Initiating Coverage in Multiplan, Brazilian Mall Operator

1. Multiplan (MULT3)
Sector: Real Estate & Construction
Target Price: R$39.00 / US$21.51 (as of October 8th)
Current Price: R$24.49 / US$13.51 (as of October 8th)
Upside: 59.2% / 48.1%
Initiation of Coverage October 09, 2007
Buy 1 Get 2: Playing Real Estate and Consumption BUY
We are initiating coverage of Multiplan shares with a December 2008 Table 1
target price of R$39.00 per share, implying a 59% upside in R$ terms Market Cap in R$MM 3,620
Firm Value in R$MM 3,297
(48% in US$) and a BUY rating.
52-week Hi-Lo in R$ 26.00 21.50
30D ADTV – R$000 3,799
The company is involved in an ambitious growth plan,
•
and currently trades at 14.8x and 10.5x FV/EBITDA for Share Price Variation 1M 3M 6M
2008 and 2009 respectively. In terms of P/FFO multiples, the Absolute 2.0% N.A. N.A.
company trades at 14.1x and 11.3x respectively. Adjusting PER Relative -12.2% N.A. N.A.
Volatility 1M 3M 6M
multiples for the yearly R$112 million goodwill amortization
Absolute 34.1% N.A. N.A.
expense, Multiplan trades at 16.8x and 13.4x respectively.
Relative 5.2% N.A. N.A.
Table 2 – R$MM 2006 2007E 2008E
Present in 6 Brazilian states, the company designs,
•
Net Revenue 253 321 396
develops and manages a chain of malls and mixed used
Adj. EBITDA 139 195 245
projects located in some of Brazil’s most important cities
Adj. Net Profit 67 167 216
and regions. Dividends N.R. 1 8
FCFF (133) (427) (137)
ROIC (%) 21.6% 2.0% 4.2%
As an IPO that came out on the verge of the July-August
•
sell off in global markets, the company’s investment case Table 3 2006 2007E 2008E
may have been overlooked by many investors, thus Adj. PER*** N.R. 21.6 16.8
creating an attractive opportunity. As shares are still FV/ Adj. EBITDA 26.3 16.9 14.8
hovering around IPO-price-levels, investors face an interesting FV/FCFF N.R. N.R. N.R.
buying opportunity. Dividend Yield N.R. 0.01% 0.22%
FCFE Yield N.R. N.R. N.R.
Net Debt to EBITDA 0.39 N.R. N.R.
In terms of multiples adjusted to growth, Multiplan
•
stocks currently trade at a 0.19x PEG ratio and a 0.41x Table 4
PEG Ratio***
FV/EBITDA-to-growth. Our experience shows that multiples- 0.19x
EBITDA Multi/Growth 0.41x
to-growth relantionships below 0.50x are an interesting entry
PBV** 1.9x
point into fundamentally attractive investment stories.
Net Debt/Equity 0.03
Net Deb/ Total Cap 0.03
We have projected the company’s growth based on: (i) *N.R. – Not Representative
•
**PBV adjusted for IPO
its already disclosed investment plans for expansions and
*** Adjusted for Amortization
green field projects, and (ii) acquisitions, either through
a buy-out of minority stakes in its malls or third-party
malls. Except for 2007 and 2008, expansion should be funded
Share Price vs Ibovespa performance
by the company’s own cash generation. 120
110
In terms of potential risks to our investment case, we
•
100
cite: (i) shopping malls concentration in specific regions; (ii)
increase in shopping asset prices; (iii) succession issues; and 90
(iv) risk of additional equity offerings in the sector.
80
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MULT3 IBOVESPA
Rafael C. de Pinho
55 11 3089-8748
rpinho@bulltick.com
See appendix A for Important Disclosures
This report has been prepared by Bulltick Brasil Consultoria e Assessoria Empresarial Ltda. which is not an FINRA member, it’s not registered under the
US Securities and Exchange Commission, and it’s not regulated by any US Securities or commodities exchange. Non-US research analysts who have
prepared this report are not registered/ qualified as research analysts with the FINRA or any other US securities exchange or regulatory body

2. Investment Thesis
Multiplan: a premium player in Brazil’s mall industry
From roughly 350 existing shopping malls in Brazil, as per ABRASCE’s (Brazilian Shopping
Multiplan controls 9 top
Centers Association) data, we estimate that around 30 should be considered “top” quality
quality malls in Brazil…
assets given their positioning, long-run track record and recognized brands in their
regions. From those, 9 are controlled by Multiplan, a remarkable stake vis-à-vis its
competitors.
Another point worth stressing out is the fact that from its 12 malls portfolio, Multiplan
… ruling out from rental
directly controls 9 and actively manages the remaining. The advantages of control are
prices to stores mix and
clear, as it allows the company to rule out on expansions, store mix repositioning,
expansion decisions.
marketing initiatives and managerial decisions. Multiplan itself had, in the past, growth
limitations imposed by an unaligned partner; thus, management perceives controlling
malls as of strategic importance.
Exhibit 1: Operational figures, Multiplan vs. peers
GLA ( 000 m2 ) # of Shoppings
Company Ticker
Cpny Stake Total Controlled Managed Total
BRMALLS BRLM3 353 788 8 25 30
GENERAL SHOPPING GSHP3 119 140 4 6 6
IGUATEMI IGTA3 153 353 2 12 12
MULTIPLAN MULT3 318 475 10 13 13
Source: Companies
Due to its preeminent and long-term leadership in the shopping mall industry, the
Leadership in malls attracts
company has been able to attract some of the most important chains in Brazilian
top quality anchors,
commerce sector to anchor its malls, besides being the starting point for some worldwide
creating customer flows…
known brands operations in Brazil, such as Nike’s or Starbucks’. Multiplan’s malls are
definitely the ones of choice for any company willing to hit a diversified, yet very well
positioned client mix in Brazil.
Exhibit 2: Sample of Anchor Stores present at Multiplan malls
Source: Multiplan and Bulltick
Additionally, the superior mall performance coupled with long dated relationships with
…thus reinforcing its
most of its clients allows the company to have above-average bargaining power when re-
bargaining power with
negotiating rental contracts.
satellite stores.
2

3. Organic Growth Drivers
Expansions in existing malls and real estate developments
It was not so long ago when Multiplan had two major obstacles to grow: (i) its long-dated
An unaligned partner and
partner, the Bozano group, which was divesting from most of its assets, thus having a
capital limitations delayed
limited appetite for new projects; and (ii) capital limitations.
growth plans in the past.
With the recent capital markets developments in Brazil, both restrictions were removed
Recent capital injections
and Multiplan paved the way to growing its businesses. In 2006, through a capital
allowed the company to
injection made by the Ontario Teacher’s Pension Fund, the company acquired the
trace ambitious growth
Bozano’s stake, consolidating its’ control over most of its portfolio.
plans.
In addition, recently, the company decided to list its shares in the BOVESPA, capitalizing
itself to cope with the ambitious growth plans traced after Bozano’s departure. Exhibit 3
below details the company’s expansion plans for the coming years.
Exhibit 3: Multiplan’s planned GLA additions
Type of Additional Addition
Shopping Openning Stake
Addition GLA Multiplan
Park Shopping Barigui Expansion 3Q08 2,188 90% 1,969
Barra Shopping Sul Green Field 3Q08 51,978 100% 51,978
Park Shopping Brasília Expansion 4Q08 3,072 60% 1,843
Ribeirão Shopping Expansion 2Q09 6,793 76% 5,176
Diamond Mall Expansion 2Q09 5,299 90% 4,769
Anália Franco Expansion 2Q09 11,786 30% 3,536
Vila Olímpia Green Field 2Q09 26,417 30% 7,925
Barra Shopping Expansion 4Q09 3,462 51% 1,769
Park Shopping Brasília Expansion 2Q10 3,346 60% 2,008
BH Shopping Expansion 4Q10 12,735 80% 10,188
Park Shopping Barigui Expansion 4Q11 14,784 90% 13,306
Barra Shopping Sul Expansion 4Q14 21,638 100% 21,638
163,498 77% 126,105
Source: Multiplan
An important aspect of the investment plan above is that most of the additions to current
Expansions take place on
GLA should come from expansions in existing shopping malls. These should not require
consolidated malls, at lower
land acquisitions or the basic construction needed in green field projects, thus, costing
costs…
less. Additionally, expansions normally take place on already consolidated malls, where
rental revenues should be peaking.
As a result, expansions should yield higher returns and, as a matter of fact, the company
… yielding better returns.
stated in its 2Q07 results release that it targets 20% unleveraged return rates for
expansions vis-à-vis 15% on green field projects.
In order to implement its expansion strategy, Multiplan normally acquires land in excess
Expansion opportunities are
of what is needed for the initial mall project, keeping the excessive land as part of its
generated by buying cheap
parking lot, for example. As the shopping consolidates, within a couple of years from
and in-excess lands nearby
opening, the company starts to add more stores, entertainment complexes and other
malls.
kinds of customer attractions, thus increasing GLA considerably, besides reinforcing
people flow and enlarging the shopping’s area of influence.
3

4. The best example of this strategy can be seen on Exhibit 4 which details the steps
executed in Barra Shopping throughout its story. Exhibit 5 shows other expansion
examples by comparing some of Multiplan malls’ initial and current number of shops.
Exhibit 4: The Barra Shopping complex
Source: Bulltick Research, Multiplan and Google
Exhibit 5: Expansions in existing malls
No. of stores Current No. of
Shopping Opening Year
Openening stores
1979 130 291
BH Shopping
218 218
1981
Ribeirão Shopping
120 581
1981
Barra Shopping
160 488
1982
Morumbi Shopping
122 241
1983
Park Shopping Brasília
225 225
1996
Diamond Mall
39 39
1999
New York City Center
237 237
1999
Shopping Anália Franco
181 181
2003
Park ShoppingBarigui
Source: Multiplan
On top of allowing for malls to expand, buying land in excess also has a secondary
Extra land creates
benefit, which is creating opportunities for other kinds of real estate investments
opportunities of mixed use
surrounding the malls, thus, transforming them into mixed use projects.
projects.
In order to implementing these strategies without being exposed in cash for too long,
Land is bought away from
Multiplan’s classic development would be away from more crowded neighborhoods,
most expensive areas…
buying cheaper land, anticipating urban developments years ahead of competitors.
Among the company’s portfolio, two examples that followed this pattern were BH
shopping and Barra Shopping, founded in 1979 and 1981, in Belo Horizonte and Rio de
Janeiro respectively. A neighborhood was almost inexistent in these areas prior to the
shopping openings.
4

5. Nonetheless, both were well served in terms of roads and access to their cities. It is
…although in the cities’
growing direction. worth highlighting that, a couple of years later, the city “moved” towards these malls,
thus, creating value through the land appreciation that followed. Investors should bear in
mind, though, that these opportunities do not lie on any sort of speculation, other than
the assumption that land surrounding a top quality shopping mall will appreciate. Since
the company is the one in charge of deciding where to put the mall, we view the
assumption as fair enough.
Exhibit 6: View of Barra da Tijuca – 1981
As an example, in 1981
Barra da Tijuca was on the
early stages of development
when Multiplan opened
Barra Shopping.
Source: Multiplan
Exhibit 7: View of Barra da Tijuca – 2007
Currently, Barra remains the
fastest growing area in Rio
de Janeiro.
Source: Bulltick and Google
5

6. Last but not least, following its IPO, the company announced investments to build two
Additional investments,
going forward, should commercial towers and a hotel in association with WTorre in São Paulo, near Morumbi
replicate the model in other Shopping. Besides being coherent with the strategy described above, Exhibit 8 shows our
malls.
estimate for additional yearly revenues to be captured with these buildings. As these
estimates were based solely on our assumptions (the company basically disclose the size
of the land and planned use for it) we, have conservatively not included them in our
valuation model.
Exhibit 8: Estimate of revenues – Commercial Building with Wtorre
Land Area (m2) 40,000
Construction Factor - Vertical Building 3.50
2
Total Area (m ) 140,000
Gross Leasable Area (m2) - 85% 119,000
2
Monthly Rent (R$/m ) - AAA building 70.00
Total Yearly Revenues - R$ 000 99,960
Multiplan's Stake on Revenues - 50% 49,980
Source: Bulltick
The company has also disclosed an investment contiguous to the Parque Barigui
Shopping, in Curitiba, where it acquired land through a financial swap. It will build
another commercial development as well as an expansion to the mall. It is important to
mention that the region where Barigui is located has been growing at a very dynamic
pace over the last few years.
6

7. Green field projects
Multiplan currently has two green field projects under development: Barra Shopping Sul
(BSS) and Shopping Vila Olímpia.
BSS is located in Porto Alegre, one of the most important state capitals in Brazil. Its
BSS will add roughly 52,000
opening is scheduled for 3Q08 and will add 51,978 square meters of GLA to Multiplan,
m2 of GLA and be 100%
being 100% controlled by the company. The project foresees the first expansion, of
controlled by Multiplan.
21,638m2, opening by 2014. With record-breaking 90% of contracts for the mall’s area
already signed more than a year ahead of its opening, BSS can already be considered a
tremendous success.
As for Shopping Vila Olímpia, it will be located in one of the fastest growing
Shopping Vila Olímpia will
neighborhoods of the city of São Paulo, surrounded by several office buildings, which
be located in a dynamic and
should generate enough demand for its 26,417m2 GLA. Multiplan’s participation is 30%
growing business region in
and it should manage the mall. The company does not hold the control of the
São Paulo.
development as it has been invited to participate by Grupo Victor Malzoni. Exhibit 9
details the geographic positioning of Shopping Vila Olímpia, as well as the presence of
large commercial buildings in the region.
It is also worth mentioning that this region will hold two other malls to be opened by
2008: JHSF’s Cidade Jardim and another one by Wtorre and Iguatemi, which should
create some competition over Vila Olímpia.
However, we remind investors that up to this point, these three malls’ strategies and
Although competition is
focus are different: Vila Olímpia should be a niche mall, serving the increasing presence
expected, Vila Olímpia
of business people in the region with restaurants and some day-to-day shopping, while
should focus on the niche of
serving the commercial the other two should be more focused on upscale brands and luxury items.
buildings.
Exhibit 9: Shopping Vila Olímpia - Strategic positioning
Source: Bulltick, Google
7

8. Inorganic Growth Opportunities
Not differently from most real estate sub-sectors, the shopping malls segment in Brazil is
Mall segment is another
very fragmented with several family-owned players or with smaller groups with isolated
fragmented sub-sector of
investments in malls for diversification purposes. As a consequence, the sector exhibits
Brazil’s real estate industry.
innumerous acquisition opportunities that capitalized players such as BR Malls, Multiplan
and Iguatemi intend to exploit.
In Multiplan’s case, more than a source of inorganic growth, our opinion is that
Instead of targeting GLA
acquisitions are evaluated much more on a strategic basis, other than only by that of
growth, Multiplan seeks
growth purposes. As an example, we show in Exhibit 10 an overview of the company’s
strategic sense on
malls in Belo Horizonte, including the recently acquired Patio Savassi.
acquisitions.
Exhibit 10: Multiplan’s assets in Belo Horizonte
Controlling the three main
malls in Belo Horizonte’s
richest areas is a
competitive advantage…
Source: Bulltick, Google
The only rival within the richest area in the city, Patio Savassi acquisition created a hard-
… reinforcing the
profitability implied in the to-penetrate fortress in the area, as far as competition is concerned. Besides, the mall
currently generates R$653/m2 of revenue yearly, versus Multiplan’s BH Shopping and
deal.
Diamond Mall’s respective R$1,060/m2 and R$845/m2, which leads us to envisage
potential revenue gains as contracts start to be renegotiated going forward.
Besides third party acquisitions, Multiplan has a series of minority shareholders in the
Minority stakeholders in its
malls portfolio should be malls it controls, as a result of its past capital limitations. Consequently, these should be,
Multiplan’s main acquisition in our view, the company’s main acquisition targets. On top of increasing the stakes it
targets.
holds in premium malls, these purchases should allow for some fixed cost dilution as
these malls are already being managed by Multiplan.
As it can be seen in Exhibit 11, the minorities in Multiplan’s malls are mostly pension
funds. The rationale behind the sale of their participation in the malls is based on
liquidity: as now the stock exchange is a feasible vehicle to play investments in Brazilian
malls, pension funds could be willing to divest from the real assets to go into shares,
leaving some liquidity discount on the table for Multiplan. Besides, some funds have
limitations in terms of exposure to a specific asset class such as real estate.
8

9. Exhibit 11: Shareholder structures, Multiplan malls
Shopping Company Stake %
Multiplan 51%
Most of Multiplan’s malls
PREVI - Pension Fund 19%
have pension funds as
Barra Shopping FAPES - Pension Fund 15%
minority shareholders.
SISTEL - Pension Fund 10%
Carvalho Hosken - Construction Co. 5%
Multiplan 50%
New York City Center
PREVI - Pension Fund 50%
Multiplan 56%
PREVI - Pension Fund 13%
Philips - Pension Fund 9%
Morumbi Shopping SISTEL - Pension Fund 8%
FUNCEF - Pension Fund 9%
FAPES - Pension Fund 4%
Solução Imobiliária - Development Co. 1%
Multiplan 80%
BH Shopping
Usiminas - Pension Fund 20%
Anália Franco 70%
Shopping Anália Franco
Multiplan 30%
Multiplan 60%
Park Shopping PREVI - Pension Fund 25%
IRB 15%
Multiplan 76%
Ribeirão Shopping PREVI - Pension Fund 20%
PreviHab - Pension Fund 4%
Multiplan 90%
Park Shopping Barigui
J. Malucelli Adm. Bens 10%
Source: Multiplan
9

10. Management: A competitive advantage
In contrast to some of its peers, Multiplan exhibits one of the most experienced
Long-term management
management teams in the sector. Its five top managers average 23 years of experience
with proven track record. A
in real estate and 20 years within Multiplan.
plus to the story.
Exhibit 12: Multiplan’s Board of Directors
Name Position Profession
José Isaac Péres Chairman Economist
Eduardo Kaminitz Péres Vice-Chairman Business Administration
Leonard Peter Sharpe Director Economist
Andrea Mary Stephen Director Business Administration
Edson de Godoy Bueno Director Doctor
José Carlos de A.S. Barata* Director Engineer
Manoel Joaquim R. Mendes Director Engineer
Source: Multiplan
* Independent Member
Exhibit 13: Multiplan’s Management
Years in Years in
Name Position Profession
Multiplan Real Estate
José Isaac Péres CEO Economist 33 33
Eduardo Kaminitz Péres VP Business Administration 19 19
VP, IRO - 23
Mário A.N. de Paula Engineer, Lawyer
Alberto José dos Santos Director Accountant 32 32
Marcello Kaminitz Barnes Director Engineer 17 17
Source: Multiplan
Besides having a proven track record in the sector, the management team has gone
through the ever-changing macroeconomic scenarios in Brazil over the last 30 years.
Achieving success for such a long time in a mostly illiquid business in Brazil, per se, is an
accomplishment. In addition, Multiplan’s management was responsible for forging many
of the trends which shaped the industry in Brazil over its existence.
Mr. José Isaac Peres history mixes with the one of shopping malls in Brazil. At the age of
Mr. Peres is hard to
66, Mr. Peres still pursues long-term objectives, as the ones it did over its successful
substitute, though matching
career. Nonetheless, investors should bear in mind that substitutes from within the
executives should come
from within the company. company are available, in case Mr. Peres decides to retire a few years in the future.
10

11. Valuation
We defined Multiplan’s end of 2007 target price using a DCF-based model. In order to
Our DCF-model discounted
reach our target price we discounted cash flows to the firm (FCFF) at a WACC of 10.58%
cash flows to the firm
in R$ terms. We also applied a 4.50% nominal perpetuity growth in R$ terms. Exhibit 14
(FCFF) at 10.58% of WACC
depicts our discount rates, target capital structure, the resulting WACC and valuation
outcomes.
Exhibit 14: Valuation Summary
US Risk Free Rate 4.5%
Brazil Country Risk 1.75%
Beta 0.85
Equity Risk Premium 6.0%
LT R$ Depreciation 2.0%
Ke (R$) 13.35%
Weight - Equity 60.00%
Cost of Debt, in R$, Before Taxes 9.8%
Effective Tax Rate 34.0%
Kd (R$) 6.44%
Weight - Debt 40.00%
WACC (R$) 10.58%
Forecasted Period 2008 – 2018
Nominal Perpetuity Growth 4.50%
December 2008 PT - R$/ share 39.00
Source: Bulltick
It is important to note that free cash flows are on positive territory most of the time
Shoppings are strong cash
except for 2007 and 2008, two years when the company should perform heavy
generators. Except for ’07
and ’08, the company’s cash investments including the building of Barra Shopping Sul and Shopping Vila Olímpia.
generation suffices to Shopping centers are good cash generators, with low maintenance needs, most of which
finance expansion plans. are paid by the shops. CAPEX is composed basically by malls expansion and acquisitions.
Exhibit 15 details our forecasted free cash flows for the 2007 – 2012 period.
Exhibit 15: Free cash flows (R$ millions)
2007E 2008E 2009E 2010E 2011E 2012E
EBITDA 173 245 351 437 528 616
Taxes (5) (10) (32) (60) (118) (156)
Change in Assets (243) (41) 6 6 8 (18)
CAPEX (352) (331) (186) (232) (201) (160)
FCFF (427) (137) 138 151 218 282
Source: Bulltick
Main Valuation Assumptions
Among our DCF-model main assumptions, we cite: (i) the YoY premium over inflation for
rent/m2 for the malls; (ii) the CAPEX/m2 assumption for green field projects, expansions
and acquisitions; (iii) third party malls acquisitions and (iv) the shopping centers and
parking lots gross margins.
On a given month, a store rent is defined between the higher of: (i) a fixed minimum
amount calculated over the store’s location and size; or (ii) a percentage of the store’s
total sales over the month. Multiplan currently works out its contracts in order to capture
as much as possible the fixed minimum and normally succeeds in implementing this
strategy based on its malls’ superior sales performance.
11

12. Nonetheless, it is interesting to note that over the last few years, as a direct result of the
country’s economic stability, monetary easing process and real-income gains, Brazilian
families took advantage of abundant credit in order to satisfy its consumption desires.
Exhibit 16 presents data on shopping mall sales over the last 6 years in Brazil. In
addition, year-to-date Multiplan’s malls posted 18% YoY growth in stores’ sales.
Exhibit 16: Shopping Mall Sales in Brazil 2000-2006
50
44
45
40
Shopping Sales (R$ billions)
CAGR '00-'06: 11.4%
40
37
35
32
30 28
25
25 23
20
15
2000 2001 2002 2003 2004 2005 2006
Source: CB Richard Ellis
Besides the strong growth in shopping sales, which in our opinion should continue over
the next few years, Multiplan works towards raising its rental rates at 4% yearly in real
terms. Currently, 95% of the company’s stores rental revenues come from minimum
rental.
All in all, for 2007 and 2008, our model assumes that, besides a real 4% annual
readjustment to the minimum rental, Multiplan should be able to capture an extra 4%
increase in rental/m2 based on shopping sales growth. For the sake of being conservative,
after that we have decreased both gains gradually until reaching a 2% real annual gain,
which we have maintained until the end of our forecast period.
As for our CAPEX assumptions, besides using the guidance given by Multiplan for 2007
and 2008 we estimated a CAPEX/m2 also based on the 2007/2008 guidance, reaching
R$4,000/m2 for expansion projects and R$4,500/m2 for green field projects.
As for acquisitions, we based our assumption on the weighted average price of the latest
acquisitions done by the company over the last 2 years, which reached R$6,725/m2.
Applying a conservative 20% premium to that number to account for the increased
acquisition activity in the sector during the last year, our model assumes R$8,000/m2.
Additionally, in regards to the potential third-party malls acquisitions, we assumed
100,000m2 to be purchased by the company. Acquisitions are, at best, hard to quantify
and especially tricky when it comes to their timing. Our solution for the matter was to
dilute them at a 20,000m2/year rate in our model to avoid much distortion.
Finally, our gross margins assumptions for shopping rentals and parking lots are flat
going forward at 83% and 35% respectively. For shopping rentals, we based our forecast
on past performance, while for parking lots we preferred to be conservative compared to
the 48% margin reported by the company in 2Q07, given the lack of information
regarding margin in the business in past periods.
12

13. Sensitivity Analysis
On Exhibit 17 we show sensitivity analysis based on the variation of WACC and long-term
growth rates.
Exhibit 17: Sensitivity Analysis
Mkt. Cap. at Target (R$ MM)
5,764 4.00% 4.25% 4.50% 4.75% 5.00%
8,107 8,451 8,838 9,275 9,773
8.58%
6,551 6,763 6,995 7,252 7,536
9.58%
5,474 5,613 5,928 6,106
10.58% 5,764
4,686 4,782 4,885 4,996 5,115
11.58%
4,085 4,154 4,227 4,305 4,388
12.58%
Year End '08 Fair Price (R$/Share)
39.0 4.00% 4.25% 4.50% 4.75% 5.00%
54.8 57.2 59.8 62.8 66.1
8.58%
44.3 45.8 47.3 49.1 51.0
9.58%
37.0 38.0 40.1 41.3
10.58% 39.0
31.7 32.4 33.1 33.8 34.6
11.58%
27.6 28.1 28.6 29.1 29.7
12.58%
Upside (%)
0.6 4.00% 4.25% 4.50% 4.75% 5.00%
124.0% 133.5% 144.2% 156.2% 170.0%
8.58%
81.0% 86.8% 93.3% 100.3% 108.2%
9.58%
51.2% 55.1% 63.8% 68.7%
10.58% 59.2%
29.5% 32.1% 35.0% 38.0% 41.3%
11.58%
12.8% 14.8% 16.8% 18.9% 21.2%
12.58%
FV/EBITDA 09 at Target
15.5 4.00% 4.25% 4.50% 4.75% 5.00%
22.2x 23.2x 24.3x 25.5x 26.9x
8.58%
17.7x 18.3x 19.0x 19.7x 20.6x
9.58%
14.7x 15.1x 16.0x 16.5x
10.58% 15.5x
12.4x 12.7x 13.0x 13.3x 13.7x
11.58%
10.7x 10.9x 11.1x 11.3x 11.6x
12.58%
P/FFO 09 at Target
18.4 4.00% 4.25% 4.50% 4.75% 5.00%
25.9x 27.0x 28.3x 29.7x 31.2x
8.58%
20.9x 21.6x 22.4x 23.2x 24.1x
9.58%
17.5x 17.9x 19.0x 19.5x
10.58% 18.4x
15.0x 15.3x 15.6x 16.0x 16.4x
11.58%
13.1x 13.3x 13.5x 13.8x 14.0x
12.58%
13

14. What is not included in our numbers
We consider our valuation for the company to be conservative as we preferred to stick
Our model priced in just
only to the recurring and already detailed investment plans announced by Multiplan. In
recurring items, as well as
that sense, among the items not included into our model, we cite: (i) the company’s
disclosed and already
residential real estate investments, (ii) its recently announced investments near Morumbi
detailed investment plans.
Shopping and Shopping Barigui, (iii) any tax benefit to be gained due to goodwill on
acquisitions and (iv) we maintained the company’s stake on upcoming mall expansions.
Regarding real estate residential investments, the company participates in some
Non-recurring residential developments on an opportunistic basis and as per its offering memorandum has a land
investments were left aside. bank of R$740 million in potential sales value. As we lack more detailed information on
the execution flow of these investments, we preferred not to take them into account in
our valuation model.
Two new investments of this kind were recently added to the company’s portfolio as: (i)
office buildings and a hotel near Morumbi shopping; and (ii) a mixed use project with
commercial building and an expansion to be added to Shopping Barigui. For the Morumbi
investment, though, as an exercise, shown in the investment thesis section of this report,
we calculated the potential revenue accretion for the company once the buildings are
completed.
One of the basis of the shopping center sector case in Brazil is based on consolidation. As
Acquisitions were priced in
such, we did consider some acquisitions in our model. Most of these acquisitions in Brazil
without considering any
should include the recognition of goodwill when companies are incorporated to the
potential tax benefit they
buyer’s balance sheet, and a consequent tax benefit should be created. As the potential
may create.
amount of goodwill to be created is something difficult to measure, we preferred not to
consider any in our model.
Finally, we have also considered that the current stakes in each individual mall should be
We also maintained
maintained whenever Multiplan executes an expansion, as per its investment plan. As all
Multiplan’s stake in malls
partners in the malls have preference rights up to their stakes when Multiplan proposes
flat, as if all partners would
expansions, we decided to consider all of them should go for the projects when the time
follow suit in expansion
to decide comes up. If they are not to follow Multiplan on the investments, then the
plans going forward.
company has an additional opportunity to grow inorganically by investing in its expansion
projects.
As a matter of fact, the situation described above already occurred in 2006, when the
company decided to expand Morumbi Shopping. As some of its partners did not invest,
Multiplan holds a 90% stake on the GLA of the expansion, vis-à-vis a prior stake of
51.7% on the mall by that time.
14

15. Risks
In terms of potential risks to the investment case, we cite: (i) shopping malls
concentration in specific regions; (ii) increase in shopping asset prices; (iii) succession
issues; and (iv) risk of additional equity offerings in the sector.
In regards to malls concentration, the monetary easing process in Brazil, besides creating
Risks include mall
a strong growth in consumption, turned prior unfeasible projects into potential
concentration in some
competitors for existing projects in more valuable areas. As an example, we cite
attractive areas…
Multiplan’s Vila Olímpia mall. Please refer to our investment thesis section for further
details.
As for the risks of rising mall participation prices, besides the natural price appreciation
… rising asset prices for
acquisitions… given the positive economic moment and consequent improvement in consumption, the
strong acquisition activity created in the sector by the so-called consolidator peers may
put additional pressure over valuations. This limits Multiplan’s ability to grow inorganically
as we assume management will not perform unaccretive acquisitions.
As any company centralized in its founder figure, Multiplan will also bear succession risks.
… succession risks…
Substituting Mr. Peres seems to be a tough task. Although we do not envisage Mr. Peres
retiring in the coming years, as of today the company has not disclosed any clear
succession plans. It is our opinion, though, that the company has executives from within
its management team that can perform the task.
As occurred with homebuilders, the shopping center segment is very fragmented and
… and upcoming IPO’s in
after four players were successfully capitalized in the BOVESPA, it is reasonable to
the sector.
assume others should be planning to follow suit. As a matter of fact, a fifth company,
Aliansce, filed and almost issued shares, but withdrew its IPO due to market conditions.
New offerings could create an overhang of shares in the sector, impacting Multiplan’s
stocks performances.
15

16. Brief Company Description
Founded 30 years ago by Mr. José Isaac Peres (CEO), Multiplan is one of the largest and
Multiplan is a 30-year old
leading mixed used projects developers in Brazil. The company designs, develops and
mixed use projects
manages a chain of malls located in some of the most important cities and regions of
developer.
Brazil.
With a stake of 63.7% over a total gross leasable area (GLA) of 241,539 square meters
With a 63.7% stake over
distributed through 10 malls, the company is taking advantage of the favorable macro-
241,639m2 of GLA.
economic scenario either to expand its existing base or to develop green field projects.
Exhibit 18 shows detailed information on the company’s shoppings and their geographical
positioning.
Exhibit 18: Multiplan’s portfolio and geographic positioning
GLA NOI
City Shopping Stake
( 000 m2 ) ( R$ MM )
Pátio Savassi 17.5 - 84%
Belo
BH Shopping 35.5 9.5 80%
Horizonte
Diamond Mall 20.8 4.6 90%
Brasília Park Shopping 39.3 6.5 60%
Curitiba Park Shopping Barigui 41.4 5.2 90%
Porto
Barra Shopping Sul 66.4 - 100%
Alegre
Ribeirão
Ribeirão Shopping 39.1 5.1 76%
Preto
Barra Shopping 69.3 21.6 51%
Rio de
Janeiro New York City Center 22.1 2.2 50%
Morumbi Shopping 55.0 19 56%
São Paulo Shopping Anália Franco 39.3 8.2 30%
Shopping Vila Olimpia 26.4 - 30%
Source: Multiplan
Recently listed in the BOVESPA’s Level II of corporate governance practices, the company
Listed in BOVESPA’s Level II
extended to all shareholders the rights of the Novo Mercado including tag along rights by
of corporate governance
its current by-laws. Exhibit 19 shows the company’s current shareholding structure.
practices…
Exhibit 19: Multiplan’s shareholding structure
Peres Family Ontario Teachers Free Float
19,5% ON 30,8% ON
49,7% ON
100% PN
40,3% Total 25,0% Total
34,7% Total
MULTIPLAN
Source: Multiplan and Bulltick
As it can be observed above, the only requirement of the Novo Mercado not fulfilled by
… granting all “Novo
the company is in regards of having 100% of common shares in the capital, as the
Mercado” rights to its
Ontario Teachers Pension fund holds preferred shares on the back of the fund’s by-laws.
shareholders.
16

17. Multiplan’s Earnings Estimates
Income Statement (R$ MM) 2006 2007E 2008E 2009E 2010E 2011E 2012E
Stores Rental 193 250 328 433 525 623 715
Services 45 47 52 65 77 88 102
Key Money 14 9 12 33 43 54 65
Parking 9 33 41 42 44 46 48
Real Estate Sales 16 10 - - - - -
Others 0 - - - - - -
Gross Revenues 276 351 433 573 688 811 929
Deductions (24) (30) (37) (49) (59) (69) (79)
Net Revenues 253 321 396 525 630 742 850
- Operational Expenditures (231) (283) (299) (329) (354) (297) (292)
Net Operating Income 22 37 97 196 276 445 559
Financial Results (34) (0) 18 (7) (8) (8) (8)
Non-Operational Results 1 1 - - - - -
EBT (11) 38 115 189 268 437 550
Income Tax (13) (6) (12) (31) (58) (116) (154)
Minority Interest (8) 0 - - - - -
Net income (32) 32 103 158 210 322 396
Depreciation & Amortization 101 136 147 155 160 83 58
EBITDA 123 173 245 351 437 528 616
Adjustments 17 22 - - - - -
Adjusted EBITDA 139 195 245 351 437 528 616
Funds from Operations 107 228 348 509 647 850 1,013
NOI Margin 9% 12% 25% 37% 44% 60% 66%
Adjusted EBITDA Margin 55% 54% 62% 67% 69% 71% 72%
Adjusted Net Margin N.R. 17% 26% 30% 33% 43% 47%
Free Cash Flow 2006 2007E 2008E 2009E 2010E 2011E 2012E
EBITDA 123 173 245 351 437 528 616
Taxes 27 (5) (10) (32) (60) (118) (156)
Change in Assets 65 (243) (41) 6 6 8 (18)
CAPEX (348) (352) (331) (186) (232) (201) (160)
FCFF (133) (427) (137) 138 151 218 282
Balance Sheet 2006 2007E 2008E 2009E 2010E 2011E 2012E
Assets
Cash and Equivalents 11 402 88 10 10 10 10
Accounts Receivable 66 73 100 126 152 177 198
Inventories 27 27 37 46 56 65 73
Fixed Assets 612 941 1,237 1,381 1,565 1,713 1,815
Goodwill 480 367 255 142 29 - -
Other 87 364 509 655 721 842 1,028
Total Assets 1,283 2,174 2,226 2,361 2,534 2,806 3,124
Liabilities
Short Term Debt 24 27 27 27 27 27 27
Payables 5 7 10 13 16 18 20
Long Term Debt 34 52 52 52 52 52 52
Other 183 160 132 146 159 187 206
Equity 1,036 1,927 2,005 2,123 2,280 2,522 2,819
Total Liabilities 1,283 2,174 2,226 2,361 2,534 2,806 3,124
Source: Multiplan and Bulltick
17

18. Multiples and Return Metrics
Multiples 2006 2007E 2008E 2009E 2010E 2011E 2012E
Adjusted PER* N.A. 21.6x 16.8x 13.4x 11.2x 10.3x 9.1x
FV / Adjusted EBITDA** 26.3x 16.9x 14.8x 10.5x 8.4x 7.0x 6.0x
P / FFO 52.6x 21.5x 14.4x 11.6x 9.8x 9.0x 8.0x
P / Adjusted FFO** 42.4x 19.0x 14.4x 11.6x 9.8x 9.0x 8.0x
P / FCFF N.R N.R N.R 26.2x 24.0x 16.6x 12.8x
Market Cap / GLA (R$ / m2) 15,623 14,986 11,406 10,040 9,217 8,497 8,116
Return Metrics 2006 2007E 2008E 2009E 2010E 2011E 2012E
ROE* 9.4% 9.8% 11.0% 13.1% 14.7% 14.6% 14.8%
ROIC* 29.3% 9.0% 10.0% 12.6% 14.0% 13.8% 13.9%
ROA* 6.1% 8.4% 9.8% 11.8% 13.2% 13.1% 13.4%
Source: Bulltick
* Adjusted for Goodwill Amortization
**Adjusted for IPO non-recurring costs
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19. Macroeconomic Assumptions
2007E 2008E 2009E 2010E 2011E 2012E 2013E 2014E
Inflation 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
Selic Rate (Year End) 11.25% 10.50% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00%
Selic Rate (Average) 12.25% 10.88% 10.25% 10.00% 10.00% 10.00% 10.00% 10.00%
Exchange Rate (Year End) 1.85 1.95 1.99 2.03 2.07 2.11 2.15 2.20
Exchange Rate (Average) 1.99 1.90 1.97 2.01 2.05 2.09 2.13 2.17
GDP Growth 4.5% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
TJLP 6.3% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0%
Libor 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0%
Source: Bulltick
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20. APPENDIX A
IMPORTANT DISCLOSURES
Bulltick Brasil Consultoria e Assessoria Empresarial Ltda. is an affiliate of Bulltick LLC (The Firm). Bulltick LLC may do
business with the companies covered in this report, 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 only as a single
factor in making their investment decision.
A. CONFLICTS OF INTEREST
Bulltick Brasil Consultoria e Assessoria Empresarial Ltda, or its affiliates, currently has, or has had within the past 12
months, Multiplan as client and/or received compensation for products and services provided to this company.
Bulltick Brasil Consultoria e Assessoria Empresarial Ltda, or its affiliates, managed or co-managed a public offering of
securities for Multiplan in the past 12 months, received compensation for investment banking services from Multiplan in
the past 12 months.
Neither Bulltick Brasil Consultoria e Assessoria Empresarial Ltda nor any of its affiliates own equity securities of any of the
subject companies.
Analyst compensation is determined by Bulltick Brasil Consultoria e Assessoria Empresarial Ltda management and is not
linked to specific transactions or recommendations.
B. ANALYST CERTIFICATION
I, Rafael Pinho, author of this report, hereby certify that all of the views expressed in this report accurately reflect my
personal views about any and all of the subject issuer(s) or securities, no part of my compensation was, is , or will be
directly or indirectly related to the specific recommendation(s) or view(s) in this report. I have not received any
compensation from any of the subject companies in the past 12 months. I also certify that neither I nor any member of
my household serves as a director, officer, or advisory board member of any of the subject companies in this report.
C. INVESTMENT RATING
Investment ratings are determined by the ranges described below:
BUY: Total return of securities expected to be above 18% (in dollar terms) in the following 12 months
NEUTRAL: Total return of securities expected to be below 18% (in dollar terms) and above 8% (in dollar terms) in the
following 12 months.
SELL: Total return of securities expected to be below 8% (in dollar terms) in the following 12 months.
Price Target: The valuation method used to determine the price targets in this report were based on the discounted
cash flow methodology.
D. RISK RATINGS
Risks for the achievement of the target prices defined in this report include major change in our base case macro-
economic scenario, increase in interest rates and in the Brazil risk, reduction in the expectations for demand for real
estate in Brazil and impact on already listed stocks of new IPOs in Brazil´s real estate sector.
Based on last 6 months volatility of subject companies, and comparing them to the volatility of the Bovespa Index
(Ibovespa) in the same period, we define each subject company´s relative volatility in the following way: Multiplan High.
20

21. OTHER DISCLOSURES
Bulltick Brasil Consultoria e Assessoria Empresarial Ltda and its subsidiaries, affiliates, shareholders, directors, officers,
employees, and licensors (“The Bulltick Parties”) will not be liable (individually, jointly, or severally) to you or any other
person as a result of your access, reception or use of the information contained in this document for indirect,
consequential, special, incidental, punitive, or exemplary damages, including, without limitation, lost profits, lost savings
and lost revenues (collectively, the “Excluded Damages”), whether or not characterized in negligence, tort, contract, or
other theory of liability.
The information contained in this document has been obtained from sources believed to be reliable, although its
accuracy and completeness cannot be guaranteed. All opinions, projections, and estimates constitute the judgment of
the author as of the date of the report and these, plus any other information contained in the report, are subject to
change without notice. Prices and availability of financial instruments also are subject to change without notice.
Bulltick Brasil Consultoria e Assessoria Empresarial Ltda and its affiliated companies have not taken any steps to insure
that the securities referred to in this report are suitable for any particular investor. The Report is for informational
purposes only and is not intended as an offer or solicitation for the purchase or sale of a security. Securities mentioned
in the report are subject to investment risks, including the possible loss of the principal amount invested. Any decision
to purchase securities mentioned in the Report must take into account existing public information on such a security or
any registered prospectus.
The financial instruments mentioned in this document may not be eligible for sale in some countries. The Report is not
to be construed as providing investment services in any jurisdiction where the provision of such services would be
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Bulltick Brasil Consultoria e Assessoria Empresarial Ltda, its affiliated companies, and/or its officers, directors, or
shareholders, may from time to time have long or short positions in the financial instruments of the companies
mentioned in this document, engage in securities transactions in a manner inconsistent with this report, buy or sell from
customers on a principal basis, or serve in an advisory capacity.
Investing in non-US securities, including ADRs, may entail certain risks. The securities of non-US issuers may not be
registered with, and may not be subject to the reporting requirements of the US Securities and Exchange Commission.
There may be limited information available on foreign securities. Foreign companies are generally not subject to
uniform audit and reporting standards, practices and requirements comparable to those in the US Securities of some
foreign companies may be less liquid and their prices more volatile than securities of comparable US companies. In
addition, exchange rate movements may have an adverse effect on the value of an investment in a foreign stock and its
corresponding dividend payment for US investors.
The information contained in the report is privileged and confidential and intended solely for the recipients who have
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21