#1Iñaki Oviedo [email protected] +52 (55) 5480 5800 ext. 4429 October 12, 2021 PROTEAK: AFTER ALL, MONEY DOES GROW ON TREES. Initiating Coverage GBM We are initiating coverage on Proteak (TEAK), with a price target of P$18.2 (+264% upside) and a Market Outperformer rating on the stock. Proteak is a forestry and wood products firm. It owns over 7,000 hectares (ha.) of teak, a premium timber that is part of the US$37 billion wood furniture supply chain. It also owns some 6,000 ha. of eucalyptus that is used as feedstock for its MDF panel board mill. Proteak is reaching a turning point: its teak farms are nearing harvest ages, while more rational competition and surging demand have stabilized prices in the MDF segment. Why is the market ignoring a triple-digit upside potential? Since its IPO in 2010 to mid-2014, Proteak's stock hovered around its initial price of P$10.36 per share, on the back of the long-term nature of its Teak unit. Later, in October 2016, the name rallied to an all-time high (P$21.7) in anticipation of the start-off of the MDF unit. The latter promised to pull cash flows forward, but heavily discounted imports depressed prices, prompting subpar results and a sell-off (currently trading at P$5 per share). 2021 vs. 2010 IPO: Today, Proteak has three times more teak plantations than in 2010. Back then, its oldest farms were twelve years away from reaping and the MDF unit didn't exist yet. Now, we expect the harvesting period to start in 2022. Yet, the stock is trading below its IPO price, which proves how the market has forgotten about Proteak. Recently improved market dynamics have stabilized MDF prices. Moreover, the intrinsic value of the Teak unit keeps increasing as plantations near harvest ages (starting in 2022, GBMe). We are convinced that recency bias has led to a great entry point into a high FCF generating business that is reaching a turning point in both of its segments. The margin of safety: Current valuations stand below our fair value estimate for the MDF unit (P$6.1 per share) and assign nil value to the Teak unit. Highlights of our document: • • • • • Aerial footage: Management provided us with footage of its hectares and mill, which will help investors grasp Proteak's assets and business model. (View Video) Teak supply chain (Slide 9-13): We explore teak import data from major global buyers. Also, we explain the increased market share that LatAm producers have grabbed. Proteak's teak (Slide 14): We read all the company's annual reports to estimate the age of its farms and when they will be harvested. Implied valuation (Slide 26-27): A strip-down approach and a rejected JV offer reaffirm the margin of safety. - - Strip down: Investors are acquiring the teak unit for free. If we only valued the MDF unit and future carbon credit issuances we'd arrive at a P$5.91 valuation (+18%). Rejected 2019 JV offer. The proposal entailed contributing 1,800 hectares of teak at a US$50 million valuation. This would imply a price of P$7.1 per share (42% upside) if no value is assigned to the MDF unit. ESG (Slide 23): Proteak's forestry management practices are constantly audited by FSC, a leading NGO in the sector. Financial benefits will range from the issuance of carbon credits (adding P$0.9 to our price target) to easier access to global supply chains. TEAK: AFTER ALL, MONEY DOES GROW ON TREES. |1#2October 12, 2021 KEY TAKEAWAYS FROM OUR DOCUMENT The company has two business units, Teak and MDF panels: Teak unit (P$11.2 per share): Future cash cow that is currently overlooked by the market. • Teak yields high-quality wood that is used for housing construction, yacht decks, and high-end furniture. ⚫ Teak trees take 18-20 years to mature. • World's annual production: ca. 2.5 million m³. • Global supply chain: Teak is exported to Asia where it's transformed to its end products. India is the largest consumer (1.3 million m3), but most of the demand is for domestic consumption. Vietnam and China are focused on selling their products (including furniture) to developed nations. • Developed nations import ca. US$37 billion of wood furniture annually (60% from Asia). . . Regulation and concerns about procuring ethically sourced materials have made third-party certifications increasingly necessary. Proteak is in the process of verifying all its plantations by FSC (1,716 already verified, 4,488 by year's end). • Proteak's owns 8,400 hectares (86% wholly-owned; 14 through a JV). Starting 2022, its plantations should reach harvesting ages. Moreover, its premium plantations should reap by 2027. MDF Wood Boards unit (P$6.1): More rational competition will set the tone for market pricing. MDF wood boards are used in the manufacturing of furniture, cabinets, flooring, and interior design projects. • Mexico's consumption: 852,000 m³ in 2019 (+5.3% 2016-2019 CAGR). • Proteak's Tecnotabla brand achieved a market share of 25% in only four years. • More rational competition: Market prices have remained low since the unit's inception, on the back of heavily discounted imports coming from Brazil, mainly. The Brazilian construction index points to a recovery in the local market, which should contribute to price stabilization in Mexico. Valuation and Margin of Safety • Our DCF approach yields a PT P$18.2 per share (264% upside). Strip down: If we only valued the MDF unit and future carbon credit issuances, we'd arrive at a P$5.91 valuation (+18%). Investors are acquiring the teak unit for free. ⚫ JV offer valued the teak unit at P$7.1 per share (42% upside) if we assigned nil value to MDF. Proposal entailed contributing 1,800 ha. at a US$50 million valuation, but its rejection points to confidence of further upside. GBM TEAK: AFTER ALL, MONEY DOES GROW ON TREES. | 2#3INDEX KEY TAKEAWAYS FROM OUR DOCUMENT GLOSSARY CORPORATE STRUCTURE AND OWNERSHIP BOD AND KEY OFFICERS BUSINESS SEGMENTS Teak Proteak's Teak MDF RISKS, OPPORTUNITIES, AND THOUGHTS ON ESG VALUATION DCF Approach GBM Estimates Buyout Offer Strip-Down Exercise Debt Profile Stock Price Performance vs. Analyst Estimates GBM 2 4 5 9 7 8 14 17 22 22 25 26 27 28 29 30 2 2 2 2 2 3 25 TEAK: AFTER ALL, MONEY DOES GROW ON TREES. | 3#4October 12, 2021 GLOSSARY 1. ACIAR: Australian Centre for International Agricultural Research 2. 3. ACIAR Study: Planted Proteak: Global production and markets, with reference to the Solomon Islands, 2015 CONAFOR: Mexico's National Forestry Commission. Government agency tasked with developing, supporting, and promoting the conservation and restoration of Mexico's forests, as well as participating in the development of plans, programs, and policies for sustainable forestry development. 4. FSC: Leading global NGO that certifies the "responsible management of the world's forests." 5. • • It audits the entire supply chain of wood products from farms' preservation of biological diversity to the relationship with local communities, sawmills, lumber yards, and furniture stores. Its seal of approval lets buyers and end customers know they are purchasing sustainably sourced wood, which is key to tapping the international furniture market. Heartwood: Inner, darker part of a log that is more commonly used as raw material. Logs with more heartwood than sapwood will command a higher price. 6. Hectare (ha.): 10,000 m2 = 2.47 acres 7. Logging: Cutting trees down 8. MDF: Medium Density Fiber 9. Round log: Part of a tree trunk that hasn't been trimmed, thus maintaining the round form of a log. Tax and cultural reasons have made it the preferred form of export to India. 10. Sapwood: Outer, lighter, and younger part of a log 11. Squared logs: Most of the sapwood is removed with four lateral cuts. 12. Teak: By "Teak", we refer to the tree species and its timber. 13. Proteak: Proteak and its subsidiaries 14. Thinning: The selective removal of trees, primarily undertaken to improve the growth rate or health of the remaining trees 8 11 9 10 5 GBM 7 12 TEAK: AFTER ALL, MONEY DOES GROW ON TREES. | 4#5October 12, 2021 CORPORATE STRUCTURE AND OWNERSHIP Proteak Uno Pro Eucalipto Holding Tacotalpa JV Comefor 88.8% No entity has a stake above 10%. Ownership 70% Institutional Investors 50% GBM PROTEAK 2000 Proteak is founded 000 First 182 ha. of teak planted 2002 2006 First FSC certification 100% IPO and acquisition of mature plantations in Costa Rica and Colombia 2010 קוד 2011 First time using clonal seeds 20% 10% Market Cap: US$100 Million 000 TIT First time exporting teak to Asia 2012 Free Float Insiders • Proteak Uno: Holding company. It directly owns the teak hectares (ha). • Pro Eucalipto Holding (PH): It owns the eucalyptus plantations, the MDF mill, and the commercial business, as well as the cogeneration plant, which generates 238 GWh of electricity and 116 GWh of heat per year for the mill. Proteak holds an 88.8% stake, while the remainder is owned by FINNFUND, a Finnish development fund. . Tacotalpa JV: It holds 1,160 ha. of teak planted in the Mexican state of Tabasco. We estimate these plantations will reach their final harvest in 2033. It has been described to us as the 'crown jewel" of the company. The other 50% is owned by Impulsora Agrícola Chichitle. 44 • Comefor: Established in 2007 to sell timber from thinning. It is the subsidiary that hires some of Proteak's employees. Buys eucalyptus plantations 2013 from FOMEX FINSA, Spain-based wood boards firm, acquires stake in TEAK 2015 MDF mill starts production 2016 and 245,000 carbon credits are issued Mill starts production of value-added boards 2017 2018 25% market shared reached in the MDF market TEAK: AFTER ALL, MONEY DOES GROW ON TREES. | 5#6October 12, 2021 BOD AND KEY OFFICERS Board Member Position Member Since Hector Bonilla Castañeda Chairman 2001 Elías Revah Mediano Independent 2007 Hector Bonilla Castañeda Founder and Chairman • Founded Proteak in 2000 • Chairman of the BoD since 2001 • Also founded Bluedrop Sustainable Agroforestry • Mr. Bonilla holds an MBA from Stanford Brett Williams Hogan Independent 2007 Omar Nacif Serio Jaime Williams Quintero Independent 2010 CEO since 2019 Luis Tejado Bárcena Jorge Hillmann Independent 2013 Independent 2014 Manuel Ruiz Gutiérrez Topete Independent 2014 Abraham Hernández Pacheco Independent 2017 Ricardo Elizondo Guajardo Independent 2019 Diego Prieto Barbachano GBM Joined the company in 2013 as CEO of the MDF boards segment. Previously served six years as CEO of Sports World, a publicly traded gym chain. • Holds a bachelor's degree in Economics from UNAM. Cesar Vélez Pongutá CFO since 2019 • Joined the company in 2019 as Supply Chain Director Previously served for almost four years as CFO of Masisa, a Chile-based wood product manufacturer. • Holds a bachelor's degree in Economics from La Salle in Bogota, Colombia, and an MBA from IPADE. Kristina Díaz Paterson Director of Human Development and Environment • Joined the company in 2010. • Thirteen years of experience in environmental affairs, including working for NGOs. Expertise in the carbon credit market. • Holds a bachelor's degree in Foreign Affairs from Universidad Iberoamericana. Jürgen Stock Forestry Director ⚫ Joined the company in 2007. • Previously worked as Forestry Director for Smurfit Carbon in Venezuela, where he gained knowledge on the use of clonal seeds. • Holds a Master of Science degree from Universidad de los Andes in Venezuela. Independent 2021 . Jorge Silberstein Tenenbaum Independent 2021 TEAK: AFTER ALL, MONEY DOES GROW ON TREES. | 6#7GBM BUSINESS SEGMENTS Teak segment (P$11.2 per share): A long-term, strong FCF generating asset widely ignored by the market. • Proteak produces high-quality wood that is used for housing construction, yacht decks, and high-end furniture. • Developed markets import US$37 billion of wood furniture every year. Regulation and customer concerns about purchasing ethically sourced wood products have made third-party verification paramount. • Proteak owns 8,300 ha. of plantations (86% wholly-owned; 14% through a JV) and is in the process of verifying all its plantations by FSC (1,716 already verified, 4,488 by year's end). • Teak farms are a long-term, strong FCF generating asset. Teak grows for 18 to 20 years before being sold. Proteak's first trees were sown in 2002 and are just entering the harvesting age. The current market price assumes nil upside from this unit. Most investments required are made in the first five years of a plantation and, once it reaches harvest periods, the unit's EBITDA is comprised of 95% EBIT. MDF Boards (P$6.1 per share): A more rational competition will set the tone for market pricing in Mexico. • MDF wood boards are used in the manufacturing of furniture, cabinets, and flooring, as well as interior design projects. • Mexico's consumption: 852,000 m³ in 2019 (+5.3% 2016-2019 CAGR). . Proteak's Tecnotabla brand achieved a market share of 25% in only four years, by way of vertical integration and differentiation strategies, and overall import substitution. • The company's eucalyptus trees take five years to mature, making them a great complement to the Teak unit. • More rational competition: Market prices have remained low since the unit's inception, on the back of heavily discounted imports coming from Brazil, mainly. The Brazilian construction index points to a recovery in the local market, which should contribute to price stabilization in Mexico. A. TEAK SEGMENT $11.2 PER SHARE MARKET DYNAMICS: KEY PLAYERS AND FIGURES FURNITURE EXPORTS HEAVYWEIGHTS: CHINA AND VIETNAM PROTEAK'S TEAK GROWTH PROCESS B. MDF (MEDIUM DENSITY FIBER) WOOD BOARDS (P$6.1 PER SHARE) MEXICO'S MDF INDUSTRY PRICE DYNAMICS AND BRAZILIAN IMPORTS. TECNOTABLA: A VERTICALLY INTEGRATED PLAYER. PRODUCTION PROCESS 08 10 13 14 16 17 18 19 20 21 TEAK: AFTER ALL, MONEY DOES GROW ON TREES. | 7#8TEAK SEGMENT P$11.2 PER SHARE GBM PROTEAK A long-term, strong FCF generating asset that is about to reap benefits • Teak yields high-quality wood that is used for housing construction, yacht decks, and high- end furniture. • Developed markets import US$37 billion of wood furniture every year. Regulation and customer concerns about purchasing ethically sourced wood products have made third- party verification paramount. ⚫ Of the 6.9 million hectares of plantation teak, we believe only a fraction has been certified. • Proteak owns 8,300 ha. of fields (86% wholly-owned; 14% through a JV) and is in the process of verifying all its plantations by FSC (1,716 already verified, 4,488 by year's end). • Teak farms as a long term, high FCF generating asset. Teak grows for 18 to 20 years before reaching harvesting age. The first five years are critical, after which a plantation's costs drop by 70% (per a recent Harvard case study on Proteak). All Proteak's wholly- owned farms are more than five years old. • Current valuations assign nil value to this business, which may be attributed to its long- term nature. Proteak's first hectares were planted in 2002 and are just reaching harvest age, while its premium hectares should start maturing by 2027. As such, investors are currently buying into a cash cow that will yield benefits in the coming decade for free. TEAK: AFTER ALL, MONEY DOES GROW ON TREES. | 8#9October 12, 2021 TEAK SEGMENT P$11.2 PER SHARE "Among timbers, teak holds a place which diamonds maintain among precious stones and gold among metals." Dietrich Brandis, Inspector General of Forests, India (c. 1855) Teak is a hardwood that grows naturally in South East Asia. Its unique attributes (listed below) have established it as a premium wood in consumers' minds. Conservation efforts have been devoted to preserving natural forests, limiting teak supply. Also, concerns about procuring ethically sourced materials have made third-party certifications increasingly necessary. As such, this has increased the number of plantations across the globe. Properties: Beauty Durability Raw material for: Furniture Strong but easy workability Boat decks Moderate weight Resistant to termites, fungi, water House building: windows and frames, doors, and decks GBM TEAK: AFTER ALL, MONEY DOES GROW ON TREES. | 9#10GBM October 12, 2021 MARKET DYNAMICS: KEY PLAYERS AND FIGURES Teak supply is restricted to approx. 6.9 million hectares (19% of the world's total). There is an estimated 36 million hectares (ha.) of teak across the globe. Teak from natural forests (81%) faces either logging (cutting down) bans from local governments to counter deforestation or, in the case of Myanmar, embargos from the United States and other developed nations. The balance was estimated at a range of 4.3-6.9 million ha., according to the ACIAR 2015 Study. Experts have pointed that mom & pop plantations are hard to quantify and question some west African plantations replant the hectares they harvest, which make us take the 6.9 million ha. as an updated figure. Relative quality of teak plantations: clonal seeds as an edge. Naturally sourced teak, especially Myanmar's, was highly esteemed in the market due to its long-standing track record. Teak farms need to establish a name for themselves while managing the trade-off between letting trees grow for more years and the time value of money. The use of clonal seeds has emerged as a solution. Clonal seeds are genetically selected (not modified) and yield trees that grow faster, taller, thicker, and straighter, thus, commanding higher prices. Global Teak Supply by Origin -figures in million hectares (ha) * Source: ACIAR 2015 Study ** 1 ha. = 10,000 sq. mt. Share of Plantation Teak by Region Plantation, 6.9 4% 8% Natural Forests, 29 30% Source: ACIAR 2015 Study 21% 37% India Indonesia Asia, others Africa LatAm Ethically sourced teak and the need for certification. Teak is part of the wood furniture value chain, whose end market tends to be developed markets. These end markets' regulations and overall awareness regarding the importance of buying sustainably sourced wood have led to the rise of third-party certifications. Only a small fraction of the total 6.9 million ha. of teak available is certified, which provides an edge to companies like Proteak. Cork Cork cambium Living phloem Vascular cambium Sapwood Heartwood TEAK: AFTER ALL, MONEY DOES GROW ON TREES. | 10#11October 12, 2021 MARKET DYNAMICS: KEY PLAYERS AND FIGURES Quality drivers. Several factors influence teak's market price: Diameter: It depends on the richness of the soil, precipitation, weather, and age. Heartwood: Inner part of the tree that is used as raw material. Knots, twists, and cracks: Trunks that grow on a straighter line will yield more logs. Myanmar exports ban and embargo. In 2014, the Myanmar government banned the export of teak logs to curb deforestation and keep production within the country. Then, as a response to the country's 2020 military coup, the US government imposed an embargo on the country's teak. Latin American teak has banked on the shortage of natural teak, as reflected in its increased share of exports to India and Vietnam. Teak trial established in Matto Grosso, Brazil Teak trial in Brazil in which two adjacent groups of trees were sowed: one with clonal seeds and one with "natural" seeds. After eight years, it is clear that clonal seeds yield taller and rounder trees. Clonal Seed "Natural" Seed GBM Production figures are hard to come by, but we estimate that it has remained stable in the 2.5 million m³ per year ballpark. LatAm teak has steadily gained share in Indian and Vietnamese exports, highlighting its quality. 2010 Teak Production Myanmar's natural forests, 21% Plantations, 79% 2.5 million m³ TEAK: AFTER ALL, MONEY DOES GROW ON TREES. | 11#12October 12, 2021 MARKET DYNAMICS: KEY PLAYERS AND FIGURES Global teak trade and the US$37 billion wood furniture market The end consumption of teak is hard to trace, as it tends to be imported to Asia, where it is either consumed locally (especially in India) or transformed and then sold globally. • • Per the ACIAR Study, India's local consumption tends to disregard the need for certification. Moreover, 10% of India's demand (ca. 130,000 m³) is destined to furniture production, an industry that is export heavy. Indian Teak Imports -USD million 600 400 333 . Vietnam and China jointly demand some 160,000 m³ of teak. Their demand is mostly focused on exporting furniture to developed markets that require certifications and could pay a premium for certified teak. 200 • Therefore, its more important to consider the end costumer than the country to which Proteak initially ships its teal. 0 2010 India: the largest teak consumer in the world . India's annual teak consumption: 1.3 million m³ • Annual imports: Approx. 1 million m3 (77% of total) • The value of imports peaked at US$550 million in 2012. Then, rupee depreciation and a decrease in purchases from Myanmar pushed the value of imports down to US$376 million in 2017. • The value of teak imports has recovered and stood at US$440 million for the fiscal year ended in February 2020. Moreover, it has remained steady in local currency terms since 2017. • LatAm teak has captured market share, going from 25% in 2012 to 55% for 2020. 40% Source: ACIAR 2015 Study India's Teak Consumption 10% 550 519 499 GBM 473 454 439 378 376 N.A. N.A. 2014 2015 2016 2017 2018 2019 2020 2011 2012 2013 Considers teak in the rough and sawn teak Source: ACIAR Study (2010-2012) and India's Ministry of Commerce (2015-2020) Share of Teak Imports by Region 0 10 20 30 40 50 60 70 80 90 100 2012 45% 35% Construction (industrial) 1.3 million m³ Doors & windows 2% 2020 55% Construction (household) Furniture 15% Myanmar ROW 30% 25% Share of Teak Imports by Region Source: ACIAR Study (2010-2012) and India's Ministry of Commerce (2015-2020) 44% LatAm TEAK: AFTER ALL, MONEY DOES GROW ON TREES. | 12#13October 12, 2021 FURNITURE EXPORTS HEAVYWEIGHTS: CHINA AND VIETNAM Vietnam: Trade war beneficiary ⚫ 2015-2018 teak imports: ca. 30-40 thousand m³ worth US$15 million per annum Imported Round Wood Teak to Vietnam 60,000 GBM 25,000,000 20,000,000 15,000,000 10,000,000 50,000 • LatAm teak imports share: >65% 40,000 • Teak purchases have bounced back after dropping in the 2010-2012 period. The lack of certified teak was cited as a major cause in ACIAR Study. 30,000 20,000 • The nation's wood furniture industry was valued at US$4.7 billion in 2012, and Vietnam recently became the US' largest trade partner in the overall furniture market, thanks in part to its relatively cheap labor and trade tensions with China. 10,000 0 0 2015 2016 2017 2018 Cubic meters USD China: The world's largest exporter of wood products ⚫ The latest available data value the Chinese industry of wood furniture and wooden doors (both use teak) at US$12.5 billion, while teak imports are valued at US$133 million. The lack of recent data makes the effect of the Myanmar embargo and bans unclear. However, its focus on exports to developed nations hints at an opportunity for LatAm teak, as in the case of India and Vietnam. Developed nations bought US$37 billion of wood furniture in 2019. • 60% of that total came from Asia. ⚫• The United States (59% of total global imports) and Japan report above-average purchases from Asia (73 and 93% in 2019, respectively). • All these countries have regulations for the purchase of legally sourced wood and emphasize the usage of third-party verifications. China's Teak Demand 77% Myanmar Source: ACIAR Study Wooden Furniture Imports to Developed Nations US$ billion 40 30 20 20 10 10 36.9 19.7 0 2016 US 38.8 21.8 5,000,000 23% 0.16 million m3 Rest of World 38.6 37.1 23.6 2017 Germany France 2018 UK Japan Source: Forest Products Annual Market Review, FAO 21.7 2019 USD TEAK: AFTER ALL, MONEY DOES GROW ON TREES. | 13#14PROTEAK'S TEAK View The Video GBM TEAK: AFTER ALL, MONEY DOES GROW ON TREES. | 14#15GBM October 12, 2021 PROTEAK'S TEAK Proteak wholly owns 7,137 ha. (GBMe) of teak in Mexico. Its plantations go through 18-20- year rotation periods (i.e., the time from sowing to harvesting) depending on the type of seeds used, the quality of the soil, etc. Harvests are supposed to improve over time, hand in hand with the increased knowledge and better practices adopted by Proteak. 57% of wholly-owned hectares are five to ten years old. The company's first farms were located in the Mexican state of Nayarit. By the time of its IPO in 2010, management realized that the soil in the state of Tabasco had better conditions. Moreover, around this time, the company started to use clonal seeds. With that in mind, we expect higher prices per tree starting in 2027 when the Tabasco plantations are harvested. Proteak also owns 1,160 ha. through a JV ("Tacotalpa"), which has been described to us as "the crown jewel" of the company. High-quality EBITDA = strong FCF generation. In the 2013-'15 period, Proteak generated average annual revenues of P$125 million and an EBITDA margin of 30% through the sale of logs from plantations acquired that have reached maturity. By then, EBIT represented ca. 95% of the segment's EBITDA, which proves the business' strong FCF generation capacity. Wholly-Owned Farms 5-10 years old 11-15 years old >15 years old Clonal Seeds Non-Clonal Seeds 57% 37% 5.6% 100% 50% 50% Year Hectares planted 2002 2003 0000000 182 0000 102 200454 000 65 2005 2006 2007 2008 2009 2010 2011 2012 A 0 F F C C F F 515 513 C ♡ 700 F Expected Final Harvest 2022 2023 2024 2025 2026 2027 2028 948 2029 2030 1,000 2031 1,200 2030 2013 909 Proteak's own teak is just entering its harvesting period. Previously, the company acquired mature teak plantations in Colombia and Costa Rica that allowed it to establish relationships with brokers and teak buyers in Asia. Although the relative quality of Proteak's harvests is yet to be defined by the market, we find reasons to be optimistic: . • Cost structure: The largest outflows already occurred. Land acquisition and maintenance during the first five years of a tree's life represent the largest outlays per hectare. All of Proteak's plantations are above this age and some are close to reaching harvesting periods, which will transform the Teak unit into a cash-generating business. FSC. Proteak currently has 1,716 verified hectares and is expected to reach 4,488 by year's end. The company grows all its plantations based on FSC guidelines and will audit the rest of the fields as they mature. 2014 2015* F 950 1160 No teak ha. has been planted since 2015 as management has focused its efforts on the MDF unit. 100% Owned 7,137ha Tacotalpa JV 1,160ha Assumes an 18 year rotations period for clonal seed ha and 20-year for non-clonal Source: GBM Research based on annual reports Total 8,297ha 2031 2032 2033 TEAK: AFTER ALL, MONEY DOES GROW ON TREES. | 15#16October 12, 2021 GROWTH PROCESS At the final harvest, the 250 best trees are logged and sold. Initially, 850-1,000 trees are planted by hectare. As time goes by, those with the least growth prospects are logged, leaving the top 250 for the final harvest, which may yield 0.64-0.88 m³. According to the company's latest annual report, market prices lie in the range of US$50-874 per m³. 2 1 2 3 Site selection: The company acquires land with ideal soil, precipitation, and location. Then, the site is prepared (tilling and rolling). Site acquisition represents the largest outlay on a teak farm. Planting and maintenance: Clonal seeds are initially grown in a greenhouse developed in situ and then sown. Special care must be taken during the first two years, as trees are more vulnerable to plagues. Maintenance costs decrease by more than 75% after this initial period, per a recent Harvard Business School study on Proteak. Thinning: 850-1,100 trees are initially seeded per hectare. Afterward, the company cuts down those with the least growth prospects. This ensures that the best trees have less competition for nutrients. 4 400 trees are cut down during the first thinning. 5 250 trees are logged during a second thinning intervention, (carried out sometime between years 15 and 18) and sold. We assume these trees command only 10% of the price of trees from the final harvest. 6 Final harvest. Approximately 250 trees are left standing for the final harvest. Depending on the Quality Scorecard factors, each hectare may yield 0.64-0.88 m³. According to the company's latest annual report, market prices lie in the range of US$50-874 per m³. 5 GBM TEAK: AFTER ALL, MONEY DOES GROW ON TREES. | 16#17GBM MDF (MEDIUM DENSITY FIBER) WOOD BOARDS (P$6.1 PER SHARE) More rational competition points to stabilized market pricing • MDF wood boards are used in the manufacturing of furniture, cabinets, and flooring, as well as interior design projects. • Mexico's consumption: 852,000 m³ in 2019 (+5.3% 2016-2019 CAGR). • Proteak's Tecnotabla brand achieved a market share of 25% in only four years, by way of vertical integration and differentiation strategies, and overall import substitution. Vertical integration: As its eucalyptus farms feed wood to its 240,000 m3 mill. FINSA's expertise: FINSA is a Spain-based board manufacturer that has produced MDF since 1980. It has been Proteak's shareholder since 2015. Differentiation strategies: Brand awareness campaigns targeted to interior designers, carpenters, and architects aim to place the Tecnotabla brand in the mind of customers. • The company's eucalyptus trees take five years to mature, making them a great complement to the Teak unit. • Rational competition: Market prices have remained low since the unit's inception, on the back of heavily discounted imports coming from Brazil, mainly. The Brazilian construction index points to a recovery in the local market, which should contribute to price stabilization in Mexico. TEAK: AFTER ALL, MONEY DOES GROW ON TREES. | 17#18October 12, 2021 MDF WOOD BOARDS (P$6.1 PER SHARE) MDF boards are used for furniture, cabinets, flooring, and interior design projects. Through an industrial process, wood is broken down into fiber that is then compressed together using glue and heat. The end product is seamlessly-looking boards that are resistant, solid, and easy to work with. This allows for the use of paint and thermally fused melamine, i.e. value-added paper overlays, which add a look of design and beauty. Mexico's demand for MDF: 852,000 m3 in 2019 (+5.3% 2016-2019 CAGR), based on company estimates. In our view, increased MDF consumption is explained by its qualities, both aesthetic and physical, that make it stand out against particle boards (PB) as a better-looking and more resistant material. Mexico's MDF Consumption - Thousand m³ 2019 Market Share 900 730 CAGR 5.3% 600 300 0 2016 Source: Company estimates Natural Boards 8% 0 10 20 852 20 30 40 40 50 50 60 60 70 80 90 100 22% 42% 22% 14% 750k m³ 4% Value-Added Boards 0% 2019 0 10 20 20 30 40 50 60 70 80 90 100 26% 56% 8% 10% 102k m³ ⑪ TECNOTABLA Arauco (Company) Imports Others by PROTEAK Source: Company estimates GBM TEAK: AFTER ALL, MONEY DOES GROW ON TREES. | 18#19GBM October 12, 2021 MDF WOOD BOARDS (P$6.1 PER SHARE) Is the recent rally in MDF prices sustainable? Proteak's MDF venture started on 2013 with the acquisition of eucalyptus hectares and the project to build a mill, which produced its first boards in August 2016. Meanwhile, macro deceleration in Brazil caused a drop in construction, leading MDF producers to export their boards at marginal prices to keep their mills running. Therefore, market prices in Mexico remained depressed between 2016 and 2019. Later, in 1H20, macro uncertainty caused a production decrease, and the strong demand that resulted took Proteak's/TEAK's 1H21 volumes (112,000 m³) 5.2% above 1H19 levels, while imports have also recovered to pre-pandemic levels, per company estimates. Prices have rallied, on account of the rebound in demand and more rational competition, as the outlook for construction has improved in Brazil, creating confidence that current market prices are sustainable in the medium term. Proteak's Implied Prices & Estimated Unit Cost -Units in MXN thou. 9 6 3 0 5.72 5.52 5.08 4.75 5.02 4.50 4.45 4.16 2017 Source: Based on company filings 7.09 8.18 2018 2019 2020 1Q21 2Q21 Implied Price Unit Cost (GBMe) Brazil's Domestic Market Construction Index 25% 15% 13.1% 5% -5% -12.0% -15% 2009 2010 4.1% 3.0% 1.4% 2011 2012 2013 Apr-2013: Proteak announces acuisition of eucalyptus fields Aug-2016: Proteak's mill produces its first MDF boards -6.6% 2014 -11,5% -12.6% 2015 Source: Eucatex 2Q21 corporate presentation, based on data from the Brazilian Association of the Construction Materials Industry (ABRAMAT) -4.0% 2.0% 1.2% -0.3% 2016 2017 2018 2019 2020 24.4% 1H21 8.0% FY21e TEAK: AFTER ALL, MONEY DOES GROW ON TREES. | 19#20October 12, 2021 MDF WOOD BOARDS (P$6.1 PER SHARE) Tecnotabla: A vertically integrated player. Under the Tecnotabla brand, Proteak has positioned itself as the second-largest player in Mexico's MDF market (23% share in FY19) after just starting operations in April 2016. Its relatively fast success can be attributed to several factors. Proteak's Annual MDF Production -Thousand m³ 250 Differentiators: FINSA's expertise: Wood board company based in Spain, founded in 1931. It started manufacturing MDF boards in 1980. Today, it owns 12 mills and sells its products in 83 countries-its FY20 sales reached €832 million. FINSA has been Proteak's shareholder since 2015 and its vast knowledge in MDF production has been key to Proteak's quick market share growth. 凹 Vertical integration: Proteak is the only player that has control over its entire supply chain. Its mill is sourced with eucalyptus that is mostly grown on 6,400 ha. owned by the company. x0 x GBM 204 206 176 198 200 19 8 14 76 24 18 25 9 33 150 121 100 171 159 157 147 121 50 0 2017 MX Natural 2018 2019 Value-Added Value-added products: Proteak has gained share in the "value-added" segment, in which a paper overlay is thermally fused into the board, earning a premium over the "natural-looking" ones. This has allowed for increases in consolidated prices even in times of tough competition in the natural board market. Source: Corporate presentations. No breakdwon disclosed for 1H21 MDF Revenues -MXN million 1,200 800 2017-'19 CAGR: 16.7% Differentiation strategies (brand awareness): Tecnotabla creates content and brand awareness campaigns to position itself among all kinds of clients-carpenters, interior designers, architects, etc. For instance, it has signed collaboration agreements with a couple of furniture stores. 2020 1H21 US Exports Total 18% 12% 1,139 1,131 1,036 400 836 851 6% 0 2017 2018 2019 2020 0% 1H21 TEAK: AFTER ALL, MONEY DOES GROW ON TREES. | 20#21October 12, 2021 PRODUCTION PROCESS 1 2 3 Production Process: Planting the tree: Proteak makes its boards out of eucalyptus, which has a five-year rotation period. The same tree can be used three times. Eucalyptus is mostly grown on 6,400 ha. owned by the company and some 300,000 m3 are harvested each year. The company purchases a small percentage from mom & pop producers in the area nearby its Tabasco mill. Transforming the logs: The logs are taken through a chipper; that is, the wood is cut into tiny pieces. Then, the chips are further broken down to extract fiber (hence, the F in MDF). Getting the boards ready: The fiber is compressed, cut to desired measures, and left to cool off. After this, the natural-looking boards are ready to be sold. 4 Value-added strategies: A paper overlay may be attached through hot pressure, adding color and texture to the boards. GBM TEAK: AFTER ALL, MONEY DOES GROW ON TREES. | 21#22October 12, 2021 RISKS, OPPORTUNITIES, AND THOUGHTS ON ESG Risks ש GBM Teak market: • Proteak's relative quality. Although the company has already established relationships with brokers and buyers in Asia, it is just starting to harvest its own teak. ⚫ Best farms are still young. The company sowed its first plantations in 2002 when it was still inexperienced. Therefore, the quality of its harvests is poised to improve over time. As such, results in the medium term may not reflect the company's full FCF generation potential. • Macro downturn: The furniture market is driven by housing development and overall macro trends. Furthermore, an economic deceleration in the United States or Europe could hinder Proteak's operations. MDF • A surge in imports: The Mexican production of MDF, including Proteak's/TEAK's, has been able to gain share in the domestic market (ca. 50%, per company estimates), while imports have rebounded to pre-pandemic levels. Nonetheless, the company mentioned there has been a surge in Mexican imports from China, which, for now, have the same price but lower quality than MDF manufactured locally. • Substitution of MDF. Demand for MDF has boomed in the last decade, but consumer preferences could shift to other types of boards, which would reduce Proteak's total addressable market (TAM). Overall • Insurance: Proteak's plantations aren't insured. Widespread fires would endanger the firm's operations. The company has hedged its operations by owning several nonadjacent farms. • Debt restructuring: The company is currently in talks with its main creditors (91% of its consolidated debt) to defer the amortizations that should have started in 2020 but keeping the face value unchanged. Per the 2Q21 earnings call, and considering improving trends, management expects to reach an agreement in 4Q21. • Climate change. Most of Proteak's plantations rely on rainfall and are at risk of catching fire. The latter is mitigated by having their trees in different plantations. TEAK: AFTER ALL, MONEY DOES GROW ON TREES. | 22#23October 12, 2021 RISKS, OPPORTUNITIES, AND THOUGHTS ON ESG Opportunities да ⚫ New hectares for teak plantations: Per a recent Harvard Business School case study, Proteak's management is looking to buy new land in Tabasco to plant teak. The main objective is to substitute the hectares that will be harvested in Nayarit in the medium term. The study indicates Proteak is considering buying one of two possible plots. ⚫ MDF plant expansion: Local Tabasco authorities revealed that Proteak is considering expanding its MDF plant in the state. GBM TEAK: AFTER ALL, MONEY DOES GROW ON TREES. | 23#24October 12, 2021 THOUGHTS ON ESG • Proteak's sustainable approach has been verified by FSC, the world's leading forest certification NGO. • The company's relationship with international development funds also validates this approach. • Expected carbon credit sales of US$2.4 million annually for the coming years would add P$0.9 to our price target. Local Communities ⚫ Fair Employer program (Empleador Justo): By YE18, Proteak had 652 employees from the local communities where its plantations are. Employees are provided with social security, private transport, and financial inclusion schemes. • Farmers program (Pequeños Productores). - This program covers a total of 899 ha. Local mom & pop plantations (<100 ha.) receive clonal seeds and help with Proteak's harvesting process. The state of Tabasco and CONAFOR provide subsidies. Proteak has a contract signed with these producers to purchase their wood. Stakeholders Groups of interest and government entities ⚫ Carbon credits: Proteak has sold carbon credits worth 890,000 tons of carbon dioxide (tCO2) and plans to issue an average of 368,000 per year in the 2022-2032 period at US$6.5 tC02. This would add P$0.85 per share to our YE22 price target. ⚫ FSC: - per The Teak unit has had 1,716 ha. verified (21% of total) and will have the balance verified as plantations mature. Meanwhile, all Proteak's farms are brought up following FSC guidelines. MDF unit: Entirely certified. • UN Global Compact: Proteak has been a participant since 2014. The company submits annual reports addressing how it tackles the UN's Sustainable Development Goals (SDGs). ⚫ National Forestry Commission (CONAFOR): Proteak has received subsidies from this public entity, as its forestry practices comply with CONAFOR's requirements. Partners and Creditors ⚫ FINNFUND (11.2% stake in MDF unit) - Finnish Fund for International Cooperation GBM Publicly funded development financier and impact investor Current investments and commitments: £800 million Since 2014, it holds an 11.2% stake in Pro Eucalipto Holding, owner of the MDF business. • AKA Commertz Bank (P$1.3 billion loan to MDF unit) European export and trade bank that's based in Frankfurt, Germany. Total loan portfolio of EUR 5.4 billion (US$6.1 billion) • IFC and Proparco (P$616 million in loans to Proteak) - - - IFC: Development banking institution focused on fostering the growth of the private sector in emerging markets. Member of the World Bank Group. US$22 billion in long-term financing commitments at the end of 2020. IFC's Environmental and Social Performance Standards serve as an international benchmark for identifying and managing environmental and social risks and has been adopted by many organizations, according to FIRST for Sustainability. Proparco: Part of AFD, a publicly funded financial institution in France. It has 40 years of experience in promoting ESG development in emerging markets. з FSC finnfund ака IFC EUROPEAN EXPORT TRADE BANK International Finance Corporation WORLD BANK GROUP UN GLOBAL COMPACT PROPARCO GROUPE AGENCE FRANÇAISE DE DÉVELOPPEMENT CONAFOR COMISIÓN NACIONAL FORESTAL TEAK: AFTER ALL, MONEY DOES GROW ON TREES. | 24#25GBM October 12, 2021 VALUATION Our YE22 price target of P$18.2 for Proteak is derived from a DCF model. Model's main assumptions: • Teak hectares: We went through every annual report of the company to see how many hectares were planted each year. We assume it takes 20 years for a hectare planted with natural seeds to mature and 18 years for those using clonal seeds. • Teak prices: The first plantations to mature will be those located in Nayarit, as this state has subpar soil relative to Tabasco. Also, those fields were planted when the firm had less expertise. We foresee the plantations in Tabasco will command higher prices as of 2027. ⚫ Teak production should halt in 2032 once all hectares have been logged. Tacotalpa's harvests expected for 2033 are considered separately. Therefore, only the MDF unit would generate cash flows after 2032. Further upside could come from a second harvesting cycle or if the company decided to sell its teak ha. after harvesting, but we're excluding both scenarios from our base case. . • MDF: The annual production increased by 8.3% in the 2017-2019 period. Going forward, we expect it to expand at a CAGR of 1.9% as production nears a capacity of 240,000 m3. Also, we indexed prices to a 3% annual inflation rate. CAPEX: Modeled as a percentage of MDF board sales, given that it is the most capital-intensive unit. We project investments will remain below D&A in the medium term, although they might increase every year between 2021 and 2026. Then, CAPEX should pick up in 2027, as cash flows from the Tabasco harvests roll in. Taxes: PThe company has paid virtually no cash taxes in recent years due to net losses and deferred tax assets. Going forward, and as operating metrics improve, the cash tax rate may rise slowly to 30%. • WACC: 10.4% and a perpetual growth rate of 3%. DCF TEAK 2021e 2022e 2023e 2024e 2025e 2026e 2027e 2028e 2029e 2030e 2031e 2032e 2033e Perp EBITDA 349 370 394 403 460 527 1,454 1,474 2,335 4,122 4,289 2,491 745 767 CAPEX -15 -24 -34 -35 -46 -57 -79 -81 -83 -86 -89 -91 -94 -94 Leases -26 -26 -26 -26 -26 -26 -26 -26 -26 -26 -26 -26 -26 0 Taxes -18 -24 -33 -40 -57 -76 -277 -304 -534 -1,029 -1,144 -706 -223 -202 WK -90 -96 -101 -106 -111 -115 -118 0 0 0 0 0 0 0 FCFF 201 200 201 196 219 254 954 1,063 1,691 2,981 3,030 1,669 402 471 TEAK: AFTER ALL, MONEY DOES GROW ON TREES. | 25#26October 12, 2021 FINANCIAL ESTIMATES GBM Stock Information Last Price No. Shares ('000s) GBM Financial Estimates P$5.00 Stock Returns -MXN Million 2019 2020 2021e 2022e 2023e 373,291 1 M 1.0% Revenues* 1,355 1,177 1,758 1,847 1,936 Mkt Cap (MXN Million) $1,866 3M -7.2% YOY % 11.0% -13.1% 49.3% 5.0% 4.8% 6M ADVT (MXN Million) $0.5 6M -13.3% Op. Profit -83 -65 275 301 334 Net Debt Incl. IFRS 16 (MXN Million) $1,564 1 Yr 40.1% Op. Mg. -6.1% -5.6% 15.7% 16.3% 17.2% EBITDA * 104 -25 406 427 455 Float¹ 20% 3 Yrs -58.3% YOY % 42.3% N.A. N.A. 5.1% 6.6% Max 52w P$8.4 5 Yrs -76.7% Min 52w P$3.5 Mg. 7.7% -2.1% 23.1% 23.1% 23.5% Net Profit -67 -219 145 173 208 YOY % N.A. N.A. N.A. 19.2% 20.0% Net Mg. -5.0% -18.6% 8.3% 9.4% 10.7% Valuation Ratios (Majority Figures) 2019 2020 2021e 2022e 2023e * Revenues adjusted for asset revaluation. EBITDA adjusted for non-recurring items and asset revaluation EV/EBITDA 52.0x N.A. 9.2x 8.3x 7.3x P/E N.A. N.A. 12.9x 10.8x 9.0x Cash Flow Statement P/S 1.4x 1.6x 1.1x 1.0x 1.0x -MXN Million 2019 2020 2021e 2022e 2023e P/BV 0.6x 0.6x 0.5x 0.5x 0.5x (+) Adj. EBITDA 65 -22 349 370 394 Net Debt/EBITDA 23.4x N.A. 3.8x 3.2x 2.6x (-) Working Capital -148 -133 90 64 59 ROE -2.2% -6.8% 4.3% 4.8% 5.5% (-) Cash Interest 115 120 98 89 80 ROIC -1.6% -1.0% 4.0% 4.4% 4.8% (-) Cash Taxes 0 0 18 24 33 Op. FCF Yield 2.3% -2.3% 5.5% 7.7% 8.7% (-) CAPEX (Maintenance) 33 9 15 24 34 FCF Yield 2.3% -2.3% 5.5% 7.7% 8.7% (-) Leases 21 26 26 26 26 Dividend Yield 0.0% 0.0% 0.0% 0.0% 0.0% (=)Op. FCF 43 -44 103 143 163 (-) CAPEX (Growth) 0 0 0 0 0 (=) FCF 43 -44 103 143 163 Dividend 0 0 0 0 0 Net Debt 1,529 1,434 1,331 1,188 1,025 1. The company considers all of its shares to be float. We exclude stake owned by long-term institutional holders and insiders. **Majority figures (88.8% MDF unit, 100% Teak unit) TEAK: AFTER ALL, MONEY DOES GROW ON TREES. | 26#27October 12, 2021 BUYOUT OFFER AND IMPLIED VALUATION Buyout proposal valued Proteak at P$7.1 per share (42% upside) if we assumed nil value for the MDF unit. • • April 2019: Conti Street Partners-a Texas-based family office that has had a seat on the BoD since 2007-proposed Proteak to form a JV. Proteak would contribute 1,800 ha. of teak plantations at a valuation range of US$47-52 million, while Conti would contribute cash for new fields. The offer was rejected; however, based on Proteak's 2021 majority net debt and if we assumed the MDF unit did not exist, it would have implied an EV/ha. of P$6.5-7.6 per share. Implied Proteak Valuation EV (USD Million) Hectares (ha.) EV/ha. (US$) Total ha.* Implied EV Maj. Net Debt 2Q21 Equity Value Price per Share (P$) Range of Conti's Offer Low High 47 52 1,800 1,800 26,111 28,889 7,717 7,717 201 223 80 80 121 143 $6.5 $7.6 *7,137 ha. wholly-owned + 50% stake in Tacotalpa JV Source: GBM Research based on company filings GBM TEAK: AFTER ALL, MONEY DOES GROW ON TREES. | 27#28October 12, 2021 BUYOUT OFFER AND IMPLIED VALUATION Strip-down: Current valuations only account for the MDF business. • We valued the MDF unit as a standalone business, arriving at an EV of P$3.7 billion and a value of P$6.1 per share. • . • Strip-down: We subtracted the 2Q21 majority net debt from GBMe MDF EV. This assigns nil value to the Teak unit and assumes no FCF generation from the MDF unit in the 2021-2022 period. We arrive at an implicit price of P$5.06 per share, close to the current market price, which proves how the market has forgotten about the Teak business. If we added the PV of future carbon credits per share, there would still be an attractive 28% upside to current market prices. -Figures in MXN Million, unless otherwise stated MDF Segment EV (GBMe) 3,733 Maj. Net Debt 2Q21 1,607 Equity Value 2,126 Proteak's Stake 88.8% Equity Value for Proteak 1,888 Shares 373 Per Share 5 Carbon Credit per Share 1 Implied Price of Proteak $5.91 GBM TEAK: AFTER ALL, MONEY DOES GROW ON TREES. | 28#29October 12, 2021 DEBT PROFILE • • Consolidated debt ex. leases: P$2.1 billion by 2Q21. Majority debt ex. leases: P$1.9 billion, as two loans were directly issued by the Pro Eucalipto subsidiary (88.8% ownership). • Currency breakdown: 81% USD, 19% MXN. Rate: 81% fixed, 19% variable • . By issuer: 71% from banks, 29% from development funds (IFC and Proparco) Weighted rates: 5.3% for USD loans and 4.1% + TIIE for MXN loans. - Figures in MXN million 1,000 500 559 76 16 806 31 31 31 230 264 232 201 154 0 0 CASH 2021 2022 2023 2024 2025 > 5 Yrs USD-denominated MXN-denominated GBM TEAK: AFTER ALL, MONEY DOES GROW ON TREES. | 29#300 Sep-20 LO 5 Oct-20 10 10 Nov-20 15 Dec-20 Jan-21 Price 20 October 12, 2021 STOCK PRICE PERFORMANCE VS. ANALYST ESTIMATES Feb-21 Mar-21 Apr-21 May-21 Jun-21 Price Target Jul-21 Aug-21 Oct-21 12/10/2021 | 18.2 Market Outperformer IMPORTANT DISCLOSURES & FORWARD-LOOKING STATEMENTS Grupo Bursatil Mexicano, S.A. de C.V., Casa de Bolsa, and its affiliates, may carry out and seek to do business with companies covered in its research reports. Investors should not consider this report as a single factor in making their investment decisions. These materials do not constitute an offer to buy or sell any security or participate in any trading strategy. This report is addressed for GBM's clients or any other suitable third party. The information and analyses contained herein are not intended as tax, legal, or investment advice and may not be suitable for your specific circumstances. However, each investor shall make their determination of the suitability of an investment of any securities referred to herein and should consult their own tax, legal, investment, or other advisors, to determine such suitability. The analyst or analysts involved in the creation of this document hereby certify that the views expressed in this document accurately reflect their personal opinions and that they have not and will not receive direct or indirect compensation for expressing specific recommendations or views in this report. Furthermore, the analyst or analysts, each, certify that, neither directly nor indirectly, currently hold or have held positions in the particular sectors and companies that each of them cover. The contents hereof are based on public information; however, those sources have not been corroborated by GBM and, therefore, no guarantee is offered in terms of their accuracy or reliability. GBM, its parent company, affiliates, units, directors, officers, or employees thereof shall not be deemed liable to their clients or any other third party, nor take any responsibility whatsoever for any direct or indirect loss that may result from the use of the contents herein. This report has been prepared by GBM and is subject to change without notice. GBM and its employees shall have no obligation to update or amend any information contained herein. This report may discuss numerous securities, some of which may not be qualified for sale in certain countries or states therein and may therefore not be offered to investors in such countries or states. This report or any portion hereof may not be reproduced, reprinted, sold or distributed without the written consent of GBM. The current document is not released with the purpose of ensuring a future business relationship with the issue (issuer); therefore, this document constitutes no promise or guarantee. For further information on any particular company, please refer to the latest published research report. Forward-looking statements: This presentation contains statements that are forward-looking. Such forward-looking statements express the opinion or expectations of the person who produced this material; are based on current expectations and projections about future events and trends that may affect any of the companies' business, and are not guarantees of future performance. Investors are cautioned that any such forward- looking statements are and will be, as the case may be, subject to many risks, uncertainties and factors, including those relating to the operations and business of such company. These, and various other factors, may adversely affect the estimates and assumptions on which these forward-looking statements are based. Forward-looking statements speak only as of the date on which they are made. GBM does not undertake any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. TEAK: AFTER ALL, MONEY DOES GROW ON TREES. | 30 GBM