FIRST CAPITAL Company Update Buy (maintained) 5:30 PM MARKET PRICE: EUR10.3 TARGET PRICE: EUR13.8 (unchanged) Financial Holding Data Shares Outstanding (m): 2.55 Market Cap. (EURm): 26.3 NAV (EURm): 39.2 Free Float (%): 40.4% Av. Daily Trad. Vol. (000): <10 Main Shareholder: Reuters/Bloomberg: Strategy Invest (27.9%) FICM.MI FICM.MI 52-Week Range (EUR) 7.6 11.1 Source: Factset, UbiBanca estimates Performance 1m 3m 12m Absolute -0.5% 7.0% 33.8% Rel. to FTSE Italy 1.1% 7.6% 2.8% Graph area Absolute/Relative 12 M Asset performance not reflected in the share price First Capital has had a sound performancee since the start of the year with a 29% (weighted average) increase in its strategic portfolio compared with +16.4% for FTSE All-share index. However, First Capital s share price has increased by just 21.2% underperforming its strategic portfolio. Since the start of the year, the company exited its historic investment in Servizi Italia (EUR1.4 million capital gain, 12% IRR and cash multiple of 1.5x) and in Masi Agricola and the Leone Film Group. It has invested in two SPACs at a cost of EUR2.5 million. First Capital also finalized the acquisition of Team Up Work SICAF, which has been authorised by Banca d Italia, intended as the vehicle to manage a FIA (a closed investment fund reserved for institutional and professional investors) with a target to raise up to EUR100 million for investment in Italian small caps; approximately EUR35 million of this will be for the conferral of First Capital s strategic portfolio. First Capital should enhance its investment power through this project. We confirm our positive rating because of: 1) the current attractive discount to NAV (33%, above the historical average of 30%), 2) the quality of its strategic assets, which are mostly growing both in sales and profitability, 3) the opportunity offered by the SICAF acquired, which should provide the means of realising the company s 2017-21 business plan. Our target price is confirmed at EUR13.8 per share. It includes a holding company discount of 10% to NAV and implies potential upside of 38%. Buy. Source: Factset Marco Cristofori Senior Analyst marco.cristofori@ubibanca.it Tel. +39 02 62753015 Website: www.ubibanca.com/equityresearch Financials 2016 2017E Total income (EURm) 2.70 3.15 Pre-tax profit (EURm) 0.92 1.05 Net Profit (EURm) 0.76 1.00 EPS (EUR) 0.30 0.39 BVPS (EUR) 12.58 12.55 2018E DPS (EUR) 0.42 0.40 0.50 0.0 Source: Company Data, UBI Banca Estimates > The first half of the year closed with a negative net result of EUR0.48 million (vs. breakeven in 1H16). However, under IFRS 9 (that requires the mark-to-market of the asset portfolio and which is compulsory from 2018) the net result would have been positive for EUR5.0 million vs. a net loss of EUR0.4 million in 1H16. Net cash was EUR2.7 million at June-17 (EUR1.4 million at Dec-16). The current investment portfolio has significantly outperformed the stock market and also outperformed First Capital s own share price. > The NAV is currently EUR15.3 per share, in line with our previous report, and our target price is EUR13.8 per share (unchanged), which implies potential upside of 34%. If we consider the target prices of the core assets, our NAV would increase to EUR18.7 per share, 81% above the current market price. 2019E 3.74 3.76 2.19 2.20 2.08 2.09 0.81 0.82 12.97 13.29 Ratios priced on 17 November 2017 2016 * 2017E 2018E 2019E P/E(x) 27.4 26.3 12.6 12.6 P/BV(x) 0.65 0.82 0.79 0.78 Dividend Yield (%) 5.1% 3.9% 4.9% 4.9% ROI (%) 2.4% 3.1% 6.3% 6.2% ROE (%) 3.0% 4.3% 11.7% 17.4% Debt/Equity (x) -0.04-0.23-0.44-0.66 Source: UBI Banca Estimates * based on average 2016 price 1
Key Financials (EURm) 2016 2017E 2018E 2019E Dividends 0.56 0.65 0.67 0.69 Other financial income 0.40 0.10 0.10 0.10 Trading profit/(loss) 1.74 2.40 2.91 2.91 Total income 2.70 3.15 3.68 3.70 Net Profit 0.76 1.00 2.02 2.03 Capital Employed 30.74 24.72 18.70 12.67 Shareholders Equity 32.13 32.06 33.06 33.57 Net Financial Position -1.39-7.34-14.37-20.90 Key Profitability Drivers 2016 2017E 2018E 2019E Net Debt/Equity (x) -0.04-0.23-0.43-0.62 Cost/Income (%) 47.2% 56.8% 33.7% 33.9% ROI (%) 3.0% 4.3% 11.4% 16.9% ROE (%) 2.4% 3.1% 6.1% 6.1% Key Valuation Ratios 2016 * 2017E 2018E 2019E P/E (x) 27.4 24.0 12.6 12.6 P/BV (x) 0.65 0.75 0.79 0.78 Dividend Yield (%) 5.1% 3.9% 4.9% 4.9% * Based on 2016 average price 2
Recent Developments > First Capital s net result in 1H17 was negative for EUR0.48 million, vs. almost breakeven in 1H16. This was mainly due to a lack of significant capital gains (just EUR0.13 million), slightly higher operating costs and a provision of EUR0.56 million for management incentives (EUR0.23 million in 1H16), partially offset by higher dividends. Reclassifying the P&L under IFRS 9 (mandatory from January 2018), which requires the asset portfolio to be marked-to-market, the net result would have been EUR5.01 million compared to a loss of EUR0.38 million in 1H16. > Net cash increased to EUR2.7 million from EUR1.4 million at Dec-16 after net divestments of about EUR2.5 million and a dividend payment of EUR1.07 million. This left liquidity for new investments of EUR7.9 million. > Since the start of the year, First Capital has entered in two SPACs: Spactiv with a 2.2% stake for an investment of EUR2 million and Capital for Progress 2 with a 0.9% stake for EUR0.5 million. The company has sold its entire investment in Servizi Italia, giving a capital gain of around EUR1.4 million along all the investment period (about 12% IRR and a cash multiple of 1.5x), and its minor shareholdings in Masi Agricola and Leone Film Group. The holdings in Elettra Investimenti and in Iniziative Bresciane have been reduced. > In May 2017, First Capital had a share consolidation in the ratio of one share for every ten shares held. Therefore, the number of shares in issue is now at 2.55 million. > The company has just finalised the acquisition of Team Up Work SICAF (renamed Value First SICAF) for a total consideration of EUR0.54 million. The deal, already authorised by Banca d Italia, meets the aims of the 2017-21 business plan: Value First SICAF should launch a FIA (a closed investment compartment reserved for institutional and professional investors) and raise up to EUR100 million to be invested in Italian small caps (about ten companies with revenues of EUR30-150 million); approximately EUR35 million should be conferred by First Capital using its strategic portfolio. In the long-term, the investments are expected to generate an annual return of 15% in line with its historical average. First Capital is not expected to make any further direct investments (except potential anchor/corner investor role in SPAC launched by Value First SICAF) but its investment power should increase with new investors and it should earn proceeds from the management of the SICAF. > First Capital s main investments have mostly reported positive 1H17 results. In particular, Tecnoinvestimenti, Cembre, Eukedos and Bomi Italia (representing 70% of total assets) had increases in both revenues and profitability with significant bottom line growth; the results of Triboo and LU-VE were somewhat disappointing as they reported higher revenues but lower profitability also due to non-recurring costs. > Tecnoinvestimenti, Cembre and Bomi Italia all outperformed the FTSE Italia All- Share index, which has risen 16.4% year-to-date. Triboo, Eukedos and LU-VE have underperformed the index. The average performance of First Capital s strategic assets (weighted by NAV) was 26.0% year-to-date and has significantly outperformed the FTSE Italia All-Share index and First Capital s own share price (up 21.2% since the start of the year). 3
Figure 1 First Capital: 1H17 results (EURm, %) 1H16A 1H17A % Change Total financial income 0.99 0.83-15.9% Operating costs (0.57) (0.62) 10.4% Pre tax profit (0.04) (0.51) nm Net result (0.05) (0.48) nm Estimated net result under IFRS 9 (0.48) 5.01 nm Net Debt (Cash) (1.39) (2.70) nm Source: Company data Figure 2 Tecnoinvestimenti (28% of total assets): 1H17 results and forecasts Tecnoinvestimenti reported a positive first half, broadly in line with consensus estimates, with buoyant growth from the Digital Trust and Sales & Marketing Solutions segments but a slowdown in the Credit Information & Management segment. 3Q17 was strong with sales up 26% and an EBITDA margin that increased to 26.7%. The share price has risen 24.8% since the start of the year. (EURm, %) 1H16A 1H17A % Change 2016A 2017E % Change Sales 70.3 85.4 22.2% 147.3 175.0 18.8% EBITDA 13.2 18.4 39.5% 29.7 40.0 34.7% % margin 18.8% 21.5% 20.2% 22.9% EBIT 8.7 12.4 45.5% 18.1 29.0 60.2% % margin 12.4% 14.5% 12.3% 16.6% Net Profit 5.3 8.0 56.3% 12.1 19.0 56.8% Net Debt (cash) 59.5 67.7 62.3 63.0 Source: Company data, Factset Figure 3 Cembre (21% of total assets): 1H17 results and forecasts Cembre showed further improvement in 1H17 and the 3Q17 results were also positive (sales up 11.2%, an EBITDA margin of over 25.7%). The company forecasts a good full-year 2017 with sales growth (+8.3% to the end of October), improved margins and an increase in net cash (EUR22.6 million at Oct-17). The share price has risen 58.4% since the start of the year. (EURm, %) 1H16A 1H17A % Change 2016A 2017E % Change Sales 62.7 66.6 6.2% 122.6 130.6 6.5% EBITDA 15.2 17.3 14.0% 30.0 32.8 9.2% % margin 24.3% 26.0% 24.5% 25.1% EBIT 12.3 14.2 15.7% 24.1 26.7 10.8% % margin 19.6% 21.4% 19.7% 20.4% Net Profit 8.5 10.2 19.3% 16.9 18.8 11.3% Net Debt (Cash) (14.6) (14.5) (26.7) (27.6) Source: Company data, Factset 4
Figure 4 Triboo (14% of total assets): 1H17 results and forecasts Triboo reported a fall in results in 1H17 (reclassified under IFRS 15) due to the weak performance of the Media division, causing a sharp reduction in 2017-19 consensus estimates. The company should move to the MTA segment of the Italian stock market (from AIM).The share price has declined by 4.2% since the start of the year. (EURm, %) 1H16A 1H17A % Change 2016A 2017E % Change Sales 30.3 32.0 5.3% 53.5 67.4 26.0% EBITDA 4.4 4.0-9.8% 8.4 9.9 18.0% % margin 14.6% 12.5% 15.7% 14.7% EBIT 2.1 1.3-39.8% 5.6 4.4-22.0% % margin 7.0% 4.0% 10.5% 6.5% Net Profit 1.5 0.7-54.0% 3.6 2.6-28.0% Net Debt (Cash) (9.1) 1.4 (5.3) (8.2) Source: Company data, Factset Figure 5 Eukedos (12% of total assets): 1H17 results and forecasts Eukedos reported positive results in 1H17 with margins boosted by cost savings and a higher load factor. The share price has been stable since the start of the year. (EURm, %) 1H16A * 1H17A % Change 2016A 2017E % Change Sales 24.5 25.6 4.6% 50.2 50.7 0.9% EBITDA 1.6 1.8 11.7% 3.3 3.7 11.1% % margin 6.7% 7.2% 6.6% 7.3% EBIT 0.9 1.0 18.4% 1.7 2.0 14.0% % margin 3.6% 4.0% 3.4% 3.9% Net Profit 0.1 0.5 nm 0.1 0.9 nm Net Debt (Cash) 18.2 17.1 17.2 15.4 Source: Company data, Factset * Pro-forma Figure 6 Bomi Italia (8% of total assets): 1H17 results and forecasts 1H17 results exceeded our expectations and showed solid organic growth (+12%) with an improvement in profitability driven by efficiencies and a better geographical mix. The company also acquired 45% of Biomedical Brazil, a major step for Bomi Italia, which will now control the entire cash inflow generated in Brazil while reducing the weight of minorities. The share price has risen 70.0% since the start of the year. (EURm, %) 1H16A 1H17A % Change 2016A 2017E % Change Sales 46.7 58.0 24.1% 100.9 119.3 18.3% EBITDA 3.8 5.5 45.2% 8.7 10.6 21.2% % margin 8.1% 9.5% 8.7% 8.9% EBIT 1.7 3.1 83.5% 5.3 7.0 33.0% % margin 3.6% 5.3% 5.2% 5.9% Net Profit 0.3 1.0 253.8% 0.5 2.5 443.9% Net Debt (Cash) 14.9 17.8 16.0 16.2 1.8% 5
Figure 7 LU-VE (6% of total assets): 1H17 results and forecasts LU-VE reported solid sales growth in 1H17 but EBITDA was weak due to higher raw material costs, the unexpected decline in the glass door segment (-45%), higher labour costs, and the MTA listing costs. The company also announced a major strategic investment: EUR36 million between now and 2021 to double production capacity at its Polish plant. The expanded plant could add revenues of about EUR25-30 million when fully operational with an EBITDA margin of more than 20%. The share price has declined 5.0% since the start of the year. (EURm, %) 1H16A 1H17A % Change 2016A 2017E % Change Sales 116.8 133.0 13.9% 251.3 270.3 7.6% EBITDA 15.1 12.9-14.8% 33.0 28.9-12.3% % margin 13.0% 9.7% 12.9% 10.6% EBIT 8.7 6.1-29.4% 20.2 15.2-24.8% % margin 7.5% 4.6% 7.9% 5.6% Net Profit 7.4 1.9-74.8% 17.5 8.0-54.3% Net Debt (Cash) 15.4 51.1 231.3% 30.2 27.1 22.7% Figure 8 Share performances of First Capital s strategic portfolio since the beginning of the year With the exception of LU-VE, Triboo and Eukedos, all First Capital s core assets have outperformed the FTSE Italia all share index since the beginning of the year with Cembre and Bomi Italia outperforming particularly well. Figure 9 - NAV breakdown (17 November 2017) Bomi Italia Cembre Tecnoinvestimenti Media & E- Commerce; 13,2% Other; 4,2% Net liquidity; 2,8% Logistic; 7,7% Health Care; 12,0% First Capital FTSE Italia All-Share SPAC; 6,6% Eukedos Triboo IT financial services; 27,4% LU-VE -10,00% 0,00% 10,00% 20,00% 30,00% 40,00% 50,00% 60,00% 70,00% 80,00% Electromechanical; 25,9% Source: Factset Source: Ubi Banca estimates 6
Financial Projections > Following the launch of Value First SICAF, which should result in all new investments being concentrated in the planned FIA, we expect the company to divest gradually its core historical assets while investing in new opportunities with a medium-long term value approach. We believe these core assets could include Cembre (21% of total assets and around EUR5.7 million of unrealised capital gains), Tecnoinvestimenti (28% of total assets and around EUR4.2 million of unrealised capital gains) and LU-VE (6% of total assets and around EUR0.9 million of unrealised capital gains). In our view, the company could maintain its investments in the healthcare sector (Eukedos and Bomi Italia) as those investments need more time to generate value. As a result, we estimate capital gains of around EUR3 million p.a. in 2018-19. Clearly the P&L could change radically when IFRS 9 is adopted (from 2018) and could become more unpredictable as it will be totally related to the market performance of the shares in the company s portfolio. > We expect the company to distribute dividends in coming years (we have assumed EUR0.4 per share for 2017 and EUR0.5 in 2018-19), giving a dividend yield of around 5% in 2018 and 2019. Figure 10 - New vs. old estimates (EURm) 2016A 2017E 2018E 2019E Old New Old New Old New Income from equity participations 2.70 4.08 3.15 4.08 3.74 2.18 3.76 % change -22.9% -8.4% 73.0% Operating costs 1.18 1.19 1.26 1.20 1.27 1.21 1.28 % change 5.8% 5.8% 5.8% Pre-tax profit 0.92 2.66 1.05 2.65 2.19 0.73 2.20 % change -60.5% -17.3% 201.5% Net profit 0.76 2.53 1.00 2.52 2.08 0.69 2.09 % change -60.5% -17.3% 201.5% 7
Valuation > The NAV is currently EUR15.3 per share, in line with our previous report (Ready to change, 4 April 2017). Consequently, our target price of EUR13.8 per share has been confirmed, offering potential upside of 34% compared to the current market price. Our target price incorporates a holding company discount of 10% to NAV, which is in line with the average for European Smaller Companies investment trusts. > The discount to NAV has decreased from 36.3% at the time of our last report to 32.8%. We estimate unrealised capital gains to total about EUR12.1 million (46% of the current market cap). > It is important to underline that the valuation method adopted in our NAV calculation values all listed investments at market value. If we replace market price with target price for the company s strategic portfolio, our NAV would grow by 22% to EUR18.66, with market price trading at 47% discount to NAV. Figure 11 NAV at 17 November 2017 (EUR, EUR m, %) % held on capital Market value Value per share % of total Tecnoinvestimenti 4.1% 10.74 4.21 28.3% Cembre 2.1% 7.92 3.10 20.9% Triboo 7.0% 5.19 2.03 13.7% Eukedos 19.8% 4.69 1.84 12.4% Bomi Italia 5.9% 2.61 1.02 6.9% Bomi 15/20 6% 6.7% 0.40 0.16 1.1% LU-VE 0.9% 2.22 0.87 5.9% Total strategic assets 33.78 13.22 89.0% Non-core assets 4.17 1.63 11.0% Total assets 37.95 14.85 100.0% Treasury shares 0.4% 0.11 0.04 Net cash (debt) 1.10 0.43 Total 39.16 15.33 No. of shares 2.55 Current price Discount NAV per share 15.33 10.30 32.8% Source: Company data, Factset Valuation method: all listed investments at market value 8
Figure 12 Value of strategic portfolio based on target prices For Cembre there is no research available and therefore we have used the market price. Company Market price Target price Upside Source Date Value at target price (EURm) Tecnoinvestimenti 5.69 7.00 23.9% Intermonte 11/08/2017 13.30 Cembre 22.01 21.72 0.0% na 7.92 Triboo 2.5* 4.20 61.9% Banca IMI 17/10/2017 8.40 Eukedos 1.04 1.24 19.0% KT&Partners 13/10/2017 5.58 Bomi Italia 2.90 4.14 42.9% UBI Banca 20/09/2017 3.73 Bomi 15/20 6% 1.11 1.11 0.0% na 0.40 LU-VE 10.59 14.03 32.5% UBI Banca 07/11/2017 2.95 Total strategic assets 42.28 Source: Factset, UBI Banca estimates Figure 13 - Share performances of First Capital s main assets First Capital s top six shareholdings, representing about 89% of total assets, have outperformed the market by 7.5% since the start of 2017 but have underperformed slightly in the last month. The average weighted performance has been 26.0% since the start of the year (23.9% simple average). Share performance (%) % Weight on NAV 1M YTD Tecnoinvestimenti 28.3% 4.1% 24.8% Cembre 20.9% -9.0% 58.3% Triboo 13.7% -4.3% -4.2% Eukedos 12.4% -1.8% -0.3% Bomi Italia 6.9% -15.6% 70.0% LU-VE 5.9% -3.1% -5.0% Total/Average 89.0% -4.9% 23.9% FTSE Italia All-share -1.4% 16.4% Over/(under) performance -3.5% +7.5% Source: Factset, UBI Banca estimates 9
Figure 14 - NAV, market cap and trend in discount to NAV The discount to NAV is now about 33%. 45.000 40.000 35.000 30.000 25.000 20.000 15.000 10.000 5.000 - Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Nov-17 NAV (EUR 000) Market cap (EUR 000) Discount (RH) 0,0% -5,0% -10,0% -15,0% -20,0% -25,0% -30,0% -35,0% -40,0% -45,0% Source: Company data up to September 2017, UBI Banca estimates Figure 15 - First Capital s NAV vs. the FTSE all share and FTSE small cap indices First Capital s NAV has outperformed the Italian stock indices 170,0 150,0 130,0 110,0 90,0 70,0 50,0 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 NAV FTSE All share FTSE small cap 10
Income Statement (EURm) 2016 2017E 2018E 2019E Dividends 0.56 0.65 0.67 0.69 Other financial income 0.40 0.10 0.10 0.10 Trading profit/(loss) 1.74 2.40 2.97 2.97 Total income 2.70 3.15 3.74 3.76 D&A -0.03-0.03-0.03-0.03 Operating (cost)/income -1.27-1.79-1.24-1.25 Financial charges -0.49-0.28-0.28-0.28 Pre-tax profit 0.92 1.05 2.19 2.20 Taxes -0.15-0.05-0.11-0.11 Net profit 0.76 1.00 2.08 2.09 Balance Sheet (EURm) 2016 2017E 2018E 2019E Net working capital -0.20-0.20-0.20-0.20 Net Fixed assets 0.07 0.06 0.06 0.06 Net financial assets 31.23 25.23 19.23 13.23 M/L term funds -0.36-0.38-0.40-0.42 Capital employed 30.74 24.72 18.70 12.67 Shareholders' equity 32.13 32.06 33.12 33.94 Shareholders' funds 32.13 32.06 33.12 33.94 Net financial debt/(cash) -1.39-7.34-14.42-21.27 Cash Flow Statement (EURm) 2016 2017E 2018E 2019E NFP Beginning of Period -3.97-1.39-7.34-14.42 Group Net Profit 0.76 1.00 2.08 2.09 Minorities 0.00 0.00 0.00 0.00 D&A 0.03 0.03 0.03 0.03 Change in Funds & TFR 0.00 0.00 0.00 0.00 Gross Cash Flow 0.79 1.03 2.11 2.12 Change In Working Capital 0.00 0.00 0.00 0.00 Other 0.49-0.01-0.01-0.01 Operating Cash Flow 1.28 1.02 2.10 2.11 Net Capex -2.92 6.00 6.00 6.00 Other Investments 0.00 0.00 0.00 0.00 Free Cash Flow -1.64 7.02 8.10 8.11 Dividends Paid -0.94-1.07-1.02-1.27 Other & Chg in Consolid. Area 0.00 0.00 0.00 0.00 Chg in Net Worth & Capital Incr. 0.00 0.00 0.00 0.00 Change in NFP -2.59 5.95 7.08 6.84 NFP End of Period -1.39-7.34-14.42-21.27 11
Financial Ratios (%) 2016 2017E 2018E 2019E Debt/Equity -0.04-0.23-0.44-0.63 Cost/Income 47.2% 56.8% 33.2% 33.3% ROI 3.0% 4.3% 11.7% 17.4% ROE 2.4% 3.1% 6.3% 6.2% Per Share Data (EUR) 2016 2017E 2018E 2019E EPS 0.30 0.39 0.81 0.82 DPS 0.04 0.40 0.50 0.50 Op. CFPS 0.50 0.40 0.82 0.82 BVPS 12.58 12.55 12.97 13.29 Stock Market Ratios (x) 2016 * 2017E 2018E 2019E P/E 27.4 26.3 12.6 12.6 P/BV 0.65 0.82 0.79 0.78 Dividend Yield (%) 5.1% 3.9% 4.9% 4.9% * Based on 2016 average price 12
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, 24122 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 faith, but no representation or warranty, express or implied, is made by UBI Banca as to 13
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 (www.ubibanca.com/equityresearch) 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 and Nomad for First Capital > 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 www.ubibanca.com/equity-research 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 www.ubibanca.com/equity-research. 14
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. 16190 dated 29.10.2007, 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. 15
Distribution of ratings Equity rating dispersion in the past 12 months Buy Hold Sell No Rating 81.1% 13.5% 0.0% 5.4% 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% Historical ratings and target prices Date Rating Target Price (EUR) Market Price (EUR) 05 May 2014 Buy 11.7 10.0 30 October 2014 Buy 11.5 9.0 10 April 2015 Buy 12.8 10.3 22 October 2015 Buy 11.3 8.2 18 April 2016 Buy 11.1 8.8 17 November 2016 Buy 11.2 7.7 4 April 2017 Buy 13.8 9.8 16