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Daily Colombian Equities Bulletin and Fundamentals, April 29, 2014

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April 29, 2014 ( newswire) The Colcap index closed at 1,642 points (+0.04%).Total turnover reached USD 118 mn. The best performers were Fabricato (+5.99%), Cemargos (+4.09%) and Conconcreto (+2.96%). On the other hand, the worst performers were El Condor (-1.65%), Cemex Latam (-3.18%) and Ecopetrol (-2.68%).

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Grupo Exito:

1Q14's revenues were COP 2.63 trillion, +1.3% YoY (Colombia's SSS dropped 3.2% and Uruguay's +5.9%). It is important to highlight that 1Q14's figures were affected by a 4,8% calendar effect derived from the concentration of the Exito Anniversary promotion in Q2 this year. If the calendar effect was excluded, total sales would have represented an over 5% growth. 1Q14's revenues came slightly below our estimates (-1.2% surprise) and in line with market's estimates (-2.7%). We highlight that 1Q14's YoY growth (+1.3%) has been the lowest since 4Q09's (+1.0%).

EBITDA in the same period was COP 209,226 million, +2.6%, which represents a margin of 7.9%, +10 bp above 1Q13's. According to the company, margins were bene?ted from its strategy of strengthening its complementary business with a strong revenue increase from Real Estate as well as from Credit Cards, Travel, and the Insurance businesses. EBITDA's figure came 2.6% above our estimates, while EBITDA margin was 29 bp above. Against market estimates, EBITDA figure came 2.3% below.

Exito's net income was COP 98,940 million, +10.8%, 52% above our estimates, as well as the markets'. Despite a higher income before taxes (+4.3% YoY), income taxes decreased 16.6% due to lower tax provisions derived from tax bene?ts in capital expenditure. The effective tax rate in 1Q14 decreased to 18.8% compared to the 23.5% reported in the same period of last year.

Exito closed the 1Q14 with a total of 526 stores, 2 more than in 4Q13 and 42 more than 1Q13, and a selling area of 838,018 (sqm), +2.89 YoY. During 1Q14, Exito had 6 openings and 4 closings. The sales mix was 72% food and 28% non-food.

Overall, we consider 1Q14's results as neutral, the surprise came mainly from the income taxes. The seasonable effect due to the Anniversary promotion should be compensated during 2Q14. Nonetheless, it is important to highlight the challenges Exito has: improve SSS in Colombia given a more competitive environment, as well as a weak SSS growth coming from Uruguay, a country that has a CPI level of 9.7% (as of March 2014).

As margins of the complementary businesses are increasing, we will try to seek for more detailed information during tomorrow's conference call. However, Exito normally does not release much detail information.

Grupo Argos:

On the other hand, 1Q14 individual revenues were COP 225 billion, +50% YoY. Excluding the non-recurrent effect of the divestiture of 1,000,000 preferred shares of Grupo Sura (COP 31 billion), the increase would be of 29% YoY. EBITDA was COP 150 bn, while net Income was COP121 bn (+5.5%). We highlight the positive results in terms of EBITDA of COMPAS (+81%YoY), SATOR (-COP 671mn from the -COP 4,816 mn of the 1Q13) and SITUM (+214% YoY).

In the first quarter of the year Cemargos presented positive operating figures in the markets where it operates. We highlight the positive performance of the Caribbean and US Regional Divisions. Despite the extreme weather conditions of the first two months of the year, the US Regional Division closed the quarter with a positive EBITDA of USD 2mn. Therefore, the regional completes two consecutive quarters with positive results. Furthermore, we highlight the positive performance of the Central America & Caribbean Regional Division (+27% YoY in revenues and +36% YoY in EBITDA).

Celsia presented neutral results during the first quarter of 2014. Celsia's operating revenues were COP 577 billion in 1Q14, -2% YoY, mainly due to lower energy sales and lower thermal generation. Consolidated EBITDA was COP 231 billion, +10% YoY and equivalent to a margin of 40%, +4% from 1Q13. Additionally, Grupo Argos acquired during 1Q14 15,652,473 shares of Celsia. Therefore, its total share increased to 52.35% (376,704,138 shares).

Overall, we consider the 1Q14's results as neutral. Regarding the new business segments, Grupo Argos continue to show progress; however, financial impact is still low. 1Q14 Net debt was COP 1.43 trillion, +0.3% QoQ.


1Q14's revenues were COP 526,202 million, +6% YoY. ISAGEN's accumulated generation grew 14% YoY, to 2,999 GWh in 2014. This greater generation is due to the higher water levels. National energy demand totaled 15,386 GWh, +4.5% YoY. We highlight, that revenues from domestic contracts were COP 409,251 (80% of total revenues) grew 23% YoY. On the other hand, revenues from international contracts dropped 97% to COP 1,993 million. This segment represented 12% of revenues in the 1Q13 Vs 0.4% in the 1Q14. This is due to the start-up of two new generation resources in eastern Venezuela. We did not have revenues estimates; however, figure reported was 0.8% above market's estimates.

1Q14's EBITDA was COP 237,347 million, + 23.1%, which represents a margin of 45.1%, +615 bp above 1Q13's. This improvement in results is explained by ISAGEN's better generation, which has been the highest recorded in recent quarters. Additionally, the decrease in operating costs and expenses contributed to the operating profit and the EBITDA demonstrating increases of 24% and 23% respectively. EBITDA figure came 0.9% above market's estimates.

Isagen's net income was COP 147,073 million, +32.6%, 2.1% above market's estimates.

Over all, we consider the 1Q14's results as positive, as EBITDA margin during the 1Q14 was one of the highest in recent history of the company. However, we have to be cautious about the current weather expectations and a higher probability of the occurrence of the "El Niño" phenomenon during the 2S14, which could impact the company's hydraulic generation and its operating margins. We consider that in the short term, Isagen's share price should continue to move based on the Government's stake sale. Current Isagen's multiples are trading at premiums Vs its peers, explained by the Government's stake sale.

Cemex Latam Holdings:

Revenues during 1Q14 were USD423 mn, 3,6% below market's estimates, but 10% higher than 1Q13 (+15% excluding FX and additional working days during the 1Q14). This YoY increase in sales was due to higher volumes, mainly in Colombia. Consolidated cement volumes grew 16% YoY, ready-mix volumes grew 16% YoY, while aggregates grew 26% YoY. Consolidated EBITDA was USD141 mn, 9% below market consensus, and flat in a YoY basis. EBITDA margin was 33.4%, 3.3bp below 1Q13 figures. This annual reduction in EBITDA margin was mainly explained by higher maintenance costs in the main markets. Net income was USD55 mn, 108% above 1Q13 figures and 58% above market consensus (USD 32.4 mn). Net Debt as of March 2014 was USD1,234mn, 5.7% below 4Q13 numbers and correspond to the debt obligations with is parent company.

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Corredores Asociados S.A. Comisionista de Bolsa is not responsible for investment decisions that may be derived from the information and analyses presented in this document. These decisions, their effects and consequences will be the sole responsibility of the investor. The information published is informative and has been taken from reliable sources, but Corredores Asociados S.A. does not guarantee that they are free of errors. Total or partial reproduction of this document is not allowed without the prior and express authorization of Corredores Asociados S.A.

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