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Italian Research Milan, July 10, 2019 SECTOR: Media Edoardo Girelli, CFA +39-02-77115.369 IERVOLINO ENTERTAINMENT e-mail: [email protected] Andrea Randone +39-02-77115.364 e-mail: [email protected] Think it Could Only Happen in Hollywood? Think Again... An Italian producer with Hollywood style and a global footprint. Iervolino Entertainment SpA (IE) is an Italian company that specialises in the production of content for cinema, new media, and television. Andrea Iervolino, an Italian producer boasting extensive international experience, established the company in 2011, supported by the team with which he has produced a range of films over the last 15 years, and in 2018 he started to concentrate all production activity at IE. The company is owned by Monika Bacardi (60%) and by Mr. Iervolino (40%), who has controlling rights thanks to multiple-voting shares (3x1). The company generates video content from scratch. Ideas can be generated internally or arise from other sources, such as the company’s network, books, videogames and movie characters (e.g. Arctic Justice webseries). Once the idea is identified, IE writes the preliminary screenplay, prepares the budget, and identifies the key figures (cast, director, etc.). These elements make up the first output to be submitted to the sales agents, who ensure a minimum non-revocable guaranteed amount (MG); by company policy, the MG together with the tax credit should at least cover the production cost. IE can exploit IPs vertically, by selling distribution to a number of sales agents, and horizontally, by producing other types of audio-video content on a range of channels other than traditional cinematographic ones. Unlike other international peers, IE does not perform film distribution activities, and unlike other EU peers, its films are produced in English. Andrea Iervolino and his team have gained strong credibility and a good reputation in the Hollywood star system thanks to already delivered productions (over 50 films as producer), which, in terms of quality and on-screen talent, can compete with best-in-class international content. Moreover, in addition to traditional audio-video content such as films and web series, IE is an early mover in the very promising area of short-content production, which benefits from a strong market tailwind. Clear strategy and use of IPO proceeds. The company’s strategy is aimed at strengthening its expertise, focusing on what it does best. Additional resources should enable IE to scale up the business significantly, also improving the business model: in fact, approximately 50% of the proceeds are to be used to set up top-notch Intellectual Property (IP) contracts that should expand the business, and leverage economies of scale. An additional 40% of the new capital resources are earmarked to set up multi-year contracts with actors, which should structurally improve the business model by optimising the cost base and the quality IPO of collaboration. Finally, the remaining 10% should be used for consolidating the international presence, by establishing an IP search team in Los Angeles to further support the company pipeline. Visible and strong growth ahead, mainly driven by the production of animation series. In projecting our estimates to 2021, we have considered the production projects already contractualised (i.e. The Poison Rose, Arctic Justice web series, Waiting for the Barbarians), a film that is expected to be contractualised in the next few weeks (Together Now), an animation series project that is close to being contractualised (Puffins), and 3 additional film production projects that are at an earlier stage and are not included in the admission document. For 2019, our estimates are almost aligned to management indications in terms FORNOT DISTRIBUTION IN THE UNITED STATES, CANADA, JAPAN OR AUSTRALIA OR TO PERSONS. U.S. of production value and EBIT (Eu81.2mn and Eu22.2mn respectively), while for 2021 we expect production value of Eu165.7mn and EBIT of Eu38.5mn. Investment conclusions. An ongoing global battle to seize quality video content. IE is in a position to take advantage of this unique market momentum and in particular is building brand credibility in the promising niche of short-content productions. In our valuation approach, as a base case, we have considered fully contractualised projects and a major additional project (the short series “Puffins”), which should be contractualised soon. We IERVOLINO ENTERTAINMENT have calculated an NPV for each project, applying a 15% visibility discount to the Puffins project. By taking into account the tax assets and deducting the impact from corporate costs, we have reached a pre-money equity value of Eu80.6mn. The listing should represent a crucial step forward for a company that has already demonstrated very high ambitions. Intermonte SIM S.p.A. Milan 20122 (Italy) – Galleria De Cristoforis, 7/8 - phone: +39-02-77115.1 fax: +39-02-77115.300 New York - (USA) - Sales contacts: JPP Eurosecurities, 595 Madison Avenue, 10022 - phone: +1 (212) 521 6718 THIS DOCUMENT HAS BEEN PREPARED BY INTERMONTE SIM S.P.A. (“INTERMONTE”) INDEPENDENTLY OF IERVOLINO ENTERTAINMENT S.P.A. (THE “COMPANY”). 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