Italian Morning Sight 16 January 2012

Amplifon Italy/Healthcare

Amplifon (Buy)

Buy Feedback from company contact and Turkish deal Recommendation unchanged Share price: EUR 3.27 Strong Q4 11e expected: based on our recent contact with the management we closing price as of 13/01/2012 guess that Q4 maintained a positive result trend, in line with the first nine months Target price: EUR 4.40 of 2011. We expect FY 11 sales growth to be around 16% Y/Y: the positive sales from Target Price: EUR 4.80 trend in Europe (+4.8% Y/Y) and the strong contribution from the consolidation of Reuters/Bloomberg AMPF.MI/AMP IM NHC in Asia-Pacific should completely offset the still negative sales trend in the Market capitalisation (EURm) 723 USA and the weak sales performance in the UK. Based on this revenue trend we Current N° of shares (m) 221 believe Amplifon managed to achieve growing profitability; therefore, we estimate Free float 39% a FY 11 EBITDA at EUR 141.1m (EBITDA margin of 17.1%). Daily avg. no. trad. sh. 12 mth 628,084 First outlook on 2012: We believe several of the markets in which Amplifon is Daily avg. trad. vol. 12 mth (m) 2 Price high 12 mth (EUR) 4.50 present will contribute to the group’s revenues in specific ways: Price low 12 mth (EUR) 3.05 1) Continental Europe: the expected slowdown in economic growth, as a Abs. perf. 1 mth 3.68% Abs. perf. 3 mth -8.35% consequence of the current sovereign crisis in Europe, to lead to greater consumer prudence. Nevertheless, given the group’s particular defensive profile in Abs. perf. 12 mth -13.15% Europe, where local national health services grant partial reimbursement and Key financials (EUR) 12/10 12/11e 12/12e where there is a stable pension regime, we believe Amplifon could reach positive Sales (m) 708 823 843 EBITDA (m) 97 141 145 sales growth in the area, as it did during the 2008 economic crisis when Amplifon EBITDA margin 13.7% 17.1% 17.2% sales growth in Europe was +2.5%. EBIT (m) 65 102 105 EBIT margin 9.2% 12.3% 12.4% 2) North America: the expected consolidation of the first few signs of consumption Net Profit (adj.)(m) 36 54 57 recovery seen in the last few months of 2011 and the positive impact of the ROCE 4.6% 7.5% 7.6% Net debt/(cash) (m) 381 351 321 completion of the Sonus business model transformation should allow Amplifon to Net Debt/Equity 1.1 0.9 0.8 reach growing sales performance in 2012. Debt/EBITDA 3.9 2.5 2.2 Int. cover(EBITDA/Fin. int) 7.6 5.2 5.9 3) UK: in our opinion the current slack in consumption and the on-going difficulties EV/Sales 1.8 1.4 1.3 in the local hearing-aid market will make sales recovery difficult; therefore, we EV/EBITDA 12.8 7.9 7.4 EV/EBITDA (adj.) 12.8 7.9 7.4 estimate the group’s sales will continue to be weak in 2012. EV/EBIT 19.1 11.0 10.3 P/E (adj.) 21.0 13.1 12.2 4) Asia Pacific: we forecast a more stable scenario in this area than in Europe; this P/BV 2.4 1.9 1.7 should allow the group to realize further positive sales growth in 2012. OpFCF yield 11.6% 7.5% 10.5% Dividend yield 1.0% 1.0% 1.1% The trial backlog roughly covers a month, therefore the business visibility on 2012 EPS (adj.) 0.18 0.25 0.27 is still low at the moment. Nevertheless, we are confident that despite the current BVPS 1.56 1.73 1.92 uncertain scenario the group will record positive sales growth in 2012 thanks to DPS 0.03 0.03 0.04 the resilient nature of the business. We have prudently slightly reduced our FY 12

4.6vvdsvdvsdy sales from EUR 849.9m to EUR 843.3m (+2.5% of growth vs. previous +3.5%). 4.4

4.2

4.0 Acquisition in Turkey: the management announced the acquisition of 100% of

3.8

3.6 the company Maxtone, the first operator in the Turkish market, for approximately 3.4 EUR 1m. The company realised a turnover of around EUR 2m; so, the total 3.2 3.0 consideration for the deal implies a multiple of 0.98x EV/Sales, in line with the 2.8 2.6 previous group’s acquisitions. Although this acquisition has not a considerable Dec 10 Jan 11 Feb 11 Mar 11 Apr 11 May 11 Jun 11 Jul 11 Aug 11 Sep 11 Oct 11 Nov 11 Dec 11 Jan 12

AMPLIFON FTSE Italy STAR (Rebased) impact on Group revenues, we believe it is positive from a strategic point of view Source: Factset as it allows the group to enter a new market with interesting growth rates and an

effective reimbursement policy, furthermore Turkey could be the platform to grow Analyst(s): Paola Saglietti, Banca Akros in the Eastern Europe in the coming years. [email protected] Conclusion & Action: : the fine tuning of our estimates and the roll-over of our +39 02 4344 4287 DCF model (WACC increased from 7.4% to 7.7%) lead us to reduce our TP from

EUR 4.8 to EUR 4.4 per share. We remain positive on the stock with a Buy

recommendation.

Banca 4 Akros

Italian Morning Sight 16 January 2012

Disclaimer

This research has been prepared by Andrea Devita, Marco Cavalleri, Luigi Tramontana, Claudio Giacomiello, Paola Saglietti, Gabriele Gambarova, Dario Michi, Giada Cabrino (all members of AIAF), Francesco Previtera, Francesco Sala, Francesco Di Gegorio, Salvatore Baiamonte and Marcello Renna (ordinary member of SIAT), who are financial analysts with Banca Akros SpA ("Banca Akros"), which is responsible for the preparation of the research. Banca Akros is a bank authorised to perform also investment services; it is part of the Bipiemme Banca Popolare di Milano Group (the “Group”) and it is duly subject to the management and co-ordination of Banca Popolare di Milano (the “Parent Company”). Banca Akros is registered with the Italian Banking Association code n. 5328 and is subject to the regulation and surveillance of Bank of Italy and Consob (Commissione Nazionale per le Società e la Borsa)." Banca Akros has prepared this research for its professional clients only, pursuant to Directive 2004/39/CE and Annex 3 of Consob Regulation on intermediaries (Resolution n. 16190). This research is being distributed as of 16 January 2012. In compliance with arts. 69 “quater” and “quinquies” of Consob Regulations for Issuers (“notification to the public regarding interest and conflict of interest”) Banca Akros hereby declared that it has a personal interest in some of the companies examined in this research, specifically: 1) Fiera Milano, Premuda, Risanamento (in which Banca Akros’ parent group holds more than 2% or is a member of shareholders pacts); 2) Amplifon, Banca Ifis, Banca Profilo, Biesse, El.En (until 30 June 2011), Enervit, Gas Plus, Granitifiandre (until 3 March 2011), I Grandi Viaggi, Imvest, Prima Industrie (until 30 June 2011), QF Investietico (for which the Bank is a specialist or liquidity provider); 3) Zucchi Ord/Pref (the Bank is a specialist and was Financial Advisor, Placing Agent, Collecting Bank for capital increase funds and Trading Bank for unsubscribed rights for the capital increase organized in November 2011); 4) Sopaf (the Bank acted as the global coordinator and the book-runner for the issuance of the convertible bonds in 2011); 5) Impregilo (until November 2011), A2A, Class Editori, Italcementi, Marr, Mediolanum, RDB, Seat Pagine Gialle (dual administrator role in related parties) 6) Gabetti Property Solutions (dual administrator role in related parties; the Bank was acting as Collecting Bank for capital increase funds and Trading Bank for unsubscribed rights for the capital increase organized in January 2011); 7) Salvatore Ferragamo (Banca Akros was the placement bank and guarantor for the IPO organized during the last twelve months); 8) Milano Assicurazioni, FondiariaSai (the Bank has been acting as Co-lead Manager of the pertinent consortia for the capital increase organized in the last twelve months); 9) Banca Pop. Emilia Romagna (the Bank was specialist until 22 June 2011 and has been a member of the consortium for the placement of the non- negotiable bonds organized in the last twelve months); 10) Crespi (was acting as Advisor of the consortium for the the capital increase organized in March 2011); 11) Terna, Banca Carige (the Bank has been acting as Joint-Lead Manager of the pertinent consortia for the placement of the non-negotiable bonds organized in the last twelve months); 12) Mediobanca (the Bank has been a member of the consortium for the placement of the non-negotiable bonds organized in the last twelve months); 13) Intesa Sanpaolo (the Bank has been acting as a member of the consortium for the capital increase organized from 23 May to 10 June 2011). 14) Bioera (Banca Akros was the placement bank for the IPO that took place in July 2011; the Banca Akros was acting as Collecting Bank for capital increase funds and Trading Bank for unsubscribed rights for the capital increase organized in September 2011); 15) Eni (the Bank is acting as a member of the consortium for the placement of convertible bonds organized in September-October 2011); 16) Unicredit (the Bank is acting as a member of the consortium for the capital increase organized from 9 to 20 January 2012). Financial analysts Andrea Devita, Marco Cavalleri, Luigi Tramontana, Claudio Giacomiello, Paola Saglietti, Gabriele Gambarova, Dario Michi, Giada Cabrino (all members of AIAF), Francesco Previtera, Francesco Sala, Francesco Di Gegorio, Salvatore Baiamonte and Marcello Renna (ordinary member of SIAT), who prepared this research, have gained considerable experience with Banca Akros and other authorised brokerage houses. Said financial analysts do not receive a bonus, salary or any other form of remuneration, whether directly or indirectly, from any earnings in any investment banking operation. Said financial analysts and their families do not hold financial instruments issued by the companies under examination nor are they directors, managers or advisors of the companies. Pursuant to Consob rulings to implement art. 114, paragraph 8 of Italian Legislative Decree 58/98 (TUF) and specifically art. 69 “quinquies”, paragraph 2 of the Issuers Regulation, Banca Akros hereby informs its clients that additional information is available at its web site (http://bancaakros.webank.it/pdf/3- MktAbuse-DAF-sitointernet-conflitti-aggiornato.pdf). The information and opinions given in this research are based on sources believed to be reliable. Banca Akros has done its best to check the source of said information and that it has already been made public. However, notwithstanding the said controls Banca Akros does not guarantee nor shall it be held liable if the information supplied herein or used to prepare this research is found to be inaccurate, incomplete, untrue or incorrect. This research is for information purposes only. It shall not be regarded as a proposal for a contract, an offer to sell nor as a solicitation to buy and/or sell financial products nor, in general, to invest. Nor shall it be regarded as advice on investment opportunities. Banca Akros does not guarantee that any of the forecasts and/or estimates supplied in this research are attainable. Moreover, Banca Akros shall not be held liable for any consequences and/or damage that may derive from the use of this research and/or the information contained herein. All the information or opinions contained in this research are subject to change without notice, without detriment to any legal or regulatory requirements. Unless specifically authorised, this research may not be reproduced and/or circulated, whether wholly or in part, directly or indirectly.

Banca 7 Akros

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