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Aerospace & Defense

Global Overview2017

Aerospace & Defense Market InsightsGeneral Overview | 2017

Global Reach, Local Presence

Unit 1907-1908No. 333 Lanhua Road

Shanghai 201204 www.oaklins.com/hfg

8F Cowell Building 140 Sapyeong-daero,

Deocho-gu Seoul 06577www.sunp.co.kr

ul. Pańska 98, Suite 83 Warsaw 00-837

www.mergers.pl

Paseo de la Reforma 2620, Despacho 1404 Col. Lomas Atlas, Mexico City 11950

www.zimma.com.mx

88, rue El Marrakchi Quartier Hippodrome

Casablanca 20100 www.atlascapital.ma

Kingdom Tower, King Fahad Road, 49th floor

Riyadh 11451 www.swicorp.com

19200 Von Karman Ave, Suite 340

Irvine, CA 92612janescapital.com

Havenlaan 2 Avenue du Port SIS, 8854

B-1080 Brusselswww.kbcsecurities.com

Engelbrektsplan 1 Stockholm SE-114 34

www.avantus.se

Member Firm in India Pending

Aerospace & Defense Market InsightsCountry Overview | 2017

Transaction Highlights Deal Financials

• On February 16, 2017, LMI Aerospace Inc.(Nasdaq:LMIA) agreed to be acquired by Sonacafor US$14/share (representing a 52% premiumover LMI’s closing share price on February 16,2017)

• Sonaca Group is a Belgian company known for itscapability to produce advanced aerostructures

• LMI Aerospace is a leading supplier of structuralassemblies, kits and components

• The transaction closed on June 27, 2017

Transaction Value: US$432MEquity Value: US$192MTEV/Sales: 1.2xTEV/EBITDA: 12.5xAnnounced Date: 02/16/17

Date Target Acquirer TEVTEV / Sales

TEV / EBITDA

07/16/17 ADB Safegate The Carlyle Group – – –

11/07/16 Advanced Circuit Boards Edmond de Rothschild, Cabestan Capital

– – –

10/10/16 Gatewing Delair-Tech – – –

04/29/16 TCR International 3i Infrastructure $200 4.3x 5.3x

12/21/15 Marlink Altamir, Apax Partners $437 – –

06/05/15 Industrial Control Machines

Teledyne Technologies $21 – –

01/21/15 Cassidian Belgium PARTER Capital Group – – –

01/08/15 Carat Security Group Axle Holdings – – –

09/29/14 Barco (aerospace and defense display business)

Esterline $189 1.0x 7.4x

04/24/14 Mecar Giat Industries $165 – –

03/04/13 ADB PAI Partners $270 1.3x –

Company Commentary/Investments

• Manufactures high lift devices, complex mechanical assemblies, and functional components for the aerospace industry

• On February 22, 2017, ASCO signed a long-term contract with Boeing for the production of hard metal and aluminum structural components and assemblies

• The agreement, valid until 2024, includes both the renewal of existing work on the 737 MAX, 747-8, 777 and 787 platforms, as well as several new packages on the 777X

• Manufactures metal and composite structures, servo-systems and sub-assemblies

• A joint venture between Dassault Group and Fokker Technologies (GKN Group)

• Focuses on “plug and fly” integrated structures, actuation systems and MRO and upgrades of platforms and equipment

• Manufactures aerospace structures, such as movable wing leading edges and wing skins, for civil, military and space markets

• LMI Aerospace (US$432, 2017) – provides structural assemblies, kits and components and design engineering services to the aerospace and defense market

Belgian Region Spotlight: Wallonia

Select Belgian A&D Transactions

Sources: CapIQ, Export.gov, Marketline, GlobeNewswire

($ in US millions)

Stephen PerryManaging Director

(949) 769-3323 [email protected]

Alyssa MorrisroeManaging Director


Ilana GermaineVice President


Select Company Profiles

($ in US millions)

Tom Van de MeirsscheSenior Associate+32-2-429-32-19

[email protected]

Stefan GoethalsHead of Corporate Finance

[email protected]

Manu De VriesDirector

[email protected]

Belgian Deal Spotlight: Sonaca to Acquire LMI Aerospace

Belgium Aerospace & Defense OverviewThe Belgian aerospace market is primarily comprised of small and medium enterprises (SMEs) producing assemblies, sub-assemblies and components forvarious aircraft, and offering various maintenance, repair and overhaul (MRO) services. These SMEs focus on advanced, small-batch production capabilities inboth metallurgy and composite materials. The overall aerospace and defense (A&D) industry has total revenues of US$3.7 billion, representing a compoundannual growth rate (CAGR) of 4.1% since 2010. The A&D industry is expected to grow at a 0.8% CAGR in the near-future, with the industry expected to reach avalue of US$3.9 billion by the end of 2019. Recently, civil aerospace has been the Belgian A&D industry’s most lucrative segment, representing over 70% of theindustry's total market.

Belgium’s defense industry is fully privatized and centered on manufacturing components, subassemblies and small arms rather than full weapon systems andplatforms. As a small nation, Belgium cannot maintain a large defense industry based on internal requirements, and instead, relies on external componentsand subcontractor work on major defense programs. Belgium’s military, similarly to other countries in Europe, is aging. The average soldier is 43 years old andthe number of soldiers has declined from 40,000 in 2006 to 32,000 in 2016. Due to this decline, Belgium is streamlining its forces to no longer have a separatearmy, navy and air force, but rather a unified defense entity with a land, sea and air component served by a joint medical component. Additionally, Belgiumhas developed the Belgian Soldier Transformation (BEST) program integrating the latest technologies, including smart textiles, enhanced integrated andscalable communication, personal optics and global positioning.

Wallonia

• The aerospace industry in Wallonia turns overalmost US$1.9 billion annually and employs5,800 people, including 1,400 in the spaceresearch sector

• The A&D industry was initially funded withstate investment. Today, several of Wallonia’slarge companies are foreign-controlled

• Companies with key investments in the regioninclude SABCA (plant in Charleroi), Safran(subsidiary Techspace Aero), Thales (twobusinesses in the region) and Sonaca (state-owned, based in Charleroi)



TEV / EBITDA

11/16/16 Gardner Aerospace Chengdu Aerospace Superalloy Technology

$406 2.2x –

10/04/16 Airwork Holdings Zhejiang Rifa Holding Group

$314 2.6x 6.2x

07/15/16 SR Technics Switzerland HNA Aviarion Group – – –

04/11/16 Gategroup Holding HNA Group $1.923 0.6x 13.5x

01/12/16 Aritex Cading AVIC International $124 – –

11/23/15 AIM Aviation AVIC Aerospace International

– – –

04/05/15 Danbury Aerospace Continental Motors(AVIC International)

– – –

12/05/14 Align Aerospace AVIC International – – –

10/23/13 TIMCO Aviation Services Hong Kong Aircraft Engineering Company

$393 1.1x 13.4x

01/03/13 Enstrom Helicopter Corp. Chongqing Helicopter Investment

$60 – –

02/28/11 Cirrus Design Corp. China Aviation IndustryGeneral Aircraft

$210 – –

Market

Cap TEV

LTM

Revenue

TEV / LTM

EBITDA

LTM EBITDA

Margin

AVIC Aircraft $7,141 $6,726 $3,724 NM 2.8%

AECC Aviation Power $6,917 $9,234 $3,249 22.5x 12.4%

China Avionics Systems $3,863 $4,378 $1,005 24.0x 13.5%

AviChina $3,683 $5,708 $5,275 10.9x 9.7%

Avicopter $3,552 $3,204 $1,767 25.6x 6.8%

China Aerospace Times Electronics$3,031 $3,431 $1,731 23.6x 8.1%

Mean 21.3x 8.9%

Company Financials Commentary/Investments

Sales: $56,537 EBITDA: $5,265Cash: $14,634

• China Aviation Planning and Design Institute (US$342M) – Provides technical consultation services to the A&D industry

• Tainjin Aviation Mechanical and Electrical (US$115M) – Develops and manufactures secondary power and fireproofing systems

• Aritex Cading (US$108) – Manufactures production and assembly lines for aeronautic companies

Sales: $15,547EBITDA: $2,730Cash: $17,549

• SR Technics – Provides MRO services for the civil aviation sector

• Gategroup Holding (US$1,923) – Provides airline catering and provisioning services worldwide

• Asia Jet Partners – Offers aircraft management, on demand charters, jet card membership, and consultancy services

Sales: $1,775EBITDA: $140Cash: $168

• TIMCO Aviation Services (US$393) – Aircraft MRO provider to commercial, government and private customers

• GE Engine Services Xiamen (US$43) – Provides MRO and aviation services for engine operators

COMAC C919 SpotlightPublic Comparable Companies

Select Recent Chinese Acquisitions of Western A&D Firms

Sources: CapIQ, Dacis, Deloitte, NY Times

($ in US millions)

Trading metrics as of 6/6/17. Valuation multiples based on LTM financial data as of 3/31/17







($ in US millions)


($ in US millions)

John ZhangPrincipal

[email protected]

Angela ChenPrincipal

[email protected]

Paul LiangManaging Director+86-21-5012-0990

[email protected]

Key Statistics

First Flight May 5th 2017

CompetitionBoeing 737

Airbus A320

Current Order Count

570 orders 23 buyers

List Price US$50 million

Estimated Sales(20 years)

2,000 units

China Aerospace & Defense OverviewIn 2016, the aerospace and defense industry in China continued to grow due to increases in defense spending and changes to the Catalogue of Industries forGuiding Foreign Investment, which expanded the range of approved investment activities of foreign entities into the aviation sector. These changes shouldallow foreign companies to manufacture small scale aircraft parts, including aircraft engine components and bearings, and drive foreign M&A and directinvestment activities. In 2016, China’s defense budget was the second largest in the world, as it rose 6.2% to US$192.0 billion. China’s military expenditure asa percentage of GDP is only 1.9%, which is low compared to other countries like India (2.3%), the US (3.3%) and Russia (5.4%), indicating additional capacity toincrease military spending. The President of China, Xi Jinping, reduced armed forces personnel by approximately 13.0% (300,000 people) earlier this year aspart of China’s ongoing restructuring to modernize its military with robust cyber warfare and joint operation capabilities.

The commercial aerospace sector has also seen rapid growth, and China’s domestic aviation market is expected to become the world’s largest by 2035,surpassing North America and Europe with 1.9 trillion revenue passenger kilometers projected by 2035. Within the next 20 years, 6,810 new aircraft would berequired to meet this growing travel demand. Domestic and global demand for travel has caused the country to enter the commercial aircraft manufacturingbusiness itself in order to reduce dependency on Boeing and Airbus. Chinese state-owned aircraft manufacture, COMAC, plans to produce a 158 seat sing-aisle aircraft, with 570 order commitments received from 23 customers. COMAC believes that its new aircraft, the COMAC C919, has a market potential ofnearly US$100 billion, and additionally has entered into a joint venture with UAC in Russia to develop a wide-body jet, the COMAC C929.

• The COMAC C919 is a 158 seat, narrow-body twinjetairliner developed by Chinese aerospacemanufacturer COMAC

• Multinationals have played a large role in thedevelopment of the C919, with GE supplying enginesand avionics and Honeywell supplying navigationequipment and fly-by-wire controls



TEV / EBITDA

08/14/15 India Aviation Training Institute

AXISCADES Engineering Technologies

$41 1.3x –

06/26/14 Thales Software India L&T Technology Services

– – –

02/06/14 Deepti Electionics & Electro-Optics

Global Strategic Technologies

– – –

07/09/13 Sansera Engineering Citi Venture Capital International

$57 0.6x –

02/07/13 Cades Studec Technologies

CADES Digitech – – –

01/29/13 BF Elbit Advanced Systems

Bharat Forge – – –

09/21/12 Aurora Integrated Systems

Tata Advanced Systems – – –

06/06/12 Pranita Engineering Solutions

Gardner Group – – –

12/29/11 Saertex-Kemrock Aerospace India

Kemrock Industries and Exports

– – –

07/01/11 Sigma Microsystems Skanda Aerospace – – –

02/01/11 Aero Accessories and VXL eTech

Salarpuria Sattva – – –


• Manufactures and supplies electronic products for the defense sector

• Offers communication, radars, naval systems, opto electronics, electronic warfare systems, weapon system, tank electronics and simulators products

• Offers aerospace components, assemblies and aircrafts• Defense Land Systems India (2013) – manufactures purpose built

special military vehicles

• Offers missile, radar, unmanned aerial, aero-structure, command and control and homeland security solutions

• Aurora Integrated Systems (2012) – manufactures systems and subsystems for commercial and military applications

• Offers engineering services to the aero engines and aerospace and defense markets

• EDF Engineering und Design im Fahrzeugbau (2015) –manufactures components, assemblies and vehicle body structures for the aerospace and automotive sectors

• Offers airframe structures and precision aerospace components, including wing and rear fuselages, ailerons, wing flaps and flap track beam assemblies and other airframe structures

• Oldland Aerospace (2008) – manufactures aerospace components and offers precision engineering parts

Market

Cap TEV

LTM

Revenue

TEV / LTM

EBITDA

LTM EBITDA

Margin

Bharat Electronics $5,840 $4,530 $1,287 16.6x 20.9%

Dynamatic Technologies $253 $337 $231 13.2x 10.9%

Taneja Aerospace and Aviation $21 $25 $6 17.8x 24.0%

Sika Interplant Systems $11 $11 $5 27.3x 7.6%

High Energy Batteries $10 $15 $7 14.4x 14.6%

Kavveri Telecom Products $4 $37 $4 N/M 8.9%

Mean 17.9x 14.5%

India Aerospace & Defense OverviewThe Indian aerospace and defense (A&D) industry is one of the fastest growing A&D industries worldwide. The Indian aerospace industry, an approximateUS$16 billion market, currently ranks in the global top 10 aerospace industries and is predicted to become the third largest aviation market by 2026. As theA&D market continues to increase, India will require 1,850 new commercial aircraft worth US$265 billion, over the next two decades. The robust expansion incommercial aviation creates similar augmentation within the A&D supply chain subsectors, particularly within the maintenance, repair and overhaul market(MRO). The Indian government aims to continue expanding the MRO industry by offering exemptions on paying customs duty, airport royalties, value-addedtaxes and ensuring adequate land available for MRO service centers.

The Indian defense industry also continues to expand quickly. The Indian defense sector budget (US$50.7 billion) became the fourth largest global defensebudget in the world and will continue to grow to US$56.5 billion by 2018 as the country seeks to bolster its military. The Indian government offers severalpolicy initiatives aimed at strengthening the local defense industry. In 2016, the Indian government removed regulations barring foreign A&D firms fromholding more than a 49.0% stake in local ventures. This relaxation of FDI regulations will assist India in becoming a key A&D manufacturing hub. The easing ofregulations also spurred Boeing to announce, in November 2016, plans to invest in a factory to produce the F/A-18 Super Hornet fighter jet. Additionally,reports exist of Lockheed Martin’s plan to shift their F-16 production facility to India. As more favorable regulations are introduced, large A&D firms willcontinue to invest in India’s burgeoning A&D industry.

Public Comparable Companies

Select Recent A&D Transactions

Sources: CapIQ, Deloitte, Export.gov, The Investor, McKinsey, Forbes, MRO Network

($ in US millions)








($ in US millions)

Select Indian Company Profiles

Hindustan Aeronautics Limited (HAL) Spotlight

Select Segments Description

Space • Engaged in manufacturing various space structures

MRO• Offers aircraft, helicopter and power plant MRO

services

Aircraft • Manufactures five various military aircraft

Business Description

HAL produces various aircraft, helicopters and engines and provides MRO services


Company Commentary

• In 2013, Delta and AeroMexico jointly opened a US$40M heavy maintenance facility

• The facility will provide work for 3,000 specialist technicians

• Shifted its assembly plants from Northern Ireland to the Queretaro region of Mexico

• Employs 1,800 full-time employees• Thirty percent of Bombardier Learjet 85’s are assembled in

Queretaro

• In 2012, opened a new manufacturing facility in Mexicali, Baja California

• The facility will produce composite structures for the Sikorsky Black Hawk Helicopter

• Invested US$27M in new Mexicali manufacturing plant that will generate 250 new jobs

• Expected to employ 2,200 people by 2018 in multiple Mexicali manufacturing plants

• Invested US$150M and opened two new plants in central Mexico

• Safran is the largest aerospace employer in Mexico, currently employing 5,000 people

Sources: CapIQ, Export.gov, PwC, EY, Pro Mexico








ProAero National Strategic Program Chihuahua Aerospace Cluster Highlight


Mexico Aerospace and Defense OverviewIn the last few years, Mexico has experienced an influx of foreign firms establishing manufacturing operations in its aerospace and defense (A&D) sector.Currently, the aerospace sector in Mexico consists of approximately 310 parts and components manufacturing firms, manufacturing, repair and overhaulcenters (MROs), technical schools and universities, as well as service providers. Nevertheless, Mexican A&D firms do not yet manufacture large aircraft fromstart to finish. The Mexican aerospace industry includes five main clusters located in the states of Baja California (Tijuana-Mexicali), Sonora, Chihuahua,Queretaro and Nuevo León. Overall, the Mexican A&D industry continues to expand with high growth from OEMs and Tier 1 suppliers and more modestgrowth from Tier 2 and Tier 3 suppliers. These aerospace hubs continue to attract new players interested in Mexico’s competitive labor costs and incentivesoffered by local, state and federal authorities. Mexico’s aerospace manufacturing capabilities continually progress from components, small parts andharnesses to manufacturing larger sections, such as engines, cockpits parts, wings, etc. Many opportunities still exist in the MRO services, testing machinery,metal treatments and aerospace molding industries. The Mexican A&D total market value is forecasted to reach US$9.6 billion by 2018 and the number ofA&D firms are expected to grow to 420 within the same period.

Alejandro RochaManaging Partner

(+52)-55-5292-6700 [email protected]

Arseny LepiavkaManaging Partner+52-55-5292-6469

[email protected]

• The Chihuahua Aerospace cluster is home to five premier OEMs: TextronAviation, Cessna and Beechcraft, Honeywell, Hawker and EZ Air

• The cluster maintains a strong presence in A&D subsectors, such asturbines, aerostructures, wiring harness, composites, special processesand treatments, high precision machining, sheet metal, engineering anddesign

• The cluster boasts 5 million square feet of industrial space, 40 certifiedsuppliers and more than 17,000 people in its direct labor force

• Beginning in 2012, a 10 year initiative, was developed to place Mexico within the top 10 global aerospace production countries

• Key strategies include:- Creating an A&D linked supply chain- Continued cluster development- Strengthening human resources, especially technical training

programs- Developing specialized clusters and R&D labs- Increasing government incentives, financing and industry

certifications• Mexico expects to become one of the 10 largest global A&D countries,

generating over US$12 billion in exports and having over 110,000 aerospace professionals


TEV / EBITDA

11/27/14 Procesos Termicos Noranco – – –

7/07/10 CMR Korea Industria de Turbo Propulsores

$45.5 – –

09/22/05 Paranetics Technology, Inc., Mexico Manufacturing Facility

Ballistic Recovery Systems

– – –

Geographic Breakdown of A&D Firms Present in Mexico

More than 50 More than 10, Less than 20More than 20, less than 50 More than 0, Less than 10


Morocco Aerospace & Defense OverviewThe Moroccan aerospace and defense industry continues to experience rapid growth in recent years due to the country’s political stability, competitiveworkforce and geographic proximity to Europe. In order to develop the aerospace industry, the Moroccan government offers significant financial incentives,including corporate tax exemptions, financial subsidies and dedicated aerospace industrial zones. The government created GIMAS, an Institution forCollaboration (IFC) tasked with developing the Moroccan aerospace sector strategy, and established the Moroccan Aerospace Institute (IMA), an aerospacelabor training center, in hopes of improving the quality and sustainability of its workforce.

The Government of Morocco continues to lure large international aerospace companies to Morocco. Boeing, Bombardier, United Technologies, SafranEngineering and Airbus are among the 110 international companies currently present in Morocco. The Moroccan aerospace and defense industry currentlygenerates US$1 billion in annual turnover, claims 17% average yearly growth since 2010 and employs over 11,500 people. As the international demand for newaircraft continues to grow, Morocco should see similar growth within its aerospace industry. The country’s ability to convince major aerospace firms to invest inMorocco should continue as their skilled labor workforce increases, government incentives remain and political stability persists. Morocco plans to double itscapacity and number of operators, while also creating 23,000 new jobs by 2020.

Moroccan Aerospace IncentivesSelect Notable A&D Firms with Sites in Morocco

Sources: CapIQ, Export.gov, GIMAS, Financial Times, Oxford Business Group







Tarik BritelManaging Partner+212 5222-37602

[email protected]

Hicham Chebihi HassaniManaging Partner+212 5222-37602

[email protected]

Zineb Chaouni BenabdallahDirector

+212 [email protected]

Recent Investments into Morocco from Leading A&D Firms

Company Recent Investment

• Airbus, through its subsidiary Stelia Aerospace, has invested US$41M in its second Moroccan plant. The plant will be located in Casablanca and will create an additional 400 aerospace jobs

• The plant will specialize in assembling complex subassemblies for Airbus A320, A330 and A350

• Boeing operates Matis, a joint venture with French aerospace firm Safran, that produces wire bundles and harnesses

• In Sep 2016, signed an agreement creating a “Boeing Ecosystem” • The ecosystem project aims to increase aeronautics exports by

US$1 billion and create 8,700 jobs in Morocco

• Plans to invest US$200M and create 850 new jobs by 2020• Moroccan plant will produce operation parts for the Bombardier C

Series, Q-Series and the CRJ Series

• Latecoere invested US$12M in a factory south of Casablanca• The new factory will specialize in manufacturing Airbus 320/350

avionics racks and A320 cockpit panels

• Thales is nearing completion of an additive manufacturing and metal 3D printing technology industrial center

• The center will commence operations in 2018

Rabat

Tanger

,

Bouskoura

Casablanca

Nouasser

Financial subsidy equal to 15% of total investment, can reach up to 30% under specific conditions

For Free Zone Areas: tax free for 5 years and 8.75% afterwards, with exemption on custom duties

Five year corporate tax exemption – 17.5% afterwards

Financial contribution for training costs: US$6,760 per engineer and US$2,250 per technician

VAT exemption of new equipment imports during first two years of production



TEV / EBITDA

05/30/17 Stocznia Marynarki Wojennej

PGZ Stocznia Wojenna – – –

07/11/16 Vac-Aero Poland MB Aerospace Holdings – – –

06/30/16 Pratt & Whitney Rzeszow Consolidated Precision Products

– – –

05/31/13 Aero AT Jiangsu Aviation Industrial

– – –

03/22/12 LOT Aircraft Maintenance Services

Agencja Rozwoju Przemyslu

– – –

09/09/10 PZL-WROCLAW UTC Aerospace Systems – – –

08/18/09 PZL-Swidnik AgustaWestland $127 0.8x –

06/11/07 Bilsam Aviation Industries

INC Spolka Akcyjna – – –

09/20/06 Polskie Zaklady Lotnicze Sikorsky Aircraft Corp. $80 – –

10/17/01 EADS PXL Warszawa-Okecie

Airbus Defence and Space

– – –

09/24/01 Wytwornia Sprzetu Komunikacyjnego

Pratt & Whitney Company

$70 – –

Business Description Key Financials

Lubawa manufactures army, police, border

patrol, fire brigade and special force products

TEV: $61Market Cap: $37Revenue: $72EBITDA: $7


• General Electric (GE) partnered with Lufthansa to invest US$270 million in Poland to build a plant that will service aircraft engines starting in 2018

• The plant will be located in Sroda Slaska and is meant to test and repair state-of-the-art engines for the Boeing 747-8 jumbo jets for Lufthansa and other airlines

• Lockheed Martin’s manufacturing facility in South East Poland, PZL Mielec, employs 1,600 people and is the largest Lockheed facility outside the US

• Lockheed Martin signed an LOI with Poland’s state owned defense company, Polska Grupa Zbrojeniowa, to expand manufacturing of defense products in Poland

• AgustaWestland partnered with PZL-Swidnik to provide the Polish government with 23 emergency medical service helicopters

• PZL-Swidnik (US$115) – Polish helicopter manufacturer, acquired by AgustaWestland in 2009

• In April of 2016, Pratt & Whitney opened a US$57 million facility in south-eastern Poland

• The facility will be used to test, build and assemble advanced aircraft engines, as well as pursue cutting-edge research and development

Lubawa SA Spotlight

Select Polish A&D Transactions

Sources: CapIQ, Deloitte, Export.gov, Polska, Lockheed Martin, Phys.org, Vertical, Polish Press Agency

($ in US millions)







Foreign Companies Invested in Poland

Maciej SzalajPrincipal

[email protected]

Henryk RytwinskiManaging Director+46-609-364-444

[email protected]

Igor PogorzelskiDirector

[email protected]

Product Spotlight Description

AMP-1 TP • First composite helmet with VPAM certification

Plate Carrier QRS • Bulletproof vest with quad release system

10-Seat Offshore Life Raft • High seas airborne inflatable resilient rescue raft

Trading metrics as of 7/25/17. Valuation based on LTM financial data as of 3/31/17

• Investment in the Polish A&Dindustry is focused in thesouth-eastern region ofPoland

• There are over 120 aviationrelated companies in Poland,and 25+ major foreign A&Dfirms that have invested inthe industry

• Advantages of investing inPoland include a skilled andlow cost labor force

Key Aerospace Production Regions in Poland

($ in US millions)

Poland Aerospace & Defense OverviewThe aerospace and defense (A&D) industry in Poland has experienced substantial growth in recent years. Continual investments from foreign companies,growing passenger traffic at Polish airports and the modernization of Soviet-era military equipment will continue to drive growth in the near-term. Theaerospace industry has grown immensely over its 80-year history, with now over 120 aviation and aviation-related companies generating over US$900 millionof annual sales and over 23,000 employees operating in Poland. Around 80% of aviation plants are located in south-eastern Poland in one of three aviationclusters, and 90% of aviation production is exported. Polish aviation companies gain their competitive edge from low labor costs and high quality productiondue to significant expertise in treatment of materials, casting, mechanical engineering and electronics. The advanced level of processes used in the Polishaviation sector is best illustrated by the participation of Avio Polska and GE EDC Poland in the development of the innovative GEnx engine used in the Boeing747-8 and 787 Dreamliner. In addition, the increased number of passengers traveling through Polish airports, which is expected to grow by 5.5% annually,reaching 40 million passengers by 2020 and 59 million by 2030, is another strong indication of continued growth in this market segment.

The defense industry in Poland is also poised for growth as the Polish military continuously undergoes changes designed to transform it into a more capableand mobile force, compatible with NATO troops. In order to modernize, an estimated US$45 billion will be spent between 2013 and 2022. In 2016, the Polishgovernment allocated US$9.9 billion to the defense budget – 2.0% of the nations GDP. Poland’s Minister of Defense recently announced his intent to increasedefense spending to 3.0% of GDP in the near future.


Market

Cap TEV

LTM

Revenu

TEV /

LTM

LTM

EBITDA

Korea Aerospace Industries $5,614 $6,246 $2,775 16.0x 14.1%

Hanwha Techwin $2,351 $2,954 $3,265 10.8x 6.3%

LIG Nex1 $1,595 $1,925 $1,626 18.7x 6.3%

S&T Dynamics $250 $65 $426 3.0x 5.1%

Aerospace Technology Of Korea $223 $313 $79 28.1x 14.3%

FIRSTEC $157 $203 $141 42.6x 3.4%

Mean 19.9x 8.2%


TEV / EBITDA

07/03/17 Hanwha Defense Systems

Hanwha Land Systems $584 – –

07/27/16 Hanwa Thales [JV] (50%)

Hanwha Techwin $254 0.4x –

08/08/16 Asia Pacific Aerospace Asia Pacific Satellite Communications

$15 – –

03/30/16 Doosan DST Hanwha Techwin $609 1.0x –

10/10/15 CMR Korea K&H – – –

06/24/15 Dodaam Systems Suncore $15 0.4x –

04/16/13 Oneseen Skytche LS CNS – – –

08/31/11 Unconsystem Firstec $5 1.2x –

08/30/10 DACC-Aerospace Lotte Chemical – – –

07/30/10 Samsung Thales Hanwha Techwin $176 0.3x –

02/10/09 C & Space RENetworks $11 – –

Company Financials Commentary/Investments


• Korea Aerospace Industries (KAI) manufactures fixed and rotary wing aircraft and airframe components

• KAI has been the target in five minority stake acquisitions over the past six years, most recently selling an 18.9% stake to The Export-Import Bank of Korea

Sales: $3,266 EBITDA: $207Cash: $123

• Hanwha Techwin participates in the security solution, engine and energy equipment and defense program businesses

• Doosan DST (US$609) – Manufactures defense products, provides optics/navigation systems and various training products


• LIG Nex1 offers various weapon systems worldwide• Product offerings include precision guided munitions,

intelligence, surveillance, and reconnaissance products and command and control systems

Sales: $426EBITDA: $22Cash: $191

• S&T Dynamics provides products for defense, auto parts, machine tools, casting and pipe making industries

• S&T Brake (US$3) – Produces and supplies break pads, lining products and break assemblies

Spotlight: KAI’s Participation in $15 Billion T-X Trainer ProgramPublic Comparable Companies


Sources: CapIQ, Deloitte, Export.gov, The Investor

($ in US millions)








($ in US millions)


($ in US millions)

Kyung Woo (Chris) KimSenior Associate

[email protected]

• Korean Aerospace Industries (KAI) has teamed withLockheed Martin to bid for the Advanced PilotTraining (APT) project worth US$15.2 billion to theUS Air Force

• The APT project is being implemented to replaceold trainers and introduce about 350 new units

• “In the history of Korean defense industry, therehasn’t been a deal as large as this one,” said HaSung-yong, CEO of KAI

• Another strong contender for the bid is aconsortium comprised of Boeing and Swedishaerospace and defense company Saab Group

South Korea Aerospace & Defense OverviewThe South Korean aerospace and defense (A&D) industry has continually expanded in recent years with growth in the defense industry due to the increasedmilitant threat of North Korea. The industry is estimated to have reached a market size of US$20.0 billion at the end of 2016, with the aerospace segmenttotaling US$7.4 billion, representing 37.0% of the industry’s overall value. The growing defense segment totaled US$12.6 billion, representing 63.0% of theoverall industry value. The South Korean government’s defense budget was US$38.6 billion in 2015, representing a 3.6% rise from the previous year andsolidifying its position as the tenth largest military spender worldwide. In an effort to modernize its military force and meet alliance specified requirements,the South Korean government has initiated US$12 to US$14 billion worth of U.S. Foreign Military Sales acquisition programs, a steep increase from previousyears.

The South Korean commercial aerospace industry is driven by local companies Korea Aerospace Industries (KAI) and Korean Air, one of the largest commercialairlines in the country. Subsidiaries of KAI and Korean Air manufacture and assemble integral parts for aerospace giants Boeing and Airbus, and are active indeveloping indigenous aircraft, including UAVs, rotary wings and fixed wings. In 2015, KAI won the bid for the US$17 billion KF-X project from the Koreangovernment, which will be paid out through 2025. Korean Air has a total of 159 aircraft, and is also very active in providing maintenance, repair, and overhaul(MRO) services for both commercial and defense aircraft. The Korean MRO market is estimated to be US$3 billion in 2014 and is expected to grow 23.5% toUS$3.7 billion market by 2020.

Chester KimPrincipal

[email protected]

Dalho KimAssociate

[email protected]


Market

Cap TEV

LTM

Revenue

TEV / LTM

EBITDA

LTM EBITDA

Margin

Hexagon $17,235 $18,672 $25 21.1x 25.2%

SKF $9,573 $11,152 $8,365 9.7x 13.3%

Saab $5,394 $5,319 $3,277 18.4x 8.7%

Beijer Alma $877 $925 $413 13.0x 16.9%

AQ Group $514 $527 $391 12.8x 10.2%

Mean 15.0x 14.9%

Company Commentary

• Arcam AB provides additive manufacturing for the production of various metal components

• Acquired by GE Aviation on Nov. 29, 2016

• GKN Aerospace is a Tier 1 multi-technology aerospace supplier that manufactures various aero structures, engines, systems and also provides MRO services

• GKN Aerospace, formerly known as Volvo Aero AB, was purchased from Volvo in Jul. 2012

• Hexagon AB offers engineering services in the aero assembly, aero engine, defense and space exploration fields

• Acquired Apodius GmbH in Aug 2016, a provider of measurement solutions for composite components to the A&D and auto industries

• SKF AB provides products, solutions and services in rolling bearings, seals, mechatronics and lubrication systems areas

• The aerospace division supplies products that support airframe, aero structures and gearboxes

• Trelleborg AB provides solutions for aircraft engines, flight control systems, landing gear, safety equipment, airframe and ground support equipment

• The company’s primary aerospace products include aircraft sealing solutions, engineered coated fabrics, fire resistant coatings and thermal insulation

Sources: CapIQ, Export.gov, SKF, Business Insider, SAAB, Arcam, GKN, Hexagon, Trelleborg







Adel KoubaaManaging Partner(+46) 8 459 82 50

[email protected]

SaaB Company Spotlight

Sweden Aerospace and Defense OverviewDespite its relatively small size, the Swedish aerospace and defense (A&D) industry is recognized as a world-class A&D region as a result of strategicimportance and the country’s strong focus on technology development. Employing approximately 12,000 people, the Swedish A&D industry annuallygenerates about US$3.3 billion in turnover and imports around US$450M of aircraft parts. The Swedish aerospace market is particularly active in the cutting-edge A&D technology, such aero engines, avionics, space applications and communications and positioning systems. Strong development of opportunitiesexist within the avionics, aircraft parts and components sectors due to increased airline passenger traffic and a skilled workforce.

As the Swedish aerospace industry continues to grow, the defense industry also exhibits expansion. One factor of growth stems from recent Russianaggressions, which is spurring the Swedish Government to increase spending on defense from its present budget of US$5.1 billion to US$6 billion by 2020.Sweden’s arms export industry, a US$1.2 billion market, also contributes to the strong defense industry growth, but faces challenges due to the governmentseeking to pass legislation barring the selling of arms to non-democratic nations. The country’s top defense contractor, SAAB, has already warned if theproposed legislation were accepted, the company may have to relocate its R&D out of Sweden.


TEV / EBITDA

4/13/17 Quintus Technologies AB Kobe Steel Ltd. $115 1.3x –

8/19/16 NanoSpace AB GS Sweden $3 – –

10/4/16 Safearo i Trelleborg AB Textron Inc – – –

9/06/16 Arcam AB General ElectricAviation

$629 9.4x 164x

8/15/16 Callenburg Technology Group

J.F. Lehman & Co $64 – –

1/25/16 Signal Processing Devices Sweden

e2v Technologies plc $18 4.5x –

3/20/15 Tactel AB Panasonic Avionics Corp

– – –

8/15/16 ThyssenKrupp Marine Systems AB

Saab AB $50 0.2x –

12/03/12 CybAero AB AeroVironment $3 – –

7/5/12 Volvo Aero Corp GKN plc $835 0.3x 7.2x

Sven-Ake LewinPartner

(+46) 31 799 65 16 [email protected]

($ in US millions)



Public Company Comparables

($ in US millions)

Select A&D Segment Services Offered

Aeronautics • Air power systems and military aviation

Dynamics • Combat weapons systems

Industrial Products • Produces aircraft wings, flaps and doors

Saab Kockums • Develops solutions for naval environments

Surveillance • Surveillance, support and systems

Business Description Key Financials

Saab AB provides products, servicesand solutions for the military, defenseand civil security markets worldwide

TEV:Market Cap:Revenue:EBITDA:

$5,319$5,394$3,277

$291


Anders InglerPartner

(+46) 8 459 82 42 [email protected]


United Arab Emirates Aerospace & Defense OverviewThe United Arab Emirates (UAE) leverages its proximity to international trading routes and central location to strengthen its position in the global travel andaviation markets. The UAE aviation sector is valued at US$80 billion and accounts for nearly 15% of the country’s GDP. Significant contributions to the UAE’srobust civil aerospace market include two world-class airlines (Emirates and Etihad), two budget airlines (Fly Dubai and Air Arabia) and the Dubai World Central(DWC) Airport, which will be the world’s largest airport when completed in 2030. Within the aerospace and defense (A&D) supply chain, maintenance, repair andoverhaul (MRO) and aircraft decommissioning and recycling opportunities exist due to a lack of nearby MRO and decommissioning facilities. The Dubai MROmarket is forecasted to grow significantly from US$4.2 billion to US$8.8 billion, and the Dubai decommissioning and recycle centers are predicted to increaseUS$500M annually for the next 10 years. Furthermore, as the UAE’s A&D manufacturing and MRO industries blossom, many opportunities will continue todevelop for international companies to partner with UAE OEM firms. As the UAE continues to focus on becoming the gateway to global markets, specifically inthe Middle East, North Africa and South Asia (MENASA) region, companies across all aerospace subsectors benefit, particularly airspace management, digitizationand business aviation. Defense expenditures, as a proportion of GDP, have remained comparatively high in recent years in response to rising Islamist extremismin the region, persistent tensions with Iran and the UAE’s participation in the Saudi-led coalition’s military efforts in Yemen. The country is looking to decrease itsdependency on defense imports through the development of its own defense manufacturing capability and bolster the Advanced Military Maintenance, Repair,and Overhaul Center (AMMROC).

Select Recent UAE A&D Transactions

Sources: CapIQ, Emirates, Export.gov, Planespotters, DACIS







Rayan LazaarSenior Associate

(+971) 4 [email protected]

Maheur MouraliManaging Director

(+966) 2 657-4160 [email protected]

Rakaan AlsallounAssociate

(+966) 11 [email protected]

UAE Government Investment in A&DUAE Airline Wide Body Aircraft Orders


TEV / EBITDA

4/24/17 AWAS Aviation Capital Designated Activity

Dubai Aerospace Enterprise (DAE)

– – –

9/20/16 Jordan Aircraft Maintenance Limited (JorAMCo)

Dubai Aerospace Enterprise (DAE)

– – –

8/01/16 TOG Manufacturing Dubai International Capital

$5 – –

8/28/14 Armac Systems Mubadala Development

– – –

5/8/14 Abu Dhabi Aircraft Technologies (ADAT)

Etihad Airways $1 – –

5/6/14 Piaggio Aero Industries MubadalaDevelopment Co

– – –

6/14/13 Automatic Screw Machine Products

– – –

48

21

150A380-80

777x

777-300

61

26

62

26

A350

787

A320

777

• Sovereign wealth fund mandated to invest in Abu Dhabi’s economy

• Developed Al Ain Aerospace Park, 25km2 of land solely for aerospace projects

• Genoa, Italy• Manufactures

and maintains various business and military aircraft

• Abu Dhabi, UAE• Produces various

components for Boeing, Airbus, Alenia Aermacchi, FACC AG and SABCA

• Abu Dhabi, UAE• Provides MRO

services

• Zurich, Switzerland

• Provides MRO services

• Sovereign wealth fund mandated to invest in Abu Dhabi’s economy

• Invested in 33 portfolio companies in various industries, including A&D

• Dubai, UAE• Leases

commercial aircraft

• Dubai, UAE• Low cost

commercial airline

• Dubai, UAE• Largest

commercial airline in the Middle East

• Dubai, UAE• Offers various

cargo, logistics and airport services

($ in US millions)

72

10A350 XWB

777x

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