SILVER BULLETS - Espirito Santo Investment Bank incorporating ...

THIRD QUARTER 2010
Finmeccanica
Valuation Metrics 2008 2009 2010E 2011E 2012E
Recommendation: Buy Execution P/E 6.4 6.5 7.7 6.6 6.2
Fair Value: € 11.5 Reported P/E 7.3 7.3 7.9 7.0 6.5
EV / Sales 0.7 0.5 0.6 0.5 0.5
Share Price: € 8.6 EV / EBITDA 5.4 4.6 4.5 4.3 4.2
Upside / Downside 34.1% EV / EBIT 8.2 7.16 7.05 6.63 6.43
FCF Yield 2.6% 4.9% 2.3% 7.3% 9.0%
Previous Fair Value € 11.5 Dividend yield 4.8% 4.8% 5.2% 5.2% 5.2%
% change to fair value 0.0%
Bloomberg: FNC IM Key ratios 2008 2009 2010E 2011E 2012E
T-One: FNC-MI
Model Published On: 01 July 2010 EBITDA margin 12.2% 11.8% 12.2% 12.3% 12.3%
Adj. EBITA margin 8.0% 7.7% 7.8% 8.0% 8.1%
Capex / Revenue 4.8% 2.6% 3.4% 3.7% 3.6%
Shares In Issue (Less Treasury) 578 Capex / Depreciation 1.17 0.63 0.76 0.88 0.88
Market Cap (mn) 4,954 Net Debt / EBITDA 2.8 2.3 2.3 2.0 1.7
Net Debt (incl Pension liability) 5,020 EBITDA / Net Interest 6.2 7.3 5.6 7.2 8.7
ROE 9% 11% 9% 10% 10%
Enterprise Value 9,974
P&L Summary 2008 2009 2010E 2011E 2012E
Forthcoming Catalysts
Revenue 15,037 18,176 18,119 18,740 19,185
1H 2010 Interim results 29 July 2010 % change 12.0% 20.9% -0.3% 3.4% 2.4%
3Q 2010 results 04 November 2010 EBITDA 1,832 2,146 2,214 2,305 2,352
% change 2.2% 17.1% 3.2% 4.1% 2.0%
% margin 12.2% 11.8% 12.2% 12.3% 12.3%
Depreciation & Amortisation -622 -754 -799 -800 -800
EBIT 1,210 1,392 1,415 1,505 1,552
% change 11.6% 15.0% 1.7% 6.4% 3.1%
Execution Analyst % margin 8.0% 7.7% 7.8% 8.0% 8.1%
Edward Stacey Associates 16 17 16 16 16
(44) 20 7456 9135 Operating Profit 1,226 1,409 1,431 1,521 1,568
edward.stacey@executionlimited.com Net Financials -294 -293 -395 -320 -270
Minority Interests -50 -64 -64 -64 -64
Pre Tax Profit 882 1,052 972 1,137 1,234
Revenue Breakdown Income Tax Expense -367 -377 -348 -432 -469
Net Income 515 675 624 705 765
Transportation
12%
Energy
Helicopters
20%
Execution Net Income
Reported EPS
609
1.17
755
1.17
709
1.08
790
1.22
850
1.32
9%
Execution EPS 1.33 1.31 1.12 1.29 1.39
DPS 0.41 0.41 0.45 0.45 0.45
Payout Ratio 35.1% 35.1% 41.7% 36.9% 34.0%
Shares In Issue (Weighted, Less Treasury) 441 578 578 578 578
Cash Flow Summary 2008 2009 2010E 2011E 2012E
Pre Tax Profit 882 1,052 972 1,137 1,234
EBITA Breakdown Depreciation & Amortisation 622 754 799 800 800
Margin Trends
Margin
14%
12%
10%
8%
6%
4%
2%
0%
Defence System
7%
Space
7%
Defence System
9%
Space
4%
Aeronautics
17%
Energy
8%
Aeronautics
17%
Transportation
8%
Defence
Electronics
28%
Helicopters
24%
Defence Electronics
30%
2008 2009 2010E 2011E 2012E
Adj. EBITDA margin Adj. EBIT EBIT margin margin
Taxes Paid -200 -377 -348 -432 -469
Change in Working Capital -518 -488 -630 -120 -20
Other Operating Cash Flow 203 26 48 48 48
Operating cash flow 989 967 841 1,433 1,593
Capital Expenditure -725 -478 -610 -700 -700
Free Cash Flow 264 489 231 733 893
Dividends Paid To Shareholders -187 -237 -237 -260 -260
Equity Raised / Bought Back 1,206 0 0 0 0
Other Financing Cash Flow 0 0 0 0 0
Net Cash Flow 1,283 252 -6 473 633
Balance Sheet Summary 2008 2009 2010E 2011E 2012E
Cash & Equivalents 2,297 2,630 2,624 3,097 3,730
Tangible Fixed Assets 4,529 4,245 4,141 4,126 4,111
Goodwill & Intangibles 8,237 8,367 8,282 8,197 8,112
Associates & Financial Investments 347 351 367 383 399
Other Assets 14,512 14,892 16,398 16,960 17,363
Total Assets 29,922 30,485 31,812 32,763 33,714
Interest Bearing Debt 7,387 7,644 7,644 7,644 7,644
Other Liabilities 16,405 16,292 17,168 17,610 17,993
Total Liabilities 23,792 23,936 24,812 25,254 25,637
Shareholders' Equity 5,974 6,351 6,738 7,183 7,688
Minority Interests 156 198 262 326 390
Total Equity 6,130 6,549 7,000 7,509 8,078
Net Debt (including pension liability) 5,090 5,014 5,020 4,547 3,914
http://www.execution-noble.com
Page 14 of 44