Wiit 8 October 2018: 7:56 CET · Intesa Sanpaolo Research Department Gabriele Berti Research Analyst +39 02 8794 9821 [email protected] Alberto Francese Price performance,

Equity Company Note

See page 33 for full disclosures and analyst certification Banca IMI is Corporate Broker to Wiit

The group at a glance. Wiit is a leading cloud computing company in the Italian market, specialised in offering cloud solutions for “Critical Applications”, those that could affect the business continuity of the client’s companies. Its offer comprises Private Cloud services (IaaS, PaaS and SaaS), Hosted Private Cloud solutions for critical applications, Public Cloud and Hybrid Cloud applications, plus advanced cybersecurity solutions. Wiit has gained a leading position in the management of ERP systems (80% of customers are SAP users), and built up a strong portfolio of references (over 65 customers). Wiit has equipped itself with two data centres, one of which is certified Tier IV (the highest certification available). In 2017, Wiit reported net sales of EUR 19.6M and net profit of EUR 3.1M.

Positives. We believe that Wiit can leverage on some company-specific positives, including: i) strong exposure to the cloud market, which is growing at a 2014-19E CAGR of 22.2%; ii) significant potential for a margin expansion thanks to a scalable platform; iii) long-term contracts with solid customers and a high renewable rate, allowing the creation of strong relationships with clients; iv) direct ownership of the data centres, of which the one in Milan obtained the highest Tier IV certification for the category; v) good visibility on revenues and cash flow streams; vi) an attractive dividend policy; Management intends to maintain a distribution rate of around 60% over the coming years; and vii) an experienced management team which has driven the development of Wiit since its foundation.

Estimates. We expect Wiit to increase revenues from EUR 19.6M in 2017A to EUR 34.3M in 2020E (2017E-20E CAGR of 20.6%). We highlight that our projections incorporate the consolidation of the recently acquired company Adelante from 3Q18 and the impact of the changes in IFRS 15 and IFRS 16. Looking at profitability we expect Wiit to drive the adjusted EBITDA from EUR 8.5M in 2017 to EUR 15.5M in 2020E (2017E-20E CAGR 26.8%), which implies a margin on revenues at 45.3% in 2020E.

Valuation. We valued Wiit using a DCF approach and a peers’ multiple comparison. We highlight that our valuation does not include any potential opportunities arising from external growth which, according to management, should be a key strategic pillar for the group in the next few years. We derived a target price of EUR 62.1/share, obtained as the average of the multiples comparison, which points to EUR 63.5/share, and the DCF model that points to EUR 60.7/share. Our target price is at a premium of around 42% on current prices, implying a BUY rating on the stock.

Key risks. In our view, the key risks are: i) increasing competition from major players; ii) a potential decrease in the price of services resulting from the growing maturity of the cloud market; and iii) we believe that the group’s limited size, limited free float and the low liquidity on the AIM market should be taken into consideration.

Wiit Raining Data from Clouds

A: actual; E: estimates; Source: Company data and Intesa Sanpaolo Research

8 October 2018: 7:56 CET Date and time of production

Italy/Information Technology Initiation of Coverage

Intesa Sanpaolo Research Department

Gabriele Berti Research Analyst +39 02 8794 9821 [email protected]

Price performance, -1Y 04/10/2018

Source: FactSet

Date and time of first circulation: 8 October 2018: 8:00 CET

*unless otherwise indicated within report. Source: FactSet and Intesa Sanpaolo Research estimates

Wiit - Key estimates and dataY/E December 2017A 2018E 2019E 2020ERevenues EUR M 19.56 24.87 30.46 34.32EBITDA EUR M 7.62 10.42 13.52 15.55EBIT EUR M 4.19 5.32 7.52 8.55Net Income EUR M 3.11 3.94 5.56 6.26Dividend ord. EUR 0.83 0.91 1.29 1.45Adj. EPS EUR 1.20 1.52 2.14 2.41EV/EBITDA x 18.6 10.9 8.4 7.3Adj. P/E x 45.7 28.7 20.3 18.1

BUY

Target Price: EUR 62.1

Corporate Brokerage Team Alberto Francese Gabriele Berti

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Wiit FTSE AIM - PRICE INDEX

Priced at market close on 04/10/2018*

Target price (€) 62.1Target upside (%) 42.37Market price (€) 43.6052Wk range (€) 60.0/43.4Market cap (€ M) 113.13No. of shares 2.59Free float (%) 24.8Major shr Wiit Fin Srl(%) 62.7Reuters WIIT.MIBloomberg WIIT IMFTSE AIM 1081

-1M -9.7 -1M -7.5-3M -11.6 -3M -11.7-12M -26.0 -12M -30.5

Performance %Absolute Rel. to FTSE AIM

Wiit 8 October 2018

2 Intesa Sanpaolo Research Department

Contents

Valuation 3

DCF model 3

Multiples valuation 4

Shareholding Structure 6

Shareholders’ agreement 7

Group Profile 8

Services Portfolio 10

Business Model 12

Retail channel 13

Strategy 14

Acquisition of Adelante 15

Market Analysis 16

The digitalisation of SMEs in Italy 16

The key growth drivers 17

Cloud Computing 18

Recent trends 18

SAP S/4 HANA 20

Wiit’s positioning 21

SWOT Analysis 22

Recent Results 23

P&L key items 23

Balance sheet & cash flow key Items 24

1H18A results 24

Earnings Outlook 26

Financials 27

Appendix 1: Management Team 29

Appendix 2: History 30

Appendix 3: Group’s Main Certifications 31

Sebastiano Grisetti contributed to this report.

Wiit 8 October 2018

Intesa Sanpaolo Research Department 3

Valuation

We valued Wiit using a DCF approach and a peers’ multiple comparison. We highlight that our valuation does not include any potential opportunities arising from external growth which, according to management, should be a key strategic pillar for the group in the next few years. We derived a target price of EUR 62.1/share, obtained as the average of the multiples comparison, which points to EUR 63.5/share, and the DCF model that points to EUR 60.7/share. Our target price is at a premium of around 42% on current prices, implying a BUY rating on the stock.

Overall, we believe that Wiit can leverage on some company-specific positives, including: i) strong exposure to the cloud market which is growing at a 2014-19E CAGR of 22.2%; ii) a significant potential for a margin expansion thanks to a scalable platform; iii) long-term contracts with solid customers and a high renewable rate, allowing the creation of strong relationships with clients; iv) direct ownership of the data centres, of which the one in Milan obtained the highest certification for the category, the Tier IV certification; v) very good visibility on revenues and cash flow streams; vi) an attractive dividend policy. Management intends to maintain a distribution rate of around 60% over the coming years; and vii) an experienced management team which has driven the development of Wiit since its foundation.

DCF model

The main assumptions in our three-stage DCF model are as follows:

Explicit estimates until 2020E;

In 2021-25E, we assume a sales CAGR of 11.2%, an average EBIT margin of 26.1%, capex equal to D&A and an average net working capital/sales ratio at 8.4%;

The terminal value at 2026E, in which we assumed flat revenues compared with our 2025E assumption and an EBIT margin at 25.2% (equal to 2017-25 average). We set a 2% perpetuity growth rate;

We then added the 2017A net cash position (adjusted for the cash-out arising from the recent acquisition).

For the WACC calculation, we used a risk-free rate at 3.0%, a risk premium at 5.75%, and a Beta of 1.1x (Source: Elaboration on Bloomberg data). Considering the ongoing focus on M&A activity, we believe that the group could adopt a leveraged financial structure to finance potential further acquisitions, thus we used a 20% ‘target’ gearing ratio. As a result, we derived a WACC of 7.65%. The table below summarises our DCF model.

Wiit - WACC calculation (%) Wiit – 2017A-26E key assumptions (%) Risk-free rate 3.0 Equity risk premium 5.75 Beta (x) 1.1 Cost of equity 9.0 Net cost of debt 2.1 Gross cost of debt 3.0 Tax rate 30 Gearing 20 WACC (%) 7.65

Sales 2017A-26E CAGR 13.1 Perpetual growth rate 2.0 EBIT margin 2017A-26E avg. 24.8 EBIT 2017A-26E CAGR 15.2 Capex to sales 2017A-26E avg. 20.6 Working capital to sales 2017A-26E 8.8

Source: Intesa Sanpaolo Research estimates, *Bloomberg Source: Intesa Sanpaolo Research estimates

Wiit - DCF valuation (EUR M)

Forecast cash flow (2018-25E) 46 Terminal value 110 Enterprise value 156 Adj. net cash (debt) 2017A 1.5 Equity value 157 Number of shares (M) 2.6 Equity value per share (EUR) 60.7

Source: Intesa Sanpaolo Research estimates

TP of EUR 62.1/share and BUY rating

Wiit can leverage on many company specific positives

Wiit 8 October 2018


Wiit – Sensitivity analysis (EUR/share) Perpetual growth rate % 1.0 1.5 2.0 2.5 3.0 Discount rate % 6.65 64.6 69.1 74.4 81.1 89.6 7.15 69.0 62.6 66.9 72.1 78.5 7.65 54.3 57.2 60.7 64.8 69.8 8.15 50.3 52.7 55.5 58.8 62.8 8.65 46.8 48.8 51.1 53.9 57.1


Multiples valuation

In our peers’ panel, we included both players exposed to Business Data Centres and Cloud segments. However, note that no listed group exactly matches the background and/or geographical presence of Wiit.

Wiit vs. peers – 2018-20E growth comparison

Revenues growth (yoy) 2017A-20E EBITDA growth (yoy) 2017A-20E

% 2018E 2019E 2020E CAGR 2018E 2019E 2020E CAGR Equinix 25.6 10.3 9.2 14.8 27.2 12.8 10.6 16.6 Internap Corporation 23.3 5.9 NA NA 33.1 8.7 NA NA Interxion Holding 15.0 14.8 14.2 14.7 16.1 15.9 16.4 16.1 Nextdc 21.8 14.7 23.7 20.0 19.0 28.4 34.6 27.2 Descartes Systems Group 27.6 10.9 9.5 15.7 27.6 14.8 11.1 17.6 Paycom Software 37.0 23.6 20.4 26.8 33.8 22.1 20.6 25.4 Qualys 29.5 18.5 20.0 22.6 31.7 18.2 30.4 26.6 Overall mean 25.7 14.1 16.2 19.1 26.9 17.3 20.6 21.6 Overall median 25.6 14.7 17.1 17.9 27.6 15.9 18.5 21.5 Wiit* 27.2 22.5 12.7 20.6 22.6 29.8 14.9 22.3

Priced at market close on 04/10/2018; NA: not available; Source: FactSet and (*) Intesa Sanpaolo Research estimates

Wiit vs. peers – 2017A-19E margins comparison

EBITDA margin EBIT margin Div yield

% 2017A 2018E 2019E 2017A 2018E 2019E 2018E 2019E Equinix 47.0 47.6 48.6 18.7 18.4 20.6 2.1 2.5 Internap Corporation 32.8 35.5 36.4 1.7 4.9 8.3 NA NA Interxion Holding 45.2 45.6 46.0 20.8 19.7 20.4 0.0 0.0 Nextdc 39.6 38.8 43.4 20.7 18.8 18.5 0.0 0.0 Descartes Systems Group 34.0 34.0 35.2 16.1 16.1 19.2 NA NA Paycom Software 42.9 41.9 41.4 38.3 37.0 36.3 0.0 0.0 Qualys 36.8 37.5 37.4 28.1 28.0 28.6 NA NA Overall mean 39.8 40.1 41.2 20.6 20.4 21.7 0.5 0.6 Overall median 39.6 38.8 41.4 20.7 18.8 20.4 0.0 0.0 Wiit* 43.5 41.9 44.4 21.4 21.4 24.7 2.1 3.0

Note: adj. EBITDA margin for Wiit; Priced at market close on 04/10/2018; NA: not available; Source: FactSet and (*) Intesa Sanpaolo Research estimates

Multiples comparison (2018-19E) x

Price Market Cap EV/sales EV/EBITDA EV/EBIT P/E

Country EUR EUR M 2018E 2019E 2018E 2019E 2018E 2019E 2018E 2019E Equinix USA 366.7 29,155 8.7 8.0 18.4 16.5 47.4 38.9 111.9 68.5 Internap Corporation USA 11.1 235 2.8 2.6 7.9 7.1 57.5 31.5 NA NA Interxion Holding USA 55.6 3,982 9.0 8.1 19.6 17.7 45.5 39.8 96.4 66.9 Nextdc AUS 4.0 1,361 12.8 13.2 33.1 30.5 68.4 71.5 NM NM Median Data Center 8.8 8.1 19.0 17.1 52.5 39.4 104.1 67.7 Descartes Systems Group Inc. CAN 27.4 2,107 8.7 7.7 25.5 21.7 53.7 39.8 71.9 55.7 Paycom Software, Inc. USA 122.1 7,160 14.8 11.7 35.3 28.3 39.9 32.2 53.7 44.0 Qualys, Inc. USA 72.5 2,825 10.9 8.9 29.0 23.7 38.8 31.0 56.1 47.4 Median Cloud 10.9 8.9 29.0 23.7 39.9 32.2 56.1 47.4 Overall mean 9.7 8.6 24.1 20.8 50.2 40.7 78.0 56.5 Overall median

9.0 8.1 25.5 21.7 47.4 38.9 71.9 55.7

Min

2.8 2.6 7.9 7.1 38.8 31.0 53.7 44.0 Max 14.8 13.2 35.3 30.5 68.4 71.5 111.9 68.5 Wiit* ITA 62.1 113.1 4.5 3.7 10.9 8.4 21.3 15.0 28.7 20.3 Vs Overall mean

-52.9 -56.8 -55.0 -59.8 -57.6 -63.0 -63.1 -64.0

Priced at market close on 04/10/2018; NM: not meaningful; NA: not available; Source: FactSet and (*) Intesa Sanpaolo Research estimates

Wiit 8 October 2018


We used the average 2018E-19E EV/EBIT to calculate our implied share value, as we consider it more representative than EV/EBITDA following the change in IFRS 16. We highlight that we applied a 40% discount to Wiit's valuation, given that the group is not very liquid and of a limited size.

Valuation range based on 2018E-19E average multiples EUR M EV/sales EV/EBITDA EV/EBIT P/E

2018E 2019E 2018E 2019E 2018E 2019E 2018E 2019E

Median multiple (x) 9.0 8.1 25.5 21.7 47.4 38.9 71.9 55.7 Implied EV 222.7 247.7 265.5 294.0 252.4 293.0

Implied equity value 223.1 250.8 265.9 297.2 252.7 296.2 282.9 310.1 Discount (%) 40.0 40.0 40.0 40.0 40.0 40.0 40.0 40.0 Implied share value (EUR) 51.6 58.0 61.5 68.7 58.4 68.5 65.4 71.7


Peers description

Equinix Inc. (USA) engages in the provision of collocation space and related service. It operates through the following geographical segments: Americas; Europe, Middle East and Africa, and Asia-Pacific.

Internap Corp. (USA) engages in the provision of information technology infrastructure services. It operates through the INAP COLO, and INAP CLOUD segments. The INAP COLO segment consists of colocation, managed services and hosting, and network services. The INAP CLOUD segment offers compute and storage services via an integrated platform that includes servers, storage and network.

InterXion Holding NV (Netherlands) engages in the provision of carrier and cloud-neutral data centre services. It operates through the following business segments: Big4, Rest of Europe, and Corporate and Other. The Big4 segment comprises France, Germany, the Netherlands, and the United Kingdom. The Rest of Europe segment consists of Austria, Belgium, Denmark, Ireland, Spain, Sweden, and Switzerland. The Corporate and Other segment represents the expenses such as corporate management, general and administrative expenses, loans, borrowings and related expenses, income tax assets, and liabilities.

NextDC Ltd. (Australia) operates and develops smart, secure and scalable data centres. The company enables business transformation through innovative data centre outsourcing solutions, connectivity services and infrastructure management software. It provides services such as private data suites, blocks & racks, and cross connect.

The Descartes Systems Group, Inc. (Canada) is an information technology company, which provides logistics technology solutions. It specialises in cloud-based solutions including modular and software-as-a-service to route, schedule, track, and measure delivery resources; plan, allocate and execute shipments; rate, audit and pay transportation invoices; access and leverage global trade and restricted party data; file customers and security documents for imports and exports; research and perform trade tariff and duty calculations and to complete numerous other logistics processes. It primarily supports transportation industry, logistics service providers, third-party logistics providers, freight forwarders, and custom brokers.

Paycom Software, Inc. (USA) provides cloud-based human capital management software solutions delivered as Software-as-a-Service. The company provides functionality and data analytics that businesses need to manage the complete employment life cycle from recruitment to retirement. Its solutions require virtually no customisation and is based on a core system of record maintained in a single database for all HCM functions, including talent acquisition, time and labour management, payroll, talent management and human resources management applications.

Qualys, Inc. (USA) engages in the provision of cloud security and compliance solutions. Its products enable organisations to identify security risks to information technology infrastructures; help protect information technology systems and applications from cyber-attacks; and achieve compliance with internal policies and external regulations. The firm operates its business through the Unites States and Foreign geographical segments. It also offers solutions through a software-as-a-service model, primarily with renewable annual subscriptions.

Wiit 8 October 2018


Shareholding Structure

Wiit shareholders’ capital comprises 2,594,739 shares. The main shareholders are:

Wiit Fin Srl: 62.7%;

Management & Others: 7.8%;

Orizzonte SGR S.p.A: 2.3%;

Free float: 24.8%.

Wiit - Shareholding structure

Source: Company data

Wiit Fin Srl was founded and is controlled by the Chairman and CEO Alessandro Cozzi. Orizzonte SGR S.p.A, owned by HAT Orizzonte Group, was founded in 2007 as part of an initiative by the Italian Chambers of Commerce. It promotes and manages private equity funds aiming to develop regional and national economies.

From 5 June 2017, the company has been listed on the AIM segment of Borsa Italiana S.pA, following the collection of EUR 27.8M in the placement phase, of which EUR 4.1M coming from the exercise of the over-allotment option, with a free float at the time of admission equal to 24.1%. The Institutional Placement generated total demand three times above the quantity of the shares offered, approximately 53% coming from Italian investors and the remaining 47% from foreign investors. The Global Coordinator subsequently exercised the Greenshoe option making the free float equal to 27.7%, and bringing the total amount of the collection to EUR 31.9M.

Following the listing, Wiit has raised resources that are being used for external growth in Europe and Italy. Domestically, to increase the company's market share and maximise existing skills and production capacity. Externally, to expand operations and obtain cost synergies.

To support these objectives, the group has also started a buy-back programme, aimed at purchasing Wiit S.p.A shares on the AIM segment in order to establish a "securities deposit". Specifically, the programme is intended to provide the company with a stock of shares in the context of any extraordinary transactions and/or for other uses deemed to be of strategic interest.

We also highlight that management’s stake could increase up to 10% assuming the assignment of all performance shares (57,327 shares to be assigned at the end of 2018 to managers).

WIIT Fin S.r.l, 62.7%

Management & Others, 7.8%

Orizzonte SGR S.p.A., 2.3%

Free Float, 24.8%

Own Shares, 2.5%

Wiit founded and controlled by CEO

Listing to foster external growth

Buy-back programme started

Wiit 8 October 2018


Shareholders’ agreement

Shareholders agreements exist between Wiit Fin Srl, Mogavero Francesco, and Orizzonte SGR.

The agreement between Wiit Fin Srl and Orizzonte SGR comprise the rights for the latter to name: i) 2 members of the BoD; ii) one permanent member and one substitute on the Audit Board; and iii) one member of the Supervisory Board ex. DL 231/2001. Regarding the stock transfers, the agreements provide for:

A share lock-up for 18 months, as from its listing on the AIM (5 June 2017), to 5 December 2018;

A Put option for Orizzonte to sell all its shares to Wiit Fin between the 24th and the 26th month after the listing date, therefore between 5 June 2019 and 5 August 2019. The price of the option will be computed following the calculation of a return rate.

The other agreement between Wiit Fin and Mogavero Francesco provides for:

A share lock-up for 18 months as from its listing on the AIM (5 June 2017), to 5 December 2018;

A Call option for Wiit Fin to buy all the shares of Mogavero Francesco between the 18th and the 60th month after the listing date, therefore between 5 December 2018 and 5 June 2022. The price of the option will be computed in order to guarantee to Mogavero a 10% return on the net capital invested in the group;

A Put option for Mogavero Francesco to sell all his shares to Wiit Fin between the 18th and the 60th month after the listing date, therefore between 5 December 2018 and 5 June 2022. The price of the option will be computed in the same way as the previous call option, so as to guarantee Mogavero a 10% return on the net capital invested in the group.

Wiit 8 October 2018


Group Profile

Founded in the 1990’s by Alessandro Cozzi (founder and CEO), Wiit is an Italian-based company which provides IT-Outsourcing services to medium-large enterprises.

Wiit is a leading cloud computing company in the Italian market, specialised in offering cloud solutions for “Critical Applications”, those that could affect the business continuity of the clients companies. Its offer comprises Private Cloud services (IaaS, PaaS and SaaS), Hosted Private Cloud solutions for critical applications, Public Cloud and Hybrid Cloud applications, plus advanced cybersecurity solutions.

The group includes Wiit SWISS S.A, a company created under Swiss regulations in 2016 and fully owned by Wiit S.p.A (the holding company). The group also retains a minority participation in the related company Foster S.r.l., with a 34.97% ownership.

Wiit - Key figures


The main success drivers recognised by management are the following:

Data centres. Wiit owns two enterprise class data centres, of which the one located in Milan is one of 36 worldwide data centres certified at a Tier IV level, the highest security level, by the Uptime Institute. Nevertheless, the company estimates that their data centres are only operating at 35% of their production capacity, leaving margin to expand its client base without enlarging the capacity of the centres;

Market leaders in business continuity solutions. The group has developed an extensive knowledge in the use of Business Continuity solutions, initially developed in the military field, and then integrated by DELL/EMC2 and applied to critical fields worldwide;

Proprietary instruments. The instruments needed for the services provided are developed internally and are registered as software;

Certifications. Over the years, the group has obtained international certifications for its data centres, for the safety of its services (the certifications ISO20000 for Process compliance, ISO27001 for Information Security, and ISO22301 regarding Business Continuity) and for the provision of services conforming to the ITIL (Infrastructure Library) standard. In addition to these certifications, Wiit is a top SAP partner and is the only Italian company to have obtained 5 out of the 6 SAP operating certifications;

Client base. The group currently has many medium and large size Italian companies among its primary clients, leaders in their respective sectors and known worldwide (including Prada and Ansaldo), as well as multinational groups. We underline that the first 10 top clients of the group have 76% of turnover overseas (Source: management calculations on clients financial reports 2017). The sector breakdown of the client companies is very heterogeneous, although the group works marginally with the Public Administration, following a strategic decision. Wiit has a solid 86% renewal rate;

Leading player in cloud services for Critical Applications

Wiit 8 October 2018


Wiit - Client breakdown by sector


Best in market technologies. Wiit offers its services using the best and most innovative technologies and solutions that the market can offer. Historical suppliers of the group are DELL/EMC2, HP, CISCO, SAP, Oracle and Microsoft;

“End to end” service. Through its own model, developed internally, Wiit directly manages the whole value chain. All strategic assets are owned by the group, with scarce utilisation of external resources and suppliers for the provision of services to clients;

“Worldwide ready”. The group provides its services 24/7 and the help desk operates both in Italian and English.

0% 5% 10% 15% 20% 25% 30% 35% 40%

CPG & Retail

Industrial

Process

Professional Services

Financial Services

Public

Engineering & Construction

Wiit 8 October 2018


Services Portfolio

Wiit is one of the few Italian providers able to offer its customers the full range of cloud services (IaaS, SaaS or PaaS) in an "end-to-end" logic, i.e. by governing all the elements that make up the service.

In particular, the group mainly delivers: Hosted Private and Hybrid Cloud services for critical applications (SAP, Oracle, Microsoft or Custom), Business Continuity and Disaster Recovery Services, Service Desk services, Cyber Security services, Application Management Services (assistance to SAP users), Digital transformation and Document Management services. Services are provided on a long-term basis and are modular.

Wiit offering


Hosted private and hybrid cloud. Wiit is a specialised provider of Hosted Private and Hybrid Cloud services for “Critical Applications” (applications that could affect business continuity) of both clients that manage the processes on international ERP (Enterprise Resource Planning), like SAP, Oracle or Microsoft and clients that operate through vertical custom solutions.

One of Wiit’s strengths is being one of the most certified SAP partners in the world in outsourcing services, having six (out of seven) SAP certifications. Only two companies in the world (Wiit & Atum IT Services India) have obtained 5 of the 6 SAP certifications. This allowed the group to positioned itself as a benchmark player in ERP systems management. In this context, one of the factors that is accelerating the companies’ implementation of cloud services is the change of platform employed by SAP, with the release of the new SAP S/4 Hana version, creating a moment of discontinuity. This new technology allows the processing of huge amounts of data in real time in the server's main memory, to provide immediate analysis and transactions. Because of this change, companies that already use SAP must decide whether to completely replace the technology platform, with a consequent reorganisation and updating of skills, or go to the cloud. By being recognised as SAP Certified in SAP Hana Operations Services, the group is trying to make the most out of this trend, as companies are tending to focus more and more on the core business, and are decentralising the activities outside the core, such as storage and data back-up;

Business continuity and disaster recovery. In IT security, the Disaster Recovery Plan is now an integral part of the Business Continuity Plan and it allows systems, data and infrastructures to be protected and recovered in case of serious problems and emergencies. The group provides services for the refurbishment of the systems in the case of problems caused by

SAP S/4 HANA opportunity

Wiit 8 October 2018


unpredictable events such as disasters, hardware and/or software system failures, and human error. It also supports the clients in the definition of the IT Business Continuity Plan, an ongoing process aiming to identify potential risks, considering the entity and the effects of possible damages, in order to plan an effective response to ensure the operativity of Critical Applications;

Service desk. The group provides SPOC (Single Point of Contact) and multilingual help desk services, 24/7, to support clients globally. When necessary, the services include on-site support of the users through specific second-level technical oversight, especially with companies that have thousands of users operating on campus. It also provides desktop management solutions to manage IMAC and INCIDENT, thanks to remote service or hybrid workstations;

Cyber security. Besides preventing cyber-attacks, Wiit offers remediation and reaction services through a SOC (Security Operating Center) structure, which is specialised in the management of crises following cyber-attacks. The group is currently investing heavily in this segment, having, (and expecting even more), demand for these services from clients;

Wiit - Strategic approach


Application management and technology migration. Through a dedicated second-level Help Desk structure and staff with extensive experience in SAP applications, Wiit provides SAP specialist services regarding user support and corrective, adaptive and evolutionary maintenance. In particular, the group has developed a Technology Migration Programme, which is based on a concept of total control of the competences chain, with a 100% success rate to date;

Digital transformation and document management. Wiit supports companies facing digital transformation through document management solutions and processes that use a solution framework built into a single document management platform. These solutions allow companies to dematerialise any type of document and manage them, in accordance with Italian and European regulations.

24/7 help desk support

Wiit 8 October 2018


Business Model

The company’s position is a result of a strategy that has, over the years, involved the build up of a broad offering in the Infrastructural domain, and a natural growth thanks to its excellence in providing services.

The distribution of outsourcing services (high technological and high value) usually occurs with automatic renewals for similar periods (unless they envisage the possibility to cancel within 6 months of the expiry date). Contracts with customers usually provide monthly or quarterly billing mechanisms with payment within 30 or 60 days from invoice issuance. The fees are usually subject to variation on an annual basis to an extent equal to the ISTAT index.

The contracts incorporate an anticipated termination clause in favour of the client, whenever a certain level of service is not supplied after the start up period and if the non-performance is attributable exclusively to Wiit. Clients also have the right to withdraw from the contract, however, they must pay an amount usually between 60% and 70% of the residual value of the contract. The withdrawal will become effective six months after communication that the client intends to avail itself of that right.

Thanks to these contracts, the group has a high level of revenue visibility, and as of 1 January 2018, it had a EUR 55.7M backlog, almost three times 2017 sales.

Another characteristic of Wiit’s business is its direct ownership of the data centres, while their major competitors usually rent them. The group deploys two dedicated Enterprise Class data centres in Italy, one in Milan and the other in Castelfranco Veneto. The first is certified by the Uptime Institute as a Tier 4 Constructed Facility, and hosts and manages the most complex and critical ERP infrastructure. The data centre of Castelfranco Veneto, on the other hand, is responsible for supporting and guaranteeing the business continuity of the former.

This business is also supported by economies of scale, as the most expensive parts such as data storage, backup, security, and personal expenses, are shared, while servers are dedicated. Wiit estimates that only 35% of the data centres production capacity is being used, thus allowing it to expand its client base without having to make investments to increase capacity.

Multiannual contracts granting high revenue visibility

Backlog almost 3x 2017 turnover

Top Tier data centre

Wiit - Data centres certifications


Wiit 8 October 2018


Retail channel

The growth of the group is strictly connected to the marketing strategy and the retail channel model adopted over recent years.

The marketing strategy is focused on increasing the brand awareness of Wiit and the generation of new business opportunities, operating both through online and offline channels. Regarding the former, the group carried out several advertising campaigns through different communication channels to reach the (decision maker) of potential client targets.

Moreover, the company is active in terms of public relations and press office activities, with articles and editorials in general and specialised journals. Lead generation campaigns destined directly to CIOs and CFOs have allowed Wiit to improve its relationship with clients and to support the sales division in creating new opportunities.

Regarding the sales channel, the group’s business model is based on a team that operates directly in the market. The salesforce is divided according to the reference market and the type of company (client or new business), in order to maximise efficiency in terms of upselling to existing clients, and the generation of new clients, which is essential to gain market share and increase margins.

At the beginning of the year, every sales manager must define his/her personal industry market strategy, which includes all the interaction activities with his/her market in terms of value proposition, take on strategy, and qualitative and quantitative objectives. To maintain the entire commercial structure aligned with the business growth objectives and management’s performance objectives, the compensation model of all the sales managers is based on results only in terms of new orders. That is, only the new upselling orders on existing customers or the orders of new customers are recognised, while neither contractual renewals by the customers nor the continuous multiannual turnover are recognised.

Extensive marketing strategy

Capillary salesforce

Wiit 8 October 2018


Strategy

The rapid growth of the cloud market and the progressive recovery of Italian companies from an infrastructural IT deficit, together with the financial crisis that affected the Italian economy (inducing companies to focus more on their core business, while entrusting specialists to the overseeing of IT) are the main macro trends that had supported Wiit’s growth in recent years. The group believes that its growth depends on organic growth, in order to increase market share with a particular focus on Hybrid Cloud, Hosted Private, Business Continuity, and Cybersecurity, and external growth, through acquisitions in both the home market (Italy) and Europe.

Internal growth will be strengthened through an increase of the salesforce and personnel, essential to adopting a more extensive and effective marketing strategy to reach and acquire new clients. The focus will be on top clients, with high needs and large IT budgets, along with a sectorial focus, on those with good growth potential such as insurance, pharma, manufacturing, and luxury. Widening the market coverage is essential to capturing new opportunities coming from the growth of the Italian cloud market, and the innovations introduced by the technology changes in the SAP platforms that are speeding up the trend for Hosted Private and Hybrid Cloud, in which the group has specialised.

Wiit aims to consolidate its positioning in the cloud market also through M&A operations both in Italy and in Europe. In particular, abroad the group has indicated that it is constantly looking for new acquisition targets especially in Germany and in France. The targets are companies in the cloud computing market with complementary business models so as to realise synergies and economies of scale, and companies with a complementary offer and business model based on continuous services and multiannual contracts to foster cross selling strategies. Acquisitions in the domestic market are expected to increase Wiit’s market share and produce synergies, while the foreign acquisitions have two main goals:

Strategic deals to more effectively enter foreign markets, leveraging on a local established brand and a native salesforce who have relationships with local clients, knowledge of local markets and data centres in the country;

Cost savings are achievable thanks to the centralisation of operations in Italy.

M&A strategy recap


Internal growth increasing salesforce

External growth

Wiit 8 October 2018


Acquisition of Adelante

On 28 June 2018, Wiit announced the acquisition of Adelante S.r.l. This operation is part of the stated strategy during the IPO phase, which envisages an increase of its Italian market share, through the consolidation of Italian players operating in the cloud market.

Adelante is specialised in the digital transformation of medium and small-sized businesses and operates providing cloud computing services, managed services, managed security, business process outsourcing, and unified communication. At the end of 2017, the Adelante group reported: 1) consolidated revenues of approximately EUR 7M; 2) consolidated EBITDA of EUR 0.9M; 3) a consolidated EBIT of approximately EUR 0.8M; and 4) a net profit of EUR 0.4M.

The operation should allow synergies in terms of competitive positioning and services offered, through the centralisation of certain processes such as operations and the use of Wiit data centres. Adelante should better exploit its industrial potential by benefiting from the economies of scale deriving from belonging to the group, and by extending its portfolio of services on critical applications where Wiit is leader.

Furthermore, the operation will allow the group to strengthen its own presence in the market of small and medium-sized enterprises in central Italy, increasing the exploitation of the available production capacity as well as strengthening the group from a managerial standpoint, in view of further acquisitions.

Target company, Adelante S.r.l

Exploiting competitive position and cost synergies

Wiit 8 October 2018


Market Analysis

The group principally operates in the ICT (Information & Communication Technology) market, and specifically the cloud computing segment.

ICT includes all the technologies (programmes, components and systems) that allow the processing and exchange of information, being numerical, textual, visual, auditory, and/or a combination of them. The ICT market is divided into two large fields, the IT market and the telecommunications services market. Wiit operates in the IT market, and specifically the Cloud Computing segment.

The ICT sector renovation that began some years ago, has intensified globally and nationally, thanks to the digital transformation that is impacting the business models of well-known companies. The 2018 Assintel report disclosed that the size of the market in Italy exceeded EUR 30Bn in 2017, of which IT covers EUR 22.7Bn, with a growth of 3.1% compared to the previous year. Those numbers are the result of two opposite trends: the first regarding the consolidation of the expanding effects of the so-called “Third Platforms”1 and “Accelerators of Innovation”2, and the second regarding the progressive contraction of the traditional ICT product and services. The former is experiencing a two-digit growth: IoT 16.4%, cognitive 20.5%, cloud 27.8%, big data & analytics 20.9%, augmented & virtual reality 335.6%.

According to the report, 2018 is expected to show a 1.3% growth from 2017. 48% of the ICT budget will be spread among big companies, and almost 25% (EUR 7Bn) of the investments will be made by the Manufacturing sector, sustained by Industria 4.0, followed by the Finance sector, with expected investments of EUR 6.2Bn.

A Nextvalue survey on the investment priorities of a pool of CIOs (Chief Information Officer), shows how cloud computing SaaS, IaaS, PaaS and Cybersecurity are among the highest potential ICT investment targets of companies in the future.

The digitalisation of SMEs in Italy

The School of Innovation of Talent Garden, Cisco Italy, Enel and Intesa Sanpaolo, with the support of the researchers of the Master in Digital Transformation for Made in Italy presented research on the state of digitalisation of Italian SMEs, a study that involved a sample of over 500 companies.

1 The technological scenario that has evolved in the last decade with the growth of Cloud technologies, mobility solutions, analytics platforms and social web applications. Source: IDC, Assintel Report 2018. 2 The technological trends that will foster the process of digital transformation through any industrial sector. Source: IDC, Assintel Report 2018.

Growth levers in the ICT market

CIOs’ willingness to invest

Source: Assinform Report 2017

Wiit 8 October 2018


Cloud computing (35%), Internet of Things (33%), Machine Learning (28%) and Blockchain (27%) are the innovative technologies deemed most effective for the strategic development of the business and on which Italian SMEs will invest in the next three years.

The survey, which involved companies with a turnover of no more than EUR 50M, photographed a general situation of growing awareness among companies about the importance and positive effects that digitalisation could bring to their business: 67% of the sample considered that innovation mainly affects the acquisition of a competitive advantage, 49% an increase of productivity, 48% an improvement of the perceived quality of customers and 47% on the internal quality of the work.

On the other hand, although most of the companies interviewed correctly interpreted the meaning of Digital Transformation, it is evident that the actual organisational transformation is still limited to the sphere of communication and entrusted to professionals belonging to marketing (63%) and not to specific figures such as the Digital Officer.

Despite the difficulties, the research shows that digitalisation by Italian SMEs is experiencing a moment of relative enthusiasm, with 86% of companies in 2017 investing in digital transformation: 38% of the sample invested between 1% and 10% of turnover, 18% between 10% and 20%, 11% between 20% and 30% and only 6% between 30% and 40% of their turnover.

The impact of digitalisation on businesses

Source: Talent Garden, Cisco Italy, Enel and Intesa Sanpaolo Report

In a context in which the need to increase investment to speed up the process of digitisation is clearly perceived, the youngest companies, (53% of the sample interviewed), invest a higher percentage of their turnover in digital transformation, compared to 47% of SMEs which have been on the market for more than 25 years.

The key growth drivers

According to Anitec-Assinform, four pillars are speeding up the growth of the ICT market: i) data centricity, and therefore the importance of data management and its strategic value; ii) customer centricity, and therefore the management of interactions and transactions with the digital customer; iii) compliance, also thanks to the new General Data Protection Regulation (GDPR) in force from May 2018; and iv) smart-working, which is increasingly practiced in professional organisations.

These four drivers support market growth, although many objectives need to be reached to overcome the gap with other nations and to extend the digital transformation in more depth across the country, especially in the regions that are behind and in those contexts where management has not yet embraced the digital culture transformation.

0% 10% 20% 30% 40% 50% 60% 70%

Obtaining competitive advantage

Increase productivity

Improve th quality perceived by customers

Improve the internal quality of work

Costs reduction

Increase turnover

Internalization

Social and enviromental awareness

Reshoring

Wiit 8 October 2018


Cloud Computing

Cloud Computing is a type of system that allows the access and configuration of remote resources and data through the internet. Essentially, companies could entrust the management of one or more IT resources to specialised providers, and from that moment on they are distributed via internet through an outsourcing contract. Cloud services can be classified into three categories conforming to the level of abstraction: SaaS, PaaS, and IaaS.

Software as a Service: is a distribution model of software where the providers develop, use (directly or through third parties), and manage a web application, making it available to their clients via Internet. Thanks to this system, the company can access the various applications that it has bought through the Web: it does not control the infrastructure which supports the software, because the management of the servers, the storage and the system are completely entrusted to the provider;

Platform as a Service: this cloud service is meant for a platform which supports the development of applications in the Cloud. The platform includes programming languages, libraries, services and dedicated tools, fully developed by the provider. In this case the clients company does not have to worry about the management or control of the Cloud Infrastructure, server, systems or storage, while it has full command of the applications developed and implemented;

Infrastructure as a Service: the IaaS is an advanced outsourcing of all the ICT resources. Basically, an entire virtual data center is in the cloud. Thanks to this, client companies can externalise their resources, run at an infrastructure level by the provider. They can manage their storage, networks and all their computing resources in distributed mode, being able to view everything from a single centralised dashboard without having to worry about the details of motorisation, monitoring, safety and updates related to the machines, that enable these online services.

The above services might be deployed in 3 models: Private Cloud, Public Cloud, and Hybrid Cloud. The first is a cloud infrastructure serving a single organisation while the second is a Cloud Infrastructure that is rendered over a network that is open to public use. The Hybrid Cloud stands between the aforementioned systems, trying to exploit the benefits of both: basically, the Cloud Infrastructure is kept together by the provider and the client, and there are systems that allow the sharing of resources and data between the data center of the client and that of the public Cloud.

Recent trends

The cloud market is experiencing a moment of profound change. Firstly, due to the increasing perception of its enabler role in the emerging technological trend, secondly thanks to the changing path carried out by the companies in order to develop their information system, and lastly for the offer portfolio development of the digital market players. According to the 2017 Assinform Report, the cloud market in Italy has grown, and is still growing, at a 2014-19E CAGR of 22.2%, with a market value expected to exceed EUR 2Bn in 2018. Another important figure shown in the report is that over 50% of Italian companies consider the cloud a paradigm necessary for digital transformation, which is directly linked to the need to make processes and

SaaS

PaaS

IaaS

The Cloud environments

Cloud market in Italy


The high-speed cloud growth

Wiit 8 October 2018


productivity more efficient, thus reducing spending. Large cap companies are pushing this trend, followed by medium enterprises, of which almost 70% consider the cloud an essential step through digital transformation.

2017 was characterised by two important trends: the first was represented by the substantial consolidation of the services used through SaaS, thanks to its significant spreading over recent years. The second is the enrichment in the use of Infrastructural services, that are progressively moving to the platforms. One of the most dynamic sectors is Manufacturing, pushed by the Industria 4.0 plan, that has boosted investments in digital innovation. Other sectors that are increasing their growth rate in the utilisation of the Cloud are Telecommunication & Media, Utilities/Oil & Gas and Banking, which are second in terms of amount of investments, behind Manufacturing.

According to a Credit Suisse and Gartner report, in 2018 the cloud expenses as a percentage of the company’s IT and Security budgets should rise by 260bps and 100bps yoy to 14.4% and 9.8%, respectively. Regarding the latter, the latest GDPR regulation will encourage companies to pay more attention to client privacy, given the sanctions which can be imposed if client privacy is not protected (up to 4% of turnover).

Forecast cloud expenses as a % of budget

Source: Company data based on the Credit Suisse and Gartner report

The IDCs’ data in the 2018 Assintel report shows how the public cloud market is growing rapidly in Italy, with an estimated growth of 25.8% in 2018, and a market size that is expected to reach EUR 1.5Bn. In 2016-18E, the SaaS segment catalysed most of the investments of Italian companies, from EUR 600M in 2016 to over EUR 900M in 2018E, with a CAGR of approximately 22%. Even higher growth rates are expected for the PaaS and IaaS services, which indicate a CAGR for the same three-year period of 38% and 33%, respectively.

Public cloud market in Italy (EUR M)

Source: IDC elaborations for the 2018 Assintel Report

7.10%

9.30%11.80%

14.40%

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Cloud expenses as % of IT budget Cloud expenses as % of security budget

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The public cloud market development in Italy

Wiit 8 October 2018


SAP S/4 HANA

Development through SAP S/4 HANA


A significant trend that is speeding the transition of companies into the cloud is the change of the SAP platform. This new SAP business suite goes beyond simply improving the offer as was the previous version of the ERP (R/3). S/4 HANA has been completely rewritten with a reduction in the memory footprint.

The reduction in the memory required by the database (footprint) allows an execution speed increase of seven times depending on the type of transaction. The result is a simplification of the data model and a smoother execution code. The existing border between transactional and analytics seems to have been removed with a merger between the OLTP (Online transaction processing) and OLAP (OnLine Analytical Processing) models.

SAP S/4 HANA landscape

Source: Tachyon Technologies

The main differences between the new and old SAP systems are the following3:

Simplification of the database thanks to the unification of all ledgers (separated in the R/3 as a general ledger, material ledger, controlling, asset accounting) into a single "Universal Journal";

New and responsive interface called SAP Fiori. It completely changes the user experience allowing accessibility even from tablets and smartphones;

Simplification of processes and new functions guaranteed by "in-memory-computing";

Elimination of duplicate functions;

Improved performance: high speed of work performance thanks to the abovementioned “in-memory-computing";

Real Time Analytics: with large volumes of data it is possible to obtain analyses and estimates in real time thanks to predictive analysis algorithms.

3 Source: Innovaformazione

Wiit 8 October 2018


SAP S/4 HANA subscribers worldwide from 1Q15

Source: Statista

Because of this change, companies that already use the SAP must decide whether to completely replace the technology platform or go into the cloud, thus causing a disruptive moment.

According to Statista data shown in the chart above, the number of new SAP subscribers is constantly increasing, and this trend is also confirmed in this first half of 2018, with 1000 new subscribers since the beginning of the year.

Wiit’s positioning

The competitors of the group in the Cloud and IT Outsourcing market at a national level can be divided into three macro sets:

Large cap multinational companies (like IBM or HP), equipped with articulated and extended organisational structures, and organised to supply big clients;

National companies (with also European coverage) of medium-large size which offer an ample range of services (consulting, system integration, or applications and hardware sales) among which Cloud services are not the core business;

National companies, which provide a niche customised service for a few clients, or operate in a captive market.

The group has targeted 1,000 companies that fit its customer criteria, and most of them operate in the segment with the highest possible growth in the next few years. This segment comprises medium-large enterprises, with turnover ranging from EUR 100M to EUR 4Bn, ICT spending between EUR 2M and EUR 50M, and with a focus on quality, security, reliability and response speed and costs.

Wiit - Group positioning


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Increasing number of subscribers

The target clients market segment

Wiit 8 October 2018


SWOT Analysis Strengths Weaknesses Leading provider of Cloud services for critical applications.

The group is leader in the mid-segment of the Italian market thanks to the quality and the efficiency of the services that it provides to its clients;

Wiit has significant potential for a margin expansion thanks to a scalable platform, in our view;

Good visibility on revenues and cash flow streams (EUR 55.7M of backlog as of 1 January 2018. Equal to 2.8x FY17A sales);

Long-term contracts with solid customers and with a high renewable rate (86%), allowing the creation of strong relationships with clients;

“End to end” service, directly managing the whole value chain though its own model;

Top European SAP partner with 5 out of 6 SAP operating certifications, granting high credibility;

Direct ownership of the data centres, of which the one in Milan obtained the highest certification for the category, the TIER IV certification;

Attractive dividend policy. Management intends to maintain a distribution rate of around 60% over the coming years.

Experienced management team who have guided the development of Wiit since its foundation.

The group's revenues are concentrated on a limited number of customers. The group’s top 10 customers accounted for around 55% of its revenues as at 31 December 2016;

Although the group detains the leadership position in the mid-segment, there are players in the Italian Cloud Computing market that hold higher market shares (IBM and Engineering) and have strong relationships with large companies, which have broader IT budgets;

Significant investments in capex to support development.

Opportunities Threats Developing and expanding the client base in the low

segment of the market thanks to the acquisition of Adelante, especially in central Italy;

Expansion into other countries through M&A, in order to increase the client base and obtain cost synergies;

Exploiting the opportunities coming from the implementation of the new SAP Hana platform, by gaining potential new clients and up-selling to existing customers;

The new GDPR regulation will push companies to pay more attention to data protection, thus having to implement increasingly advanced cyber security systems to avoid loss of sensitive data and incurring heavy penalties;

The groups’ Data Centres are only operating at 35% of production capacity, allowing further client expansion (therefore increasing turnover) without the need for substantial investments.

The niche market in which the group operates could limit the number of target companies to be acquired and therefore result in difficulties in identifying and finding investment opportunities;

The Cloud Computing market is characterised by constantly increasing competition, due to the significant growth in margins recorded by this sector in recent years;

Although the group pays keen attention to the identification and obtainment of quality certifications, it cannot be excluded that any failure to obtain, or the loss of one or more of the aforementioned quality certificates may have a negative impact on its credibility, essential to the market in which it operates;


Wiit 8 October 2018


Recent Results

P&L key items

Overall, during 2014A-17A group revenues rose at an 18% CAGR, riding the wave of the Cloud market trend to expand the client base and the services offered (acquisition of new customers and up-selling to the existing customer base). Furthermore (almost all contracts were renewed in the period). Adj. EBITDA increased from EUR 3.0M to EUR 8.5M (+41.5% CAGR), with the margin rising from 25.2% in 2014 to 43.5% in 2017, thanks to operating leverage. In 2017 the adjustments were mainly related to IPO costs and the cost of performance shares. We underline that Wiit has significant potential for margin expansion thanks to a scalable platform. Specifically, we consider the following items to be the only fixed costs: a) personnel; b) connectivity costs; and c) rent.

Wiit - Revenues and EBITDA trend (2015-17A)


EBIT increased from EUR 1.4M to EUR 4.2M (+44.4% CAGR), with the margin rising from 11.7% in 2014 to 21.4% in 2017. From 2016, the company has also benefited from the “Super-ammortamento” tax provision, which entails a 140% overvaluation of the 2017 investments in new assets purchased or leased.

Wiit - P&L key items (2014-17A) EUR M 2014A 2015A 2016A 2017A Revenue from services 11.7 11.9 14.6 18.8 Other revenue 0.2 0.8 0.7 0.7 Total revenues 11.9 12.8 15.3 19.6 YoY change (%) 7.5 19.9 27.5 Cost for services -5.9 -5.9 -7.6 -7.7 Cost of labour -2.5 -2.5 -3.2 -4.0 Other costs -0.4 -0.5 -0.4 -0.2 Change in inventories -0.1 0.0 -0.04 0.0 EBITDA 3.0 3.8 4.1 7.6 YoY change (%) 26.3 8.7 85.1 EBITDA margin (%) 25.2 29.6 26.8 39.0 EBITDA adj. 3.0 3.8 4.7 8.5 YoY change (%) 26.7 23.7 80.9 EBITDA adj. margin 25.2 29.7 30.6 43.5 D&A and provision (total) -1.6 -1.9 -2.3 -3.4 EBIT 1.4 1.9 1.8 4.2 YoY change (%) 33.6 -2.1 130.4 EBIT margin (%) 11.7 14.5 11.8 21.4 EBIT adj. 1.4 1.9 2.4 5.0 EBIT adj. margin 11.7 14.5 15.6 25.6 Net financial income -0.3 -0.3 -0.4 -0.3 Other -0.8 0.0 Pre-tax profit 1.1 0.8 1.4 3.8 YoY change (%) -28.4 75.7 180.0 Tax -0.5 -0.6 -0.4 -0.7 Net profit 0.6 0.2 0.9 3.1

A: actual; Source: Company data

12.8 15.319.6

3.8 4.78.5

29.7 30.6

43.5

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Revenues CAGR at 18%

EBIT CAGR at 44.7%

Wiit 8 October 2018


Balance sheet & cash flow key Items

Wiit - Balance Sheet key items (2014-17A) EUR M 2014A 2015A 2016A 2017A Fixed assets 9.5 10.9 11.6 16.1 Net working capital managerial

-0.4 1.4 3.0 2.0

Others -0.6 -1.0 -1.2 -1.2 Net invested capital 8.5 11.3 13.4 16.9 Group shareholders’ equity 3.6 3.0 4.5 24.8 Net financial debt 4.9 8.4 8.9 -7.9 Total cover 8.5 11.3 13.4 16.9


Fixed assets mainly include Wiit’s two data centres. The amortisation of these investments is over five-years. Over the last four years Wiit has carried out important investments for the development of a new, high quality data centre (certified Tier IV) and the financing of external growth (the rationale was to acquire data centres from third parties). Excluding investments for external growth, every year the group allocates EUR 0.5M to R&D and EUR 1M to maintenance, in order to mitigate the technological risk (obsolescence) and enhance technology enabling it to increase its competitive advantage. Lastly, development capex are mainly represented by set-up costs for newly acquired customers: these costs are incurred in the first year of the contract and represent around 15% of the total value of the contract in terms of revenues.

For the time being, Wiit does not need to invest in further capacity since the proprietary data centre facilities are currently used at 35% of their capacity. In order to finance these important investments, the company has increased its leverage in the last few years (reaching 2x EBITDA as at YE16).

The group’s net debt position improved substantially, mainly due to the capital increase and the listing on the AIM, and the large cash generation from operating activities. Furthermore, following the IPO all bonds were converted into equity. Today, the company's debt comprises:

Finance leases (EUR 6.1M for new equipment in order to honour new contracts entered into in the O&G and Fashion sectors);

Term Loans (with maturities ranging from 2018 to 2020).

The group does not have structurally high working capital requirements (about 6.6% on revenues on average during the 2014-17 period).

Wiit - Funds flow key items (2014-17A) EUR M 2014A 2015A 2016A 2017A Net fin debt beg of year 5.5 4.9 8.4 8.9 Net income 0.6 0.2 0.9 3.1 Depreciation 1.6 1.9 2.3 3.4 Change in working capital 3.0 -1.8 -1.6 1.0 Operating cash flow 5.2 0.3 1.7 7.5 Capex -3.5 -3.2 -2.9 -7.5 Acquisitions -1.9 -0.9 Free cash flow -0.2 -3.8 -1.2 0.0 Dividends -0.6 -0.2 -0.9 Other movements 0.8 0.9 0.9 17.6 Cash flow 0.6 -3.5 -0.5 16.7 Net fin debt/-cash end of year 4.9 8.4 8.9 -7.9


1H18A results

In the first semester of the year, a general increase in the level of efficiency achieved, the medium-long term duration of the contracts in the portfolio, and a constantly growing reference market, allowed Wiit to report positive results driven by organic growth.

Positive 1H18A results

Wiit 8 October 2018


1H18A revenue increased by 15.8% to EUR 10.7M, driven by the provision of services up by 8%. The core business now accounts for 89.8% of total revenues. Historically, 95% of annual revenues are represented by recurring revenues deriving from active contracts, while 5% comes from new customers.

Geographically, Italy is the main market, while there was an increase in revenues coming from Extra EU countries in FY17A, broadly stable in 1H18A, thanks to the contribution of the subsidiary Wiit Swiss SA, consolidated from the date of its acquisition (7 July 2016).

Wiit - 1H18A key data EUR M 1H17A 1H18A chg yoy % Revenue from services 8.9 9.6 8.0 Other revenue 0.3 1.1 215.8 Revenue 9.2 10.7 15.8 EBITDA 3.3 4.5 35.8 EBITDA margin % 36 42 Adj. EBITDA4 3.9 4.6 18.7 Adj. EBITDA margin % 42.0 43.0 EBIT 1.9 2.1 10.9 Net Income 1.3 1.4 6.8 Net debt/-cash 4.9 2.7 -44.7


Looking at costs we highlight that:

Purchases of other services from third parties decreased by 8.3% to EUR 0.75M;

Rental costs decreased by 86.7% yoy to EUR 0.05M, while costs for purchasing raw materials increased significantly, reaching EUR 1.11M (vs. EUR 0.25M in 1H17A);

Overall, due to the aforementioned trends, the costs for services increased by 4.8% yoy compared to 1H17;

Labour costs were broadly stable, increasing by only 2.8% yoy.

Wiit - Cost of services (1H18) EUR M 1H17A 1H18A chg yoy % Purchase of other services from third parties 0.82 0.75 -8.3 Purchase of services - Intercompany 0.16 0.16 0.0 Electricity 0.13 0.15 17.5 Connectivity 0.46 0.42 -10.5 Rentals 0.37 0.05 -86.7 Cost of purchase of raw materials 0.25 1.11 345.1 Company car hire 0.15 0.06 -60.2 Directors 0.54 0.90 66.5 Others 0.88 0.35 -60.6


On an adjusted basis, EBITDA increased by 18.7% yoy, with a 43% margin. The group benefited from a scalable platform, which, together with the organic growth of turnover, boosted margins. These margins demonstrate the level of optimisation achieved by Wiit in the process and operating services organisation. The decrease in the EBIT margin, from 20% in 1H17 to 19% in 1H18, was mainly due to the amortisation/depreciation relating to significant investments made in the previous year, accounted for this year with the full rate.

Net profit increased by 6.8%, from EUR 1.3M in 1H17 to EUR 1.4M in 1H18A.

4 Adjusted EBITDA is a non-GAAP measure used by the group which is equal to EBITDA excluding the following items: personnel costs in accordance with IFRS 2 relating to performance shares and the write-downs of the items of current assets. It should be noted that adjusted EBITDA is not identified as an accounting measure as part of the IAS/IFRS adopted by the European Union

Wiit 8 October 2018


Earnings Outlook

We expect Wiit to grow total revenues from EUR 19.6M in 2017A to EUR 34.3M in 2020E (2017-20E CAGR of 20.6%). We highlight that our projections incorporate the consolidation of Adelante from 3Q (organically we expect a growth of around 12.5% YoY in 2018E) and the impact of the changes in IFRS 15 and IFRS 16 (see details below).

These expectations are based on the following assumptions:

We assume that every year 100% of the consolidated customer base with contracts approaching expiry (average contract duration of five years) will renew for a further five years. The renewal should occur at a slight discount vs. the previous contract;

Increasing revenues from a consolidated customer base, which should come from customers’ increased data usage, combined with up-selling;

Strengthening of Wiit’s sales force, which should allow the company to increase the number of customers.

Looking at profitability, we expect Wiit to increase adjusted EBITDA from EUR 8.5M in 2017 to EUR 15.5M in 2020E (2017-20 CAGR 26.8%), which implies a margin on revenues at 45.3% in 2020E. We underline that the decrease in adj. EBITDA margin between 2017A and 2018E was mainly due to the abovementioned adoption of the IFRS 15. Indeed, this obliged the company to account for the average margin throughout the order (while previously Wiit booked higher revenues and profitability at the beginning upon receipt of advanced payments).

On the other hand, IFRS 16 has a positive effect on EBITDA, while a neutral effect at the EBIT level (rental costs will be accounted as D&A instead of Opex). Net of this accounting effect, D&A are expected to grow in line with the increase in fixed assets. We assume fixed assets will be depreciated over a five-year period.

In 2018, Wiit should still benefit from favourable taxation, related to the “Super-ammortamento” tax provision. Going forward, further tax benefits could come from the patent box regulation (not included in our forecasts).

Overall, we expect net profit to grow from EUR 3.1M in 2017 to EUR 6.3M in 2020E.

Looking at cash flow we expect the company to absorb cash in 2018E, as a result of the EUR 6.4M cash-out related to the acquisition of Adelante. Then we expect Wiit’s cash generation to improve strongly, in line with EBITDA growth (we assume total capex at around EUR 6M/year on average over our forecast period and management to maintain a dividend distribution rate of around 60% over the coming years).

Top line 2017-20E CAGR of 20.6%

Wiit 8 October 2018


Financials Wiit - P&L key items (2014A-20E) EUR M 2014A 2015A 2016A 2017A 2018E 2019E 2020E Total Revenues 11.9 12.8 15.3 19.6 24.9 30.5 34.3 YoY change (%) 7.5 19.9 27.5 27.2 22.5 12.7 EBITDA 3.0 3.8 4.1 7.6 10.4 13.5 15.5 YoY change (%) 26.3 8.7 85.1 36.8 29.8 14.9 EBITDA margin (%) 25.2 29.6 26.8 39.0 41.9 44.4 45.3 Adj. EBITDA 3.0 3.8 4.7 8.5 10.4 13.5 15.5 YoY change (%) 26.7 23.7 80.9 22.6 29.8 14.9 Adj. EBITDA margin 25.2 29.7 30.6 43.5 41.9 44.4 45.3 D&A and provision -1.6 -1.9 -2.3 -3.4 -5.1 -6.0 -7.0 EBIT 1.4 1.9 1.8 4.2 5.3 7.5 8.5 YoY change (%) 33.6 -2.1 130.4 27.2 41.4 13.6 EBIT margin (%) 11.7 14.5 11.8 21.4 21.4 24.7 24.9 Net financial income -0.3 -0.3 -0.4 -0.3 -0.3 -0.3 -0.2 Other 0.0 -0.8 0.0 0.0 0.0 0.0 0.0 Pre-tax profit 1.1 0.8 1.4 3.8 5.0 7.2 8.3 YoY change (%) -28.4 75.7 180.0 29.9 45.0 15.5 Tax -0.5 -0.6 -0.4 -0.7 -1.0 -1.7 -2.1 Net profit 0.6 0.2 0.9 3.1 3.9 5.6 6.3


Wiit - Balance Sheet key items (2014A-20E) EUR M 2014A 2015A 2016A 2017A 2018E 2019E 2020E Fixed assets 9.5 10.9 11.6 16.1 22.9 22.9 21.9 Net working capital managerial

-0.4 1.4 3.0 2.0 2.5 2.8 2.9

Others -0.6 -1.0 -1.2 -1.2 -1.2 -1.2 -1.2 Net invested capital 8.5 11.3 13.4 16.9 24.2 24.6 23.6 Group shareholders’ equity 3.6 3.0 4.5 24.8 24.5 27.7 30.7 Net financial debt 4.9 8.4 8.9 -7.9 -0.3 -3.2 -7.1 Total cover 8.5 11.3 13.4 16.9 24.2 24.6 23.6


Wiit - Funds flow key items (2014A-20E) EUR M 2014A 2015A 2016A 2017A 2018E 2019E 2020E Net fin debt beg. of year 5.5 4.9 8.4 8.9 -7.9 -0.3 -3.2 Net income 0.6 0.2 0.9 3.1 3.9 5.6 6.3 Depreciation 1.6 1.9 2.3 3.4 5.1 6.0 7.0 Change in working capital 3.0 -1.8 -1.6 1.0 -0.5 -0.4 0.0 Operating cash flow 5.2 0.3 1.7 7.5 8.5 11.2 13.2 Capex -3.5 -3.2 -2.9 -7.5 -5.5 -6.0 -6.0 Acquisitions -1.9 -0.9 0.0 0.0 -6.4 0.0 0.0 Free cash flow -0.2 -3.8 -1.2 0.0 -3.4 5.2 7.2 Dividends 0.0 -0.6 -0.2 -0.9 -2.2 -2.4 -3.3 Other movements 0.8 0.9 0.9 17.6 -2.0 0.0 0.0 Cash flow 0.6 -3.5 -0.5 16.7 -7.5 2.8 3.9 Net fin debt end of year 4.9 8.4 8.9 -7.9 -0.3* -3.2* -7.1*

(*) excluding effects of IFRS16; A: actual; E: estimates; Source: Company data and Intesa Sanpaolo Research

Wiit 8 October 2018


Wiit - Key data

NM: not meaningful; NA: not available; Neg.: negative; A: actual; E: estimates; Source: Company data and Intesa Sanpaolo Research

Rating Target price (EUR/sh) Mkt price (EUR/sh) Sector Free float (%) Reuters CodeBUY Ord 62.1 Ord 43.60 24.8 WIIT.MIInformation TechnologyValues per share (EUR) 2016A 2017A 2018E 2019E 2020ENo. ordinary shares (M) 2.59 2.59 2.59 2.59 2.59No. NC saving/preferred shares (M) 0.00 0.00 0.00 0.00 0.00Total no. of shares (M) 2.59 2.59 2.59 2.59 2.59Market cap (EUR M) NA 142.04 113.13 113.13 113.13Adj. EPS 0.36 1.20 1.52 2.14 2.41CFPS 1.2 2.5 3.5 4.5 5.1BVPS 1.7 9.5 9.5 10.7 11.8Dividend ord 0.35 0.83 0.91 1.29 1.45

1 1 1 1 1

Income statement (EUR M) 2016A 2017A 2018E 2019E 2020ERevenues 15.34 19.56 24.87 30.46 34.32EBITDA 4.12 7.62 10.42 13.52 15.55EBIT 1.82 4.19 5.32 7.52 8.55Pre-tax income 1.37 3.83 4.98 7.22 8.35Net income 0.93 3.11 3.94 5.56 6.26Adj. net income 0.93 3.11 3.94 5.56 6.26

Cash flow (EUR M) 2016A 2017A 2018E 2019E 2020ENet income before minorities 0.9 3.1 3.9 5.6 6.3Depreciation and provisions 2.3 3.4 5.1 6.0 7.0Others/Uses of funds 0 0 0 0 0Change in working capital -1.6 1.0 -0.5 -0.4 -0.0Operating cash flow 1.7 7.5 8.5 11.2 13.2Capital expenditure -2.9 -7.5 -5.5 -6.0 -6.0Financial investments 0 0 0 0 0Acquisitions and disposals 0 0 -6.4 0 0Free cash flow -1.2 0.0 -3.4 5.2 7.2Dividends -0.2 -0.9 -2.2 -2.4 -3.3Equity changes & Other non-operating items 0.9 17.6 -1.9 0 0Net cash flow -0.5 16.7 -7.4 2.8 3.9

Balance sheet (EUR M) 2016A 2017A 2018E 2019E 2020ENet capital employed 13.4 16.9 24.2 24.6 23.6of which associates 0 0 0 0 0Net debt/-cash 8.9 -7.9 -0.3 -3.2 -7.1Minorities 0 0 0 0 0Net equity 4.5 24.8 24.5 27.7 30.7Minorities value 0 0 0 0 0Enterprise value NA 142.0 113.1 113.1 113.1

Stock market ratios (x) 2016A 2017A 2018E 2019E 2020EAdj. P/E NA 45.7 28.7 20.3 18.1P/CFPS NA 21.7 12.5 9.8 8.5P/BVPS NA 5.7 4.6 4.1 3.7Payout (%) 97 69 60 60 60Dividend yield (% ord) NA 1.5 2.1 3.0 3.3FCF yield (%) NA 0.0 -3.0 4.6 6.4EV/sales NA 7.3 4.5 3.7 3.3EV/EBITDA NA 18.6 10.9 8.4 7.3EV/EBIT NA 33.9 21.3 15.0 13.2EV/CE NA 8.4 4.7 4.6 4.8D/EBITDA 2.2 Neg. Neg. Neg. Neg.D/EBIT 4.9 Neg. Neg. Neg. Neg.

Profitability & financial ratios (%) 2016A 2017A 2018E 2019E 2020EEBITDA margin 26.8 39.0 41.9 44.4 45.3EBIT margin 11.8 21.4 21.4 24.7 24.9Tax rate 32.2 18.9 21.0 23.0 25.0Net income margin 6.1 15.9 15.8 18.3 18.2ROCE 13.5 24.8 22.0 30.6 36.2ROE 24.9 21.3 16.0 21.3 21.4Interest cover 4.1 12.1 15.7 25.1 42.7Debt/equity ratio 197.2 -31.8 -1.3 -11.4 -23.0

Growth (%) 2017A 2018E 2019E 2020ESales 27.5 27.2 22.5 12.7EBITDA 85.1 36.8 29.8 14.9EBIT NM 27.2 41.4 13.6Pre-tax income NM 29.9 45.0 15.5Net income NM 26.6 41.3 12.5Adj. net income NM 26.6 41.3 12.5

Wiit 8 October 2018


Appendix 1: Management Team Wiit - Management team

Role Background Alessandro Cozzi Chairman & CEO

Founder and majority shareholder of Wiit; President and Chief Executive Officer since its inception. An expert in business administration, finance and control, he directly pilots the administration and financial activity, strategic alliances and M&A activity.

Riccardo Mazzanti Managing Director (MD)

With over 20 years of experience in the ICT sector, Riccardo Mazzanti is Managing Director at Wiit, which he joined in 2008, and boasts extensive know-how in the optimisation and management of IT organisations, IT provisioning and IT governance. Before joining Wiit, Riccardo acquired extensive expertise in the IT sector, at Infogroup, Metro, Fininvest and Mediaset.

Enrico Rampin Sales & Marketing Director

Enrico joined Wiit in 2009 as Sales & Marketing Director. He has devoted his entire career in sales to expanding into new regions, new markets and new distribution channels for ICT goods and services. Prior to joining Wiit, Enrico spent a number of years at Oracle, where he was successful in the sale of applications and was given direct responsibility for developing sales targets.

Francesco Baroncelli CMA & Head of New Markets

Founder of Adelante Group. Baroncelli has 20 years of experience in the Information Technology. Since 2018, he is Chief Mergers & Acquisitions & Head of New Markets of Wiit


Wiit 8 October 2018


Appendix 2: History Wiit – History


Wiit 8 October 2018


Appendix 3: Group’s Main Certifications Group’s main certifications


Wiit 8 October 2018


Notes

Wiit 8 October 2018


Disclaimer

Analyst certification

The financial analysts who prepared this report, and whose names and roles appear within the document, certify that:

1. The views expressed on the company mentioned herein accurately reflect independent, fair and balanced personal views; 2. No direct or indirect compensation has been or will be received in exchange for any views expressed.

Specific disclosures

1. Neither the analysts nor any persons closely associated with the analysts have a financial interest in the securities of the Company.

2. Neither the analysts nor any persons closely associated with the analysts serve as an officer, director or advisory board member of the Company.

3. Some of the analysts named in the document are members of AIAF

4. The analysts named in this document are not registered with or qualified by FINRA, the U.S. regulatory body with oversight over Banca IMI Securities Corp. Accordingly, the analysts may not be subject to FINRA Rule 2241 and NYSE Rule 472 with respect to communications with a subject company, public appearances and trading securities in a personal account. For additional information, please contact the Compliance Department of Banca IMI Securities Corp at 212-326-1133.

5. The analysts of this report do not receive bonuses, salaries, or any other form of compensation that is based upon specific investment banking transactions.

6. The research department supervisors do not have a financial interest in the securities of the Company.

This research has been prepared by Intesa Sanpaolo SpA and distributed by Banca IMI SpA Milan, Banca IMI SpA-London Branch (a member of the London Stock Exchange) and Banca IMI Securities Corp (a member of the NYSE and FINRA). Intesa Sanpaolo SpA accepts full responsibility for the contents of this report and also reserves the right to issue this document to its own clients. Banca IMI SpA and Intesa Sanpaolo SpA, which are both part of the Intesa Sanpaolo Group, are both authorised by the Banca d'Italia and are both regulated by the Financial Conduct Authority in the conduct of designated investment business in the UK and by the SEC for the conduct of US business.

Opinions and estimates in this research are as at the date of this material and are subject to change without notice to the recipient. Information and opinions have been obtained from sources believed to be reliable, but no representation or warranty is made as to their accuracy or correctness. Past performance is not a guarantee of future results. The investments and strategies discussed in this research may not be suitable for all investors. If you are in any doubt you should consult your investment advisor.

This report has been prepared solely for information purposes and is not intended as an offer or solicitation with respect to the purchase or sale of any financial products. It should not be regarded as a substitute for the exercise of the recipient’s own judgment. No Intesa Sanpaolo SpA or Banca IMI SpA entities accept any liability whatsoever for any direct, consequential or indirect loss arising from any use of material contained in this report. This document may only be reproduced or published together with the name of Intesa Sanpaolo SpA and Banca IMI SpA.

Intesa Sanpaolo SpA and Banca IMI SpA have in place the Conflicts of Interest Management Rules for managing effectively the conflicts of interest which might affect the impartiality of all investment research which is held out, or where it is reasonable for the user to rely on the research, as being an impartial assessment of the value or prospects of its subject matter. A copy of these Rules is available to the recipient of this research upon making a written request to the Compliance Officer, Intesa Sanpaolo SpA, C.so Matteotti n° 1, 20121 Milan (MI) Italy. Intesa Sanpaolo SpA has formalised a set of principles and procedures for dealing with conflicts of interest (“Rules for Research”). The Rules for Research is clearly explained in the relevant section of Intesa Sanpaolo’s web site (www.intesasanpaolo.com).

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Persons who receive this document are obliged to comply with the above indications.

Wiit 8 October 2018


Coverage policy and frequency of research reports

The list of companies covered by the Research Department is available upon request. Intesa Sanpaolo SpA aims to provide continuous coverage of the companies on the list in conjunction with the timing of periodical accounting reports and any exceptional event that affects the issuer’s operations. The companies for which Banca IMI acts as sponsor or specialist or other regulated roles are covered in compliance with regulations issued by regulatory bodies with jurisdiction. In the case of a short note, we advise investors to refer to the most recent company report published by Intesa Sanpaolo SpA’s Research Department for a full analysis of valuation methodology, earnings assumptions, risks and the historical of recommendation and target price. In the Equity Daily note and Weekly Preview report the Research Department reconfirms the previously published ratings and target prices on the covered companies (or alternatively such ratings and target prices may be placed Under Review). Research is available on Banca IMI’s web site (www.bancaimi.com) or by contacting your sales representative.

Equity Research Publications in Last 12M The list of all recommendations on any financial instrument or issuer produced by Intesa Sanpaolo Research Department and distributed during the preceding 12-month period is available on the Intesa Sanpaolo website at the following address:

http://www.group.intesasanpaolo.com/scriptIsir0/si09/studi/eng_archivio_racc_equity.jsp

Valuation methodology (long-term horizon: 12M)

The Intesa Sanpaolo SpA Equity Research Department values the companies for which it assigns recommendations as follows: We obtain a fair value using a number of valuation methodologies including: discounted cash flow method (DCF), dividend discount model (DDM), embedded value methodology, return on allocated capital, break-up value, asset-based valuation method, sum-of-the-parts, and multiples-based models (for example PE, P/BV, PCF, EV/Sales, EV/EBITDA, EV/EBIT, etc.). The financial analysts use the above valuation methods alternatively and/or jointly at their discretion. The assigned target price may differ from the fair value, as it also takes into account overall market/sector conditions, corporate/market events, and corporate specifics (ie, holding discounts) reasonably considered to be possible drivers of the company’s share price performance. These factors may also be assessed using the methodologies indicated above.

Equity rating key: (long-term horizon: 12M)

In its recommendations, Intesa Sanpaolo SpA uses an “absolute” rating system, which is not related to market performance and whose key is reported below:

Equity rating key (long-term horizon: 12M) Long-term rating Definition BUY If the target price is 20% higher than the market price ADD If the target price is 10%-20% higher than the market price HOLD If the target price is 10% below or 10% above the market price REDUCE If the target price is 10%-20% lower than the market price SELL If the target price is 20% lower than the market price RATING SUSPENDED The investment rating and target price for this stock have been suspended as there is not a sufficient fundamental

basis for determining an investment rating or target. The previous investment rating and target price, if any, are no longer in effect for this stock.

NO RATING The company is or may be covered by the Research Department but no rating or target price is assigned either voluntarily or to comply with applicable regulations and/or firm policies in certain circumstances, including when Intesa Sanpaolo is acting in an advisory capacity in a merger or strategic transaction involving the company.

TARGET PRICE The market price that the analyst believes the share may reach within a one-year time horizon MARKET PRICE Closing price on the day before the issue date of the report, as indicated on the first page, except

where otherwise indicated

Historical recommendations and target price trends (long-term horizon: 12M)

Target price and market price trend (-1Y) Historical recommendations and target price trend (-1Y)

Equity rating allocations (long-term horizon: 12M)

Intesa Sanpaolo Research Rating Distribution (at August 2018) Number of companies considered: 105 BUY ADD HOLD REDUCE SELL Total Equity Research Coverage relating to last rating (%) 42 29 27 2 1 of which Intesa Sanpaolo’s Clients (%) (*) 75 73 29 50 100

(*) Companies on behalf of whom Intesa Sanpaolo and the other companies of the Intesa Sanpaolo Group have provided corporate and Investment banking services in the last 12 months; percentage of clients in each rating category

Initiation of Coverage Initiation of Coverage

http://www.group.intesasanpaolo.com/scriptIsir0/si09/studi/eng_archivio_racc_equity.jsp

Wiit 8 October 2018


Valuation methodology (short-term horizon: 3M)

Our short-term investment ideas are based on ongoing special market situations, including among others: spreads between share categories; holding companies vs. subsidiaries; stub; control chain reshuffling; stressed capital situations; potential extraordinary deals (including capital increase/delisting/extraordinary dividends); and preys and predators. Investment ideas are presented either in relative terms (e.g. spread ordinary vs. savings; holding vs. subsidiaries) or in absolute terms (e.g. preys).

The companies to which we assign short-term ratings are under regular coverage by our research analysts and, as such, are subject to fundamental analysis and long-term recommendations. The main differences attain to the time horizon considered (monthly vs. yearly) and definitions (short-term ‘long/short’ vs. long-term ‘buy/sell’). Note that the short-term relative recommendations of these investment ideas may differ from our long-term recommendations. We monitor the monthly performance of our short-term investment ideas and follow them until their closure.

Equity rating key (short-term horizon: 3M)

Equity rating key (short-term horizon: 3M) Short-term rating Definition LONG Stock price expected to rise or outperform within three months from the time the rating

was assigned due to a specific catalyst or event SHORT Stock price expected to fall or underperform within three months from the time the rating

was assigned due to a specific catalyst or event

Company specific disclosures

Intesa Sanpaolo S.p.A. and the other companies belonging to the Intesa Sanpaolo Banking Group (jointly also the “Intesa Sanpaolo Banking Group”) have adopted written guidelines “Modello di Organizzazione, Gestione e Controllo” pursuant to Legislative Decree 8 June, 2001 no. 231 (available at the Intesa Sanpaolo website, webpage http://www.group.intesasanpaolo.com/scriptIsir0/si09/governance/eng_wp_governance.jsp, along with a summary sheet, webpage https://www.bancaimi.com/en/bancaimi/chisiamo/documentazione/normative) setting forth practices and procedures, in accordance with applicable regulations by the competent Italian authorities and best international practice, including those known as Information Barriers, to restrict the flow of information, namely inside and/or confidential information, to prevent the misuse of such information and to prevent any conflicts of interest arising from the many activities of the Intesa Sanpaolo Banking Group which may adversely affect the interests of the customer in accordance with current regulations.

In particular, the description of the measures taken to manage interest and conflicts of interest – related to Articles 5 and 6 of the Commission Delegated Regulation (EU) 2016/958 of 9 March 2016 supplementing Regulation (EU) No. 596/2014 of the European Parliament and of the Council with regard to regulatory technical standards for the technical arrangements for objective presentation of investment recommendations or other information recommending or suggesting an investment strategy and for disclosure of particular interests or indications of conflicts of interest as subsequently amended and supplemented, the FINRA Rule 2241, as well as the FCA Conduct of Business Sourcebook rules COBS 12.4 - between the Intesa Sanpaolo Banking Group and issuers of financial instruments, and their group companies, and referred to in research products produced by analysts at Intesa Sanpaolo S.p.A. is available in the "Rules for Research " and in the extract of the "Corporate model on the management of inside information and conflicts of interest" published on the website of Intesa Sanpaolo S.p.A.

At the Intesa Sanpaolo website, webpage http://www.group.intesasanpaolo.com/scriptIsir0/si09/studi/eng_archivio_conflitti_mad.jsp you can find the archive of disclosure of interests or conflicts of interest of the Intesa Sanpaolo Banking Group in compliance with the applicable laws and regulations.

Furthermore, we disclose the following information on the Intesa Sanpaolo Banking Group’s conflicts of interest:

1 One or more of the companies of the Intesa Sanpaolo Banking Group plan to solicit investment banking business or intends to seek compensation from Wiit in the next three months

2 Banca IMI acts as Corporate Broker relative to securities issued by Wiit

http://www.group.intesasanpaolo.com/scriptIsir0/si09/governance/eng_wp_governance.jsp

https://www.bancaimi.com/en/bancaimi/chisiamo/documentazione/normative

http://www.group.intesasanpaolo.com/scriptIsir0/si09/studi/eng_archivio_conflitti.jsp

http://www.group.intesasanpaolo.com/scriptIsir0/si09/studi/eng_archivio_conflitti.jsp

Wiit 8 October 2018


Intesa Sanpaolo Research Department – Head of Research Department: Gregorio De Felice Head of Equity & Credit Research Giampaolo Trasi +39 02 8794 9803 [email protected] Equity Research Monica Bosio +39 02 8794 9809 [email protected] Luca Bacoccoli +39 02 8794 9810 [email protected] Antonella Frongillo +39 02 8794 9688 [email protected] Manuela Meroni +39 02 8794 9817 [email protected] Gian Luca Pacini +39 02 8794 9818 [email protected] Elena Perini +39 02 8794 9814 [email protected] Bruno Permutti +39 02 8794 9819 [email protected] Roberto Ranieri +39 02 8794 9822 [email protected] Corporate Broking Research Alberto Francese +39 02 8794 9815 [email protected] Gabriele Berti +39 02 8794 9821 [email protected] Technical Analysis Corrado Binda +39 02 8021 5763 [email protected] Sergio Mingolla +39 02 8021 5843 [email protected] Research Clearing & Production Anna Whatley +39 02 8794 9824 [email protected] Bruce Marshall +39 02 8794 9816 [email protected] Annita Ricci +39 02 8794 9823 [email protected] Wendy Ruggeri +39 02 8794 9811 [email protected] Elisabetta Bugliesi (IT support) +39 02 8794 9877 [email protected]

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Banca IMI Securities Corp.

US Institutional Sales

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Banca IMI SpA

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Banca IMI Securities Corp.

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Banca IMI London Branch

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mailto:[email protected]

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Documents

Wiit 8 October 2018: 7:56 CET · Intesa Sanpaolo Research Department Gabriele Berti Research Analyst +39 02 8794 9821 [email protected] Alberto Francese Price performance,