Masterflex SE — Regulatory Filings 2015

Nov 30, 2015

Masterflex SE November 30, 2015 P. 1 WGZ BANK RESEARCH

Update

Masterflex SE 3) 4) November 30, 2015

Recommendation:	Buy			Company data
before:	-	as of	-	Sector	Industry
Target price (EUR)	7.50			Market segment	Prime Standard
Share price (Xetra) (EUR)	6.07			ISIN	DE0005492938
11/27/15 3:17 PM				Reuters	MZXG.DE
Share price potential	24%			Bloomberg	MZX

Raising cost reduction potential in focus for 2016

• ^Q After a moderate topline development in H1 2015 (+3.2% y/ y) sales remained almost unchanged at EUR16.0m (16.1; our forecast: 16.3) in Q3 2015. This was due to problems at Novoplast Schlauchtechnik and the lack of growth in the US. Due to the the lack of topline dynamics the Q3 EBIT fell to EUR1.4m (1.8; our forecast: 1.5; EBIT margin in Q3: 8.6% (11.0%; 9M 2015: 9.0%)).
• ^Q For 2015 we confirm our sales growth forecast of 3% (Masterflex target: 2-4%) and EBIT of EUR5.8m (Masterflex target: <6.3) as well as EBIT margin of 9.1% (Masterflex target: single-digit figure). According to the management the main focus in 2016 is on profitability enhancement (return to a doubledigit EBIT margin by internal cost reductions (among others, staff costs) and optimisation of the product portfolio). Due to yet to be realised cost savings potential we expect EBIT margin of 10.0% and sales of EUR67.5m (before: 68.5) in 2016.
• ^Q We confirm our Buy recommendation (among others, use of the US market potential; company acquisitions in new technology sectors also allowing for cross-selling to new client groups; from 2016 on again robust FCF) with a price target of EUR7.50.

	2012	2013	2014	2015E	2016E	2017E
Gross revenue	55.0	57.9	62.5	64.4	67.5	72.0
Growth in revenue	3.7%	5.3%	7.9%	3.0%	4.9%	6.7%
EBIT	7.6	6.1	6.3	5.8	6.8	7.9
EBIT margin	13.7%	10.6%	10.1%	9.1%	10.0%	10.9%
Net income	3.4	2.6	3.0	2.9	3.5	4.2
Net margin	6.3%	4.5%	4.9%	4.5%	5.2%	5.9%
EPS	0.39	0.29	0.34	0.33	0.40	0.48
DPS	0.00	0.00	0.00	0.00	0.00	0.00
Net financial debt / EBITDA	2.0	2.2	1.8	1.8	1.5	1.1
Net gearing	1.1	0.8	0.7	0.6	0.4	0.3
Free cash flow (FCF)	0.9	4.0	3.0	0.9	3.4	3.8
FCF per share	0.10	0.45	0.34	0.10	0.39	0.43
EV/sales	1.2	1.2	1.3	1.1	1.0	1.0
EV/EBITDA	6.2	7.7	8.7	8.2	7.1	6.4
EV/EBIT	8.4	11.0	12.6	12.3	10.3	8.9
EV/FCF	57.6	16.0	26.2	71.6	19.4	17.4
P/E	13.1	19.1	20.4	18.4	15.4	12.7
P/B	2.4	2.3	2.6	2.0	1.8	1.6
Dividend yield	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%

Figures in EURm except EPS, DPS and FCF per share (EUR); source: Masterflex SE, own estimates Authors: A. Vashkevich, S. Röhle (analysts)

Share data
Shares (m)	8.866
Freefloat	54.9%
Market cap. (EURm)	54.0
∅ Trading volume (shares)	3,461
52W High 08/19/2014	EUR7.41
52W Low 10/16/2014	EUR5.60
Events
Q4 results	March 2016
Q1 results	Mai 2016
Performance
	absolute	relative to
		DAX
1M	1.6%	-2.9%
3M	-7.7%	-16.6%
6M	-14.3%	-13.8%
12M	-13.6%	-24.0%

Index weighting

No index membership

Source: Bloomberg

Contact

Research Department

Head: Dr. Frank Wohlgemuth, CIIA/CEFA

Equity Sales Team +49 (0) 211 778-3370

Thomas Aldenrath / thomas.aldenrath@wgzbank.de Jörg Eberhardt / joerg.eberhardt@wgzbank.de Oliver Garbe / oliver.garbe@wgzbank.de Dorothee Hönes / dorothee.hoenes@wgzbank.de Ansgar Krekeler / ansgar.krekeler@wgzbank.de Thomas Reher / thomas.reher@wgzbank.de Udo Zartner / udo.zartner@wgzbank.de

1)2)3)4)6) Please notice the advice regarding possible conflicts of interests as well as the disclaimer at the end of this document Please notice the indications concerning the preparation of this document, the indications concerning potential conflicts of interest, the compulsory information required by paragraph 34b WpHG (Wertpapierhandelsgesetz - Securities Trade Act) and the liability declaration at the end of this document. This financial analysis in the meaning of paragraph 34b WpHG shall only be distributed to professional clients or eligible counterparties according to § 31a WpHG.

• ^Q Sales increased by a mere 2.0% to EUR49.0m (48.1) in 9M 2015. On the one hand, the home market business with smooth hoses at the subsidiary Novoplast Schlauchtechnik underperformed. This was due to technical problems of a large project in the Medical Products business unit and delays of some projects in the Industrial business unit. On the other hand, there was no topline growth in the international focus market North America (marketing weakness, among others, owed to the local management).
• ^Q The 9M sales dynamics did not suffice to keep the EBIT margin in the double-digit area (9.0% (11.0%); lack of economies of scale). The 9M EBIT fell to EUR4.4m (5.3; among others, increase in operating costs by EUR2.9m y/y). The personnel costs rose by EUR1.9m y/y. This is, on the one hand, due to the staff expansion (especially in production), the minimum wage legislation in Germany (higher staff expenditures due to the wage/benefits gap rule at some Masterflex sites + "Obama-Care" in the US). On the other hand, the staff expenditures in Q3 contain a part of double wage payments and compensation payments for some dismissed project managers and managers at Novoplast Schlauchtechnik as well as the management in the US. The personnel expenses ratio (to sales + changes in inventories) increased to 38.5% (36.0%).
• ^Q However, we welcome the decline of the costs of material ratio (to sales + changes in inventories) to 31.9% (32.3%) in 9M 2015, which is due to stable costs of raw materials and the product mix, but also internal optimisation of the manufacturing process.
• ^Q Because of the increase in working capital (in our view, also at the large project in the Medical Products business unit at Novoplast Schlauchtechnik) and the weaker cash earnings Masterflex only reached the breakeven at the FCF level in 9M 2015 (9M 2014: EUR2.1m). For the full year we now expect a FCF of only EUR0.9m (before: 2.6). From 2016 on, however, we expect the return to a robust FCF (2014: EUR0.34 per share).
• ^Q The divestment of the 51% stake in the Russian JV to the Russian partner (low six-digit proceeds) along with the formation of an exclusive trade partnership (reduction of economic and legal risks) took place on October 2.
• ^Q In the coming year profitability enhancement is at the very top of the agenda (return to a double-digit EBIT margin; our forecast: 10.0% (2015E: 9.1%)). Within this framework costs will be reduced (among others, the personell ones - staff reduction on the management level that has partly begun in Q3 (should mainly be finished by the end of 2015); staff adjustment on other levels, growth without further staff expansion) and the product portfolio will be optimized.
• ^Q The mid-term success depends on the increase in organic growth, especially by expansion in the North American market (enhancement of marketing activities), which is double the size of the domestic market, but also in Asia as well as international technology supplementing acquisitions.

Lacking 9M sales dynamics at Novoplast Schlauchtechnik and in the US

Decline of the 9M EBIT due to the lack of economies of scale

Slight decrease in 9M cost of material ratio

2015E: below-average FCF; from 2016 on robust FCF assumed

Divestment of the stake in the Russian JV

Profitability enhancement as main focus in 2016

Internationalisation and selected takeovers are key for the mid-term success

Valuation

Valuation summary

Our valuation of the Masterflex share is further based solely on a DCF model. This produces a fair value of EUR67.1m or EUR7.57 per share. Our price target remains unchanged at EUR7.50.

Price target unchanged at EUR7.50

Masterflex SE
DCF model
in EURm	2015E	2016E	2017E	2018E	2019E	2020E	2021E	2022E	2023E	2024E
Sales	64.4	67.5	72.0	77.3	82.6	87.8	92.7	97.4	101.8	106.4
Growth yoy	3.0%	4.9%	6.7%	7.4%	6.8%	6.2%	5.7%	5.1%	4.5%	4.5%
EBIT margin	9.1%	10.0%	10.9%	11.5%	12.0%	12.5%	13.0%	12.8%	12.7%	12.5%
EBIT	5.8	6.8	7.9	8.9	9.9	11.0	12.1	12.5	12.9	13.3
- Income taxes	-1.7	-2.0	-2.4	-2.7	-3.0	-3.3	-3.6	-3.8	-3.9	-4.0
+ Amortisation and depreciation	2.9	3.0	3.1	3.2	3.3	3.4	3.5	3.5	3.6	3.7
+/- Other non cash items	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
Gross operating cash flow	7.0	7.7	8.6	9.5	10.3	11.1	11.9	12.3	12.6	13.0
-/+ Change in net working capital	-2.3	-0.8	-1.1	-1.8	-1.9	-1.9	-1.9	-1.9	-1.9	-2.0
- Investments in fixed assets	-3.6	-3.3	-3.5	-3.6	-3.6	-3.7	-3.7	-3.6	-3.6	-3.7
Free cash flow	1.1	3.6	4.1	4.1	4.8	5.6	6.4	6.8	7.2	7.3
Present values	1.1	3.3	3.4	3.2	3.4	3.6	3.8	3.7	3.6	3.4
Total present values	32.6
Terminal value	51.1		in % of total value:		61%
Value of operating business	83.6
+ Cash and cash equivalents	4.1			Model parameters:
- Financial debt	-20.2			Target capital structure:		Equity:	70%	Financial debt:		30%
- Pension provision	0.0
- Minority interests	-0.4
Fair market value of equity	67.1		Risk-free Rate		3.0%	Beta:	1.6		Risk prem. debt:	2.7%
						Risk premium	5.0%	Tax shield:		30.0%
Number of shares outstanding (m)	8.866					Cost of equity	10.8%	Cost of debt:		4.0%
Fair value per share (EUR)	7.57		Growth FCF (TV):		2.0%	WACC:	8.8%	Date		11/30/15

Source: own estimates

Sensitivity analysis (EUR)
				Discount rate (WACC)
		7.8%	8.3%	8.8%	9.3%
	1.0%	8.24	7.49	6.83	6.25
FCF (TV) Growth	1.5%	8.74	7.90	7.17	6.54
	2.0%	9.33	8.38	7.57	6.88
	2.5%	10.03	8.94	8.03	7.26
Source: own estimates

Appendix

Masterflex SE

Consolidated income statement

EURm	2012	2013	2014	2015E	2016E	2017E
Sales	55.0	57.9	62.5	64.4	67.5	72.0
Changes in inventory of finished goods and work in progress	0.8	0.3	0.3	0.2	0.3	0.0
Work performed by the enterprise and capitalised	0.3	0.0	0.3	0.0	0.0	0.0
Other operating income	1.6	0.4	0.9	0.9	0.6	0.7
Gross revenue	57.7	58.7	63.9	65.5	68.4	72.7
Cost of materials	-17.8	-18.1	-20.4	-20.8	-21.7	-23.1
Staff costs	-20.1	-21.8	-23.3	-24.2	-24.8	-25.8
Depreciation	-2.6	-2.7	-2.9	-2.9	-3.0	-3.1
Other expenses	-9.6	-10.0	-11.1	-11.7	-12.1	-12.7
EBIT	7.6	6.1	6.3	5.8	6.8	7.9
Other interest and similar results	0.0	-0.1	0.0	0.1	0.1	0.1
Interest and similar expenses	-1.6	-1.5	-1.2	-1.1	-1.2	-1.2
Net profit/loss from investments carried at equity	0.0	0.0	0.0	0.0	0.0	0.0
Other financial results	0.0	0.0	0.0	0.0	0.0	0.0
Net financial income/expense	-1.6	-1.6	-1.1	-1.1	-1.1	-1.1
Extraordinary result	-0.2	0.0	0.0	0.0	0.0	0.0
EBT	5.8	4.5	5.2	4.7	5.7	6.8
Income tax expense	-1.9	-1.7	-2.0	-1.7	-2.0	-2.3
Net income	3.9	2.9	3.2	3.0	3.7	4.4
Extraordinary result (after taxes)	-0.3	-0.1	-0.2	0.0	0.0	0.0
Minority interests	-0.2	-0.2	0.0	-0.1	-0.2	-0.2
Net income after minority interests	3.4	2.6	3.0	2.9	3.5	4.2
Number of shares (m)	8.87	8.87	8.87	8.87	8.87	8.87
Earnings per share (basic, EUR)	0.39	0.29	0.34	0.33	0.40	0.48

Source: Masterflex SE; own estimates

Masterflex SE

Consolidated income statement (as percentage of sales)

	2012	2013	2014	2015E	2016E	2017E
Sales	100.0%	100.0%	100.0%	100.0%	100.0%	100.0%
Changes in inventory of finished goods and work in progress	1.4%	0.6%	0.5%	0.3%	0.4%	0.0%
Work performed by the enterprise and capitalised	0.5%	0.1%	0.4%	0.0%	0.0%	0.0%
Other operating income	3.0%	0.8%	1.4%	1.4%	0.9%	0.9%
Gross revenue	104.9%	101.4%	102.4%	101.7%	101.3%	100.9%
Cost of materials	-32.4%	-31.3%	-32.6%	-32.3%	-32.2%	-32.1%
Staff costs	-36.5%	-37.7%	-37.2%	-37.7%	-36.7%	-35.9%
Depreciation	-4.8%	-4.6%	-4.6%	-4.5%	-4.4%	-4.3%
Other expenses	-17.5%	-17.3%	-17.8%	-18.2%	-17.9%	-17.7%
EBIT	13.7%	10.6%	10.1%	9.1%	10.0%	10.9%
Other interest and similar results	0.1%	-0.1%	0.0%	0.1%	0.1%	0.1%
Interest and similar expenses	-2.9%	-2.6%	-1.8%	-1.8%	-1.8%	-1.6%
Net profit/loss from investments carried at equity	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%
Other financial results	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%
Net financial income/expense	-2.8%	-2.7%	-1.8%	-1.7%	-1.7%	-1.5%
Extraordinary result	-0.3%	0.0%	0.0%	0.0%	0.0%	0.0%
EBT	10.6%	7.8%	8.3%	7.4%	8.4%	9.4%
Income tax expense	-3.4%	-2.9%	-3.1%	-2.7%	-3.0%	-3.2%
Net income	7.1%	5.0%	5.2%	4.7%	5.4%	6.2%
Extraordinary result (after taxes)	-0.5%	-0.1%	-0.2%	0.0%	0.0%	0.0%
Minority interests	-0.4%	-0.3%	-0.1%	-0.2%	-0.2%	-0.3%
Net income after minority interests	6.3%	4.5%	4.9%	4.5%	5.2%	5.9%

Source: Masterflex SE; own estimates

1)2)3)4)6) Please notice the advice regarding possible conflicts of interests as well as the disclaimer at the end of this document

Consolidated balance sheet

2012	2013	2014	2015E	2016E	2017E
3.3	3.3	3.3	3.3	3.3	3.3
0.9	1.0	0.8	0.9	1.0	1.1
21.2	21.8	22.6	23.2	23.4	23.7
0.4	0.3	0.3	0.3	0.3	0.3
0.1	0.1	0.0	0.0	0.0	0.0
4.3	3.5	2.6	2.7	2.5	2.4
30.2	29.9	29.6	30.4	30.6	30.9
11.1	10.7	11.7	13.0	13.8	14.7
5.5	5.1	5.4	6.2	6.7	7.3
1.2	1.3	0.9	1.4	1.2	1.0
2.8	4.7	4.4	6.3	8.5	10.8
20.6	21.8	22.4	26.9	30.2	33.8
0.0	0.0	0.0	0.0	0.0	0.0
50.8	51.7	52.0	57.4	60.8	64.7
8.7	8.7	8.7	8.7	8.7	8.7
26.3	26.3	26.3	26.3	26.3	26.3
-15.3	-12.7	-9.7	-9.7	-9.7	-9.7
-1.4	-1.8	-1.9	-1.9	-1.9	-1.9
0.0	0.0	0.0	0.0	0.0	0.0
0.0	0.0	0.0	2.9	6.4	10.7
0.0	0.0	0.0	0.0	0.0	0.0
18.3	20.5	23.4	26.4	29.9	34.1
0.5	0.6	0.4	0.4	0.4	0.4
18.9	21.1	23.8	26.8	30.3	34.5
0.2	0.2	0.2	0.2	0.2	0.2
17.1	18.2	15.1	16.8	16.7	16.2
0.8	0.6	0.6	0.6	0.6	0.6
1.5	1.5	1.3	1.3	1.4	1.5
19.6	20.4	17.2	18.9	18.8	18.5
2.6	2.5	2.3	2.5	2.6	2.4
6.1	4.4	5.2	5.7	5.4	5.1
1.7	1.6	1.5	1.6	1.7	2.0
1.5	1.5	1.8	1.7	1.8	1.9
11.9	10.0	10.8	11.5	11.5	11.5
0.4	0.2	0.2	0.2	0.2	0.2
50.8	51.7	52.0	57.4	60.8	64.7

Source: Masterflex SE; own estimates

Consolidated balance sheet (as percentage of total assets)

Goodwill 6.5% 6.4% 6.3% 5.8% 5.4% Other intangible assets 1.8% 1.8% 1.5% 1.6% 1.6% Property, plant and equipment 41.8% 42.1% 43.6% 40.5% 38.5% Non-current financial assets 0.8% 0.7% 0.6% 0.5% 0.5% Other non-current receivables and assets 0.2% 0.2% 0.0% 0.0% 0.0% Deferred taxes 8.4% 6.7% 4.9% 4.7% 4.2% Non-current assets 59.4% 57.9% 57.0% 53.0% 50.3% Inventories 21.9% 20.7% 22.5% 22.7% 22.7%	10.8% 9.9% 2.4% 2.4%				5.1% 1.7% 36.7% 0.5% 0.1% 3.7% 47.8%
					22.7%
Trade receivables 10.3%			10.8%	11.0%	11.3%
Other current assets 1.7% 2.4% 2.0%					1.5%
Cash and cash equivalents 5.5% 9.2% 8.5% 11.1% 14.0%					16.7%
Current assets 40.6% 42.1% 43.0% 47.0% 49.7%					52.2%
Assets held for sale 0.0% 0.0% 0.0% 0.0% 0.0%					0.0%
Total assets 100.0% 100.0% 100.0% 100.0% 100.0%					100.0%
Subscribed capital 17.2% 16.9% 16.8% 15.2% 14.4%					13.5%
Capital reserve 51.7% 50.8% 50.5% 45.8% 43.2%					40.6%
Other comprehensive income -30.2% -24.6% -18.6% -16.9% -15.9%					-15.0%
Other components of equity -2.7% -3.5% -3.6% -3.3% -3.1%					-2.9%
Treasury shares 0.0% 0.0% 0.0% 0.0% 0.0%					0.0%
Consolidated profit 0.0% 0.0% 0.0% 5.1% 10.6%					16.5%
Dividend payment 0.0% 0.0% 0.0% 0.0% 0.0%					0.0%
Shareholder's equity 36.1% 39.6% 45.1% 46.0% 49.1%					52.8%
Minority interests 1.1% 1.2% 0.8% 0.7% 0.7%					0.6%
Total equity 37.1% 40.7% 45.9% 46.7% 49.8%					53.4%
Other non-current provisions 0.4% 0.4% 0.4% 0.3% 0.3%					0.3%
Non-current financial liabilities 33.7% 35.1% 29.0% 29.2% 27.4%					25.0%
Deferred tax liabilities 1.6% 1.1% 1.2% 1.1% 1.0%					1.0%
Other non-current liabilities 3.0% 2.9% 2.5% 2.3% 2.2%					2.3%
Non-current liabilities and provisions 38.6% 39.5% 33.0% 32.9% 31.0%					28.6%
Current provisions 5.1% 4.8% 4.4% 4.4% 4.3%					3.7%
Current financial liabilities 12.0% 8.4% 9.9% 9.9% 8.8%					7.9%
Trade payables 3.3% 3.1% 2.9% 2.9% 2.8%					3.1%
Other current liabilities 3.0% 2.9% 3.5% 3.0% 3.0%					3.0%
Current liabilities 23.4% 19.3% 20.7% 20.1% 18.9%					17.7%
Liabilities directly connected with assets held for sale 0.8% 0.5% 0.4% 0.3% 0.3%					0.3%
Total equity and liabilities 100.0% 100.0% 100.0% 100.0% 100.0%					100.0%

Source: Masterflex SE; own estimates

Consolidated cash flow statement

EURm	2012	2013	2014	2015E	2016E	2017E
EBIT	7.0	5.6	6.1	5.8	6.8	7.9
Depreciation	2.1	2.7	2.9	2.9	3.0	3.1
Paid/received income tax	-1.8	-0.9	-1.3	-1.7	-2.0	-2.3
Other non-cash expenses/income	-0.1	0.1	-0.3	-0.1	-0.1	-0.1
Changes in pension provisions and other non-current liabilities	-0.8	-0.1	-0.2	0.0	0.0	0.0
Gross cash flow	6.4	7.4	7.2	6.9	7.7	8.6
Change in inventories, trade receivables and other assets	-1.8	1.1	-0.4	-2.7	-1.1	-1.3
Change in trade payables and other liabilities	-1.0	-0.6	0.0	0.4	0.3	0.2
Other non-cash items	0.0	0.0	0.0	0.0	0.0	0.0
Net cash from operating activities	3.6	8.0	6.8	4.6	6.9	7.5
Payments to acquire property, plant and equipment	-2.1	-3.4	-3.6	-3.5	-3.2	-3.4
Payments to acquire financial assets	-0.1	0.0	0.0	0.0	0.0	0.0
Payments to acquire intangible assets	-0.4	-0.4	-0.1	-0.1	-0.1	-0.1
Payments made for investments in non-current assets	-2.6	-3.8	-3.7	-3.6	-3.3	-3.5
Payments received from the disposal of consolidated subsidiaries	0.0	0.0	0.0	0.0	0.0	0.0
Proceeds from the disposal of non-current assets	0.0	0.3	0.3	0.0	0.0	0.0
Proceeds/payments relating to financial assets	0.2	0.2	0.0	0.0	0.0	0.0
Payments received from the sale of consolidated subsidiaries	0.0	0.0	0.0	0.0	0.0	0.0
Other non-current assets	-0.1	0.0	0.0	0.0	0.0	0.0
Net cash from/used in investing activities	-2.5	-3.3	-3.4	-3.6	-3.3	-3.5
Increase/decrease from financial liabilities	-0.9	-0.5	-2.3	2.2	-0.4	-0.8
Payments to owners and minority interests	-0.3	-0.2	-0.2	0.0	0.0	0.0
Dividend payout	0.0	0.0	0.0	0.0	0.0	0.0
Change in deferred taxes	0.0	0.0	0.0	-0.2	0.1	0.1
Proceeds/payments from capital measures	0.0	0.0	0.0	0.0	0.0	0.0
Interest payments/interest received	-1.5	-1.5	-1.0	-1.1	-1.1	-1.1
Proceeds/payments of financial assets	0.0	0.0	0.0	0.0	0.0	0.0
Net cash from/used in financing activities	-2.7	-2.2	-3.6	0.9	-1.4	-1.8
Changes in cash and cash equivalents	-1.6	2.5	-0.2	1.9	2.2	2.3
Exchange rates/consolidation/others	-0.2	-0.6	-0.1	0.0	0.0	0.0
Cash and cash equivalents at the beginning of the period	4.6	2.8	4.8	4.4	6.3	8.5
Cash and cash equivalents at the end of the period	2.8	4.8	4.4	6.3	8.5	10.8
Payments/debt positions held for sale	0.0	0.0	0.0	0.0	0.0	0.0
Funds balance	2.8	4.8	4.4	6.3	8.5	10.8

Source: Masterflex SE; own estimates

Key figures
	2012	2013	2014	2015E	2016E	2017E
Growth rates
Gross revenue growth
EBITDA growth	3.7%	5.3%	7.9%	3.0%	4.9%	6.7%
EBIT growth	2.1%	-13.8%	4.6%	-4.8%	12.0%	12.2%
EBT growth	0.8% -6.0%	-19.1% -21.8%	3.3% 14.5%	-7.7% -8.6%	16.3% 19.0%	16.2% 20.1%
EPS growth	-6.4%	-24.7%	17.2%	-3.9%	19.9%	21.2%
Margins
EBITDA margin	18.5%	15.1%	14.7%	13.6%	14.5%	15.2%
EBIT margin	13.7%	10.6%	10.1%	9.1%	10.0%	10.9%
EBT margin	10.6%	7.8%	8.3%	7.4%	8.4%	9.4%
Net margin	6.3%	4.5%	4.9%	4.5%	5.2%	5.9%
Yield analysis
ROI	6.8%	5.1%	5.9%	5.3%	5.9%	6.8%
ROCE	15.7%	11.6%	11.1%	9.9%	11.0%	12.4%
ROE	19.7%	13.0%	13.5%	11.6%	12.3%	13.1%
ROIC	15.0%	11.3%	11.0%	9.9%	11.0%	12.4%
Balance sheet analysis
Equity ratio	37.1%	40.7%	45.9%	46.7%	49.8%	53.4%
Equity/Non-current assets ratio	62.5%	70.4%	80.5%	88.0%	98.9%	111.8%
Equity + non-current debt/Non-current assets ratio	127.5%	138.7%	138.5%	150.0%	160.5%	171.6%
Asset intensity	59.4%	57.8%	57.0%	53.0%	50.3%	47.8%
Inventory turnover	5.4	5.3	5.6	5.2	5.0	5.1
Receivables turnover	10.6	10.9	12.0	11.1	10.5	10.3
Days of sales outstanding	34.5	33.4	30.5	32.8	34.9	35.5
Working capital/Sales ratio Days of payables outstanding	18.7% 32.8	20.9% 33.2	19.8% 27.6	21.8% 27.5	23.1% 28.0	23.0% 29.2
Debt ratios
Net financial debt (EURm)	20.4	17.8	15.8	16.1	13.5	10.5
Net financial debt/EBITDA	2.0	2.2	1.8	1.8	1.5	1.1
Net gearing	1.1	0.8	0.7	0.6	0.4	0.3
EBITDA interest coverage	6.3	5.8	8.0	7.6	8.2	9.4
EBIT interest coverage	4.7	4.0	5.5	5.1	5.7	6.8
Cash flow analysis
Free cash flow (FCF)	0.9	4.0	3.0	0.9	3.4	3.8
FCF/Sales	1.6%	6.9%	4.8%	1.4%	5.1%	5.3%
FCF/Net income	26.1%	154.6%	98.8%	30.8%	98.0%	89.8%
FCF per share (EUR)	0.10	0.45	0.34	0.10	0.39	0.43
FCF yield	2.0%	8.1%	4.9%	1.7%	6.4%	7.1%
Capex (EURm)	2.6	3.8	3.7	3.6	3.3	3.5
Capex/Depreciation	1.0%	1.3%	1.3%	1.2%	1.1%	1.1%
Capex/Sales	4.7%	5.4%	6.0%	5.6%	4.9%	4.9%
Valuation multiples
EV/Sales	1.2	1.2	1.3	1.1	1.0	1.0
EV/EBITDA	6.2	7.7	8.7	8.2	7.1	6.4
EV/EBIT	8.4	11.0	12.6	12.3	10.3	8.9
EV/FCF	57.6	16.0	26.2	71.6	19.4	17.4
P/E	13.1	19.1	20.4	18.4	15.4	12.7
P/B	2.4	2.3	2.6	2.0	1.8	1.6
P/CF	12.6	6.2	9.1	11.7	7.8	7.2
P/S	0.8	0.9	1.0	0.8	0.8	0.7
Dividend yield	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%

Source: Masterflex SE; own estimates

1)2)3)4)6) Please notice the advice regarding possible conflicts of interests as well as the disclaimer at the end of this document

⇒ Successful restructuring in years 2008-2010

⇒ Internationalisation, innovations and possible company acquisitions as main drivers of topline development

Distribution of sales by region (2014)

Germany Rest of Europe Third Countries

⇒ ⇒ Europe (including Germany) is Masterflex´ main market for historical reasons Overproportional growth outside Europe in future (especially America/Asia; Asia

H1 2015: double-digit growth rate)

⇒ Sales in the German region contain indirect exports, among others

⇒ The ROW region (especially North America and Asia) should play an increasingly important role in future

⇒ The operating profit in 2013 was temporarily burdened by the upfront costs of internationalisation

⇒ 2015E: weak sales dynamics should weigh on the income temporarily; 2016E: cost reduction is the focus

Investments (EURm)

⇒ We expect an investment ratio of 4-6% of sales

Number of employees and sales/employees

⇒ 2011-2013: strong staff expansion (first level of internationalisation strategy); 2015E: weak sales dynamics burden sales/employee

⇒ From 2016 on increase in sales/employee (according to the CFO growth without further staff expansion)

Source: Masterflex SE; own estimates

1)2)3)4)6) Please notice the advice regarding possible conflicts of interests as well as the disclaimer at the end of this document

Disclaimer

Recommendations concerning particular shares

• Buy: According to our assessment, the stock should register an absolute profit of at least 15% within a 6-month period.
• Hold: According to our assessment, the stock should register an absolute profit between 0 and 15% within a 6-month period.
• Sell: According to our assessment, the stock should register an absolute loss within a 6-month period.

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Key sources of information

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Summary of the evaluation principles used:

Analyses of shares:

In valuing companies standard and accepted valuation methods (amongst others the Discounted Cash Flow Method (DCF Method), Peer-Group Analysis) are applied. Under the DCF Method the capitalised value of the issuers is calculated which shows the sum of the discounted company results, i.e. the current value of the issuer's future net distributions. The capitalised value is therefore determined with reference to the anticipated future company results and the capitalisation yield applied. Under the Peer-Group Analysis Method issuers quoted on the Stock Exchange are valued with reference to the comparison of ratio indices (e.g. share price / profit ratio, share price / book value ratio, enterprise value / sales, enterprise value / EBITDA, enterprise value / EBIT). The comparability of the ratio indices is determined above all by business activity and commercial prospects.

Sensitivity of the evaluation parameters:

The figures taken from the income statement, the cash-flow statement and the balance sheet upon which the evaluation of companies is based are numerical estimates and therefore subject to risks. These may change at any time without prior notice.

Quite apart from the evaluation method applied, there exists a very real risk that the share price goal may not be reached in the anticipated period of time. These risks include unforeseen changes in competitive pressure or in the demand for the issuer's products. Such fluctuations in demand may arise as a result of changes of a technological nature, the overall level of economic activity or in some cases as a result of changes in business moral concepts. Changes in tax law, in currency exchange rates and, in certain business segments, in regulations are further factors which can influence evaluations. This discussion of evaluation methods and risk factors makes no claim to be exhaustive.

Timing conditions of planned up-dates:

Analyses of shares:

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Possible conflicts of interest – as at: 11/30/2015 –

The WGZ BANK and/or its affiliated companies hold shares of the issuer analysed in their trading portfolio.

Further possible conflicts of interest are indicated as follows:

The WGZ BANK and/or its affiliated companies:

• 1) own at least 1% of the issuers share capital.
• 2) were involved within the last twelve months in the management of a consortium issuing financial instruments of the issuer by way of a public offer.
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As at: 11/30/2015

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