE 7 March Bank Securities 2008 does not rule out offering brokerage services to an issuer of securities being the subject of a recommendation. Information concerning a conflict of interest arising in 7 connection with issuing a recommendation (should such a conflict exist) is located on the final page of this report.

2 Strong Advertising Market Financial Situation Q4 07 and FY2007 Results The fourth quarter of 2007 was very good for the Company as far as its earnings are concerned. Revenues were record high at PLN 521.6m vs. PLN 405m a year earlier. Given the Company s degree of operational leverage, the rapidly increasing revenues allowed it to improve profitability and to register record-high operating profit. In Q4 07, EBIT margin increased from 33.3% to 37.1% y/y. EBIT was PLN 193.8m vs. PLN 134.9m a year earlier. Net income in Q4 was negatively impacted by the revaluation of the option to redeem, which is embedded in the bonds it had issued. As a result of interest rate increases, the option brought about a loss. Q4 07 net income was PLN 135.8m vs. PLN 128.1m a year earlier. Excluding the adjustment for the revaluation of this option, net income increased from PLN 116.7m to PLN 146.3m. With good earnings in the fourth quarter, FY2007 was good for the Company as well. Revenues amounted to PLN m vs. PLN m a year earlier. EBIT margin increased from 29.9% in FY2006 to 31.0% in This allowed the Group to register operating profit of PLN 482.0m, which is 38.3% more than PLN 348.5m seen in the previous year. As far as net income is concerned, the impact of the revaluation of the bond redemption option was even greater than in Q4 alone. In 2007, the Company earned PLN 258.8m, vs. PLN 243.3m. Without the impact of the option revaluation, net income would be PLN 330.5m, i.e. 42% above PLN 232.8m seen in Q4 07 and FY2007 results Q Q change change revenues % % EBIT % % net income % % adjusted net income % % EBIT margin 37.08% 33.31% 11.3% 31.00% 29.91% 3.6% net margin 26.04% 30.53% -14.7% 42.40% 43.77% -3.1% adjusted net margin 23.80% 18.94% 25.7% 21.26% 19.98% 6.4% Source:, BRE Bank Securities Advertising Market Growth 2007 was an exceptionally good year for the Polish advertising market. According to Starlink, during this period advertising expenditure grew by 18.3%, to ca. PLN 6.6bn. As a result, there was PLN 200m more in the Polish TV advertising market than most market watchers expected. This fast growth had a direct impact on 's earnings, given that it has a 32% share in the TV advertising market, while its Onet.pl web portal is a leader of the online advertising segment. The Group was therefore able to capture a significant part of these extra funds and consequently to beat the Management's financial targets. Such high growth of advertising expenditure has convinced us that our earlier assumptions regarding the future must be revised. We are now estimating that the advertising market will grow by 13%, vs. the 12% previously assumed. Combined with the higher growth seen in FY2007, this has a significant impact on 's revenue forecast. Moreover, the combination of rapid revenue growth and operational leverage will allow the Company to partially offset the pressure of programming, salary and marketing expenses, making it possible to improve margins. Faster revenue growth and higher margins will bring in better profits. Prospects for the Future We believe that the advertising market will be growing slower every year, towards the rate of growth of the Polish GDP. The growth will be faster in the immediate future as some branches of the economy are further deregulated and as the country reaches the levels of advertising expenditure seen in developed economies (at present, advertising expenditure as percent of GDP is barely over half the EU average). As this convergence happens, the growth rate should stabilize at ca. 5-6% a year, beginning in 2013 (i.e. after the EURO 2012 soccer competition which will be held in Poland and the Ukraine). However, one should also bear in mind the threat stemming from the condition of the global economy, should the slowdown spread into Poland. 7 March

3 Value of the advertising market under the previous forecast and after the revision % 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% Source: BRE Bank Securities forecast revised forecast growth rate-forecast growth rate-revision We are also assuming that the TV stations share of the advertising pie will start to decrease in the period of the forecast, because of two factors. On the one hand, people will watch less TV and use the internet more, and the advertisers will follow them. In addition, outdoor advertising will be getting more important as Poles start spending less and less time in their homes. On the other hand, there are legal limits on TV advertising. At present, no more than 15% of airtime can be devoted to advertising. As the market grows, the impact of this limit will be gaining strength. Price hikes will become the key to market growth, but they in turn will make TV less attractive vis-à-vis alternative advertising media. This tendency may in fact be speeded up. The European Commission has voiced its objections to the practice of not including sponsorship airtime in the total advertising airtime. If the EU regulations force Polish broadcasters to change this practice, available airtime will decrease further, pushing prices up. After the big recession that the advertising market suffered at the start of the century, and the ensuing discount war waged by TV stations, TV advertising remains relatively cheap in Poland, compared to the prices in other media and to TV advertising prices in Western European countries. According to the World Advertising Research Centre, in Poland in 2005 the cost of reaching 1000 people through newspaper and magazine advertising was approximately 75% higher than the cost of reaching such a group via television. In the same period, the cost of TV advertising per 1000 people was just 33% of the Western European average. Even if the recent price hikes are taken into account, it is unlikely that in 2008 this ratio will significantly exceed 50%. This is why at present there is much excess demand in the TV advertising market. As a result, the impact of price hikes on the demand for advertising will not be very strong. However, as the advertising market grows and the prices converge, further price increases will affect the advertisers decisions on where to spend their money, especially in the context of the internet's rapid growth. As a result, the share of television in the overall advertising market will gradually decrease. At present it is over 50%, while the world average is 37%. 7 March

4 revenues under the earlier forecast and after the revision forecast forecast revision Source: BRE Bank Securities EBITDA margin under the earlier forecast and after the revision 37.5% 37.0% 36.5% 36.0% 35.5% 35.0% 34.5% 34.0% 33.5% 33.0% 32.5% forecast forecast revision Source: BRE Bank Securities Competition in the Market Ratings In the recent months, the Company s flagship channel,, has been gradually loosing its audience. This process started in early Except for the very good November, ratings were lower than in the corresponding periods of the previous year. In FY2007, 's share of the audience fell from 16.7% in 2006 to 16.5%. This reflects a general market trend: large broadcasters are feeling increasingly strong pressure from thematic channels, which are able to expand their audience share because the dynamic growth of satellite platforms enables them to broaden their signal coverage. Apart from Polsat, for which 2007 was a great success, the other three major players in the TV market (i.e. and the two channels of the public television) were losing their audience share. TVP2 was affected particularly strongly. We are expecting this trend to continue in the future. As the differences in signal coverage gradually decrease, large TV stations will encounter increasingly strong competition from the ever more numerous thematic channels. 7 March

5 TV station viewership in 2006 and % 24% 22% 20% 18% 16% 14% 12% 10% TVP1 TVP2 Polsat Source: AGB Nielsen, BRE Bank Securities The weaker results of the channel were more than offset by the Group s thematic channels. This is particularly true of the 24 news channel. In the period of political turmoil that last year was, its audience share increased from 2% in 2006 to 3%. An additional factor that helps thematic channels is their broader signal coverage, brought about by the quick growth of digital satellite platforms. In our view, 24 will find it difficult to further increase its audience share given that the political turmoil has subsided and that there is now competition in the form of TVP Info, with the launch of Polsat 24 coming soon. This is why even though we are expecting household penetration by cable TV and digital satellite platforms to increase, we believe that in the future the audience will remain at the current level. In the future, thematic channels will be the key to keeping the share of the advertising market. However, as the market gets oversaturated, it will be necessary to open more and more such channels, which will in turn require more investment and which will dampen the short-term margins, as they will need time to become profitable. Audience shares of Group s channels 28% 26% 24% 22% 20% 18% 16% 14% 12% 10% January February March April May June July August September October November December Source:, BRE Bank Securities In the recent weeks, has launched its new spring schedule. We have a very positive view of the changes introduced and the programming investments made and we believe that they might help the station to reverse the downward trend on the ratings and regain the audience it has lost. This contention is supported by the February ratings, much better than those for February of last year. has not only been losing audience share, but the quality of its audience has been decreasing as well. This is illustrated by its lower share of the target demographic, defined as viewers aged 16-49, living in cities of over 100,000 inhabitants. Advertisers are particularly 7 March

6 interested in this group of people, as they have a higher-than-average purchasing power and it is easier to influence their spending patterns through advertising. The high share of target demographic allows to capture a share of the advertising market that is disproportionately high when compared to its overall audience share. Over the past year, the share of this audience decreased significantly, much more so than for the overall audience. This is largely attributable to the changes in Polsat s strategy and image. It has decided to fight for this audience and to this end it has greatly increased the quality of its programming. The ratings show that this strategy was successful. In all of 2007, managed to improve its monthly ratings among this segment of the audience only once, in November. All the other months saw decreases, and this trend has so far continued in 2008, despite the successful launch of the spring schedule. Primetime audience shares of Group s channels (target demographic) 34% 32% 30% 28% 26% 24% 22% 20% 18% January February March April May June July August September October November December Source:, BRE Bank Securities TV Puls In late March and early April, TV Puls should receive the new transmitters in Katowice, Wrocław, Szczecin and Nowy Sącz that have been granted to it by the National Broadcasting Council (KRRiT) in January. With these new frequencies, the terrestrial household penetration of the station, which is controlled by News Corporation, will increase from 16% to 25%, significantly boosting the number of potential viewers. We are disappointed by the station s programming so far, and we doubt that without improving it its 2008 year-end target of a 2% audience share can be reached, even when household penetration increases. It appears that without more intensive investment in programming content, the station will not be able to compete with thematic channels, which was meant to be the first stage the conquest of the Polish TV market. According to the station itself, major investments are planned for the fall schedule, which means that TV Puls is not planning an intensive fight for viewership in the spring season. We believe that as the station s household penetration increases due to the growth of digital satellite platforms and the launch of digital terrestrial television, News Corporation should invest more in its content. Digitization of Poland It is very likely that in late 2008 and early 2009 a tender will be held for the management of the multiplex that will be used for digital terrestrial television. This means that the digitization of Poland will commence in The launch of the multiplex does not mean, however, that all the people in the country will automatically gain access to more TV atations. A special TV set is required to watch digital television. Given that we do not know yet what will be the coding format used by the winner of the tender, it is not possible to purchase the appropriate TV set now. It appears that the Office for Electronic Communications, which oversees the digitization process, missed the big chance that the Euro soccer championship is, with its ensuing increase in the sales of TV sets. Had the tender been held at the beginning of this year, consumers would have been able to purchase TV sets that would allow for DTTV reception. The one-year delay means that many households will have new TV sets that will not be DTTVready. An alternative to purchasing a new TV set will be to purchase a set-top box, but until there is a decision in the tender and the coding format is known, producers cannot start manufacturing them, which could potentially lead to shortages in the market in the early days of DTTV. Given all these restrictions, the European Broadcasting Union forecasts that by 2012 household penetration of DTTV in Poland will only reach 25%. The deadline to give up analog 7 March

7 broadcasting in favor of full digitization falls in June From that moment on, Poland will no longer be able to protect the analog signal on its territory. As a result, many people living close to the borders will face difficulties with analog signal reception, because of signal interference from the neighboring countries. Digital Platforms Given the obstacles to the introduction of DTTV in Poland, digital satellite platforms play a major role in evening out the differences in the reach of the different TV stations. At present, the three operators in this market, i.e. Cyfrowy Polsat, Cyfra Plus and n have 3.3m subscribers between them, i.e. almost one in four households. The number of subscribers is growing rapidly, mostly thanks to Cyfrowy Polsat. In 2007 alone, it gained almost 1m new subscribers. The total number of subscribers increased by almost 50%, which boosted the reach of the stations broadcast over these platforms. We believe that it will not be possible to keep such growth rates this year and in the future, because the market is nearing saturation. Nonetheless, in 2008 the number of subscribers should increase, and consequently the reach of small thematic stations will increase as well. 7 March

8 DCF Valuation (PLN m) 2008F 2009F 2010F 2011F 2012F 2013F 2014F 2015F 2016F 2017F Revenue ,8 change 18.5% 12.8% 11.5% 10.9% 9.7% 8.2% 8.1% 7.3% 6.4% 5.9% 6,2% EBITDA ,8 EBITDA margin 36.4% 36.6% 37.0% 37.2% 36.7% 36.2% 35.6% 34.9% 34.2% 33.6% 32,8% Amortization and depreciation ,2 Management stock options ,0 EBIT ,6 EBIT margin 32.5% 32.7% 32.5% 32.5% 32.3% 32.1% 31.8% 31.3% 30.8% 30.3% 29,7% Tax rate on EBIT ,9 NOPLAT ,6 CAPEX ,2 Working capital ,4 Other ,0 FCF ,2 WACC 10.3% 10.3% 10.3% 10.3% 10.3% 10.3% 10.3% 10.3% 10.3% 10.3% 10,6% discount factor 92.2% 83.6% 75.8% 68.8% 62.4% 56.6% 51.3% 46.5% 42.2% 38.3% 38,2% PV FCF ,4 WACC 10.3% 10.3% 10.3% 10.3% 10.3% 10.3% 10.3% 10.3% 10.3% 10.3% 10,6% Cost of debt 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 6,6% Risk-free rate 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% 5,6% Risk premium 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1,0% Effective tax rate 19.0% 19.0% 19.0% 19.0% 19.0% 19.0% 19.0% 19.0% 19.0% 19.0% 19,0% Net debt / EV 13.0% 13.0% 13.0% 13.0% 13.0% 13.0% 13.0% 13.0% 13.0% 13.0% 0,0% Cost of equity 11.0% 11.0% 11.0% 11.0% 11.0% 11.0% 11.0% 11.0% 11.0% 11.0% 10,6% Risk premium 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5,0% Beta ,0 FCF growth after the forecast horizon 4.0% Sensitivity analysis Terminal value FCF growth in perpetuity Discounted terminal value (PV TV) % 3.0% 4.0% 5.0% 6.0% Discounted FCF in the forecast horizon WACC +1.0pp Equity value (EV) WACC +0.5pp Net debt WACC Other non-operating assets 0.0 WACC -0.5pp Minority interests 0.0 WACC -1.0pp Management stock options Equity value Number of shares (millions) Equity value per share (PLN) 23.5 Cost of equity (9M) 8.2% Target price 25.4 EV/EBITDA('07) for the target price 16.5 P/E('07) for the target price 36.2 TV to EV 61% 7 March

9 Current share value under the preliminary valuation FCF growth in perpetuity 2.0% 3.0% 4.0% 5.0% 6.0% WACC +1.0pp WACC +0.5pp WACC WACC -0.5pp WACC -1.0pp Value of the underlying of the option FCF growth in perpetuity 2.0% 3.0% 4.0% 5.0% 6.0% WACC +1.0pp WACC +0.5pp WACC WACC -0.5pp WACC -1.0pp Option value FCF growth in perpetuity 2.0% 3.0% 4.0% 5.0% 6.0% WACC +1.0pp WACC +0.5pp WACC WACC -0.5pp WACC -1.0pp Share value adjusted for employee options FCF growth in perpetuity 2.0% 3.0% 4.0% 5.0% 6.0% WACC +1.0pp WACC +0.5pp WACC WACC -0.5pp WACC -1.0pp M share value adjusted for employee options FCF growth in perpetuity 2.0% 3.0% 4.0% 5.0% 6.0% WACC +1.0pp WACC +0.5pp WACC WACC -0.5pp WACC -1.0pp March

10 Income Statement (PLN m) F 2008F 2009F 2010F 2011F 2012F Revenue change 35.4% 33.5% 18.5% 12.8% 11.5% 10.9% 9.7% Advertising revenues Other revenues COGS license amortization productions salaries broadcasting amortization and depreciation management options marketing and promotion rentals copyright fees revaluation of receivables other other net operating profit EBIT change 36.1% 38.4% 24.0% 13.7% 10.9% 10.8% 9.2% EBIT margin 29.9% 31.0% 32.5% 32.7% 32.5% 32.5% 32.3% Profit on financing activity Extraordinary gains/losses Other Pre-tax income Tax Minority interests Net income change 23.7% -6.0% 76.5% 17.1% 13.9% 14.0% 11.8% margin 22.2% 15.7% 23.3% 24.2% 24.7% 25.4% 25.9% Amortization and depreciation EBITDA change 35.7% 38.6% 21.1% 13.4% 12.8% 11.5% 8.2% EBITDA margin 34.3% 35.6% 36.4% 36.6% 37.0% 37.2% 36.7% Shares at year-end (millions) EPS CEPS ROAE 31.7% 18.2% 27.1% 26.7% 26.2% 25.8% 25.0% ROAA 17.8% 12.0% 19.9% 21.3% 21.8% 23.7% 26.2% 7 March

11 Balance Sheet (PLN m) F 2008F 2009F 2010F 2011F 2012F ASSETS Fixed assets Property. plant and equipment Intangible assets Long-term programming assets Assets held for sale Receivables from subsidiaries (bonds) Deferred tax asset Other fixed assets Current assets Short-term programming assets Receiv. from deliveries and services Derivative instruments Prepayments Taxes receivable Other Cash and cash equivalents (PLN m) F 2008F 2009F 2010F 2011F 2012F LIABILITIES Equity Share capital Share premium reserve Retained earnings Long-term liabilities Senior Notes (9.5%) Long-term derivatives Deferred tax reserve Long-term liabilities Trade creditors Bond interest payable Tax liabilities Other Debt Net debt (Net debt / Equity) 59.9% 47.8% 29.6% 26.4% 19.1% 4.4% -8.0% (Net debt / EBITDA) BVPS March

12 Cash Flows (PLN m) F 2008F 2009F 2010F 2011F 2012F Cash flows from operating activities EBITDA Working capital Tax Provisions Other Cash flows from investing activities CAPEX Capital investments Other (non-cash) Cash Flows Debt Stock offering Dividends/share buy-back Derivatives Interest paid Interest received F/X differences Other Change in cash Cash at the end of period DPS (PLN) FCF (CAPEX / Sales) 10.4% 10.0% 9.2% 17.4% 13.6% 5.1% 4.6% Market multiples F 2008F 2009F 2010F 2011F 2012F P/E P/CE P/BV P/S FCF/EV 3.7% 2.7% 4.4% 3.1% 4.7% 8.2% 9.5% EV/EBITDA EV/EBIT EV/S DYield 0.0% 1.7% 1.6% 2.7% 3.2% 3.7% 4.2% Price (PLN) Shares at year-end (millions) MC (PLN m) Equity attributable to minority shareholders (PLN m) EV (PLN m) March

13 Michał Marczak tel. (+48 22) Managing Director Head of Research Strategy, telco, mining, metals, media Research Department: Marta Jeżewska tel. (+48 22) Deputy Director Banks Analysts: Kamil Kliszcz tel. (+48 22) Retail, materials, other Piotr Janik tel. (+48 22) , IT, other Kacper Żak, CFA tel. (+48 22) Real-estate developers, other Samer Masri tel. (+48 22) Construction Piotr Grzybowski tel. (+48 22) Other Sales and Trading: Piotr Dudziński tel. (+48 22) Director Grzegorz Domagała tel. (+48 22) Deputy Director Marzena Łempicka-Wilim tel. (+48 22) Deputy Director Traders: Emil Onyszczuk tel. (+48 22) Grzegorz Stępien tel. (+48 22) Tomasz Dudź tel. (+48 22) Michał Jakubowski tel. (+48 22) Tomasz Jakubiec tel. (+48 22) Grzegorz Strublewski tel. (+48 22) Dom Inwestycyjny BRE Banku S.A. ul. Wspólna 47/ Warszawa 7 March

14 List of abbreviations and ratios contained in the report: EV net debt + market value EBIT Earnings Before Interest and Taxes EBITDA EBIT + Depreciation and Amortisation P/CE price to earnings with amortisation MC/S market capitalisation to sales EBIT/EV operating profit to economic value P/E (Price/Earnings) price divided by annual net profit per share ROE (Return on Equity) annual net profit divided by average equity P/BV (Price/Book Value) price divided by book value per share Net debt credits + debt papers + interest bearing loans cash and cash equivalents EBITDA margin EBITDA/Sales Recommendations of BRE Bank Securities A recommendation is valid for a period of 6-9 months, unless a subsequent recommendation is issued within this period. Expected returns from individual recommendations are as follows: BUY we expect that the rate of return from an investment will be at least 15% ACCUMULATE we expect that the rate of return from an investment will range from 5% to 15% HOLD we expect that the rate of return from an investment will range from 5% to +5% REDUCE we expect that the rate of return from an investment will range from -5% to -15% SELL we expect that an investment will bear a loss greater than 15% Recommendations are updated at least once every nine months. This document has been created and published by BRE Bank Securities S.A. The present report expresses the knowledge as well as opinions of the authors on day the report was prepared. The opinions and estimates contained herein constitute our best judgement at this date and time, and are subject to change without notice. The present report was prepared with due care and attention, observing principles of methodological correctness and objectivity, on the basis of sources available to the public, which BRE Bank Securities S.A. considers reliable, including information published by issuers, shares of which are subject to recommendations. However, BRE Bank Securities S.A., in no case, guarantees the accuracy and completeness of the report, in particular should sources on the basis of which the report was prepared prove to be inaccurate, incomplete or not fully consistent with the facts. BRE Bank Securities S.A. bears no responsibility for investment decisions taken on the basis of the present report or for any damages incurred as a result of investment decisions taken on the basis of the present report. 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It is possible that BRE Bank Securities S.A. renders, will render or in the past has rendered services for companies and other entities mentioned in the present report. The present report was not transferred to the issuer prior to its publication. BRE Bank Securities S.A., its shareholders and employees may hold long or short positions in the issuer's shares or other financial instruments related to the issuer's shares. BRE Bank Securities S.A., its affiliates and/or clients may conduct or may have conducted transactions for their own account or for account of another with respect to the financial instruments mentioned in this report or related investments before the recipient has received this report. Copying or publishing the present report, in full or in part, or disseminating in any way information contained in the present report requires the prior written agreement of BRE Bank Securities S.A. Recommendations are addressed to all Clients of BRE Bank Securities S.A. This report is not for distribution to third parties. The activity of BRE Bank Securities S.A. is subject to the supervision of the Polish Financial Supervision Commission. Individuals who did not participate in the preparation of this recommendation, but had or could have had access to the recommendation prior to its publication, are employees of BRE Bank Securities S.A. authorised to access the premises in which recommendations are prepared, other than the analysts mentioned as the authors of the present recommendation. Strong and weak points of valuation methods used in recommendations: DCF acknowledged as the most methodologically correct method of valuation; it is based in discounting financial flows generated by a company; its weak point is the significant susceptibility to a change of forecast assumptions in the model. Comparative based on a comparison of valuation multipliers of companies from a given sector; simple in construction, reflects the current state of the market; weak points include substantial variability (fluctuations together with market indices) as well as difficulty in the selection of Previous recommendations issued for Recommendation Sell Hold Date issued Price on date of recommendation WIG on date of recommendation March