Masterflex SE — Earnings Release 2012

May 10, 2012

9 May 2012 Masterflex AG FIRST BERLIN Equity Research

Q1 RESULTS

MASTERFLEX AG

GERMANY / INDUSTRIAL PRODUCTS & PLASTICS

Primary exchange: Frankfurt Bloomberg symbol: MZX GR ISIN: DE0005492938

Q1 RESULTS IN LINE WITH OUR EXPECTATIONS

Masterflex has released final Q1 2012 results. Sales and income development were in line with our expectations. The company confirmed its guidance for the current fiscal year. Sales are expected in the range €57-58m (y/y sales growth of more than 7.5%). At the operating level, Masterflex predicts EBIT of €8m. We reiterate our €7.50 price target and our Buy recommendation.

Positive start to 2012 Masterflex had already released preliminary sales and EBIT figures at the end of April. Sales increased 4% y/y to €14.51m (FBe: €14.50m; Q1/11: €13.93m). EBIT came in at €2.12m (FBe: €2.02m; Q1/11: €2.40m). As expected (see our 26 April update), operating development in Q1 2012 was burdened by higher material costs (€4.81m; FBe: 4.87m; Q1/11: €4.47m) and personnel expenses (€4.94m; FBe: €4.94m; Q1/11: €4.52m). Net income for the period amounted to €1.06m (FBe: €1.09m; Q1/11: €0.94m) or €0.12 (FBe: €0.12; Q1/11: €0.11) per share.

Balance sheet remains solid In Q1 2012, operating cash flow improved slightly to €-1.01m (Q1/11: €-1.13m). Net cash flows amounted to €-1.67m (Q1/11: €-5.57m). Thus, liquid funds decreased to €2.92m (FY/11: €4.54m). Net debt was €21.1m (FY/11: €19.33m) at the end of March 2012. Masterflex' equity position improved to €16.80m (FY/11: €15.68m), which corresponds to an equity ratio of 34.2% (FY/11: 31.9%).

2012 guidance confirmed Masterflex confirmed its guidance for the current fiscal year. In 2012, sales are expected to increase by more than 7.5% y/y to €57-58m. EBIT is expected to come in at €8m. (p.t.o.)

FINANCIAL HISTORY & PROJECTIONS

	2010	2011	2012E	2013E	2014E	2015E
Revenue (€m)	46.06	53.00	57.87	62.91	68.19	73.58
Y-o-y growth	n.a.	15.1%	9.2%	8.7%	8.4%	7.9%
EBIT (€m)	6.45	7.50	8.16	8.99	9.85	10.70
EBIT margin	14.0%	14.2%	14.1%	14.3%	14.4%	14.5%
Net income (€m)	-2.33	3.88	4.48	5.35	5.99	6.66
EPS (diluted) (€)	-0.49	0.44	0.51	0.61	0.69	0.76
EV / Sales (x)	1.4	1.2	1.1	1.0	0.9	0.9
EV / EBIT (x)	10.0	8.6	7.9	7.2	6.6	6.1
P/E (x)	n.a.	10.9	9.5	7.9	7.1	6.4
DPS (€)	0.00	0.00	0.00	0.00	0.00	0.00
Yield	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%
FCF (€m)	2.65	2.10	3.32	3.89	4.34	5.02
Net gearing	192.9%	123.3%	63.5%	38.0%	18.8%	3.6%
Liquid assets (€m)	14.40	4.54	3.53	6.52	8.56	0.46

RISKS

Risks to our price target include debt servicing, dependency on raw material prices and burdened profitability due to regional expansion.

RATING:	Buy
PRICE TARGET:	€7.50
RETURN POTENTIAL:	54.2%
RISK RATING:	High

COMPANY PROFILE

Masterflex AG focuses on developing and manufacturing high grade connection and hose systems made of innovative high-tech plastics. The firm is a global market leader in high-tech hose systems.

TRADING DATA

Closing price (08.05.12)	€4.87
Shares outstanding	8.73m
Market capitalisation	€42.48m
52-week range	€3.80 / 6.80
Average volume (12 months)	11,948

STOCK OVERVIEW

COMPANY DATA (as of 31 March 2012)

Liquid assets	€2.92m
Current assets	€20.20m
Intangible assets	€4.08m
Total assets	€51.02m
Current liabilities	€13.07m
Shareholders' equity	€16.80m

SHAREHOLDERS

SVB GmbH & Co. KG/Schmidt	19.6%
Familienmitglieder Bischoping	5.3%
BBC GmbH	4.6%
Other	8.1%
Free Float	62.4%

Analyst: Jens Hasselmeier, Tel. +49 (0)30 - 80 93 96 83

Unchanged forecasts Since Masterflex had already published preliminary figures for Q1 2012 at the end of April, the final results were hardly surprising. Based on unchanged forecasts for 2012E and subsequent years, we reiterate our Buy rating and our €7.50 price target.

REPORTED FIGURES VERSUS ESTIMATES

All figures in €m	Q1-12A	Q1-12E	Delta	Q1-11	Delta
Sales	14.51	14.50	0.1%	13.93	4.2%
EBIT	2.12	2.02	5.1%	2.40	-11.5%
margin	14.6%	13.9%		17.2%
Net income	1.06	1.09	-2.5%	0.94	13.7%
margin	7.3%	7.5%		6.7%
EPS (diluted)	0.12	0.12	-2.5%	0.11	9.1%

Table 1 Source: First Berlin

Report No.:	Date of publication	Previous day closing price	Recommen dation	Price target
Initial Report	5 December 2011	€4.61	Buy	€7.10
22	↓	↓	↓	↓
3	6 March 2012	€5.11	Buy	€7.20
4	4 April 2012	€5.27	Buy	€7.50
5	26 April 2012	€4.95	Buy	€7.50
6	Today	€4.87	Buy	€7.50

FIRST BERLIN RECOMMENDATION & PRICE TARGET HISTORY

Jens Hasselmeier

First Berlin Equity Research GmbH

Mohrenstraße 34 10117 Berlin

Tel. +49 (0)30 - 80 93 96 83 Fax +49 (0)30 - 80 93 96 87

info@firstberlin.com www.firstberlin.com

FIRST BERLIN POLICY

In an effort to assure the independence of First Berlin research neither analysts nor the company itself trade or own securities in subject companies. In addition, analysts' compensation is not directly linked to specific financial transactions, trading revenue or asset management fees. Analysts are compensated on a broad range of benchmarks. Furthermore, First Berlin receives no compensation from subject companies in relation to the costs of producing this report.

ANALYST CERTIFICATION

I, Jens Hasselmeier, certify that the views expressed in this report accurately reflect my personal and professional views about the subject company; and I certify that my compensation is not directly linked to any specific financial transaction including trading revenue or asset management fees; neither is it directly or indirectly related to the specific recommendation or views contained in this research. In addition, I possess no shares in the subject company.

INVESTMENT RATING SYSTEM

First Berlin's investment rating system is five tiered and includes an investment recommendation and a risk rating. Our recommendations, which are a function of our expectation of total return (forecast price appreciation and dividend yield) in the year specified, are as follows:

STRONG BUY: Expected return greater than 50% and a high level of confidence in management's financial guidance BUY: Expected return greater than 25% ADD: Expected return between 0% and 25% REDUCE: Expected negative return between 0% and -15% SELL: Expected negative return greater than -15%

Our risk ratings are Low, Medium, High and Speculative and are determined by ten factors: corporate governance, quality of earnings, management strength, balance sheet and financing risk, competitive position, standard of financial disclosure, regulatory and political uncertainty, company size, free float and other company specific risks. These risk factors are incorporated into our valuation models and are therefore reflected in our price targets. Our models are available upon request to First Berlin clients.

Up until 16 May 2008, First Berlin's investment rating system was three tiered and was a function of our expectation of return (forecast price appreciation and dividend yield) over the specified year. Our investment ratings were as follows: BUY: expected return greater than 15%; HOLD: expected return between 0% and 15%; and SELL: expected negative return.

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