CANCOM SE — Investor Presentation 2013

Jul 10, 2013

CANCOM SE Germany - IT Services

Buy (old: Buy) 10-July-13

Price target: EUR 29.00 (old: EUR 22.50) Tim Wunderlich, CFA

Price:	EUR 18.03	Next result:	Q2 13: 13.08.13
Bloomberg:	COK GR	Market cap:	EUR 204.7 m	tim.wunderlich@ha-research.de
Reuters:	COKG.DE	Enterprise Value:	EUR 168.9 m	Tel.: +49 40 4143885 81

Riding the cloud towards higher profitability; Adj. Est. & PT

Cloud Computing is en vogue amongst investors given lively M&A activity and strong market growth prospects. But while investors should be well acquainted with cloud heavyweights like Amazon and Salesforce.com, German small-and mid-caps with cloud exposure yet remain largely undiscovered outside Germany – offering potential for superior returns.

One of these stocks is CANCOM. Formerly a little exciting pure IT system house, CANCOM is seeing rapid growth in Private Cloud solutions for the German Mittelstand helped by its unique AHP cloud software which drives differentiation from rivals like Bechtle and Computacenter due to its multiple benefits including significant cost and time savings, greater transparency AND higher stability of the final cloud solution.

Thanks to its software's unique features, an early mover advantage and access to 25,000 long-standing SME customers, CANCOM looks set to capture a material share of the burgeoning Private Cloud market translating into expected 39% sales growth p.a. for its Cloud Computing business driving related sales from c. € 10m in '12 to € 27m in '15E (4% of group sales). But the beauty of Cloud Computing is really its recurring and high-margin nature offering EBITDA margins of 30%+. Helped by price increases given excess demand for CANCOM's cloud know-how, cloud-related EBITDA should increase by 54% p.a. from € 3.0m ('12) to € 11.0m by 2015E explaining 28% of group EBITDA.

News flow looks set to remain positive as the growing visibility AND profitability of the business model should drive a positive re-rating of the stock which is attractively valued trading at multiples of only 6.1x EV/EBIT '14E and at discounts to cloud peers like Rackspace and Equinix.

Evidently, several private investors with in-depth industry know-how seem to think alike: Mr.Schick and Mr.Vielberth have both recently snapped up 10% stakes supporting our view that CANCOM is an appealing take-over target especially for companies looking for cloud exposure to German SMEs such as IBM and T-Systems. On adjusted profitability estimates reflecting CANCOM's recent success in winning new Private Cloud deals, we upgrade the PT to € 29.00 (old: € 22.50) based on an overhauled DCF model. BUY. (Please see full update released separately today)

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 fully diluted	0.49	0.76	1.11	1.00	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	0.8 %	0.8 %	1.7 %	1.9 %	2.2 %	2.5 %	2.8 %
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	0.5	0.4	0.3	0.3	0.3	0.3	0.2
EV/EBITDA	19.3	9.7	6.7	6.3	5.5	4.6	3.9
EV/EBIT	25.8	12.2	9.0	8.5	7.5	6.1	4.9
PER	37.5	19.6	15.8	17.0	13.6	11.4	9.9
Adjusted FCF yield	3.3 %	6.3 %	9.4 %	9.0 %	10.6 %	12.8 %	15.7 %

Source: Company data, Hauck & Aufhäuser Close price as of: 09.07.2013

Analyst

Source: Company data, Hauck & Aufhäuser

High/low 52 weeks:	18.11 / 10.78
Price/Book Ratio:	2.2
Relative performance (TecDAX):
3 months	15.0 %
6 months	19.3 %
12 months	-1.9 %

Changes in estimates

		Sales	EBIT	EPS
2013	old:	591.0	22.6	1.33
	∆	-	-	-
	old:	622.0	25.2	1.52
2014	∆	-	4.0%	4.0%
	old:	643.8	28.4	1.70
2015	∆	0.5%	7.0%	7.2%

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:

Free Float	71.3 %
Family Schick	10.2 %
Elber Beteiligung	10.0 %
AGI	4.7 %
Stefan Kober	2.3 %
Klaus Weinmann	1.6 %

Company description:

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

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	3.2 %	4.8 %	9.4 %	1.8 %	5.2 %	6.5 %	7.8 %
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	4.3	3.7	3.1	2.6	2.2	2.0	1.7
EV/sales	0.5	0.4	0.3	0.3	0.3	0.3	0.2
EV/EBITDA	19.3	9.7	6.7	6.3	5.5	4.6	3.9
EV/EBITA	25.8	12.2	7.5	7.3	6.5	5.4	4.5
EV/EBIT	25.8	12.2	9.0	8.5	7.5	6.1	4.9
EV/FCF	30.5	20.8	9.6	48.8	15.7	12.1	9.4
Dividend yield	0.8 %	0.8 %	1.7 %	1.9 %	2.2 %	2.5 %	2.8 %

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,
• (2) has entered into an agreement on the production of the research report with the analysed company,
• (3) or its affiliate(s) has, within the past twelve months, been party to an agreement on the provision of investment banking services with the analysed company or have received services or a promise of services under the term of such an agreement,
• (4) or its affiliate(s) holds 5% or more of the share capital of the analysed company,
• (5) or its affiliate(s) regularly holds a trading position in shares of the analysed company or derivatives thereof,
• (6) or its affiliate(s) manages the financial instruments of the analysed company on the basis of an existing contractual relationship,
• (7) or the analyst has any other significant financial interests relating to the analysed company such as, for example, exercising mandates in the interest of the analysed company.
• (8) The research report has been made available to the company prior to its publication. Thereafter, only factual changes have been made to the report.

Conflicts of interest that existed at the time when this research report was published:

Company	Disclosure
CANCOM SE	2, 5

Historical target price and rating changes for CANCOM SE in the last 12 months

Buy	58.33 %	100.00 %
Sell	15.63 %	0.00 %
Hold	26.04 %	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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