Allgeier SE

Earnings Release • Mar 21, 2016

Allgeier SE

Buy | Target 22.00 EUR

Allgeier SE
Buy  Target 22.00 EUR \$TypCap\$ 1573 1 1 6401 2	Est.chg	2015e	2016e
Price : 16.39 EUR Upside : 34 %	EPS	-	-

Preliminary 2015 results: delivered as expected

8 Dez 12Mrz 13Jun 13Sep 13Dez 13Mrz 14Jun 14Sep 14Dez 14Mrz 15Jun 15Sep 15Dez 15Mrz 16

Allgeier SE	Allgeier SE Relative to IT Services (Rebased)			in EURm	FY15 rep.		FY15 Oddo est. FY15 Consensus	FY14 rep.	% yoy
Capital
AEI GY AEIG.DE				Group revenue	498.9	495.9	496.3	456.5	9.3%
Market Cap (EURm)			149	EBITDA adjusted	29.3	32.6		25.3	15.8%
Enterprise value (EURm)			190	Margin	5.9%	6.6%		5.5%	+40bp
Extrema 12 months		14.22	18.70	EBITDA	27.1	28.6		24.0	12.9%
Free Float (%)			53.8	Margin	5.4%	5.8%		5.3%	+10bp
Performance (%)	1m	3m	12m	EBIT	12.6	15.4	17.7	10.5	20.0%
Absolute	9.2	-0.7	0.4
Perf. rel. Country Index	5.1	5.0	17.2	Margin	2.5%	3.1%	3.6%	2.3%	+20bp
Perf. rel. IT Services	4.9	3.5	9.7		Source: Company data, Oddo Seydler
P&L	12/15e	12/16e	12/17e		Sale of 3 subsidiaries generates			additional pre-tax income of €	10m
Sales (EURm)	496	560	617
EBITDA (EURm)	28.6	36.6	45.4		AEI sold 3 subsidiaries from its Solutions segment in 2015 for an estimated c.€ 32m: i) b+m
Current EBIT (EURm)	15.4	22.6	31.2		Informatik AG (Oddo Seydler est.: revenues of c.€ 8.5m, EBITDA margin of 8.4%, sold for an
Attr. net profit (EURm)	6.1	10.3	15.0		est. 6x EBITDA i.e. ~€ 4.3m), ii) terna Group (Oddo Seydler est.: ~€ 30m revenues, 11.3%
Adjusted EPS (EUR)	0.90	1.27	1.79	EBITDA margin, sold for an est. 8x EBITDA i.e. ~€ ~27m), and iii) the Storage activities of Allgeier (Switzerland) AG (Oddo Seydler est.: revenues below ~€ 1m, 0% EBITDA margin, and probably sold for significantly less than 0.5x sales on our estimates). AEI shows these
Dividend (EUR)	0.63	0.56	0.60
P/E (x)	18.4	12.9	9.2
P/B (x)	1.5	1.4	1.3	units as discontinued operations. According to preliminary figures the sale of these units
Dividend Yield (%)	3.8	3.4	3.7	generated incremental pre-tax income of € 10m. As a result, the Executive Board will
FCF yield (%)	1.8	6.8	10.0		propose at the next AGM a special DPS of € 0.20 in addition the normal DPS of € 0.50.
EV/Sales (x)	0.38	0.33	0.28
EV/EBITDA (x)	6.7	5.0	3.8	Maintain Buy recommendation and TP of € 22
EV/Current EBIT (x)	12.4	8.1	5.5
Gearing (%)	27	22	11		All in all the 2015 preliminaries were not fantastic but still support our investment case.
Net Debt/EBITDA(x)	1.0	0.6	0.3	Based on a pure sum-of-the-parts valuation, AEI's market cap could be roughly double its current level. The catalyst for a revaluation towards our TP would be, in our view, consistent proof that the company's enhanced management structure can indeed successfully cope
Next Events					with the group's further-increasing number of acquired companies. Our DCF analysis derives

29.04.2016 FY Results

Monday 21 March 2016 Earnings outgrew revenue

Allgeier SE (AEI) reported preliminary 2015 results on 18 March. Group revenue was up a substantial 9.3% yoy to € 498.9m and thus roughly in line with our estimate (€ 495.9m). Earnings again outgrew sales, with EBITDA up 12.9% yoy to € 27.1m (Oddo Seydler est.: € 28.6m), resulting in an EBITDA margin of 5.4%, an improvement of 10bp yoy. The EBIT margin improved 20bp yoy despite increased amortization expense following the first-time consolidation of acquired companies and higher investments.

	Allgeier SE: Preliminary 2015 results
--	---------------------------------------	--	--

Group revenue	498.9	495.9	496.3	456.5	9.3%
EBITDA adjusted	29.3	32.6		25.3	15.8%
Margin	5.9%	6.6%		5.5%	+40bp
EBITDA	27.1	28.6		24.0	12.9%
Margin	5.4%	5.8%		5.3%	+10bp
EBIT	12.6	15.4	17.7	10.5	20.0%
Margin	2.5%	3.1%	3.6%	2.3%	+20bp

Sale of 3 subsidiaries generates additional pre-tax income of € 10m

Maintain Buy recommendation and TP of € 22

All in all the 2015 preliminaries were not fantastic but still support our investment case. Based on a pure sum-of-the-parts valuation, AEI's market cap could be roughly double its current level. The catalyst for a revaluation towards our TP would be, in our view, consistent proof that the company's enhanced management structure can indeed successfully cope with the group's further-increasing number of acquired companies. Our DCF analysis derives a target price of € 22 equating to 5.5x EV/EBITDA and 0.4x EV/sales. At these multiples the shares would still trade at significant discounts of -26% and -54% to EV/EBITDA (7.4x) and EV/sales (0.88x) multiples of the corresponding IT service sector/ industry. AEI is currently trading at the lower end of the IT service sector valuation bandwidth of 5x to 12x for NTM EV/EBITDA and 0.3x to 1.2x for NTM EV/sales. In view of AEI's business turn-around, the currently bottoming valuation levels offer an attractive risk/reward profile. We therefore recommend Buying the stock.

The detailed 2015 results will be published on 29 April 2016.

Henning Steinbrink (Analyst)

+49 (69) 92 05 48 17 henning.steinbrink@oddoseydler.com

Conflict of interests:

Oddo Securities, a division of Oddo et Cie, limited sharepartnership - Bank authorised by ACPR. Oddo & Cie and/or one of its subsidiaries could be in a conflict of interest situation with one or several of the groups mentioned in this publication. Please refer to the conflict of interests section at the end of this document.

This is a non-contractual document, it is strictly for the private use of the recipient, and the information it contains is based on sources we believe to be reliable, but whose accuracy and completeness cannot be guaranteed. The opinions given in the document reflect our appraisal at the time of publication and may therefore be revised at a later date.

Allgeier SE Monday 21 March 2016

AEIG.DE AEI GY	Buy				Price	16.39EUR
IT services Germany	Upside	34.23%			TP	22.00EUR
PER SHARE DATA (EUR)	12/11	12/12	12/13	12/14	12/15e	12/16e	12/17e
Adjusted EPS	0.68	0.42	0.74	0.30	0.90	1.27	1.79
Reported EPS	0.52	0.39	0.36	0.05	0.68	1.16	1.68
Growth in EPS(%)	-	-38.6%	79.2%	-59.3%	ns	40.9%	40.9%
Net dividend per share	0.50	0.50	0.50	0.50	0.63	0.56	0.60
FCF to equity per share	1.86	-2.40	2.23	0.12	0.30	1.12	1.63
Book value per share	9.99	10.63	10.46	10.83	11.08	11.70	12.91
Number of shares market cap	8.38	8.38	8.44	9.00	9.00	9.00	9.00
Number of diluted shares VALUATION	8.38 12/11	8.38 12/12	8.44 12/13	9.00 12/14	9.00 12/15e	9.00 12/16e	9.00 12/17e
12m highest price	14.00	12.70	16.70	19.35	18.70	16.95
12m lowest price	9.70	9.70	10.00	12.71	13.64	14.22
(*) Reference price	11.57	10.94	13.19	16.18	16.54	16.39	16.39
Capitalization	97	92	111	146	149	148	148
Restated Net debt	10	36	23	28	28	23	13
Minorities (fair value)	0.0	0.0	0.0	0.0	0.0	0.0	0.0
Financial fixed assets (fair value)	0.0	3.9	0.2	4.4	4.4	10	16
Provisions	32	34	23	16	18	23	29
Enterprise Value	139	158	157	185	190	184	173
P/E (x)	17	26	18	53	18	13	9.2
P/CF (x)	5.1	4.8	7.9	11	7.4	6.3	5.2
Net Yield (%)	4.3%	4.6%	3.8%	3.1%	3.8%	3.4%	3.7%
FCF yield (%)	16.1%	ns	16.9%	0.8%	1.8%	6.8%	10.0%
P/B incl. GW (x)	1.16	1.03	1.26	1.49	1.49	1.40	1.27
P/B excl. GW (x)	7.79	ns	72.73	62.34	77.03	19.78	8.02
EV/Sales (x) EV/EBITDA (x)	0.37 6.2	0.37 7.6	0.37 6.0	0.43 7.9	0.38 6.7	0.33 5.0	0.28 3.8
EV/EBIT (x)	12	22	11	17	12	8.1	5.5
(*) historical average price
PROFIT AND LOSS (EURm)	12/11	12/12	12/13	12/14	12/15e	12/16e	12/17e
Sales	379	423	421	428	496	560	617
EBITDA	22.3	20.8	26.2	23.5	28.6	36.6	45.4
Depreciations	-10.3	-13.7	-11.3	-12.8	-13.2	-14.0	-14.2
Current EBIT	12.0	7.1	14.9	10.7	15.4	22.6	31.2
Published EBIT	10.4	6.3	14.7	10.7	15.4	22.6	31.2
Net financial income Corporate Tax	-0.9 -4.2	-0.2 -2.4	-4.4 -7.1	-4.5 -5.1	-2.0 -6.6	-2.3 -9.1	-2.3 -13.0
Net income of equity-accounted companies	0.0	0.0	0.0	0.0	0.0	0.0	0.0
Profit/loss of discontinued activities (after tax)	0.0	0.0	0.0	0.0	0.0	0.0	0.0
Minority interests	-0.9	-0.4	-0.1	-0.6	-0.7	-0.8	-0.9
Attributable net profit	4.4	3.3	3.2	0.5	6.1	10.3	15.0
Adjusted attributable net profit	5.7	3.5	6.3	2.7	8.1	11.4	16.1
BALANCE SHEET (EURm)	12/11	12/12	12/13	12/14	12/15e	12/16e	12/17e
Goodwill	79	103	101	105	108	108	108
Other intangible assets	24	25	20	18	17	12	9.7
Tangible fixed assets	8.8	11	12	11	14	16	18
WCR Financial assets	19 0.0	20 3.9	7.6 0.2	5.3 4.4	6.0 4.4	8.4 10	9.9 16
Ordinary shareholders equity	84	89	92	97	99	104	115
Minority interests	4.5	4.5	2.4	4.1	4.2	4.4	4.9
Shareholders equity	88	93	95	101	103	109	120
Non-current provisions	32	34	23	16	18	23	29
Net debt	10	36	23	28	28	23	13
CASH FLOW STATEMENT (EURm)	12/11	12/12	12/13	12/14	12/15e	12/16e	12/17e
EBITDA	22.3	20.8	26.2	23.5	28.6	36.6	45.4
Change in WCR Interests & taxes	0.0 -5.1	0.0 -2.6	10.8 -11.5	2.7 -9.6	0.4 -8.6	-0.6 -11.4	0.3 -15.3
Others	1.6	0.8	0.0	-0.3	0.0	-2.0	-2.0
Operating Cash flow	18.9	19.0	25.5	16.3	20.4	22.5	28.4
CAPEX	0.0	-41.7	-5.0	-13.7	-17.4	-11.7	-13.0
Free cash-flow	18.9	-22.7	20.5	2.6	3.0	10.8	15.5
Acquisitions / disposals	-1.1	-4.6	3.2	-4.7	-0.3	-5.9	-6.5
Dividends	-4.2	-4.2	-4.2	-4.5	-5.7	-5.1	-5.4
Net capital increase	0.0	0.0	0.0	0.0	0.0	0.0	0.0
Others	-7.6	-19.6	-5.6	52.1	2.5	4.9	6.9
Change in net debt GROWTH MARGINS PRODUCTIVITY	13.6 12/11	-26.3 12/12	13.0 12/13	-4.4 12/14	-0.4 12/15e	4.7 12/16e	10.5 12/17e
Sales growth	-	11.6%	-0.4%	1.6%	15.8%	12.8%	10.4%
Lfl sales growth	-	-	-	-	-	-	-
Current EBIT growth	-	-40.6%	ns	-28.0%	44.0%	46.5%	38.4%
Growth in EPS(%)	-	-38.6%	79.2%	-59.3%	ns	40.9%	40.9%
Net margin	1.5%	0.8%	1.5%	0.6%	1.6%	2.0%	2.6%
EBITDA margin	5.9%	4.9%	6.2%	5.5%	5.8%	6.5%	7.4%
Current EBIT margin	3.2%	1.7%	3.5%	2.5%	3.1%	4.0%	5.1%
CAPEX / Sales	0.0%	-9.9%	-1.2%	-3.2%	-3.5%	-2.1%	-2.1%
WCR / Sales Tax Rate	5.0% 44.1%	4.7% 38.9%	1.8% 68.3%	1.2% 82.0%	1.2% 49.3%	1.5% 45.0%	1.6% 45.0%
Normative tax rate	40.0%	40.0%	40.0%	40.0%	40.0%	40.0%	40.0%
Asset Turnover	-	2.9	2.8	3.1	3.5	3.9	4.3
ROCE post-tax (normative tax rate)	-	2.9%	5.9%	4.6%	6.5%	9.4%	12.9%
ROCE post-tax hors GW (normative tax rate)	-	7.9%	18.5%	17.2%	25.9%	36.7%	50.0%
ROE	-	4.0%	6.9%	2.9%	8.3%	11.2%	14.7%
DEBT RATIOS	12/11	12/12	12/13	12/14	12/15e	12/16e	12/17e
Gearing	11%	39%	25%	28%	27%	22%	11%
Net Debt / Market Cap Net debt / EBITDA	0.10 0.45	0.40 1.75	0.21 0.89	0.19 1.18	0.19 0.98	0.16 0.64	0.09 0.29

EBITDA / net financial charges 25.8 10,387.0 33.2 4.2 14.0 15.6 19.5

Recommendation and target price changes history over the last 12 months for the company analysed in this report

Date	Reco	Price Target (EUR)	Price (EUR)
Risk of conflict of interest :
Investment banking and/or Distribution
securities for the subject company/ies?		Has Oddo Group, or Oddo & Cie, or Oddo Seydler managed or co-managed in the past 12 months a public offering of	No
from the subject company/ies in the last 12 months?		Has Oddo Group, or Oddo & Cie, or Oddo Seydler received compensation for investment banking services from the subject company/ies in the past 12 months or expects to receive or intends to seek compensation for investment banking services	No
Research contract between Oddo group & the issuer
said issuer as a service to the issuer		Oddo & Cie and the issuer have agreed that Oddo & Cie will produce and disseminate investment recommendations on the	Yes
Liquidity provider agreement and market-making
	Oddo Group or Oddo & Cie, or Oddo Seydler signed a liquidity provider agreement with the subject company/ies?	At the date of the distribution of this report, does Oddo Group, or Oddo & Cie, or Oddo Seydler act as a market maker or has	Yes
Significant equity stake
company/ies?		Does Oddo Group, or Oddo & Cie, or Oddo Seydler own 5% or more of any class of common equity securities of the subject	No
	Does the subject company beneficially own 5% or more of any class of common equity of Oddo & Cie or its affiliates?		No
Disclosure to Company
	distribution, for the sole purpose of verifying the accuracy of factual statements ?	Has a copy of this report ; with the target price and/or rating removed, been presented to the subject company/ies prior to its	No
	Have the conclusions of this report been amended following disclosure to the company/ies and prior its distribution?		No
Additional material conflicts
	Is Oddo Group, or Oddo & Cie, or Oddo Seydler aware of any additional material conflict of interest?		No

Statement of conflict of interests of all companies mentioned in this document may be consulted on Oddo & Cie's: www.oddosecurities.com

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This research has been prepared in accordance with regulatory provisions designed to promote the independence of investment research. "Chinese walls" (information barriers) have been implemented to avert the unauthorized dissemination of confidential information and to prevent and manage situations of conflict of interest. This research has been prepared in accordance with French and German regulatory provisions designed to promote the independence of investment research.

At the time of publication of this document, ODDO and/or Oddo Seydler, and/or one of its subsidiaries may have a conflict of interest with the issuer(s) mentioned. While all reasonable effort has been made to ensure that the information contained is not untrue or misleading at the time of publication, no representation is made as to its accuracy or completeness and it should not be relied upon as such. Past performances offer no guarantee as to future performances. All opinions expressed in the present document reflect the current context and which is subject to change without notice. The views expressed in this research report accurately reflect the analyst's personal views about the subject securities and/or issuers and no part of his compensation was, is, or will be directly or indirectly related to the specific views contained in the research report.

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This research has been prepared in accordance with regulatory provisions designed to promote the independence of investment research. "Chinese walls" (information barriers) have been implemented to avert the unauthorized dissemination of confidential information and to prevent and manage situations of conflict of interest. This research has been prepared in accordance with French and German regulatory provisions designed to promote the independence of investment research.

At the time of publication of this document, ODDO and/or Oddo Seydler, and/or one of its subsidiaries may have a conflict of interest with the issuer(s) mentioned. While all reasonable effort has been made to ensure that the information contained is not untrue or misleading at the time of publication, no representation is made as to its accuracy or completeness and it should not be relied upon as such. Past performances offer no guarantee as to future performances. All opinions expressed in the present document reflect the current context and which is subject to change without notice.

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