Equity strategy Zimbabwe

Outlook Equity research 29 January 2010

Dzika Danha +263 912 573 083 DDanha@rencap.com Anthea Alexander +263 912 421 845 AAlexander@rencap.com Samir Gadio +263 912 421 845 SGadio@rencap.com

Zimbabwe: 2010 outlook Cementing the turnaround
Evidence of economic turnaround in 2009. Last year saw a tipping point in the reversal of Zimbabwe’s economic
fortunes, effectively ending what we regard as the country’s lost decade (1998-2008) – a period characterised by a precipitous GDP decline (IMF estimate 40%, cumulatively) and hyperinflation that reached epic proportions. Central to the relative economic stability reached in 2009 was the formation of a unity government in Feb 2009, and the subsequent dollarisation of Zimbabwe’s economy in the form of a multi-currency regime. Consequently, the country achieved positive economic growth for the first time in 10 years, registered at 3.7% by the IMF. Furthermore, inflation was halted, and YoY deflation of -7.7% was achieved to Dec 2010 (Central Statistics Office).

Political developments will determine the nature of economic progress. The relative political stability
achieved in the past 12 months is clearly positive in having re-started the economy. We think more tangible results in resolving outstanding issues surrounding the Global Political Agreement (GPA) between Zimbabwe’s various political parties will result in more robust economic growth, accompanied by further improvements in foreign investor sentiment. Any stalling of political progress will curtail economic recovery. We forecast GDP growth of 7.1% for 2010, and expect YoY inflation to trend to 6.1% by the year-end.

Equities outperformed expectations in 2009. The market’s response to macroeconomic improvements postdollarisation have exceeded our expectations. We view the equity market’s performance as largely a mean-reversion to historical levels, with most of the gains having taken place in 1H09. In 3Q09, performance was more subdued as the market entered a consolidation phase. Liquidity continued to improve on the back of increased foreign inflows and greater transparency, and 4Q saw an average daily traded volume of $2.3mn. The fourth quarter also saw the release of some corporate earnings, which were predominantly poor as companies continued to adjust to the new environment, and this weighed on the market. We estimate the market capitalisation of the Zimbabwe Stock Exchange (ZSE) advanced 301% to $4.2bn over 2009, and the rebased Industrial Index and Mining Index closed at 151.99 (+52%), and 185.50 (+85.5%), respectively, at YE09.

Outlook for 2010: We expect recapitalisation by corporates to be a central theme for equities in Zimbabwe over 2010,
driven by the need for companies to sharpen their ability to compete by improving efficiency, through capex and securing adequate working capital. Domestic credit remains expensive and foreign credit markets are still difficult to access for local companies, so we think equity issuance is likely to increase – particularly by small and midsized names. In turn, we think this may hold back the performance of mid-tier stocks in 1H10, although we expect blue chips to outperform the market over the period. We expect 2H10 to see more positive performance, as recapitalisation and sustained macroeconomic stability bear fruit in the form of improving corporate profitability. Our base-case target market capitalisation for the ZSE is $5.5bn at YE10, representing a 31% increase on YE09. Our target YE11 market cap is $6.9bn

Our top picks are Econet Wireless (BUY, target price [TP] $5.90); CBZ Holdings (BUY, TP $0.34); Delta Corporation (BUY,
TP $1.20); AICO Africa (BUY, TP $1.38); Innscor Africa (BUY, TP $1.04); and Pearl Properties (BUY, TP $0.11). We have placed our rating and target price on African Sun Under Review (previously Buy, $0.36/share), pending adjustments to our model and estimates on the back of the company’s first ever dollar-denominated earnings release.

Important disclosures are found at the Disclosures Appendix. Communicated by Renaissance Securities (Cyprus) Limited, regulated by the Cyprus Securities & Exchange Commission, which together with non-US affiliates operates outside of the USA under the brand name of Renaissance Capital.

29 January 2010

Zimbabwe: 2010 outlook

Renaissance Capital

Zimbabwe: Economic overview
2009: The tipping point
Last year was a tipping point in the reversal of Zimbabwe’s economic fortunes, effectively ending what we regard as the country’s lost decade of 1998-2008 – a period characterised by a precipitous GDP decline (IMF estimate 40%) and hyperinflation that reached epic proportions. Central to the relative economic stability reached in 2009 was the formation of a unity government in Feb 2009 and the subsequent adoption of dollarisation in the form of a multi-currency regime. Consequently, Zimbabwe achieved positive economic growth for the first time in 10 years registered at approximately 3.7% according to the IMF. Inflation was halted, and estimated deflation of -7.7% YoY was achieved to Jan 2010 (Central Statistics Office). Against the backdrop of Zimbabwe’s nascent recovery, significant progress was made on a number of fronts last year. Government finances accelerated, with monthly receipts of $3mn in Jan 2009, rising to an estimated $100mn in Dec 2009 (MoF). International acceptance of the GPA increased donor funding to the country, to support social causes. In addition, the banking system continued to revive, with total deposits at the start of Dec 2009 amounting to $1.2bn, vs about $200mn at the start of 2009. Despite the signing of the GPA, however, political tensions remained evident, culminating in the Movement for Democratic Change (MDC) temporarily pulling out of the unity government in October, due to outstanding issues regarding the GPA. Subsequent interventions by the Southern African Development Community (SADC), and more importantly incumbent South African President Jacob Zuma, have seen a renewed effort to deal with all outstanding issues relating to the agreement. Political tensions have also limited the inflow of funding from external sources, specifically the West, however Zimbabwe did receive its general allocation from the IMF ($510mn), under liquidity support measures to combat the global credit crunch.

Economic outlook for 2010
Although the economic recovery seen since the start of 2009 remains fragile, we see opportunities to further entrench the economic gains made last year if policies are maintained consistently and political tensions calmed. On this front, we expect dollarisation to remain in place for the foreseeable future – a factor we regard as critical given its central role in the recovery so far. Politics remains the key determinant of external funding for government – specifically, how quickly the respective parties can resolve their outstanding issues. For 2010, we estimate Zimbabwe’s intrinsic fiscal shortfall will increase to $810mn (14.6%/GDP), from $391mn in 2009 (7.5%/GDP). The country’s Ministry of Finance assumes the deficit will be funded externally. We estimate Zimbabwe’s external debt at $5.4bn, of which $3.8bn is arrears. We note that the government plans to set up a debt management and clearance office at the Ministry of Finance to devise a reduction and clearance strategy. Given that Zimbabwe has not benefited from any of the IMF’s Heavily Indebted Poor Countries (HIPC) initiatives, we expect this agency to be central to any debt-reduction strategy. We think the signing and ratification of the Bilateral Investment Promotion and Protection Agreement (BIPPA) agreement between Zimbabwe and South Africa, in Dec 2009, should spur increased FDI inflows, particularly from South African

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Zimbabwe: 2010 outlook

29 January 2010

corporates. Given the financial strain on Zimbabwe’s government, we expect to see greater effort in terms of a privatisation strategy. Put simply, the government does not have the resources to adequately capitalise most of its parastatals, support lossmaking entities or adequately support its own finances. Other initiatives to promote greater investment will likely include resolving issues at the Reserve Bank of Zimbabwe (RBZ) to better promote depth in the financial system, and therefore credit growth, as well as clarity on the issue of tenure on agricultural land. We think political noise will continue to threaten economic progress, particularly in terms of how it affects foreign investor sentiment and therefore FX inflows. However we do not expect elections to take place in the medium term, given the potential for repolarisation of the political climate. In our view, the GPA remains the most viable political arrangement for Zimbabwe. We remain positive on economic prospects for 2010, and forecast GDP growth of 7.1%, and year-end YoY inflation of 6.1%.
Figure 1: Zimbabwe – economic assumptions 2000 Nominal GDP, $bn 6.1 Nominal GDP (growth %) 5.9 Nominal GDP market prices, ZMDbn 6.1 Nominal GDP market prices (growth %) 5.9 Real GDP growth, % -7.3 Inflation (end of period, %) 55.2 Inflation (average, %) 55.7 Population 11.7 Population growth, % -0.3 GDP per capita current, $ 519 GDP per capita growth, % 6.3 2001 3.7 -39.1 3.7 -39.1 -2.7 112.1 74.4 11.7 -0.3 316 -39.0 2002 2.3 -36.6 2.3 -36.6 -4.4 198.9 134.5 11.6 -0.3 201 -36.5 2003 1.9 -20.6 1.9 -20.6 -10.4 598.7 384.7 11.6 -0.3 160 -20.3 2004 3.9 109.8 3.9 109.8 -3.6 132.7 381.4 11.7 1.1 333 107.5 2005 3.9 -0.8 3.9 -0.8 -4.0 585.5 266.7 11.7 0.0 330 -0.8 2006 3.7 -3.3 3.7 -3.3 -6.3 1,281.1 1,033.5 11.7 0.0 319 -3.3 2007 3.6 -4.2 3.6 -4.2 -6.9 66,212.0 12,562.5 11.7 0.0 305 -4.2 2008 3.1 -12.2 3.1 -12.2 -14.1 11.7 0.0 268 -12.2 2009E 5.2 65.3 5.2 13.1 3.7 11.8 0.6 441 64.4 2010E 5.5 5.8 5.5 46.2 7.1 6.1 3.4 12.0 1.7 458 4.0 2011E 6.1 10.9 6.1 5.8 8.2 7.5 6.5 12.2 1.7 500 9.1 2012E 6.7 9.8 6.7 10.9 8.3 7.4 7 12.5 2.5 536 7.2

Source: Renaissance Capital estimates, IMF, RBZ, Ministry of Finance

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29 January 2010

Zimbabwe: 2010 outlook

Renaissance Capital

Figure 2: Zimbabwe’s share of Sub-Sahara African output 3.0% 2.5% 2.0% 1.5% %

Figure 3: Zimbabwe’s nominal GDP and real growth Nominal GDP $bn Real GDP growth % 10 8 6 $bn 4 2 0

10% 5% 0% -5% -10% -15% -20% %

1.0% 0.5% 0.0% 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009E 2010E 2011E 2012E 2013E 2014E

Source: IMF

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009E 2010E 2011E 2012E 2013E 2014E
Source: IMF

Figure 4: Zimbabwe – current-account dynamics $bn %/GDP 0.2 0.0 -0.2 -0.4 $bn -0.6 -0.8 -1.0 -1.2 -1.4 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009E 2010E 2011E 2012E 2013E 2014E

Figure 5: Zimbabwe – Foreign reserves 5 0 -5 $mn -15 -20 -25 -30 -35 %/GDP -10 300 250 200 150 100 50 0 2000
Source: IMF

2001

2002

2003

2004

2005

2006

2007

2008
Source: IMF

Figure 6: 2009 MoM inflation in Zimbabwe 1.0 0.5 0.0 -0.5 % -1.0 -1.5 -2.0 -2.5 -3.0 -3.5 Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec
Source: CSO

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Equity market overview
2009
Performance: Last year was eventful for the ZSE. Having been suspended in Nov 2008, the exchange reopened on 19 Feb 2009 following the formation of the unity government and official dollarisation of the economy. Trade commenced in dollars, and a price-discovery process ensued. Initially turnover was weak, but volume grew consistently over the year. The market’s response to the macroeconomic improvements post dollarisation exceeded our expectations. We view its performance as largely a reversion to mean historical levels. In 3Q09, performance was more subdued as the market entered a consolidation phase. Liquidity continued to improve on the back of increased foreign inflows and greater transparency. The fourth quarter saw the release of some corporate earnings which were predominantly poor, as companies continued to adjust to the new environment, and this weighed on the market. The rebased Industrial Index and Mining Index closed the year at 151.99 (+52%), and 185.50 (+85.5%), respectively. Market capitalisation: As noted, market cap escalated rapidly in 1H. We estimate the market’s value climbed 295%, from $1bn in Nov 2008 to $4.1bn at 30 June 2009. The industrial and mining indices added 54% and 172%, respectively, in 1H09. In 3Q09, we estimate the market’s value gained a further 5.1%, and in 4Q it retreated 3.4%. Over 2H, the industrial and mining indices lost 1.6% and 31.7%, respectively. The market’s value closed at $4.2bn on 31 Dec 2009 (up 301% for the year). Turnover: Total market turnover was $392mn for 2009 vs an estimated $276mn for 2008 (+42%). There was a clear trend of improving liquidity throughout the year and the daily average improved from $1.1mn for 1H09 to $2.3mn for 2H09, giving an overall average of $1.8mn for the year. Some 74% of total turnover was achieved in 2H09. This was driven largely by an increase in foreign investor inflows and improved FX liquidity in the local market. Towards the end of 2009, trade volumes tapered off due to persistent political uncertainty, compounded by a lull in demand commonly experienced at year-end. Sector split: We saw significant changes in sector weightings comparing YE08 with YE09. The contribution of the telecoms, media and technology sector increased to 20.5% from 8%, purely driven by gains in Econet Wireless. Agriculture was also up (8% to 14%), due to appreciation in Hippo Valley Estates and Seedco. A strong escalation in CBZ Holding’s price saw a rise in the banking sector’s contribution to 10% (vs 8% at the beginning of 2009). Despite gains in Innscor Africa, OK Zimbabwe and Truworths, the retail sector’s contribution dropped to 10% from 16%. This was due to losses in small-caps Edgars Stores, Medtech Holdings and Red Star. The most notable decline was seen in the property sector, which dropped from a 13% weighting to 3%. Three of the sector’s four counters (Dawn Properties, Mashonaland Holdings and Pearl Properties) suffered substantial declines.

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29 January 2010

Zimbabwe: 2010 outlook

Renaissance Capital

Best and worst ZSE performers
Figure 7: Top- and bottom-15 ZSE performers in 2009 Top-15 performers Hippo Agriculture 1,800% Seedco Agriculture 1,800% Truworths Clothing retail 1,500% Food processing 1,025% National Foods CBZ Banking 700% Cafca OK Zimbabwe TSL Star Africa Econet Manufacturing Food retail Agriculture Conglomerate Telecoms, media, technology 650% 620% 510% 450% 390% Worst-15 performers Food retail Banking Manufacturing Property Banking Telecoms, media, Celsys technology Apex Manufacturing Ariston Horticulture Pearl Properties Property Redstar CFX NTS Dawn Trust Edgars Clothing retail

-94% -80% -80% -74% -65% -63% -63% -63% -63% -6%

Source: Zimbabwe Stock Exchange

Due to the price discovery process at the onset of dollar trading, we saw no clear trends in terms of stock performance. However, some large caps, specifically Econet and CBZ, have since emerged as top gainers, due to the release of positive earnings results and increased foreign buying. Small and mid-cap names still dominate the top performers’ list, due to speculative buying, however clearer trends are emerging as transparency continues to improve. A number of retail stocks have recovered rapidly and this is reflected in their share prices (in particular, OK Zimbabwe and Innscor). At the other end of the spectrum, the property sector seems largely to have been ignored by investors.

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Figure 8: YtD performance of Zimbabwe’s industrial and mining indices Industrial index 350 300 250 200 Mining index

Figure 9: Market capitalisation evolution 5 5 4 4 3 $bn 3 2 2 1 1 1.2 1.1 2.2 1.7 1.9 1.0 2.5 4.0

4.3

4.2

150 100 50 0 Aug-09 Sep-09 Oct-09 Nov-09 May-09 Dec-09 Feb-09 Mar-09 Jun-09 Apr-09 Jul-09

0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Source: Zimbabwe Stock Exchange, Renaissance Capital estimates

Source: Zimbabwe Stock Exchange

Figure 10: One year turnover evolution Turnover, $mn 700 600 500 $mn 400 300 200 100 6% 135 16% 272 15% 263 187 7% 7% 82 101 5% 204 8%

% of MktCap 30% 26% 583 25% 20% 264 276 6% 5% 0% 15% 14% 10%

Figure 11: Sector split by market capitalisation, 2009 Manufacturing 3% Hotels Property Food 3% 3% processing 4% Mining TMT 4% 21% Insurance 4% Conglomerate 5% Cement/Constr uction 5% Banking 9% Beverages 15% Retail Agriculture 14% 10%
Source: Zimbabwe Stock Exchange, Renaissance Capital estimates

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Source: Zimbabwe Stock Exchange, Renaissance Capital estimates

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29 January 2010

Zimbabwe: 2010 outlook

Renaissance Capital

Equity strategy
2010 outlook
We expect recapitalisation to be a central theme for equities in 2010, driven by the need for companies to improve their ability to compete by improving efficiencies, through capex and securing adequate working capital. Credit in the local market remains expensive and foreign credit markets remain difficult to access for local companies, so we think equity issuance is likely to increase, particularly for small and midsized names. We believe this may hold back the performance of mid-tier stocks in 1H10, but we think blue chips will outperform the market over the period. We regard management strategy, cost-containment strategies and capital adequacy as crucial in identifying stock we think will perform strongly. We recommend an overweight stance in the blue chips (including Delta Corporation and Econet Wireless) particularly in 1H; and would look to go down the liquidity curve in 2H, following recapitalisation efforts by mid-tier names. We believe Zimbabwean equities will continue to see net foreign inflows over the year, with local pension funds becoming increasingly active as inflows improve. Although we remain bullish on Zimbabwe equities in 2010, we see the central risks to this position as political, and associated, potential adverse, policy changes.

Key catalysts
A political resolution and external funding. Any tangible political results achieved, particularly in terms of resolving outstanding issues related to the GPA, are likely to improve foreign investor sentiment and subsequent inflows. On the flipside, we think continued stalling on a political resolution will weaken Zimbabwe’s economic recovery, and therefore corporate earnings. We would expect improved sentiment from Western governments to result in increased funding for Zimbabwe’s government and traction on debt reduction. Earnings visibility and recapitalisation initiatives. We expect the first set of full-year dollar earnings releases this quarter, and we think these will likely highlight the strain on Zimbabwe’s corporates, in light of a lack of capital and an inability to control costs in the face of strained revenues. We think the blue chips’ results are more likely to surprise on the upside. Going forward, we would expect capitalised businesses with dominant market shares to outperform the market.

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Figure 12: Recommended sector allocation Sector 2010 weighting Comments Focus names 4Q09 weighting Mobile penetration at end-Dec 2009 estimated at 29% from about 14% at Dec 2008. We expect Telecoms Overweight Econet Overweight to see increased additions in 2010. Manufacturing Underweight Low capacity utilisation, cost pressures, significant capex required. ART Corp, PGI Neutral We expect production to increase rapidly from a low base following liberalisation of the sector in RioZim, Falgold, Mining Neutral 1Q09, assuming global commodity prices remain as they are; we expect continued growth in Neutral Hwange production in 2010. Further recapitalisation expected in the industry. Total deposits in the system continue to rise estimated currently at $1.2bn in Dec 2009. Loan-toBanking Overweight Overweight deposit ratios remain low, which we think remains the opportunity. Further reforms of the RBZ CBZH, Barclays, NMB should enhance sector efficiency. We think competition in the sector is set to remain significant, and smaller players are likely to Innscor, OK Retail Overweight continue to drop out, in line with the reformalisation of the retail industry which started in 2009. Neutral Zimbabwe We favour larger retailers with a nationwide presence. We still see evidence of undersupply in the market. Per-capita consumption in the market Beverages Overweight Delta Overweight remains low (lager: 14 l/capita vs 40 l/capita in 1990s). Insurance Underweight Insurance set to be a marginal product, in light of constrained disposable incomes. Zimre, Nicoz Diamond Underweight AICO, Ariston, Agriculture Neutral Prospects of upcoming season will depend on the availability of credit and availability of inputs. Neutral Interfresh While rental yields have improved in the short term, we think they are likely to be soft in the Pearl Properties, Property Neutral medium term. With a lack of marginal buyers in the sector we expect to see softer valuations, Dawn Properties, Neutral however we believe property prices will bottom out in 2010. Mash Holdings Occupancies appear to have troughed in 1H09, particularly in resort areas. Capex remains Hotels Neutral critical to ensuring higher average room rates. Significant pick up in occupancies from a low African Sun, RTG Neutral base in evidence in 4Q09 and 1Q10. The 2010 World Cup in South Africa is a potential catalyst.
Source: Renaissance Capital estimates

We envisage three potential scenarios for Zimbabwe’s equity market over 2010, specifically: A bull scenario (to which we assign 10% probability), with a target market capitalisation of $5.75bn (+37%). This scenario assumes a mildly positive performance by equities in 1H, with large volumes of equity issuance and genuine political progress. We assume a positive bias in 2H on more encouraging earnings from corporate, as the benefits of recapitalisation and sustained macroeconomic stability emerge, supported by increased FDI and donor inflows. This scenario assumes global markets and commodity prices continue to re-rate upwards, supported by continued government policy measures to support a sustained global economic recovery. A base scenario (to which we assign 60% probability), with a target market capitalisation of $5.5bn, (+31%). This scenario assumes a lacklustre performance by equities in 1H, with large volumes of equity issuance and a lack of political clarity dampening foreign investor sentiment. It assumes a positive bias in 2H on more encouraging corporate earnings, as we begin to see the benefits of recapitalisation and sustained macroeconomic stability. This scenario also assumes global markets and commodity prices hold at current levels. A bear scenario (to which we assign 30% probability), with a target market capitalisation of $4.75bn (+13%). This scenario assumes a negative performance by equities in 1H against large volumes of equity issuance and a regression of political progress. We assume a positive bias in 2H on more encouraging earnings from corporates as we begin to see the benefits of recapitalisation and sustained macroeconomic stability. This scenario assumes global markets and commodities correct downwards aggressively, on widespread fiscal and monetary tightening, impacting foreign investor sentiment towards emerging markets.

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29 January 2010

Zimbabwe: 2010 outlook

Renaissance Capital

Valuations
Figure 13: Zimbabwe valuations Company Agriculture AICO Construction PG Industries Consumer and retail Dairibord Zimbabwe Consumer and retail Delta Corporation Consumer and retail Innscor Consumer and retail OK Zimbabwe Hotels African Sun Manufacturing ART Corp Real estate Pearl Properties Telecoms Econet Wireless Banking CBZ Holdings Cap-weighted average, Zimbabwean non-financials Renaissance Zimbabwe Index Price, LCU 27 Jan 2010 0.25 0.10 0.11 0.50 0.67 0.07 0.07 0.03 0.03 4.79 0.17 88.60 Target price 1.38 0.39 0.44 1.20 1.04 0.15 0.11 5.91 0.34 P/E EV/EBITDA EBITDA margin Upside/ downside Rating 2009E 2010E 2011E 2009E 2010E 2011E 2010E 2011E potential 452% BUY 8.7x 6.2x 4.5x 4.9x 3.3x 2.4x 23% 26% 290% BUY 50.0x 18.0x 7.0x 16.5x 12.5x 4.9x 7% 12% 304% BUY 13.6x 5.8x 4.0x 8.1x 3.4x 2.5x 12% 13% 140% BUY 33.2x 14.5x 8.7x 46.9x 8.9x 5.8x 17% 21% 55% BUY 33.5x 12.4x 9.7x 31.3x 8.8x 6.8x 9% 9% Not rated 9.4x 8.8x 7.4x 7.0x 12% 12% Under review na 5.3x 2.0x -20.6x 4.1x 1.3x 23% 27% 359% BUY 5.7x 2.4x 1.8x 5.4x 2.4x 1.7x 10% 12% 348% BUY 0.0x 0.0x 23% BUY na 10.6x 7.4x 33.0x 5.5x 4.0x 53% 53% 100% BUY 2.1x 1.6x 1.3x 1.3x 1.0x 0.8x 15.5x 10.8x 7.3x 29.7x 6.5x 4.6x 28% 30% Div. Yield 2010E 7% 4% 7% 0% 2% 0% 18% 17% 3% 0% 3% MktCap, $mn 133 29 38 578 362 51 58 9 31 836 116 2,112 Price performance 1M 9% 11% 38% 0% 29% 3% -7% 10% 0% 1% 0% 6% 8% 3M 0% 26% 10% -11% 3% -11% -9% -40% -14% -13% -11% -6% -10% 6M 9% 11% -8% 0% 8% 3% -36% -34% -25% 60% 6% 26% Avg daily volume, no. of shares 309,115 185,264 490,954 438,278 188,991 523,722 324,313 173,754 856,233 102,923 348,847 3,069,825 Avg daily Turnover $ 66,473 16,577 41,911 211,290 114,416 30,859 31,996 7,873 23,096 365,988 49,741 870,747

Source: Source: ZSE, Bloomberg, Renaissance Capital estimates

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Disclosures appendix
Analysts certification and disclaimer
This research report has been prepared by the research analyst(s), whose name(s) appear(s) on the front page of this document, to provide background information about the issuer or issuers (collectively, the “Issuer”) and the securities and markets that are the subject matter of this report. Each research analyst hereby certifies that with respect to the Issuer and such securities and markets, this document has been produced independently of the Issuer and all the views expressed in this document accurately reflect his or her personal views about the Issuer and any and all of such securities and markets. Each research analyst and/or persons connected with any research analyst may have interacted with sales and trading personnel, or similar, for the purpose of gathering, synthesizing and interpreting market information. If the date of this report is not current, the views and contents may not reflect the research analysts’ current thinking. Each research analyst also certifies that no part of his or her compensation was, or will be, directly or indirectly related to the specific ratings, forecasts, estimates, opinions or views in this research report. Research analysts’ compensation is determined based upon activities and services intended to benefit the investor clients of Renaissance Securities (Cyprus) Limited and any of its affiliates (“Renaissance Capital”). Like all of Renaissance Capital’s employees, research analysts receive compensation that is impacted by overall Renaissance Capital profitability, which includes revenues from other business units within Renaissance Capital.

Important issuer disclosures
Important issuer disclosures outline currently known conflicts of interest that may unknowingly bias or affect the objectivity of the analyst(s) with respect to an issuer that is the subject matter of this report. Disclosure(s) apply to Renaissance Securities (Cyprus) Limited or any of its direct or indirect subsidiaries or affiliates (which are individually or collectively referred to as “Renaissance Capital”) with respect to any issuer or the issuer’s securities. A complete set of disclosure statements associated with the issuers discussed in the Report is available using the ‘Stock Finder’ or ‘Bond Finder’ for individual issuers on the Renaissance Capital Research Portal at: http://research.rencap.com/eng/default.asp

Investment ratings
Investment ratings may be determined by the following standard ranges: Buy (expected total return of 15% or more); Hold (expected total return of 0-15%); and Sell (expected negative total return). Standard ranges do not always apply to emerging markets securities and ratings may be assigned on the basis of the research analyst’s knowledge of the securities. Investment ratings are a function of the research analyst’s expectation of total return on equity (forecast price appreciation and dividend yield within the next 12 months, unless stated otherwise in the report). Investment ratings are determined at the time of initiation of coverage of an issuer of equity securities or a change in target price of any of the issuer’s equity securities. At other times, the expected total returns may fall outside of the range used at the time of setting a rating because of price movement and/or volatility. Such interim deviations will be permitted but will be subject to review by Renaissance Capital’s Research Management. Where the relevant issuer has a significant material event with further information pending or to be announced, it may be necessary to temporarily place the investment rating Under Review. This does not revise the previously published rating, but indicates that the analyst is actively reviewing the investment rating or waiting for sufficient information to re-evaluate the analyst’s expectation of total return on equity. If data upon which the rating is based is no longer valid, but updated data is not anticipated to be available in the near future, the investment rating may be Suspended until further notice. The analyst may also choose to temporarily suspend maintenance of the investment rating when unable to provide an independent expectation of total return due to circumstances beyond the analyst’s control such as an actual, apparent or potential conflict of interest or best business practice obligations. The analyst may not be at liberty to explain the reason for the suspension other than to Renaissance Capital’s Research Management and Compliance Officers. Previously published investment ratings should not be relied upon as they may no longer reflect the analysts’ current expectations of total return. If issuing of research is restricted due to legal, regulatory or contractual obligations publishing investment ratings will be Restricted. Previously published investment ratings should not be relied upon as they may no longer reflect the analysts’ current expectations of total return. While restricted, the analyst may not always be able to keep you informed of events or provide background information relating to the issuer. If for any reason Renaissance Capital no longer wishes to provide continuous coverage of an issuer, investment ratings for the issuer will be Terminated. A notice will be published whenever formal coverage of an issuer is discontinued. Where Renaissance Capital has not expressed a commitment to provide continuous coverage and/or an expectation of total return, to keep you informed, analysts may prepare reports covering significant events or background information without an investment rating (Unrated). Your decision to buy or sell a security should be based upon your personal investment objectives and should be made only after evaluating the security’s expected performance and risk.

Renaissance Capital equity research distribution ratings
Investment Rating Distribution Renaissance Capital Research Buy 133 Hold 51 Sell 13 Under Review 24 Suspended 0 Restricted 0 Unrated 138 359 37% 14% 4% 7% 0% 0% 38% Investment Banking Relationships* Renaissance Capital Research Buy 3 60% Hold 1 20% Sell 0 0% Under review 1 20% Suspended 0 0% Restricted 0 0% Unrated 0 0% 5

*Companies from which RenCap has received compensation within the past 12 months. NR – Not Rated UR – Under Review

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Banking + 7 (495) 258 7748 David Nangle DNangle@rencap.com Milena Ivanova-Venturini Armen Gasparyan Chemicals/Engineering/Building materials + 7 (495) 783 5653 Marina Alexeenkova MAlexeenkova@rencap.com Consumer/Retail/Agriculture + 7 (495) 258 7753 Natasha Zagvozdina NZagvozdina@rencap.com Ulyana Lenvalskaya Central Asia + 7 (727) 244 1544 Milena Ivanova-Venturini Tatyana Kalachova Equity Strategy + 7 (495) 258 7916 Roland Nash RNash@rencap.com Tom Mundy Ovanes Oganisian

Metals & Mining + 44 (20) 7367 7781 Rob Edwards REdwards@rencap.com Boris Krasnojenov Oil & Gas + 7 (495) 258 7904 Alexander Burgansky ABurgansky@rencap.com Irina Elinevskaya Ildar Davletshin Tatyana Kalachova (Central Asia) Dragan Trajkov (Africa) Media/Technology/Real Estate + 7 (495) 258 4350 David Ferguson DFerguson@rencap.com Telecoms/Transportation + 7 (495) 258 7902 Alexander Kazbegi AKazbegi@rencap.com Ivan Kim Utilities + 44 (20) 7367 7793 Derek Weaving DWeaving@rencap.com Vladimir Sklyar Ukraine +38 (044) 492-7383 Anastasiya Golovach

Macro & Fixed Income Research + 7 (495) 258 7946 Alexei Moisseev AMoisseev@rencap.com Nikolai Podguzov Petr Grishin Maxim Raskosnov Andrey Markov Anastasiya Golovach (Ukraine) Anton Nikitin Ilya Zhila

Africa Macro & Strategy +234 1 448 5300 Samir Gadio SGadio@rencap.com Africa Financials +234 1 448 5300 Kato Mukuru KMukuru@rencap.com Africa Oil & Gas +44 207 367 7941 x8941 Dragan Trajkov DTrajkov@rencap.com East Africa +263 (11) 634-463 Dzika Danha DDanha@rencap.com Eric Musau Southern Africa +263 (11) 634-463 Dzika Danha DDanha@rencap.com Anthea Alexander West Africa + 234 1 271 91 33 Esili Eigbe EEigbe@rencap.com

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