European small and mid caps-Stock picks Q4 2007-Q1 2008 - Fourlis

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Mid cap European small and mid caps 17 October 2007 abc Financials & valuation: Lanxess Financial statements Year to 12/2006a 12/2007e 12/2008e 12/2009e Profit & loss summary (EURm) Revenue 6944.0 6545.9 6132.4 6349.9 EBITDA 675.0 713.5 767.1 807.2 Depreciation & amortisation -254.0 -246.1 -240.8 -248.3 Operating profit/EBIT 421.0 467.4 526.4 558.9 Net interest -39.0 -18.0 -9.0 3.5 PBT 287.0 191.4 407.8 481.2 HSBC PBT 332.0 397.9 464.3 507.7 Taxation -85.0 -57.4 -130.5 -154.0 Net profit 197.0 128.8 271.8 321.5 HSBC net profit 229.1 260.4 305.5 335.1 Cash flow summary (EURm) Cash flow from operations 537.0 511.6 513.0 600.6 Capex -267.0 -298.6 -282.2 -292.7 Cash flow from investment -228.0 -298.6 -282.2 -292.7 Dividends -21.2 -21.2 -19.3 -40.8 Change in net debt -146.0 -127.9 -196.4 -252.1 FCF equity 354.0 489.5 307.3 319.4 Balance sheet summary (EURm) Intangible fixed assets 41.0 41.0 41.0 41.0 Tangible fixed assets 1559.0 1611.5 1652.9 1697.4 Current assets 2362.0 2097.0 2181.7 2247.0 Cash & others 171.0 122.0 122.0 122.0 Total assets 4205.0 3992.5 4118.7 4228.3 Operating liabilities 2038.0 1909.3 1997.8 2083.0 Gross debt 1202.0 1025.1 828.7 576.6 Net debt 1031.0 903.1 706.7 454.6 Shareholders funds 1403.0 1463.4 1694.5 1967.7 Invested capital 1753.0 1718.2 1755.9 1780.3 Ratio, growth and per share analysis Year to 12/2006a 12/2007e 12/2008e 12/2009e Y-o-y % change Revenue -2.9 -5.7 -6.3 3.5 EBITDA 16.2 5.7 7.5 5.2 Operating profit 26.8 11.0 12.6 6.2 PBT -33.3 113.0 18.0 HSBC EPS 102.8 15.6 17.3 9.7 Ratios (%) Revenue/IC (x) 3.9 3.8 3.5 3.6 ROIC 16.7 18.9 20.6 21.5 ROE 17.3 18.2 19.4 18.3 ROA 5.1 3.6 7.0 7.8 EBITDA margin 9.7 10.9 12.5 12.7 Operating profit margin 6.1 7.1 8.6 8.8 EBITDA/net interest (x) 17.3 39.6 85.2 Net debt/equity 72.2 60.5 40.8 22.6 Net debt/EBITDA (x) 1.5 1.3 0.9 0.6 CF from operations/net debt 52.1 56.6 72.6 132.1 Per share data (EUR) EPS Rep (fully diluted) 2.33 1.55 3.27 3.86 HSBC EPS (fully diluted) 2.71 3.13 3.67 4.03 DPS 0.25 0.23 0.49 0.58 NAV 16.58 17.59 20.37 23.65 Valuation data Overweight Year to 12/2006a 12/2007e 12/2008e 12/2009e EV/sales 0.6 0.6 0.6 0.5 EV/EBITDA 5.7 5.2 4.6 4.1 EV/IC 2.2 2.2 2.0 1.8 PE* 13.1 11.4 9.7 8.8 P/NAV 2.1 2.0 1.7 1.5 FCF yield (%) 12.5 17.3 10.8 11.3 Dividend yield (%) 0.7 0.7 1.4 1.6 Note: * = Based on HSBC EPS (fully diluted) Issuer information Share price (EUR) 35.53 Target price (EUR) 47.00 Potent'l tot rtn (%) 32.3 Reuters (Equity) LXSG.DE Bloomberg (Equity) LXS GR Market cap (USDm) 4189.4 Market cap (EURm) 2956.2 Free float (%) 100 Enterprise value (EURm) 3730.6 Country Germany Sector Chemicals Analyst Sebastian Satz Contact +49 211 910 2373 Price relative 49 44 39 34 29 24 24 Oct-06 Apr-07 Oct-07 Lanxess Rel to DAX-100 Source: HSBC Note: price at close of 12 Oct 2007 49 44 39 34 29 54
Mid cap European small and mid caps 17 October 2007 abc Metka In our view, Metka remains a promising vehicle with which to play the imminent liberalisation of the Greek electricity sector Consistent financial performer; keeps delivering on expectations Target price of EUR20.5 (13% potential total return); Overweight Investment summary Metka, c52%-owned by Mytilineos Group (MG), is involved mainly in the EPC (engineeringprocurement-construction) of power plants. Overall, we believe that Metka is a consistent financial performer that keeps delivering on both our and market expectations. We also expect potential positive newsflow (new project awards both in Greece and abroad) to boost sentiment and financials. In our view, Metka remains a promising vehicle with which to play the imminent liberalisation of the Greek electricity sector, while continued international expansion further improves earnings visibility. On balance, we believe Metka’s strong backlog, resilient margins and bright prospects are not fully priced in at current levels. Strong Q2/H1 2007 results Metka released in August a very strong set of H1 interims, which were above our estimates across the board (with the exception of the top line) on the back of impressive gross margin performance and cost containment. Metka recorded net profit of EUR13.5m in Q2 2007, matching last year’s record-high quarterly performance. Attractive valuation – Overweight Metka’s share price has gained 86% in absolute terms y-t-d, outperforming the market by 52%, on constant positive newsflow and strong results. Having said that, Metka’s relative valuation against its admittedly much larger peers continues to look attractive. Metka trades at a discount on 2007-09e PE and EV/EBITDA, while offering a significantly higher dividend yield (in 2008e, Metka’s DY of 4.6% is among the highest in our Greek universe, on our estimates), but a weaker growth outlook (2006-09e EPS CAGR of 14.8%, versus 18.3% for the peer group). Key facts ___________________ Financial summary_____________________ ___________Valuation summary____________ Analyst: Vangelis Karanikas Year to Revenue EBITDA HSBC HSBC HSBC Yield HSBC EV/ EV/ ROIC HSBC Tel: +30 210 6965 211 (EURm) (EURm) net profit EPS EPS growth (%) PE EBITDA IC (%) REP Email: vangelis.karanikas@hpss.hsbc.gr (EURm) (EUR) (%) (x) (x) (x) (x) Current price (EUR) 18.60 12/2006a 294.1 60.8 40.6 0.78 8.7 2.2 23.8 15.8 8.5 45.1 1.7 Target price (EUR) 20.5 12/2007e 316.1 70.6 48.3 0.93 19.0 2.7 20.0 13.9 6.2 36.3 1.6 Mkt cap (EURm) 966.3 12/2008e 548.8 104.9 75.6 1.46 56.4 4.6 12.8 9.1 5.8 46.3 1.1 Bloomberg METTK GA 12/2009e 494.9 85.8 61.5 1.18 -18.6 4.6 15.7 11.1 5.2 34.8 1.4 Reuters MTKr.AT Source: Reuters, HSBC estimates 55
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European small and mid caps-Stock picks Q4 2007-Q1 2008 - Fourlis

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