CANCOM SE — M&A Activity 2013

Oct 14, 2013

CANCOM SE Germany - IT Services

Buy (old: Buy)				14-October-13
	Price target: EUR 32.00	(old: EUR 29.00)		Tim Wunderlich, CFA Analyst
Price:	EUR 23.70	Next result:	Q3 13: 08.11.13
Bloomberg:	COK GR	Market cap:	EUR 286.9 m	tim.wunderlich@ha-research.de
Reuters:	COKG.DE	Enterprise Value:	EUR 250.8 m	Tel.: +49 40 4143885 81

Value-accretive take-over of on line Datensysteme and bid for Pironet; Adj. Est. & PT for "on line"

CANCOM has announced the acquisition of on line Datensysteme. The company is an internationally active IT service provider specialising on storage, server, software and security solutions. It covers the complete value chain from consulting to the delivery and implementation of hard- and software as well as maintenance of IT. The company has nine sites in Germany, selected sites in Eastern Europe and Asia as well as one site each in Africa and South America.

The target is growing dynamically and profitably. on line Datensysteme has a record of high double-digit revenue growth (see graph on next page). The company is expected to increase sales by above 30% yoy to € 53m in 2013E in our view thanks to dynamic market share gains amongst its key clientele, public institutions (e.g. German Federal Pension Fund, KfW, Hamburg Police Department). on line operates at 9.5% EBITDA margins (vs. c. 5% for CANCOM) implying a high service sales share. The take-over should hence be margin-accretive for CANCOM. Visibility on on line's 2014E performance is high given long running contracts (3 years+) which have largely been renewed in 2012 or 2013. As a consequence, the majority of next year's revenue is secured already today.

The take-over looks highly value-accretive: CANCOM pays the take-over price by issuing 750,000 new shares. This would equal c. € 17.5m at a € 23.50 share price valuing on line at merely 3.5x EV/EBIT '13E and 2.9x EV/EBIT '14E - significantly below CANCOM's multiples of c. 11x EV/EBIT '13E and c. 8x EV/EBIT '14E. Valueaccretion should be supported by synergies: Note that CANCOM has an excellent track record of improving the efficiency of take-over targets by integrating them into its more efficient structure and cutting out fixed costs.

Estimate changes: on line Datensysteme is integrated into our model boosting sales by 10% for 2014E (€ 60m) and by 11% for 2015E (€ 70m). EBIT estimates are raised by 19% for 2014E and by 20% for 2015E accounting for € 1m amortisation from purchase price allocation (eH&A). Dilution from the 0.75m new shares is reflected in EPS estimates which still rise by 11% for 2014E and by 12% for 2015E.

– continued –

Y/E 31.12 (EUR m)	2009	2010	2011	2012	2013E	2014E	2015E
Sales	348.3	474.6	544.4	558.1	606.0	682.0	717.0
Sales growth	2 %	36 %	15 %	3 %	9 %	13 %	5 %
EBITDA	9.5	19.0	25.0	28.1	32.1	40.7	45.8
EBIT	7.1	15.2	18.5	20.7	23.8	31.2	36.4
Net income	5.1	7.8	11.5	11.5	16.0	21.4	24.8
Net debt	-3.5	-0.9	-18.5	-29.2	-36.2	-46.1	-59.7
Net gearing	-8.0 %	-1.8 %	-30.4 %	-36.3 %	-33.0 %	-36.5 %	-41.0 %
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	1.31	1.76	2.04
CPS	0.80	1.28	2.18	0.89	1.18	1.56	1.92
DPS	0.15	0.15	0.30	0.35	0.40	0.45	0.50
Dividend yield	0.6 %	0.6 %	1.3 %	1.5 %	1.7 %	1.9 %	2.1 %
Gross profit margin	31.0 %	29.3 %	29.1 %	29.5 %	29.9 %	29.8 %	30.0 %
EBITDA margin	2.7 %	4.0 %	4.6 %	5.0 %	5.3 %	6.0 %	6.4 %
EBIT margin	2.0 %	3.2 %	3.4 %	3.7 %	3.9 %	4.6 %	5.1 %
ROCE	10.5 %	19.5 %	20.6 %	21.1 %	20.9 %	23.2 %	23.8 %
EV/sales	0.7	0.5	0.4	0.4	0.4	0.4	0.3
EV/EBITDA	25.5	12.8	9.0	8.6	7.8	5.9	5.0
EV/EBIT	34.1	16.0	12.2	11.6	10.6	7.7	6.2
PER	49.3	25.7	20.8	22.3	18.1	13.5	11.6
Adjusted FCF yield	2.5 %	4.8 %	7.0 %	6.5 %	7.5 %	10.4 %	12.6 %

Source: Company data, Hauck & Aufhäuser Close price as of: 11.10.2013

Source: Company data, Hauck & Aufhäuser

High/low 52 weeks:	25.83 / 10.78
Price/Book Ratio:	2.6
Relative performance (TecDAX):
3 months	6.4 %
6 months	40.9 %
12 months	81.5 %

Changes in estimates

		Sales	EBIT	EPS
	old:	591	22.6	1.33
2013	∆	3%	5%	-1%
	old:	622	26.2	1.58
2014	∆	10%	19%	11%
	old:	647	30.4	1.82
2015	∆	11%	20%	12%

Key share data:

Number of shares: (in m pcs)	12.2
Authorised capital: (in € m)	4.0
Book value per share: (in €)	9.0
Ø trading volume: (12 months)	60,000

Major shareholders:

Free Float	82.9 %
AGI	13.3 %
Stefan Kober	2.3 %
Klaus Weinmann	1.6 %

Company description:

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

On top of the acquisition of on line Datensysteme, CANCOM has launched a takeover bid for Pironet at € 4.50 per share valuing the company at € 44m (EV).

Note: Estimates do not include the potential acquisition of Pironet until the transaction is closed.

Pironet is a leading cloud operator in Germany targeting SMEs: Cloud revenues are expected to amount to € 36m in 2013E with related EBITDA of € 7.3m (20% EBITDA margin). 80% of Pironet's Cloud Computing sales are recurring as customers access IT software and hardware on demand paying per user, per month. With this planned take-over, CANCOM will be accelerating its transformation from a simple IT service provider into a differentiated Cloud Computing company.

The deal looks compelling:

• Most importantly, by shifting Pironet's top consultants into its Cloud Computing projects, CANCOM should be able to ease its capacity bottleneck regarding its own AHP software - the only obstacle to even stronger growth in Cloud Computing currently.
• Further, CANCOM should be able to generate synergies in admin; expected cost savings amount to € 1.0m p.a. (eH&A).
• As Pironet owns and operates its own data centre (hidden asset not reflected on its balance sheet), CANCOM can migrate its hosted servers from M-Net in Munich where it currently rents data centre space. Savings are seen to amount to € 0.5m p.a.

In sum, CANCOM should be able to achieve € 1.5m cost synergies AND put Pironet's consultants to more profitable use: While Pironet currently achieves c. 20% EBITDA margins in Cloud Computing, CANCOM operates at 30%+ with its own software and even achieved 50% in recent deals.

CANCOM already owns 13.65% of Pironet directly and has effected an agreement with Pironet's management board members to buy their 13.75% stake at € 4.50 per share. Its total stake should hence amount to 27.40% prior to the full take-over offer announced today. The deal will be financed by a rights issue: No details have yet been disclosed concerning the capital increase.

The PT is increased to € 32.00 (old: € 29.00) based on DCF thanks to the valueaccretive take-over of on line. The planned take-over of Pironet will be incorporated once transparency emerges concerning the capital increase and the acceptance rate of shareholders. Remains a BUY.

on line Datensysteme: Sales and EBITDA performance

Financials

Profit and loss (EUR m)	2009	2010	2011	2012	2013E	2014E	2015E
Net sales	348.3	474.6	544.4	558.1	606.0	682.0	717.0
Sales growth	1.6 %	36.2 %	14.7 %	2.5 %	8.6 %	12.5 %	5.1 %
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	607.0	683.0	718.0
Other operating income	2.3	3.3	0.7	0.6	0.4	0.7	0.7
Material expenses	241.1	336.3	386.6	395.1	425.4	479.4	502.3
Personnel expenses	79.2	97.0	108.0	112.4	120.2	129.9	135.1
Other operating expenses	21.8	26.8	26.4	25.8	29.7	33.6	35.5
Total operating expenses	339.8	456.8	520.3	532.5	574.9	642.3	672.2
EBITDA	9.5	19.0	25.0	28.1	32.1	40.7	45.8
Depreciation	2.4	3.8	2.8	4.0	4.8	5.1	5.4
EBITA	7.1	15.2	22.2	24.0	27.3	35.6	40.4
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	3.5	4.4	4.0
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	23.8	31.2	36.4
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	1.6	1.3	1.3
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	-0.7	-0.3	-0.6
Recurring pretax income from continuing operations	5.9	13.3	16.9	18.9	23.1	30.9	35.8
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	23.1	30.9	35.8
Taxes	0.9	3.7	4.9	6.6	6.9	9.3	10.7
Net income from continuing operations	5.0	9.6	12.0	12.3	16.2	21.6	25.1
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	16.2	21.6	25.1
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	16.0	21.4	24.8
Average number of shares	10.4	10.3	10.4	10.6	12.2	12.2	12.2
EPS reported	0.49	0.76	1.11	1.09	1.31	1.76	2.04

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 %	0.1 %	0.1 %
Total sales	100.3 %	100.3 %	100.2 %	100.5 %	100.2 %	100.1 %	100.1 %
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 %	70.2 %	70.3 %	70.1 %
Personnel expenses	22.7 %	20.4 %	19.8 %	20.1 %	19.8 %	19.0 %	18.8 %
Other operating expenses	6.3 %	5.7 %	4.8 %	4.6 %	4.9 %	4.9 %	4.9 %
Total operating expenses	97.6 %	96.3 %	95.6 %	95.4 %	94.9 %	94.2 %	93.8 %
EBITDA	2.7 %	4.0 %	4.6 %	5.0 %	5.3 %	6.0 %	6.4 %
Depreciation	0.7 %	0.8 %	0.5 %	0.7 %	0.8 %	0.7 %	0.8 %
EBITA	2.0 %	3.2 %	4.1 %	4.3 %	4.5 %	5.2 %	5.6 %
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 %	0.6 %	0.6 %	0.6 %
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 %	3.9 %	4.6 %	5.1 %
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 %	3.8 %	4.5 %	5.0 %
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 %	3.8 %	4.5 %	5.0 %
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 %	2.7 %	3.2 %	3.5 %
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 %	2.7 %	3.2 %	3.5 %
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 %	3.1 %	3.5 %

CANCOM SE

Balance sheet (EUR m)	2009	2010	2011	2012	2013E	2014E	2015E
Intangible assets	31.5	42.5	39.6	41.2	57.7	56.3	55.3
Property, plant and equipment	6.5	9.7	12.9	17.6	19.6	22.5	25.4
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	82.4	83.9	85.8
Inventories	12.6	13.4	15.0	8.7	12.1	14.2	15.6
Accounts receivable	47.2	68.0	72.2	88.3	94.6	108.4	115.9
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	47.1	57.0	70.6
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	157.0	182.7	205.2
TOTAL ASSETS	134.9	177.4	194.9	208.6	239.4	266.6	291.0
SHAREHOLDERS EQUITY	43.9	50.9	60.7	80.6	109.6	126.2	145.6
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	83.0	93.4	98.2
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	117.8	128.2	133.0
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY	134.9	177.4	194.9	208.6	239.4	266.6	291.0

Balance sheet (common size)	2009	2010	2011	2012	2013E	2014E	2015E
Intangible assets	23.4 %	24.0 %	20.3 %	19.8 %	24.1 %	21.1 %	19.0 %
Property, plant and equipment	4.8 %	5.5 %	6.6 %	8.4 %	8.2 %	8.4 %	8.7 %
Financial assets	0.1 %	1.8 %	1.1 %	2.4 %	2.1 %	1.9 %	1.7 %
FIXED ASSETS	28.3 %	31.2 %	28.0 %	30.6 %	34.4 %	31.5 %	29.5 %
Inventories	9.3 %	7.5 %	7.7 %	4.2 %	5.1 %	5.3 %	5.4 %
Accounts receivable	35.0 %	38.3 %	37.1 %	42.3 %	39.5 %	40.7 %	39.8 %
Other current assets	3.8 %	3.6 %	3.7 %	0.4 %	0.4 %	0.3 %	0.3 %
Liquid assets	19.2 %	17.7 %	22.8 %	21.4 %	19.7 %	21.4 %	24.2 %
Deferred taxes	1.9 %	0.4 %	0.3 %	0.5 %	0.5 %	0.4 %	0.4 %
Deferred charges and prepaid expenses	2.5 %	1.1 %	0.4 %	0.5 %	0.5 %	0.4 %	0.4 %
CURRENT ASSETS	71.7 %	68.8 %	72.0 %	69.4 %	65.6 %	68.5 %	70.5 %
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 %	45.8 %	47.3 %	50.0 %
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 %	2.7 %	2.4 %	2.2 %
Provisions for pensions and similar obligations	0.0 %	0.0 %	0.0 %	0.1 %	0.1 %	0.0 %	0.0 %
Other provisions	3.2 %	1.8 %	3.9 %	2.4 %	2.1 %	1.9 %	1.7 %
Non-current liabilities	19.3 %	18.2 %	12.5 %	9.3 %	4.8 %	4.3 %	4.0 %
short-term liabilities to banks	0.5 %	0.9 %	4.7 %	0.6 %	1.9 %	1.7 %	1.5 %
Accounts payable	35.5 %	36.3 %	37.4 %	36.9 %	34.7 %	35.0 %	33.8 %
Advance payments received on orders	0.8 %	0.9 %	1.0 %	1.7 %	1.5 %	1.4 %	1.3 %
Other liabilities (incl. from lease and rental contracts)	7.9 %	9.2 %	9.0 %	9.0 %	7.8 %	7.0 %	6.5 %
Deferred taxes	1.5 %	2.4 %	1.4 %	1.4 %	1.2 %	1.1 %	1.0 %
Deferred income	2.0 %	3.4 %	2.9 %	2.4 %	2.1 %	1.9 %	1.7 %
Current liabilities	48.2 %	53.1 %	56.2 %	52.0 %	49.2 %	48.1 %	45.7 %
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY	100.0 %	100.0 %	100.0 %	100.0 %	100.0 %	100.0 %	100.0 %

CANCOM SE

Cash flow statement (EUR m)	2009	2010	2011	2012	2013E	2014E	2015E
Net profit/loss	5.1	7.9	11.7	11.6	16.2	21.6	25.1
Depreciation of fixed assets (incl. leases)	2.4	3.8	2.8	4.0	4.8	5.1	5.4
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	3.5	4.4	4.0
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	24.5	31.1	34.5
Increase/decrease in inventory	-0.9	0.3	-6.3	6.2	-3.4	-2.1	-1.4
Increase/decrease in accounts receivable	0.8	-15.2	-5.2	-16.1	-6.4	-13.7	-7.5
Increase/decrease in accounts payable	2.7	17.1	15.3	4.0	6.1	10.4	4.8
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	-3.6	-5.4	-4.1
Cash flow from operating activities	10.7	16.9	26.7	16.1	20.8	25.7	30.3
CAPEX	4.7	8.1	9.4	12.5	9.9	11.0	11.3
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	-9.9	-11.0	-11.3
Cash flow before financing	8.0	-0.4	18.8	5.5	10.9	14.7	19.0
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	4.8	5.4
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	-4.8	-5.4
Increase/decrease in liquid assets	7.0	5.6	13.0	0.2	2.4	9.9	13.6
Liquid assets at end of period	25.8	31.5	44.5	44.6	47.1	57.0	70.6

Source: Company data, Hauck & Aufhäuser

2009	2010	2011	2012	2013E	2014E	2015E
386.1	441.7	502.0	529.1	575.7	648.6	682.6
19.8 %	14.4 %	13.7 %	5.4 %	8.8 %	12.7 %	5.2 %
36.4	32.9	42.4	29.0	30.3	33.4	34.4
n/a	-9.6 %	28.9 %	-31.7 %	4.7 %	10.3 %	3.0 %
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	606.0	682.0	717.0
31.1 %	12.3 %	14.7 %	2.5 %	8.6 %	12.5 %	5.1 %

CANCOM SE

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 %	8.6 %	12.5 %	5.1 %
EBITDA growth	21.3 %	100.7 %	31.6 %	12.2 %	14.3 %	26.9 %	12.5 %
EBIT growth	26.0 %	114.0 %	21.7 %	12.0 %	15.0 %	31.4 %	16.6 %
EPS growth	87.8 %	55.5 %	46.4 %	-2.1 %	20.8 %	34.1 %	15.9 %
Efficiency
Total operating costs / sales	97.6 %	96.3 %	95.6 %	95.4 %	94.9 %	94.2 %	93.8 %
Sales per employee	196.0	257.7	273.1	270.9	285.4	307.2	309.7
EBITDA per employee	5.3	10.3	12.5	13.6	15.1	18.3	19.8
Balance sheet analysis
Avg. working capital / sales	3.4 %	2.8 %	2.6 %	2.6 %	3.0 %	3.3 %	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	-3.8	-2.3	-1.0
Cash flow analysis
Free cash flow	6.0	8.8	17.3	3.6	10.9	14.7	19.0
Free cash flow/sales	1.7 %	1.9 %	3.2 %	0.6 %	1.8 %	2.2 %	2.7 %
FCF / net profit	118.4 %	113.1 %	150.3 %	31.4 %	68.5 %	68.7 %	76.7 %
FCF yield	2.4 %	3.6 %	7.1 %	1.3 %	3.8 %	5.1 %	6.6 %
Capex / depn	188.4 %	206.6 %	139.0 %	169.0 %	118.9 %	115.8 %	120.2 %
Capex / maintenance capex	137.6 %	133.1 %	151.6 %	n/a	106.2 %	117.6 %	116.9 %
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	-36.2	-46.1	-59.7
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	-0.3	-0.4	-0.4
Interest cover	5.4	8.0	8.3	9.7	15.3	24.0	28.0
Dividend payout ratio	30.7 %	19.7 %	26.7 %	34.7 %	30.3 %	25.4 %	24.4 %
Asset utilisation
Capital employed turnover	4.9	5.6	5.8	5.5	4.8	4.8	4.4
Operating assets turnover	20.1	18.9	21.5	16.4	15.3	14.2	13.0
Plant turnover	53.4	49.0	42.2	31.8	30.9	30.3	28.2
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 %	20.9 %	23.2 %	23.8 %
ROE	11.5 %	15.4 %	19.0 %	14.2 %	14.6 %	17.0 %	17.1 %
Other
Interest paid / avg. debt	5.9 %	7.2 %	7.9 %	10.3 %	11.8 %	11.9 %	11.9 %
No. employees (average)	1777	1842	1994	2060	2123	2220	2315
Number of shares	10.4	10.3	10.4	10.6	12.2	12.2	12.2
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	1.31	1.76	2.04
Valuation ratios
P/BV	5.6	4.8	4.1	3.4	2.6	2.3	2.0
EV/sales	0.7	0.5	0.4	0.4	0.4	0.4	0.3
EV/EBITDA	25.5	12.8	9.0	8.6	7.8	5.9	5.0
EV/EBITA	34.1	16.0	10.1	10.0	9.2	6.8	5.6
EV/EBIT	34.1	16.0	12.2	11.6	10.6	7.7	6.2
EV/FCF	40.3	27.4	13.0	66.7	22.9	16.4	11.9
Dividend yield	0.6 %	0.6 %	1.3 %	1.5 %	1.7 %	1.9 %	2.1 %

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, 3, 5, 7

Buy	61.17 %	100.00 %
Sell	18.45 %	0.00 %
Hold	20.39 %	0.00 %

1. General Information/Liabilities

This research report has been produced for the information purposes of institutional investors only, and is not in any way a recommendation, offer or solicitation to buy or sell the financial instruments mentioned herein. The document is confidential and is made available by Hauck & Aufhäuser Institutional Research AG (the ʺCompanyʺ), a majority-owned subsidiary of Hauck & Aufhäuser Privatbankiers KGaA, exclusively to selected recipients [in DE, GB, FR, CH, US, Scandinavia, and Benelux or, in individual cases, also in other countries]. A distribution to private investors in the sense of the German Securities Trading Act (WpHG) is excluded. It is not allowed to pass the research report on to persons other than the intended recipient without the permission of the Company. Reproduction of this document, in whole or in part, is not permitted without prior permission of the Company. All rights reserved.

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Past performance of a financial instrument is not necessarily indicative of future performance.

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This research report was prepared by the research analyst named on the front page (the ʺProducerʺ). The Producer is solely responsible for the views and estimates expressed in this report. The report has been prepared independently, i.e. the content of which was not independently examined by the Company or Hauck & Aufhäuser Privatbankiers KGaA.

The estimates and views in this financial report may deviate from those of Hauck & Aufhäuser Privatbankiers KGaA.

The content of the research report was not influenced by the issuer of the analysed financial instrument at any time. It may be possible that parts of the research report were handed out to the issuer for information purposes prior to the publication without any major amendments being made thereafter.

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The Company and Hauck & Aufhäuser Privatbankiers KGaA took internal organisational and regulative precautions to avoid or accordingly disclose possible conflicts of interest in connection with the preparation and distribution of the research report. All members of the Company involved in the preparation of the research report are subject to internal compliance regulations.

No part of the Producer's compensation is directly or indirectly related to the preparation of this financial analysis.

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.

Hauck & Aufhäuser Institutional Research uses the following three-step rating system for the analysed companies:

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.

NB: The recommendations of Hauck & Aufhäuser Institutional Research are not based on a performance that is expected to be "relative" to the market.

The decision on the choice of the financial instruments analysed in this document was solely made by the Company. The opinions and estimates in this research report are subject to change without notice. It is within the discretion of the Company whether and when it publishes an update to this research report.

5. Major Sources of Information

Part of the information required for this research report was made available by the issuer of the financial instrument. Furthermore, this report is based on publicly available sources (such as, for example, Bloomberg, Reuters, VWD-Trader and the relevant daily press) believed to be reliable. The Company has checked the information for plausibility but not for accuracy or completeness.

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Contacts: Hauck&Aufhäuser Investment Banking

Hauck & Aufhäuser Research

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Lars Dannenberg Analyst

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Hauck & Aufhäuser Sales Vincent Bischoff Sales James Bonsor, CFA Sales Hamish Edsell Sales

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Christian von Schuler Trading

Tel.: +49 (0)40 414 3885 77 E.Mail: christian.schuler@hauck-aufhaeuser.de Carolin Weber Middle-Office

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