B a sl er A G # $T ypcap$ 1576 14 1 1 x 6495 2 Page 1/6 First Take Reco. lowered Neutral vs Buy Electronics Germany Neutral Target price : 60.00 EUR vs 52.00 EUR Price (11/01/2016) : 58.04 EUR Upside : 3 % Est.chg 2016e 2017e EPS 19.7% 17.8% Very solid Q3; excellent story, but priced in; TP upped to 60.00; downgrade to neutral Publication date 03.11.2016 08:36 Writing date 03.11.2016 07:46 60 55 50 45 40 35 30 25 20 Sep 13Dez 13Mrz 14Jun 14Sep 14Dez 14Mrz 15Jun 15Sep 15Dez 15Mrz 16Jun 16Sep 16Dez 16 Relative to Software (Rebased) Capital BSL GY BSLG.DE Market Cap (EURm) 196 Enterprise value (EURm) 201 Extrema 12 months 37.46 59.92 Free Float (%) 35.0 Performance (%) 1m 3m 12m Absolute -1.2 16.1 30.3 Perf. rel. Country Index 1.1 17.7 45.9 Perf. rel. Software 7.8 23.1 33.9 P&L 12/16e 12/17e 12/18e Sales (EURm) 95.2 108 118 EBITDA (EURm) 17.8 19.2 20.4 Current EBIT (EURm) 12.3 13.7 14.8 Attr. net profit (EURm) 8.1 8.6 9.2 Adjusted EPS (EUR) 2.53 2.69 2.86 Dividend (EUR) 0.76 0.81 0.86 P/E (x) 22.9 21.6 20.3 P/B (x) 3.7 3.3 ns Dividend Yield (%) 1.3 1.4 1.5 FCF yield (%) 1.0 2.5 7.9 EV/Sales (x) 2.11 1.87 1.57 EV/EBITDA (x) 11.3 10.5 9.1 EV/Current EBIT (x) 16.4 14.7 12.6 Gearing (%) 26 23 ns Net Debt/EBITDA(x) 0.7 0.7 ns Next Events Q3 2016: Very solid quarter, better than expected (BSL) reported Q3 2016 figures yesterday (vember 2). Sales were up 7.2% yoy to 23.7m (22.1m) and in line with our estimate of 24.3m. EBT was up 3.1% yoy to 3.3m (3.2m) and significantly above our estimate of 2.8m (see table). 9M 16 revenues were up 9% yoy to 72.2m and EBT up 1% yoy to 8.6m. Order intake came in at 26.3m (+29% yoy). Overall, Q3 2016 was very solid and better than expected, but more muted in comparison to the very strong Q2 (revenues +19.2%, EBT +34.8%), which had followed a disappointing Q1 (revenues flat; EBT down -27%). Q3 16 EBT was up only marginally yoy but on a very strong base in Q3 2015 (strongest EBT margin in the last 8 quarters). Basler reiterated its recently increased guidance for 2016, i.e. revenues of 94-96m at an EBT margin of 11-12%. Basler Q3 2016 (in EURm) Q3 2016 Q3 2016 Oddo (%) Q3 2015 (%) Sales 23.7 24.3-2.4% 22.1 +7.2% EBT 3.3 2.8 +17.8% 3.2 +3.1% EBT % 13.9% 11.5% +230bp 14.3% -40bp Order intake 26.3 n/a n/a 20.4 +29% Source : Company data; Oddo Seydler Feedback from conference call The company held a conference call in the afternoon (vember 2) at 11:30 CET. Our key takeaways: Order intake: Order intake was very strong in Q3 (yoy +29%), especially in August and September after a weaker July. The strong order intake indicates that the Q4 top-line will very likely be similar to Q3. Against this backdrop, we slightly increase our 2016e sales estimate from 94.0m to 95.2m. Growth drivers: The growth drivers in Q3 16 were again the electronics/semiconductor industry (i.e. mostly driven by mobile devices). In geographic terms, Asia was again very strong (in particular China and Korea). Use of cash: Management stated that it will continue to buy back stock and pay a dividend of 30% of EAT. Continued on next page... Stock trading at fair value; TP upped to 60; downgrade to Neutral We believe in Basler s business model and see the company with very good long-term growth prospects. However, we think that the stock is currently trading at fair value. In our view the share price is driven in part by M&A speculation within the sector but we doubt the Basler family would be willing to sell. We increase our TP from 52.00 to 60.00 (see our updated DCF model on next page) but downgrade the stock to Neutral (Buy). At our TP the stock would trade at a P/E 2017e of 22.3x. Dr. Oliver Pucker, CFA (Analyst) +49 (69) 92 05 48 27 oliver.pucker@oddoseydler.com Conflict of interests: Oddo Securities, a division of Oddo et Cie, limited sharepartnership - Bank authorised by ACPR. Oddo & Cie and/or one of its subsidiaries could be in a conflict of interest situation with one or several of the groups mentioned in this publication. Please refer to the conflict of interests section at the end of this document.
8 Page 2/6 Thursday 03 vember 2016 Feedback from conference call (continued): Gross margin: The Q3 16 gross margin came in at 48.1% and was slightly lower than the Q2 (49.8%) and Q1 (49.1%) levels. The main reason for this was slightly higher depreciation on capitalized R&D (3.8% of sales in Q3 vs 3.1% in H1). Tax rate: The tax rate in Q3 was very low at around 12% due to intercompany netting effects. Over the next 1-2 years, the tax rate should stay at a similar level as in 9M 2016, i.e. around 22%. Going forward, there will be two opposing effects: (1) Tax losses carried forward will decrease, leading to a higher tax rate, while (2) the revenue share in Asia will very likely continue to increase which leads to lower taxes. Singapore production facility: The capacity utilization rate at this facility continues to be very high at around 90%. Investments in 2017: Management stated during the call that 2017 should require a regular amount of investments, i.e. around 3.5% of revenues. Valuation: We increase our target price to 60.00 (52.00) after updating our DCF model. The key assumptions of our three-phase DCF model assumptions are as follows: Phase 1 (2016e 2018e): Our Phase 1 free cash flow estimates (FCF) are based on the detailed financial forecasts of our explicit forecast period. For 2016e, we increase our sales estimate to 95.2m (94.0) and our EBT margin estimate to 11.7% (10.3%). For 2017e, we increase our sales estimate to 107.5m (102) and our EBT margin estimate to 11.2% (10.5%). For 2018e, we increase our sales estimate to 118.3m (111) and our EBT margin estimate to 11.1% (10.3%). Discounted Cash Flow Model (DCF) PHASE 1 PHASE 2 PHASE 3 2016e 2017e 2018e 2019e 2020e 2021e 2022e 2023e 2024e 2025e Sales 95.2 107.5 118.3 129.5 140.5 151.1 160.9 169.8 177.4 183.6 Y-o-Y grow th 11.4% 13.0% 10.0% 9.5% 8.5% 7.5% 6.5% 5.5% 4.5% 3.5% Gross Profit 47.40 53.56 58.91 64.38 69.85 75.09 79.97 84.37 87.99 91.07 Gross Profit Margin 49.8% 49.8% 49.8% 49.7% 49.7% 49.7% 49.7% 49.7% 49.6% 49.6% EBIT 12.3 13.7 14.8 15.5 16.7 18.0 18.8 19.9 20.6 21.3 EBIT margin 12.9% 12.7% 12.5% 12.0% 11.9% 11.9% 11.7% 11.7% 11.6% 11.6% EBT margin 11.7% 11.2% 11.1% 10.7% 10.7% 10.8% 10.7% 10.7% 10.7% 10.7% Income tax on EBIT -3.3-3.8-4.4-4.7-5.0-5.4-5.6-6.0-6.2-6.4 Depreciation and amortisation 5.5 5.5 5.6 8.2 8.9 9.5 10.1 10.7 11.2 11.6 Change in net working capital -3.0-2.1-2.2-2.2-2.2-2.1-2.0-1.8-1.5-1.2 Net capital expenditure -7.1-9.3-9.5-9.7-10.5-11.3-12.1-12.7-13.3-11.6 Free cash flow 4.3 3.9 4.3 7.1 7.8 8.7 9.3 10.1 10.7 13.7 Present values 4.3 3.6 3.7 5.7 5.8 6.0 6.0 6.1 6.0 7.1 143.7 Present value Phase 1 11.6 Risk free rate 2.50% Target equity ratio 75.0% Present value Phase 2 42.8 Equity risk premium 6.00% Beta 1.00 Present value Phase 3 143.7 Debt risk premium 1.50% WACC 7.08% Total present value 198.0 Tax shield (Phase 3) 30.0% Terminal growth 2.00% + Excess cash/n-operating assets 16.6 - Financial debt (incl. Financial Lease) -19.8 Source: Oddo Seydler Bank AG Sensitivity analysis Terminal growth rate 1.0% 1.5% 2.0% 2.5% 3.0% Fair value of equity 194.9 6.08% 65.08 70.62 77.53 86.37 98.08 6.58% 58.32 62.68 68.01 74.63 83.12 Number of shares (m) 3.2 WACC 7.08% 52.69 56.19 60.38 65.49 71.85 7.58% 47.94 50.79 54.15 58.17 63.07 Fair value per share (in EUR) 60.38 8.08% 43.87 46.22 48.96 52.18 56.04 Phase 2 (2019e 2025e): For Phase 2, we make more general assumptions: revenue growth gradually fades to 2.0%, resulting in a CAGR of 6.5% for the overall period. We also assume a slight decrease in the EBT margin to 10.7%.
Page 3/6 Thursday 03 vember 2016 Phase 3 (terminal value): For our terminal value calculation we apply a long-term FCF growth rate of 2.0%, which we believe is reasonable considering the growth prospects in the company s underlying business and long term global economic outlook. WACC: We set our risk-free rate at 2.5% on the basis of long-term German federal bond yields. We assume an equity risk premium of 6.0%, and a debt risk premium of 1.5%. We apply a beta of 1.0 to our DCF valuation which is in line with the company s historical beta. The above parameters result in a WACC of 7.08%. We calculate a fair value for the company s entire core operating business of 198.0m. Adding back the company s cash position of 16.6m and deducting its financial debt of 19.8m (including the financial lease), we derive a fair value of equity of 194.9m. This translates to a fair value of 60.38/share based on shares outstanding of 3.2m.
Page 4/6 Thursday 03 vember 2016 BSLG.DE BSL GY Neutral Price 58.04EUR Electronics Germany Upside 3.38% TP 60.00EUR PER SHARE DATA (EUR) 12/12 12/13 12/14 12/15 12/16e 12/17e 12/18e Adjusted EPS 1.21 0.86 1.75 1.01 2.53 2.69 2.86 Reported EPS 1.21 0.86 1.75 1.01 2.53 2.69 2.86 Growth in EPS(%) - -29.1% ns -42.7% ns 6.3% 6.4% Net dividend per share 0.30 0.30 0.47 0.58 0.76 0.81 0.86 FCF to equity per share 1.86 0.88 1.51 0.18 0.60 1.47 4.61 Book value per share 8.77 9.89 11.59 14.07 15.85 17.73 0.00 Number of shares market cap 3.37 3.28 3.22 3.21 3.21 3.21 3.21 Number of diluted shares 3.37 3.28 3.22 3.21 3.21 3.21 3.21 VALUATION 12/12 12/13 12/14 12/15 12/16e 12/17e 12/18e 12m highest price 14.40 31.05 43.85 62.00 59.92 12m lowest price 9.40 13.70 28.59 37.46 43.29 (*) Reference price 11.70 20.81 36.55 47.64 58.04 58.04 58.04 Capitalization 39.5 68.3 118 153 186 186 186 Restated Net debt 18.3 18.3 16.5 9.9 13.1 13.1 0.0 Minorities (fair value) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Financial fixed assets (fair value) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Provisions 0.5 1.7 3.4 4.8 1.7 1.9 0.0 Enterprise Value 58.3 88.3 138 168 201 201 186 P/E (x) 9.7 24.2 20.8 47.4 22.9 21.6 20.3 P/CF (x) 3.1 6.2 7.0 17.6 15.4 11.5 12.6 Net Yield (%) 2.6% 1.4% 1.3% 1.2% 1.3% 1.4% 1.5% FCF yield (%) 15.9% 4.2% 4.1% 0.4% 1.0% 2.5% 7.9% P/B incl. GW (x) 1.33 2.10 3.15 3.38 3.66 3.27 ns P/B excl. GW (x) 1.33 2.10 3.15 3.38 3.66 3.27 ns EV/Sales (x) 1.04 1.36 1.74 1.96 2.11 1.87 1.57 EV/EBITDA (x) 4.4 7.9 9.0 13.3 11.3 10.5 9.1 EV/EBIT (x) 7.0 15.2 13.7 24.0 16.4 14.7 12.6 (*) historical average price PROFIT AND LOSS (EURm) 12/12 12/13 12/14 12/15 12/16e 12/17e 12/18e Sales 56 65 79 85 95 108 118 EBITDA 13.3 11.2 15.4 12.6 17.8 19.2 20.4 Depreciations -5.0-5.4-5.3-5.6-5.5-5.5-5.6 Current EBIT 8.3 5.8 10.0 7.0 12.3 13.7 14.8 Published EBIT 8.3 5.8 10.0 7.0 12.3 13.7 14.8 Net financial income -2.7-0.8-1.4-0.9-1.1-1.7-1.7 Corporate Tax -1.5-2.2-2.9-2.9-3.0-3.4-3.9 Net income of equity-accounted companies 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Profit/loss of discontinued activities (after tax) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Minority interests 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Attributable net profit 4.1 2.8 5.6 3.2 8.1 8.6 9.2 Adjusted attributable net profit 4.1 2.8 5.6 3.2 8.1 8.6 9.2 BALANCE SHEET (EURm) 12/12 12/13 12/14 12/15 12/16e 12/17e 12/18e Goodwill 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Other intangible assets 13.6 14.5 17.4 20.9 22.2 24.7 0.0 Tangible fixed assets 3.4 4.3 5.4 6.3 6.7 7.0 0.0 WCR 13.9 16.9 18.4 17.4 20.9 23.3 0.0 Financial assets 17.5 16.7 16.1 15.4 16.0 17.0 0.0 Ordinary shareholders equity 29.6 32.5 37.3 45.2 50.9 56.9 0.0 Minority interests 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Shareholders equity 29.6 32.5 37.3 45.2 50.9 56.9 0.0 n-current provisions 0.5 1.7 3.4 4.8 1.7 1.9 0.0 Net debt 18.3 18.3 16.5 9.9 13.1 13.1 0.0 CASH FLOW STATEMENT (EURm) 12/12 12/13 12/14 12/15 12/16e 12/17e 12/18e EBITDA 13.3 11.2 15.4 12.6 17.8 19.2 20.4 Change in WCR -0.2-1.7-3.3 1.2-3.0-2.1 0.0 Interests & taxes 0.9 0.4 0.1-0.1-5.6-1.7-3.9 Others -1.5-0.6 1.3-3.7-0.1-1.4-1.7 Operating Cash flow 12.6 9.4 13.4 9.9 9.1 14.0 14.8 CAPEX -6.3-6.5-8.6-9.3-7.2-9.3 0.0 Free cash-flow 6.3 2.9 4.9 0.6 1.9 4.7 14.8 Acquisitions / disposals 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Dividends -1.0-1.0-1.5-2.2-2.4-2.6 0.0 Net capital increase -1.4-1.8-2.2-0.2 0.0 0.0 0.0 Others -3.1-1.4-0.6-3.6-0.6 0.7 0.0 Change in net debt 2.3-1.3-0.4-3.2-1.7 0.5 14.8 GROWTH MARGINS PRODUCTIVITY 12/12 12/13 12/14 12/15 12/16e 12/17e 12/18e Sales growth - 16.6% 21.7% 7.8% 11.4% 13.0% 10.0% Lfl sales growth - - - - - - - Current EBIT growth - -30.2% 72.8% -30.2% 75.6% 11.2% 8.3% Growth in EPS(%) - -29.1% ns -42.7% ns 6.3% 6.4% Net margin 7.3% 4.3% 7.1% 3.8% 8.5% 8.0% 7.8% EBITDA margin 23.9% 17.2% 19.4% 14.7% 18.7% 17.8% 17.2% Current EBIT margin 14.9% 8.9% 12.6% 8.2% 12.9% 12.7% 12.5% CAPEX / Sales -11.3% -10.0% -11.0% -11.0% -7.5% -8.6% 0.0% WCR / Sales 24.9% 25.9% 23.3% 20.3% 21.9% 21.6% 0.0% Tax Rate 26.9% 44.0% 34.1% 47.0% 27.0% 28.0% 30.0% rmative tax rate 30.0% 30.0% 30.0% 30.0% 30.0% 30.0% 30.0% Asset Turnover - 2.0 2.1 2.0 2.0 2.1 4.3 ROCE post-tax (normative tax rate) - 12.2% 18.2% 11.4% 18.2% 18.3% 37.6% ROCE post-tax hors GW (normative tax rate) - 12.2% 18.2% 11.4% 18.2% 18.3% 37.6% ROE - 9.1% 16.2% 7.8% 16.9% 16.0% 32.3% DEBT RATIOS 12/12 12/13 12/14 12/15 12/16e 12/17e 12/18e Gearing 62% 56% 44% 22% 26% 23% ns Net Debt / Market Cap 0.46 0.27 0.14 0.06 0.07 0.07 0.00 Net debt / EBITDA 1.38 1.63 1.08 0.79 0.74 0.68 ns EBITDA / net financial charges 4.9 14.8 10.7 13.9 15.6 11.5 12.3
Page 5/6 Thursday 03 vember 2016 Mention of conflicts of interest Valuation method Our target prices are established on a 12-month timeframe and we use three valuation methods to determine them. First, the discounting of available cash flows using the discounting parameters set by the Group and indicated on Oddo Securities' website. Second, the sum-of-the-parts method based on the most pertinent financial aggregate depending on the sector of activity. Third, we also use the peer comparison method which facilitates an evaluation of the company relative to similar businesses, either because they operate in identical sectors (and are therefore in competition with one another) or because they benefit from comparable financial dynamics. A mixture of these valuation methods may be used in specific instances to more accurately reflect the specific characteristics of each company covered, thereby fine-tuning its evaluation. Our stock market recommendations Our stock market recommendations reflect the RELATIVE performance expected for each stock on a 12-month timeframe. Buy: performance expected to exceed that of the benchmark index, sectoral (large caps) or other (small and mid caps). Neutral: performance expected to be comparable to that of the benchmark index, sectoral (large caps) or other (small and mid caps). Reduce: performance expected to fall short of that of the benchmark index, sectoral (large caps) or other (small and mid caps). The prices of the financial instruments used and mentioned in this document are the closing prices. All publications by Oddo Securities or Oddo Seydler concerning the companies covered and mentioned in this document are available on the research site: www.oddosecurities.com Recommendation and target price changes history over the last 12 months for the company analysed in this report Date Reco Price Target (EUR) Price (EUR) Analyst 02.11.16 Neutral 60.00 58.04 Dr. Oliver Pucker, CFA Recommendation split Buy Neutral Reduce Our whole coverage (413) 49% 39% 11% Liquidity providers coverage (146) 55% 39% 5% Research service coverage (65) 66% 31% 3% Investment banking services (30) 73% 23% 3% Risk of conflict of interest : Investment banking and/or Distribution Has Oddo Group, or Oddo & Cie, or Oddo Seydler managed or co-managed in the past 12 months a public offering of securities for the subject company/ies? Has Oddo Group, or Oddo & Cie, or Oddo Seydler received compensation for investment banking services from the subject company/ies in the past 12 months or expects to receive or intends to seek compensation for investment banking services from the subject company/ies in the last 12 months? Yes Research contract between Oddo group & the issuer Oddo & Cie and the issuer have agreed that Oddo & Cie will produce and disseminate investment recommendations on the said issuer as a service to the issuer Yes Liquidity provider agreement and market-making At the date of the distribution of this report, does Oddo Group, or Oddo & Cie, or Oddo Seydler act as a market maker or has Oddo Group or Oddo & Cie, or Oddo Seydler signed a liquidity provider agreement with the subject company/ies? Yes Significant equity stake Does Oddo Group, or Oddo & Cie, or Oddo Seydler own 5% or more of any class of common equity securities of the subject company/ies? Does the subject company beneficially own 5% or more of any class of common equity of Oddo & Cie or its affiliates? Disclosure to Company Has a copy of this report ; with the target price and/or rating removed, been presented to the subject company/ies prior to its distribution, for the sole purpose of verifying the accuracy of factual statements? Have the conclusions of this report been amended following disclosure to the company/ies and prior its distribution? Additional material conflicts Is Oddo Group, or Oddo & Cie, or Oddo Seydler aware of any additional material conflict of interest? Statement of conflict of interests of all companies mentioned in this document may be consulted on Oddo & Cie s: www.oddosecurities.com
Page 6/6 Thursday 03 vember 2016 Disclaimer: Disclaimer for Distribution by Oddo & Cie to n-united States Investors: This research publication is produced by Oddo Securities ( Oddo Securities ), a division of Oddo & Cie ( ODDO ), which is licensed by the Autorité de Contrôle Prudentiel et de Résolution (ACPR) and regulated by the Autorité des Marchés Financiers ( AMF ), and/or by ODDO SEYDLER BANK AG ( Oddo Seydler ), a German subsidiary of ODDO, regulated by Bundesanstalt für Finanzdienstleistungsaufsicht ( BaFin ). The research, when distributed outside of the U.S., is intended exclusively for non-u.s. customers of ODDO and cannot be divulged to a third-party without prior written consent of ODDO. This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. This research has been prepared in accordance with regulatory provisions designed to promote the independence of investment research. Chinese walls (information barriers) have been implemented to avert the unauthorized dissemination of confidential information and to prevent and manage situations of conflict of interest. This research has been prepared in accordance with French and German regulatory provisions designed to promote the independence of investment research. The recommendation presented into this document is reviewed and updated at least following each Quarterly Report published by the issuer purpose of this Research Report. At the time of publication of this document, ODDO and/or Oddo Seydler, and/or one of its subsidiaries may have a conflict of interest with the issuer(s) mentioned. While all reasonable effort has been made to ensure that the information contained is not untrue or misleading at the time of publication, no representation is made as to its accuracy or completeness and it should not be relied upon as such. Past performances offer no guarantee as to future performances. All opinions expressed in the present document reflect the current context and which is subject to change without notice. The views expressed in this research report accurately reflect the analyst s personal views about the subject securities and/or issuers and no part of his compensation was, is, or will be directly or indirectly related to the specific views contained in the research report. This research report does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Clients should consider whether any advice or recommendation in this research is suitable for their particular circumstances and, if appropriate, seek professional advice, including tax advice. Disclaimer for Distribution by Oddo New York to United States Investors: This research publication is produced by Oddo Securities, a division of ODDO and/or by Oddo Seydler. 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At the time of publication of this document, ODDO and/or Oddo Seydler, and/or one of its subsidiaries may have a conflict of interest with the issuer(s) mentioned. While all reasonable effort has been made to ensure that the information contained is not untrue or misleading at the time of publication, no representation is made as to its accuracy or completeness and it should not be relied upon as such. Past performances offer no guarantee as to future performances. All opinions expressed in the present document reflect the current context and which is subject to change without notice. Rule 15a-6 Disclosure: Under Rule 15a-6(a)(3), any transactions conducted by ODDO and/or Oddo Seydler, and/or one of its subsidiaries with U.S. persons in the securities described in this foreign research must be effected through ONY. 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