Masterflex SE — Investor Presentation 2012

Apr 27, 2012

26 April 2012 Masterflex AG FIRST BERLIN Equity Research

MASTERFLEX AG

GERMANY / INDUSTRIAL PRODUCTS & PLASTICS

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

PRELIMINARY Q1 RESULTS

POSITIVE START TO 2012

Masterflex published preliminary Q1 2012 figures on 24 April. Sales were in line with our forecast and EBIT was better than we expected. Based on the solid Q1 figures, the company confirmed its 2012 guidance for sales in the range €57-58m and EBIT of €8m. We reiterate our Buy recommendation and our €7.50 price target.

Better than expected profitability According to preliminary figures, Q1 sales increased by 4% y/y to €14.5m (FBe: €14.5m; Q1/11: €13.9m). EBIT came in at €2.1m (FBe: €2.0m; Q1/11: €2.4m). Compared with the prior year's Q1, operating development in 2012 was presumably dragged-down by higher material and personnel costs.

2012 guidance confirmed In view of the positive start to 2012, Masterflex 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.

Unchanged forecasts In our opinion, the company will achieve its goal of organic sales growth of 8-10% y/y in the coming years due to continuous innovation (for example introduction of the new self-extinguishing hose series XFlame) and further internationalisation. However, associated costs (e.g. for R&D) may slightly retard the expected gradual improvement in profitability. We thus stick to our forecasts for 2012E and subsequent years even though Masterflex' Q1 2012 operating performance was slightly better than we had anticipated. We reiterate our Buy rating and our €7.50 price target.

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.	11.1	9.7	8.1	7.2	6.5
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	3.34	3.89	4.34	5.02
Net gearing	192.9%	123.3%	67.7%	39.9%	19.5%	3.6%
Liquid assets (€m)	14.40	4.54	3.58	6.57	8.61	0.50

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:	51.4%
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 (25.04.12)	€4.95
Shares outstanding	8.73m
Market capitalisation	€43.25m
52-week range	€3.80 / 6.80
Average volume (12 months)	12,183

STOCK OVERVIEW

COMPANY DATA (as of 31 December 2011)

Liquid assets	€4.54m
Current assets	€19.61m
Intangible assets	€4.11m
Total assets	€50.93m
Current liabilities	€13.94m
Shareholders' equity	€15.68m

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

Report No.:	Date of publication	Previous day closing price	Recommen dation	Price target
Initial Report	5 December 2011	€4.61	Buy	€7.10
	↓	↓	↓	↓
2	19 December 2011	€4.95	Buy	€7.10
3	6 March 2012	€5.11	Buy	€7.20
4	4 April 2012	€5.27	Buy	€7.50
5	Today	€4.95	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.

ADDITIONAL DISCLOSURES

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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.

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