September 29, 2017 Information Analysis Analysts: Daniel Großjohann, Dr. Roger Becker, CEFA +49 69 71 91 838-42, -46 daniel.grossjohann@bankm.de, roger.becker@bankm.de Evaluation result NOT RATED - Fair value (previous: not rated) (previous: -) Find BankM Research on Bloomberg, CapitalIQ, Factset, ResearchPool, Thomson Reuters, vwd and www.bankm.de Half-year sales below (weak) prior-year level In the first six months of 2017, PA Power Automation AG reported sales of 1.69m (H1 2016: 1.78m) and negative EBT (- 1.6m). The company has been faced with falling sales for some time, despite the new PA 9000 generation of controls. There are various reasons for this: while the macro situation in Turkey has had a negative impact up to now (but is currently improving), it seems that PA Power originally put its trust in the wrong partner in the USA. High expectations for business in Asia are linked to the company s new strategic partner, Techmation. The company therefore seems to be making progress on many fronts so it has confirmed its guidance. We are leaving our estimates unchanged, but are still refraining from issuing a rating as uncertainty remains high. PA's business performance in the first half of this year was disappointing, with declining sales and clearly negative after-tax income (- 1.47m; H1 2016: - 1.35m). As a result, it has made some adjustments to its strategy. These included reorganizing distribution in the USA and strengthening access to the Asian market in early 2017 through its strategic partner Techmation Co. Ltd. USA: Cooperation with its previous partner was terminated in H1 2017. The retrofit business for Fadal machines in this market is now being driven forward through direct distribution (the plan is to retrofit 135 machines p.a. in the mid term). EMEA: While the French market contracted and no orders were placed in Dubai, the company registered a pleasing upturn in orders in Turkey. The existing major customer ordered more systems and PA also gained a new customer in Turkey. Cooperation with the German machine tool manufacturer Zuse Hüller-Hille (announced in June 2017) has already resulted in an initial installation. Asia: From PA s standpoint, momentum was low in China (its partner Shenzhen Double CNC Tech Co., Ltd. reduced inventories), although this was apparently in line with expectations. A first prototype of the control for milling machines has been produced for PA s partner Techmation, but is not expected to generate sales until next year. Key data / Earnings Year Sales EBITDA EBIT EBT adj. NP ( mln) adj. EPS ( ) EBIT margin adj. net margin 2015a 8.8 1.8 1.4 1.7 1.3 0.31 15.9% 15.3% 2016e 3.9-3.2-3.6-3.7-3.6-0.71-91.7% -92.2% 2017e 6.5-0.6-1.0-1.1-1.1-0.17-15.8% -16.3% 2018e 7.5 0.0-0.5-0.6-0.5-0.08-6.2% -6.4% 2019e 8.6 0.7 0.2 0.1 0.2 0.04 2.8% 1.0% 2020e 9.9 1.4 1.0 0.9 1.0 0.16 10.5% 8.7% Sector WKN ISIN Bloomberg/Reuters Accounting standard Financial year H1 report Market segment Transparency standard Financial ratios 2017e 2018e 2019e EV/Sales 1.9 1.7 1.4 EV/EBITDA neg. neg. n.a. EVEBIT neg. neg. n.a. P/E adj. neg. neg. n.a. Price/Bookvalue 1.8 2.0 1.9 Price/FCF neg. neg. 20.6 ROE (in %) neg. neg. 0.0 Dividend yield (in %) 0.0 0.0 0.0 Number of shares outs. (in mln) 6.430 MarketCap / EV (in mln) Free float (in %) Ø daily trading vol. (3M, in ) 15,755 12 months high/low 2.45 / 1.23 Price May 26, 2017 1.36 Performance 1M 6M 12M absolute (in %) -11.5% -23.2% -42.2% relative (in %) -15.7% -26.6% -50.0% Benchmark 140 130 120 110 100 90 80 70 60 50 40 Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 Sep-17 PA Power Automation AG (XETRA) (red/light) vs. DAXsubsector Software Performance (black) Source: Bloomberg Industry Software 692440 DE0006924400 PPA GR/PPA.DE HGB Dec 31 May, 2018 Open Market Basic Board 10.80 / 12.40 47.0 DAXsubsector Software This document has been prepared due to a service agreement with the respective issuer. BankM Repräsentanz der Repräsentanz der FinTech Group Bank AG is the designated sponsor of the company s stock and in this function as a designated sponsor regularly holds a trading stock or long or short positions in the company s stock. Equity investments generally involve high risks. Potential investors should take into account that share prices may fall and rise and that income from an investment may fluctuate considerably. Investors may lose some or all of the money invested. Investors make their decisions at their own risk. FinTech Group Bank AG, Frankfurt, is responsible for the preparation of this document.
- 2/6 - Tables September 29, 2017 Tables Income statement Fiscal Year 31.12 (IFRS) 2015a 2016a 2017e 2018e 2019e 2020e 5y - CAGR (%) in '000 2016-2020 Total Sales 8,813 3,946 6,500 7,475 8,596 9,886 Growth rate (in %) 14.7-55.2 65 15.0 15.0 15.0 2.3 Changes in inventory -6 74 0 0 0 0 0 424 0 0 0 0 Other operating income 506 281 0 0 0 0 Total Output 9,312 4,724 6,500 7,475 8,596 9,886 Growth rate (in %) 1.4-49.3 37.6 15.0 15.0 15.0 1.2 Cost of materials 2,658 1,881 2,275 2,616 3,009 3,460 % of total output 28.5 39.8 35.0 35.0 35.0 35.0 Personnel expenses 2,433 2,766 2,822 2,878 2,936 2,994 % of total output 27.6 70.1 43.4 38.5 34.1 30.3 Other operating expenses 2,429 3,236 2,000 2,000 2,000 2,000 EBITDA 1,792-3,159-597 -19 652 1,431 Depreciation and amortization 392 458 430 446 414 425 EBIT 1,400-3,618-1,026-466 238 1,007 Financial result 252-96 -100-100 -100-100 EBT 1,653-3,714-1,126-566 138 907 Taxes on Income (Exp.+/Inc.-) 206-20 50 50 50 50 Other Taxes 2 14 0 0 0 0 Net Profit 1,444-3,708-1,176-616 88 857 Minorities -99 71 116 134 154 177 Result after minorities 1,346-3,637-1,060-482 242 1,034 No. of shares (Ø outstanding) 4,404 5,152 6,324 6,324 6,324 6,324 Net profit / share (EPS) 0.31-0.71-0.17-0.08 0.04 0.16 P&L margins Margins (in %) 2015a 2016a 2017e 2018e 2019e 2020e Gross Profit margin 69.8 52.3 65.0 65.0 65.0 65.0 EBITDA margin 20.3-80.1-9.2-0.3 7.6 14.5 EBIT margin 15.9-91.7-15.8-6.2 2.8 10.5 EBT margin 18.8-94.1-17.3-7.6 1.6 9.2 adj. Net Profit margin 15.3-92.2-16.3-6.4 1.0 8.7
September 29, 2017 Tables - 3/6 - Cash flow statement Fiscal Year 31.12 (IFRS) 2015a 2016a 2017e 2018e 2019e 2020e in '000 Net Profit 1,444-3,708-1,060-482 242 1,034 + Depreciation and amortization 392 458 430 446 414 425 + Chg. in long-term provisions 138-75 0 0 0 0 + Result from at equity investment -437 0 0 0 0 0 65-114 24 100 100 100 = Cash Earnings 1,603-3,438-606 65 756 1,559 + Change of NWC -1,032 1,785-184 -156-146 -134 = Operating Cash Flow 571-1,653-790 -91 610 1,425 - Capex 5,387 264 72 82 86 91 = Free Cash Flow -4,816-1,917-862 -173 523 1,334 + Increase in share capital 4,352 0 3,273 0 0 0 + Net cash flow from loans 629 1,796-936 -936-436 -436 + Other -474-296 -100-100 -100-100 = Incr. in Cash (+)/Decr. in Cash (-) -309-417 1,375-1,209-12 798 Liquid funds at period end 598 180 1,555 346 334 1,132
- 4/6 - Tables September 29, 2017 Balance sheet Fiscal Year 31.12 (IFRS) 2015a 2016a 2017e 2018e 2019e 2020e in '000 Assets Total Fixed Assets 7,048 6,962 6,132 5,768 5,440 5,106 Tangible assets 234 160 148 134 156 172 Intangible assets 5,076 5,064 4,246 3,896 3,546 3,197 t/o Goodwill 36 44 36 36 36 36 t/o prepayments 143 25 0 0 0 0 Financial assets 1,738 1,738 1,738 1,738 1,738 1,738 Total Current Assets 9,247 6,816 8,898 8,044 8,407 9,603 Inventories 747 1,101 822 904 994 1,094 Accounts receivable 7,367 5,081 6,068 6,341 6,627 6,925 Total liquid funds 597 179 1,554 345 333 1,131 Other current assets 537 453 453 453 453 453 Accruals 51 51 0 0 0 0 Balance Sheet Total 16,346 13,828 15,030 13,812 13,847 14,709 Shareholder's Equity / Liabilities Shareholders Equity 8,069 4,256 5,871 5,389 5,631 6,665 Subscribed capital 13,172 13,172 16,445 16,445 16,445 16,445 Share premium 5,899 5,899 5,899 5,899 5,899 5,899 Retained earnings/acc. deficit -9,994-13,633-14,809-15,425-15,337-14,480 Currency reserve -329-379 -379-379 -379-379 Minorities -679-803 -1,285-1,152-998 -820 Long Term Liabilities 5,083 4,351 3,415 2,479 2,043 1,607 Long term debt 5,083 4,351 3,415 2,479 2,043 1,607 Short Term Liabilities (< 1 year) 3,195 5,221 5,744 5,943 6,173 6,437 Acc. payable & prepayments 534 808 1,331 1,531 1,761 2,025 Short term debt 1,591 3,615 3,615 3,615 3,615 3,615 Provisions 1,070 797 797 797 797 797 Total Liabilities 8,277 9,572 9,159 8,423 8,216 8,044 Balance Sheet Total 16,346 13,828 15,030 13,812 13,847 14,709 Balance sheet ratios In % of Balance Sheet Total 2015a 2016a 2017e 2018e 2019e 2020e Total Fixed Assets 43 50 41 42 39 35 Total Current Assets 57 49 59 58 61 65 Inventories 5 8 5 7 7 7 Trade receivables 45 37 40 46 48 47 Total liquid funds 4 1 10 2 2 8 Shareholder's Equity 49 31 39 39 41 45 Long Term Liabilites 31 31 23 18 15 11 Short Term Liabilities 20 38 38 43 45 44 Total Liabilities 51 69 61 61 59 55
September 29, 2017 Important information, disclosures and disclaimer - 5/6 - Important information, disclosures and disclaimer A. Important information Equity investments generally involve high risks. Investors may lose some or all of the money invested. Potential investors should take into account that share prices may fall and rise and that income from an investment may fluctuate considerably. Past performance is no guarantee for future results. Investors make their decisions at their own risk. B. Disclosures according to Section 34b of the German Securities Trading Act (WpHG) and the Ordinance on the Analysis of Financial Instruments (FinAnV): I. Information about author, company held accountable, regulatory authority: Responsible for the content of this document: FinTech Group Bank AG (FTG Bank), Frankfurt, Germany. Authors: Daniel Großjohann, Dr. Roger Becker, CEFA, Analysts. Regulatory authority for FTG Bank is the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin), Graurheindorfer Straße 108, 53117 Bonn, Germany and Lurgiallee 12, 60439 Frankfurt am Main, Germany. Issuer of the analysed instruments is PA Power Automation AG. Notice according to sec. 4. 4 N o 4 FinAnV (previous publications regarding the issuer within the last 12 months): Analyst Date Evaluation Result Fair Value Daniel Großjohann, Dr. Roger Becker September 30, 2016 Buy 2.80 Daniel Großjohann, Dr. Roger Becker November 25, 2016 Hold 2.45 Daniel Großjohann, Dr. Roger Becker February 08, 2017 Hold 2.45 Daniel Großjohann, Dr. Roger Becker March 03, 2017 No valuation - Daniel Großjohann, Dr. Roger Becker May 30, 2017 No valuation - II. Additional Information: 1. Sources of information: Main sources of information for the compilation of this document are publications in national and international media and information services (e.g. Reuters, VWD, Bloomberg, dpa-afx, ACMR-IBIS World and others), financial newspapers and magazines (e.g. Börsenzeitung, Handelsblatt, Frankfurter Allgemeine Zeitung, Economist and others), specialist media, published statistics, rating agencies as well as publications by peer group companies and the company itself. Furthermore talks with the management of the issuer have been held. This document was made available to the issuer before publication to ensure the accuracy of the information provided. This resulted in no changes in content. 2. Summary of the valuation principles and methods used to prepare this document: BankM Repräsentanz der FinTech Group Bank AG (BankM) uses a 3-tier absolute rating model. The ratings are the evaluation results and refer to a fair value pricing reflecting a time-horizon of up to 12 months. BUY: The calculated fair value of the company s stock is at least 15 % higher than the current market price at the time of the compilation of this document. HOLD: The calculated fair value of the company s stock lies between 15% and +15 % of the current market price at the time of the compilation of this document. SELL: The calculated fair value of the company s stock is at least 15 % lower than the current market price at the time of the compilation of this document. The following valuation methods are being used: Multiple-based models (Price/Earnings, Price/Cash-flow, Price/Book value, EV/Sales, EV/EBIT, EV/EBITA, EV/EBITDA), peer-group comparisons, historical valuation approaches, discount models (DCF, DDM), break-up value and sum-of-the-parts-approaches, assetbased evaluation methods or a combination of the above. The used valuation models depend on macroeconomic factors, such as interest rates, exchange rates, raw materials and on basic assumptions about the economy. Additionally, market sentiment affects the valuation of companies. The valuation is also based on expectations that might change rapidly and without notice, depending on developments specific to individual industries. Rendered evaluation results and fair values derived from the models might therefore change respectively. The evaluation results in general relate to a 12-month horizon. However, evaluation results are subject to changing market conditions and represent only the situation at a given point of time. The evaluation results and fair value prices may in fact be achieved more quickly or slowly than expected by the analysts. Also, the evaluation results and fair value prices might need to be revised upward or downward. 3. Date of first publication of this document: September 29, 2017 4. Date and time of prices of the instruments quoted in this document: Closing prices of September 28, 2017 5. Updates: A specific date or time for an update of this document has not been set. The information given in this document reflects the author s judgement on the date of this publication and is subject to change without notice; it may be incomplete or condensed and it may not contain all material information concerning the company covered. It is in the sole responsibility of BankM to decide on a potential update of this document. III. Disclosures about potential conflicts of interest: 1. BankM s business model is based on economic relationships with issuers and equity transactions to be performed relating to the issuer s stock. BankM has entered into an agreement about the preparation of this document with the issuer that is, or whose financial instruments are, the subject of this document.
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In the function as a designated sponsor, BankM manages the financial instruments that are, or whose issuers are, the subject of the financial analysis on a market by placing buy or sell orders and will regularly hold a trading stock or long or short positions in the issuer s stock. 3. BankM s internal organisation is aligned with the prevention of conflict of interests in producing and distributing research reports. Possible conflicts of interests will be treated adequately. In particular, physical and non-physical boundaries were installed to keep analysts from gaining access to information that possibly could constitute a conflict of interest for the bank. Insiders dealings according to 12 WpHG in conjunction with Art. 14 directive (EU) 596/2014 categorically are prohibited. All staff members of FTG Bank and BankM that have access to inside information categorically have to disclose all dealings in financial instruments to the internal compliance department. The compliance of legal requirements and supervisory regulations is subject to continuous supervision and control of the compliance department of FTG Bank. In this regard, the right to restrict employees dealings in financial instruments is reserved. 4. The remuneration of the analysts mentioned above is not dependent on any investment banking transactions of BankM or its affiliates. The analysts that compiled this document did not receive or acquire shares in the issuer that is, or whose financial instruments are, the subject of this document at any time. The analysts mentioned above herby certify that all of the views expressed accurately reflect their personal views about the issuer and that no part of their compensation was, is or will be, directly or indirectly, related to the specific evaluation result or views expressed by the analyst in this document. 5. 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