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Drillisch
(TecDAX, Telecom/Internet)
Value Indicators:
Buy
EUR
32.00
Price
EUR 25.48
Upside
25.6 %
EUR
Share data:
DCF:
FCF-Value Potential 16e:
32.00
18.60
Bloomberg:
Reuters:
ISIN:
Market Snapshot:
EUR m
Shareholders:
Market cap:
No. of shares (m):
EV:
Freefloat MC:
Ø Trad. Vol. (30d; EUR):
1,223
48
1,147
1,103
8.92 m
Description:
DRI GR
DRIG
DE0005545503
Virtual mobile network operator
Risk Profile (WRe):
Freefloat
MV GmbH
SP GmbH
M. Brucherseifer
90.2 % Beta:
0.8 % Price / Book:
0.8 % Equity Ratio:
2.0 %
Fidelity
2014e
1.3
6.2 x
59 %
5.5 %
Last Friday sees stock volatility
On Friday, Drillisch published the results for Q3/14. While the stock was +3% in the morning, it closed with -6%. Q3/14 results had come in as
expected. Furthermore, Drillisch confirmed the EBITDA guidance and said that the dividend would remain at least stable at EUR 1.60 in 2014
and 2015. As such, it is interesting to consider the reasons for such high volatility.
At the analyst conference, Drillisch commented on various elements of its 2015 strategy: the takeover of 150 to 300 shops, the contract with
Telefonica (no new information provided), and the fact it is considering a price strategy which should not disrupt the market: something which is
clearly positive. On top of this, Drillisch said that it is planning to take over Yourfone. The transaction price here should be between > EUR 50m
and < EUR 100m. Drillisch said that Yourfone currently has 235k active customers. The indicated transaction price and customer figures
translate into a price per customer of between EUR 212 and EUR 425. Yourfone is positioned as a price-aggressive player in the market and in
the past has spent huge sums on marketing.
There are two theoretical consequences of the above newsflow: (1) Transaction price is too high (2) Price-aggressive strategies do not
necessarily lead to customer growth which would be clearly negative for our investment case.
Our opinion is that the transaction price of Yourfone should be separated into two parts: brand and customers. We consider Yourfone
to be a well-known brand in Germany and believe it is better to use such a well-known brand for the retail outlet strategy instead of investing
millions into a completely new one. Also, Yourfone can be repositioned onto the O2 network instead of the E-Plus network, creating a new tariff
structure. The separation of the transaction price into brand and customers would lead to a lower transaction price per customer.
Drillisch's strategy is not only based on price, but rather, on a combination of price, quantity, favourable network usage conditions,
first-mover advantage in LTE (among the non-network operators) and the combined approach of stationary retail and online
distribution.
We reiterate our investment case which is based on (a) acceleration of customer growth starting in 2015 (6.8% to 8.0% of total yearly contract
gross add potential in Germany), (b) an EBITDA target of EUR 252m in 2019, (c) price rationality of the overall German telco market and (d)
Drillisch’s favourable conditions for the usage of network capacities in terms of price and technology (production costs advantage and
technological advantage).
FY End: 31.12.
in EUR m
Sales
Change Sales yoy
Gross profit margin
EBITDA
Margin
EBIT
Margin
Net income
Rel. Performance vs TecDAX:
1 month:
-7.7 %
6 months:
-8.2 %
Year to date:
13.0 %
Trailing 12 months:
10.4 %
Company events:
EPS
EPS adj.
DPS
Dividend Yield
FCFPS
EV / Sales
EV / EBITDA
EV / EBIT
P/E
P / E adj.
FCF Yield Potential
Net Debt
ROE
ROCE (NOPAT)
Guidance:
CAGR
(13-16e)
35.0 %
17.5 %
15.0 %
-29.1 %
-29.1 %
11.4 %
4.0 %
2010
2011
2012
2013
2014e
2015e
2016e
362
5.2 %
24.9 %
46
12.7 %
40
11.1 %
31
349
-3.7 %
30.1 %
51
14.7 %
48
13.8 %
41
324
-7.3 %
34.3 %
62
19.1 %
55
17.1 %
23
290
-10.3 %
41.8 %
71
24.4 %
61
21.1 %
156
295
1.4 %
46.7 %
85
28.9 %
75
25.6 %
55
584
98.2 %
34.6 %
97
16.6 %
76
13.0 %
45
714
22.3 %
37.3 %
115
16.1 %
93
13.0 %
56
0.58
0.58
0.50
9.5 %
0.69
0.77
0.77
0.70
9.6 %
0.32
0.44
0.44
1.30
14.8 %
0.02
3.25
0.84
1.60
10.5 %
0.77
1.15
1.15
1.80
7.1 %
1.11
0.93
0.93
1.80
7.1 %
-2.29
1.16
1.16
1.80
7.1 %
1.01
0.1 x
0.7 x
0.7 x
9.0 x
9.0 x
108.1 %
0.7 x
4.7 x
5.1 x
9.4 x
9.4 x
15.6 %
1.4 x
7.1 x
7.9 x
20.0 x
20.0 x
13.1 %
1.2 x
5.0 x
5.8 x
4.7 x
18.2 x
10.9 %
3.9 x
13.5 x
15.2 x
22.2 x
22.2 x
4.9 %
2.3 x
13.9 x
17.7 x
27.4 x
27.4 x
5.0 %
1.9 x
12.0 x
14.9 x
22.0 x
22.0 x
5.8 %
121
25.6 %
26.4 %
159
40.0 %
23.0 %
31
138
253
-99
-75
21.4 %
26.9 %
16.4 %
92.2 %
26.8 %
15.6 %
15.9 %
18.5 %
21.7 %
47.2 %
EBITDA 2014e: EUR 82m - EUR 85m, dividend per share 2014e: EUR 1.60
Analyst
J o che n Re ic hert
jreichert@warburg-research.com
+49 40 309537-130
COMMENT
P u bl i s h e d 1 7 . 1 1 . 2 0 1 4
1
Drillisch
Sales development
EBITDA development
EBIT development
in EUR m
in EUR m
in EUR m
Source: Warburg Research
Source: Warburg Research
Source: Warburg Research
Company Background
Drillisch has a contract with Telefonica Deutschland about the exclusive access of 20% of the Telefonica Detschland's network
capacity in Germany. Capacity is measuered in mobile data volume.
Drillisch has the obligation to purchase the capacity independently it can sell it or not to its own customer base. The obligation to
acquire 20% of the used capacity will start in 2019.
Between 2015 and 2019, the volume which Drillisch is oblighed to purchase, is increasing step by step.
Drillisch is positioned as a mobile virtual network operator. It has introduced a challenger strategy at the German mobile telecom
market. It is establishing beside its current online sales channels a retail network.
Drillisch sees itself as the price-quality leader for mobile tariffs in the German market. It can offer tariff prices lower than those of
network operators or other MVNOs but deliver higher mobile data volumes.
Competitive Quality
Management track-record: Since 2003, the management has several times adjusted the strategy and sucessfully reacted on market
changes. Drillisch was transferred from a prepaid distributer to a leading MVNO in Germany.
Network and technolgy access: Drillisch can operate as a mobile network operator without taking CAPEX and technology risks. In
addition, it has the best access to capacities and technology compared to competition.
Attractive purchase conditions: Drillisch's purchase conditions are assumed to be very competitive. Drillisch beats network operativer
tariffs by more than 25% and can place itself as the price-quality leader.
Budget customers
Service Revenues
Blended ARPU
in k
in EUR m
in EUR
Source: Warburg Research
Source: Warburg Research
COMMENT
P u bl i s h e d 1 7 . 1 1 . 2 0 1 4
Source: Warburg Research
2
Drillisch
DCF model
Detailed forecast period
Transitional period
Term. Value
Figures in EUR m
2014e
2015e
2016e
2017e
2018e
2019e
2020e
2021e
2022e
2023e
2024e
2025e
2026e
Sales
Sales change
295
1.4 %
584
98.2 %
714
22.3 %
857
20.0 %
968
13.0 %
1,065
10.0 %
1,097
3.0 %
1,130
3.0 %
1,164
3.0 %
1,199
3.0 %
1,235
3.0 %
1,272
3.0 %
1,272
0.0 %
EBIT
EBIT-margin
75
25.6 %
76
13.0 %
93
13.0 %
147
17.1 %
190
19.6 %
228
21.4 %
241
22.0 %
249
22.0 %
256
22.0 %
264
22.0 %
272
22.0 %
280
22.0 %
280
22.0 %
Tax rate (EBT)
25.0 %
31.0 %
31.0 %
31.0 %
31.0 %
31.0 %
31.0 %
31.0 %
31.0 %
31.0 %
31.0 %
31.0 %
31.0 %
56
52
64
101
131
157
167
172
177
182
187
193
193
10
3.3 %
21
3.6 %
22
3.1 %
27
3.1 %
30
3.1 %
32
3.0 %
33
3.0 %
34
3.0 %
35
3.0 %
36
3.0 %
37
3.0 %
38
3.0 %
25
2.0 %
0
0
0
0
-1
0
0
0
0
0
0
0
0
2
10
3.3 %
12
164
28.1 %
11
15
2.1 %
10
17
2.0 %
8
19
2.0 %
7
21
2.0 %
2
22
2.0 %
2
23
2.0 %
3
23
2.0 %
3
24
2.0 %
3
25
2.0 %
3
25
2.0 %
0
25
2.0 %
0
0
0
0
0
0
0
0
0
0
0
0
0
Free Cash Flow (WACC
Model)
55
-103
60
100
132
161
175
180
186
191
197
203
193
PV of FCF
54
-95
51
80
98
111
112
107
103
98
94
90
80
NOPAT
Depreciation
in % of Sales
Changes in provisions
Change in Liquidity from
- Working Capital
- Capex
Capex in % of Sales
Other
0.54 %
share of PVs
47.91 %
Model parameter
WACC
193
1,046
51.55 %
Valuation (m)
Derivation of WACC:
Debt ratio
Cost of debt (after tax)
Market return
Risk free rate
0.0 %
Derivation of Beta:
25.00 %
2.1 %
8.00 %
2.50 %
7.61 %
Financial Strength
Liquidity (share)
Cyclicality
Transparency
Others
1.00
1.00
1.00
1.00
1.75
Beta
1.26
Present values 2026e
Terminal Value
Financial liabilities
Pension liabilities
Hybrid capital
Minority interest
Market val. of investments
Liquidity
Equity Value
983
1,046
324
1
0
0
0
150
1,855
No. of shares (m)
Value per share (EUR)
57.3
32.38
Sensitivity Value per Share (EUR)
Beta
1.50
1.38
1.32
1.26
1.20
1.14
1.02
WACC
8.6 %
8.1 %
7.9 %
7.6 %
7.4 %
7.1 %
6.6 %
Terminal Growth
-0.75 % -0.50 % -0.25 %
26.26
26.63
27.01
28.37
28.80
29.26
29.52
29.99
30.49
30.74
31.25
31.80
32.04
32.60
33.20
33.43
34.04
34.70
36.49
37.24
38.03
0.00 %
27.42
29.74
31.02
32.38
33.84
35.40
38.89
0.25 %
27.85
30.26
31.58
33.00
34.52
36.15
39.82
0.50 %
28.31
30.81
32.19
33.66
35.25
36.97
40.82
0.75 %
28.80
31.39
32.83
34.38
36.04
37.84
41.91
Beta
1.50
1.38
1.32
1.26
1.20
1.14
1.02
WACC
8.6 %
8.1 %
7.9 %
7.6 %
7.4 %
7.1 %
6.6 %
Delta EBIT-margin
-1.5 pp -1.0 pp -0.5 pp +0.0 pp +0.5 pp +1.0 pp +1.5 pp
25.08
25.86
26.64
27.42
28.20
28.98
29.75
27.25
28.08
28.91
29.74
30.57
31.40
32.24
28.43
29.30
30.16
31.02
31.88
32.74
33.60
32.38
29.70
30.60
31.49
33.27
34.16
35.06
31.06
31.99
32.91
33.84
34.76
35.69
36.61
37.32
38.28
32.52
33.48
34.44
35.40
36.36
35.77
36.81
37.85
38.89
39.93
40.97
42.01
In 2015e we assume an upfront investment of EUR 150m related to the contract with Telefonica Deutschland
Number of shares: 57m; convertible bonds: +4.1m; own shares: +5.1m
Additional financial debts of EUR 234m are reflected which relates to the factoring transactions for handsets
COMMENT
P u bl i s h e d 1 7 . 1 1 . 2 0 1 4
3
Drillisch
Free Cash Flow Value Potential
Warburg Research's valuation tool "FCF Value Potential" reflects the ability of the company to generate sustainable free cash flows. It is based on the
"FCF potential" - a FCF "ex growth" figure - which assumes unchanged working capital and pure maintenance capex. A value indication is derived by
discounting the “FCF potential” of a given year with the weighted costs of capital. The fluctuating value indications over time add a timing element to the
DCF model (our preferred valuation tool).
2010
2011
2012
2013
2014e
2015e
2016e
31
6
2
2
0
41
3
4
2
0
23
6
-35
6
0
156
10
117
10
0
55
10
-2
10
0
45
21
-11
10
0
56
22
-13
10
0
32
108.1 %
7.61 %
38
15.6 %
7.61 %
58
13.1 %
7.61 %
39
10.9 %
7.61 %
57
4.9 %
7.61 %
67
5.0 %
7.61 %
80
5.8 %
7.61 %
= Enterprise Value (EV)
30
244
441
356
1,147
1,344
1,382
= Fair Enterprise Value
427
501
758
508
743
879
1,052
Net Debt (Cash)
Pension Liabilities
Other
Market value of minorities
Market value of investments
-100
1
-280
0
0
-100
1
-280
0
0
-100
1
-280
0
0
-100
1
-280
0
0
-76
1
0
0
0
120
1
0
0
0
158
1
0
0
0
= Fair Market Capitalisation
805
880
1,137
887
819
758
893
No. of shares (total) (m)
48
48
48
48
48
48
48
16.78
18.33
23.68
18.48
17.05
15.79
18.60
-33.1 %
-38.0 %
-27.0 %
12.68
13.83
15.26
17.05
19.40
22.58
27.14
10.61
11.97
13.66
15.79
18.56
22.32
27.71
12.40
14.04
16.06
18.60
21.92
26.42
32.87
in EUR m
+
+
Net Income before minorities
Depreciation + Amortisation
Net Interest Income
Maintenance Capex
Other
= Free Cash Flow Potential
Free Cash Flow Yield Potential
WACC
+
= Fair value per share (EUR)
premium (-) / discount (+) in %
Sensitivity Fair value per Share (EUR)
WACC
10.61 %
9.61 %
8.61 %
7.61 %
6.61 %
5.61 %
4.61 %
14.26
14.93
15.74
16.78
18.12
19.95
22.56
15.38
16.16
17.12
18.33
19.91
22.05
25.13
19.22
20.40
21.85
23.68
26.07
29.32
33.97
15.48
16.27
17.25
18.48
20.08
22.25
25.37
FCF-Value potential does exclude the growth potential until 2019e
FCF-Value potential reflects until 2016e the cash outflowswhich are needed to prepare the assumed growth path.
The valuation tool ignores the substantial FCF growth after 2016.
Therefore, results are misleading because it overestimates current growth-related OPEX but ignores FCF growth.
COMMENT
P u bl i s h e d 1 7 . 1 1 . 2 0 1 4
4
Drillisch
Valuation
Price / Book
Book value per share ex intangibles
EV / Sales
EV / EBITDA
EV / EBIT
EV / EBIT adj.*
P / FCF
P/E
P / E adj.*
Dividend Yield
Free Cash Flow Yield Potential
2010
2011
2012
2013
2014e
2015e
2016e
2.0 x
1.16
0.1 x
0.7 x
0.7 x
0.7 x
7.8 x
9.0 x
9.0 x
9.5 %
108.1 %
2.3 x
1.63
0.7 x
4.7 x
5.1 x
5.1 x
24.2 x
9.4 x
9.4 x
9.6 %
15.6 %
3.9 x
0.24
1.4 x
7.1 x
7.9 x
7.9 x
188.4 x
20.0 x
20.0 x
14.8 %
13.1 %
3.4 x
2.42
1.2 x
5.0 x
5.8 x
5.8 x
19.1 x
4.7 x
18.2 x
10.5 %
10.9 %
6.2 x
1.98
3.9 x
13.5 x
15.2 x
15.2 x
25.3 x
22.2 x
22.2 x
7.1 %
4.9 %
7.9 x
-1.83
2.3 x
13.9 x
17.7 x
17.7 x
n.a.
27.4 x
27.4 x
7.1 %
5.0 %
9.9 x
-2.20
1.9 x
12.0 x
14.9 x
14.9 x
27.9 x
22.0 x
22.0 x
7.1 %
5.8 %
2010
2011
2012
2013
2014e
2015e
2016e
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
0
n.a.
n.a.
0
n.a.
n.a.
0
n.a.
n.a.
0
n.a.
n.a.
0
n.a.
*Adjustments made for: -
Company Specific Items
Service Revenues
Budget Customer
Blended ARPU
COMMENT
P u bl i s h e d 1 7 . 1 1 . 2 0 1 4
5
Drillisch
Consolidated profit & loss
2010
2011
2012
2013
2014e
2015e
2016e
362
5.2 %
349
-3.7 %
324
-7.3 %
290
-10.3 %
295
1.4 %
584
98.2 %
714
22.3 %
Increase / decrease in inventory
Own work capitalised
Total Sales
Material Expenses
Gross profit
Gross profit margin
0
2
364
274
362
24.9 %
0
2
351
246
349
30.1 %
0
2
326
215
324
34.3 %
0
2
293
171
290
41.8 %
0
3
297
160
295
46.7 %
0
3
587
385
584
34.6 %
0
4
718
451
714
37.3 %
Personnel expenses
Other operating income
Other operating expenses
Unfrequent items
EBITDA
Margin
24
3
23
0
46
12.7 %
21
2
34
0
51
14.7 %
23
8
34
0
62
19.1 %
24
4
30
0
71
24.4 %
24
4
32
0
85
28.9 %
41
9
73
0
97
16.6 %
59
6
99
0
115
16.1 %
Depreciation of fixed assets
EBITA
Amortisation of intangible assets
Goodwill amortization
EBIT
Margin
EBIT adj.
1
45
5
0
40
11.1 %
40
1
51
3
0
48
13.8 %
48
1
61
5
0
55
17.1 %
55
1
70
9
0
61
21.1 %
61
1
84
9
0
75
25.6 %
75
3
95
19
0
76
13.0 %
76
3
112
19
0
93
13.0 %
93
Interest income
Interest expenses
Other financial income (loss)
EBT
Margin
1
2
3
42
11.7 %
1
5
8
52
15.0 %
1
12
-24
21
6.4 %
1
50
166
178
61.3 %
1
3
0
74
25.1 %
1
12
0
65
11.1 %
1
13
0
81
11.3 %
12
31
0
31
0
31
8.5 %
11
41
0
41
0
41
11.7 %
-3
23
0
23
0
23
7.2 %
22
156
0
156
0
156
53.7 %
18
55
0
55
0
55
18.8 %
20
45
0
45
0
45
7.7 %
25
56
0
56
0
56
7.8 %
53
0.58
0.58
53
0.77
0.77
53
0.44
0.44
48
3.25
0.84
48
1.15
1.15
48
0.93
0.93
48
1.16
1.16
In EUR m
Sales
Change Sales yoy
Total taxes
Net income from continuing operations
Income from discontinued operations (net of tax)
Net income before minorities
Minority interest
Net income
Margin
Number of shares, average
EPS
EPS adj.
*Adjustments made for:
Guidance: EBITDA 2014e: EUR 82m - EUR 85m, dividend per share 2014e: EUR 1.60
Financial Ratios
Total Operating Costs / Sales
Operating Leverage
EBITDA / Interest expenses
Tax rate (EBT)
Dividend Payout Ratio
Sales per Employee
2010
2011
2012
2013
2014e
2015e
2016e
87.8 %
-1.8 x
23.2 x
27.4 %
86.3 %
1,035,689
85.9 %
-5.3 x
10.9 x
21.5 %
90.7 %
997,420
81.6 %
-2.1 x
5.3 x
-12.9 %
294.8 %
924,834
76.4 %
-1.0 x
1.4 x
12.5 %
49.3 %
829,911
72.0 %
16.2 x
34.0 x
25.0 %
156.1 %
841,714
83.9 %
0.0 x
8.4 x
31.0 %
192.9 %
1,668,571
84.4 %
1.0 x
8.8 x
31.0 %
155.5 %
2,040,000
Sales, EBITDA
Operating Performance
in EUR m
in %
Source: Warburg Research
Source: Warburg Research
COMMENT
P u bl i s h e d 1 7 . 1 1 . 2 0 1 4
Performance per Share
Source: Warburg Research
6
Drillisch
Consolidated balance sheet
In EUR m
2010
2011
2012
2013
2014e
2015e
2016e
78
11
67
1
123
0
203
8
28
28
8
72
275
78
11
67
1
236
0
316
9
42
21
7
78
394
108
41
67
1
260
0
369
8
42
77
26
153
523
101
34
67
1
0
0
103
6
45
187
11
249
352
101
34
67
2
0
0
103
7
46
163
12
228
331
242
175
67
3
0
0
246
20
80
26
17
143
388
229
162
67
9
0
0
239
24
98
18
17
157
396
59
126
31
-76
140
0
140
11
0
58
0
25
40
134
275
57
120
31
-43
165
0
165
7
1
158
0
25
39
228
394
54
92
31
-56
120
0
120
11
1
330
0
16
45
402
523
53
96
31
37
218
0
218
11
1
87
0
16
21
135
352
53
96
-9
55
196
0
196
12
1
86
0
16
21
135
331
53
96
-40
45
154
0
154
12
1
146
0
48
28
234
388
53
96
-81
56
123
0
123
12
1
176
0
59
25
272
396
2010
2011
2012
2013
2014e
2015e
2016e
-28.2 x
2.1 x
15.2 %
79.7 x
1.2 x
13.0 %
12.4 x
0.9 x
6.4 %
9.8 x
2.4 x
151.5 %
9.1 x
2.4 x
53.9 %
12.7 x
2.1 x
18.2 %
11.3 x
2.5 x
23.3 %
15.6 %
21.4 %
21.4 %
15.9 %
26.9 %
26.9 %
18.5 %
16.4 %
16.4 %
21.7 %
92.2 %
23.8 %
47.2 %
26.8 %
26.8 %
26.4 %
25.6 %
25.6 %
23.0 %
40.0 %
40.0 %
31
30
22.1 %
66.1 %
2.6
1.2
138
137
83.3 %
266.5 %
3.1
1.6
253
252
210.0 %
407.8 %
2.3
0.2
-99
-100
-45.4 %
n.a.
4.5
2.4
-75
-76
-38.4 %
n.a.
4.1
2.0
121
120
78.7 %
123.8 %
3.2
-1.8
159
158
129.0 %
137.4 %
2.6
-2.2
Assets
Goodwill and other intangible assets
thereof other intangible assets
thereof Goodwill
Property, plant and equipment
Financial assets
Other long-term assets
Fixed assets
Inventories
Accounts receivable
Liquid assets
Other short-term assets
Current assets
Total Assets
Liabilities and shareholders' equity
Subscribed capital
Capital reserve
Retained earnings
Other equity components
Shareholder's equity
Minority interest
Total equity
Provisions
thereof provisions for pensions and similar obligations
Financial liabilites (total)
thereof short-term financial liabilities
Accounts payable
Other liabilities
Liabilities
Total liabilities and shareholders' equity
Financial Ratios
Efficiency of Capital Employment
Operating Assets Turnover
Capital Employed Turnover
ROA
Return on Capital
ROCE (NOPAT)
ROE
Adj. ROE
Balance sheet quality
Net Debt
Net Financial Debt
Net Gearing
Net Fin. Debt / EBITDA
Book Value / Share
Book value per share ex intangibles
ROCE Development
Source: Warburg Research
Net debt
Book Value per Share
in EUR m
in EUR
Source: Warburg Research
Source: Warburg Research
COMMENT
P u bl i s h e d 1 7 . 1 1 . 2 0 1 4
7
Drillisch
Consolidated cash flow statement
In EUR m
Net income
Depreciation of fixed assets
Amortisation of goodwill
Amortisation of intangible assets
Increase/decrease in long-term provisions
Other non-cash income and expenses
Cash Flow
Increase / decrease in inventory
Increase / decrease in accounts receivable
Increase / decrease in accounts payable
Increase / decrease in other working capital positions
Increase / decrease in working capital (total)
Net cash provided by operating activities
Investments in intangible assets
Investments in property, plant and equipment
Payments for acquisitions
Financial investments
Income from asset disposals
Net cash provided by investing activities
Change in financial liabilities
Dividends paid
Purchase of own shares
Capital measures
Other
Net cash provided by financing activities
Change in liquid funds
Effects of exchange-rate changes on cash
Cash and cash equivalent at end of period
2010
2011
2012
2013
2014e
2015e
2016e
31
1
0
5
0
5
41
-1
5
-3
-1
-1
41
-3
-2
0
0
3
-1
-23
-16
0
0
0
-39
1
0
28
41
1
0
3
0
-7
37
-1
-13
-3
0
-17
20
-3
-2
0
-67
0
-70
78
-27
-8
0
-1
43
-7
0
21
23
1
0
5
0
31
61
1
0
-22
-16
-37
24
-20
-2
0
-75
106
8
92
-36
-32
0
0
25
57
0
77
156
1
0
9
0
-115
51
2
-3
-2
10
6
57
-17
-2
0
0
370
350
-183
-62
-8
0
-44
-298
110
0
187
55
1
0
9
0
0
65
-1
-1
0
0
-2
63
-8
-2
0
0
0
-10
-1
-77
0
0
0
-78
-24
0
163
45
3
0
19
0
0
66
-12
-34
34
0
-12
54
-160
-4
0
0
0
-164
60
-86
0
0
0
-26
-137
0
26
56
3
0
19
0
0
78
-4
-18
11
-3
-14
64
-6
-9
0
0
0
-15
30
-86
0
0
0
-56
-8
0
18
2010
2011
2012
2013
2014e
2015e
2016e
37
9.9 %
32
9.9 %
116.3 %
2.9 %
2.9 %
17
4.6 %
38
4.6 %
39.0 %
2.2 %
4.4 %
1
0.8 %
58
0.8 %
10.6 %
1.9 %
4.8 %
37
13.2 %
39
13.2 %
24.7 %
1.0 %
24.2 %
54
18.2 %
57
18.2 %
96.7 %
0.6 %
2.9 %
-110
-18.9 %
67
-18.9 %
-245.9 %
0.5 %
9.9 %
49
6.8 %
80
6.8 %
87.4 %
2.3 %
8.1 %
1.4 %
0.6 %
84.7 %
-3.9 %
114.8 %
35.6 x
29
33
-56
1.1 %
0.6 %
119.3 %
-1.6 %
166.1 %
27.6 x
44
37
-56
6.7 %
1.9 %
337.7 %
4.3 %
260.7 %
27.1 x
47
27
-28
6.4 %
3.4 %
191.8 %
9.1 %
286.7 %
27.5 x
57
34
-34
3.3 %
3.4 %
99.0 %
9.9 %
285.7 %
21.6 x
57
37
-33
28.1 %
1.7 %
777.3 %
6.2 %
166.7 %
19.7 x
50
46
-33
2.1 %
1.4 %
68.2 %
6.8 %
166.6 %
18.9 x
50
48
-33
Financial Ratios
Cash Flow
FCF
Free Cash Flow / Sales
Free Cash Flow Potential
Free Cash Flow / Sales
Free Cash Flow / Net Profit
Interest Received / Avg. Cash
Interest Paid / Avg. Debt
Management of Funds
Investment ratio
Maint. Capex / Sales
Capex / Dep
Avg. Working Capital / Sales
Trade Debtors / Trade Creditors
Inventory Turnover
Receivables collection period (days)
Payables payment period (days)
Cash conversion cycle (Days)
CAPEX and Cash Flow
Free Cash Flow Generation
Working Capital
Source: Warburg Research
Source: Warburg Research
in EUR m
Source: Warburg Research
COMMENT
P u bl i s h e d 1 7 . 1 1 . 2 0 1 4
8
Drillisch
LEGAL DISCLAIMER
This research report was prepared by the Warburg Research GmbH, a subsidiary of the M.M.Warburg & CO (AG & Co.) KGaA and is passed on by the
M.M.Warburg & CO (AG & Co.) KGaA. It contains selected information and does not purport to be complete. The report is based on publicly available
information and data ("the information") believed to be accurate and complete. Warburg Research GmbH neither does examine the information to be
accurate and complete, nor guarantees its accuracy and completeness. Possible errors or incompleteness of the information do not constitute grounds
for liability of M.M.Warburg & CO (AG & Co.) KGaA or Warburg Research GmbH for damages of any kind whatsoever, and M.M.Warburg & CO (AG &
Co.) KGaA and Warburg Research GmbH are not liable for indirect and/or direct and/or consequential damages. In particular, neither M.M.Warburg &
CO (AG & Co.) KGaA nor Warburg Research GmbH are liable for the statements, plans or other details contained in these analyses concerning the
examined companies, their affiliated companies, strategies, economic situations, market and competitive situations, regulatory environment, etc.
Although due care has been taken in compiling this research report, it cannot be excluded that it is incomplete or contains errors. M.M.Warburg & CO
(AG & Co.) KGaA and Warburg Research GmbH, their shareholders and employees are not liable for the accuracy and completeness of the
statements, estimations and the conclusions derived from the information contained in this document. Provided a research report is being transmitted in
connection with an existing contractual relationship, i.e. financial advisory or similar services, the liability of M.M.Warburg & CO (AG & Co.) KGaA and
Warburg Research GmbH shall be restricted to gross negligence and wilful misconduct. In case of failure in essential tasks, M.M.Warburg & CO (AG &
Co.) KGaA and Warburg Research GmbH are liable for normal negligence. In any case, the liability of M.M.Warburg & CO (AG & Co.) KGaA and
Warburg Research GmbH is limited to typical, expectable damages. This research report does not constitute an offer or a solicitation of an offer for the
purchase or sale of any security. Partners, directors or employees of M.M.Warburg & CO (AG & Co.) KGaA, Warburg Research GmbH or affiliated
companies may serve in a position of responsibility, i.e. on the board of directors of companies mentioned in the report. Opinions expressed in this
report are subject to change without notice. All rights reserved.
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DISCLOSURE ACCORDING TO §34B (1) OF THE GERMAN SECURITIES TRADING ACT (WHPG) AND THE ORDINANCE ON
THE ANALYSIS OF FINANCIAL INSTRUMENTS (FINANV)
The valuation underlying the investment recommendation for the company analysed here is based on generally accepted and widely used methods of
fundamental analysis, such as e.g. DCF Model, Free Cash Flow Potential, Peer Group Comparison or Sum of the Parts Model. The result of this
fundamental valuation is modified to take into consideration the analyst’s assessment as regards the expected development of investor sentiment and
its impact on the share price.
Independent of the applied valuation methods, there is the risk that the price target will not be met, for instance because of unforeseen changes in
demand for the company’s products, changes in management, technology, economic development, interest rate development, operating and/or
material costs, competitive pressure, supervisory law, exchange rate, tax rate etc. For investments in foreign markets and instruments there are further
risks, generally based on exchange rate changes or changes in political and social conditions.
This commentary reflects the opinion of the relevant author at the point in time of its compilation. A change in the fundamental factors underlying the
valuation can mean that the valuation is subsequently no longer accurate. Whether, or in what time frame, an update of this commentary follows is not
determined in advance.
In accordance with § 5 (4) of the Ordinance on the Analysis of Financial Instruments (FinAnV) Warburg Research GmbH has implemented additional
internal and organisational arrangements to prevent or to deal with conflicts of interest. Among these are the spatial separation of Warburg Research
GmbH from M.M.Warburg & CO (AG & Co.) KGaA and the creation of areas of confidentiality. This prevents the exchange of information, which could
form the basis of conflicts of interest for Warburg Research in terms of the analysed issuers or their financial instruments.
The analysts of Warburg Research GmbH do not receive a gratuity – directly or indirectly – from the investment banking activities of M.M.Warburg &
CO (AG & Co.) KGaA or of any company within the Warburg Group.
All prices of financial instruments given in this financial analysis are the closing prices on the last stock-market trading day before the publication date
stated, unless another point in time is explicitly stated.
M.M.Warburg & CO (AG & Co.) KGaA and Warburg Research GmbH are subject to the supervision of the Federal Financial Supervisory Authority,
BaFin.
SOURCES
All data and consensus estimates have been obtained from FactSet except where stated otherwise.
COMMENT
P u bl i s h e d 1 7 . 1 1 . 2 0 1 4
9
Drillisch
Reference in accordance with section 34b of the German Securities Trading Act (WpHG) and the Ordiance on the Analysis of
Financial Instruments (FinAnV) regarding possible conflicts of interest with the analysed company:
-1-
The company preparing the analysis or any of its affiliated companies hold over 5% of shares in the analysed company’s equity
capital.
Within the last twelve months, the company preparing the analysis or any of its affiliated companies have participated in the
-2-
management of a consortium for the public offering of financial securities, which are (or the issuer of which) is the subject of
the analysis.
-3-
The company preparing the analysis or any of its affiliated companies manage the securities of the analysed company on the
grounds of an existing contract.
-4-
On the grounds of an existing contract, the company preparing the analysis or any of its affiliated companies, have managed
investment banking services for the analysed company within the last twelve months, out of which a service or the promise of
a has service emerged.
-5-
The company preparing the analysis and the analysed company came to an agreement regarding the preparation of the
financial analysis.
-6-
The company preparing the analysis or any of its affiliated companies regularly trade in shares or derivatives of the analysed
company.
-7-
The company preparing the analysis as well as its affiliated companies and employees have other important interests in
relation to the analysed company, such as, for example, the exercising of mandates at analysed companies.
Company
Disclosure
Link to the historical price targets and rating changes (last 12 months)
Drillisch
5, 6
http://www.mmwarburg.com/disclaimer/disclaimer_en/DE0005545503.htm
COMMENT
P u bl i s h e d 1 7 . 1 1 . 2 0 1 4
10
Drillisch
INVESTMENT RECOMMENDATION
Investment recommendation: expected direction of the share price development of the financial instrument up to the given price target in the opinion of
the analyst who covers this financial instrument.
-B-
Buy:
The price of the analysed financial instrument is expected to rise over the next 12 months.
-H-
Hold:
The price of the analysed financial instrument is expected to remain mostly flat over the next 12
months.
-S-
Sell:
The price of the analysed financial instrument is expected to fall over the next 12 months.
“-“
Rating suspended:
The available information currently does not permit an evaluation of the company.
WARBURG RESEARCH GMBH – RESEARCH UNIVERSE BY RATING
Rating
Number of stocks
% of Universe
Buy
113
60
Hold
63
34
Sell
8
4
Rating suspended
4
2
188
100
Total
WARBURG RESEARCH GMBH – ANALYSED RESEARCH UNIVERSE BY RATING …
… Looking only at companies for which a disclosure according to § 34b of the Germany Securities Trading Act and the
FinAnV has to be made.
Rating
Number of stocks
% of Universe
Buy
92
64
Hold
43
30
Sell
4
3
Rating suspended
4
3
143
100
Total
PRICE AND RATING HISTORY DRILLISCH AS OF 17.11.2014
The chart has markings if Warburg Research GmbH changed its
rating in the last 12 months. Every marking represents the date
and closing price on the day of the rating change.
COMMENT
P u bl i s h e d 1 7 . 1 1 . 2 0 1 4
11
Drillisch
EQUITIES
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Investment Strategy
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Bloomberg
FactSet
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COMMENT
Kerstin Muthig
+49 40 3282-2703
Sales Assistance
P u bl i s h e d 1 7 . 1 1 . 2 0 1 4
kmuthig@mmwarburg.com
12