Document 886483241

22 May 2011 Americas/Brazil Equity Research Entertainment
T4F Entretenimento S.A (SHOW3)

Rating Price (20 May 11, R$) Target price (R$) 52-week price range Market cap. (R$ m) Enterprise value (R$ m) OUTPERFORM* [V] 15.00 22.00 16.00 - 14.67 1,037.85 860.75 INITIATION
Time for Fun means time for growth

Initiating coverage with Outperform rating and R$22/SHOW3 target price. T4F is a leading Brazilian-based live entertainment company that specializes in promoting events in live music, theater, performing arts and sports. We view the shares of T4F as an attractive vehicle for exposure to rising discretionary incomes in LatAm through one of the largest concert promoters in the world. We estimate T4Fs 3-year growth CAGR (2010-2013) at a high rate of 17% for revenues and 27% for Ebitda. Pipeline of diversified, high quality content. We believe T4Fs business model succeeds in delivering high returns and growth because it is integrated across content segments and leverages diverse revenue streams from events, including sponsorship revenues. The companys largest business segment is live music. In addition, T4F has pioneered the markets for Broadway shows, Cirque du Soleil, and stock car in South America. Catalysts: strong 2Q11 ahead. T4F reported weak 1Q11 results due to lack of major attractions when compared to 1Q10. We believe 2Q11 results should show a strong improvement, as the company promoted shows for the band U2 in April. According to the company, April monthly revenues were already 34% above the total revenue for the entire 1Q11. We also believe catalysts are likely over the next year regarding acquisitions and greenfield projects that should enhance the robustness of T4Fs business model. Valuation: trading at attractive multiples. T4F trades at an inexpensive multiple of 13.5x P/E 2011, when compared to Brazilian discretionary stocks at more than 20x P/E on average. In the live entertainment sector, there is a lack of ideal comps, but CTS Eventim, a European live entertainment company, trades at 20x P/E. T4F has 47% upside to our DCF-based R$22/share target price. At our target price, the shares would trade at 20x P/E.
*Stock ratings are relative to the relevant country benchmark. Target price is for 12 months. [V] = Stock considered volatile (see Disclosure Appendix).
Research Analysts Andrew T. Campbell, CFA 55 11 3841 6313 andrew.t.campbell@credit-suisse.com Marcelo Goncalves 55 11 3841 6311 marcelo.goncalves@credit-suisse.com
Share price performance

Daily Apr 11, 2011 - May 20, 2011, 4/11/11 = R$16.
17 16 15 14 Apr-11 Price Indexed Price Relative
On 05/20/11 the Sao Paulo SE - Bovespa index closed at 62596.52
Quarterly EPS 2010A 2011E
Q1 0.19 0.01
Q2 0.15 0.36
Q3 -0.14 0.35
Q4 0.50 0.39
Financial and valuation metrics Year Revenue (R$ m) EBITDA (R$ m) EBIT (R$ m) Net income (R$ m) EPS (CS adj.) (R$) Dividend yield (%) P/E (x) EV/EBITDA P/B (x) ROE stated - return on equity ROIC (%) Net debt (R$ m) Net debt/equity (12/11E, %) Capex (R$ m)
Source: Company data, Credit Suisse estimates.
12/10A 569.2 95.1 90.1 40.1 0.70 21.3 11.1 6.5 30.6 33.32 23 17.1 7
12/11E 717.4 122.3 114.5 76.8 1.11 2.7 13.5 7.0 2.9 21.4 41.05 -177 -49.0 44
12/12E 815.5 154.4 142.6 123.9 1.79 1.8 8.4 5.6 2.2 26.8 36.17 -173 -37.0 92
12/13E 901.7 196.0 182.3 148.9 2.15 3.0 7.0 3.8 1.8 25.6 44.65 -291 -49.4 14
DISCLOSURE APPENDIX CONTAINS ANALYST CERTIFICATIONS AND THE STATUS OF NON-US ANALYSTS. U.S. Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.
22 May 2011
Exhibit 1: T4F -- Main financial estimates

R$ millions, unless otherwise stated
BASICS Sector Price (R$) Target (R$) Recommendation Mkt. cap. (R$ mn) Free Float (R$ mn) SHAREHOLDERS FA Comrcio e Participaes Gvea Investimentos Fernando Luiz Altrio CIE International Free Float TOTAL Tickets Sold (2008-2013E) 3,000 2,500
85.0% 12.0% 48.7%
Entertainment 15.00 22.00
Ticker Target (US$)
SHOW3
13.00 OUTPERFORM 1,038 505
COMPANY DESCRIPTION T4F is a Brazilian-based live entertainment company specialized in promoting events in live music, theater, performing arts and sports. The company is the largest concert promoter in South America and one of the largest concert promoters in the world.
ON 19 8 5 3 34 69
PN 28.1% 12.0% 6.6% 4.5% 48.7% 100.0%
TOTAL 19 8 5 3 34 69
28.1% 12.0% 6.6% 4.5% 48.7% 100.0%
POSITIVES Exposure to rising discretionary income in South America Strong FCF generation and high returns on capital Pipeline of diversified, high quality content NEGATIVES Volatility in results because of lumpy events calendar Lacks venues in second tier markets Local players can create competition for content in certain segments OWNERSHIP STRUCTURE
CIE Internacional Fernando Luiz Altrio Gvea Investimentos Free float
2,000
15.0%
1,500 1,000 500 2008A 2009A 2010A 2011E 2012E 2013E

4.5%
FA Comrcio e Participaes 28.1% 6.6%
Direct + Indirect Ownership CIE International Fernando Luiz Altrio Gvea Investimentos 8.7% 30.5% 12.0%
Live Music Ticket Solds('000)
Theater and Performing Arts Ticket Solds('000)
Free Float
FINANCIALS (R$ mn) Revenues COGS SG&A EBIT EBIT margin EBITDA EBITDA margin Adj. EBITDA Net financial expenses Taxes Net income Net margin # shares (millions) EPS (R$) NOPAT Depreciation Capex FCFE Dividends/ IOE Total assets Cash Current Assets Current Liabilities Net debt Book value Market cap. EV adj. Invested capital
2008A 597 421 76 83 14.0% 100 16.8% 100 (37) 13 47 7.9% 57 0.82 58 17 (7) 57 (12) 548 93 239 163 114 126 1,038 1,151 239
2009A 435 316 72 31 7.1% 46 10.6% 46 73 (5) 6 1.4% 57 0.10 22 15 (7) 14 474 57 178 162 90 119 1,038 1,127 209
2010A 569 397 77 90 15.8% 95 16.7% 95 14 28 40 7.1% 57 0.70 63 5 (7) 38 521 128 252 200 23 131 1,038 1,061 154
2011E 717 515 80 115 16.0% 122 17.0% 122 (5) 40 77 10.7% 69 1.11 80 8 (44) 41 (28) 766 327 468 219 (177) 358 1,038 861 181
2012E 815 569 92 143 17.5% 154 18.9% 154 (25) 42 124 15.2% 69 1.79 100 12 (92) 43 (19) 865 327 487 208 (173) 463 1,038 865 290
2013E 902 609 96 182 20.2% 196 21.7% 196 (25) 56 149 16.5% 69 2.15 128 14 (14) 149 (31) 999 445 621 222 (291) 581 1,038 747 290
OPERATING METRICS Live Music Ticket Solds('000) ATP Live Music(R$)

Theater and Performing Arts Ticket Solds('000)
ATP Theater and Performing Arts(R$) LEVERAGE Net debt/ Adj. EBITDA Net debt / Equity Capex / Operat.Cash Flow RETURN / YIELD ROIC WACC Cost of Equity (ke) ROE FCF Yield Div. Yield VALUATION EV / Adj. EBITDA EV / IC P/E P/B
2008A 1,927 114 1,172 146 2008A 1.1 0.9 (0.0) 2008A 27.0% 11.2% 12.5% 37.4% 5.5% 1.1% 2008A 11.5 4.8 22.1 8.3
2009A 1,440 105 740 133 2009A 1.9 0.8 (1.2) 2009A 43.0% 11.2% 12.5% 5.0% 1.4% 0.0% 2009A 24.5 5.4 174.1 8.7
2010A 1,801 127 936 141 2010A 0.2 0.2 (0.1) 2010A 33.3% 11.2% 12.5% 30.6% 3.7% 0.0% 2010A 11.1 6.9 25.9 7.9
2011E 2,299 147 753 151 2011E (1.4) (0.5) (0.4) 2011E 41.0% 11.2% 12.5% 21.4% 3.9% 2.7% 2011E 7.0 4.8 13.5 2.9
2012E 2,141 153 904 197 2012E (1.1) (0.4) (0.9) 2012E 36.2% 11.2% 12.5% 26.8% 4.2% 1.8% 2012E 5.6 3.0 8.4 2.2
2013E 2,600 160 831 157 2013E (1.5) (0.5) (0.1) 2013E 44.7% 11.2% 12.5% 25.6% 14.4% 3.0% 2013E 3.8 2.6 7.0 1.8
Source: Company data, Credit Suisse estimates
22 May 2011
Investment Positives
Exposure to rising discretionary income in South America. We believe the live entertainment industry in South America has highly favorable macro tailwinds. With income levels on the rise and the middle class blossoming, especially in Brazil, T4F is in an excellent position to benefit from higher spending on recreation and entertainment. Unemployment in Brazil is at historically low levels and, despite the current monetary tightening cycle, we expect GDP growth of 4.2% in real terms in 2011 and 5.0% in 2012. Wage increases in local terms have been supplemented by appreciation of the Brazilian Real and Chilean Peso against the USD, thereby increasing purchasing power for fans to watch international acts. We expect the strong macro case in LatAm to underpin growth in ticket sales and sponsorship revenues at T4F. Market leader in LatAm excellent content portfolio. T4F sold more tickets than any other concert promoter in Latin America in 2010, according to Billboard. We believe this reflects the companys access to high quality content both locally and internationally. Access to content has been nurtured over the past 25 years by executing efficiently and profitability events and gaining the trust of artists. In addition, T4F has an exclusive contract with Live Nation to promote concerts in T4Fs markets for Live Nation entertainers. This contract, signed in August 2008 and with duration of seven years, provides T4F with a pipeline of superstar international music acts, such as U2, which performed one show in Santiago, three shows in Buenos Aires and three shows in Sao Paulo earlier this year. T4F also pioneered the market for Broadway musicals and plays in Brazil and was responsible for bringing highly successful Cirque du Soleil tours to Brazil. Integration: ticketing and venues. T4F has increased the integration of its business model to capture a greater part of the value chain. T4F operates five high quality venues, the most notable of which are Credicard Hall in Sao Paulo and Citibank Hall in Rio de Janeiro, which have capacity for around 7,000 to 8,000 people (standing). Access to own venues is a plus when negotiating with content providers and it opens up additional revenue streams from ancillary revenues, such as food & beverage, suite rentals and naming rights. Last year, T4F migrated from Ticketmaster to a new ticketing platform in Brazil, TicketsForFun, where T4F is responsible for selling tickets for its own events and earns a handsome convenience fee on tickets sold via the internet, call centers or pointsof-sale. Sponsorship revenues: a hot corner of the ad market. A strong boost to T4Fs profitability comes from sponsorship sales, which accounted for almost one quarter of the companys revenues in 2010. Overall spending on advertising is increasing at rates above GDP in T4Fs markets and we believe advertisers are eager to find new channels to reach their audiences, especially considering low penetration of traditional media (newspaper, magazines) among middle class consumers. By working with some of the largest advertisers in Brazil (Bradesco, Citibank, Chevrolet, etc.) we believe T4F has crafted highly effective sponsorship packages. Recent newspaper reports (Valor Economico) have stated that prices for sponsor packages in Brazil are going up as competition among advertisers has intensified in this segment. Growth strategy: new markets to tap. T4Fs activities in Brazil have mostly been concentrated in the Sao Paulo-Rio de Janeiro axis. One of the companys avenues for growth is to expand to second tier cities which have now become worthwhile destinations for artists after the rise in incomes over the past decade. As an example, the first Cirque du Soleil tour promoted by T4F went to only four cities in 2006-2007, while the most recent tour in 2009-2010 was expanded to twelve cities. We believe markets such as Recife, Salvador, Curitiba, Brasilia, etc. will become increasingly attractive markets for live entertainment. In addition, twelve new soccer stadiums are currently under construction throughout Brazil for the 2014 soccer World Cup. These are venues that could potentially be leased by T4F for promoting concerts.
22 May 2011
Management depth / sophistication. T4Fs Chairman and CEO is Fernando Alterio, the founder of the company with almost 30 years of industry experience. Since establishing his first venue in Sao Paulo, he has assembled a competent and professional management team that is adept at identifying and attracting content under terms that are financially sensible for the company. T4F has a track record for discipline and not chasing business at any cost just for the purpose of exposure or market share. As a result, the company sometimes misses the chance to host high profile shows, but manages to maintain healthy Ebitda margins (16.7% in 2010). In addition, T4F has two other important shareholders: CIE, the Mexican controller of OCESA, and Gavea Investimentos, a Brazilian asset management firm that bought into the company in 2007. Finally, T4F is a Novo Mercado company; it has one share class (one vote each) with tag-along rights and has the protections of Novo Mercado. Strong FCF generation and high returns on capital. T4F has had an asset-light business model that has allowed the company to generate high levels of FCF and high returns on invested capital. In 2010, for example, the companys return on average equity was above 30%. The companys net debt declined from R$89mn to R$23mn during 2010 from internal cash generation, thereby allowing the company to distribute dividends in 1Q11. The companys only major outstanding borrowing is an issuance of R$150mn in local debentures completed in March 2010 and maturing through 2015. After completing its IPO in April 2011, we believe the company may become more active investing in fixed assets, such as audio/stage equipment and greenfield venue construction. This could create a more robust business model by enhancing the level of integration and extending their competitive advantages, while still maintaining high levels of profitability.
22 May 2011
Investment Risks
Exposure to LatAm macro is double-edged sword. We mostly see T4Fs exposure to the growing economies of Brazil, Chile and Argentina as a positive, but in the event of a sharp slowdown or economic crisis in one of these countries, then T4F would likely be hit hard. T4Fs revenues are fueled by discretionary income. As an example, in 2009, the companys revenues contracted sharply when the global financial crisis hit and was aggravated by H1N1 flu. Any recurrence of a pandemic would hit T4F badly as customers look to avoid groups and public places. In spite of this risk, the outlook is for continuing gains in real wages in the companys three main markets. Further, the company may have opportunities to grow in other promising LatAm markets, such as Peru and Colombia. Slow start in 2011. Due to a light events calendar, 1Q11 results were weak, with revenues and Ebitda declining materially y/y. We attribute this weakness to an atypically strong 1Q10 that benefited from Cirque du Soleil and international concerts (Metallica and Coldplay). In contrast, 1Q11 had no Cirque du Soleil revenues and a lighter international tour schedule. The situation should improve substantially through the course of the year, and we still expect full year 2011 revenues and Ebitda to increase by more than 20%. Results in 2Q11 will already reflect U2s Brazil and Argentina shows that generated high box office and sponsorship revenues. In late 3Q11, the company will launch the Cirque du Soleil season (Varekai) and Witches of Eastwick musical, both of which should create more favorable comparisons with 3Q10. Competition for content. In the live music segment T4F faces competition from other concert promoters who sometimes are willing to be more aggressive with artist royalties in order to bring shows to the region. As an example, Mondo Entretenimento brought Shakira and Iron Maiden to Brazil in March this year. Both of these events could potentially have been attractive to T4F. In September/October, the Rock in Rio festival, organized by a competitor, plans to bring stars such as Rihanna, Red Hot Chili Peppers and Elton John to Brazil. While T4F may periodically miss the chance to host big name acts, we believe the companys track record as one of the top promoters in the world, access to venues, contract with Live Nation, and financial discipline when pursuing mandates should keep the company on a good growth trajectory with sound profitability for coming years. Lack of venues in 2nd tier cities. T4Fs venues are located in Sao Paulo, Rio and Buenos Aires, but the company does not operate venues in large, growing cities in other parts of Brazil, such as Belo Horizonte, Salvador and Porto Alegre. Furthermore, in Sao Paulo, the companys lease at Citibank Hall, a smaller venue, is up for renewal and appears likely to be lost. While the lack of venues may appear to be a gap in the companys strategy, in reality we believe it is an opportunity to expand either through acquiring existing venues or building greenfield facilities. We believe the company is already actively exploring potential venue acquisitions or locations to build. If successful, this expansion could be highly complementary to T4Fs existing business. Political, regulatory risks. The live entertainment business is not heavily regulated, but T4F still faces some legal and regulatory risks. For example, in Brazil companies organizing cultural, artistic and sporting events are required to sell tickets at half price to students and senior citizens. The proliferation of fake student I.D.s can end up being a risk to average ticket price, although T4F has experience dealing with this problem. In Argentina, sovereign and political risks are higher than in Brazil and Chile heading into presidential elections later this year. Argentina was responsible for 19% of revenues and 9% of T4Fs Ebitda in 2010.
22 May 2011
Valuation: heavily discounted

Since its IPO in April, T4F shares have traded down 6.3%, essentially tracking the performance of the Ibovespa. At the current share price, we believe T4F shares are deeply undervalued with upside of 47% to our DCF-based target price. The shares are trading at 7.0x EV/Ebitda and 13.5x P/E for 2011, a sharp discount to any available peer group, such as Brazilian consumer discretionary stocks, LatAm media stocks (Televisa), and European ticketing / live entertainment comps (CTS Eventim). Our expectation is that this discount will narrow in the coming months as T4F delivers its growth strategy, concerns about the slowing Brazilian economy diminish, and visibility for T4Fs recent listing increases. It is also worth highlighting that our P/E multiples are based on the companys book earnings, which actually tend to understate cash earnings because the companys cash tax rate is lower than book taxes. The reason for this difference is because goodwill amortization (from the acquisition of T4F in 2007) reduces taxable income and should continue to do so over the next several years until goodwill is fully amortized. Upside of 47% to DCF-based target price We value T4Fs equity with a discounted cash flow model (DCF) that assumes a weighted average cost of capital of 11.2%. We assume leverage will reach 20% debt/capital in the companys capital structure, once the companys business has matured. We assume the companys cost of equity is higher than the Brazilian market (Beta of 1.2x) due to the companys fairly low margins and high leverage to economic growth. Our perpetuity growth assumption is 3% nominal growth, essentially in line with our inflation forecast over the long-term.
Exhibit 2: T4F -- WACC calculation
%
US risk free rate Sovereign spread Equity risk premium Beta Cost of equity Debt spread over soveign Cost of debt (pre-tax) Tax rate Cost of debt (after tax) Debt as % of total capital WACC 5.0% 1.5% 5.0% 1.20 12.5% 2.0% 8.5% 30% 6.0% 20% 11.2%
In our model we consider a step-up in capex in 2011 and 2012 for the purchase of sound/stage equipment and construction of a concert arena with capacity for up to 60,000 in the city of So Paulo. We estimate the cost savings from the arena and sound/stage equipment should increase Ebitda margins to close to 22% in 2013. Importantly, our forecasts do not include other potential value-enhancing events, such as expansion into other LatAm markets (Colombia), acquisitions of venues in second tier markets, and complementary acquisitions. Multiples analysis: lack of ideal comparables One of the challenges to value T4F is that there are no other listed out-of-home entertainment companies in South America to be used as comparables. In the absence of alternatives, we refer to Brazilian consumer discretionary companies given the importance of discretionary income to T4Fs businesses. This peer group includes retailers such as Marisa and Hering. On average these shares are trading at 12x EV/Ebitda and 28x P/E for
22 May 2011
2011. Although T4F would not necessarily trade in line with this peer group, we believe a substantial narrowing of the discount is warranted as investors become more accustomed to T4Fs business model. Outside of Brazil, another potential peer group for comparison is media and entertainment companies in LatAm. For example, CIE in Mexico controls a similar live entertainment business to T4F, called OCESA. The problem is that OCESA is not listed and its parent company, CIE, is listed but has low trading liquidity, high financial leverage, and diversification into amusement parks, gaming, and other businesses that are not related to T4F. This means that CIE is not an instructive comparable, in our view. Among other companies in LatAm, Televisa is a TV broadcaster that is driven mainly by advertising revenues. Given the importance of sponsorship revenues to T4F, we see some common ground with Televisa. With Televisa trading at 8.5x EV/Ebitda and 21x P/E for 2011, T4F is trading at a discount. Of the remaining universe of potential comps, we also refer to global content companies such as Disney, News Corp and Time Warner, because at the end of the day T4F is a content-driven business. These shares trade on average at 7x EV/Ebitda and 13x earnings for 2011, more in line with T4Fs valuation. One difference is that these companies tend to have weaker growth prospects than T4Fs. Among European comps, perhaps the most relevant is CTS Eventim, a ticketing company in Europe that has interests in the leading German tour and concert promoters. The shares are not covered by CS, but based on consensus data, we estimate Eventim shares are trading at 10.5x EV/Ebitda and 21x P/E for 2011, a sizable premium to T4Fs multiples.
Exhibit 3: T4F valuation table

in local currency, unless otherwise stated
EPS Stock Global media & content Walt Disney Company News Corporation Time Warner, Inc Viacom Live Nation CTS Eventim Vivendi Mean Latam media and entertainment Televisa TV Azteca T4F Entretenimento S.A Mean Brazil consumer discretionary Lojas Renner Lojas Americanas Marisa S.A. B2W CIA HERING Mean
Source: Company data, Credit Suisse estimates IBES estimates
EPS growth 2012 2010 2011 2012 (%) 3.11 1.34 3.30 4.26 0.18 2.82 2.29 17 24 31 25 n.m 5 1 23 14 16 19 n.m 33 1 14 14 18 13 n.m 22 5 18.8 16.9 15.3 16.2 n.m 27.4 8.9 15.8 2010
P/E (x) 15.3 14.8 13.2 13.6 n.m 20.6 8.8 13.5 21.2 12.0 13.5 20.5 20.5 32.4 19.8 26.9 28.0 13.4 13.0 11.2 12.0 62.9 16.9 8.4 12.4
PEG
EV/EBITDA (x)
ND/EQ (%)
Ticker
View
Mkt cap (US$ mn)
2010
2011 (x)
2011 2012 2011 2012 2010 2011 2012
DIS US NWSA US TWX US VIA/B US LYV US EVD GR VIV FP
O N O N NC NC O
78,441 31,974 39,395 27,363 2,000 1,635 34,123 214,932
2.21 1.03 2.41 3.17 (1.36) 1.74 2.16
2.71 1.18 2.80 3.76 (0.08) 2.31 2.18
0.82 1.06 1.21 1.06 0.94 0.74 0.87 1.03 n.m n.m 0.83 0.94 10.91 1.71
9.3 6.2 8.2 8.8 11.0 5.3 8.0 9.9 6.3 11.1 12.2
8.1 5.6 7.7 8.1 7.2 4.0 7.0 8.5 5.8 7.0 8.5
7.3 5.0 7.3 7.5 6.3 9.1 3.9 6.5 7.5 5.7 5.6 7.6 9.9
27 26 32 77 42 2 38
13.3 10.5
TV US TVAZTCPO MM SHOW3 BZ
O N O
11,305 2,014 642 13,319
1.09 0.06 0.70
1.11 0.06 1.11
1.25 0.05 1.79
38 76 573
2 -9 58
12 -3 61
21.5 10.9 21.3 20.9
18.9 13.83 1.75 12.4 8.4 18.3 17.3 21.9 15.9 40.0 15.9 21.1 3.38 1.09 4.04 0.68 1.80 0.80 1.11 0.75 n.m -3.77 0.37 0.22
10 90 74
LREN3 BZ LAME4 BZ AMAR3 BZ BTOW3 BZ HGTX3 BZ
O O O N NC
4,179 6,779 2,878 2,247 3,494 19,578
2.53 0.41 1.13 0.14 1.29
2.69 0.44 1.27 0.57 1.60
3.20 0.65 1.59 0.58 2.18
62 75 49 -56 82
6 9 12 291 24
19 48 25 3 36
21.8 35.2 22.2 26.9 43.4
13.4 12.0 11.9 9.9
1 619 290
13.4 11.9 10.0
8.4 net cash
160.5 41.0
0.55 16.34 13.8 12.0 10.3 14.4 12.1 10.0
20.2 14.6 11.0 net cash
22 May 2011
22 May 2011
Company Overview
Summary
The leading player in out-of-home entertainment in South America T4F is the leading player in South America for out-of-home entertainment with more than 1,000 events organized and almost 3mn tickets sold during 2010. (Events are defined as each day an exhibition is open or a show is produced.) The company promotes concerts for attractions such as U2, AC/DC, Madonna, Bon Jovi, and Aerosmith from the international scene, and Roberto Carlos, Caetano Veloso, Maria Bethania, and Victor & Leo from the local scene. The company had R$569mn in net revenues in 2010 and we expect revenues to exceed R$700mn this year. Integrated platform with high quality venues A key to the companys business strategy is its degree of integration. T4F operates five venues: four located in Brazil and one located in Argentina. Three of those five venues are under long-term leases. Long-term leases give T4F the upper hand when negotiating contract terms with artists and scheduling shows, as there is a scarcity of desirable locations in their markets. Its quality of venues and renowned organizational capability make T4F the number-one name in events in South America and one of biggest events promoters in the world.
Exhibit 4: T4F -- Net revenues and main operational figures, 2010

R$mn Net revenues Box office Live music Theater and performing arts Sport events (Vicar) Operation of venues (F&B) and ticketing Sponsorship Total Live Music # of concerts # of tickets sold ('000) occupancy rate Theater and performing arts # of events # of tickets sold ('000) occupancy rate Source: Company data, Credit Suisse estimates
Exhibit 5: T4F -- Box office revenue breakdown, 2010

%
355 219 123 13 90 124 569 348 1,801 67% 737 936 60%
Sport events (Vicar) 4% Theater and performing arts 35%
Live music 61%
In addition to promoting concerts, T4F promotes the Cirque du Soleil tour in its markets. Over the years, the company has increased the number of Cirque du Soleil cities and events from 4 cities and 150 presentations in the 2006-2007 tour to 12 cities and 414 presentations in the last tour. The next tour is slated to kick off in September this year. T4F also promotes original Broadway theater presentations of well-known plays, such as Mamma Mia, Phantom of the Opera, and Cats, in Brazil and Argentina. Exclusivity agreements with major content providers To improve visibility on its pipeline of content, T4F has exclusivity agreements with Live Nation, the largest live entertainment company in the world, for international artists, and Cirque du Soleil, which allows T4F to bring high-quality entertainment options to South America.
22 May 2011
Company history
T4F started operations in 1983 through the Palace (now known as Citibank Hall), their first venue, in the city of Sao Paulo. From 1983 to 1999, Mr. Fernando Luiz Altrio promoted shows at the Palace, their only venue at the time. CIE (ticker: CIEB.MX), a Mexican entertainment company, acquired a stake in T4F in 1999. After that, T4F inaugurated its second venue, Credicard Hall, considered the best venue in Latin America, according to Pollstar in 2009 and 2010. In 2001, T4F inaugurated Teatro Abril, a venue specialized in the presentation of Broadway shows in Sao Paulo that started its first season with the performance of the play Les Misrables. T4F later expanded to Rio through the acquisition of Metropolitan, a venue now known as Citibank Hall. 2006: the Cirque du Soleil endeavor In 2006, T4F started to promote Cirque du Soleil, at first in four cities, with the show Saltimbanco. The show proved to be a success, and in 2007, T4F brought back Cirque du Soleil with shows in 8 cities and with more than double the total number of performances held in 2006. Due to the high-profile audience of Cirque du Soleil, T4F celebrated a sponsorship agreement with Bradesco, which is a now an important source of T4F revenues.
Exhibit 6: T4F Timeline
Foundation Expansion 2005: ! Acquisition of Ticketek (Argentina) 1983: ! Brazil - Opening of Palace (So Paulo) 2001: ! Brazil - First year of Broadway promotion ! Brazil - Opening of Teatro Abril venue (So Paulo) 2007: ! Acquisition of T4F Argentina and T4F Chile ! Acquisition of control of T4F by Fernando Alterio and Gvea Investimentos ! Exclusivity agreement to operate in the Monumental del Nues stadium in Argentina (River Plate) Consolidation of the Business Model 2008: ! Agreement with Live Nation in LatAm. 2009: ! Brazil Acquisition of Vicar (20%) ! Launch of Softix System New Expansion Cycle
1999: ! Brazil Opening of Credicard Hall venue (So Paulo) ! First year of Broadway promotion
2000: ! Brazil - Start of operations of Ticketmaster system
2001: ! Acquisition of Metropolitan (Rio de Janeiro)
2006: ! Acquisition of Vicar (55%) ! First year of promotion of Cirque du Soleil
2011-2013: ! Capitalize on the booming of the South American economies, particularly Brazil ! Continue to expand geographically, with strong gains of scale ! Further develop the vertically integrated business model ! Solidify the diversified business model, being the partner of choice for the main global content providers
Racing into the stock car segment In 2006, T4F acquired 55% of Vicar, the promoter of the most famous stock car races in Brazil, the Copa Caixa Stock Car, and the Stock Car Light, now known as Chevrolet Montana. In 2009, T4F acquired another 20% of Vicar, increasing its stake to 75%, with the remaining stake held by minority shareholders. In 2010, Vicar also started the Copa Mini Challenge with the sponsorship of BMW. All these events leverage on the structure set up for the stock car races, as the other events take place before the start of the Copa Caixa Stock Car races. Fast expansion of operations In 2007, T4F expanded its operations to Latin America through the merger with CIEs operations in Argentina. Strong ties with other LatAm countries are critical, as well-known international artists generally prefer to book tours covering all major LatAm markets such
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as Brazil, Argentina, and Chile. The acquisition of operations in Argentina and Chile marked T4Fs expansion outside of Brazil. In Argentina, T4F operates one venue, owned by the company, Opera Citi, and promotes events at stadiums. In Chile, T4F promotes events with third party venues.
Exhibit 7: Revenue share by country, 2010

%
Exhibit 8: Geographic presence

in millions, unless otherwise stated
Chile 14%
Peru
Brasil
Argentina 20%
Argentina
Brazil 66%
Chile Countries with T4F offices Expansion already in place
Argentina: high entertainment expenditure Spending on entertainment as a percentage of disposable income is much higher in Argentina than in other emerging countries, at 8% of disposable income versus 3% in other LatAm countries, according to Euromonitor. The strong share of entertainment in disposable income increases Argentinas importance as a market for music concerts and performing arts. It also may point to the upside for entertainment spending in the T4Fs other markets. Finally, in 2007, T4F obtained a license for use of the Ticketmaster software, which allowed it to operate ticketing services for the company and third parties in Brazil.
Business lines: expertise across segments

T4F has expanded its business model from promoting mainly live music concerts to also promoting performing arts, sports and exhibitions. This variety of attractions allows T4F to sell sponsorship packages that fit a wide range of advertisers. We believe competition among advertisers to sponsor top events is fierce, given strong competition among top advertisers in such sectors as telcos, banks, and beverages and lack of available advertising alternatives. T4F has a portfolio of music concerts, exhibitions, and theater plays that fit the target audience of almost any marketing campaign, allowing T4F and sponsors to engage in long-term contracts.
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Exhibit 9: T4F -- Revenue breakdown, 2010

Exhibit 10: T4F -- Gross profit breakdown, 2010

Sponsorship 124 (22%) Box office 355 (62%)
Sponsorship 124 (75%)
Box office 7 (4%) Operation of venues (F&B) and ticketing 35 (21%)
Operation of venues (F&B) and ticketing 90 (16%)
Live music: shows for all audiences T4F promotes indoor and outdoor music concerts in Brazil, Argentina, and Chile. The live music business is the main contributor to T4Fs top line. Live music entails the promotion of concerts at T4F venues and third party stadiums. Live music represented about 60% of box office revenues in 2010 and is an important element for attracting sponsors. Shows such as U2, held earlier this year, and Madonna (2008), give excellent visibility to sponsoring brands.
Exhibit 11: Live music segment net revenues, 2008-2010
Exhibit 12: Average ticket price, 2008-2010

R$, unless otherwise stated
219 186 154
127 114 105
2008
2009
2010
2008
2009
2010
Venue operations: 4 located in Brazil and 1 in Argentina T4Fs own venues, Credicard Hall and Citibank Hall Rio, are suitable for hosting concerts from 4,000 to 7,000 people. These venues are mainly used to host international and local artists that have a lower attendance than major international attractions. For larger shows, like Bon Jovi, U2, and AC/DC, T4F leases soccer stadiums that can accommodate about 60,000 people. These extensive venue options give T4F flexibility when negotiating dates, as their competitors do not have the same reach. T4F has the advantage of being able to propose a tour that can include major cities such as Rio, So Paulo, and Buenos Aires all using venues operated by T4F. In addition, T4F has the know-how to organize tours covering the major markets of the country for international artists. Citibank Hall in Sao Paulo accommodates just 3,000 people standing for smaller concerts. This venue is pending a contract renewal, as its lease expired in August 2008 and the owner of the location wants to erect a new building on the land. We estimate the impact on 2010 numbers from Citibank Hall is about R$3mn in Ebitda, or 3% of the total Ebitda for the year. Our expectation is that this lease is unlikely to renewed, although a portion of the financial impact is likely to be offset by transferring events to other locations.
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Exhibit 13: T4F -- Venue Details
Credicard Hall Largest and most technically advanced venue in South America So Paulo, Brazil 1999 3,900 seated / 7,500 standing 15,000 m 32 (26 leased) Jan 2010* Sep 2019
Teatro Abril The only private theater in Brazil technically equipped for Broadway productions So Paulo, Brazil 2001 1,530 seated 6,000 m None Dec 2019 Apr 2011
Citibank Hall RJ The most important venue in Rio de Janeiro
Opera Citi One of the most traditional theaters in Buenos Aires
Citibank Hall SP T4Fs first venue for live entertainment in So Paulo
Highlight
Location Inauguration Year Capacity Total Constructed Area Number of Suites Expiration of Leasing Contract Expiration of Naming Rights
Rio de Janeiro, Brazil 1994 3,500 seated / 8,432 standing 15,200 m 14 (10 leased) Mar 2012 Feb 2012
Buenos Aires, Argentina 1982 2,000 seated 4,000 m None Own property Jan 2013
So Paulo, Brazil 1983 1,648 seated / 3,098 standing 3,600 m None Aug 2008 Feb 2012
*T4F and the owner already agreed on a contract renewal although terms of the rental payment have not been finalized. Source: Company data, Credit Suisse estimates
22 May 2011
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Live music revenue model Generally speaking, there are three types of compensation arrangements between T4F and the artists: (i) revenue sharing, (ii) flat deal, and, (iii) minimum royalty with profit sharing. In the revenue-sharing model, used mainly with local artists, the total net boxoffice revenues are shared at fixed percentage with the artist, and T4F bears all costs related to the operation. This model reduces T4Fs risks associated with a lower occupancy rate, which also reduces the amount to be paid to the artist. In the flat deal case, T4F pays an upfront fee and the artist has no share in the profits from the show. In the minimum royalty with profit-sharing model, to guarantee the artists pay, a minimum royalty fee is previously agreed with the artist. The artist also receives a share of the profits from the event above a certain threshold. For certain high-profile musicians, this share may be high in favor of the artist. For every concert into which T4F enters in the bidding process, the company runs several simulations for the concert payoff to be able to decide how aggressively to bid. We believe the company uses its extensive industry research / expertise and financial modeling to determine bid levels. Overall, we believe the company has a track record for bidding judiciously for concerts and leveraging its integrated business model to maximize profitability. In the minimum royalty with profit share model, which has the higher risk, T4F makes projections using (i) a stronger dollar rate, so the company has a cushion for local currency depreciation and, (ii) different occupancy rate scenarios. Normally, when taking into account the ticketing and sponsorship revenues, T4F would only lose money at a high-profile music concert only under extreme cases of low occupancy rates.
Exhibit 14: Hypothetical pay-off, profit share
2,000 1,500 1,000 500 0 -500 -1,000 -1,500 -2,000 -2,500 50% (Thousands)
Exhibit 15: Hypothetical pay-off, revenue share

140 (Thousands) Pay-off 120 100 80 60 40 20 0 35% 40% 45% 50% 55% 60% 65% 70% 75% 80% 85% Occupancy rate (%)
Pay-off
55%
60% 65% 70% 75% Occupancy rate (%)
80%
85%
Performing arts and theater: the Cirque du Soleil effect Stage performances, cultural exhibitions, theater plays and Broadway musicals are the contributors to this business segment. Before the start of Cirque du Soleil, T4Fs revenues for this segment were mainly related to theater plays and Broadway musicals, which for a positive return on investment needed to run for at least four months. With Cirque du Soleil, the number of presentations and the average ticket price stepped up, as did the occupancy rate. Cultural exhibits and plays are still a part of total revenues and profits.
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Exhibit 16: Theater and performing arts net revenues, 2008-2010

R$ millions
Exhibit 17: Theater and performing arts ATP, 2008-2010

R$
170 123 83
143 141 133
2008
2009
2010
2008
2009
2010
Performing arts: Cirque du Soleil returning in September 2011 Performing arts includes Cirque du Soleil, the Blue Man Group, Stomp, among others, which are presented in each city of the tour generally once every two years. Cirque du Soleil is the showcase event. We expect the next tour, Varekai, to last about 15 months and visit 12 cities. Normally, Cirque du Soleil performs in a city once every two years, as pushing performances every year could deplete demand. In 2011, Cirque du Soleil should start its season in Sept. 2011 in the Southeast of Brazil, impacting mainly 4Q11 theater and performance revenues. Most of the revenue from Varekai should land in 2012, when Cirque du Soleil is expected to stay most of the year touring in Brazil and other LatAm countries. Varekai debuted in Montreal in 2002 and it is dubbed an "acrobatic tribute to the nomadic soul".
Exhibit 18: Cirque du Soleil tour highlights
2006/2007 Event 2007 / 2008 2009 / 2010
Number of Events
362 150
414
Brazil Footprint Chile Santiago Rio de Janeiro So Paulo Buenos Aires Argentina 4 cities Chile Santiago
Brazil Brasilia Horizonte So Paulo Belo de Janeiro Rio Curitiba Porto Alegre Buenos Aires Argentina 8 cities
Peru Lima Chile Santiago
Fortaleza Recife Salvador Brasilia Belo Horizonte So Paulo Rio de Janeiro Curitiba Porto Alegre Buenos Aires Brazil Argentina 12 cities
Cirque du Soleil: untapped content One of the risks of having performance arts revenues heavily dependent on Cirque du Soleil is the development of new Cirque du Soleil content. The Quidam tour, held in 2009/2010, had a lower-than-expected occupancy rate, due to the financial crisis, H1N1 flu and the less upbeat storyline than the previous one, Alegria.
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We believe there is no shortage of appealing Cirque du Soleil content to take to Brazil. Cirque du Soleil has increased its number of events since 2006 and now it has 22 shows. Of those, seven are touring shows that have not yet come to Brazil. Currently, Cirque du Soleil is touring a Michael Jackson version of its show in US and Canada, an attraction that we believe would be appealing for Brazil. Theater: Mamma Mia currently the main attraction Theater revenues main contribution is from the Broadway shows, which use local stages, personnel, and supporting staff, but under the direction of the Broadway rights owner. T4Fs know-how in hiring local personnel and its contacts with high-quality staff facilitates the plays success and allows it to fulfill the strict quality requirements of the rights owner. T4F has no exclusivity with main content owners, such as Andrew Lloyd Webber, Cameron Mackintosh, and Disney. However, the good track record of execution and high occupancy rates at venues make it the leading company to bring original Broadway shows to Brazil. Adding to that, Teatro Abril is one of the only venues, along with Teatro Bradesco, to have enough stage space to be able to execute an original Broadway play. T4F also produces fully adapted Broadway shows such as the Witches of Eastwick; in that case a local director will be the one to adapt the play. We expect Witches of Eastwick to debut in Sao Paulo later this year. Vicar: an important step into sports market Although sports represent a tiny percentage of box office revenues, we believe this segment is still important because of its contribution to sponsorship revenues. We estimate Vicar had net revenues, including sponsorship, of about R$40mn in 2010. Given the subsidiarys asset-light structure, it should positively contribute to T4F earnings. The Copa Caixa Stock Car is broadcasted by Globo, the largest TV network in Brazil, and other pay TV channels, which guarantees TV coverage of over 100 hours per year. Copa Caixa has among its drivers five former Formula 1 racers, which also helps to promote the races. The TV coverage is the main draw for sponsorship agreements. Ticketing: an important supplement to profits T4F runs its ticketing business using Softix software, which is fully adapted to Brazils tax regulations and allows more users to access the platform at the same time. For use of Softix, T4F pays a small fee per ticket sold. The change of service provider from Ticketmaster to Softix has improved the efficiency of the process and at more favorable terms for T4F.
Exhibit 19: Brazil Broadband access, 2007-2010E
% of households
Exhibit 20: Live Nation Web sales at Ticketmaster

% of total sales
Broadband penetration per household (including mobile datacards) 25.2%
31.4%
73%
77%
23.8% 19.4% 18.2% 14.3% 2007 20.4%

62% 56% 2004 2005
70% 67%
Broadband penetration per household (fixed broadband) 2008 2009 2010E
2006
2007
2008
2009
For tickets sold through any channel other than the box office, T4F charges a convenience fee, which is about 20% of the value of the ticket. In 2010, the box office represented
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roughly 60% of the tickets sold, while sales through the Web were about 20%. In comparison, for Live Nation, more than 70% of the tickets were sold through the Web. Despite the 20% price difference, given the box offices restricted business hours and locations, we believe the share of ticket sales over the internet should increase over time. Contributing to that trend is the increase in broadband access in Brazil, which grew by 24% in 2010, if we consider mobile broadband access (datacards). Sponsorship: delivering the profitability Strong ties with sponsors are maintained by T4F by consistently delivering more advertising punch than that actually anticipated by the sponsor. In the case of long-term contracts, the sponsor may buy a series of shows that include high, medium, and lowprofile shows, for which T4F has a history of delivering better-than-expected brand exposure. The risks of a music concert can be higher than those of a normal advertising campaign. In the case of a poor performance, the sponsors brand could be tarnished. T4Fs extensive track record and professionalism puts the sponsor at ease when sponsoring a T4F event.
Exhibit 21: Sponsorship revenues, 2008-2010
Exhibit 22: Sponsorship revenue breakdown by industry segment, 2010

%
134 121
124
Car Manufacturers 4% Services 6% Others 7% Banks 40% Telcos 11%
Credit Cards 14%
2008
2009
2010
Consumer Products 18%

An important part of sponsorship revenue comes from exclusivity rights to pre-sale tickets, enabling the sponsor to give their clients priority to buy the tickets before they are available to the public. For example, Citibank has a pre-sale ticket agreement with T4F for live music. We believe this is viewed as a major advantage for Citibank cardholders. The pre-sale period is normally long (about 10 days), allowing the cardholder to have access to the best seating. Naming rights: steady revenue flow Venues operated by T4F have naming rights contracts, which were first implemented in Brazil by T4F for Credicard Hall, which was inaugurated in 1999. The company has naming rights agreements with Credicard, Citibank and Abril group. The naming rights contracts are set to expire from 2011 to 2013, with the exception of that for Credicard Hall, which only expires in 2019. At Credicard Hall (SP) and Citibank Hall (RJ), T4F increased the recurrence of revenues of the venues by leasing suites to corporate customers. These contracts allow the tenant to have access to any of the shows presented in the venue by paying a fixed fee per year. The ability of T4F to bring leading attractions to its venues gives it a lease ratio of 70%80% of the total suites.
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Growth opportunities
Geographic expansions to new markets in Brazil We believe T4F is in a strong position to benefit from South America becoming an increasingly attractive destination for international tours because of rising purchasing power that should benefit ticket sales and prices. Currently, T4F has about 80% of its revenues in Brazil concentrated in the cities of Rio de Janeiro and Sao Paulo. This was based on a strategy of building high-quality venues in both places and enabling T4F to have the upper hand when negotiating with artists. Due to the income distribution in Brazil back in 2000, the expansion to other geographic areas would have represented more of a risk than an opportunity at the time. Now, the middle class has edged above 50% of the total population and in regions such as the Central-West and Northeast of Brazil, the income of the lowest bracket of the population has risen even more sharply than that of the rest of the country. This trend justifies efforts to try to take attractions to places other than Rio and Sao Paulo and even to acquire venues outside the main markets, to be able to better promote shows.
Exhibit 23: Class ABC share in metropolitan regions, 2003-2009
% of total population
32 Recife 48
Bogota Ecuador Colombia Venezuela Guiana Suriname Guiana francesa
Exhibit 24: T4F presence in South America
40 Salvador 61
Peru Lima
Belm Brazil Braslia Bolivia
Fortaleza Recife Salvador
46 Belo Horizonte 71
56 Porto Alegre 71
Belo Horizonte Campinas Rio de Janeiro Paraguay Sao Paulo Curitiba Chile Argentina Porto Alegre Santiago Uruguay Buenos Aires
59 Sao Paulo 73 2003 2009

Indicates cities where T4F is present with venues Cities where T4F can expand operations.
Twelve new stadiums across Brazil for World Cup 2014 Expansion into new markets in Brazil should be facilitated by the World Cup, set to occur in Brazil in 2014 in twelve regions of the country. To host the World Cup, stadiums are being built across the country. Those modern stadiums have capacities ranging from 45,000 to 76,500, with most of the stadiums in the 50,000-60,000 range. This makes them appropriate to host high-profile international concerts. We believe T4F can leverage these stadiums to extend its footprint of shows into other cities and especially the Northeast, where stadiums are being built in Salvador, Natal, Fortaleza and Recife.
18
Exhibit 25: Brazil Stadiums under construction for the World Cup 2014
R$, unless otherwise stated
Maracan (Rio de Janeiro)
Estdio Nacional (Braslia)
Mineiro (Belo Horizonte)
Castelo (Fortaleza)
Itaquera (So Paulo)
Beira-Rio (Porto Alegre)
76.525
705mn
70.000
696mn
67.806
655mn
66.700
519mn
65.000
600mn
60.000
155mn
Arena Fonte Nova (Salvador)
Arena Amaznia (Manaus)
Arena Permambuco (Recife)
Arena das Dunas (Natal)
Arena Pantanal (Cuiab)
Arena da Baixada (Curitiba)
50.000
592mn
47.750
500mn
46.000
532mn
45.000
400mn
43.000
342mn
41.000
145mn
Source: Folha de Sao Paulo newspaper, Credit Suisse estimates
22 May 2011
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Venues to widen the competitive advantage World Cup stadiums should be attractive to lease for major international attractions, but T4Fs own venues are an important asset in negotiations with artists for more modest shows. By acquiring more venues, T4F could take control of important assets, enhance scheduling flexibility, improve the customer experience, and increase bargaining power vis--vis artists. In addition, T4Fs strong sponsorship ties should allow the company to negotiate better naming rights. Venue construction, especially in Sao Paulo Greenfield construction of own venues could be an attractive option for T4F in markets with no available venues to purchase or lease. In Sao Paulo, for example, a large arena designed primarily for concerts would be a strategic boost for T4F, as it would be the only venue with capacity for up to 60,000 people that is not a soccer stadium. The concert arena could have flex capacity depending on the concert. Such flexibility in capacity would be possible because the stage position could be adjusted to decrease the distance to the audience. Additionally, we believe the company could sell naming rights of the arena in a similar way they do with its other venues. The only vaguely similar venue in operation today is Arena Anhembi, which has a capacity for 30,000 people. However, this arena is flat, which does not allow for the audience to have proper visibility. Compared to a soccer stadium, a T4F concert arena would have three clear advantages: (i) shorter distance from the stage to the audience, of 85 meters, compared to 165 meters in a stadium, (ii) no conflict between show dates and soccer matches, and (iii) better acoustics.
Exhibit 26: Arena vs. soccer stadium
SOCCER STADIUM Operating cost Higher Promoter must install and uninstall equipment and structures to adapt the stadium for events In the event of a low occupancy concert, the promoter has to deal with high rental expense paid to the stadium Lower Front seats can be up to 165 meters away from the stage; side seats tend to have poor visibility of the stage Lower-than-optimal quality of sound Lower Most stadiums have unnumbered and uncomfortable seats, low-quality food service, and insufficient restroom facilities Lower Has to compete with the agenda of soccer teams and other companies events ARENA Lower The Arena is already prepared for events In the event of a low occupancy concert, only has its own fixed costs, which are generally lower than the rental expense paid to the stadium Better Front seats can be located closer to the stage; project is designed so that side seats have good visibility of the stage Higher quality of sound Higher Seats numbered and comfortable, food service of higher quality, and the restroom facilities adequate Higher Total control over the agenda; no competition with other events Possibility to rent to third parties when its not booked
Quality of Events
Level of comfort
Control over venues agenda
We believe the construction of own T4F venues could give a strategic advantage to the company, as there is a lack of quality venues with more than 10,000 people capacity in Sao Paulo and lack of smaller venues in many second tier markets. Soccer stadiums, which are the current option for outdoor international shows, need considerable investments in infrastructure (restrooms, stage construction and equipment to protect the soccer field), not to mention that concerts must compete against the soccer teams agendas. The rental fee of a stadium is expensive and could cost around R$1,000,000 for each day of concert.
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Possible complementary acquisitions: Festivals: a niche within live music. Festivals are events lasting for more than one day, which normally bring together artists playing simultaneously on 2 or 3 stages. The goal is to reconcile big attractions with up and coming, talented musicians. T4F does not own any festival in Brazil. Buying rights to a festival could be a good complement to its portfolio of attractions when negotiating sponsorship agreements. Smaller promoters: more vertical integration. Smaller promoters responsible for events like the Telefonica Jazz Festival, the Brasil Tennis Open and Nescafe Blues could be acquisitions that would allow T4F to set foot in new markets for smaller company and sports events. Those acquisitions would be small and probably contribute to synergies on the operating side, as some administrative activities could be achieved by T4F. Sports promotion. T4F has opportunities to expand beyond Vicar into other areas of sports promotion and marketing, such as beach soccer, volleyball, tennis, etc. Other related businesses. We believe T4F may also have opportunities to acquire firms in other related businesses such as private events, sales promotion, ticketing and advertising.
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Board of directors, management and shareholder structure

T4F concluded its IPO on 13 April with a total offering of 468mn shares, consisting of 187mn primary and 281mn secondary. In the primary offering the company sold a total of 8mn shares with price per share of R$16 for total net proceeds of R$180mn. In the secondary offer, the controlling group composed of Fernando Altrio, CIE International and Gavea Investimentos reduced their aggregate stake in the company after the offer to 51%. After the offer, Fernando Luiz Altrio (the companys founder) is still the companys largest shareholder with a total stake of 30% (indirect and direct ownership). Gvea Investimentos, an important Brazilian asset manager, holds a 12% stake in T4F that was acquired in 2007. CIE International, a Mexican entertainment company, is a strategic investor and holds a 9% stake (indirect and direct ownership).
Exhibit 27: T4F shareholder structure
%
CIE International Fernando Luiz Altrio 85.0% 6.6% Gvea Investimentos 12.0% Free float 48.7%
15.0%
FA Comrcio e Participaes 28.1%
4.5% Direct + Indirect Ownership CIE International Fernando Luiz Altrio Gvea Investimentos 8.7% 30.5% 12.0%
Five members compose the Board of Directors, all elected by shareholders in a general shareholders meeting. The members are elected every two years and are eligible for reelection. All three T4F controlling shareholders (Gvea Investimentos, CIE International and FA Comrcio) hold seats on the Board.
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Exhibit 28: T4F -- Board of directors

Directors Title Date of election Age Details CEO and Chairman of the Board, Altrio holds an undergraduate degree in business administration from the Getlio Vargas Foundation (FGV) and is the founder of T4F. Altrio has built his career in the entertainment industry, in the finance market, and in the sugar and ethanol sector. He was founder and director at Credicard Hall (1997-2000), CEO of Cruzeiro DTVM (1980-1985), and vice president at Usina da Barra for six years. Luciano Nogueira holds an undergraduate degree in business administration from Getlio Vargas Foundation (FGV) and an undergraduate degree in law from Universidade de So Paulo (USP). Nogueira was a co-founder and partner in T4F until 2000. He worked in Palace Promoes LTDA and Lojas Pernambucanas until 2007. He joined the T4F Board in 2007. Luis Kuri holds an undergraduate degree in business administration from Universidade Iberoamericana and an MBA from Insper University. He built his career in the entertainment industry as founder of Corporacin Interamericana de Entretenimiento. Kuri is also a Board Member in Amrica Mvil and Banco Nacional de Mxico. Piero Minardi holds an undergraduate degree in engineering from Universidade de So Paulo (USP) and an MBA from INSEAD (France). Minardi built his career in financials institutions, such as Banco Pactual, Baring Private Equity Partners and AIG Capital Partners. Minardi joined T4Fs Board in 2007 and is currently also a Director in Gif Gesto de Investimentos e Participaes LTDA. Maurizio Mauro holds an undergraduate degree in business administration from Getlio Vargas Foundation (FGV) and MBA in corporate finance from Universidade de So Paulo (USP). Maurizio was professor of Insper University, CEO of Grupo Abril (2001-2006) and a senior member of Booz Allen Hamilton for fourteen years. Maurizio joined T4Fs Board in 2008 and currently is also a board member in Brazilian companies, such as Tecnisa and Droga Raia.
Fernando Luiz Altrio
Chairman
13-Jan-2011
58
Luciano Nogueira Neto
Vice Chairman
13-Jan- 2011
57
Luis Alejandro Sobern Kuri
Board Member
13-Jan-2011
50
Piero Paolo Picchioni Minardi
Board Member
13-Jan-2011
50
Maurizio Mauro
Board Member
13-Jan-2011
61
The companys management team is composed of experienced, well-regarded executives in the entertainment business. Fernando Luiz Altrio, the companys founder, has almost 30 years experience in the entertainment business and has been a pioneer in developing this sector in Brazil. Grace Tourinho, T4F Brazil CEO, is an experienced executive who has played a leading role at important Brazilian companies, including Ambev, KimberleyClark Brasil and PriceWaterCoopers. Other executives also have vast experience in the entertainment business, such as Jos Muniz (Vice President of T4F USA), who has been in the industry since 1983. Muniz founded Mercury Concerts in 1990, a company that was a leader in live entertainment and responsible for performances such as Bon Jovi, AC/DC and Iron Maiden. Muniz sold Mercury Concerts to CIE in 1999 and became director of the Concerts Division at T4F.
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Financial analysis
T4F had a comeback year in 2010 after a perfect storm hit results in 2009. During 2009, revenues dropped 27% due to the (i) global economic crisis that pulled down entertainment spending and (ii) swine flu, as customers avoided public places. In addition, a weaker calendar for high-profile international concerts and only partial year of Cirque du Soleil weighed on growth in 2009. However, in 2010, revenues grew 31% on the back of strong GDP growth, Cirque du Soleil tour in high quality markets, and a stronger set of international attractions, like Bon Jovi and Aerosmith.
Exhibit 29: T4F -- Total number of events, 2008-2012E
1,600 1,400 1,200 1,000 800 600 400 200 0
Exhibit 30: T4F -- Tickets sold, 2008-2012E

(000)
Tickets sold ('000) Live Music 1,927 1,801 1,440 1,172 936 740 2008 2009 2010 753 2011E 2012E Tickets sold ('000) Theater & performing arts 904 2,299 2,141
1,052 661 368 295 737
867
1,023
348
345
323
2008 2009 2010 2011E 2012E # of concerts # of theater and performing arts presentations
Healthy growth should continue in 2011 We forecast top line growth in excess of 20% in 2011 driven by a strong increase in the number of events, especially in theater/performing arts. Although the number of events may decline in the live music segment in 2011, we still expect strong revenue growth because of larger shows and higher occupancy rates. In particular, U2s tour was a huge success, so occupancy rates should trend up from box office sales and sponsorship revenues, although convenience fees on ticket sales were already recognized in 4Q10.
Exhibit 31: T4F -- Net revenues, 2008-2012E
R$ millions, unless otherwise stated 900 Box office Operation of venues (F&B) and ticketing 800
700 600 500 400 300 200 100 0 2008 2009 2010 2011E 2012E 373 249 135 90 121 65 355 124 90 459 512 168 130 91 Sponsorship 174
On the theater side, Mamma Mia, an original Broadway play, should perform at Teatro Abril for the full year 2011. This should be supplemented by the Witches of Eastwick musical starting in August 11 in Sao Paulo and another season of Cirque du Soleil (Varekai), starting in Sept 11.
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Higher ticket volumes main driver for 2011 revenues In 2011, we expect higher ticket volumes (not prices) to drive revenues. South American economic fundaments are favorable for ticket pricing, but we still expect average ticket price (ATP) to be roughly flat in 2011, mainly because higher ATP in live music should offset lower ATP in theater/performing arts. We expect ATP in the theater/performing arts segment to drop in 2011 because of a lower mix of Cirque du Soleil sales, which typically command higher prices. This drop should reverse in 2012 with a higher mix of Varekai tickets.
Exhibit 32: Theater and performing arts net revenues and growth, 2008-2012E
170 48% 83 123 -10% -51% 2009 Theater and performing arts 110
171 56%
2008
2010
2011E 2012E growth:Theater and performing arts
T4F has strong relationships with the main advertisers in Brazil and a solid track record for delivering quality events. The current backlog of more than R$100mn revenues to be recognized in 2011 already gives a solid starting point for the year. We believe strong spending by the main sponsors, like the banking and telcos sectors, should drive increasing competition to sponsor events and lead to high revenue growth in the sponsorship segment for T4F in 2011.
Exhibit 33: Live music net revenues and growth, 20082012E
Exhibit 34: Sponsorship net revenues and growth, 20082012E

53% 42% 336 219 186 154
327
135 121 124
35% 168
174
-3% -17% 2008 2009 Live music 2010 2011E growth:Live music 2012E
2008 -10%
3%
4%
2009 2010 2011E Sponsorship growth:Sponsorship
2012E
Ticketing/food & beverage: high base year in 2010 We believe the largest contributor to revenues in the ticketing/F&B/merchandising/venues segment is ticketing, www.ticketsforfun.com.br. We estimate that 95% of tickets sold through the website are for events promoted by T4F, as other promoters/venues have had some resistance to using a competitors ticketing platform.
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Exhibit 35: Ticketing and F&B revenues, 2008-2012E

Operation of venues (F&B) and ticketing 91
130
90 65 2008 2009
90
2010
2011E
2012E
Nevertheless, in Argentina, T4F (through Ticketek) has been able to sell tickets for third party events, which could be an opportunity for market share increases if replicated in Brazil. Over the medium-term, we expect strong structural growth in ticket revenues as sales mix shifts towards channels that charge convenience fees (mainly the internet). However, in 2011 ticketing revenues are unlikely to grow because convenience fees were high in 4Q10 because of U2 ticket sales. After 2011, we expect this segment to resume strong growth in 2012. 2011: a slow start, but momentum builds later in the year The fairly light events calendar for 1Q11 resulted in a weak operating performance that compared unfavorably to 1Q10, with revenues down y/y. We believe momentum should build throughout the year in 2011 with the massive 360 U2 tour already contributing in 2Q11, Cirque du Soleil starting in September, Witches of Eastwick debuting in August, and the possibility of new concert announcements. T4F has also announced that it will be hosting shows for Tears for Fears, Judas Priest, Aerosmith and others towards the end of this year. Ebitda margins improving due to investments in equipment T4F has been able to maintain an asset light business by leasing land for their venues (with the exception of the Argentinean venue) and minimizing capex. Given the number of shows promoted by T4F every year, we believe the company is reaching a sufficient size to justify the acquisition of its own stage, sound and lighting equipment. Equipment purchases increase the verticalization of the business and should improve Ebitda margins. We expect this investment to take place late this year and have a meaningful uplift to margins in 2012. T4F venues are all fully depreciated which means the company has a low depreciation expense. Under current IFRS rules, goodwill from the original 2007 acquisition of T4F from CIE is no longer amortized for accounting purposes. Based on that, we expect a strong conversion of Ebitda into earnings during 2011. Goodwill amortization should favor lower tax rate T4F has accumulated goodwill with a total value of R$135mn related to the acquisition of Vicar in 2006 and 2009, and, the merger with ADTSPE holding company. The amortization of this goodwill, although not recognized for accounting purposes, should reduce T4Fs cash tax rate for the next several years.
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Exhibit 36: Ebitda and Ebitda margin, 2008-2010E

Exhibit 37: Net income and net income margin, 20082010E

16.8% 100 10.6% 46
16.7% 95
17.0% 122
18.9% 154
8% 47 6 1% 2009 Net income 7% 40 2010 2011E Net income margin 11% 77
15% 124
2008
2009 2010 2011E EBITDA Ebitda margin
2012E
2008
2012E
Capex and cash flow: assuming higher capex in 2011/2012 Given low capital requirements, T4F has historically been a strong cash generator. In our base case assumptions, we factor in a step-up in capex in 2011 to assume that T4F invests in sound and stage equipment for about R$30mn and the start a new venue construction which should consume about R$15mn. This investment can be funded through the companys internally generated FCF. Under our base case, capex should also increase in 2012 with R$85mn related to the building of venues. Equipment purchase: clear cost gains The current system of renting sound equipment is appropriate only if the company does not produce enough shows per year. T4F is expected to promote more than 300 live music events per year, so an investment would appear to be a straightforward cost saving for the company. We assume the investment in sound / stage equipment already starts to have a positive impact on operating costs in late 2011 and a larger impact in 2012. On the other hand, we expect no Ebitda contribution from the sizeable investments in greenfield venues because of the lead time needed for construction. We assume a favorable Ebitda contribution from greenfield venues starting only in 2013.
Exhibit 38: Capex forecast, 2008-2012E
Exhibit 39: Free cash flow, 2008-2010E

92
57 38 41 43
44
14
7 2008 7 2009 7 2010 2011E 2012E
2008
2009
2010
2011E
2012E
Potential upside from M&A and other investments While our base case includes investments in equipment and a larger Sao Paulo venue, it does not include upside from other potential growth initiatives from the company. Below we summarize some potential opportunities that are not included in our base case that could lead to additional value creation for the company. Consolidating the venues market in Rio and So Paulo. By acquiring existing venues, T4F could gain synergies and increase the volume on their ticketing website. On top of that, such acquisitions would allow T4F to have a more
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comprehensive offer for sponsorship and increase its flexibility when negotiating with artists. In an aggressive expansion scenario, we believe T4F could acquire up to three medium-sized venues for a total disbursement between R$100mn to R$150mn to fortify their presence in the markets of Rio and Sao Paulo. Geographic expansion through building in under-served markets. In second tier markets with fewer venue options than Rio and So Paulo, we believe T4F could build greenfield venues. Many of these second tier cities have become more attractive markets for live entertainment but they have a scarcity existing venues to acquire. With a reinforced balance sheet, we believe T4F could consider additional capex of up to R$70mn for the construction of new venues. Acquisition of companies in strategic sectors. We believe M&A opportunities are not related just to venues but could also include companies that fit into T4Fs integrated business model. For example, T4F could add expertise in ticketing or niches of live entertainment, such as sports marketing and classical music. We believe acquisitions of this nature could also consume up to R$70mn in the next 2 years. The potential value creation from these initiatives is not considered in our base case projections.
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Exhibit 40: T4F balance sheet, 2008-2012E

ASSETS Current assets Cash and cash equivalents Receivables from clients Other current assets Long-term Assets Long term receivables Deferred assets PP&E (Net) Investments LIABILITIES & EQUITY Current liabilities Suppliers Other operational accounts Dividends payable Debt (Short & Long-term) Long term payables Minority interest Stockholders' equity Net Debt 2008 548 239 93 69 76 309 129 0 38 142 548 163 88 74 1 206 51 3 126 114 2009 474 178 57 53 68 296 134 0 25 138 474 162 38 124 0 147 44 2 119 90 2010 521 252 128 66 58 269 109 0 23 137 521 200 36 154 10 150 37 2 131 23 2011E 766 468 327 82 59 298 101 0 59 137 766 219 59 159 0 150 35 4 358 -177 2012E 865 487 327 93 67 378 101 0 140 137 865 208 59 148 0 154 35 5 463 -173
Exhibit 41: T4F -- Income statement, 2008-2012E

Box office 2008 373 2009 249 2010 355 2011E 459 2012E 512
Live music Theater and performing arts Sport events (Vicar) Operation of venues (F&B) and ticketing Sponsorship Net revenues Costs (-)Operating costs / Expenses (-)G&A expenses Gross Profit ex-D&A Gross Profit margin EBITDA Ebitda margin (-) Depreciation (+/-) Non-operational revenues (expenses) (+/-) Net financial revenues (expenses) Net income before income tax
(-) Income tax and social contribution (-) Minority interest / Employee profit sharing Net income
186 170 17 90 135 597

421 76 176
154 83 12 65 121 435

316 72 118
219 123 13 90 124 569

397 77 172
336 110 13 91 168 717

515 80 203
327 171 14 130 174 815

569 92 246
29.5% 100 16.8% (17) 0 (24) 60

(13) 0 47
27.2% 46 10.6% (15) 2 (30) 3

5 (2) 6
30.3% 95 16.7% (5) (2) (22) 66

(28) 2 40
28.3% 122 17.0% (8) (1) 5 118

(40) (2) 77
30.2% 154 18.9% (12) 0 25 168

(42) (2) 124
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Entertainment sector overview

In the US, CD sales declined by 20% in 2010, while sales of individual digital songs were only flat, according to Nielsen SoundScan. Concert tours are now the largest source of revenues for most music acts. In this environment, bands are increasingly willing to tour and to travel to South America. This is giving concert promoters, like T4F, enhanced access to content. In light of high unemployment and the stagnant macro environment, the US concert market has become less attractive relative to other regions. According to Pollstar magazine, box office revenues from the top 50 concert tours declined by 15% in 2010 in North America. In contrast, South America has become a more appealing touring destination. At the same time that wages have been increasing in real terms, local currencies have also appreciated against the USD. For international bands, the payout from tickets sold in Brazilian Reais and Chilean Pesos has become more alluring.
Exhibit 42: Latam Nominal FX rates, Jan09-Jan11
Base 100, higher values indicates appreciation against the dollar
Exhibit 43: Top music acts, 2009

%
130 120 110 100100.0 90 80 Jan-09 116.4 111.6 Brazil 122.9 119.5 123.3 114.8 Chile
127.5 121.5
U2 12%
88%
137
Bruce Springsteen 5%
95%
105
Britney Spears 6%
94%
90
AC/ DC 6%
94%
86
Tour Gross Album sales
May-09
Sep-09
Jan-10
May-10
Sep-10
Jan-11
Jonas Brothers 9%
91%
79
Ad spending: leveraged to growth With high leverage to GDP growth, advertising spending has been increasing at a healthy pace across the main South American markets. After leveling in 2009, we believe growth resumed in 2010 at a strong clip. Advertising penetration is low (as % of GDP), especially in Brazil. Brazil, Argentina and Chile together account for more than half of ad spending in Latin America. Media spending is highly concentrated in free-to-air TV, which accounts for close to 2/3 of ad spending in Brazil. This reflects the low penetration of traditional media in middle income classes, such as: newspaper, magazines, cinema and pay TV. The broadcast market is highly concentrated with about 75% audience share in top three networks. Furthermore, outdoor advertising (billboards) is banned in Sao Paulo city. Dependence on TV and lack of vehicles for reaching the mass market mean that out-of-home advertising, including sponsorship, is an attractive alternative for advertisers. Out-of-home only represents 3% of ad pie in Brazil and is likely to increase share in our opinion. Advertisers turn to sponsorship of cultural / sporting events Brazilian advertisers are increasingly turning to sponsorship as an alternative media to reach target audiences. For example, Brazil is now the third largest market in world for ad rights on football jerseys, trailing only England and Germany (ahead of Italy and Spain). According to a study from Sport+Markt, Brazil was not even in the top 8 markets three years ago.
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Exhibit 44: Advertising expending in Brazil

in billions, unless otherwise stated
Exhibit 45: Brazilian media spending by segment, 2009

% of total
Internet Cinema Pay TV 4% 4% 0.4% Guides and directories 2% Out-of-home 3% Radio 4% Magazine 8% TV 61%
25
20
15
Newspaper 14%
10 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates
Live music sponsorship revenues climb Although industry data is scarce, reports in Valor newspaper said that headline sponsorship for large, outdoor concerts in Brazil costs from R$10mn to R$15mn. Regular sponsors pay from R$2mn to R$4mn per show. Valor newspaper reported on 26 January 11 that the number of shows in Brazil is expected to increase 20% this year and the sponsorship price is increasing. Sponsorship packages have become increasingly complex to better serve advertisers. Plain vanilla sponsorship are increasingly accompanied by below the line actions i.e., non-media advertising. This includes leveraging sponsored events to launch product lines, distribute samples, and solidify business relationships. T4F: #1 live entertainment company in South America T4F is the third largest promoter in the world and it does not compete directly with the top two. Live Nation, the largest promoter in the world, has a non-compete agreement with T4F. This agreement gives T4F exclusive access to Live Nation content in T4Fs markets. The second largest promoter, AEG Live, is not a major player in South America and when promoting shows in Brazil it normally works through partnerships. Of the top five grossing tours in 2010 globally, four were promoted by T4F in the T4F region: Bon Jovi, AC/DC, U2 and Metallica.
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Exhibit 46: Top-ten worldwide gross revenues, 2010

Bon Jovi* AC/DC* U2* Lady Gaga Metallica* Michael Bubl Walking with Dinosaurs Paul McCartney** Eagles Roger Waters 201.1 177.0 160.9 133.6 110.1 104.2 104.1 93.0 92.3 89.5 2010: $1.27 down 14% Top 10 concerts total gross (billions) 2009: $1.47
Exhibit 47: Tickets sold worldwide, by promoter,2010

In millions, unless otherwise stated Live Nation AEG Live T4F - Time for Fun C3 Presents Evenko MCD 3A Entertainment Jam Productions Chugg Entertainment FKP Scorpio Konzertproduktionen Evenpro/ Water Brother Intl (South America Michael Coppel Presents Ocesa / CIE(Mxico) Daint Consolidated Entertainment Garry Van Egmond Enterprises Beaver Productions I.M.P Nederlander Concerts Outback Concerts Another Planet Entertainment S.J.M Concerts Andrew Hewitt CO. Bill Silva Presents Cardenas Marketing Network Aiken Promotions Source: Company data, Credit Suisse estimates
28,813 13,268 3,317 1,612 1,170 1,152 1,102 1,072 967 926 912 904 881 761 737 731 699 608 561 435 390 266 262 258 248
* tours promoted by T4F in South America **show promoted by T4F in Buenos Aires
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Main competitor profiles

Mondo Entretenimento The most direct competitor to TF4 in the live music segment, Mondo was created two years ago from the merger of Mondo and Evenpro. The company is part of Grupo ABC, the advertising empire controlled by Nizan Guanaes. The companys strategy is to expand initially to Colombia and Venezuela and eventually all Latin America within a four year period. Recent shows included the Pop Music Festival (Shakira) and Iron Maiden in March 2011. The company intends to increase vertical integration to include promotion of theater, ticketing (LivePass), venues, merchandising and sponsorship. strengths: (i) capacity to manage large, international outdoor shows, (ii) synergies with parent company may help to sell sponsorships, (iii) present in Chile and Argentina. weaknesses: (i) lacks own venues, (ii) concentration in live music but not strong in theatre/performing arts, (iii) LivePass is essentially a start-up.
Planmusic Entretenimento Not as strong competitor as Mondo, Planmusic has a history of over 20 years promoting live music events in Brazil. Most recently, the company promoted a show for Paul McCartney in Sao Pulo. The company is controlled by Luiz Oscar Niemeyer and is based in Rio de Janeiro. Signature events have included the Rolling Stones (2006) and Elton John (2009). strengths: (i) has managed large, high visibility shows, (ii) long track record in industry. weaknesses: (i) promotes a smaller number of shows, (ii) not a very active pipeline for short-term, (iii) lacks venues and ticketing, (iv) not strong outside Brazil (e.g., Paul McCartney toured with T4F in Argentina), (v) not horizontally integrated into theater, sports, etc.
Rock in Rio festival Touted as the largest music festival in the world, Rock in Rio has scheduled its fourth Brazilian edition for 6 days in the months of September and October in the Barra da Tijuca neighborhood. The previous editions were in 1985, 1991 and 2001. The festival will have headline acts such as Elton John, Metallica, Red Hot Chili Peppers, Shakira, Coldplay and Guns NRoses. The event is already sold-out. Valor newspaper has reported that Itau-Unibanco will be the principal sponsor. Rock in Rios organizer is publicist Roberto Medina. strengths: (i) massive event capable of attracting top notch talent, (ii) already has confirmed group of sponsors, including Volkswagen, Trident and Claro. weaknesses: (i) event is held infrequently; last event in Brazil was ten years ago, (ii) festival format not appealing to many fans and acts, (iii) one and done: no integration into beyond live music and low degree of horizontal integration, (iv) challenging access for fans outside of Rio area.
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Grupo Tom Brasil A competitor to T4Fs Credicard Hall and Citibank Hall venues, the Tom Brasil group manages three venues for indoor concerts and events. The company does not promote live music but operates venues that are leased to promoters. The largest venues are HSBC Brasil (So Paulo) and Vivo Rio (Rio de Janeiro), both of which have capacity for about 4,000 people (standing). HSCB Brasil is located on Av. Naes Unidas (inaugurated in 2003) and Vivo Rio is located in Aterro do Flamengo (inaugurated in 2006). These venues are suitable for Brazilian acts and smaller international acts. Owned by Paulo Amorim and Gladstone Tadesco, the groups third venue is essentially a jazz club, Tom Jazz, located in the Higienopolis neighborhood of So Paulo with capacity for 200 people. Strengths: (i) two fairly modern venues in convenient locations, (ii) venues are good size for national, indoor shows, (iii) track record back to 1995 with original Tom Brasil facility in Sao Paulo. Weaknesses: (i) no venues large enough for outdoor / international shows, (ii) lack of vertical integration into concert promotion, ticketing, etc., (iii) no venues outside of Sao Paulo / Rio markets.
Via Funchal A competitor to T4Fs Credicard Hall venue, Via Funchal is a single venue with capacity for about 6,000 people (standing) that is located in the Vila Olimpia neighborhood of So Paulo. Inaugurated in 1998, the site typically hosts smaller international acts (BB King, Norah Jones, George Benson) or domestic acts (Claudia Leitte, Caetano Veloso, Marisa Monte). The company is owned by the businessman Jorge Maluf. Strengths: (i) quality venue in a favorable location, (ii) good size for national, indoor shows, (iii) track record to 1998 since opening. Weaknesses: (i) single venue with no presence outside of So Paulo, (ii) not large enough for outdoor and international shows, (iii) lack of vertical integration into concert promotion, ticketing, etc., (iv) not part of a larger entertainment group.
Opus Promoes A competitor to T4Fs Teatro Abril, Opus is more focused on theater venue management. Opus currently manages three theaters: Teatro Bradesco (So Paulo), Teatro do Bourbon Country (Porto Alegre) and Teatro Riachuelo (Natal). The companys business model is focused on locating theaters within shopping centers. Teatro Bradesco is one of only two venues capable of hosting Broadway quality shows in So Paulo. The group is also in the process of remodeling the Auditorio Araujo Vianna in Porto Alegre. With capacity for 3,000 people, the theater is expected to be ready this year. Opus group is based in Porto Alegre and headed by Carlos Konrath. Strengths: (i) quality venues for theater productions, (ii) successful model of locating theaters in shopping centers, (iii) present in two attractive markets outside of Sao Paulo. Weaknesses: (i) lack of vertical integration into content production, (ii) venues not large enough for many kinds of concerts, (iii) not present in Rio de Janeiro and many important markets.
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Companies Mentioned (Price as of 20 May 11) B2W (BTOW3, R$23.20, NEUTRAL [V], TP R$30.00) CIA Hering S.A. (HGTX3, R$34.70) CIE (CIEB, $.52) CTS Eventim (EVDG) Live Nation, Inc. (LYV, $11.00) Lojas Americanas (LAME4, R$14.30, OUTPERFORM, TP R$20.00) Lojas Renner (LREN3, R$55.20, OUTPERFORM, TP R$72.50) Marisa Lojas S.A. (AMAR3, R$25.20, OUTPERFORM, TP R$31.00) News Corporation (NWSA, $17.49, NEUTRAL, TP $18.00) T4F Entretenimento S.A (SHOW3, R$15.00, OUTPERFORM [V], TP R$22.00) Televisa (TV, $23.56, OUTPERFORM, TP $27.00) Time Warner, Inc (TWX, $36.79, OUTPERFORM, TP $40.00) TV Azteca (TVAZTCACPO, peso7.89, NEUTRAL, TP peso9.50) Viacom (VIAB, $51.29, NEUTRAL [V], TP $51.00) Vivendi (VIV.PA, Eu19.26, OUTPERFORM, TP Eu23.80, OVERWEIGHT) Walt Disney Company (DIS, $41.50, OUTPERFORM, TP $48.00)
Disclosure Appendix
Important Global Disclosures Andrew T. Campbell, CFA & Marcelo Goncalves each certify, with respect to the companies or securities that he or she analyzes, that (1) the views expressed in this report accurately reflect his or her personal views about all of the subject companies and securities and (2) no part of his or her compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report. See the Companies Mentioned section for full company names.
3-Year Price, Target Price and Rating Change History Chart for SHOW3
SHOW3 Date Closing Price (R$) Target Price Initiation/ (R$) Rating Assumption
16 14 12 10 8 6 4 2 R$ 0
The analyst(s) responsible for preparing this research report received compensation that is based upon various factors including Credit Suisse's total revenues, a portion of which are generated by Credit Suisse's investment banking activities. Analysts stock ratings are defined as follows: Outperform (O): The stocks total return is expected to outperform the relevant benchmark* by at least 10-15% (or more, depending on perceived risk) over the next 12 months. Neutral (N): The stocks total return is expected to be in line with the relevant benchmark* (range of 10-15%) over the next 12 months. Underperform (U): The stocks total return is expected to underperform the relevant benchmark* by 10-15% or more over the next 12 months. *Relevant benchmark by region: As of 29th May 2009, Australia, New Zealand, U.S. and Canadian ratings are based on (1) a stocks absolute total return potential to its current share price and (2) the relative attractiveness of a stocks total return potential within an analysts coverage universe**, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. Some U.S. and Canadian ratings may fall outside the absolute total return ranges defined above, depending on market conditions and industry factors. For Latin American, Japanese, and non-Japan Asia stocks, ratings are based on a stocks total return relative to the average total return of the relevant country or regional benchmark; for European stocks, ratings are based on a stocks total return relative to the analyst's coverage universe**. For Australian and New Zealand stocks a 22% and a 12% threshold replace the 10-15% level in the Outperform and Underperform stock rating definitions, respectively, subject to analysts perceived risk. The 22% and 12% thresholds replace the +10-15% and -10-15% levels in the Neutral stock rating definition, respectively, subject to analysts perceived risk. **An analyst's coverage universe consists of all companies covered by the analyst within the relevant sector.
l-0 8 22 -S ep -0 8 22 -N ov -0 8 22 -Ja n09 22 -M ar22 09 -M ay -0 22 9 -Ju l22 09 -S ep 22 09 -N ov -0 9 22 -J a n10 22 -M ar 22 10 -M ay -1 22 0 -J u l-1 0 22 -S ep -1 0 22 -N ov -1 0 22 -Ja n22 11 -M ar11
Closing Price Target Price Initiation/Assumption Rating O=Outperform; N=Neutral; U=Underperform; R=Restricted; NR=Not Rated; NC=Not Covered
22 -M ay
-0 8 22
-Ju
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Restricted (R): In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications, including an investment recommendation, during the course of Credit Suisse's engagement in an investment banking transaction and in certain other circumstances. Volatility Indicator [V]: A stock is defined as volatile if the stock price has moved up or down by 20% or more in a month in at least 8 of the past 24 months or the analyst expects significant volatility going forward. Analysts coverage universe weightings are distinct from analysts stock ratings and are based on the expected performance of an analysts coverage universe* versus the relevant broad market benchmark**: Overweight: Industry expected to outperform the relevant broad market benchmark over the next 12 months. Market Weight: Industry expected to perform in-line with the relevant broad market benchmark over the next 12 months. Underweight: Industry expected to underperform the relevant broad market benchmark over the next 12 months. *An analysts coverage universe consists of all companies covered by the analyst within the relevant sector. **The broad market benchmark is based on the expected return of the local market index (e.g., the S&P 500 in the U.S.) over the next 12 months. Credit Suisses distribution of stock ratings (and banking clients) is: Global Ratings Distribution Outperform/Buy* 47% (63% banking clients) Neutral/Hold* 40% (56% banking clients) Underperform/Sell* 10% (50% banking clients) Restricted 2%
*For purposes of the NYSE and NASD ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, and Underperform most closely correspond to Buy, Hold, and Sell, respectively; however, the meanings are not the same, as our stock ratings are determined on a relative basis. (Please refer to definitions above.) An investor's decision to buy or sell a security should be based on investment objectives, current holdings, and other individual factors.
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See the Companies Mentioned section for full company names. Price Target: (12 months) for (SHOW3) Method: Our R$22/share target price is based on WACC of 10.8% and a perpetuity growth rate of 3%. Risks: The risk to our R$22/share target price include (i) a stronger dollar, (ii) a severe economic slowdown, and, (iii) increase in competition from new promoters. Please refer to the firm's disclosure website at www.credit-suisse.com/researchdisclosures for the definitions of abbreviations typically used in the target price method and risk sections. See the Companies Mentioned section for full company names. The subject company (SHOW3) currently is, or was during the 12-month period preceding the date of distribution of this report, a client of Credit Suisse. Credit Suisse provided investment banking services to the subject company (SHOW3) within the past 12 months. Credit Suisse has managed or co-managed a public offering of securities for the subject company (SHOW3) within the past 12 months. Credit Suisse has received investment banking related compensation from the subject company (SHOW3) within the past 12 months. Credit Suisse expects to receive or intends to seek investment banking related compensation from the subject company (SHOW3) within the next 3 months. As of the end of the preceding month, Credit Suisse beneficially owned 1% or more of a class of common equity securities of (SHOW3). This holding is calculated according to U.S. regulatory requirements which are based on Section 13(d) of the Securities and Exchange Act of 1934. Important Regional Disclosures Singapore recipients should contact a Singapore financial adviser for any matters arising from this research report. The analyst(s) involved in the preparation of this report have not visited the material operations of the subject company (SHOW3) within the past 12 months. Restrictions on certain Canadian securities are indicated by the following abbreviations: NVS--Non-Voting shares; RVS--Restricted Voting Shares; SVS--Subordinate Voting Shares. Individuals receiving this report from a Canadian investment dealer that is not affiliated with Credit Suisse should be advised that this report may not contain regulatory disclosures the non-affiliated Canadian investment dealer would be required to make if this were its own report. For Credit Suisse Securities (Canada), Inc.'s policies and procedures regarding the dissemination of equity research, please visit http://www.csfb.com/legal_terms/canada_research_policy.shtml. The following disclosed European company/ies have estimates that comply with IFRS: VIV.PA. As of the date of this report, Credit Suisse acts as a market maker or liquidity provider in the equities securities that are the subject of this report.
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Principal is not guaranteed in the case of equities because equity prices are variable.
Commission is the commission rate or the amount agreed with a customer when setting up an account or at anytime after that. Andrew T. Campbell, CFA & Marcelo Goncalves, each certify that (1) The views expressed in this report solely and exclusively reflect my personal opinions and have been prepared independently, including with respect to Banco de Investimentos Credit Suisse (Brasil) S.A. or its affiliates (Credit Suisse). (2) Part of my compensation is based on various factors, including the total revenues of Credit Suisse, but no part of my compensation has been, is, or will be related to the specific recommendations or views expressed in this report. In addition, Credit Suisse declares that: Credit Suisse has provided, and/or may in the future provide investment banking, brokerage, asset management, commercial banking and other financial services to the subject company/companies or its affiliates, for which they have received or may receive customary fees and commissions, and which constituted or may constitute relevant financial or commercial interests in relation to the subject company/companies or the subject securities. To the extent this is a report authored in whole or in part by a non-U.S. analyst and is made available in the U.S., the following are important disclosures regarding any non-U.S. analyst contributors: The non-U.S. research analysts listed below (if any) are not registered/qualified as research analysts with FINRA. The non-U.S. research analysts listed below may not be associated persons of CSSU and therefore may not be subject to the NASD Rule 2711 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account. Andrew T. Campbell, CFA, non-U.S. analyst, is a research analyst employed by Banco de Investimentos Credit Suisse (Brasil) S.A. or its affiliates. Marcelo Goncalves, non-U.S. analyst, is a research analyst employed by Banco de Investimentos Credit Suisse (Brasil) S.A. or its affiliates. Taiwanese Disclosures: Reports written by Taiwan-based analysts on non-Taiwan listed companies are not considered recommendations to buy or sell securities under Taiwan Stock Exchange Operational Regulations Governing Securities Firms Recommending Trades in Securities to Customers. For Credit Suisse disclosure information on other companies mentioned in this report, please visit the website at www.creditsuisse.com/researchdisclosures or call +1 (877) 291-2683. Disclaimers continue on next page.
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22 May 2011 Americas/Brazil Equity Research Entertainment

T4F Entretenimento S.A (SHOW3)

Time for Fun means time for growth

Share price performance

17 16 15 14 Apr-11 Price Indexed Price Relative

On 05/20/11 the Sao Paulo SE - Bovespa index closed at 62596.52

Quarterly EPS 2010A 2011E

Exhibit 1: T4F -- Main financial estimates

Entertainment 15.00 22.00

Ticker Target (US$)

13.00 OUTPERFORM 1,038 505

PN 28.1% 12.0% 6.6% 4.5% 48.7% 100.0%

28.1% 12.0% 6.6% 4.5% 48.7% 100.0%

1,500 1,000 500 2008A 2009A 2010A 2011E 2012E 2013E

FA Comrcio e Participaes 28.1% 6.6%

Live Music Ticket Solds('000)

Theater and Performing Arts Ticket Solds('000)

OPERATING METRICS Live Music Ticket Solds('000) ATP Live Music(R$)

Source: Company data, Credit Suisse estimates

T4F Entretenimento S.A (SHOW3)

T4F Entretenimento S.A (SHOW3)

T4F Entretenimento S.A (SHOW3)

T4F Entretenimento S.A (SHOW3)

Valuation: heavily discounted

Source: Company data, Credit Suisse estimates

T4F Entretenimento S.A (SHOW3)

T4F Entretenimento S.A (SHOW3)

T4F Entretenimento S.A (SHOW3)

Exhibit 3: T4F valuation table

Mkt cap (US$ mn)

2011 2012 2011 2012 2010 2011 2012

DIS US NWSA US TWX US VIA/B US LYV US EVD GR VIV FP

78,441 31,974 39,395 27,363 2,000 1,635 34,123 214,932

2.21 1.03 2.41 3.17 (1.36) 1.74 2.16

2.71 1.18 2.80 3.76 (0.08) 2.31 2.18

11,305 2,014 642 13,319

1.09 0.06 0.70

1.11 0.06 1.11

1.25 0.05 1.79

21.5 10.9 21.3 20.9

LREN3 BZ LAME4 BZ AMAR3 BZ BTOW3 BZ HGTX3 BZ

4,179 6,779 2,878 2,247 3,494 19,578

2.53 0.41 1.13 0.14 1.29

2.69 0.44 1.27 0.57 1.60

3.20 0.65 1.59 0.58 2.18

21.8 35.2 22.2 26.9 43.4

13.4 12.0 11.9 9.9

13.4 11.9 10.0

8.4 net cash

0.55 16.34 13.8 12.0 10.3 14.4 12.1 10.0

20.2 14.6 11.0 net cash

Exhibit 4: T4F -- Net revenues and main operational figures, 2010

Exhibit 5: T4F -- Box office revenue breakdown, 2010

Sport events (Vicar) 4% Theater and performing arts 35%

Live music 61%

Source: Company data, Credit Suisse estimates

T4F Entretenimento S.A (SHOW3)

2000: ! Brazil - Start of operations of Ticketmaster system

2001: ! Acquisition of Metropolitan (Rio de Janeiro)

2006: ! Acquisition of Vicar (55%) ! First year of promotion of Cirque du Soleil

Source: Company data, Credit Suisse estimates

T4F Entretenimento S.A (SHOW3)