Smaller. Companies Review. Italy. Smaller companies. 37 companies covered. Market cap below EUR2.5bn.

Transcription

1 Smaller Italy Companies Review Smaller companies January companies covered Market cap below EUR2.5bn Smaller Companies Team

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3 CONTENTS I Top picks Page 04 II Performance, valuation and EPS trends Page 06 III Ranking.. Page 10 IV Company Profiles Page 17 ACEA (3/Underperform) Organic growth fully priced in P.19 Amplifon (3/Underperform) A fully valued story P.23 ASM Brescia (3/Underperform) Fundamentals priced in: no evident short term catalysts P.27 Astaldi (2/Outperform) 15% share price slowdown is a good investment opportunity P.31 Auto TOMI (3/Underperform) Limited upside P.35 Banca Italease (2/Outperform) More than meets the eye P.39 Benetton (2/Outperform) Close to the moment of truth P.43 Beni Stabili (2/Outperform) Resilient and well managed P.47 Brembo (3/Underperform) Flattish scenario P.51 Cairo (3/Underperform) Strong magazine outlook already priced in P.55 Caltagirone Editore (2/Outperform) Waiting for acquisitions P.59 Campari (3/Underperform) Strong, but fully valued fundamentals P.63 Cementir (2/Outperform) Expansion continues P.67 CIR (3/Underperform) Lack of short term catalysts P.71 De Longhi (3/Underperform) Good sales recovery in Q4-05, but still too early to come back on the share P.75 DMT (3/Underperform) No room for further upside P.79 Ergo Previdenza (2/Outperform) Undervalued stock P.83 Gemina (2/Outperform) ADR potential still strong, despite weaker regulatory environment P.87 Geox (2/Outperform) Consolidating in Europe, ramping up in the US P.91 Hera (2/Outperform) Active consolidation P.95 IFI (2/Outperform) Control chain shortening is driving the share P.99 IMA (3/Underperform) Outlook remains weak P.103 Impregilo (2/Outperform) Addressing its most urgent problems P.107 Indesit (3/Underperform) Lengthy turnaround P.111 Italmobiliare (3/Underperform) Lack of catalysts prompted rating downgrade P.115 L'Espresso (3/Underperform) Margin deterioration ahead P.119 Mondadori (3/Underperform) Waiting for a better magazine outlook P.123 Pininfarina (1/Selected) Ramping up P.127 Pirelli Real Estate (2/Outperform) Active real estate management P.131 SAVE (2/Outperform) Good story, despite unclear regulatory environment P.135 SIAS (2/Outperform) Investing for tomorrow P.139 Sirti (2/Outperform) Not only big dividends P.143 Sogefi (2/Outperform) Another step ahead? P.147 TI Media (2/Outperform) DTT is the key P.151 Tiscali (3/Underperform) Higher investments may delay cash generation deadline P.155 Tod's (2/Outperform) Zooming ahead P.159 Valentino Fashion Grp. (2/Outperform) Another strong year ahead P.163 3

4 II TOP PICKS Banca Italease EUR /Outperform - Target 34 qç=pnlno= = OMMQ= OMMRb= OMMSb= OMMTb= oéîéåìéë=ebro=ãf= = `çëílfååçãé=ê~íáç=ebf= = _~Ç=ÇÉÄí=ÅÜ~êÖÉ=EBF= = lék=éêçñáí=ebro=ãf= = kéí=~ííêáäk=éêçñáí=ebro=ãf= = `äé~å=bmp= = mlb=eñf= = NS `çêé=å~éáí~ä=ê~íáç=ebf= = `çêé=olb=ebf= = q~åöáääé=_smp= = mlq_smp=eñf= = NS kéí=çáîáçéåç= = váéäç=ebf= = m~óçìí=ê~íáç=ebf= = We initiate coverage with a 2/Outperform rating and a TP of EUR34, backed by Italease's superior earnings growth, strong fundamentals and inexpensive valuation. We expect ~40% EPS growth in E (almost 2x European leasing peers and Italian banks), which will boost profitability from the current 15% to ~24%. Italease's 21% revenue growth is underpinned by its: (1) leading position in the fast-growing Italian leasing business; (2) favourable business mix and high margin complementary products. It could also reduce risk provisions. We expect Italease to beat its 2007 net profit target by 40%. Trading at 11.8x 2007 PE, ~5% below its European leasing peers for 2x stronger earning growth, we feel the stock is an attractive investment opportunity. Geox EUR9.45 2/Outperform - Target: 10.9 qç=pnlno= = OMMQ= OMMRb= OMMSb= OMMTb= p~äéë=ebro=ãf= = PQMKN QQVKN= RTUKV SVRKU k^m=êéëík=ebro=ãf= = RQKU TRKV= VTKP NNTKR `äé~å=bmp=ebrof= = MKON MKOV= MKPU MKQS oééçêíéç=bmp=ebrof= = MKO MKP= MKQ MKR mlb=eñf= = OTKM PNKS= ORKP OMKV ^ííêáäk=c`c=óáéäç=ebf= = NKU NKT= NKU OKU bslb_fqa^=eñf= = NSKT NVKN= NQKQ NNKQ bslb_fq^=eñf= = NVKR OOKT= NSKV NPKQ ol`b=ebf= = RUKP SQKT= TMKT TPKN olb=ebf= = QOKQ QPKV= QNKN PTKP ml_s=eñf= = NNKM NOKU= VKS TKP kéí=çéäílb_fqa^=eñf= = EMKPF EMKQF= EMKQF EMKRF kéí=çáîáçéåç=ebrof= = MKMS MKMV= MKNN MKNQ váéäç=ebf= = NKM MKV= NKO NKQ We recently raised our target price for Geox to EUR10.90 from EUR8.80 and confirm our 2/Outperform rating. We believe Geox represents one of the most appealing growth stories in the Italian market based on: 1) its US expansion strategy, as it is ramping up efforts to penetrate this lucrative market (S/S order backlog rose by 124% y-o-y) by increasing its mono-brand shop presence and ad-spend; 2) consistent growth in the European markets, backed by its outstanding order backlog for 2006 (+49% y-o-y); 3) the improving outlook for the new apparel line (+45% backlog increase), which should be marketed abroad starting this year, after a successful launch in the domestic market. Impregilo EUR3.23 2/Outperform - Target: 4 qç=pnlno= = OMMQ= OMMRb= OMMSb= OMMTb= p~äéë=ebro=ãf= = O=VVVKT O=QQMKM= O=RRNKM O=SVNKN k^m=êéëík=ebro=ãf= = EUUKSF ENOSKRF= QTKT UPKO `äé~å=bmp=ebrof= = EMKNOF EMKOOF= MKNO MKON oééçêíéç=bmp=ebrof= = EMKNF EMKSF= MKM MKO mlb=eñf= = kp kp= OTKS NRKU ^ííêáäk=c`c=óáéäç=ebf= = NPKO kp= kp MKU bslb_fqa^=eñf= = NMKM kp= SKN QKU bslb_fq^=eñf= = NTKV VKR= VKN TKR ol`b=ebf= = NSKV NOKM= NQKP NSKP olb=ebf= = EPSKRF EQTKPF= PKM NOKQ ml_s=eñf= = RKV OKN= OKQ OKP kéí=çéäílb_fqa^=eñf= = PKU NKR= NKR NKN kéí=çáîáçéåç=ebrof= = MKMM MKMM= MKMM MKMR váéäç=ebf= = MKM MKM= MKM NKR Impregilo is Italy's biggest engineering and general contracting group. In 2005, the company, which has been in deep financial trouble over the last few years, was completely reshuffled, and new shareholders and management came on board. An extensive re-financing plan, including a EUR650m rights issue, eased its financial constraints, while a new business plan is currently being deployed. Towards the end of the year, Impregilo began to effectively address its most critical problems, and we now expect a good The turnaround story, coupled with Impregilo's attractive valuation, back our positive stance. 4

5 Pininfarina EUR /Outperform - Target: 34.5 qç=pnlno= = OMMQ= OMMR= OMMSb= OMMTb= p~äéë=ebro=ãf= = QSSKO POQKV= NMMRKP NOSTKS k^m=êéëík=ebro=ãf= = EPKNF ENOKPF= OMKS PNKV `äé~å=bmp=ebrof= = EMKPQF ENKPOF= OKON PKQO oééçêíéç=bmp=ebrof= = EMKPF MKN= OKO PKQ mlb=eñf= = kp kp= NQKM VKM ^ííêáäk=c`c=óáéäç=ebf= = kp kp= NKO SKO bslb_fqa^=eñf= = RKP NUKQ= RKM PKQ bslb_fq^=eñf= = NVKQ kp= TKS QKT ol`b=ebf= = QKT kp= NSKM OPKN olb=ebf= = ENKOF MKT= NMKQ NQKS ml_s=eñf= = NKN NKQ= NKQ NKO kéí=çéäílb_fqa^=eñf= = EOKVF EOKVF= MKS MKP kéí=çáîáçéåç=ebrof= = MKPQ MKPQ= MKQM MKRM váéäç=ebf= = NKS NKO= NKP NKS Pininfarina is a leading designer and manufacturer of niche cars (sport, luxury and SUV), which also specializes in engineering, prototyping and testing. After a weak 2005, characterized by the phase-out of all the old models, production is set to pick up in 2006, with 4 new models now in production. Volumes should nearly quintuple in 2006, topping 72k units in 2007 and profitability should rise sharply as Italian plants will be running at full capacity. On the back of the bright outlook and attractive valuation (huge discount to both carmakers and suppliers), we have added Pininfarina to our Selected List. Valentino Fashion Group EUR /Outperform - Target: 26 qç=pnlno= = OMMQ= OMMR= OMMSb= OMMTb= p~äéë=ebro=ãf= = N=RRMKS N=TOSKS= N=UUQKQ O=MRPKQ k^m=êéëík=ebro=ãf= = NSKU STKQ= UTKT NMTKS `äé~å=bmp=ebrof= = MKOP MKVN= NKNU NKQR oééçêíéç=bmp=ebrof= = MKT MKV= NKO NKR mlb=eñf= = kp OOKU= NVKT NSKM ^ííêáäk=c`c=óáéäç=ebf= = QKT PKM= PKT QKV bslb_fqa^=eñf= = NMKR NNKV= NMKT UKV bslb_fq^=eñf= = NRKN NSKM= NPKV NNKP ol`b=ebf= = NTKS OMKS= OQKP OTKU olb=ebf= = NUKP OOKT= ORKU OTKP ml_s=eñf= = kp RKO= RKN QKQ kéí=çéäílb_fqa^=eñf= = NKU NKR= NKO MKV kéí=çáîáçéåç=ebrof= = MKMM MKQR= MKRV MKTP váéäç=ebf= = MKM OKO= OKR PKN We have upgraded our estimates, target price and stance for Valentino Fashion Group, as we expect a strong performance in The order backlog for the Valentino brand is advancing at a double-digit rate and Hugo Boss is still performing very well, both in terms of its overall results and order backlog. For 2006, we forecast a 9% increase in the top line and a 21% increase at the EBIT level, which should bring net profit very close to EUR90m, 30% above last year. We value VFG at EUR26 per share, based on our fair value of Hugo Boss (the key item for our VFG valuation, accounting for EUR17) and factor in the Valentino brand at 14x 2007 EV/EBIT. 5

6 II OVERVIEW 37 stocks below EUR2.5 market capitalisation Our small cap sample consists of 37 companies with less than EUR2.5bn market capitalisation, representing just less than half of our Italian coverage universe and 6% of the market value of the Italian stock exchange. Breakdown by sector Cheuvreux's small cap sample Real Estate 7% Other 8% Media 15% Holdings 15% Consumer 25% Industrials/Constr 10% Utilties/Transp 20% Source: Cheuvreux Italian market: sector breakdown is very different for small caps and S&P MIB Looking at the sector breakdown, we see big differences in the composition of our small cap and S&P-MIB samples: the small caps sample is heavily weighted in favour of consumer goods, while there is a distinct lack of exposure to financials (12 of the 40 S&P-MIB stocks are banks). The other sector that is sharply underrepresented in the small caps sample is telecommunications. In our view, Italian small caps offer better diversification and more attractive opportunities compared to the large caps, where the best bets are concentrated in the financial and energy sectors. Breakdown by sector S&P MIB Banks 29% Other 12% Industrials 5% Cons goods 8% Telco/Tech 8% Utilities 13% Media 13% Insurance 12% Source: Cheuvreux 6

7 30% outperformance in the last 12 months Performance Italian small caps have consistently outperformed over the last few years, reaching a peak in October 2005, when they outperformed large caps by 16% y-t-d. In the last quarter of 2005, this outperformance slowed down sharply and the smaller stocks ended the year at +5% vs. the large caps started off well, with the small caps reporting a 4% outperformance vs. large caps, which have remained broadly flat since the beginning of the year. COMIT small cap index Last 5 years COMIT small cap index Last 12 months NRM NOR NMM TR RM OMMN OMMO OMMP OMMQ OMMR OMMS NRM NQM NPM NOM NNM NMM g c j ^ j g g ^ p l k a g Source: Cheuvreux Source: Cheuvreux Italian small caps vs. large caps Last 5 years Italian small caps vs. large caps Last 12 months MKQR MKQM MKPR MKPM MKOR MKOM OMMN OMMO OMMP OMMQ OMMR OMMS MKQQ MKQO MKQM MKPU MKPS MKPQ MKPO g c j ^ j g g ^ p l k a g Source: Cheuvreux Source: Cheuvreux More growth, but these stocks are not actually cheaper Relative valuation Small cap valuations have not changed significantly compared to 6 months ago. In general, estimates have stabilised and the key earnings downgrades of the industrial stocks made in H1-05 were not repeated over the last 6 months. Growth is the key factor affecting the valuation outlook: small caps are not cheap in terms of P/E (in 2006, they actually trade above large caps on average), but they should deliver superior growth. We expect 18% EPS growth in , with a 15% increase in EBIT both ~500bps above the level of the large caps. Given the differences in the sector breakdown, this superior growth should also translate into lower equity free cash flow generation and a more modest dividend yield. 7

8 Valuation comparison Smaller companies vs. large caps Smaller Companies S&PMIB* Companies Market capitalisation Performance (%, median) 1 week month months months P/E 2006E E EPS growth (%) P/BV 2006E (median) ROE 2006E (median) Dividend yield (%, median) 2005E E FCF yield (%, median) 2006E E EV/EBITDA (median) 2006E E EV/EBITA (median) 2006E E Source: Cheuvreux Discount has narrowed slightly compared to last July Our forecast for operating profit growth has not changed significantly, although we now expect a slower pace of growth for the large caps. Indeed, the average discount on EV/Multiples has narrowed slightly compared to 6 months ago. All in all, we continue to find the small caps more attractive than the large caps. Small caps vs. large caps Historical comparison vs. large caps Current comparison July-05 P/E Slightly more expensive in 2006, in line in 2007 No significant valuation gap FCF yield Lower in the short term, in line for 2007 Lower in the short term, more appealing in 2007 Dividend yield 1% point lower in 2005, 0.4% in % point lower EBIT margin and growth More appealing growth (15% vs. 9%) More appealing growth (15% vs. 12%) EV Multiples 8-13% discount 10-20% discount Source: Cheuvreux Two downgrades, one switch Conclusion In this review, we have taken the opportunity to revise the target prices and ratings of several stocks included in our sample. In particular, we take a more cautious stance on two holding companies (CIR and Italmobiliare) and we have removed Cementir from our Selected List following its outstanding performance (+27% in 3 months) and have switched to Pininfarina, which is still undervalued, despite its bright prospects. We are also making a few changes to our target prices as we outline below. 8

9 Main changes of rating and target price New rating Previous rating New target price Old target price Cementir 2/Outperform 1/Selected list CIR 3/Underperform 2/Outperform Italmobiliare 3/Underperform 2/Outperform Pininfarina 1/Selected List 2/Outperform - - Benetton SIAS Telecom Italia Media Tod's Valentino Fashion Group Source: Cheuvreux Best picks Of the 37 stocks included in this review, we have selected the following top picks. Our selection is mildly weighted in favour of financials (Banca Italease) and consumer goods (Geox and Valentino). We also like Impregilo and Pininfarina the most significant industrial turnaround stories in our sample. Banca Italease (2/Outperform, target price EUR34) is very well-positioned in the fast-growing Italian leasing market, with a very favourable product mix. As it also has great potential to sharply reduce its risk provisions, we expect the company to post superior earnings growth (as much as 40% EPS CAGR in ). Geox (2/Outperform, target price EUR10.9) is a growth stock in the consumer goods segment. Its 25% EPS growth for the next 2 years is underpinned by the expansion of the commercial network in the US and European markets and by the new apparel line. The good performance of the order backlog (+32%) improves the short term outlook. Impregilo (2/Outperform, target price EUR4.30) is undergoing a sweeping restructuring program. Our positive stance is supported by the huge order backlog (EUR5.6bn), its leading position in the construction sector and the credibility of the new management team. In 2006, Pininfarina (rating upgraded to 1/Selected List, target price EUR34.5) should report a strong acceleration in production (thanks to 4 new car models). The bright outlook for 2006 and 2007 is coupled with a significant discount to carmarkers and suppliers, which led us to add it to our Selected List. After the financial restructuring of 2005, Valentino FG (2/Outperform, target price EUR26) is now focusing on upgrading the Valentino and HB commercial network. The strong performance of the order backlog is increasing visibility for 2006, which prompted us to upgrade our estimates and view on the stock. Stocks we would avoid We take a cautious stance on two sectors: media and utilities. In the media sector (Cairo, L'Espresso and Mondadori are all rated 3/Underperform), incentives for publishers will be phased out, eroding 2006 profitability, while the outlook for the advertising market remains uncertain. The local utilities included in our sample (ACEA, ASM Brescia) are both embarking on very challenging investment plans and the interest rate trend is not helping. Similarly, we remain cautious on Tiscali, which due to the negative market perception of telecom sector with an uncertain outlook, where we would not be surprised to see higher investment commitments and delayed cash flow generation. 9

10 II RANKING P/E 2006E (x) P/E 2006E Rating % Upside Company % Upside Rating SOGEFI ASTALDI BREMBO CEMENTIR ERGO PREV PIRELLI RE INDESIT ITALMOBILIARE PININFARINA CAMPARI IMA ASM BRESCIA AUTOSTRADA TOMI ACEA BANCA ITALEASE BENETTON MONDADORI IFI DE LONGHI SIAS L ESPRESSO CIR VALENTINO FASHION GROUP HERA SIRTI CALTAGIRONE EDITORE GEOX AMPLIFON BENI STABILI IMPREGILO TOD'S GEMINA SAVE CAIRO DMT TELECOM ITALIA MEDIA NM 2 TISCALI NM 3 Median 16.7 SAVE 33.7% 2 ASTALDI 29.8% 2 IMPREGILO 23.9% 2 SIAS 22.0% 2 CALTAGIRONE EDITORE 21.4% 2 SIRTI 19.6% 2 SOGEFI 19.1% 2 BANCA ITALEASE 18.9% 2 PIRELLI REAL ESTATE 17.6% 2 BENI STABILI 17.3% 2 HERA 17.0% 2 ERGO PREVIDENZA 16.4% 2 PININFARINA 16.2% 1 GEMINA 16.0% 2 GEOX 15.3% 2 TELECOM ITALIA MEDIA 11.2% 2 VALENTINO FASHION GROUP 10.6% 2 CEMENTIR 10.2% 2 BENETTON 9.9% 2 AUTOSTRADA TOMI 7.4% 3 IFI 7.1% 2 CIR 6.8% 3 TOD'S 6.4% 2 ASM BRESCIA 5.9% 3 MONDADORI 5.5% 3 ACEA 5.3% 3 L ESPRESSO 5.0% 3 ITALMOBILIARE 4.3% 3 TISCALI 3.9% 3 CAMPARI 2.3% 3 DMT 1.7% 3 BREMBO 0.9% 3 IMA -2.3% 3 DE LONGHI -5.7% 3 AMPLIFON -6.5% 3 INDESIT -8.7% 3 CAIRO -11.6% 3 Median 9.9% Source: Cheuvreux Source: Cheuvreux 10

11 E EPS CAGR Dividend yield 2005E (%) EPS CAGR 04/07 Rating (%) DY 2005E Rating GEMINA 58.7% 2 BANCA ITALEASE 47.8% 2 SIRTI 45.3% 2 CAIRO 43.9% 3 SAVE 37.9% 2 GEOX 30.7% 2 DMT 30.3% 3 TOD'S 28.3% 2 ASTALDI 28.0% 2 IFI 24.4% 2 AMPLIFON 22.2% 3 IMA 19.5% 3 CEMENTIR 17.8% 2 HERA 15.6% 2 PIRELLI REAL ESTATE 12.8% 2 SOGEFI 11.4% 2 CAMPARI 11.1% 3 ACEA 10.0% 3 CALTAGIRONE EDITORE 7.9% 2 BENETTON 7.2% 2 BREMBO 7.2% 3 SIAS 5.4% 2 DE LONGHI 3.6% 3 ERGO PREVIDENZA 3.4% 2 MONDADORI 3.3% 3 ASM BRESCIA 2.1% 3 INDESIT 2.0% 3 L ESPRESSO 1.7% 3 ITALMOBILIARE 1.5% 3 AUTOSTRADA TOMI 1.5% 3 CIR -8.2% 3 BENI STABILI -14.2% 2 IMPREGILO NM 2 PININFARINA NM 1 TELECOM ITALIA MEDIA NM 2 TISCALI NM 3 VALENTINO FASHION GROUP NM 2 Median 11.2% SIRTI 8.8% 2 ASM BRESCIA 5.5% 3 ACEA 5.4% 3 MONDADORI 4.8% 3 IMA 4.6% 3 PIRELLI REAL ESTATE 4.3% 2 SOGEFI 4.3% 2 CALTAGIRONE EDITORE 3.6% 2 L ESPRESSO 3.6% 3 BENETTON 3.5% 2 CAIRO 3.4% 3 ERGO PREVIDENZA 3.4% 2 INDESIT 3.4% 3 HERA 3.1% 2 SIAS 3.1% 2 BREMBO 2.8% 3 AUTOSTRADA TOMI 2.6% 3 BENI STABILI 2.5% 2 CIR 2.3% 3 SAVE 2.3% 2 BANCA ITALEASE 2.2% 2 VALENTINO FASHION GROUP 2.2% 2 ASTALDI 1.9% 2 ITALMOBILIARE 1.9% 3 IFI 1.8% 2 CAMPARI 1.6% 3 CEMENTIR 1.6% 2 DE LONGHI 1.3% 3 PININFARINA 1.2% 1 TOD'S 1.1% 2 GEOX 0.9% 2 AMPLIFON 0.8% 3 DMT - 3 GEMINA - 2 IMPREGILO - 2 TELECOM ITALIA MEDIA - 2 TISCALI - 3 Median 2.7% Source: Cheuvreux Source: Cheuvreux 11

12 EBIT margin P/CF 2006E (%) 2005E EBIT margin 2006E EBIT margin Rating (x) P/CF 2006E Rating SIAS 47.5% 30.8% 2 AUTOSTRADA TOMI 26.1% 27.5% 3 GEOX 23.0% 24.4% 2 CAMPARI 23.2% 24.2% 2 DMT 21.7% 22.8% 3 SAVE 20.1% 22.1% 2 GEMINA 18.9% 21.8% 2 TOD'S 18.3% 20.0% 2 CALTAGIRONE EDITORE 16.9% 17.0% 2 CEMENTIR 15.2% 16.8% 1 L ESPRESSO 16.5% 16.4% 2 ACEA 14.4% 16.0% 3 AMPLIFON 13.5% 13.6% 3 VALENTINO 11.1% 12.3% 3 ASM BRESCIA 12.8% 11.8% 2 IMA 9.1% 11.8% 3 MONDADORI 10.8% 11.1% 3 HERA 10.4% 11.0% 3 BENETTON 10.1% 10.2% 2 CIR 9.4% 10.0% 2 SIRTI 9.0% 10.0% 2 ASTALDI 10.0% 9.9% 2 BREMBO 9.0% 9.6% 2 SOGEFI 8.1% 8.3% 2 IMPREGILO 5.5% 6.7% 2 DE LONGHI 4.4% 5.6% 3 INDESIT 4.0% 5.0% 4 CAIRO 3.8% 4.7% 2 PININFARINA -10.3% 4.3% 3 TISCALI -8.8% 2.3% 3 BANCA ITALEASE NM NM 4 BENI STABILI NM NM 3 ERGO PREVIDENZA NM NM 3 IFI NM NM 2 ITALMOBILIARE NM NM 2 PIRELLI REAL ESTATE NM NM 2 TELECOM ITALIA MEDIA NM NM 3 Median 10.1% 10.6% ERGO PREVIDENZA DE LONGHI INDESIT BREMBO SOGEFI CEMENTIR ASTALDI ACEA PININFARINA SIAS TISCALI ASM BRESCIA HERA IMPREGILO VALENTINO IMA AUTOSTRADA TOMI BENETTON GEMINA PIRELLI REAL ESTATE MONDADORI CAMPARI L ESPRESSO SAVE CALTAGIRONE EDITORE SIRTI AMPLIFON TOD'S GEOX DMT CAIRO BENI STABILI BANCA ITALEASE NM 2 CIR NM 3 IFI NM 2 ITALMOBILIARE NM 3 TELECOM ITALIA MEDIA NM 2 Median 8.7 Source: Cheuvreux Source: Cheuvreux 12

13 EV/Sales 2006E (x) EV/Sales 06E Rating EV/EBITDA 2006E (x) EV/EBITDA 06E Rating PININFARINA CIR ASTALDI INDESIT IMPREGILO DE LONGHI SOGEFI CAIRO BREMBO IMA SIRTI MONDADORI BENETTON ASM BRESCIA CEMENTIR HERA CALTAGIRONE EDITORE TISCALI ACEA VALENTINO FASHION GROUP L ESPRESSO AMPLIFON CAMPARI SAVE AUTOSTRADA TOMI TOD'S SIAS GEMINA GEOX DMT TELECOM ITALIA MEDIA BANCA ITALEASE NM 2 BENI STABILI NM 2 ERGO PREVIDENZA NM 2 IFI NM 2 ITALMOBILIARE NM 3 PIRELLI REAL ESTATE NM 2 Median 1.50 CIR SOGEFI PININFARINA ASTALDI BREMBO CEMENTIR INDESIT DE LONGHI IMPREGILO SIAS CALTAGIRONE EDITORE IMA ACEA ASM BRESCIA MONDADORI TISCALI HERA AUTOSTRADA TOMI BENETTON SAVE CAIRO SIRTI L ESPRESSO CAMPARI GEMINA VALENTINO AMPLIFON TOD'S DMT IFI GEOX BANCA ITALEASE NM 2 BENI STABILI NM 2 ERGO PREVIDENZA NM 2 ITALMOBILIARE NM 3 PIRELLI REAL ESTATE NM 2 TELECOM ITALIA MEDIA NM 2 Median 7.9 Source: Cheuvreux Source: Cheuvreux 13

14 P/BV 2006E (x) P/BV 2006E Rating ROE 2006E (%) ROE 2006E Rating DE LONGHI IFI BENI STABILI CEMENTIR CALTAGIRONE EDITORE ITALMOBILIARE GEMINA PININFARINA BENETTON ASM BRESCIA ERGO PREVIDENZA ACEA ASTALDI CIR BREMBO HERA SAVE INDESIT AUTOSTRADA TOMI SOGEFI SIAS IMPREGILO CAMPARI TISCALI DMT BANCA ITALEASE PIRELLI REAL ESTATE MONDADORI CAIRO TOD'S L ESPRESSO IMA VALENTINO FASHION GROUP AMPLIFON GEOX SIRTI NM 2 TELECOM ITALIA MEDIA NM 2 Median 2.10 GEOX 41.1% 2 IMA 26.9% 3 PIRELLI REAL ESTATE 26.5% 2 VALENTINO FASHION GROUP 25.8% 2 AMPLIFON 22.9% 3 SOGEFI 21.5% 2 L ESPRESSO 19.3% 3 BANCA ITALEASE 19.1% 2 MONDADORI 18.6% 3 ASTALDI 18.2% 2 BREMBO 17.7% 3 CAMPARI 16.7% 3 AUTOSTRADA TOMI 15.7% 3 INDESIT 15.1% 3 TOD'S 13.6% 2 SIAS 12.9% 2 CAIRO 11.2% 3 ASM BRESCIA 11.1% 3 ACEA 11.0% 3 PININFARINA 10.4% 1 CEMENTIR 10.0% 2 ITALMOBILIARE 10.0% 3 TISCALI 9.3% 3 BENETTON 9.0% 2 HERA 8.3% 2 DMT 8.0% 3 CIR 7.2% 3 SAVE 6.2% 2 IFI 5.1% 2 CALTAGIRONE EDITORE 4.9% 2 GEMINA 4.8% 2 DE LONGHI 3.8% 3 BENI STABILI 3.4% 2 IMPREGILO 3.0% 2 ERGO PREVIDENZA NM 2 SIRTI NM 2 TELECOM ITALIA MEDIA NM 2 Median 11.1% Source: Cheuvreux Source: Cheuvreux 14

15 Market capitalisation (EUR m) Market Cap Rating Free float (%) Free Float Rating GEOX IFI HERA BANCA ITALEASE ITALMOBILIARE MONDADORI ASM BRESCIA PIRELLI REAL ESTATE ACEA VALENTINO FASHION GROUP L ESPRESSO CAMPARI BENETTON TOD'S CIR BENI STABILI TELECOM ITALIA MEDIA AUTOSTRADA TOMI IMPREGILO SIAS AMPLIFON TISCALI INDESIT CALTAGIRONE EDITORE CEMENTIR GEMINA SOGEFI SIRTI SAVE ASTALDI ERGO PREVIDENZA BREMBO CAIRO DE LONGHI DMT IMA PININFARINA Total IFI 93.0% 2 IMPREGILO 75.6% 2 VALENTINO FASHION GROUP 64.2% 2 SAVE 61.0% 2 GEMINA 56.6% 2 TISCALI 55.0% 3 CIR 50.0% 3 BENI STABILI 47.3% 2 SIRTI 46.7% 2 CAMPARI 45.6% 3 ACEA 44.7% 3 AUTOSTRADA TOMI 44.3% 3 HERA 44.0% 2 DMT 43.0% 3 L ESPRESSO 41.0% 3 MONDADORI 40.6% 3 ASTALDI 38.7% 2 SIAS 38.6% 2 CEMENTIR 37.6% 2 SOGEFI 37.0% 2 BREMBO 36.3% 3 PIRELLI REAL ESTATE 35.5% 2 TOD'S 34.2% 2 BENETTON 32.9% 2 PININFARINA 31.1% 1 AMPLIFON 28.9% 3 GEOX 28.9% 2 CALTAGIRONE EDITORE 28.0% 2 TELECOM ITALIA MEDIA 27.5% 2 BANCA ITALEASE 27.0% 2 CAIRO 27.0% 3 ITALMOBILIARE 26.6% 3 DE LONGHI 25.0% 3 IMA 23.4% 3 INDESIT 18.5% 3 ASM BRESCIA 17.6% 3 ERGO PREVIDENZA 17.4% 2 Median 37.6% Source: Cheuvreux Source: Cheuvreux 15

16 Market Cap P/E Multiples EPS CAGR P/CF EV/EBITDA EV/Sales P/BV ROE Yield Company Price Rating (EUR m) 06E 07E 04/07 06E 06E 06E 06E 06E 05E ACEA AMPLIFON ASM BRESCIA ASTALDI AUTOSTRADA TOMI BANCA ITALEASE NM NM NM BENETTON BENI STABILI (14.2) 22.4 NM NM BREMBO CAIRO CALTAGIRONE ED CAMPARI CEMENTIR CIR (8.2) NM DE LONGHI DMT ERGO PREV NM NM GEMINA GEOX HERA IFI NM 13.8 NM IMA IMPREGILO NM INDESIT ITALMOBILIARE NM NM NM L ESPRESSO MONDADORI PININFARINA NM PIRELLI RE NM NM SAVE SIAS SIRTI NM SOGEFI TI MEDIA NM NM NM NM NM 6.3 NM NM 0.0 TISCALI NM 15.4 NM TOD'S VALENTINO NM Median small caps Median Italy Source: Cheuvreux 16

17 Company Profiles 17

18 18

19 ACEA (EUR9.11) Water Utilities - 25 January 2006 Rating: 3/Underperform - Target price: +5.3% EUR9.6 Marco Baccaglio To 31/12 (EUR) - IFRS E 2006E 2007E Sales (m) Net att. profit, rest. (m) Free Cash Flow (m) (69.9) EBITDA margin (%) Clean EPS Reported EPS P/E (x) Attrib. FCF yield (%) 5.4 NS EV/EBITDA (x) EV/EBIT (x) ROCE (%) ROE (%) P/BV (x) Net debt/ebitda (x) Gross dividend Yield (%) /01 09/01 05/02 12/02 08/03 03/04 10/04 06/05 01/06 mêáåé mêáåéljfabu Market capitalisation EUR1 941m MIDEX month 3 months 12 months No. of shares, adjusted m Reuters ACE.MI Absolute perf. 8.7% 5.9% 6.3% Daily volume EUR2.11m Bloomberg ACE IM Relative perf. 0.5% -6.9% -3.3% Shareholders: Municipality of Rome 51.0%, Schroders 9.9%, Suez-Electrabel 8.6%, Caltagirone Francesco 2.0%, Free Float 29.5% Organic growth fully priced in RECENT DEVELOPMENTS - SPECIFIC EQUALISATION AND ELECTRICITY SALES BOLSTERED 9M-05 RESULTS ACEA achieved 20.3% revenue growth in 9M-05, thanks to higher electricity and gas volumes and prices. Lower labour costs (down EUR10m) and the specific equalization mechanism (+EUR27m) offset the 31% increase in opex (due to higher fuel costs), which helped ACEA to reach EUR284m EBITDA (+13.4%). The electricity networks contributed 52%, electricity sales 5% and the water business 43% respectively of ACEA's total EBITDA. EBIT totalled EUR172.3m, due to slightly higher D&A, while financial charges were in line with 9M-04, despite the fixed loan (4.875% coupon) issued last year. Net profit was boosted by the EUR26.7m profit on discontinued operations, of which EUR22.5m was related to a fair value adjustment and the remainder was attributable to net profit generated by ACEA Trasmissione and Acqua Italia. Net debt stood at EUR1bn (5% average cost, 12.5 year maturity). OUTLOOK KEY DRIVERS: VERTICAL INTEGRATION IN ELECTRICITY AND FURTHER GROWTH IN WATER In 2006, ACEA should proceed with its vertical integration strategy for the electricity business by building two CCGT plants in Rosignano and Leini and opening a 375MW CCGT plant in Voghera (which should be fully operational this year). In 2006, we expect EBITDA to grow by 14.5% to EUR458m (vs. +4.5% expected for 2005). This strong performance should be mainly driven by electricity (up from EUR210m in 2005E to EUR238m in 2006E). At the water business, ACEA will proceed with the ATO agreement in Florence and with the consolidation of hydro services in ATO2. Heavier investments will raise depreciation charges. In 2006, debt is expected to climb to EUR1.2bn vs. EUR1bn in 2005, in line with the current business plan. ACEA's official strategy and EUR1.6bn investment plan have not been updated since September We expect the company to revise it within the next few months and issue a new guidance for future developments. 19

20 Company profile Valuation ACEA is the City of Rome's local multi-utility. The company is involved in electricity distribution, providing power to 2.7m clients ( n.2 provider in Italy with GWh) and it is the leading domestic operator in the water business (with 7m clients). It is also involved in electricity generation through its joint venture with Electrabel which invested in Tirreno Power (fourth operator in Italy with ~3.6% market share). ACEA should report EUR1.1bn net debt at end-2005, corresponding to a gearing of ~80%. Based on its business plan, net debt should reach ~EUR1.2bn in The City of Rome is ACEA's main shareholder with a 51% stake. A 8.6% stake is owned by Electrabel Italia, while the remainder is free float. We have a DCF-based target price of EUR9.6. DCF We estimate a fair value of EUR2bn which corresponds to EUR9.6 per share, based on 6.3% WACC and 1.2% terminal growth beyond ACEA's DCF valuation is very sensitive to changes in our assumptions, as cash generation is skewed towards : for this reason, the terminal value of EUR2.7bn (7.6x 2010E EV/EBITDA) represents 87% of its fair EV of EUR3.16bn. Multiples comparison ACEA is relatively cheap compared to its peers, trading at 6.7x EV/EBITDA07 vs. 7.7x. We think that the discount is justified by ACEA's more limited growth potential (underlying growth of 10-11% vs % for the average of peers). Investment case SWOT analysis ACEA has underperformed in recent months (+4.9% over the past year vs % for other utilities), due to uncertainty in the sector, the adverse impact of new laws and unfavourable weather conditions. We expect this impasse to continue, due to the following factors: ACEA lacks new growth opportunities and being short in generation and long in sales, it is exposed to high wholesale electricity prices. Expansion via acquisitions/new concessions is tied to long term negotiations with PA (Italian public administration). ACEA's official strategy and EUR1.6bn investment plan have not been updated since September We expect the company to revise it within the next few months and issue a new guidance for future developments. Strengths 1 - Leadership and expertise in the water business 2 - Low risk, as 90% of its EBITDA comes from regulated activities (electricity distribution and water)= 3 - Long term concession for water business (30 years)= Weaknesses 1 - Modest growth trend for core businesses 2 - Still limited involvement (short position) in electricity generation Opportunities 1 - Expansion in the water business (54 ATOs still to be assigned) 2 - Upgrade of electricity generation capacity 3 - Synergies from Electrabel partnership (ACEA s stake is 60%) in electricity (1,660 MW capacity for ,660 MW via its 50% stake in Tirreno Power) Threats= 1 - Rising interest rate scenario 2 - Increasing competition in generation, as several new plants should become operative from Management's official mandate is due to expire in April 2007 and the Roman mayoral election is due in May Specific equalisation system could be changed or suspended (EUR27m in 9M-05) 20

21 Sales & ROCE Margin / Trends (%) IFRS IFRS Sales (m) ROCE aft. tax, (rhs) EBITDA margin EBITA margin Net margin PE after and before goodwill EV multiples IFRS IFRS P/E P/E bef GW EV/EBITDA EV/EBITA EV/Sales, (rhs) Gearing and Rest. ROE DCF Valuation IFRS Total (EUR m) Per share (EUR) % of EV DCF QNQKN= NKV= NPB= Terminal Value O=TQQKQ= NOKV= UTB= Total P=NRUKR= NQKU= NMMB= 2005 debt EN=NNTKSF= ERKOF= JPSB= Equity O=MQMKV= VKS= SRB= WACC SKPB= Terminal growth NKOB= Gearing RoE, (rhs) Terminal EV/EBITDA TKS= ACEA: Peer comparison Company Mkt. Target Performance P/E Yield EV/EBITDA P/BV ROE Price Cap. Rating Price 1mo 3mos 06E 07E 06E 06E 07E 06E 06E AEM NKU= P=ONP= O= OKN= VKM= TKT= NOKP= NNKN= PKP= UKQ= TKU= OKM= NSKO= ASM BRESCIA OKS= O=MNN= P= OKU= NKQ= NKT= NPKU= NQKS= QKS= TKO= TKT= NKS= NNKN= HERA OKP= O=OVQ= O= OKS= MKR= UKR= ONKT= NQKO= PKR= UKM= SKO= NKV= UKP= Weighted Average = = = = QKP= SKP= NRKS= NPKM= PKT= UKM= TKP= NKU= NOKQ= Median = = = = NKQ= TKT= NPKU= NQKO= PKR= UKM= TKT= NKV= NNKN= ACEA VKN= N=VQN= P= VKS= UKT= RKV= NPKV= NPKM= SKO= TKN= SKT= NKS= NNKM= Source: Cheuvreux 21

22 ACEA IFRS FY to 31/12 (Euro m) E 2006E 2007E Profit & Loss Account Sales % Change 2.6% 67.6% 14.2% 13.2% 15.5% 18.2% 7.7% 3.9% Staff costs (180.3) (197.5) (222.1) (212.4) (215.1) (234.2) (222.6) (230.4) (237.3) Other costs (399.8) (476.9) (515.7) (526.8) (613.1) (617.0) (622.6) (688.4) (730.3) EBITDA % Change 2.4% 27.3% 5.1% 7.1% 26.6% 4.5% 14.5% 7.6% Depreciation (111.9) (137.9) (336.9) (178.2) (189.0) (172.3) (160.0) (169.5) (181.0) EBITA (43.3) % Change -10.5% 31.5% NS NS 53.5% 14.0% 20.2% 8.1% Goodwill amortisation before OP Goodwill amortisation [impairment test] Non recurring operational items EBIT (43.3) Net financial items (25.8) (79.8) (108.0) (43.4) (45.3) (28.5) (40.5) (42.3) (47.7) Non recurring financial items Other exceptional items (0.4) Tax (30.1) (29.2) 21.0 (66.1) (65.7) (65.9) (83.8) (103.4) (111.0) Goodwill amortisation Discontinuing activities Goodwill amortisation Net profit [loss] before minorities (106.8) Dividend to preferred shares Minorities (2.5) 1.9 (1.2) (9.9) (5.7) (3.9) (2.0) (3.0) (4.0) Net attributable profit [loss] (108.0) Restatement [impairment test] Adj. for exceptional items 0.2 (7.1) (12.7) (14.5) (7.2) Net attrib. profit [loss], restated (*) (120.7) % Change -56.0% -17.3% NS 119.1% NS 1.4% 22.9% 6.8% Cash flow Balance Sheet Shareholders' equity [group share] Minority interests Net debt [cash] Gearing [%] Per Share Data (at 30/12/2005) EPS before goodwill (0.57) EPS, reported (0.51) Goodwill per share Dividend per share Cash flow per share Book value per share No. of shares, adjusted Latest price Market capitalisation Enterprise value Valuation P/E NS P/E before goodwill NS P/CF Attrib. FCF yield [%] NS NS NS 5.4 NS P/BV Enterprise value / Op CE Yield [%] EV/EBITDA, restated EV/EBITA, restated NS EV/Sales EV/Debt-adjusted cash flow Return [%] Pre-tax RoCE NS ROE [%] NS Return on equity, restated NS * before goodwill for historical data 22

23 Amplifon (EUR60.98) Healthcare Equipment - 25 January 2006 Rating: 3/Underperform - Target price: -6.5% EUR57 Alberto Checchinato To 31/12 (EUR) - IFRS E 2006E 2007E Sales (m) Net att. profit, rest. (m) Free Cash Flow (m) 9.6 (22.1) (25.7) (21.0) EBITDA margin (%) Clean EPS Reported EPS P/E (x) Attrib. FCF yield (%) 1.2 NS NS NS EV/EBITDA (x) EV/EBIT (x) ROCE (%) ROE (%) P/BV (x) Net debt/ebitda (x) Gross dividend Yield (%) /02 12/02 05/03 10/03 04/04 09/04 03/05 08/05 01/06 mêáåé mêáåéljf_qbi Market capitalisation EUR1 205m MIDEX month 3 months 12 months No. of shares, adjusted m Reuters AMP.MI Absolute perf. 8.7% 12.3% 55.4% Daily volume EUR1.37m Bloomberg AMP IM Relative perf. 6.6% 2.9% 36.5% Shareholders : Holland Family 60.7%, Freefloat 39.3% A fully valued story RECENT DEVELOPMENTS WEAKER THAN EXPECTED Q3-05 PERFORMANCE IN THE US MARKET In 9M-05, sales grew by 9.9% to EUR386.9m. The Italian operations performed well, with Q3 organic growth topping 10% y-o-y, but the US market (i.e. 31% of Amplifon revenues) slowed down a little (just 3% same-store growth), due to one-off costs for shop conversions and the impact of the hurricanes in the southern US. Operational profitability also improved, as EBITDA reached EUR58.6m, implying a 0.9% increase in the EBITDA margin from 14.2% to 15.1%, but it was lower than expected, due to slow integration of some recent acquisitions in the US. Net profit totaled EUR25.3m (+18.7% y-o-y). In 9M-05, Amplifon proceeded with its external growth strategy abroad, spending ~EUR49m to buy 159 new shops, which will generate ~EUR46m of additional revenues. Last year, its most important deal was the acquisition of a German retail hearing aid chain, Axt-Wendton: this acquisition, the largest and most expensive in 2005 (1.27x EV/Sales vs. an average of 1.05x), marked Amplifon's entrance into the lucrative German market (the 2nd largest in the world after the US). This acquisition was followed by a smaller one in Germany, in early January (16 shops, EUR4m of additional turnover). OUTLOOK NET SALES TO GROW BY >13% IN 2005 ACQUISITION CAMPAIGN TO GO ON We expect net sales to grow by 13.6% to EUR558.5m in 2005, while EBITDA should climb to EUR90.2m in 2005 (+24.7% YoY), with the margin moving from 14.8% to 16.2%. In the short term, Amplifon intends to make other acquisitions, to fulfil its main strategic objective: to reach ~EUR250m additional sales from external growth in the next three to four years. The company's European acquisition strategy entails: 1) reaching critical mass (i.e. ~EUR100m of revenues) in the German market, by acquiring another regional network and via other smaller deals; 2) entering the UK market by buying a major player (i.e. >EUR50m sales); 3) expanding in Spain, where it currently commands only 6% market share. In the US, Amplifon believes it is still undersized, and it aims to raise its market share from the current 14% to ~20% by 2007: it should strengthen its position by acquiring ~100 shops worth ~USD30m of additional sales per year, favoured by the highly fragmented market (>8,000 independent stores). In the US, it also plans to open 300 new franchised shops in Wal-Mart department stores in (~EUR5-10m of investments, ~EUR20m of additional sales). Overall, Amplifon aims to reach EUR1bn of revenues between 2008 and We estimate that US sales will rise from EUR145.2m in 2004 to EUR225.3m in 2007 ( CAGR of 15.8%). Profitability should also be on the rise: we estimate that EBITDA should reach EUR125m by 2007 ( CAGR of 20%), with a 16.7% EBITDA margin. 23

24 Company profile Valuation Amplifon is the leading worldwide distributor of hearing aids with 7% market share. In 9M-05, revenues reached EUR387m, with hearing aids accounting for 97% of the total, and EUR25m of net profit. The group operates in eleven countries: key markets are Italy (31.6% of consolidated revenues), USA- Canada (29.5%), France (14.4%) and Netherlands (14.3%). Amplifon also entered Germany recently (2nd largest hearing aids market in the world), by buying the regional Hamburg-based retailer Axt-Wendton (26 shops, ~EUR12m sales in 2004) last April. This acquisition was part of Amplifon's strategic expansion plan. Amplifon operates one of world's largest retail and service networks, with approximately 2,210 outlets (of which 1,220 corporate outlets and 990 franchised shops), 2,950 service centres and 2,100 network affiliates. Amplifon's majority shareholder is the Holland family with a 60.7% stake. Our DCF-based valuation points to a target price of EUR57 per share. DCF valuation Main assumptions underpinning our model are: 4% riskfree rate, 4% market risk premium, 0.9 beta, 7.2% WACC, 2% perpetuity growth rate. Our fair value is based on the sum of the NPV of 5-year FCFO (EUR263m, 21% of EV) and a terminal value based on 2011 FCFO (EUR980m, 79% of EV). Multiple comparison The stock currently trades at 23.9x based on 2006E P/E and 20.3x on 2007E (i.e. line vs. its peers). Amplifon presents a 12% discount on 2006E EV/EBITDA compared to its peer group, and it is cheaper on P/CF multiples, with a 2006E figure of 18.3x, 7% below the peer average. Investment case SWOT analysis We confirm our 3/Underperform rating for Amplifon based on the following: US expansion strategy: Amplifon has invested USD38m of the USD60-70m targeted for the period. However, the US expansion strategy primarily entails the acquisition of "Mom & Pop" hearing aid shops which are cheaper than larger chains, but might require much more time to significantly increase the company's size. As a result, we do not expect any major surprises in terms of the pace of expansion or prices paid for upcoming acquisitions. If fast, European growth might be costly. As the Axt-Wendton deal has shown (1.27x EV/Sales paid vs. <1x for family shops), there is no discount for large chains. The first German deal was strategic to enter the market, but further European acquisitions of this size would probably be too costly for Amplifon. After the recent stock price rally (+8.7% in the last month), Amplifon's fundamentals appear to be fairly priced at current levels. We now have a 6% downside vs. our target price and Amplifon has completely filled the valuation gap with its peers. Strengths 1 - Worldwide leader (~7% market share) 2 - Broadly diversified geographic revenue base 3 - Most extensive retail and service network in sector 4 - Strong bargaining power vs. its suppliers Weaknesses 1-50% of hearing aids sold come from a single supplier 2 - Highly fragmented market slows external growth 3 - Limited revenue diversification (96% hearing aids) 4 - Non-strategic biomedical unit still on the books Opportunities 1 - Further expansion in the US, Germany and UK 2 - Larger acquisitions could accelerate growth plans 3 - Italian market still under-exploited (3.5 hearing aids per 1,000 inhabitants vs. 8 on average in Germany) 4 - Profitability increase via supply side scale economies Threats 1 - Deterioration of European public healthcare system 2 - Large scale external growth would imply higher prices 3 - Competitive pressure from suppliers' own retail chain 4 - Alternative medical solutions to hearing problems 24

25 Hearing aids sales by region (2004A) Sales and ROCE Netherlands 15% Other Countries 7% Italy 32% UMM SMM QMM OMKM NRKM NMKM OMM RKM France 15% M OMMN OMMO OMMP OMMQ OMMR OMMS OMMT MKM USA 31% p~äéë=eãf ol`b=~ñíéê=í~ñ=ebfi=êáöüíjü~åç=ëå~äé Margins (%) Gearing (%) and ROE OM NR NM R M OMMN OMMO OMMP OMMQ OMMR OMMS OMMT UM SM QM OM M OMMN OMMO OMMP OMMQ OMMR OMMS OMMT ORKM OMKM NRKM NMKM RKM MKM b_fqa^=ã~êöáå kéí=ã~êöáå b_fq=ã~êöáå dé~êáåö oéëí~íéç=oçbi=êáöüíjü~åç=ëå~äé EV Multiples Valuation Summary OM NR NM R M OMMN OMMO OMMP OMMQ oéëík=bslb_fqa^ bslp~äéëi=êáöüíjü~åç=ëå~äé OMMR OMMS oéëík=bslb_fq OMMT OKR OKM NKR NKM MKR MKM Total (EUR m) per share % of EV DCF % Terminal Value % EV % Debt (Cash) % Equity Value % WACC 7.1% Terminal growth 2.0% Terminal EV/EBITDA 8.9x Amplifon: Peer comparison Mkt. Cap. P/E EV/EBITDA Peers Country Rating (EUR m) 06E 07E 06E 07E Audika FRANCE 3/Underperform Phonak SWITZERLAND 2/Outperform Weighted Average Amplifon 3/Underperform Source: Cheuvreux 25

26 Amplifon IFRS FY to 31/12 (Euro m) E 2006E 2007E Profit & Loss Account Sales % Change 35.1% 8.6% 13.1% 10.9% 13.6% 17.3% 15.2% Staff costs 0.0 (66.9) (83.4) (91.4) (109.6) (121.4) (137.9) (161.1) (184.9) Other costs 0.0 (87.8) (116.5) (140.6) (169.9) (202.9) (228.1) (266.3) (309.9) EBITDA % Change 58.5% 48.7% 22.3% 35.2% 10.7% 16.7% 18.8% Depreciation 0.0 (5.5) (6.7) (7.8) (13.7) (14.6) (15.1) (16.0) (18.5) EBITA % Change 71.4% 57.1% 12.2% 43.7% 12.3% 18.7% 19.5% Goodwill amortisation before OP 0.0 (1.7) (7.3) (9.2) (7.6) (8.6) (4.5) (4.5) (4.5) Goodwill amortisation [impairment test] Non recurring operational items (1.8) (2.8) (3.2) (6.7) EBIT Net financial items 0.0 (2.2) (7.1) (7.6) (6.3) (5.4) (5.7) (6.0) (7.7) Non recurring financial items Other exceptional items 0.0 (0.3) (0.2) (0.0) (6.5) (3.3) Tax 0.0 (7.5) (5.8) (6.6) (10.4) (18.4) (27.3) (32.7) (39.2) Goodwill amortisation Discontinuing activities Goodwill amortisation Net profit [loss] before minorities Dividend to preferred shares Minorities (0.2) (0.2) (0.2) 0.1 (0.1) (0.1) (0.2) Net attributable profit [loss] Restatement [impairment test] Adj. for exceptional items Net attrib. profit [loss], restated (*) % Change 104.5% 109.4% -2.2% 44.2% 22.1% 19.9% 18.0% Cash flow Balance Sheet Shareholders' equity [group share] Minority interests Net debt [cash] Gearing [%] NS Per Share Data (at 9/1/2006) EPS before goodwill EPS, reported Goodwill per share Dividend per share Cash flow per share Book value per share No. of shares, adjusted Latest price Market capitalisation Enterprise value Valuation P/E NS NS P/E before goodwill NS NS P/CF NS NS NS Attrib. FCF yield [%] NS NS NS NS NS NS NS P/BV NS NS Enterprise value / Op CE NS Yield [%] EV/EBITDA, restated NS EV/EBITA, restated NS EV/Sales NS EV/Debt-adjusted cash flow Return [%] Pre-tax RoCE NS ROE [%] NS Return on equity, restated NS * before goodwill for historical data 26