12 december 2012 report research specialmedia.rtl.nl/media/financien/rtlz/2012/rabolist.pdf · food...

1 | Rabobank International – GFM Equity Research Please note the disclaimer on the last page of this document

Wednesday 12 December 2012 Report

Research Special

Conviction List 2013

Our conviction list generated a healthy 660bps alpha in 2012. For 2013, key themes

are (i) limited cyclical European exposure, (ii) balance sheet strenght, (iii) M&A

fantasy and (iv) attractive valuation and/or dividend yield. In light of a weakening

European macro picture, stock picking is key. We are not necessarily bearish on

equity markets given a relatively attractive return versus other asset classes.

Figure 1: Rabo Conviction List (last price 12 December 2012)

Company Entry date Entry price

(EUR)

Last price

(EUR)

α generation

since entry (%)

Price target

12-m (EUR)

Upside

(%)

Ahold (entry) 12-Dec-2012 10.2 10.2 11.0 8

ABInbev (exit) 31-Jan-2012 45.7 68.5 30.3 76.0 11

Barco 1-Aug-2012 46.5 53.6 7.5 63.0 18

CSM 10-Sept-2012 13.7 16.4 15.3 18.0 10

Fugro (re-entry) 12-Dec-2012 45.3 45.3 60.0 35

ING Group 10-Sept-2012 6.7 7.2 4.1 9.5 42

Reed Elsevier 9-Nov-2012 10.6 11.3 2.5 12.0 6

TomTom (entry) 12-Dec-2012 3.8 3.8 5.8 51

UNIT4 (entry) 12-Dec-2012 22.4 22.4 25.0 12

Average (incl. closed positions) 6.6

Performance since 6 January 2012

AEX 312.5 344.1 10.1

AMX 472.0 529.7 13.2

AScX 377.6 394.8 2.8

Bel-20 2,095.5 2431 16.7

Total return Rabo conviction list (%) 21.2

Source: Company data, Rabobank International

New entries in Rabobank Conviction List: Ahold, Fugro, TomTom and UNIT4

We add Ahold as a true value play, given its handsome FCF (10%) and attractive valuation, while the

ICA exit could imply a further increase in cash returns to shareholders. Fugro returns on our list, as we

feel that market concerns on recent management changes are overdone. We flag the still healthy

growth prospects for the subsea markets, while FCF should improve hugely. TomTom is primarily on

our list, as its maps and mapping expertise could be crucial to solve Apple’s map issues. This should

lead to significant benefits. UNIT4 is one of the very few European IT software plays to capture the

large SaaS opportunity, while remaining a prime M&A target also given its compelling valuation.

Barco, CSM, ING Group and Reed Elsevier remain top picks

We reiterate our preference for Belgian Barco, given triggers like (i) expected dividend pay-out

increases (in 13H1), (ii) confirmation of growth prospects in digital projector markets and

Entertainment (iii) add-on acquisitions, combined with a highly attractive valuation (< 7x P/E 2013)

Special sit CSM offers a number of triggers: (i) disposal of Bakery Supplies, (ii) substantial return of

cash to shareholders, (iii) new contracts in PLA and (iv) remaining ingredients business becoming

Analysts

David Tailleur

+31 30 7124474

[email protected]

Philip Scholte

+31 30 7124471

[email protected]

Rabobank International GFM

Equity Sales

Equity Sales Trading

+ 31 30 216 9101

+31 30 216 9123

www.rabotransact.com

Research special

B runel *Rating:B uy (unchanged)

*Price as of 11 December 2 012 : EUR 3 6.83 (+1.08% ) *Price target: EUR 42 .00 (unchanged)

*EPS 2 012 E: EUR 2 .3 4 (unchanged)

an M&A target. ING offers upside from (i) multiple divestments, which so far generated sound take-

out prices leading to an enhanced capital base and (ii) a compelling valuation. The recent EC deal

markedly improved ING’s negotiation position. Reed Elsevier remains an ultimate safe play with

upside coming from (i) earnings revisions and (ii) potential room for extra cash returns.

http://www.rabotransact.com/

Research special - 12 December 2012

2 | Rabobank International – GFM Equity Research

Overview closed ideas Rabo Conviction List in 2012

Figure 1: Overview closed ideas Rabo Conviction List

Company Open date Close date Open price Close price Alpha (%)

Fugro 6-1-2012 25-1-2012 45.97 48.85 3.5

Arcadis 6-1-2012 31-1-2102 12.84 14.85 7.0

Delhaize 6-1-2012 31-1-2012 43.99 42.17 -9.2

Wolters Kluwer 6-1-2012 3-7-2012 12.12 12.74 1.1

TenCate 6-1-2012 20-7-2012 22.01 19.54 -20.9

DSM 31-1-2012 6-3-2012 39.08 42.9 9.7

SBM Offshore 31-1-2012 23-3-2012 12.67 15.19 16.6

TKH 31-1-2012 29-6-2012 16.34 16.75 -1.4

Ahold 31-1-2012 1-8-2012 9.76 9.87 -4.5

Beter Bed 31-1-2012 30-8-2012 15.56 14.35 -4.9

Akzo Nobel 26-3-2012 30-7-2012 43.38 45.25 2.2

Aalberts Industries 10-9-2012 30-10-12 13.93 14.09 -0.6

Philips 01-08-2012 23-10-12 17.95 19.86 10.3

Wolters Kluwer 01-08-2012 8-11-2012 13.57 14.88 7.4

Fugro 22-5-2012 19-11-2012 47.65 42.02 -20.5

ABInbev 31-1-2012 12-12-2012 45.65 68.45 30.3

Source: Rabobank International

- 12 December 2012



Ahold Please note the disclaime r on the last page of this

Safe value play in troubled sector

Despite the Macro backdrop, we expect Ahold to continue to generate strong

FCF in both the US and the Netherlands. A balanced and disciplined approach

to the allocation of FCF likely implies the re-initiation of SBBs. Although the

market has not factored in an ICA exit, we see it is a key trigger for H1, offering

an additional upside of c. 10%.

Source: Company data, Rabobank International Year to December, fully diluted

More ambitious towards growth and in maximizing FCF

During the last 2 years, Ahold has become more transparent and more ambitious towards

maximising FCF and to invest in sustainable and profitable growth. Moreover, balance sheet

efficiency is to improve further and management will remain disciplined regarding CF allocation.

Strong ability to generate cash. Disciplined approach to CF allocation

The recent Capital Markets Day confirmed our view that Ahold is a true value stock, in terms of its

ability to generate EUR 1bn in FCF as well as towards the allocation of this. Whereas growth in

Europe will be driven by a combination improved customer loyalty, store openings and

remodels, growth in the US should come from optimisation of the existing network and further

add ons. We also believe that online expansion will accelerate, offering incremental sales with a

decent ROIC. On several occasions, management has stressed the disciplined approach towards

CF allocation. Annual FCF of EUR 1bn implies a combination of further add on deals and that

substantial cash will continue to be returned to SHs. We regard a major M&A deal as unlikely.

An ICA exit is the key trigger we expect to materialize by H1 2013

The share’s valuation has hardly factored in an exit from ICA. Part of the sceptic relates to

previous intentions to exit JMR, but the ICA case is different related to its size and Hakon being

much more cooperative. Based on a fair value of Ahold’s 60% stake in ICA of EUR 1.9bn and a

share split, Ahold trades at attractive 2013 multiples: 8.8x PER, an EV/EBITDA of 4.1x and a FCF

yield of 12.8%. Hakon’s 40% stake is implicitly valued at EUR 1.7bn, translating into 7.4x EBITDA

and a 27% premium vs Ahold’s stake. Such valuation is a reflection of ICA Sweden and the

baking by RE, while Axfood trades at 7x EV/EBITDA. An alternative scenario is a separate listing or

sale to Hakon, which proceeds are to be allocated to M&A (EUR 1bn) and SBB’s (EUR 1bn).

Analysts

Patrick Roquas

+31 (0)30 712 4470

[email protected]

Karel Zoete

+31 (0)30 712 4476

[email protected]


Equity Sales


+ 31 30 216 9101

+31 30 216 9123


Ahold

*Rating:B uy (unchanged) *Price as of 05 December 2 012 : EUR 9.96 (+0.94% )

*Price target: EUR 11.00 (unchanged) *EPS 2 012 E: EUR 0.79 (unchanged)

Forecast 2011 2012E 2013E 2014E

Sales (EURm) 30,271 33,059 34,378 35,377

EBITDA (EUR m) 2,143 2,247 2,330 2,436

EBIT before exceptionals (EUR m) 1,346 1,371 1,426 1,506

Recurring net income (EUR m) 1,031 865 1,084 1,161

EPS Recurring New (EUR) 0.88 0.79 0.99 1.06

EPS Recurring Old (EUR) 0.88 0.79 0.99 1.06

P/E 10.6 12.6 10.0 9.4

EV/EBITDA 5.3 5.3 4.9 4.5

FCF Yield (%) 7.4 10.4 11.0 11.1

Dividend Yield (%) 4.0 4.5 4.7 5.1

Rating Buy =

Price target (12m) EUR 11.00 =

Price 05-Dec-2012 EUR 9.96

Up-/downside 10.5%

Food & Staples Retailing

Netherlands

Market capitalisation

EUR 10,562m

Avg (3month) daily turnover

3,373,625

Reuters

AHLN.AS

Bloomberg

AH NA

Web site

www.ahold.com

Share Performance

1m 3m 12m

Ahold 1.9 -1.3 4.5

AEX 1.1 3.0 11.1

Agenda

None --


- 12 December 2012


Financial Information


Financial InformationFiscal year ends 12/2012 2008 2009 2010 2011 2012E 2013E 2014E 2015EIncome Statement (EUR mln)Revenues 25,722 27,926 29,518 30,271 33,059 34,378 35,377 36,410Cost of sales -18,777 -20,338 -21,601 -22,152 -24,193 -25,158 -25,889 -26,645Gross profit 6,945 7,587 7,917 8,119 8,866 9,220 9,488 9,765Operating costs 0 0 0 0 0 0 0 0EBITDA 1,866 2,053 2,148 2,143 2,247 2,330 2,436 2,535Depreciation -662 -756 -812 -797 -876 -904 -930 -958EBITA (before exceptionals) 1,204 1,297 1,336 1,346 1,371 1,426 1,506 1,577Exceptional items 0 0 0 0 0 0 0 0Amortisation of goodwill & other ITA 0 0 0 0 0 0 0 0EBIT 1,204 1,297 1,336 1,346 1,371 1,426 1,506 1,577Net financial result -216 -283 -259 -316 -223 -214 -206 -197Other pre-tax items 0 0 0 0 0 0 0 0EBT 988 1,014 1,077 1,030 1,148 1,212 1,300 1,380Income taxes -226 -148 -271 -140 -277 -304 -326 -347Minority interests -5 0 0 0 0 0 0 0Other post-tax items / participation 124 106 57 141 -6 176 187 197Extraordinary Items & Discontinued Operations 0 0 0 0 0 0 0 0Net income 881 972 863 1,031 865 1,084 1,161 1,231Extraordinary Items & Amortisation 0 0 0 0 0 0 0 0Net income recurring (cash) 881 972 863 1,031 865 1,084 1,161 1,231Balance Sheet (EUR mln)Cash & Cash equivalents 2,863 2,688 2,600 2,438 1,587 2,166 2,798 3,468Current assets 2,433 2,417 2,594 2,755 N/A N/A N/A N/ATangible fixed assets 5,532 5,407 5,827 5,984 6,103 6,161 6,222 6,283Goodwill 251 619 762 836 1,663 1,663 1,663 1,663Other Intangible assets 0 0 0 0 0 0 0 0Other non-current assets 2,513 2,802 2,942 2,967 N/A N/A N/A N/ATotal Assets 13,591 13,933 14,725 14,980 14,899 15,543 16,328 17,156

Short-term debt 271 564 216 648 384 384 384 384Current liabs 3,867 3,461 3,876 3,966 4,020 4,180 4,302 4,427Long-term debt 3,924 3,413 3,577 3,302 3,380 3,380 3,380 3,380Other non-current liabs 853 1,055 1,146 1,187 1,260 1,233 1,258 1,284Minority interest 0 0 0 0 0 0 0 0Total equity 4,687 5,440 5,910 5,877 5,768 6,365 7,003 7,680Total liabs & equity 13,602 13,933 14,725 14,980 14,813 15,543 16,328 17,156

Net debt 1,586 725 977 1,086 1,615 1,123 688 13Invested capital 19,246 19,476 19,651 19,814 19,649 19,580 19,587 19,593Invested capital excl. hitorical goodwill 3,705 3,935 4,110 4,273 4,108 4,039 4,045 4,052Off balance lease liabilities 2,927 3,178 3,359 3,445 3,762 3,913 4,026 4,144Net pension assets -113 -96 -129 -94 N/A N/A N/A N/ACash Flow Statement (EUR mln)Operating income 1,204 1,297 1,336 1,346 1,371 1,426 1,506 1,577Depreciation & Amortisation 662 756 812 797 876 904 930 958Other non-cash Items 0 0 0 0 0 0 0 0Change in Working Capital -629 -433 326 -83 138 -20 25 26Change in Provisions 109 144 87 19 -12 -27 25 26Cash taxes -226 -148 -271 -140 -277 -304 -326 -347Cash interest -216 -283 -259 -316 -223 -214 -206 -197Cash impact associates & minorities 129 106 57 141 -6 176 187 197Other cash expectionals / cash flow assets held for sale 0 0 0 0 1 2 2 2Operating cash flow 1,070 1,498 2,092 1,786 1,953 1,944 2,143 2,242

CAPEX 1,080 632 1,100 938 926 963 991 1,019Acquisitions & Disposals 0 0 0 0 790 0 0 0Other Investments 38 289 140 25 -49 -154 12 12Cash Flow from Investments 1,118 921 1,240 963 1,667 808 1,003 1,032

Cash dividend -176 -292 -345 -412 -433 -488 -522 -554Change in Equity 0 0 0 -523 -568 0 0 0Change in Bank Debt -473 -218 -184 157 -186 0 0 0Other adjustments -82 0 0 0 0 0 0 0Cash Flow from Financing -731 -510 -529 -778 -1,186 -488 -522 -554FX effect N/A N/A N/A N/A N/A N/A N/A N/AChange in Cash -780 68 323 44 -901 646 616 654

Free Cash Flow -49 577 852 823 1,076 1,134 1,139 1,208

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- 12 December 2012



Financial InformationFiscal year ends 12/2012 2007 2008 2009 2010 2011 2012E 2013E 2014EPer share itemsShares outstanding (avg. mln) 22.7 22.9 23.1 23.2 23.4 23.7 23.8 24.0Shares outstanding fully diluted (avg. mln) 22.7 22.9 23.1 23.2 23.5 24.0 24.2 24.4Share price (average) 22.3 13.9 15.8 25.1 27.6 35.8 35.8 35.8

EPS reported 1.59 1.96 1.34 1.08 1.83 2.37 2.74 3.21EPS recurring 1.59 1.96 1.34 1.15 1.82 2.34 2.70 3.16FCF per share 1.15 0.72 2.41 0.02 0.30 1.38 2.25 1.47Book value per share 5.94 7.12 7.81 8.69 10.10 11.16 12.47 14.01Dividend per share 0.70 0.80 0.80 0.80 0.90 1.17 1.35 1.58% GrowthRevenues 16.2 23.2 3.4 -2.4 35.9 25.9 4.7 12.2Organic revenue growth 16.2 23.2 3.4 -2.4 35.9 25.9 4.7 12.2EBITA 44.9 21.1 -27.3 -12.5 63.1 29.8 15.6 17.7Organic EBITA growth 44.9 21.1 -27.3 -12.5 63.1 29.8 15.6 17.7Net income recurring 51.8 24.2 -30.8 -14.2 61.0 31.1 16.0 18.0Dividend per share 90.5 14.9 -0.2 -0.9 13.3 29.8 15.1 17.1Margins & returnsGross margin 23.5 23.4 20.8 21.1 19.7 18.5 18.7 18.5EBITDA margin 9.4 9.1 6.6 6.0 7.0 7.3 8.0 8.4EBITA margin (before exceptionals) 8.8 8.7 6.1 5.5 6.6 6.8 7.5 7.9Net recurring margin 6.2 6.3 4.2 3.7 4.4 4.6 5.0 5.3

ROE 26.8 27.6 17.2 12.5 18.1 21.3 21.9 22.9ROIC 40.6 43.0 29.5 22.4 30.5 32.8 32.7 34.9ROIC excl. historical goodwill 42.5 44.7 31.1 23.8 32.1 34.2 33.9 36.0EVA spread (ROIC - WACC) 31.6 34.0 20.5 13.4 21.5 23.8 23.7 25.9ValuationEnterprise Value (mln) 468.8 280.7 294.1 523.6 568.1 791.5 773.6 775.2

P/E recurring (x) 14.0 7.1 11.7 21.9 15.2 15.3 13.3 11.3P/FCF (x) 19.4 19.2 6.5 1,256.6 91.0 25.9 15.9 24.3P/B (x) 6.2 5.2 4.7 4.2 3.6 3.2 2.8 2.5Dividend yield (%) 2.0 2.3 2.2 2.2 2.5 3.3 3.8 4.4Free Cash Flow Yield (%) 3.2 2.0 6.8 0.1 0.8 3.9 6.3 4.1

EV/Sales (x) 0.8 0.4 0.4 0.7 0.6 0.6 0.6 0.5EV/EBITDA (x) 8.6 4.3 6.1 12.1 8.3 8.8 7.5 6.4EV/EBITA (x) 9.1 4.5 6.5 13.3 8.8 9.5 8.0 6.8EV/Invested capital 5.2 2.7 2.7 4.5 4.1 4.7 3.9 3.6EV/FCF (x) 17.9 16.9 5.3 1,126.6 79.5 23.9 14.2 21.6Leverage & ratiosNet debt/EBITDA -0.7 -0.6 -1.5 -1.5 -1.3 -0.8 -0.9 -0.8Interest cover -719.7 -168.0 N/M -41.5 -78.3 -130.0 -97.8 -84.9Solvency (Equity / Total assets) 68.2 69.1 70.8 68.7 60.8 62.2 63.9 64.1Working capital as % of revenues 13.8 14.7 10.8 15.5 12.4 13.7 13.7 14.5CAPEX/revenues -0.7 -0.6 -0.8 -0.5 -0.7 -0.5 -0.5 -0.5Dividend pay-out ratio (%) 44.0 41.0 59.7 73.5 49.2 49.4 49.2 49.1

Inventory period days 0 0 0 0 0 0 0 0Trade debtor days 87.3 80.1 78.9 85.2 84.2 83.7 88.1 86.7Trade creditor days 9.6 7.8 7.3 8.5 29.2 25.5 10.7 10.4Cash cycle 77.7 72.3 71.6 76.7 54.9 58.2 77.4 76.4

- 12 December 2012



Barco Please note the disclaime r on the last page of this

An acquired taste

Besides further growth of Barco’s business, for H1 2013, we see several share

price triggers, especially shareholder payout increases and additional insight in

the digital projector market. Furthermore, in our view Barco’s valuation remains

attractive at below 7x 2013 earnings, also as we see several initiatives in place

to partly counter the effects of lower cinema digitalization revenue in 2015.


Continued strong growth and lot’s of new order wins

Besides continued news regarding (smaller sized) project wins and new initiatives, the main

news items for Barco are: (i) Chinese cinema market. In December Barco announced that they

will supply 800 digital cinema projectors to the China Film Group. In addition, they announced

that the annual number of devices purchased from Barco will increase each year. China is still a

growing market in which Barco has a market share over 60%. We note that Barco is able to

produce around 10k screens per annum, so this order represents around one month of

production capacity, and (ii) Q3 2012 reported figures. Barco reported very strong revenue

growth, supported by all divisions. Q3 2012 revenues came in at EUR 285m, up 13% compared to

last year. We note that the growth in the Healthcare division was only 4.8%, as the announced

acquisitions and investments currently do not contribute. Q3 2012 order intake was very strong

at EUR 291m, increasing the order book to EUR 503. (75% relates to orders for Q4 2012 and Q1

2013). In addition, Barco stated that the EBITDA margin increased compared to last year,

consistent with the progress reported for H1 2012 (EBITDA margin 13.5%). Barco’s net cash

position further increased, at Q3 2012 we anticipate > EUR 80m of cash (> EUR 6.5 ps).

Many share price triggers for H1 2013

Besides further growth, in our view the main triggers for Barco’s share price are: (i) Shareholder

payout increases. We anticipate more news regarding a possible share buyback program and

dividend increase in H1 2013, (ii) Additional insight in the digital projector (replacement) market

and new products in the Entertainment division. We also anticipate more insight in this market

during H1 2013, which should take some uncertainty regarding a possible strong decrease of

revenues related to the saturation of the cinema market regarding the transformation to

digitalization, (iii) Add-on acquisitions, i.e. in line with the JAOtech and FIMI acquisitions and in

line with Barco’s strategy as set out during its 2012 CMD, and (iv) A take-out bid.

Analysts

Micha Tiekink

+31 (0)30 712 4475

[email protected]

Philip Scholte

+31 (0)30 712 4471

[email protected]


Equity Sales


+ 31 30 216 9101

+31 30 216 9123


B arco

*Rating:B uy (unchanged) *Price as of 10 December 2 012 : EUR 52 .91 ( -3 .10% )

*Price target: EUR 63 .00 (unchanged) *EPS 2 012 E: EUR 7.70 (unchanged)

Forecast 2011 2012E 2013E 2014E

Sales (EURm) 1,041 1,135 1,176 1,242

EBITDA (EUR m) 130 157 171 182

EBIT before exceptionals (EUR m) 78 101 113 123

Recurring net income (EUR m) 86 98 103 97



P/E 6.9 6.9 6.6 7.0

EV/EBITDA 3.8 3.3 2.5 2.0

FCF Yield (%) 11.1 12.3 15.1 13.9

Dividend Yield (%) 2.1 2.3 2.5 2.6

Rating Buy =



Up-/downside 19.1%

Electronic Equipment, Instruments & Components

Belgium


EUR 670m


18,131

Reuters

BARBt.BR

Bloomberg

BAR BB

Web site

www.barco.com

Share Performance

1m 3m 12m

Barco -5.8 2.5 52.2

BEL MID 1.2 5.9 18.5

Agenda

None --


- 12 December 2012


Valuation still looks very appealing, Buy reiterated

Although we recognize the temporarily strong demand from the entertainment industry as a result of the

transition to digital cinema, Barco is attractively valued at below 7x 2013 earnings, as (i) In our view several

measures are in place to partly counter the effects of the decrease of revenues in the Entertainment division after

2014/2015, i.e. (a) Laser technology, which could be a catalyst for the replacement cycle, (b) mid-market

initiatives, (c) strong growth of the Entertainment business unrelated to the digitalization of cinema’s, we

understand that the growth in 2012 mainly stems from this part of the Entertainment business, and (d) finally the

replacement market, (ii) Barco currently has a net cash position of > EUR 80m, (iii) Barco is not capital intensive,

and (iv) Barco has a FCF yield >10%. We reiterate our Buy rating and a PT of EUR 63.

Dependency on economic developments seems to be limited at Barco

YTD Q3 2012 Barco has shown revenue growth of 10%, driven by all businesses, but predominantly by the

Control Rooms & Simulation (+13%), Defense & Aerospace (21%) and Ventures (+17%) businesses. Despite this

strong growth so far, we note that part of Barco’s business is affected by the difficult mature European markets

and austerity measures by governments. As a result, the growth has come mainly from Latin American, Asian and

the Middle Eastern markets, offset by more difficult North American and European markets. Furthermore, as a part

of Barco’s business supports the efficiency and effectiveness of certain end markets, f.i. in Healthcare markets

Barco’s products are relevant for the growth of endoscopic surgery and in Defense markets Barco’s products are

supportive to the development towards unmanned drones, Barco should be able to partly grow its business

despite (more) difficult mature European markets and additional austerity measures by governments.

- 12 December 2012




Financial InformationFiscal year ends 12/2012 2007 2008 2009 2010 2011 2012E 2013E 2014EIncome Statement (EUR mln)Revenues 736 725 638 897 1,041 1,135 1,176 1,242Cost of sales 736 725 638 897 1,041 1,135 1,176 1,242Gross profit 0 0 0 0 0 0 0 0Operating costs N/A N/A N/A N/A N/A N/A N/A N/AEBITDA 109 68 24 99 130 157 171 182Depreciation -11 -13 -13 -13 -14 -15 -15 -15EBITA (before exceptionals) 98 55 11 85 116 142 156 167Exceptional items 0 0 0 0 -0 0 0 0Amortisation of goodwill & other ITA -40 -46 -41 -40 -38 -41 -43 -45EBIT 59 9 -30 45 78 101 113 123Net financial result -6 -8 -5 -2 -3 -1 -1 -1Other pre-tax items 4 4 4 1 1 3 4 5EBT 56 5 -31 44 75 103 115 126Income taxes -10 0 6 0 10 -5 -12 -29Minority interests -0 0 0 0 0 0 0 0Other post-tax items / participation 0 0 0 0 0 0 0 0Extraordinary Items & Discontinued Operations 8 13 -35 0 -10 0 0 0Net income 53 18 -60 44 76 98 103 97Extraordinary Items & Amortisation -8 -13 35 0 10 0 0 0Net income recurring (cash) 46 5 -25 44 86 98 103 97Balance Sheet (EUR mln)Cash & Cash equivalents 73 72 46 46 79 143 224 296Current assets 493 418 323 472 465 501 513 536Tangible fixed assets 65 62 54 56 58 63 65 67Goodwill 48 57 32 53 44 44 44 44Other Intangible assets 81 71 60 68 84 90 95 100Other non-current assets 27 40 58 59 85 85 85 85Total Assets 788 721 572 755 815 927 1,027 1,128

Short-term debt 112 91 11 27 8 8 8 8Current liabs 236 207 200 306 318 347 359 379Long-term debt 15 14 12 13 19 19 19 19Other non-current liabs 4 6 5 13 8 9 9 10Minority interest 0 0 0 0 0 0 0 0Total equity 422 403 344 396 461 544 632 712Total liabs & equity 788 721 572 755 815 927 1,027 1,128

Net debt 53 33 -23 -9 -62 -126 -207 -269Invested capital 147 134 114 124 142 154 161 167Invested capital excl. hitorical goodwill 147 134 114 124 142 154 161 167Off balance lease liabilities 0 0 0 0 0 0 0 0Net pension assets 0 0 0 0 0 0 0 0Cash Flow Statement (EUR mln)Operating income 59 9 -30 45 78 101 113 123Depreciation & Amortisation 50 59 54 54 52 55 58 60Other non-cash Items 0 0 31 1 11 0 0 0Change in Working Capital -61 39 80 -47 31 -8 0 -3Change in Provisions 4 2 -0 8 -5 1 0 1Cash taxes -16 -17 0 0 -11 -5 -12 -29Cash interest -2 -4 -2 -1 -3 2 2 3Cash impact associates & minorities -0 0 0 0 0 0 0 0Other cash expectionals / cash flow assets held for sale 18 -5 -43 -12 -6 0 0 0Operating cash flow 52 83 90 47 145 146 161 155

CAPEX -13 -10 -5 -13 -20 -20 -17 -17Acquisitions & Disposals 0 -36 0 -10 -9 0 0 0Other Investments -52 -47 -52 -41 -55 -47 -48 -49Cash Flow from Investments -55 -33 -33 -62 -83 -67 -65 -66

Cash dividend -28 -29 0 0 -13 -14 -16 -17Change in Equity -10 -1 0 0 4 0 0 0Change in Bank Debt 33 -22 -83 15 -20 0 0 0Other adjustments 1 1 0 0 1 0 0 0Cash Flow from Financing -4 -51 -83 15 -28 -14 -16 -17FX effect N/A N/A N/A N/A N/A N/A N/A N/AChange in Cash -8 -1 -26 0 33 64 81 72

Free Cash Flow 39 73 85 34 125 126 144 138

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EPS reported 4.43 1.53 -5.02 3.66 6.32 8.14 8.53 8.04EPS recurring 3.60 0.42 -1.96 3.44 6.73 7.70 8.07 7.61FCF per share -23.06 5.72 2.15 1.20 5.89 6.53 7.99 7.35Book value per share 35.05 33.88 28.84 33.15 38.39 45.11 52.34 58.98Dividend per share 2.40 0 0 1.00 1.10 1.20 1.30 1.40% GrowthRevenues N/M -1.5 -12.0 40.6 16.1 9.0 3.6 5.6Organic revenue growth 0 0 0 0 0 0 0 0EBITA N/M -44.1 -79.4 655.6 35.9 22.2 9.8 7.2Organic EBITA growth 0 0 0 0 0 0 0 0Net income recurring N/M -88.4 N/M N/M 96.8 14.4 4.8 -5.8Dividend per share N/M N/M N/A N/M 10.0 8.7 8.4 7.9Margins & returnsGross margin 0 0 0 0 0 0 0 0EBITDA margin 14.8 9.4 3.8 11.0 12.5 13.8 14.5 14.7EBITA margin (before exceptionals) 8.0 1.2 -4.6 5.0 7.5 8.9 9.6 9.9Net recurring margin 6.2 0.7 -3.9 4.9 8.2 8.7 8.8 7.8

ROE 12.6 4.5 -17.4 11.0 16.5 18.0 16.3 13.6ROIC N/A 6.3 -39.6 37.9 64.3 66.2 66.3 62.2ROIC excl. historical goodwill N/A 6.3 -39.6 37.9 64.3 66.2 66.3 62.2EVA spread (ROIC - WACC) N/A -2.8 -48.7 28.8 55.2 57.1 57.2 53.1ValuationEnterprise Value (mln) 831.6 457.0 256.0 438.1 498.9 512.7 431.9 369.9

P/E recurring (x) 17.9 84.7 -12.0 10.9 6.9 6.9 6.6 7.0P/FCF (x) -2.8 6.2 10.9 31.2 7.9 8.1 6.6 7.2P/B (x) 1.6 1.7 1.9 1.7 1.5 1.2 1.1 0.9Dividend yield (%) 4.5 0 0 1.9 2.1 2.3 2.5 2.6Free Cash Flow Yield (%) -43.6 10.8 4.1 2.3 11.1 12.3 15.1 13.9

EV/Sales (x) 1.1 0.6 0.4 0.5 0.5 0.5 0.4 0.3EV/EBITDA (x) 7.6 6.7 10.6 4.4 3.8 3.3 2.5 2.0EV/EBITA (x) 14.2 51.3 -8.7 9.7 6.4 5.1 3.8 3.0EV/Invested capital N/A 3.3 2.1 3.7 3.7 3.5 2.7 2.3EV/FCF (x) 21.6 6.3 3.0 13.0 4.0 4.1 3.0 2.7Leverage & ratiosNet debt/EBITDA 0.5 0.5 -1.0 -0.1 -0.5 -0.8 -1.2 -1.5Interest cover 17.6 8.3 4.4 40.8 37.8 108.5 118.5 126.5Solvency (Equity / Total assets) 53.5 55.9 60.1 52.4 56.6 58.7 61.5 63.1Working capital as % of revenues 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0CAPEX/revenues -1.8 -1.4 -0.7 -1.5 -1.9 -1.8 -1.4 -1.4Dividend pay-out ratio (%) 54.2 0 0 27.4 17.4 14.7 15.2 17.4

Inventory period days 50.6 98.9 95.9 76.6 81.4 77.8 78.0 75.5Trade debtor days 50.2 93.3 86.7 68.3 68.0 62.9 64.4 63.8Trade creditor days 21.6 38.8 38.6 39.3 41.4 37.2 38.2 37.8Cash cycle 79.1 153.4 144.1 105.6 108.0 103.4 104.3 101.5

- 12 December 2012



CSM Please note the disclaime r on the last page of this

A Sure Fire Win

Since announcing its strategic repositioning, the shares gained almost 50%.

More time might be required to sell BS, but we have become more optimistic

regarding the potential for cash returns and new contracts in PLA. Combined

with a target multiple of 7.5x EBITDA for Ingredients, these factors provide

further upside to EUR 20-25.


Fair value Bakery Supplies estimated at EUR 0.8 – 1.2bn

Our base case values BS at EUR 1bn, or 5.4x post synergies, justified by the options CSM has in

selling the assets and the financial and strategic upside for the acquirer. Although we assume

sound interest for the US assets, selling Europe might require more time or an exit in several

pieces. The key risk remains that Bakery is sold for EUR 800m, only 4.4x EBITDA post synergies.

Combined with a target multiple for Ingredients of 7.5x EBITDA, generates a PT of EUR 12.

However, selling below EUR 800m would: (i) provide little comfort for new M&A, (ii) weaken the

position of the team, and thus, (iii) make CSM vulnerable for a hostile take-over or a full break up.

In such event, we apply a target multiple of 10-11x, translating into a SOTP of EUR 17. Our worst

case PT therefore arrives in the midst at c. EUR 14. Our blue sky PT offers 56% upside: (i) Bakery is

sold for EUR 1.2bn, (ii) up to EUR 350m in cash is returned, (iii) Ingredients becomes a prey.

From niche to mainstream in PLA could be imminent

Rumours are that Purac will become a partner of PTT in the development of PLA. Such would be

excellent news, albeit that the market is skeptic given previews delays and disappointments: (i)

how likely is it for PPT and Purac to team up, (ii) how fast will PTT and Purac scale up? For three

reasons, we believe a partnership is realistic: (i) it would provide PTT improved security of supply,

(ii) we hear ongoing rumours that PTT is not satisfied with the quality of the PLA supplied by

Natureworks, while Purac’s PLA would give way to high end applications.

Sequence of triggers for the next 12 months

We anticipate the following triggers: (i) news in Q4 2012 might already provide an indication of

the potential disposal price, followed by a preliminary agreement, (iii) the announcement of a

SBB in H1 2013, (iv) the strategy for the remaining business being presented in H1 2013.

Analysts

Patrick Roquas

+31 (0)30 712 4470

[email protected]

Karel Zoete

+31 (0)30 712 4476

[email protected]


Equity Sales


+ 31 30 216 9101

+31 30 216 9123


CSM

*Rating:B uy (unchanged) *Price as of 05 December 2 012 : EUR 15 .93 (+4.05% )

*Price target: EUR 17.5 0 (unchanged) *EPS 2 012 E: EUR 1.3 6 (unchanged)

Forecast 2011 2012E 2013E 2014E

Sales (EURm) 3,113 3,312 3,388 3,585

EBITDA (EUR m) 223 235 249 265

EBIT before exceptionals (EUR m) -129 137 157 178

Recurring net income (EUR m) -174 59 96 118



P/E 21.8 11.7 10.3 8.2

EV/EBITDA 8.4 7.0 6.3 5.8

FCF Yield (%) 4.0 7.6 11.1 8.5

Dividend Yield (%) 4.4 4.4 4.4 4.4

Rating Buy =



Up-/downside 9.9%

Food Products

Netherlands


EUR 1,114m


261,506

Reuters

CSMNc.AS

Bloomberg

CSM NA

Web site

www.csm.nl

Share Performance

1m 3m 12m

CSM 2.1 18.0 40.4

AMX 0.2 4.6 12.7

Agenda

None --


- 12 December 2012




Financial InformationFiscal year ends 12/2012 2008 2009 2010 2011 2012E 2013E 2014E 2015EIncome Statement (EUR mln)Revenues 2,599 2,556 2,990 3,113 3,312 3,388 3,585 3,725Cost of sales -2,079 -2,045 -2,392 -2,490 -2,650 -2,710 -2,868 -2,980Gross profit 520 511 598 623 662 678 717 745Operating costs N/A N/A N/A N/A N/A N/A N/A N/AEBITDA 192 212 287 223 235 249 265 288Depreciation 59 61 72 72 73 69 66 68EBITA (before exceptionals) 113 151 215 151 162 180 199 220Exceptional items 0 0 -21 -21 -34 -4 0 0Amortisation of goodwill & other ITA -7 -8 -36 -280 -25 -23 -21 -21EBIT 107 143 158 -149 103 153 178 199Net financial result -28 -29 -28 -30 -26 -25 -19 -17Other pre-tax items 0 0 0 0 0 0 0 0EBT 78 114 131 -179 77 128 159 183Income taxes 12 -27 -31 5 -18 -32 -41 -48Minority interests 0 0 0 0 0 0 0 0Other post-tax items / participation 0 0 0 0 0 0 0 0Extraordinary Items & Discontinued Operations 0 0 0 0 0 0 0 0Net income 90 87 99 -174 59 96 118 134Extraordinary Items & Amortisation 0 0 0 0 0 0 0 0Net income recurring (cash) 90 87 99 -174 59 96 118 134Balance Sheet (EUR mln)Cash & Cash equivalents 84 120 119 116 126 193 236 281Current assets 662 554 718 740 736 744 787 817Tangible fixed assets 513 500 575 583 590 592 615 659Goodwill 774 766 1,147 912 928 905 884 863Other Intangible assets 0 0 0 0 0 0 0 0Other non-current assets 74 64 70 64 62 62 62 62Total Assets 2,107 2,004 2,627 2,415 2,443 2,497 2,584 2,683

Short-term debt 5 4 4 5 8 8 8 8Current liabs 473 444 638 623 629 637 655 669Long-term debt 607 445 746 727 723 723 723 723Other non-current liabs 80 111 123 113 107 107 107 107Minority interest 0 0 0 0 0 0 0 0Total equity 942 1,000 1,117 948 976 1,023 1,091 1,176Total liabs & equity 2,107 2,004 2,627 2,415 2,443 2,497 2,584 2,683

Net debt 528 328 631 616 605 538 495 450Invested capital 622 498 532 588 590 593 640 701Invested capital excl. hitorical goodwill 622 498 532 588 590 593 640 701Off balance lease liabilities 70 68 80 83 89 91 96 100Net pension assets 0 0 0 0 0 0 0 0Cash Flow Statement (EUR mln)Operating income 107 143 158 -149 103 153 178 199Depreciation & Amortisation -52 -54 -36 208 -48 -46 -45 -47Other non-cash Items 0 0 0 0 0 0 0 0Change in Working Capital -37 80 21 -40 7 -2 -28 -20Change in Provisions -52 31 12 -10 -6 0 0 0Cash taxes 12 -27 -31 5 -18 -32 -41 -48Cash interest -28 -29 -28 -30 -26 -25 -19 -17Cash impact associates & minorities 0 0 0 0 0 0 0 0Other cash expectionals / cash flow assets held for sale 3 4 5 6 7 8 8 8Operating cash flow 70 271 244 133 164 195 184 211

CAPEX 52 48 146 92 80 72 89 112Acquisitions & Disposals 0 0 0 0 0 0 0 0Other Investments 16 -10 6 -6 -1 0 0 0Cash Flow from Investments 69 38 152 86 79 72 89 112

Cash dividend -54 -57 -44 77 -26 -42 -52 -59Change in Equity 0 0 0 0 0 0 0 0Change in Bank Debt 118 -163 301 -18 -1 0 0 0Other adjustments 0 0 0 0 0 0 0 0Cash Flow from Financing 64 -220 257 59 -26 -42 -52 -59FX effect N/A N/A N/A N/A N/A N/A N/A N/AChange in Cash 62 9 344 100 52 73 36 32

Free Cash Flow -2 229 87 42 79 115 88 92

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- 12 December 2012



Financial InformationFiscal year ends 12/2012 2008 2009 2010 2011 2012E 2013E 2014E 2015EPer share itemsShares outstanding (avg. mln) 61.8 64.8 65.9 67.6 68.8 68.8 68.8 68.8Shares outstanding fully diluted (avg. mln) 61.8 65.0 68.0 68.0 68.0 68.0 68.0 68.0Share price (average) 18.2 12.8 22.6 19.4 15.9 15.9 15.9 15.9

EPS reported 1.46 1.34 1.51 -2.58 0.85 1.40 1.71 1.95EPS recurring 1.86 1.40 1.84 0.89 1.36 1.54 1.94 2.18FCF per share -0.03 3.53 1.34 0.64 1.21 1.77 1.35 1.41Book value per share 15.22 15.42 16.96 14.04 14.18 14.48 21.56 23.72Dividend per share 0.88 0.88 0.90 0.70 0.70 0.70 0.70 0.70% GrowthRevenues 4.6 -1.7 17.0 4.1 6.4 2.3 5.8 3.9Organic revenue growth N/A N/A N/A N/A N/A N/A N/A N/AEBITA 73.2 32.9 42.9 -29.9 7.4 11.2 10.6 10.6Organic EBITA growth N/A N/A N/A N/A N/A N/A N/A N/ANet income recurring -55.6 -3.6 14.4 N/M N/M 64.5 22.5 14.0Dividend per share 0 0 2.3 -22.2 0 0 0 0Margins & returnsGross margin 20.0 20.0 20.0 20.0 20.0 20.0 20.0 20.0EBITDA margin 7.4 8.3 9.6 7.2 7.1 7.4 7.4 7.7EBITA margin (before exceptionals) 4.1 5.6 6.0 -4.1 4.1 4.6 5.0 5.4Net recurring margin 3.5 3.4 3.3 -5.6 1.8 2.8 3.3 3.6

ROE 9.6 8.7 8.9 -18.4 6.0 9.4 10.8 11.4ROIC 20.3 19.8 23.4 -20.3 13.3 19.4 21.7 22.3ROIC excl. historical goodwill 20.3 19.8 23.4 -20.3 13.3 19.4 21.7 22.3EVA spread (ROIC - WACC) 10.7 10.1 13.7 -30.0 3.6 9.8 12.0 12.6ValuationEnterprise Value (mln) 1,654.6 1,158.1 2,101.9 1,874.9 1,640.0 1,572.6 1,530.4 1,485.3

P/E recurring (x) 9.8 9.2 12.3 21.8 11.7 10.3 8.2 7.3P/FCF (x) -570.6 3.6 16.9 30.3 13.2 9.0 11.8 11.3P/B (x) 1.2 1.1 1.0 1.2 1.1 1.1 1.0 0.9Dividend yield (%) 5.5 5.5 5.6 4.4 4.4 4.4 4.4 4.4Free Cash Flow Yield (%) -0.2 22.1 8.4 4.0 7.6 11.1 8.5 8.9

EV/Sales (x) 0.6 0.5 0.7 0.6 0.5 0.5 0.4 0.4EV/EBITDA (x) 8.6 5.5 7.3 8.4 7.0 6.3 5.8 5.1EV/EBITA (x) 15.5 8.1 11.7 -14.5 12.0 10.0 8.6 7.4EV/Invested capital 2.8 2.1 4.1 3.3 2.8 2.7 2.5 2.2EV/FCF (x) -838.2 5.1 24.1 45.1 20.9 13.6 17.4 16.2Leverage & ratiosNet debt/EBITDA 2.8 1.5 2.2 2.8 2.6 2.2 1.9 1.6Interest cover 6.8 7.3 10.4 7.5 9.0 10.0 13.6 17.2Solvency (Equity / Total assets) 44.7 49.9 42.5 39.3 39.9 41.0 42.2 43.8Working capital as % of revenues 7.3 4.3 2.7 3.8 3.2 3.2 3.7 4.0CAPEX/revenues 2.0 1.9 4.9 2.9 2.4 2.1 2.5 3.0Dividend pay-out ratio (%) 60.5 65.7 59.7 -27.1 82.3 50.0 40.8 35.8


- 12 December 2012



Fugro Please note the disclaime r on the last page of this

Turbulent times, but fundamentals unchanged

In our view, the divestment of the majority of the Geoscience division to CGG

improves the business mix. We anticipate that Fugro’s remaining activities will

show robust organic growth in 2013E and beyond. The almost debt free balance

sheet will enable the company to continue with add-on acquisitions and we do

not rule out a modest extra cash pay-out to shareholders. Buy reiterated.


Recent news flow: change at the top and lowering of the FY outlook

In November, Fugro surprised the market with the announcement that CEO Mr. Steenbakker will

leave the company “because of a difference of opinion with respect to the vision regarding the

direction for the company”. Mr. Steenbakker will be replaced by Mr. Van Riel, a Fugro board

member with a strong track record and a background as entrepreneur. In addition, Fugro

lowered its FY net income guidance to EUR 280m (was at least EUR 310m). The new net income

outlook, adjusted for one-off elements, is at least EUR 26m below the former outlook provided

by Fugro. Important to note, the company stated that EUR 15-20m relates to lower utilization

rates for the marine seismic data acquisition vessels, which implies that only EUR 5-10m relates

to the core activities of Fugro (mainly the slow start of Subsea projects in Brazil, part of the

Survey division).

Several eminent triggers for the share price

In our view, there are at least five triggers for the share price: 1) The final close of the divestment

of the majority of the Geoscience division to CGG for EUR 1.2bn. We anticipate more news

before February, 2) Healthy growth of the remaining activities within Fugro. We anticipate an

improvement of the Subsea activities (ROV’s) based on the many tree awards in 2012. Looking to

the past, teh ROV market improves with a time lag of 6-18 months on the actual tree award3)

Solid revenues from the multi-client seismic data library. Many investors are still questioning the

quality of the data library. Fugro indicated that the total book value will be approximately EUR

500m end 2012. 4) Add-on acquisitions. In the past, Fugro added on average 5% to revenues per

annum, and finally 5) We do not completely rule out that Fugro will increase the pay-out to

investors. The company is almost debt free by the end of 2013E, which implies that there is room

to change the dividend policy towards cash only, increase the dividend payout or buy back

shares. We anticipate more news at the publication of the FY results or in August 2013.

Analysts

Michel Aupers

+31 (0)30 712 4462

[email protected]

Micha Tiekink

+31 (0)30 712 4475

[email protected]


Equity Sales


+ 31 30 216 9101

+31 30 216 9123


Fugro

*Rating:B uy (unchanged) *Price as of 10 December 2 012 : EUR 46.3 7 (+1.11% )

*Price target: EUR 60.00 (unchanged) *EPS 2 012 E: EUR 3 .68 (unchanged)

Forecast 2011 2012E 2013E 2014E

Sales (EURm) 2,578 2,904 2,852 3,015

EBITDA (EUR m) 581 677 710 781





P/E 13.4 12.6 11.3 9.9

EV/EBITDA 9.1 6.3 6.1 5.2

FCF Yield (%) -2.0 18.1 11.6 11.2

Dividend Yield (%) 3.2 3.2 3.5 3.9

Rating Buy =



Up-/downside 29.4%

Energy Equipment & Services

Netherlands


EUR 3,774m


555,103

Reuters

FUGRc.AS

Bloomberg

FUR NA

Web site

www.fugro.nl

Share Performance

1m 3m 12m

Fugro -10.8 -7.0 8.2

AEX 3.3 2.2 12.6

Agenda

08 March FY 2012 results


- 12 December 2012


Valuation: FCF yield of 10% in 2013E and beyond

In our view, the valuation of Fugro is very attractive. Looking to price earnings and EV/EBITDA multiples, the

shares are trading slightly below the valuation of many good quality European mid- and small caps and clearly

below the valuation of oil services peers (however, there is not a peer with a comparable activity mix). However,

we conclude that the underlying quality of the assets is clearly above average (see the investment case below).

We conservatively forecast the FCF from the MC data library at EUR 100m per annum for the 2013-2017 period

and estimate the net income generated by the core-activities of Fugro at EUR 280m in 2013E, which implies a FCF

yield above 10%. In addition, we anticipate that there is some room for working capital improvement. However,

at this moment we do not take this into account.

Dependency on economic developments is relatively low

Approximately 75% of Fugro’s activities are related to the oil and gas industry, which implies that global E&P

spend is the main driver for revenue and margin growth. Fugro is generating approximately 25% of revenues

onshore, which is somewhat under pressure due to the budget constraints of governments. However, we

observe that large and complicated infrastructure projects are seen as investments in the future. In addition,

Fugro is good positioned in regions which continue to grow and onshore the company is also active for private

clients which continue to invest.

Investment case: Buy, price target EUR 60

The annual depletion rate of oil reserves is 6-8% and global demand continues to increase by 1.5% We anticipate

that the demand for deep water services (20-25% of Fugro’s total group revenues) is growing even faster. Fugro is

excellently positioned to benefit from the structural growth trend towards deep water oil explorations.

Furthermore, Fugro is a consultant, which implies that its operational risk is much lower than most other oil

services companies. The company is a global market leader in Geotechnical (80% global market share) and Survey

(50% global market share) and Seabed Geophysics (40% global market share, in joint venture with CGG which has

a 40% stake in these activities) In our view, the operational leverage within Fugro is high: we anticipate that an

improved fleet/ROV utilisation will be followed by a more attractive pricing environment. In our view, the outlook

is bright. In addition, Fugro will continue to strengthen its market position by add-on acquisitions (historically

adding on average 5% to group revenues per annum) and we do not rule out that the company will decide to

increase the cash pay out to shareholders. We decided to add Fugro to our conviction buy list, because we

believe that the recent decline of the share price (after the CEO change and lowering of the FY net income

guidance) is overdone. We reiterate our price target at EUR 60.

- 12 December 2012




Financial InformationFiscal year ends 12/2012 2007 2008 2009 2010 2011 2012E 2013E 2014EIncome Statement (EUR mln)Revenues 1,803 2,154 2,053 2,280 2,578 2,904 2,852 3,015Cost of sales 1,363 1,619 1,502 1,719 1,997 2,228 2,141 2,234Gross profit 0 0 0 0 0 0 0 0Operating costs 0 0 0 0 0 0 0 0EBITDA 440 536 551 561 581 677 710 781Depreciation -108 -140 -174 -201 -221 -248 -220 -235EBITA (before exceptionals) 332 395 378 360 360 429 490 546Exceptional items 0 0 0 0 0 0 0 0Amortisation of goodwill & other ITA -7 -9 -10 -8 -11 -11 -10 -10EBIT 325 386 367 351 349 418 480 536Net financial result -35 -7 -28 -22 -43 -57 -49 -43Other pre-tax items 4 5 7 28 29 1 9 11EBT 294 384 347 358 336 362 440 504Income taxes -71 -95 -74 -79 -45 -72 -88 -100Minority interests -6 -6 -10 -8 -8 -8 -30 -35Other post-tax items / participation -0 -0 0 1 5 4 4 4Extraordinary Items & Discontinued Operations 0 0 0 0 0 296 0 0Net income 216 283 263 272 288 582 326 373Extraordinary Items & Amortisation 7 9 10 8 11 -285 10 10Net income recurring (cash) 223 292 274 280 298 297 336 382Balance Sheet (EUR mln)Cash & Cash equivalents 72 113 108 81 170 876 1,082 1,286Current assets 595 668 672 1,052 1,310 1,575 1,394 1,468Tangible fixed assets 599 859 1,043 1,291 1,483 1,190 1,202 1,232Goodwill 408 452 493 576 782 700 690 681Other Intangible assets 0 0 0 0 0 0 0 0Other non-current assets 26 31 51 89 116 69 69 69Total Assets 1,700 2,123 2,366 3,090 3,862 4,410 4,437 4,735

Short-term debt 85 221 193 324 248 150 150 150Current liabs 412 505 453 571 622 669 588 722Long-term debt 450 395 441 591 1,215 1,215 1,050 900Other non-current liabs 47 66 79 81 103 103 102 103Minority interest 7 7 12 15 18 22 35 51Total equity 700 928 1,188 1,508 1,656 2,252 2,512 2,810Total liabs & equity 1,700 2,123 2,366 3,090 3,862 4,410 4,437 4,735

Net debt 463 503 527 833 1,292 489 118 -236Invested capital 1,410 1,703 2,000 2,609 3,223 3,078 2,989 2,960Invested capital excl. hitorical goodwill 784 1,023 1,269 1,787 2,184 2,110 2,022 1,992Off balance lease liabilities 0 0 0 0 0 0 0 0Net pension assets -30 -52 -73 -76 -98 -98 -98 -98Cash Flow Statement (EUR mln)Operating income 325 386 367 351 349 418 480 536Depreciation & Amortisation 115 149 184 210 232 259 230 245Other non-cash Items 0 0 0 22 -5 0 0 0Change in Working Capital -6 70 -46 -244 -286 -219 101 60Change in Provisions -6 19 13 2 4 0 -1 1Cash taxes -71 -89 -92 -98 -72 -72 -88 -100Cash interest -24 -31 -14 -17 -25 -57 -40 -32Cash impact associates & minorities 6 6 10 9 8 12 34 39Other cash expectionals / cash flow assets held for sale 0 0 0 0 0 296 0 0Operating cash flow 329 499 413 231 192 625 669 694

CAPEX -338 -406 -315 -335 -266 46 -232 -265Acquisitions & Disposals 0 0 0 0 -203 0 0 0Other Investments -43 -58 -71 -131 -35 119 0 0Cash Flow from Investments -381 -464 -385 -465 -504 165 -232 -265

Cash dividend -23 -40 -58 -62 -64 -60 -131 -150Change in Equity -23 -67 -2 -10 -80 73 66 75Change in Bank Debt 93 82 18 280 548 -98 -165 -150Other adjustments 6 7 9 0 -2 0 0 0Cash Flow from Financing 52 6 -33 208 401 -84 -231 -225FX effect 0 0 0 0 0 0 0 0Change in Cash 1 41 -5 -26 89 706 206 204

Free Cash Flow -8 94 98 -104 -74 671 437 428

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- 12 December 2012



Financial InformationFiscal year ends 12/2012 2007 2008 2009 2010 2011 2012E 2013E 2014EPer share itemsShares outstanding (avg. mln) 69.6 73.0 76.2 78.4 79.2 80.0 81.4 82.6Shares outstanding fully diluted (avg. mln) N/A N/A N/A N/A N/A N/A N/A N/AShare price (average) 46.2 43.6 31.0 47.0 50.5 46.4 46.4 46.4

EPS reported 3.11 3.88 3.46 3.47 3.63 7.28 4.00 4.52EPS recurring 3.17 3.82 3.55 3.59 3.78 3.68 4.10 4.67FCF per share -0.12 1.28 1.29 -1.32 -0.94 8.39 5.37 5.19Book value per share 10.06 12.71 15.58 19.23 20.91 28.15 30.87 34.03Dividend per share 1.25 1.50 1.50 1.50 1.50 1.50 1.60 1.80% GrowthRevenues 25.7 19.5 -4.7 11.1 13.1 12.7 -1.8 5.7Organic revenue growth 22.9 23.4 -5.6 6.0 7.6 9.1 -15.8 5.7EBITA 52.4 19.1 -4.5 -4.7 0.1 19.2 14.2 11.3Organic EBITA growth 0 0 0 0 0 0 0 0Net income recurring 51.7 31.0 -6.5 2.5 6.4 -0.3 13.0 13.9Dividend per share 50.6 20.0 0 0 0.0 -0.0 6.8 12.3Margins & returnsGross margin 0 0 0 0 0 0 0 0EBITDA margin 24.4 24.9 26.8 24.6 22.5 23.3 24.9 25.9EBITA margin (before exceptionals) 18.0 17.9 17.9 15.4 13.5 14.4 16.8 17.8Net recurring margin 12.4 13.6 13.3 12.3 11.6 10.2 11.8 12.7

ROE 30.9 30.5 22.2 18.0 17.4 25.9 13.0 13.3ROIC 19.2 18.8 15.7 12.0 10.4 10.7 12.7 14.5ROIC excl. historical goodwill 36.0 32.5 25.4 18.1 15.3 15.7 18.7 21.5EVA spread (ROIC - WACC) 10.9 10.5 7.4 3.7 2.1 2.4 4.4 6.2ValuationEnterprise Value (mln) 3,681.6 3,777.2 2,972.0 4,567.1 5,290.3 4,233.9 4,362.1 4,064.2

P/E recurring (x) 14.6 11.4 8.7 13.1 13.4 12.6 11.3 9.9P/FCF (x) -385.3 34.0 24.1 -35.5 -53.9 5.5 8.6 8.9P/B (x) 5.4 4.1 3.2 2.5 2.3 1.7 1.5 1.3Dividend yield (%) 2.7 3.2 3.2 3.2 3.2 3.2 3.5 3.9Free Cash Flow Yield (%) -0.3 2.8 2.8 -2.9 -2.0 18.1 11.6 11.2

EV/Sales (x) 2.0 1.8 1.4 2.0 2.1 1.5 1.5 1.3EV/EBITDA (x) 8.4 7.1 5.4 8.1 9.1 6.3 6.1 5.2EV/EBITA (x) 11.3 9.8 8.1 13.0 15.1 10.1 9.1 7.6EV/Invested capital 2.9 2.4 1.6 2.0 1.8 1.3 1.4 1.4EV/FCF (x) -440.7 40.4 30.3 -44.0 -71.3 6.3 10.0 9.5Leverage & ratiosNet debt/EBITDA 1.1 0.9 1.0 1.5 2.2 0.7 0.2 -0.3Interest cover 12.6 79.7 20.0 25.4 13.7 11.9 14.5 18.1Solvency (Equity / Total assets) 41.2 43.7 50.2 48.8 42.9 51.1 56.6 59.3Working capital as % of revenues 10.2 7.6 11.0 21.7 27.2 31.7 28.8 25.2CAPEX/revenues -18.7 -18.8 -15.3 -14.7 -10.3 1.6 -8.1 -8.8Dividend pay-out ratio (%) 40.2 38.7 43.4 43.2 41.3 20.6 40.0 39.8


- 12 December 2012



ING Group Please note the disclaime r on the last page of this

Positive newsflow to continue

The last few months there has been quite some positive newsflow from ING

Group, and we expect this to continue the next few months. At a PE of 6x and a

moderate risk profile the company is attractively valued. Economic conditions

have some impact on the stock, but ING reduced its PIIGS exposure clearly. The

restructuring might not take as long as the market expects. Buy.


Recent news flow was all positive

11 Oct: ING announced the sale of its Malaysia business for EUR 1.3bn;

19 Oct: ING announced the sale of its Hong Kong, Macau, Thailand business for EUR 1.64bn;

19 Nov: ING reached agreement on an amended EC restructuring plan which prevents that

ING has to sell Westland Utrecht bank and gives it more time for the insurance divestments;

26 Nov: ING paid back EUR 1,125m to the Dutch state, being EUR 750m + 50% penalty.

Many positive triggers for the share price to come

Going forward we expect the following items to be positive for the share price:

Divestment of the South Korean life insurance business for about EUR 1.6bn;

Possible other divestments like the Eastern European Insurance business and maybe the in

the press rumourd Turkey banking business (both are our view, and are not based on ING’s

statements);

Continuing good earnings figures, mostly driven by the bank operations;

Upstreaming of the cash flow and divestment proceeds will clearly reduce the remaining

EUR 7bn holding debt increasing the chance for a spin off, and increasing transparency;

Starting of the US Insurance IPO process in 13Q1 to be executed in 13Q2.

Valuation attractive at PE of 6

ING Group’s valuation is actually not so difficult as by end 2013 the current excess capital +

retained profits + divestment proceeds are estimated to be enough to fully redeem the holding

debt and government capital. So the remaining business is the bank plus the Dutch insurer

which generate an EPS14 of EUR 1.15 which is a PE of 6.3x for a company which is for 90% a bank

and 10% a Dutch insurer. This is quite attractively valued. Maybe the growth of the business is

not so high as other financials, but a bank in the more stable Benelux market with 80% of the

revenues from the understandable net interest income is also attractive in this respect.

Analysts

Cor Kluis

+31 (0)30 712 4467

[email protected]


Equity Sales


+ 31 30 216 9101

+31 30 216 9123


IN G Group

*Rating:B uy (unchanged) *Price as of 06 December 2 012 : EUR 7.19 (+0.8 4% )

*Price target: EUR 9.5 0 (unchanged) *EPS 2 012 E: EUR 0.92 (unchanged)

Forecast 2011 2012E 2013E 2014E

Net income (EURm) 3,796.2 3,464.1 4,614.6 4,921.2

EPS Reported New 1.00 0.92 1.22 1.30

EPS Reported Old 1.00 0.92 1.22 1.30

Dividend per share 0 0 0 0.20

Book value per share 10.13 10.06 11.28 12.38

P/E 7.2 7.9 5.9 5.5

P/B 0.7 0.7 0.6 0.6

Dividend Yield (%) 0 0 0 2.8

Rating Buy =



Up-/downside 32.2%

Diversified Financials

Netherlands


EUR 27,532m


20,262,386

Reuters

ING.AS

Bloomberg

INGA NA

Web site

www.ing.com

Share Performance

1m 3m 12m

ING Group 4.5 12.6 14.1

AEX 1.2 1.4 12.0

Stoxx 600 Insurance 3.7 8.0 26.9

Agenda

None --


- 12 December 2012


Dependency on economic developments

As being mostly a Benelux bank the economic conditions in the Benelux are important for ING Group.

Although also in the Benelux there is an impact of the European austerity measures, the conditions in the

Benelux are better than in most of Europe.

The Euro developments are important for ING Group as it has some banking activities in Southern Europe

(ING Direct Spain and Italy). ING has been actively reducing their net funding exposure towards Spain to EUR

11bn end October (from EUR 22bn end 2011) and we expect this to decline to EUR 5bn end 2013. The net

funding exposure of ING Italy was EUR 7bn end 12Q3.

The general economic and capital market sentiment has some influence on the prices ING can receive for

exiting the insurance operations. However, this is mitigated as ING has extra time to do the divestments

under the adjusted European Commission agreeement.

Wild card: the restructuring does not have to take many years

The market has been expecting that ING remains a restructuring story for quite a few years because the European

Commission has given ING Group more time for the insurance divestments. However, we believe that if market

conditions enable it, that ING will still finish the restructuring as soon as possible. The extra time improves the

negotiation position of ING Group, as it does not have to make the divestments deals if the price and terms are

not satisfactory.

- 12 December 2012




05 06 07 08 09 10 11 12E 13E 14E 15E

ING Insurance

Life 2,647 3,509 5,009 -1,691 -670 -948 -34 357 1,237 1,321 1,409

Non-life 1,331 1,377 1,144 470 266 244 171 45 185 192 199

Combined ratio 94.6% 90.4% 97.1% 96.5% 101.5% 100.5% 100.5% 99.5% 99.5% 99.5% 99.5%

Asset management 169 212 207 219 229 239

Profit before tax insurance 3,978 4,886 6,152 -1,221 -404 -535 349 609 1,641 1,741 1,846

ING Bank

Interest 9,162 9,334 9,063 11,084 12,539 13,420 13,491 12,022 11,627 12,151 12,573

(% of average RWAs) 3.1% 2.9% 2.6% 3.0% 3.7% 4.1% 4.1% 3.9% 4.0% 4.0% 4.0%

Commission 2,401 2,675 2,927 2,896 2,678 2,628 2,484 2,164 2,238 2,337 2,439

Other revenues 2,285 2,191 2,627 -2,249 -1,904 1,281 219 921 1,316 1,112 1,113

Total income 13,848 14,200 14,617 11,731 13,313 17,329 16,194 15,107 15,181 15,600 16,125

Total costs 8,844 9,063 9,521 10,003 10,134 9,712 9,668 8,715 8,709 8,883 9,218

Gross profit 5,004 5,137 5,096 1,728 3,179 7,617 6,526 6,393 6,472 6,716 6,907

Addition to loan loss provision 88 103 125 1,280 2,972 1,751 1,670 2,072 1,394 1,298 1,334

Profit before tax 4,916 5,034 4,971 448 207 5,866 4,856 4,321 5,077 5,418 5,572

ING Group

Commercial Banking (excl. real estate) 2,028 1,856 1,736 907 2,083 2,379 2,048 1,909 2,472 2,482 2,485

Real estate 631 664 -297 -1,388 -40 66 0 0 0 0

Retail Banking 1,815 1,932 2,062 1,688 1,536 2,177 1,967 1,967 2,252 2,390 2,476

ING Direct 617 717 531 -1,123 -666 1,450 999 493 583 788 854

Other banking 107 -102 -22 -727 -1,358 -99 -223 -48 -230 -242 -242

Insurance Europe 2,021 2,328 1,882 650 649 1,029 541 257 1,108 1,150 1,194

Insurance Americas 1,986 1,992 2,058 -517 68 -1,145 -574 408 786 833 883

Insurance Asia/Pacific 452 609 575 116 245 519 588 250 0 0 0

Asset management 0 0 0 0 0 169 212 207 219 229 239

Other insurance -481 -53 1,637 -1,471 -1,378 -1,107 -417 -513 -472 -471 -470

Group pre-tax profit 8,545 9,910 11,123 -774 -209 5,332 5,207 4,929 6,719 7,159 7,419

ING Group

ING Insurance 3,978 4,886 6,152 -1,221 -404 -535 349 609 1,641 1,741 1,846

ING Bank 4,916 5,034 4,971 448 207 5,866 4,856 4,321 5,077 5,418 5,572

Profit before tax 8,894 9,920 11,123 -773 -197 5,331 5,205 4,929 6,719 7,159 7,419

Taxation -1,930 -2,193 -2,268 577 149 -1,355 -1,329 -1,349 -2,016 -2,144 -2,218

Third-party interests -305 -341 -267 37 119 -100 -82 -116 -88 -94 -97

Dividend on core tier 1 capital + yield on this cash -425

Operational net profit (from 2005 net profit) 6,659 7,386 8,588 -159 -355 3,876 3,794 3,464 4,615 4,921 5,104

Insurance cleaning

-/- insurance equity capital gains/losses 532 761 2,714 -558 -331 164 110 159 100 100 100

-/- insurance real estate capital gains/losses 217 286 156 -315 -337 -38 -12 -48 86 87 88

-/- Capital gains fixed income (insurance) 98 -7 -33 0 0 163 165 73 93 95 95

-/- Release provisions insurance 69 131 67 32 0 123 -91 -20 0 0 0

-/- Derivatives that do not qualify for hedge accounting 23 44 -83 -338 53 199 25 -606 0 0 0

-/- Estimated one time tax effect 400 115 50 0 0 40 135 172 0 0 0

DAC write offs (25% tax) 0 9 0 767 475 1,223 1,069 -83 0 0 0

Minimum guarantees (27% tax) (insurance) 0 0 0 58 -8 347 0 0 0 0 0

Bond defaults (27% tax) 1 8 49 750 358 477 830 44 180 185 190

Extra provision/charges in insurance 20 44 58 0 225 37 -36 169 0 0 0

Bank cleaning

-/- Capital gains fixed income (bank) 40 65 57 -1,680 -1,072 -6 -501 -204 0 50 60

-/- Capital gains equities (bank) 113 119 292 -264 -25 113 35 15 62 62 62

-/- Revaluations real estate (bank) 42 47 66 -491 -506 -72 -34 -18 0 0 80

-/- Derivatives that do not qualify for hedge accounting 96 53 4 -156 0 4 92 -302 0 0 0

-/- Release of provision 0 46 0 0 0 0 0 25 0 0 0

-/- Estimated one time tax effect 173 30 90 0 26 0 0 0 0 0 0

Cost provision bank 135 144 67 -16 628 21 32 0 0 0 0

Cleaned net group profit 4,631 5,942 5,381 5,169 3,505 5,100 5,764 4,025 4,453 4,713 4,811

Tax rate 21.7% 22.1% 20.4% 74.6% 75.3% 25.4% 25.5% 27.4% 30.0% 29.9% 29.9%

Average number of shares (m) 3,071 3,048 3,030 2,905 3,095 3,784 3,784 3,785 3,785 3,785 3,785

EPS (EUR) 2.17 2.42 2.83 -0.05 -0.11 1.02 1.00 0.92 1.22 1.30 1.35

Dividend per share 0.83 0.93 1.05 0.52 0.00 0.00 0.00 0.00 0.00 0.20 0.30

RWA Bank 319,653 314,286 387,206 343,387 332,374 321,101 330,420 283,878 297,425 309,500 322,923

Value adj. To receivables / avg RWA 0.03% 0.03% 0.04% 0.35% 0.88% 0.54% 0.51% 0.67% 0.48% 0.43% 0.42%

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- 12 December 2012



Valuation of ING Group (estimated after exiting the insurance business) (EUR m)

base case fair

value

15% discount

on insurance

fair value

30% discount

on insurance

fair value

Net profit ING bank 2014E 3,641 3,641 3,641

-/- Est. net profit effect of Westland Utrecht divestment -30 -30 -30

+/+ Est. net profit effect of redemption of holding leverage (est 3% interest cost) 169 169 169

Net profit of the new recurring ING bank 2014E 3,780 3,780 3,780

+/+ Net profit of Dutch insurance activities 657 559 460

Net profit new ING after transactions 2014E 4,437 4,339 4,240

Number of shares (m) 3 ,784 3,784 3,784

EPS 2014E (EUR) 1.17 1.15 1.12

Share price (EUR) 7.22 7.22 7.22

PE 2014 6.2 6.3 6.4

- 12 December 2012



Reed Elsevier Please note the disclaime r on the last page of this

Risk on the upside

Reed Elsevier is a Conviction Buy as we continue to see room for small EPS

upgrades due to (1) Growth acceleration for the Risk Solutions business; (2)

Additional share buy backs; (3) Balance sheet refinancing benefits; (4)

Continuing operational improvements. We also believe that the open access

threat is clearly manageable for the Science & Technology unit.


50bpos lower interest rate benefit

The refinancing of the balance sheet through redeeming the expensive Choicepoint debt (8.0-

8.5% rates) and issuing new debt at much lower rates (2.8%!) will bring the blended interest

percentage down with 50bps in 2013. Reed Elsevier’s gross debt stood at EUR 4.8bn at 30 June

2012, so this could lead to EUR 20-25m lower interest charges in 2013.

Room for even more cash returns in 2013

Due to higher disposal proceeds as a result of the Variety transaction and some other small

disposals, Reed raised the amount of share buy backs in 2012 towards EUR 310m, up from EUR

193m previously. Given the de-leveraging of the balance sheet, the highly FCF generative

character of the business and the focus on organic growth, we expect to see a more positive

stance towards share buy-backs out of the FCF in the next 6-12 months. At the interims leverage

stood at 2.3x on a pension and lease adjusted basis. We believe there is potential room for a EUR

500m SBB program in 2013.

Acceleration Risk business is a key positive

As expected Reed Elsevier reaffirmed the 2012FY forecasts. A key positive was that the high-

margin Risk business accelerated in terms of growth from 5% in 12H1 towards 7% in 12Q3 (Rabo

12Q3 estimate: 5%). Organic growth trends for Legal (+ 1%), STM (+ 2%) and Reed Exhibitions (+

7%) were in line with our expectations.

Analysts

Hans Slob

+31 (0)30 712 4472

[email protected]

Philip Scholte

+31 (0)30 712 4471

[email protected]


Equity Sales


+ 31 30 216 9101

+31 30 216 9123


Reed Elsevier

*Rating:B uy (unchanged) *Price as of 05 December 2 012 : EUR 11.3 0 (+0.53% )

*Price target: EUR 12 .00 (unchanged) *EPS 2 012 E: EUR 0.95 (unchanged)

Forecast 2011 2012E 2013E 2014E

Sales (EURm) 6,902 7,509 7,633 7,950

EBITDA (EUR m) 2,108 2,359 2,487 2,643

EBIT before exceptionals (EUR m) 1,457 1,683 1,768 1,873

Recurring net income (EUR m) 1,219 1,387 1,477 1,568



P/E 10.7 11.8 11.2 10.5

EV/EBITDA 8.1 8.0 7.7 7.1

FCF Yield (%) 8.0 6.9 8.5 9.8

Dividend Yield (%) 3.9 4.3 4.5 4.7

Rating Buy =



Up-/downside 6.2%

Media

Netherlands


EUR 8,193m


2,166,412

Reuters

ELSN.AS

Bloomberg

REN NA

Web site

www.reed-elsevier.com

Share Performance

1m 3m 12m

Reed Elsevier 7.3 6.1 29.8

AEX 1.1 3.0 11.1

Agenda

None --


- 12 December 2012


Steady growth for Science & Technology

RBI continued to grow 1% in 12Q3 (Rabo estimate: - 1%) in spite of weakness for US construction related data

services and weakening print advertising trends (13% of RBI sales). With the fast growing Accuity business

becoming part of organic growth from 2013 onwards, the RBI growth profile will further shift towards fast

growing data services and analytics.

In spite of the open access threat, Science & Technology continued to show healthy 5% organic sales growth in

12Q3. Double digit growth for usage and article submissions continued. Health Sciences remained a flat liner, as

growth for medical research and e-tools was offset by lower medical print book sales and a decrease for the

pharma promotional business. Due to the reorganized management structure with Ron Mobed now also

responsible for Health, we hope to see a sale of the pharma promotional business in order to improve the growth

and margin profile of Health.

In a flat market, Legal continued to grow 1% in 12Q3. We estimate that the North American business grew 1-2%

organically, with Europe being flat to slightly down. This is a major outperformance when compared to Wolters

Kluwer, which saw its sales falling 7-8% in 12Q3 for Legal & Regulatory Europe.

The LexisNexis Legal & Professional CMD in London confirmed our view that that organic growth and margins

will recover slowly and that capital expenditure has peaked for this division (27% of sales; 14% of EBITA).

Management expects to see recovery of the business in line with GDP growth, but was not willing to make any

statements about whether it expects to be able to gain share after the massive investment program in recent

years. Growth is gradually returning back to the business. After 5% and 2% organic sales declines in 2009/2010,

the business returned to 1% growth in 2011 and 12H1. Some 60% of the business is now coming from Legal

Digital Solutions which is growing low to mid-single digits. The other 40% of the business (print information;

news & business; directory listings) is declining low to mid-single digits. After a period of underinvestment in the

2007/2008 period, capital expenditure has been ramped up from 4% of sales in 2008 towards 12% of sales in

2011. It has now peaked and it is expected to level off in the medium term towards high single digits as

percentage of sales.

As we expected organic growth (ex biennial cycling) for Reed Exhibitions decelerated from 8% in 12H1 towards

6% in 12Q3. Growth in Europe (48% of sales) is slowing down mainly due to increasing weakness in France lately,

which is the largest single country in Europe. Double-digit growth outside the US and Europe continued.

Compelling 8.5% FCF yield

The 8.5% FCF yield remains compelling. Quick de-leveraging of the balance sheet resulting from strong FCF

generation and subdued acquisition activity create ample room for additional cash return in 2013/2014 on top of

the solid dividend (4.5% yield).

- 12 December 2012




Financial InformationFiscal year ends 12/2012 2007 2008 2009 2010 2011 2012E 2013E 2014EIncome Statement (EUR mln)Revenues 6,694 6,721 6,800 7,084 6,902 7,509 7,633 7,950Cost of sales N/A N/A N/A N/A N/A N/A N/A N/AGross profit N/A N/A N/A N/A N/A N/A N/A N/AOperating costs N/A N/A N/A N/A N/A N/A N/A N/AEBITDA 1,876 1,948 2,008 2,096 2,108 2,359 2,487 2,643Depreciation -216 -211 -250 -277 -238 -263 -305 -358EBITA (before exceptionals) 1,660 1,737 1,758 1,819 1,870 2,096 2,181 2,286Exceptional items 0 0 0 0 0 0 0 0Amortisation of goodwill & other ITA -378 -412 -610 -408 -413 -413 -413 -413EBIT 1,282 1,325 1,148 1,411 1,457 1,683 1,768 1,873Net financial result -203 -219 -326 -326 -270 -264 -229 -212Other pre-tax items 0 0 0 0 0 0 0 0EBT 1,079 1,106 822 1,085 1,187 1,420 1,540 1,661Income taxes -344 -355 -328 -339 -373 -440 -469 -498Minority interests -4 -5 -4 -7 -8 -6 -7 -8Other post-tax items / participation 267 0 0 0 0 0 0 0Extraordinary Items & Discontinued Operations 0 -153 -53 19 68 0 0 0Net income 998 593 437 758 874 974 1,064 1,155Extraordinary Items & Amortisation 428 565 663 389 345 413 413 413Net income recurring (cash) 1,426 1,158 1,100 1,147 1,219 1,387 1,477 1,568Balance Sheet (EUR mln)Cash & Cash equivalents 3,355 386 822 868 871 1,928 2,256 2,712Current assets 1,929 2,094 2,058 2,149 2,187 2,294 2,332 2,429Tangible fixed assets 325 339 327 341 346 519 633 673Goodwill 6,189 9,584 8,928 9,241 9,867 9,454 9,041 8,628Other Intangible assets 0 0 0 0 0 0 0 0Other non-current assets 1,059 848 559 456 533 533 533 533Total Assets 12,857 13,251 12,694 13,055 13,804 14,728 14,795 14,975

Short-term debt 1,533 461 759 604 1,178 1,178 1,178 1,178Current liabs 4,672 5,475 4,993 5,350 5,614 5,620 5,689 5,864Long-term debt 2,723 5,865 4,511 4,430 3,960 3,960 3,960 3,960Other non-current liabs 209 425 446 366 395 401 403 408Minority interest 15 15 15 0 0 4 0 0Total equity 3,705 1,010 1,970 2,305 2,657 3,565 3,565 3,565Total liabs & equity 12,857 13,251 12,694 13,055 13,804 14,728 14,795 14,975

Net debt 901 5,940 4,448 4,166 4,267 3,210 2,882 2,426Invested capital 13,682 17,490 17,739 18,172 19,078 19,352 19,435 19,397Invested capital excl. hitorical goodwill -1,473 -1,472 -1,177 -1,465 -1,598 -1,324 -1,241 -1,279Off balance lease liabilities 0 0 0 0 0 0 0 0Net pension assets -181 -537 -386 -263 -290 -290 -290 -290Cash Flow Statement (EUR mln)Operating income 1,282 1,325 1,148 1,411 1,457 1,683 1,768 1,873Depreciation & Amortisation 594 623 860 685 651 676 718 771Other non-cash Items 0 0 0 0 0 0 0 0Change in Working Capital 1,295 13 -301 296 138 -101 31 78Change in Provisions -172 216 21 -80 29 6 2 5Cash taxes -344 -355 -328 -339 -373 -440 -469 -498Cash interest -203 -219 -326 -326 -270 -264 -229 -212Cash impact associates & minorities 271 5 4 7 8 6 7 8Other cash expectionals / cash flow assets held for sale 0 -153 -53 19 68 0 0 0Operating cash flow 2,398 2,075 876 1,636 1,788 1,561 1,822 2,016

CAPEX 212 217 271 364 403 436 420 398Acquisitions & Disposals -2,748 3,037 0 0 0 0 0 0Other Investments N/A N/A N/A 1,286 N/A N/A N/A N/ACash Flow from Investments -2,536 3,254 271 1,650 403 436 420 398

Cash dividend -700 -573 -550 -600 -640 -693 -739 -784Change in Equity -1,061 36 1,000 0 297 -310 0 0Change in Bank Debt -223 2,070 -1,056 -236 104 0 0 0Other adjustments -9 -5 -4 -22 -8 -3 -11 -8Cash Flow from Financing -1,993 1,528 -610 -858 -247 -1,006 -749 -791FX effect 0 0 0 0 0 0 0 1Change in Cash 1,458 -1,056 450 562 422 417 644 814

Free Cash Flow 1,828 1,963 873 1,382 1,319 1,126 1,402 1,619

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- 12 December 2012



Financial InformationFiscal year ends 12/2012 2007 2008 2009 2010 2011 2012E 2013E 2014EPer share itemsShares outstanding (avg. mln) 1,642.0 1,420.0 1,390.0 1,466.8 1,466.8 1,452.2 1,458.0 1,463.8Shares outstanding fully diluted (avg. mln) 1,642.0 1,420.0 1,390.0 1,466.8 1,466.8 1,452.2 1,458.0 1,463.8Share price (average) 13.5 11.0 8.2 9.1 8.9 11.3 11.3 11.3

EPS reported 0.61 0.42 0.31 0.52 0.60 0.67 0.73 0.79EPS recurring 0.88 0.87 0.79 0.78 0.83 0.95 1.01 1.07FCF per share 1.13 1.48 0.63 0.94 0.90 0.78 0.96 1.11Book value per share 2.29 0.76 1.42 1.57 1.81 2.45 2.45 2.44Dividend per share 0.43 0.40 0.40 0.41 0.44 0.49 0.51 0.54% GrowthRevenues -15.6 0.4 1.2 4.2 -2.6 8.8 1.7 4.1Organic revenue growth 5.8 4.0 -6.0 2.0 1.7 3.9 2.0 4.2EBITA -6.7 4.7 1.2 3.5 2.8 12.1 4.1 4.8Organic EBITA growth N/A N/A N/A N/A N/A N/A N/A N/ANet income recurring 16.9 -18.8 -5.0 4.3 6.3 13.8 6.5 6.2Dividend per share 3.3 -5.3 -1.9 3.4 6.7 11.7 3.9 5.7Margins & returnsGross margin N/A N/A N/A N/A N/A N/A N/A N/AEBITDA margin 28.0 29.0 29.5 29.6 30.5 31.4 32.6 33.3EBITA margin (before exceptionals) 19.1 19.7 16.9 19.9 21.1 22.4 23.2 23.6Net recurring margin 21.3 17.2 16.2 16.2 17.7 18.5 19.4 19.7

ROE 26.9 58.7 22.2 32.9 32.9 27.3 29.8 32.4ROIC 8.4 8.5 7.7 7.8 7.7 8.3 8.5 8.9ROIC excl. historical goodwill -165.5 -90.4 -102.4 -106.4 -93.6 -109.0 -129.3 -137.9EVA spread (ROIC - WACC) 0.3 0.5 -0.4 -0.2 -0.4 0.3 0.5 0.9ValuationEnterprise Value (mln) 22,054.6 19,886.1 16,105.9 17,267.0 17,049.7 18,985.1 19,050.6 18,660.8

P/E recurring (x) 15.3 12.6 10.3 11.6 10.7 11.8 11.2 10.5P/FCF (x) 12.0 7.4 13.0 9.7 9.9 14.6 11.8 10.2P/B (x) 2.2 8.1 4.2 3.6 3.1 2.3 2.3 2.3Dividend yield (%) 3.8 3.6 3.5 3.6 3.9 4.3 4.5 4.7Free Cash Flow Yield (%) 10.0 13.1 5.6 8.3 8.0 6.9 8.5 9.8

EV/Sales (x) 3.3 3.0 2.4 2.4 2.5 2.5 2.5 2.3EV/EBITDA (x) 11.8 10.2 8.0 8.2 8.1 8.0 7.7 7.1EV/EBITA (x) 17.2 15.0 14.0 12.2 11.7 11.3 10.8 10.0EV/Invested capital 1.5 1.3 0.9 1.0 0.9 1.0 1.0 1.0EV/FCF (x) 12.1 10.1 18.4 12.5 12.9 16.9 13.6 11.5Leverage & ratiosNet debt/EBITDA 0.5 3.0 2.2 2.0 2.0 1.4 1.2 0.9Interest cover 9.2 8.9 6.2 6.4 7.8 8.9 10.9 12.5Solvency (Equity / Total assets) 28.8 7.6 15.5 17.7 19.2 24.2 24.1 23.8Working capital as % of revenues -26.9 -26.9 -22.2 -25.5 -28.2 -24.5 -24.5 -24.5CAPEX/revenues 3.2 3.2 4.0 5.1 5.8 5.8 5.5 5.0Dividend pay-out ratio (%) 70.1 96.7 125.8 79.1 73.2 72.7 69.4 67.9

Inventory period days 35.7 19.7 17.9 14.8 13.1 11.4 11.7 11.5Trade debtor days 101.2 89.5 91.4 87.5 92.7 88.5 89.8 88.7Trade creditor days 151.5 150.0 150.8 149.2 164.2 159.8 163.3 161.3Cash cycle -14.6 -40.8 -41.5 -46.9 -58.5 -59.8 -61.8 -61.1

- 12 December 2012



TomTom Please note the disclaime r on the last page of this

A sweet Apple?

Due to the problems of Apple with its mapping app, we see a 30% chance on a

take-out by Apple for EUR 9-10 per share. Just as Nokia acquired Navteq, we

believe Apple needs to go “all in” with mapping through acquiring TomTom.

Our stand alone value is EUR 4.20 per share. As we incorporate a 30% chance on

a take-out at EUR 9-10, we lift our SPT from EUR 4.20 EUR 5.80 (> 50% upside).


Apple might have to go “all in” with mapping

Just as Nokia acquired Navteq, Apple might have to go “all in” with mapping technology

through acquiring TomTom. Because of Apple’s major issues with its mapping app, we see an

increasing logic for a complete tie-up between Apple and TomTom.

Ten reasons for Apple to consider an acquisition of TomTom

We see ten reasons for Apple to consider an acquisition of TomTom: 1) Crowd-surfing

functionality (Mapshare). TomTom has the procedures and tools (MapShare) in place to make

map corrections faster than Apple can. 2) Apple has not enough mapping experts to solve its

issues quickly. 3) TomTom HD Traffic is an excellent differentiator to improve the map

functionality. 4) Apple can leverage TomTom POI database outside USA; 5) Apple could use IQ

routes, as Apple has limited historical traffic data. 6) Sharing of source codes to faster develop

apps and location based services; 7) Faster map updates; 8) Entry into leading carmakers; 9)

Apple needs the know-how of TomTom; 10) It’s a royal way out for the four TomTom founders.

2013 will not be an exciting year

The year 2013 will not be an exciting year, as the outlook for the Consumer and Automotive

units are rather bleak. We therefore lower our 2013 EPS Recurring forecast from EUR 0.43.

towards EUR 0.35 (flat EPS scenario). Medium term prospects are clearly positive as we see good

upside potential for the gross margins from 14H2 onwards when the high-margin PSA contract

will start to contribute.

Analysts

Hans Slob

+31 (0)30 712 4472

[email protected]


Equity Sales


+ 31 30 216 9101

+31 30 216 9123


TomTom

*Rating:B uy (unchanged) *Price as of 11 December 2 012 : EUR 3 .8 4 (+1.40% ) *Price target: EUR 5 .8 0 (upgraded from EUR 4.2 0)

*EPS 2 012 E: EUR 0.35 (downgraded from EUR 0.3 7)

Forecast 2011 2012E 2013E 2014E

Sales (EURm) 1,273 1,061 987 990

EBITDA (EUR m) 214 162 157 171





P/E 8.5 10.9 11.0 9.3

EV/EBITDA 5.7 5.9 5.6 4.5

FCF Yield (%) 16.9 7.8 7.6 11.9

Dividend Yield (%) 0 0 0 0

Rating Buy =

Price target (12m) EUR 5.80p


Up-/downside 50.9%

Communications Equipment

Netherlands


EUR 853m


1,641,119

Reuters

TOM2.AS

Bloomberg

TOM2 NA

Web site

www.tomtom.com

Share Performance

1m 3m 12m

TomTom 3.7 0.2 28.9

AEX 3.7 2.4 13.0

Agenda

None --


- 12 December 2012


Apple-TomTom relationship likely to grow

TomTom’s strategic direction is clear: reduce PND exposure, license more technology and maps, strengthening

ties with automotive OEM’s, capture the traffic technology opportunity (HD traffic). What remains unclear is the

direction and future of TomTom’s relationship with Apple. On June 2012 TomTom signed a partnership

agreement with Apple. The TomTom-Apple license partnership is very secretive. Nobody wants to tell what

TomTom exactly is actually licensing to Apple. Nor is there any information about the pricing or the business

model. What we have understand is that TomTom’s revenues from Apple are for a large part a fixed sum and that

a small part is more volume based.

Apple under high pressure to fix its mapping issues

During our recent meetings with TomTom management the company did not want to go much deeper into

TomTom’s relationship with Apple. TomTom stated that it is selling maps and other content to Apple, and that

TomTom has people working for the Apple mapping team. The recent departure of Apple’s head of software

development and its head of mapping software highlights the enormous challenges Apple has with its heavily

criticized mapping application. Apple management is under strong pressure to deliver a quick fix for its mapping

software issues. So we conclude that Apple has a major mapping problem and that it has to do everything it can

to make the maps app better. In light of Apple’s failure to produce a mapping application that delivers the

content and accuracy expected by the millions of iPhone users, there is one move which Apple could made now

in our view: acquire TomTom. The best way to acquire a high number of quality professionals needed is to make

a wholesale purchase of its primary mapping supplier. Just as Nokia acquired NAVTEQ, we believe that Apple

needs to go “all in” with mapping technology through acquiring TomTom. When it comes to wrong or

incomplete map data, a lot of the problem wasn't that Apple didn't have the data, rather it wasn't integrating it

correctly. Often the underlying TomTom map had the correct data, but Apple have overlaid incorrect information

from third party sources. Owning TomTom will help this process as its has the experience to correctly integrate

data from a number of different sources.

Apple can fully monetize TomTom’s maps

Since the maps fiasco, Apple’s share price fell from a level of USD 705 towards a current level of USD 540, this

reflects a market cap loss of USD 155bn. Of course one cannot completely attribute this loss to the failed launch

of the Apple map application. Still, the maps failure and the public apologies from CEO Tim Cook from Apple has

lowered investor’s confidence in the company. The economic rationale of the deal is clear: TomTom is unable to

fully monetize its mapping assets and expertise as a standalone company. However, Apple can monetize the

maps across hundreds of millions of users worldwide. Therefore the earnings potential of the maps is much

higher for Apple than for TomTom.

Buy TomTom, keep the maps, sell the remainder back to the founders

Is unlikely that Apple would pay the EUR 2.9bn for the maps, as TomTom did when it bought TeleAtlas after the

bidding war with Garmin. Since the acquisition of TeleAtlas it has wrote down EUR 1bn of the value in 2010. As it

was originally was acquired for EUR 2.9bn, we believe that TomTom would ask at least EUR 1.9bn for its mapping

unit. In our view the most easy way for Apple to gain control of TomTom’s valuable maps would be to make a

knock-out cash bid for the entire company. Following the completion of the acquisition, it could then sell the

assets which have no value for Apple back to the TomTom founders and/or private equity. After the sale to Apple,

TomTom will take a long term map license from Apple as it of course needs the map data for the PND,

Automotive and Fleet Management businesses. This would be the same situation as Garmin which is licensing its

map data from Navteq (Nokia).

- 12 December 2012


How much is TomTom worth to Apple?

Since the maps fiasco, Apple’s share price fell from a level of USD 705 towards a current level of USD 540, this

reflects a market cap loss of USD 155bn. Of course one cannot completely attribute this loss to the failed launch

of the Apple map application. Still, the maps failure and the public apologies from CEO Tim Cook from Apple has

lowered investor’s confidence in the company. The economic rationale of a deal is pretty straightforward:

TomTom is unable to fully monetize its mapping assets and expertise as a standalone company. However, Apple

can monetize the maps across hundreds of millions of iOS users worldwide. Therefore the revenue potential of

the maps is much higher for Apple than for TomTom. We believe that Apple could be willing to pay EUR 2bn

(USD 2.6bn) for the maps, the mapping expertise and all the mapping employees, and EUR 300-500m for the

other parts (PND, Webfleet and Automotive). For Apple, EUR 2bn represents 2% of its USD 125bn war chest and

6% of its USD 47bn estimated free cash flow for the current book year.

- 12 December 2012




Financial InformationFiscal year ends 12/2012 2007 2008 2009 2010 2011 2012E 2013E 2014EIncome Statement (EUR mln)Revenues 1,737 1,748 1,480 1,521 1,273 1,061 987 990Cost of sales -973 -893 -749 -777 -634 -525 -484 -480Gross profit 764 855 731 744 640 536 504 510Operating costs -360 -1,581 -510 -558 -552 -483 -454 -445EBITDA 418 394 324 287 214 162 157 171Depreciation -7 -17 -20 -15 -34 -27 -25 -24EBITA (before exceptionals) 411 377 304 272 180 135 132 147Exceptional items 0 0 0 0 0 0 0 0Amortisation of goodwill & other ITA -17 -1,095 -75 -78 -85 -83 -83 -83EBIT 411 -726 221 186 87 53 49 65Net financial result 19 -52 -71 -35 -16 -13 -11 -8Other pre-tax items -16 59 -39 -17 -0 0 0 0EBT 415 -720 111 134 71 39 39 57Income taxes -114 -78 -25 -26 2 -9 -9 -12Minority interests 0 -1 -0 -0 -1 -1 -1 -1Other post-tax items / participation 0 0 0 0 0 0 0 0Extraordinary Items & Discontinued Operations -17 88 -17 0 0 0 0 0Net income 317 -873 87 108 -438 30 29 43Extraordinary Items & Amortisation -1 1,183 58 48 560 49 49 49Net income recurring (cash) 316 311 145 156 122 78 78 92Balance Sheet (EUR mln)Cash & Cash equivalents 463 321 368 306 194 269 349 463Current assets 591 488 397 447 304 240 233 234Tangible fixed assets 18 53 43 39 33 56 81 107Goodwill 0 855 855 855 382 299 216 134Other Intangible assets 0 0 0 0 0 0 0 0Other non-current assets 897 1,050 1,022 976 886 886 886 886Total Assets 1,970 2,767 2,686 2,623 1,799 1,751 1,767 1,824

Short-term debt 0 147 201 204 384 384 384 384Current liabs 575 804 820 842 656 577 550 551Long-term debt 0 1,242 588 384 0 0 0 0Other non-current liabs 42 60 59 52 50 42 39 40Minority interest 0 5 0 0 0 3 4 6Total equity 1,352 508 1,018 1,142 708 745 790 845Total liabs & equity 1,970 2,767 2,686 2,623 1,799 1,751 1,767 1,825

Net debt -463 1,067 421 282 190 115 35 -79Invested capital 48 3,817 3,670 3,650 3,584 3,631 3,680 3,705Invested capital excl. hitorical goodwill 48 917 770 750 684 731 780 805Off balance lease liabilities 0 0 0 0 0 0 0 0Net pension assets 0 0 0 0 0 0 0 0Cash Flow Statement (EUR mln)Operating income 411 -726 221 186 87 53 49 65Depreciation & Amortisation 23 1,113 95 93 119 110 107 106Other non-cash Items 0 -74 1 0 -11 0 0 0Change in Working Capital 49 103 113 -17 -14 -15 -21 0Change in Provisions 32 18 -1 -7 -2 -8 -3 0Cash taxes -114 -78 -25 -26 2 -9 -9 -12Cash interest 19 -52 -71 -35 -16 -13 -11 -8Cash impact associates & minorities -16 59 -38 -17 1 1 1 1Other cash expectionals / cash flow assets held for sale 0 0 0 0 0 0 0 1Operating cash flow 388 591 287 165 137 117 114 152

CAPEX 17 70 76 65 74 51 49 49Acquisitions & Disposals 0 2,900 0 0 0 0 0 0Other Investments 1,651 -667 -21 -40 -81 0 0 0Cash Flow from Investments 1,668 2,302 55 25 -7 51 49 49

Cash dividend 0 0 0 0 0 0 0 0Change in Equity 938 47 0 0 0 0 0 0Change in Bank Debt 0 1,388 -599 -202 -204 0 0 0Other adjustments 0 0 0 0 0 0 0 0Cash Flow from Financing 938 1,435 -599 -202 -204 0 0 0FX effect N/A N/A N/A N/A N/A N/A N/A N/AChange in Cash -325 -271 -372 -61 -61 69 65 101

Free Cash Flow -1,263 1,189 232 141 144 67 65 101

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- 12 December 2012




EPS reported 2.79 -7.12 0.47 0.49 -1.97 0.13 0.13 0.19EPS recurring 2.65 2.53 0.78 0.70 0.55 0.35 0.35 0.41FCF per share -10.59 9.71 1.26 0.63 0.65 0.30 0.29 0.46Book value per share 11.34 4.15 5.50 5.14 3.19 3.36 3.56 3.81Dividend per share 0 0 0 0 0 0 0 0% GrowthRevenues 27.4 0.6 -15.4 2.8 -16.3 -16.6 -7.0 0.3Organic revenue growth 27.4 1.0 -15.0 2.8 -16.3 -16.6 -7.0 0.3EBITA 26.0 -8.3 -19.4 -10.5 -33.9 -24.9 -2.3 11.6Organic EBITA growth N/A N/A N/A N/A N/A N/A N/A N/ANet income recurring 42.4 -1.9 -53.3 7.4 -21.8 -35.8 -0.7 17.8Dividend per share N/A N/A N/A N/A N/A N/A N/A N/AMargins & returnsGross margin 44.0 48.9 49.4 48.9 50.2 50.5 51.0 51.5EBITDA margin 24.1 22.6 21.9 18.9 16.8 15.3 15.9 17.3EBITA margin (before exceptionals) 23.7 -41.5 14.9 12.3 6.9 5.0 5.0 6.5Net recurring margin 18.2 17.8 9.8 10.2 9.6 7.4 7.9 9.2

ROE 23.5 -171.6 8.5 9.4 -61.8 4.0 3.7 5.1ROIC 402.8 -29.8 5.1 4.5 2.4 1.1 1.1 1.4ROIC excl. historical goodwill 402.8 -119.3 22.7 21.5 12.3 5.8 5.1 6.4EVA spread (ROIC - WACC) 389.9 -36.1 -2.9 -4.0 -6.6 -7.9 -8.0 -7.7ValuationEnterprise Value (mln) 2,912.2 3,009.7 1,756.7 1,529.2 1,211.6 955.2 875.9 764.6

P/E recurring (x) 13.0 6.4 7.9 8.2 8.5 10.9 11.0 9.3P/FCF (x) -3.3 1.7 4.9 9.1 7.2 12.8 13.2 8.4P/B (x) 0.6 1.7 0.8 0.7 1.2 1.1 1.1 1.0Dividend yield (%) 0 0 0 0 0 0 0 0Free Cash Flow Yield (%) -275.7 252.6 32.7 16.5 16.9 7.8 7.6 11.9

EV/Sales (x) 1.7 1.7 1.2 1.0 1.0 0.9 0.9 0.8EV/EBITDA (x) 7.0 7.6 5.4 5.3 5.7 5.9 5.6 4.5EV/EBITA (x) 7.1 -4.1 8.0 8.2 13.9 18.2 17.7 11.8EV/Invested capital 38.8 1.6 0.5 0.4 0.3 0.3 0.2 0.2EV/FCF (x) -2.3 2.5 7.6 10.9 8.4 14.4 13.6 7.5Leverage & ratiosNet debt/EBITDA -1.1 2.7 1.3 1.0 0.9 0.7 0.2 -0.5Interest cover -21.9 7.6 4.6 8.2 13.6 12.4 14.6 20.9Solvency (Equity / Total assets) 68.7 18.4 37.9 43.5 39.4 42.5 44.7 46.3Working capital as % of revenues 0.9 -5.0 -13.5 -12.1 -13.3 -14.6 -13.6 -13.6CAPEX/revenues 1.0 4.0 5.1 4.3 5.8 4.8 5.0 5.0Dividend pay-out ratio (%) 0 0 0 0 0 0 0 0


- 12 December 2012



UNIT4 Please note the disclaime r on the last page of this

Winning in the cloud

UNIT4 is one of the few software companies in Europe to play the cloud

software theme. As a frontrunner in developing SaaS solutions, UNIT4 is well

positioned to capture the large SaaS opportunity. The increasing proportion of

more valuable and recurring SaaS subscription revenues in the total sales mix

should drive a clear re-rating for the shares in 2013. Conviction Buy, SPT EUR 25.


SaaS machine is gaining steam

On 27 November 2012 UNIT4 announced that its SaaS and subscription revenue passed the EUR

50m annual run rate. At year end 2011 the run rate was EUR 38.6m. Despite the high growth for

SaaS, UNIT4’s license revenues have not declined, showing that it is growing its market share.

The switch to the SaaS subscription model undervalues the underlying performance. If the

signed SaaS deals would have been recognized as upfront license sales, UNIT4 claims that

EBITDA would have been EUR 28m higher in 2011 and EUR 21m higher in 2010.

High growth for FinancialForce.com continuing

Due to the seamless integration of the FinancialForce software with the Force.com platform, and

the combination offering of Accounting with PSA functionality, FinancialForce.com is able to

sign larger deals, also with US blue chip companies.

Breakthrough in Germany

With the win, against SAP, of the state of Sachsen, UNIT4 Germany made an important step into

the German public sector. This is (after a few upgrades from Kirp customers to Agresso Business

World) the first real win of a new governmental customer. The Federal State of Saxony has

decided to move all their 17 state organizations to Agresso Business World. Many of them are

now running SAP, MACH or other products. The deal value (spread over 3 years) is approximately

EUR 5m (including services).

Analysts

Hans Slob

+31 (0)30 712 4472

[email protected]

Frank Claassen

+31 (0)30 712 4464

[email protected]


Equity Sales


+ 31 30 216 9101

+31 30 216 9123


UN IT4

*Rating:B uy (unchanged) *Price as of 07 December 2 012 : EUR 2 1.48 ( -0.44% )

*Price target: EUR 2 4.00 (unchanged) *EPS 2 012 E: EUR 1.32 (unchanged)

Forecast 2011 2012E 2013E 2014E

Sales (EURm) 446 479 506 528

EBITDA (EUR m) 84 90 97 105





P/E 14.8 16.3 13.3 11.7

EV/EBITDA 8.8 7.8 6.9 6.0

FCF Yield (%) 7.4 6.7 6.7 8.4

Dividend Yield (%) 1.9 1.6 2.1 2.7

Software

Netherlands


EUR 631m


45,691

Reuters

UNI4.AS

Bloomberg

UNIT4 NA

Web site

www.unit4.nl

Share Performance

1m 3m 12m

UNIT4 4.9 1.8 6.8

AMX 1.7 3.2 14.1

Agenda

None --

Rating Buy =

Price target (12m) EUR 25.00 = Price 07-Dec-2012 EUR 21.48

Up-/downside 11.7%


- 12 December 2012


70% license sales growth in the UK

UNIT4 reported a strong 12Q3 topline performance. Sales in 12Q3 were up 11% towards EUR 110.7m some 4%

ahead of our EUR 106.6m estimate. With a 25% increase license sales were exceptionally strong in 12Q3. License

sales were up more than 70% in the UK and double digit growth rates were seen in North America, Sweden,

Benelux and Asia. In the UK the performance was driven by multiple larger deals. The outperformance in the

Benelux was also broad based (SME, Accountancy, mid-market). UNIT4’s total subscription sales grew with

approximately 30%, and pure SaaS revenues grew with more than 50% according to the company.

Low operational leverage

Operational leverage was low as 12Q3 EBITDA of EUR 20.5m (11Q3: EUR 19.4m) was slightly below our EUR 21.5m

estimate. Operational expenses grew 19%, as investments in sales and marketing were boosted. There were also

EUR 1m incidental costs for lawyers and auditors following the accounting irregularities in Poland. Reassuring is

that the total remaining exposure in Poland is not material. Excluding for FinancialForce.com EBITDA was up

more than 10%, reflecting the healthy underlying trends.

FinancialForce.com sales almost doubled

Versus a higher comparison base FinancialForce.com almost doubled its sales in 12Q3 (12H1: + 125%). The

investments in FinancialForce.com will be further stepped up. We therefore expect that the 2012FY loss will come

at approximately EUR 8m compared to our previous forecast of a EUR 6m loss. FinancialForce.com recently

relocated from San Mateo, California to San Francisco, tripling its office space. FinancialForce.com has broadened

its integration with Salesforce.com, now also tying into its Service Cloud customer-service software offering.

FinancialForce.com is seeing rapid growth in both the size of customers it is signing and in the average deal size.

Switch to SaaS to impact 12Q4

The previous outlook of a single digit EBITDA and sales growth was not maintained. UNIT4 expect that the switch

from upfront to SaaS deals may have a larger impact on 12Q4. The UNIT4 sales force is now strongly incentivized

to sell multi-year SaaS contracts instead of upfront license deals. Due to the additional EUR 1m cost for lawyers

and auditors and the extra investments in FinancialForce.com we lowered our 2012E EBITDA forecast from EUR

93m towards EUR 90m after the 12Q3 results.

Spike in SaaS valuations positive for UNIT4

Due to the strong underlying momentum for the business and the switch to the more profitable SaaS business

model we maintain our Buy rating for the shares. The years 2011 and 2012 have seen a spike in revenue multiple

valuations for publicly listed SaaS and cloud software companies. Recently listed Workday is now valued at 28x

forward sales. The increasing proportion of more valuable and recurring SaaS revenues in the UNIT4 sales mix

should drive a further re-rating for the shares. Valuation is attractive: UNIT4 is traded at 2013E EV/EBITDA of 6.9x, a

clear discount compared to the slower growing peer Sage (9.0x) and broadly in line with Exact Software (7.1x),

which is in decline. Given its higher SaaS exposure UNIT4 should be traded at a clear premium to both peers in

our view.

- 12 December 2012




Financial InformationFiscal year ends 12/2012 2007 2008 2009 2010 2011 2012E 2013E 2014EIncome Statement (EUR mln)Revenues 309 394 379 422 446 479 506 528Cost of sales -37 -40 -32 -36 -35 -36 -38 -40Gross profit 272 354 347 386 411 443 468 489Operating costs -220 -284 -272 -299 -323 -353 -371 -384EBITDA 52 70 75 86 84 90 97 105Depreciation -13 -20 -22 -20 -22 -27 -27 -27EBITA (before exceptionals) 39 51 53 66 62 63 70 78Exceptional items 0 0 0 0 0 0 0 0Amortisation of goodwill & other ITA -14 -18 -18 -26 -28 -27 -27 -27EBIT 25 32 35 40 34 36 43 51Net financial result 2 -7 -7 -6 -4 -9 -6 -5Other pre-tax items 0 0 0 0 0 0 0 0EBT 27 25 28 34 30 27 38 47Income taxes -6 -1 -6 -8 -8 -8 -9 -10Minority interests -3 0 -0 -1 1 1 1 2Other post-tax items / participation 0 0 0 0 0 0 0 0Extraordinary Items & Discontinued Operations 0 0 0 0 0 0 0 0Net income 25 12 19 23 23 21 30 38Extraordinary Items & Amortisation -3 18 15 20 20 18 18 17Net income recurring (cash) 22 30 35 43 42 39 48 55Balance Sheet (EUR mln)Cash & Cash equivalents 61 35 44 36 21 47 81 118Current assets 111 99 88 113 103 116 122 128Tangible fixed assets 26 33 31 35 35 42 51 61Goodwill 159 296 293 366 359 333 306 280Other Intangible assets 0 0 0 0 0 0 0 0Other non-current assets 13 14 18 18 32 32 32 33Total Assets 369 477 474 569 551 569 592 620

Short-term debt 39 59 52 58 54 54 54 54Current liabs 156 172 155 172 166 175 182 189Long-term debt 1 144 128 106 85 85 85 85Other non-current liabs 7 5 4 5 6 6 7 8Minority interest 28 0 1 11 8 7 6 4Total equity 137 98 134 216 231 242 258 279Total liabs & equity 369 477 474 569 551 569 592 619

Net debt -21 167 136 128 118 92 58 21Invested capital 448 603 618 733 747 758 765 774Invested capital excl. hitorical goodwill -2 -2 -2 13 7 18 25 34Off balance lease liabilities 5 5 5 5 5 5 6 6Net pension assets -0 -0 -0 -3 -4 -4 -4 -3Cash Flow Statement (EUR mln)Operating income 25 32 35 40 34 36 43 51Depreciation & Amortisation 27 38 40 46 49 54 54 54Other non-cash Items 0 0 0 0 0 0 0 1Change in Working Capital 52 9 -0 -10 7 -4 1 1Change in Provisions -3 -3 -0 1 1 0 0 0Cash taxes -6 -1 -7 -9 -9 -9 -10 -11Cash interest 2 -7 -7 -6 -4 -9 -6 -5Cash impact associates & minorities 3 0 0 1 -1 -1 -1 -2Other cash expectionals / cash flow assets held for sale 0 0 0 1 0 7 -6 -2Operating cash flow 92 87 56 64 77 77 78 91

CAPEX -17 -26 -21 -27 -32 -34 -36 -37Acquisitions & Disposals -54 -173 -33 -68 -11 0 0 0Other Investments 3 -1 -4 1 -14 0 0 0Cash Flow from Investments -69 -201 -58 -94 -56 -34 -36 -37

Cash dividend -19 0 -5 -7 -11 -10 -14 -17Change in Equity 2 2 2 2 2 0 0 0Change in Bank Debt -26 162 -23 -15 -25 0 0 0Other adjustments 0 0 0 0 0 0 0 0Cash Flow from Financing -42 164 -25 -20 -34 -10 -14 -17FX effect 0 0 0 0 0 0 0 0Change in Cash -152 193 -10 -40 -57 34 30 36

Free Cash Flow 75 60 35 37 45 43 43 54

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- 12 December 2012




EPS reported 0.98 0.48 0.76 0.85 0.83 0.72 1.02 1.28EPS recurring 0.86 1.15 1.33 1.52 1.49 1.32 1.61 1.83FCF per share 2.87 2.29 1.34 1.30 1.59 1.45 1.44 1.80Book value per share 5.28 3.71 5.14 7.57 8.10 8.22 8.72 9.37Dividend per share 0.75 0 0.19 0.25 0.40 0.35 0.46 0.57% GrowthRevenues 33.8 27.5 -3.6 11.2 5.7 7.5 5.6 4.5Organic revenue growth 14.0 9.0 -3.0 3.0 3.0 5.2 5.6 4.5EBITA 12.5 28.5 5.3 23.5 -6.2 1.4 11.4 11.3Organic EBITA growth N/A N/A N/A N/A N/A N/A N/A N/ANet income recurring -21.2 35.1 14.7 24.5 -2.0 -8.7 23.4 14.4Dividend per share 0 N/M N/M 31.8 61.8 -12.5 30.3 25.3Margins & returnsGross margin 88.0 89.9 91.5 91.4 92.1 92.5 92.5 92.5EBITDA margin 16.8 17.8 19.8 20.4 18.8 18.8 19.2 19.9EBITA margin (before exceptionals) 8.2 8.2 9.3 9.5 7.7 7.5 8.5 9.7Net recurring margin 7.3 7.7 9.1 10.2 9.5 8.1 9.4 10.3

ROE 18.2 12.6 14.5 10.9 9.9 8.7 11.7 13.6ROIC 7.5 9.4 7.6 8.4 7.2 7.2 7.9 8.7ROIC excl. historical goodwill 163.5 -2,552.0 -2,215.6 1,058.7 525.3 430.7 279.6 226.6EVA spread (ROIC - WACC) -2.1 0.9 -1.0 -0.4 -1.8 -0.8 -0.1 0.7ValuationEnterprise Value (mln) 501.3 525.5 427.6 673.7 735.2 699.2 667.5 634.2

P/E recurring (x) 22.9 12.6 9.0 12.5 14.8 16.3 13.3 11.7P/FCF (x) 6.9 6.3 9.0 14.6 13.9 14.8 14.9 11.9P/B (x) 4.6 6.5 4.7 2.9 2.7 2.6 2.4 2.3Dividend yield (%) 3.5 0 0.9 1.2 1.9 1.6 2.1 2.7Free Cash Flow Yield (%) 13.4 10.7 6.2 6.1 7.4 6.7 6.7 8.4

EV/Sales (x) 1.6 1.3 1.1 1.6 1.6 1.5 1.3 1.2EV/EBITDA (x) 9.7 7.5 5.7 7.8 8.8 7.8 6.9 6.0EV/EBITA (x) 19.7 16.2 12.2 16.8 21.4 19.4 15.5 12.4EV/Invested capital 1.1 1.0 0.7 1.0 1.0 0.9 0.9 0.8EV/FCF (x) 6.7 8.7 12.3 18.2 16.2 16.4 15.7 11.8Leverage & ratiosNet debt/EBITDA -0.4 2.4 1.8 1.5 1.4 1.0 0.6 0.2Interest cover -32.5 10.0 11.0 13.4 20.7 10.4 17.5 23.3Solvency (Equity / Total assets) 37.2 20.5 28.2 37.9 41.9 42.5 43.6 45.0Working capital as % of revenues -6.8 -7.7 -7.9 -4.6 -5.9 -4.6 -4.6 -4.6CAPEX/revenues -5.7 -6.7 -5.5 -6.4 -7.1 -7.1 -7.1 -7.1Dividend pay-out ratio (%) 76.1 0 24.7 29.1 48.1 48.8 44.8 44.8


- 12 December 2012


Disclaimer Appendix The information and opinions in this document were prepared by Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A. (also referred to throughout this report under its trade name “Rabobank International”), independently of the companies mentioned in this document (further called the "Company"). Coöperat ieve Centrale Raiffeisen-Boerenleenbank B.A. is registered with the Dutch Authority for the Financial Markets (“Autoriteit Financiële Markten”). Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A. has no authority whatsoever to give any information or make any representation or warranty on behalf of the Company or any person in connection with any offering of the Company. In particular, the opinions and projections expressed in this document are entirely those of Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A. and are given as part of its normal research activities and not as a manager or underwriter of any offering or as an agent for the Company or any other person. This document is not a prospectus or information memorandum whatsoever of the Company and is based on information available to the public. The information and opinions contained in this document have been compiled or arrived at from sources believed to be reliable, but no representation or warranty, express or implied, is made as to their accuracy, completeness or correctness. All opinions and estimates expressed in this document are subject to change without notice. The returns on investments which have been achieved in the past do not serve as a warranty for the future. 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None of Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A. or its affiliates accept any liability whatsoever for any direct or consequential loss howsoever arising from any use of this document or its contents or otherwise arising in connection therewith. Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A. or its affiliates, their directors and/or representatives, and/or employees, and/or families may have a long or short position in any of the securities issued by the Company, or any related investment, at any time, and may make a purchase, and/or sale of any of the securities issued by the Company, or any related investment, from time to time in the open market, or otherwise, in each case either as principals or as agents. Persons connected with Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A. or other entities of the group to which it belongs may provide or have provided corporate finance and/or other services to the Company. 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The price target is the level the stock should currently trade at if the market supported the analyst's view of the stock, provided that the necessary catalysts are in place to effect this change in perception, within the performance horizon. In this way, therefore, the price target abstracts from the need to take a view on the market or sector. If it is felt that the catalysts are not fully in place to effect a re-rating of the stock to its warranted value the price target will differ from 'fair' value. Price targets are based on a combination of several valuation approaches: the discounted cash flow methodology, a peer group comparison on relevant multiples and, when appropriate, a sum-of-the-parts analysis. Information on our recommendation structure, distribution of recommendations, and complete disclosure information on companies covered by Rabobank International Equity Research is available at http://equityresearch.rabobank.com/disclaimer/. 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