benelux digest - ing belgium · benelux digest april 2013 4 philips remains a benelux top pick, as...

Benelux Digest April 2013

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Benelux Digest Leaving the trenches – the sequel

EQUITY RESEARCH

research.ing.com SEE THE DISCLOSURES APPENDIX FOR IMPORTANT DISCLOSURES & ANALYST CERTIFICATION

8 April 2013

Top picks: Conservative gearing (x)

Net debt/EBITDA

2013F

EV/EBITDA

2014F

Historical

EV/EBITDA

AMG 1.9 4.8 3.4Ageas n/a n/a n/aAhold -0.7 4.5 5.7Boskalis 1.7 5.9 5.7Barco -0.8 3.9 4.7CSM -1.4 8.5 6.8Melexis 0.1 7.2 7Post NL 3.9 4.5 6.1Philips 0.5 5.1 7.6SBM Offshore 3.3 7.0 6.5Median 5.1 6.1

Source: Bloomberg consensus as of close 4 April 2013, ING estimates

Top picks: FCF yield (%)

2013F 2014F 2015F

AMG 9.6 10.0 11.6Ageas n/a n/a n/aAhold 11.0 12.1 12.3Boskalis 7.6 8.0 8.9Barco 13.5 14.1 13.1CSM 4.1 6.2 6.7Melexis 6.7 8.9 9.8Post NL 0.2 5.7 13.9Philips 8.4 8.2 11.0SBM Offshore n/a n/a n/aMedian 8.0 8.6 11.3

Source: ING estimates

M&A: Potential take-out targets with no blocking vote

Style

Probability

outcome

Upside

(%)

BAM Cyclical L 106.2Unit4 Cyclical M/H 78.5BESI Cyclical L/M 64.3Heijmans Cyclical L 63.6Wessanen Defensive L 53.6Imtech Cyclical L 42.7TKH Group Cyclical L 40.3Nutreco Defensive M 34.1Kendrion Cyclical L 32.5Delhaize Defensive L 32.0CSM Defensive H 31.0DEMB Defensive H 25.5Nyrstar Cyclical M 24.3Wolters Defensive L 24.0Beter Bed Defensive L 22.4EVS Cyclical M 22.3TNT Express Cyclical M/H 21.9Ten Cate Defensive L 21.0Umicore Cyclical M 11.5Ziggo Defensive H 11.3Agfa Gevaert Cyclical L 9.1


The performance of ING’s top picks/least preferred stocks over the first

quarter was -4.1%, impacted by Imtech and CoreLab, but our 12-month

performance remains positive. We continue to opt for a balanced approach

for 2Q13, as after an initial re-rating seen in 1Q13 we believe the next leg of

upside should come from earnings momentum, which we believe is less

obvious in view of the most recent economic indicators. We have made a few

changes to our Benelux Top Picks list. Five names are retained (Ahold, AMG,

Barco, Philips and PostNL) and we introduce five new names: Ageas,

Boskalis, CSM, Melexis and SBM Offshore. A take-out special is also

included, as M&A is returning to the forefront.

Markets higher despite turmoil. Benelux markets have been strong in the first quarter

of the year (AEX and BEL20 rose 3% and 6%, respectively). In our view, further upside in

the indexes should come from estimates being revised upwards, as multiple expansion

should become less obvious (defensives are already trading at peak multiples). EPS

estimates have dropped over the past 18 months and are close to historical lows.

Favour balanced approach. We continue to favour a balanced approach in the current

environment, by focusing on: (1) strong balance sheets; (2) strong cash flow generation;

(3) the potential for special events (either buybacks/dividends on the one hand or take-out

potential on the other; (4) a relatively attractive valuation and the risk for 2013 EPS

disappointment being low. In the report, we carry out screenings on the above criteria.

Take-out focus returning to the forefront. Over the past two years, corporates have

improved their balance sheets substantially and, with a potential economic pick-up over

2014-15, in combination with historically low interest rates, we expect a pick-up in M&A

activity. With Ziggo and DE MasterBlenders potentially out (according to recent press

reports, and an indicative offer, respectively), we believe investors should have potential

take-out targets on their radar screen.

Performance. The performance of ING’s top picks/least preferred stocks over the first

quarter was -4.1%, impacted by the performance of Imtech (top pick) on the one hand

and Core Laboratories (least preferred) on the other. On a rolling 12-month basis, our

Benelux Top Picks continued to post positive Alpha (see details in this report).

ING Benelux Top Picks. We retain five names from our previous list (Ahold, AMG,

Barco, Philips and PostNL) and add five new names: Ageas, Boskalis, CSM, Melexis

and SBM Offshore.

Benelux Favourites

Mcap Price Target Upside PER (x) EV/EBITDA (x) Div yield (%) (€m) (€) price (€) (%) 2013F 2014F 2013F 2014F 13F

Ahold 13,343 12.13 13.8 14 11.6 11.7 4.8 4.5 3.8Ageas 6,030 26.30 32.5 24 10.7 10.2 n/a n/a 4.7AMG 225 6.35 9.0 42 8.6 6.9 5.4 4.7 0.0Barco 840 65.82 83.0 26 8.2 8.9 4.2 3.9 2.4Boskalis 3,687 31.52 38.0 21 12.5 10.3 6.9 5.9 3.9CSM 1,146 16.47 21.0 28 27.3 14.0 9.4 8.5 4.3Melexis 595 14.70 18.0 22 12.0 10.9 8.2 7.2 4.6Philips 20,705 23.00 29.0 26 14.1 11.9 6.0 5.1 3.5PostNL 708 1.61 3.0 86 6.8 3.5 5.8 4.5 0.0SBMO 2,597 12.47 17.0 36 7.3 6.8 6.9 7.0 0.0Median 1,872 26 11.2 10.3 6.0 5.1 3.7

Source: ING estimates Benelux All Caps Team

EQUITY RESEARCH

research.ing.com SEE THE DISCLOSURES APPENDIX FOR IMPORTANT DISCLOSURES & ANALYST CERTIFICATION


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Contents

Summary 3

Benelux market valuation 11

ING forecasts versus consensus 13

Macroeconomic view 14 The Dutch economy .........................................................................................................15 Belgian economy..............................................................................................................18

Equity strategy 21 Introduction ......................................................................................................................21 Our top picks ....................................................................................................................21 Sensitivity analysis: conservative gearing ........................................................................22 Sensitivity analysis: strong free cash flow yield................................................................22 Sensitivity analysis: potential take-out candidates ...........................................................22 Sensitivity analysis: synthetic buyback potential ..............................................................25 Financials sector outlook..................................................................................................25 Benelux Real Estate outlook ............................................................................................28

ING’s top picks in the Benelux 31 Performance of ING’s top picks........................................................................................32

Recommendation, target price and EPS revisions 33 Reasons for recommendation changes............................................................................33

Companies 35 Ageas...............................................................................................................................36 Ahold................................................................................................................................38 AMG.................................................................................................................................40 Barco................................................................................................................................42 Boskalis............................................................................................................................44 CSM .................................................................................................................................46 Melexis .............................................................................................................................48 Philips ..............................................................................................................................50 PostNL .............................................................................................................................52 SBM Offshore...................................................................................................................54

Rankings 56

Disclosures Appendix 62


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Summary

Ageas. We identify the following three catalysts for a further re-rating: (1) an expected

roadmap to increase ROE from 8.7% to an 11% target for 2015; (2) the Asian angle (20-

25% of insurance profit) true value remains overlooked – recent transaction multiples point

to a €3.3bn valuation, or 55% of market cap (our SOTP valuation points to €1.8bn); and

(3) with BNP call options and RPI (structured credits) accounting for 20% of market cap,

Ageas appears to be in the driving seat versus the Belgian State, which seems keen to exit.

Ahold. The upcoming AGM could clear the authorisation to acquire up to 10% of the

common shares outstanding. On top of the current €500m programme, Ahold could

announce another €750m programme (ICA related) that might be up to 6% accretive to

EPS. Although the start of the year might be tough due to poor weather and a soft

economic environment, we believe Ahold is well placed to continue to gain market share

and push costs out of the system. BUY maintained.

AMG remains a Benelux top pick because, in spite of assuming no cyclical recovery in

2013F, we believe we have good visibility on free cash flow growth, mainly via

management’s focus on reducing costs (guidance for c.US$12-13m cost savings) and

capex (-US$14m YoY). Consequently, the valuation appears quite attractive, as AMG

offers an 11% equity free cash flow yield. In the short to medium term, partial divestments

might be a catalyst to unlock part of AMG’s undervaluation. In the medium term, we

continue to like AMG’s mining and processing assets in critical raw materials, and do not

exclude the possibility of AMG starting to pay a dividend.

Barco remains on our Top Picks list, as: (1) we believe 2013 consensus EBIT is still c.9%

too low; (2) Barco targets reaching an EBIT of at least €120m by 2016 while consensus

(€95m) is much more prudent; (3) the balance sheet strength (INGF net cash position of

€140m end-2013) will be used for EPS-enhancing acquisitions; and (4) the valuation is

still attractive at 6.4x 2013 EV/EBIT and a FCFe yield of c.10% on an unlevered balance

sheet.

Boskalis is in an excellent state after successfully acquiring heavy marine transporter

Dockwise. We expect Dockwise to support strong operating performance of the newly

created Offshore Energy unit over 2013-14F. We estimate that the energy unit will

surpass the good old dredging business as Boskalis’ prime earnings driver in 2014,

clearly highlighting the company’s strategic transformation to become a full-service

marine contractor for the global oil & gas industry. On our €38 target price, the shares

trade at a 2013-14F EV/EBITDA of 6.5x, in line with the historical average. We foresee

stable performance in its other activities despite the still-challenging macro conditions,

and hence we like Boskalis’ strong cash flow and balance sheet.

CSM. The disposal announcement created a ‘sell the fact’ moment, as shareholders still

have to wait until the end of June (CMD). In our view, this creates an excellent buying

opportunity to position for the next ‘Time to cash: the final episode’ moment. We believe

‘Future-CSM’ will see a sharp rerating in the coming 12 months, with more clarity on the

continuing business and on how cash will be returned to shareholders. With the

accelerating newsflow in bio-plastics, finally some positives could be imminent as well.

Melexis. is a Benelux Top Pick, as its present valuation is not capturing Melexis’

attractive traits of sustainable, superior value creation (ROIC >30%) in an industry that is

forecasted to grow substantially faster than global GDP. Going forward, we expect the

improving earnings momentum to provide sufficient triggers for a further re-rating to

Melexis average historical median multiples, seeing a 27% upside. The attractive,

sustainable dividend yield (4.6%) provides downside protection.


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Philips remains a Benelux Top Pick, as Philips still has to complete more than €1.7bn in

cost savings in the period until 2016, of which €429m to go for 2013, €200m planned for

2014 and an additional €1bn over 2014-16. Additionally, we see a raw material tailwind of

almost €100m for 2013F due to lower rare earth prices. Given Philips’ very solid balance

sheet at only 0.5x 2013 net debt/EBITDA, we believe there is room for further

shareholder-friendly activities, such as larger dividends and EPS-accretive acquisitions.

Despite that, Philips currently still only trades at a 2013 PER of 14x and a 2013

EV/EBITDA of 6.2x, which is more than 20% below the historical average multiples of 17x

and 8x, respectively.

PostNL remains a Benelux Top Pick. Despite the recent 23% drop in the share price, the

FY12 results give comfort to our investment case. (1) Master Plan savings were raised,

with limited extra cash-out; (2) the balance sheet gave more relief, ie, more comfort on

net debt and liquidity; (3) the equity gap was lower due to an increased discount rate; and

(4) the pension cash-out was guided lower. In addition, looking forward, we might see

lower top-up payments and expect further de-risking of the pension fund. Moreover, the

share price seems to have priced in a significant further decline in the pension discount

rate (INGF <3.0%, ie, 70bp), which we feel is overdone, as well as the concerns over the

2013-14F cash flow, given the updated Master Plan and lowered pension cash out flow.

SBM Offshore. The main issues are behind the company, in our view, and management

will now focus fully on the core FPSO business. This new strategy will fully come to fruit in

the coming years, supported by a high demand for FPSOs, the best solution for

developing an oil field in deep water. The combination of SBM Offshore’s better risk

profile and its growth prospects against a large discount to SOTP justify our BUY

recommendation for SBM Offshore, and it deserves a place on our Benelux Favourites

list. Our target price is €17 (unchanged), offering 34% upside.

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Fig 1 ING Benelux all caps valuation comparison

Company Rec Mkt cap Price PER (x) EV/EBITDA (x) Sector (€m) (€m) 2013F 2014F 2013F 2014F

Aalberts Industries Buy 1,844 16.87 11.3 10.3 7.5 6.7 Industrial Goods & Services AB InBev Hold 122,571 76.51 18.8 16.4 13.1 10.7 Food & Beverage Ackermans & van Haaren Hold 2,206 65.87 10.8 n/a n/a n/a Financial Services Acomo Hold 365 15.60 12.1 11.5 10.6 10.0 Food & Beverage Aedifica Hold 490 49.50 23.8 21.3 n/a n/a Real Estate Aegon Hold 8,820 4.69 7.5 6.9 n/a n/a Insurance Ageas Buy 6,030 26.30 10.7 10.2 n/a n/a Insurance Agfa Gevaert Hold 240 1.43 6.6 3.5 6.5 5.7 Industrial Goods & Services Ahold Buy 13,343 12.13 11.6 11.7 4.8 4.5 Retail AkzoNobel Hold 11,384 47.23 12.4 9.4 7.3 6.2 Chemicals AMG Buy 225 6.35 8.6 6.9 5.4 4.7 Industrial Goods & Services Aperam Hold 727 9.36 n/a 28.4 5.9 4.6 Basic Resources Arcadis Buy 1,539 21.70 13.5 12.2 8.2 7.3 Industrial Goods & Services ArcelorMittal Hold 14,776 9.51 18.1 9.3 4.9 4.0 Basic Resources Arseus Buy 616 20.18 11.9 10.7 8.7 7.8 Healthcare Ascencio Hold 226 54.25 15.7 14.9 n/a n/a Real Estate ASM International Buy 1,577 24.99 23.3 14.1 14.8 10.5 Technology ASML Hold 21,310 50.75 22.7 15.0 16.0 11.0 Technology Ballast Nedam Hold 102 10.55 21.6 10.6 4.0 3.3 Construction & Materials BAM Buy 768 3.18 8.4 7.6 9.8 9.1 Construction & Materials Banimmo Buy 116 10.20 26.9 19.4 n/a n/a Real Estate Barco Buy 840 65.82 8.2 8.9 4.2 3.9 Industrial Goods & Services BE Semiconductor Industries Buy 247 6.56 8.7 6.4 3.7 2.6 Technology Befimmo Hold 921 49.88 12.1 12.7 n/a n/a Real Estate Bekaert Hold 1,298 21.98 29.4 18.1 6.2 5.5 Industrial Goods & Services Belgacom SA Sell 6,392 19.00 10.6 11.8 4.9 5.2 Telecommunications Beter Bed Hold 315 14.43 14.4 11.8 7.8 6.5 Retail BinckBank Buy 547 7.48 10.2 9.1 n/a n/a Financial Services Boskalis Buy 3,687 31.52 12.5 10.3 6.9 5.9 Construction & Materials Brunel International Buy 781 33.70 15.0 12.9 7.5 6.3 Industrial Goods & Services CFE Hold 601 45.89 9.0 7.9 4.6 4.3 Construction & Materials CMB Sell 520 15.10 233.7 56.4 12.2 10.0 Industrial Goods & Services Cofinimmo Hold 62 89.46 12.6 13.2 n/a n/a Real Estate Colruyt Hold 5,790 36.66 16.5 15.5 7.8 7.4 Retail Core Laboratories Hold 4,693 131.58 26.5 23.1 18.7 16.7 Oil & Gas Corio Buy 3,447 35.84 13.0 12.1 n/a n/a Real Estate CSM Buy 1,146 16.47 27.3 14.0 9.4 8.5 Food & Beverage DE Master Blenders Buy 7,208 12.12 24.8 23.5 16.0 13.9 Food & Beverage Deceuninck Hold 142 1.32 15.1 11.6 4.8 4.4 Construction & Materials Delhaize Hold 4,161 41.40 9.9 8.9 4.2 3.8 Retail Delta Lloyd Buy 2,368 13.39 5.9 5.7 n/a n/a Insurance Dexia Sell 92 0.05 n/a n/a n/a n/a Banks D’Ieteren Buy 2,002 36.20 14.7 12.0 6.5 5.4 Retail DSM Buy 7,963 46.84 12.5 10.5 7.5 6.3 Chemicals Econocom Buy 600 6.34 10.9 10.5 6.9 6.2 Technology

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Elia Buy 2,016 33.41 12.7 12.7 10.0 10.1 Utilities Eurocommercial Properties Buy 1,219 29.21 15.2 14.8 n/a n/a Real Estate Euronav Hold 167 3.36 n/a n/a 7.0 5.6 Industrial Goods & Services EVS Buy 661 48.94 n/a n/a 10.8 8.9 Industrial Goods & Services Exact Holding Hold 395 16.20 10.4 10.4 6.4 6.1 Technology Exmar Hold 427 7.64 12.5 10.9 11.7 12.7 Industrial Goods & Services Fugro Buy 3,588 44.43 14.0 12.9 8.6 7.6 Oil & Gas Galapagos Buy 515 19.08 n/a n/a n/a n/a Healthcare GBL Hold 9,764 60.51 n/a n/a n/a n/a Financial Services GIMV Hold 914 38.13 n/a n/a n/a n/a Financial Services Grontmij Buy 214 3.36 14.2 9.4 9.0 6.8 Construction & Materials Heijmans Buy 120 7.14 6.2 5.3 4.5 3.9 Construction & Materials Heineken Buy 33,603 58.44 17.4 15.4 10.7 9.8 Food & Beverage Home Invest Belgium Hold 235 77.22 27.7 25.9 n/a n/a Real Estate Imtech Hold 845 8.99 5.3 4.9 5.0 4.5 Industrial Goods & Services Kas Bank Buy 131 8.96 9.7 9.2 n/a n/a Financial Services KBC Buy 11,306 27.11 8.2 8.1 n/a n/a Banks KBC Ancora Buy 1,052 13.44 n/a n/a n/a n/a Banks Kendrion Buy 221 18.98 11.4 8.9 5.8 4.7 Industrial Goods & Services Kinepolis Buy 580 99.00 15.3 14.0 7.9 7.2 Travel & Leisure KPN Hold 3,749 2.62 6.0 5.3 3.6 3.7 Telecommunications Leasinvest Hold 290 72.15 13.5 13.3 n/a n/a Real Estate Macintosh Hold 211 8.66 16.1 13.9 5.8 5.5 Retail Melexis Buy 595 14.70 12.0 10.9 8.2 7.2 Technology Mobistar Hold 1,033 17.22 7.5 7.9 3.3 3.4 Telecommunications Nieuwe Steen Investments Hold 352 5.16 6.8 7.1 n/a n/a Real Estate Nutreco Hold 2,502 70.49 13.3 12.7 7.9 7.2 Food & Beverage Nyrstar Hold 614 3.79 n/a 19.3 4.6 4.0 Basic Resources Ordina Hold 108 1.18 11.5 7.0 6.8 4.0 Technology Philips Buy 20,705 23.01 14.1 11.9 6.0 5.1 Industrial Goods & Services PostNL Buy 708 1.61 6.8 3.5 5.8 4.5 Industrial Goods & Services Quest for Growth Buy 77 6.70 n/a n/a Financial Services Randstad Hold 5,297 31.20 14.8 11.9 9.9 8.0 Industrial Goods & Services Recticel Buy 179 6.18 7.1 6.1 4.6 4.2 Chemicals Reed Elsevier Buy 17,024 12.81 13.0 12.2 10.0 9.0 Media RDSA Buy 159,615 24.95 6.5 6.2 4.3 4.0 Oil & Gas Royal Ten Cate Buy 468 17.98 17.5 16.1 6.8 6.1 Industrial Goods & Services SBM Offshore Buy 2,581 12.47 7.3 6.8 6.9 7.0 Oil & Gas SES Buy 9,866 24.69 16.8 14.2 10.0 9.1 Media Sligro Hold 1,099 24.84 14.9 13.5 7.6 6.9 Retail Solvay Hold 8,557 103.45 11.9 10.3 6.0 5.4 Chemicals Telenet Group Buy 4,344 39.38 35.1 28.4 8.5 7.8 Media Tessenderlo Hold 616 20.13 13.3 10.7 6.6 5.9 Chemicals TKH Group Buy 764 20.32 11.7 10.5 7.9 7.1 Industrial Goods & Services TNT Express Buy 3,114 5.75 14.4 13.2 4.6 4.0 Industrial Goods & Services

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TomTom Buy 705 3.19 14.2 7.0 5.6 3.2 Technology UCB Buy 8,824 48.97 24.2 17.8 16.1 12.8 Healthcare Umicore Hold 3,986 35.63 16.7 14.1 8.8 7.7 Chemicals Unibail-Rodamco Hold 16,396 174.00 17.0 15.1 n/a n/a Real Estate Unilever Hold 89,676 31.80 18.4 17.2 10.9 9.8 Food & Beverage Unit4 Buy 732 25.14 12.5 10.2 7.5 5.6 Technology USG People Buy 523 6.73 18.0 11.2 8.3 6.0 Industrial Goods & Services Van Lanschot Hold 519 13.25 103.6 9.8 n/a n/a Banks VastNed Retail Buy 622 32.65 10.4 10.6 n/a n/a Real Estate Vopak Hold 6,033 47.19 16.7 15.0 11.5 10.8 Industrial Goods & Services WDP Hold 743 49.25 12.1 11.4 n/a n/a Real Estate Wereldhave Buy 1,183 54.59 16.6 15.5 n/a n/a Real Estate Wessanen Hold 172 2.29 13.1 12.7 5.3 5.0 Food & Beverage Wolters Kluwer Buy 5,204 17.33 10.6 10.3 7.8 7.2 Media Ziggo Buy 5,577 27.89 18.4 17.3 9.4 9.3 Telecommunications

Benelux average 6,720 17.2 12.6 7.8 6.8 Benelux median 845 13.0 11.7 7.3 6.2

Benelux LC median 8,260 14.1 11.9 7.8 7.3 Benelux SMC median 595 12.6 10.9 6.8 6.0 Premium/discount SMC vs LC

Benelux Cyclical median 616 12.5 10.7 6.6 5.6 Benelux Defensive median 4,344 14.2 12.7 7.9 7.2 Benelux Growth median 732 14.0 9.6 6.9 6.1 Benelux Financial median 1,052 9.7 9.1

Netherlands median 1,183 13.0 10.6 7.4 6.3 Belgium median 616 12.6 11.9 6.6 5.9

Prices as at 04 April 2013


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Company Country Style Rec Free float INGF EPS growth (%) Consensus EPS growth (%) Net debt/EBITDA (x) (%) 2013F 2014F 2013F 2014F 2012F 2013F

Aalberts Industries Netherlands Cyclical Buy 77 7.0 10.0 2.1 7.0 1.8 1.6 AB InBev Belgium Defensive Hold 45 15 15 9 14 1.9 1.3 Ackermans & van Haaren Belgium Financial Hold 66 12 n/a 29 8 n/a n/a Acomo Netherlands Defensive Hold 51 7 5 11 4 2.5 2.3 Aedifica Belgium Real Estate Hold 69 -3 12 -2 2 n/a n/a Aegon Netherlands Financial Hold 85 n/a 8 -10 6 n/a n/a Ageas Belgium Financial Buy 85 -21 5 -14 7 n/a n/a Agfa Gevaert Belgium Cyclical Hold 100 n/a 89 n/a 154 1.6 1.1 Ahold Netherlands Defensive Buy 100 3 -1 -5 7 0.7 (0.7) AkzoNobel Netherlands Cyclical Hold 100 50 31 8 13 2.5 1.4 AMG Netherlands Cyclical Buy 100 23 26 80 39 2.3 1.9 Aperam Luxembourg Cyclical Hold 59 n/a n/a -82 n/a 3.8 2.4 Arcadis Netherlands Cyclical Buy 75 13 11 -8 11 1.6 1.0 ArcelorMittal Netherlands Cyclical Hold 56 8 95 103 95 3.2 2.0 Arseus Belgium Cyclical Buy 54 5 12 -4 15 3.1 2.3 Ascencio Belgium Real Estate Hold 32 3 6 40 6 n/a n/a ASM International Netherlands Cyclical Buy 68 n/a 65 n/a 87 (1.3) (1.1) ASML Netherlands Cyclical Hold 70 4 52 -16 54 (1.4) (1.4) Ballast Nedam Netherlands Cyclical Hold 100 n/a 105 n/a 37 n/a 1.2 BAM Netherlands Cyclical Buy 100 -6 11 -25 10 5.9 5.2 Banimmo Belgium Real Estate Buy 17 17 39 n/a 2 n/a n/a Barco Belgium Growth Buy 76 19 -8 -7 -1 (0.7) (0.8) BE Semiconductor Industries Netherlands Cyclical Buy 55 40 36 61 70 (2.2) (1.5) Befimmo Belgium Real Estate Hold 0 -3 -5 71 -4 n/a n/a Bekaert Belgium Cyclical Hold 61 n/a 62 n/a 99 2.7 2.2 Belgacom SA Belgium Defensive Sell 41 -21 -10 -10 -5 1.0 1.1 Beter Bed Netherlands Defensive Hold 44 51 22 -5 10 0.2 0.0 BinckBank Netherlands Financial Buy 80 5 12 -4 14 n/a n/a Boskalis Netherlands Cyclical Buy 67 5.3 20 7 13 1.1 1.7 Brunel International Netherlands Cyclical Buy 34 33 17 47 9 (1.4) (1.4) CFE Belgium Cyclical Hold 55 36 14 24 24 2.0 1.8 CMB Belgium Cyclical Sell 34 -57 n/a -94 n/a 5.5 6.9 Cofinimmo Belgium Real Estate Hold 100 -7 -4 0 2 n/a n/a Colruyt Belgium Defensive Hold 43 2 6 2 6 (0.4) (0.6) Core Laboratories Netherlands Growth Hold 100 9 15 13 15 0.9 0.7 Corio Netherlands Real Estate Buy 63 0 7 -2 0 n/a n/a CSM Netherlands Defensive Buy 100 3 95 18 36 6.5 (1.4) DE Master Blenders Netherlands Defensive Buy 100 0 5 -3 17 2.1 0.8 Deceuninck Belgium Cyclical Hold 65 133 29 138 37 1.9 1.6 Delhaize Belgium Defensive Hold 100 -2 10 25 9 1.9 1.1 Delta Lloyd Netherlands Financial Buy 99 -2 4 8 -3 n/a n/a Dexia Belgium Financial Sell 6 n/a n/a -67 -24 n/a n/a D’Ieteren Belgium Cyclical Buy 41 -31 22 -14 20 1.3 1.1 DSM Netherlands Cyclical Buy 100 39 20 36 17 2.2 1.8 Econocom Belgium Cyclical Buy 50 16 3 10 4 0.1 (0.4)

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Elia Belgium Defensive Buy 43 11 0 -4 5 5.9 5.7 Eurocommercial Properties Netherlands Real Estate Buy 100 -1 2 1 3 n/a n/a Euronav Belgium Cyclical Hold 43 n/a n/a -14 -21 7.6 5.9 EVS Belgium Growth Buy 93 n/a n/a -14 23 (0.3) (0.3) Exact Holding Netherlands Defensive Hold 43 13 1 26 -2 (1.4) (1.4) Exmar Belgium Cyclical Hold 39 99 15 -22 -34 2.9 6.9 Fugro Netherlands Growth Buy 91 8 8 1 7 3.4 1.4 Galapagos Belgium Growth Buy 70 n/a n/a -114 n/a (20.9) n/a GBL Belgium Financial Hold 50 n/a n/a n/a 10 n/a n/a GIMV Belgium Financial Hold 73 n/a n/a n/a n/a n/a n/a Grontmij Netherlands Defensive Buy 69 n/a 51 -131 56 10.0 3.3 Heijmans Netherlands Cyclical Buy 100 21 16 n/a 62 n/a 2.3 Heineken Netherlands Defensive Buy 37 14 13 10 12 2.8 3.1 Home Invest Belgium Belgium Real Estate Hold 55 5 7 n/a 31 n/a n/a IBA Belgium Growth Buy 60 45 n/a -57 42 1.2 1.0 Imtech Netherlands Growth Hold 95 -30 8 n/a -18 3.9 2.0 Kas Bank Netherlands Financial Buy 44 -33 5 -12 11 n/a n/a KBC Belgium Financial Buy 51 39 1 -16 12 n/a n/a KBC Ancora Belgium Financial Buy 39 n/a n/a -56 -191 n/a n/a Kendrion Netherlands Cyclical Buy 100 22 28 42 28 0.6 0.4 Kinepolis Belgium Defensive Buy 51 6 9 6 4 1.3 0.7 KPN Netherlands Defensive Hold 100 -29 14 -48 -17 2.8 2.6 Leasinvest Belgium Real Estate Hold 0 2 1 -2 -1 n/a n/a Macintosh Netherlands Cyclical Hold 29 70 16 135 19 12.6 0.9 Melexis Belgium Cyclical Buy 38 -2 10 3 14 0.2 0.1 Mobistar Belgium Defensive Hold 47 -17 -6 -17 -7 0.7 0.8 Nieuwe Steen Investments Netherlands Real Estate Hold 66 -23 -4 n/a -8 n/a n/a Nutreco Netherlands Defensive Hold 100 7 5 9 9 0.8 0.7 Nyrstar Belgium Cyclical Hold 100 n/a n/a -126 n/a 3.4 2.4 Ordina Netherlands Cyclical Hold 100 41 66 n/a 10 0.7 0.2 Philips Netherlands Cyclical Buy 100 77 19 47 14 1.3 0.6 PostNL Netherlands Cyclical Buy 78 -2 94 69 20 3.7 3.9 Quest for Growth Belgium Defensive Buy 78 n/a n/a 69 20 n/a n/a Randstad Netherlands Cyclical Hold 67 -11.0 25 n/a 16 1.9 1.3 Recticel Belgium Cyclical Buy 62 2 16 -1 34 2.1 1.8 Reed Elsevier NV Netherlands Defensive Buy 100 2 6 -17 8 1.9 1.5 RDSA Netherlands Defensive Buy 100 13 6 5 3 0.8 0.6 Royal Ten Cate Netherlands Growth Buy 63 20 9 64 21 2.6 1.9 SBM Offshore Netherlands Growth Buy 100 n/a 7 20 10 3.1 3.3 SES Luxembourg Defensive Buy 73 -10 18 -25 14 3.0 2.8 Sligro Netherlands Defensive Hold 66 5 11 6 14 0.5 0.3 Solvay Belgium Cyclical Hold 70 7 16 15 13 0.5 0.5 Telenet Group Belgium Defensive Buy 49 -4 23 0 30 3.8 3.4 Tessenderlo Belgium Cyclical Hold 74 15 24 n/a 19 n/a 2.2 TKH Group Netherlands Cyclical Buy 100 30 11 62 15 2.1 1.3

10

Benelux D

igest A

pril 2013



TNT Express Netherlands Cyclical Buy 70 47 9 n/a 81 (0.2) (0.4) TomTom Netherlands Growth Buy 45 -43 102 -45 9 0.5 (0.1) UCB Belgium Defensive Buy 62 -5 36 -8 24 4.3 3.6 Umicore Belgium Cyclical Hold 100 -14 19 8 13 0.5 0.4 Unibail-Rodamco Netherlands Real Estate Hold 100 9 12 6 8 n/a n/a Unilever NV Netherlands Defensive Hold 100 7 7 7 9 0.9 0.6 Unit4 Netherlands Growth Buy 72 23 23 -2 17 0.6 0.1 USG People Netherlands Cyclical Buy 80 -29 62 86 27 2.8 1.8 Van de Velde Belgium Defensive Hold 41 8 n/a 0 2 (1.0) (1.4) Van Lanschot Netherlands Financial Hold 18 n/a n/a -119 n/a n/a n/a VastNed Retail Netherlands Real Estate Buy 100 -5 -2 -2 -2 n/a n/a Vopak Netherlands Defensive Hold 47 12 11 5 14 2.7 2.4 WDP Belgium Real Estate Hold 69 11 7 54 3 n/a n/a Wereldhave Netherlands Real Estate Buy 100 -16 7 n/a 10 n/a n/a Wessanen Netherlands Defensive Hold 100 27 3 n/a 35 1.6 0.8 Wolters Kluwer Netherlands Defensive Buy 100 1 3 -1 6 2.5 2.1 Ziggo Netherlands Defensive Buy 63 58 6 38 8 3.5 3.2

Benelux average 69.1 10.2 19.8 4.2 15.0 1.8 1.4 Benelux median 69.0 7.0 11.0 0.7 11.3 1.9 1.3

Benelux LC median 73.0 7.0 11.5 4.6 12.3 1.9 1.3 Benelux SMC median 66.0 7.0 11.0 0.1 10.3 1.7 1.2

Benelux Cyclical median 68.0 10.5 19.0 9.2 16.7 1.9 1.5 Benelux Defensive median 63.0 5.5 8.0 1.4 8.6 1.9 1.1 Benelux Growth median 83.5 14.0 8.5 -1.8 12.9 1.1 0.9 Benelux Financial median 51.0 -2.0 5.0 -13.6 6.4

Netherlands median 80.0 7.0 11.0 4.6 12.3 1.9 1.3 Belgium median 52.5 5.0 11.0 -2.5 8.6 1.8 1.1

Source: Company data, ING estimates


11

Benelux market valuation

PER multiples above historical median

Fig 3 AEX index price evolution (€)

Fig 4 BEL20 index price evolution (€)

260

280

300

320

340

360

380

Jan 11 Jun 11 Nov 11 May 12 Oct 12 Apr 13

1,900

2,000

2,100

2,200

2,300

2,400

2,500

2,600

2,700

2,800


Source: Bloomberg Source: Bloomberg

Since the start of 2013, the AEX and BEL20 indexes rose 3% and 6%, respectively. YoY,

the indexes are up 12% and 16%, respectively.

Fig 5 AEX index PER blended 12-mth-fw (x)

Fig 6 BEL20 index PER blended 12-mth-fw (x)

7.0

7.5

8.0

8.5

9.0

9.5

10.0

10.5

11.0

11.5

12.0


9.0

9.5

10.0

10.5

11.0

11.5

12.0

12.5

13.0



In conjunction with the indexes moving up, PER multiples (blended 12-month-forward)

moved higher, based on Bloomberg consensus estimates. Both the AEX and BEL20

indexes currently trade above their median multiple for the first time in over 18 months.

The AEX trades at 11.4x PER, while the BEL20 trades at 11.9x.

The AEX trades 10% above the 10.3x median (since January 2006) and 3% above the

11.0x multiple at the start of 2013. The BEL20 trades 3% above the 11.6x median, yet

1% below the 12.1x multiple at the start of the year.

The above, in our view, suggest that further upside in the indexes should be driven

mostly by consensus estimates being revised upwards, as multiple expansion should

become less obvious. Figures 7 and 8 demonstrate that so far consensus estimates have

dropped over the past 18 months for the AEX index, and remained relatively flat for the

AEX and BEL20 are up 12%

and 16% YoY, respectively

AEX and BEL20 forward PER

seems 10% and 3% above

historical median,

respectively


12

BEL20. For both indexes, consensus estimates seem below the historical median

(2006-12).

Fig 7 AEX EPS blended 12-mth-fw (€)

Fig 8 BEL20 EPS blended 12-mth-fw (€)

30

31

32

33

34

35

36

37


190

195

200

205

210

215

220

225

230



Benelux indices versus MSCI Euro index and AEX midcap index The MSCI Euro index currently trades at 11.1x. This implies that multiples for the AEX

and BEL20 are 3% and 7% higher, respectively. Historically, the valuation of the MSCI

Euro (10.4x) seems in line with the AEX (10.3x), yet 10% below the BEL20 (11.6x).

The Amsterdam midcap index currently trades at 11.7x PER. Hence, midcaps currently

trade with a 3% premium versus the large caps (AEX at 11.4x). Historically, however, the

premium seems higher (8%), as the 2006-12 median multiple for the midcaps amounts to

11.1x (versus 10.3x for the AEX).

Fig 9 MSCI EURO PER blended 12-mth-fw (x)

Fig 10 Amsterdam midcap index PER blended 12-mth-fw (x)

7.0

7.5

8.0

8.5

9.0

9.5

10.0

10.5

11.0

11.5


7

8

9

10

11

12

13



AEX and BEL20 PER seem

3% and 7% above MSCI Euro

Midcaps trade with 3%

premium to large caps


13

ING forecasts versus consensus

Fig 11 Top picks: ING versus consensus estimates (€)

2013F 2014F Difference (%) INGF Consensus INGF Consensus 2013F 2014F

AMG (US$) 0.94 0.76 1.19 1.06 24 13Ageas 2.46 2.76 2.59 2.91 -11 -11Ahold 1.04 0.96 1.04 1.04 9 0Boskalis 2.52 2.52 3.06 2.85 0 7Barco 8.01 7.26 7.41 6.68 10 11CSM 0.60 0.50 1.18 1.15 20 3Melexis 1.22 1.28 1.35 1.41 -5 -5PostNL 0.24 0.44 0.46 0.48 -45 -4Philips 1.63 1.64 1.93 1.90 0 2SBM Offshore (US$) 2.20 1.85 2.35 2.30 19 2Median (%) 4 2

Source: Bloomberg, ING estimates


14

Macroeconomic view

Despite a weak batch of confidence indicators in March, the ECB’s tone on the economic

outlook remained rather unchanged. The ECB still expects the improvements in financial

markets since last summer to “work their way through to the real economy” and still

foresees a gradual recovery in the second half of the year. Risks to the economic outlook

remain to the downside. As regards inflation, the ECB still sees risks being broadly

balanced. As in March, the euro exchange rate is no longer considered to be a risk to

price stability.

Fig 12 GDP forecasts

%YoY 1Q13F 2Q13F 3Q13F 4Q13F 1Q14F 2013F 2014F

World (USD) 2.2 2.5 3.0 3.3 3.3 2.7 3.3US 1.5 1.5 1.5 2.1 2.3 1.6 2.3Japan -0.1 1.0 3.0 2.9 2.6 1.5 1.5Germany 0.3 0.5 0.7 1.6 1.6 0.7 1.5France -0.3 -0.1 0.0 0.5 0.8 0.0 1.0UK 0.3 1.0 0.5 1.3 1.8 0.8 2.2Italy -2.2 -1.7 -1.5 -0.5 0.0 -1.5 0.5Canada 1.2 1.3 2.1 2.2 2.4 1.7 2.5Australia 2.3 2.4 2.7 2.9 3.0 2.6 3.2New Zealand 2.4 2.6 2.7 3.0 3.0 2.7 2.6

Eurozone -0.9 -0.6 -0.2 0.6 0.9 -0.3 1.2Spain -1.7 -1.5 -1.3 -0.5 -0.1 -1.2 0.5Netherlands -1.1 -1.4 -0.1 0.5 0.7 -0.5 0.5Belgium -0.8 0.0 0.4 0.9 1.2 0.2 1.1Greece -5.1 -4.8 -3.7 -2.3 -0.7 -4.0 0.4Switzerland 0.6 0.8 0.5 0.7 1.3 0.7 1.6Sweden 1.4 0.9 0.7 1.1 1.3 1.0 1.5Norway 0.9 0.3 1.7 1.7 1.9 1.2 2.4Denmark -0.3 0.6 0.5 0.8 1.0 0.4 1.6Bulgaria 0.9 1.4 1.1 1.4 0.0 1.2 2.1

Croatia -1.9 0.0 1.4 1.0 1.3 0.1 1.1Czech Republic -1.2 -0.3 0.5 1.5 2.4 0.1 2.9Hungary -0.8 0.1 0.8 1.0 2.1 0.3 1.8Poland 0.5 0.8 1.3 1.8 2.4 1.1 2.9Romania -0.5 -0.1 1.2 1.0 1.1 0.5 2.0Russia 1.8 2.8 4.1 4.4 4.4 3.5 3.8Kazakhstan 4.6 5.0 5.2 5.9 5.6 5.3 5.8Turkey 4.1 4.8 4.8 5.5 4.7 4.8 5.0South Africa 2.5 2.9 2.4 2.7 2.5 2.6 3.0Israel 2.9 2.7 3.9 4.4 4.6 3.5 4.3

Brazil 2.1 2.7 3.2 3.5 3.5 2.9 3.5Mexico 2.9 3.4 4.0 4.2 4.4 3.7 4.5

China 8.1 8.8 9.4 9.5 9.0 9.0 8.4Hong Kong 3.9 3.6 3.5 3.5 3.2 3.5 4.0India 5.7 6.0 6.0 6.2 6.3 6.0 6.8Indonesia 6.7 6.8 7.2 7.1 7.0 7.0 7.5Korea 3.2 3.4 4.0 3.0 3.0 3.4 3.4Malaysia 5.5 5.1 4.8 4.5 5.0 5.0 5.0Philippines 6.5 6.8 5.7 5.5 5.7 6.1 5.6Singapore 3.3 2.7 4.4 3.7 3.0 3.5 3.5Taiwan 3.9 4.2 4.0 4.0 3.9 4.0 4.0Thailand 4.5 4.0 4.5 3.8 4.0 4.2 4.2

Source: ING

Although the ECB seems to stick to its earlier macro-economic assessment and has, at

least for the time being, filed the latest disappointing sentiment indicators under “one-off

fluctuation”, ECB president Draghi sounded slightly more dovish than in March. The

promise that the ECB’s monetary policy stance will remain accommodative “for as long as

needed” and that liquidity operations will be continued with full allotment “for as long as

ECB still foresees a gradual

recovery in second half

Could Cyprus be the last

one-off?


15

necessary” was already given last month but received a more prominent position in

yesterday’s introductory statement. Combined with the only real new phrase of “in the

coming weeks, we will monitor very closely all incoming information on economic and

monetary developments and assess any impact on the outlook for price stability”, this

normally could imply that a rate cut has come closer

The Dutch economy Waiting for growth The Dutch economy continues to struggle. After the historical sharp contraction in 2009,

the economy rebounded in 2010 and 2011, but posted barely positive growth in the first

half of 2012. In the third quarter, the economy contracted again by 1.0% QoQ, followed

by a 0.2% drop QoQ in the fourth quarter. As a result, in 2012, full-year GDP shrunk by

0.9%. Not only historically, but also compared to other ‘core’ Eurozone countries, the

Netherlands has performed less favourably. While German and Belgian GDP are again

above pre-crisis levels and the French economy is roughly back at par, the Dutch

economy is still 3% smaller than in 2008.

Lacklustre consumer spending is the main reason the Dutch economy currently trails the

rest of the ‘core’. Households have reined in spending for eight quarters in a row now. A

continued decline in (real) disposable incomes is the main culprit for the weak spending

figures. In recent months, unemployment (6.0% – Eurostat definition) has accelerated to

the highest level since 1997. Meanwhile, nominal wage growth has been very moderate

and not high enough to compensate for inflation. In October, consumer price inflation

jumped from 2.5% to 3.3% (harmonised), mainly as a result of the VAT hike from 19% to

21%. Until 2011, Dutch inflation was below the Eurozone average (2.5%), but now it is

considerably higher. This swing is not only due to the effects of austerity measures, but

also the result of oil prices pushing petrol prices higher, as well as the cost of gas and

electricity (with a delay).

Fig 13 Where has all the growth gone?

Fig 14 NL trailing the Eurozone ‘core’

-2.5

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

I II III IV I II III IV I II III IV I II III IV I II III IV

2008 2009 2010 2011 2012

GDP growth, QoQ %

92

94

96

98

100

102

104

2008 2009 2010 2011 2012

Germany Belgium France Netherlands

GDP volume, index, Q1 2008 = 100

Source: Ecowin Source: Ecowin, ING calculations

On a positive note, despite continued pressure on purchasing power and rising

unemployment, 90% of households say they can still get by without resorting to taking

from their savings or incurring debt. Half of that group says their income is ‘just’ enough.

The other half says they still have money left over to save at the end of the month.

Currently, 5% of households say they are eating into their savings, which is in line with

the historical average. Note that total retail savings deposits have even hit a record high –

just under €330bn in February. For 2% of the households, financial problems have grown

worse. They have to incur debt to make ends meet, though that figure is only slightly

higher than at the beginning of 2009, and still in line with the historical average.

In terms of GDP growth, the

Dutch economy is still

struggling…

…mainly as a result of

lacklustre consumer

spending…

..triggered by falling real

disposable incomes…


16

Falling income is not the only factor weighing on spending. The housing market downturn

plays a key role too. A large proportion of consumer spending is related to moving house,

but last year there were less than 120,000 home sales, which is 40% less than before the

crisis started in 2008 and the lowest in 20 years. Meanwhile, house prices have fallen

further and are now 19% below the peak of August 2008. Falling house prices translate

into negative wealth effects, leading to cuts in spending that are unrelated to the housing

market as well. It is no coincidence that the Dutch housing market is performing worse

than in the rest of the Eurozone core.

There is little hope for personal spending to pick up in 2013. Consumer confidence has

dropped to a record low level. This year, household disposable incomes will be squeezed

for the sixth consecutive year as unemployment is expected to rise further. Meanwhile,

austerity measures will lead to higher (direct) taxes and social security contributions. It

will also keep inflation elevated. The Dutch central bank has calculated that higher taxes

(energy, insurance premium) and excises (tobacco, alcohol), including the VAT hike,

raises inflation in 2013 by 1ppt. Once these effects fall out of the equation inflation, it

should head lower in the final quarter to below 2%. Headline consumer price inflation in

the Netherlands should then fall back in line with the Eurozone average. Despite this,

full-year inflation will still be around 2.5%.

Fig 15 Inflation continues to outpace income growth

Fig 16 Housing market still struggling

-2

-1

0

1

2

3

4

5

'06 '07 '08 '09 '10 '11 '12 '13

Yearly chg in nominal disposable household income, in %

Consumer price inflation, YoY, in %)

forecast

-2

-1

0

1

2

3

4

5

'06 '07 '08 '09 '10 '11 '12 '13



forecast

2006 2007 2008 2009 2010 2011 2012 2013

-2

-1

0

1

2

3

4

5

'06 '07 '08 '09 '10 '11 '12 '13



forecast

-2

-1

0

1

2

3

4

5

'06 '07 '08 '09 '10 '11 '12 '13



forecast

2006 2007 2008 2009 2010 2011 2012 2013

0

20

40

60

80

100

120

0

2

4

6

8

10

12

14

16

18

20

1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

home sales, in 000s per month (lhs)

House price indx, existing homes (rhs)

(LHS)

(RHS)

0

20

40

60

80

100

120

0

2

4

6

8

10

12

14

16

18

20

1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

home sales, in 000s per month (lhs)

House price indx, existing homes (rhs)

(LHS)

(RHS)

Source: Statistics Netherlands, EcoWin, ING forecasts Source: Land registry, ING calculations

House prices and sales are expected to fall further too as a result of low consumer

confidence, rising unemployment and tighter regulation. This year it has become even

more difficult for first-time home buyers, who are essential for kick-starting chains of

housing transactions, to enter the market. After the September elections, the new

coalition government of Liberals (VVD) and Labour (PvdA) agreed that starting 1 January

2013, interest on new mortgages would only be tax deductible for amortising or straight-

line mortgages. Up until then, it was quite common to take out an interest-only mortgage

for part of the price of the house (it was already limited to 50%). This was to limit

borrowing costs and take advantage of the tax deductibility. In the meantime, action has

been taken to water down the plans (no necessity for 100% annuity), but the exact details

are still lacking.

Still, on balance, conditions appear to remain tighter than in 2012. This is also because

the new austerity measure came on top of the earlier decision (Spring Agreement) to

gradually lower the maximum loan-to-value of 106 to 100 (incl. transfer tax) in 2018. So,

unlike what was quite common, in the future buyers will have to bring in own money when

purchasing a house. Furthermore, as a result of the fall in purchasing power, living cost

…and a weak housing market

Consumer spending set to

remain Dutch economy’s

Achilles' heel…

…as austerity weighs on

incomes…

Households are likely to cut

spending further…

…as housing activity remains

very weak…

…which is partly a result of

tighter regulation


17

ratios were further lowered in 2013. This means, for any combination of income level and

interest rate, a lower capacity to borrow.

While new homeowners feel most of the new housing regulations, it has also been

agreed that mortgage interest rate tax deductibility for existing homeowners will be

reduced. For the higher income tax bracket, tax deduction will be gradually reduced for

new and existing mortgages. As from 2014, the maximum tax advantage will be reduced

in increments of 0.5%, from 52% to 38% (28 years).

The new mortgage rules boil down to home buyers having less to offer when wanting to

buy a house. Meanwhile, selling parties are reluctant to drastically lower their asking price

because of a risk of a negative home equity. This severely hampers supply and demand

in finding a new equilibrium.

The outlook of less favourable borrowing conditions led to a brief flurry of home sales in

the final months of 2012 as (first-time) buyers rushed to purchase a home before

1 January 2013 (see Figure 16). Since this merely reflected a frontloading effect, sales

levels fell back sharply in early 2013. House prices also rebounded very briefly, but fell

back again as well.

Fig 17 German IFO points to pick-up in Dutch exports

Fig 18 Deficit contracts by less than assumed

-15

-10

-5

0

5

10

15

75

80

85

90

95

100

105

110

115

06 07 08 09 10 11 12 13

German IFO, expectations index, 3M lead, lhs

Dutch exports (%YoY), rhs

-15

-10

-5

0

5

10

15

75

80

85

90

95

100

105

110

115

06 07 08 09 10 11 12 13



(LHS)

(RHS)

2006 2007 2008 2009 2010 2011 2012 2013-15

-10

-5

0

5

10

15

75

80

85

90

95

100

105

110

115

06 07 08 09 10 11 12 13



-15

-10

-5

0

5

10

15

75

80

85

90

95

100

105

110

115

06 07 08 09 10 11 12 13



(LHS)

(RHS)

-15

-10

-5

0

5

10

15

75

80

85

90

95

100

105

110

115

06 07 08 09 10 11 12 13



-15

-10

-5

0

5

10

15

75

80

85

90

95

100

105

110

115

06 07 08 09 10 11 12 13



(LHS)

(RHS)

2006 2007 2008 2009 2010 2011 2012 2013

-6

-5

-4

-3

-2

2010 2011 2012 2013

Government Agreement

ING expectations (excl proceeds auction 4G freq.)

Budget balance (in % GDP)

Source: Ecowin Source: CPB, ING forecasts

As long as the housing market and domestic demand keep each other in a firm grip, a

return to positive growth of Dutch GDP has to be kick-started by stronger foreign

demand.

Fortunately, external conditions have taken a turn for the better in recent months, most

notably outside the eurozone. More general, the global growth momentum has improved,

with China showing signs of stronger growth. With the US having narrowly avoided the

big “fiscal cliff”, world trade could expand at a (somewhat) faster clip in 2013. Important to

note is that within the Eurozone, leading economic indicators for Germany, the main

Dutch export market, have turned less negative too.

For a highly open economy such as the Netherlands, this is a bright spot in dark days.

Note too, that as one of the most competitive economies in the world – No.5 in the World

Economic Forum ranking and No.2 within the Eurozone – the Netherlands stands ready

to benefit from a global recovery.

Assuming foreign demand strengthens in the course of this year, the Dutch economy

should start to grow again in the second half of this year. However, as a result of

weakness in the first half of 2013, full-year GDP growth is expected to still come in below

0%. In 2014, we should see a return to positive full-year growth again. By then, improved

Return to positive GDP

growth has to be triggered by

exports

…helping the economy to

stabilize in H213

Fortunately, global growth

momentum is improving…

…and the Dutch economy is

one of the most competitive

countries in the world…


18

labour market conditions should help restore consumer confidence, as a result of which

households could start to unleash some pent-up demand. Home sales should then pick

up as well. Some tax relief – payback from the VAT hike in 2012 – helps too.

Despite a possible return to positive territory, growth is likely to remain very sluggish.

Continued consolidation measures by the government to bring the budget deficit back

towards the Brussels norm of -3% of GDP should take their toll on growth. From -5.1% in

2010, the deficit has already improved to 3.8% in 2012. Against a backdrop of weak

economic activity, the deficit is expected to improve only slightly more this year to -3.4%

(including the proceeds from the 4G auction and the nationalisation of SNS). That is still

above the EMU ceiling of 3%. Under the assumption of no policy changes, the deficit

should hardly improve further and could even deteriorate marginally in 2014.

Given this fiscal outlook and the government’s commitment to the European budget rules,

it’s hardly a surprise then, that additional austerity measures have been announced for

next year. On the table are plans to freeze salaries for one year for civil servants and

health-care workers, saving €2bn. It’s also possible that a tax break worth €640m for

companies will be scrapped. The government also said it plans to spend €500m on

infrastructure in 2014, while €300m has been reserved for boosting the spending power

of low-income households. The new package presented by the Liberal-Labour coalition

government adds austerity measures beyond those already announced for 2013-17.

The announced measures should cut the deficit by 0.4ppt, bringing it within the EU’s limit

of 3% of GDP next year, but it comes at the cost of (up to) half a percentage point of

economic growth. It’s not all written in stone yet though. Details of the new austerity

package will be discussed in the coming weeks and may be subject to change.

It is partly owed to the commitment to put public finances on a sound footing that the

Netherlands is still one of the core Eurozone countries benefiting from an AAA-status. It is

also of great importance that, while the focus appears on short-term measures, structural

elements have been added to the austerity package as well. Those elements include an

increase of the retirement age to boost labour participation and measures to reduce

household mortgage debt. In the longer-term, this should strengthen the already strong

structural position of the Dutch economy in the global economy.

[email protected]

Belgian economy

After a long period of resilience, the Belgian labour market has been affected by the

weak economic growth in 2012. Only external trade is likely to support the economy

in the short run.

Belgian economic growth remains subdued. 2012 ended with another GDP contraction

(-0.2% for the whole year) and GDP at the end of 2012 was still at a lower level than in

the first quarter of 2011. Having said that, it is interesting to notice that external trade is

the only pillar able to support economic growth for the time being. Net export contribution

to growth has been slightly positive over the last four quarters (Figure 19).

Domestic demand, on the contrary, remains lacklustre. Indeed, corporate investment

remained quite stable in 2012 (in real terms). Moreover, as industrial production

continues to fall and as the number of bankruptcies increase, the economic slowdown

weighs on the labour market. The private sector lost about 25,000 net jobs in 2012

(Figure 20). This has only been partially compensated by job creation in the public sector.

Moreover, the number of job seekers has also increased by nearly 25,000 units during

the year. This obviously affects consumer confidence and finally private consumption. In

Still, growth will remain

sluggish…

Focus not only on quick

wins, but on structural

reforms as well, which helps

to maintain ‘AAA’-status

2012 ended with a new

contraction of GDP…

…as the domestic demand is

unable to re-start...

…and will take time to

recover…

…as austerity continues to

weigh on activity


19

2012, it contracted by 0.7%, which is exceptional for the Belgian economy, traditionally

characterised by dynamic exports and private consumption.

Looking ahead, domestic demand is likely to take some time to recover. The very low rate

of capacity utilisation will not induce companies to invest more, while the labour market

may continue to experience the effects of the slow growth, as shown in the subdued

hiring intentions of companies. Low employment growth coupled with wage restraint and

higher taxes will once again put households’ disposable income under pressure. On top of

that, after some improvement in the very beginning of 2013, confidence came back to its

low level of end-2012 in March. It seems that the uncertainty around the Eurozone and the

future of the Belgian economy is weighing on consumer and business confidence. Any

strong increase of investment or consumption activity seems to be excluded this year.

Fig 19 Belgian GDP: contributions to growth (ppt)

Fig 20 After a long-lasting resilience, the labour market finally cracks

Q3

Q4

Q1

Q2

Q Q4

Inventories Net exports

DD (excl. Inventories) GDP growth

Q3

Q4

Q1

Q2

Q Q4



-1,0%-0,8%

-0,6%-0,4%

-0,2%0,0%

0,2%0,4%

0,6%

0,8%1,0%

Q3 2

011

Q4 2

011

Q1 2

012

Q2 2

012

Q3 2

012

Q4 2

012

-1,0%-0,8%

-0,6%-0,4%

-0,2%0,0%

0,2%0,4%

0,6%

0,8%1,0%1.0%

0.8%

0.6%

0.4%

0.2%

0.0%-0.2%

-0.4%

-0.6%

-0.8%

-1.0%

1.0%

0.8%

0.6%

0.4%

0.2%

0.0%-0.2%

-0.4%

-0.6%

-0.8%

-1.0%3Q11 4Q11 1Q12 2Q12 3Q12 4Q12

-1,0%-0,8%

-0,6%-0,4%

-0,2%0,0%

0,2%0,4%

0,6%

0,8%1,0%

Q3 2

011

Q4 2

011

Q1 2

012

Q2 2

012

Q3 2

012

Q4 2

012

-1,0%-0,8%

-0,6%-0,4%

-0,2%0,0%

0,2%0,4%

0,6%

0,8%1,0%1.0%

0.8%

0.6%

0.4%

0.2%

0.0%-0.2%

-0.4%

-0.6%

-0.8%

-1.0%

1.0%

0.8%

0.6%

0.4%

0.2%

0.0%-0.2%

-0.4%

-0.6%

-0.8%

-1.0%3Q11 4Q11 1Q12 2Q12 3Q12 4Q12

Q3

Q4

Q1

Q2

Q Q4



Q3

Q4

Q1

Q2

Q Q4



-1,0%-0,8%

-0,6%-0,4%

-0,2%0,0%

0,2%0,4%

0,6%

0,8%1,0%

Q3 2

011

Q4 2

011

Q1 2

012

Q2 2

012

Q3 2

012

Q4 2

012

-1,0%-0,8%

-0,6%-0,4%

-0,2%0,0%

0,2%0,4%

0,6%

0,8%1,0%1.0%

0.8%

0.6%

0.4%

0.2%

0.0%-0.2%

-0.4%

-0.6%

-0.8%

-1.0%

1.0%

0.8%

0.6%

0.4%

0.2%

0.0%-0.2%

-0.4%

-0.6%

-0.8%

-1.0%3Q11 4Q11 1Q12 2Q12 3Q12 4Q12

-1,0%-0,8%

-0,6%-0,4%

-0,2%0,0%

0,2%0,4%

0,6%

0,8%1,0%

Q3 2

011

Q4 2

011

Q1 2

012

Q2 2

012

Q3 2

012

Q4 2

012

-1,0%-0,8%

-0,6%-0,4%

-0,2%0,0%

0,2%0,4%

0,6%

0,8%1,0%1.0%

0.8%

0.6%

0.4%

0.2%

0.0%-0.2%

-0.4%

-0.6%

-0.8%

-1.0%

1.0%

0.8%

0.6%

0.4%

0.2%

0.0%-0.2%

-0.4%

-0.6%

-0.8%

-1.0%3Q11 4Q11 1Q12 2Q12 3Q12 4Q12

-25

-20

-15

-10

-5

0

5

10

15

20

25

30

07 08 09 10 11 12

4300

4350

4400

4450

4500

4550

4600

4650

4700

Private Sector (QoQ, .000) Public Sector (QoQ, .000)

total employment (rhs, .000)

Source: National Bank of Belgium Source: National Bank of Belgium

That said, we believe that the conditions are still there to see a smooth recovery in the

second half of the year, kick-started by external trade, as there are clear signs of

improvement in the US and in many emerging markets. Therefore, after a 0.2%

contraction in GDP this year, growth is likely to remain weak in 2013, to the tune of 0.1%.

The budget for 2013 has been presented in December. The aim is to reduce the public

deficit to 2.15% of GDP. The new measures taken by the government imply some tax

increases, but at this stage they are not able to destabilise the economy.

As the economic growth is likely to be weaker than the government’s first assumption

(0.7%), the budget deficit will be somewhat higher than the target, around 2.5% of GDP.

In the two coming years, the government will have to focus on structural reform in order

to guarantee the long-term sustainability of the Belgian public finances, and also to

sustain economic growth. As there will be federal and regional elections next year, this

task could be quite difficult.

Nevertheless, Belgian public finances are among the soundest in the Eurozone. The

primary balance was already positive in 2012 and even in the case of lower economic

growth, the deficit would remain below 3% this year. This probably explains why Belgian

bonds benefit from investors’ confidence and why the spread with the German bond

remains far below 100bp.

Finally, despite the fact that Eurostat decided to add the new Dexia recapitalisation (end-

2012) to the budget deficit, thereby lifting the 2012 deficit above 3.0% of GDP, it doesn’t

alter the public finances dynamics for 2013 and after.

But there are some less

negative signs…

The budget is fixed…

Inflation is on a declining

path…

…as the labour market

remains weak

…but additional efforts are

needed…

…as growth will be lower

than expected by the

government

That said, Belgian bonds

continue to benefit from

investors’ confidence


20

Inflation significantly declined at the beginning of 2013 and is now at 1.1%. This positive

development is mainly due to the fall in inflation of energy prices. Food price inflation was

also favourably impacted by a decline in fresh food prices at the end of 2012. Finally, new

measures introduced by the government to correct the CPI cut inflation by another 0.2ppt.

In the coming months, we believe that general inflation of consumer prices will stabilise

around 1.5%. As a consequence, there will be no wage indexation in 2013, which will be

positive for companies, as the labour cost should not increase that much in 2013.

In conclusion, even if in absolute terms the economic situation of Belgium remains very

weak, it remains part of the core of the Eurozone. Having said that, as in many countries,

structural reforms still have to be implemented in order to ensure the long-term

sustainability of the economy, and in particular of the public finances.

[email protected]

…and will stabilise around

1.5% in 2013


21

Equity strategy

Introduction Financial markets have managed to stay flattish since the start of the year, despite

continued political and economic uncertainty. We flagged these main risks (except for

Cyprus) in our last report (see Benelux Digest, Leaving the trenches, 18 January 2013).

Since then, we have seen the US fiscal cliff materialise, we have seen Italy’s political

outcome resulting in a standstill and we have seen the rescue of Cyprus in the first

quarter of the year (and the discussion of a potential new ‘template’ for rescuing banks),

but still the financial markets are higher than at the start of the year.

Still, the difference in performance was more pronounced than expected at the beginning

of the year, with high quality, highly visible defensive names such as AB INBEV, Unilever

and Heineken reaching new highs, but several cyclical names such as Arcelor Mittal,

Nyrstar and Aperam losing substantial ground.

As long as this political uncertainty about the crisis lingers on, we expect a delay in new

money finding its way to a more risk-on strategy. Although we have seen some temporary

profit-taking in defensive names early on in the quarter, the crisis in Cyprus has led to a

reversal of positioning for sure. Still, at the current valuation levels for defensives, we

could see new money moving gradually to high quality, attractively valued cyclical names

with low gearing.

We continue to favour a balanced approach in our stock selection, backed by:

1) strong balance sheets

2) strong cash flow generation

3) the potential for synthetic share buybacks or special events (M&A target)

4) attractive relative valuation levels

5) low risk for 2013 EPS disappointments

Our top picks In our screening, we see average upside of 26% in our portfolio with a median

EV/EBITDA (x) of 4.8x for 2014F, attractively valued as well. It is a balance between

cyclical names, and financial and defensive names.

Fig 21 Top picks (€)

Share Target Rec MCap Upside PER (x) EV/EBITDA (x) price price (€m) (%) 2013F 2014F 2013F 2014F

AMG 6.4 9.0 Buy 175 42 8.6 6.9 5.4 4.8Ageas 26.3 32.5 Buy 6,030 24 10.7 10.2 n/a n/aAhold 12.1 13.8 Buy 13,343 14 11.7 11.7 4.9 4.5Boskalis 26.3 38 Buy 3,687 24 12.5 10.3 6.9 5.9Barco 65.8 83 Buy 840 26 8.2 8.9 4.2 3.9CSM 16.5 21 Buy 1,146 28 27.3 14.0 9.4 8.5Melexis 14.7 18 Buy 595 22 12.0 10.9 8.2 7.2PostNL 1.6 3 Buy 708 86 6.8 3.5 5.8 4.5Philips 23.0 29 Buy 20,705 26 14.1 11.9 6.0 5.1SBM Offshore 12.5 17 Buy 2,594 36 7.3 6.8 6.9 7.0Median 26 10.7 10.2 6.0 5.1

Prices as at 4 April 2013


Leaving the trenches

New money still has not

adopted a risk-on strategy

Absolute valuation levels will

start playing a role in our

view


22

Sensitivity analysis: conservative gearing It is clear that our selection (although slightly weighted towards cyclical exposure) still has

plenty of ‘security’ built in, as we have selected stocks with a relatively attractive gearing

and a strong balance sheet.

Our top picks screen well on this metric. All of our top picks, except PostNL and SBMO,

have net debt/EBITDA ratios for 2013F that are below 2x; out of these, Barco, Ahold,

CSM and Melexis actually have net cash positions.

We expect PostNL to show marked improvement in 2014F and bring down net

debt/EBITDA to 3.7x (from 4.7x in 2013F). For SBM Offshore, the net debt/EBITDA

multiple is not adjusted for its lease portfolio.

Fig 22 Top picks: conservative gearing (x)

Net debt/EBITDA EV/EBITDA EV/EBITDA Historical Premium/ 2013F 2014F BB consensus EV/EBITDA discount (%)

AMG 1.9 4.8 3.8 3.4 40Ageas n/a n/a n/a n/a n/aAhold (0.7) 4.5 6.1 5.7 -22Boskalis 1.7 5.9 5.2 5.7 3Barco (0.8) 3.9 4.7 4.7 -18CSM (1.4) 8.5 10.2 6.8 25Melexis 0.1 7.2 7.5 7 3PostNL 3.9 4.5 4.0 6.1 -26Philips 0.5 5.1 5.8 7.6 -33SBM Offshore 3.3 7.0 4.2 6.5 7Median 5.1 5.2 6.1 -16

Source: Bloomberg consensus as of close 4 April 2013, ING estimates

Sensitivity analysis: strong free cash flow yield In our screening we continue to pay a lot of attention to improving free cash flow trends.

Figure 23 below shows that 8 out of the 10 companies screen well on free cash flow

yields (except for Ageas, as the FCF yield is not a metric to focus on for financials, and

SBM Offshore, which has a capex cycle for the coming three years).

Fig 23 Top picks: FCF yield (%)

2013F 2014F 2015F

AMG 9.6 10.0 11.6Ageas n/a n/a n/aAhold 11.0 12.1 12.3Boskalis 7.6 8.0 8.8Barco 13.5 14.1 13.1CSM 4.0 6.2 6.7Melexis 6.7 8.9 9.8PostNL 0.2 5.7 13.9Philips 8.4 8.2 11.0SBM Offshore n/a n/a n/aMedian 8.0 8.6 11.3


Sensitivity analysis: potential take-out candidates It is no surprise that financial markets are looking for companies with solid cash flow

performance and strong balance sheets in the current environments. Many corporates

have indeed built up a very strong balance sheet in this uncertain economic environment,

but now the end of the tunnel could be near, with the stabilisation of end markets and a

pick-up seen in 2014-15F. This, in combination with the ample availability of funds at

historically low interest rates, provides for excellent opportunities for acquisitions. With

Ziggo and DE MB potentially out, we have listed a potential target list for the Benelux.


23

Fig 24 Mergers & acquisitions: potential candidates screened on likelihood

Potential Blocking Probability Potential Style take-out vote outcome acquirer

Aalberts Industries Cyclical Yes Yes Low Private equity ACOMO Defensive Yes Yes Low Industrial buyer in commodity space like Cargill Agfa Gevaert Cyclical Yes No Low Financial buyer. Most industrial players do not have the financial strength Ahold Defensive Yes Yes Low Industrial buyer in US like Target, in NL financial buyer AMG Cyclical Yes Yes Medium/High Financial buyer, which could sell the parts Aperam Cyclical Yes Yes Medium Industrial buyer amid industry consolidation Arseus Defensive yes yes Medium Financial buyer Ballast Nedam Cyclical Yes Yes Low Other construction companies, domestic and abroad BAM Cyclical Yes No Low Foreign construction companies BESI Cyclical Yes No Low/Medium Industry buyer/Private equity Beter Bed Defensive Yes No Low Private equity, family-lead investor group Brunel International Cyclical Yes Yes Medium/High Strategic player (eg, large generalist/specialist staffer) CFE Cyclical Yes Yes Low Vinci CSM Defensive Yes No High Industrial buyer like DSM, BASF, Solvay D’Ieteren Cyclical Yes Yes Medium Financial buyer (D’Ieteren family?) DE Master Blenders Defensive Yes No High Financial buyer most likely, (JAB), Industrial buyer like Nestle, Mondelez Deceuninck Cyclical Yes Yes Medium Industrial buyer amid industry consolidation Delhaize Defensive Yes No Low Industrial buyer EVS Cyclical Yes No Medium Industrial buyer most likely but financial buyer also possible given net

cash position and fact that biggest R&D investments now made Exact Holding Defensive Yes Yes Low/Medium Private equity/industry player Galapagos Defensive Yes Yes high Potential buyer could be J&J, GSK, Abvie Grontmij Defensive Yes Yes high After restructuring US players with deep pockets might look at Grontmij Heijmans Cyclical Yes No Low Foreign construction companies Imtech Cyclical Yes No Low Private equity, large industrial/energy conglomerates Kendrion Cyclical Yes No Low Large automotive suppliers, private equity, family-lead investment group Kinepolis Defensive Yes Yes Low Industrial buyer, private equity KPN Defensive Yes Yes Medium Industrial buyer like AMX, AT&T or one of the European incumbents Macintosh Cyclical Yes Yes Low Take-over interest driven by rapid change in online business models Mobistar Defensive Yes Yes Medium Industrial buyer like FT, Telenet/Tecteo Nutreco Defensive Yes No Low Industrial Buyer like Cargill could be interested Nyrstar Cyclical Yes No Medium Industrial player Ordina Cyclical Yes Yes Low Industry player/private equity Recticel Cyclical Yes Yes Medium/High Industrial player like Kingspan Royal Ten Cate Defensive Yes No Low Industry players, private equity, family-lead investment group Sligro Defensive Yes Yes Low Industrial buyer like Colruyt, limited seen Financial buyer Telenet Group Defensive Yes Yes High Industrial buyer (Liberty Global) Tessenderlo Cyclical Yes Yes Medium Industrial buyer, post strategy execution TKH Group Cyclical Yes No Low Private equity, family-lead investor group TNT Express Cyclical Yes No Medium/High FedEx TomTom Cyclical Yes Yes Medium Apple, Google, smart phone manufacturer UCB Defensive Yes Yes Medium Astrazeneca Umicore Cyclical Yes No Medium Industrial buyer Unit4 Cyclical Yes No Medium/High Industry player, private equity USG People Cyclical Yes Yes Low/Medium Industry player Wessanen Defensive Yes No Low Financial buyer, Reed Elsevier Wolters Kluwer Defensive Yes No Low Financial buyer potentially (LBO, MBO) Ziggo Defensive Yes No High Industrial buyer like Liberty Global (most likely) or Vodafone


We highlight in Figure 25 those companies with and without a blocking vote and a

low/medium to high chance of take-out. We have screened the stocks for upside on

potential take-out multiples.

24

Benelux D

igest A

pril 2013

Fig 25 M&A: Potential take-out candidates (€m)

Style Blocking vote Probability Net debt 2013F EBITDA 2013F EV/EBITDA 2014F (x) Take-out (x) Potential MCap Current MCap Up/Down (%)

AMG Cyclical Yes Medium/High 170.5 89.75 5.0 6.0 368.0 174.00 111.5 Galapagos Defensive Yes high (81.89) (1.955) -25.7 -500.0 1,059.4 516.80 105.0 BAM Cyclical No Low 1,120 214.7 9.2 12.5 1,563.8 776.00 101.5 Recticel Cyclical Yes Medium/High 141.4 96.7 3.0 5.0 342.1 177.10 93.2 Delhaize Defensive No Low 1,570 1,378 4.0 6.5 7,387.0 4,136.00 78.6 Unit4 Cyclical No Medium/High 9.791 101 6.3 13.0 1,303.2 729.90 78.5 Brunel International Cyclical Yes Medium/High (125.8) 86.94 6.4 14.0 1,343.0 771.30 74.1 Heijmans Cyclical No Low 142.6 61.42 4.1 5.5 195.2 116.80 67.1 BE Semiconductor Industries Cyclical No Low/Medium (70.37) 48.37 2.8 7.0 409.0 250.00 63.6 Deceuninck Cyclical Yes Medium 82.04 51.21 4.6 6.0 225.2 145.50 54.8 Aperam Cyclical Yes Medium 762.9 316 4.9 6.0 1,133.1 734.00 54.4 Wessanen Defensive No Low 32.12 39.15 5.1 7.5 261.5 170.70 53.2 Macintosh Cyclical Yes Low 38.47 44.94 5.6 8.0 321.1 212.90 50.8 Ballast Nedam Cyclical Yes Low 45.2 36.82 3.5 5.5 157.3 105.80 48.7 Ordina Cyclical Yes Low 2.915 16.26 4.6 10.0 159.7 108.80 46.8 Exact Holding Defensive Yes Low/Medium (71.68) 50.31 6.4 10.0 574.8 397.00 44.8 Imtech Cyclical No Low 676.5 333.8 4.9 5.5 1,159.4 808.70 43.4 TomTom Cyclical Yes Medium (17.63) 122.8 3.7 8.0 1,000.0 707.20 41.4 TKH Group Cyclical No Low 163.2 123.5 7.3 10.0 1,071.8 758.10 41.4 Arseus Defensive yes Medium 215.5 95.86 8.2 11.0 839.0 627.80 33.6 Kendrion Cyclical No Low 15.4 41.1 4.7 7.5 292.6 220.86 32.5 Mobistar Defensive Yes Medium 357.2 427.2 3.3 4.0 1,351.6 1,022.00 32.3 ACOMO Defensive Yes Low 115 49.56 10.1 12.0 479.7 365.70 31.2 KPN Defensive Yes Medium 10,380 4,066 3.5 3.7 4,664.2 3,590.00 29.9 UCB Defensive Yes Medium 2,508 702.1 13.2 20.0 11,534.0 8,920.00 29.3 Nutreco Defensive No Low 255.1 351 7.5 10.0 3,254.9 2,518.00 29.3 Tessenderlo Cyclical Yes Medium 341 162.2 5.9 7.0 794.4 620.90 27.9 CSM Defensive No High (143.8) 106.1 7.6 12.5 1,470.1 1,154.00 27.4 DE Master Blenders Defensive No High 281 467.5 14.3 20.0 9,069.0 7,200.00 26.0 Beter Bed Defensive No Low (0.1189) 40.34 6.5 9.5 383.3 306.40 25.1 Nyrstar Cyclical No Medium 705.8 288.6 3.8 5.0 737.2 596.50 23.6 TNT Express Cyclical No Medium/High (250.5) 616.8 4.4 5.8 3,803.3 3,119.00 21.9 Wolters Kluwer Defensive No Low 1,881 915.6 7.6 9.0 6,359.4 5,224.00 21.7 Royal Ten Cate Defensive No Low 188.3 100.5 6.5 7.5 565.5 468.70 20.6 EVS Cyclical No Medium (16.33) 59.9 9.0 13.0 795.0 660.30 20.4 Aalberts Industries Cyclical Yes Low 512.4 319.4 7.0 8.5 2,202.5 1,867.00 18.0 USG People Cyclical Yes Low/Medium 145.6 80.55 6.2 9.0 579.4 508.90 13.8 Kinepolis Defensive Yes Low 54.81 77.82 7.6 9.0 645.6 572.10 12.8 D’Ieteren Cyclical Yes Medium 402.5 372.6 5.7 7.0 2,205.7 1,989.00 10.9 Umicore Cyclical No Medium 199.9 512.2 7.8 9.0 4,409.9 4,011.00 9.9 Telenet Group Defensive Yes High 2,814 839.4 8.0 9.0 4,740.6 4,342.00 9.2 Ziggo Defensive No High 2,926 902.2 9.2 10.0 6,096.0 5,621.00 8.5 Agfa Gevaert Cyclical No Low 257.7 226 5.9 7.0 245.3 243.20 0.9 Sligro Defensive Yes Low 45.48 150 7.2 7.5 1,079.5 1,094.00 -1.3 Grontmij Defensive Yes high 130.6 39.42 7.3 7.4 161.1 214.40 -24.9



25

With Ziggo and DE MB potentially out, we believe the market might be wondering who

could be next on that list? From our target list above, we can make a short list with those

not having a blocking vote and a substantial upside based on potential take-out multiples.

Fig 26 M&A: a potential short list (€m)

Style

Potential take-out target

Potential Blocking vote

Probability outcome

2013F Net debt

2013FEBITDA

2014F EV/EBITDA

Potential Take-out

(x)

Potential MCap

CurrentMCap

Upside/downside

(%)

BAM Cyclical Yes No Low 1,120 214.7 9.1 12.5 1,563.8 758.40 106.2Unit4 Cyclical Yes No Medium/High 9.791 101 6.3 13.0 1,303.2 730.20 78.5BE Semiconductor Industries Cyclical Yes No Low/Medium (70.37) 48.37 2.8 7.0 409.0 248.90 64.3Heijmans Cyclical Yes No Low 142.6 61.42 4.1 5.5 195.2 119.30 63.6Wessanen Defensive Yes No Low 32.12 39.15 5.1 7.5 261.5 170.30 53.6Imtech Cyclical Yes No Low 676.5 333.8 4.9 5.5 1,159.4 812.30 42.7TKH Group Cyclical Yes No Low 163.2 123.5 7.4 10.0 1,071.8 763.70 40.3Nutreco Defensive Yes No Medium 255.1 351 7.3 10.0 3,254.9 2,427.00 34.1Kendrion Cyclical Yes No Low 15.4 41.1 4.7 7.5 292.6 220.86 32.5Delhaize Defensive Yes No Low 1,570 1,378 3.9 5.0 5,320.0 4,030.00 32.0CSM Defensive Yes No High (143.8) 106.1 7.4 12.5 1,470.1 1,122.00 31.0DE Master Blenders Defensive Yes No High 281 467.5 14.3 20.0 9,069.0 7,226.00 25.5Nyrstar Cyclical Yes No Medium 705.8 288.6 3.8 5.0 737.2 593.30 24.3Wolters Kluwer Defensive Yes No Low 1,881 915.6 7.5 9.0 6,359.4 5,128.00 24.0Beter Bed Defensive Yes No Low (0.1189) 40.34 6.6 9.5 383.3 313.30 22.4EVS Cyclical Yes No Medium (16.33) 59.9 8.9 13.0 795.0 650.30 22.3TNT Express Cyclical Yes No Medium/High (250.5) 616.8 4.4 5.8 3,803.3 3,120.00 21.9Royal Ten Cate Defensive Yes No Low 188.3 100.5 6.5 7.5 565.5 467.40 21.0Umicore Cyclical Yes No Medium 199.9 512.2 7.7 9.0 4,409.9 3,954.00 11.5Ziggo Defensive Yes No High 2,926 902.2 9.0 10.0 6,096.0 5,476.00 11.3Agfa Gevaert Cyclical Yes No Low 257.7 226 5.8 7.0 245.3 224.80 9.1


Sensitivity analysis: synthetic buyback potential We believe that in an environment where growth will be hard to realise, it is important to

select stocks that have ‘self-help’ potential. In the screening in Figure 27, we highlight the

potential self-help opportunity for our top picks and how much room these companies

have in terms of synthetic buyback potential based on 2013F net debt (excluding

financials).

Fig 27 Synthetic share buyback: potential opportunity for ‘self-help’ (€m)

Style Net debt/EBITDA

target (x)2013F

EBITDA 2013F

Net debt2013F

FCF2014F

FCFOpportunity

gearingContribution

FCF Synthetic

SBBMCap MCap as

%

Ahold Defensive 3 2,205 (1,456) 1,172 1,229 8,071 2,401 10,472 13,340 79AMG Cyclical 2 89.75 170.5 46.91 46.22 9 93.13 102.13 175 58Barco Cyclical 2 167.4 (140.7) 94.2 90.91 475.5 185.11 660.61 840 79Boskalis Cyclical 2 720.2 1,199 377.3 383.3 241.4 760.6 1,002 3,687 27CSM Defensive 3 106.1 (143.8) 40.54 69.47 462.1 110.01 572.11 1,146 50Melexis Cyclical 2 72.83 4.234 39.92 51.45 141.426 91.37 232.796 595 39Philips Cyclical 2 3,758 1,971 1,905 1,746 5,545 3,651 9,196 20,700 44PostNL Defensive 3 379 1,489 4.514 126.3 (352) 130.814 (221.186) 708 -31SBM Offshore Cyclical 2 901.4 2,990 (805) (794.7) (1,187.2) (1,599.7) (2,786.9) 2,594 -107

Source: ING estimates based on close of 4 April

Financials sector outlook Financial outperformance has come to an end We said at the beginning of the year that following a rally in financials last year (banks

+23% and insurance +33% vs index +14%), the risk-reward would become more

balanced in 1H13. So far this has proved correct; insurers have performed essentially in

line with broader indices. However, banks actually slightly underperformed by 5%

following tensions over Cyprus and uncertainty about the outcome of the Italian elections.

The insurance sector has performed essentially in line with the broader Euro Stoxx 600

index year-to-date (SXIP +5% vs market +6%), but has continued to outperform the

banks sector (SX7P), which is up only 1% year-to-date. Initially, the banks outperformed

After two years of

outperformance, insurers

have performed in line year-

to-date

After good initial start banks

have underperformed

broader market by c.5%


26

the insurance sector by 6ppt, which was our expectation for 1H13, but tensions over the

outcome of the Italian elections and the bailout of Cyprus saw a complete reversal with

overall performance flat since the start of the year for banks.

Our favourite Benelux financials stocks are KBC and KBC Ancora (a leveraged play on

KBC given its high return prospects, the likelihood of an earlier-than-expected repayment

of state aid and a resumption of a normalised dividend policy); Ageas (valuation,

potential for further share buybacks and upside from Royal Park Investments) and Delta

Lloyd (valuation, confirmation of dividend sustainability and a good play on rising interest

rates).

Fig 28 Absolute performance

Fig 29 Relative performance

-20%

-10%

0%

10%

20%

30%

40%

1-yr 2-yr 2H12 YTD

Stoxx 600 (SXXP) Insurance (SXIP) Banks (SX7P)

-30%

-20%

-10%

0%

10%

20%

30%

40%

1-yr 2-yr 2H12 YTD

Insurance (SXIP) Banks (SX7P) Insurance vs banks


Insurance outlook: modesty after strong 2012 We believe the strong (out)performance since end-2012 is unlikely to be sustained in

2013. The sector’s proven stability (balance sheet strength), combined with attractive

dividend yields (supported by cash flows) attracted investors’ attention. A more bullish

backdrop for insurers would be: (1) a meaningful increase in (long-term) bond yields (not

our base case); and (2) a strong equity market performance (year-to-date positive).

Re-rating was the sole performance driver in 2012, as earnings momentum over the year

was still slightly negative. The insurance sector trades at a two-year forward PER of 9.0x

and P/BV of 1.0x for a 5.2% yield. This compares with levels at end-September last year

of 7.0x, 0.9x and 5.5%, respectively. Risk-reward thus seems more balanced.

Banks: Time for differentiation or still too early? The banks sector index staged a rally in 2012 (especially in 2H12: +28%) despite

negative earnings revisions of c.20% for 2013-14, but the 2013 year-to-date performance

has been flat. The promising start to the year was erased after tensions over Cyprus and

Italy surfaced as a reminder of the vulnerability of stability in the Eurozone. We see scope

for further outperformance if market concerns fade versus the insurance index, but the

sector currently seems more fairly valued, trading at approximately 0.9x tangible equity

for about 10% near-term return. This still looks cheap in a historical multiples (and

profitability) context, but, in our view, we need convincing earnings surprises and macro

data (which seems less likely) to re-rate much further in the short term. On PER, the

sector trades at approximately 8.0-9.0x in 2014F – at a small premium versus broader

indices. The capital ratios in the sector are approaching 10% (Basel III common equity)

and, given low loan growth and continued deleveraging, the free cash flow generation is

high, supporting dividends. This could be an area of surprise for 2013. The main risk we

Re-rating was the sole

performance driver in 2012

Banks trading at c.0.9x

tangible equity for about 10%

near term return; risk-reward

getting more balanced


27

see is continued debate on risk-weighted asset comparability and a general tendency of

companies and regulators to raise the bar on CET1 ratios.

We believe the main themes for 2013 will be: (1) German elections (September); (2)

whether Spain will request for OTM; (3) bail-in of debt and deposit holders; (4) a further

bedding down of regulation; and (5) debate about the US fiscal cliff and prospects of QE3.

We summarise below the main events to watch in 2013.

Agenda of key events for 1H13

• The fiscal cliff has been ducked until later this quarter, but not totally evaded

• Will Spain request for OMT or not? Only likely, in our view, if spreads widen again

• Greek bailout not enough; Portugal might need second programme, and Slovenia and

Hungary seem at risk

• France: labour market reform test for Holland

• Finalisation of Basel III (CRD IV directive) and developments in Solvency II

Agenda of key events for 2H13

• German elections in September: pro or contra Europe

• Banking union discussion including ESM allowed to re-cap banks

• Fiscal union talks to intensify: only post German elections debate can continue

• Fears about missing 2013 budget targets: high risk of missing targets once more

• Compromise final EU-wide Financial Transaction Tax (implementation date seen as

1/1/16 and deadline 1/1/14 unlikely to be met)


28

Benelux Real Estate outlook Still at trough We see the Benelux real estate shares currently valued close to trough earnings

multiples and as such relatively attractively priced. Income returns look favourable

compared with historical returns.

We continue to see prime property as the preferred play for the long run, with the current

economic environment characterised by uncertainty, low consumer and producer

confidence and central bank stimulus, coupled with government and consumer austerity.

No earnings multiple expansion yet: Benelux names close to trough PER multiple

Figure 30 illustrates the lack of multiple expansion in both Dutch and Belgian listed real

estate names since the start of the economic crisis. However, Belgian real estate names

have shown more stable results and are now trading at a premium versus the Dutch real

estate names and somewhat closer to historical highs. In particular, the smaller caps in

Belgium have fared well recently. The reversal in multiple ranking is also due to the

higher exposure of the Dutch companies to secondary property.

Fig 30 Cash PER, 2006-13F

10x

12x

14x

16x

18x

20x

22x

24x

2006 2007 2008 2009 2010 2011 2012 2013

Netherlands Belgium EV weigthed Netherlands EV weightedweighted

10x

12x

14x

16x

18x

20x

22x

24x

2006 2007 2008 2009 2010 2011 2012 2013

Netherlands Belgium EV weigthed Netherlands EV weightedweighted

The EV weighted average for Netherlands listed stocks significantly differs from their unweighted average due to the large weighting of Unibail

Source: ING

Prime versus secondary gap widening

As the gap widens between peripheral and core Europe, we believe continued support

from central governments will be needed to sustain an orderly transition back to growth

for the periphery. We believe this will translate into low rates for an extended period of

time in Europe while economic growth will remain subdued, but overall positive in the

core.

Prime property will be the main beneficiary, as its income is (better) preserved, by

contrast with secondary property, which runs the risk of bearing the brunt of austerity

measures and low confidence. However, prime property also benefits from the same

improved funding conditions provided it has access to capital markets. This also

increasingly favours larger companies. Unibail continues to be our preferred prime play

for Europe in the long term.

Real Estate sector income returns historically attractive

Figure 31 indicates the spread between government bond yields and the dividend yield of

the ING Benelux coverage universe. We see that the spread peaked in 2012, partly

because of unsustainably high dividends paid by companies that are reshaping their

portfolios and/or are caught by weak end markets. We see the reset dividends as stable

Benelux cash PER multiples

close to trough

Benelux Real Estate close to

trough PER multiples

For the longer term, we still

prefer prime property

After resetting dividends in

2012, most dividend streams

in the Benelux appear stable

Unibail preferred long-term

prime real estate play


29

and the current yield premium of real estate companies over government bonds at 370bp,

still close to the high of over 400bp last year.

Fig 31 Dividend yield spread

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

2006 2007 2008 2009 2010 2011 2012 2013

0

500

1,000

1,500

2,000

2,500

3,000

Spread over Bonds 10 Yr BondsBenelux dividend yield EPRA Index (RHS)

Enterprise value weighted dividend yield, government bonds weighted average of the Netherlands, France, Belgium and Germany

Source: ING

Overall, we see the income streams of the Benelux real estate companies as attractive

relative to bonds and to their own historical average, while the EPRA real estate share

index and many individual real estate stocks are still 50% off their 2007 highs,

highlighting that, on average, shares have not regained previous highs.

We remove Aedifica from the Benelux Least Favourite list

We had added Aedifica to the Benelux Least Favourites on 18 March due to the share

price jump following the company’s inclusion in the EPRA index. Added at a share price

of €51.2, we now remove Aedifica at a somewhat more normalised price of €49.5 (-3%),

as we believe the effects of the index inclusion should be factored in now.

We added NSI to our Benelux Least Favourites on 26 February at a share price of €5.83

and removed NSI from the list on 18 March, again due to a sharp fall in the share price to

€5.10 (-13%).

Fig 32 ING Real Estate coverage universe multiple ranking, 2013F

Prem/disc to EPRA NAV (%) PER (x) EBITDA implied yield (%) Loan to value (%) Dividend yield (%)

NSI -44 NSI 6.8 NSI 7.0 NSI 61 Vastned 7.7Vastned -31 Vastned 10.7 Vastned 6.8 LRE 56 NSI 7.3ECP -23 Befimmo 12.1 WDP 6.2 WDP 55 Befimmo 6.9Wereldhave -22 WDP 12.2 Wereldhave 6.1 Banimmo 55 Cofinimmo 6.7Banimmo -15 Cofinimmo 12.6 Corio 6.0 Cofinimmo 50 ECP 6.7Corio -12 Corio 13.3 Cofinimmo 5.8 Befimmo 47 WDP 6.6Cofinimmo -8 LRE 13.5 ECP 5.8 Corio 45 Corio 6.4Befimmo -7 ECP 14.9 Ascencio 5.8 Vastned 45 LRE 6.2Ascencio 6 Ascencio 15.7 Befimmo 5.8 Ascencio 43 Wereldhave 6.1LRE 8 Wereldhave 16.6 LRE 5.2 Unibail 41 Ascencio 5.8Unibail 15 Unibail 17.8 Unibail 5.2 ECP 41 Unibail 4.7Aedifica 17 Aedifica 23.8 HIB 4.9 Aedifica 36 HIB 4.3HIB 22 HIB 27.6 Aedifica 4.9 HIB 24 Aedifica 3.8WDP 42 Banimmo 36.6 Banimmo 2.8 Wereldhave 19 Banimmo 2.7

Average Benelux -4 Average Benelux 16.7 Average Benelux 5.6 Average Benelux 44 Average Benelux 5.9Average NL -19 Average NL 13.4 Average NL 6.2 Average NL 42 Average NL 6.5Average BE 8 Average BE 19.3 Average BE 5.2 Average BE 46 Average BE 5.4

EBITDA implied yield is calculated as EBITDA (t+1)/EV


We remove Aedifica from the

Benelux Least Favourite list

30

Benelux D

igest A

pril 2013

Fig 33 Benelux Real Estate coverage universe overview

Name

Market cap

(€m)

2013F EV

(€m)Price

(€)

Target premium/ discount

(%)

2013F IFRS NAV

(€m)

2013Fadjusted

NAV(€m)

P/IFRS NAV

(x)

P/adjusted NAV

(x)

2013F implied net rental yield

(%)

2013F PER

(x)

2013FLTV(%)

12m target price

(lc)

12m pricereturn

(%)

2013F dividend

yield (%)

12m total return

(%)Rec

Belgium Aedifica 490 721 49.5 5 38.2 42.2 1.30 1.17 5.5 23.8 36 44.5 -10.1 3.8 -6.4 Hold Ascencio 221 361 54.1 5 47.1 51.1 1.15 1.06 6.4 15.7 43 53.6 -0.8 5.8 5.0 Hold Banimmo 107 320 10.0 -10 11.7 11.7 0.85 0.85 5.0 36.6 55 10.5 5.1 2.7 7.8 Buy Befimmo 915 1,760 49.6 -5 53.0 53.1 0.94 0.93 6.5 12.1 47 50.9 2.6 6.9 9.5 Hold Cofinimmo 1,430 3,187 89.6 -5 94.0 97.7 0.95 0.92 6.6 12.6 53 90.8 1.4 6.7 8.1 Hold Home Invest Belgium 234 296 77.0 0 62.4 63.3 1.23 1.22 5.8 27.6 24 64.6 -16.1 4.3 -11.8 Hold Leasinvest Real Estate 294 647 72.4 0 64.1 67.2 1.13 1.08 6.1 13.5 56 69.8 -3.6 6.2 2.6 Hold WDP 731 1,379 49.3 10 30.8 34.6 1.60 1.42 6.6 12.2 55 39.6 -19.7 6.6 -13.1 Hold

Netherlands Corio 3,450 6,881 36.6 0 42.1 41.6 0.87 0.88 6.4 13.3 45 41.6 13.6 6.4 20.1 Buy Eurocommercial Properties 1,194 2,304 29.2 -10 32.2 37.7 0.91 0.77 6.3 14.9 41 33.9 16.0 6.7 22.7 Buy NSI 355 1,680 5.2 -30 8.1 9.2 0.64 0.56 7.6 6.8 61 6.0 15.3 7.3 22.6 Hold Unibail Rodamco 17,888 30,033 186.9 15 149.2 162.1 1.25 1.15 5.6 17.8 41 185 -1.0 4.7 3.7 Hold Vastned 613 1,459 33.0 -20 44.0 47.5 0.75 0.69 7.4 10.7 45 38.6 17.0 7.7 24.8 Buy Wereldhave 1,092 1,640 54.6 -15 67.1 70.1 0.81 0.78 7.0 16.6 19 59.7 9.4 6.1 15.5 Buy

Average Belgium (unweighted) 0.0 1.14 1.11 5.8 19.3 46 -5.2 5.4 0.2 Average Netherlands (unw) -10.0 0.87 0.85 7.3 13.4 42 11.7 6.5 18.2 Average Benelux (unw) -4.3 1.03 0.99 6.6 16.2 44 2.1 5.9 7.9

Prices as at 4 April 2013 Source: ING


31

ING’s top picks in the Benelux

Despite a weak batch of confidence indicators in March, the ECB’s tone on the economic

outlook remained rather unchanged. The ECB still expects the improvements in financial

markets since last summer to “work their way through to the real economy” and still

foresees a gradual recovery in the second half of the year. Risks to the economic outlook

remain to the downside. As regards inflation, the ECB still sees risks being broadly

balanced. As in March, the euro exchange rate is no longer considered to be a risk to

price stability.

Although the ECB seems to stick to its earlier macro-economic assessment and has, at

least for the time being, filed the latest disappointing sentiment indicators under “one-off

fluctuation”, ECB president Draghi sounded slightly more dovish than in March. The

promise that the ECB’s monetary policy stance will remain accommodative “for as long as

needed” and that liquidity operations will be continued with full allotment “for as long as

necessary” was already given last month but received a more prominent position in

yesterday’s introductory statement. Combined with the only real new phrase of “in the

coming weeks, we will monitor very closely all incoming information on economic and

monetary developments and assess any impact on the outlook for price stability”, this

normally could imply that a rate cut has come closer

As long as this political uncertainty about the crisis lingers on we expect a delay of new

money finding its way to a more risk-on strategy but the turning point is near in our view.

Although we have temporarily seen some profit taking in defensive names early on in the

quarter the crisis in Cyprus has led to a reversal of positioning. Still at current valuation

levels of defensives we could see new money moving gradually to high quality,

attractively valued cyclical names with low gearing.

We continue to favour a balanced approach in our stock selection

1) backed by a strong balance sheets and

2) strong cash flow generation

3) potential for synthetic share buybacks or special events (M&A target)

4) relative attractive valuation levels and finally with

5) risk for 2013 EPS disappointment being low.

Fig 34 Benelux favourites list: April 2013

Mcap Price Target price Upside PER (x) EV/EBITDA (x) Dividend yield (%) (€m) (€) (€) (%) 2013F 2014F 2013F 2014F 2013F

Ahold 13,343 12.13 13.8 14 11.6 11.7 4.8 4.5 3.8Ageas 6,030 26.30 32.5 24 10.7 10.2 n/a n/a 4.7AMG 225 6.35 9.0 42 8.6 6.9 5.4 4.7 0.0Barco 840 65.82 83.0 26 8.2 8.9 4.2 3.9 2.4Boskalis 3,687 31.52 38.0 21 12.5 10.3 6.9 5.9 3.9CSM 1,146 16.47 21.0 28 27.3 14.0 9.4 8.5 4.3Melexis 595 14.70 18.0 22 12.0 10.9 8.2 7.2 4.6Philips 20,705 23.01 29.0 26 14.1 11.9 6.0 5.1 3.5PostNL 708 1.61 3.0 86 6.8 3.5 5.8 4.5 0.0SBM Offshore 2,597 12.47 17.0 36 7.3 6.8 6.9 7.0 0.0

Median 1,872 26 11.2 10.3 6.0 5.1 3.7

Prices as at 4 April 2013 Source: ING estimates

Alongside our favourites, we have a list of companies that we think should be avoided in

the upcoming quarters.

ECB still foresees a gradual

recovery in second half

Could Cyprus by the last one-

off?

Could turning point be near,

now that defensive valuation

is ahead of itself?


32

Fig 35 Benelux risk list: April 2013

Mcap Price Target price Upside PER (x) EV/EBITDA (x) Dividend yield (%) (€m) (€) (€) (%) 2013F 2014F 2013F 2014F 2013F

CMB 520 15.10 12.0 -21 233.7 56.4 12.2 10.0 0.7Belgacom SA 6,392 19.00 18.0 -5 10.6 11.8 4.9 5.2 11.5Heineken 33,603 58.44 65.0 11 17.4 15.4 10.7 9.8 1.6Sligro 1,099 24.84 23.0 -7 14.9 13.5 7.6 6.9 4.2

Median 3,746 -6 16.2 14.5 9.2 8.4 2.9

Prices as at 4 April 2013 Source: ING estimates

Performance of ING’s top picks Our previous Benelux favourites list (from September 2012) generated a 13.8% alpha

over the MSCI Europe index whilst our last Benelux favourites list (from January 2013)

generated a -5.9% Alpha versus MSCI Europe, so still in positive territory over the past

nine month period. Star performers in our last Benelux Digest were Arseus (+25.3%) and

Barco (+17.7%) and Philips (+9.9%). The bleeder in our portfolio was Imtech (-42.9%).

Fig 36 Performance of Benelux favourites list

Open (€) Current/closing (€) Performance (%)

Ahold (out since 22 Feb) 10.56 10.98 4.0AMG 6.84 6.35 -7.2Arseus 16.10 20.18 25.3ASMI (out since 26 March) 28.55 26.43 -7.4Barco 55.90 65.82 17.7DSM 45.63 46.84 2.7Fugro (out since 12 Feb) 43.91 38.81 -11.6Imtech (out since 4 Feb) 19.07 10.88 -42.9KBC 26.77 27.12 1.3Philips 20.93 23.01 9.9PostNL (in since 21 February) 1.86 1.61 -13.4Total -2.6

AEX 347.9 346.5 -0.4BEL-20 2,499.4 2,579.0 3.2MSCI World 1,382.72 1,422.22 2.9MSCI Europe 98.47 100.20 1.8DJ EuroSTOXX 267.34 265.43 -0.7

Source: Bloomberg

At the other end of the spectrum AB INBEV (-4.1%), NSI (-11.6%) and Aedifica (-3.4%)

were overshadowed by the flight to safety Unilever (+9.7%) and Sligro (+13.6%).

Fig 37 Performance of Benelux least preferred list

Open (€) Current/closing (€) Performance (%)

AB INBEV (out since 1 Feb) 66.65 63.90 -4.1Aedifica (in since 18 Mar) 51.24 49.50 -3.4Aperam (out since 7 Feb) 11.03 11.00 -0.3CMB 14.66 15.10 3.0Core Laboratories 109.80 131.37 19.6NSI (in since 27 Feb - out since 18 Mar) 5.77 5.16 -11.6Sligro 21.87 24.84 13.6Unilever 28.98 31.80 9.7Total 1.4

AEX 347.9 346.5 -0.4BEL-20 2,499.4 2,579.0 3.2MSCI World 1,382.72 1,422.22 2.9MSCI Europe 98.47 100.20 1.8DJ EuroSTOXX 267.34 265.43 -0.7

Source: Bloomberg


33

Recommendation, target price and EPS revisions

Fig 38 Changes in recommendations, target prices and earnings

Rec Target price (€) 2013F EPS (€) 2014F EPS (€)

Old New Old New Old New %ch Old New %ch

Boskalis Buy Buy 38.0 38.0 2.39 2.52 5.3 2.56 3.06 19.6CSM Hold Buy 18.5 21.0 0.50 0.60 21.1 1.17 1.18 0.5Exact Holding Hold Hold 18.0 17.0 1.50 1.55 3.6 1.66 1.56 -6.0Melexis Hold Buy 15.0 18.0 1.22 1.22 0.1 1.35 1.35 0.0Ordina Hold Hold 1.1 1.3 0.13 0.10 -23.1 0.20 0.17 -15.9Philips Buy Buy 27.0 29.0 1.69 1.63 -3.4 1.90 1.93 1.7PostNL Buy Buy 2.9 3.0 0.41 0.24 -42.1 0.49 0.46 -6.0Randstad Hold Hold 27.0 33.0 2.04 2.11 3.6 2.59 2.63 1.4Unibail-Rodamco Hold Hold 185.0 185.0 21.44 10.47 -51.2 28.11 11.75 -58.2Unit4 Buy Buy 25.8 30.0 2.00 1.79 -10.5 2.47 2.24 -9.3USG People Buy Buy 7.0 7.5 0.60 0.37 -37.7 0.83 0.60 -27.6


Reasons for recommendation changes Exact We maintain our HOLD rating, but lower our target price a touch from €18.0 to €17.0, to

reflect our lower estimates, lower dividend and the increased capitalisation of R&D

expenses in the coming years. This, in our view, warrants a lower target multiple, which

we set at an 11x PER on our FY14F estimate (implying a 15% discount to the historical

average).

Risks. Downside risk factors include larger software companies moving in to target small-

to medium-sized companies, which would create increased competition. A collapse of the

euro and a consequent severe recession would have a significant negative impact on our

forecasts. Moreover, the roll-out of the Online offering abroad could be a risk, as it would

require investment, and Exact might face tough competition.

The upside risk is a faster-than-expected turnaround of the company towards growth

again and that Exact Online could be more successful than is expected and thus boost

earnings momentum. Lastly, a bid on the company from a strategic buyer or private

equity could also lead to an upside risk to our rating.

Ordina We maintain our HOLD rating, but raise our target price from €1.10 to €1.25, based on

the average forecasts of FY13-14F on which we apply the historical PER of 11.9x. We do

not yet apply a full turnaround fair value, as we believe the current macroeconomic

outlook for the Benelux is still weak, with low visibility, which adds to earnings risk.

However, the upside in a successful turnaround is significant, as when we apply the 8-

10% EBITDA margin targets to FY15F on the 11.9x PER target multiple we might see

upside to well above €2.00.

Risks. A severe recession in the Benelux, in which companies again delay IT investment,

would have a serious negative impact on our earnings forecasts. Ordina has a high

exposure to the government and the financial segment in the Netherlands. Budget cuts

might endanger future projects.

Randstad We maintain our HOLD rating, but raise our target price from €27.0 to €33.0 to reflect that

we cautiously look towards FY14F estimates while we still apply a multiple in the range of

12-13x, which is applicable in times of low visibility and lack of earnings momentum. We


34

are not yet confident enough on the macro environment to already play the earnings

momentum card, as we believe that it is still too early and as risk at the moment is more

on the downside than on the upside (despite the recent update on working days for 1Q).

Risks. Weaker economic growth in the US and the Eurozone than is currently priced in

would offer downside risk to the shares. Given Randstad’s high exposure to the US,

France, Germany and the Netherlands, it is vulnerable to a deep recession in these

regions. Randstad has material currency exposure to the US dollar, Japanese yen,

sterling and Australian dollar. The upside risk is that Eurozone concerns fade out and that

economic growth is not coming under pressure or even seeing upside.

Unit4 We maintain our BUY rating, but raise our target price from €25.75 to €30.0, reflecting

that we have rolled over our target multiple to FY14F, based on the improved visibility

and strong order intake for Unit4 (scored large subscription deals in the UK). Our target

multiple is set at 9.0x EV/EBITDA, which is at the higher end of the historical multiple,

and this implies a 13.5x PER target multiple, which is also a touch above the historical

average. We believe this is warranted by the increase in the recurring revenues and

upside potential from FinancialForce.com (Cloud offering). If we were to even value

FF.com at a Cloud multiple of on average 5x EV/sales, we arrive at a target price of

almost €35.0. It is still early days for FF.com, but we at least want to flag the potential

upside if proven successful and sizeable enough.

Risks. Risks to our investment case relate to a general slowdown in the software

investment climate and potential increased competition in the ERP market, especially

from the larger, deep-pocketed players such as SAP, Oracle and Microsoft. Another risk

is the transition towards Cloud computing, which might replace the traditional licence and

on-premise model, which also brings a new type of competitor. Unit4 is heavily investing

into Cloud, but the risk is that this might not be successful in the end.

USG People We maintain our BUY rating, but raise our target price from €7.0 to €7.5, reflecting the

improved risk profile after the sale of the Energy business, which significantly reduces the

net debt position. We also believe that the divestment of the low-yielding generalist

business outside the Benelux and Germany is still likely in the medium term. This,

combined with the potential renewed take-over speculation post divestments, in our view,

will lead to a further re-rating, and hence we raise our target price.

Risks. The key risk to our investment case is weakening economic growth in Europe,

especially in its key regions: the Netherlands, Belgium, Germany and France. Given

USG’s cyclical nature, this could materially reduce earnings forecasts. USG is vulnerable

in countries outside the Benelux due to limited scale and small market positions. In

addition, a failure of the expected divestment of general business outside the Benelux

would limit upside in the medium term.


35

Companies


36

Ageas Maintained

Three catalysts indentified for further re-rating BuyBelgium Market cap €6,030.5mInsurance Bloomberg AGS BB

We identify the following three catalysts for a further re-

rating: (1) an expected roadmap to increase ROE from 8.7%

to an 11% target for 2015; (2) the Asian angle (20-25% of

insurance profit) true value remains overlooked – recent

transaction multiples point to a €3.3bn valuation, or 55% of

market cap (our SOTP valuation points to €1.8bn); and

(3) with BNP call options and RPI (structured credits)

accounting for 20% of market cap, Ageas appears to be in

the driving seat versus the Belgian State, which seems keen

to exit.

Investment case Catalyst 1: Strategy update expected in September – four

actions to improve ROE. We expect Ageas to present strategic

actions that will seek to improve ROE from 8.7% to a group

target of 11%, including the disposal of underperforming assets

and upstreaming of capital to the corporate centre, supporting

further share buybacks. We also expect a sharpening of the

combined ratio target (<100%), which we believe is a key

operational driver of group ROE given its inherently high ROE.

We expect Ageas to aim for ≤98.0%.

Catalyst 2: Asian angle still overlooked (20-25% of profits, of

which China c.10ppt). Recent transaction multiples and the

share price performance of Asian listed peers highlight, in our

view, a substantial valuation discrepancy. We believe the value

of Ageas’ Asian activities is being overlooked. If valued at recent

transaction multiples (and the suggested value of rumoured

potential transactions), we believe the assets could be valued at

€3.3bn (55% of market cap, excluding General Account

valuation: 65%) versus our SOTP-valuation of €1.8bn (P/B 1.0x

and PER 12.6x), a significant discount of c.45%.

Catalyst 3: BNP call options and Royal Park Investments (20%

market cap). This catalyst seems to be coming into play earlier

than we had anticipated (2014 event). The Belgian press (De

Tijd) has mentioned that the Belgian government could consider

selling its stakes in BNP and Royal Park Investments to reduce

the debt-to-GDP ratio due to pressure from Europe. For Royal

Park Investments, we believe a dividend payment would be more

logical than a sale (keep in mind the government also

guarantees CP programme of €4bn) and for the BNP call options

we expect a settlement. In the General Account, apart from net

cash of €1.2bn, the most valuable asset is Royal Park

Investments (44.7% stake), with IFRS equity of €872m, or 14%

of market cap. Royal Park Investments is a structured credit

vehicle containing bad bank assets of the former Fortis Bank.

The improvement in the US housing market is a positive, given a

50% exposure to US RMBS. Of the remaining assets, 60%

needs to be recovered to support the equity value of €872m; we

believe this is feasible, as high-risk assets are limited to 31% of

the total.

Price (04/04/13) €26.31

Maintained

Target price (12-mth) €32.50

Forecast total return 28.3%

Asian assets’ true value overlooked In our view, one of Ageas’ most valuable assets in Asia is its

24.9% stake in Taiping Life (TPL) in China. We think this stake

alone could be worth c.€0.8bn and thus already reflects 45% of

our SOTP value of Ageas’ total Asian activities (€1.8bn).

Moreover, TPL is majority owned (50.05%) by listed China

Taiping Insurance Holding (CTIH, 966 HK Bloomberg ticker). The

majority of value of CTIH stems, in our view, from its stake in

TPL and, based on current market valuation, we believe this

underpins €0.8bn of value of Ageas’ stake

On 13 March 2013, Reuters reported that the Chaiyawan family

is planning to sell at least a 20% stake in unlisted Thai Life

Insurance (Thailand) Co, indicated to be valued at US$500m

(100% equity €1.9bn). Based on the 2011 Annual Report of the

Thai Life Assurance Association (www.tlaa.org), the capital

amounts to €904m, or an implied P/BV of 2.1x.

Ageas holds a 31% stake in Muang Thai Life and a 15% stake in

non-life activities; given this is a minority position, the

read-across of a 20% sale in Thai Life is interesting. Listed

Bangkok Life is currently trading at c.4.0x P/BV 2013F.

Applying a multiple on Ageas’ stake in Muang Thai Group would

value it at €521m, or c.8% of market cap. If we were to value at

an average of Muang Thai and listed Bangkok Life, the multiple

value would be €751m.

Valuation and litigation risk In our base-case scenario, we value the operating entities at

€29.4/share, or 0.8x P/BV and 10.7x PER, compared with the

peer group’s median PER of 9.2x. Adjusting market capitalisation

for net cash of €1.2bn, the PER falls to 7.5x.

The General Account asset valuation is an estimated €1,247m.

We admit many assets in the General Account are illiquid (Royal

Park Investments, BNP call option). However, even when valuing

them at zero and only valuing the General Account at 1x net

cash (€1.2bn), this leaves an underlying PER for insurance

activities of only c.7.5x for 2013F (peer group median at 9.2x),

making it hard to argue that Ageas is expensive.

Alternatively, if we were to value all operating activities at market

value, compared with the current market capitalisation, this gives

an implied negative value for the General Account assets of

€1.2bn. This is a substantial difference of €2.4bn compared with

our base-case valuation and upside of 39%. The difference

cannot, in our view, be explained by ligation risk fears.

Albert Ploegh, CEFA Amsterdam +31 20 563 8748 [email protected]


37

Newsflow

Date Description

24 April 2013 EGM15 May 2013 1Q13 results2 August 2013 2Q13 results6 November 2013 3Q12 results

Source: Company data, ING

Major shareholders (%)

Norges Bank 5.20Fortis Bank 5.15Ageas (to be cancelled) 5.02Ping An 4.98Franklin Advisors 2.99


Share data

Avg daily volume (3-mth) 683,341Free float (%) 85.0Market cap (€m) 6,030.5Dividend yield (1F, %) 4.7


Share price performance

0

50

100

150

200

3/08 3/09 3/10 3/11 3/12 3/13

Price BEL 20 (rebased)

Source: ING

Company profile

Ageas offers international insurance services under itssegments, Life (69% of total income in 2012) and Non-Life (31%), as well as disability and medicalservices to individuals and groups. Ageas operates inBelgium, the UK, Continental Europe and Asia.Belgium, its largest market, accounted for 64% of totalincome in 2012, while the UK generated 16% andContinental Europe generated 17% of total income.

Risks

General risks relate to financial markets (equity marketand interest rate risk). Company-specific risks includea fall in BNP’s share price, as this would decrease thefair value of Ageas’ BNP call option, and a widening ofcredit spreads, decreasing the value of the Royal ParkInvestments structured credit entity. However, atransaction with BNP on so-called ‘CASHES’ hasreduced volatility. Litigation risks: There are severallegal proceedings and investigations pending thatcould result in claims. We deduct €500m from our valuation to reflect litigation risk but there is a risk thatthe amount could be greater.

Financials

Year end Dec (€m) 2010 2011 2012 2013F 2014F 2015F

Income statement

Gross written premiums 5,997 6,770 7,111 8,014 8,496 9,008Property & casualty 3,214 4,107 4,362 5,109 5,411 5,731Life 2,784 2,663 2,749 2,905 3,085 3,277Segmental operating profitsLife 686 (591) 779 720 768 818Property & casualty (2) 148 368 308 327 336Asset management 0 0 0 0 0 0Other businesses (563) (353) 147 (69) (76) (76)Net interest 0 0 0 0 0 0Corporate expenses/consd 21 40 (26) 32 40 40Operating profit 141 (757) 1,268 990 1,060 1,118Net capital gains (losses) 0 0 0 0 0 0Non-op income (expense) 0 0 0 0 0 0Pre-tax profit 141 (757) 1,268 990 1,060 1,118Tax 223 83 (339) (266) (299) (316)Minorities (141) 95 (186) (160) (168) (175)Other post-tax items 0 0 0 0 0 0Net profit 223 (578) 743 565 593 626IFRS net operating profit 223 (578) 743 565 593 626

EEV income statement

Life new business value 66 32 69 78 87 97EEV operating profit 554 299 236 178 392 402Tax 0 0 0 0 0 0EEV net profit (411) (1,599) 1,557 (1,022) 392 402Opening embedded value 5,236 5,400 4,008 5,565 4,543 4,936Closing embedded value 4,825 3,686 5,565 4,543 4,936 5,337

Balance sheet

Opening shareholders funds 8,432 8,422 7,760 9,911 10,190 10,482Closing shareholders funds 8,422 7,761 9,911 10,190 10,482 10,792Ordinary equity 8,422 7,760 9,911 10,190 10,482 10,792Hybrid capital 0 0 0 0 0 0Preferred equity 0 0 0 0 0 0Equity 8,422 7,760 9,911 10,190 10,482 10,792Minorities 744 607 876 716 548 373Total equity 9,166 8,368 10,786 10,907 11,031 11,165Total debt 5,069 5,251 4,884 4,884 4,884 4,884Total capital 14,235 13,618 15,670 15,790 15,914 16,049

Performance & returns

APE (new business) mgn (%) 10.9 5.9 11.2 13.8 14.3 14.6PVNBP margin (%) 1.2 0.68 1.2 1.3 1.4 1.4P&C combined ratio (%) 106.0 100.1 99.1 98.1 97.9 98.0IFRS net op profit growth (%) -81.6 n/a n/a -24.0 5.0 5.6BV growth (%) -0.11 -7.9 27.7 2.8 2.9 3.0Embedded value growth (%) -1.5 -23.6 51.0 -18.4 8.6 8.1Life ROEV (%) 10.6 5.5 5.9 3.2 8.6 8.1Reported ROE (%) 2.6 -7.1 8.4 5.6 5.7 5.9Solvency ratio (%) 232.0 207.0 206.1 222.9 223.2 223.5Gearing (%) 35.6 38.6 31.2 30.9 30.7 30.4

Valuation

Price/embedded value (x) 1.4 1.7 1.1 1.3 1.2 1.1Price/book (x) 0.81 0.82 0.65 0.60 0.58 0.56Price/tangible book (x) 1.0 1.0 0.76 0.70 0.68 0.66PER (IFRS net op EPS) (x) 29.3 n/a 8.4 10.7 10.2 9.6Dividend yield (%) 3.0 3.3 4.6 4.7 5.0 5.2

Per share data

IFRS net operating EPS (€) 0.90 (2.27) 3.13 2.46 2.59 2.73IFRS net op EPS growth (%) -81.7 n/a n/a -21.3 5.0 5.6Dividend per share (€) 0.80 0.88 1.20 1.24 1.31 1.38EEV per share (€) 18.68 15.32 22.89 19.62 21.31 23.05BV/share (€) 32.61 32.25 40.76 44.00 45.26 46.60Tangible BV/share (€) 26.08 25.62 34.60 37.53 38.79 40.13



38

Ahold Maintained

Clarity on use of disposal proceeds expected soon after AGM BuyNetherlands Market cap €13,343.0mRetail Bloomberg AH NA

In our view, the upcoming AGM could clear the authorisation

to acquire up to 10% of the common shares outstanding. On

top of the current €500m programme, Ahold could announce

another €750m programme that might be up to 6% accretive

to EPS. Although the start of the year might be tough due to

poor weather and a soft economic environment, we believe

Ahold is well placed to continue to gain market share and

push costs out of the system. BUY maintained.

Investment case We believe the main focus should remain on strong cash flow

delivery. The new share buyback of €500m was expected, but is

separate from a successful disposal of ICA. Although potential

interest in Harris Teeter could weigh on the shares in the short

term, we virtually rule out Ahold being interested, as we believe

Ahold has proven to adhere strictly to its M&A criteria (which

rules this one out) and has built a strong track record in M&A

under its new management. The balance between investing in

future growth and returning cash to shareholders should remain

topical until ICA’s disposal is finalised. In our view, more

disposals could follow.

Netherlands’ margin drop in 1Q13F is well flagged. We

believe that the 1Q13F underlying margin for the Netherlands

could drop as much as 70bp YoY, as it still has to lapse a tough

comparable YoY. Recall that in 2Q12, Ahold decided to step up

price investments, which resulted in a c.60bp drop in the

underlying margin over the next three quarters. Hence, there is

one additional tough quarterly comparable (all other things being

equal). We believe this is well flagged by the market by now.

Adjusting for IAS 19 accounting should lead to a c.€50m impact

(non-cash) on Ahold’s underlying operating margins. Of course,

the group will restate 2012, in our view, but the effect will be that

underlying operating margins will be c.€50m lower in 2013F, or

the equivalent of a 40bp impact.

Cash flow remains strong in 2013. The underlying cash flow

was better than expected, and Ahold posted a 22% increase

YoY in 2012. Although we expect a modest drop in FCF in 2013

on the back of lower dividends from JVs (related to the ICA

disposal), we should still see a substantial improvement,

including the one-off gain from the ICA disposal in 2013.

Valuation remains attractive. Ahold is currently trading at 11.7x

FY14F PER (based on EPS that is not adjusted for a potential

new buyback programme). At 4.5x 2014F EV/EBITDA, the group

remains at a 20% discount to European peers. Furthermore, the

free cash flow yield of 12.1% is at a 25% premium to its

European peers, whilst its dividend yield remains a notch above

peers at 3.8% for 2014F compared with 3.4%.

With c.80% of the shares being free float but an additional 20% or

so tied to two long-term investors, a potential share buyback of

100m shares will have a positive effect on the shares in our view.

Price (04/04/13) €12.13

Maintained



AGM on 17 April to approve further buyback? Authorisation to acquire shares. It is proposed to the General

Meeting of Shareholders to authorise the Corporate Executive

Board for a period of 18 months from the date of this AGM, ie,

until and including 17 October 2014, to acquire shares in the

company. The purpose of this proposal is to give the Corporate

Executive Board the authorisation to reduce the company’s

outstanding share capital in order to return capital to the

company’s shareholders, and/or to cover obligations under

share-based compensation plans or for other purposes. Shares

may be acquired at the stock exchange or otherwise, at a price

(i) for common shares between par value and 110% of the

opening price at Euronext Amsterdam N.V. at the date of the

acquisition, and (ii) for the cumulative preferred financing shares

between 100% and 110% of the amount paid up (including share

premium) on the relevant shares. Shares may be acquired up to

10% of the issued share capital at the date of acquisition

provided that the company and its subsidiaries do not hold more

than 10% of the issued share capital in the company.

Cancellation of common shares. It is proposed to the General

Meeting of Shareholders to cancel any or all common shares in

the share capital of the company held or repurchased by the

company under the authorisation referred to under agenda item

18, resulting in a reduction of the company’s issued common

shares. The cancellation may be executed in one or more

tranches. The number of shares that will be cancelled (whether

or not in a tranche) shall be determined by the Corporate

Executive Board, with a maximum of the same 10% of the issued

share capital that may be acquired pursuant to agenda item 18.

Pursuant to the relevant statutory provisions, cancellation may

not be effected earlier than two months after a resolution to

cancel shares is adopted and publicly announced; this will apply

for each tranche. The purpose of this proposal is cancellation of

common shares held by the company or that have been acquired

in accordance with the proposal under agenda item 18 to the

extent that such shares shall not be used to cover obligations

under share-based compensation plans or for other purposes.

Potential €750m additional buyback. According to our

calculations, the current €500m buyback programme, based on

an average share price of €12, would reduce the fully diluted

number of shares by c.4.0%. Based on another 6% share

reduction and an average share price of €13.0, Ahold could

announce an additional buyback programme of €750m and a

special dividend of €750m.

Marco Gulpers, CFA Amsterdam +31 20 563 8758 [email protected]


39

Newsflow

Date Description

14 April 2013 AGM05 June 2013 1Q13 results22 Aug 2013 1H13 results14 Nov 2013 3Q13 results



Stichting Adminis pref 19.48Deltafort Beleggingen 11.90ING Groep 9.82Blackrock 6.23Mondrian Investment 5.46


Share data

Avg daily volume (3-mth) 3,316,800Free float (%) 100.0Market cap (€m) 13,343.0Net debt (1F, €m) (1,456)Enterprise value (1F, €m) 10,687Dividend yield (1F, %) 3.8



4

6

8

10

12

14

3/08 3/09 3/10 3/11 3/12 3/13

Price AEX All Share (rebased)

Source: ING

Company profile

Ahold is a Netherlands-based retail group that operates on two geographical platforms: AholdEurope, which consists of names such as Albert Heijn,Etos and Gall & Gall, and Ahold USA, which consistsof Giant Carlisle, Giant Landover and Stop & Shop.Ahold operates supermarkets, convenience stores,drugstores and wine stores through its varioussubsidiaries. The company also owns a 49% stake inPortuguese-based Jerónimo Martins Retail. In May2013, Ahold announced that it had successfullycompleted the sale of its stake in ICA to Hakon Investof Sweden. Ahold USA accounted for 48% of 2012EBIT,

Risks

The main risks we see are industry wide related toconsumer sentiment issues. However Ahold is mainlyoperating in non-food which is more resilient. A newprice war in Netherlands could have an impact on profitability and put margins under pressure. A largeM&A transaction could make us negative as well.

Financials

Year end Dec (€m) 2010 2011 2012 2013F 2014F 2015F

Income statement

Revenues 29,530 30,271 32,841 34,216 35,410 36,661EBITDA 2,121 2,119 2,008 2,174 2,239 2,306EBIT 1,336 1,347 1,187 1,429 1,494 1,562Net interest (259) (316) (227) (201) (189) (176)Associates 57 141 81 67 10 12Other pre-tax items 0 0 0 0 0 0Pre-tax profit 1,134 1,172 1,041 1,295 1,315 1,398Tax (271) (140) (211) (282) (294) (312)Minorities 0 0 0 0 0 0Other post-tax items (10) (15) (3) 0 0 0Net profit 853 1,017 827 1,013 1,022 1,086Normalised net profit 863 1,024 1,047 1,036 1,030 1,094

Balance sheet

Tangible fixed assets 6,899 7,071 7,085 7,253 7,433 7,626Intangible fixed assets 762 836 1,569 1,569 1,569 1,569Other non-current assets 1,870 1,880 2,012 2,012 2,012 2,012Cash & equivalents 2,923 2,592 1,886 4,199 4,740 5,247Other current assets 2,271 2,601 2,530 2,582 2,626 2,703Total assets 14,725 14,980 15,082 17,615 18,380 19,156Short-term debt 216 536 136 136 136 136Other current liabilities 3,876 4,078 4,291 4,439 4,594 4,698Long-term debt 2,947 2,647 2,610 2,110 2,110 2,110Other long-term liabilities 1,279 1,345 1,553 1,553 1,553 1,553Total equity 6,407 6,374 6,492 9,376 9,987 10,660Total liabilities & equity 14,725 14,980 15,082 17,615 18,380 19,156Net working capital (1,368) (1,341) (1,627) (1,724) (1,834) (1,861)Net debt (cash) 737 1,088 1,357 (1,456) (1,997) (2,504)

Cash flow

Cash flow EBITDA 1,675 1,829 1,798 1,757 1,766 1,831Tax, interest & other 484 322 370 435 492 495Change in working capital 67 (163) 76 97 110 27Net cash from op activities 1,816 1,530 1,874 1,862 1,944 1,927Capex (870) (755) (911) (911) (924) (936)Net acquisitions (193) (43) (744) 2,450 0 0Net financing cash flow (893) (931) (688) (1,059) (59) (59)Dividends & minority distrib'n (272) (328) (415) (438) (456) (460)Net ch in cash & equivalents (157) (226) (511) 2,004 541 507FCF 1,265 1,044 1,250 1,172 1,229 1,187


Revenue growth (%) 5.7 2.5 8.5 4.2 3.5 3.5Normalised EPS growth (%) -10.1 24.7 9.3 3.4 -0.58 6.3Normalised EBITDA mgn (%) 7.4 7.1 6.8 6.4 6.4 6.4Normalised EBIT margin (%) 4.7 4.5 4.3 4.3 4.3 4.4ROACE (%) 14.8 14.4 15.1 14.0 12.8 12.7Reported ROE (%) 13.8 15.9 12.9 12.8 10.6 10.5Working capital as % of sales -4.6 -4.4 -5.0 -5.0 -5.2 -5.1Net debt (cash)/EBITDA (x) 0.35 0.51 0.68 (0.67) (0.89) (1.1)EBITDA net interest cvg (x) 8.2 6.7 8.8 10.8 11.8 13.1

Valuation

EV/revenue (x) 0.44 0.44 0.41 0.31 0.29 0.26EV/normalised EBITDA (x) 5.9 6.2 6.0 4.8 4.5 4.1EV/normalised EBIT (x) 9.3 9.6 9.5 7.3 6.6 6.0Normalised PER (x) 16.4 13.2 12.0 11.6 11.7 11.0Price/book (x) 2.3 2.1 2.1 1.4 1.3 1.2Dividend yield (%) 2.4 3.3 3.6 3.8 3.8 4.1FCF yield (%) 9.8 7.9 9.3 11.0 12.1 12.3

Per share data

Reported EPS (€) 0.73 0.92 0.80 1.02 1.03 1.09Normalised EPS (€) 0.74 0.92 1.01 1.04 1.04 1.10Dividend per share (€) 0.29 0.40 0.44 0.46 0.46 0.49Equity FCFPS (€) 0.84 0.72 0.98 0.98 1.05 1.02BV/share (€) 5.16 5.67 5.79 8.93 9.54 10.22



40

AMG Maintained

Focus from EBITDA to cash flow BuyNetherlands Market cap €174.8mIndustrial Goods & Services Bloomberg AMG NA

AMG remains a Benelux top pick because, in spite of

assuming no cyclical recovery this year (and REBITDA

remaining closer to the trough than to the peak), we believe

we have good visibility on a strong 10.6% equity free cash

flow yield in 2013F, mainly via management’s focus on

reducing costs and capex. In the medium term, we continue

to like AMG’s mining and processing assets in critical raw

materials.

Investment case Equity free cash flow growth in 2013F

In spite of assuming virtually no top-line growth due to ongoing

macro headwinds, we expect AMG’s equity free cash flow to

increase from US$17.5m in 2012 to US$23.7m, due to

REBITDA growth of 6% (or US$5.0m) and lower capex (US$34m

vs US$48.1m), even if we take a cautious stance and do not

assume further working capital inflow (US$9.9m in 2012).

Risk on REBITDA growth even seems to the upside, as

management guided for: (1) a limited group top-line growth; and

(2) guidance for c.US$12-13m in cost savings: (i) a 2.5%

improvement in gross margin, which translates to a c.US$5m

improvement; and (ii) a 5% reduction in SG&A, which translates

to a c.US$7.5m improvement.

Looking at the activities: (1) tantalum (c.10% of gross profit)

should start to benefit from c.25% capacity expansion and sales

at higher price levels under the new LT contract as of

mid-2013F; (2) engineering (c.30% of gross profit) demonstrated

that demand bottomed out in 2H12 while the order backlog

remains stable at low levels for now; (3) demand for titanium

master alloys (c.13% of gross profit) remains stable, with

expected LT growth linked to robust demand from fuel-efficient

commercial aircraft; (4) ferrovanadium (c.10% of gross profit)

should start to benefit from its c.30% capacity expansion during

2013; (5) silicon metal and graphite (12% of gross profit) should

see some recovery from a very weak 4Q12 (destocking); and (6)

antimony (10% of group profit) continues to face lower spot

prices (-11% YTD).

Attractive valuation multiples remain very attractive on 2013F.

AMG trades at a 10.6% equity free cash flow yield, 0.40x

EV/sales (vs a 4.7% REBIT margin) and 5.4x EV/EBITDA (recall

that peer Titanium Metals was acquired at 13.2x EV/EBITDA in

4Q12). At our €9.0 target price, AMG would trade at a fair 7.4%

equity FCF yield, 0.48x EV/sales (in line with a 4.7% REBIT

margin) and 6.5x EV/EBITDA (in line with its historical median

multiple).

Price (04/04/13) €6.35

Maintained



Balance sheet not an issue

In line with our equity free cash flow assumption, we expect net

debt to decline US$24m YoY to US$170m by end-2013F.

Consequently, net debt/EBITDA declines from 2.3x to 1.9x,

significantly below the 3.0x covenant. Furthermore, the main

credit facility matures only in April 2016, and cash and cash

equivalents amounted to US$121.6m at the end of 2012.

Dividend not excluded going forward

So far, AMG has not paid a dividend to its shareholders.

However, given its new focus on maximising cash flow, instead

of growing EBITDA via capex, we do not exclude that AMG could

start paying a dividend in the medium term.

In the medium term, we continue to like AMG’s mining and

processing assets in critical raw materials. Today, AMG is

the largest global miner of conflict-free tantalum. Tantalum

products empower capacitors in portable electronic devices,

helping to make new technologies faster and more compact. In

2012, AMG reopened its graphite mine in Germany, and is

developing new mine projects in Mozambique to increase its

supply of high-purity natural graphite products, which are

increasingly used for more energy-efficient building insulation

materials. Furthermore, AMG’s antimony-based materials, widely

used in everyday electronics and plastics, are critical to ensuring

safety from heat and flame. Also in 2012, AMG completed the

construction of a gravimetric separation and concentration plant

at the antimony mine in Turkey. This is the next step to reduce

potential supply disruptions through vertical integration of its

antimony business. Moreover, AMG produces critical materials

for more fuel-efficient aerospace engines, such as titanium

master alloys.

Catalyst: divestments? AMG’s business model seems rather

complex, certainly for a small/midcap. This, in our view, together

with the more limited sell-side coverage, at least partly explains

the current undervaluation. However, we understand from

investors that AMG management has been more vocal at recent

investor meetings about the possibility of partial divestments.

This could be a clear trigger, since selling part of the business at

a good multiple should make clear how ‘cheap’ the rest of the

activities are.

Filip De Pauw Brussels +32 2 547 6097 [email protected]


41

Newsflow

Date Description

3 May 2013 1Q13 results4-5 June 2013 ING Benelux day New York9 August 2013 2Q13 results11-12 September 2013 ING Benelux Conference London



JP Morgan 5.0T Row Price 4.8Luxor Capital 4.7DNB 4.5Hunter Hall 4.5


Share data

Avg daily volume (3-mth) 182,305Free float (%) 100.0Market cap (€m) 174.8Net debt (1F, US$m) 170Enterprise value (1F, US$m) 488Dividend yield (1F, %) 0.0



0

10

20

30

40

50

60

70

3/08 3/09 3/10 3/11 3/12 3/13


Source: ING

Company profile

AMG is a global leader in the production of highlyengineered specialty metal products and advancedvacuum furnace systems. Its key end markets are theaerospace, energy (including solar and nuclear),electronics, optics, chemicals, construction andtransportation industries. Of AMG’s operatingsegments, Advanced Materials accounted for 78% ofEBIT in 2012, while Graphit Kropfmühl accounted for22%. Engineering Systems made an operating lossduring the year. AMG earns the majority of its revenuefrom Germany (23% of total sales in 2012) and the US(23%).

Risks

Macro risk, with focus on aerospace, construction,energy (solar and nuclear), raw material price risk forthe processing businesses, currency risk, risk of under delivering on cost savings, and inventory risk.

Financials

Year end Dec (US$m) 2010 2011 2012 2013F 2014F 2015F

Income statement

Revenues 990 1,351 1,216 1,219 1,255 1,295EBITDA 85 110 85 90 97 105EBIT 43 70 34 48 55 63Net interest (10) (22) (26) (23) (21) (19)Associates (19) (20) 2 0.8 0.8 0.8Other pre-tax items 0 0 0 0 0 0Pre-tax profit 13 27 11 25 35 45Tax (11) (19) (11) (9) (12) (16)Minorities 0.3 (3) 2 0 0 0Other post-tax items 0 0 0 0 0 0Net profit 2 5 2 16 23 29Normalised net profit 38 36 21 26 33 39

Balance sheet

Tangible fixed assets 254 269 296 298 300 302Intangible fixed assets 27 38 39 39 39 39Other non-current assets 56 58 60 60 60 60Cash & equivalents 89 80 122 145 170 201Other current assets 429 456 432 433 446 460Total assets 855 901 948 974 1,014 1,061Short-term debt 49 58 50 50 50 50Other current liabilities 243 250 243 244 251 259Long-term debt 188 210 266 266 266 266Other long-term liabilities 141 162 171 181 191 201Total equity 234 221 218 234 256 285Total liabilities & equity 855 901 948 974 1,014 1,061Net working capital 280 288 263 264 272 281Net debt (cash) 148 189 194 170 145 115

Cash flow

Cash flow EBITDA 49 79 68 81 88 96Tax, interest & other 57 71 55 43 44 45Change in working capital (37) (18) 10 (0.3) (6) (6)Net cash from op activities (2) 45 66 58 59 65Capex (33) (52) (48) (34) (34) (34)Net acquisitions (30) (29) 0.2 0 0 0Net financing cash flow 42 28 22 0 0 0Dividends & minority distrib'n 0 0 0 0 0 0Net ch in cash & equivalents (28) (10) 42 24 25 31FCF (21) 5 36 47 46 50


Revenue growth (%) 14.2 36.4 -10.0 0.24 3.0 3.2Normalised EPS growth (%) 981.7 -8.5 -41.3 23.1 25.6 19.3Normalised EBITDA mgn (%) 8.6 8.2 7.0 7.4 7.8 8.1Normalised EBIT margin (%) 6.0 5.9 4.4 4.7 5.2 5.7ROACE (%) 13.3 16.7 10.4 10.7 11.7 12.5Reported ROE (%) 1.1 2.4 1.1 7.3 9.5 11.0Working capital as % of sales 28.3 21.3 21.7 21.7 21.7 21.7Net debt (cash)/EBITDA (x) 1.7 1.7 2.3 1.9 1.5 1.1EBITDA net interest cvg (x) 8.1 4.9 3.3 3.9 4.6 5.5

Valuation

EV/revenue (x) 0.45 0.38 0.42 0.40 0.37 0.33EV/normalised EBITDA (x) 5.3 4.7 6.0 5.4 4.7 4.1EV/normalised EBIT (x) 7.5 6.4 9.6 8.4 7.1 5.9Normalised PER (x) 5.7 6.2 10.6 8.6 6.9 5.8Price/book (x) 0.99 1.1 1.1 0.99 0.90 0.81Dividend yield (%) 0.0 0.0 0.0 0.0 0.0 0.0FCF yield (%) n/a 1.0 7.1 9.6 10.0 11.6

Per share data

Reported EPS (US$) 0.09 0.19 0.09 0.58 0.82 1.05Normalised EPS (US$) 1.43 1.31 0.77 0.94 1.19 1.42Dividend per share (US$) 0.00 0.00 0.00 0.00 0.00 0.00Equity FCFPS (US$) (1.29) (0.25) 0.64 0.86 0.91 1.12BV/share (US$) 8.25 7.42 7.65 8.23 9.05 10.11



42

Barco Maintained

Consensus estimates for 2013 too low BuyBelgium Market cap €839.7mIndustrial Goods & Services Bloomberg BAR BB

Barco remains on our top pick list, as: (1) we believe 2013

consensus EBIT is still c.9% too low; (2) Barco targets

reaching an EBIT of at least €120m by 2016, while

consensus (€95m) is much more prudent; (3) the balance

sheet strength (INGF net cash position of €141m end-2013)

will be used for EPS-enhancing acquisitions; and (4) the

valuation remains attractive at 6.4x 2013F EV/EBIT and a

FCFe yield of c.10% on an unlevered balance sheet.

Consensus estimates too low: Barco guides for profitable

growth in 2013, though at a slower pace than in 2012 (EBIT

growth 28%). We estimate 2013 EBIT growth of 9% YoY

(consensus flat), driven by a sales growth of 3.6% and

profitability improvements. The sales growth fully relates to the

acquisition of Projectiondesign (4.7%). Excluding

Projectiondesign, we expect Barco sales to drop by 1.1% YoY,

as the slowdown in the conversion to Digital Cinema (65%) is not

fully offset by growth in Healthcare and Advanced Visualisation.

We estimate group EBIT margins to improve from 8.7% in 2012

to 9.1% in 2013 thanks to Healthcare and Advanced

Visualisation. The margin recovery should come from

improvements in the supply chain, economies of scale and lower

Healthcare investments. Despite our estimate that Digital

Cinema sales will drop by 24% YoY in 2013, we do not expect

Projection margins to drop substantially (only 80bp to 13.5%), as

scale is key, and expect Projection sales to be flattish in 2013.

The slight drop in margin relates to the integration of

Projectiondesign.

Targets for 2016 not at all reflected in consensus: Barco

targets for a 2016 EBIT of at least €120m (consensus €95m).

Consensus believes that Projection earnings will fall, as already

65% of all screens are converted to digital, which should slow

the Digital Cinema conversion rate (INGF c.16.5% in FY12) in

the coming years. We believe Projection earnings could stabilise

at the current levels (€69m) if Barco succeeds in keeping sales

flat, as economies of scale are key. Barco aims to stabilise

Projection sales by broadening its product base (laser, Auro 3D)

and by investing in Corporate AV, which has a four-year growth

CAGR of 10%. We expect 2013 Projection sales of €475m (-1%

YoY), which can be split up as: (1) Digital Cinema sales of

€278m (-23% YoY); and (2) Corporate AV sales of €198m (+65%

YoY).

Balance sheet optimisation: We estimate Barco’s net cash

position to amount to €141m (16% market cap) at end-FY13.

Barco’s strong balance sheet, in combination with its strong cash

generation (FCFe yield of 10%), gives it room to: (1) strengthen

its market positions; (2) make EPS-enhancing acquisitions;

(3) gradually grow the dividend; and (4) start a share buy back.

Price (04/04/13) €65.82

Previously €72.00Target price (12-mth) €83.00


Valuation: Trading at 6.4x 2013F EV/EBIT and 6.8x 2013

cash-adjusted PER, we believe the share price does not include

Barco’s earnings growth outlook, but that it rather reflects that

Digital Cinema earnings will drop by c.€30-35m by 2014. If Barco

convinces the market that the Digital Cinema earnings decline

will be (partially) offset by its broadened product base, we expect

Barco shares to gradually rerate to 9x EV/EBIT. Based on our

2013 estimate, this would imply a target price of €88. Based on

our bottom earnings in 2016 (EBIT of €85m), this would imply a

target price of €71. Based on the company target (EBIT of at

least €120m), the share price could rerate to €96. We increase

our target price from €72 to €83 by rolling our DCF forward to

end-2013 and by slightly increasing our longer-term profitability

estimates, as we get more comfort that the end of the Digital

Cinema cycle will have a lower-than-expected impact on Barco’s

group profitability.

Market potential: Barco estimates the total addressable market

at €6.6bn in 2011 and expects the market to grow at a CAGR of

4% to €7.7bn in 2015. Note that this includes an 8% negative

CAGR for Digital Cinema, since conversion rates are already at

65%. The largest growth should come from Healthcare (CAGR

13%) and Corporate AV (CAGR 10%). Barco targets growing

much quicker (CAGR 10%) than the market by: (1) focusing on

the market with the highest growth prospects; (2) moving to the

mid segment; and (3) expanding into BRIC countries. Consensus

is currently more prudent (sales CAGR 5%), as it estimates

Digital Cinema sales to drop further.

Short-term triggers are: (1) the 1Q13 trading update (24 April),

which could indicate that consensus earnings are still too low. It

could also comfort investors by showing a flat evolution in

Projection sales; (2) divestment ventures and/or Defense &

Aerospace, improving the ROCE of the group; (3) using the

balance sheet for EPS-enhancing acquisitions; and (4)

developments in laser technology, which could help materially

(as of 2014) in offsetting the Digital Cinema earnings decline.

Emmanuel Carlier Brussels +32 2 547 75 34 [email protected]


43

Newsflow

Date Description

24 April 2012 1Q13 trading update25 April 2013 AGM19 July 2013 1H13 results23 November 2013 3Q13 trading update



GIMV 9.4Barco 5.5Templeton Invest Counsel 4.8Franklin Resources 3.6Petercam 1.3


Share data

Avg daily volume (3-mth) 32,246Free float (%) 76.1Market cap (€m) 839.7Net debt (1F, €m) (141)Enterprise value (1F, €m) 699Dividend yield (1F, %) 2.4



01020304050607080

3/08 3/09 3/10 3/11 3/12 3/13


Source: ING

Company profile

Based in Belgium, Barco is a world leader inprofessional visualisation and display solutions forB2B customers, ranking first or second in every nicheit operates in. Barco reports in five divisions: (1)Entertainment (55% of 2012 EBITDA); (2) Healthcare(15%); (3) Control Rooms & Simulation (16%); (4)Defence & Aerospace (8%); and (5) Ventures (6%).Barco’s geographical sales split is EMEA-Latam 42%,North America 34% and APAC 24%.

Risks

Key risks are: (1) growing competition from Asianmanufacturers; (2) not succeeding in localising thesupply chain; (3) slowing DC conversion rates whilethe replacement market does not pick up; (4) arecession potentially preventing the weakerperforming BU’s from improving their profitability; and(5) impact from austerity measures, mainly onDefense and Healthcare.

Financials

Year end Dec (€m) 2010 2011 2012 2013F 2014F 2015F

Income statement

Revenues 897 1,041 1,156 1,198 1,240 1,273EBITDA 99 129 159 167 167 161EBIT 45 68 100 109 109 103Net interest (2) (3) 1 2 3 3Associates 0 0 2 2 2Other pre-tax items 0 0 0 0 0 0Pre-tax profit 44 66 101 113 113 108Tax 0 10 (4) (11) (19) (27)Minorities 0 (0.4) 0 0 0 0Other post-tax items 0 0 0 0 0 0Net profit 44 76 97 102 94 82Normalised net profit 43 70 86 102 94 82

Balance sheet

Tangible fixed assets 56 58 59 59 59 59Intangible fixed assets 121 128 176 176 176 176Other non-current assets 59 85 124 124 124 124Cash & equivalents 46 79 122 159 212 253Other current assets 472 465 440 461 477 490Total assets 755 815 922 980 1,050 1,103Short-term debt 0 0 0 0 0 0Other current liabilities 251 271 313 324 336 345Long-term debt 39 27 18 18 18 18Other long-term liabilities 69 55 32 10 (6) (21)Total equity 396 461 558 627 701 761Total liabilities & equity 755 815 922 980 1,050 1,103Net working capital 116 120 89 99 103 106Net debt (cash) (7) (52) (104) (141) (194) (235)

Cash flow

Cash flow EBITDA 99 129 161 169 169 163Tax, interest & other 2 (0.7) 5 13 20 28Change in working capital (56) 28 66 (10) (5) (4)Net cash from op activities 42 151 224 152 148 137Capex (55) (67) (70) (58) (58) (58)Net acquisitions (10) (17) (64) (32) (10) (10)Net financing cash flow 6 (10) (25) (6) (6) (5)Dividends & minority distrib'n 0 (13) (13) (18) (20) (22)Net ch in cash & equivalents (16) 45 51 38 54 42FCF (11) 87 156 94 91 79


Revenue growth (%) 40.6 16.1 11.0 3.6 3.5 2.7Normalised EPS growth (%) n/a 61.3 23.2 19.3 -7.5 -13.6Normalised EBITDA mgn (%) 10.9 10.8 12.7 14.0 13.5 12.7Normalised EBIT margin (%) 4.9 6.0 7.7 9.1 8.8 8.1ROACE (%) 11.1 13.5 16.7 17.9 15.9 13.7Reported ROE (%) 11.8 17.7 19.1 17.2 14.2 11.2Working capital as % of sales 13.0 11.5 7.7 8.3 8.3 8.3Net debt (cash)/EBITDA (x) (0.07) (0.40) (0.66) (0.84) (1.2) (1.5)EBITDA net interest cvg (x) 65.4 50.9 n/a n/a n/a n/a

Valuation

EV/revenue (x) 0.93 0.76 0.64 0.58 0.52 0.47EV/normalised EBITDA (x) 8.5 7.0 5.0 4.2 3.9 3.8EV/normalised EBIT (x) 18.8 12.7 8.3 6.4 5.9 5.9Normalised PER (x) 19.5 12.1 9.8 8.2 8.9 10.3Price/book (x) 2.1 1.8 1.5 1.3 1.2 1.1Dividend yield (%) 1.5 1.7 2.1 2.4 2.6 2.7FCF yield (%) n/a 11.0 21.2 13.5 14.1 13.1

Per share data

Reported EPS (€) 3.44 5.94 7.63 8.01 7.41 6.40Normalised EPS (€) 3.38 5.45 6.72 8.01 7.41 6.40Dividend per share (€) 1.00 1.10 1.40 1.60 1.70 1.80Equity FCFPS (€) (1.02) 6.60 12.06 7.31 7.06 6.16BV/share (€) 31.22 36.12 43.77 49.17 54.98 59.68



44

Boskalis Maintained

Seaworthy BuyNetherlands Market cap €3,686.6mConstruction & Materials Bloomberg BOKA NA

Boskalis is in an excellent state after successfully acquiring

heavy marine transporter Dockwise. We expect Dockwise to

support strong operating performance of the newly created

Offshore Energy unit in 2013-14F. We estimate that the energy

unit will surpass the good old dredging business as Boskalis’

prime earnings driver in 2014, clearly highlighting the

company’s strategic transformation to become a full-service

marine contractor for the global oil & gas industry. On our €38

TP, the shares trade at a 2013-14F EV/EBITDA of 6.5x, in line

with the historical average. We foresee stable performance of

its other activities despite the still-challenging macro

conditions, and hence we like Boskalis’ strong cash flow and

balance sheet.

Investment case Dockwise will support Boskalis’ 2013-14F earnings growth

through: (1) Refinance benefits from Dockwise’s existing debt; (2)

cost synergies, to be achieved by end-2013 or early 2014; (3) solid

business prospects for Dockwise (order book up 25% in 4Q12); and

(4) a more concentrated end market, as Dockwise’s competitor

Fairstar was taken over last year. Dockwise will be consolidated

from 2Q13 onwards and will support operating performance in

Boskalis’ newly created Offshore Energy division, which doubled its

order book on a standalone basis last year. It is noteworthy that this

division represented 16% of group EBIT in 2012, but we expect it to

surpass the good old dredging activities, as Boskalis’ prime

earnings driver in 2014F (Offshore Energy 39% of 2014F EBIT),

stressing Boskalis’ strong strategic action to become a key fully

integrated offshore contractor for the global oil & gas industry.

The outlook for dredging activities is stable in the ongoing

challenging market conditions. The current order book and work

load provides visibility on fleet utilisation rates in 2013. Also,

Boskalis’ competitors have healthy order book levels and are not

pessimistic about 2013. We expect stable margins in 2013-14.

More business development is expected in 2013, which could

act as a positive share price trigger. We believe Boskalis might

sell its 40% stake in Middle East–based wet infra contractor

Archirodon for a price of €150m. Boskalis could also sell

Dockwise DYT, small but nonetheless stressing the company’s

active portfolio management. Lastly, there are negotiations with

SAAM to put the harbour towage activities in the Americas in a

JV structure, putting the business at arm’s length.

The balance sheet is quite healthy; we expect a 2013F leverage

ratio of 1.7x, indicating Boskalis has a war chest of over €200m

just one year after the Dockwise transaction. The projected

2013-14F EBITDA of €720-€812m supports solid free cash flow

generation, even if the company expects 2013 capex of €325m

excluding Dockwise (INGF: €370m ex divestments). Thus, our

stable YoY dividend forecast of €1.24, reflecting a dividend yield of

3.9%, could turn out to be too conservative.

Price (04/04/13) €31.52

Maintained



Strategic execution is impressive The figure below shows the projected group operating profit split

based on our 2014F forecasts. The Offshore Energy division will

surpass the dredging activities in 2014 as the key earnings

driver, highlighting the strategic ambition of Boskalis to move

away from pure dredging towards the international offshore oil &

gas market. The acquisitions of both Smit International and

Dockwise have created a unique versatile marine contractor.

Group operating income breakdown in 2014F (%)

Dredging37%

Offshore Energy39%

Inland Infra9%

Towage & Salvage

15%


Historic EV/EBITDA multiple Boskalis (x)

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

Jan-

06

Jul-0

6

Jan-

07

Jul-0

7

Jan-

08

Jul-0

8

Jan-

09

Jul-0

9

Jan-

10

Jul-1

0

Jan-

11

Jul-1

1

Jan-

12

Jul-1

2

Jan-

13

EV/EBITDA (x) Avg EV/EBITDA (x)

Source: Bloomberg

Tijs Hollestelle Amsterdam +31 20 563 8789 [email protected]


45

Newsflow

Date Description

08 May 2013 1Q trading update10 May 2013 Ex dividend15 August 2013 1H results15 November 2013 3Q trading update



HAL Investments 33.9Mondrian Investment Partners 5.2Sprucegrove Investment Man 5.2Oppenheimer 1.9Sarasin 1.6


Share data

Avg daily volume (3-mth) 354,031Free float (%) 67.0Market cap (€m) 3,686.6Net debt (1F, €m) 1,199Enterprise value (1F, €m) 4,962Dividend yield (1F, %) 3.9



10

15

20

25

30

35

40

45

3/08 3/09 3/10 3/11 3/12 3/13


Source: ING

Company profile

Royal Boskalis Westminster is a global companyoperating in Dredging (54% of EBIT in 2012), OffshoreEnergy (16%), Towage & Salvage (20%) and InlandInfra (10%), in more than 75 countries across 6continents. Its core activities include the constructionand maintenance of ports, offshore contracting services to the global oil & gas industry and the creation of landin water as well as coastal defense and riverbankprotection. At the end of 2012, it was operating a fleet of1,200 vessels.

Risks

Project execution remains one of the key risks toBoskalis’ business model. Payment risk also rankshighly, given the wide variety of clients and customersin developing countries. As such, geopolitical factorsaffect the pricing discipline in a typical globaloligopoly, while the capex cycle is complex, given that it requires a 3 to 5 year strategic view on the market.The biggest risk to our earnings estimates comes frommargins in the dredging division, which have by far thelargest impact on our group EPS forecasts.

Financials

Year end Dec (€m) 2010 2011 2012 2013F 2014F 2015F

Income statement

Revenues 2,713 2,810 3,095 3,464 3,664 3,747EBITDA 621 590 568 720 812 832EBIT 402 354 337 409 474 487Net interest (37) (40) (34) (62) (43) (40)Associates 25 2 0.3 8 0.3 0.3Other pre-tax items 0 0 0 0 0 0Pre-tax profit 390 316 303 354 431 447Tax (77) (55) (50) (59) (72) (75)Minorities (2) (7) (3) (1) (1) (1)Other post-tax items 0 0 0 0 0 0Net profit 311 254 250 294 358 371Normalised net profit 311 254 250 294 358 371

Balance sheet

Tangible fixed assets 2,179 2,206 2,261 3,320 3,332 3,337Intangible fixed assets 594 596 596 886 886 886Other non-current assets 80 164 306 306 306 306Cash & equivalents 358 398 398 322 512 723Other current assets 1,105 1,310 1,327 1,569 1,676 1,715Total assets 4,315 4,674 4,889 6,403 6,712 6,968Short-term debt 104 128 390 390 390 390Other current liabilities 1,907 2,119 1,977 2,296 2,397 2,433Long-term debt 705 680 605 1,130 1,130 1,130Other long-term liabilities 0 0 0 0 0 0Total equity 1,599 1,747 1,916 2,586 2,794 3,014Total liabilities & equity 4,315 4,674 4,889 6,403 6,712 6,968Net working capital (744) (771) (617) (695) (689) (686)Net debt (cash) 452 410 598 1,199 1,009 798

Cash flow

Cash flow EBITDA 646 593 568 728 812 832Tax, interest & other 163 76 78 121 115 115Change in working capital 158 27 (154) 78 (7) (3)Net cash from op activities 760 480 328 685 691 713Capex (297) (293) (314) (370) (350) (350)Net acquisitions (731) (105) (160) (502) 0 0Net financing cash flow 341 (100) 152 (78) (6) (2)Dividends & minority distrib'n (29) (45) (40) (131) (145) (150)Net ch in cash & equivalents (492) 33 (40) (449) 184 209FCF 526 350 84 377 383 404


Revenue growth (%) 24.3 3.6 10.2 11.9 5.8 2.3Normalised EPS growth (%) 20.5 -20.1 -4.6 6.3 21.6 3.4Normalised EBITDA mgn (%) 22.9 21.0 18.4 20.8 22.2 22.2Normalised EBIT margin (%) 14.8 12.6 10.9 11.8 12.9 13.0ROACE (%) 21.2 14.3 12.3 11.7 11.2 11.0Reported ROE (%) 21.7 15.4 13.8 13.2 13.4 12.8Working capital as % of sales -27.4 -27.4 -19.9 -20.1 -18.8 -18.3Net debt (cash)/EBITDA (x) 0.73 0.69 1.1 1.7 1.2 0.96EBITDA net interest cvg (x) 16.9 14.6 16.5 11.5 19.1 20.7

Valuation


Per share data




46

CSM Previously Hold

Time to cash: the final episode BuyNetherlands Market cap €1,146.0mFood & Beverage Bloomberg CSM NA

The disposal announcement created a ‘sell the fact’

moment, as shareholders still have to wait until the end of

June (CMD) for more clarity on what will happen to the

disposal proceeds. In our view, this creates an excellent

buying opportunity to position for the next ‘Time to cash:

the final episode’ moment. We believe ‘Future-CSM’ will see

a sharp rerating in the coming 12 months, with more clarity

on the continuing business and on how cash will be

returned to shareholders. With the accelerating newsflow in

bio-plastics, finally some positives could be imminent as

well. We raise our target price from €18.5 to €21 and

upgrade our recommendation to BUY.

Investment case Returning cash to shareholders. With the signing of the

disposal contract, a major hurdle is overcome by the current

team despite the absence of clarity on how CSM will be returning

cash to shareholders. This uncertainty opens up a good buying

opportunity ahead of the next leg of the transition. In our view,

CSM will return c.€400m to shareholders in the coming period,

potentially via a medium-term share buyback programme, a

special dividend or a combination of both. (for modelling

purposes, we use a SBB over a 2.5 years of €400m). Clarity on

the return to shareholders will boost shares.

Newsflow accelerating in bioplastics. Newsflow in bioplastics

is accelerating, and, in our view, we may finally hear more

positives soon. Although seeing is believing, the market is not

putting any value to it at the moment. Based on the acceleration

of the newsflow, the upcoming CMD and the fact that CSM has

now finalised its disposal of Bakery, we believe the timing is right

to start expecting more good news from PURAC. If PURAC’s

bioplastics strategy turns to ‘proven technology’, it will unlock

take-out speculation by the market.

Proven technology could spark a take-out. CSM shares are

currently trading at a 15% discount to peers, based on estimates

on a continuing basis and excluding any recovery in PURAC.

With newsflow accelerating in bioplastics and a full focus on its

biotechnology future, we believe the market is fully neglecting

the call option when bioplastics strategy becomes a ‘proven

technology’. In our view, this will spark a double rerating of the

shares. We raise our weighted target price for the standalone

entity from €18.5 to €21 (applying a 10% likelihood of success in

its bioplastics strategy).

More details can be found in our separate note published today

as well. We tweak our 2013F and 2014F EPS estimates to €1.18

and €1.36, respectively, from €1.17 and €1.34 previously, on the

back of improving central cost expectations.

Price (04/04/13) €16.47

Previously €18.50



In our view, Future-CSM has plenty of opportunity to return cash

to shareholders (see figure below). We would advocate a multi-

year programme.

CSM potential return to shareholders (€m)

2013F

Net debt 2012 515Disposal proceeds 850Net cash 335Net debt/EBITDA (x) 0.25EBITDA 2013F 111Returning cash 363Operating cash flow 2013F 40Potential cash return 403


Although CSM is continuing as not fully comparable with its

peers above, we expect the market to initially put CSM at a

discount of c.10-15%. We put CSM at a 10% discount based on

PER and at a 15% discount based on EV/EBITDA.

Scenario analysis

2014 EV/EBITDA (x) 7.0 8.0 9.0 10.0 11.0 12.0

EBITDA 134.5 134.5 134.5 134.5 134.5 134.5EV 942 1,076 1,211 1,345 1,480 1,614Net cash 335 335 335 335 335 335Pension/pref shares 65 65 65 65 65 65Market cap 1,212 1,346 1,481 1,615 1,750 1,884No. of shares (m) 68.9 69.9 69.9 69.9 69.9 69.9Value per share (€) 17.6 19.3 21.2 23.1 25.0 27.0


PURAC newsflow is expected to improve quickly in the course of

the year, and the past six-months’ acceleration of the newsflow

is already a good omen, in our view. If a first snippet of positive

news comes in, the take-out speculation kicks in, in our view.

EBITDA (with or without full capacity utilisation) (€m)

2012 2013F 2014F 2015F 2016F

Caravan 56.4 58.6 60.3 61.9 63.5PURAC excluding 70.3 74.4 85.3 90.5 97.9PURAC including 70.3 78.4 109.1 122.0 134.5Central costs (25.5) (22.0) (11.4) (11.9) (12.5)EBITDA excluding 101.2 111.1 134.2 140.5 148.9EBITDA including 101.2 115.1 158.0 172.0 185.5EBITDA (%) excluding 13.4 14.3 16.5 16.5 16.7EBITDA (%) including 13.4 14.8 16.4 16.3 16.4


Marco Gulpers, CFA Amsterdam +31 20 563 8758 [email protected]


47

Newsflow

Date Description

23 April 2013 1Q13 results06 May 2013 AGMEnd of June 2013 Capital markets day07 August 2013 1H13 results



ING Group 10.25Lansdowne Partners 9.82ASR Nederland 6.46Allianz Asset Management 3.59JO HAMBRO 2.44


Share data

Avg daily volume (3-mth) 281,709Free float (%) 100.0Market cap (€m) 1,146.0Net debt (1F, €m) (144)Enterprise value (1F, €m) 1,002Dividend yield (1F, %) 4.3



5

10

15

20

25

30

3/08 3/09 3/10 3/11 3/12 3/13


Source: ING

Company profile

Netherlands-based CSM operates through two key

segments. Bakery Supplies (87% of 2012 revenue)

sells bakery ingredients to the Artisan, Industrial and

Out of Home segments in Europe and North America,

while Purac (13% of 2012 revenue) produces and

preserves bioplastics, fortifying minerals, green

chemicals and bio-based plastics produced from lactic

acid. Key geographies include North America (61% of

2012 net sales), the Netherlands (4%) and Rest of

Europe (35%). In March 2013, CSM announced plans

to divest its Bakery Supplies business to Rhône

Capital for an EV of €1,050m in 3Q13.

Risks

Downside risks to our investment case include: (1) ascenario where the disposal does not happen; (2) asudden increase in raw material prices, mainly grains,edible oils and sugar.

Financials

Year end Dec (€m) 2010 2011 2012 2013F 2014F 2015F

Income statement

Revenues 2,990 3,113 754 777 814 852EBITDA 265 202 83 106 132 138EBIT 158 (150) 40 63 86 90Net interest (28) (30) (25) (16) 0.5 (1.0)Associates 0 0 0 0 0 0Other pre-tax items 0 0 0 0 0 0Pre-tax profit 130 (179) 15 47 87 89Tax (31) 5 12 (14) (26) (26)Minorities 0 0 0 0 0 0Other post-tax items (4) (4) (4) (4) (4) (4)Net profit 95 (179) 24 29 58 60Normalised net profit 115 48 41 37 63 65

Balance sheet

Tangible fixed assets 575 583 303 297 293 286Intangible fixed assets 1,147 912 93 88 82 76Other non-current assets 70 64 32 32 32 32Cash & equivalents 136 142 80 260 93 (13)Other current assets 701 714 1,677 206 212 222Total assets 2,629 2,415 2,185 882 711 601Short-term debt 4 5 2 2 2 2Other current liabilities 483 479 688 124 134 145Long-term debt 746 727 614 114 64 14Other long-term liabilities 277 257 23 46 46 46Total equity 1,119 948 859 595 464 394Total liabilities & equity 2,629 2,415 2,185 882 711 601Net working capital 405 403 139 144 142 145Net debt (cash) 613 590 536 (144) (26) 30

Cash flow

Cash flow EBITDA 271 192 81 106 127 138Tax, interest & other 59 25 13 31 25 27Change in working capital (55) (18) 6 (22) 4 0.6Net cash from op activities 154 125 50 55 107 111Capex (75) (93) (55) (31) (37) (34)Net acquisitions (333) 15 29 850 0 0Net financing cash flow 301 (18) (115) (650) (200) (150)Dividends & minority distrib'n (36) (23) (22) (43) (37) (33)Net ch in cash & equivalents 11 6 (113) 180 (167) (106)FCF 110 62 20 41 69 78


Revenue growth (%) 17.0 4.1 -75.8 3.2 4.7 4.7Normalised EPS growth (%) 31.1 -59.4 -17.9 3.4 94.9 15.4Normalised EBITDA mgn (%) 8.9 6.5 11.0 13.7 16.3 16.2Normalised EBIT margin (%) 6.0 3.9 7.7 8.7 10.9 10.9ROACE (%) 10.8 6.8 3.7 6.2 14.3 19.7Reported ROE (%) 9.0 -17.3 2.6 3.9 10.9 13.9Working capital as % of sales 13.5 12.9 18.4 18.5 17.5 17.0Net debt (cash)/EBITDA (x) 2.3 2.9 6.5 (1.4) (0.20) 0.22EBITDA net interest cvg (x) 9.6 6.8 3.4 6.5 n/a 142.5

Valuation


Per share data (€)

Reported EPS 1.44 (2.64) 0.34 0.46 1.08 1.25Normalised EPS 1.75 0.71 0.58 0.60 1.18 1.36Dividend per share 0.88 0.70 0.70 0.70 0.70 0.70Equity FCFPS 1.20 0.47 (0.07) 0.38 1.31 1.62BV/share 16.95 14.02 12.28 9.58 8.67 8.24



48

Melexis Previously Hold

Punch it! BuyBelgium Market cap €595.4mTechnology Bloomberg MELE BB

We are BUYers of Melexis as we see improved earnings

momentum going forward to trigger a further re-rating to

Melexis’ historical median 12-month forward PER of 14x. A

valuation we deem justified given Melexis’ high, sustainable,

ROIC and its growth profile. The 4.6% dividend yield

provides for downside protection.

Investment case Our top-down analysis of automotive supply chain inventory

levels, YTD global light vehicle sales, light vehicle production

forecasts and content growth forecast provided sufficient support

of Melexis bottom-up guidance for mid-to-high single-digit growth

in FY13. In turn, Melexis guidance of limited YoY growth for

1Q13, implies a FY13 being back-end loaded. The post 1Q13

pick up in sales growth rates, and hence earnings, will be driven

by: (1) the fading out of end-of-year negative effects; and (2) the

ramping up of volumes of newly introduced products. Melexis

introduced a total of 25 new products in 2011 and an additional

15 during 2012. The majority of the products are so-called “green

products”. These products support automotive technologies that

allow for the development for more fuel efficient and lower

carbon dioxide emitting cars.

In our view, the improved earnings momentum should trigger

further re-rating to Melexis historical median multiple of 14x

12�3month forward PER. A valuation we deem justified given

Melexis’ high ROIC and growth profile. In our view, both

sustainable traits given that new players face high barriers to

entry, customers face high supplier switching costs and the

industry is underpinned by secular growth trends.

Post 1Q13, our estimates bank on 12m rolling sales of €274m,

up 10% YoY. Our operational margin stands at 22.2% implying

REBIT of €61m, up 11% YoY. From 2Q13F onwards sequential

growth should kick back in. For 1Q13F, we see sales coming in

at €59.9m, down 3.5% sequentially. Our REBIT estimate stands

at €12.3m, down 6.6% YoY. Our FY13F dividend estimate

stands at €0.67 share, slightly up from the €0.65/share in FY12.

A first trigger could be found in the 1Q13 earnings release, in

terms of 2Q13 guidance. Furthermore we identify: (1) positive

newsflow in terms of design wins; (2) light vehicle production;

and (3) earnings releases as triggers for unlocking the value of

the shares.

Melexis’ 4.6% 2013F dividend yield should provide downside

protection in an adverse scenario. We stress tested our model

and revealed that Melexis could, while keeping opex at our

base-case level of €65m (FY11 €59.6m), withstand a 10%

revenue drop and 370bp drop in gross margin before having to

cut the dividend below the FY12 level of €0.65/share.

Price (04/04/13) €14.70

Previously €15.00



Structural growth drivers Melexis The rising demand for Melexis components is driven by following

secular trends:

Cleaner environment: Global warming and urbanisation are

urging governments across the world to implement ever stricter

emission legislation. To adhere to these strict norms automobile

manufactures make use of ever evolving high tech technologies

that are supported by Melexis products.

Energy efficiency: In an effort to reduce overall running cost of

produced vehicles, car manufactures are continuously increasing

fuel efficiency of their models. Melexis develops state-of-the-art

technologies that enable engine downsizing and reduction of

average fuel consumption per mile.

More safety features: Heightened consumer awareness and

stricter government regulations in terms of passenger safety are

responsible for cars containing ever increasing amounts of

accident avoiding electronics and active/passive passenger

safety systems. Melexis provides supporting solutions through its

Opto and Magnetic sensor product lines.

Heightened connectivity: The birth of an internet society has

heightened demand for in car connectivity to the WWW. The

technology allows people to connect to social media, stream

online music or search online for road information.

Sound financial structure Melexis reported FY12 net debt of €12m, with the net debt/

EBITDA ratio standing at 0.2x and the net debt/equity ratio at

13%. The dividend (cash flow) coverage amounted to 2.3x.

Diversified geographical exposure Melexis’ geographical spread of the customer base is in line with

the distribution of global automotive semiconductor demand.

FY12 sales were spread 40%/42%/18% over the APAC, EMEA

and NALA region. The diversified geographical footprint allows

Melexis to profit from high growth regions in developing regions

while maintaining a strong foothold in Europe, which firmly

retains its position as innovator in the automotive world.

Fabless business model Melexis operates a fabless business model, owning no proper

semiconductor foundries. The fabless business model results in

lower costs, lower capital intensity, higher R&D focus, premium

designs and premium pricing.

Matthias Maenhaut Brussels +32 2547 7523 [email protected]


49

Newsflow

Date Description

26 April 2013 1Q1318 June 2013 Analyst meeting31 July 2013 1H13



Xtrion 53.58FMR LLC 9.98Melexis 0.86


Share data

Avg daily volume (3-mth) 23,391Free float (%) 38.3Market cap (€m) 595.4Net debt (1F, €m) 4Enterprise value (1F, €m) 600Dividend yield (1F, %) 4.6



2468

1012141618

3/08 3/09 3/10 3/11 3/12 3/13


Source: ING

Company profile

Melexis designs and develops ICs, most of which arefor use in automotive electronics, and supplies nearlyall automotive OEMs. The company holds a strongposition in the market for sensors. Melexis employs afabless business model, relying on foundries formanufacturing and is structured under two operatingsegments, Automotive (84% of 2012 sales) andNon-Automotive (16%). The founders/managementcurrently own a 53.58% stake in the company.

Risks

The main risks to our investment case lie in ourassumptions on vehicle production growth andsemiconductor content growth. If these prove to betoo low or too high, this will cause our estimates to goup or down

Financials

Year end Dec (€m) 2010 2011 2012 2013F 2014F 2015F

Income statement

Revenues 219 231 247 261 284 307EBITDA 68 66 71 73 80 85EBIT 56 54 56 57 63 69Net interest (2) (1) (0.9) (0.4) (0.6) (0.5)Associates 0 0 0 0 0 0Other pre-tax items 0 0 0 0 0 0Pre-tax profit 54 53 55 56 62 69Tax (6) (7) (3) (7) (8) (9)Minorities 0 0 0 0 0 0Other post-tax items 0 0 0 0 0 0Net profit 49 46 51 49 54 59Normalised net profit 49 46 51 49 54 59

Balance sheet

Tangible fixed assets 49 51 60 63 60 59Intangible fixed assets 2 2 2 2 2 2Other non-current assets 20 20 20 20 20 20Cash & equivalents 21 18 21 29 50 72Other current assets 89 87 92 97 106 114Total assets 180 178 196 212 239 268Short-term debt 21 6 36 1 1 1Other current liabilities 24 26 27 25 28 30Long-term debt 37 37 2 32 32 32Other long-term liabilities 3 3 1 1 1 1Total equity 95 107 129 152 176 203Total liabilities & equity 180 178 196 212 239 268Net working capital 61 62 57 63 68 74Net debt (cash) 37 25 17 4 (17) (39)

Cash flow

Cash flow EBITDA 68 66 71 73 80 85Tax, interest & other 8 9 6 7 9 10Change in working capital (14) 1 (13) (7) (6) (6)Net cash from op activities 46 59 55 59 65 69Capex (15) (15) (21) (20) (14) (15)Net acquisitions 0 0 0 0 0 0Net financing cash flow (18) (25) (7) (5) (0.1) (0.1)Dividends & minority distrib'n (12) (24) (26) (27) (30) (32)Net ch in cash & equivalents (1) (3) 4 8 21 21FCF 33 46 36 40 51 54


Revenue growth (%) 70.3 5.1 7.1 5.6 8.9 8.0Normalised EPS growth (%) 1,035 -5.5 18.0 -2.2 9.8 9.1Normalised EBITDA mgn (%) 30.9 28.8 28.7 27.9 28.2 27.8Normalised EBIT margin (%) 25.7 23.6 22.6 21.7 22.2 22.5ROACE (%) 39.3 35.9 35.2 32.1 31.9 30.9Reported ROE (%) 62.6 45.3 43.6 35.2 33.1 31.2Working capital as % of sales 27.9 26.7 23.0 24.1 24.1 24.1Net debt (cash)/EBITDA (x) 0.54 0.37 0.24 0.06 (0.21) (0.45)EBITDA net interest cvg (x) 31.1 56.9 77.6 182.1 130.4 168.2

Valuation


Per share data




50

Philips Maintained

Lighting the way BuyNetherlands Market cap €20,704.5mIndustrial Goods & Services Bloomberg PHIA NA

We see 2013 as a year with significant tailwinds as we

believe lower rare-earth prices, cost savings and an

improving economy can result in significant positive

operational leverage in the consumer and lighting divisions.

Additionally, we believe Philips’ strong balance sheet at 0.5x

2013 net debt/EBITDA leaves room for more

shareholder-friendly activities. Finally, we argue that

valuation is still attractive, with the company trading at a

20% discount compared with historical multiples.

Investment case We see 2013 as a year with significant tailwinds as (1) we see a

rare-earth raw material tailwind of €100m. After a €100m

headwind in 2011 and a steady decline of rare-earth prices

throughout 2012, Philips’ hedging policies will result in the

potential for a €100m rare-earth tailwind in 2013, in our view. The

company has already guided for some tens of millions of positive

impact in 1Q13, but we are just starting to see this impact;

(2) self-help with €1.1bn cost-savings programme until 2014

and €1bn additional until 2016. Philips has an ongoing €1.1m

cost-savings programme, which will be completed in 2014 and of

which we assume a 50% retention rate. Philips has completed a

cumulative €471m of the cost-savings programme in 2012. Still,

this leaves €429m to go for 2013, with the remaining €200m

planned for 2014. Additionally, the company has initiated a DfX

plan, which aims to reduce costs by an additional €1bn in the

2014-16 period, of which we assume a 50% retention rate;

(3) Philips’ lighting and consumer lifestyle divisions are still

operating in a weak economic environment with Philips

showing peak margins in lighting of 12.5% in 2010 versus 6.9%

in 2012, and 12.6% in consumer lifestyle versus 9.4%, which in

our view shows that as soon as the supply/demand picture

improves, there is room for better margins, even without the

cost-savings programme;

(4) Philips currently has an ongoing share buyback

programme of €2.0bn of which there is almost €250m left to

complete in the coming months. Given Philips’ very solid balance

sheet at only 0.5x 2013 debt/EBITDA, we believe there is room

for further shareholder-friendly activities such as larger

dividends, more share buybacks or EPS-accretive acquisitions;

(5) we believe Philips’ current valuation is still supportive,

even after a very solid performance in 2012. Philips currently

trades at 2013 PE of 14.1x and 2013 EV/EBITDA of 6.0x, which

is more than 20% below historical average multiples of 17x and

8x, respectively.

Price (04/04/13) €23.01

Previously €27.00



Valuation remains supportive

Historical EV/EBITDA valuation

0

2

4

6

8

10

12

14

1/31

/200

5

1/31

/200

6

1/31

/200

7

1/31

/200

8

1/31

/200

9

1/31

/201

0

1/31

/201

1

1/31

/201

2

1/31

/201

3

EV/EBITDA Average EV/EBITDA

Source: Bloomberg

Cost savings will boost results of both the Accelerate!

programme (€1.1bn by 2014) and the DfX programme (additional

€1bn over 2014-16).

Sufficient self-help potential (€m)

2011 2012 2013 2014 2016

Cumulative gross savings 25 471 900 1,100 2,100Restructuring costs (37) (249) (125) (60)Investments (37) (128) (100) (100)

Source: Philips, ING estimates

Lighting sales will accelerate, thereby boosting growth and

margins in the lighting division.

LED sales will boost lighting growth and margins (€bn)

2011 2016 2020

Total lighting sales 7,638 11,256 14,322LED 1,528 6,280 10,863Green traditional 3,055 2,899 2,115Non-green traditional 3,055 2,078 1,344

Source: McKinsey (‘Lighting the way’ report), ING estimates

Fabian Smeets Amsterdam +31 20 501 3478 [email protected]


51

Newsflow

Date Description

22 April 2013 1Q13 results3 May 2013 AGM22 July 2013 2Q13 results17 September 2013 Lighting and consumer lifestyle CMD



Dodge & Cox 4.81Blackrock 4.73Southeastern 4.34Franklin 1.40Vanguard 1.12


Share data

Avg daily volume (3-mth) 3,424,732Free float (%) 100.0Market cap (€m) 20,704.5Net debt (1F, €m) 1,971Enterprise value (1F, €m) 22,710Dividend yield (1F, %) 3.5



10

15

20

25

30

3/08 3/09 3/10 3/11 3/12 3/13


Source: ING

Company profile

Philips is a Dutch company active in the followingmarkets: (1) Healthcare (40% of 2011 revenue), whichincludes personal and professional care products; (2)Lighting (34%), which includes products, such as professional lamps, ballasts and luminaires, amongothers; and (3) Consumer Lifestyle (26%), which includesa range of sound, vision and household products. Its keygeographies are the Netherlands, Germany and France(14% of 2011 revenues); the US (28%); China and Japan (13%); Brazil (3%); and Rest of the World (41%).

Risks

Key downside risks to our investment case are: (1) increasing competition in the healthcare market, which currently consists of three large players, but withSamsung indicating it wants to carry out more acquisitions, the healthcare market could become morecompetitive in the long term; (2) an economic slowdowncould hit sales and margins in the consumer andlighting divisions; and (3) acquisitions at high multiplescould destroy shareholder value.

Financials

Year end Dec (€m) 2010 2011 2012 2013F 2014F 2015F

Income statement

Revenues 22,287 22,579 24,788 24,611 26,071 27,319EBITDA 3,436 2,540 2,463 3,556 4,058 4,668EBIT 2,080 (269) 1,030 2,080 2,552 3,130Net interest (121) (240) (246) (246) (246) (246)Associates 18 16 (214) (26) 4 4Other pre-tax items 0 0 0 0 0 0Pre-tax profit 1,977 (493) 570 1,808 2,310 2,888Tax (499) (283) (308) (513) (646) (808)Minorities (6) (4) (5) (4) (4) (4)Other post-tax items (26) (515) (31) 24 0 0Net profit 1,446 (1,295) 226 1,314 1,660 2,077Normalised net profit 1,602 144 848 1,460 1,718 2,134

Balance sheet

Tangible fixed assets 3,326 3,217 3,136 2,652 2,327 2,019Intangible fixed assets 12,233 11,012 10,679 10,207 9,735 9,263Other non-current assets 1,993 2,273 2,736 2,722 2,835 2,836Cash & equivalents 5,945 3,376 3,971 4,559 5,548 6,903Other current assets 8,772 9,517 8,557 8,453 8,955 9,919Total assets 32,269 29,395 29,079 28,593 29,400 30,940Short-term debt 2,404 1,326 1,326 1,326 1,326 1,326Other current liabilities 8,354 8,458 8,629 8,664 9,033 9,610Long-term debt 4,532 5,277 5,726 5,204 4,730 4,388Other long-term liabilities 1,887 1,984 2,224 2,223 2,229 2,253Total equity 15,092 12,350 11,174 11,175 12,083 13,363Total liabilities & equity 32,269 29,395 29,079 28,593 29,400 30,940Net working capital 4,529 5,107 5,241 5,204 5,512 5,812Net debt (cash) 991 3,227 3,081 1,971 508 (1,189)

Cash flow

Cash flow EBITDA 2,834 678 1,695 2,770 3,171 3,618Tax, interest & other (729) 837 (39) 0 0 0Change in working capital 16 (747) 542 37 (309) (300)Net cash from op activities 2,121 768 2,198 2,808 2,862 3,319Capex (894) (1,000) (1,061) (1,053) (1,116) (1,163)Net acquisitions 160 (403) (223) 0 0 0Net financing cash flow 201 (1,531) (37) (600) 0 0Dividends & minority distrib'n (296) (259) (255) (717) (757) (801)Net ch in cash & equivalents 1,447 (2,686) 527 588 989 1,355FCF 1,356 (104) 1,563 1,905 1,746 2,156


Revenue growth (%) 10.9 1.3 9.8 -0.72 5.9 4.8Normalised EPS growth (%) 179.3 -91.1 508.6 77.0 18.5 24.3Normalised EBITDA mgn (%) 16.0 11.9 13.4 15.3 15.9 17.4Normalised EBIT margin (%) 9.9 5.4 7.6 9.3 10.1 11.8ROACE (%) 10.3 6.0 10.2 12.7 14.7 17.3Reported ROE (%) 9.8 -9.5 1.9 11.8 14.3 16.4Working capital as % of sales 20.3 22.6 21.1 21.1 21.1 21.3Net debt (cash)/EBITDA (x) 0.29 1.3 1.3 0.55 0.13 (0.25)EBITDA net interest cvg (x) 28.4 10.6 10.0 14.5 16.5 19.0

Valuation

EV/revenue (x) 0.98 1.1 0.96 0.92 0.81 0.72EV/normalised EBITDA (x) 6.1 8.9 7.2 6.0 5.1 4.1EV/normalised EBIT (x) 9.8 19.5 12.6 10.0 8.1 6.1Normalised PER (x) 13.5 152.2 25.0 14.1 11.9 9.6Price/book (x) 1.4 1.7 1.9 1.8 1.7 1.6Dividend yield (%) 3.3 3.3 3.3 3.5 3.7 3.9FCF yield (%) 6.2 n/a 6.6 8.4 8.2 11.0

Per share data

Reported EPS (€) 1.54 (1.36) 0.25 1.47 1.87 2.33Normalised EPS (€) 1.70 0.15 0.92 1.63 1.93 2.40Dividend per share (€) 0.75 0.75 0.75 0.80 0.85 0.90Equity FCFPS (€) 1.44 (0.11) 1.70 2.13 1.96 2.42BV/share (€) 15.90 13.30 12.18 12.52 13.39 14.81



52

PostNL Maintained

Phoenix from the flames – part 2 BuyNetherlands Market cap €708.0mIndustrial Goods & Services Bloomberg PNL NA

PostNL remains a Benelux top pick. Despite the recent 23%

drop in the share price, the FY12 results give comfort to our

investment case. (1) Master Plan savings were raised, with

limited extra cash-out; (2) the balance sheet gave more relief

than expected, ie, more comfort on net debt and liquidity; (3)

the equity gap narrowed due to the increased discount rate;

and (4) and pension cash-out was guided lower than before.

Moreover, we might see lower top-up payments and further

de-risking of the pension fund. The share price seems to

have priced in a significant further decline in the discount

rate, which we feel is overdone, as well as the concerns over

the cash flow.

Investment case Top-up payments might drop further, and de-risking is also

expected. At end-4Q12, the coverage ratio was 102.5%. In

January it dropped to 100.9% and improved to 102.8% in

February. Based on the asset performance in March and the

coverage ratio of pension funds in the Netherlands in March

(+4%ppt), we might see lower top-up payments. We expect a

positive outcome from limited top-up payments within the next

two quarters.

We see upside from negotiations with the pension fund. Cash

contributions were guided to decline from €265m in 2012 to €165m

in 2015. However, we believe some upside remains from the

negotiations, which will be announced in the next two quarters.

Equity funding gap, severe decline in discount rate seem

priced in; dividends payable in 2016F. A different calculation

of the discount rate increased the discount rate from 3.1% to

3.7%. We see that in the first half of 1Q13 the yield improved

and since then fell, but it is still stable vs end-4Q12, ie, no impact

on our fair value. We might see further downside due to

uncertainty on equity markets due to Cyprus; however, according

to our fair value calculation, the market has already priced in a

c.>70bp drop to just below 3.00%, which we believe is overdone.

Dividends are expected to return in 2016F (previously 2018F).

TNT share price does not explain recent share price

weakness, as the shares still trade roughly as before PostNL’s

23% decline. The positive is that PostNL is committed to sell the

stake and that it is now easier to do so.

Master Plan savings increased (+€70m), and perhaps some

positive regulatory changes are coming up. Limited extra

cash-out is required for the plan, and it seems less risky. The

appeal related to the net cost bill 2011 is off the table, in

exchange for a higher increase in the stamp price. We also

expect the Monday delivery to be cancelled, and perhaps more.

Balance sheet relief. PostNL stated clearly that a rights issue is

not needed, and worries over cash outflows in 2013-14 seem

overdone, in our view. PostNL expects its credit rating to return

to BBB+ before equity is seen positive in 2016.

Price (04/04/13) €1.61

Previously €2.90



FY12 results give comfort to our investment case, but share

price disagrees

Despite what we believe is a positive results publication, which

ticked quite a few boxes in our investment case, the share lost

18% (€1.85) since then. On the day of the publication, the shares

traded up 7%, but lost 23% since then. Key items of the results:

Results were more or less in line. FY12 results were a touch

better, and the FY13 and FY15 outlook came in at the lower-end.

The cash EBIT for 4Q12 came in at €67m vs company-collated

consensus of €60m and INGF €61m. The guidance for cash

EBIT for both FY13 and FY15 came in a touch below our

forecasts at €20-60m (INGF pre-results: €71m) and for FY15 of

€300-370m (INGF pre-results: €371m).

Master Plan savings increased. The positive was that the

Master Plan savings target was raised by €70m, which is more

than what was expected. Importantly, there are limited additional

provisions needed to reach that target, ie, +€50m, but not more

cash-out was guided for.

Relief on net debt position. Net debt came in lower at €1,224m

vs INGF €1,365m, and the cash outflow for the Master Plan

came in c.€25m lower than what we anticipated.

Equity gap smaller. The negative equity position was c.€240m

lower than expected post the IAS19 implementation, and PostNL

guided for a positive equity position in 2016 vs INGF pre-results

for 2018F. A revised calculation of the discount rate improved it

from 3.1% at the end of 3Q12 to 3.7% at the end of 4Q12, which

has a significant positive impact on the pension deficit.

Comfort on balance sheet. Management provided comfort on

the debt position/liquidity by stating that a rights issue is not

needed and that PostNL has sufficient financial resources to

meet its funding needs. Moreover, the €570m credit facility is still

undrawn, which was better than what we anticipated.

Lower pension cash-out. Pension cash-out is guided lower by

€20m for 2013 than what we anticipated, ie, €240m cash-out.

Guidance was also lower for 2015, ie, €165m vs INGF

pre-results €190m.

Marc Zwartsenburg, CEFA Amsterdam +31 20 563 8721 [email protected]


53

Newsflow

Date Description

16 April 2013 AGM7 May 2013 1Q13 results5 August 2013 2Q13 results4 November 2013 3Q13 results



Mackenzie Financial 8.5ING 8.1Causeway Capital 7.7Manning & Napier 5.5Alberta Investments 4.8


Share data

Avg daily volume (3-mth) 7,684,547Free float (%) 78.0Market cap (€m) 708.0Net debt (1F, €m) 1,489Enterprise value (1F, €m) 2,211Dividend yield (1F, %) 0.0



0

2

4

6

8

10

12

14

3/08 3/09 3/10 3/11 3/12 3/13


Source: ING

Company profile

PostNL is the incumbent postal service provider in the Netherlands (formerly TNT Post) with a market shareof roughly 80%. It delivers letters and parcels withinthe Netherlands, and it has an international lettersorting and distribution organisation in Germany, Italy,and the UK. PostNL also operates a large andgrowing parcels business with annual sales of about€600m. In total, PostNL generates annual revenues ofroughly €4bn (of which about €2.5bn in the Dutchletter market and about €1.3bn in foreign).

Risks

PostNL is highly sensitive to a more severe decline in addressed mail volumes, given the impact on futurecash flows and need for further cost savings to offsetthe declines. It is also highly sensitive to equity marketperformance and bond yields, given the scope of thepension fund’s liabilities. A decline in high-quality corporate bond yields (AA10+) and in equity marketshas a material negative impact on the fair value.Given PostNL’s significant stake in TNT Express, a decline in the share price of TNT would be a majornegative for our investment case.

Financials

Year end Dec (€m) 2010 2011 2012 2013F 2014F 2015F

Income statement

Revenues 4,315 4,350 4,362 4,386 4,422 4,454EBITDA 600 529 382 379 488 532EBIT 480 417 291 288 401 441Net interest (106) (100) (104) (145) (123) (105)Associates (1) (661) 571 (435) 0 0Other pre-tax items 0 (2) 0 0 0 0Pre-tax profit 373 (346) 758 (291) 278 337Tax (91) (78) (80) (39) (75) (91)Minorities 0 0 0 0 0 0Other post-tax items 69 2,159 0 0 0 0Net profit 351 1,735 678 (330) 203 246Normalised net profit 383 246 107 105 203 246

Balance sheet

Tangible fixed assets 499 451 536 581 605 612Intangible fixed assets 166 176 168 178 178 178Other non-current assets 1,184 2,180 1,520 985 1,090 1,160Cash & equivalents 65 668 391 263 266 55Other current assets 6,223 643 2,041 650 633 616Total assets 8,137 4,118 4,656 2,656 2,773 2,621Short-term debt 3 63 0 63 63 63Other current liabilities 1,262 1,336 1,187 1,166 1,175 1,183Long-term debt 1,810 1,763 1,808 1,689 1,680 1,293Other long-term liabilities 2,619 542 579 154 72 59Total equity 2,443 414 1,080 (488) (285) (39)Total liabilities & equity 8,137 4,118 4,654 2,584 2,705 2,559Net working capital 304 248 258 295 283 269Net debt (cash) 1,748 1,158 1,417 1,489 1,477 1,301

Cash flow

Cash flow EBITDA 600 529 541 359 473 517Tax, interest & other 91 (68) (259) (47) 3 112Change in working capital (19) 40 (15) 41 35 35Net cash from op activities 171 122 (56) 6 115 273Capex (109) (137) (204) (151) (137) (122)Net acquisitions (3) 108 15 0 0 0Net financing cash flow 26 512 (66) (8) 0 (387)Dividends & minority distrib'n (119) (80) 0 0 0 0Net ch in cash & equivalents (14) 603 (277) (128) 4 (211)FCF 178 148 (134) 5 126 281


Revenue growth (%) n/a 0.81 0.28 0.55 0.83 0.72Normalised EPS growth (%) n/a -37.3 -62.2 -2.2 93.7 21.2Normalised EBITDA mgn (%) 14.2 12.4 8.7 8.6 11.0 11.9Normalised EBIT margin (%) 13.4 9.8 6.7 6.6 9.1 9.9ROACE (%) 27.3 13.1 11.3 13.9 29.4 31.8Reported ROE (%) 29.0 122.9 92.3 -116.3 -50.7 -139.7Working capital as % of sales 7.0 5.7 5.9 6.7 6.4 6.0Net debt (cash)/EBITDA (x) 2.9 2.2 3.7 3.9 3.0 2.4EBITDA net interest cvg (x) 5.7 5.3 3.7 2.6 4.0 5.1

Valuation

EV/revenue (x) 0.57 0.43 0.49 0.50 0.50 0.45EV/normalised EBITDA (x) 4.1 3.5 5.6 5.8 4.5 3.8EV/normalised EBIT (x) 4.3 4.4 7.3 7.7 5.5 4.6Normalised PER (x) 1.6 2.5 6.6 6.8 3.5 2.9Price/book (x) 0.25 1.6 0.66 n/a n/a n/aDividend yield (%) -13.3 0.0 0.0 0.0 0.0 -21.2FCF yield (%) 7.2 7.9 n/a 0.20 5.7 13.9

Per share data

Reported EPS (€) 0.94 4.53 1.54 (0.75) 0.46 0.56Normalised EPS (€) 1.03 0.64 0.24 0.24 0.46 0.56Dividend per share (€) (0.21) 0.00 0.00 0.00 0.00 (0.34)Equity FCFPS (€) 0.21 0.12 (0.53) (0.27) 0.01 0.40BV/share (€) 6.44 1.02 2.43 (1.14) (0.68) (0.12)



54

SBM Offshore Maintained

Growing backlog, growing confidence BuyNetherlands Market cap €2,594.4mOil & Gas Bloomberg SBMO NA

With the main issues behind, we believe SBM’s focused

strategy will fully come to fruit in the coming years. The

combination of its growth prospects and low valuation in PER

terms alongside a large discount to SOTP justifies a BUY

rating for SBM as well as a place on the Benelux Favourites

list. Our target price is €17 (unchanged), offering 34% upside.

Investment case We believe SBM’s management has recently shown its ability to

cope and solve complex legacy problems. Going forward, we

foresee that the current management will raise SBM’s leading

profile within the oil services sector and fully restore SBM’s

credibility with the investment community.

1) Management has worked on the organisation model, placing

responsibility lower in the organisation and reducing employees’

chances of passing on responsibilities to others. This supports a

more agile company.

2) Among its FPSO peers, management is very actively promoting

a more healthy business model, which should lead to a better

balance of risk/reward for the contractors against their clients.

Although not everyone seems to be joining yet, the necessity is

broadly subscribed by the majority of the FPSO contractors, after

they all suffered losses over the past five years. As a

consequence, day rates or contract prices offered will rise unless

clients are willing to share risks with the contractor. While this

needs to gain further ground in the coming years, it is certainly an

encouraging development. The latest LOIs signed with Petrobras

are an example of the new approach, with Petrobras realising that

fast and timely delivery and local content demands do not always

match.

3) Management’s focus on a better balance sheet should lead to

better solvency/gearing ratios. Although this will lead to less financial

leverage, we believe that higher ratios are being welcomed as a

robust and flexible balance sheet enables moving faster to win and

finance mega projects. The target of 40-45% solvency (we estimate

end-FY13 at 33%) enables a corporate credit rating for SBM, which

is instrumental to tap the (US)PP market in the future as project

financing by banks is on its way back.

4) Management has made clear statements about its strategy,

the construction, lease and operation of FPSOs and turrets and

no tendering for adjacent products. This implies a return to the

core activity at which SBM is good and where it has a reputation

to lose in delivering on time and within budget.

Overall, the conclusion is that under the helm of a very dedicated

management team, SBM has become a much better company

than it has been for around five years. Combining these steps

with the favourable outlook for this industry – supported by the

continued and rising demand for FPSO as the most attractive

solution to develop an oil field in deep water – it is clear that

SBM’s prospects are very strong.

Price (04/04/13) €12.47

MaintainedTarget price (12-mth) €17.00


Breakdown earnings FY12-FY14F

Table Outlook FY09-14F (US$m) FY12A FY13F FY14F

Revenues 3,695 4,126 4,695EBITDA 698 901 1,011EBIT 50 589 654Net (75) 452 491EPS ($) (0.46) 2.20 2.35

Breakdown (US$m) EBIT Lease (327) 284 290EBIT Turnkey Systems 357 303 362EBIT Turnkey Services 69 56 60EBIT margin Lease (%) -35.1 27.2 24.8EBIT margin Turnkey Systems (%) 14.4 10.7 11.1EBIT margin Turnkey Services (%) 24.5 22.2 22.0


Valuation Looking at earnings, we foresee an 2013F EPS of $2.20

excluding special charges. This results in a 2013F PER of 7.4x.

For FY14, our estimates are an EPS of $2.35 and a 2014F PER

of 6.9x, taking into account the dilution from both equity issues.

At the EBIT level, we expect growth in the coming years of c.9%

on average, partially eroded due to the gate for contracts,

recognising EBIT when 25% of projects are completed. We

estimate EBITDA to cross €1bn in FY14.

SOTP

NPV lease fleet US$m €m € per share

Existing fleet 6,668 5,209 25.04Contract extensions 1,552 1,212 5.83Debt (5,028) (3,928) (18.88)Lease portfolio 3,191 2,493 11.98DCF based: Supply side (EBIT margins 12-13%) 2,231 1,743 8.38

Total SOTP value 5,422 4,236 20.36

Current share price 12.70Discount (%) 38


These favourable numbers point towards an undemanding share

price. Looking at the SOTP, we estimate the lease portfolio

including extensions to represent a value of €12. Total SOTP

including the latest contracts from Petrobras comes in at €20.35.

At a share price of €12.47, SBM is valued at a discount of almost

40%. Given the changes implemented by management,

favourable market conditions and the outlook for better earnings,

we are convinced that SBM will be a stock outperforming the

Benelux in the coming months. Therefore, we put SBM on our

Benelux Favourites list.

Quirijn Mulder Amsterdam +31 20 563 8757 [email protected]


55

Newsflow

Date Description

16 April 2013 End trading claims rights issue23 May 2013 1Q13 trading update8 August 2013 1H13 figures14 November 2013 3Q13 trading update



HAL Trust (March 2013) 13.3Sprucegrove Investment Management Ltd. 5.0


Share data

Avg daily volume (3-mth) 2,176,316Free float (%) 100.0Market cap (€m) 2,594.4Net debt (1F, US$m) 2,990Enterprise value (1F, US$m) 6,246Dividend yield (1F, %) 0.0



5

10

15

20

25

30

3/08 3/09 3/10 3/11 3/12 3/13


Source: ING

Company profile

SBM Offshore designs, builds and operatesequipment, vessels and complete systems for the oil& gas industry. This includes the design andconstruction of FPSOs. It aims to maintain its marketposition through advanced technology and to be apreferred supplier. Its clients include oil majors andNOCs, and it targets large complicated FPSOs. Thegroup also contracts and operates FPSOs underlong-term leases to oil companies. SBMO currentlyhas 14 FPSOs (with three under construction) andthree FSOs/MOPUstor/semi-subs (with two underconstruction) and operates three further units.

Risks

Risk for SBMO is related to the development of the oilprice; a material lower oil/gas prices would imply lowercapex in the oil and gas industry. The effect is notvisible immediately for SBM due to the long lead timeof the large projects, but in the long-term it impairs SBM’s business. A more specific risk is related to theinvestigation of improper sales activities: theinvestigation is ongoing and there is no view on whatthe outcome can be.

Financials

Year end Dec (US$m) 2010 2011 2012 2013F 2014F 2015F

Income statement

Revenues 3,058 3,159 3,826 4,226 4,695 4,610EBITDA 714 811 698 901 1,011 1,067EBIT 386 (341) 50 589 654 690Net interest (84) (50) (87) (98) (120) (134)Associates 0 0 0 0 0 0Other pre-tax items 0 0 0 0 0 0Pre-tax profit 303 (391) (36) 492 534 556Tax (27) (50) (38) (39) (43) (45)Minorities (36) (32) (5) (4) (3) (2)Other post-tax items 0 0 0 0 0 0Net profit 240 (473) (79) 449 488 509Normalised net profit 240 (23) (79) 449 488 509

Balance sheet

Tangible fixed assets 2,942 2,534 2,482 2,985 3,880 4,605Intangible fixed assets 68 47 29 27 25 23Other non-current assets 268 983 885 1,525 1,875 2,075Cash & equivalents 206 203 774 422 273 289Other current assets 1,590 1,523 2,164 2,362 2,410 2,460Total assets 5,073 5,290 6,335 7,322 8,463 9,453Short-term debt 312 716 672 672 672 672Other current liabilities 905 1,290 1,833 1,633 1,633 1,633Long-term debt 1,732 1,933 2,290 2,740 3,390 3,990Other long-term liabilities 1.0 2 0.6 0.6 0.6 0.6Total equity 2,123 1,349 1,540 2,276 2,767 3,157Total liabilities & equity 5,073 5,290 6,335 7,322 8,463 9,453Net working capital 723 275 537 813 860 910Net debt (cash) 1,838 2,446 2,188 2,990 3,789 4,372

Cash flow

Cash flow EBITDA 603 711 573 764 848 889Tax, interest & other 0 0 0 0 0 0Change in working capital 0 0 0 0 0 0Net cash from op activities 533 624 422 627 685 710Capex (1,164) (1,373) (1,200) (1,530) (1,600) (1,300)Net acquisitions 107 36 8 0 0 0Net financing cash flow 580 618 1,192 784 950 900Dividends & minority distrib'n 0 0 0 0 0 0Net ch in cash & equivalents (377) (371) (36) (41) (265) 10FCF (578) (709) (679) (805) (795) (456)


Revenue growth (%) 3.4 3.3 21.1 10.5 11.1 -1.8Normalised EPS growth (%) -1.5 n/a n/a n/a 6.8 4.4Normalised EBITDA mgn (%) 23.3 25.7 18.2 21.3 21.5 23.1Normalised EBIT margin (%) 12.6 3.5 1.3 13.9 13.9 15.0ROACE (%) 9.9 2.7 1.2 11.6 10.5 9.4Reported ROE (%) 12.4 -28.2 -5.8 24.4 20.0 17.7Working capital as % of sales 23.6 8.7 14.0 19.2 18.3 19.7Net debt (cash)/EBITDA (x) 2.6 3.0 3.1 3.3 3.7 4.1EBITDA net interest cvg (x) 8.5 16.2 8.0 9.2 8.4 8.0

Valuation

EV/revenue (x) 1.7 1.8 1.4 1.5 1.5 1.7EV/normalised EBITDA (x) 7.2 7.1 7.8 6.9 7.0 7.2EV/normalised EBIT (x) 13.3 52.4 107.8 10.6 10.8 11.1Normalised PER (x) 11.2 n/a n/a 7.3 6.8 6.5Price/book (x) 1.3 2.1 1.9 1.5 1.2 1.1Dividend yield (%) 4.4 0.0 0.0 0.0 3.7 3.8FCF yield (%) n/a n/a n/a n/a n/a n/a

Per share data

Reported EPS (US$) 1.44 (2.77) (0.46) 2.20 2.35 2.45Normalised EPS (US$) 1.44 (0.13) (0.46) 2.20 2.35 2.45Dividend per share (US$) 0.71 0.00 0.00 0.00 0.59 0.61Equity FCFPS (US$) (3.78) (4.39) (4.51) (4.42) (4.40) (2.83)BV/share (US$) 12.41 7.54 8.52 10.58 12.93 14.79



56

Rankings

Fig 39 Benelux ranking tables

Value traded daily (6M avg) EV/EBITDA 2014F PER 2014F

Company Country (€m) Company Country (x) Company Country (x)

AB InBev Belgium 121.5 BE Semiconductor Industries Netherlands 2.6 Agfa Gevaert Belgium 3.5RDSA Netherlands 112.9 TomTom Netherlands 3.2 PostNL Netherlands 3.5ArcelorMittal Netherlands 106.1 Ballast Nedam Netherlands 3.3 Imtech Netherlands 4.9Unilever NV Netherlands 105.4 Mobistar Belgium 3.4 Heijmans Netherlands 5.3ASML Netherlands 90.0 KPN Netherlands 3.7 KPN Netherlands 5.3Philips Netherlands 64.2 Delhaize Belgium 3.8 Delta Lloyd Netherlands 5.7KPN Netherlands 49.7 Barco Belgium 3.9 Recticel Belgium 6.1AkzoNobel Netherlands 44.1 Heijmans Netherlands 3.9 RDSA Netherlands 6.2Core Laboratories Netherlands 41.4 ArcelorMittal Netherlands 4.0 BE Semiconductor Industries Netherlands 6.4KBC Belgium 39.0 Nyrstar Belgium 4.0 SBM Offshore Netherlands 6.8Heineken Netherlands 37.8 Ordina Netherlands 4.0 Aegon Netherlands 6.9DSM Netherlands 36.3 RDSA Netherlands 4.0 AMG Netherlands 6.9Aegon Netherlands 35.9 TNT Express Netherlands 4.0 Ordina Netherlands 7.0TNT Express Netherlands 32.4 Recticel Belgium 4.2 TomTom Netherlands 7.0Ahold Netherlands 32.4 CFE Belgium 4.3 Nieuwe Steen Investments Netherlands 7.1Unibail-Rodamco Netherlands 31.6 Deceuninck Belgium 4.4 BAM Netherlands 7.6SBM Offshore Netherlands 27.5 Ahold Netherlands 4.5 CFE Belgium 7.9Solvay Belgium 26.0 Imtech Netherlands 4.5 Mobistar Belgium 7.9Fugro Netherlands 25.6 PostNL Netherlands 4.5 KBC Belgium 8.1Reed Elsevier NV Netherlands 25.0 Aperam Luxembourg 4.6 Barco Belgium 8.9Imtech Netherlands 20.8 AMG Netherlands 4.7 Delhaize Belgium 8.9Delhaize Belgium 20.3 Kendrion Netherlands 4.7 Kendrion Netherlands 8.9Ziggo Netherlands 17.8 Wessanen Netherlands 5.0 BinckBank Netherlands 9.1Umicore Belgium 17.0 Philips Netherlands 5.1 Kas Bank Netherlands 9.2Randstad Netherlands 17.0 Belgacom SA Belgium 5.2 ArcelorMittal Netherlands 9.3Delta Lloyd Netherlands 14.7 D’Ieteren Belgium 5.4 AkzoNobel Netherlands 9.4Ageas Belgium 14.5 Solvay Belgium 5.4 Grontmij Netherlands 9.4Wolters Kluwer Netherlands 14.3 Bekaert Belgium 5.5 Van Lanschot Netherlands 9.8Belgacom SA Belgium 14.2 Macintosh Netherlands 5.5 Ageas Belgium 10.2PostNL Netherlands 14.2 Euronav Belgium 5.6 Unit4 Netherlands 10.2Quest for Growth Belgium 14.2 Unit4 Netherlands 5.6 Aalberts Industries Netherlands 10.3DE Master Blenders Netherlands 14.0 Agfa Gevaert Belgium 5.7 Boskalis Netherlands 10.3Vopak Netherlands 13.0 Boskalis Netherlands 5.9 Solvay Belgium 10.3Corio Netherlands 11.7 Tessenderlo Belgium 5.9 Wolters Kluwer Netherlands 10.3SES Luxembourg 10.8 USG People Netherlands 6.0 Exact Holding Netherlands 10.4Boskalis Netherlands 9.9 Exact Holding Netherlands 6.1 DSM Netherlands 10.5UCB Belgium 9.7 Royal Ten Cate Netherlands 6.1 Econocom Belgium 10.5ASM International Netherlands 8.7 AkzoNobel Netherlands 6.2 TKH Group Netherlands 10.5Aperam Luxembourg 8.4 Econocom Belgium 6.2 Ballast Nedam Netherlands 10.6Nutreco Netherlands 7.6 Brunel International Netherlands 6.3 VastNed Retail Netherlands 10.6Telenet Group Belgium 6.7 DSM Netherlands 6.3 Arseus Belgium 10.7GBL Belgium 6.6 Beter Bed Netherlands 6.5 Tessenderlo Belgium 10.7TomTom Netherlands 6.4 Aalberts Industries Netherlands 6.7 Exmar Belgium 10.9Wereldhave Netherlands 5.9 Grontmij Netherlands 6.8 Melexis Belgium 10.9Colruyt Belgium 4.9 Sligro Netherlands 6.9 USG People Netherlands 11.2CSM Netherlands 4.5 SBM Offshore Netherlands 7.0 WDP Belgium 11.4Mobistar Belgium 4.0 TKH Group Netherlands 7.1 Acomo Netherlands 11.5BAM Netherlands 3.7 Kinepolis Belgium 7.2 Deceuninck Belgium 11.6Nyrstar Belgium 3.6 Melexis Belgium 7.2 Ahold Netherlands 11.7Cofinimmo Belgium 3.1 Nutreco Netherlands 7.2 Belgacom SA Belgium 11.8Aalberts Industries Netherlands 2.7 Wolters Kluwer Netherlands 7.2 Beter Bed Netherlands 11.8Bekaert Belgium 2.7 Arcadis Netherlands 7.3 Philips Netherlands 11.9Eurocommercial Properties Netherlands 2.4 Colruyt Belgium 7.4 Randstad Netherlands 11.9Brunel International Netherlands 2.2 Fugro Netherlands 7.6 D’Ieteren Belgium 12.0USG People Netherlands 1.9 Umicore Belgium 7.7 Corio Netherlands 12.1Arcadis Netherlands 1.8 Arseus Belgium 7.8 Arcadis Netherlands 12.2Ackermans & van Haaren Belgium 1.8 Telenet Group Belgium 7.8 Reed Elsevier NV Netherlands 12.2KBC Ancora Belgium 1.7 Randstad Netherlands 8.0 Befimmo Belgium 12.7BinckBank Netherlands 1.7 CSM Netherlands 8.5 Elia Belgium 12.7Elia Belgium 1.5 EVS Belgium 8.9 Nutreco Netherlands 12.7D’Ieteren Belgium 1.5 Reed Elsevier NV Netherlands 9.0 Wessanen Netherlands 12.7VastNed Retail Netherlands 1.5 BAM Netherlands 9.1 Brunel International Netherlands 12.9Barco Belgium 1.4 SES Luxembourg 9.1 Fugro Netherlands 12.9Melexis Belgium 1.4 Ziggo Netherlands 9.3 Cofinimmo Belgium 13.2Galapagos Belgium 1.3 Heineken Netherlands 9.8 TNT Express Netherlands 13.2Tessenderlo Belgium 1.3 Unilever NV Netherlands 9.8 Leasinvest Belgium 13.3Royal Ten Cate Netherlands 1.2 Acomo Netherlands 10.0 Sligro Netherlands 13.5AMG Netherlands 1.1 CMB Belgium 10.0 Macintosh Netherlands 13.9Befimmo Belgium 1.0 Elia Belgium 10.1 CSM Netherlands 14.0Unit4 Netherlands 1.0 ASM International Netherlands 10.5 Kinepolis Belgium 14.0


57


Value traded daily (6M avg) EV/EBITDA 2014F PER 2014F

Company Country (€m) Company Country (x) Company Country (x)

EVS Belgium 0.9 AB InBev Belgium 10.7 ASM International Netherlands 14.1Nieuwe Steen Investments Netherlands 0.8 Vopak Netherlands 10.8 Umicore Belgium 14.1Arseus Belgium 0.7 ASML Netherlands 11.0 SES Luxembourg 14.2GIMV Belgium 0.7 Exmar Belgium 12.7 Eurocommercial Properties Netherlands 14.8Aedifica Belgium 0.6 UCB Belgium 12.8 Ascencio Belgium 14.9WDP Belgium 0.6 DE Master Blenders Netherlands 13.9 ASML Netherlands 15.0Exmar Belgium 0.6 Core Laboratories Netherlands 16.7 Vopak Netherlands 15.0Sligro Netherlands 0.5 Ackermans & van Haaren Belgium n/a Unibail-Rodamco Netherlands 15.1TKH Group Netherlands 0.5 Aedifica Belgium n/a Heineken Netherlands 15.4CFE Belgium 0.5 Aegon Netherlands n/a Colruyt Belgium 15.5Heijmans Netherlands 0.5 Ageas Belgium n/a Wereldhave Netherlands 15.5Dexia Belgium 0.5 Ascencio Belgium n/a Royal Ten Cate Netherlands 16.1Grontmij Netherlands 0.5 Banimmo Belgium n/a AB InBev Belgium 16.4Kinepolis Belgium 0.4 Befimmo Belgium n/a Unilever NV Netherlands 17.2Wessanen Netherlands 0.4 BinckBank Netherlands n/a Ziggo Netherlands 17.3Acomo Netherlands 0.4 Cofinimmo Belgium n/a UCB Belgium 17.8Econocom Belgium 0.4 Corio Netherlands n/a Bekaert Belgium 18.1Agfa Gevaert Belgium 0.3 Delta Lloyd Netherlands n/a Nyrstar Belgium 19.3BE Semiconductor Industries Netherlands 0.3 Dexia Belgium n/a Banimmo Belgium 19.4Van de Velde Belgium 0.3 Eurocommercial Properties Netherlands n/a Aedifica Belgium 21.3Ordina Netherlands 0.2 Galapagos Belgium n/a Core Laboratories Netherlands 23.1Exact Holding Netherlands 0.2 GBL Belgium n/a DE Master Blenders Netherlands 23.5Kas Bank Netherlands 0.2 GIMV Belgium n/a Home Invest Belgium Belgium 25.9CMB Belgium 0.2 Home Invest Belgium Belgium n/a Aperam Luxembourg 28.4Deceuninck Belgium 0.2 IBA Belgium n/a Telenet Group Belgium 28.4Euronav Belgium 0.2 Kas Bank Netherlands n/a CMB Belgium 56.4IBA Belgium 0.2 KBC Belgium n/a IBA Belgium n/aRecticel Belgium 0.2 KBC Ancora Belgium n/a Quest for Growth Belgium n/aBeter Bed Netherlands 0.1 Leasinvest Belgium n/a Van de Velde Belgium n/aKendrion Netherlands 0.1 Nieuwe Steen Investments Netherlands n/a Ackermans & van Haaren Belgium n/aLeasinvest Belgium 0.1 Quest for Growth Belgium n/a Dexia Belgium n/aHome Invest Belgium Belgium 0.1 Unibail-Rodamco Netherlands n/a Euronav Belgium n/aVan Lanschot Netherlands 0.1 Van de Velde Belgium n/a EVS Belgium n/aBallast Nedam Netherlands 0.1 Van Lanschot Netherlands n/a Galapagos Belgium n/aMacintosh Netherlands 0.1 VastNed Retail Netherlands n/a GBL Belgium n/aBanimmo Belgium 0.0 WDP Belgium n/a GIMV Belgium n/aAscencio Belgium 0.0 Wereldhave Netherlands n/a KBC Ancora Belgium n/a

Median 2.2 6.2 11.7



58


Net debt/EBITDA 12A EPS growth FY12F Dividend yield FY13F

Company Country (x) Company Country (%) Company Country (%)

Galapagos Belgium -20.9 Deceuninck Belgium 133 Mobistar Belgium 13.4BE Semiconductor Industries Netherlands -2.2 Exmar Belgium 99 Belgacom SA Belgium 11.5ASML Netherlands -1.4 Philips Netherlands 77 VastNed Retail Netherlands 8.4Brunel International Netherlands -1.4 Macintosh Netherlands 70 Exact Holding Netherlands 8.2Exact Holding Netherlands -1.4 Ziggo Netherlands 58 Elia Belgium 7.9ASM International Netherlands -1.3 Beter Bed Netherlands 51 Delta Lloyd Netherlands 7.7Van de Velde Belgium -1.0 AkzoNobel Netherlands 50 Nieuwe Steen Investments Netherlands 7.4Barco Belgium -0.7 TNT Express Netherlands 47 Befimmo Belgium 6.8Colruyt Belgium -0.4 IBA Belgium 45 Cofinimmo Belgium 6.7EVS Belgium -0.3 Ordina Netherlands 41 Eurocommercial Properties Netherlands 6.6TNT Express Netherlands -0.2 BE Semiconductor Industries Netherlands 40 Tessenderlo Belgium 6.6Econocom Belgium 0.1 DSM Netherlands 39 WDP Belgium 6.6Beter Bed Netherlands 0.2 KBC Belgium 39 Ziggo Netherlands 6.6Melexis Belgium 0.2 CFE Belgium 36 Corio Netherlands 6.5Sligro Netherlands 0.5 Brunel International Netherlands 33 GIMV Belgium 6.4Solvay Belgium 0.5 TKH Group Netherlands 30 Leasinvest Belgium 6.2TomTom Netherlands 0.5 Wessanen Netherlands 27 Wereldhave Netherlands 6.1Umicore Belgium 0.5 AMG Netherlands 23 Ascencio Belgium 5.8Kendrion Netherlands 0.6 Unit4 Netherlands 23 Kas Bank Netherlands 5.60Unit4 Netherlands 0.6 Kendrion Netherlands 22 RDSA Netherlands 5.6Ahold Netherlands 0.7 Heijmans Netherlands 21 EVS Belgium 5.2Mobistar Belgium 0.7 Royal Ten Cate Netherlands 20 BAM Netherlands 5.0Ordina Netherlands 0.7 Barco Belgium 19 Unibail-Rodamco Netherlands 5.0Nutreco Netherlands 0.8 Banimmo Belgium 17 Beter Bed Netherlands 4.9RDSA Netherlands 0.8 Econocom Belgium 16 Recticel Belgium 4.9Core Laboratories Netherlands 0.9 AB InBev Belgium 15 BinckBank Netherlands 4.8Unilever NV Netherlands 0.9 Tessenderlo Belgium 15 Heijmans Netherlands 4.8Belgacom SA Belgium 1.0 Heineken Netherlands 14 Aegon Netherlands 4.7Boskalis Netherlands 1.1 Arcadis Netherlands 13 Ageas Belgium 4.7IBA Belgium 1.2 Exact Holding Netherlands 13 Melexis Belgium 4.6D’Ieteren Belgium 1.3 RDSA Netherlands 13 Acomo Netherlands 4.4Kinepolis Belgium 1.3 Ackermans & van Haaren Belgium 12 CSM Netherlands 4.3Philips Netherlands 1.3 Vopak Netherlands 12 Home Invest Belgium Belgium 4.3Agfa Gevaert Belgium 1.6 Elia Belgium 11 SES Luxembourg 4.3Arcadis Netherlands 1.6 WDP Belgium 11 Wolters Kluwer Netherlands 4.3Wessanen Netherlands 1.6 Core Laboratories Netherlands 9 Nyrstar Belgium 4.2Aalberts Industries Netherlands 1.8 Unibail-Rodamco Netherlands 9 Sligro Netherlands 4.2AB InBev Belgium 1.9 ArcelorMittal Netherlands 8 Banimmo Belgium 4.1Deceuninck Belgium 1.9 Fugro Netherlands 8 Bekaert Belgium 3.9Delhaize Belgium 1.9 Van de Velde Belgium 8 Boskalis Netherlands 3.9Randstad Netherlands 1.9 Aalberts Industries Netherlands 7 Brunel International Netherlands 3.9Reed Elsevier NV Netherlands 1.9 Acomo Netherlands 7 Reed Elsevier NV Netherlands 3.9CFE Belgium 2.0 Nutreco Netherlands 7 Aedifica Belgium 3.8DE Master Blenders Netherlands 2.1 Solvay Belgium 7 Ahold Netherlands 3.8Recticel Belgium 2.1 Unilever NV Netherlands 7 BE Semiconductor Industries Netherlands 3.8TKH Group Netherlands 2.1 Boskalis Netherlands 6 Wessanen Netherlands 3.8DSM Netherlands 2.2 Kinepolis Belgium 6 Philips Netherlands 3.5AMG Netherlands 2.3 Arseus Belgium 5 Fugro Netherlands 3.4Acomo Netherlands 2.5 BinckBank Netherlands 5 Nutreco Netherlands 3.4AkzoNobel Netherlands 2.5 Home Invest Belgium Belgium 5 Randstad Netherlands 3.4Wolters Kluwer Netherlands 2.5 Sligro Netherlands 5 AkzoNobel Netherlands 3.3Royal Ten Cate Netherlands 2.6 ASML Netherlands 4 Delhaize Belgium 3.3Bekaert Belgium 2.7 Ahold Netherlands 3 DSM Netherlands 3.3Vopak Netherlands 2.7 Ascencio Belgium 3 Kendrion Netherlands 3.3Heineken Netherlands 2.8 CSM Netherlands 3 TKH Group Netherlands 3.3KPN Netherlands 2.8 Colruyt Belgium 2 Arseus Belgium 3.2USG People Netherlands 2.8 Leasinvest Belgium 2 Solvay Belgium 3.2Exmar Belgium 2.9 Recticel Belgium 2 Exmar Belgium 3.1SES Luxembourg 3.0 Reed Elsevier NV Netherlands 2 Van de Velde Belgium 3.1Arseus Belgium 3.1 Wolters Kluwer Netherlands 1 TNT Express Netherlands 2.9SBM Offshore Netherlands 3.1 Corio Netherlands 0 Royal Ten Cate Netherlands 2.8ArcelorMittal Netherlands 3.2 DE Master Blenders Netherlands 0 Umicore Belgium 2.8Fugro Netherlands 3.4 Eurocommercial Properties Netherlands -1 Unilever NV Netherlands 2.8Nyrstar Belgium 3.4 Delhaize Belgium -2 AB InBev Belgium 2.7Ziggo Netherlands 3.5 Delta Lloyd Netherlands -2 Ackermans & van Haaren Belgium 2.7PostNL Netherlands 3.7 Melexis Belgium -2 CFE Belgium 2.6Aperam Luxembourg 3.8 PostNL Netherlands -2 Colruyt Belgium 2.6Telenet Group Belgium 3.8 Aedifica Belgium -3 D’Ieteren Belgium 2.5Imtech Netherlands 3.9 Befimmo Belgium -3 Kinepolis Belgium 2.5UCB Belgium 4.3 Telenet Group Belgium -4 Macintosh Netherlands 2.5CMB Belgium 5.5 UCB Belgium -5 Telenet Group Belgium 2.5BAM Netherlands 5.9 VastNed Retail Netherlands -5 Barco Belgium 2.4Elia Belgium 5.9 BAM Netherlands -6 Aalberts Industries Netherlands 2.2CSM Netherlands 6.5 Cofinimmo Belgium -7 UCB Belgium 2.1Euronav Belgium 7.6 SES Luxembourg -10 Unit4 Netherlands 2.1


59


Net debt/EBITDA 12A EPS growth FY12F Dividend yield FY13F

Company Country (x) Company Country (%) Company Country (%)

Grontmij Netherlands 10.0 Randstad Netherlands -11 ASM International Netherlands 2.0Macintosh Netherlands 12.6 Umicore Belgium -14 Econocom Belgium 2.0Ackermans & van Haaren Belgium n/a Wereldhave Netherlands -16 Vopak Netherlands 2.0Aedifica Belgium n/a Mobistar Belgium -17 IBA Belgium 1.8Aegon Netherlands n/a Ageas Belgium -21 USG People Netherlands 1.8Ageas Belgium n/a Belgacom SA Belgium -21 ArcelorMittal Netherlands 1.6Ascencio Belgium n/a Nieuwe Steen Investments Netherlands -23 Heineken Netherlands 1.6Ballast Nedam Netherlands n/a KPN Netherlands -29 Deceuninck Belgium 1.5Banimmo Belgium n/a USG People Netherlands -29 ASML Netherlands 1.2Befimmo Belgium n/a Imtech Netherlands -30 Core Laboratories Netherlands 1.1BinckBank Netherlands n/a D’Ieteren Belgium -31 KPN Netherlands 1.1Cofinimmo Belgium n/a Kas Bank Netherlands -33 DE Master Blenders Netherlands 1.0Corio Netherlands n/a TomTom Netherlands -43 CMB Belgium 0.7Delta Lloyd Netherlands n/a CMB Belgium -57 Agfa Gevaert Belgium 0.0Dexia Belgium n/a Aegon Netherlands n/a AMG Netherlands 0.0Eurocommercial Properties Netherlands n/a Agfa Gevaert Belgium n/a Aperam Luxembourg 0.0GBL Belgium n/a Aperam Luxembourg n/a Arcadis Netherlands 0.0GIMV Belgium n/a ASM International Netherlands n/a Ballast Nedam Netherlands 0.0Heijmans Netherlands n/a Ballast Nedam Netherlands n/a Dexia Belgium 0.0Home Invest Belgium Belgium n/a Bekaert Belgium n/a Euronav Belgium 0.0Kas Bank Netherlands n/a Dexia Belgium n/a Galapagos Belgium 0.0KBC Belgium n/a Euronav Belgium n/a GBL Belgium 0.0KBC Ancora Belgium n/a EVS Belgium n/a Grontmij Netherlands 0.0Leasinvest Belgium n/a Galapagos Belgium n/a Imtech Netherlands 0.0Nieuwe Steen Investments Netherlands n/a GBL Belgium n/a KBC Belgium 0.0Quest for Growth Belgium n/a GIMV Belgium n/a KBC Ancora Belgium 0.0Tessenderlo Belgium n/a Grontmij Netherlands n/a Ordina Netherlands 0.0Unibail-Rodamco Netherlands n/a KBC Ancora Belgium n/a PostNL Netherlands 0.0Van Lanschot Netherlands n/a Nyrstar Belgium n/a Quest for Growth Belgium 0.0VastNed Retail Netherlands n/a Quest for Growth Belgium n/a SBM Offshore Netherlands 0.0WDP Belgium n/a SBM Offshore Netherlands n/a TomTom Netherlands 0.0Wereldhave Netherlands n/a Van Lanschot Netherlands n/a Van Lanschot Netherlands 0.0

Median 1.9 7.0 3.3



60


FCF yield FY13F (%) P/B FY13F (x) ROCE FY13F (%)

Company Country (%) Company Country (x) Company Country (%)

TomTom Netherlands 19.8 Telenet Group Belgium -7.8 EVS Belgium 72.9Ordina Netherlands 16.4 PostNL Netherlands -0.9 Core Laboratories Netherlands 65.8USG People Netherlands 14.7 Dexia Belgium 0.0 DE Master Blenders Netherlands 40.6Barco Belgium 13.5 Euronav Belgium 0.2 Beter Bed Netherlands 40.4Exact Holding Netherlands 13.5 Aperam Luxembourg 0.2 Mobistar Belgium 33.2Delhaize Belgium 12.8 ArcelorMittal Netherlands 0.3 Melexis Belgium 32.1Van de Velde Belgium 12.5 Heijmans Netherlands 0.4 Van de Velde Belgium 31.5Ahold Netherlands 11.0 Van Lanschot Netherlands 0.4 Brunel International Netherlands 29.5Wessanen Netherlands 10.8 Aegon Netherlands 0.4 Colruyt Belgium 28.5Mobistar Belgium 10.6 Ordina Netherlands 0.5 Exact Holding Netherlands 27.4Euronav Belgium 9.9 Nyrstar Belgium 0.5 Reed Elsevier NV Netherlands 26.0AMG Netherlands 9.6 Ageas Belgium 0.6 Unilever NV Netherlands 24.2Royal Ten Cate Netherlands 9.4 CMB Belgium 0.6 Kinepolis Belgium 24.0Econocom Belgium 8.9 KPN Netherlands 0.6 Econocom Belgium 23.1Kinepolis Belgium 8.7 Recticel Belgium 0.6 ASML Netherlands 21.8Arcadis Netherlands 8.6 Nieuwe Steen Investments Netherlands 0.6 Acomo Netherlands 20.7Wolters Kluwer Netherlands 8.5 Deceuninck Belgium 0.6 Kendrion Netherlands 20.2Philips Netherlands 8.4 Kas Bank Netherlands 0.6 Wolters Kluwer Netherlands 18.6Recticel Belgium 8.4 Delhaize Belgium 0.7 Barco Belgium 17.9Unit4 Netherlands 8.4 VastNed Retail Netherlands 0.7 AB InBev Belgium 17.8Sligro Netherlands 8.0 Ballast Nedam Netherlands 0.8 Belgacom SA Belgium 17.7Deceuninck Belgium 7.9 RDSA Netherlands 0.8 Nutreco Netherlands 17.5ArcelorMittal Netherlands 7.8 BAM Netherlands 0.8 Agfa Gevaert Belgium 16.0Grontmij Netherlands 7.7 Wereldhave Netherlands 0.8 Arcadis Netherlands 16.0Randstad Netherlands 7.7 TomTom Netherlands 0.8 RDSA Netherlands 16.0Boskalis Netherlands 7.6 Imtech Netherlands 0.8 Umicore Belgium 15.9Imtech Netherlands 7.6 Delta Lloyd Netherlands 0.8 ASM International Netherlands 15.1Reed Elsevier NV Netherlands 7.6 Corio Netherlands 0.9 Aalberts Industries Netherlands 14.3Kendrion Netherlands 7.5 Banimmo Belgium 0.9 Fugro Netherlands 14.3Brunel International Netherlands 7.1 KBC Belgium 0.9 PostNL Netherlands 14.3Nyrstar Belgium 6.9 Eurocommercial Properties Netherlands 0.9 Ziggo Netherlands 14.1Melexis Belgium 6.7 BE Semiconductor Industries Netherlands 0.9 Ahold Netherlands 14.0Nutreco Netherlands 6.7 Elia Belgium 0.9 Solvay Belgium 13.8Telenet Group Belgium 6.6 TNT Express Netherlands 0.9 Imtech Netherlands 13.6Beter Bed Netherlands 6.5 Befimmo Belgium 0.9 Telenet Group Belgium 13.4Ziggo Netherlands 6.5 Bekaert Belgium 0.9 Unit4 Netherlands 13.1Belgacom SA Belgium 6.4 Cofinimmo Belgium 1.0 Arseus Belgium 12.7Bekaert Belgium 6.3 Exmar Belgium 1.0 Philips Netherlands 12.7Aperam Luxembourg 6.0 Macintosh Netherlands 1.0 SBM Offshore Netherlands 12.5Colruyt Belgium 6.0 IBA Belgium 1.0 Sligro Netherlands 12.4AB InBev Belgium 5.8 Wessanen Netherlands 1.0 BE Semiconductor Industries Netherlands 12.3Fugro Netherlands 5.8 AMG Netherlands 1.0 SES Luxembourg 12.2BAM Netherlands 5.7 Royal Ten Cate Netherlands 1.0 Heineken Netherlands 12.0Heineken Netherlands 5.7 USG People Netherlands 1.0 Vopak Netherlands 11.9TNT Express Netherlands 5.5 CFE Belgium 1.1 Boskalis Netherlands 11.7Aalberts Industries Netherlands 5.4 Leasinvest Belgium 1.1 Recticel Belgium 11.7BE Semiconductor Industries Netherlands 5.3 Unibail-Rodamco Netherlands 1.2 TKH Group Netherlands 11.3D’Ieteren Belgium 5.3 D’Ieteren Belgium 1.2 TNT Express Netherlands 11.1Agfa Gevaert Belgium 5.2 BinckBank Netherlands 1.2 Tessenderlo Belgium 11.0Macintosh Netherlands 5.1 Home Invest Belgium Belgium 1.2 AkzoNobel Netherlands 10.8Unilever NV Netherlands 4.8 Agfa Gevaert Belgium 1.3 AMG Netherlands 10.7DSM Netherlands 4.6 DSM Netherlands 1.3 Wessanen Netherlands 10.7SES Luxembourg 4.6 Aedifica Belgium 1.3 Randstad Netherlands 9.8EVS Belgium 4.5 Solvay Belgium 1.3 D’Ieteren Belgium 9.0CFE Belgium 4.4 Barco Belgium 1.3 DSM Netherlands 8.9Arseus Belgium 4.3 SBM Offshore Netherlands 1.3 Grontmij Netherlands 8.7ASML Netherlands 4.3 Boskalis Netherlands 1.4 KPN Netherlands 8.7RDSA Netherlands 4.3 Ascencio Belgium 1.5 CFE Belgium 8.7Heijmans Netherlands 4.1 Ahold Netherlands 1.5 Delhaize Belgium 8.6TKH Group Netherlands 4.1 AkzoNobel Netherlands 1.5 Macintosh Netherlands 7.8CSM Netherlands 4.0 Grontmij Netherlands 1.6 USG People Netherlands 6.9Acomo Netherlands 3.7 WDP Belgium 1.6 IBA Belgium 6.7Umicore Belgium 3.5 Tessenderlo Belgium 1.6 Elia Belgium 6.7Ballast Nedam Netherlands 3.4 Aalberts Industries Netherlands 1.8 Royal Ten Cate Netherlands 6.7Solvay Belgium 3.4 Fugro Netherlands 1.8 Deceuninck Belgium 6.6DE Master Blenders Netherlands 3.3 Philips Netherlands 1.9 CSM Netherlands 6.2UCB Belgium 3.3 Sligro Netherlands 1.9 UCB Belgium 6.1Core Laboratories Netherlands 3.1 UCB Belgium 1.9 Bekaert Belgium 5.8IBA Belgium 2.8 Randstad Netherlands 1.9 Heijmans Netherlands 5.7Elia Belgium 2.5 CSM Netherlands 1.9 Exmar Belgium 4.9ASM International Netherlands 1.9 Kendrion Netherlands 2.0 BAM Netherlands 4.7Tessenderlo Belgium 1.9 TKH Group Netherlands 2.0 Ballast Nedam Netherlands 4.6AkzoNobel Netherlands 1.4 ASM International Netherlands 2.0 ArcelorMittal Netherlands 3.6CMB Belgium 0.6 Umicore Belgium 2.1 Nyrstar Belgium 3.5PostNL Netherlands 0.2 Arseus Belgium 2.2 Ordina Netherlands 3.4


61


FCF yield FY13F (%) P/B FY13F (x) ROCE FY13F (%)

Company Country (%) Company Country (x) Company Country (%)

Vopak Netherlands 0.0 Belgacom SA Belgium 2.2 TomTom Netherlands 2.4Ackermans & van Haaren Belgium n/a Arcadis Netherlands 2.3 Euronav Belgium 0.5Aedifica Belgium n/a Van de Velde Belgium 2.3 Aperam Luxembourg 0.5Aegon Netherlands n/a Nutreco Netherlands 2.4 CMB Belgium 0.0Ageas Belgium n/a Brunel International Netherlands 2.7 Ackermans & van Haaren Belgium n/aAscencio Belgium n/a Acomo Netherlands 2.7 Aedifica Belgium n/aBanimmo Belgium n/a Vopak Netherlands 2.7 Aegon Netherlands n/aBefimmo Belgium n/a Exact Holding Netherlands 2.7 Ageas Belgium n/aBinckBank Netherlands n/a Unit4 Netherlands 2.8 Ascencio Belgium n/aCofinimmo Belgium n/a Econocom Belgium 2.8 Banimmo Belgium n/aCorio Netherlands n/a Wolters Kluwer Netherlands 2.9 Befimmo Belgium n/aDelta Lloyd Netherlands n/a Heineken Netherlands 2.9 BinckBank Netherlands n/aDexia Belgium n/a Colruyt Belgium 3.2 Cofinimmo Belgium n/aEurocommercial Properties Netherlands n/a Mobistar Belgium 3.3 Corio Netherlands n/aExmar Belgium n/a SES Luxembourg 3.5 Delta Lloyd Netherlands n/aGalapagos Belgium n/a Melexis Belgium 3.9 Dexia Belgium n/aGBL Belgium n/a Ziggo Netherlands 4.2 Eurocommercial Properties Netherlands n/aGIMV Belgium n/a Kinepolis Belgium 4.3 Galapagos Belgium n/aHome Invest Belgium Belgium n/a Beter Bed Netherlands 4.6 GBL Belgium n/aKas Bank Netherlands n/a Unilever NV Netherlands 4.9 GIMV Belgium n/aKBC Belgium n/a Galapagos Belgium 4.9 Home Invest Belgium Belgium n/aKBC Ancora Belgium n/a ASML Netherlands 4.9 Kas Bank Netherlands n/aKPN Netherlands n/a Reed Elsevier NV Netherlands 6.9 KBC Belgium n/aLeasinvest Belgium n/a AB InBev Belgium 7.1 KBC Ancora Belgium n/aNieuwe Steen Investments Netherlands n/a EVS Belgium 8.0 Leasinvest Belgium n/aQuest for Growth Belgium n/a Core Laboratories Netherlands 17.7 Nieuwe Steen Investments Netherlands n/aSBM Offshore Netherlands n/a DE Master Blenders Netherlands 27.4 Quest for Growth Belgium n/aUnibail-Rodamco Netherlands n/a KBC Ancora Belgium 32.9 Unibail-Rodamco Netherlands n/aVan Lanschot Netherlands n/a Ackermans & van Haaren Belgium n/a Van Lanschot Netherlands n/aVastNed Retail Netherlands n/a GBL Belgium n/a VastNed Retail Netherlands n/aWDP Belgium n/a GIMV Belgium n/a WDP Belgium n/aWereldhave Netherlands n/a Quest for Growth Belgium n/a Wereldhave Netherlands n/a

Median 6.2 1.3 12.4



62

Disclosures Appendix

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Valuation and risks: For details of the valuation methodologies used to determine our price targets and risks related to the achievement of these targets refer to the main body of this report and/or the most recent equity company report available at http://research.ing.com.

The remuneration of research analysts is not tied to specific investment banking transactions performed by ING Group although it is based in part on overall revenues, to which investment banking contribute.

Securities prices: Prices are taken as of the previous day’s close on the home market unless otherwise stated.

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Target prices, where included, are based on reasonable assumptions supported by objective data. Unless otherwise stated, neither historic share price performance data nor ING projections on potential share price performance reflect the impact of commissions, fees and charges. Past performance is not indicative of future results. Forecasts are not a reliable indicator of future performance.

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RATING DISTRIBUTION (as of end 1Q13) RATING DEFINITIONS

Equity coverage Investment Banking clients*

Buy 41% 63%Hold 47% 68%Sell 12% 35% 100% * Percentage of companies in each rating category that are Investment Banking clients of ING Financial Markets LLC or an affiliate.

Buy: Forecast 12-mth absolute total return greater than +15%

Hold: Forecast 12-mth absolute total return of +15% to -5%

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Total return: forecast share price appreciation to target price plus forecast annual dividend. Price volatility and our preference for not changing recommendations too frequently means forecast returns may fall outside of the above ranges at times.

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