CFA Institute Research Challenge: Alexandru Ioan Cuza University of Iasi

CFA Institute Research Challenge
hosted by
CFA Society Romania
Alexandru Ioan Cuza University of Iasi
New Europe Property Investments PLC
Student Research Industry: Real Estate ROMANIA
This report is published for educational purposes only
bystudents competing in the CFA Institute Research Ticker: NEP SJ Exchange: JSE
Challenge.
20 February 2013 A value stock mirroring growth

Recommendation Forecast and Valuation 2012A 2013F 2014F 2015F 2016F 2017F
Rental Income €m 40.2 60.7 63.4 70.3 75.2 79.8
BUY EBIT €m 50.9 42.9 44.9 50.1 53.6 56.9
Net income €m 35.2 29.3 26.2 27.9 28.3 29.4
DPS ¢ 23.3 26.8 30.8 35.4 40.7 46.8
Target Price: €6.20 (R73.58) BVS x 2.7 2.6 2.7 2.9 3.0 3.1
Price (20.02.2013): €5.18 (R61.50) ROA % 6.1 4.2 3.4 3.3 3.1 3.0
Upside: 19.64% ROE % 10.5 7.6 6.8 6.9 6.7 6.7
D/E % 55.7 81.6 93.1 103.7 108.7 111.7
EV/EBIT x 20.7 24.5 23.4 21.1 19.7 18.5
Exchange rate EUR/ZAR: 11.9047
Source: Company data, Team’s Analysis
Highlights
 Valuation and financials are indicators of a BUY recommendation:
We initiate our coverage with a target price of €6.20 (R73.58) at the
end of 2013, with an upside potential of 19.64%. The Group follows a
typical REIT business model, with increasing levels of leverage and
high dividend payout ratio. Our valuation is based on the Dividend
Discount Mode, sustained by other models in our analysis.
 High growth prospects: Currently, NEPI has a portfolio of
investments in Romania and Germany, which includes 42 properties
Market Profile
and 2 developments. Beside this, it has also 8 development projects, a
52 wk. Price Range (R) 33.7-61.5 significant tailwind for growth in an undersupplied shopping center
Avg. Daily Volume 2,298,928 market and favorable macroeconomic conditions.
Beta 0.7  Strong competitive positioning: The Key Success Factors (KSF)
Shares Outstanding 144,362,152 analysis revealed no potential competitors that will come close to
Market Cap. (R) 8,878,272,348 emulating NEPI’s success at the moment and in the near future. The
Market Cap. (€) 748,096,203 main competitive advantages of NEPI come from easy access to equity
funding, practical cash management, strategic locations and lifelong
BV/S (€) 2.7 experience of the management team.
Source: Bloomberg  The Group will maintain healthy financials: NEPI has a robust
forecasted balance sheet and a high rental performance related to its
investment prospects. EBIT margins are expected to remain at high
levels, given the Group’s financial capabilities.
 Main risks to our target price: NEPI may encounter difficulties from
expansion into new markets due to different market characteristics.
Other risks that may impact NEPI’s performance are political
instability and regulatory changes.
10% FTSE 100

8%
6% NEPI
Return (%)
4%
2%
0%
Jul-11
Jul-12
Nov-11
Nov-12
Mar-11
Mar-12
Jan-11
Jan-12
Jan-13
May-11
May-12
Sep-11
Sep-12
-2%
-4%
-6%
-8%
Source: Bloomberg, JSE

CFA Institute Research Challenge Alexandru Ioan Cuza University of Iași Student Research
Business Description
Figure 1 – Rental Income Growth New Europe Property Investments PLC (NEPI) is a property investment holding
company founded in August 2007 by a team of professionals. It has the structure of a
100
group, including subsidiaries located in Romania and other countries (the Group). It
80 is listed on 3 stock exchanges: London Stock Exchange (2007), Johannesburg Stock
Million EUR
60 Exchange (2009) and Bucharest Stock Exchange (2011). The Group is internally
managed by directors and staff, who own 17% of the company, and have a combined
40
experience in development, as well as property and asset management.
20
It owns 42 income producing properties and 2 developments, valued at EUR
0
478.2m; its major assets include two 53,000sqm and 46,000sqm regional malls in
2013F
2014F
2015F
2016F
2017F
2012A
2007A
2008A
2009A
2010A
2011A
Braila and Ploiesti, a 43,100sqm retail park in Pitesti, a 36,000sqm A-grade office
and another 25,000sqm office building in Bucharest and a 27,000sqm office in
Rental Revenue
Timisoara.
NEPI focuses its investments in Romania, where it has 36 properties (95% of gross
rentals), and only owns 6 properties in Germany (5% of gross rentals). Its portfolio
exposure is 46% in retail and 49% in offices. The remainder 5% of gross rentals is
on the back of opportunistic investments in industrial spaces (Appendix 35).
NEPI’s investment strategy is biased towards long-term leases in EUR with strong
Figure 2 –Tenant Profile by Gross corporate tenants, across many industries. Thus, 83% of the contracted rental income
Rentals (Q4 2011) was from large global retailers and multinationals (Figure 2). The weighted average
lease expiry is of 6.9 years (Figure 3).The Group’s business model focuses on three
types of tenants.
6%
11%
Type A. Represented by large international and national tenants, listed tenants,
government and major franchisees, this class of tenants significantly reduces NEPI’s
default and credit risk, as they are usually companies with assets and/or turnovers in
83% excess of EUR 200m.
Type B. This particular category of tenants is comprised of smaller international and

national tenants, smaller listed tenants and medium to large professional firms. Since
Type A Type B Type C
they usually are companies with assets and/or turnovers between EUR 100-200m,
Source: Company data they generate a slightly higher default and credit risk to the Group, compared to the
type A tenants.
Type C. Regarding the size of their business, they are represented by other tenants,
which have under EUR 100m of assets and/or turnovers. Of these 259 tenants, 110
of them are located in Germany.
Figure 3 –Lease Expiry Profile (H2 2012) Contractual rental income and expense recoveries increased to EUR 40.1m in 2012,
35 compared to EUR 32m in 2011 (+25.3% YoY) (Figure 1); the main drivers of the
30 Group’s continued strong performance were the impact of the acquisition of City
Thousand EUR
25 Business Center in February 2012. Additional rental income was generated through
20 various re-developments that were completed towards the end of the prior year, as
15
10
well as a settlement with the vendors of Promenada Mall. Also, the consistent
5 increase in gross margin reflects the operational efficiency of the Group.
0
The Group’s sustainability strategy is designed to return reliable, quantifiable
improvements in performance over the long-term. It focuses on investments in
Retail Office Industrial
dominant or potentially dominant retail and office assets, as well as opportunistic
investments in industrial properties in Romania, but could later include other Eastern
Source: Company data European countries, such as Serbia, Slovakia and Hungary.
20 February 2013 2
Industry Overview and Competitive Positioning

Figure 4 – Macro Indicators in Romania Macroeconomic dynamics: Prospects outweigh risks
The uncertainties in Europe remain elevated, but 2013 is expected to bring an
10.0 inflection point in terms of economic growth. The safety net offered by the European
5.0
Central Bank (ECB) through its Outright Monetary Transactions program is helping
to restore the economic and consumer confidence, but the fiscal policy still has to
find the right combination between austerity and growth stimulus. The recovery will
%
0.0
2015F
2013F
2014F
2006
2005
2007
2008
2009
2010
2011
2012
be a long and slow process, but if there are no major political disruptions, the
-5.0 European economic growth is set to accelerate in 2014.
-10.0 GDP growth
Inflation Romania has been slowly emerging from recession over the past two years, driven
Unemployment rate by the good performances in industrial production, services, export and agriculture
growth. In 2011 the economy registered a GDP growth of 2.5% and the estimated
Source: IMF economic growth during 2012 is 1.5%, according to the International Monetary Fund
(IMF). For the coming years, GDP is expected to continually increase, supported by
investments. Favorable perspectives for unemployment and inflation will determine
an increase in the domestic demand, which will lead further to a growth in the retail
sector (Figure 4).
Figure 5 – Urbanization Trend in Romania
Romania 2002 2011 The urbanization situation of Romania is depicted in Figure 5. For the following
Total population 22.3 21,4
decade, we expect an urbanization trend based on the increasing concentration of
farming areas, less sustainable subsistence agriculture, more jobs in the cities due to
Urban population 11.5 11.3
the European recovery.Moreover, the expansion of the national transport
Population growth -4.3% infrastructure during recent years will continue, even if at a slow pace. For 2013,
% urbanization 51.7% 52.9% planned government investments of EUR 1bn for the undergoing and scheduled
projects will grant an increased growth of the economic sector of Romania. Urban
Source: WEF, National Institute of Statistics sprawl, as a result of large investments in infrastructure and urbanization, will
continue to enable stronger growth in retail trade.
The economic sentiment indicator for Romania has recorded higher levels compared
to EU27, suggesting more optimistic expectations towards GDP growth. However,
for the last two year the trend is descending, due to the slow recovery of the
Figure 6 –Economic Sentiment Index European economy (Figure 6).Further information on the macroeconomic context of
130 Romania can be found in Appendix 7.
110
90 Retail market:
Units
70 Regarding the household consumption in the European countries, this indicator in

50 the case of Romania has recorded one of the highest CAGR from 2005 to 2012 (9 th
30 position), but it still has the lowest level per capita. Considering that the CAGR of
10
the GDP per capita has registered an even higher growth (4th position), this enables
-10
Jan-09
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-10
Jan-11
Jan-12
Jan-13
further opportunities for growth (Appendix 10).
Mirroring consumption trends, the Romanian retail turnover recorded an important

EU Romania
contraction during the recent global financial crisis (GFC), but has stabilized during
2011 and 2012. Retail sales (excluding the sale of motor vehicles and cycles)
Source: European Commission
recorded a continued growth, as they increased by 3.0% YoY in Nov 2012. Indeed,
sales have shown signs of recovery during the whole year, improving steadily by
3.9% in the first 11 months of 2012 (Appendix14).
Retail rents in Romania are situated in the range of 280-660 EUR/sqm/annum, and
are significantly lower than in the majority of the European countries, but more in
line with other CEE countries. However, Romania is ranked first considering the
prime retail rent yields, at 8.50-9.75%. This enables the country to be an attractive
opportunity in the coming years (Appendix19).
Despite favorable consumer and retail expenditure prospects and low retail rents,
Romania still remains under-supplied in regards to shopping centers. The national
20 February 2013 3
average of 127sqm/1,000 pop reflects an untapped potential of the shopping center
Figure 7 – Shopping Centers in CEE
market (Appendix 15).
Capitals (Q4 2011)
Furthermore, at the end of 2011, Bucharest had one of the lowest levels for shopping
Gross Lettable Density center density, as compared to other CEE capitals (Figure 7). Several property
City Area - GLA (sqm/1,000
(sqm) pop) developers, such as AFI Europe, NEPI, Sonae Sierra,Real4You, Immofinanz and
Argo Real Estate, have obviously identified this opportunity, having projects under
Warsaw 1,065,000 612 development throughout the country.
Bucharest 736,600 379
Prague 726,740 578
The 150,000sqm of new retail completion for the year 2012 represent approximately
Budapest 681,870 402
6% of the total modern shopping center stock, and is four times lower than the
Bratislava 412,600 892
volume of completions registered in 2008. Thus, the retail stock in Romania reached
approximately 2.7m sqm at end 2012, out of which 30% (809,000sqm) are located in
Source: WEF, National Institute of Statistics Bucharest (Appendix17). The national average of shopping center stock per 1,000
inhabitants is lower than Bucharest’s, which accounts for 416sqm/1,000 inhabitants
(Appendix18).
Figure 8 – Prime European Office Rental The Consumer Confidence Index shows a more pessimistic view among Romanian
Index (Q3 2012) citizens as compared to EU27; however, the trend is positive due to improved
perception regarding the future state of the economy. The Retail Trade Confidence
Index illustrates a decline across Romania over the last year, although for the EU27
it has improved. This could be explained by the negative perception of consumers
towards future business outlook (Appendix11 and 12).
Office market:
The European office market is still facing a slow recovery, and it is expected to
pause on a short-term horizon. Due to modest demand conditions and slow growth
and supply, the European Office Index recorded a fall of 0.6% over the third quarter
of 2012 (Figure 8).
Office rents in Bucharest (€18.50/sqm/month, on average) are lower compared to

other European countries (Appendix23), whereas rental yields are higher
(Appendix24). Strong demand for high-quality space is the leading factor of the
Source: Jones Lang LaSalle
increase in occupancy costs in the office market. In the third quarter of 2012,
occupancy costs in Bucharest totaled €291/sqm/annum, one of the lowest levels in
Europe, with a 2% decrease from the previous year (Appendix25). Additional
information about Bucharest’s Office market is provided in Appendix 26.
According to CBRE, compared to other EMEA cities, Bucharest is on the 9/16 office
market rent cycle position, at the bottom of the cycle, alongside with Budapest,
Dublin, Milan, Prague and Lisbon. Hence, the next variation will be most likely
upwards, though no significant change is recognizable yet (Appendix22).
Due to funding constraints, the office market in Romania is not fully exploited,
resulting in an opportunity not to be missed.
Industrial market:
There is significant potential in the industrial spaces market, should our expectations
about European recovery come true. Romania could then become one of the
important production facilities for Western Europe, conditional of course upon
infrastructure investments. Moreover, new developments in infrastructure
(completion of A3 Bucharest-Ploiesti highway and the Cernavoda-Medgidia section
of the A2 Bucharest-Constanta highway) might attract logistics and industrial
developers.
Looking at the industrial market across Europe in the last quarter of 2012, Bucharest
has one of the lowest prime industrial rents (€49.2/sqm/annum), but one of the
highest prime industrial yields i.e. 7.5% (Appendix 27). Comparing Bucharest to
other major Romanian cities, it can be seen that Bucharest accounts for 40% of the
industrial take-up, followed by Cluj-Napoca (Appendix 28).
20 February 2013 4
Competitive Positioning:Since it was founded, NEPI managed to become a brand
in the real estate sector, through its track record of being able to fund and implement
deals. During the recession, it succeeded to achieve steady annualized growth
Figure 9 –Porter’s Five Forces Analysis through inflation-indexing, undervalued acquisitions and strategic developments.
Rivalry
among
Based on the SWOT (Appendix 30) and competition analysis, we have identified 4
Competitors key success factors in the real estate sector (see details in Appendix 31):
4
3
2
Professionalism of Management: We have considered the years in real estate of the
Threat of
Substitutes 1 Buyer Power most experienced Director and his involvement in the property industry. Also, we
0 have analyzed whether the companies’ strategy was focused or diversified (a focused
approach is more attractive to investors) and have examined their management
Threat of
practice in terms of independence and shareholdings in the company.
Supplier
New
Power
Entrants Access and Location: For retail, the main aspects taken into account were the ease
Retail Office Industrial of access to each shopping center; the land capability expansion (the potential of
expansion can be decisive in order to make the asset dominant); the locations of the
4 = Most favorable to NEPI shopping centers relative to the cities and the number of larger shopping centers on a
1 = Least favorable to NEPI 15 km radius. For offices, we have evaluated the location – proximity to
business/city center and to public transportation points.
Source: Team’s Analysis
Liquidity: The analysis was based on tenant default risk mitigants and the level of
cash and cash equivalents against the companies’ short-term liabilities.
Capitalization: This factor was evaluated considering if the company is public (easy
access to equity funding), and the shareholdings of large, strategic investors.
Figure 10 –Competitive Positioning Our analysis highlighted:
Professionalism of… Lifelong experience: Aged over 60, Jeffrey Zidel is NEPI’s director with 2/3 of his
Access and Location
life spent developing and investing in the property industry; his past and current
experiences include Resilient Property Income Fund Limited (m/cap USD 1.7bn),
Liquidity
Fortress Income Fund Limited (m/cap USD 455m) and Property Index Tracker
Capitalization Managers (Proprietary) Limited (m/cap USD 103m), all listed on JSE.
OVERALL
Aligned interests: NEPI’s management interests are lined up with the interests of
0 1 2 3 4 5 6
investors; Directors and staff own 17% of the company and internally manage the
NEPI Immofinanz Iulius Group
Group, in an integrated combination of property and asset management skills.

Strategic locations: NEPI’s development concept is to expand next to established
large international hypermarkets (Carrefour, Auchan) and to build on established
trading densities; they also aim to secure key locations, with expansion capabilities
and on which opportunistic future projects are to be developed.
Practical cash management: The Group aims at retaining high levels of access to
liquidity, in order to mitigate any default risks and to have enough cash to pursue
developments and investment opportunities; in order to diminish the diluting effect
this has on earnings, a portion of the cash held for capital commitments has been
invested in liquid dividend paying listed property shares, which at year end
amounted to EUR 71.5m and traded at a premium to their initial acquisition cost.
Although equity investments could be considered outside company statutory scope
of activity and therefore add additional risk to shareholders, the fact that investments
are within the sector of the core activity of NEPI and the strong experience of the
management in evaluating such businesses, make these investments rather a factor of
risk reduction through diversification.
Easy access to equity funding: NEPI’s major strategic shareholders own 53% of
the company and are always open to contribute capital in case of new development
opportunities. This provides the Group a competitive advantage over its competitors
as they have the possibility to quickly fund new deals.
20 February 2013 5
Porter’s Five Forces Model indicates that there are opportunities that NEPI could
exploit in all segments, especially in the industrial sector, in which competitiveness
is the lowest (Appendix 33).
Figure 11 – Peers Sharpe Indicators
Investment Summary
Corio NV
0.2 The analysis of the business and industry, along with the estimated value of the
New Europe Eurocommer Group through various models, led us to a strong BUY recommendation. The target
Property … 0.3 0.3 cial…
price is€6.20(R73.58)at the end of 2013 and illustrates an upside of 19.64%.
-1.9 The Group has shown solid fundamentals during the last five-years, and rental
Klepierre -0.1 0.0 Vastned
Retail NV income growth between 25-90%. Starting from its foundation, NEPI has had a
robust balance sheet and an outstanding net rental performance, due to its
Unibail- remarkable acquisition policy. Furthermore, the Group has kepta sustainable level of
Rodamco SE
leverage. During the GFC, NEPI has managed to maintain its gross margins, mainly
Source: Team’s Analysis thanks to its asset management style and strong portfolio.
NEPI has a sustainable business model. It has eight developments projects

expected to complete in the next two years, representing a significant support for
earnings growth. Moreover, the local market shows high growth prospects as
property yields are among the highest and rent the lowest. The under-supplied
Figure 12 – WACC Assumptions Romanian market regarding shopping centers and growing retail sales form a solid
platform for organic growth in the coming years.
WACC Calculation
Median industry beta 0.577 We expect NEPI will maintain high EBIT margins, through its development
pipeline and expansion to other countries. The highest value of 126.76% for 2012 is
Median industry D/E 0.767
explained by the gains from investments and other operating income, that we
consider as non-recurrent items. However, starting with 2013 we assume these
Risk- free rate 0.039 margins will stabilize around 69%. The EBIT margin for 2013 mirrors the impact of
Credit spread 0.020 the most significant transaction in the Romanian real estate market, amounted to
Cost of debt 0.059 €61.7m. Moreover, an important acquisition in CEE is expected to finalize before
end 2013, which will boost the earnings for this year.
Levered beta 1.020 Our competitive positioning analysis revealed no potential competitors that will
Market risk premium 0.058 come close to emulating NEPI’s success at the moment and in the near future. The
Cost of equity, levered 0.098 main competitive advantages of NEPI come from easy access to equity funding,
practical cash management, strategic locations and lifelong experience of the
management team.
Debt-to-capital 0.600
Equity-to-capital 0.400 Analyzing the stock performance, we computed Jensen Alpha using the Least
WACC 0.069 Square Method (LSM) (Appendix 46). We obtained a value of 1.41, which shows
the excess return of NEPI over FTSE100. Comparing this ratio and of other industry
Source: Team’s Analysis, peers, NEPI outperformed, giving higher reward per unit of volatility. The same
Damodaran Data conclusion follows from the comparison of Sharpe Ratios and Treynor Ratios
(Figure 11).
The sector in which NEPI operates can be cyclical and faces risks at a number of
levels. First of all, the major risks faced by the Group are operational and regulatory
risks, which may affect the value of the Group’s operations and further the stock’s
performance (Appendix 43). These risks are described latter in the risk analysis
section.
Valuation
We evaluated NEPI using five models: Discounted Dividend Model (DDM),
Discounted Cash-Flow Model (DCF), Sum-of-the Parts (SOTP), Net Asset Value
(NAV) and Multiples Analysis (Figure 13). However, our investment decision is
based on the first two models as further argued.
20 February 2013 6
DDM
Figure 13 – Price Matrix DDM is appropriate to value the Group given the constant dividend policy and
Model Price (€) thehigh payout ratio. The main assumptions behind the model are a 15% growth rate
of dividends supported by historical data, and a perpetuity growth rate of 3%. The
DCF 6.46 base price obtained is €6.20 (Appendix 37).
DDM 6.20
SOTP 7.58 DCF
NAV 2.82
We value NEPI using DCF as it has high growth prospects and the model properly
illustrates the free cash-flow value of the Group. Furthermore, the model implies for
Multiples 6.13-6.49 growth prospects on a long-term horizon, based on the assumption of 3% perpetuity.
We assess a fair value of €6.46 (Appendix 36).
SOTP
This methodology is an alternative mode of assessing the value of NEPI, determined
as a sum of all individual properties and developments, quantified at fair value.
Figure 14 – EBIT and Gross Margins However, we will not base our recommendation on this model, as it is a simplified
view of future cash-flows; we only consider it as a support for validating the
Group’s forecasted rental growth (Appendix 38).
150%
NAV
100% We considered this approach due to high applicability to real estate valuation.
50% Nevertheless, it did not influence our recommendation for target price. In our
opinion, the NAV per share of €2.82 is understated, given the significant
0% development pipeline considered at cost. We are confident that at completion, these
2013F
2014F
2015F
2016F
2017F
2007A
2008A
2009A
2010A
2011A
2012A
developments will add value and increase the NAV. Moreover, the entire real estate
market in Romania is currently behaving like a distressed asset, due to sequels of the
financial crisis. In different words, the liquidity of the market is so low that the NAV
Gross Margin EBIT Margin
valuations are not relevant, and this is why we prefer to assess the value of the
company based on its future cash flows rather than based on assets value (Appendix
Source: Team’s Analysis 40).
Multiples Analysis
We used the multiples analysis as a cross check of previous work and to get more
insights about the company’s positioning in the industry. The most robust indicator
was EV/EBIT multiple, as it is less susceptible to manipulation by changes in capital
structure than other indicators, such as P/E range (Figure 15). With this method, we
obtained a price range of €6.13- 6.49 (Appendix 37).
Figure 15 –EV/EBIT Multiples 2013 Historical Analysis

The rental income CAGR for the last five years is 39.1%, sustained by a strong
Corio NV expansion. The gross margin shows a constant trend, fluctuating in the range of 70-
19.2 80%. On the other hand, the EBIT margin went from a stable growth to a sudden
Eurocomm
ercial increase in 2012, reaching 126.76%, mainly due to gains from investments and other
Klepierre 17.9
10.0 Properties operating income (Figure 14). We do not consider these gains are replicable in the
NV following years and as such we do not include them as recurrent income in our
models. During the same period, the Group maintained a high payout ratio of around
Unibail- 16.4 20.3 Vastned
Rodamco
100%.
Retail NV
SE
Forecasted Financial Statements
Source: Team’s Analysis Starting from the historical trend, we forecast the Group’s rental income for a five-
year period as a percentage of investment property (10.2%), as it is its main source
of income. Next, property expenses move in line with investment property (2.5%),
whereas SG&A are a function of rental income (5%).
The income statement items that are not directly related to the core operating activity
of NEPI are ignored, being considered non-recurrent, and their impact is not
significant for the value of free cash-flows.
20 February 2013 7
We project that investment property will grow more in 2013 (15%), due to
Figure 16 – Capital Structure Evolution significant announced development plans, and the growth will stabilize to 6% in
2017. Our hypothesis is sustained by the expected recovery of the economy, which
100% will lead to competition enhancement and more expensive assets.
80%
Given that NEPI’s business model is based on a relatively high level of leverage, we
60%
assume a target capital structure with 60% debt and 40% equity. The common
40% capital structure of a REIT implies high leverage and NEPI will follow this model in
20% the long run. However, we assume NEPI will only reach 52 % debt in 2017 (Figure
0% 16), against equity issuance, far more expensive and presumably less attractive for
2014F
2013F
2015F
2016F
2017F
2008A
2009A
2010A
2011A
2012A
South African (SA) investors.
Furthermore, we foresee the Group will maintain its cash management policy and
Debt/capital Equity/capital
will keep its short-term investments in liquid dividend-paying listed property
Source: Company data, Team’s Estimates
companies (Unibail-Rodamco, Klepierre and Eurocommercial Properties). The cash
balances will remain significant, as they are a buffer for future developments and
could also form a base for higher future dividend distributions.
For the terminal value component, we assume a 3% perpetual growth rate, based on
our belief that NEPI will be able to benefit from its diversified portfolio in Romania
and in other CEE countries.
The cost of equity was computed based on CAPM, using as risk free rate the longest
(2019) Romanian government bond yield on EUR (3.9%) and a market risk premium
Figure 17 – Profitability Indicators for Romania of 5.8% (as of January 2013).Next, we computed the WACC (Figure
12) by considering the pure play approach and using the target D/E ratio i.e. 1.5.
12%
10% Financial Analysis
8%
6% We analyzed the Group’s profitability, efficiency, liquidity and solvency by looking
4% at financial ratios. Next, we compared the results with the past evolution (horizontal
2% analysis), as well as with the industry average for the most recent available data for
0%
REIT(Appendix 3).
One measure of profitability is return on equity (ROE), which is well above the
Return on Capital (ROC) industry’s average, suggesting strength and a good signal for stockholders’ wealth. It
Return on Equity (ROE) has a positive trend compared to previous years, due to the increase in net income.
However, return on capital (ROC) is below the industry average (14.58%), although
Source: Company data, Team’s Estimates it has improved in the last years, due to an increase in rental income in 2012 with
25% YoY(Figure 17).
An efficiency indicator is the total asset turnover, which shows a smooth decrease
for the forecasted period, and balance around 8%, partly attributable to the increase
in investment property and new development (Figure 18). Next, liquidity was
measured through the current ratio. The forecast sustains an improvement in this
Figure 18 – Efficiency Indicators ratio, suggesting that NEPI will be able to fulfill its short-term obligations.
16%
14%
12% In order to have a perspective over the company’s use of debt, we analyzed debt-to-
10%
8%
capital and debt-to-equity ratios. Both have forecasted values below the industry’s
6% averages, but in line with past results. This could be a good signal to attract new
4%
2% creditors or for a foreseen credit rating, because the Group does not have an
0%
excessive level of leverage.
We performed a vertical analysis for NEPI’s financial statements, in order to cross-

check the forecast. We observe a healthy trend, in line with historical performance,
Total Asset Turnover
based on cautious assumptions that are strongly sustainable.
Fixed Asset Turnover
The Group maintained a relatively high gearing for the past five years (in the range
Source: Company data, Team’s Estimates of 40- 50%) to sustain its development policy. The repayment profile of existing
20 February 2013 8
Figure 19 – Altman Z-Score debt is scheduled until 2016, but we are confident in the Group’s ability to attract
new funds through flexible revolving loans. Another source of financing from which
Z-score the Group could benefit in the long run perspective would be bond issues, that offer
the advantage of lowering the cost of debt.
T1 0.1024
T2 0.0000 We expect that the Group will continue to issue equity at lower levels, given its
T3 0.0773
advantage over peers.
T4 1.4860 The high demand for its shares from SA investors represents an opportunity for the
2.7519 management to finance new attractive acquisitions or potentialdevelopments through
Source: Team’s Estimates
equity issuance. We base our assumption on the reputation the Group built among
SA investors (oversubscribed rights issuance – 17 December 2010).
The F-Score of 6 for NEPI indicates that the firm is likely to perform at or better
than the market (Appendix 41). Another indicator that positions the Group in the
safe zone regarding the default risk is Altman Z Score. This has a value of 2.75,
which suggests the financial strength of NEPI (Figure 19).We analyzed the value-at-
risk of NEPI in order to measure the total risk an investor is exposed to. The 1-year
VaR obtained with a 95% confidence interval is R459.38, which in percentages is
8.13% from the value of the stock (Figure 20).
Other Relevant Headings

Shareholder Analysis
NEPI’s issued a total of 144.3m shares, out of which 53.58% are owned by the top
10 largest shareholders. Resilient Property Income Fund, Fortress Income Fund,
Figure 20 – Value at risk
Hero Nominees Ltd together holds 37.18% of the issued shares (Appendix 42).
95% Confidence Corporate Governance (CG)

Interval (CI) NEPI maintains a corporate governance structure that ensures balanced, responsible
Lower 5488.37 decision-making that best serves the interests of all stakeholders. It complies with
Upper 6389.35 the recommendations of the Quoted Companies Alliance Corporate Governance
Guidelines for Smaller Quoted Companies and the King III Report on Corporate
Governance in South Africa. From the detailed analysis of corporate governance
95% VaR statements in the annual reports and accounts, we found that the basic elements of a
Lower(one-tail) 5191.61 good governance practice are disclosed by the Group (Appendix 44).
(Absolute) VaR 459.38
Percentage VaR 8.13% Investment Risks
Operational risks:
Economic Volatility: Rental income and the market value of properties are generally
affected by overall conditions in the economy, such as growth in GDP, employment
trends, inflation and changes in interest rates. Moreover, it is assumed that retail
sales are highly sensitive to economic conditions. However, as financials suggest,
there is a low correlation between the Group’s sales, GDP and CPI on the other
hand. We further assume that the Group’s asset management style, development
pipeline and the strong asset portfolio are the key value drivers of EPS.
Credit risk: A downturn of the economy, leading to disappointing retail sales and a
sudden turn in office take-up could cause tenants failure to meet contractual
obligations, having significantly impact on the Group’s earnings. However, the
Group’s widespread customer base, the tenant security deposit policy along with a
close monitoring of tenants’ activity, and an impressive tenants list of global retailers
and multinationals, with a relatively small exposure to any one single tenant (largest
exposure to one single tenant is 4.0% of total portfolio rent), substantially reduces
credit risk.
Corruption in the Company’s target market:Unfortunately, the Group operations
may be affected by corruption or any distortion of official processes within
Romania, which could have an adverse impact on the Group’s performance. The
Corruption Perceptions Index for 2012 place Romania on the 66th place in the world,
20 February 2013 9
indicating a medium to high level of corruption (Figure 22). This risk is mitigated by
the fact that the Group dealings with official institutions are limited to a normal
business level, without special partnership and contracts with state controlled
entities.
Figure 21 – Sensitivity Analysis DDM Financial risks:
Growth
Cost of equity FX risk: The Group is exposed to foreign currency risk on purchases and
rate
receivables that are denominated in currencies different from the reporting
.088 .093 .098 .103 .108
currency(EUR). Moreover, foreign exchange losses and gains appear from
.010 5.81 5.42 5.07 4.76 4.49
translation of the financial statements of subsidiaries.
.020 6.47 5.99 5.56 5.19 4.86
Interest rate risk: The Group is vulnerable to adverse interest rate movements that
.030 7.36 6.73 6.20 5.73 5.33
could increase borrowing or hedging costs. However, we assess interest rate risk on
.040 8.62 7.76 7.05 6.45 5.93
loans and cash balances as relatively low, given the company’s active hedging
.050 10.5 9.26 8.25 7.43 6.75
policy. In line with our thesis, the sensitivity analysis performed by management
Source: Team’s Analysis concludes that a 1% increase in interest rate leads to a limited negative impact of
0.87% on net profit.
Regulatory Risks:
Regulation uncertainty: Romania, as an emerging country, is subject to political

Figure 22 – Corruption Score instability and changes in regulation framework. As such, expected elections in
Romania in autumn bring even more uncertainties. Another source of uncertainty
comes from the new REIT regime to be adopted in South Africa, starting 1st of April
2013 that could bring changes in dividend taxation. The impact could indirectly
affect the Group, as investors may negatively react to news and choose to invest in
other sectors.
Valuation risks:
The Group’s value determined through DCF model is relying much on the Terminal
Value, and implicitly on the perpetual growth rate and the cost of capital. In order to
assess the risks, we considered a sensitivity analysis with changes is these two
factors (Appendix 45). The range for the price per share obtained is €3.59-
28.55.Considering the same main arguments, the DDM was tested for changes in the
perpetual growth rate of dividends and cost of equity. The prices were in the range
€4.49-10.54 (Figure 21).
The rental income growth rate assumption is a milestone in our analysis of SOTP
Model. Starting from the risk of changes in the rental growth rate, we performed a
Monte Carlo simulation on this model to estimate the volatility of our target price.
The results showed that there is only 10% chance for a recommendation of sell and
hold, and a 90% probability of gain (Appendix 47).
Strategic risks:
Expansion into new markets: There are rumors concerning potential expansion to
other markets, so additional risks are foreseen. These may include legislative and
governments’ barriers, foreign exchange exposure, a more aggressive competition,
as well as uncertainty related to individual real estate market characteristics.
Unsuccessful transaction costs: The Group may incur substantial legal, financial
and other advisory expenses arising from unsuccessful transactions (such as the
withdrawal from the Victoria City Center development opportunity in 2012) which
Source: Transparency International may include expenses incurred in dealing with transaction documentation and legal,
accounting and other due diligence.
Competition:There is risk that consumers will increasingly use other shopping
channels, like e- & m-commerce; e-commerce share from total retail (1.3%) raised,
on average, 33% in the last three years.
20 February 2013 10
Appendix 1: Income Statement
Income Statement (€ m)
2007A 2008A 2009A 2010A 2011A 2012A 2013 F 2014 F 2015 F 2016 F 2017 F
Rental income 0.344 7.713 10.709 21.269 32.069 40.177 56.580 63.369 70.340 75.264 79.780
Property expenses (0.022) (1.398) (2.438) (5.045) (8.342) (9.744) (12.722) (14.248) (15.816) (16.923) (17.938)
SG&A (0.142) (0.499) (1.544) (1.991) (2.023) (3.805) (2.829) (3.168) (3.517) (3.763) (3.989)
Share-based payment expense 0.000 (0.082) (0.153) (0.525) (1.042) (0.997) (0.997) (0.997) (0.997) (0.997) (0.997)
Foreign exchange (loss)/gain 0.000 1.144 1.811 0.178 (0.476) (2.529)
Investment advisory fees (0.102) (0.571) (0.671) (0.703) 0.000 0.000
Fair value adjustment on investment property
0.000 (1.671) 0.575 1.112 3.011 6.450
and goodwill
Gains from investment+distributable income 11.111
Other operating income 10.264
Profit/(loss) before net finance
0.078 4.637 8.289 14.295 23.197 50.927 40.032 44.956 50.010 53.581 56.855
(expense)/income
Interest income 0.330 0.276 0.262 0.582 6.254 1.854 1.750 1.317 1.478 1.633 1.791
Interest expense (0.074) (2.239) (3.707) (6.489) (11.179) (14.428) (12.930) (18.282) (21.756) (25.277) (27.598)
Profits before taxes 0.334 2.673 4.843 8.388 18.272 38.352 28.853 27.991 29.733 29.937 31.048
Reported taxes (0.058) (1.204) (2.121) (1.477) 0.500 (5.249) (2.214) (1.781) (1.757) (1.575) (1.556)
Net income 0.276 1.469 2.722 6.911 18.772 33.104 26.638 26.210 27.976 28.362 29.491
20 February 2013 11
Appendix 2: Balance Sheet
Balance Sheet (€ m)
2007A 2008A 2009A 2010A 2011A 2012A 2013 F 2014 F 2015 F 2016 F 2017 F
Cash 33.651 4.419 12.277 23.847 55.065 87.512 65.851 73.924 81.651 89.529 95.336
Trade and other receivables 0.143 1.771 3.396 7.338 7.751 15.799 17.277 19.350 21.479 22.982 24.361
Investment property at fair value 21.718 78.628 139.222 300.899 316.393 393.966 514.361 576.084 639.454 684.216 725.268
Investment property under development 0.000 6.515 6.743 12.856 25.409 22.708 29.647 33.205 36.858 39.438 41.804
Other financial assets 0.000 0.005 1.091 1.387 7.250 14.803 14.803 14.803 14.803 14.803 14.803
Goodwill 0.000 2.386 4.415 13.850 13.351 13.189 15.431 17.283 19.184 20.526 21.758
Financial investments 81.865 81.865 81.865 81.865 81.865 81.865
Investment property held for sale 28.665
Total assets 55.512 93.724 167.144 360.177 425.221 658.507 739.236 816.514 895.294 953.360 1,005.196
Trade and other payables 2.402 3.268 6.028 7.657 5.251 12.985 16.953 18.988 21.077 22.552 23.905
Short-term debt 0.000 1.862 1.956 9.847 8.236 102.048 14.785 16.330 17.906 19.067 20.104
Tenant deposits 0.000 0.000 0.000 2.212 2.377 2.701 2.701 2.701 2.701 2.701 2.701
Long-term debt 0.000 32.751 77.970 168.564 156.630 117.100 295.072 352.408 410.519 448.700 480.318
Deferred tax liabilities 0.057 3.869 7.388 15.586 15.086 22.321 22.321 22.321 22.321 22.321 22.321
Other financial liabilities 0.000 0.575 1.082 1.224 2.382 7.730 7.730 7.730 7.730 7.730 7.730
Equity 53.054 51.398 72.719 155.087 235.259 393.622 379.674 396.036 413.041 430.289 448.117
Total liabilities and equity 55.512 93.724 167.144 360.177 425.221 658.507 739.236 816.514 895.294 953.360 1,005.196
20 February 2013 12
Appendix 3: Ratios Analysis
2007A 2008A 2009A 2010A 2011A 2012A 2013 F 2014 F 2015 F 2016 F 2017 F
Profitability
Return on Assets (ROA) 1.97% 2.09% 2.62% 4.78% 6.11% 3.81% 3.37% 3.27% 3.07% 3.01%
Return on Capital (ROC) 6.67% 6.95% 5.88% 6.32% 10.06% 6.15% 6.18% 6.23% 6.16% 6.16%
Return on Equity (ROE) 2.81% 4.39% 6.07% 9.62% 10.53% 6.89% 6.76% 6.92% 6.73% 6.71%
Return on Capital Employed (ROCE) 4.17% 5.32% 5.74% 9.07% 8.96% 7.02% 6.62% 6.77% 6.59% 6.58%
Cash Return on Capital Invested (ROCI) 9.02% 11.40% 9.22% 9.86% 12.94% 10.54% 11.35% 12.11% 12.45% 12.69%
Margin Analysis
Gross Margin 93.67% 81.87% 77.23% 76.28% 73.99% 75.75% 77.52% 77.52% 77.52% 77.52% 77.52%
SG&A Margin 41.34% 6.46% 14.42% 9.36% 6.31% 9.47% 5.00% 5.00% 5.00% 5.00% 5.00%
EBIT Margin 22.80% 60.11% 77.41% 67.21% 72.34% 126.76% 70.75% 70.94% 71.10% 71.19% 71.27%
Net Income Margin 80.21% 19.05% 25.42% 32.49% 58.54% 82.40% 47.08% 41.36% 39.77% 37.68% 36.97%
Efficiency
Total Asset Turnover 10.34% 8.21% 8.07% 8.17% 7.41% 8.10% 8.15% 8.22% 8.14% 8.15%
Fixed Asset Turnover 14.44% 9.27% 9.25% 9.78% 10.59% 11.78% 10.99% 10.94% 10.75% 10.70%
Liquidity
Current Ratio 14.07 1.21 1.96 1.58 3.96 0.88 2.41 2.45 2.47 2.54 2.56
Long Term Solvency
Total Debt/Equity 0.00% 67.34% 109.91% 115.04% 70.08% 55.67% 81.61% 93.11% 103.72% 108.71% 111.67%
Total Debt/Capital 0.00% 40.24% 52.36% 53.50% 41.20% 35.76% 44.94% 48.22% 50.91% 52.09% 52.76%
LT Debt/Equity 0.00% 63.72% 107.22% 108.69% 66.58% 29.75% 77.72% 88.98% 99.39% 104.28% 107.19%
LT Debt/Capital 0.00% 38.08% 51.08% 50.54% 39.15% 19.11% 42.79% 46.08% 48.79% 49.96% 50.64%
Total Liabilities/Total Assets 4.43% 45.16% 56.49% 56.94% 44.67% 40.23% 48.64% 51.50% 53.87% 54.87% 55.42%
LT Debt/ Total Assets 0.00% 34.94% 46.65% 46.80% 36.83% 17.78% 39.92% 43.16% 45.85% 47.07% 47.78%
EBIT / Interest Expense 105.22% 207.06% 223.59% 220.31% 207.50% 352.97% 309.61% 245.91% 229.87% 211.97% 206.01%
Total Debt/EBIT 0.00% 746.50% 964.21% 1248.08% 710.71% 430.32% 774.02% 820.23% 856.67% 873.01% 880.17%
ROE ROCI EBIT margin ROC Debt/capital D/E

REIT Industry -12.45% 0.00% 161.63% 14.58% 73.73% 280.63%
20 February 2013 13
Appendix 4: Income Statement (Common Size)
Income Statement (€)

2007A 2008A 2009A 2010A 2011A 2012A 2013 F 2014 F 2015 F 2016 F 2017 F
Rental income 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Property expenses 6.33% 18.13% 22.77% 23.72% 26.01% 24.25% 22.48% 22.48% 22.48% 22.48% 22.48%
SG&A 41.34% 6.46% 14.42% 9.36% 6.31% 9.47% 5.00% 5.00% 5.00% 5.00% 5.00%
Share-based payment expense 0.00% 1.06% 1.43% 2.47% 3.25% 2.48% 1.76% 1.57% 1.42% 1.32% 1.25%
Foreign exchange (loss)/gain 0.00% 14.83% 16.91% 0.84% 1.48% 6.30% 0.00% 0.00% 0.00% 0.00% 0.00%
Investment advisory fees 29.53% 7.40% 6.26% 3.31% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Fair value adjustment on investment
0.00% -21.66% 5.37% 5.23% 9.39% 16.06% 0.00% 0.00% 0.00% 0.00% 0.00%
property and goodwill
Profit/(loss) before net finance
22.80% 60.11% 77.41% 67.21% 72.34% 126.76% 70.75% 70.94% 71.10% 71.19% 71.27%
(expense)/income
Interest income 95.95% 3.58% 2.44% 2.74% 19.50% 4.61% 3.09% 2.08% 2.10% 2.17% 2.24%
Interest expense 21.67% 29.03% 34.62% 30.51% 34.86% 35.91% 22.85% 28.85% 30.93% 33.58% 34.59%
Profits before taxes 97.08% 34.66% 45.23% 39.44% 56.98% 95.46% 50.99% 44.17% 42.27% 39.78% 38.92%
Reported taxes 16.87% 15.61% 19.81% 6.94% 1.56% 13.06% 3.91% 2.81% 2.50% 2.09% 1.95%
Net income 80.21% 19.05% 25.42% 32.49% 58.54% 82.40% 47.08% 41.36% 39.77% 37.68% 36.97%
20 February 2013 14
Appendix 5: Balance Sheet (Common Size)
Balance Sheet (€)

2007A 2008A 2009A 2010A 2011A 2012A 2013 F 2014 F 2015 F 2016 F 2017 F
Cash 60.62% 4.71% 7.34% 6.62% 12.95% 13.29% 8.91% 9.05% 9.12% 9.39% 9.48%
Trade and other receivables 0.26% 1.89% 2.03% 2.04% 1.82% 2.40% 2.34% 2.37% 2.40% 2.41% 2.42%
Investment property at fair value 39.12% 83.89% 83.29% 83.54% 74.41% 59.83% 69.58% 70.55% 71.42% 71.77% 72.15%
Investment property under development 0.00% 6.95% 4.03% 3.57% 5.98% 3.45% 4.01% 4.07% 4.12% 4.14% 4.16%
Other financial assets 0.00% 0.01% 0.65% 0.38% 1.71% 2.25% 2.00% 1.81% 1.65% 1.55% 1.47%
Goodwill 0.00% 2.55% 2.64% 3.85% 3.14% 2.00% 2.09% 2.12% 2.14% 2.15% 2.16%
Total assets 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Trade and other payables 4.33% 3.49% 3.61% 2.13% 1.23% 1.97% 2.29% 2.33% 2.35% 2.37% 2.38%
Short-term debt 0.00% 1.99% 1.17% 2.73% 1.94% 15.50% 2.00% 2.00% 2.00% 2.00% 2.00%
Tenant deposits 0.00% 0.00% 0.00% 0.61% 0.56% 0.41% 0.37% 0.33% 0.30% 0.28% 0.27%
Long-term debt 0.00% 34.94% 46.65% 46.80% 36.83% 17.78% 39.92% 43.16% 45.85% 47.07% 47.78%
Deferred tax liabilities 0.10% 4.13% 4.42% 4.33% 3.55% 3.39% 3.02% 2.73% 2.49% 2.34% 2.22%
Other financial liabilities 0.00% 0.61% 0.65% 0.34% 0.56% 1.17% 1.05% 0.95% 0.86% 0.81% 0.77%
Equity 95.57% 54.84% 43.51% 43.06% 55.33% 59.77% 51.36% 48.50% 46.13% 45.13% 44.58%
Total liabilities and equity 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
20 February 2013 15
Appendix 6: NEPI Stock - Event Timeline
Monthly volume (shares) Share price (R)

7,000,000 7000
Acquisition: Proposed development: Proposed
Appointment of new non- Floreasca Business Victoria City Centre development: Galati
6,000,000 executive directors Park 6000
Fitch & Moody's:
Romania->investment Belrom Settlement
5,000,000 Potential grade 5000
acquisition- Acquisition: Retail
Braila Park Auchan Pitesti
4,000,000 4000
3,000,000 3000
2,000,000 2000
1,000,000 1000
0 0
Jun-09
Jun-10
Jun-11
Jun-12
Aug-09
Aug-10
Aug-11
Aug-12
Apr-09
Dec-09
Apr-10
Dec-10
Apr-11
Dec-11
Apr-12
Dec-12
Feb-10
Feb-11
Feb-12
Oct-12
Oct-09
Oct-10
Oct-11
20 February 2013 16
Appendix 7: Romania Macroeconomic Context
Romania has the 8th largest population in EU27, providing a market of reasonable size.
Table 1 - Populations of European Countries
Rank Country Population mid 2012 (millions)

1 Germany 81.8
2 France 63.6
3 United Kingdom 63.2
4 Italy 60.9
5 Spain 46.2
6 Ukraine 45.6
7 Poland 38.2
8 Romania 21.4
9 Netherlands 16.7
10 Belgium 11.1
11 Greece 10.8
12 Portugal 10.6
13 Czech Republic 10.5
14 Hungary 9.9
15 Sweden 9.5
16 Austria 8.5
17 Bulgaria 7.2
18 Denmark 5.6
19 Finland 5.4
20 Slovakia 5.4
21 Ireland 4.7
22 Lithuania 3.2
23 Slovenia 2.1
24 Latvia 2
25 Estonia 1.3
26 Cyprus 1.2
27 Luxembourg 0.5
Source: Population Reference Bureau 2012
20 February 2013 17
According to the IMF estimates for 2012, Romania had the 74th largest GDP per capita in the world.
Table 2 – World GDP per capita
Rank Country Q1 2012 estimates ($)
1 Qatar 106,283.96
2 Luxembourg 79,649.49
7 United States 49,601.41
19 Germany 38,695.94
29 Spain 30,315.48
30 Italy 30,132.59
69 Bulgaria 14,020.60
74 Romania 12,843.14
79 South Africa 11,273.08
Source: International Monetary Fund
Bucharest is by far the largest city in Romania, trailed by other 18 cities with population between 100,000 – 350,000.
Moreover, it is amongst the largest European cities – ranking 10th by population size.
Table 3 –European Cities’ Populations Table 4 – Cities in Romania of over 100,000 inhabitants (2011)
City Population (thousands) City Population City Population
London 8,174 Bucharest 1,677,985 Braila 168,389

3,501 Cluj-Napoca 309,136 Pitesti 148,264
Berlin
Timisoara 303,708 Arad 147,992
Madrid 3,284 Iasi 263,410 Sibiu 137,026
Rome 2,799 Constanta 254,693 Bacau 133,460
Paris 2,234 Craiova 243,765 TarguMures 127,849
Hamburg 1,802 Galati 231,204 Baia Mare 114,925
Budapest 1,740 Brasov 227,961 Buzau 108,384
Ploiesti 197,542 Botosani 100,899
Vienna 1,730
Oradea 183,123
Warsaw 1,711 Source: Romanian Statistical Yearbook, end 2011
Bucharest 1,677
Barcelona 1,621
Munich 1,378
Milan 1,350
Source: United Nations
20 February 2013 18
Appendix 8: Global Transparency Index
Based on Jones Lang LaSalle’s Global Transparency Index, in June 2012, Romania was ranked 40 th out of 97
surveyed countries, being classified as semi-transparent in regards to regulatory and legal processes, transaction
process, performance measurement and listed vehicles. It is slightly less transparent than countries like Poland, Italy,
South Africa, Austria and Czech Republic.
Source: Jones Lang LaSalle
20 February 2013 19
Appendix 9: Global Competitiveness Report
According to WEF’s Global Competitiveness Report in June 2012, Romania is at an efficiency-driven stage of
development. At this point, the competitiveness is increasingly driven by pillars such as higher education and training,
efficient goods markets, well-functioning labor markets, developed financial markets and other. The next logical step
is for Romania to develop more efficient production processes and to increase product quality. The most problematic
factors for doing business in Romania are represented by the level of corruption, tax rates and regulations, inefficient
government bureaucracy and access to financing.
Source: World Economic Forum
20 February 2013 20
Appendix 10: GDP/capita and Household consumption/capita growth across Europe
2005 2012
Household
GDP per Household Household GDP
Country GDP per consumption
capita consumption per consumption per CAGR
capita (€) CAGR
(€) capita (€) capita (€)
Slovakia 8,902 7,837 16,726 13,104 9.4% 7.6%

Latvia 6,910 6,763 13,316 11,216 9.8% 7.5%
Norway 65,646 39,955 99,316 63,175 6.1% 6.8%
Lithuania 7,644 7,682 12,873 11,771 7.7% 6.3%
Poland 7,963 6,820 12,302 10,384 6.4% 6.2%
Bulgaria 3,753 3,667 6,974 5,575 9.3% 6.2%
Estonia 10,319 8,011 15,987 11,849 6.5% 5.8%
Czech Republic 12,726 9,303 18,337 13,702 5.4% 5.7%
Romania 4,589 4,285 8,029 6,305 8.3% 5.7%
Sweden 41,369 30,912 54,879 42,586 4.1% 4.7%
Malta 14,831 12,854 19,740 17,484 4.2% 4.5%
Luxembourg 81,163 39,613 105,720 53,874 3.8% 4.5%
Finland 37,316 28,494 45,545 38,305 2.9% 4.3%
Slovenia 17,857 13,514 22,461 18,092 3.3% 4.3%
Belgium 36,187 26,893 43,175 34,883 2.6% 3.8%
Austria 37,143 28,137 46,330 35,380 3.2% 3.3%
Denmark 47,617 36,429 55,448 45,170 2.2% 3.1%
Spain 26,102 19,676 28,976 23,761 1.5% 2.7%
France 35,107 27,972 40,690 33,759 2.1% 2.7%
Netherlands 39,190 29,352 45,942 35,146 2.3% 2.6%
Germany 33,603 27,810 41,168 32,851 2.9% 2.4%
Italy 30,607 24,680 32,522 27,797 0.9% 1.7%
Hungary 10,925 9,128 12,934 9,827 2.4% 1.1%
Portugal 18,252 16,586 19,768 17,562 1.1% 0.8%
United Kingdom 38,159 33,227 38,591 34,918 0.2% 0.7%
Greece 21,737 19,836 22,757 20,832 0.7% 0.7%
Ireland 49,133 29,086 44,781 30,509 -1.3% 0.7%
Average 27,583 20,316 34,270 25,919 4.0% 3.9%
Source: Eurostat, IMF, Team’s Analysis
20 February 2013 21
Appendix 11: Consumer Confidence Index
Jan-05
Jan-03
Jan-04
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
0
-10
-20
EU
-30
Units
Romania
-40
-50
-60
-70
Appendix 12: Retail Trade Confidence Index
30
20
10
0 EU
Jan-06
Jan-12
Jan-03
Jan-04
Jan-05
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-13
Romania
-10
-20
-30
20 February 2013 22
Appendix 13: European Investments by Sector
Other markets
18%
Industrial market
7% Office market
50%
Retail market
25%
Source: CBRE Research, Q3 2012
Appendix 14: Monthly Trade Turnover in Romania
Source: National Institute of Statistics
20 February 2013 23
Appendix 15: Shopping Center Densities across Europe
Source: Cushman & Wakefield, Q3 2012
20 February 2013 24
Appendix 16: European Shopping Center Pipeline H2 2012-2013
According to Cushman & Wakefield, the shopping center pipeline in Romania for H2 2012-2013 is expected to be
around 250,000sqm, being ranked 10th across all of Europe.
Source: Cushman & Wakefield
20 February 2013 25
Appendix 17: Completion of Modern Shopping Centers in Romania
1% 0% 2% 1999
2% 1%
3% 2000
6%
2001
10% 5% 2002
2003
8% 10% 2004
2005
2006
12% 2007
16%
2008
2009
2010
24%
2011
2012
Appendix 18: Shopping Center Densities across Romania

Sq m per 1000 inhabitants
1200
1000
800
600
400
200
20 February 2013 26
Appendix 19: Shopping Center Rents and Yields across Europe
Short term yield

Country Rent (€/sqm/year) Prime yield (%)
outlook
Romania 280-660 8.50-9.75 ▼

Slovakia 585-720 7.25-8.00 ►
Hungary 600-1,080 6.75-7.75 ►
Italy 500-800 6.25-7.50 ►
Netherlands 650-900 6.25-7.15 ►
Spain 700-1,080 6.25-6.75 ►
Poland 550-1,000 6.00-6.75 ▼
Austria 800-1,350 6.00-6.50 ►
U.K 1,465-2,100 5.50-6.50 ▲
Belgium 800-1,400 5.35-6.00 ►
France 1,400-2,000 5.00-5.75 ►
Sweden 590-880 5.00-5.75 ►
Denmark 500-1,150 5.00-5.50 ►
Germany 1,250-1,680 4.80-5.80 ►
Appendix 20: Shopping Center and High Street Prime Rents in Romania
According to Jones Lang LaSalle, the prime rents in Bucharest for shopping center and high street spaces has recorded
a downtrend, decreasing from an average of just over 100 €/sqm/month in 2008 to an average of just over 60
€/sqm/month in Q3 2012.
Shopping Center Prime Rents High street Prime Rent Band

Year
Band (€/sqm/month) (€/sqm/month)
2012/Q3 60-70 60-65

2011 65-70 65-70
2010 65-80 60-70
2009 70-85 60-75
2008 100-115 95-115
Source: Jones Lang LaSalle, Q3 2012
Looking at the rents for prime high street spaces in other large Romanian cities, it can be observed that they are
situated at lower levels than in Bucharest, thus being attractive opportunities for future retail development.
Growth %
High street shops €/sqm/month €/sqm/annum
1y CAGR 5y CAGR
Brasov 40 480 8.1 -2.3

Timisoara 35 420 0.0 -4.9
Constanta 20.0 240 -25.9 -15.0
Cluj-Napoca 37.0 444 5.7 -10.7
20 February 2013 27
Appendix 21: Retail Scene in Romania
Romania has become a very attractive market for large and international retailers, which have identified the upward
trend of retail sales growth in our country. Moreover, this potential has determined them to look into intensifying their
presence in our market.
Major Domestic Food Retailers

Regional chains of supermarkets such as: Unicarm, Carmolimp, Angst, Succese
Major International Food Retailers

Kaufland, Carrefour, Real, Cora, Auchan, Metro Cash & Carry, Selgros Cash & Carry, Billa, Mega Image,
Profi, Lidl, Penny Market
Major Domestic Non-Food Retailers

Dedeman, Leonardo, House of Art, Altex, Diverta, Domo, Flanco, Nissa
International Retailers in Romania (selection)

Inditex Group (Zara, Bershka, Pull & Bear, Stradivarius, Oysho, Zara Home, Massimo Dutti), H&M, C&A,
New Yorker, Takko, LC Waikiki, Intersport, Hervis, Decathlon, Nike, Deichmann, Humanic, Sephora,
Douglas, Ikea, Praktiker, OBI, BauMax, Bricostore
Food & Beverage Operations

McDonalds, KFC, Pizza Hut, Subway, Starbucks, Nord See, Paul Bakery, Pizza Dominium, Gloria Jeans
Coffee, Spring Time
Source: Cushman & Wakefield, 2012/2013
Appendix 22: EMEA Office Market Rent Cycle
20 February 2013 28
Appendix 23: Prime Office Rents across European Cities
London West End 1261

Zurich 812
Paris CBD 770
London City 756
Oslo 545
Stockholm 513
Luxembourg 480
St. Petersburg 417
Rome 400
Frankfurt 396
Munich 372
Amsterdam 335
European Cities
Dublin 323
Warsaw 300
Helsinki 300
Madrid 291
Hamburg 288
Brussels 285
Berlin 264
Prague 252
Copenhagen 241
Budapest 240
Stuttgart 222
Lisbon 222
Bucharest 222
Barcelona 216
Athens 204
€/sq.m/annum
20 February 2013 29
Appendix 24: Prime Office Yields across European Cities
12
10
Prime office yields %
Appendix 25: Prime Office Occupancy Costs
Total Occupancy Cost Change last 12 months

Main European Cities
(€/sqm/annum) (%)
London West End 1,864 8.3

London City 1,118 8.7
Paris CBD 1,002 0.1
Zurich 736 -4.6
Luxembourg 652 0
Stockholm 639 9.2
Frankfurt 555 0
Oslo 543 10
Rome 495 -2.2
Munich 465 5.4
Warsaw 440 3.1
Brussels 436 0
Madrid 434 -1.6
Dublin, Ireland 434 -5.9
Helsinki 422 3.8
Amsterdam 411 -0.3
Prague 396 0
Athens 368 -9.5
Hamburg 350 3.8
Copenhagen 339 -0.6
Budapest 323 0
Berlin 306 0
Lisbon 297 0
Bucharest 291 -2
Barcelona 290 -3.4
* Occupancy costs include service charges and taxes and are standardized on a net internal area basis
20 February 2013 30
Appendix 26: Bucharest Office Market Overview
According to CBRE’s research, half of Bucharest’s office space is occupied by technology and telecom companies,
followed by manufacturing (20%) and professional services (15%) companies.
Others
Medical sector
3%
5%
Public sector
7%
Profesional Technology
Services &Telecom
15% 50%
Manufacturing
20%
Jones Lang LaSalle’s report on the office market in Bucharest indicates a general trend towards the occupancy of
office spaces, even though the average vacancy rate is 13.25%.
Vacancy
Prime Headline Rent
Submarket Vacancy Rate rate
(€/sqm/month)
Q-Q
North 16-18 10% ►

Pipera 11-14 25% ▲
CBD 18-19 13.70% ▲
Center 14-17 14% ►
West 12-16 7% ▼
South 10-12.5 5% ▼
East 11-12.5 18% ▼
Average 13-15.5 13.25% ▼
20 February 2013 31
Appendix 27: Prime Industrial Rents and Yields across Europe
180 16
160 14
140
12
120
10
€/sq.m/annum
100
%
8
80
6
60
4
40
20 2
0 0
Prime industrial rents (€/sqm/annum) Prime industrial yields(%)
Appendix 28: Industrial Take-up in Romania
Cluj Napoca
37%
Bucharest
40%
Brasov
7%
Timisoara
Ploiesti 5%
Baia Mare Sibiu Iasi 4%
2% 2% 3%
Source: Jones Lang LaSalle, H1 2012
20 February 2013 32
Appendix 29: NEPI’s Major Assets
Source: Company data, Team’s analysis
20 February 2013 33
Appendix 30: SWOT Analysis
STRENGTHS WEAKNESSES
 Experienced internal management with large  Access to bond funding is limited

shareholdings in the company  Small company globally (m/cap EUR <1bn), and certain
 Management compensation scheme institutional investors only invest in large companies
 Contractual rental income with a high percentage of large (m/cap EUR >1bn)
international tenants
 Interest rate hedge policy
 Developments near existing multinational hypermarkets
 Easy access to equity funding
OPPORTUNITIES THREATS
 Low-cost debt funding  Recent GFC hinders revenue growth

 Competition for assets is low, due to tight funding  Romanian pension funds are restricted from investments
markets in real estate, as of Jan 2013
 Exploring opportunities in new markets from the CEE  Fluctuations on the foreign exchange market
region  Equity risk for investments in short-term securities
 Exploiting distressed acquisitions
20 February 2013 34
Appendix 31: Competitive Assessment
Competitive positioning is carried out with the Key Success Factors analysis – using the Key Performance Indicators
methodology. We identified the main drivers that lead to the company’s success (KSF) and then we provided
measures (KPI) for each KSF to assess the Group’s competitive position, relative to its main competition. NEPI’s
competitors include Iulius Group, AFI Europe, S Immo, Immofinanz and Argo Real Estate, of which only Iulius
Group is focused only on the Romanian market. Iulius Group and Immofinanz are NEPI’s main competitors – the first
has 5 operational commercial centers, and the latter has 6 commercial centers and 9 office properties in Romania.
Immofinanz
KSF KPI NEPI Iulius Group
Group
Professionalism of # yrs. of experience in
40+ 18 20+
Management industry
Strategic focus (Y/N) Yes Yes No
Internal management
Yes Yes Yes
(Y/N)
Directors are
Yes No No
shareholders (Y/N)
Access and Location Retail*
in the City Ease of access to
Yes Yes Yes
transport (Y/N)
Expansion capability
Yes No Yes
(Y/N)
# larger shopping centers
1 1 1
on a 15 km radius
Office
Proximity to city
center/business center Yes Yes Yes
(Y/N)
Proximity to public
transportation point Yes Yes Yes
(Y/N)
Liquidity Tenant default risk
Yes Yes Yes
mitigants** (Y/N)
Practical cash
>1 <1 <1
management (quick ratio)
Capitalization Listed on stock exchange Yes No Yes
% large strategic
53 - 48
shareholders
** A more in-depth analysis of the retail assets is presented in Appendix 32
** Mitigants include monthly tenant performance review & comparisons in order to forecast tenant defaults, as well as
ESCROW warranties.
20 February 2013 35
Appendix 32: Comparative Retail Assets’ Access and Location
In order to assess NEPI’s and its main competitors’ retail assets, we developed a methodology based on: ease of
access, location relative to the city, expansion capability and dominating position.
Access to Existing
shopping larger
Expansion
center by shopping
Company Property Location capability
(Foot / Car / centers on a
(Y/N)
Public 15 km radius
transport) (Y/N)
NEPI Promenada Car
Edge of city Yes No
Mall Braila Pub.tran.
Retail Park Car
Edge of city Yes No
Auchan Pitesti Pub.tran.
Ploiesti Car
Out of city Yes No
Shopping City Pub.tran.
Brasov Strip Car
Edge of city Yes Yes
Mall Pub.tran.
Iulius Group Foot
Palas Mall Iasi City center Car No No
Pub.tran.
Foot
Iulius Mall Iasi City center Car No Yes
Pub.tran.
Foot
Iulius Mall
City center Car No No
Timisoara
Pub.tran.
Iulius Mall Car
Edge of city Yes No
Cluj Pub.tran.
Iulius Mall Car
Out of city Yes No
Suceava Pub.tran.
Immofinanz Group Maritimo
Shopping Car
Edge of city Yes No
Center Pub.tran.
Constanta
Polus Car
Out of city Yes No
CenterCluj Pub.tran.
Euromall Car
Edge of city Yes Yes
Pitesti Pub.tran.
Gold Plaza Car
Edge of city Yes No
Baia Mare Pub.tran.
20 February 2013 36
Appendix 33: Porter’s Five Forces Analysis
Five Forces
Industry Retail Office Industrial
Analysis
Moderate Moderate Low to Moderate
- Large shopping centers - Main focus is on - High availability of

Rivalry among developers focus on Bucharest, where there is a industrial spaces
Competitors different cities large number of office
- Experienced management buildings
team provides competitive
advantage
Moderate Moderate to High Low
- Well positioned and - Relatively high number of - High switching costs for
Buyer Power dominant assets are office spaces available buyer
attractive to buyers - Consideration only of
strategic locations can
provide an advantage
Low to Moderate Low to Moderate Low
Supplier Power
- Plenty suppliers - Plenty suppliers - No shortage of suppliers
Low to Moderate Moderate Moderate to High
Threat of New Entrants - Limited access to debt - High capital requirements - Low barriers to entry
funding - High yielding industry
- High capital requirements
Low Low Low
- E-commerce convenience - Work from home - High switching costs for

Threat of Substitutes
stores buyer
- Investments in production
facilities in other countries
20 February 2013 37
Appendix 34: NEPI’s Portfolio Occupancy
NEPI Portfolio Occupancy (H2 2012)
Retail
Office Rented area

Vacant area
Industrial
- 50,000 100,000 150,000 200,000

sqm
NEPI Portfolio Occupancy (H2 2012)
Retail
96.70% 3.30%
Office
88.60% 11.40%
Industrial
98.59% 1.41%
0.00% 20.00% 40.00% 60.00% 80.00% 100.00%
Rented area Vacant area
20 February 2013 38
Appendix 35: NEPI’s Portfolio Profile
NEPI’s Portfolio Geographical Profile by Gross Rentals (Q4 2011)
5%
Romania
Germany
95%
Source: Company data
NEPI’s Portfolio Sectorial Profile by Gross Rentals (Q4 2011)
5%
46% Retail
Office
49%
Industrial
20 February 2013 39
Appendix 36: DCF Valuation
NOPLAT statement (€m )

2007A 2008A 2009A 2010A 2011A 2012A 2013 F 2014 F 2015 F 2016 F 2017 F
Rental income 0.344 7.713 10.709 21.269 32.069 40.177 56.580 63.369 70.340 75.264 79.780
Property expenses (0.022) (1.398) (2.438) (5.045) (8.342) (9.744) (12.722) (14.248) (15.816) (16.923) (17.938)
SG&A (0.142) (0.499) (1.544) (1.991) (2.023) (3.805) (2.829) (3.168) (3.517) (3.763) (3.989)
Share-based payment expense 0.000 (0.082) (0.153) (0.525) (1.042) (0.997) (0.997) (0.997) (0.997) (0.997) (0.997)
Investment advisory fees (0.102) (0.571) (0.671) (0.703) 0.000 0.000
Foreign exchange (loss)/gain 0.000 1.144 1.811 0.178 (0.476) (2.529)
Fair value adjustment on investment property and
0.000 (1.671) 0.575 1.112 3.011 6.450
goodwill
Gains from investment+distributable income 11.111
Other operating income 10.264
ADJUSTED EBIT 0.078 4.637 8.289 14.295 23.197 50.927 40.032 44.956 50.010 53.581 56.855
Operating taxes (0.046) (0.846) (1.528) (0.439) 2.289 (5.093) (4.003) (4.496) (5.001) (5.358) (5.686)
NOPLAT 0.032 3.791 6.761 13.856 25.486 45.834 36.029 40.460 45.009 48.223 51.170
After-tax interest income 0.277 0.232 0.220 0.489 5.253 1.557 1.470 1.106 1.242 1.372 1.504
After-tax interest expense (0.063) (1.881) (3.114) (5.450) (9.391) (12.120) (10.861) (15.357) (18.275) (21.233) (23.183)
NET INCOME 0.247 2.142 3.867 8.895 21.349 35.272 26.638 26.210 27.976 28.362 29.491
FCF statement (€)

2007A 2008A 2009A 2010A 2011A 2012A 2013 F 2014 F 2015 F 2016 F 2017 F
NOPLAT 0.032 3.791 6.761 13.856 25.486 45.834 36.029 40.460 45.009 48.223 51.170
Decrease (increase) NWC 30.332 (6.629) (3.781) (35.483) (20.489) 18.753 (6.566) (6.192) (6.745) (4.796)
FCF 34.123 0.132 10.076 (9.997) 25.345 54.782 33.894 38.817 41.478 46.374
20 February 2013 40
Valuation DCF (€ m )
2007A 2008A 2009A 2010A 2011A 2012 A 2013 F 2014 F 2015 F 2016 F 2017 F
FCF 54.782 33.894 38.817 41.478 46.374
Continuing value 1,224.40
Discount
factor 0.935 0.875 0.819 0.766 0.716
Present value of FCF and CV 51.246 29.659 29.723 29.710 910.238
Sum of present values 1,050.576
Enterprise value,
gross 1,050.576
Debt (117.100)
Value of
equity 933.476
No. of
shares 144.362
Price per share 6.466
Appendix 37: DDM Valuation
2012A 2013F 2014F 2015F 2016F 2017F Market Assumptions
Dividends (€) 0.23 0.27 0.31 0.35 0.41 0.47 Risk free rate 3.90%
Terminal value 7.90
Market Risk Premium 5.80%
Discount factor 0.91 0.83 0.76 0.69 0.63
PV 0.22 0.23 0.24 0.26 5.24 Levered Beta 1.02
Price (€) 6.20 Cost of Equity 9.82%
Dividend Growth Rate 15.00%
Growth Rate (perpetuity) 3.00%
20 February 2013 41
Appendix 38: SOTP Valuation

Weighted Weighted
Rentable area 2012 Rental 2013 Rental
Name Ownership average rental average
(sqm) income (€ m) income (€ m)
(€) vacancy (sqm)
RETAIL PORTFOLIO
Promenada Mall Braila 100% 53,000 8.49 3.7% 5.417 5.417
Retail Park Auchan Pitesti 100% 43,100 10.54 5.0% 5.179 2.984
Leipzig 50% 5,864 9.69 0.0% 0.341 0.341
Bruckmühl 50% 5,889 7.07 0.0% 0.250 0.250
Mölln 50% 5,510 5.67 0.0% 0.187 0.187
Bucarest 100% 838 56.65 0.0% 0.570 0.570
Brasov 100% 5,290 11.69 0.0% 0.742 0.742
Eilenburg 50% 3,727 7.88 0.0% 0.176 0.176
Frankfurt 50% 1,088 14.50 0.0% 0.095 0.095
Iasi 100% 193 37.58 0.0% 0.087 0.087
Bacau 100% 150 41.92 0.0% 0.075 0.075
Ploiesti Shopping City 50% 46,000 8.93 0% 0.308 2.465
OFFICE PORTFOLIO
Floreasca Business Park 100% 36,032 19.35 0.0% 8.367 8.367
Munich 50% 2,222 14.83 0.0% 0.198 0.198
Brasov 100% 6,720 6.30 50.6% 0.251 0.251
Zalau 100% 3,460 6.17 28.9% 0.182 0.182
Craiova 100% 2,486 6.82 0.0% 0.203 0.203
Galati 100% 2,814 4.78 4.2% 0.155 0.155
Buzau 100% 2,422 6.32 0.0% 0.184 0.184
Baia Mare 100% 2,406 4.88 7.1% 0.131 0.131
Slatina 100% 2,767 5.22 12.3% 0.152 0.152
Alba Iulia 100% 2,366 4.51 20.1% 0.102 0.102
Targoviste 100% 2,373 4.90 25.9% 0.103 0.103
Sfantu Gheorghe 100% 2,349 5.94 3.6% 0.161 0.161
TarguMures 100% 2,033 2.11 38.3% 0.032 0.032
Timisoara A, B 100% 16,632 13.93 10% 2.502 2.502
Timisoara C 100% 10,519 11.79 30% 0.347 1.042
Deva 100% 1,860 7.25 0.0% 0.162 0.162
Slobozia 100% 1,907 5.53 8.1% 0.116 0.116
20 February 2013 42
Calarasi 100% 1,421 7.49 1.0% 0.126 0.126
Resita 100% 1,322 7.35 0% 0.117 0.117
Sibiu 100% 900 1.71 0% 0.018 0.018
Alexandria 100% 975 7.33 0% 0.086 0.086
Lakeview Bucharest 100% 25,564 16.07 0% - 4.108
INDUSTRIAL PORTFOLIO
Rasnov industrial facility 100% 23,040 4.33 2% 1.177 1.177
Otopeni warehouse 100% 4,802 8.84 0% 0.509 0.509
DEVELOPMENTS Expected completion
Victoriei office 100% 4,400 20.00 06. 2014
Timisoara 100% 20,000 12.00 2013
Cluj A 100% 18,082 10.00 spring 2014
Cluj B, C 100% 36,118 10.00 2015
Galati 100% 50,000 8.50 2014
OTHER PROPOSED DEVELOPMENTS/ NEGOCIATIONS
Bucarest- Vulcan 25,500 15.00 2014
Brasov 65,000 10.00 2014
5* Land adjacent to Kaufland (Alexandria, Sf
Gheorghe) 12,000 9.00 2015
Land adjacent to Promenada mall Braila 1,900 8.49 2014
20 February 2013 43
SOTP - price calculation

2012 A 2013 F 2014 F 2015 F 2016 F 2017 F
Growth rate 5% 8% 10% 10%
Rental income 28.810 39.305 59.891 71.383 78.522 86.374
Operating expenses (9.744) (9.031) (13.761) (16.401) (18.041) (19.845)
Administrative expenses (3.805) (1.965) (2.995) (3.569) (3.926) (4.319)
Net rental profit 15.260 28.309 43.136 51.413 56.554 62.210
Discount factor 0.935 0.875 0.819 0.766 0.716

Sum of PV 26.482 37.747 42.085 43.305 44.560
Perpetuity 901.442
Total Value 1,095.621
WACC 0.069
No. of shares (m) 144.362
Price per share 7.589
20 February 2013 44
Appendix 39: Multiples Valuation
Enterprise value
Company Industry Equity value (€ m) Debt (€ m) Raw beta world 5y m Debt/equity ratio
(€ m)
Corio NV REIT 4140.10 3176.60 7316.70 1.21 0.77
Eurocommercial Properties NV REIT 1370.15 0.00 1370.15 0.60 0.00
Vastned Retail NV REIT 1049.86 928.35 1978.21 0.75 0.88
Unibail-Rodamco SE REIT 13055.50 10006.00 23061.50 1.02 0.77
Klepierre REIT 342322.10 695517.10 1037839.20 1.22 2.03
EV/EBITDA-multiple EV/EBIT-multiple
Company
2011A 2012A 2013F 2011A 2012A 2013F
Corio NV 19.2 19.0 19.0 19.5 19.1 19.2
Eurocommercial Properties NV 10.4 10.2 10.0 10.4 10.2 10.0
Vastned Retail NV 21.2 20.7 20.3 21.2 20.7 20.3
Unibail-Rodamco SE 18.7 17.6 16.4 18.7 17.7 16.4
Klepierre 11.9 11.7 11.4 18.7 18.3 17.9
Company Country Portfolio

Corio NV Netherlands Retail 97%, Office 3%
Eurocommercial Properties NV Netherlands Retail 100%
Vastned Retail NV Netherlands Retail 100%
Unibail-Rodamco SE France Retail 75%, Office 20%, Other 5%
Klepierre France Retail 96%, Other 4%
20 February 2013 45
Appendix 40: NAV Valuation
Assumed 12-Month Current

Capitalized Income
Cap Rate Forward NOI Value
NOI Contribution from
Investment Property 9% 39 416.67
Balance Sheet % of BS Current

Balance Sheet (€m)
Value Value Value
Non-Operating Real Estate Assets

Construction in Progress 22.71 120% 27.25
Other Balance Sheet Assets

Cash & Cash-Equivalents 87.51 100% 87.51
Accounts Receivable, Net 15.80 100% 15.80
Prepaid Expenses & Other Assets 14.73 100% 14.73
Financial assets at fair value through profit or loss 0.08 100% 0.08
Investment property held for sale 28.67 100% 28.67
Financial investments 81.87 100% 81.87
Total Asset Value 672.57
Liabilities
Short-term Loans and borrowings 102.05 100% 102.05
Accounts Payable 12.99 100% 12.99
Tenant deposits 2.70 100% 2.70
Long-term debt 117.10 100% 117.10
Other liabilities 30.05 100% 30.05
Total Liabilities Value 264.89
Net Asset Value 407.68

Total Diluted Shares & Units Outstanding 144.36
Net Asset Value Per Share 2.82
Current Stock Price 5.18

Premium / (Discount) to NAV Per Share 83%
20 February 2013 46
Appendix 41: F-score and Z-score
F-score factors*
1. Is net income positive? 1
2. Is operating cash flow positive? 1
3. Is operating cash flow > net income? 1
4. Has return on assets increased (from the prior year)? 1
5. Has gross margin improved? 1
6. Has asset turnover improved? 0
7. Has LT Debt / Total Assets decreased? 1
8. Has the current ratio improved? 0
9. Has there been no new equity issuance? 0
6
* Questions 6 and 8 are irrelevant for the real estate industry.
Z-score Components Explanation

T1 Working Capital/Total Assets
T2 Retained Earnings/Total Assets
T3 EBIT/Total Assets
T4 Book Value of Equity/Total Liabilities
Z-score model: Z= 6.56 T1+ 3.26 T2 +6.72 T3+ 1.05 T4

Z> 2.6 “Safe” zone
1.1<Z<2.6 “Gtey” zone
Z< 1.1 “Distress” zone
Appendix 42: NEPI’s 10 Largest Shareholders
Shareholder Name Beneficial Shareholdings % of issued shares

Resilient Property Income Fund 21,517.635 14.91%
Fortress Income Fund 16,900.000 11.71%
Hero Nominees Ltd. 15,246.219 10.56%
Martin Slabbert 5,565.529 3.86%
Des de Beer 5,204.554 3.61%
Chataprop Holdings 4,106.611 2.85%
Stanlib Property Equity Fund 2,624.394 1.82%
RCG Trade &Finance (Pty) Ltd 2,233.371 1.55%
Investec Property Equity Fund 2,106.874 1.46%
Sakhisizwe Investment Hldgs
1,841.211 1.28%
(Pty)Ltd
TOTAL 77,349.398 53.58%
Shareholding Details
Authorized shares 300,000,000
Total shares in issue 144,362,152
Shares not in public hands 50%
20 February 2013 47
Appendix 43: Risk Matrix
-Credit risk - Economic

volatility
- Competition
- Political instability
Impact High
- Limited expansion - Unsuccessful

opportunities transaction costs
- Valuation risks
- Foreign exchange - New REIT regime

risk in South Africa
- Interest rate risk - Corruption
Low
Low Probability High

High
20 February 2013 48
Appendix 44: Corporate Governance Analysis
1. Structure and process 2/2
A report by the chairman of how the QCA guidelines are applied to provide for the company’s long- 1
term success.
The number of meetings of the board and of the committees and individual directors’ attendance at 1
them
2. Responsibility and accountability 2/3
A statement of how the board operates to set, develop and execute the company’s strategy 1
A description of the chairman’s and chief executive’s roles and responsibilities. 0
A list of matters reserved for the board 1
PANEL A. Flexible, efficient and effective management
3. Board balance and size 2/3
The identity of all the directors and their roles and committee memberships. 1
The identity of those directors the board considers to be independent and the reasons why it has 1
determined a director to be independent notwithstanding factors which may appear to impair that
status.
The terms and conditions of appointment of nonexecutive directors. 0
4. Board skills and capabilities 3/3
The relevant skills and experience that the executive and nonexecutive directors bring to the board 1
The audit, remuneration and nomination committees’ terms of reference explaining their roles and the
authority delegated to them by the board. 1
A brief description of each committees’ work
1
5. Performance and development 1/2
A description of any board performance evaluation procedures that the board applies, focusing on its 1
objectives and outcomes
An explanation of the role of any external advisors to the board or its committees and any internal 0
advisory responsibilities
6. Information and support 1/1
An explanation of the role of any external advisers to the board or its committees. -
A brief summary of information received by the board and by individual committees. 1
7. Cost-effective and value-added 1/1
A summary of risk management and internal control systems and activities, and explanation of how 1
these relate to strategy and link into key performance indicators, remuneration policies and CSR
activities.
8. Vision and strategy 1/1
A Business Review detailing strategy and how this is communicated to and brought into all areas of 1
PANEL B. Enterpreneurial
the business.
9. Risk management and internal control 1/4
management
An audit committee report explaining the major tasks and demonstrating how independent oversight 1
of both management and external auditors has been exercised.
A summary of risk management and internal control systems, and explanation of how these relate to
strategy, KPIs, remuneration policies and CSR activities. 0
An explanation to shareholders of how auditor objectivity and independence is safeguarded,
particularly if the auditor provides significant non-audit services. 0
A remuneration committee report explaining how the company’s remuneration practices align the
interests of senior management with those of shareholders. 0
20 February 2013 49
10. Shareholders’ needs and objectives 1/1

PANEL C. Delivering growth for
shareholders long-term wealth
Where votes at a general meeting are by show of hands, the votes by proxy received by the company, 1
including abstentions or votes withheld, should be reported as soon as practicable after the meeting.
Where votes are conducted on a poll the actual votes, including votes withheld or abstentions, should
be reported as soon as practicable after the poll.
11. Investor relations and communication: 1/1
The annual report and other governancerelated material, including notices of general meetings 1
12. Stakeholder and social responsibilities 1/1
A summary of risk management and internal control systems and activities, and explanation of how 1
these relate to strategy and link into key performance indicators, remuneration policies and CSR
activities.
PANEL A. Flexible, efficient and PANEL B. Entrepreneurial PANEL C. Delivering growthfor
effective management management shareholders long-term wealth
3- 3+
3- 2+
12+
Source: Team’s Analysis, Quoted Companies Alliance Corporate Governance Guidelines for Smaller Quoted Companies
20 February 2013 50
Appendix 45: Sensitivity Analysis
Table 1. Sensitivity Analysis DCF
Price per share (€) - DCF

Growth WACC
6.5 0.059 0.064 0.069 0.074 0.079
0.010 5.41 4.83 4.35 3.94 3.59
0.020 6.75 5.89 5.20 4.64 4.17
0.030 9.01 7.56 6.46 5.65 4.99
0.040 13.64 10.63 8.66 7.26 6.23
0.050 28.55 18.08 13.12 10.22 8.32
Table 2. Sensitivity Analysis NAV
NAV per share

Construction in progress(%BS) Capitalization rate
2.82 0.084 0.089 0.094 0.099 0.104
1.10 3.15 2.97 2.81 2.66 2.53
1.15 3.16 2.98 2.82 2.67 2.54
1.20 3.17 2.99 2.82 2.68 2.55
1.25 3.18 2.99 2.83 2.69 2.55
1.30 3.18 3.00 2.84 2.69 2.56
The NAV per share is sensitive to the construction in progress

ratio and capitalization ratios. Therefore, we ran a sensitivity
analysis, and we obtained a NAV per share between €2.53-3.18.
20 February 2013 51
Appendix 46: Reward to Risk Ratios
Table 1. Reward to Risk Ratios
Computations Jensen Alpha

Covariance 0.000013382
Variance market portfolio 0.0000
Beta 0.7017
Risk-free rate 3%
Daily risk-free rate 0.012%
Dummy value α 0.35%
Least squares method (LSM)

Sum of squared differences 0.001374774
Alpha (estimated using LSM) 1.41
Treynor ratio
Risk-free rate monthly 0.25%
Average monthly return Nepi 0.49%
Ratio 0.0034
Sharpe ratio
Standard deviation 0.008892005
Ratio 0.268
Risk adjusted performance

0.116033846
(Modigliani)
Table 2. Peer Comparison
Company Sharpe Ratio Jensen α Treynor ratio

Corio NV 0.220 0.209 0.252
Eurocommercial Properties NV 0.260 0.000 0.000
Vastned Retail NV 0.000 0.000 0.000
Unibail-Rodamco SE -1.850 0.000 0.000
Klepierre -0.080 -0.010 -0.160
New Europe Property Investments 0.270 1.410 0.003
20 February 2013 52
Appendix 47: Monte Carlo Simulation
0.45
SELL- 1% HOLD - 9% BUY - 90%
0.40
0.35
0.30
0.25
0.20
0.15
0.10
0.05
0.00
3.7 4.0 4.3 4.6 4.9 5.2 5.5 5.8 6.1 6.4 6.7 7.0 7.3 7.6 7.9 8.2 8.5 8.8 9.1 9.4 9.7 10.0 10.3 10.6
Assumptions and analysis
The sensitive factor that could affect the value obtained through SOTP Model is the rental income growth rate. We
further assumed that the growth rate is normally distributed using the standard deviation of 5% per year.
20 February 2013 53
Disclosures:
Ownership and material conflicts of interest:
The authors, or a member of their household, of this report do not hold a financial interest in the securities of this company.
The authors, or a member of their household, of this report do not know of the existence of any conflicts of interest that
might bias the content or publication of this report.
Receipt of compensation:
Compensation of the authors of this report is not based on investment banking revenue.
Position as an officer or director:
The authors, or a member of their household, do not serve as an officer, director or advisory board member of the subject
company.
Market making:
The authors do not act as a market maker in the subject company’s securities.
Disclaimer:
The information set forth herein has been obtained or derived from sources generally available to the public and believed by
the authors to be reliable, but the authors do not make any representation or warranty, express or implied, as to its accuracy
or completeness. The information is not intended to be used as the basis of any investment decisions by any person or
entity. This information does not constitute investment advice, nor is it an offer or a solicitation of an offer to buy or sell
any security. This report should not be considered to be a recommendation by any individual affiliated with CFA Society
Romania, CFA Institute or the CFA Institute Research Challenge with regard to this company’s stock.
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CFA Institute Research Challenge

20 February 2013 A value stock mirroring growth

10% FTSE 100

Source: Bloomberg, JSE

Type B. This particular category of tenants is comprised of smaller international and

Industry Overview and Competitive Positioning

70 Regarding the household consumption in the European countries, this indicator in

further opportunities for growth (Appendix 10).

Mirroring consumption trends, the Romanian retail turnover recorded an important

Office rents in Bucharest (€18.50/sqm/month, on average) are lower compared to

Figure 10 –Competitive Positioning Our analysis highlighted:

Source: Team’s Analysis

NEPI has a sustainable business model. It has eight developments projects

Figure 15 –EV/EBIT Multiples 2013 Historical Analysis

South African (SA) investors.

We performed a vertical analysis for NEPI’s financial statements, in order to cross-

Other Relevant Headings

95% Confidence Corporate Governance (CG)

Regulation uncertainty: Romania, as an emerging country, is subject to political

Appendix 1: Income Statement

Appendix 2: Balance Sheet

Appendix 3: Ratios Analysis

ROE ROCI EBIT margin ROC Debt/capital D/E

Appendix 4: Income Statement (Common Size)

Income Statement (€)

Appendix 5: Balance Sheet (Common Size)

Balance Sheet (€)

Appendix 6: NEPI Stock - Event Timeline

Monthly volume (shares) Share price (R)

Appendix 7: Romania Macroeconomic Context

Table 1 - Populations of European Countries

Rank Country Population mid 2012 (millions)

Table 2 – World GDP per capita

Rank Country Q1 2012 estimates ($)

City Population (thousands) City Population City Population

London 8,174 Bucharest 1,677,985 Braila 168,389

Appendix 8: Global Transparency Index

Source: Jones Lang LaSalle

Appendix 9: Global Competitiveness Report

Source: World Economic Forum

Appendix 10: GDP/capita and Household consumption/capita growth across Europe

Slovakia 8,902 7,837 16,726 13,104 9.4% 7.6%

Appendix 11: Consumer Confidence Index

Source: European Commission

Appendix 12: Retail Trade Confidence Index

Source: European Commission

Appendix 13: European Investments by Sector

Source: CBRE Research, Q3 2012

Appendix 14: Monthly Trade Turnover in Romania

Source: National Institute of Statistics

Appendix 15: Shopping Center Densities across Europe

Source: Cushman & Wakefield, Q3 2012

Appendix 16: European Shopping Center Pipeline H2 2012-2013

Source: Cushman & Wakefield

Appendix 17: Completion of Modern Shopping Centers in Romania

Source: CBRE Research, Q4 2012

Appendix 18: Shopping Center Densities across Romania

Source: CBRE Research, Q4 2012