BOMI ITALIA. 1H18 results in line but currency hits. Buy (maintained) Company Update. 8 October :30 PM. Healthcare services

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1 Company Update 5:30 PM Healthcare services Data Shares Outstanding (m): Market Cap. (EURm): Enterprise Value (EURm): Free Float (%): 37.4% Av. Daily Trad. Vol. (m): 0.0 Main Shareholder: Reuters/Bloomberg: Ruini family 45.0% BOMI.MI BOMI IM 52-Week Range (EUR) Source: Factset Performance 1m 3m 12m Absolute -3.3% -16.6% -22.4% Rel. to FTSE IT -1.7% -10.4% -13.9% Graph area Absolute/Relative 12 M Buy (maintained) MARKET PRICE: EUR2.67 TARGET PRICE: 4.30 (from EUR4.62) 1H18 results in line but currency hits 1H18 was penalised by negative forex impact, in particular for Brazil, Turkey and China, resulting in a top line growth limited to 5.9% (but +14.8% at constant exchange rate) and an EBITDA margin declining to 8.8% (vs. 9.6% in 1H17). However, results were in line with our expectations at constant currency basis. (strong growth in Brazil, Latam, Turkey and China). As expected, lower taxes and minorities boost net attributable profit by 21% vs. 1H17, while net debt increased to EUR29.5 million due to the acquisition of Farma Logistica, De Salute and minorities in Latam. Against this backdrop, we have revised our estimates for incorporating a worsening exchange rate for BRL and lower prospects for Turkey, resulting in the reduction of our bottom line estimate of 10% on average in We remain buyers of Bomi Italia which presents an attractive organic growth and acquisitions track record while operational leverage (fixed costs will be spread over a higher revenue base) and effective cost cutting initiatives should combine to improve profitability in the future. Our target price is now EUR4.30 per share (vs. EUR4.62) indicating potential in excess of >60%. Buy reiterated. Source: Factset Marco Cristofori Senior analyst marco.cristofori@ubibanca.it Tel Financials E Revenues (EURm) EBITDA (EURm) EBITDA margin (%) 9.6% 9.8% EBIT (EURm) EPS (EUR) CFPS (EUR) E DPS (EUR) Source: Company Data, UBI Banca Estimates > Management did not supply a specific outlook for 2018 but substantially confirmed its business plan which forecasts a CAGR in sales of 6.6% up to 2020 (+4.7% organic growth and +8.9% at fixed exchange rates) with an EBITDA margin thatt is expected to increase to >11.0% in 2020 from 9.6% in We have lowered our top line estimates by 3.6% on average in reflecting a lower BRL and the slowdown in Turkey. We now expect an EBITDA margin of 9.8% this year which should progressively grow to 11.5% in > Bomi Italia successfully completed the share capital increase of EUR5 million at an issue price of EUR3.0 per share. Following the right issue the stake of the Ruini family declined to 45.02% (from 49.65%) while the free float is now 37.4%. > Following the multiples decline of our peer sample and our estimates revision, the target price has been reduced by around 7% to EUR4.30 per share implying potential in excess of 60%. Bomi Italia is trading 42% below our peer sample on EV/EBITDA. 2020E % 11.5% Ratios priced on October 5, * 2018E 2019E 2020E P/E(x) P/CF(x) 5.0 P/BV(x) 5.1 Dividend Yield 0.0% 1.9% 2.6% 3.4% EV/EBITDA(x) 6.4 Debt/Equity (x) 2.9 Debt/EBITDA (x) 2.3 Source: UBI Banca Estimates * based on 2017 average price 1

2 Key Financials (EURm) E 2019E 2020E Revenues EBITDA EBIT NOPAT Free Cash Flow Net Capital Employed Shareholders Equity Net Financial Position Source: Company data, UBI Banca estimates Key Profitability Drivers E 2019E 2020E Net Debt/Ebitda (x) Net Debt/Equity (x) Interest Coverage (%) Free Cash Flow Yield (%) 8.3% nm 11.6% 21.2% ROE (%) 29.0% 29.0% 35.7% 35.2% ROI after tax (%) 10.1% 9.0% 13.1% 17.3% ROCE (%) 10.7% 9.5% 13.7% 18.1% Source: Company data, UBI Banca estimates Key Valuation Ratios 2017 * 2018E 2019E 2020E P/E (x) P/BV (x) P/CF (x) Dividend Yield (%) 0.0% 1.9% 2.6% 3.4% EV/Sales (x) EV/EBITDA (x) EV/EBIT (x) EV/CE (x) Source: Company data, UBI Banca estimates * Based on 2017 average price Key Value Drivers (%) E 2019E 2020E Payout 0.0% 34.8% 28.4% 26.7% Cost of Equity 8.8% 8.8% 8.8% 8.8% NWC/Sales -0.3% -0.6% -0.2% -0.7% Capex/Sales 6.1% 4.2% 1.6% 1.6% Source: Company data, UBI Banca estimates 2

3 Recent Developments > In the first half of the year, Bomi Italia reported results which confirmed the growth trend planned in business plan announced on 22 January 2018; however, consolidated figures were hurt by the drop recorded in 2Q18 by emerging currencies (in particular Brazilian Realis and Turkish Lira). Overall, consolidated revenues 1H18 rose by 5.9% YoY to >EUR67 million; net of forex effect, increase would have been at 14.8% reflecting organic growth of 5.5% and consolidation since 1 January 2018 of De Salute, a company specialised in biotech, pharmaceutical and healthcare technologies logistics. > In detail, the Brazilian company, which represent 32% of total revenues, recorded a 3.8% increase of top line in local currency; as an effect of the deep devaluation of BRL, reported revenues were EUR20 million (down 13.7% or EUR4 million). Other Latam subsidiaries grew by 59% to EUR7.7 million thanks to new clients acquired at the end of Despite political turmoil, in 1H18 Turkish area grew by 2.4% in local currency but forex effect led reported revenues down 18.6% to EUR2.2 million from EUR2.7 million in 1H17. > Adjusted EBITDA margin (net of non-recurring costs) declined from 9.6% to 8.8% in 1H18. At constant exchange rate, it would have been broadly flattish at 9.3%. In absolute term, EBITDA before extraordinary items closed at EUR5.5 million compared to EUR5.6 million in 1H17. Non-recurring items were EUR0.76 million (compared to EUR0.48 million in 1H17), mainly due to non-compete agreement included in the acquisition of the minority interest in Brazilian company (EUR0.36 million) and lay-off cost in Italy, Turkey and Brazil (EUR0.17 million). D&A increased from EUR0.48 million in 1H17 to EUR0.76 million in 1H18. Following net financial income of EUR0.75 million, pre-tax profit dropped to EUR1.4 million (-41% YoY). However, lower taxes (tax rate declined from 36% in 1H17 to 15%) and minorities close to zero (from EUR0.6 million in 1H17 when Brazil was controlled at 55%) underpinned an improvement in net profit (+21% to EUR1.17 million). > Net debt was in line with our forecast at EUR29.5 million. Cash out for the acquisition of De Salute and of minorities in Colombia and Holland (EUR4.6 million) was financed by an EUR4.7 million capital increase finalized last June. Net debt of De Salute (EUR1.3 million) was consolidated into Bomi Group. Operating Free Cash Flow was EUR1.4 million after EUR2.4 million negative change in working capital partially due to seasonally effect. Capex reached EUR3.2 million in 1H18. > On 18 June, Bomi Italia announced the acquisition of 100%-stake in Farma Logistica, which operates in logistics and transport for the healthcare sector in Central-Southern Italy. Price-tag was set at EUR2.9 million + earn-out (up to EUR1.1 million tied to the achievement of certain performance parameters to be calculated by 18 July 2021). The company acquired, which reported EUR5.3 million sales in 2017 (or 4.5% of Bomi Italia consolidated sales in 2017) with an EBITDA margin of around 15%, is a step towards the group s strategy of consolidation in Europe. > In June Bomi Italia successfully completed the share capital increase of EUR5 million at an issue price of EUR3.0 per share. Following the right issue (which implied an EPS dilution of around 10% already accounted in our previous estimates) the stake of the Ruini family declined to 45.02% (from 49.65%) while Quaestio Capital Management controls a stake of 12.39%, First Capital 5.20% while the free float is 37.4%. The new share number is million. We remained that the Board proposed the establishment of Loyalty Shares for long-term shareholders (at least 2 years ownership). Loyalty shares imply 3

4 double voting rights and, based on our calculation, would give the Ruini family 55.4% of total voting rights. Loyalty Shares should apply from the listing on the MTA market segment. > In May, the company has obtained a long-term financing of EUR20 million from a pool of banks (Crédit Agricole, Cariparma and Deutsche Bank). The loan expires on April 2023 and has a variable rate equal to Euribor (3 months) +1.25%. This new financing should help to reduce the average cost of debt (4.6% in 2017, based on our calculation). Figure 1 1H18 results (EURm) 1H17A 1H18A % Chg. 1H18A at constant currency % Chg. Sales Italy % % Sales Brazil % % Sales RoW % % Sales total % % EBITDA % % % margin 9.6% 8.8% 9.3% EBIT % % Pre tax % % Net result % % Minorities % % Net attributable result % % Net debt/(cash) % Source: Company data Figure 2 Revenues and EBITDA margin semi-annual trend H1-14A H2-14A H1-15A H2-15A H1-16A H2-16A H1-17A H2-17A H1-18A Sales EBITDA % margin 17.0% 15.0% 13.0% 11.0% 9.0% 7.0% 5.0% Source: Company data 4

5 Figure 3 Current shareholders Figure 4 Voting rights post loyalty shares Free float 23.00% Free float 37.40% Incab & Co 45.02% First Capital 6.39% Incab & Co 55.37% First Capital 5.20% Source: Company data Quaestio Capital 12.39% Quaestio Capital 15.24% Source: Company data, UBI Banca estimates 5

6 Financial Projections > Following 1H18 results and the progressive deterioration of Brazilian and Turkish currencies, we have lowered our top line estimates by 3.6% on average in In particular, our estimates are now based on an exchange rate of Euro/BRL 4.5 in 2018 (4.0 before), 4.7 in 2019 (4.3 before) and 4.8 in 2020 (4.65 before). This reduction coupled with lower expectations for Turkey and China has prompted our estimates cut. At consolidated level, we expect a top line CAGR of 7.5% in (8.1% before). > Accordingly our EBITDA estimates have been slightly reduced as Brazil presents a higher profitability compared with the rest of the Group. We now expect an EBITDA margin of 9.8% this year which should progressively grow to 11.5% in As a result, our bottom line has been decreased by 10% on average in Overall, our new forecasts are 2% below the business plan in on average and 3% lower at EBITDA level. > We also incorporated the recent acquisition of Farma Logistica which should add around EUR5.5 million sales in Net debt at Dec-18 is now expected to reach EUR32.6 million after acquisition for EUR8.8 million and capex fopr EUR5.3 million. The intervention of Simest (EUR6.05 million which supported the acquisition of the minority interest in Brazil) which is shown in the consolidated financial statements for 2017 as non-controlling interest has been considered part of net debt at Dec-18. > We estimate that capital turnover (sales/average capital employed) could be 3.25x this year (3.40x in 2017), generating a ROCE of 9.5% in 2018 (10.7% in 2017) which should improve in due to falling capex and improved NOPAT margin, reaching 13.7% in 2019 and 18.1% in 2020, making Bomi Italia a strong value creator company. Figure 5 - Old vs. new estimates (EURm) 2017A 2018E 2019E 2020E Old New Old New Old New Sales % change -5.9% -3.4% -1.6% EBITDA % change -9.1% -8.4% -3.0% % margin 9.6% 10.1% 9.8% 11.3% 10.7% 11.6% 11.5% EBIT % change -21.9% -6.9% 1.7% % margin 4.7% 5.2% 4.4% 6.6% 6.3% 7.1% 7.4% Net Income % change -27.1% -12.9% -5.8% Net Income attribtable % change -21.4% -8.1% -0.6% Net debt (cash) Source: Company data, UBI Banca estimates 6

7 Valuation > Our target price per share is based on the average of a DCF analysis (50% weight) and a relative valuation (50% weight), after applying a 20% liquidity discount for the listing on the AIM market and the modest liquidity of the shares. > Following the revision to our estimates and the decline of the multiples of our peer sample (the average performance since the beginning of the year is 6% negative), our target price has declined by 6.9% to EUR4.30 per share (from EUR4.62). Our new target price indicates potential upside of >60% supporting our Buy rating. > At the current market price Bomi Italia is trading at an average EV/EBITDA 42% below its peers. At our target price, the company would trade at 7.8x 2019 EV/EBITDA, which is well below the average multiple of our peer sample (11.1x). > The EUR5.4 million convertible bond issued at the time of the IPO (June 2015) can be converted up to June 2020 at a ratio of shares for each bond (issued at EUR3.600 each) at EUR3.6 per share. In the event of full bond conversion, which seems unlikely given that the current share price is well below the strike price, Bomi Italia will issue 1.5 million new shares resulting in a dilution of around 9%. Figure 6 Valuation Summary Method Fair Value (EUR) Weight 9/04/2018 % Chg. DCF % % Relative valuation % % Fair value % 20% discount (1.08) (1.16) Target price % Current price % Increase/decrease % 61.2% 47.3% Source: UBI Banca estimates Figure 7 - WACC and embedded DCF assumptions WACC assumptions Embedded DCF assumptions Risk-free rate 2.5% Revenue CAGR (%) 4.3% Debt spread (%) 3.5% Target EBIT margin 2026 (%) 6.5% Cost of debt [net] (%) 4.4% D&A. on sales (avg ) (%) 4.2% Market risk premium (%) 4.5% Capex on sales (avg ) (%) 4.0% Beta (x) 2.27 Cost of equity (%) 12.7% Weight of Debt 74% Weight of Equity 26% WACC 6.50% Source: UBI Banca estimates 7

8 Figure 8 DCF Valuation Our DCF valuation implies an EV/EBITDA of 7.8x at terminal value Valuation (EUR m) % Weight Per share (EUR) Sum of PV FCF % 2.79 Terminal value % 5.12 Total Enterprise value % Pension provision (1.5) (0.09) - Net cash (debt) (25.5) (1.51) Total Equity value Minorities (15% DCF) (16.0) (0.95) Total Equity value Bomi Italia Number of shares outstanding (m) 16.9 Fair value per share (EUR) 5.37 Source: UBI Banca estimates Figure 9 Peer comparison and valuation based on multiples (priced on October ) Company Market Cap Country P/E EV/EBITDA EV/EBIT (EURm) 2018E 2019E 2020E 2018E 2019E 2020E 2018E 2019E 2020E Cardinal Health 14,432 USA 10.8 x 10.7 x 9.9 x 7.3 x 8.0 x 7.6 x 9.1 x 9.5 x 9.0 x DSV 14,139 Denmark 25.2 x 22.4 x 20.0 x 17.7 x 16.2 x 15.1 x 20.1 x 18.3 x 16.8 x Kuhne & Nagel International AG 15,348 Switzerland 21.8 x 20.1 x 18.8 x 13.4 x 12.3 x 11.5 x 16.2 x 14.8 x 13.7 x McKesson Corporation 23,270 USA 10.1 x 9.4 x 8.7 x 7.3 x 7.0 x 6.9 x 8.3 x 7.7 x 7.7 x UDG Healthcare 1,930 Ireland 20.0 x 18.4 x 16.7 x 13.2 x 12.0 x 10.8 x 17.0 x 14.7 x 12.7 x United Parcel Service 87,635 USA 16.2 x 14.8 x 13.6 x 12.2 x 11.1 x 10.4 x 15.9 x 14.4 x 13.4 x Average 17.4 x 16.0 x 14.6 x 11.8 x 11.1 x 10.4 x 14.4 x 13.2 x 12.2 x Median 18.1 x 16.6 x 15.2 x 12.7 x 11.5 x 10.6 x 16.1 x 14.5 x 13.0 x Bomi Italia current market multiples x 18.6 x 10.8 x 6.4 x 7.2 x 5.6 x 13.0 x 16.2 x 9.5 x Premium (discount) to average 1.3% 16.6% -25.8% -46.2% -35.1% -46.0% -10.2% 22.5% -22.6% Source: Factset, UBI Banca estimates Figure 10 Implicit multiples based on our EUR4.30 target price (x) 2018E 2019E 2020E P/E 30.0 x 17.5 x 12.7 x EV/EBITDA 9.9 x 7.8 x 6.1 x EV/EBIT 22.3 x 13.1 x 9.5 x EV/Sales 0.97 x 0.83 x 0.70 x P/BV 8.7 x 6.2 x 4.5 x P/CF 8.8 x 7.4 x 5.7 x EV/ Capital employed 2.8 x 2.7 x 2.7 x Source: UBI Banca estimates 8

9 Income Statement (EURm) E 2019E 2020E Net Revenues EBITDA EBITDA margin 9.6% 9.8% 10.7% 11.5% EBIT EBIT margin 4.7% 4.4% 6.3% 7.4% Net financial income /expense Associates & Others Profit before taxes Taxes Minorities & discontinuing ops Net Income Source: Company data. UBI Banca estimates Balance Sheet (EURm) E 2019E 2020E Net working capital Net Fixed assets M/L term funds Capital employed Shareholders' equity Minorities Shareholders' funds Net financial debt/(cash) Source: Company data. UBI Banca estimates Cash Flow Statement (EURm) E 2019E 2020E NFP Beginning of Period Group Net Profit Minorities D&A Change in Funds & TFR Gross Cash Flow Change In Working Capital Other Operating Cash Flow Net Capex Other Investments Free Cash Flow Dividends Paid Other & Chg in Consolid. Area Chg in Net Worth & Capital Incr Change in NFP NFP End of Period Source: Company data. UBI Banca estimates 9

10 Financial Ratios (%) E 2019E 2020E ROE 29.0% 29.0% 35.7% 35.2% ROI pre-tax 15.1% 13.4% 19.6% 25.9% Net Fin. Debt/Equity (x) Net Fin. Debt/EBITDA (x) Interest Coverage NWC/Sales -0.3% -0.6% -0.2% -0.7% Capex/Sales -6.1% -4.2% -1.6% -1.6% Pay Out Ratio 0.0% 34.8% 28.4% 26.7% Source: Company data. UBI Banca estimates Per Share Data (EUR) E 2019E 2020E EPS DPS Op. CFPS Free CFPS BVPS Source: Company data. UBI Banca estimates Stock Market Ratios (x) 2017 * 2018E 2019E 2020E P/E P/OpCFPS P/BV Dividend Yield (%) 0.0% 1.9% 2.6% 3.4% Free Cash Flow Yield (%) 8.3% nm 11.6% 21.2% EV (EURm) EV/Sales EV/EBITDA EV/EBIT EV/Capital Employed Source: Company data. UBI Banca estimates * Based on average 2017 price Growth Rates (%) E 2019E 2020E Growth Group Net Sales 16.9% 6.1% 9.1% 7.2% Growth EBITDA 29.1% 8.5% 19.0% 15.1% Growth EBIT 48.1% -1.9% 58.5% 24.8% Growth Net Profit 348.7% 16.4% 71.6% 37.0% Source: Company data. UBI Banca estimates 10

11 Disclaimer Analyst Declaration This research report (the Report ) has been prepared by Marco Cristofori on behalf of UBI Banca S.p.A. ( UBI Banca ) in the context of the ancillary service provided by UBI Banca named Investment research and financial analysis or other forms of recommendation relating to transactions in financial instruments under Paragraph 5), Section B, Annex I of the Directive 2014/65/EU ( MiFID II ). UBI Banca is an Italian bank under art. 4 (1)(27) of MiFID II and it is supervised by the European Central Bank and duly authorised to provide investment services pursuant to Article 1, Paragraph 5, letter a), b), c), c-bis), e) and f) of the Legislative Decree 24 February 1998, n 58 under the supervision of the Italian Authority for the financial markets (Consob). UBI Banca has its head office at Piazza Vittorio Veneto 8, Bergamo. The analyst who prepared the Report, and whose name and role appear on the front page, certifies that: a. The views expressed on the company, mentioned herein (the Company ) accurately reflect his personal views, but does not represent the views or opinions of UBI Banca, its management or any other company which is part of or affiliated with UBI Banca group (the UBI Banca Group ). It may be possible that some UBI Banca Group officers may disagree with the views expressed in this Report; b. He has not received, and will not receive any direct or indirect compensation in exchange for any views expressed in this Report; c. The analyst does not own any securities and/or any other financial instruments issued by the Company or any financial instrument which the price depends on, or is linked to any securities and/or any financial instruments issued by the Company. d. Neither the analyst nor any member of the analyst s household serves as an officer, director or advisory board member of the Company. e. The remuneration of the analyst is not directly tied to transactions for services for investment firms or other types of transactions it or any legal person, part of the same group performs, or to trading fees it or any legal person that is part of the same group receives. f. The analyst named in this document is a member of AIAF. General disclosure This Report is for information purposes only. This Report (i) is not, nor may it be construed, to constitute, an offer for sale or subscription or of a solicitation of any offer to buy or subscribe for any securities issued or to be issued by the Company, (ii) should not be regarded as a substitute for the exercise of the recipient s own judgement. In addition, the information included in this Report may not be suitable for all recipients. Therefore the recipient should conduct their own investigations and analysis of the Company and securities referred to in this document, and make their own investment decisions without undue reliance on its contents. Neither UBI Banca, nor any other company belonging to the UBI Banca Group, nor any of its directors, managers, officers or employees, accepts any direct or indirect liability whatsoever (in negligence or otherwise), and accordingly no direct or indirect liability whatsoever shall be assumed by, or shall be placed on, UBI Banca, or any other company belonging to the UBI Banca Group, or any of its directors, managers, officers or employees, for any loss, damage, cost, expense, lower earnings howsoever arising from any use of this Report or its contents or otherwise arising in connection with this Report. 11

12 The information provided and the opinions expressed in this Report are based upon information and data provided to the public by the Company or news otherwise public, and refers to the date of publication of the Report. The sources (press publications, financial statements, current and periodic releases, as well as meetings and telephone conversations with the Company s representatives) are believed to be reliable and in good faith, but no representation or warranty, express or implied, is made by UBI Banca as to their accuracy, completeness or correctness. Past performance is not a guarantee of future results. Any opinions, forecasts or estimates contained herein constitute a judgement as of the date of this Report, and there can be no assurance that the future results of the Company and/or any future events involving directly or indirectly the Company will be consistent with any such opinions, forecasts or estimates. Any information herein is subject to change, update or amendment without notice by UBI Banca subsequent to the date of this Report, with no undertaking by UBI Banca to notify the recipient of this Report of such change, update or amendment. Organizational and administrative arrangements to prevent conflicts of interests UBI Banca maintains procedures and organizational mechanism (physical and non physical barriers designed to restrict the flow of information between the unit which performs investment research activity, and other units of UBI Banca) to prevent and professionally manage conflicts of interest in relation to investment research in accordance with art. 23 of Directive 2014/65/EU and under art. 34 (3) and art. 37 of the Regulation 2017/565/EU. More specifically, UBI Banca has established, implements and maintains an effective conflicts of interests policy aimed at preventing and managing the potential conflicts of interest that could occur during the performance of the investment research services. Insofar as the above mentioned organizational and administrative arrangements established by UBI Banca to prevent or manage potential conflicts of interests are not sufficient to ensure, with reasonable confidence, that risks of damage to the interests of the client will be prevented, UBI Banca engages to provide a clear disclosure of the specific conflicts of interests arising from the performance of investment research services, including a description of the sources of those conflicts and the steps undertaken to mitigate them, taking into account the nature of the client to whom the disclosure is being made. For further information please see UBI Banca s website ( - Informativa sintetica sull attività di ricerca ) and ( - Policy sintetica conflitti di interessi ). More details about the conflicts of interests policy will be provided by UBI Banca upon request. Disclosure of interests and conflicts of interests pursuant to Delegated Regulation 2016/958/EU In relation to the Company the following interest/conflict of interest have been found: > UBI Banca acts as Specialist for Bomi Italia. > UBI Banca may have long or short positions with the issuer On the basis of the checks carried out no other interest/conflict of interest arose. Frequency of updates UBI Banca aims to provide continuous coverage of the companies in conjunction with the timing of periodical accounting reports and any exceptional event that occurs affecting the issuer s sphere of operations and in any case at least twice per year. The companies for 12

13 which UBI Banca acts as Sponsor or Specialist are covered in compliance with regulations of the market authorities. For further information please refer to Valuation methodology UBI Banca s analysts value the Company subject to their recommendations using several methods among which the most prevalent are: the Discounted Cash Flow method (DCF), the Economic Value Added method (EVA), the Multiple comparison method, the SOP method and the NAV method. The analysts use the above valuation methods alternatively and/or jointly at their discretion. The assigned target price may differ from their fair value, as it also takes into account overall market/sector conditions, corporate/market events, and corporate specifics (i.e. holding discounts) reasonably considered to be possible drivers of the company s share price performance. These factors may also be assessed using the methodologies indicated above. For further information please refer to Ranking system UBI Banca s analysts use an absolute rating system, not related to market performance. The explanation of the rating system is listed below: Buy: if the target price is 10% higher than the market price, over the next 12 months. Hold: if the target price is 10% below or 10% above the market price, over the next 12 months. Sell: if the target price is 10% lower than the market price, over the next 12 months. No Rating: the investment rating and target price have been suspended as there is not sufficient fundamental basis for determining an investment rating or target. The previous investment rating and target price, if any, are no longer in effect. Alternatively, No Rating is assigned in certain circumstances when UBI Banca is acting in any advisory capacity in a strategic transaction involving the Company. Target price: the market price that the analyst believes that the share may reach within a one-year time horizon. Market price: closing price on the day before the issue date of the report, appearing on the first page. Distribution Italy: This document is intended for distribution in electronic form to Professional Clients and Qualified Counterparties as defined by Legislative Decree 24 February 1998, n. 58 and by Consob Regulation n dated , as further amended and supplemented. This Report has been released within 30 minutes from the timing reported on the front page. IN THE UNITED KINGDOM, THIS DOCUMENT IS BEING DISTRIBUTED ONLY TO, AND IS DIRECTED ONLY AT PERSONS WHO (A) ARE (I) PERSONS FALLING WITHIN ARTICLE 19 OR ARTICLE 49 OF THE FINANCIAL SERVICES AND MARKETS ACT 2000 (FINANCIAL PROMOTION) ORDER 2005 (AND ONLY WHERE THE CONDITIONS CONTAINED IN THOSE ARTICLES HAVE BEEN, OR WILL AT THE RELEVANT TIME BE, SATISFIED) OR (II) ANY OTHER 13

14 PERSONS TO WHOM IT MAY BE LAWFULLY COMMUNICATED; AND (B) ARE QUALIFIED INVESTORS WITHIN THE MEANING OF ARTICLE 2(1)(E) OF THE PROSPECTUS DIRECTIVE (DIRECTIVE 2003/71/EC), (ALL SUCH PERSONS BEING REFERRED TO AS "RELEVANT PERSONS"). THIS DOCUMENT MUST NOT BE ACTED ON OR RELIED ON BY PERSONS WHO ARE NOT RELEVANT PERSONS. Copyright This Report is being supplied solely for the recipient s information and may not be reproduced, redistributed or passed on, directly or indirectly to any other person or published, in whole or in part, for any purpose without prior written consent of UBI Banca. The copyright and intellectual property rights on the data are owned by UBI Banca Group, unless otherwise indicated. The data, information, opinions and valuations contained in this Report may not be subject to further distribution or reproduction, in any form or via any means, even in part, unless expressly consented by UBI Banca. By accepting this Report the recipient agrees to be bound by all of the forgoing provisions. Distribution of ratings Equity rating dispersion in the past 12 months Buy Hold Sell No Rating 87.5% 2.5% 0.0% 10.0% Proportion on issuers to which UBI Banca has supplied investment banking services relating to the last 12 months Buy Hold Sell No Rating 100% 100% - 100% For further information regarding yearly and quarterly rating statistics and descriptions, please refer to Historical ratings and target prices Date Rating Target Price (EUR) Market Price (EUR) 24/07/2017 BUY /09/2017 BUY /01/2018 BUY /04/2018 BUT