Wiit: Data is the new oil - Hosting SAP & Hybrid Cloud · 2019-02-19 · Wiit: Data is the new oil d Wiit offers a unique opportunity to take advantage of megatrends in an extremely

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Wiit: Data is the new oil

d Wiit offers a unique opportunity to take advantage of megatrends in an extremely attractive growth market. The Group is in a position to benefit from the ongoing, positive trend of demand for Cloud services, specifically thanks to its unique know-how in this sector. The golden age of Cloud technology, reflected in strong sector growth With a 2014-2020e CAGR of 22.2% in Italy and a virtual to physical ratio expected to reach 2.9x in 2020e (vs 1.8x in 2017) globally, the Cloud market presents a high-growth megatrend that Wiit intends to benefit from. Wiit, a pure Cloud player with rare expertise Wiit has rare and widely recognised expertise in the management of critical applications requiring a high level of security, illustrated by (i) its achievement of Tier IV certification issued by the International Uptime Institute, (ii) Level 6 SAP certification, and (iii) three quality certificates issued by Bureau Veritas. This unique expertise has enabled Wiit to take advantage of its solid reputation, being able it to form major partnerships with SAP, Oracle and Microsoft. Clear visibility over future cash flows Wiit operates in a market that has solid barriers to entry and has successfully implemented an efficient customer retention strategy specifically focusing on customer satisfaction, as well as through the signing of multiyear contracts of an initial five-year fixed term (70% of the residual contract value to be paid by the customer in the event of early termination). This high rate of customer retention is reflected in a significant backlog (2.8x in 2017) thus favouring visibility over the Group's future cash flows. A profitable growth profile The Group recently improved its balance sheet structure, affected by significant investments having increased its debt stock, providing it with a sufficient margin to raise acquisition debt. A primarily variable cost structure and regional expansion through M&A are two factors that have enabled Wiit to post not only attractive profitability levels (EBIT margin of 24.5% in 2019e vs. 16.8% in the sector as a whole) but also to generate positive FCF as of 2018. M&A as a catalyst In line with its deployment strategy, Wiit began implementing an opportunity-driven policy for the acquisition of profitable targets, combined with an upcoming commercial ramp-up, the main driving force being the (i) consolidation of its position on the Cloud services market and (ii) the penetration of new regions in Germany with, however, the centralisation of operations in Italy to optimise the cost structure. An attractive valuation The boom in business and increasing profitability are set to continue over the coming years, within a highly favourable market environment. Posting EV/EBITDA of 8.2x in 2019 in relation to peers (EV/EBITDA ratio of 16.1x) calls for ongoing revaluation of the share. We initiate the coverage of Wiit with a Buy recommendation and a target price of €61.1 per share.

Market information

Sector

Technology – Cloud services

Price (€)

43.6

Capitalisation (€ millions)

112.9

Stock market

Borsa Italiana – AIM

Bloomberg WIIT IM

Shareholders

Founders & Management 70.5%

Free float 24.8%

Hat Orizzonte 2.3%

Treasury shares 2.5%

€m (31/12) 2017a 2018e 2019e 2020e

Revenue 19.6 24.8 30.1 35.3

Change 27.5% 26.6% 21.6% 17.4%

EBIT 4.2 5.2 7.4 9.3

margin 21.4% 21.0% 24.5% 26.4%

Net income 3.1 3.9 5.7 7.2

EPS (€) 1.22 1.50 2.18 2.78

Change 179% 23% 45% 27%

Dividend (€) 0.83 1.13 1.31 1.67

Dividend Yield 1.4% 2.6% 3.0% 3.8%

FCF (0.9) 4.1 5.4 6.8

ROCE 8.5% 11.5% 15.9% 18.9%

EV/Revenue (x) 4.4x 3.7x 3.1x

EV/EBIT(x) 21.2x 14.9x 11.8x

P/E (x) 29.1x 20.0x 15.7x

Net debt (7.5) 0.1 (2.2) (5.5)

Net gearing ratio N.M. 0.5% N.M. N.M.

Midcap Partners estimates

Next release: 3Q2018 earnings release – 25/10/2018

Previous recommendations

Date Recommendation 19/09/2018 Buy

Analyst: Pierre Buon

E-mail: [email protected]

Landline: +33 (0)186 954 771

Recommendation: Buy

Closing price on 18/09/2018: €43.6 Target price: €61.1

mailto:[email protected]

MIDCAP PARTNERS • LOUIS CAPITAL MARKETS • 42 RUE WASHINGTON - PARIS • 130 WOOD STREET - LONDON 2

Contents

I. WIIT IN A NUTSHELL 3

II. WIIT, A PLAN TO BECOME THE EUROPEAN CLOUD MARKET LEADER 4

A. Overview of the Cloud services market ............................................................................................ 4

B. Wiit's positioning in a market offering a high-growth megatrend .................................................... 5

III. WIIT, A HISTORY OF PROFITABLE GROWTH 19

A. Evolution of top line growth ........................................................................................................... 19

B. Evolution of the Group's investment policy .................................................................................... 19

C. Changes in the Group's debt structure ........................................................................................... 20

D. Improvement in cash generation .................................................................................................... 20

E. An attractive dividend policy .......................................................................................................... 21

IV. VALUATION 22

A. DCF method with a sensitivity analysis ........................................................................................... 22

B. Analogical approach via the trading multiples method .................................................................. 23

V. WIIT – FINANCIAL DATA 28

VI. DISCLAIMER 29


I. Wiit in a nutshell

Description Operating data

Wiit is a pure provider of Cloud computing services to companies, mainly in the form of Private and Hybrid Cloud. Wiit has positioned itself as the leader in ERP system management (SAP, Oracle, Microsoft) and has a reference portfolio of over 65 active customers. In addition, the company has two data centres, one of which is Tier IV certified (the highest level of certification that can be obtained).

Data Centres (1 of which being Tier IV certified) by Uptime Institute (the highest level of reliability worldwide) – capacity 35% used

4 Offices in Italy (Florence, Milan, Rome and Castefranco Veneto) and 1 abroad (Dottikon, Switzerland)

70 connected countries

6 SAP certifications (only 2 companies in the world have this, one being Wiit)

5 quality certificates

80% of customers are SAP users

90% of customers use ERP systems

Breakdown of 2017 revenues Evolution of revenues and EBITDA margin

Strengths Weaknesses

Experienced management team (also shareholders)

Strong exposure to the Cloud market, showing a high-growth megatrend

Solid barriers to entry (strong expertise, broad range of offerings, multi-year contracts, focus on critical applications)

Clear visibility over cash flows, helped by a contractual structure that helps to constitute a significant order book

Consistent investments by businesses in the new SAP HANA system

Significant investments in CAPEX to support development

Strong focus on revenue (circa 80% generated by SAP users) mitigated by the fact that SAP recently upgraded its guidance following the outperformance of its HANA system

Opportunities Threats

Recruit sellers and deploy the sale force in order to secure new customers

Horizontal and/or vertical external growth (i) in Italy in order to extend the Group's market share and (ii) abroad, (FR, GER, UK) in an effort to penetrate new markets and thus leverage the target network and sales force already established – Minor integration costs by setting up the centre of operations in Italy

Benefit from the non-compliance of other players with the General Data Protection Regulation (GDPR) in order to gain market share

Strong competition from major players

A decrease in the price of services resulting from the growing maturity of the Cloud market

Considerable reputational risk in the event of a system malfunction

3%

93%

4%

Products Services Other

€19.6m

11.9 12.8

15.3

19.6

3.0 3.8 4.7

8.5

25.2% 29.7% 30.6%

43.5%

0%

10%

20%

30%

40%

50%

0

5

10

15

20

25

2014 2015 2016 2017

Revenues (€m) EBITDA (€m) margin (%)


II. Wiit, a plan to become the European Cloud market leader

A. Overview of the Cloud services market

In some respects, Cloud servers function in the same way as physical servers, the difference being that they can provide extremely different functions. When customers opt for Cloud hosting, they hire the virtual server space rather than hiring or purchasing physical servers. The cost of Cloud hosting is often based on an hourly rate, depending on the capacities required at any given time.

Exhibit 1: Overview of the Cloud market

Source: Company

IaaS (Infrastructure as a Service), PaaS (Platform as a Service) and SaaS (Software as a Service) are 3 different Cloud Computing technical or usage models. Each of these models plays a specific role:

- IaaS: corresponds to the infrastructure part of the Cloud. It enables companies to externalise and develop their physical infrastructure (servers, network, object and block storage) remotely and on request. In IaaS, only the physical infrastructure (hardware) is digitised. For example, this includes data storage for back-up purposes, carried out by companies that no longer wish to store data internally. See our storage and back-up offering.

- PaaS: a model that "sits" on IaaS. It enables the physical infrastructure to be externalised, as well as middleware: databases, data integration layers and application development environments. Cloudwatt provides its customerss with open source middleware such as LAMP, MEAN.js, PostgreSQL, Gitlab, Jenkins, etc. for Dev & Testing activities, as well as OwnCloud as a Storage solution, or Wordpress, Piwik and Prestashop as website hosting applications.

- SaaS: the final Cloud layer, the most sophisticated and the easiest to understand for the internet user. Via an interface, it enables the end user to access company applications hosted in a secure environment (the end user simply has to connect using his or her username and password). The company therefore uses its applications on request, as needed.


Always accessible

Each Cloud component can be accessed by the end user via the internet. IaaS and PaaS have so far been designed for developers, while SaaS is generally more ergonomic, making it accessible to all regular users of the application. They can access the company's resources by simply logging in, whether from a computer, smartphone or tablet.

In Cloud Computing, the terms public, private and hybrid mean the different Cloud structures adapted to highly specific needs.

- The Public Cloud is a flexible and open structure, managed by a third-party service provider. Multiple

users (individuals or companies) may access it via the internet. With the Public Cloud, multiple entities

share the same IT resources (made available by the provider).

- The Private Cloud is used by a single company and deployed internally. Although the Cloud is hosted

by a service provider, users can only access it via secure networks (VPN). The private Cloud suits large

companies or companies whose requirements in terms of data criticality and security are significant.

Virtual Private Clouds can be hosted on the Public Cloud, combining strengthened security (for

example via a direct MPLS connection) and natural elasticity.

- The Hybrid Cloud is a mixed structure that combines the internal resources of the Private Cloud with

the external resources of the Public Cloud. For example, a company that uses a Hybrid Cloud may

make occasional use of the public Cloud during peaks in business, using internal resources the rest of

the time. This is what is referred to as "hybridisation".

B. Wiit's positioning in a market offering a high-growth megatrend

1. A market comprising a high-growth megatrend

Wiit is a pure player operating in the Cloud services sector, at the heart of the 4th

industrial revolution. Data processing has become a major challenge. Data generation worldwide has multiplied by 10 in just 9 years and is expected to reach 163 ZB

1 by 2025e.

Exhibit 2: Development of the data market

Source: World Economic Forum/Accenture analysis - Digital Transformation Initiative (2017)

As shown in the table below, the Cloud market is evolving at a faster rate than the IT market, resulting in a change of behaviour. Indeed, users prefer the Cloud to more traditional IT technologies.

1 1 ZettaByte (ZB) = 10

21 bits


Exhibit 3: Total value of the Cloud market in Europe

Source: Uptake of Cloud in Europe Report – European Commission

We can see that Italy was slow to adopt Cloud services by comparing the number of data centres per country within the EU. Indeed, Italy only has 32 data centres, compared to 102 in France and 107 in Germany.

Exhibit 4: Number of data centres in the main countries

Source: DataCenter9

In Italy

The Cloud market in Italy developed slightly later than in other European countries, consequently presenting greater opportunities for growth.

Exhibit 5: Megatrend in the Cloud market in Italy

Sources: Assinform report 2017, Osservatori Digitale Innovation 2018

The Cloud market benefits from strong growth, with an estimated worth of €2.6bn in 2019 (CAGR 14-19E of 22.2%).

€m 2013 spend 2015 spend CAGR '13-'15 2020 spend CAGR '15-'20

SaaS 5,061 8,477 29.4% 23,416 22.5%

PaaS 770 1,363 33.0% 4,855 28.9%

IaaS 868 1,476 30.4% 4,487 24.9%

Total Public 6,699 11,316 30.0% 32,758 23.7%

Private Cloud (IaaS only) 2,847 5,902 44.0% 12,067 15.4%

Total Cloud 9,546 17,218 34.3% 44,825 21.1%

Total IT Spend 363,120 381,285 414,189

Cloud Spend as % of IT spend 2.6% 4.5% 10.8%

25

32

54

102

107

139

896

0.95

1.23

1.51

1.84

2.20

2.60

2014 2015 2016 2017 2018e 2019e

Value of the cloud market in Italy (€bn)

+22.2% CAGR


Globally, we are seeing a megatrend on the Cloud market in Italy (up 18% YoY), driven in particular by the Public & Hybrid Cloud (up 23.8% YoY) thanks to strong growth in PaaS (up 45.6% YoY) and SaaS (up 22.7% YoY). The PaaS segment is expected to grow significantly over the coming years. Virtual Private Cloud has also seen strong growth momentum of 16% YoY. Exhibit 6: The Cloud market in Italy – YoY growth

Source: Osservatori Digitale Innovation 2018

As shown in the exhibit below, in Italy in 2018e, Cloud will represent 29% (i.e. €2.2bn) of the total ICT markets and will benefit from the second best growth rate (19%), just behind Big Data (23%), proving to be a less mature market. Exhibit 7: The digital ICT market in Italy

Sources: Assintel 2016 & 2017 reports

SaaS, IaaS, PaaS and XaaS Cloud Computing, as well as cyber security, represent 3 of the 6 investments offering the highest potential in ICT, according to company CIOs. Exhibit 8: Attractiveness matrix: ICT investment intentions and priorities

Sources: Nextvalue I Survey “La Trasformazione Digitale vista dai CIO”, 2017

26%

27%5%

20%

22%

SDDC & (Hyper)ConvergedInfrastructure

Virtual PrivateCloud

PaaS

IaaS

SaaS

€1.68bn

FY2016

24%

26%

6%

21%

23%

SDDC & (Hyper)ConvergedInfrastructure

Virtual PrivateCloud

PaaS

IaaS

SaaS

€1.98bn

(+18% YoY)

FY2017

19%

9%

4%

25%

34%

9%

2018e

11.5Mds€

Cloud – 19%

Big Data – 23%

Web Management Platforms – 16%

Internet of Things – 16%

Mobile Business – 13%

Security – 12%

Category – CAGR 2016-2018e


Brief overview of competition

Tech giants are still the Group's main competitors, as presented in the exhibit below.

Exhibit 9: Forecast of service provider market share in Cloud services worldwide by 2020e

Source: Cloud Vision 2020: The Future of the Cloud, LogicMonitor

Tech giants dominate and will continue to dominate the Cloud services market over the next few years. Three of these giants stand out in particular: Amazon, the undisputed leader, Microsoft and Google. However, with the arrival of GDPR, certain foreign companies will be forced to comply with the new European standards in order to continue operating in Europe. It is therefore possible that these giants will start acquiring medium-sized European companies. Furthermore, Wiit would represent an attractive target for one of these major groups.

2. A company with rare and recognised expertise

In addition to having an experienced management team at its disposal (see Appendix 1), Wiit's expertise is widely recognised abroad. Indeed, one of its data centres (550m² located in Milan) is Tier IV certified by the International Uptime Institute, the highest level of reliability and security in the world.

Exhibit 10: Criteria for obtaining Tier IV certification

Source: International Uptime Institute

Only around 45 data centres worldwide have been awarded full Tier 4 certification, including 6 in Italy (compared to 0 in Germany or France), those belonging to Wiit and Elmec being the only ones used for entirely commercial purposes.

52%

21%

18%

9%

AmazonWebservicesMicrosoftAzure

GoogleCloudPlatformOthers

Tier Data

Center Class

Grade of

infrastructure

of the facility

Capacity of

components to

support IT load

Delivery

network

channel

Maintanable

without service

outages

Fault tolerant :

does not

require service

calls for

continuity

Compartmental

ised:

everything is

separated and

duplicated

Continual

conditioning

Average

availability

over the year

Annual

downtime

Tier IV

Enterprise

Corporations

Fault Tolerant2N+1

Fully Redundant

Double always

activeYes Yes Yes Yes 99.995% 26.3 minutes

Tier III

Large Business

Concurrently

maintainable

N+1

Fault Tolerant

One active and

one alternateYes -- -- -- 99.982% 1.6 hours

Tier II

Medium Size

Business

Redundant N+1 Single -- -- -- -- 99.750% 22 hours

Tier I

Small BusinessBasic N Single -- -- -- -- 99.670% 28.8 hours


Exhibit 11: 6 Tier IV certified centres in Italy (constructed facility)

Source: International Uptime Institute

Other than the Tier IV certification, Wiit also has other ISO certifications issued by Bureau Veritas, such as ISO 27001 covering data security, ISO 20000 relating to compliance, and ISO 22301 concerning business continuity.

As shown in the set of exhibits presented below, the #1 criterion for customers when making their choice is security and reliability, which is perfectly in keeping with Wiit's offering. Exhibit 12: Main requirements of Cloud users

Source: CS IT Hardware Research IT Survey 2018

0%10%20%30%40%50%60%70%80%90%

100%

Cloud Buyers value availability, perf. and reputation over price

0%

10%

20%

30%

40%

50%

60%

70%

Reduce Capex and Agility Are the Top Reasons for Cloud

0%

10%

20%

30%

40%

50%

60%

Public Cloud Well Received Despite Security Remaining Top Concern

0%

4%

8%

12%

16%

20%

IaaS, Hyperconvergence Viewed as the Most Disruptive Technologies

Q. Respondents asked priorities when looking for a cloud vendor Q. Respondents asked rationales of moving to Cloud

Q. Respondents asked the most disruptive technology Q. Respondents asked concerns for the public Cloud


The issues of reliability and security are today at the heart of the debate on the use of data centres, and a number of cases demonstrate the weakness of certain centres:

These three examples of a lack of Cloud reliability resulted in losses of approximately $500m, while the total cost in 2017 amounted to several billion dollars. This shows the importance of having a company that is reliable, secure and entirely dedicated to its Cloud service. Through its Tier IV certification, Wiit fully meets these expectations. The high-level certifications obtained, enable Wiit to increase visibility and obtain first-class partnerships, such as:

Wiit is one of the most highly certified companies in the world in terms of SAP outsourcing services. Only two companies in the world (Wiit & Atum IT Services India) have obtained 6 of the 7 SAP certifications

Gold Partner qualified

Wiit is an official partner of Microsoft

3. A comprehensive and high-quality offering suited to its customers' specific needs

As mentioned above, Wiit has unique expertise in the Cloud services sector and provides a comprehensive offering, making it possible to optimise critical applications management, demanding the highest standards.

Wiit has gradually positioned itself as a benchmark player in ERP systems management (SAP, Oracle, Microsoft). The new market trend is progressively shifting towards critical applications (SAP-ERP, CRM, EPM, etc.) as well as core platforms and infrastructures, requiring a high level of service and security, data protection, customisation, integration and flexibility. To achieve this, the use of Customer & Hosted Private Clouds is required.

As shown in the exhibit below, Wiit's solution is extensive and reliable, meeting the needs of the most sophisticated customer base.

British Airways faces an outage in May 2017, costing them over

$150m

Last May 2017, a contractor doing maintenance work at a British

Airways data center at Boadicea House inadvertently switched off

the power supply, knocking out the airline’s computer systems. The

outage lasted 15 minutes and brought down the website, stopping

people from checking in. The outage forced British Airways to cancel

800 flights from Gatwick and Heathrow, leaving 75,000 people

stranded and costing British Airways $100-140m in compensation

alone, with ~$40m in lost revenue.

Delta Airlines faced two outages, both lasting over 3 hours and

costing hundreds of millions

Delta’s systems have faced two separate outages, the first involving

a fire that cancelled 2,300 flights over three days and cost the

airline $150m. The first outage lasted approximately 5 hours but

had lasting effects for the company. The second outage lasted a

little under 4 hours, forcing Delta to cancel ~300 flights.

Amazon employee takes down one too many servers while

debugging, leaving the internet in the dark

An Amazon employee was in the process of debugging an issue

with the billing system and accidentally took more servers offline

than intended. As the subsystems went offline, S3 was unable to

service many requests, leaving a good portion of the internet in the

dark, including companies such as Slack and Trello. The outage

cost companies in the S&P 500 ~$150m.


Exhibit 13: Services offered by Wiit according to Cloud type

Source: Company

Wiit's offering mainly targets medium and large companies committed to innovation, with low change resistance as illustrated in the following exhibit.

SaaS Software

PaaS

SAP Application Support

SAP System Mgmt & other

App

Database Mgmt

SOC & Cyber Security

IaaS

Server Management &

cyber security

Help Desk

Dedicated & shared

servers

Backup & Data Storage

Data Center

Cloud

TypeServices Public

System

Integrator

Datacenter

ProviderWIIT

SaaS Software Wiit provides data management and dematerialization services in SaaS mode, leveraging its

high-end data center. In this way a pay-document model could enrich the cloud offer

PaaS

SAP Application Support Support for dedicated users in SAP, also covering the application update

Wiit remains at the disposal of the customer to assist in the transformation of its business

SAP System Mgmt & other

App

The team is endowed with unique expertise, including inter alia the highest certification level in

the world for SAP (6 certifications in management and maintenance services)

Database Mgmt Permanent access and specialized know-how in the basic components of applications, operating

systems and databases

IaaS

Server Management &

cyber security

The processes, procedures and tools are all certified according to international standards (inter

alia ITIL, ISO20000). Wiit offers a 24x7 availability guarantee from state of the art infrastructure

Help Desk

Customer support is available 24 hours a day in Italian or English. The quality of the services

provided is constantly monitored. Wiit tends to maximize user experience as well as customer

satisfaction

Dedicated & shared

servers

Wiit is a leader in the performance and technology security market, tailor-made solutions are

offered to customers based on their specific needs. Wiit guarantees the processing capacity

according to the degree of sophistication of the application

Backup & Data Storage Leader in the market for technological performance and shared security, Wiit is able to offer

protected access to corporate data, in real time

Data Center

Equipped with 2 data centers in Italy (currently used for c.35% of total capacity), one of which is

certified Tier IV (the highest level of reliability in the world). Wiit’s Data Centers offer a guarantee

in terms of business continuity


Exhibit 14: Wiit's positioning in its market

Source: Company

The advantages of Cloud for users

Cloud offers user companies significant improvements to the bottom line, including inter alia:

A simplified IT landscape and a reduced total cost of IT ownership An increased scalability in order to support growth and growing demand An access to the latest software updates used directly in the Cloud Optimised analyses to improve decision making More efficient business processes A reduction in inventories with the help of improved planning An improved customer experience thanks to supply chain optimisation A step-up in company transformation in order to meet constantly changing business objectives

The exhibit below shows the breakdown of potential cost savings over three years for companies having adopted Cloud technology.

Exhibit 15: Total Cost of Ownership (TCO) on Compute Is ~60% Cheaper, Slicing IT Costs Significantly

Source: AWS TCO Calculator

The exhibit below shows the average data storage cost savings per company in the US, across all sectors.

ICT Spending between € 2-50m

Inefficient / ineffective sourcing model

Focus on quality, security, reliability,

response speed and costs

Top Corporations

Mid & Large

Corporates

SMEs

Turnover

€ 100m

€ 4bn

Industry

segmentation

Industry IT

Drivers

ICT Spending >€50m

Internal sourcing and/or outsourcing with the

big players

Strong impact of outsourcing through

disvestment of branches of the company

ICT Spending <€ 2m

Internal sourcing model

Focus on costs

Cloud journey

index

High globalisation

Market fast follower

High change resistance

High globalisation

Market innovator + fast follower

Mid-Low change resistance

Low globalisation

Market follower

High change resistance

Big Players

Sweet Spot

ASP’s Local

SaaS

$705/mo or

$25,375

Server

hardware

Network

hardware

Hardware

maintenance

Software/

Virtualization

Power &

cooling

2 web

servers

2 app

servers

2 DB

servers

Networking

overhead

20% of

server

acquisition

cost

Both server and

networking

Power

consumption

of 2.25KW

Electricity

price of

$0.12/kWH

$153,137Three-year cost

Traditional Steady-State Web Application Scenario

Rack

infrastructure

cost

Top-of-rack

switch

included

Deployment

One-time

deployment

$292 per month or

$10,512

2 web servers &

2 application servers2 Database servers

High-Memory Extra Large 3-

Year Heavy Utilization Reserved

EC2 $0.05/hr with one-time

$1314 up front

High-Memory Extra Large 3-Year Heavy Utilization

Reserved Amazon RDS DB Instance

$0.71/hr with one-time $5,256 up front

$64,130Three-year cost

“New” Steady-State Web Application Scenario

Support

$278/mo or

$10,016

$386/mo or

$13,886

$765/mo or

$27,532

$1,694/mo or

$60,998

$405/mo or

$14,580

$21/mo or

$750

$1331per month or

$47,935

$244 per month or

$5,683


Exhibit 16: Cloud TCO Is ~70% Lower than Traditional Storage, Slicing IT Costs Significantly

Source: AWS TCO Calculator

Storage Acquisition Cost Drives a Material Part of the Cost of the Internal Storage Model: Here, it is

assumed for 100 TB that the cost would be around $200k exclusive the consideration of redundancy

requirement and utilization issues.

Utilization and Replication Sizably Affect Costs of Internal Storage: Typically storage environments

see raw capacity utilization (data written over raw capacity on hand) below 60%, and RAID protection

requires at least two copies of data.

Staff, Facilities, and Maintenance Are a Major Part of Costs: Although Often Obscured: It is assumed

here that cloud services store multiple copies of every piece of data to prevent loss of unavailability. If

the included copy count is lower than three, Forrester assumes that you would have to pay for extra

redundancy for the service to be effective for this use case.

The exhibit below shows that for a typical retailer, Cloud technology offers potentially significant savings. Indeed, for this mid-sized retailer, Cloud technology enabled it to reduce its IT costs by around 47% after having replaced its IT equipment with the Cloud, generating savings that could be more effectively reinvested back into the company.

Exhibit 17: Cloud technology offers considerable cost savings

Source: BCG – February 2017 Note: results for a retailer with 500 employees and 40 stores using the Public Cloud; data from Amazon Web Services, SaaS pricing, and estimates of labour reduction based on Cloud outsourcing and automation

Companies are increasingly turning to the Cloud in order to manage their changing workloads Traditional retailers are looking to compete with online retailers by providing low-cost, agile and secure POS systems,

$50k $117k $248k $80k $50k

Data

content

Redundancy

& utilization

Operating

costs

Warranty &

maintenance

Data

migration

100 TB

$2/GB@50%

discount

Expected

lifespan: 4

years

2 copies of data

for redundancy

Typical

utilization: 60%

Storage admin:

2@ $120k/year

Facilities/power

: $8.3k/year

Annualized

maintenance

charge

Annualized

data migration

charge

$545k annual

cost

Traditional File Storage Systems Are Expensive to Buy and Run, but Moving to the Cloud Compresses Spend Significantly

$60k $1.3k $72k $20k

Data

content

Redundancy

& utilization

Operating

costs

Incremental network

bandwidth costs

Monthly

subscription

100 TB

$0.05/GB/mo

nth

$0.05/GB

transfer-in rate

One-time initial

transfer

$0.12/GB

transfer-out

rate

Data

out/month: 50%

$153.3k

annual cost

Traditional File Storage Systems Are Expensive to Buy and Run, but Moving to the Cloud Compresses Spend Significantly

-79%

Today Future

Network IT Infrastructure IT Software IT payroll

$1.52m

$0.80m

41%

25%

11%

23%16%

13%

23%

48%

-47%

Companies typically reinvest savings in cloud usage / new

services


innovative customer loyalty programmes and optimised supply chain processes, while unlocking new business opportunities.

4. A loyal and established customer base

Wiit has approximately 65 active customer accounts, including prestigious names such as Prada and Lagardère. The customer base 2012-2017 CAGR was 13.2%.

The retention rate is extremely high, due to (i) the high level of customer satisfaction thanks to the premium service offered by Wiit and (ii) the contractual structure that favours Wiit, providing for, inter alia, a multi-year contract term of 4-5 years, guaranteeing clear visibility over the Group's business and reducing the risk of substitution, strong penalties in the event of early contract termination (~60-70% of the residual contract value), with Wiit reserving the right to terminate the contract in the event of payment default / customer insolvency. Wiit's cash-in is carried out either on a monthly or quarterly basis, thus reducing the risk to Working Capital.

We can also assess the pricing power exercised by Wiit through the increase in revenues per customer, which increased from €190k per year in 2012 to €259k per year in 2017 (CAGR 2012-2017 up 6.4%) and to €360k at June 2018, specifically thanks to (i) larger customers, (ii) increasingly sophisticated demand, and (iii) the effect of up-selling ancillary services to existing customers.

Exhibit 18: Strong growth in Wiit's customer base

Source: Company

As mentioned above, the advantageous contract structure combined with a growing reputation provides visibility over Wiit's business, as reflected in the significant order book (2.8x in January 2018 – flat YoY).

Exhibit 19: Business visibility reflected in a significant order book

Source: Company

A diversified and broad customer base

35 41 46 53 60 65

190 183

209200

233

259

2012 2013 2014 2015 2016 2017

# clients Revenues by client (€k)

CAGR 13.2%

Wiit's sales force (# of professionals) 3 4 4 4 5 8

19.8

58.1

Sales 2017B Backlog

Backlog as at January 1st 2017 (€m)

2.9x

19.6

55.7

Sales 2017A Backlog

Backlog as at January 1st 2018 (€m)

2.8x


It is worth noting that the Top 10 customers contributed 55% of 2017 full year revenues, highlighting the low level of concentration of the client base. Furthermore, Wiit is on a constant and active search for new customers. The Group's positive reputation is expected to provide support in this regard.

As presented in the exhibit below, the sectors having contributed the most to the Group's 2017 full year revenues are Retail (36%), Industrial and Processing (22% each). Wiit counts among its clients Armani, Assimoco, Bauli, Cuccinelli, Fila, Lagardère, Prada, San Benedetto, etc.

Exhibit 20: Contribution of customer sectors to 2017 revenues

Source: Company

80% of Wiit's customer base are also SAP customers

As stated above, Wiit is one of two companies in the world to have obtained Level 6 SAP certification, making it one of the primary partners.

Systeme Anwendungen Produkte (SAP) is the global leader in the development and marketing of integrated professional software. The recent release of its Enterprise Resourcing Planning (ERP) system, SAP HANA, connected via the Cloud, supplements the SAP offering and has been met with resounding success.

S/4HANA is at the core of the enterprise

S/4HANA, SAP’s next-generation ERP (enterprise resource planning, including financials, procurement, supply chain and more) business suite is a real-time enterprise resource management suite for digital business, built on SAP’s “in-memory”, column-orientated relational database management system, SAP HANA. S/4 is specifically optimized for the HANA database, and sits as the system of record, truly operating at the core of the enterprise, offering deep functionality across all lines of business. In addition, S/4HANA was designed using the modern UX design principals of SAP Fiori to deliver a role-based, consumer-grade user experience across all lines of business and devices.

S/4HANA on-premises version has been available since 2015, with the cloud version introduced in February 2017.

S/4HANA functionality is broad, and a foundation for additional products

SAP's S/4HANA combines functionality across functions – finance, procurement, engineering, manufacturing, supply chain, asset management, projects, human capital management, and sales/commerce.

The main advantages offered by S/4HANA include inter alia: - Reduced complexity and reduced hardware cost. - Improved user experience (driven by Fiori).

36%

13%22%

22%

3%

1%3%

CPG & Retail

ProfessionalServices

Industrial

Process

Public

Engineering &Construction

FinancialServices

€19.6m

Finance Procurement Engineering Manufacturing Supply chain Asset Mgmt Projects HR Sales

Accounting &

Finance

Operational

procurement

Product

engineering

Production

operationsInventory Mgmt

Maintenance

management

Project

ManagementTime recoring Order Mgmt

Finance

operationsSupplier Mgmt

Product lifecycle

mgmt

Production

scheduling

Goods receipt /

issue

Assets ops &

maintenance

Time & expense

ManagementGlobal HR Contract Mgmt

Treasury & risk

mgmt

Procurement

Analysis

Enterprise project

pf. Mgmt

Complex

manufacturing

Warehouse

management

Enterprise Asset

management

Project control &

accTalent InterCy sales

Financial plannig

& analysis

Collaborotive

sourcing

Project control &

product dev.Quality Mgmt

Transportation

managementCollaboration

Workforce

planning

Subscription

billings & rev

Tasks & cmpl.

MgmtBusiness network

Manufacturing

executionGlobal payroll Configure-to-quote

Travel exp. &

mgmt

Contingent

workforceCommerce


- Built for high-performance, big data, and real-time analytics. - Faster processing and data-driven decisions with predictive analytics. The real-time analytics also

allow for new business processes (for example, a company could quote an individual price to a customer in real-time while he or she is ordering, factoring in current supply & demand trends for that item, as well as the customer’s own buying history, to offer appropriate discounts or cross-sell additional products).

- Cloud enabled – gives customers a choice to run on-premises or in a cloud configuration, or some hybrid combination.

- Connected workflows across every part of the enterprise and the entire value chain to increase productivity, improve collaboration and drive innovation.

- No more redundancies, such as duplicate tables and metatables, because everything in kept “in-memory”.

- Development, operation and backups are easier, plus a slimmed-down back end. - Improved contextual automation, efficiency and agility – through machine learning.

It is also worth noting that mainstream maintenance of the classic ERP business suite is scheduled to end in 2025, and so customers will start preparing for that ahead of time. The upgrade to S/4HANA should soon be fully on the agenda of nearly all SAP existing Business Suite customers.

The SAP S/4 HANA customer base is constantly evolving, thus reducing the risk of concentration of Wiit's customers. Furthermore, the seasonality of the influx of new customers in the fourth quarter each year (closing of operating & fiscal years, preparation of budgets for the next year) highlights the actual needs of this ERP system's customers.

Exhibit 21: Change in the number of SAP S/4 HANA customers

Source: SAP

5. New regulations strengthen the legitimacy of Wiit in its market

The European Union maintains the most stringent regulations regarding personal data management and privacy.

Indeed, the recent introduction of GDPR on 25 May 2018 aiming to protect customer data, strengthens and standardises data protection for individuals within the EU. The regulations apply to companies established outside the EU that process data relating to the activities of EU organisations. Non-European companies will also be subject to the regulation if they target EU residents through profiling, or offer goods and services to European residents. Fines issued to companies that fail to comply with this regulation are considerable and may be up to 5% of the Group's total revenues.

Today, almost 74% of Cloud services are not in compliance with the regulation, a figure that may be even higher given the imperfect compliance within the EU itself. Wiit does not fall into this category, thanks to the fact that it offers one of the most secure and confidential services available; this essential factor considerably strengthens its legitimacy in its market.

370 900

1,300

2,700 3,200

3,700 4,100

5,400 5,800

6,300 6,900

7,900 8,300

1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18

S/4 HANA customers #

370

530

400

1,400

500 500400

1,300

400500

600

1,000

400

1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18

S/4 HANA cutomers added in the term


Exhibit 22: 74% of Cloud services are non-compliant with GDPR

Source: McAfee - 74% of Cloud Services do not Meet European Data Residency Requirements

6. A growth model ensuring the profitability and sustainability of the Group's business

model

Wiit aims to position itself as a leader in the Private and Hybrid Cloud markets, by (i) developing its organic growth and (ii) applying an opportunity-driven policy of targeted profitable acquisitions, combined with an up-coming commercial ramp-up.

Organic growth

Recruitment and deployment of the sales force Focus on the largest customers with significant requirements and a considerable IT budget Sector specialisation, specifically in luxury goods and fashion, "Made in Italy", as well as industry and

manufacturing – sectors in which Wiit already has extensive expertise and long-standing experience. Furthermore, the pharmaceutical and insurance sectors offer high growth potential

External growth in Italy

Acquisitions in Italy in order to increase Wiit's market share and capture synergies (e.g. data centres)

External growth in Europe

Potential targets mainly in Europe, Germany, France and the UK Strategic acquisitions to penetrate foreign markets as appropriately as possible, by taking advantage of:

A brand already established locally A local sales force, with existing relationships with local customers, knowledge of the local market and

with one or more data centres in the target country Potentially considerable cost savings, via the centralisation of operations in Italy

Similar business: possible cost synergies, together with a low integration risk (same business) Complementary business: up-selling strategy with the possibility of implementing multi-year

contracts. Cost and revenue synergies (up-selling), and a moderate integration risk

The Group has indicated that it is constantly looking for new acquisition targets especially in Germany and in France.

Indeed, we expect the Group will complete at least two acquisitions by the end of 2018 (one of which was recently carried out in June 2018 – see below), which will begin contributing to full year earnings as of 2019. These transactions are expected to be financed by cash (amounting to €21.4m at December 2017) and acquisition financing. Once the target has been acquired, an upgrade of the newly acquired data centres would be required in order to obtain at least Tier IV certification. For information purposes only, no data centre in Germany currently holds this level of certification, enabling the Group to set itself apart thanks to its high-quality offering.

Acquisition of Adelante S.r.l. – June 2018

On June 28th

, 2018, Wiit announced the acquisition of a 100% stake in Adelante S.r.l. from Francesco Baroncelli (Sole Director of Adelante at the time of the transaction), a company specialising in Cloud computing services for companies, in particular Hybrid Cloud services and hosted Private Cloud for critical applications.

15%

4%

7%

74%

Hosted in EU

Hosted incountry withequivalentprivacy

US hosted withSafe Harbor

Cloud Servicesthat should nothold EU Data


Rationale: this structural acquisition is in line with the Group's growth plan, enabling Wiit to increase its market share in Italy, specifically by targeting SMEs operating in the central region of Italy.

Adelante 2017 financials: €7m revenue, €0.9m EBITDA (13% margin), €0.8m EBIT (11% margin) and €0.4m net income (6% net margin). Synergies are expected to be created, Wiit having already gradually integrated Adelante into the Group, and counting on EBITDA of approximately €1.1m in 2018e.

Deal structure:

Acquisition: 100% of the capital Base price: €6.4m + net cash recorded at the closing date (in all likelihood July 2018 – valuation based

on trading multiples)

Post-deal: - Earn-out based on performance of the target company, up to c.€4.4m payable on an annual

basis until 2022, either in shares (with a lock-up period of 12 months) or in cash; - Francesco Baroncelli to be appointed CEO of Adelante and Director of M&A and new markets

at Wiit. Francesco Baroncelli shall also sit on the Wiit Board of Directors, which will comprise eight members (compared to the current seven).

Payment: a portion paid at closing, as well as four instalments to be paid in full by June 2022.

Impacts of the transaction on Wiit: (i) consolidate its leading position in the domestic market, (ii) extend and ramp-up the Group's offering, particularly in terms of its regional footprint (Central Italy), but also in terms of high-quality IT services and (iii) implement a real Group growth strategy, whether organic or external.

Finally, it is worth mentioning that (i) the target’s margin shall gradually converge towards Wiit’s margin mainly thanks to both the envisaged cross-sell strategy and the disposal of the hardware & software division (less profitable) and (ii) the same contractual structure shall be implemented at the target’s level.


Costs (€m) Nature FY2017 % of total CAGR '14-'17

Outsourcing Variable 2.0 17.0% (4.0%)

Electric energy Variable 0.3 2.4% 8.8%

Connection Variable 0.7 5.9% 17.6%

Rent Fixed 0.7 6.4% 1.6%

Raw materials Variable 1.2 10.3% 25.7%

Car rent Variable 0.3 2.6% 10.2%

BoD Fixed 1.1 9.6% 15.8%

Other costs n.m. 1.3 10.9% 15.0%

Services costs 7.5 65.0% 8.3%

Payroll & assimilated Variable 3.8 33.1% n.m.

Other operating costs n.m. 0.2 1.9% 15.6%

Total OpEx 11.6 100.0% (20.2%)

% Variable 81.7%

% Fixed 18.3%

III. Wiit, a history of profitable growth

A. Evolution of top line growth

Wiit has seen a significant acceleration in its growth over the last few years, achieving 2017 full-year revenues of €19.6m (2014-2017 CAGR of 18%), riding the wave of the Cloud market trend. This strong, sustained growth was made possible by (i) acquisition of new customers, (ii) the advantageous contract structure (initial term of 5 years), and (iii) up-selling to the existing customer base (high level of customer satisfaction leading to contract renewal). It is worth noting that most costs throughout 2017 were variable and therefore correlate with the increase in revenue.

The potentially considerable improvement in margins specifically lies in the centralisation of costs in Italy (less expensive than in the rest of Europe, Germany in particular) which will contribute to the creation of cost efficiencies.

Exhibit 23: Historical top line growth

Source: Company

B. Evolution of the Group's investment policy

Over the past few years, Wiit has made significant investments in the development of the business and in a new Tier IV certified data centre. The Group allocates c.€0.5m p.a. to R&D and €1m p.a. to maintenance, in order to mitigate the technological risk (obsolescence) and enhance technology enabling it to increase its competitive advantage. Most CAPEX is still allocated to the acquisition of new customers, allowing the Group to be selective when choosing its customers, while consolidating its position on its market.

Exhibit 24: Changes in CapEx

Source: Company

11.9 12.8

15.3

19.6

3.0 3.8 4.7

8.5

25.2% 29.7% 30.6%

43.5%

0%

10%

20%

30%

40%

50%

0

5

10

15

20

25

2014 2015 2016 2017

Revenues (€m) EBITDA (€m) margin (%)

5.4

4.5

2.9

7.5

1.6 1.9 2.3

3.4

45.4%

34.9%

19.2%

38.6%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

50.0%

0.0

2.0

4.0

6.0

8.0

10.0

12.0

2014 2015 2016 2017

CapEx D&A CapEx/Sales


Debt instruments (FY2017) €m %

CPLTD owed to Banks 3.2 22.7%

ST Lease Debt 2.1 14.8%

Short term Debt 5.2 37.6%

LT Bank Debt 4.7 33.5%

LT Lease Debt 4.0 29.0%

Long term Debt 8.7 62.4%

Gross Debt 13.9 100.0%

C. Changes in the Group's debt structure

Wiit had to incur a significant amount of debt in order to partially finance its CapEx. Net gearing ratio reached 265% at its highest in 2015, and the net leverage ratio 2.3x at its highest in 2016. The Group today is reasonably leveraged (negative net leverage ratio at December 2017 thanks to the cash position) and any change in debt is strictly monitored. In December 2017, Wiit entirely repaid, in advance, the bond taken out with Hedge Invest SGR in 2015 with a maturity initially set at September 30

th, 2020, with a total residual amount of €1.79m.

Furthermore, all of the bonds taken out by Wiit in 2014, 2015 and Q4 2016 for a total amount of €4.25m were converted into around 135k new shares, thus improving the Group's financial structure. Today, the company's debt comprises finance leases (€6.1m for new equipment in order to honour new contracts entered into in the O&G and Fashion sectors – renewable every four years – the most recent renewal having taken place at a fixed rate of 140 bps) and Term Loans (with maturities ranging from 2018e to 2020e, the older tranches of which primarily bearing interest based on the Euribor 3-months rate of 0.70% to 2.50% per annum, while new tranches are fixed, thus guaranteeing protection against a potential increase in interest rates. Exhibit 25: Change in Wiit's financial structure

Source: Company

D. Improvement in cash generation

Despite consistently negative FCF (which is expected to become positive again from 2018e) due to the heavy weight of CapEx in order to sustain the Group's development, we have noted an improvement in cash generation over the last few years, illustrated by (i) increased FFO, (ii) FCF gradually becoming positive again (iii) an improvement in the FFO/Adj. EBITDA of 86.3% in FY2017.

2.2x 2.1x

2.3x

(1.0x)

186%

265%

209%

-30% (50.0%)

0.0%

50.0%

100.0%

150.0%

200.0%

250.0%

300.0%

(1.5x)

(1.0x)

(0.5x)

0.0x

0.5x

1.0x

1.5x

2.0x

2.5x

2014a 2015a 2016a 2017a

Net Leverage Net Gearing

2.5 3.2 3.2

6.6 6.7 7.8

9.4

(7.5)

37.3% 40.9% 34.0%

(87.7%)(105.0%)

(85.0%)

(65.0%)

(45.0%)

(25.0%)

(5.0%)

15.0%

35.0%

55.0%

(10.0)

(5.0)

0.0

5.0

10.0

15.0

2014a 2015a 2016a 2017a

FFO Net Debt FFO/Net Debt

8.0

9.9

13.013.9

6.7 7.8

9.4

(7.5)

(10.0)

(5.0)

0.0

5.0

10.0

15.0

2014a 2015a 2016a 2017a

Gross Debt Net Debt


Exhibit 26: Changes in operating cashflow, FCF and FFO/Adj. EBITDA

Source: Company

E. An attractive dividend policy

The founders and management team are also shareholders (70.5% stake), thus enabling shareholders' and managers' interests to be aligned, as well as guaranteeing that managers provide their unconditional support to the company.

This structure also enables shareholders to benefit from a more advantageous dividend distribution policy, which also boosts the IRR. Management, the members of which also hold an interest in the company, tends to pay more dividends, without compromising the company's financial position. Management intends to maintain a distribution rate of around 60% over the coming years.

Exhibit 27: Dividend distribution

Source: Company Note: Adj EPS excluding extraordinary items (specifically executives' share-based compensation and IPO costs), ceteris paribus

1.2

-2.9

-0.9 -0.9

(3.50)

(3.00)

(2.50)

(2.00)

(1.50)

(1.00)

(0.50)

0.00

0.50

1.00

1.50

2014a 2015a 2016a 2017a

Free Cash Flow (€m)

2.5

3.2 3.2

6.6

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

2014a 2015a 2016a 2017a

FFO (€m)

83.4% 84.6%

77.9%

86.3%

72.0%

74.0%

76.0%

78.0%

80.0%

82.0%

84.0%

86.0%

88.0%

2014a 2015a 2016a 2017a

FFO/Adj. EBITDA

0.10

0.44

1.22

0.10

0.43

0.83

99.9% 96.5%

67.9%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

120.0%

--

0.20

0.40

0.60

0.80

1.00

1.20

1.40

2015a 2016a 2017a

Basic EPS (€) DPS (€) Dividend payout ratio (%)


IV. Valuation

In order to determine the fair value of the Wiit share, we are going to use two different valuation methods, more specifically (i) valuation using the DCF method, including a sensitivity analysis (50%) and (ii) the trading multiples method (50%).

By taking into account these different valuation methods and their respective processes (with the DCF method as the main model, then confirmed by the trading multiples method), we obtained a price per share of €61.1. We therefore initiate the coverage of Wiit with a buy recommendation.

Historical performance & valuation

As illustrated in the set of charts below, despite the strong financial performance, Wiit trades below both its own and the peer group historical levels.

Exhibit 28: Historical performance & valuation

Source: , FactSet, Midcap Partners

A. DCF method with a sensitivity analysis

Our DCF method is simple, based on our projections for 2018e-2022e and applying assumptions presented in the table below until 2028e, which we believe to be conservative (e.g. growth rate and margins). The assumptions took into account for the valuation work include inter alia:

- The acquisition of Adelante contributing for 5 months to FY2018 financials

- A flat EBITDA margin of 44.4% beyond 2022

0.0x

100.0x

200.0x

300.0x

400.0x

500.0x

600.0x

Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18

WIIT SpA InterXion GDS HoldingsNextDC Internap EquinixAverage WIIT SpA Average Total peer group

0.0x

50.0x

100.0x

150.0x

200.0x

250.0x

300.0x

350.0x


WIIT SpA InterXion GDS Holdings

NextDC Equinix Average WIIT SpA

Average Total peer group

0.0x

10.0x

20.0x

30.0x

40.0x

50.0x

60.0x

70.0x

80.0x

90.0x

100.0x


WIIT SpA InterXion GDS HoldingsNextDC Internap EquinixEquinix Average WIIT SpA Average Total peer group

Share price performance (rebased 100 – from IPO to date) Historical EV/EBITDA trading (from IPO to date)

Historical EV/EBIT trading (from IPO to date) Historical P/E trading (from IPO to date)

-40.6% vs Wiit historical level

-47.4% vs peer group historical level





60

80

100

120

140

160

180

200

WIIT SpA FTSE Italia AIM FTSE Italia Star InterXion

NextDC Internap Equinix

115.8x

81.6x117.7x

50.4x

29.3x

26.0x


Exhibit 29: Key assumptions for the DCF method

Parameter Value EBITDA margin post-2022 44.4% Perpetual growth rate 2.5%

Assumptions applicable to WACC calculation Risk-free rate (BTP) 2.9% Market risk premium 6.1% β 0.73x Risk not captured by β (liquidity, size, place) 3.0% Cost of equity 10.3% Cost of debt post taxes 0.9% Debt/(Equity+Debt) @Market value 11.0% Income tax rate (taking into account the substantial amortisation effect) 22.0% WACC 9.3%

Source: Midcap Partners

As shown in the exhibit below, the discounted cash flows calculated above are expected to result in a price of €60.4 per share.

Exhibit 30: Calculation of the share price derived from the DCF method


The table presented below shows the sensitivity of the share price determined by changes in assumptions over the long term.

Exhibit 31: DCF sensitivity – Sensitivity of the share price based on the WACC and TGR (in euros)


B. Analogical approach via the trading multiples method

Wiit is a pure player in the Cloud services market. In our opinion, Wiit is positioned in a segment of the market presenting a megatrend. As such, the Group has a highly concentrated portfolio of which it can take full advantage.

DCF Valuation 2018e 2019e 2020e 2021e 2022e 2023e 2024e 2025e 2026e 2027e 2028e

Sales 24.8 30.1 35.3 41.5 48.9 55.2 60.3 64.3 67.4 69.7 71.5

Δ YoY 26.6% 21.6% 17.4% 17.5% 17.8% 12.8% 9.2% 6.7% 4.8% 3.5% 2.5%

EBIT 5.2 7.4 9.3 12.0 14.9 17.4 19.0 20.1 20.8 21.2 21.5

EBIT margin 21.0% 24.5% 26.4% 28.8% 30.4% 31.5% 31.5% 31.3% 30.9% 30.4% 30.1%

(-) Taxes (1.1) (1.6) (2.1) (2.6) (3.3) (3.8) (4.2) (4.4) (4.6) (4.7) (4.7)

Taxes rate 22.0% 22.0% 22.0% 22.0% 22.0% 22.0% 22.0% 22.0% 22.0% 22.0% 22.0%

NOPAT 4.0 5.7 7.3 9.3 11.6 13.5 14.8 15.7 16.2 16.5 16.8

(+) D&A 5.3 6.0 6.3 6.4 6.8 7.1 7.7 8.4 9.1 9.7 10.2

D&A % of sales 21.4% 19.9% 17.9% 15.5% 14.0% 12.9% 12.8% 13.1% 13.5% 13.9% 14.3%

WC 1.6 0.3 0.3 0.4 0.5 0.5 0.6 0.6 0.6 0.7 0.7

(+/-) ∆ WC (0.3) (0.3) (0.3) (0.4) (0.5) (0.5) (0.6) (0.6) (0.6) (0.7) (0.7)

∆ WC % of sales (1.3%) (1.1%) (0.9%) (0.9%) (0.9%) (0.9%) (0.9%) (0.9%) (0.9%) (0.9%) (0.9%)

Operating CF 9.0 11.4 13.3 15.4 18.0 20.1 22.0 23.5 24.7 25.6 26.3

(-) CapEx (5.0) (6.0) (6.5) (7.0) (7.5) (8.5) (9.2) (9.9) (10.3) (10.7) (11.0)

CapEx % of sales 20.0% 20.0% 18.4% 16.9% 15.3% 15.3% 15.3% 15.3% 15.3% 15.3% 15.3%

FCFF 4.1 5.4 6.8 8.4 10.5 11.7 12.7 13.6 14.3 14.9 15.3

Cash conversion 78.2% 72.9% 43.3% 45.6% 48.2% 47.7% 47.7% 47.8% 48.0% 48.2% 48.4%

Discount factor 1.0 0.9 0.8 0.7 0.7 0.6 0.6 0.5 0.5 0.4 0.4

Discounted FCFF (perceived) 1.1 4.8 5.5 6.3 7.2 7.3 7.3 7.1 6.9 6.5 6.2

Implied terminal trailing EV/EBITDA 28e 7.3x

Terminal Value 232.3 2.5% TGR

Discounted Terminal Value 93.3 58.5% % of EV

EV 159.6

(-) Preferred equity 0.0

(-) Minority interests 0.0

(-) (Net debt) / Net cash (2.2)

(-) Readjusted other liabilities & commitments (0.2)

(+) Investments in associates & JVs (0.5)

Equity value 156.7

Shares outstanding 2.6

Price Target 60.4

60.4 1.5% 2.0% 2.5% 3.0% 3.5%

8.9% 56.1 60.2 64.7 69.8 75.8

9.1% 54.4 58.2 62.5 67.3 72.8

9.3% 52.8 56.4 60.4 64.9 70.0

9.5% 51.3 54.7 58.4 62.6 67.4

9.7% 49.9 53.1 56.6 60.5 65.0

TGR

WA

CC


We believe that a valuation method via an analogical approach is appropriate for Wiit, which outperforms its peers in terms of margins, as well as generating positive net income, a factor we particularly appreciate. In an effort to remain conservative, we nevertheless decided to apply a 40% discount to Wiit's valuation, given that the Group is not very liquid, of a limited size, and listed in Italy (vs US, China and Australia for peers).

The tables below present Wiit's peers, independent of their market valuation levels.

Exhibit 32: Valuation using the trading multiples method


We obtained a value of €61.9 per share, resulting from the average 2019e EV/EBITDA and 2019e EV/EBIT, to which a 40% discount is applied for the liquidity, listing place and size. Besides, it is worth noting that 2019 financial metrics outperform the peer group in terms of margins, FCF Yield and CFRoE.

A valuation of €61.1 per share

Our valuation work resulted in a target price of €61.1 per Wiit share.

Exhibit 33: Valuation summary

Method Coefficient Valuation Discounted cash flows (DCF) 50% 60.4

2019e EV/EBITDA 25% 50.7

2019e EV/EBIT 25% 73.1

Valuation retained 100% 61.1


78%

14%

2%3%3%

USA

Canada

Japan

Europe

Other

Op

era

tio

na

lP

rofi

le

Company

Description

Founded in 1998 in the

Netherlands, Interxion is a

leading provider of cloud-

neutral colocation data

center services with 49

state-of-the-art facilities

located in 13 cities in 11

European countries.

GDS Holdings Ltd. engages

in software development

and provision of data

infrastructures. It specializes

in hosting, data centers, and

cloud services. Its also

involves in design, build-out,

and operation of data

centers.

NextDC Ltd. operates and

develops smart, secure and

scalable datacenters. 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.

Internap Corp. engages in

the provision of information

technology infrastructure

services. The company's

services include colocation,

managed services and

hosting, and network

services.

Equinix, Inc. operates as a

real estate investment trust.

The Company invests in

interconnected data centers.

Equinix focuses on

developing network and

cloud-neutral data center

platform for cloud and

information technology,

enterprises, network, and

mobile services providers,

as well as for financial

companies.

Revenues by

geography

Fin

an

cia

l P

rofi

le

Revenues €489.3m / +16% YoY US$248m / +53.1% YoY AU$123.6m / +33.1% YoY US$280.7m / -5.9% YoY US$4.37bn / +21% YoY

EBITDA /

Margin€221m / 45.2% US$78.7m / 31.7% AU$49m / 39.6% US$86.0m / 30.6% US$1.81bn / 41.4%

EBIT / Margin €98.3m / 20.1% US$12.6m / 5.1% AU$25.3m / 20.5% US$10.9m / 3.9% US$765m / 17.5%

Net income /

Margin€39.1m / +2.0% YoY -US$50m / n.m. AU$22.9m / 18.5% -US$45.3m / n.s. US$233m / 5.3%

CapEx/CA 52.3% 105.4% 120.2% 13.2% 31.5%

Gross Debt /

Cash€911.7m / €55.3m US$1.21bn / US$475m AU$303.3m / AU$218.2m US$869.9m / US$21.1m US$10.1bn / US$1.47bn

Utilisation rate 81% 60.9% 88% n.a. 80.4%

China97%

Hong Kong3%

Macao0%

Australie

100%

18%

22%

16%

9%

35%

France

Germany

Netherlands

UK

Other

50%

31%

19%

Americas

EMEA

APAC

PeersMarket

Cap. (MC)

EBITDA

margin

2019e

EV/EBITDA

2019e

EBIT margin

2019e

EV/EBIT

2019e

CFRoE

2019e

FCF Yield

2019eMC/FCF

InterXion 4,873 45.9% 16.8x 20.4% 37.8x (28.2%) (4.9%) n.m.

GDS Holdings 3,996 39.4% 20.6x 13.2% 61.5x (54.0%) (10.2%) n.m.

NextDC 2,120 47.0% 20.4x 22.1% 43.3x (25.5%) (10.9%) n.m.

Internap 266 36.3% 6.3x 7.6% 30.4x (57.3%) 11.0% 9.1x

Equinix 35,623 48.6% 16.3x 20.6% 38.4x 7.5% 1.6% 61.2x

WIIT SpA 113 44.4% 8.2x 24.5% 14.9x 20.5% 4.8% 20.9x

Average 43.5% 16.1x 16.8% 42.3x (31.5%) (2.7%) 35.1x

Average @40% discount 9.6x 25.4x

Implied Share Value @40 discount (using mean) 50.7 73.1

Implied return 16.2% 67.6%


Today, Wiit presents relatively attractive valuation levels, given sector trends that are expected to greatly benefit the Group. For all of the reasons stated above, Wiit offers significant potential in terms of ensuring a dynamic and profitable growth trajectory.

The currently high level of business activity, combined with the ability to generate structural and permanent cash flows, will make it possible to continue implementing the external growth policy.

We initiate the coverage of Wiit with a Buy recommendation, combined with a target price of €61.1 per share.


Appendix 1: Presentation of the management team

Manager Description

Alessandro Cozzi, Chairman & CEO Founder and majority shareholder of Wiit Group, Alessandro Cozzi (46) has been Chairman and CEO since the Group's creation. In early 2000, Alessandro decided to create a high-level, 100% Italian player in the outsourcing sector by founding Wiit S.p.A, guiding the company's growth until the present day. Alessandro is also a financial expert, overseeing corporate administration, management, financial audit and M&A activities.

Riccardo Mazzanti, Managing Director (MD) With over 20 years of experience in the ICT sector, Riccardo Mazzanti (48) 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 (50) 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. Thanks to his long-standing experience as sales director, Enrico has acquired considerable expertise in sales resource management. Prior to joining Wiit, Enrico spent a number of years at Oracle, where he achieved great success in the sale of applications and was given direct responsibility for developing sales targets.

Aldo Napoli, Independent Director VP and Chairman of the Executive Committee at Hat Orizzonte, Aldo has spent his career in the administrative and financial sector as a director at several Italian and multinational companies. For a number of years, Aldo worked abroad at General Motors Corporation and General Motors Acceptance, and was CFO and CEO of Cerved (Market cap. of €1.8 billion), CEO at Tecno Holding from 1997 to 2014 and at Tecnoservicecamere from 2014 to 2017. Aldo also sits on a number of boards of directors at companies such as Aeroporti Holding S.r.l., Aéroport de Florence and a number of SPVs.

Dario Albarello, Independent Director Since October 2010, Dario has been Investment Manager at Hat Orizzonte and manages the ICT fund. Having successfully obtained a degree in economics and commerce from Turin University, Dario began his career within PwC's audit department, before moving on to TS and later joining the Corporate Finance team at Banca Intermobiliare di Investimenti e Gestioni, where he worked on M&A and ECM transactions. He was then promoted to the position of Assistant CEO, participating in the setting of the Group's strategic guidelines.

Marco Vismara, Non-executive director Marco coordinated the transaction leading to the Hat Orizzonte investment. Marco has been a Partner at Oaklins since 2013 and manages the international M&A transactions department. He was previously CEO at Cape Natixis (private equity), Chairman at Cape Live (investment firm) and worked at Monitor Company (strategic consulting). Marco is a graduate of Luigi Bocconi University (cum laude) and speaks fluent English and French.

Amelia Bianchi, Non-executive Director Amelia has considerable experience in internationalisation processes and expansion into new markets for SMEs. Amelia is responsible for business development and the organisation of Import-Export activities, under the investment and expansion strategy in keeping with the Group's ambitious growth plans.

Source: Company


Appendix 2: The History of Wiit

Appendix 3: Group governance model

A growth model driven by a structured, loyal and stable management team

The company's governance structure is made up of real experts (both financial and technical – see Appendix 1) and complies with the recommendations issued by the Italian stock market regarding governance during the IPO, including, inter alia, two independent directors and two non-executive directors.

Appendix 4: Group shareholders

Given that members of the management team are also shareholders, they are fully committed to the Group's development.

The founders and management team are also shareholders (70.5% comprehensive stake), thus enabling shareholders' and managers' interests to be aligned, as well as guaranteeing that managers provide their unconditional support to the company.

It is also worth noting that the management team may, until December 2018 and under certain conditions, benefit from a bonus indexed against an increase in the Group's EBITDA. Therefore, approximately 57,300 new shares are expected to be allocated to the management team in December 2018, as provided for in the performance plan. These new shares have been taken into consideration in the valuation.

2004 2007 2008 2013 2015 2016 2017

Acquisition of the 1st

data center

Acquisition of the 2nd

data center

Achievement of the

first 2 levels of SAP

certification

Orizzonte SGR

becomes a shareholder

Achievement of the 3rd

level of SAP certification

Promoted

innovative SME

with high potential

Establishment of

Wiit Switzerland

Achievement of the 4th,

5th and 6th levels of

SAP certification

Acquisition of Visiant

Technologies

Achievement of the Tier

IV certification

IPO on the AIM

segment AIM of the

Milan stock exchange

2018

Acquisition of

Adelante S.r.l. from

Francesco

Baroncelli

Comittee type # members o/w independant % independance

BoD 7 2 28.6%

Audit 3 3 100.0%

Compliance 3 2 66.7%

Founders & Management

70.4%

Free Float24.8%

Hat Orizzonte SGR2.3%

Treasury Shares2.5%


V. Wiit – Financial data

Income statement (€m) 2015a 2016a 2017a 2018e 2019e 2020e

Revenues 12.8 15.3 19.6 24.8 30.1 35.3

Δ YoY 0.0% 19.9% 27.5% 26.6% 21.6% 17.4%

Gross Margin 11.3 12.6 17.4 22.0 26.8 31.4

% sales 88.1% 82.3% 89.0% 89.0% 89.0% 89.0%

SG&A (7.5) (8.5) (9.8) (11.5) (13.4) (15.8)

EBITDA 3.8 4.1 7.6 10.5 13.3 15.7

% sales 29.6% 26.8% 39.0% 42.4% 44.4% 44.4%

D&A (1.9) (2.3) (3.4) (5.3) (6.0) (6.3)

EBIT 1.9 1.8 4.2 5.2 7.4 9.3

% sales 14.5% 11.8% 21.4% 21.0% 24.5% 26.4%

Other non current items (1.1) 0.0 (0.0) 0.0 0.0 0.0

Financial result 0.0 (0.5) (0.3) (0.2) (0.1) (0.1)

EBT 0.8 1.3 3.9 5.0 7.3 9.2

% sales 6.1% 8.7% 19.8% 20.2% 24.1% 26.2%

Tax (0.6) (0.4) (0.7) (1.1) (1.6) (2.0)

Tax rate 74.9% 32.9% 18.8% 22.0% 22.0% 22.0%

Net Income 0.2 0.9 3.1 3.9 5.7 7.2

Discontinued operations 0.0 0.0 0.0 0.0 0.0 0.0

Minorities 0.0 0.0 0.0 0.0 0.0 0.0

Net Income - Group 0.2 0.9 3.1 3.9 5.7 7.2

Financial Balance Sheet (€m) 2015a 2016a 2017a 2018e 2019e 2020e

Intangible assets (incl. Goodwill) 2.0 2.2 2.7 2.7 2.7 2.7

Tangible assets 8.4 8.9 12.9 19.0 19.0 19.2

Financial assets 0.8 0.9 0.5 0.5 0.5 0.5

Deferred tax assets 0.0 0.4 0.7 0.7 0.7 0.7

WCR 2.3 3.0 2.0 2.4 2.7 3.0

Assets 13.6 15.4 18.8 25.2 25.6 26.0

Shareholders equity 3.0 4.5 24.8 23.5 26.2 30.1

Provisions 2.8 1.1 1.1 1.1 1.1 1.1

Deferred tax l iabilities 0.0 0.3 0.4 0.4 0.4 0.4

Net debt 7.8 9.4 (7.5) 0.1 (2.2) (5.5)

Liabilities 13.6 15.4 18.8 25.2 25.6 26.0

Cash Flow Statement (€m) 2015a 2016a 2017a 2018e 2019e 2020e

Net income 0.2 0.6 2.3 3.9 5.7 7.2

Add-back items 3.6 3.1 4.4 6.6 7.7 8.5

Δ Working Capital (1.7) (1.7) 0.2 (0.3) (0.3) (0.3)

Cash Taxes (paid) / accrued (1.2) (0.6) (0.1) (1.1) (1.6) (2.0)

Others 1.1 0.7 (0.2) 0.0 0.0 0.0

Cash flow from operations 2.0 2.1 6.6 9.1 11.4 13.3

CapEx (4.5) (2.9) (7.5) (5.0) (6.0) (6.5)

Others (0.5) (0.1) 0.0 0.0 0.0 0.0

Free Cash Flow (2.9) (0.9) (0.9) 4.1 5.4 6.8

Acquisitions 0.0 0.0 0.0 (6.4) 0.0 0.0

Divestitures 0.9 0.0 0.0 0.0 0.0 0.0

Cash flow from investing activities (4.1) (3.0) (7.5) (11.4) (6.0) (6.5)

Dividends paid (common & pref) (0.6) (0.2) (0.9) (2.1) (2.9) (3.4)

CIP (0.2) (0.2) (0.4) (0.2) (0.1) (0.1)

Δ Debt (incl. SH loans) 1.1 (0.8) 7.1 (3.2) (1.9) (1.4)

Δ Equity 0.0 0.8 18.1 (3.0) 0.0 0.0

Others 2.5 2.5 (6.1) 0.0 0.0 0.0

Cash flow from financing activities 2.9 2.1 17.7 (8.5) (4.9) (4.9)

Currency translation effect on cash 0.0 0.3 1.1 0.0 0.0 0.0

CF from discontinued operations 0.0 0.0 0.0 0.0 0.0 0.0

Δ Cash 0.8 1.5 17.9 (10.8) 0.4 1.9

Cash BoP 1.3 2.1 3.6 21.4 10.6 11.1

Cash EoP 2.1 3.6 21.4 10.6 11.1 13.0


VI. Disclaimer

This document may refer to valuation methods, which are defined as follows: 1/ DCF method; discounting of future cash flows generated by the company's operations. Cash flows are determined using the analyst's financial projections and models. The discount rate used corresponds to the weighted average cost of capital, which is defined by the weighted average cost of the company's debt and the theoretical cost of equity as estimated by the analyst. 2/ Comparables method: application of market valuation multiples or those observed as part of recent transactions. These multiples may be used as a reference and may be applied to the company's financial aggregates in order to determine its valuation. The sample is prepared by the analyst based on the company's characteristics (size, growth, profitability etc.). The analyst may also apply a premium/discount depending on their perception of the company's characteristics. 3/ Asset method: estimate of the value of equity based on assets revalued and adjusted for the value of debt. 4/Dividend discount method: discounting of estimated future dividend flows. The discount rate applied is generally the cost of capital. 5/Sum of the parts: this method consists of estimating a company's different operations by using the most appropriate valuation method for each one, then doing the sum. Recommendations: Buy: expected to outperform the market by more than 10% over the next 6 – 12 months Neutral: performance expected between -10% and +10% compared to the market over the next 6 – 12 months Sell: expected to underperform the market by more than 10% over the next 6 – 12 months Detecting conflicts of interest:

Company Closing price (€) Recommendation Notice

Wiit S.p.A. €43.6 Buy G A LOUIS CAPITAL MARKETS – MCP or any related legal entity holding more than 5% of all of the capital issued by the issuer; B The issuer holds more than 5% of all of the capital issued by LOUIS CAPITAL MARKETS - MCP or any related legal entity; C LOUIS CAPITAL MARKETS - MCP, alone or with other legal entities, is related to the issuer via other significant financial interests; D LOUIS CAPITAL MARKETS - MCP or any related legal entity is a market maker or liquidity provider with whom a liquidity contract has been entered into with regard to the issuer's financial instruments; E LOUIS CAPITAL MARKETS – MCP or any related legal entity has participated, over the last twelve months, as lead manager or joint lead manager for an offering for financial instruments of the issuer made public; F LOUIS CAPITAL MARKETS – MCP or any related legal entity party to any other agreement with the issuer concerning the provision of investment services relating to corporate activity; G LOUIS CAPITAL MARKETS – MCP and the issuer have agreed that the former shall provide the latter a production and distribution service for the investment recommendation on said issuer.

Breakdown of recommendations At 19/09/2018, the recommendations issued by the Louis Capital Markets – MCP Midcap research team breaks down as follows:

Recommendation Companies monitored including "Corporate" companies

Buy 68% 77%

Neutral 28% 23%

Sell 4% 0%

The reference prices used in this document are closing prices. Any opinion issued in this document reflects our current assessment and may be changed without prior notice. LOUIS CAPITAL MARKETS - MCP has adopted effective administrative and organisational procedures, including information barriers, in order to anticipate and avoid conflicts of interest with regard to investment recommendations. The remuneration of financial analysts involved in the preparation of the recommendation is not related to "corporate finance" activities. Past performance is not an indicator of future performance.

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