CANCOM SE — Investor Presentation 2013

Sep 12, 2013

CANCOM SE Germany - IT Services

Buy (old: Buy) 12-September-13

Price target: EUR 29.00 (old: EUR 29.00) Tim Wunderlich, CFA

			Analyst
Price:		Next result: Q3 13: 08.11.13
Bloomberg:		Market cap: EUR 250.7 m	tim.wunderlich@ha-research.de
Reuters:	Tel.: +49 40 4143885 81	Enterprise Value: EUR 214.9 m

Roadshow feedback: AHP the sustainable differentiator

Discussions during the roadshow centred on CANCOM's AHP Private Cloud solution, which should account for c. € 5m of recurring EBITDA in FY '13E (>30% margin / 16% of EBITDA).

Management stressed AHP's uniqueness and defensibility: There is no comparable solution in the market AND rivals like Bechtle or Computacenter would require several years to reverse-engineer this "best-practice" solution which is based on more than ten years of experience and further development.

Benefits of AHP for customers moving into the cloud are: (1) Speed: CANCOM requires much less time than rivals to install a Private Cloud because its solution is a standardised out-of-the-box cloud architecture. While rivals may need 12 months or more, CANCOM can implement it in 3-6 months. (2) ROI: A major customer decided to install CANCOM's solution even during the crisis of 2009 as he benefited from a ROI of less than one year due to high savings stemming from lower maintenance and IT personnel costs.

CANCOM has a pipeline of 70 cloud projects. In our view, each deal could contribute € 50,000 recurring sales per month or € 0.6m per year on average. Accordingly, the current total opportunity amounts to € 42m in sales and € 13m in EBITDA assuming margins of 30%.

Reaping this potential is only a question of expanding capacity which is the bottleneck: By training own and hiring new personnel, CANCOM plans to increase the number of IT consultants capable of implementing its cloud solution by 10-15 people per year going forward from c. 30 currently.

A conservative estimate given recent project wins is that cloud-related recurring EBITDA should increase by € 3m in '14E and '15E respectively to € 8m (23% of EBITDA) and € 11m (28% of EBITDA) at least.

CANCOM continues to look for acquisitions to put its cash pile to sensible use. Key reason to acquire would be to gain access to a customer base to cross-sell its cloud solution. The typical target size should be between € 20m and € 50m of sales and CANCOM has several targets on its short list.

						- continued -
Y/E 31.12 (EUR m)	2009	2010	2011	2012	2013E	2014E	2015E
Sales	348.3	474.6	544.4	558.1	591.0	622.0	647.0
Sales growth	2 %	36 %	15 %	3 %	6 %	5 %	4 %
EBITDA	9.5	19.0	25.0	28.1	30.6	34.6	38.7
EBIT	7.1	15.2	18.5	20.7	22.6	26.2	30.4
Net income	5.1	7.8	11.5	11.5	15.2	18.1	20.8
Net debt	-3.5	-0.9	-18.5	-29.2	-36.0	-44.7	-55.4
Net gearing	-8.0 %	-1.8 %	-30.4 %	-36.3 %	-39.2 %	-42.4 %	-45.8 %
Net Debt/EBITDA	0.0	0.0	0.0	0.0	0.0	0.0	0.0
EPS pro forma	0.48	0.92	1.14	1.06	1.33	1.58	1.82
CPS	0.80	1.28	2.18	0.89	1.22	1.45	1.65
DPS	0.15	0.15	0.30	0.35	0.40	0.45	0.50
Dividend yield	0.7 %	0.7 %	1.4 %	1.6 %	1.8 %	2.0 %	2.3 %
Gross profit margin	31.0 %	29.3 %	29.1 %	29.5 %	30.1 %	30.5 %	30.8 %
EBITDA margin	2.7 %	4.0 %	4.6 %	5.0 %	5.2 %	5.6 %	6.0 %
EBIT margin	2.0 %	3.2 %	3.4 %	3.7 %	3.8 %	4.2 %	4.7 %
ROCE	10.5 %	19.5 %	20.6 %	21.1 %	21.6 %	22.8 %	23.4 %
EV/sales	0.6	0.5	0.4	0.4	0.4	0.3	0.3
EV/EBITDA	23.7	11.9	8.3	7.9	7.0	6.0	5.0
EV/EBIT	31.7	14.9	11.3	10.7	9.5	7.9	6.4
PER	45.9	24.0	19.3	20.8	16.6	14.0	12.1
Adjusted FCF yield	2.7 %	5.1 %	7.5 %	7.1 %	8.3 %	9.9 %	11.8 %

Source: Company data, Hauck & Aufhäuser Close price as of: 11.09.2013

Analyst

Source: Company data, Hauck & Aufhäuser

High/low 52 weeks:	25.83 / 10.78
Price/Book Ratio:	2.7
Relative performance (TecDAX):
3 months	14.1 %
6 months	33.0 %
12 months	43.0 %

Changes in estimates

		Sales	EBIT	EPS
2013	old:	591.0	22.6	1.33
	∆	-	-	-
	old:	622.0	26.2	1.58
2014	∆	-	-	-
	old:	647.0	30.4	1.82
2015	∆	-	-	-

Key share data:

Number of shares: (in m pcs)	11.4
Authorised capital: (in € m)	4.0
Book value per share: (in €)	8.0
Ø trading volume: (12 months)	60,000

Major shareholders:

71.3 %
10.2 %
10.0 %
4.7 %
2.3 %
1.6 %

Company description:

CANCOM is Germany's 3rd largest independent system house operating a scalable eCommerce business.

Current trading remains sound: CANCOM experienced a strong July but softer August. However, sales in the first two months of Q3 should be up yoy. Q3 and Q4 should benefit from the three recent implemented cloud deals by adding c. € 0.5m EBITDA in H2 to the group. Remains a BUY with a PT of € 29.00 based on DCF.

Financials

Profit and loss (EUR m)	2009	2010	2011	2012	2013E	2014E	2015E
Net sales	348.3	474.6	544.4	558.1	591.0	622.0	647.0
Sales growth	1.6 %	36.2 %	14.7 %	2.5 %	5.9 %	5.2 %	4.0 %
Increase/decrease in finished goods and work-in-process	1.0	1.3	0.9	2.5	1.0	1.0	1.0
Total sales	349.3	475.8	545.3	560.6	592.0	623.0	648.0
Other operating income	2.3	3.3	0.7	0.6	0.4	0.5	0.5
Material expenses	241.1	336.3	386.6	395.1	414.0	433.1	448.3
Personnel expenses	79.2	97.0	108.0	112.4	119.0	125.7	130.3
Other operating expenses	21.8	26.8	26.4	25.8	28.8	30.1	31.2
Total operating expenses	339.8	456.8	520.3	532.5	561.4	588.4	609.3
EBITDA	9.5	19.0	25.0	28.1	30.6	34.6	38.7
Depreciation	2.4	3.8	2.8	4.0	4.8	5.0	5.3
EBITA	7.1	15.2	22.2	24.0	25.8	29.6	33.4
Amortisation of goodwill	0.0	0.0	0.0	0.0	0.0	0.0	0.0
Amortisation of intangible assets	0.0	0.0	3.7	3.4	3.2	3.4	3.0
Impairment charges	0.0	0.0	0.0	0.0	0.0	0.0	0.0
EBIT	7.1	15.2	18.5	20.7	22.6	26.2	30.4
Interest income	0.2	0.1	0.3	0.4	0.5	0.6	0.7
Interest expenses	1.3	1.9	2.2	2.1	1.5	1.1	1.1
Other financial result	0.0	0.0	0.4	0.0	0.4	0.4	0.0
Financial result	-1.1	-1.8	-1.6	-1.8	-0.6	-0.1	-0.4
Recurring pretax income from continuing operations	5.9	13.3	16.9	18.9	22.0	26.1	30.0
Extraordinary income/loss	0.0	0.0	0.0	0.0	0.0	0.0	0.0
Earnings before taxes	5.9	13.3	16.9	18.9	22.0	26.1	30.0
Taxes	0.9	3.7	4.9	6.6	6.6	7.8	9.0
Net income from continuing operations	5.0	9.6	12.0	12.3	15.4	18.3	21.0
Result from discontinued operations (net of tax)	-0.1	1.7	0.3	0.7	0.0	0.0	0.0
Net income	5.1	7.9	11.7	11.6	15.4	18.3	21.0
Minority interest	0.0	0.1	0.2	0.1	0.2	0.2	0.2
Net income (net of minority interest)	5.1	7.8	11.5	11.5	15.2	18.1	20.8
Average number of shares	10.4	10.3	10.4	10.6	11.4	11.4	11.4
EPS reported	0.49	0.76	1.11	1.09	1.33	1.58	1.82

Profit and loss (common size)	2009	2010	2011	2012	2013E	2014E	2015E
Net sales	100.0 %	100.0 %	100.0 %	100.0 %	100.0 %	100.0 %	100.0 %
Increase/decrease in finished goods and work-in-process	0.3 %	0.3 %	0.2 %	0.5 %	0.2 %	0.2 %	0.2 %
Total sales	100.3 %	100.3 %	100.2 %	100.5 %	100.2 %	100.2 %	100.2 %
Other operating income	0.6 %	0.7 %	0.1 %	0.1 %	0.1 %	0.1 %	0.1 %
Material expenses	69.2 %	70.9 %	71.0 %	70.8 %	70.1 %	69.6 %	69.3 %
Personnel expenses	22.7 %	20.4 %	19.8 %	20.1 %	20.1 %	20.2 %	20.1 %
Other operating expenses	6.3 %	5.7 %	4.8 %	4.6 %	4.9 %	4.8 %	4.8 %
Total operating expenses	97.6 %	96.3 %	95.6 %	95.4 %	95.0 %	94.6 %	94.2 %
EBITDA	2.7 %	4.0 %	4.6 %	5.0 %	5.2 %	5.6 %	6.0 %
Depreciation	0.7 %	0.8 %	0.5 %	0.7 %	0.8 %	0.8 %	0.8 %
EBITA	2.0 %	3.2 %	4.1 %	4.3 %	4.4 %	4.8 %	5.2 %
Amortisation of goodwill	0.0 %	0.0 %	0.0 %	0.0 %	0.0 %	0.0 %	0.0 %
Amortisation of intangible assets	0.0 %	0.0 %	0.7 %	0.6 %	0.5 %	0.5 %	0.5 %
Impairment charges	0.0 %	0.0 %	0.0 %	0.0 %	0.0 %	0.0 %	0.0 %
EBIT	2.0 %	3.2 %	3.4 %	3.7 %	3.8 %	4.2 %	4.7 %
Interest income	0.0 %	0.0 %	0.1 %	0.1 %	0.1 %	0.1 %	0.1 %
Interest expenses	0.4 %	0.4 %	0.4 %	0.4 %	0.3 %	0.2 %	0.2 %
Other financial result	0.0 %	0.0 %	0.1 %	0.0 %	0.1 %	0.1 %	0.0 %
Financial result	-0.3 %	-0.4 %	-0.3 %	-0.3 %	-0.1 %	0.0 %	-0.1 %
Recurring pretax income from continuing operations	1.7 %	2.8 %	3.1 %	3.4 %	3.7 %	4.2 %	4.6 %
Extraordinary income/loss	0.0 %	0.0 %	0.0 %	0.0 %	0.0 %	0.0 %	0.0 %
Earnings before taxes	1.7 %	2.8 %	3.1 %	3.4 %	3.7 %	4.2 %	4.6 %
Tax rate	15.6 %	28.1 %	28.8 %	35.0 %	30.0 %	30.0 %	30.0 %
Net income from continuing operations	1.4 %	2.0 %	2.2 %	2.2 %	2.6 %	2.9 %	3.2 %
Income from discontinued operations (net of tax)	0.0 %	0.4 %	0.1 %	0.1 %	0.0 %	0.0 %	0.0 %
Net income	1.5 %	1.7 %	2.1 %	2.1 %	2.6 %	2.9 %	3.2 %
Minority interest	0.0 %	0.0 %	0.0 %	0.0 %	0.0 %	0.0 %	0.0 %
Net income (net of minority interest)	1.5 %	1.6 %	2.1 %	2.1 %	2.6 %	2.9 %	3.2 %

Balance sheet (EUR m)	2009	2010	2011	2012	2013E	2014E	2015E
Intangible assets	31.5	42.5	39.6	41.2	41.0	40.6	40.6
Property, plant and equipment	6.5	9.7	12.9	17.6	19.4	21.4	23.1
Financial assets	0.2	3.2	2.2	5.0	5.0	5.0	5.0
FIXED ASSETS	38.2	55.4	54.6	63.8	65.4	67.0	68.7
Inventories	12.6	13.4	15.0	8.7	11.8	13.0	14.1
Accounts receivable	47.2	68.0	72.2	88.3	92.3	98.8	104.6
Other current assets	5.1	6.4	7.2	0.9	0.9	0.9	0.9
Liquid assets	25.8	31.5	44.4	44.6	46.9	55.6	66.3
Deferred taxes	2.6	0.7	0.6	1.1	1.1	1.1	1.1
Deferred charges and prepaid expenses	3.4	2.0	0.9	1.1	1.1	1.1	1.1
CURRENT ASSETS	96.7	122.0	140.2	144.8	154.2	170.5	188.1
TOTAL ASSETS	134.9	177.4	194.9	208.6	219.6	237.5	256.8
SHAREHOLDERS EQUITY	43.9	50.9	60.7	80.6	91.8	105.3	121.0
MINORITY INTEREST	0.0	0.1	0.2	0.2	0.4	0.6	0.8
Long-term debt	21.6	29.0	16.7	14.1	6.4	6.4	6.4
Provisions for pensions and similar obligations	0.0	0.1	0.1	0.1	0.1	0.1	0.1
Other provisions	4.3	3.2	7.6	5.1	5.1	5.1	5.1
Non-current liabilities	26.0	32.2	24.4	19.3	11.6	11.6	11.6
short-term liabilities to banks	0.7	1.6	9.1	1.3	4.5	4.5	4.5
Accounts payable	47.9	64.4	72.9	76.9	81.0	85.2	88.6
Advance payments received on orders	1.1	1.5	1.9	3.6	3.6	3.6	3.6
Other liabilities (incl. from lease and rental contracts)	10.7	16.3	17.4	18.8	18.8	18.8	18.8
Deferred taxes	2.0	4.3	2.7	2.8	2.8	2.8	2.8
Deferred income	2.7	6.0	5.6	5.1	5.1	5.1	5.1
Current liabilities	65.0	94.2	109.6	108.6	115.8	120.0	123.5
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY	134.9	177.4	194.9	208.6	219.6	237.5	256.8

Balance sheet (common size)	2009	2010	2011	2012	2013E	2014E	2015E
Intangible assets	23.4 %	24.0 %	20.3 %	19.8 %	18.7 %	17.1 %	15.8 %
Property, plant and equipment	4.8 %	5.5 %	6.6 %	8.4 %	8.8 %	9.0 %	9.0 %
Financial assets	0.1 %	1.8 %	1.1 %	2.4 %	2.3 %	2.1 %	2.0 %
FIXED ASSETS	28.3 %	31.2 %	28.0 %	30.6 %	29.8 %	28.2 %	26.8 %
Inventories	9.3 %	7.5 %	7.7 %	4.2 %	5.4 %	5.5 %	5.5 %
Accounts receivable	35.0 %	38.3 %	37.1 %	42.3 %	42.0 %	41.6 %	40.7 %
Other current assets	3.8 %	3.6 %	3.7 %	0.4 %	0.4 %	0.4 %	0.4 %
Liquid assets	19.2 %	17.7 %	22.8 %	21.4 %	21.3 %	23.4 %	25.8 %
Deferred taxes	1.9 %	0.4 %	0.3 %	0.5 %	0.5 %	0.5 %	0.4 %
Deferred charges and prepaid expenses	2.5 %	1.1 %	0.4 %	0.5 %	0.5 %	0.5 %	0.4 %
CURRENT ASSETS	71.7 %	68.8 %	72.0 %	69.4 %	70.2 %	71.8 %	73.2 %
TOTAL ASSETS	100.0 %	100.0 %	100.0 %	100.0 %	100.0 %	100.0 %	100.0 %
SHAREHOLDERS EQUITY	32.5 %	28.7 %	31.2 %	38.6 %	41.8 %	44.3 %	47.1 %
MINORITY INTEREST	0.0 %	0.0 %	0.1 %	0.1 %	0.2 %	0.2 %	0.3 %
Long-term debt	16.0 %	16.3 %	8.6 %	6.8 %	2.9 %	2.7 %	2.5 %
Provisions for pensions and similar obligations	0.0 %	0.0 %	0.0 %	0.1 %	0.1 %	0.1 %	0.0 %
Other provisions	3.2 %	1.8 %	3.9 %	2.4 %	2.3 %	2.1 %	2.0 %
Non-current liabilities	19.3 %	18.2 %	12.5 %	9.3 %	5.3 %	4.9 %	4.5 %
short-term liabilities to banks	0.5 %	0.9 %	4.7 %	0.6 %	2.0 %	1.9 %	1.8 %
Accounts payable	35.5 %	36.3 %	37.4 %	36.9 %	36.9 %	35.9 %	34.5 %
Advance payments received on orders	0.8 %	0.9 %	1.0 %	1.7 %	1.7 %	1.5 %	1.4 %
Other liabilities (incl. from lease and rental contracts)	7.9 %	9.2 %	9.0 %	9.0 %	8.6 %	7.9 %	7.3 %
Deferred taxes	1.5 %	2.4 %	1.4 %	1.4 %	1.3 %	1.2 %	1.1 %
Deferred income	2.0 %	3.4 %	2.9 %	2.4 %	2.3 %	2.1 %	2.0 %
Current liabilities	48.2 %	53.1 %	56.2 %	52.0 %	52.7 %	50.5 %	48.1 %
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY	100.0 %	100.0 %	100.0 %	100.0 %	100.0 %	100.0 %	100.0 %

Cash flow statement (EUR m)	2009	2010	2011	2012	2013E	2014E	2015E
Net profit/loss	5.1	7.9	11.7	11.6	15.4	18.3	21.0
Depreciation of fixed assets (incl. leases)	2.4	3.8	2.8	4.0	4.8	5.0	5.3
Amortisation of goodwill	0.0	0.0	0.0	0.0	0.0	0.0	0.0
Amortisation of intangible assets	0.0	0.0	3.7	3.4	3.2	3.4	3.0
Others	-0.6	3.0	4.7	2.9	0.0	0.0	0.0
Cash flow from operations before changes in w/c	6.9	14.7	22.9	21.9	23.4	26.7	29.3
Increase/decrease in inventory	-0.9	0.3	-6.3	6.2	-3.1	-1.1	-1.1
Increase/decrease in accounts receivable	0.8	-15.2	-5.2	-16.1	-4.0	-6.5	-5.7
Increase/decrease in accounts payable	2.7	17.1	15.3	4.0	4.0	4.2	3.4
Increase/decrease in other working capital positions	1.1	0.0	0.0	0.0	0.0	0.0	0.0
Increase/decrease in working capital	3.8	2.2	3.8	-5.8	-3.1	-3.4	-3.4
Cash flow from operating activities	10.7	16.9	26.7	16.1	20.3	23.2	25.9
CAPEX	4.7	8.1	9.4	12.5	9.6	10.0	10.0
Payments for acquisitions	0.4	10.5	3.6	0.1	0.0	0.0	0.0
Financial investments	-0.2	-0.1	-0.3	0.0	0.0	0.0	0.0
Income from asset disposals	2.3	1.1	4.8	2.0	0.0	0.0	0.0
Cash flow from investing activities	-2.6	-17.3	-7.9	-10.6	-9.6	-10.0	-10.0
Cash flow before financing	8.0	-0.4	18.8	5.5	10.7	13.2	15.9
Increase/decrease in debt position	0.1	8.1	-2.6	-11.9	-4.5	0.0	0.0
Purchase of own shares	0.2	-0.6	0.0	0.0	0.0	0.0	0.0
Capital measures	0.0	0.0	0.0	11.2	0.0	0.0	0.0
Dividends paid	0.0	1.5	1.6	3.3	4.0	4.5	5.1
Others	-1.0	-1.3	-1.6	-1.4	0.0	0.0	0.0
Effects of exchange rate changes on cash	0.0	0.1	0.0	0.0	0.0	0.0	0.0
Cash flow from financing activities	-1.1	5.9	-5.8	-5.3	-8.5	-4.5	-5.1
Increase/decrease in liquid assets	7.0	5.6	13.0	0.2	2.2	8.7	10.8
Liquid assets at end of period	25.8	31.5	44.5	44.6	46.9	55.6	66.3

Source: Company data, Hauck & Aufhäuser

2009	2010	2011	2012	2013E	2014E	2015E
386.1	441.7	502.0	529.1	561.5	591.5	615.9
19.8 %	14.4 %	13.7 %	5.4 %	6.1 %	5.4 %	4.1 %
36.4	32.9	42.4	29.0	29.6	30.5	31.1
n/a	-9.6 %	28.9 %	-31.7 %	2.1 %	3.1 %	1.9 %
0.0	n/a	n/a	n/a	n/a	n/a	n/a
n/a	n/a	n/a	n/a	n/a	n/a	n/a
0.0	n/a	n/a	n/a	n/a	n/a	n/a
n/a	n/a	n/a	n/a	n/a	n/a	n/a
0.0	n/a	n/a	n/a	n/a	n/a	n/a
n/a	n/a	n/a	n/a	n/a	n/a	n/a
422.5	474.6	544.4	558.1	591.0	622.0	647.0
31.1 %	12.3 %	14.7 %	2.5 %	5.9 %	5.2 %	4.0 %

Key ratios (EUR m)	2009	2010	2011	2012	2013E	2014E	2015E
P&L growth analysis
Sales growth	1.6 %	36.2 %	14.7 %	2.5 %	5.9 %	5.2 %	4.0 %
EBITDA growth	21.3 %	100.7 %	31.6 %	12.2 %	9.0 %	13.1 %	11.8 %
EBIT growth	26.0 %	114.0 %	21.7 %	12.0 %	9.4 %	15.9 %	16.0 %
EPS growth	87.8 %	55.5 %	46.4 %	-2.1 %	22.5 %	18.8 %	15.1 %
Efficiency
Total operating costs / sales	97.6 %	96.3 %	95.6 %	95.4 %	95.0 %	94.6 %	94.2 %
Sales per employee	196.0	257.7	273.1	270.9	278.4	280.2	279.5
EBITDA per employee	5.3	10.3	12.5	13.6	14.4	15.6	16.7
Balance sheet analysis
Avg. working capital / sales	3.4 %	2.8 %	2.6 %	2.6 %	3.0 %	3.4 %	3.8 %
Inventory turnover (sales/inventory)	27.7	35.5	36.3	63.8	50.0	48.0	46.0
Trade debtors in days of sales	49.5	52.3	48.4	57.7	57.0	58.0	59.0
A/P turnover [(A/P*365)/sales]	50.1	49.6	48.9	50.3	50.0	50.0	50.0
Cash conversion cycle (days)	-3.9	-3.1	-6.3	-5.3	-4.0	-2.9	-1.7
Cash flow analysis
Free cash flow	6.0	8.8	17.3	3.6	10.7	13.2	15.9
Free cash flow/sales	1.7 %	1.9 %	3.2 %	0.6 %	1.8 %	2.1 %	2.5 %
FCF / net profit	118.4 %	113.1 %	150.3 %	31.4 %	70.6 %	73.3 %	76.4 %
FCF yield	2.6 %	3.9 %	7.6 %	1.4 %	4.3 %	5.3 %	6.3 %
Capex / depn	188.4 %	206.6 %	139.0 %	169.0 %	120.0 %	119.0 %	120.5 %
Capex / maintenance capex	137.6 %	133.1 %	151.6 %	n/a	101.5 %	102.9 %	98.6 %
Capex / sales	1.3 %	1.7 %	1.7 %	n/a	n/a	n/a	n/a
Security
Net debt	-3.5	-0.9	-18.5	-29.2	-36.0	-44.7	-55.4
Net Debt/EBITDA	0.0	0.0	0.0	0.0	0.0	0.0	0.0
Net debt / equity	-0.1	0.0	-0.3	-0.4	-0.4	-0.4	-0.5
Interest cover	5.4	8.0	8.3	9.7	15.1	23.6	27.4
Dividend payout ratio	30.7 %	19.7 %	26.7 %	34.7 %	29.9 %	28.3 %	27.3 %
Asset utilisation
Capital employed turnover	4.9	5.6	5.8	5.5	5.5	5.1	4.7
Operating assets turnover	20.1	18.9	21.5	16.4	15.2	14.0	13.1
Plant turnover	53.4	49.0	42.2	31.8	30.5	29.1	28.1
Inventory turnover (sales/inventory)	27.7	35.5	36.3	63.8	50.0	48.0	46.0
Returns
ROCE	10.5 %	19.5 %	20.6 %	21.1 %	21.6 %	22.8 %	23.4 %
ROE	11.5 %	15.4 %	19.0 %	14.2 %	16.6 %	17.1 %	17.2 %
Other
Interest paid / avg. debt	5.9 %	7.2 %	7.9 %	10.3 %	11.4 %	10.2 %	10.2 %
No. employees (average)	1777	1842	1994	2060	2123	2220	2315
Number of shares	10.4	10.3	10.4	10.6	11.4	11.4	11.4
DPS	0.2	0.2	0.3	0.4	0.4	0.5	0.5
EPS reported	0.49	0.76	1.11	1.09	1.33	1.58	1.82
Valuation ratios
P/BV	5.2	4.5	3.8	3.1	2.7	2.4	2.1
EV/sales	0.6	0.5	0.4	0.4	0.4	0.3	0.3
EV/EBITDA	23.7	11.9	8.3	7.9	7.0	6.0	5.0
EV/EBITA	31.7	14.9	9.4	9.2	8.3	7.0	5.9
EV/EBIT	31.7	14.9	11.3	10.7	9.5	7.9	6.4
EV/FCF	37.5	25.5	12.0	61.6	20.0	15.6	12.3
Dividend yield	0.7 %	0.7 %	1.4 %	1.6 %	1.8 %	2.0 %	2.3 %

Disclosures regarding research publications of Hauck & Aufhäuser Institutional Research AG pursuant to section 34b of the German Securities Trading Act (WpHG) and the regulations of the German Financial Analysis Ordinance (FinAnV)

Pursuant to section 34b of the German Securities Trading Act (WpHG) and section 5 of the Financial Analysis Ordinance (FinAnV) a research report has to point out possible conflicts of interest in connection with the analysed company. A conflict of interest is presumed to exist in particular if Hauck & Aufhäuser Institutional Research AG

• (1) or its affiliate(s) was, within the past twelve months, a member in a consortium that acquired the financial instruments of the analysed company,
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Conflicts of interest that existed at the time when this research report was published:

Company	Disclosure
CANCOM SE	2, 5

Buy	61.00 %	100.00 %
Sell	20.00 %	0.00 %
Hold	19.00 %	0.00 %

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4. Information Concerning the Methods of Valuation/Update

The determination of the fair value per share, i.e. the price target, and the resultant recommendation is done on the basis of the adjusted free cash flow (adj. FCF) method and on the basis of the discounted cash flow – DCF model. Furthermore, a peer group comparison is made.

The adj. FCF method is based on the assumption that investors purchase assets only at a price (enterprise value) at which the operating cash flow return after taxes on this investment exceeds their opportunity costs in the form of a hurdle rate of 7.5%. The operating cash flow is calculated as EBITDA less maintenance capex and taxes.

Within the framework of the DCF approach, the future free cash flows are calculated initially on the basis of a fictitious capital structure of 100% equity, i.e. interest and repayments on debt capital are not factored in initially. The adjustment towards the actual capital structure is done by discounting the calculated free cash flows with the weighted average cost of capital (WACC), which takes into account both the cost of equity capital and the cost of debt. After discounting, the calculated total enterprise value is reduced by the interest-bearing debt capital in order to arrive at the equity value.

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Buy: Sustainable upside potential of more than 10% within 12 months Sell: Sustainable downside potential of more than 10% within 12 months. Hold: Upside/downside potential is limited. No immediate catalyst visible.

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