WGZ BANK AG RESEARCH MAY 31, 2012 p. 1 AG MAY 31, 2012 Recommendation: Buy Company data before: - as of - Sector IT Target price (EUR) 9.20 Market segment General Standard Share price (Xetra) (EUR) 6.70 ISIN DE000A0Z23Q5 05/30/12 5:29 PM Reuters ADNGk.DE Share price potential 37% Bloomberg ADN1 Development of dynamic.suite product family discontinued! To our surprise, has decided to discontinue development of the dynamic.suite product family for (municipal) energy and water utilities. Thus, the company has cancelled a promising software project in its recently developed key industry, the energy and water management sector.! According to, discontinuation of the development for the dynamic.suite product family will have a P&L impact of EUR2.1m due to goodwill amortisation at the subsidiary dynamicutilities (impact: EUR-0.3m), amortisation of intangible assets (impact from own work capitalised: EUR-1.2m), and impairment of deferred tax assets (impact: EUR-0.6m).! We are now forecasting revenues of EUR119.0m (before: 119.5; company's target: 118-120; only small sales contribution from dynamic.suite product family expected in 2012), EBITDA of EUR9.1m (before: 8.8), and EBT of EUR4.7m (before: 6.3).! In the course of a revaluation of the stock (DCF valuation/peer group analysis), we are lowering our price target to EUR9.20 (before: 9.80). With an estimated upside potential of 37%, we reaffirm our Buy recommendation. Share data Shares (m) 5.742 Freefloat 35.4% Market cap. (EURm) 38.5 Trading volume (shares) 4,997 52W High 05/11/11 EUR7.89 52W Low 04/21/11 EUR5.70 Termine Q2 figures 08/28/12 Q3 figures 11/13/12 Performance absolute relative to DAX 1M -6.3% 0.9% 3M -8.2% 0.2% 6M 0.7% -2.3% 12M -8.2% 4.6% Index weighting CDAX 0.002% 8.00 7.00 6.00 5.00 Sales 66.8 71.3 85.7 106.0 119.0 128.4 Sales growth - 6.8% 20.1% 23.7% 12.3% 7.9% EBITDA 8.1 5.8 5.6 8.6 9.1 10.2 EBITDA margin 12.1% 8.1% 6.5% 8.1% 7.7% 7.9% Net income 4.2 3.5 2.4 4.1 2.4 4.2 Net margin 6.3% 4.9% 2.8% 3.9% 2.0% 3.2% EPS 0.74 0.61 0.42 0.72 0.41 0.73 DPS 0.00 0.15 0.15 0.18 0.25 0.30 Net financial debt/ebitda -1.8-2.0-1.5-1.4-1.3-0.8 Net Gearing -0.6-0.3-0.3-0.5-0.2-0.2 Free cash flow (EUR) 7.7-2.6 3.6 8.3-7.8 2.3 FCF per share (EUR) 1.35-0.46 0.63 1.44-1.36 0.40 EV / sales 0.5 0.4 0.4 0.4 0.3 0.3 EV / EBITDA 3.8 5.1 5.9 4.4 4.2 3.8 EV / EBIT 6.7 9.7 12.4 7.3 7.2 5.1 EV / FCF 3.9-11.0 9.1 4.5-4.9 16.6 P/E ratio 7.2 8.3 13.8 9.0 16.3 9.2 P/B ratio 1.2 1.0 1.1 1.1 1.0 0.9 Dividend yield 0.0% 2.9% 2.6% 2.8% 3.7% 4.5% Figures in EURm except EPS, DPS and FCF per share (EUR), Source: AG; own estimates 4.00 03/08 01/09 11/09 09/10 07/11 05/12 Source: Bloomberg Kontakt Research Department Head: Dr. Frank Wohlgemuth, CIIA/CEFA Equity Sales Team +49 (0) 211 778-3370 Thomas Aldenrath / thomas.aldenrath@wgzbank.de Oliver Garbe / oliver.garbe@wgzbank.de Ansgar Krekeler / ansgar.krekeler@wgzbank.de Alexander Lachmann / alexander.lachmann@wgzbank.de Thomas Reher / thomas.reher@wgzbank.de Peter Richards / peter.richards@wgzbank.de Udo Zartner / udo.zartner@wgzbank.de Author: Matthias Engelmayer (analyst) Please notice the indications concerning the preparation of this document, the indications concerning potential conflicts of interest, the compulsory information required by paragraph 34b WpHG 1)2)3)4)6) (Wertpapierhandelsgesetz Please notice - Securities the advice Trade regarding Act) and the possible liability declaration conflicts at the of end interests of this document. as well This as financial the disclaimer analysis in the at meaning the end of paragraph of this document 34b WpHG shall only be distributed to professional clients or eligible counterparties according to 31a WpHG.
AG MAY 31, 2012 p. 2! According to company statements, discontinuation of the development of the dynamic.suite product family was due to delays in the completion of (software) modules required for the product family, which ultimately would have delayed market launch. Consequently, 's technological lead on its competitors would have been lost or too small, with large capex still outstanding (total software development capex so far: over EUR2m; capital requirements of EUR0.2m per month originally expected until end of 2012).! Taking into account the lacking start-up costs for the dynamic.suite product family (impact on earnings in Q1 2012: EUR-0.5m), has raised its EBITDA target to EUR8.8m-9.1m (before: 8.3-8.6). However, has lowered its EBT target to EUR3.5m (before: 5.0) due to impairments resulting from the cancellation.! We have lowered our sales forecast for 2013 because of the lacking sales contribution from dynamic.suite product family: EUR128.4 (before: 131.2). The growth prospects of the energy and water management activities are limited - because of the ongoing loss-making subsidiary evu.it (SAP services for energy utilities; earnings contribution, Q1 2012: EUR-0.5m). Completion of software modules delayed Guidance for 2012 revised Limited growth prospects of the energy and water management activities
AG MAY 31, 2012 p. 3 Valuation Conclusion of the valuation Our valuation of the stock is based on a DCF model and a peer group analysis. The DCF model calculates a fair value of EUR10.95 (before: 11.15) per share and the peer group analysis of EUR7.60 (before: 8.39) per share. Weighting the DCF model and peer group analysis at 50% each, we have calculated a fair value of EUR9.28 (before: 9.77) per share. The (averaged) fair value corresponds to a P/E ratio 2012E of 22.6 and a P/E ratio 2013E of 12.7. Fair value of EUR9.28 (before: 9.77) per stock DCF model EURm 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E Sales 119.0 128.4 131.0 133.6 136.2 139.0 141.7 144.6 147.5 150.4 Growth y/y - 7.9% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% EBIT margin 4.5% 5.9% 6.0% 6.5% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% EBIT 5.3 7.6 7.9 8.7 9.5 9.7 9.9 10.1 10.3 10.5 - Income taxes -1.6-1.6-2.4-2.6-2.9-2.9-3.0-3.0-3.1-3.2 + Amortisation and depreciation 3.5 2.6 2.6 2.7 2.7 2.8 2.8 2.9 2.9 3.4 +/- Change in long-term provisions 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 +/- Others (e.g. minority interests) -0.7-0.7-0.7-0.7-0.7-0.7-0.7-0.7-0.7-0.7 Gross operating cash flow 6.7 8.1 7.7 8.3 8.9 9.1 9.3 9.5 9.7 10.4 -/+ Change in net working capital -2.2-2.4-0.6-0.7-0.7-0.7-0.7-0.7-0.7-0.7 - Investments in fixed assets -12.3-3.4-3.0-3.1-3.1-3.2-3.2-3.3-3.4-3.4 Free cash flow -7.8 2.3 4.0 4.6 5.1 5.3 5.4 5.5 5.6 6.2 Present values -7.4 1.3 2.5 2.7 2.8 2.7 2.5 2.3 2.2 2.2 Total present values (2012E-2021E) 13.8 Terminal value 33.0 in % of total value: 71% Value of operating business 46.8 Model parameters + Cash and cash equivalents 22.5 - Financial debt/pension provisions -6.5 Target capital structure Equity 80% Financial debt 20% Fair market value of equity 62.9 Risk-free rate: 4.0% Beta: 1.2 Risk prem. debt: 2.0% Risk prem.: 5.0% Tax shield: 30.0% Number of shares outstanding (m) 5.7 Cost of equity: 10.0% Cost of debt: 4.2% Fair value per share (EUR) 10.95 Source: own estimates Growth FCF (TV): 2.0% WACC: 8.8% Date: 05/31/2012 Sensitivity analysis (EUR) Discount rate (WACC) 8.3% 8.8% 9.3% 9.8% 2.0% 11.94 10.95 10.21 9.56 2.5% 12.40 11.43 10.61 9.90 3.0% 13.10 12.00 11.07 10.28 3.5% 13.95 12.67 11.61 10.72 Source: own estimates Growth FCF (TV)
AG MAY 31, 2012 p. 4 Peer group analysis P/E ratio EV / EBIT EV / EBITDA 2012E 2013E 2012E 2013E 2012E 2013E Allgeier Holding 11.2 8.4 7.5 5.9 4.6 3.8 GFT Technologies 9.3 7.8 3.9 3.4 3.4 3.0 SQS Software Quality Systems 11.0 8.6 9.6 7.7 5.2 4.5 COR&FJA 13.7 9.7 15.2 10.3 7.7 6.1 Seven Principles 5.7 4.6 3.7 2.8 3.0 2.3 Mean 10.2 7.8 8.0 6.0 4.8 4.0 Median 11.0 8.4 7.5 5.9 4.6 3.8 16.3 9.2 7.2 5.1 4.2 3.8 Figures in EURm, EPS EBIT EBITDA only EPS in EUR 2012E 2013E 2012E 2013E 2012E 2013E 0.41 0.73 5.3 7.6 9.1 10.2 Enterprise value (EV) 40.5 42.2 41.0 39.4 Liquid assets 22.5 22.5 Financial liabilities -6.5-6.5 Fair market capitalisation 56.5 42.2 57.1 39.4 Number of shares (units m) 5.7 5.7 Fair value 5.44 6.19 9.85 7.35 9.94 6.86 Average value Weighting Fair value per share (EUR) 5.81 8.60 0.33 0.33 7.60 8.40 0.33 Source: own estimates; Bloomberg Closing prices as of 05/30/2012
AG MAY 31, 2012 p. 5 Appendix Profit and loss statement EURm Sales 66.8 71.3 85.7 106.0 119.0 128.4 Other internally generated assets 0.0 0.0 0.0 0.9 0.6 0.0 Other operating income 2.3 2.1 1.4 1.7 0.0 0.0 Gross profit 69.1 73.5 87.0 108.6 119.6 128.4 Costs of material -6.4-8.0-9.4-13.3-14.3-15.4 Personnel costs -40.1-45.4-54.6-65.5-72.3-77.7 Other operating expenses -14.4-14.4-17.4-21.2-23.8-25.1 EBITDA 8.1 5.8 5.6 8.6 9.1 10.2 Depreciatin on property, plant and equipment -3.6-2.8-2.9-2.0-3.5-2.6 Depreciation on goodwill 0.0 0.0 0.0-1.4-0.3 0.0 EBIT 4.5 3.0 2.7 5.2 5.3 7.6 Income from investments 0.0 0.0 0.0 0.0 0.0 0.0 Other financial result 0.0 0.3 0.0 0.0 0.0 0.0 Interest income and similar income 0.5 0.3 0.2 0.2 0.2 0.2 Interest expenses and similar expenses -0.4-0.3-0.4-0.4-0.8-0.6 EBT 4.6 3.3 2.5 5.0 4.7 7.3 Income taxes -0.4 0.3 0.0-1.1-1.6-1.6 Net income 4.3 3.6 2.5 3.9 3.1 5.6 Share of minority interests -0.1-0.1-0.1 0.2-0.7-1.5 Net income after minorities 4.2 3.5 2.4 4.1 2.4 4.2 Number of shares (unit) 5.7 5.7 5.7 5.7 5.7 5.7 EPS (undiluted, EUR) 0.74 0.61 0.42 0.72 0.41 0.73 EPS (diluted, EUR) 0.74 0.61 0.42 0.72 0.41 0.73 Source: ; own estimates Profit and loss statement (as % of sales) Sales 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Other internally generated assets 0.0% 0.0% 0.0% 0.9% 0.5% 0.0% Other operating income 3.5% 3.0% 1.6% 1.6% 0.0% 0.0% Gross profit 103.5% 103.0% 101.6% 102.5% 100.5% 100.0% Costs of material -9.6% -11.2% -11.0% -12.5% -12.1% -12.0% Personnel costs -60.1% -63.6% -63.7% -61.8% -60.7% -60.5% Other operating expenses -21.6% -20.1% -20.3% -20.0% -20.0% -19.6% EBITDA 12.1% 8.1% 6.5% 8.1% 7.7% 7.9% Depreciatin on property, plant and equipment -5.4% -3.9% -3.4% -1.9% -2.9% -2.0% Depreciation on goodwill 0.0% 0.0% 0.0% -1.3% -0.3% 0.0% EBIT 6.7% 4.2% 3.1% 4.9% 4.5% 5.9% Income from investments 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Other financial result 0.0% 0.5% 0.0% 0.0% 0.0% 0.0% Interest income and similar income 0.8% 0.5% 0.2% 0.2% 0.2% 0.1% Interest expenses and similar expenses -0.6% -0.5% -0.5% -0.3% -0.7% -0.4% EBT 6.9% 4.6% 2.9% 4.7% 3.9% 5.7% Income taxes -0.5% 0.4% 0.0% -1.0% -1.4% -1.3% Net income 6.4% 5.0% 2.9% 3.7% 2.6% 4.4% Share of minority interests -0.1% -0.1% -0.1% 0.2% -0.6% -1.1% Net income after minorities 6.3% 4.9% 2.8% 3.9% 2.0% 3.2% Source: ; own estimates
AG MAY 31, 2012 p. 6 Balance sheet EURm Intangible assets 4.1 3.9 3.0 3.0 1.8 1.2 Goodwill 6.6 12.3 12.6 11.5 17.6 17.6 Property, plant and equipment 0.9 1.0 1.2 1.4 1.3 1.1 Financial assets 0.4 0.3 0.3 0.2 0.2 0.2 Other assets 0.3 0.3 0.3 0.3 1.9 1.9 Receivables from income taxes 0.1 0.1 0.1 0.1 0.1 0.1 Deffered taxes 5.1 5.7 5.9 6.8 6.8 7.3 Non-current assets 17.5 23.6 23.4 23.2 29.6 29.4 Trade accounts receivable 9.5 14.3 17.2 19.1 21.8 24.6 Receivables PoC 4.8 2.2 3.1 3.7 3.8 3.9 Receivables from income taxes 0.8 0.7 0.8 0.5 0.4 0.7 Financial assets 0.1 0.3 0.3 0.1 0.1 0.1 Other assets 0.4 0.5 0.6 0.9 1.0 1.1 Fiduciary held cash on hand and at bank 4.1 0.0 0.0 0.0 0.0 0.0 Cash on hand and at bank 18.7 17.3 17.0 22.5 18.9 18.4 Current assets 38.3 35.3 38.9 46.7 46.1 48.8 Assets 55.8 58.9 62.3 69.9 75.7 78.2 Subscribed capital 40.0 5.7 5.7 5.7 5.7 5.7 Capital reserve -23.3 11.0 11.1 11.4 11.4 11.4 Other retained earnings 4.2 8.4 11.0 12.5 16.2 18.6 Reserve for currency conversion 0.1 0.1 0.4 0.5 0.6 0.6 Consolidated earnings 4.3 3.6 2.5 3.9 3.1 5.6 Minority share 0.1 0.1 0.2 0.3 1.1 1.1 Equity 25.3 28.8 30.9 34.4 38.1 43.1 Financial liabilities 2.1 5.6 5.5 3.6 8.9 7.1 Pernsion and similar liabilities 0.5 0.5 0.5 0.6 0.6 0.7 Provisions 0.1 0.3 0.3 0.5 0.6 0.6 Other non-current liabilities 0.0 0.0 0.0 0.1 0.1 0.2 Deferred taxes liabilities 1.7 1.4 1.2 1.4 1.3 2.0 Non-current liabilities 4.5 7.9 7.5 6.2 11.5 10.5 Financial liabilities 5.3 3.0 2.2 2.2 2.0 2.0 Trade accounts payable 4.4 3.8 3.5 6.2 7.0 7.5 Liabilities PoC 2.9 2.1 2.2 2.0 2.0 2.0 Liabilities from income taxes 0.9 0.7 0.4 1.3 1.2 1.9 Provisions 1.9 1.6 1.5 1.5 1.6 1.8 Other current liabilities 10.5 10.9 14.1 16.0 12.3 9.5 Current liabilities 26.0 22.2 23.9 29.3 26.1 24.6 Liabilities 55.8 58.9 62.3 69.9 75.7 78.2 Source: ; own estimates
AG MAY 31, 2012 p. 7 Balance sheet (as % of sales) Intangible assets 7.4% 6.6% 4.9% 4.2% 2.3% 1.5% Goodwill 11.8% 21.0% 20.2% 16.5% 23.3% 22.5% Property, plant and equipment 1.7% 1.7% 1.9% 2.0% 1.7% 1.4% Financial assets 0.8% 0.5% 0.5% 0.3% 0.2% 0.2% Other assets 0.4% 0.4% 0.4% 0.4% 2.5% 2.4% Receivables from income taxes 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% Deffered taxes 9.2% 9.7% 9.5% 9.7% 9.0% 9.4% Non-current assets 31.4% 40.1% 37.6% 33.2% 39.1% 37.6% Trade accounts receivable 17.1% 24.2% 27.5% 27.3% 28.8% 31.5% Receivables PoC 8.5% 3.7% 5.0% 5.2% 5.0% 5.0% Receivables from income taxes 1.4% 1.2% 1.2% 0.7% 0.6% 0.8% Financial assets 0.1% 0.4% 0.4% 0.1% 0.1% 0.1% Other assets 0.7% 0.9% 0.9% 1.4% 1.4% 1.4% Fiduciary held cash on hand and at bank 7.3% 0.0% 0.0% 0.0% 0.0% 0.0% Cash on hand and at bank 33.5% 29.4% 27.3% 32.2% 25.0% 23.6% Current assets 68.6% 59.9% 62.4% 66.8% 60.9% 62.4% Assets 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Subscribed capital 71.7% 9.7% 9.2% 8.2% 7.6% 7.3% Capital reserve -41.8% 18.7% 17.8% 16.3% 15.1% 14.6% Other retained earnings 7.6% 14.2% 17.7% 17.9% 21.4% 23.8% Reserve for currency conversion 0.2% 0.2% 0.7% 0.8% 0.8% 0.8% Consolidated earnings 7.7% 6.1% 4.0% 5.6% 4.0% 7.2% Minority share 0.1% 0.1% 0.3% 0.4% 1.4% 1.4% Equity 45.4% 49.0% 49.6% 49.2% 50.2% 55.1% Financial liabilities 3.8% 9.5% 8.8% 5.2% 11.8% 9.1% Pernsion and similar liabilities 0.9% 0.8% 0.8% 0.8% 0.8% 0.9% Provisions 0.3% 0.6% 0.5% 0.7% 0.7% 0.8% Other non-current liabilities 0.0% 0.0% 0.0% 0.2% 0.2% 0.2% Deferred taxes liabilities 3.1% 2.5% 1.9% 2.0% 1.7% 2.5% Non-current liabilities 8.0% 13.4% 12.0% 8.9% 15.2% 13.5% Financial liabilities 9.5% 5.1% 3.5% 3.2% 2.6% 2.6% Trade accounts payable 7.9% 6.5% 5.7% 8.9% 9.2% 9.6% Liabilities PoC 5.2% 3.6% 3.6% 2.9% 2.6% 2.5% Liabilities from income taxes 1.7% 1.2% 0.6% 1.9% 1.6% 2.4% Provisions 3.4% 2.7% 2.4% 2.1% 2.2% 2.2% Other current liabilities 18.9% 18.6% 22.6% 23.0% 16.3% 12.1% Current liabilities 46.6% 37.6% 38.4% 41.9% 34.5% 31.4% Liabilities 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Source: ; own estimates
AG MAY 31, 2012 p. 8 Cash flow statement EURm EBT 4.6 3.3 2.5 5.0 4.7 7.3 Income from financing and investment activities -0.1-0.3 0.2 0.2 0.2 0.2 Depreciation and amortization on PP&E and intangible assets 3.6 2.8 2.9 3.5 3.8 2.6 Expenses from the disposal of PP&E 0.0 0.0 0.0 0.0 0.0 0.0 Other non-cash income 0.0 0.0 0.1 0.2 0.2 0.2 Change in pension provisions 0.0 0.0 0.0 0.0 0.1 0.0 Change in other provisions 0.1-0.1-0.1 0.1 0.2 0.2 Tax payments -0.9-1.2-1.2-0.2-1.6-1.6 Cash earnings 7.3 4.4 4.3 8.7 7.5 8.8 Change to net operating assets 1.1-2.1-0.1 1.5-2.2-2.4 Cash flow from operating activities 8.4 2.3 4.2 10.2 5.3 6.4 Disinvestments of PP&E 0.0 0.0 0.0 0.0 0.0 0.0 Payments-in for investments in intangible assets 0.0 0.0 0.0 0.0 0.0 0.0 Change of cash and cash equivalents from the disposal / deconsolidation of consolidated companies 0.0-0.3 0.0 0.0 0.0 0.0 Change in cash and cash equivalents from initial consolidation -0.1-4.3 0.1 0.1-8.0 0.0 Payments for investments in PP&E -0.5-0.6-0.7-1.0-3.3-2.4 Payments for investments in intangible assets -0.1-0.1-0.1-1.0-1.0-1.0 Cash flow from investment activities -0.7-5.3-0.6-1.9-12.3-3.4 Dividend payments 0.0-0.1-0.9-0.9-1.0-1.4 Capital increase 0.0 0.0 0.0 0.1 0.0 0.0 Acquisition of minority interests -0.1 0.0 0.0 0.0 0.0 0.0 Repayment of liabilities from finance leases -0.1-0.1 0.0 0.0 0.0 0.0 New liabilities to banks 0.0 5.0 2.2 0.0 6.0 0.0 Repayment of financial liabilities -0.9-3.5-5.1-2.0-1.0-1.8 Payment from other financial loans received 0.0 0.2 0.0 0.0 0.0 0.0 Interest paid -0.2-0.3-0.3-0.2-0.8-0.6 Interest received 0.5 0.3 0.2 0.2 0.2 0.2 Cash flow from financing activities -0.8 1.6-4.0-2.9 3.3-3.6 Change in cash and cash equivalents 7.0-1.4-0.4 5.4-3.6-0.5 Currency differences 0.1 0.0 0.1 0.0 0.1 0.0 Cash and cash equivalents at the beginning of the period 11.6 18.7 17.3 17.0 22.5 18.9 Cash and cash equivalents at the end of the period 18.7 17.3 17.0 22.5 18.9 18.4 Source: ; own estimates
AG MAY 31, 2012 p. 9 Key figures Growth analysis Sales growth - 6.8% 20.1% 23.7% 12.3% 7.9% EBITDA growth - -28.8% -2.8% 53.8% 5.9% 11.7% EBIT growth - -33.5% -11.2% 93.6% 3.4% 43.0% EBT growth - -28.9% -25.3% 103.5% -6.1% 54.5% EPS growth (diluted) - -16.9% -32.3% 74.4% -43.2% 77.0% Margin analysis EBITDA margin 12.1% 8.1% 6.5% 8.1% 7.7% 7.9% EBIT margin 6.7% 4.2% 3.1% 4.9% 4.5% 5.9% EBT margin 6.9% 4.6% 2.9% 4.7% 3.9% 5.7% Net margin 6.3% 4.9% 2.8% 3.9% 2.0% 3.2% Yield analysis ROI 7.6% 6.1% 3.9% 6.3% 3.2% 5.4% ROCE 17.0% 11.1% 7.5% 10.7% 8.3% 12.5% ROE 16.7% 13.0% 8.0% 12.8% 6.6% 10.5% ROIC 12.5% 9.1% 6.9% 10.0% 7.6% 11.4% Balance sheet analysis Equity ratio 45.4% 49.0% 49.6% 49.2% 50.2% 55.1% Equty / LT assets ratio 144.5% 122.1% 132.0% 148.4% 128.5% 146.6% Equity + LT debt / LT assets ratio 170.0% 124.2% 134.2% 150.9% 130.6% 148.9% Asset intensity 31.4% 40.1% 37.6% 33.2% 39.1% 37.6% Debtor turnover 4.7 4.3 4.2 4.7 4.6 4.5 Debtor terms / -days 78.1 84.1 86.4 78.2 78.7 81.0 Working capital / sales ratio 10.4% 12.2% 14.6% 13.7% 13.1% 13.9% Days of payables outstanding (days) 417.6 272.5 223.6 225.3 227.7 223.6 Debt ratios Net financial debt -14.9-8.3-8.8-16.0-7.4-8.6 Net financial debt / EBITDA -1.8-2.0-1.5-1.4-1.3-0.8 Net gearing -0.6-0.3-0.3-0.5-0.2-0.2 EBITDA interest coverage 19.3 17.0 13.7 24.2 10.8 18.5 EBIT interest coverage 10.7 8.8 6.5 14.5 6.3 13.8 Cash flow analysis Free cash flow (FCF) 7.7-2.6 3.6 8.3-7.8 2.3 FCF / sales 11.6% -3.7% 4.2% 7.8% -6.6% 1.8% FCF / net income 182.6% -75.3% 152.6% 199.5% -331.8% 55.7% FCF per share (EUR) 1.35-0.46 0.63 1.44-1.36 0.40 FCF yield 25.4% -9.1% 11.0% 22.1% -20.3% 6.0% Capex (EURm) -0.7-5.0-0.6-1.9-12.3-3.4 Capex / Depreciation and amortization 19.2% 179.5% 19.8% 94.0% 354.2% 132.8% Capex / sales 1.0% 6.9% 0.7% 1.8% 10.4% 2.7% Valuation multiples EV / sales 0.5 0.4 0.4 0.4 0.3 0.3 EV / EBITDA 3.8 5.1 5.9 4.4 4.2 3.8 EV / EBIT 6.7 9.7 12.4 7.3 7.2 5.1 EV / FCF 3.9-11.0 9.1 4.5-4.9 16.6 P/E ratio 7.2 8.3 13.8 9.0 16.3 9.2 P/B ratio 1.2 1.0 1.1 1.1 1.0 0.9 P/CF ratio 3.6 12.6 7.8 3.7 7.2 6.0 P/S ratio 0.5 0.4 0.4 0.4 0.3 0.3 Dividend yield 0.0% 2.9% 2.6% 2.8% 3.7% 4.5% Source: ; own estimates
AG MAY 31, 2012 p. 10 Sales development Sales by region (2011) 140 120 100 80 25% 20% 15% 20% 60 40 20 10% 5% 80% 0 0% Sales (EURm) Change y/y IT Services IT Solutions High double-digit growth rates since 2009; 2012 forecast includes sales impact from company's majority takeover of ARITHNEA CAGR 2008-2013E of 14% IT Services segment still dominating (80% (2010: 86%) of group sales) Above average sales growth in software business Earnings development (EURm) ROE 12 10 8 6 4 2 0 45.0 40.0 35.0 30.0 25.0 20.0 15.0 10.0 5.0 0.0 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% EBITDA EBIT Equity excl. minorities (EURm) ROE Double-digit EBIT growth expected until 2013 (incl. earnings impact from external grwoth); CAGR EBIT 2008-2013E: 11% Expansion of software business leads to higher economies of scale Expected ROE (2012E: 10.5%) slightly above cost of equity (10.0%) Shareholders' equity 2012E of EUR37.0m equal to P/B ratio of 1.0 Operating cash flow (EURm) Net cash 12.0 10.0 8.0 6.0 4.0 2.0 0.0-2.0-4.0 18.0 16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0 2.5 2.0 1.5 1.0 0.5 0.0 Operating cash flow Net working capital Net cash (EURm) - left axes Net cash / EBITDA - right axes Extraordinary high operating cash flow in 2011 (EUR10.2m) - positive impact due to working capital reduction Operating cash flow 2012E of EUR5.3m Strength of operating cash flow leads traditionally to high net cash position; decrease in 2012 due to higher capex Net cash position to continue the buy-and-build strategy Source: ; own estimates
AG MAY 31, 2012 p. 11 Peer group companies in EURm except EPS Share price Market cap EV Sales EBITDA EBIT EPS 2012E 2013E 2012E 2013E 2012E 2013E 2012E 2013E Allgeier Holding 11.96 108.4 124.0 429.0 468.5 27.1 32.3 16.5 21.0 1.07 1.43 Growth (sales) or margin (EBITDA, EBIT) 9.2% 6.3% 6.9% 3.8% 4.5% - - GFT Technologies 3.07 80.7 43.9 247.8 266.0 12.9 14.5 11.3 13.0 0.33 0.39 Growth (sales) or margin (EBITDA, EBIT) 7.4% 5.2% 5.5% 4.6% 4.9% - - SQS Software Quality Systems 2.50 69.7 82.8 197.5 212.5 15.8 18.3 8.6 10.7 0.23 0.29 Growth (sales) or margin (EBITDA, EBIT) 7.6% 8.0% 8.6% 4.4% 5.0% - - COR&FJA 1.17 49.9 69.1 141.0 147.5 9.0 11.3 4.5 6.7 0.09 0.12 Growth (sales) or margin (EBITDA, EBIT) 4.6% 6.4% 7.7% 3.2% 4.5% - - Seven Principles 5.40 21.8 21.3 105.0 117.0 7.1 9.4 5.7 7.6 0.95 1.17 Growth (sales) or margin (EBITDA, EBIT) 11.4% 6.8% 8.0% 5.5% 6.5% - - Source: Own estimates; Bloomberg Closing prices as of 05/30/2012
AG MAY 31, 2012 p. 12 Disclaimer Recommendations concerning particular shares Buy: Hold: Sell: According to our assessment, the stock should register an absolute profit of at least 15% within a 6-month period. According to our assessment, the stock should register an absolute profit between 0 and 15% within a 6-month period. According to our assessment, the stock should register an absolute loss within a 6-month period. Compulsory information required under 34b of the German Securities Trading Law (WpHG) and the Financial Analysis Regulation Key sources of information Key sources of information used in the preparation of this document are publications in foreign and domestic media such as information services (e.g. Reuters, VWD, Bloomberg, DPA-AFX etc.), the financial press (e.g. Börsenzeitung, Handelsblatt, FAZ, FTD, Wall Street Journal, Financial Times etc.), specialised journals, published statistics, rating agencies and publications of the issuers analysed. Summary of the evaluation principles used: Analyses of shares: In valuing companies standard and accepted valuation methods (amongst others the Discounted Cash Flow Method (DCF Method), Peer-Group Analysis) are applied. Under the DCF Method the capitalised value of the issuers is calculated which shows the sum of the discounted company results, i.e. the current value of the issuer s future net distributions. The capitalised value is therefore determined with reference to the anticipated future company results and the capitalisation yield applied. Under the Peer-Group Analysis Method issuers quoted on the Stock Exchange are valued with reference to the comparison of ratio indices (e.g. share price / profit ratio, share price / book value ratio, enterprise value / sales, enterprise value / EBITDA, enterprise value / EBIT). The comparability of the ratio indices is determined above all by business activity and commercial prospects. Sensitivity of the evaluation parameters: The figures taken from the income statement, the cash-flow statement and the balance sheet upon which the evaluation of companies is based are numerical estimates and therefore subject to risks. These may change at any time without prior notice. Quite apart from the evaluation method applied, there exists a very real risk that the share price goal may not be reached in the anticipated period of time. These risks include unforeseen changes in competitive pressure or in the demand for the issuer s products. Such fluctuations in demand may arise as a result of changes of a technological nature, the overall level of economic activity or in some cases as a result of changes in business moral concepts. Changes in tax law, in currency exchange rates and, in certain business segments, in regulations are further factors which can influence evaluations. This discussion of evaluation methods and risk factors makes no claim to be exhaustive.
AG MAY 31, 2012 p. 13 Timing conditions of planned up-dates: Analyses of shares: The WGZ BANK maintains a list of issuers for whom company-based financial analyses ( Cover list of share analyses ) are published. The criterion for the inclusion or removal of an issuer from this list is governed primarily by the company s inclusion in an index (DAX and EuroStoxx 50 SM ). In addition, selected issuers from the mid and small cap segment or from the US markets are included. In such cases the inclusion or removal of these issuers from the cover list is at the sole discretion of the WGZ BANK. Generally, a short expert commentary together with a summary and evaluation of current events specific to the company is prepared every week for the issuers included on the cover list share analyses. Moreover, every day company-specific events such as, for example, ad hoc announcements or important news relating to individual companies on the cover list are evaluated. The decision as to which issuers are covered by such publications is at the sole discretion of the WGZ BANK. Moreover, fundamental analyses are prepared for the issuers included on the cover list. The decision as to which issuers are covered by such publications is at the sole discretion of the WGZ BANK. It may occur at any time that, in fulfilment of the provisions of the Securities Trading Law, the publication of financial analyses of individual issuers included in the cover list are blocked without any prior warning. Internal organisational measures to deal with the prevention or handling of conflicts of interest: Employees of the WGZ BANK who are involved with the preparation and / or the offering of financial analyses are subject to the company s internal compliancy regulations which classifies them as employees of an area requiring confidentiality. The company s internal compliancy regulations are in line with the provisions of the Guideline for the Concretisation of Organisational Obligations of Companies Trading in Securities in accordance with 33 and 33b of the Securities Trading Law (WpHG). Possible conflicts of interest as at: 05/31/2012 The WGZ BANK and/or its affiliated companies hold shares of the issuer analysed in their trading portfolio. Further possible conflicts of interest are indicated as follows: The WGZ BANK and/or its affiliated companies: 1) own at least 1% of the issuers share capital. 2) were involved within the last twelve months in the management of a consortium issuing financial instruments of the issuer by way of a public offer. 3) look after financial instruments of the issuer in a market through the placement of buying or selling orders. 4) have within the last twelve months concluded an agreement with issuers, which are either themselves or through their financial instruments the object of a financial analysis, covering services related to investment banking transactions or have received a service or a promise of services in such an agreement. 6) have concluded an agreement with the issuers which are either themselves or through their financial instruments the object of the financial analysis regarding the preparation of the financial analysis. As at: 05/31/2012 WGZ BANK AG Responsible supervisory authority: Westdeutsche Genossenschafts-Zentralbank Federal Authority for the Supervision of Financial Services Ludwig-Erhard-Allee 20 (Bundesanstalt für Finanzdienstleistungsaufsicht) D-40227 Düsseldorf Graurheindorfer Str. 108, 53117 Bonn and Marie-Curie-Straße 24-28, 60439 Frankfurt am Main
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