Contents
1. Investment case 3
2. FY08, also a tough year for our portfolio 5
3. Better Mid Cap performance due to Financials 7
4. Macro and Investment strategy 9
4.1. Economic situation: the recovery has downwards risks 9
5. Screening: Aguas & Técnicas among the best 13
6. Fortis vs. Consensus 15
6.1. Main divergences in terms of ratings 15
6.1.1. Fortis more bullish than the consensus 15
6.1.2. Fortis more bearish than the consensus 15
6.2. Main discrepancies in terms of estimates 16
6.2.1. Fortis more bullish than the consensus 17
6.2.2. Fortis more bearish then the consensus 17
7. Ratings 19
8. Our Top Picks 21
9. Our portfolio 23
Abengoa 24
Aguas de Barcelona 18
Ebro Puleva 32
Tubacex 36
Vidrala 40
10. Rest of companies 45
Acerinox 46
Almirall 48
Amper 50
Antena 3 52
Avanzit 54
Azkoyen S.A. 56
Barón de Ley 58
Bodegas Riojanas 60
Bolsas y Mercados 62
C.F. Alba 64
Campofrío 66
Cementos Portland 68
Clínica Baviera 70
Codere 72
Corporación Dermoestética 74
CVNE 76
Ence 78
Europac 80
Federico Paternina 82
Gamesa 84
Grifols 86

Grupo Prisa 88
Grupo SOS 90
Iberia 92
Indra 94
Jazztel 96
La Seda de Barcelona 98
Natra 100
Natraceutical 102
NH Hoteles 104
OHL 106
Pescanova 108
Prosegur 110
Realia 112
Renta Corporación 114
Rovi 116
Sol Meliá 118
Solaria 120
Técnicas Reunidas 122
Tecnocom 124
Telecinco 126
Uralita SA 128
Vértice 360 130
Viscofan 132
Vocento 134
Zeltia 136
11. Appendix. Financial data and valuation ratios for the Universe of
Companies 139

1. Investment case
In this edition (the thirteenth) of the “Spanish Small & Mid Caps Guide” we
present a selection of five top picks: Abengoa, Aguas de Barcelona, Ebro
Puleva, Tubacex and Vidrala. After the market’s severe crash in 2008, and given
the current macroeconomic context, we seek a defensive bias, where we
underscore picks such as Aguas de Barcelona and Ebro Puleva. When betting on
growth, we need a higher degree of visibility such as is the case for Abengoa and
Vidrala. And finally, value and exposure to a recovery is present in our portfolio
through Tubacex, which is trading at 4.7x EV/EBITDA09E.
The negative performance of equities in 2008 was reflected in our “Fortis Spain
S&M Caps” portfolio which lost -43.9% between June 15th and the end of FY08.
Generally speaking our portfolio continues to reflect a better performance than
the Small and Mid cap index: in the last three months, our portfolio reflected a
-9.96% decline compared to the Ibex Medium’s -18.48% drop, and the MSCI
Spain Small Cap Local’s -20.94% setback. Among the investment ideas that
provided the best contribution to the portfolio we underscore Aguas de
Barcelona, Ebro Puleva and Indra.
Within this context and as we expected S&M Caps have not played the role of
safe harbour in view of the market’s across the board declines. On the other
hand, the performance of mid-size companies has generally speaking indeed
beat the market (+2% -6M) due to the punishment suffered by the financial
sector whose weighting on mid-sized index is low. The global nature of the
market collapse has caused Spanish S&M have performed in line with European
S&M.
In view of the coming six months, we do not perceive a recovery of the
macroeconomic outlook, in which we expect to see the first signs, albeit weak,
of a recovery in the US at the end of 2009 while in the Eurozone we expect this
to become a reality in 2010. And in Spain, the macro outlook is weak, both in
2009 as well as in 2010 although to a lesser degree. Within this environment,
Spanish S&M Caps continue to be more expensive (in terms of P/E) than Blue
Chips, something which has sharpened over the last six months. Thus, together
with a higher degree of de-leveraging of Blue Chip companies and slower deleveraging
process for Small Caps, in mid-term we continue to expect the Ibex-
35 to outperform Spanish S&M Cap stocks.
Within the negative macro context, we again undertake a quantitative stock
picking exercise in which we establish clearly restrictive targets. Among the
selection criteria we underscore valuation (EV/EBITDA09<6x and upside
potential >40%), liquidity (average daily volume exceeding EUR 1m), growth
(EBITDA09 >10% vs. EBITDA08) and gearing (Net Debt/ EBITDA<1x). Only
two companies meet these criteria: Aguas de Barcelona and Técnicas Reunidas.
In this report which includes our Small and Mid Cap universe of coverage
formed by 51 companies, we continue to reflect an average in favour of positive
ratings: 62.7% of ratings are Buys(vs. 58.7% our previous report) and 25.5%
(vs. 30.5% our previous report) are negative ratings. We underscore the fact that
only 11.8% of our ratings are neutral. If we compare our position to the
consensus we could say that we are slightly more negative in ratings.