Masterflex SE — Earnings Release 2011

Mar 6, 2012

6 March 2012 Masterflex AG FIRST BERLIN Equity Research

MASTERFLEX AG

GERMANY / INDUSTRIAL PRODUCTS & PLASTICS

Primary exchange: Frankfurt Bloomberg symbol: MZX ISIN: DE0005492938

PRELIMINARY
			FY 2011 FIGURES

STRONG PRELIMINARY FIGURES FOR FY 2011

On 5 March 2011 Masterflex published strong preliminary figures for FY 2011 which exceeded our expectations. Moreover, at the beginning of March the company reported that expansion into Asia is progressing well. We reiterate our Buy rating based on a new price target of €7.20 (previously: €7.10).

Preliminary figures 2011 On 5 March Masterflex published preliminary 2011 figures. Sales increased 15.0% y/y to €53m (FY10: €46.1m; FBe: €50.5m). EBIT came in at €7.5m (FY10: €6.4m) which corresponds to an EBIT margin of 14.2% (FY10: 14.0%). Masterflex beat our estimates at the operating level (FBe: EBIT of €7.1m, EBIT margin of 14.1%) as well.

Internationalisation on track Masterflex is making progress in setting-up its new lead subsidiary in Asia, Masterflex Asia Pte Ltd in Singapore. The company is currently hiring sales and marketing staff for the Asia-Pacific region. Moreover, Masterflex managed to find a suitable location near Shanghai for its Chinese operations. First projects with new customers in China will begin shortly.

Unchanged forecasts Masterflex' strong preliminary FY 2011 figures suggest that our sales and profitability estimates from FY 2012 onwards might be too conservative. However, we are sticking to our current estimates pending publication of the 2011 annual report (29 March). Besides the firm's guidance for 2012, we will pay special attention to Masterflex' operating development in the BRIC countries since the company's emerging markets activities are expected to be an important driver of future growth. Our updated DCF model yields a new price target of €7.20 (previously: €7.10). We reiterate our Buy rating.

FINANCIAL HISTORY & PROJECTIONS

	2010	2011	2012E	2013E	2014E	2015E
Revenue (€m)	46.06	53.00	54.72	58.66	61.94	65.01
Y-o-y growth	n.a.	15.1%	3.2%	7.2%	5.6%	5.0%
EBIT (€m)	6.45	7.50	7.60	8.04	8.43	8.63
EBIT margin	14.0%	14.2%	13.9%	13.7%	13.6%	13.3%
Net income (€m)	-2,33	-	3.99	4.59	4.92	5.10
EPS (diluted) (€)	-0,49	-	0.46	0.53	0.56	0.58
EV / Sales (x)	1.4	1.2	1.1	1.1	1.0	1.0
EV / EBIT (x)	9.7	8.4	8.3	7.8	7.4	7.3
P/E (x)	n.a.	-	11.2	9.7	9.1	8.7
DPS (€)	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	-	4.02	4.01	4.89	4.83
Net gearing	192.9%	-	59.1%	34.7%	14.5%	-0.3%
Liquid assets (€m)	14.40	-	5.47	8.03	12.01	13.59

RISKS

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

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.

RATING: Buy PRICE TARGET: €7.20 RETURN POTENTIAL: 41.0% RISK RATING: High

TRADING DATA

Closing price (05.03.12)	€5.11
Shares outstanding	8.73m
Market capitalisation	€44.58m
52-week range	€3.77 / 6.80
Average volume (12 months)	12,497

STOCK OVERVIEW

COMPANY DATA (as of 30 September 2011)

Liquid assets	€4.08m
Current assets	€19.81m
Intangible assets	€4.11m
Total assets	€52.82m
Current liabilities	€14.02m
Shareholders' equity	€14.04m

SHAREHOLDERS

SVB GmbH & Co. KG/Schmidt	19.6%
BBC GmbH	4.6%
Familienmitglieder Bischoping	4.4%
Other	8.1%
Free Float	63.3%

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

REPORTED FIGURES VERSUS ESTIMATES

All figures in \$m	FY 2011 A	FY 2011 E	Delta	FY 2010 A	Delta
Sales	53.00	50.48	5.0%	46.06	15.1%
EBIT	7.50	7.10	5.6%	6.45	16.3%
margin	14.2%	14.1%		14.0%
Net income	-	3.73	-	7.93	-
margin	-	7.4%		17.2%
EPS (diluted)	-	0.43	-	1.67	-

Table 1 Source: First Berlin

			FIRST BERLIN RECOMMENDATION & PRICE TARGET HISTORY
Report	Date of	Previous day	Recommen	Price

No.:	publication	closing price	dation	target
Initial Report	5 December 2011	€4.61	Buy	€7.10
20	↓	↓	↓	↓
1	19 December 2011	€4.95	Buy	€7.10
2	Today	€5.11	Buy	€7.20

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.

ADDITIONAL DISCLOSURES

First Berlin's research reports are for qualified institutional investors only.

This report is not constructed as an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer would be illegal. We are not soliciting any action based upon this material. This material is for the general information of clients of First Berlin. It does not take into account the particular investment objectives, financial situation or needs of individual clients. Before acting on any advice or recommendation in this material, a client should consider whether it is suitable for their particular circumstances and, if necessary, seek professional advice. The material is based upon information that we consider reliable, but we do not represent that it is accurate or complete, and it should be relied upon as such. Opinions expressed are our current opinions as of the date appearing on this material only; such opinions are subject to change without notice.

Copyright © 2012 First Berlin Equity Research GmbH. All rights reserved. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without First Berlin's prior written consent. The research is not for distribution in the USA or Canada. When quoting please cite First Berlin as the source. Additional information is available upon request.