FIRST BERLIN Equity Research

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1 FRST BERLN Equity Research NTERSHOP COMMUNCATONS AG GERMANY / TECHNOLOGY Primary Exchange: Frankfurt Bloomberg symbol: SH2 SN: DE000A0EPUH1 NTERSHOP COMMUNCATONS AG OVERVEW 15 December 2010 RATNG: Buy PRCE TARGET: 2.60 RETURN POTENTAL: 29.9% RSK RATNG: High BOARD COMPROMSE REACHED; SHAREHOLDER GROUP TO REMAN ACTVE GS s Attempted Silent Takeover of ntershop has Suffered a Setback. The Extraordinary General Meeting of ntershop took place yesterday in Jena. The meeting had been called by strategic partner and largest shareholder, GS, which sought to take all seats on ntershop s Supervisory Board (SB). As indicated in our previous research on the company, we expected that minority shareholders would try to block GS s move. This expectation has materialized. GS has conceded the Supervisory Board Chairman seat. Dr. Herbert May will remain ntershop s Chairman. This outcome had been negotiated ahead of the EGM between GS and a shareholder group led by Mr. Roland Klauss. Effectively, the only change to the SB was the appointment of Michael R. Conn, GS s CFO, in place of Günter Lorenz. Thus, GS currently control 2 out 3 Supervisory Board seats. Shareholder group to remain active. Mr. Klauss was able to rally EGM shareholders representing an aggregate stake of above 20%. Combined with press coverage and analyst research published in the run-up to the event, this contributed to record high shareholder turn-out of 50.3% at the meeting, which lasted nearly 7 hours. Mr. Klauss gave clear indication that the shareholder group will remain active. Discussions with major investors are underway as the activist group tries to increase its stake in ntershop further. The EGM outcome is positive for ntershop s stock price. GS will retain its stake in ntershop. GS wishes to control the development of Enfinity Suite 7, which is a critically important project for both companies. The activist shareholder group is also seeking to bring new strategic investors into the picture. This implies short-term upward pressure on ntershop s stock. We maintain our BUY rating and 2.60 price target on ntershop. FNANCAL HSTORY & PROJECTONS E 2011E 2012E Revenue ( m) Y-o-y growth na 4.5% 13.0% 20.0% 12.5% 13.8% EBT ( m) EBT margin -7.2% 6.7% 6.3% 4.5% 7.1% 8.8% Net income ( m) EPS (diluted) ( ) P/E (x) na DPS ( ) Yield 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% FCF ( m) Net gearing 1.4% 7.6% 4.2% 12.7% 13.0% 13.5% Liquid assets ( m) ,42 26,26 RSKS Risks include, but are not limited to, market share losses, unfavorable macroeconomic developments, and management churn. COMPANY PROFLE ntershop is one of the pioneers of the e- commerce solutions market. ntershop has over 300 customers. The company's target customer base includes mid-market and large enterprise companies. Typical implementation projects include online retail store development, supply chain integration, and online marketing campaigns. TRADNG DATA Closing price ( ) 2.00 Shares outstanding 29.12m Market capitalisation 58.27m 52-week range 1.44/2.20 Avg. vol. (12-mos.) 57,826 STOCK OVERVEW 2,4 2,2 2,0 1,8 1,6 1,4 1,2 Dec 09 Mar 10 Jun 10 Sep 10 ntershop Communications AG COMPANY DATA (as of 30 September 2010) Liquid assets Current assets ntangible assets Total assets Current liabilities Shareholders equity SHAREHOLDERS NMDP ndex GS Commerce, nc. 27.2% Free float 72.8% m 23.42m 8.87m 33.74m 7.78m 23.04m Analyst: Tsvetan Kintisheff, Tel. +49 (0)

2 NCOME STATEMENT ANALYSS All figures in ' A 2008A 2009A 2010E 2011E 2012E Revenues 26,911 28,118 31,777 38,132 42,900 48,800 Cost of goods sold 14,879 16,713 16,866 22,584 24,855 27,438 Gross Profit 12,032 11,405 14,911 15,548 18,045 21,363 SG&A 9,428 7,105 8,355 8,963 9,438 10,736 R&D 2,977 1,228 4,275 4,924 5,577 6,344 Other Operating ncome/expense 1,572 1, Operating income -1,945 1,871 2,000 1,701 3,030 4,283 Net financial result ncome before income taxes and minority interests -2,162 1,754 2,135 1,704 3,030 4,283 ncome taxes Minority interests Net income / loss -2,033 1,503 2,089 1,619 2,727 3,854 EPS Diluted EPS EBTDA ,346 3,765 3,984 5,530 7,283 Ratios Gross margin 44.7% 40.6% 46.9% 40.8% 42.1% 43.8% EBT-Margin -7.2% 6.7% 6.3% 4.5% 7.1% 8.8% EBTDA margin -3.7% 8.3% 11.8% 10.4% 12.9% 14.9% Net ncome Margin -7.6% 5.3% 6.6% 4.2% 6.4% 7.9% Tax Rate n.m. 14.3% 20.0% 10.0% 10.0% 10.0% Expenses as % of revenues SG&A 35.0% 25.3% 26.3% 23.5% 22.0% 22.0% R&D 11.1% 4.4% 13.5% 12.9% 13.0% 13.0% Other Operating ncome/expense 5.8% 4.3% 0.9% -0.1% 0.0% 0.0% Y-Y Growth Total revenues 0.0% 4.5% 13.0% 20.0% 12.5% 13.8% Operating income 0.0% n.m. 6.9% -15.0% 78.2% 41.3% Net income/ loss 0.0% n.m. 39.0% -22.5% 68.5% 41.3% 1

3 BALANCE SHEET ANALYSS All figures in ' A 2008A 2009A 2010E Assets Current Assets, Total 15,798 15,709 17,873 23,420 Cash and Cash Equivalents 5,949 8,082 6,314 14,188 Trade accounts and notes receivables 4,760 5,713 10,569 7,428 Receivables to Associated Parites 2, nventories 2,353 1, ,421 Non-Current Assets, Total 7,368 9,160 10,868 9,519 Goodwill + ntangible Assets 5,639 7,526 9,504 8,867 Property, plant and Equipment Other Assets 1,270 1, Total Assets 23,166 24,869 28,741 33,739 Shareholders' Equity & Debt Current Liabilities, Total 10,622 7,297 9,559 7,781 Trade payables 3,294 2,536 3,862 3,263 Short Term Debt + CP of LTD 2, Current provisions 1,764 2,000 2,230 2,065 Short term finance leases ,054 0 Other current liabilities 3,429 2,097 2,413 2,453 Longterm Liabilities, Total 178 1, ,922 Long Term Debt Deferred Revenue ,453 Other Liabilities Shareholders Equity, Total 12,366 16,335 18,723 23,036 Share Capital 24,879 26,193 26,309 29,120 Capital Reserve 5,678 6,579 6,728 7,465 Other Reserves 1,869 2,120 2,154 2,240 Loss carryforward / retained eranings -20,060-18,557-16,468-15,789 Minority interests Total Consolidated Equity and Debt 23,166 24,869 29,068 33,739 Ratios Current ratio Quick ratio Equity ratio (as%) 53.4% 65.7% 63.3% 68.3% Debt to equity ratio (gearing as %) 1.4% 7.6% 4.2% 12.7% Equity per share Net cash 3,948 8,082 6,314 14,188 nterest coverage ratio Capital employed (CE) 11,274 16,405 18,389 25,158 Return on Equity (ROE) n.m Return on capital employed (ROCE) n.m 9.2% 11.4% 6.4% Return on net assets (RONA) n.m 6.0% 7.3% 4.8% Days of inventory turnover Days of sales outstanding (DSO)

4 CASH FLOW ANALYSS All figures in ' A 2008A 2009A 2010E 2011E 2012E Net ncome -2,033 1,503 2,089 1,619 2,727 3,854 Depreciation and amortization ,765 2,283 2,500 3,000 nvestment in working capital -6, ,485 2, Others 1, Operating Cashflow -6,330 3, ,561 5,227 6,854 CAPEX nvestments in ntangibles -30-2,106-2,505-1, Free cashflow -6, ,067 5,111 4,827 6,454 Debt Financing Equity Financing 5, , Other Changes in Cash 3,476 2, Change in Cash 2,320 2,132-1,767 9,096 5,227 6,854 Cash, start of the year 3,629 5,949 8,082 6,314 14,188 19,415 Cash, end of the year 5,949 8,082 6,314 14,188 19,415 26,269 Cashflow per share in Y-Y Growth Operating Cashflow 0.0% n.m % 693.3% -20.3% 31.1% Free cashflow 0.0% n.m. n.m. n.m. -5.5% 33.7% Cashflow per share 0.0% -9.3% n.m. n.m % 30.0% 3

5 FRST BERLN RECOMMENDATON & PRCE TARGET HSTORY Report No.: Date of publication Previous day closing price Recommendation Price target nitial Report 18 November Buy 2.60 nterim Update 18 November Buy Today 2.00 Buy 2.60 Disclaimer F R S T B E R L N D S C Tsvetan Kintisheff First Berlin Equity Research GmbH Mohrenstraße Berlin Tel. +49 (0) Fax +49 (0) info@firstberlin.com FRST BERLN POLCY n an effort to assure the independence of First Berlin research neither analysts nor the company itself trade or own securities in subject companies. n addition, analysts compensation is not directly linked to specific financial transactions, trading revenue or asset management fees. Analysts are compensated on a broad range of benchmarks. Furthermore, First Berlin receives no compensation from subject companies in relation to the costs of producing this report. ANALYST CERTFCATON, Tsvetan Kintisheff, certify that the views expressed in this report accurately reflect my personal and professional views about the subject company; and certify that my compensation is not directly linked to any specific financial transaction including trading revenue or asset management fees; neither is it directly or indirectly related to the specific recommendation or views contained in this research. n addition, possess no shares in the subject company. NVESTMENT RATNG SYSTEM First Berlin s investment rating system is five tiered and includes an investment recommendation and a risk rating. Our recommendations, which are a function of our expectation of total return (forecast price appreciation and dividend yield) in the year specified, are as follows: STRONG BUY: Expected return greater than 50% and a high level of confidence in management s financial guidance BUY: Expected return greater than 25% ADD: Expected return between 0% and 25% REDUCE: Expected negative return between 0% and -15% SELL: Expected negative return greater than -15% Our risk ratings are Low, Medium, High and Speculative and are determined by ten factors: corporate governance, quality of earnings, management strength, balance sheet and financing risk, competitive position, standard of financial disclosure, regulatory and political uncertainty, company size, free float and other company specific risks. These risk factors are incorporated into our valuation models and are therefore reflected in our price targets. Our models are available upon request to First Berlin clients. Up until 16 May 2008, First Berlin s investment rating system was three tiered and was a function of our expectation of return (forecast price appreciation and dividend yield) over the specified year. Our investment ratings were as follows: BUY: expected return greater than 15%; HOLD: expected return between 0% and 15%; and SELL: expected negative return. ADDTONAL DSCLOSURES This report is not constructed as an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer would be illegal. We are not soliciting any action based upon this material. This material is for the general information of clients of First Berlin. t does not take into account the particular investment objectives, financial situation or needs of individual clients. Before acting on any advice or recommendation in this material, a client should consider whether it is suitable for their particular circumstances and, if necessary, seek professional advice. The material is based upon information that we consider reliable, but we do not represent that it is accurate or complete, and it should be relied upon as such. Opinions expressed are our current opinions as of the date appearing on this material only; such opinions are subject to change without notice. Copyright 2008 First Berlin Equity Research GmbH. All rights reserved. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without First Berlin s prior written consent. The research is not for distribution in the USA or Canada. When quoting please cite First Berlin as the source. Additional information is available upon request. 4