szspecialsituations winner 61ab2e5e7047

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GreenWood Investors LLC www.gwinvestors.com 1

One Page Summary

Share Price 7.62 LTMEV

Multiple

x Shares 578.1 Sales 15.93 56.8%

= Market Cap 4.4 EBITDA 1.54 5.88x

+ Net Debt (Average) 4.6 EBIT 0.91 9.95x

= Enterprise Value (EV) 9.0 Backlog 36.91 24.5%

Valuation Considerations All figures in billions, except per share amounts

In A Nutshell:In going hunting for bargains in the Italian market, one of the cheapest in the world, a sensitive nose will pick up Finmeccanica as a large-cap opportunity in Italy with substantial room for price appreciation. After a scandal caused management heads to roll, a new CEO has come to the helm with a phenomenal track record and a plan to sell non-core and loss-making divisions, reign in costs and capital spending, improve margins and begin returning cash back to shareholders. Near-term sale catalysts represent over 4.00 per share in near-term upside optionality while barely reducing operating profit (these divisions represent 4% of the LTM EBITDA). Prior to all of these value-creating levers being pulled, the sum-of-the-parts valuation is nearly triple the current stock price, and the company has the cheapest valuation in the aerospace and defense industry. With plans about to be detailed to the investing public in late January, early February, we think timing here (as well as valuation) couldn't be better. European and Italian headwinds are calming down and will at some point turn into tailwinds. Even before they do, we believe shares of Finmeccanica will take flight as a result of a very able pilot guiding the ship back to more favorable air currents and shedding unnecessary pounds. Weve got our carryons stowed and our seat belts on. Starting with the sale of AnsaldoBreda and Ansaldo STS, we anticipate take-off any day now.

Seven Major Reasons We Think Its Our Next Fiat: 1. Excellent CEO with a history of turn-arounds, under government involvement 2. High-quality business units masked by some weaker divisions 3. Active sales process ongoing for weaker divisions 4. Restructuring: Significant cost cutting opportunities 5. EU starkly contrasts to US defense spending, which has only begun to

decline.. Buy Europe, initiatives & rebounding budgets will create slightly favorable environment.

6. Cheaper than cheap European peers 7. Sum-of-the-Parts nearly a triple before margin expansion and cost cutting

Tuesday, December 16, 2014

Quintessential Special Situations: New Management: Turn-around-focused CEO with phenomenal track record

Non-Core Asset Sales: Over 50% of current stock price in net realizable value

Cash Returns: Restructuring to raise margins, de-leverage and reinstate dividend

Confusion: Incorrect Financial Information on Bloomberg, Factset and CapitaliIQ, plus weak

businesses masking best-in-class subsidiaries

Restructuring Plans: Upcoming investor day to discuss new CEOs plans

(FNC IM): Volare

Sum of the Parts (LTM)

Helicopters 11.83 P. 9

Defense 9.52 P. 12

Aerospace 5.39 P. 13

Non-Core Sales 4.02 P. 15

Corporate -1.50

=21.23

per share

Watch the 5m Pitch!

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Macro & Market Considerations: Fish in a Barrel

Upon arriving at Italys stock exchange in Milan, the Borsa Italiana, any visitor or company attempting to access the capital markets is greeted by a giant middle finger in the square directly in front of the entrance. Its a fitting display of art in a country whose labor workers think about their function in an incredibly different way than the typical American worker. US workers will typically be focused on the companys stock price, the value created, and in a very competitive manner, seek to outdo their peers at other institutions. While Italians, particularly in the north, are very proud of their work output, and typically take pains to ensure all the small details have been thought of, its a culture that is far more combative against business owners. As long as they keep their benefits and job protection, they will typically produce best-in-class products. While the country is less than 1% of the worlds population, their dominance in the world of design and luxury (the finer things in life) seems to command an over-sized presence on Fifth Avenue or in the parking spaces of Monte Carlo. Yet, when the economy turns against companies, the wine turns to vinegar. Its incredibly difficult to fire employees, and any attempt to make the workforce more efficient is vehemently resisted by a small minority of unions who try to wreak havoc, with their heads buried firmly in the sand.

In many ways, Italy has deserved the negative reputation it has with global investors, but in so many circumstances, evidence to the contrary of the bear thesis is totally ignored. Companies with the same geographic and product mix (like Ford and Fiat-Chrysler) are priced at opposite ends of

the spectrum. Recently its been hard to turn on Bloomberg or CNBC without hearing some economist talking about how Europe hasnt passed any structural reforms. We suppose translating Italian in the age of Google Translate was so hard, that these talking heads simply ignored the significant labor reform package that passed the Italian legislature in November. It is a multi-1pronged bill that goes above and beyond any reform that was passed in the US during our own recession. According to the Financial Times, A worker earning 20,000 a year would see net pay rise from 1,200 to 1,350 per month, while the cost to the employer would drop from 2,200 to about 1,650. Additionally, the new law limits the courts influence in 2employment matters, particularly in firings, as well as spells out a clearly limited severance package to be given to fired employees. The goal of the

legislation is both to stimulate after-tax income as well as to strengthen Mario Montis 2012 labor market reforms that made it much easier for firms to

fire employees for economic reasons.

This pro-business and pro-economic bill is expected to be finalized into law before the end of the year, yet Italy has already been written off by most of the global investment community. We were

Politi, James: Renzis Labour Reforms Clear Hurdle in Italys Parliament1

Politi, James and Segreti, Giulia: Italy Has Atomic Bomb to Revive Economy, says Renzi Aide2


Full Report

http://www.ft.com/intl/cms/s/0/ba925ef4-64d8-11e4-bb43-00144feabdc0.html#axzz3LcdMB7Xyhttp://www.ft.com/intl/cms/s/0/c9a1c19a-74ce-11e4-a418-00144feabdc0.html#axzz3JzawuIUThttp://www.gwinvestors.comhttps://www.sumzero.com

looking forward to follow-up meetings with a few companies during the annual November Italian Market day in New York, but instead ended up receiving messages such as, Unfortunately I had to cancel my trip to NY. As of today interest in Italian media by the US investor is not really exiting.

Its funny, that in every conversation we have with US-focused investors, each one laments the fact that its been incredibly hard to find high-conviction ideas that arent crowded shorts. Even the former energy bulls dont even want to buy oil & gas stocks, except a few steely-eyed GreenWood Investors! Over the last year, weve been troubled by a similar conclusion on US markets, which is most concisely conveyed by the markets Cyclically-Adjusted PE (CAPE) Ratio. The CAPE ratio takes the average of the last 10 years earnings to smooth out the cyclical effects. In the US, it has only been higher in the tech bubble of the 1990s and in the late roaring twenties, just prior to the market collapse which kicked off the Great Depression with a thunderous roar.

Exhibit 1: Global CAPE Ratios

We suggest investors turn their attention to less competitive markets, perhaps to ones that are being completely ignored because of a behavioral bias similar to that of the US markets in late 2009 and 2010: the availability heuristic. There hasnt been a hopeful headline about Italy or its economy since the World Cup of 2006. The CAPE ratio of Italys MIB Index still sits at 9x, making it one of the cheapest markets in the world. As exhibit 1 shows, Italys market is in the Whos Who, of global markets, with great company in Greece, Russia, Hungary and Portugal. Yet, contrary to its new peers, Italys economy is diverse and dynamic. Every region in the northern half is equal to or more competitive than Western Germany and the Netherlands (see exhibit 2). Given the stock market indexs constituents are generally global companies headquartered in the north, southern Italy basically only exists for great resorts and transfer payments - it doesnt even play a role in much of anything anyone could invest in anyway. Before offending half of my family with ties to the south, I must say, they can grow a great tomato!

While Italys CAPE is among the cheapest in the world, the markets price to sales ratio is bested only by Hungary. Thanks to the depression the economy has weathered since 2012, the Indexs operating profit margins have declined to 6.6% from 15.2% in 2006. Investing in Italy is near the opposite of investing in the US market, with very cheap earnings and sales multiples, trough


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Source: Star Capital

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margins and peak unemployment, but at least improving consumer confidence. Also contrary to the US government over the past four years, its government also has a mandate to enact reforms and pass pro-economic legislation. On the other side of the pond, were just slapping high fives because our congress averted another government shut-down.

Exhibit 2: GDP Per Capita by European Region

Source: Eurostat

Exhibit 3: FTSE MIBs Price / Sales Ratio

Data Source: Bloomberg


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4/28/06 4/28/07 4/28/08 4/28/09 4/28/10 4/28/11 4/28/12 4/28/13 4/28/14

http://epp.eurostat.ec.europa.eu/statistics_explained/images/b/b0/Gross_domestic_product_%28GDP%29_per_inhabitant%2C_in_purchasing_power_standard_%28PPS%29%2C_by_NUTS_2_regions%2C_2011_%281%29_%28%25_of_the_EU-28_average%2C_EU-28_%3D_100%29_RYB14.pnghttp://www.gwinvestors.comhttps://www.sumzero.com

If you can buy companies that are trading at cheap levels relative to current operations given the employment rate and all of the discussed factors hampering Italys economy, what happens when the economy actually starts to recover? Margin expansion, de-leveraging and higher equity multiples. The modern triumvirate of outsized stock returns.

Having identified a fully stocked barrel of fish, which ones do you decide to shoot? Our Fiat thesis has been playing out quite well, and while it still has considerable room to run (our fair value is currently north of 20 and will rise to north of 30 in the next two years), and it remains our biggest position. But theres another Italian job that reminds us of Fiat in nearly every way.

Overview of the Multi-Faceted Special Situation

Finmeccanica is a state-suggested rollup that has become a modern Rube Goldberg managed in the past without a serious concern to shareholders or capital allocation. Historical capital allocation has been magnificently terrible, which is part of the reason why the trifecta of Capital IQ, Factset and Bloomberg all calculate the companys financial situation dramatically different than reality (see Exhibit 29 on page 28). Finmeccanica is similar to Fiat in seven major ways:

1. Excellent CEO with a history of turn-arounds, particularly with heavy government involvement 2. High-quality business units being masked by some weaker divisions 3. Active sales process ongoing for weaker divisions 4. Restructuring: Significant cost cutting opportunities 5. EU starkly contrasts to US defense spending, which has only begun to decline. Buy Europe,

initiatives, rebounding budgets will create slightly favorable environment. 6. Cheaper than the cheapest European peers 7. Sum-of-the-Parts gets you nearly a triple before segment margin expansion and cost cutting

The idea represents a special situation in nearly every sense of the word: its literally a turn-around CEO focused on unwinding 66 years of government-influenced investments and is instead implementing a Jack Welch strategy of focusing on the company's strengths. Many of the divisions that have been flagged as non-core are money-losing and have near-term catalysts, as the sales process has been quite active recently. His stated goals of improving profitability, ROIC, leverage, and cash returns to shareholders will reward investors if he achieves them. While Finmeccanica is cheaper than its European and US peers, the discount alone doesnt justify buying the stock. A favorable investment will rely upon a very capable CEO to restructure weaker parts of the business, and to end the companys history of capital mis-allocation and repetitive write-downs. Given the Italian government owns 30% of the company, and the ministry of defense is a large and important customer, restructuring such an entity with entrenched interests everywhere requires an incredibly shrewd manager. Thanks to a bribery scandal involving the Indian government (Italians and Indians accepting or receiving bribes? Oh, the chances!), management heads have rolled and Finmeccanica has found itself with perhaps its most capable CEO it has had in a very long while.

1. Excellent CEO

It's hard to imagine a more Byzantine and sclerotic culture than the Italian government bureaucracy. If lean and efficient corporate America has a true opposite in this world, perhaps the culture can be found somewhere along the banks of Fiume Tevere. In September 2006, when the Italian economy was nearing its peak, the passenger rail system was heavily leveraged with


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negative EBITDA and was on the verge of bankruptcy or a state rescue. An insider named Mauro Moretti assumed the role of CEO in September of the year and embarked on an ambitious turnaround plan in the face of negative rail traffic in his first full year on the job. Despite the headwinds both traffic and the Italian economy would create, Moretti managed to de-leverage the organization (taking net leverage down from 43x EBITDA in 2005 to 5x in 2013), substantially raise profitability and generate a un-leveraged incremental return on invested capital of nearly 11% in his first four years on the job, a level roughly equivalent to the ROIC of CSX, Norfolk Southern, and Kansas City Southern. This was partially achieved by reducing annual capital spending from around 8 billion a year to under 4 billion in his fourth year as CEO- a level which has been sustained as margins continue to expand.

Exhibit 4: Morettis Profitability Turnaround at TrenItalia

Ones first thought upon hearing this impressive turnaround of financial profile of the rail network in Italy is that he must have had an easy job raising price, as there are no alternate passenger rail operators in Italy. It is, in fact, a monopoly. Yet it's a heavily-regulated monopoly, with doubtless intervention from the government in many aspects. Exhibit 5 shows just how meaningful Morettis 10% operating margin achievement has been. He has managed to turn TrenItalia into a best-in-class operator, beating the financial profile of always-on-time, Swiss and Germany rail operators. Given the heavy involvement of European governments in Finmeccanicas business lines, Moretti's experience restructuring a government-owned enterprise should prove invaluable as he goes to execute a plan that certain managers and unions will inevitably dislike. Additionally, since the government owns 30% of the company, navigating these investment curtailments, asset sales and restructuring will require a politically-savvy manager to navigate all of the special interests. Early efforts and actions have proven his experience at TrenItalia is coming in handy, after several months of union protests, the sale of the companys bus manufacturing division, BredaMenarinibus to a Chinese company has recently closed.


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2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

EBITDA Margin EBIT Margin

Moretti becomes CEO Sept 2006

10% EBIT margin acheived 2 years

ahead of plan


Exhibit 5: Operating Profit Margins at Monopolistic Rail Networks

Sources: CapitalIQ, Amtrak 2012 Annual Report

In the first couple of minutes of Morettis first conference call with investors in August, he provided a glimpse into his approach and assessment of the company. Weve pasted portions of his introductory remarks, as its telling how focused he will be on concentrating investment in the highest-return areas.

I am very clear that is a company that needs to move more aggressively to deliver sustainable profitability and cash to its shareholders. It is absolutely our need to have the confidence of our shareholders. It is my challenge to deliver that, and I accepted this role because I don't usually accept challenges that I am not able to manage. My experience in my previous role as CEO of the Italian Railways -- and you know that the railways business is very tough, in Great Britain particularly, showed me that business that may appear to be challenged can be revitalized and repositioned. And also, you must be prepared to take tough decisions to focus your effort and achieve your targets. And we can achieve our objectives at Finmeccanica if we commit to what I have described as positive mix of continuity and discontinuity. Positive continuity means making the most of the strength of Finmeccanica. Positive discontinuity means being decisive with radical changes, where and when they need to be made, without any hesitation.

So first, let us look at what is apparent from the recent record for the growth over the last few years. You can see that there has been a resilient commercial performance. Finmeccanica is a diverse group with some robust businesses, delivering high-quality products and technologies to its customers. Our helicopters is world class. Our train business is state-of-the-art and very well positioned to capture share in the growing markets: Israel, Poland, Singapore and so. And having already met and spoken to many of our largest commercial industrial partners, I have seen that our business is underpinned by some world-class technologies and capabilities. Look at the track record in orders and revenues over the 4 years in tough market condition. This is reflected in a book-to-bill ratio that has exceeded 1x every year, apart from 1. And as per our guidance, we aim this year to maintain it at this level. More can be done


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TrenItalia SBB Deutsche Bahn

SNCF Renfe Amtrak

http://www.gwinvestors.comhttp://www.amtrak.com/ccurl/103/360/Amtrak-Annual-Report-2012.pdfhttps://www.sumzero.com

Finmeccanica is also a company that has gone through some challenging moments. And clearly, a lot more has to be done to improve our low profitability. A decline in revenue environment and the number of specific operating challenges is reflected in declining EBITA. Against this backdrop, a lot has been done to improve our margins in the last 2 years. And if we deliver our guidance, there will be further improvement for 2014. But we must raise profitability to a more satisfactory level. I know perfectly that we are more or less at the lower position compared to our peers. And that means reducing the cost base, especially SG&A costs

And a lot more has to be done to reduce the volatility of our net results. We need to reduce the volatility in the result we achieved from our existing operations with a more stable earning profile, and that also means we need to achieve a higher quality of earnings with less dependence on extraordinary gains and fewer impacts for extraordinary losses.

We need to work to increase the group's cash generation. In the recent years, this has been very weak And finally, we need to reduce our level of indebtedness in order to strengthen our strategic and financial flexibility.

So what do we need to address now? Defense budgets are under pressure, and civil business, the competitors are very tough. And having spent deep in the business the last 2.5 months, I will share the following central profile -- priorities. You cannot respond effectively in this environment with a too-diversified portfolio. It's incredible. When I faced for the first time our portfolio, I was astonished.

Finmeccanica is involved in too many sectors, products, service, businesses, and investing in too many technologies. It's impossible to make this -- to do this in the best way. We don't have enough resources to invest in all the businesses.

A key driver for the future success of the group is how and where and when to invest. At the moment it's not absolutely clear, the investment policy. So we must decide where to use our resources, not only financial resources but particularly the human resources.

For this purpose, we are carrying out a deep review and analysis of the entire product portfolio of every company of the group, looking at every single line of business, ranking them based on cost and opportunity toward the investments in order to decide whether to invest or to shut down or exit. We will share the result of this review as part of the new industrial plan.

While Moretti won't be presenting his turnaround plan to investors until early 2015 (late January / early February), these comments provide visibility to his priorities, all of which sound to us like all of the main levers any management team can pull to generate significant returns. Later, we show all of the probable non-core assets that will likely go on the block, if they aren't already there, and have tallied them up to over half of the company's stock price, while the sales would only reduce the group's EBITDA by 4%. Many of the joint-ventures or non-core assets contribute negatively to the groups financial metrics, so any sales will be significantly accretive to an already cheap valuation.

William Thorndikes The Outsiders profiled eight CEOs who started every project with one question, what is the return? Finmeccanicas recent past illustrates how important this question is, particularly in the defense & aerospace industry, with incredibly long time horizons used in the planning process. The company should be generating incredibly healthy margins from supplying critical carbon fiber components (the fuselage and the tail stabilizers) for the Boeing 787, yet Alenia



operates this program at a break-even margin due to over-investment in infrastructure to correct early quality control issues. Given the longer time horizons the industrys programs require, having a rational capital allocator is of utmost importance. Its no coincidence that two of the eight CEOs profiled in The Outsiders ran aerospace & defense companies. The industry provides near unlimited R&D opportunities and a large number of ways to destroy significant amounts of capital. No former politician sitting on the board of one of Finmeccanicas divisions will ask what the returns of the program are at the inception of the discussion. Now that those boards have been eliminated, Moretti has direct control over capital and development spending at each unit. So while the industry offers numerous ways to destroy significant amounts of capital, it also offers numerous ways to differentiate great leadership in capital allocation.

Moretti has already demonstrated the ability to overcome government involvement with headcount reductions at TrenItalia, and transformed the rail network into the most profitable monopolistic rail network on the continent. He significantly cut annual capital spending, helping to significantly lift the operators return on invested capital. His rsum suits Finmeccanica perfectly, as he will have to overcome over sixty years of political involvement in order to streamline divisions, workforces and special pet projects, that have large hurdles to generating sustainably attractive returns. With the sales of just a few poorly-performing businesses, the financial profile of Finmeccanica will be transformed into a best-in-class aerospace and defense player as the strength of some of its segments will finally no longer be masked by multiple anchors that have accumulated over time.

2. High-Quality Businesses

Finmeccanica has some very well-respected and high quality divisions wrapped up inside the conglomerate, and Moretti has stated he views them to be core to the group. Helicopters, Aerospace, Defense and Electronics will remain central to the company. Much of everything else will either be sold, shut, or transformed. As longer-term shareholders, its important to review what the company will look like after some of these restructuring levers are pulled.

AgustaWestland

Finmeccanicas helicopter division is the crown jewel of the groups profitability and value. AgustaWestland was born in 2000 as a result of the merger of Finmeccanicas Agusta helicopter division with British GKNs Westland helicopters. The company was operated as a 50:50 joint venture until 2004, when Finmeccanica bought out GKNs interest for 1.064 billion (1,609.5 3million). In 2004, the company ended up generating 291 million of EBITDA, so the final take-out valuation was 11.04x EBITDA. Clearly the asset has performed very well since the take-out, with 2013 EBITDA north of 700 million. Using the same multiple than the take-out valuation, AgustaWestland would be worth nearly the entire enterprise value today, with every other division (generating 12 billion in revenue) owned for free in the hypothetical monetization of AgustaWestland. While the market will not give AW a take-out valuation, given its one of the few divisions the company doesnt intend on monetizing, the four major competitors (TXT, UTC, AIR FP, BA) trade at 9.1x EBITDA, which would suggest AgustaWestland is worth just over 6 billion, or 10.43 a share. Yet the division is out-competing its rivals, with a very robust book to bill of 1.27x over the last twelve months and the highest margins of its peer group, as exhibit 6 demonstrates.

BBC News: GKN sells its stake in Westland3


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Exhibit 6: 2013 Operating Profit Margins at Helicopter Divisions (Ex-Unusuals)

Source: Company Reports

This industry-leading margin is set to potentially expand even further as AgustaWestland has been focusing its Research & Development of the division on adopting a family approach to its helicopters in multiple different classes (4.5-8.5 tons). Despite having a different interior and exterior design, the family approach has begun sharing the same architectural blueprint in order to share components, maintenance and training programs, thereby reducing production and operating costs

Exhibit 7: AgustaWestlands Financials at a Glance

While the US military order book for helicopters has been the strongest over the past few years, the entire industry has benefitted from increased demand from both commercial and military customers - of which both roughly split the industrys total demand for helicopters. It has been a rising tide for all players, which has created a source for debate, as some predict a diminished industry outlook as payback, from healthier selling levels. If there will be any payback, we believe


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AgustaWestland Bell Helicopter Sikorsky Boeing Military Airbus Helicopter

2010! 2011! 2012! 2013! LTM 9/30/14!Backlog! 12,162! 12,121! 11,876! 11,928! 12,197!Orders! 5,982! 3,963! 4,013! 4,384! 5,218!Revenue! 3,644! 3,915! 4,243! 4,076! 4,114!

Change! 4.7%! 7.4%! 8.4%! -3.9%!

Book/Bill! 1.64x! 1.01x! 0.95x! 1.08x! 1.27x!

EBIT-Adjusted! 413! 417! 473! 562! 539!Margin! 11.3%! 10.7%! 11.1%! 13.8%! 13.1%!

EBITDA! 542! 552! 619! 701! 661!Margin! 14.9%! 14.1%! 14.6%! 17.2%! 16.1%!


itll be from the source which has generated the most outsized demand over the last decade, the US government. AW is less exposed to this than is Sikorsky (United Technologies) and Bell (Textron). During the United Technologies investor day on December 11, 2014, the CEO highlighted probable weakness to come from the oil & gas sector, to which it is slightly more exposed given Sikorsky excels at the larger helicopters the industry typically demands. Yet, even if the order book from oil & gas were to drop to zero, commercial demand for helicopters, according to Honeywells demand outlook, would still be flat to up. Potentially offsetting some of this potential weakness, is the fact that lower oil & gas prices will likely boost GDP and demand from many other commercial helicopter customers.

Exhibit 8: Honeywells Commercial Helicopter Demand Outlook

Source: Honeywell Helicopter Demand Outlook

Thus, while the helicopter industry has enjoyed years of robust demand, and many are prepared for lower growth going forward, we havent heard anyone ringing the bell on industry demand. The two most likely sources for demand weakness are unlikely to wreak havoc on AgustaWestlands order book, which continues to grow. The backlog represents three years of full production (in all actuality, the backlog stretches for longer than three years), and continues to grow, as the book to bill has recently accelerated. Given AgustaWestland has the highest margins in the industry, and the family approach is likely to continue to lift margins even further, we believe the division is worth at least as much as the public market valuation of its peers (9.1x EBITDA), if not even higher. For such a business, with such good visibility and competitive barriers, the 11.0x buyout valuation from 2004 is probably justified for AgustaWestland, which suggests using LTM EBITDA, the division is worth between 6.0-7.3 billion, or 10.43-12.62 per FNC IM share. While we discuss cost cutting opportunities in a later section, we would also note that these historical financial results exclude any impact from the ambitious restructuring plan Moretti is about to enact. Thus, despite a weaker presence of the oil & gas industry in the market, we believe the risks are to the upside for AgustaWestland.


http://www.airtrafficmanagement.net/2014/02/global-helicopter-demand-steady-for-next-five-years/http://www.gwinvestors.comhttps://www.sumzero.com

Defense Electronics & Systems

The most valuable and largest part of Finmeccanicas Defense Electronics segment is Selex ES, which manufactures a wide array of electronics used in the defense, aerospace and space industries. The units products and services are diverse and range from traffic management systems for aircraft and airports (as well as maritime and rail customers) all the way to optical/infraredsurveillanceand targeting systems. Selex ES also makes display, navigation and communication equipment for airplanes and ships. Aside from more traditional military and aerospace products, the company provides battlefield intelligence gathering and electronic warfare systems to protect both government network infrastructures as well as airplanes.

Exhibit 9: Defense Electronics at a Glance

The electronics segment has a smaller backlog relative to sales than most of FNCs other businesses, as contracts and awards tend to have shorter lead times than the capital equipment segments. There have been large awards in the Security & Smart Systems offering that have been elusive in becoming a firm order, that has led to part of the weakness at Selex ES as some other contracts in the division have rolled off during the bidding process.

Although it seems to be an electronic jack of all trades for the industry, perhaps the most notable aspect of the business is its out-sized R&D spend (14% of revenue in the most recent year) relative to peers in the space. The company was formed by a merger of three separate companies, so there have been overlaps that needed to be eliminated, and the businesses have been going through the process of being transformed into one cohesive unit. And while Selex ES has been going through its own restructuring during the last couple of years, we would expect Morettis business plan to address at least a portion of this wide R&D spread between Selex ES and peers. The unit needs to continue to focus its efforts on a narrower line of products and services where it achieves a higher return on capital.

The performance of Electronics segment has also been negatively affected by its other electronics and systems unit, DRS Technologies, which receives over 90% of its revenue from the US government. Due to the strong and direct correlation between DRSs business and the field presence of US troops in combat, this business has been facing headwinds ever since the withdrawal of troops from Iraq and Afghanistan. Nearly all of what DRS sells is used to support troops, everything from computers to power generation systems. In his first two conference calls with investors, Moretti has indicated this unit will most likely be considered to be non-core to the group, so its probably going to be sold. Still, in our sum-of-the-parts valuation we provide later in



Change! 6.2%! -15.4%! -4.7%! -15.0%!

Book/Bill! 0.95x! 0.81x! 0.89x! 1.01x! 1.09x!

EBIT-Adjusted! 735! 471! 384! 221! 155!Margin! 10.3%! 7.8%! 6.7%! 4.5%! 3.3%!

EBITDA! 890! 630! 558! 400! 360!Margin! 12.5%! 10.4%! 9.7%! 8.2%! 7.7%!


the report, we dont ascribe a control premium to the segment, and simply value it at peers trading multiples today, before any restructuring benefits.

The defense systems segment houses a few assets that manufacture weapons systems, the most valuable of which is MBDA, but it also has two smaller units which manufacture and sell torpedoes, and cannons (or mountain guns). MBDA is by far the most valuable unit within the division, as its one of the largest manufacturers of missiles in the world. FNC owns 25% of the company, which unfortunately doesnt report full financial information, while Airbus and BAE Systems both own 37.5% of the venture. Given the more limited competitive landscape in missile manufacturing, we believe the unit is likely highly profitable. When the division reported its 2013 revenue, orders and backlog, its book to bill ratio was a solid 1.43x as it booked 4.0 billion in orders against a very successful year of 2.8 billion in revenue. At the end of 2013, the backlog stood at 10.8 billion. 4If we were to use these two metrics to value FNCs stake in MBDA, the stake would be worth between 800 million and 2.2 billion, as shown in exhibit 10. While one could drive a truck through the middle of this spread, it's so wide, should MBDA land on the auction block as part of Morettis re-focusing initiatives, the company will net a material amount of cash relative to todays stock price.

Exhibit 10: Hypothetical Valuation of MBDA Stake

Data sources: CapitalIQ and MBDA. Comparable companies include RTN, GY, LMT, ATK

Aeronautics

Look at any Boeing, Airbus, or industry presentation about commercial aircraft demand, and youll see a lot of hockey stick charts. Its all up and to the right. Better fuel economy for new planes is fueling replacement demand, which comprises 40% of Airbus order book (the largest in the industry) . The balance is coming from growth in passenger traffic, which of course is being fueled 5by GDP growth and rising incomes. Finmeccanicas aeronautics division is comprised of two separate subsidiaries, Alenia Aermacchi and ATR. Alenia is the result of a rollup of smaller aeronautic and defense divisions within Finmeccanica over the years, and as a result, its operations run the gamut across the industry.

Alenia manufactures training planes for defense customers, of which the latest and greatest is its M-346 model, which it has sold to Italy, Poland and Israel. Both Poland and Israel are very demanding customers, so the export sales were good wins for the company. Alenia has created a venture with General Dynamics to develop a variant of the M-346 (called the T-100) in order to compete for the upcoming T-X program the US Military is commissioning. Given most of the militarys training planes are using a platform introduced in the early 1960s, the US is long overdue

MBDA Missile Systems: MBDA: Global Player, European Champion, Trusted Partner 4

From Airbuss 2014 Investor Day Commentary5


Peers! MBDA 2013! 25% Value!EV/Sales! 1.20x! 2,800! 842!EV/Backlog! 81%! 10,800! 2,178!Average! 1,510!Per FNC Share! 2.61!

http://www.gwinvestors.comhttp://www.mbda-systems.com/mediagallery/#/news/3235http://www.airbusgroup.com/int/en/investors-shareholders/Publications.html#chapter-04https://www.sumzero.com

for replacement trainers. The T-X program is estimated to be an $11 billion endeavor , so clearly 6any progress on this front would be material to Alenia.

Another key defense program Alenia plays a substantial role in is the manufacturing of the Eurofighter Typhoon. Eurofighter is a joint-venture between BAE Systems, Airbus and Alenia, and the company owns 25% of the program, which makes a fighter jet that first entered into service in 2003. Its been a successful program since its launch, with deliveries to Italy, Germany, Austria, United Kingdom, Spain, Saudi Arabia and Oman. Somewhat similar to the Eurofighter Typhoon, Alenia manufactures the wings of Lockheed Martins F35 fighter jet, a major program which will commercially launch a new family of fighter jets starting in about a year from now. The total spending associated with the program has been estimated at over $1 trillion over 55 years. Alenia 7and Italy were recently awarded the maintenance contract for the fighter, which will start contributing to the groups performance in 2018. 8

The company has developed its own drones for research purposes, and is also participating with Dassault on the development of Europes answer to un-manned flying, which has become wildly successful in recent years. The Dassault nEUROn program is perhaps the best shot at European companies competing in the space, but still remains exploratory at this time. The last major defense product Alenia manufactures is the C-27J transport plane, which has successfully been sold to an even broader audience than the Eurofighter, including the US military as well as many European and Latin American countries. In conjunction with its defense manufacturing, it also sells flight simulators and training platforms.

Exhibit 11: Aeronautics At a Glance

In commercial aeronautics, Alenia supports both Boeing and Airbus in multiple programs. Unfortunately for the company, they are best known for being part of the massive delay the Boeing 787 faced in being ready for commercial deliveries. Due to problems manufacturing the carbon fiber sections of the fuselage for the B787, the company was forced to reconfigure and replace many production systems. This resulted in wasteful over-investment which is unlikely to be recouped over the life of the contract. Thus, the company is operating this program, one which should have been a huge rubber stamp of approval for Alenia, at a break-even financial result,

Clark, Colin: Northrop Takes The Lead From BAE On $11B T-X Trainer6

Wheeler, Winslow: The cost to acquire the F-35 has gone up compared to last years estimate7

Shalal, Andrea: Italy, Turkey to service F-35 jet, engine in Europe8



Change! 6.4%! -4.9%! 11.4%! 12.4%!

Book/Bill! 0.90x! 1.09x! 1.07x! 1.19x! 1.06x!

EBIT-Adjusted! 205! -103! 104! 182! 169!Margin! 7.3%! -3.9%! 3.5%! 5.4%! 4.6%!

EBITDA! 359! 18! 233! 346! 374!Margin! 12.8%! 0.7%! 7.8%! 10.3%! 10.3%!

http://breakingdefense.com/2014/07/northrop-takes-the-lead-from-bae-on-t-x-trainer/http://www.gwinvestors.comhttp://www.reuters.com/article/2014/12/11/lockheed-fighter-maintenance-idUSL1N0TV1SF20141211http://www.arizonadailyindependent.com/2014/04/25/the-cost-to-acquire-the-f-35-has-gone-up-compared-to-last-years-estimate/https://www.sumzero.com

which negatively affects the segments operating profit margin. The company maintains it still has a good relationship with Boeing, and produces parts for the 777 as well as the 767. As for Airbus, the company is making sections of the fuselage for the A380 and the A321, as well as parts for the A330, A320 and the A400M.

After Alenia, the other major asset sitting within Finmeccanicas Aeronautics division is the companys ATR joint venture with Airbus (both own 50%), which manufactures regional propeller planes for the commercial market. ATR is a market leader in the segment, in terms of its sales and deliveries. The only major competitor in the market is the Bombardier Q400. The ATR-72 breaks even at a 35% load factor, whereas the Q400 breaks-even at 60% . Clearly for smaller regional 9routes, the load factor break-even is the key to profitability, so the competitive dynamics for ATR are very, very favorable. Although Finmeccanica doesnt own 100% of ATR, this will likely remain a core program in the Aeronautics division, rather than face the sell-side investment bankers.

Lastly, the aeronautics division owns a stake in a joint-venture called Sukhoi, which is a loss-making, Russian manufacturer of commercial commuter jets which recently started commercial sales. Finmeccanica owns 25% of the joint-venture, and Italian media reports have suggested the stake in Sukhoi will be considered non-core and will likely be sold. Any success Moretti has in this effort will be accretive to the group and the Aeronautics division, as long as he sells it for a positive value. Exhibit 12: Sukhois Financials at a Glance (in millions of USD)

3. The Chopping Block: Upcoming Asset Sales

Speaking of Sukhoi, there are a lot of non-core businesses that Finmeccanica has accumulated over the last seven decades. The only sectors that have previously been identified by Moretti as core, have been discussed above. Every sector except helicopters contains at least one joint venture which could end up being monetized, but we would wait for specific direction from the company on DRS, MBDA and Sukhoi. Until we receive more detail on those smaller divisions, theyve been valued in the sum-of-the-parts valuation at peers valuation, so any take-over premium (or removal of losses in Sukhois case) would be accretive to our valuation. Given MBDA is a highly valuable asset, some of the additional upside could be significant. Outside of these sectors, Finmeccanica has a struggling Transportation division as well as a profitable, but joint-ventured Space division. Because media reports dont suggest that the entire Space division will definitely be sold, weve valued it in line with peers trading multiples, without any upside given to the possibility a premium valuation is obtained.

Transport

Finmeccanica owns a 40% stake in profitable and respected Ansaldo STS SpA (STS IM), which designs and builds rail transportation systems, primarily signaling systems. At current market

AeroBlogger: Why The ATR-72 Is Outselling The Bombardier Q4009


2008 2009 2010 2011 2012 2013Revenue 6.0 7.2 3.9 77.7 197.9 513.8 EBITDA (43.5) (0.3) (141.3) (25.7) (65.9) (113.3) EBIT (44.8) (3.5) (145.6) (27.6) (91.1) (144.9)

Net Debt 765.7 1,145.0 1,449.2 1,935.5 2,354.3 2,636.6

http://www.gwinvestors.comhttp://aeroblogger.com/home/blog/atr-72-bombardier-q400/https://www.sumzero.com

prices (8.25), the value of FNCs stake is worth 660 million, or 1.14 per FNC share. Given the position is a controlling position, a monetization of FNCs stake will very likely come at a premium to this current value. In the third quarter earnings call, Moretti guided that the sale process will be finalized around the end of 2014, or perhaps earlier 2015 should the two interested parties need additional time to submit binding offers. Moretti is attempting to tie the sale of the stake in Ansaldo STS to sale of Finmeccanicas trains and subway manufacturing unit, AnsaldoBreda. AnsaldoBreda, like the other transportation subsidiaries of Finmeccanica, is loss-making. As the prior CEO of AnsaldoBredas largest customer (TrenItalia), theres no one better to assess the long-term strategic value of the unit than Moretti. While he has stated the unit makes competitive products, the unit has had its fair share of disappointing results coupled with some high-profile disputes with customers.

While Hitachi has made a non-binding offer of 1.45 billion for both AnsaldoSTS and AnsaldoBreda, it has certain follow up items that need to be addressed. Italian media have also 10recently reported that Chinese companies Insigma-Xinzhu are planning on making a binding offer for both companies. Such competition may help FNC sell the transportation division for a fairly 11reasonable price. Given competitors Siemens and Bombardier trade at just shy of 15x operating come, and Siemens purchased British signaling company Invensys plc at exactly 15x operating income in late 2012, a controlling stake in STS should fetch roughly 15x. STS stock would be worth 10.44 per STS share at 15x operating income, which implies that should Hitachis 1.45 billion offer come through, the company would buy STS for a fair take-out price and get AnsaldoBreda for 0.33x revenue, substantially below peers trading at 0.83x today . 12

Even at this fairly cheap valuation, FNC would potentially offload AnsaldoBreda, as it has been a loss-making division for a considerable amount of time. While the unit is getting closer to breakeven through the first nine months of the year (operating losses have been reduced by two thirds), a sale of both companies for 1.45 billion will be highly beneficial for stockholders, as it would inject the group with cash worth roughly 20% of the companys enterprise value today, while actually raising trailing EBITDA and operating profit. Operating profit would rise 6-7%, while EBITDA would rise by 2-3%. Thus, it would be a doubly-accretive sale. Without any further asset sales, it would make FNCs pro-forma EV/EBITDA 4.4x and EV/EBIT 7.2x, which would be substantially below any competitor in any of its remaining divisions. The median multiples from its peer group (including all businesses) are 10.2x and 13.4x respectively. In short, any sale of loss-making divisions that helps show the higher margin business potential of most of Finmeccanicas segments would allow for significant equity appreciation as the groups financial profile becomes clearer to both computers (quant models) and humans that are trading the stock.

Exhibit 13: Train Engineering Company Valuations

Gerosa, Francesca: Finmeccanica, i dettagli del nuovo piano attirano gli acquisti10

Dragoni, Gianni: Insigma-Xinzhu expected to submit a binding offer on AnsaldoBreda soon11

Peers include Siemens, Thales and Bombardier12


Company! EV / Sales! EV / EBITDA! EV / EBIT! EV / Backlog!BBD.B CN! 0.68x! 10.97x! 14.78x! 35.1%!HO FP! 0.61x! 6.04x! 8.53x! 34.5%!SIE GR! 1.19x! 10.51x! 14.39x! 85.5%!Average! 0.83x! 9.17x! 12.57x! 51.7%!

http://www.italy24.ilsole24ore.com/art/markets/2014-12-03/insigma-xinzhu-expected-to-submit-binding-offer-on-ansaldobreda-soon-194136.php?uuid=ABfdvdLChttp://www.gwinvestors.comhttp://www.milanofinanza.it/news/finmeccanica-i-dettagli-del-nuovo-piano-attirano-gli-acquisti-201412081025364301https://www.sumzero.com

A small line item housed within the Transport division is Italian bus maker BredaMenarinibus, which is unsurprisingly another small loss-making division at the company. Italian news has reported that an agreement has already been finalized in the fourth quarter to sell 80% of the division to Chinese-owned King Long Italia for an undisclosed amount. While the sale was clearly not material to the 13overall size of the company, if Finmeccanica was able to offload any debt or receive net cash for the sale of the stake, the transaction will be accretive to the groups financial position. As exhibit 14 demonstrates, BredaMenarinibus has been loss-making for the recent past.

Exhibit 14: Selected Historical Financials for BredaMenarinibus

While BredaMenarinibuss competitors are larger, profitable enterprises, the comparable valuations are shown in Exhibit 15. These valuations suggest, on the low-end, the bus divisions could have netted Finmeccanica 51 million (0.09 per share), using a valuation similar to CNH Industrials today, based on revenue and gross profit.

Exhibit 15: Comparable Bus Manufacturers Valuations

Data Source: CapitalIQ

Construction Why is an aerospace and defense company in the construction business? Oh right, this has been a state-sponsored rollup for decades. FATA SpA will definitely find a "for sale" sign hung around its neck in the near future, if a data room isnt already open on it, or it will find its neck in the guillotine soon. Its by definition non-core to Morettis new strategy of focusing on helicopters, aerospace and defense. Given FATA specializes in the construction of power plants, and both Italy and Europe over invested in generation capacity over the last decade, FATA is unlikely to fetch a rich price in a monetization.

Exhibit 16: Select Historical Financial Information on FATA SpA


Bettazzi, Marco: Bredamenarinibus diventa cinese: firmato l'accordo al ministero13


12/31/08! 12/31/09! 12/31/10! 12/31/11! 12/31/12! 12/31/13!Revenue! 283.3! 241.8! 118.4! 110.0! 160.5! 134.2!Gross Profit! 105.1! 112.7! 53.9! 61.9! 67.5! 66.5!EBITDA! 4.8! 2.5! -4.8! -2.6! -4.7! -2.1!EBIT! 3.7! 1.9! -5.2! -3.2! -6.1! -2.8!Net Debt! -3.2! -4.5! -4.2! -3.5! -2.7! -4.5!

12/31/08! 12/31/09! 12/31/10! 12/31/11! 12/31/12! 12/31/13!Revenue! 49.3! 97.1! 85.2! 95.0! 33.7! 64.2!Gross Profit! 20.6! 53.3! 26.7! 30.3! 15.5! 33.1!EBITDA! -7.7! 18.1! -17.4! -26.3! -45.8! -4.1!EBIT! -9.3! 16.0! -19.1! -29.0! -48.5! -6.3!Net Debt! -1.1! -1.3! -0.2! -0.1! -1.0! -0.1!

European Peers! EV! Revenue! Multiple! Gross Profit! Multiple! EBITDA! Multiple!Scania Take-Out! 195,092! 86,847! 2.25x! 22,263! 8.8x! 11,091! 17.6x!MAN GR! 14,926! 14,537! 1.03x! 2,846! 5.2x! 1,252! 11.9x!VOLV B! 191,667! 282,111! 0.68x! 63,193! 3.0x! 19,421! 9.9x!CNHI! 14,362! 33,877! 0.42x! 6,446! 2.2x! 3,075! 4.7x!Average! ! ! 1.09x! ! 4.82x! ! 11.01x!Median! 0.85x! 4.14x! 10.90x!Minimum! ! ! 0.42x! ! 2.23x! ! 4.67x!

http://bologna.repubblica.it/cronaca/2014/11/20/news/bredamenarinibus_diventa_cinese_firmato_l_accordo-101050471/http://www.gwinvestors.comhttps://www.sumzero.com

Yet, even using the cheapest European peers, it should at least sell for 0.11 per share based on its revenue and gross profit. Should it receive a median valuation relative to peers, FATA may be worth up to 0.21 per share. Perhaps even more importantly, FATA is loss-making, so any sale or wind-down will be mildly accretive to Finmeccanicas valuation. The company reports the division within its Transport group, joining Ansaldo STS and Ansaldo Breda on the auction block.

Exhibit 17: European Construction Valuations (EV-Based)


Space

Both of Finmeccanicas companies housed within the Space segment are just starting to enjoy the bull market the European Space Agencys (ESA) budget is experiencing. Thales Alenia Space, which is 33%-owned by FNC, is a leading satellite manufacturer in Europe and benefits heavily from the ESAs Buy European policy to which it generally tries to adhere. Its sister business,Telespazio, is also a joint venture with Thales, except FNC owns 67% of this division. Telespazio operates and manages satellites and provides platforms for TV broadcasting and telecommunications. Due to the implementation of IFRS accounting standard #11, which was enacted on January 1, 2014, both joint-ventures are no longer accounted for in FNCs financial statements under the proportional method. Rather, only equity income is recorded. We have shown each divisions recent financial results, which clearly reflect the ESAs growing budget.

Exhibit 18: Space Segment Financials & Valuation

Valuing each business in line with the current median revenue, EBITDA and EBIT multiples its peers currently trade at (ATK, BA, BBD.B CN, GY, HO FP, LMT, MDA CN, ORB), as shown in Exhibit 19, we can see that Thales Alenia space is worth on average 0.85 per FNC share, while Telespazio is


Revenue! Multiple! Gross Profit! Multiple! EBITDA! Multiple!DG FP! 40,676! 0.95x! 4,748! 8.1x! 5,643! 6.8x!FGR FP! 14,291! 1.18x! 11,734! 1.4x! 2,186! 7.7x!MT IM! 1,685! 0.56x! 419! 2.3x! 84! 11.3x!TRE SM! 3,039! 0.39x! 1,097! 1.1x! 164! 7.3x!SAL IM! 3,613! 0.70x! 567! 4.4x! 362! 7.0x!AST IM! 2,638! 0.65x! 731! 2.4x! 331! 5.2x!TFI IM! 1,124! 0.91x! 657! 1.6x! 115! 8.8x!Average! ! 0.76x! ! 3.03x! ! 7.73x!Median! 0.70x! 2.25x! 7.27x!Minimum! ! 0.39x! ! 1.08x! ! 5.21x!

Telespazio 2010 2011 2012 2013Revenue 278.0 246.5 325.7 356.5 EBITDA 8.1 (17.5) 40.2 43.0 EBIT (9.2) (54.6) 16.6 20.0 Net Debt (0.1) 0.0 4.8 3.5

Thales Alenia SpaceRevenue 1,535.3 1,614.5 1,668.9 1,690.6 EBITDA 74.2 112.1 131.5 132.9 EBIT 52.0 85.3 106.0 107.3 Net Debt 15.0 17.6 28.8 2.2


worth on average 0.41 per share. Taken together, the Space segment has a current fair value of 1.26 per FNC share without any take-over premium given.

Exhibit 19: Comparable Valuations of the Space Companies

Just between the rumored 1.45 billion bid Hitachi has made for the Ansaldo entities, and the potential proceeds from a sale of the two space companies, over the next several quarters, shareholders of FNC will be exposed to significant upside potential as these units eventually get sold. Adding any contributions from BredaMenarinibus and FATA, shareholders are exposed to roughly 4.02 per share in non-core monetizations in the near to medium-term. Such sales would only reduce group EBITDA by 4% on a trailing twelve month basis, yet it would reduce the enterprise value (by injecting cash) by 25%, and represents a substantial 53% of the current market capitalization.

4. Restructuring: Significant Cost Cutting & Cash Return Opportunities

With very little time on the job as CEO, Moretti began implementing a corporate overhead restructuring, which will have the clear positive effect of lifting the groups profitability, and will more importantly give him more control over capital allocation decisions at each division. While he arrived at the company in late Q2, his early restructuring actions have already saved the company an additional 15-20 million in Q3, above and beyond earlier restructuring actions that had previously been taken. The savings that started showing up in the first quarter after Morettis arrival are a result of the elimination of external board members at each division, and corporate overhead comprised of lower external consulting expenses, reduced travel expenses, and various changes to employee benefits. While the company hasnt guided to an annualized savings figure as a result of the changes, these will be above and beyond the 300 million in restructuring benefit the company has said it will realize between 2014-2015.

In Morettis first conference call with investors (highlighted on page 7), he noted that operating expenses, particularly administrative costs, need to come down substantially as the group focuses on raising its profit margins and increasing its cash flow. Given the diverse opportunities the group has, he noted they needed to focus both their own capital and their human capital on the best opportunities. One capital-light initiative Moretti is focused on is increasing the mix of revenues coming from services. Given many of the companys units have substantial installed bases, and clearly have the skilled human capital with deep understanding in their respective fields, increasing


Telespazio Comps ValueRevenue 0.99x 353.1 EBITDA 10.29x 442.1 EBIT 13.25x 264.9

Thales Alenia SpaceRevenue 0.99x 1,674.3 EBITDA 10.29x 1,366.9 EBIT 13.25x 1,421.3

Telespazio Thales AleniaAverage Value 353.4 1,487.5 Net to FNC 236.8 490.9 Per FNC Share 0.41 0.85


the companys presence in more predictable, higher-margin, capital-light services business will help transform the financial profile.

Moretti also noted that the business was too diverse and not focused enough to generate satisfactory returns. He committed to formulating a more focused (i.e. reduced) plan for investment in the businesses, which combined with margin expansion and restructuring will raise the companys returns on invested capital. In the third quarter earnings call, he followed up this commitment by highlighting his intent to cut research and development (R&D) investments. As exhibit 20 starkly shows, the company has been investing a substantially greater amount of revenue back into R&D than its peers.

Exhibit 20: R&D Spending by FNC and Peers, by Division

While the company is capitalizing roughly 80% of its annual R&D expenditures, the total opportunity to lift free-cash-flow is substantial should each division converge to similar levels of spending than their peers. As exhibit 20 demonstrates, if each division converged its R&D expenses (as a percentage of revenue) to its peers, Finmeccanicas free-cash-flow would improve by nearly 1.1 billion, or 25% of todays stock price. While no CEO presenting a restructuring plan would ever publicly share such bullish near-term potential, there is substantial room to cut low-return capital spending. Assuming a 10% FCF yield is conservative, the total opportunity represents roughly 19 per share of additional upside, above and beyond any SG&A cuts and the sum-of-the-parts valuation, which is already north of 20 per share.

As the group improves its free-cash-flow profile, it will be able to de-leverage the company in order to get it back to an investment-grade rating (currently Ba1 / BB+). We estimate that if the rumored 1.45 billion sale of AnsaldoBreda and AnsaldoSTS goes through, the companys leverage profile would again support an investment-grade rating. It also would likely be the catalyst that would allow the company to resume returning cash to shareholders via dividends or share repurchases. In Morettis first conference call with investors, he highlighted cash returns to shareholders as a top priority. The company hasnt paid a dividend since the annual dividend of 0.41 was cancelled in 2012. Should Moretti be successful in selling both Ansaldo stakes to either Hitachi or the Chinese, we think cash returns will soon be following.

5. Industry Considerations

One of the first things a US investor would think about the defense industry is that weve completed a long cycle of significant defense spending growth over the last decade, and now with troop withdrawals from Iraq and Afghanistan, spending is inevitably coming down. Pair the budget sequestration together with the wind-down of the field presence, and its hard to come up with a bull scenario for the defense industry barring another geopolitical catastrophe. Even with Russias slow annexation of Ukraine and the the growing and serious threat from ISIS, its hard to find a defense bull anywhere. As exhibit 21 shows, the absolute dollar amount of annual spending by the US government has doubled over the last decade. The only core European countries that have increased defense spending have been the United Kingdom and Germany, but such increases have been far more muted than the US governments increase. Netting the top five European


Helicopters! Electronics! Aerospace! Systems! Transportation! Space! Total!R&D Average! 4.4%! 4.5%! 4.6%! 3.5%! 4.1%! 2.6%!FNC (2013)! 12.0%! 14.0%! 8.0%! 20.6%! 3.1%! 5.4%! 11.4%!Nomralization Boost! 314! 446! 123! 210! N/A! 1,093!


countries together, the last decade has seen a very flat result for European defense companies, with total spending up less than 5%. Exhibit 21: Defense Expenditures by Key NATO Members (>90% of Budget) Italy US

UK France

Germany Spain

Source: NATO; denominated in millions of euros, dollars and pounds

Given Finmeccanicas mix of revenue (only 23% from North America and nearly 60% from Europe), the company faces less headwinds than US-focused companies facing a declining domestic budget. Nearly 20% of Finmeccanicas revenue comes from Italy, where government funding has been significantly reduced. Thus, the current valuation and results already reflect a fairly austere level of government support. Given the thrifty European states have already committed in 14September at the NATO Welsh summit to bring back defense spending to the NATO-suggested

NATO Wales Summit Declation14


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2% of GDP over the next decade, its possible that the environment for defense spending in Europe actually becomes favorable for the longer-term stock holder. Exhibit 22: 2013 Defense Spending as % of GDP

Source: NATO

If the European under-spenders follow through on their commitment (somewhat doubtful), the total spending by the top five countries in the EU will rise by 32.3% above and beyond any GDP expansion over the next decade. Finmeccanica and its European peers will benefit most from any potential rebound, given the Buy European, policy most countries have, as well as the European Space Agency. While some countries, including Italy, may end up missing the 2% target, barring some sort of larger-scale Russian invasion of Ukraine, our main point is that European defense contractors face tailwinds, not headwinds, as most US companies are currently facing. Many smart international consultants or strategists weve talked to believe that Putin wont rest until Russia has fully annexed Ukraine. If these predictions turn true, there are clear risks to the upside to European spending, as many will be asking, where will he stop? The Russian border would be inching closer to Germany, Austria and Italy. On a happier note, the commercial aerospace demand outlook remains very robust, as both Boeing and Airbus are introducing next-generation planes that are significantly more fuel efficient than the current airplane installed base. Airbus recently estimated that as much as 40% of its demand is coming just from replacement demand for fleets upgrading to more efficient planes. The balance of the growth is coming primarily from passenger growth, and Boeing recently estimated that to accommodate this increased traffic, the global fleet of airplanes will need to double by 2033. Exhibit 23: Boeings Estimated Global Commercial Airplane Fleet

Source: Boeings Current Market Outlook 2014-2033


% of GDP!Big 5 EU! 1.6%!France! 1.9%!Germany! 1.3%!Italy! 1.2%!Spain! 0.9%!United Kingdom! 2.4%!US! 4.4%!

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6. Cheaper than the Cheapest European Competitors Given the reduction in US defense spending, there are pockets of weakness in the aerospace and defense industries, which show up in some companies valuations. Some have had to deal with shrinking backlogs, which typically indicates a more modest future operating profile than today. Finmeccanicas backlog has been growing, with some choppiness on a quarterly basis, yet at 5.9x EBITDA, it is priced cheaper than even the cheapest peers in the comparable valuation table.

Exhibit 24: Aerospace, Defense, Space and Transportation Comparable Valuations

Data Sources: Company Reports, CapitalIQ

While Finmeccanica is currently the cheapest (using EBITDA) major company in the industry, at the same time it has the most significant opportunity for improvement. The pessimist could say this is just indicative of how poorly FNC has been operating, and we wouldnt disagree with him. Our conviction in being able to realize value from an improving profit and capital return performance lies in Moretti and his restructuring plan that he is currently formulating. The current cheap valuation suggests that FNC will continue to be run in an inefficient way, without regard to capital returns, yet we think the opposite is true. The really neat part of the bull thesis, is that many of FNCs divisions dont need any significant surgery - their strength is simply being masked by hangovers from past bad investments or acquisitions. When one finally begins looking at each division separately, the analyst is able to see that the total value lying within Finmeccanica group is substantially higher than where it trades today, even before any restructuring plans get implemented.

7. A Sum-of-the-Parts Story that Will Actually Be Realized

Given Finmeccanica historically tried to be everything for everyone in the industrial European landscape, looking at the group by each sector makes a lot more sense than valuing rocket science equally to power plant construction. We took the comparable valuations displayed in exhibit 24 to come up with a sector-level valuation by revenue, EBITDA, adjusted EBIT, and backlog in exhibit 25. The table shows exactly which companies are included by business line.


EV! EV / Sales! R&D %! EV / EBITDA! EV / EBIT! EV / Backlog!AIR FP! 37,430! 0.51x! 5.41%! 8.1x! 14.0x! 4.9%!AM FP! 9,885! 2.33x! 10.82%! 19.8x! 23.3x! 129.9%!ATK! 5,290! 1.04x! 1.16%! 6.7x! 8.0x! 75.6%!BA! 87,298! 0.97x! 3.49%! 10.2x! 13.1x! 17.8%!BA LN! 15,011! 0.94x! 6.57%! 8.2x! 11.0x! 37.8%!BBD.B CN! 13,293! 0.68x! 1.63%! 11.0x! 14.8x! 35.1%!BEAV! 10,131! 2.47x! 6.53%! 11.6x! 13.6x! 113.8%!GD! 43,747! 1.42x! 1.01%! 10.2x! 11.7x! 58.8%!GY! 1,585! 0.97x! 2.63%! 12.5x! 24.0x! 75.5%!HO FP! 8,634! 0.61x! 5.06%! 6.0x! 8.5x! 34.5%!LMT! 61,062! 1.37x! 1.56%! 10.4x! 12.0x! 73.9%!MDA CN! 3,996! 2.00x! 14.9x! 19.7x! 133.2%!MTX FP! 4,135! 1.06x! 3.38%! 8.0x! 11.6x! 62.7%!NOC! 31,191! 1.30x! 2.11%! 8.5x! 9.7x! 80.9%!ORB! 1,371! 1.01x! 2.40%! 9.6x! 13.4x! 29.2%!RTN! 32,484! 1.44x! 2.06%! 9.5x! 10.6x! 97.7%!SAF FP! 23,783! 1.60x! 12.95%! 11.9x! 19.7x! 42.3%!SIE GR! 85,501! 1.19x! 5.65%! 10.5x! 14.4x! 85.5%!SPR! 6,277! 0.93x! 0.49%! 14.0x! 21.3x! 14.3%!TXT! 14,125! 1.06x! 4.90%! 10.1x! 14.7x! 143.9%!UTX! 89,003! 1.37x! 3.90%! 7.4x! 8.9x! 196.9%!VSAT! 3,772! 2.79x! 3.92%! 16.3x! 81.8x! 191.0%!Average! 1.30x! 4.12%! 10.6x! 16.9x! 78.9%!Median! 1.06x! 3.43%! 10.2x! 13.4x! 74.7%!


Exhibit 25: Comparable Valuations By Sector

One of the really unique things that sets Finmeccanicas Sum-of-the-Parts (SOP) valuation apart from most other circumstances, is the CEO is proactively selling off divisions that are considered non-core, as well as anything within the core industries (helicopters, aerospace, and defense) that the company doesnt have direct control over as it relates to capital allocation. Again, the primary driver of value in these long-investment-cycle industries is the managements ability to effectively allocate capital to the highest-return areas.


Defense!Helicopters! Electronics! Aerospace! Systems! Transportation! Space!

AIR FP! X! X!AM FP! X!ATK! X! X!BA! X! X! X!BA LN! X! X! X!BBD.B CN! X! X!BEAV! X!GD! X! X! X!GY! X!HO FP! X! X! X! X! X!LMT! X! X! X! X!Loral Space Systems Sale! X!MDA CN! X!MTX FP! X!NOC! X! X! X!ORB! X!RTN! X!SAF FP! X! X!SIE GR! X!SPR! X!TXT! X! X! X!UTX! X! X!VSAT! ! ! ! ! ! X!Average!Median!

R&D Average! 4.4%! 4.5%! 4.6%! 3.5%! 4.1%! 2.6%!

EV/Sales! Helicopters! Electronics! Aerospace! Systems! Transportation! Space!Average! 0.98x! 1.24x! 1.27x! 1.12x! 0.83x! 1.23x!Median! 1.02x! 1.37x! 1.06x! 1.18x! 0.68x! 0.99x!

EV/EBITDA!Average! 8.97x! 9.25x! 10.08x! 8.91x! 9.17x! 10.49x!Median! 9.12x! 9.53x! 10.15x! 9.32x! 10.51x! 10.29x!

EV/EBIT (Adjusted)!Average! 12.63x! 11.89x! 13.40x! 11.26x! 12.57x! 20.50x!Median! 13.51x! 10.97x! 11.98x! 11.33x! 14.39x! 13.25x!

EV/Backlog!Average! 91%! 61%! 73%! 72%! 52%! 74%!Median! 81%! 59%! 63%! 66%! 35%! 74%!


Exhibit 26: Finmeccanicas Sum-Of-The-Parts Valuation, Trailing Twelve Month Figures

While the current SOP valuation is worth nearly triple FNCs current stock price, given the company is underperforming peers in its profit margins, perhaps the EBITDA and EBIT valuations of 10.46-12.61 per share are more appropriate, before Moretti enacts his cost restructuring programs.

Should the company sell its Transportation Division to Hitachi for the rumored 1.45 billion, it would create even further upside, particularly as it relates to the EBITDA and EBIT valuations shown above. Exhibit 27 shows a revised concise SOP valuation table, fixing AnsaldoBreda and STS at 1.45 billion valuation. This excludes the proceeds from the sale of the bus division, BredaMenarinibus, which took place in November 2014, as well as any potential proceeds from the companys sales efforts for the engineering and construction firm, FATA SpA. As we showed earlier in exhibit 17, this division should be worth at least an additional 0.11 per share. Both segments have been reported in the Transportation division.


EV/Sales! Helicopters! Electronics! Aerospace! Systems! Transportation! Space! Corporate! Total SOP!Average! 0.98x! 1.24x! 1.27x! 1.12x! 0.83x! 1.23x!Median! 1.02x! 1.37x! 1.06x! 1.18x! 0.68x! 0.99x! 1.06x!FNC! 4,114! 4,675! 3,645! 1,231! 1,887! NM! -429!Value! 4,180! 6,400! 3,878! 1,453! 1,288! NM! -456! 16,743!Per Share! 7.23! 11.07! 6.71! 2.51! 2.23! NM! - 0.79! 20.93!

EV/EBITDA!Average! 8.97x! 9.25x! 10.08x! 8.91x! 9.17x! 10.49x!Median! 9.12x! 9.53x! 10.15x! 9.32x! 10.51x! 10.29x! 10.17x!FNC! 661! 261! 205! 147! -39! 105! -69!Value! 6,031! 2,486! 2,080! 1,367! -410! 1,078! -702! 11,931!Per Share! 10.43! 4.30! 3.60! 2.37! - 0.71! 1.86! - 1.21! 12.61!

EV/EBIT (Adjusted)!Average! 12.63x! 11.89x! 13.40x! 11.26x! 12.57x! 20.50x!Median! 13.51x! 10.97x! 11.98x! 11.33x! 14.39x! 13.25x! 13.43x!FNC! 539! 155! 169! 108! -60! 84! -133!Value! 7,280! 1,700! 2,024! 1,223! -864! 1,113! -1,787! 10,690!Per Share! 12.59! 2.94! 3.50! 2.12! - 1.49! 1.92! - 3.09! 10.46!

EV/Backlog!Average! 91%! 61%! 73%! 72%! 52%! 74%!Median! 81%! 59%! 63%! 66%! 35%! 74%! 75%!FNC! 12,197! 8,456! 7,139! 3,654! 8,679! NM! -696!Value! 9,862! 4,970! 4,478! 2,424! 3,044! NM! -520! 24,259!Per Share! 17.06! 8.60! 7.75! 4.19! 5.27! NM! - 0.90! 33.93!

R&D Average! 4.4%! 4.5%! 4.6%! 3.5%! 4.1%! 2.6%! 1.9%!FNC (2013)! 12.0%! 14.0%! 8.0%! 20.6%! 3.1%! 5.4%!

Average Value! 6,838! 3,889! 3,115! 1,617! 765! 1,095! -866! 16,453!Less Debt (Average LTM)! ! ! ! ! ! ! -4,642!Stock Fair Value! 11,812!Per Share! 11.83! 6.73! 5.39! 2.80! 1.32! 1.89! - 1.50! 20.43!


Exhibit 27: Sum-Of-The-Parts Valuation Pro Forma Potential Transport Sale

While the total SOP value increases modestly, to 21.62 per share, the EBITDA and EBIT valuations of 10.46-12.61 rise significantly, to 14.46-15.83. Thus, using the companys trailing twelve months results, which is before all of the identified 300 million in cost savings and the additional 15-20 million a quarter Moretti implemented in Q3, as well as any further restructuring actions that he is inevitably planning to present in January or February, the current SOP valuation for the company is more than double the current stock price, using the most conservative assumptions (on EBIT and EBITDA as opposed to Revenue and backlog). Given SG&A, R&D and Capex cuts that will be coming, as well as the companys book-to-bill ratio remaining above 1.0x (suggesting the backlog is growing, and demand is outstripping deliveries), we think there are significant risks to the upside from this mid-teens SOP valuation.

Summing it Up: Why Does This Opportunity Exist?

The aerospace and defense industries have significant competitive barriers to new entrants coming and disrupting the businesses. Perhaps the only potential disrupter to watch is Elon Musk at SpaceX, who has shown that with hard work, time and thinking outside of the box, one can actually compete with the established players. Musk has the trust of many important investors that have given him a cheap cost of capital in which to patiently and thoughtfully develop both his electric car and his rocket. We admire Musk for taking the long-term view on investment which seems to be glaringly absent in the capital markets of the past several decades. Elon has understood that one of the primary barriers to entry in the aerospace and defense industries was


EV/Sales! Helicopters! Electronics! Aerospace! Systems! Transportation! Space! Corporate! Total SOP!Average! 0.98x! 1.24x! 1.27x! 1.12x! 0.83x! 1.23x!Median! 1.02x! 1.37x! 1.06x! 1.18x! 0.68x! 0.99x! 1.06x!FNC! 4,114! 4,675! 3,645! 1,231! 1,887! NM! -429!Value! 4,180! 6,400! 3,878! 1,453! 1,450! NM! -456! 16,905!Per Share! 7.23! 11.07! 6.71! 2.51! 2.51! NM! - 0.79! 21.21!

EV/EBITDA!Average! 8.97x! 9.25x! 10.08x! 8.91x! 9.17x! 10.49x!Median! 9.12x! 9.53x! 10.15x! 9.32x! 10.51x! 10.29x! 10.17x!FNC! 661! 261! 205! 147! -39! 105! -69!Value! 6,031! 2,486! 2,080! 1,367! 1,450! 1,078! -702! 13,791!Per Share! 10.43! 4.30! 3.60! 2.37! 2.51! 1.86! - 1.21! 15.83!

EV/EBIT (Adjusted)!Average! 12.63x! 11.89x! 13.40x! 11.26x! 12.57x! 20.50x!Median! 13.51x! 10.97x! 11.98x! 11.33x! 14.39x! 13.25x! 13.43x!FNC! 539! 155! 169! 108! -60! 84! -133!Value! 7,280! 1,700! 2,024! 1,223! 1,450! 1,113! -1,787! 13,003!Per Share! 12.59! 2.94! 3.50! 2.12! 2.51! 1.92! - 3.09! 14.46!

EV/Backlog!Average! 91%! 61%! 73%! 72%! 52%! 74%!Median! 81%! 59%! 63%! 66%! 35%! 74%! 75%!FNC! 12,197! 8,456! 7,139! 3,654! 8,679! NM! -696!Value! 9,862! 4,970! 4,478! 2,424! 1,450! NM! -520! 22,665!Per Share! 17.06! 8.60! 7.75! 4.19! 2.51! NM! - 0.90! 31.18!

R&D Average! 4.4%! 4.5%! 4.6%! 3.5%! 4.1%! 2.6%! 1.9%!FNC (2013)! 12.0%! 14.0%! 8.0%! 20.6%! 3.1%! 5.4%!

Average Value! 6,838! 3,889! 3,115! 1,617! 1,450! 1,095! -866! 17,138!Less Debt (Average LTM)! ! ! ! ! ! ! -4,642!Stock Fair Value! 12,497!Per Share! 11.83! 6.73! 5.39! 2.80! 2.51! 1.89! - 1.50! 21.62!


simply the nature of the investment cycle. As Airbus showed in its recent investor day presentation from December 10, programs in the industry take years to ramp up and generate positive returns.

Exhibit 28: Airbus Illustrative Product Life Cycle Returns

Source: Airbus Group Investor Day Slides

Above and beyond the multiple years of negative cashflows and margins in a program, the bidding process itself takes quarters, if not multiple years. This is both a blessing and a curse. It keeps many potential new entrants from entering a competitive bid, and it also provides managers with very long-range visibility for business plans and investments. The downside is that the more years of upfront negative cash-flows, the worse a projects rate of return will be. Any oil man knows he wants to get his cash spent drilling back as soon as possible to ensure high returns. The lengthier cash-flow cycle of the industry typically means that the companies with the most future growth potential will be showing lower margins than peers that are under-investing. Even with the lower general returns on invested capital the industry faces, stockholders today are paying a fraction of Finmeccanicas invested capital, so the return on our invested capital will be higher than what Moretti manages to generate.

Finmeccanica has been investing heavily in recent history, and its been doing so with very lackluster results. Special one-time charges and write-downs of development costs and acquisitions have made the historical unadjusted financials incredibly volatile. The volatility has tripped up Bloomberg, CapitalIQ and Factset, as all three companies are reporting widely divergent financial results for Finmeccanica. We believe this financial mis-information trifecta has hampered the price discovery mechanism in the market, and partially led to the deep undervaluation of Finmeccanicas shares. It also highlights just how important having a capital-returns-focused CEO at the helm is in the aerospace & defense industries.


8

Product Life Cycle EBIT and Cash Flow Curves

GLOBAL INVESTOR FORUM 2014

New Development Programmes Upfront investment

Learning curve brings down recurring costs

Incremental Upgrades Extend programme life

Less investment

Less risk

EBIT Contribution

Cashflow Contribution

ILLUSTRATIVE

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Exhibit 29: 2013 Financial Metrics- Truth vs. Falsehood

The volatility in the companys historical financial results has likely also scared away investors in the industry who are used to sleepier financial reporting conditions, similar to a Telecom investor being used to AT&T and waking up to a Sprint report with massive and unexpected one-time charges. Because most US investors use one of the three services to research foreign companies, weve provided the key financial information by segment at the end of this report, in exhibit 30.

Furthermore, as the company has been over-investing in an overly-broad and complex portfolio of businesses, it has dampened operating profit margins and lowered its return on invested capital. As he has alluded to in his first two calls with investors, Morettis plan (to be detailed in just over a month), will concentrate investments on the groups strengths (Helicopters, Defense, Electronics, and Aerospace), while seeking strategic alternatives for the transportation and Space divisions, as well as JVs which are not under FNCs direct control. Morettis focus on controlling his own investment destiny shows that this outsider truly understands the levers that need to be pulled to restore Finmeccanica back to its respected industrial reputation.

Over the next few months, shareholders will likely see the sale and de-consolidation of its loss-making transportation division as well as some potential opportunistic sales of non-controlled JVs. Moretti has been focusing on honing capital spending to only high-return programs, and has signaled there will be R&D cuts going forward. Thus, shareholders will see the financial results meaningfully improve over the next several years as a result of the actions Moretti will likely unveil in late January or early February. Still, its important to keep in mind that any good manager, particularly a new one, will set lower near-term hurdles to jump over in order to not risk running into a snafu of missing expectations, and triggering a crisis in confidence. Although Moretti is unlikely to promise near-term hat tricks, the company is trading at a steep valuation discount to its peers, and through selective sales of certain subsidiaries and joint ventures, the sum-of-the-parts valuation has a decent chance of being actualized by investors. Morettis restructuring plans will only add to the upside of the SOP valuation, which is currently worth roughly triple the current stock price. With certain asset sales nearing resolution, the upcoming investor day, the rapidity in which Moretti is cutting costs, and a favorable book to bill in all core businesses, we believe shares have significant room to appreciate over the next six months, year, and even half decade as the new CEO fuses focus, accountability and competitiveness back into the nucleus of Italian industry. Layered on top of Morettis magic is the fact that investors are buying a stock in the FTSE MIB-Index, in a market that is among the cheapest in the world, with a government that has, contrary to popular wisdom, begun enacting real economic reforms, and a central bank that is just beginning its quantitative easing program in hopes of stimulating price inflation. A significantly weaker euro will help all European defense companies more effectively compete against US aerospace and defense companies. European and Italian headwinds are calming down and will at some point turn into tailwinds. Even before they do, we believe shares of Finmeccanica will take flight as a result of a very able pilot guiding the ship back to more favorable air currents and

Factset Capital IQ Bloomberg Actual

Revenue 16,033 16,156 16,033 16,033

EBITDA 839 911 864 1,574

EBIT 128 350 46 949

Net Debt 3,051 3,965 3,973 3,316


Slight Difference!


shedding unnecessary pounds. Weve got our carryons stowed and our seat belts on. Starting with the sale of AnsaldoBreda and Ansaldo STS, we anticipate take-off any day now.

Exhibit 30: Key Divisional Historical Financial Information


Year! Year! Year! Year! Year! Year! Year! Quarter! Quarter! Quarter!Backlog! 12/31/07! 12/31/08! 12/31/09! 12/31/10! 12/31/11! 12/31/12! 12/31/13! 3/31/14! 6/30/14! 9/30/14!Helicopters! 9,004 ! 10,481 ! 9,786 ! 12,162 ! 12,121 ! 11,876 ! 11,928 ! 12,457 ! 12,590 ! 12,197 !Electronics and Security! 8,725 ! 10,700 ! 12,280 ! 11,747 ! 9,591 ! 8,831 ! 8,494 ! 8,277 ! 8,529 ! 8,456 !Aeronautics! 8,248 ! 8,281 ! 8,850 ! 8,638 ! 8,656 ! 8,819 ! 9,014 ! 7,478 ! 7,342 ! 7,139 !Defence Systems! 4,099 ! 3,879 ! 4,010 ! 3,797 ! 3,656 ! 3,381 ! 3,654 ! 1,251 ! 1,159 ! 1,139 !Transportation! 5,108 ! 4,849 ! 5,954 ! 7,303 ! 8,317 ! 8,679 ! 8,246 ! 7,981 ! 8,701 ! 8,679 !Corporate and Other! 597 ! 357 ! 172 ! 113 ! 256 ! 159 ! (804) ! (712) ! (270) ! (696) !Space! 1,423 ! 1,383 ! 1,611 ! 2,568 ! 2,465 ! 2,261 ! 2,165 ! ! ! !Total Backlog! 37,204 ! 39,930 ! 42,663 ! 46,328 ! 45,062 ! 44,006 ! 42,697 ! 36,732 ! 38,051 ! 36,914 !

Orders!Helicopters! 3,970 ! 5,078 ! 3,205 ! 5,982 ! 3,963 ! 4,013 ! 4,384 ! 1,514 ! 1,171 ! 398 !Electronics and Security! 5,240 ! 4,418 ! 8,215 ! 6,783 ! 4,917 ! 5,136 ! 4,952 ! 731 ! 1,362 ! 894 !Aeronautics! 3,104 ! 2,720 ! 3,725 ! 2,539 ! 2,919 ! 3,169 ! 3,980 ! 432 ! 572 ! 525 !Defence Systems! 981 ! 1,087 ! 1,228 ! 1,111 ! 1,044 ! 1,005 ! 1,575 ! 33 ! 45 ! 72 !Transportation! 1,786 ! 1,557 ! 2,834 ! 3,228 ! 2,723 ! 2,290 ! 1,908 ! 222 ! 1,204 ! 379 !Corporate and Other! 557 ! 113 ! 113 ! 105 ! 319 ! (610) ! (230) ! (36) ! (66) ! (99) !Space! 979 ! 921 ! 1,145 ! 1,912 ! 919 ! 866 ! 1,002 ! ! ! !Total Orders! 16,617 ! 15,894 ! 20,465 ! 21,660 ! 16,804 ! 15,869 ! 17,57

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Documents

parts valuation

noncore sales

weaker divisions

cheapest valuation

current stock price

price appreciation

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lossmaking divisions