LU-VE. Perfect storm in 1H17 but investment case still intact. Buy (maintained) Company Update

Transcription

1 Company Update Buy (maintained) 5:30 PM MARKET PRICE: EUR10.47 TARGET PRICE:EUR13.60 (from EUR16.07) Heat exchangers, refrigeration Data Shares Outstanding (m): 22.2 Market Cap. (EURm): Enterprise Value (EURm): Free Float (%): 32.4% Av. Daily Trad. Vol. (m): 0.02 Main Shareholder: Reuters/Bloomberg: Liberali family 50.1% LUVE.MI LUVE IM 52-Week Range (EUR) Source: Factset, UbiBanca estimates Performance 1m 3m 12m Absolute -19.2% -23.7% 15.7% Rel. to FTSE IT -22.0% -28.8% -14.7% Graph area Absolute/Relative 12 M Source: Factset Marco Cristofori Senior Analyst marco.cristofori@ubibanca.it Tel Website: Perfect storm in 1H17 but investment case still intact LU-VE reported 1H17 sales slightly above our estimates but EBITDA was below our expectations due to higher raw material costs, the unexpected decline in the glass door segment (-45%), higher labour costs, and EUR1.3 million of MTA listing costs (expected) which depressed the EBITDA margin to 9.7% (from 13.0% in 1H16). Nevertheless, we believe the market has overreacted to 1H17 results (the share price has fallen by almost 20%) and we remain buyers of the stock: 1) organic growth remains healthy at 3.5% rising to 7.2% excluding the glass doors segment while Spirotech contributed revenues of EUR12.2 million representing an increase of almost 20%; 2) LU-VE has raised its prices since May and should therefore be able to absorb higher input costs in the coming months, despite the difficult market environment; 3) LU-VE is accelerating its capex program which should lead to higher profitability in future; 4) cross-selling synergies with Spirotech are starting to materialize and the project of producing air cooled equipment has been launched; 5) the listing on the MTA market from June-17 should increase the liquidity of the shares, giving LU-VE access to new institutional investors; 6) new potential acquisitions (three companies under consideration) could increase the appeal of the share. We reiterate our positive stance with a new target price of EUR13.60 per share, implying nearly 30% upside. > Although sales rose 13.9%, EBITDA fell 15% in 1H17, impacted by higher raw material prices, non-recurring costs (of EUR1.3 million) and higher labour costs. Attributable net profit, which fell 75%, was impacted by EUR3.8 million of unrealized forex losses. Net debt was EUR51.1 million at June-17 vs. EUR30.2 million at Dec-16. > Following 1H17 results, we have reduced our EBITDA estimates by 18% in 2017 (and by 8% on average in ), reflecting higher input and labour costs and non-recurring costs reported in 1H17. Our EPS has been cut by 25% on average. Our new estimates for the net financial position imply net debt of EUR37 million at Dec- 17 rising, excluding potential acquisitions. > Following these changes to our estimates, we have set a new target price of EUR13.60 per share (from EUR16.07) which still implies upside of nearly 30%. LU-VE is trading at a 31% discount to the average EV/EBITDA of its peers. Buy reiterated. Financials priced on 22 September * 2017E 2018E 2019E Revenues (EURm) EBITDA (EURm) EBITDA margin (%) 13.1% 10.7% 12.7% 13.4% EBIT (EURm) EPS (EUR) CFPS (EUR) DPS (EUR) Source: Company Data, UBI Banca Estimates. * Pro-forma Ratios priced on 22 Septmeber * 2017E 2018E 2019E P/E(x) P/CF(x) P/BV(x) Dividend Yield 1.9% 2.3% 2.5% 2.7% EV/EBITDA(x) Debt/Equity (x) Debt/EBITDA (x) Source: UBI Banca Estimates * based on average 2016 price 1

2 Key Financials (EURm) 2016 * 2017E 2018E 2019E Revenues EBITDA EBIT NOPAT Free Cash Flow Net Capital Employed Shareholders Equity Net Financial Position * Pro-forma results Key Profitability Drivers E 2018E 2019E Net Debt/EBITDA (x) Net Debt/Equity (x) Interest Coverage (%) Free Cash Flow Yield (%) -11.3% 0.1% 6.3% 9.0% ROE (%) 13.2% 5.9% 10.3% 11.7% ROI (%) pre-tax 12.8% 8.2% 11.5% 13.5% ROCE (%) 10.5% 6.6% 9.1% 10.7% Key Valuation Ratios 2016 * 2017E 2018E 2019E P/E (x) P/BV (x) P/CF (x) Dividend Yield (%) 2.2% 2.3% 2.5% 2.7% EV/Sales (x) EV/EBITDA (x) EV/EBIT (x) EV/CE (x) * based on average 2016 price Key Value Drivers (%) E 2018E 2019E Payout 24.9% 66.6% 38.5% 33.5% NWC/Sales 5.7% 5.6% 5.1% 4.6% Capex/Sales 6.1% 6.3% 5.2% 4.2% 2

3 Recent Developments > Revenues in 1H17 were slightly above our expectations with an increase of 13.9% (+3.5% organically), but EBITDA was somewhat disappointing with margins falling to 9.7% (from 13.0% in 1H16) and net attributable profit down by almost 75%, partly due to unrealized forex losses (of EUR3.8 million) and higher taxes. > Core applications (refrigeration and air conditioning representing 85% of revenues) rose 7.5% (3.3% on a like-for-like basis). The heat exchanger segment (61% of consolidated sales) grew by 13.2% on a like-for-like basis confirming the positive trend of 2016 and close controls also rose 8.4%. However, air cooling equipment declined by 4.1% and the glass door segment fell by almost 45% as the main client of LU-VE, representing around 50% of glass door sales, has in-sourced production, which deprived LU-VE of sales of >EUR3 million, while its second-largest customer temporarily suspended purchases. However, there was a particularly notable improvement in both Russia (+21.6%) and India (+19.6%). > 1H17 was a sort of perfect storm for LU-VE. Several factors combined to depress profitability: 1) the increase in raw material costs (EUR1.9 million impact), mostly copper (which accounts for about 35% of raw material costs) and aluminium (about 12% of raw material costs), which rose 17% and 27% respectively since the beginning of the year. The company is 60/65% covered on OEM sales due to pass-through contracts which, however, cannot immediately be transferred to clients and which therefore had a disproportionate effect on first half results. LU-VE put through price increases in May and July (by 5%) and the negative effect of higher raw material costs should consequently have a lower impact in the coming months; 2) EUR1.3 million of listing cost on MTA, fully recorded in 1H17; 3) the lower contribution of the glass door segment which reduced EBITDA by EUR0.9 million; 4) higher labour costs (representing 21% of sales vs. 20.9% in 1H16) due to higher intake (122 units) higher overtime and incentives; 5) weaker margins in Russia (EUR0.5 million impact). The combination of these items reduced EBITDA by EUR6.1 million or 4.6% of sales. Margin fell to 9.7% (10.7% excluding non-recurring costs) from 13% in 1H16. > Following deductions of EUR6.8 million for D&A, EBIT was EUR6.1 million (4.5% margin). Below the operating line LU-VE reported EUR3.8 million of unrealized forex losses (mostly relating to the Russian, Indian and Polish currencies) partially offset by EUR0.4 million of realized forex gains, leading to a pre-tax profit of EUR2.5 million, 71% below 1H16. Net profit came to EUR1.9 million vs. EUR7.4 million in 1H16. > Positive news came from Spirotech, the Indian company specializing in heat exchangers with a strong aluminium welding capability, acquired in September 2016: sales rose 19.6% and the EBITDA margin was 18.7%. The integration with LU-VE is well on track and Spirotech has already begun production of air cooled equipment and has signed significant new contracts with e.g. Electrolux, Miele. > Net debt increased to EUR51.1 million from EUR30.2 million at Dec-16 due to the seasonal mid-year peak in NWC, higher capex (EUR11.8 million, partly due to the acquisition of a new building site in Poland for EUR3 million) and dividend payment (EUR4.4 million). NWC rose slightly to 14.3% of revenues (12.8% in 1H16) mainly due to the consolidation of Spirotech whose NWC accounts for about 34% of sales (initiatives have been implemented to reduce trade receivables, with significant improvements expected by management in the 3

4 coming months). Capital employed rose to EUR186 million (EUR164.6 million at Dec-16) reflecting the new perimeter. > Following the conversion at the end of May of the outstanding warrants (7.1 million) as well as the special shares, 2.03 million of new shares were issued increasing the number of shares in circulation to million representing dilution of about 12%. > The listing on the MTA since 21 June 2017 should increase the liquidity of the shares, giving LU-VE access to new institutional investors who are restricted from investing in the AIM market. Following conversion of the warrants, free float has increased to 32.4% (from 27% previously) with the Liberali family controlling 50.1% of the company and the Faggioli family 17.6%. We believe that the improved free float is a step towards a listing on the Star segment even if the management ruled out this possibility in the short term. > Management confirmed that LU-VE continues to research new acquisitions of companies with similar product ranges and a presence in new markets (mainly North America) or with innovative technologies (patented). Assuming target gearing of 50%, we estimate that LU-VE has funds for expansion of about EUR50 million. Currently there are three potential candidates, of which one is a US company, although no deadlines have been given. Figure 1 1H17 results (EURm) 1H16A 1H17A % Chg. Sales % Value of production % EBITDA % Margin (%) 13.0% 9.7% EBIT % Margin (%) 7.5% 4.6% Net Result attributable % Net debt % Source: Company data Figure 2 1H17 sales breakdown by product Heat exchangers reported 32.3% growth, sustained by the acquisition of Spirotech, but rose 13.27% on a like-for-like basis. Close control rose 8.4%, Air cooled equipment declined by 4.1% and Glass doors fell 44.6%. Figure 3 1H17 sales breakdown by application Refrigeration sales rose 3.5% in ih17 while Air conditioning was up 24.5% (7.2% on a like-for-like basis). Special applications increased by 64.4% (-1.6% excluding Spirotech) while Power Gen was down 4.6%. Glass doors 3.5% Close control 3.6% Other 1.7% Special applications 14.0% Power generation 2.6% Other 1.7% Air cooled equipment 30.2% Heat exchangers 60.9% Air conditioning 18.2% Refrigeration 63.6% Source: Company data Source: Company data 4

5 Financial Projections > The company has not published official targets for top line growth or operating profitability for However, management confirmed an organic growth target of 6-7% in the coming years, supported by a backlog that was up 21% at end- August, and higher capex. It should be noted that LU-VE typically has about two months visibility. > Given the lower profitability reported in the first half, we have revised our estimates for 2017 factoring in higher raw material prices, particularly copper and aluminium, the prices of which continue to rise. Their weight on sales is now expected to be 53.5% (54.5% in 1H17 and 51% in our previous estimates), slightly higher labour costs and non-recurring expenses of EUR1.3 million related to the listing on MTA. We have slightly upgraded our revenue and VoP projections but reduced the EBITDA margin (from 13.4% in our previous estimate to 10.6% and to 11.0% on an adjusted basis). We have also incorporated around EUR3 million of forex losses. Consequently, our net profit estimate for 2017 has been reduced by 47%. Projected year-end Net debt has been increased to EUR37 million, reflecting lower operating cash flow and higher capex. > We have slightly increased our sales expectations for due to higher organic growth arising from continuing macro-economic recovery in Europe, but we have reduced our EBITDA forecasts by about 8%, incorporating higher input costs. The EBITDA margin could recover to 13.3% in 2019 when cross-selling synergies with Spirotech are likely to fully materialize. > We expect to see a gradual reduction in net debt, despite higher capex, due to a reduction in Spirotech s NWC and higher operating cash flow, excluding possible acquisitions. Figure 4 New vs. old estimates (EUR) 2016A 2017E 2018E 2019E Aggregated Old New Old New Old New Revenues % change 3.5% 2.4% 0.6% VoP % change 3.4% 2.4% 0.6% EBITDA % change -18.5% -8.5% -7.8% EBITDA adjusted % change -17.4% -8.5% -7.8% EBIT % change -29.1% -11.7% -10.2% Pre-tax profit % change -46.6% -17.3% -12.4% Net profit attributable % change -47.2% -16.3% -11.2% Net financial debt (cash)

6 Figure 5 - NOPAT margin, Capital Turnover and ROCE trend The decline in reported ROCE in 2017 is attributable to the decline in the NOPAT margin. The expected recovery in 2018, coupled with the increase in the capital turnover, should drive up ROCE which could exceed 11% in % 12.0% 11.0% 10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% Capital turnover (LH) NOPAT margin (RH) ROCE (RH) Figure 6 Revenue, EBITDA and EBIT trend Following an expected decline in 2017, EBITDA margins are expected to recover in coming years due to the acquisition of Spirotech, additional synergies, softening raw material price pressure and improvements in some key markets (Russia, India, Italy) % 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% Net Revenues EBITDA margin EBIT margin 6

7 Valuation > LU-VE s share price has fallen almost 20% following the announcement of first half results reflecting the market s disappointment with the poor performance. However, we believe this was an overreaction given that LU-VE s fundamentals remain healthy and long term prospects bright, with expected top line growth of 6.3% CAGR in The company is currently trading at a 31% discount to the industry in terms of EV/EBITDA and at a 22% discount in terms of P/E. We consider these discounts to be unjustified, as we believe that the listing on the MTA could eliminate or minimise the liquidity discount usually applied by investors to companies listed on the AIM. > Following the downgrades to our estimates, we have cut our target price by 15% to EUR13.60 from EUR16.07 per share. This is based on the average of a DCF (fair value of EUR13.39 per share) and a relative valuation (based on both the average of the multiples of direct peers and the average of larger companies operating, though not exclusively, in the same sectors as LU-VE). This produces a fair value of EUR11.64 per share for direct peers and EUR15.78 for diversified companies. Our target price implies upside of nearly 30% to the current market price. > At our EUR13.60 target price, the shares would still trade at a 13% discount to the EV/EBITDA of its peers. Figure 7 Valuation summary (EUR) Current valuation Weight Previous valuation (22/03/2017) Delta DCF Valuation % % Relative Valuation (focused companies) % % Relative Valuation (diversified companies) % % Target Price % Current price % Potential upside 29.9% 23.6% Source: UBI Banca estimates Figure 8 DCF Valuation Our DCF valuation is based on a 6.7% WACC, 1% terminal growth rate and implies an EV/EBITDA of 7.8x at terminal value. Valuation (EUR m) % Weight Per share (EUR) Sum of PV FCF % 5.22 Terminal value % 9.81 Total Enterprise value % minorities (1.8) (0.08) - Pension Provision (3.9) (0.18) - Net cash (debt) including acquisition cost (30.2) (1.36) Total Equity value Number of shares outstanding (m) 22.2 Fair value per share (EUR) Source: UBI Banca estimates 7

8 Figure 9 - Relative valuation based on diversified companies priced on 22 September 2017 Market Cap. P/E EV/EBITDA (EURm) 2017E 2018E 2019E 2017E 2018E 2019E NIBE Industrier 4, x 21.3 x 20.0 x 15.2 x 13.8 x 12.7 x Walter Meier x 44.0 x 22.0 x 15.9 x 13.1 x 11.3 x Lindab International x 13.1 x 12.3 x 10.0 x 8.4 x 7.6 x Beijer Ref 1, x 19.6 x 18.0 x 15.7 x 14.1 x 13.0 x Emerson Electric 33, x 21.8 x 19.7 x 12.9 x 11.3 x 10.8 x Alfa Laval 8, x 21.3 x 18.9 x 14.6 x 13.2 x 11.8 x SPX Corporation x 12.9 x 11.9 x 8.6 x 7.4 x 6.3 x Ingersoll-Rand 18, x 17.2 x 15.5 x 12.0 x 11.0 x 10.3 x United Technologies Corporation 76, x 16.7 x 15.3 x 10.1 x 9.9 x 8.9 x Average 40.0 x 20.9 x 17.1 x 12.8 x 11.4 x 10.3 x LU-VE Group valuation on multiples (EUR) Source: Factset, UBI Banca estimates Figure 10 - Relative valuation based on focused companies priced on 22 September 2017 Market Cap. P/E EV/EBITDA (EURm) 2017E 2018E 2019E 2017E 2018E 2019E Systemair AB x 14.5 x 15.5 x 11.4 x 9.4 x 8.1 x Centrotec sustainable x 12.8 x 11.5 x 6.1 x 5.4 x 4.8 x Lennox International 6, x 19.1 x 17.7 x 13.7 x 12.4 x 11.6 x Average 18.2 x 15.5 x 14.9 x 10.4 x 9.1 x 8.2 x LU-VE Group valuation on multiples (EUR) Source: Factset, UBI Banca estimates Figure 11 Implicit multiples based on our EUR13.60 target price 2017E 2018E 2019E P/E EV/EBITDA EV/EBIT EV/Sales P/BV P/CF 22:05 04:44 00:10 EV/ Capital employed

9 Income Statement (EURm) 2016 * 2017E 2018E 2019E Net Revenues EBITDA EBITDA margin 13.1% 10.7% 12.7% 13.4% EBIT EBIT margin 8.0% 5.6% 7.6% 8.5% Net financial income /expense Associates & Others Profit before taxes Taxes Minorities & discontinuing ops Net Income * Pro-forma results Balance Sheet (EURm) E 2018E 2019E Net working capital Net Fixed assets M/L term funds Capital employed Shareholders' equity Minorities Shareholders' funds Net financial debt/(cash) Cash Flow Statement (EURm) E 2018E 2019E 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

10 Financial Ratios (%) E 2018E 2019E ROE 13.2% 5.9% 10.3% 11.7% ROI pre-tax (%) 12.8% 8.2% 11.5% 13.5% Net Fin. Debt/Equity (x) Net Fin. Debt/EBITDA (x) Interest Coverage NWC/Sales 5.7% 5.6% 5.1% 4.6% Capex/Sales 6.1% 6.3% 5.2% 4.2% Pay Out Ratio 24.9% 66.6% 38.5% 33.5% Per Share Data (EUR) E 2018E 2019E EPS DPS Op. CFPS Free CFPS BVPS Stock Market Ratios (x) 2016 * 2017E 2018E 2019E P/E P/OpCFPS P/BV Dividend Yield (%) 2.2% 2.3% 2.5% 2.7% Free Cash Flow Yield (%) -11.3% 0.1% 6.3% 9.0% EV (EURm) EV/Sales EV/EBITDA EV/EBIT EV/Capital Employed * based on average 2016 price Growth Rates (%) E 2018E 2019E Growth Group Net Sales 18.4% 7.6% 5.6% 5.8% Growth EBITDA 25.8% -12.3% 25.6% 11.7% Growth EBIT 45.3% -24.8% 43.4% 17.2% Growth Net Profit 92.8% -54.3% 87.1% 23.8% 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 ). UBI Banca is an Italian bank supervised by the European Central Bank and is 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 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 reflects his personal views. It does not represent the views or opinions of UBI Banca, its management or any other company which is part of or affiliated to the UBI Banca group (the UBI Banca Group ). It may possible that some UBI Banca Group s employees 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 instrument issued by the Company or any financial instrument whose price depends on or is linked to any securities and/or any financial instrument 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 in services of investment firms or other type 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 the document is 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 of or 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 his own investigations and analysis of the Company and securities referred to in this document and make his own investment decisions without undue reliance on its contents. Neither UBI Banca, nor any other company of 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 of 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. 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 11

12 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 at 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. For further information please see UBI Banca s website ( Informativa sintetica sull attività di ricerca. Disclosure of potential conflicts of interest In relation to the Company the following potential conflict of interest have been found: > UBI Banca acts as Specialist for LU-VE > UBI Banca may have long or short positions with the issuer On the basis of the checks carried out no other 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 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 the 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 12

13 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 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. 13

14 Distribution of ratings Equity rating dispersion in the past 12 months Buy Hold Sell No Rating 84.4% 12.5% 0.0% 3.1% 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% - - 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) 8 July 2015 Buy September 2015 Buy April 2016 Buy October 2016 Buy March 2017 Buy