benelux all caps guide - quest for growth...benelux all caps guide 3 welcome to our 2012 benelux all...

December 2012

BENELUX ALL CAPS GUIDE

kbcsecurities.com Refer to important disclosures, disclaimers and analyst certifications at the end of the body of this research.


kbcsecurities.com Refer to important disclosures, disclaimers and analyst certifications at the end of the body of this research.


CONTENTS PART 1 INTRODUCTION

KBC Securities Top Picks ................................................................................................................................................... 5 2013 Small cap selection .................................................................................................................................................... 7 Ranking by different valuation multiples.............................................................................................................................. 9 Economic outlook: challenging environment requires A-team planning ............................................................................ 12 Pricing ratios ................................................................................................................................................................... 504 Contacts .......................................................................................................................................................................... 512 PART 2 BENELUX ALL CAPS GUIDE

Aalberts ...................................... 16AB InBev .................................... 20Ablynx ........................................ 24Ackermans ................................. 28Aedifica ...................................... 32AEGON ...................................... 36Ageas ......................................... 40Agfa............................................ 44Ahold.......................................... 48Akzo Nobel................................. 52Arcadis ....................................... 56Arseus ........................................ 60ASMI .......................................... 64Atenor......................................... 68BAM ........................................... 72Banimmo.................................... 76Barco.......................................... 80Befimmo..................................... 84Bekaert....................................... 88Belgacom ................................... 92Beter Bed Holding ...................... 96BinckBank ................................ 100BIP ........................................... 104Bois Sauvage ........................... 108Boskalis.................................... 112Brederode ................................ 116Brunel International .................. 120CFE.......................................... 124CMB ......................................... 128Cofinimmo................................ 132Colruyt...................................... 136Deceuninck .............................. 140Delhaize ................................... 144Delta Lloyd ............................... 148D.E Master Blenders ................ 152Dexia ........................................ 156D'Ieteren................................... 160Dockwise.................................. 164DSM ......................................... 168Elia ........................................... 172Euronav.................................... 176

EVS ..........................................180EXMAR.....................................184Floridienne................................188Fluxys .......................................192Foyer ........................................196Fugro ........................................200Galapagos ................................204GBL ..........................................208GDF Suez.................................212Gimv .........................................216Grontmij ....................................220Hal Trust ...................................224Hamon ......................................228Heijmans...................................232Heineken ..................................236Heineken Holding .....................240Henex .......................................244IBA............................................248Imtech.......................................252ING ...........................................256IO&W........................................260Jensen-Group...........................264Kardan ......................................268Kas Bank ..................................272Kinepolis ...................................276Lotus Bakeries ..........................280Luxempart.................................284Melexis .....................................288Miko ..........................................292Mobistar....................................296Montea......................................300Moury Construct .......................304Nutreco .....................................308Nyrstar ......................................312Option .......................................316Pharming ..................................320Picanol......................................324PinguinLutosa...........................328PostNL......................................332Punch International...................336Quest for Growth ......................340

Randstad.................................. 344RealDolmen ............................. 348Recticel .................................... 352Reed Elsevier........................... 356Resilux ..................................... 360Retail Estates ........................... 364RHJ .......................................... 368Roularta.................................... 372RTL Group ............................... 376Sapec....................................... 380SBM Offshore........................... 384Sioen........................................ 388Sipef ......................................... 392SNS REAAL ............................. 396Sofina ....................................... 400Solvac ...................................... 404Solvay ...................................... 408Spector..................................... 412Telegraaf .................................. 416Telenet ..................................... 420Ter Beke................................... 424Tessenderlo ............................. 428Texaf ........................................ 432Thrombogenics ........................ 436Tigenix...................................... 440TNT Express ............................ 444Transics.................................... 448Tubize ...................................... 452UCB ......................................... 456Umicore.................................... 460Unit4......................................... 464USG People ............................. 468Van de Velde............................ 472Van Lanschot ........................... 476Vopak....................................... 480Vranken-Pommery ................... 484WDP......................................... 488Wessanen ................................ 492Wolters Kluwer ......................... 496Zetes ........................................ 500

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Part 1 Introduction

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Welcome to our 2012 Benelux All Caps guide. Over the last 12 months our research team has expanded its universe by initiating coverage on D.E Master Blenders 1753, Mediq, Unit4, Electrawinds, RTL and Vranken Pommery and re-initiating the real estate sector with the additions of Aedifica, Atenor, Banimmo, Befimmo, Cofinimmo, Intervest Offices, Montea, Retail Estates and WDP. Our Benelux universe currently consists of 132 companies, of which we have included 122 in this publication. Approximately two thirds of our universe consists of large and midcap Belgian and Dutch names with broad coverage of the AEX, Bel20, AMX and BelMid indices. About one third of our coverage is made up of Belgian Small Cap names. KBC SECURITIES BENELUX UNIVERSE BY MARKET KBC SECURITIES BENELUX UNIVERSE BY MARKETCAP

Other2.3% Belgium (> 0.5bn)

26.5%

Belgium (< 0.5bn)37.9%

The Netherlands31.1%

Luxemburg2.3%

Less than € 100m15.9%

More than € 5bn15.2% Between € 1bn and

€ 5bn21.2%

Between € 0.5bn and € 1bn

14.4%

Between € 100m and € 500m

33.3%

Source: KBC Securities Source: KBC Securities During the course of 2012 we hosted our annual Benelux conferences in Brussels (March) and London (May). In addition two Biotech conferences were held, one in Brussels (March) and one in New York (November). On the 11th of December the senior management of 15 companies will be present at our annual Small & Mid Cap Conference in Brussels. In total, more than 70 companies were present during these conference days. In addition to our conferences, we hosted over 100 separate company roadshows in cities including Brussels, Paris, Amsterdam, London, Frankfurt, New York, Boston, Copenhagen, Stockholm and Geneva. Looking ahead, KBC Securities remains dedicated to offering added value and continuity with the ambition to strengthen our Benelux product both in terms of names and new initiatives. Since the publication of our previous Benelux Ideas, the BEL20, AEX and EuroStoxx50 have risen by respectively 11.9%, 18.4% and 12.1%. Our selection of last year was up on average by 13.9% with strong outperformances from our value picks (up 19.3%) and small cap selection (up 18.3%). The performance of our top picks list (+4.0%) was hit hard by SBM Offshore (-45.4%), Delhaize (-37.8%) and Imtech (-13.7%), but this was offset by strong performances of Heineken (+44.7%), Aegon (+40.8%) and DSM (+24.8%). Our list of “value picks” performed excellently, with Barco (+65.7%), Ageas (+63.6%), Euronav (+34.3%) and ASMI (+32.0%) more than offsetting the disappointing performance of BinckBank (-25.8%). Our small cap selection made a similar performance driven by Barco, Jensen (+45.1%) and Melexis (+31.9%). PERFORMANCE OF 2012 TOP PICKS

Close of 12 December 2011 Close of 27 November 2012 % change

AEX 297.39 332.92 11.95% Bel20 2,030.47 2,404.94 18.44% EuroStoxx50 2,269.46 2,543.45 12.07%

Average performance KBC Securities 2012 Top Picks 4.01% Average performance KBC Securities 2012 Value Picks 19.27% Average performance KBC Securities 2012 Small Cap Selection (vs. close of 25 November 2011) 18.34%

Source: Bloomberg, KBC Securities


For the upcoming year, our research team has selected 10 large and midcap Benelux names as well as 10 smallcap names. Delhaize, DSM and Heineken have been retained from last year’s top picks, while Exmar, RealDolmen, Resilux and Sioen have been retained on our small cap selection. The investment cases for the individual stocks are provided in the section following this introduction. TOP PICKS FOR 2013

Company Price Target Mcap P/E13 EV/EBITDA13 DIV12% FCF13% P/B12

Aalberts Industries 14.34 19.00 1,549.93 9.57 6.51 2.47% 9.70% 1.62 Ageas 20.45 28.50 4,970.61 6.75 n.r. 4.40% n.r. n.r. Brunel International 35.61 46.00 827.58 14.48 8.03 3.49% 6.48% 3.03 Delhaize 26.92 40.00 2,742.94 5.66 3.08 6.54% 14.58% 0.48 D'Ieteren 35.93 42.00 1,987.02 9.81 6.25 2.23% 9.85% 1.13 DSM 43.50 50.00 7,103.55 11.75 6.68 3.45% 5.86% 1.20 EVS 43.80 52.00 596.78 14.85 9.66 5.66% 5.29% 8.23 Heineken 50.60 57.00 29,145.73 14.21 8.51 1.88% 8.94% 2.67 ING 6.84 9.00 26,207.87 4.38 n.r. 0.00% n.r. n.r. Unit4 20.87 25.50 610.82 12.65 7.89 1.95% 7.97% 2.28

Source: KBC Securities (close of 27 November 2012) 2013 SMALL CAP SELECTION

Company Price Target Mcap P/E13 EV/EBITDA13 DIV12% FCF13% P/B12

Ablynx 4.79 9.00 208.85 n.r. n.r. 0.00% -22.25% 5.91 Banimmo 9.02 13.00 102.65 6.24 n.r. 4.44% 0.00% 0.72 CFE 37.99 46.00 497.37 9.82 4.66 3.03% 7.69% 0.93 EXMAR 5.72 8.00 340.34 12.11 7.04 6.12% 13.64% 1.14 Grontmij 2.82 3.30 180.20 14.68 5.86 0.00% 12.81% 1.29 PinguinLutosa 11.25 16.00 185.17 8.45 2.43 0.00% 4.95% 0.62 RealDolmen 16.18 20.00 86.61 11.69 4.27 0.00% 10.49% 0.58 Resilux 50.00 57.50 93.56 9.25 3.93 3.70% 9.47% 1.29 Sioen 5.78 7.00 123.64 7.75 4.54 4.67% 18.16% 0.78 USG People 5.21 9.00 404.75 10.74 4.14 3.20% 12.62% 0.58

Source: KBC Securities (close of 27 November 2012) After the investment cases for the companies retained in our 2013 top picks and small cap selection, you will find tables with our universe ranked by EV/EBITDA and P/E multiples as well as dividend and free cash flow yields. It is worth nothing that one out of four companies in our universe is offering a 2012 dividend yield in excess of 5%. Before the individual company profiles on the 122 retained Benelux names, our colleague Koen De Leus from KBC Economic Research will offer his take on the macroeconomic outlook for the year ahead. Happy reading! KBC Securities Research Department

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KBC SECURITIES TOP PICKS Our new Benelux top picks list is composed of the following 10 names:

Aalberts Industries has strong and defendable market positions, which have always enabled strong cash generation. The company has emerged leaner and meaner from the previous crisis, which has resulted in new peak margins and earnings in Industrial Services. Flow Control has been much more resilient, and has been gaining market share amidst sluggish end markets. Over the past 18 months, we have noticed more emphasis on internal development (greenfields, key account management, product development, cross-selling), which we consider as positive, as it should benefit the growth profile. In addition, there have been few acquisitions of late, which implies that strong cash flows should once again come into the spotlight, leading to strong deleveraging, which we believe could lead to even lower interest rates as leverage ratios are likely to cross yet another hurdle rate soon.

Since 2009, Ageas has made great progress in simplifying the group structure and dealing with the legacy issues. AGEAS's capital position is sound and the net cash position allowed the company to launch a second € 200m share buy-back. Monetizing the BNP Paribas call would result in an additional dividend while the improving situation at Royal Park Investments could allow for a special dividend by RPI to its shareholders. At the operating level, AGEAS continues to streamline the portfolio and reinforce partnerships with selective investments in Life & Non-life aimed at strengthening and growing the business. Our conservative valuation and target price is set at € 28.5 per share.

Our positive stance on Brunel is driven by the extremely strong business mix and competitive position in combination with their steep growth path and the presence of numerous uncultivated growth opportunities in Germany and the worldwide Energy sector. In addition, profitability remains solid and the company continues to trade at a discount versus peers while it deserves a premium.

We consider Delhaize’s share price correction to be overdone. The current share price implies an EBIT margin of 2.5%, that we use to calculate the terminal value in the DCF model and the market cap currently stands at 51% of shareholders’ equity (€ 5.4bn). The stock is trading at very attractive valuation multiples. This has not gone unnoticed by Silchester International Investors LLP, which increased its stake in Delhaize to 10.05% on 19 October 2012. Extremely low valuation multiples could attract predators. The stock is currently trading at 5.5x its targeted free cash flow for this year. The group is an attractive prey given its strong balance sheet, strong brands and cash flow generation power. We stick to our BUY rating.

D'Ieteren should face easier comparables in the coming quarters. Belron faced exceptionally tough weather-related comparables in 1Q12 when mild winter conditions on both sides of the Atlantic Ocean resulted in low glass breakage. We expect a further pick-up in the number of miles driven in the US as the economy recovers. D’Ieteren Auto aims at further market share gains. Febiac expects Belgian new car registrations to stabilize in 2013 following a 15% decline in 2012. We arrive at a value of € 42 per share based on a P/E13 of 12x for Belron and 10x for D’Ieteren Auto. The exercise price of the options granted to Belron’s minority shareholders (7.3% stake) amounted to € 146m at the end of June 2012, implying a value of € 2.0bn for the entire company. We arrive at a value of € 42 per share based on a P/E13 of 12x for Belron and 10x for D’Ieteren Auto.

DSM has undergone a major transformation in recent years, which included the sale of a series of low-added-value assets and included acquisitions of amongst others, Martek, Ocean Nutrition Canada, Tortuga, Fortitech and Kensey Nash. Upon closure of all recently-announced acquisitions, Nutrition will have increased its share in group EBITDA to an estimated 70% in 2013, thus increasing the company’s earnings resilience. Our Sum-of-the-parts model yields € 50 in a conservative scenario (Nutrition 8.5x EV/EBITDA13E, Pharma 5.5x, Performance Materials 5.75x, Polymer Intermediates 5.3x).

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EVS’s strategy is to focus on consolidating its leadership in the niche market of outside broadcast (OB) vans.

Management recently decided to accelerate penetration in the studio market by developing new added-value solutions for studio players. EVS will benefit from clear growth drivers: 1) transition to tapeless solutions; 2) diversification of video content consumption habits, 3) including the new media; 4) technological migrations, such as high definition and 3D; 5) increasing popularity of sport on television and development of new solutions to increase efficiency of studio productions. EVS confirms that it expects FY 2012 sales growth to exceed 25%, despite the usual Q4 slowdown following the summer’s big sporting events. We have a € 52 target price.

Heineken is the world’s third largest brewer, ranking only behind AB InBev and SABMiller. Beer tends to be a fairly defensive industry with high profitability prospects in the more consolidated markets. Heineken has not only grown significantly in recent years through large-scale acquisitions such as FEMSA Cerveza and Asia Pacific Breweries, but it has also significantly improved the geo-mix towards emerging markets, now representing approximately 62% of consolidated beer volume and about 55% of EBIT (beia). Besides the more attractive geo-mix, Heineken is also working hard on improving efficiency, as witnessed by the € 500m savings program that is currently being implemented and which involves, amongst other things, the roll out of a shared services centre. At 8.5x EV/EBITDA13E, Heineken carries an excessive discount vs. its key international peers.

ING's amended EC restructuring plan extends the time horizon and flexibility of the divestment process. We view this agreement as a positive since it ends all litigation and pending issues with the EC and allows ING to retain earnings in the Group for longer, pay the Dutch state later (preserving solvency) and potentially also to obtain better prices for its divestments. ING can also keep 90% of Westland Utrecht Bank's mortgage book, which has above (Group) average margins. Our € 9 fair value and target price still offers sufficient upside.

Approximately 50% of Unit4 sales are derived from recurring annual contract payments, which including maintenance climbs as high as 80%. As many as 97% of customers remain loyal to Unit4 so we could label roughly 80% of total turnover as "recurring". Flanking the recurring business, we expect the company to maintain strong growth thanks to market share gains, extending an already impressive track record. But the top line is difficult to predict and often a cause for concern: since Unit4 is actively repositioning itself toward cloud-based business (SaaS), some of the traditional license revenue is shifted to off-premise contracts. While this depresses sales in the short run, the higher annual fees generated in the SaaS-model (from the fourth year of the contract onward) have substantially higher margins. Since the IPO in 1998, sales have risen by 20.3% y/y, driven by acquisitions, internal growth and strong market share gains. Profitability increased in this period by an average of 20%. The company has meanwhile matured and become a cash cow. The share currently quotes at 8.3x EBITDA for 2013, 1.6x sales and 12.4x earnings, compared with a 7-year average of 10.27x, 18.49x and 1.93x. Free cash flows are rising rapidly, with few to no large-scale acquisitions in sight and with most of the acquisition debt almost paid off. Finally, Unit 4 has no controlling shareholder that could block a hostile bid, which regularly leads to periods of heightened takeover speculation. We belief that Unit4 will continue to steal market share from SAP and Oracle and will be able to finance a steadily-rising dividend based on strong cash generation. We feel the stock is easily worth € 29 based on a DCF-derived fair value estimate, but a Private Equity player with a bag of money should be offering at least € 40 in a takeover scenario.

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2013 SMALL CAP SELECTION Within our small cap universe, we select the following ten stocks:

Ablynx has announced in 4Q12 strong intermediate data for a new of rheumatoid arthritis drug candidate. This data put the company back on the radar of big pharma players – and investors – who are now awaiting confirmation from the 24-week data publication, expected by 1Q13. The company has indicated its preference for a full licensing deal, accompanied with a multimillion euro upfront payment, which should not only validate the product’s potential but also the company’s Nanobody technology platform. Other projects – developed with or without partners – and the company’s strong cash position, point to a fair value of € 9/share and explain our Buy rating.

Banimmo combines the strength of high margins on internally-developed projects with recurring rental income to cover its costs. It also spreads risk across stakes in different joint-ventures in Belgium and France, thus creating a portfolio that is geographically diversified and active in different segments. We appreciate the diversification towards certain built-to-suit projects that reduces development risk, and we see multiple redevelopment opportunities in the current market. We obtain a theoretical value range from € 12.9 to € 14.3 p.s. and set our target price at € 13 (40% upside). This value corresponds to an expected dividend yield of 4% and a P/NAV of only 1.13x. We believe this target price to be conservative as a developer is expected to generate significant capital gains on disposals, which are not included in the company’s current NAV.

CFE is a Belgian construction company and 50% shareholder of DEME, one of the leading international dredging companies. We believe the share price correction following the weak 1H12 results is overdone. DEME had expanded its order book to a record-high € 3.3bn at the end of September after having acquired major projects including Gladstone LNG and Wheatstone LNG in Australia and the port of Doha in Qatar. Looking ahead, we see earnings momentum improving in 2H12 and 2013, driven in particular by DEME.

In the last 12 months, Exmar realised major milestones including the completion of the OPTI-EX sale and an agreement with Pacific Rubiales for the provision of a FLRSU. We are on the lookout for news regarding medium-term employment starting mid-2013 for the LNG Carrier Excel (50%) and possible news on the second phase of the project with Pacific Rubiales. Our sum-of-the-parts valuation points to € 8.56 per share, suggesting significant upside potential from current levels.

Grontmij is easy for investors to dislike after a horrific 2011 and what has so far been an irregular 2012. We still believe however that the company deserves a fresh chance and see it as a typical restructuring story. The newly-appointed management of Grontmij has identified € 24m of structural cost savings by 2015, is contemplating the disposal of € 65m of non-core / low-margin revenues, aims to improve trade working capital and tighten up project management. Although we and the market will only trust the 2012-15 6-8% EBITA margin target once the environment improves, and management can prove that measures taken so far are bearing fruit, a back-of the envelope calculation based on cost savings, market growth and project and commercial excellence shows that these goals are realistic, albeit still ambitious on historical terms. At our TP of € 3.3/sh, there is still ~20% upside. If management achieves its 2012-15 guidance we see opportunities to double up.

The sale of Lutosa will make Pinguin net cash positive. The deal is therefore a real game changer. After the transaction, Pinguin 2.0 will be a debt-free group with just under € 600m in sales and EBITDA of close to € 45m. As from November, Marleen Vaesen (formerly active at Sara Lee) was appointed as CEO, taking over from Hein Deprez. The main challenges in the near future are the ongoing consolidation of the Scana Noliko and CECAB acquisitions, and the further organic growth of PinguinLutosa through commercial initiatives and product development, while maintaining a clear focus on international markets.

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RealDolmen, a Belgian IT services provider active in Belgium, France and Luxemburg, recently announced the

resignation of CEO Bruno Segers, to be replaced by Chief Operating Officer Marc De Keersmaecker, who becomes General Manager. We suspect these changes are related to a divergence of opinion on how RealDolmen should be positioned after the successful merger between Real and Dolmen. We still expect RealDolmen to generate strong free cash flow in the coming years, helped by its important deferred tax assets and limited capex, translating into impressive FCF yields. RealDolmen also has a strong balance sheet. The company started a prudent share buyback programme to take advantage of the attractive valuation of the stock and its strong balance sheet, a move we welcome.

Next to Resilux’s core business, we are also positive on Air0Pack, an innovative technology for filling recyclable plastic packaging (PET) with liquids, powders and gases. A number of specific characteristics make PET an excellent material for bottles and other packaging and superior to rivals on the packaging market. A comparison based on the requirements that packaging material for drinks and food must satisfy shows that PET is clearly the most versatile material. The production of PET bottles is less capital intensive than glass or cans, while the transport and storage of PET is also less expensive. We have a target price of € 57.5 but at this stage, we prefer not to incorporate growth from Air0Pack in our model, and therefore consider it as a free option for the company.

Sioen is a fully-integrated group specializing in the production of technical textiles. The group is world leader in coated technical textiles (e.g. truck tarpaulins, geotextiles), a European market leader in industrial protective apparel and a niche specialist in fine chemicals. The operational activities are spread across three divisions. We have a € 7.0 Price Target, backed by an attractive dividend yield. Sioen also launched a share buy-back program for maximum 10% of the shares outstanding.

Momentum for USG People has improved. The sales decline has bottomed out, cost cutting was strong in 3Q and the company-specific problem in Germany has been stable since the summer. Risks to our investment case however are the ST outlook in Europe and USG's weaker competitive position versus the Big 3 and we remain cautious on the effects of the introduction of equal pay rules in Germany.

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RANKINGS BY DIFFERENT VALUATION MULTIPLES

BY EV/EBITDA 13

Based on 2013 EV/EBITDA multiples, Moury Construct, Pinguin and Delhaize are the cheapest in our universe. From the list below we have retained Delhaize as a top pick and PinguinLutosa and Resilux for our small cap selection. TOP 15: LOWEST EV/EBITDA13 TOP 15: HIGHEST EV/EBITDA13

Company EV/EBITDA12 EV/EBITDA13 Company EV/EBITDA12 EV/EBITDA13

Moury Construct 2.32 1.76 Aedifica 23.23 22.21 PinguinLutosa 2.72 2.40 Cofinimmo 17.41 17.82 Delhaize 3.85 3.08 Befimmo 17.07 17.54 Picanol 2.60 3.08 Retail Estates 17.99 17.37 Zetes 4.75 3.19 Montea 19.04 16.33 Spector Photo Group n.r. 3.38 Vranken 16.86 16.23 Mobistar 3.25 3.40 Intervest O&W 16.64 16.15 Miko 4.41 3.54 Warehouses De Pauw 16.74 16.06 Recticel 4.23 3.56 Banimmo 30.00 15.82 Ahold 4.23 3.66 ASM International 20.20 15.57 Barco 3.99 3.80 UCB 16.52 13.12 Ter Beke 4.61 3.86 Thrombogenics 26.11 13.07 Resilux 4.61 3.93 Fluxys Belgium 12.75 12.91 Hamon 5.23 3.93 AB InBev 13.96 12.28 Deceuninck 4.46 3.93 Texaf 12.88 11.90

Source: KBC Securities Source: KBC Securities BY P/E 13

SNS REAAL, SBM Offshore and Agfa are the cheapest stocks in our Benelux universe based on P/E13 multiples. We have retained ING, Delhaize and Ageas as top picks. TOP 15: LOWEST P/E13 TOP 15: HIGHEST P/E13

Company P/E12 P/E13 Company P/E12 P/E13

SNS REAAL Groep 1.94 2.19 Telenet 45.50 39.06 SBM Offshore 4.95 4.16 UCB 38.47 31.77 Agfa n.r. 4.18 TNT Express 43.01 28.00 ING 4.98 4.38 Fluxys Belgium 24.97 26.26 PostNL 4.64 4.79 Wessanen 49.23 26.02 Recticel 6.94 5.61 Bekaert 301.39 24.62 Delhaize 6.55 5.66 ASM International 56.65 24.59 Delta Lloyd Groep 4.89 5.71 Duvel Moortgat 22.49 19.65 Banimmo 21.49 6.24 Aedifica 19.91 19.25 Foyer 6.58 6.52 Vopak 21.10 19.01 Van Lanschot 19.63 6.62 Texaf 20.05 18.52 BinckBank 7.91 6.66 IBA n.r. 17.88 Ageas 7.41 6.75 AB InBev 18.60 17.04 Roularta 6.72 6.82 Lotus Bakeries 17.04 16.58 Imtech 8.89 6.90 Colruyt 15.93 16.17

Source: KBC Securities Source: KBC Securities

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BY GROSS DIVIDEND YIELD (2012)

One out of four of the companies we cover offer a dividend yield in excess of 5%. PostNL, Mobistar, Telenet and Belgacom are offering the highest dividend yield (2012E), although for PostNL this is a dividend entirely in stock. Delhaize and EVS have been retained as top picks and Exmar for our small cap selection. HIGHEST DIV12 YIELD HIGHEST DIV12 YIELD (continued)

Company DIV12% DIV13% Company DIV12% DIV13%

PostNL 13.79% 12.28% RTL Group 6.67% 6.67% Mobistar 13.76% 14.36% Melexis 6.65% 6.65% Telenet 12.80% 0.00% Delhaize 6.54% 6.69% Belgacom 11.17% 9.78% Recticel 6.34% 6.77% SBM Offshore 10.37% 12.33% BinckBank 6.15% 7.03% Delta Lloyd Groep 9.36% 9.64% EXMAR 6.12% 6.12% Intervest O&W 9.07% 9.39% Tessenderlo 6.05% 6.05% GDF Suez 8.94% 8.94% Atenor Group 6.02% 6.33% Kas Bank 8.29% 9.67% Gimv 5.77% 6.69% Cofinimmo 7.47% 7.47% AEGON 5.74% 8.04% Warehouses De Pauw 7.30% 7.66% EVS 5.66% 5.94% Befimmo 7.22% 7.22% BAM Groep 5.58% 5.58% Montea 7.19% 7.91% Vranken 5.48% 5.48% Telegraaf Media Groep 7.14% 7.14% Beter Bed Holding 5.45% 7.07% CMB 7.02% 7.02% Retail Estates 5.42% 5.61%

Source: KBC Securities Source: KBC Securities BY FREE CASH FLOW YIELD (2013)

TOP 15: HIGHEST FCF13% YIELD TOP 15: LOWEST FCF13 YIELD

Company FCF12% FCF13% Company FCF12% FCF13%

Agfa -3.61% 29.12% Option -131.19% -138.37% Spector Photo Group 115.34% 24.49% Pharming -127.62% -62.20% Euronav -18.58% 24.30% Ablynx -10.35% -22.25% Sioen 22.23% 18.16% Tigenix -18.98% -15.17% Mobistar 18.34% 15.33% PostNL -25.22% -15.13% Delhaize 17.82% 14.58% Galapagos 16.56% -12.93% Roularta 3.76% 14.00% SBM Offshore -30.18% -11.45% EXMAR 23.74% 13.64% IRIS Group 0.15% -2.60% Heijmans -4.90% 13.57% Devgen 2.16% -1.23% Recticel 12.85% 13.39% Sapec 37.07% 0.49% Grontmij -11.99% 12.81% Sipef -1.13% 1.03% Ter Beke 11.81% 12.73% Tessenderlo -13.99% 1.31% Imtech 6.72% 12.64% Vranken -6.78% 1.38% USG People 18.48% 12.62% Vopak 3.11% 2.38% Kinepolis Group 9.69% 12.14% Texaf 6.53% 2.49%

Source: KBC Securities Source: KBC Securities

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PERFORMANCE OF 2012 TOP PICKS


AEGON 3.09 4.35 40.84% Belgacom 23.53 22.29 -5.27% Delhaize 43.28 26.92 -37.80% DSM 34.87 43.50 24.75% Fugro 41.45 43.85 5.79% Heineken 34.98 50.60 44.65% Imtech 19.07 16.46 -13.71% Randstad 21.23 24.23 14.11% SBM Offshore 15.49 8.46 -45.38% Wolters Kluwer 12.89 14.45 12.10%

Average performance 4.01%

Source: Bloomberg, KBC Securities PERFORMANCE OF 2012 VALUE PICKS


Ageas 12.50 20.45 63.56% ASMI 19.98 26.38 32.01% Barco 33.50 55.50 65.67% BinckBank 7.67 5.69 -25.83% D’Ieteren 33.91 35.93 5.96% Euronav 3.32 4.46 34.34% Melexis 10.24 12.04 17.58% PostNL 2.21 2.47 11.86% RealDolmen 17.00 16.18 -4.82% USG People 5.64 5.21 -7.64%


Source: Bloomberg, KBC Securities PERFORMANCE OF 2012 SMALL CAP SELECTION

Close of 25 November 2011 Close of 27 November 2012 % change

Barco 33.33 55.50 66.52% Exmar 5.24 5.72 9.16% Jensen 8.01 11.62 45.07% Melexis 9.13 12.04 31.87% Moury Construct 110.00 111.20 1.09% RealDolmen 16.19 16.18 -0.06% Resilux 49.00 50.00 2.04% Sioen 5.27 5.78 9.68% Sipef 56.59 58.00 2.49% Transics 6.10 7.05 15.57%


Source: Bloomberg, KBC Securities

11


ECONOMIC OUTLOOK: CHALLENGING ENVIRONMENT REQUIRES A-TEAM PLANNING ‘I love it when a plan comes together.’ It used to be one of my favourite quotes when I was young. Lieutenant Colonel ‘Hannibal’ Smith, the leader of the A-Team, usually lit up a cigar when he needed to do some thinking. A master tactician, he was always able to hatch a plan for getting the team out of any sticky situation they had got themselves into. And although his plans rarely unfolded exactly as intended, they did work. Now 30 years older I am more inclined to follow economic series. People and countries get themselves in to dire strait all the time. And plans are drawn up to get them out again. In the US Ben Bernanke and the American government are trying hard to drag the United States from the debris of a burst real estate bubble. In Europe politicians are still trying to agree on a plan to introduce the missing ‘economic’ link of European and Monetary Union. Wherever there is an absence of crisis, the main actors seem to lack a sense of urgency. At crucial moments, the only man with a plan in Europe seems to be the ECB boss Mario Draghi. MODERATE GROWTH IN US Progress is being made in the United States. The loose monetary policy has pushed down interest rates on mortgages. Notwithstanding the still-huge housing inventory overhang, housing prices seem to have bottomed and housing activity is gaining momentum. Taking into account the decreased share of GDP (from a peak of 8.8% in 4Q05 to 5.3% in 3Q12), the direct positive effect on GDP-growth will be limited in the years to come. However the effect on consumer sentiment and employment should not be underestimated. The fall in the unemployment rate from 8.9% to 7.9% is promising, but there is still a long way to go. The sobering reality is that the year-to-date average job creation stands at 156,000 per month. At the current pace it would take about four years to bring the unemployment rate down to 6.0 percent, which is considered full employment. And bringing the participation rate back to more or less ‘normal’ levels would add two full percentage points to the unemployment rate. Consumer spending is a good indicator of overall economic growth in the US. At the moment, spirits are high, with consumer confidence (Conference Board) at its highest level since March 2008. But we can’t eat on hope alone. Real income growth has been muted due to modest jobs gains and weak wage increases. The annualized growth of our income proxy stands at 1.2 percent. Current spending has been financed by a decline in the saving rate. Will saving rates in the US fall further below their long-term average? We think they could. Why save when your savings don’t earn you a dime? US CHANGE IN EMPLOYMENT* DIVERGENT ECONOMIC GROWTH: EMU vs. US

Source: Thomson Reuters Datastream *in thousands Source: Thomson Reuters Datastream

12


13

If US politicians succeed in successfully avoiding the fiscal cliff – e.g. by prolonging some of the tax cuts and not implementing all of the spending cuts – American growth is bound to continue showing moderate growth in 2013. In China, economic growth bottomed out in 1Q12. Investors searching for growth know where to look. European companies with exposure to the US and emerging markets should benefit as well. EMU ADRIFT The two main engines, China and the US, will push global growth higher and for the first time in decennia it looks like the EMU will miss the ride. The current divergence in growth between the US and the EMU might even become more pronounced in the near future. The suffocating uncertainty surrounding the eurocrisis has prompted companies to postpone their investments. Consumer spending is being squeezed by austerity and unemployment. In the GIPS-countries (Greece, Ireland, Portugal, Spain), unemployment rates have at least doubled since the start of the crisis, while Greece and Spain saw their rates triple. Economic growth in 3Q12 was -0.1% for the EMU, though most core countries managed to stay in the green. However the latest economic indicators (PMI, industrial production, new orders) point to a further weakening in the months ahead. Germany has the best prospects of seeing an economic recovery in 2013: the budget deficit does not require excessive savings, its main export markets are situated outside the eurozone and real household income has increased. France, and particularly Italy and Spain, are feeling the weight of severe government spending cuts. Structural reforms enhance growth in the long term (Germany being a case in point) but are painful in the short term. France, like Germany, can still take advantage of the ultra-low interest rates but the same cannot be said for Italy, Spain and the other Southern European countries. UNEMPLOYMENT RATE OVERVIEW INTEREST PAID NEW LOANS NON-FINANCIAL COMPANIES

0

4

8

12

16

20

24

28

Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12

Italy Spain Portugal Ireland France Germany Belgium Greece

Italy

Spain

PortugalIreland

Germany

Belgium

Greece

France

0

1

2

3

4

5

6

7

8

9

Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12

Germany France Italy Spain Ireland Portugal Greece

Spain

Greece

Portugal

Ireland

Ital

France

y

Germany

Source: KBC Economic Research Source: KBC Economic Research The priority of ECB president Mr. Draghi is simple and clear: to ensure the survival of the euro, no matter what it takes. He has succeeded in calming the markets, but so far this has not translated into an improvement of the real economy. In Southern Europe, the ultra-low interest rate policy has had absolutely no effect. Demand for credit remains low. A case in point is the much higher interest rates now being paid for new loans (see right-hand graph above). In short, the monetary transmission mechanism is broken.


Mr. Draghi has warned repeatedly about the financial fragmentation underway in Europe. And it is not only in bank funding and lending that examples abound. In the money markets too, intra-euro cross-border interbank lending stands at its lowest level since 2007. In the sovereign bond market the cross-border use of collateral in the monetary policy operations of the Eurosystem fell from 55% in January 2008 to 20% today. A reappearance of ‘home bias’ at financial institutions is undeniable. This is a worrying evolution, but one that, at the moment, is paradoxically applauded by these institutions’ own financial regulators. The only credible way to stop this damaging trend is to build a viable European banking union. The ECB is at the helm, with a European Deposit Insurance and Resolution Fund (and Authority) being an integral component. This will restore trust among the European financial institutions. It will also restore the trust of clients in their banks, and should therefore help to prevent capital flight from banks in crisis-hit countries. The unhealthy relationship between huge banks with Europe-wide reach and their small client countries has to be broken via direct recapitalization by the ESM rescue fund and a common resolution fund. A banking union would achieve that and would also lay the foundations for an economic – and political – union. STOCK PICKING REMAINS KEY But building this United States of Europe will take time and the politicians are holding the roadmap. The route they have followed in recent years has been rough, with every step forward being preceded by a crisis on the financial markets. And they are unlikely to change route in the years to come. The ECB will probably strive to provide the economy with as much oxygen as possible while the politicians try to reach a compromise. The low interest rate environment will be maintained for a while. The global bond market put in a decent performance in 2012. The benchmark for European government bonds yielded a total return of 9%. For European corporate bonds the return reached 12% (return calculated till half November). Global shares thrived as well with a total return of 12%. So despite all the trouble and strife, 2012 has turned out to be a ‘Grand Cru’ year for investors. For bond investors it will be difficult to repeat this performance. Bond yields are at their lowest levels in decennia. A Japan scenario cannot be excluded, certainly not for the EMU, but the margin for even lower rates is small, so investors trying to improve their purchasing power cannot afford to ignore stocks. For equity investors, the challenging economic environment within the EMU makes stock picking more important than ever. Koen De Leus KBC Economic Research

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15

Part 2 All caps guide


28 November 2012

16

AALBERTS INDUSTRIES Core holding, irrespective of the cycle INDUSTRIAL ENGINEERING CURRENT PRICE € 14.34 BUYNETHERLANDS TARGET PRICE € 19.00 RATING UNCHANGED

FY/e 31.12 2011 2012E 2013E 2014E Sales (€ m) 1,937.4 2,036.4 2,109.0 2,187.0 REBITDA (€ m) 279.4 298.1 311.4 325.3 Net earnings (€ m) 131.4 137.2 149.3 161.8 Diluted adj. EPS (€) 1.35 1.41 1.50 1.59 Dividend (€) 0.34 0.35 0.38 0.40 P/E 10.44 10.19 9.57 9.01 EV/REBITDA 7.75 7.14 6.51 5.85 Free cash flow yield 7.7% 6.6% 9.7% 10.4% Dividend yield 2.4% 2.5% 2.6% 2.8%

Source: Thomson Reuters Datastream Source: KBC Securities Bloomberg AALB NA Reuters AALB.AS www.aalberts.nl Market Cap € 1,550m Shares outst. 109.4m Volume (Daily) € 3.80m Free float 71.83% Next corporate event

Results FY12: 26 February 2013 Performance 1M 3M 12MAbsolute 2% 3% 34%Rel. AEX 1% 3% 11% 12-m Hi/Lo € 15.81/11.28

Michael Roeg

Financial Analyst - Brussels

KBC Securities NV

+32 2 429 39 41

[email protected]

Aalberts Industries is a producer of tailor-made components for industrial end users and building products for a wide range of end markets such as construction, utilities, laboratories, and others.

Strong track record: Aalberts has a strong track record of sales and earnings growth through a combination of organic growth and acquisitions that typically enhance EPS and shareholder value from day one. The company’s consistently strong cash flow provides a healthy war chest, which allows management to further strengthen the network by acquiring companies that add a new geography or a new product/services category. In the absence of acquisitions, balance sheet ratio’s and interest costs benefit strongly from deleveraging.

Emerging strongly from the previous crisis: Following the 2008/2009 crisis, Industrial Services recovered much faster than expected with new peak margins that are well above pre-crisis margins. Flow Control proved more resilient, and is expected to match pre-crisis profits in 2012, at higher sales. Margins are lagging pre-crisis margins by circa 150bps because volumes have not yet returned to former peak levels due to sluggish European construction markets and because of dilution from acquisitions that carried below-average margins. Management intends to lift the latter to group-level margins, which should boost earnings going forward.

Buy rating with a target price of € 19: Our target price is based on the average of the fair values from our DCF-model (€ 19) and average historic valuation multiples (€ 20).

1011121314151617

N D J F M A M J J A S O N

Share performanceAmsterdam AEX (EOE) performance

AALBERTS

28 November 2012

17

COMPANY PROFILE SWOT ANALYSYS

Aalberts Industries is an industrial group with twoactivities: Industrial Services (30% of 2013E sales), and Flow Control (70%). Industrial Services has two mainactivities: (1) production of tailor-made, metal-based components for industrial end users, and (2) heat- and chemical treatment of metal-based components tostrengthen their structure. In production, competition ismainly from in-house units of industrial companies. Intreatment, Aalberts is Europe’s second largest player afterBodycote. Flow Control is a producer of components andsystems for the regulated flow of fluids and gasses (oftenlabelled building materials). It is market leader in Europeand one of the larger players in North America.

Over time, many acquisitions were made to strengthen thegroup by adding new products, services, clients, andgeographies. The latest acquisition was that of Galvanotechnik Baum, a German company that added circa€ 21m in sales to Industrial Services.

For 2012, management expects further growth in EPSbefore amortization, barring unforeseen circumstances.

Strengths Balanced sales split (segments, clients, geography) Strong market shares in niche segments Pan-European sales network allows for cross-selling Strong track record on acquisitions (EPS and EVA)

Weaknesses Limited visibility: few sales indicators, no backlog Some end markets are (deeply) cyclical Small direct exposure to emerging markets outside

Europe Hardly active in high-end consumer segment of Flow

Control

Opportunities Cross-selling of products from acquired companies Further expansion of the portfolio (e.g. plastics, Asia) Outsourcing of metal treatment by industrial firms Strong cash flow allows for debt reduction and/or M&A

Threats Competition from low cost countries Consolidation at clients could affect bargaining power Time lag related to passing on changes in input prices Euro/financial crisis could hamper new construction

projects

SALES BY ACTIVITY (2013E) SALES AND ROIC (POST-TAX)

Industrial Services70%

Flow Control30%

0

500

1,000

1,500

2,000

2,500

00 01 02 03 04 05 06 07 08 09 10 11 12E 13E 14E 15E0%

4%

8%

12%

16%

20%

Sales (m) ROIC post-tax (%) (right) ROIC adjusted

Source: Aalberts Industries, KBC Securities Source: Aalberts Industries, KBC Securities

AALBERTS

28 November 2012

18

FINANCIAL DATA Income statement (€ m) 2010 2011 2012E 2013E 2014E 2015E Sales 1,682.8 1,937.4 2,036.4 2,109.0 2,187.0 2,268.0 COGS -678.6 -791.5 -832.0 -861.6 -893.5 -926.6 Gross profit 1,004.2 1,145.9 1,204.4 1,247.4 1,293.5 1,341.4 Operating costs -837.1 -951.4 -999.8 -1,031.7 -1,066.4 -1,101.5 Other income & costs - - - - - - EBIT 167.1 194.5 204.6 215.6 227.2 239.9 Net interest -27.5 -26.6 -17.9 -12.9 -7.9 -2.9 Other non-operating - - - - - - Pre-tax earnings 139.5 167.9 186.7 202.7 219.3 237.0 Taxes -33.1 -36.3 -48.8 -52.7 -56.7 -60.9 Associates 0.0 0.0 0.0 0.0 0.0 0.0 Discontinued & other - - - - - - Consolidated earnings 106.4 131.6 137.9 150.0 162.6 176.1 Minority interests -2.0 -0.2 -0.7 -0.7 -0.8 -0.8 Net earnings 104.4 131.4 137.2 149.3 161.8 175.3

Depreciation and amortisation -68.3 -70.5 -76.7 -79.0 -81.4 -83.8 Amortisation other intangibles/ Impairments -12.9 -14.4 -16.8 -16.8 -16.8 -16.8 Non recurring elements included in EBIT 0.0 0.0 0.0 0.0 0.0 0.0

REBITDA 248.2 279.4 298.1 311.4 325.3 340.5 EBITDA 248.2 279.4 298.1 311.4 325.3 340.5 REBITA 179.9 208.9 221.4 232.4 244.0 256.7 EBITA 179.9 208.9 221.4 232.4 244.0 256.7 Net earnings from continued operations 104.4 131.4 137.2 149.3 161.8 175.3 Adjusted net earnings 117.3 145.8 154.0 166.1 178.6 192.1

Balance sheet (€ m) 2010 2011 2012E 2013E 2014E 2015E Intangible assets 609.2 701.0 686.2 684.4 669.6 654.8 Tangible assets 530.4 565.3 573.6 574.6 574.3 574.5 Financial assets 20.7 17.4 16.4 16.4 16.4 16.4 Other assets - - - - - - Inventories 386.7 421.1 448.0 464.0 481.1 499.0 Receivables 230.5 227.1 245.1 252.7 260.9 269.4 Cash & equivalents 0.1 0.1 0.1 0.1 0.1 0.1 TOTAL ASSETS 1,777.5 1,932.0 1,969.5 1,992.3 2,002.5 2,014.2

Equity 732.6 849.0 966.0 1,096.4 1,237.7 1,390.7 Minorities 13.2 9.5 10.2 10.2 10.2 10.2 Provisions 98.8 125.4 106.7 106.7 106.7 106.7 LT financial debt 414.6 384.4 300.0 179.8 35.1 -120.3 Other liabilities - - - - - - Payables 339.1 342.4 365.2 377.9 391.4 405.5 ST financial debt 179.3 221.3 221.3 221.3 221.3 221.3 TOTAL LIABILITIES 1,777.5 1,932.0 1,969.5 1,992.3 2,002.5 2,014.2

Net working capital 278.1 305.8 327.9 338.9 350.6 362.9 Capital employed 1,417.6 1,572.1 1,587.7 1,597.9 1,594.5 1,592.1 Net debt 593.7 605.6 521.3 401.0 256.4 101.0 Net debt, incl. off-balance items 593.7 605.6 521.3 401.0 256.4 101.0

Cash flow statement (€ m) 2010 2011 2012E 2013E 2014E 2015E Consolidated earnings 104.4 131.4 137.2 149.3 161.8 175.3 Depreciation, amortisation & impairment 81.2 84.9 93.5 95.8 98.2 100.6 Other cash flow from operations 12.5 9.5 -18.8 0.0 0.0 0.0 Change in working capital -12.8 -27.9 -22.8 -11.0 -11.8 -12.2 CASH FLOW FROM OPERATIONS 185.4 197.9 189.2 234.1 248.2 263.7

Net capital expenditure -58.7 -81.0 -85.0 -80.0 -81.0 -84.0 Acquisitions / disposals -69.4 -107.3 2.0 2.0 2.0 2.0 Other cash flow from investments -2.1 -3.4 -2.0 -15.0 -2.0 -2.0 CASH FLOW FROM INVESTMENTS -130.3 -191.7 -85.0 -93.0 -81.0 -84.0

Dividend payments -6.7 -8.5 -19.9 -20.9 -22.6 -24.3 Shares issues 0.0 0.0 0.0 0.0 0.0 0.0 New borrowings / reimbursements -36.9 11.9 -84.3 -120.3 -144.7 -155.4 Other cash flow from financing -11.5 -9.6 0.0 0.0 0.0 0.0 CASH FLOW FROM FINANCING -55.1 -6.2 -104.2 -141.1 -167.2 -179.7

Fx and changes to consolidation scope - - - - - - CHANGE IN CASH & EQUIVALENTS 0.0 0.0 0.0 0.0 0.0 0.0

Free cash-flow 126.7 116.9 104.2 154.1 167.2 179.7 Change in net debt -36.9 11.9 -84.3 -120.3 -144.7 -155.4

AALBERTS

28 November 2012

19

Performance criteria 2010 2011 2012E 2013E 2014E 2015E Sales growth 19.8% 15.1% 5.1% 3.6% 3.7% 3.7% Gross profit growth 21.3% 14.1% 5.1% 3.6% 3.7% 3.7% REBITDA growth 47.0% 12.6% 6.7% 4.5% 4.5% 4.7% EBITDA growth 47.0% 12.6% 6.7% 4.5% 4.5% 4.7% REBITA growth 81.9% 16.1% 6.0% 5.0% 5.0% 5.2% EBIT growth 93.9% 16.4% 5.2% 5.4% 5.3% 5.6% Pe-tax earnings growth 170.9% 20.3% 11.2% 8.6% 8.1% 8.1% Net earnings growth 151.8% 25.8% 4.4% 8.8% 8.4% 8.3% Earnings growth from continued operations 151.8% 25.8% 4.4% 8.8% 8.4% 8.3% Adjusted earnings growth 116.4% 24.3% 5.7% 7.8% 7.5% 7.5%

Gross margin 59.7% 59.1% 59.1% 59.1% 59.1% 59.1% REBITDA margin 14.8% 14.4% 14.6% 14.8% 14.9% 15.0% EBITDA margin 14.8% 14.4% 14.6% 14.8% 14.9% 15.0% REBITA margin 10.7% 10.8% 10.9% 11.0% 11.2% 11.3% EBIT margin 9.9% 10.0% 10.0% 10.2% 10.4% 10.6% Net working capital / sales 16.5% 15.8% 16.1% 16.1% 16.0% 16.0% CAPEX/ Sales 3.5% 4.2% 4.2% 3.8% 3.7% 3.7% FCF / Sales 7.5% 6.0% 5.1% 7.3% 7.6% 7.9% Depreciation / Capital Expenditure 116.4% 87.0% 90.2% 98.8% 100.5% 99.8% Capital expenditure / EBITDA 23.6% 29.0% 28.5% 25.7% 24.9% 24.7%

Net debt / Equity + Minorities 79.6% 70.5% 53.4% 36.2% 20.5% 7.2% Net debt / EBITDA 2.4 2.2 1.7 1.3 0.8 0.3 EBITDA / net interest 9.0 10.5 16.7 24.1 41.2 117.4 Pay-out ratio 28.6% 28.0% 28.2% 28.0% 27.8% 27.6%

Net earnings margin 6.2% 6.8% 6.7% 7.1% 7.4% 7.7% x CE turnover (Sales / avg. CE) 1.2 1.3 1.3 1.3 1.4 1.4 x Leverage (avg. CE / avg. equity) 2.0 1.9 1.7 1.5 1.4 1.2 = Return on Equity (avg) 15.5% 16.6% 15.1% 14.5% 13.9% 13.3% Return on Equity - adjusted (avg) 17.4% 18.4% 17.0% 16.1% 15.3% 14.6% Return on Capital Employed (avg) 9.6% 10.4% 9.8% 10.3% 10.8% 11.4% Return on Capital Employed - adjusted (avg) 9.6% 10.4% 9.8% 10.3% 10.8% 11.4%

Per share data (€) 2010 2011 2012E 2013E 2014E 2015E weighted average # shares (m) 106.68 107.50 108.96 110.13 111.53 112.93 weighted average # shares, diluted (m) 106.68 108.10 109.43 110.83 112.23 113.63

Basic EPS 0.98 1.22 1.26 1.36 1.45 1.55 Adjusted EPS 1.10 1.36 1.41 1.51 1.60 1.70 Diluted EPS 0.98 1.22 1.25 1.35 1.44 1.54 Diluted, adjusted EPS 1.10 1.35 1.41 1.50 1.59 1.69

Diluted EPS: y/y growth 150.4% 24.2% 3.2% 7.4% 7.0% 7.0% Diluted EPS: CAGR 3Y 47.5% 11.2% 5.9% 7.1% -100.0% -100.0% Adjusted, diluted EPS: y/y growth 115.1% 22.7% 4.4% 6.5% 6.2% 6.2% Adjusted, diluted EPS: CAGR 3Y 40.2% 10.9% 5.7% 6.3% -100.0% -100.0%

REBITDA / share 2.33 2.58 2.72 2.81 2.90 3.00 EBITDA / share 2.33 2.58 2.72 2.81 2.90 3.00 REBITA/share 1.69 1.93 2.02 2.10 2.17 2.26 EBIT/ share 1.57 1.80 1.87 1.95 2.02 2.11

Net book value / share 6.87 7.85 8.83 9.89 11.03 12.24 Free cash flow / share 1.19 1.09 0.96 1.40 1.50 1.59 Dividend (€) 0.28 0.34 0.35 0.38 0.40 0.43

Valuation data 2010 2011 2012E 2013E 2014E 2015E Max share price (€) 15.98 17.25 15.81 - - - Min share price (€) 9.36 10.45 11.47 - - - Reference share price (€) 11.91 14.09 14.34 14.34 14.34 14.34 Reference market capitalisation (€ m) 1,270.9 1,522.7 1,569.2 1,589.2 1,609.3 1,629.4 Enterprise value (€ m) 1,904.5 2,164.5 2,127.1 2,026.9 1,902.3 1,767.0

P/E 10.8 10.4 10.2 9.6 9.0 8.5 EV/sales 1.1 1.1 1.0 1.0 0.9 0.8 EV/REBITDA 7.7 7.7 7.1 6.5 5.8 5.2 EV/EBITDA 7.7 7.7 7.1 6.5 5.8 5.2 EV/REBITA 10.6 10.4 9.6 8.7 7.8 6.9 EV/EBIT 11.4 11.1 10.4 9.4 8.4 7.4 EV/Capital employed 1.3 1.4 1.3 1.3 1.2 1.1 P/ NBV 1.7 1.8 1.6 1.4 1.3 1.2 Free cash flow yield 10.0% 7.7% 6.6% 9.7% 10.4% 11.0% Dividend yield 2.4% 2.4% 2.5% 2.6% 2.8% 3.0% Source: KBC Securities *Historic valuation data are based on historic prices


28 November 2012

20

AB INBEV King of Beers (& Efficiency) BEVERAGES CURRENT PRICE € 66.54 HOLDBELGIUM TARGET PRICE € 67.00 RATING UNCHANGED

FY/e 31.12 2011 2012E 2013E 2014E Sales ($ m) 39,046.0 39,484.4 48,300.6 50,444.0 REBITDA ($ m) 15,357.0 15,495.8 18,677.4 19,876.0 Net earnings ($ m) 5,855.0 7,478.4 8,206.0 9,156.9 Diluted adj. EPS ($) 4.00 4.64 5.06 5.65 Dividend (€) 1.20 1.50 1.80 2.00 P/E 14.23 18.60 17.04 15.28 EV/REBITDA 11.30 13.96 12.28 11.25 Free cash flow yield 10.0% 4.7% 7.1% 6.8% Dividend yield 2.9% 2.3% 2.7% 3.0%

Source: Thomson Reuters Datastream Source: KBC Securities Bloomberg ABI BB Reuters ABI.BR www.ab-inbev.com Market Cap € 106,626m Shares outst. 1,606.1m Volume (Daily) € 129.45m Free float 46.81% Next corporate event

Results FY12: 27 February 2013 Performance 1M 3M 12MAbsolute 1% 1% 56%Rel. BEL20 -1% -1% 25% 12-m Hi/Lo € 69.94/43.81

Wim Hoste


KBC Securities NV

+32 2 429 37 13

[email protected]

AB InBev is the world’s largest brewer, holding approximately one quarter of the global beer market with number one positions in some of the world’s largest beer profit pools like the US, Brazil and, upon closing of the full Grupo Modelo takeover, also in Mexico.

Recent results show weak volumes & strong pricing. 3Q12 volumes declined by 0.3% organically. We believe the volume weakness relates partly to aggressive pricing actions; e.g. in Braziland Central & Eastern Europe. Overall, revenue per hl increased by 10.1% organically in 3Q12.

Full Grupo Modelo takeover for $ 20.1bn. In June 2012 AB InBev announced its intention to take over the remaining 49.7% minorities in Grupo Modelo as well as the 53.5% minority stake in glass bottling subsidiary DIFA for $ 20.1bn, which represented 17xEV/EBITDA12E at that time. AB InBev targets at least $600m synergies following the transaction, which represents an EBITDA margin improvement at Grupo Modelo of around 900bps, which is very significant albeit slightly less than the margin improvement realized at Anheuser-Busch following the latter’s acquisition in 2008 (although we believe that Anheuser-Busch had more fat).

Conclusion. We believe AB InBev is a very well managed company with very strong and profitable positions in a number of large and highly profitable beer markets like the US & Brazil. However, the strong pricing discipline is currently weighing on organic volume performance. At approximately 12.3x EV/REBITDA13 we believe the stock is fairly valued, hence our Hold rating.

39

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49

54

59

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69

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Share performance BEL20 performance

AB INBEV

28 November 2012

21

COMPANY PROFILE SWOT

AB InBev has become the world’s largest brewer through aseries of M&A operations, including Labatt’s (1995), AmBev(2004) and Anheuser-Busch (2008).

The company is currently in the process of acquiring theremaining 49.7% stake in the Mexican market leader GrupoModelo as well as the 53.5% minority stake in glass bottlesubsidiary DIFA, for an EV of $ 20.1bn, in a deal that isexpected to close in 1Q13. With a net debt to EBITDAmultiple that is expected to rise to 2.4x following thisacquisition and is guided to fall below 2.0x in the course of2014, AB InBev can absorb the full takeover of GrupoModelo with relative ease in our opinion.

After the full takeover of Grupo Modelo, AB InBev will control almost one quarter of the global beer market. Thegroup will then have a number one position in three out ofthe four largest beer profit pools (US, Brazil and Mexico).Note that the group is the dominant player in the Americasregion, and is a top 3 player in China, Russia and WesternEurope.

Global flagship brands include Budweiser, Stella Artois,Becks and (soon) Corona. Apart from the global brands, ABInBev still has over 200 local brands.

The company is still controlled by the former Interbrew reference Belgian family and the former referenceshareholders of AmBev, which together hold about 53.1% ofthe outstanding shares.

Strengths Number one positions in three out of the four largest

beer profit pools (after the announced Grupo Modelo takeover close, which is guided for 1Q13)

Strong pricing power and discipline. Revenue per hl increased by 10.1% in 3Q12 (on a constant geo-mix)

Strong acquisition and margin improvement track record

Weaknesses Weak volume development recently, although this is

partly to do with the strong pricing discipline

Opportunities The intended full takeover of Grupo Modelo further

improves the geo-mix towards emerging markets and offers significant synergies ($ 600m target)

Further consolidation and price laddering adjustment potential in the US distribution system

Threats Rumoured US Department of Justice objections to the

planned full takeover of Grupo Modelo may lead to some forced additional divestments. This story may weigh on investor sentiment but we assume that any forced divestments would be fairly small

FX volatility. Note especially the high dependence on the BRL

Raw materials volatility. Note that AB InBev typically hedges on a rolling 12-month forward base

GROUP REVENUE BREAKDOWN * NORMALIZED EBITDA BREAKDOWN *

GrupoModelo

15%

Asia Pacific6%

Global Exportand Holding Companies

3%

Latin America North25%Latin America

South6%

North America35%

CEE3%

Western Europe7%

WesternEurope

6%

CEE2%

North America37%

Latin America South

8%

Latin America North32%

GrupoModelo

12%

AsiaPacific

3%

Source: KBC Securities *2013 forecast, including Grupo Modelo Source: KBC Securities *2013 forecast, including Grupo Modelo

AB INBEV

28 November 2012

22

FINANCIAL DATA Income statement ($ m) 2010 2011 2012E 2013E 2014E 2015E Sales 36,297.0 39,046.0 39,484.4 48,300.6 50,444.0 52,577.0 COGS -16,151.0 -16,634.0 -17,254.7 -21,252.3 -22,195.4 -23,133.9 Gross profit 20,146.0 22,412.0 22,229.7 27,048.4 28,248.6 29,443.1 Operating costs -9,585.0 -10,499.0 -11,213.6 -13,620.8 -14,225.2 -14,826.7 Other income & costs 604.0 694.0 1,750.6 2,102.3 2,647.3 3,222.0 EBIT 11,165.0 12,607.0 12,766.8 15,529.8 16,670.7 17,838.4 Net interest -3,736.0 -3,137.0 -1,870.0 -1,980.0 -1,650.0 -1,450.0 Other non-operating -268.0 -278.0 0.0 -20.0 -20.0 0.0 Pre-tax earnings 7,161.0 9,192.0 10,896.8 13,529.8 15,000.7 16,388.4 Taxes -1,920.0 -1,856.0 -1,906.9 -3,044.2 -3,450.2 -3,933.2 Associates 521.0 623.0 697.8 40.0 42.0 44.1 Discontinued & other - - - - - - Consolidated earnings 5,762.0 7,959.0 9,687.6 10,525.6 11,592.5 12,499.3 Minority interests -1,736.0 -2,104.0 -2,209.2 -2,319.7 -2,435.6 -2,557.4 Net earnings 4,026.0 5,855.0 7,478.4 8,206.0 9,156.9 9,941.8

Depreciation and amortisation -2,703.0 -2,749.0 -2,729.0 -3,147.6 -3,205.4 -3,264.4 Amortisation other intangibles/ Impairments 0.0 0.0 0.0 0.0 0.0 0.0 Non recurring elements included in EBIT -50.0 -20.0 -20.0 0.0 0.0 0.0

REBITDA 13,869.0 15,357.0 15,495.8 18,677.4 19,876.0 21,102.8 EBITDA 13,869.0 15,357.0 15,495.8 18,677.4 19,876.0 21,102.8 REBITA 11,165.0 12,607.0 12,766.8 15,529.8 16,670.7 17,838.4 EBITA 11,165.0 12,607.0 12,766.8 15,529.8 16,670.7 17,838.4 Net earnings from continued operations 4,026.0 5,855.0 7,478.4 8,206.0 9,156.9 9,941.8 Adjusted net earnings 5,040.0 6,449.0 7,485.4 8,220.0 9,170.9 9,941.8

Balance sheet ($ m) 2010 2011 2012E 2013E 2014E 2015E Intangible assets 75,857.0 75,120.0 76,070.0 95,070.0 95,070.0 95,070.0 Tangible assets 15,893.0 16,022.0 16,893.0 23,845.4 23,973.6 24,104.2 Financial assets 7,538.0 6,940.0 6,940.0 940.0 940.0 940.0 Other assets 2,855.0 2,335.0 2,378.0 2,686.5 2,761.5 2,836.2 Inventories 2,409.0 2,466.0 2,566.5 3,139.5 3,278.9 3,417.5 Receivables 4,638.0 4,121.0 4,343.3 5,313.1 5,548.8 5,783.5 Cash & equivalents 5,152.0 5,423.0 4,998.0 8,658.5 7,360.8 6,435.0 TOTAL ASSETS 114,342.0 112,427.0 114,188.8 139,653.1 138,933.6 138,586.4

Equity 35,259.0 37,492.0 42,332.1 47,490.3 52,967.1 58,820.0 Minorities 3,540.0 3,552.0 3,552.0 3,552.0 3,552.0 3,552.0 Provisions 3,896.0 4,555.0 4,555.0 4,555.0 4,555.0 4,555.0 LT financial debt 41,961.0 34,598.0 31,598.0 48,598.0 41,598.0 34,598.0 Other liabilities 17,754.0 17,406.0 17,503.2 18,781.6 19,092.4 19,401.7 Payables 8,999.0 9,257.0 9,081.4 11,109.1 11,602.1 12,092.7 ST financial debt 2,933.0 5,567.0 5,567.0 5,567.0 5,567.0 5,567.0 TOTAL LIABILITIES 114,342.0 112,427.0 114,188.8 139,653.1 138,933.6 138,586.4

Net working capital -1,952.0 -2,670.0 -2,171.6 -2,656.5 -2,774.4 -2,891.7 Capital employed 86,131.0 84,183.0 86,448.1 110,945.8 110,720.4 110,499.0 Net debt 39,742.0 34,742.0 32,167.0 45,506.5 39,804.2 33,730.0 Net debt, incl. off-balance items 39,742.0 34,742.0 32,167.0 45,506.5 39,804.2 33,730.0

Cash flow statement ($ m) 2010 2011 2012E 2013E 2014E 2015E Consolidated earnings 5,762.0 7,959.0 9,687.6 10,525.6 11,592.5 12,499.3 Depreciation, amortisation & impairment 2,703.0 2,749.0 2,729.0 3,147.6 3,205.4 3,264.4 Other cash flow from operations 1,214.0 369.0 -2,209.2 -2,319.7 -2,435.6 -2,557.4 Change in working capital 226.0 1,409.0 -444.1 1,454.7 353.7 351.9 CASH FLOW FROM OPERATIONS 9,905.0 12,486.0 9,763.3 12,808.2 12,715.9 13,558.2

Net capital expenditure -2,344.0 -3,376.0 -3,200.0 -3,000.0 -3,333.6 -3,395.0 Acquisitions / disposals 305.0 -25.0 -1,350.0 -20,100.0 0.0 0.0 Other cash flow from investments -507.0 670.0 0.0 0.0 0.0 0.0 CASH FLOW FROM INVESTMENTS -2,546.0 -2,731.0 -4,550.0 -23,100.0 -3,333.6 -3,395.0

Dividend payments -1,924.0 -3,088.0 -2,638.3 -3,047.8 -3,680.1 -4,089.0 Shares issues 215.0 155.0 0.0 0.0 0.0 0.0 New borrowings / reimbursements -4,290.0 -4,558.0 -3,000.0 17,000.0 -7,000.0 -7,000.0 Other cash flow from financing -758.0 -1,505.0 0.0 0.0 0.0 0.0 CASH FLOW FROM FINANCING -6,757.0 -8,996.0 -5,638.3 13,952.2 -10,680.1 -11,089.0

Fx and changes to consolidation scope 861.0 -488.0 0.0 0.0 0.0 0.0 CHANGE IN CASH & EQUIVALENTS 1,463.0 271.0 -425.0 3,660.5 -1,297.7 -925.7

Free cash-flow 7,561.0 9,110.0 6,563.3 9,808.2 9,382.3 10,163.2 Change in net debt -5,661.0 -5,000.0 -2,575.0 13,339.5 -5,702.3 -6,074.3

AB INBEV

28 November 2012

23

Performance criteria 2010 2011 2012E 2013E 2014E 2015E Sales growth -1.3% 7.6% 1.1% 22.3% 4.4% 4.2% Gross profit growth 3.0% 11.2% -0.8% 21.7% 4.4% 4.2% REBITDA growth 6.4% 10.7% 0.9% 20.5% 6.4% 6.2% EBITDA growth 6.4% 10.7% 0.9% 20.5% 6.4% 6.2% REBITA growth 8.9% 12.9% 1.3% 21.6% 7.3% 7.0% EBIT growth 8.9% 12.9% 1.3% 21.6% 7.3% 7.0% Pe-tax earnings growth 0.2% 28.4% 18.5% 24.2% 10.9% 9.3% Net earnings growth -12.7% 45.4% 27.7% 9.7% 11.6% 8.6% Earnings growth from continued operations -12.7% 45.4% 27.7% 9.7% 11.6% 8.6% Adjusted earnings growth 28.3% 28.0% 16.1% 9.8% 11.6% 8.4%

Gross margin 55.5% 57.4% 56.3% 56.0% 56.0% 56.0% REBITDA margin 38.2% 39.3% 39.2% 38.7% 39.4% 40.1% EBITDA margin 38.2% 39.3% 39.2% 38.7% 39.4% 40.1% REBITA margin 30.8% 32.3% 32.3% 32.2% 33.0% 33.9% EBIT margin 30.8% 32.3% 32.3% 32.2% 33.0% 33.9% Net working capital / sales -5.4% -6.8% -5.5% -5.5% -5.5% -5.5% CAPEX/ Sales 6.5% 8.6% 8.1% 6.2% 6.6% 6.5% FCF / Sales 20.8% 23.3% 16.6% 20.3% 18.6% 19.3% Depreciation / Capital Expenditure 115.3% 81.4% 85.3% 104.9% 96.2% 96.2% Capital expenditure / EBITDA 16.9% 22.0% 20.7% 16.1% 16.8% 16.1%

Net debt / Equity + Minorities 102.4% 84.6% 70.1% 89.2% 70.4% 54.1% Net debt / EBITDA 2.9 2.3 2.1 2.4 2.0 1.6 EBITDA / net interest 3.7 4.9 8.3 9.4 12.0 14.6 Pay-out ratio 41.9% 45.1% 40.8% 44.8% 44.7% 43.2%

Net earnings margin 11.1% 15.0% 18.9% 17.0% 18.2% 18.9% x CE turnover (Sales / avg. CE) 0.4 0.5 0.5 0.5 0.5 0.5 x Leverage (avg. CE / avg. equity) 2.6 2.3 2.1 2.2 2.2 2.0 = Return on Equity (avg) 12.3% 16.1% 18.7% 18.3% 18.2% 17.8% Return on Equity - adjusted (avg) 15.4% 17.7% 18.8% 18.3% 18.3% 17.8% Return on Capital Employed (avg) 9.7% 12.0% 12.3% 12.2% 11.6% 12.3% Return on Capital Employed - adjusted (avg) 9.7% 12.0% 12.3% 12.2% 11.6% 12.3%

Per share data ($) 2010 2011 2012E 2013E 2014E 2015E weighted average # shares (m) 1,592.00 1,595.00 1,595.00 1,604.91 1,604.91 1,604.91 weighted average # shares, diluted (m) 1,611.00 1,614.00 1,614.00 1,623.91 1,623.91 1,623.91

Basic EPS 2.53 3.67 4.69 5.11 5.71 6.19 Adjusted EPS 3.17 4.04 4.69 5.12 5.71 6.19 Diluted EPS 2.50 3.63 4.63 5.05 5.64 6.12 Diluted, adjusted EPS 3.13 4.00 4.64 5.06 5.65 6.12

Diluted EPS: y/y growth -13.7% 45.2% 27.7% 9.1% 11.6% 8.6% Diluted EPS: CAGR 3Y 17.0% 26.5% 15.8% 9.7% 4.2% -100.0% Adjusted, diluted EPS: y/y growth 26.9% 27.7% 16.1% 9.1% 11.6% 8.4% Adjusted, diluted EPS: CAGR 3Y 23.4% 17.4% 12.2% 9.7% 4.1% -100.0%

REBITDA / share 8.61 9.51 9.60 11.50 12.24 13.00 EBITDA / share 8.61 9.51 9.60 11.50 12.24 13.00 REBITA/share 6.93 7.81 7.91 9.56 10.27 10.98 EBIT/ share 6.93 7.81 7.91 9.56 10.27 10.98

Net book value / share 21.98 23.36 26.38 29.59 33.00 36.65 Free cash flow / share 4.75 5.71 4.11 6.11 5.85 6.33 Dividend (€) 0.80 1.20 1.50 1.80 2.00 2.10

Valuation data 2010 2011 2012E 2013E 2014E 2015E Max share price ($) 64.00 61.26 88.33 - - - Min share price ($) 48.09 50.48 60.04 - - - Reference share price (€) 40.12 40.83 66.54 66.54 66.54 66.54 Reference market capitalisation ($ m) 85,371.3 91,314.8 138,565.5 138,565.5 138,565.5 138,565.5 Enterprise value ($ m) 156,719.2 173,598.7 216,384.0 229,269.5 223,567.2 217,493.0

P/E 17.0 14.2 18.6 17.0 15.3 14.1 EV/sales 4.3 4.4 5.5 4.7 4.4 4.1 EV/REBITDA 11.3 11.3 14.0 12.3 11.2 10.3 EV/EBITDA 11.3 11.3 14.0 12.3 11.2 10.3 EV/REBITA 14.0 13.8 16.9 14.8 13.4 12.2 EV/EBIT 14.0 13.8 16.9 14.8 13.4 12.2 EV/Capital employed 1.8 2.1 2.5 2.1 2.0 2.0 P/ NBV 2.4 2.4 3.3 2.9 2.6 2.4 Free cash flow yield 8.9% 10.0% 4.7% 7.1% 6.8% 7.3% Dividend yield 2.0% 2.9% 2.3% 2.7% 3.0% 3.2% Source: KBC Securities *Historic valuation data are based on historic prices


28 November 2012

24

ABLYNX Making the next-generation biotherapeutics PHARMACEUTICALS & BIOTECHNOLOGY CURRENT PRICE € 4.79 BUYBELGIUM TARGET PRICE € 9.00 RATING UNCHANGED

FY/e 31.12 2011 2012E 2013E 2014E Sales (€ th) 21,869 41,461 28,724 33,789 REBITDA (€ th) -42,751 -24,298 -39,894 -38,253 Net earnings (€ th) -43,792 -24,882 -42,305 -40,456 Diluted adj. EPS (€) -1.00 -0.57 -0.97 -0.93 Dividend (€) P/E EV/REBITDA Free cash flow yield -12.2% -10.4% -22.3% -23.4% Dividend yield

Source: Thomson Reuters Datastream Source: KBC Securities Bloomberg ABLX BB Reuters ABLX.BR www.ablynx.com Market Cap € 209m Shares outst. 43.6m Volume (Daily) € 0.56m Free float 29.97% Next corporate event

Results FY12: 27 February 2013 Performance 1M 3M 12MAbsolute -11% 59% 96%Rel. BEL20 -13% 56% 57% 12-m Hi/Lo € 5.86/2.41

Jan De Kerpel, PhD


KBC Securities NV

+32 2 429 84 67

[email protected]

Ablynx is focussed on the discovery and development of Nanobodies, a novel class of antibody-derived therapeutic proteins based on single-domain antibody fragments, for a range of serious life-threatening human diseases.

Ablynx’s Nanobody technology is one the most advanced next-generation antibody technology platforms in existence, which has proven itself to be safe and effective in different clinical studies. 7 Nanobodies are in the clinic for a variety of disease indications.

This is attracting attention from big pharma players. Lucrative R&D partnerships have been closed with Boehringer Ingelheim, Merck Serono, Novartis and most recently with Merck. Via the Algeta collaboration, Ablynx looks at new ways to tackle cancer tumours.

First-in-class and best-in-class opportunities are targeted in areas where the Nanobodies can provide therapeutic advantages.

The company is well capitalized with around € 65m cash at end September. For FY12, cash burn is guided below € 25m, suggesting an operational runway of at least 2-3 years.

Recently, promising clinical results were shown from the first pulmonary delivery of an anti-RSV product and the proof-of-concept for anti-IL6R nanobody ALX-0061 in rheumatoid arthritis patients.

While the stock has nearly doubled in recent months, we believe the valuation still underestimates the value of the clinical assets and the platform’s potential. The recent positive news flow has put Ablynx back on investors’ radar screens. A key stock driver will be the 24-week data release from ALX-0061 by 1Q13 and a partnering deal shortly after. Our SOTP points to € 9/sh, BUY rating.

2.22.73.23.74.24.75.25.76.2



ABLYNX

28 November 2012

25

VALUATION AND NEWS FLOW

SOTP valuation We value Ablynx by a SOTP approach valuing both the internal andexternal projects to which we have visibility. We add no value to ALX-0141 or ozoralizumab as we believe partnering will be difficult. On ozoralizumab, Ablynx guide that by YE12 it will be know whether theproduct can be partnered or not. While the Novartis product is inclinical testing, the SOTP value is limited given the modest deal terms.

ALX-0061 is a key value driver BUY, € 9/sh target price

A key short-term value driver for Ablynx’s stock should be the 24-week data release of ALX-0061 in RA and a subsequent partnering deal. Based on this anticipated news, we have a BUY rating and € 9 target.

SUM-OF-THE-PARTS (NOVEMBER 2012)

NPV (€ m) NPV (€ /share) Status

Internal pipeline 142 3.3 Von Willebrand Factor - ALX-0681 23 0.6 TTP in PII Bone disease – ALX-0141 0 0 Looking for academic partner Inflammation – ALX-0061 96 2.3 PIIa showed first POC Ozoralizumab (TNF-) 0 0.0 Pfizer returned rights, 48 week OLE data RSV – ALX-0171 23 0.6 Phase I Collaborations 209 4.8 Novartis 12 0.3 Phase Ib Boehringer – Alzheimer 0 0 Phase I ready* Boehringer – strategic collaboration 106 2.4 Preclinical Merck-Serono (inflammation/cancer) 29 0.7 Preclinical Merck-Serono II (inflammation) 19 0.4 Discovery Merck-Serono III (osteoarthritis) 24 0.5 Discovery Merck (Neurology) 19 0.4 Discovery Other 24 0.6 Nanobody platform 21 0.5 POC confirmed Non-R&D costs -57 -1.3 Cash – debt & provisions 60 1.4 At YE12 Sum of the Parts 375 8.6

Source: KBC Securities research *initiation of phase I questionable given recent setbacks in Alzheimer’s RECENT AND EXPECTED NEWS FLOW

Timing Indication/Project Lead Comment Stock impact

Pipeline 18 September Virology/RSV ALX-0171 Confirmed safety, via pulmonary route, in healthy volunteers 4 October Rheuma/IL-6R ALX-0061 Phase II proof-of-concept results in RA patients at week 12 2 October Neurology R&D collaboration on ion-channels with Merck 21 November Oncology Discovery collaboration with Algeta 1Q13 Rheuma/IL-6R ALX-0061 Final read-out phase II study at week 24 Medium Mid 2013 Rheuma/IL-6R ALX-0061 Partnering deal with big pharma High Mid 2013 Virology/RSV ALX-0171 Initiation of further phase I tolerance and pK studies Low 4Q13 Haematology/vWF Caplacizumab Phase II proof of concept in orphan disease (formerly ALX-681) High 1H14 Oncology/DR5 TAS266 Novartis project phase Ib in solid tumour patients High

Source: KBC Securities research and Ablynx

ABLYNX

28 November 2012

26

FINANCIAL DATA Income statement (€ th) 2010 2011 2012E 2013E 2014E 2015E Sales 31,432 21,869 41,461 28,724 33,789 23,102 COGS - - - - - - Gross profit 31,432 21,869 41,461 28,724 33,789 23,102 Operating costs -57,394 -66,730 -67,760 -70,829 -74,046 -77,416 Other income & costs 97 -668 0 0 0 0 EBIT -25,865 -45,529 -26,299 -42,105 -40,256 -54,314 Net interest 1,607 1,737 1,616 0 0 0 Other non-operating 0 0 -200 -200 -200 -200 Pre-tax earnings -24,258 -43,792 -24,882 -42,305 -40,456 -54,514 Taxes 0 0 0 0 0 0 Associates - - - - - - Discontinued & other - - - - - - Consolidated earnings -24,258 -43,792 -24,882 -42,305 -40,456 -54,514 Minority interests - - - - - - Net earnings -24,258 -43,792 -24,882 -42,305 -40,456 -54,514

Depreciation and amortisation -2,877 -2,778 -2,001 -2,211 -2,003 -1,951 Amortisation other intangibles/ Impairments - - - - - - Non recurring elements included in EBIT - - - - - -

REBITDA -22,988 -42,751 -24,298 -39,894 -38,253 -52,363 EBITDA -22,988 -42,751 -24,298 -39,894 -38,253 -52,363 REBITA -25,865 -45,529 -26,299 -42,105 -40,256 -54,314 EBITA -25,865 -45,529 -26,299 -42,105 -40,256 -54,314 Net earnings from continued operations -24,258 -43,792 -24,882 -42,305 -40,456 -54,514 Adjusted net earnings -24,258 -43,792 -24,882 -42,305 -40,456 -54,514

Balance sheet (€ th) 2010 2011 2012E 2013E 2014E 2015E Intangible assets 1,416 1,018 822 698 624 582 Tangible assets 4,692 4,984 5,810 5,310 5,229 4,641 Financial assets - - - - - - Other assets 94,905 84,438 86,719 84,809 85,568 83,965 Inventories 5,277 2,233 4,146 2,872 3,379 2,310 Receivables 3,034 4,767 5,390 3,734 4,393 3,003 Cash & equivalents 27,342 3,322 -18,301 -64,777 -113,734 -170,765 TOTAL ASSETS 131,389 98,529 80,440 29,774 -17,920 -78,573

Equity 100,790 58,630 35,348 -5,325 -44,116 -96,931 Minorities - - - - - - Provisions - - - - - - LT financial debt 1,134 1,752 1,752 1,752 1,752 1,752 Other liabilities 21,561 27,475 32,170 22,488 15,360 11,839 Payables 7,582 9,867 10,365 10,054 8,278 3,962 ST financial debt 322 805 805 805 805 805 TOTAL LIABILITIES 131,389 98,529 80,440 29,774 -17,920 -78,573

Net working capital 729 -2,867 -829 -3,447 -507 1,351 Capital employed -5,319 -17,402 -17,147 -12,618 -1,946 1,201 Net debt -25,886 -765 20,858 67,334 116,291 173,322 Net debt, incl. off-balance items -25,886 -765 20,858 67,334 116,291 173,322

Cash flow statement (€ th) 2010 2011 2012E 2013E 2014E 2015E Consolidated earnings -24,258 -43,792 -24,882 -42,305 -40,456 -54,514 Depreciation, amortisation & impairment 2,877 2,778 2,001 2,211 2,003 1,951 Other cash flow from operations 1,555 1,466 1,600 1,632 1,665 1,698 Change in working capital -764 8,935 2,289 -6,427 -10,321 -4,846 CASH FLOW FROM OPERATIONS -20,590 -30,613 -18,992 -44,889 -47,110 -55,710

Net capital expenditure -3,113 -3,893 -2,631 -1,587 -1,847 -1,321 Acquisitions / disposals 106 1,221 0 0 0 0 Other cash flow from investments -40,500 8,000 0 0 0 0 CASH FLOW FROM INVESTMENTS -43,507 5,328 -2,631 -1,587 -1,847 -1,321

Dividend payments - - - - - - Shares issues 47,181 0 0 0 0 0 New borrowings / reimbursements -190 1,101 0 0 0 0 Other cash flow from financing 150 164 0 0 0 0 CASH FLOW FROM FINANCING 47,141 1,265 0 0 0 0

Fx and changes to consolidation scope - - - - - - CHANGE IN CASH & EQUIVALENTS -16,956 -24,020 -21,623 -46,475 -48,957 -57,031

Free cash-flow -23,703 -34,506 -21,623 -46,475 -48,957 -57,031 Change in net debt 18,420 25,121 21,623 46,475 48,957 57,031

ABLYNX

28 November 2012

27

Performance criteria 2010 2011 2012E 2013E 2014E 2015E Sales growth 5.9% -30.4% 89.6% -30.7% 17.6% -31.6% Gross profit growth 5.9% -30.4% 89.6% -30.7% 17.6% -31.6% REBITDA growth 17.6% 86.0% -43.2% 64.2% -4.1% 36.9% EBITDA growth 17.6% 86.0% -43.2% 64.2% -4.1% 36.9% REBITA growth 16.7% 76.0% -42.2% 60.1% -4.4% 34.9% EBIT growth 16.7% 76.0% -42.2% 60.1% -4.4% 34.9% Pe-tax earnings growth 23.2% 80.5% -43.2% 70.0% -4.4% 34.7% Net earnings growth 23.2% 80.5% -43.2% 70.0% -4.4% 34.7% Earnings growth from continued operations 23.2% 80.5% -43.2% 70.0% -4.4% 34.7% Adjusted earnings growth 23.2% 80.5% -43.2% 70.0% -4.4% 34.7%

Gross margin 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% REBITDA margin -73.1% -195.5% -58.6% -138.9% -113.2% -226.7% EBITDA margin -73.1% -195.5% -58.6% -138.9% -113.2% -226.7% REBITA margin -82.3% -208.2% -63.4% -146.6% -119.1% -235.1% EBIT margin -82.3% -208.2% -63.4% -146.6% -119.1% -235.1% Net working capital / sales 2.3% -13.1% -2.0% -12.0% -1.5% 5.9% CAPEX/ Sales 9.9% 17.8% 6.3% 5.5% 5.5% 5.7% FCF / Sales -75.4% -157.8% -52.2% -161.8% -144.9% -246.9% Depreciation / Capital Expenditure 92.4% 71.4% 76.0% 139.3% 108.4% 147.7% Capital expenditure / EBITDA -13.5% -9.1% -10.8% -4.0% -4.8% -2.5%

Net debt / Equity + Minorities -25.7% -1.3% 59.0% -1264.6% -263.6% -178.8% Net debt / EBITDA 1.1 0.0 -0.9 -1.7 -3.0 -3.3 EBITDA / net interest 14.3 24.6 15.0 - - - Pay-out ratio - - - - - -

Net earnings margin -77.2% -200.2% -60.0% -147.3% -119.7% -236.0% x CE turnover (Sales / avg. CE) -3.2 -1.9 -2.4 -1.9 -4.6 -62.1 x Leverage (avg. CE / avg. equity) -0.1 -0.1 -0.4 -1.0 0.3 0.0 = Return on Equity (avg) -27.4% -54.9% -53.0% -281.8% 163.7% 77.3% Return on Equity - adjusted (avg) -27.4% -54.9% -53.0% -281.8% 163.7% 77.3% Return on Capital Employed (avg) 261.1% 400.8% 152.2% 282.9% 552.8% 14595.9% Return on Capital Employed - adjusted (avg) 261.1% 400.8% 152.2% 282.9% 552.8% 14595.9%

Per share data (€) 2010 2011 2012E 2013E 2014E 2015E weighted average # shares (th) 41,925 43,604 43,604 43,604 43,604 43,604 weighted average # shares, diluted (th) 41,925 43,604 43,604 43,604 43,604 43,604

Basic EPS -0.58 -1.00 -0.57 -0.97 -0.93 -1.25 Adjusted EPS -0.58 -1.00 -0.57 -0.97 -0.93 -1.25 Diluted EPS -0.58 -1.00 -0.57 -0.97 -0.93 -1.25 Diluted, adjusted EPS -0.58 -1.00 -0.57 -0.97 -0.93 -1.25

Diluted EPS: y/y growth - - - - - - Diluted EPS: CAGR 3Y - - - - - - Adjusted, diluted EPS: y/y growth - - - - - - Adjusted, diluted EPS: CAGR 3Y - - - - - -

REBITDA / share -0.55 -0.98 -0.56 -0.91 -0.88 -1.20 EBITDA / share -0.55 -0.98 -0.56 -0.91 -0.88 -1.20 REBITA/share -0.62 -1.04 -0.60 -0.97 -0.92 -1.25 EBIT/ share -0.62 -1.04 -0.60 -0.97 -0.92 -1.25

Net book value / share 2.31 1.34 0.81 -0.12 -1.01 -2.22 Free cash flow / share -0.57 -0.79 -0.50 -1.07 -1.12 -1.31 Dividend (€) - - - - - -

Valuation data 2010 2011 2012E 2013E 2014E 2015E Max share price (€) 8.58 9.04 5.86 - - - Min share price (€) 6.30 2.25 2.41 - - - Reference share price (€) 7.73 6.49 4.79 4.79 4.79 4.79 Reference market capitalisation (€ th) 336,968 282,813 208,861 208,861 208,861 208,861 Enterprise value (€ th) 238,354 215,125 159,757 208,165 257,717 314,748

P/E - - - - - - EV/sales 7.6 9.8 3.9 7.2 7.6 13.6 EV/REBITDA - - - - - - EV/EBITDA - - - - - - EV/REBITA - - - - - - EV/EBIT - - - - - - EV/Capital employed - - - - - 262.0 P/ NBV 3.3 4.8 5.9 -39.2 -4.7 -2.2 Free cash flow yield -7.0% -12.2% -10.4% -22.3% -23.4% -27.3% Dividend yield - - - - - - Source: KBC Securities *Historic valuation data are based on historic prices


28 November 2012

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ACKERMANS Creating in-depth value EQUITY INVESTMENT INSTRUMENTS CURRENT PRICE € 62.92 BUYBELGIUM TARGET PRICE € 70.00 RATING UNCHANGED

FY/e 31.12 2008 2009 2010 2011 Net result (group) 114.6 117.4 160.8 177.5 Adjusted net result 136.4 111.6 168.4 174.8 Basic EPS (€) 3.45 3.54 4.86 5.36 Total return -43.6% 46.6% 22.9% 2.5% Return on Equity (avg) 7.3% 7.7% 10.1% 10.4% Adjusted equity value 59.95 63.63 70.00 81.02 Premium (-)/ Discount 40.5% 43.9% 10.7% 28.9% Dividend per share 1.39 1.44 1.55 1.64 Dividend yield 3.8% 2.8% 2.5% 2.6%

Source: Thomson Reuters Datastream Source: KBC Securities Bloomberg ACKB BB Reuters ACKB.BR www.avh.be Market Cap € 2,108m Shares outst. 33.5m Volume (Daily) € 1.87m Free float 67.05% Next corporate event

Results FY12: 28 February 2013 Performance 1M 3M 12MAbsolute 0% -1% 23%Rel. BEL20 -2% -2% -2% 12-m Hi/Lo € 65.09/53.37

Jan-Willem Billiet Financial Analyst - Brussels KBC Securities NV +32 2 429 45 04 [email protected]

Tom Simonts


KBC Securities NV

+32 2 429 37 22

[email protected]

Ackermans & van Haaren is a € 2.7bn, Antwerp-based investment company with a long-term approach to creating value in 5 segments: Marine Engineering & Infrastructure, Private Banking, Real Estate & Senior Care, Development Capital and Energy & Resources.

The Private Banking unit’s strong brands and ability to circumvent the immediate impact of the debt crisis mean that its earnings provide Ackermans & van Haaren with a solid earnings backbone going forward. That also goes for DEME, which so far in 2012 has expanded its order-book aggressively at what we believe to be normal operating margins. The crisis is squeezing the Private Equity and Real Estate units harder, but a prudent, long-term approach and opportunistic divestments (AR Metallizing) should add to AvH’s bottom line in a more pronounced way.

Ackermans’ big guns (DEME, Bank Delen and Bank J. van Breda) are growing strongly, despite the current crisis. The company has a hands-on approach to creating value, which should allow for higher current earnings from FY12 onwards. We expect Ackermans to up its dividend by 5% y/y up until FY15, based on a steady growth of current earnings. Our Buy rating is supported by an experienced management team and well-balanced portfolio that combines growth with defensiveness.

Based on yesterday’s closing prices, we estimate Ackermans’ target equity value at € 81.09 per share. The implied discount of our € 70 target price versus the target equity value is 13.68%. The upside potential versus a stock price of € 62.92 equals 11.25%. We have a Buy rating

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28 November 2012

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COMPANY PROFILE 3Q12 UPDATE

Ackermans & van Haaren posted FY11 revenue of € 3.1bn, generated by its share holdings. The group employsapproximately 18,000 people and concentrates on a limitednumber of strategic participations with an important potentialfor growth.

DEME (30% of NAV) is one of the largest marineengineering companies in the world. From its coreactivities, dredging and civil marine engineering, thegroup has developed complementary activities such asenvironmental engineering (treatment of soil and sludge),services for the oil and gas sector and extraction ofconstruction aggregates from the sea.

Bank Delen (28% of NAV) specialises in asset management and general financial advice for a widerange of mainly private customers. Delen Private Bankclosed FY11 with assets under management at a recordlevel of € 15.7bn. The company gained a foothold in theUK in 2011 and acquired a majority shareholding of73.49% in JM Finn & Co, a leading London assetmanager with € 6.9bn AuM.

Bank J. Van Breda & C° (14% of NAV) is a specialistadvisory bank focusing exclusively on entrepreneurs andthe liberal professions with regard to both their privateand professional needs, and with a specific focus onasset growth, management and protection. The bankrealised a FY11 net profit of € 54.9m. The underlying net profit amounted to € 26.4m, up from € 25.7m in FY10.Assets under management reached € 7.1bn.

Sofinim (9% of NAV) is a prominent investment company in Belgium specialised in private equity. Sofinim provides development capital to medium-sized and larger companies. The group applies an industrial and long-term vision.

The start-ups of DEME’s Wheatstone and New Doha Port sites were delayed, AvH’s banks increased their assets under management once again, some of the real estate and Private Equity operations showed a mixed picture while the bulk of the Energy & Resources division performed in line.

Contracting: DEME performed in line with expectations. Due to a delay in the start-up, Wheatstone and New Doha Port will only contribute to the results as of FY13. The order book declined from € 3.44bn in 1H12 to € 3.29bn.

Financial services: Delen’s AuM increased from € 24.0bn in 1H12 to € 25.2bn (we were only shooting for a FY12 figure of € 24.5bn so today’s figuring is north of the assumption in our model) due to the positive evolution of financial markets and continuing net inflow at Delen & JM Finn & Co. Bank J. van Breda recorded a solid Q3 with a slight increase in client assets from € 7.7bn to € 7.9bn.

Real Estate: Extensa realised few land sales but recorded further sales on its projects in Hasselt, Roeselare and Istanbul, although the difficult economic situation led to a general slowdown in demand. Results at Financière Duval were adversely affected by losses in the project management operations (Gérim, Alamo). Private Equity: Reorganisations and a general deterioration of the economy have squeezed earnings

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