immobiliare grande distribuzione siiq spa - gruppoigd.it · igd emerged from a transfer of a large...

18 May 2016 DEAL RESEARCH

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UniCredit Research page 1

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Immobiliare Grande Distribuzione SIIQ SpA

■ Immobiliare Grande Distribuzione SIIQ SpA (IGD), with total assets of EUR 2.2bn in FY15, is a listed Italian real estate company with a long-term strategy focused on commercial real estate. IGD is one of the main Italian companies in the retail segment of the real estate sector: it owns a property portfolio valued at EUR 2.08bn as of 31 December 2015, across 11 Italian regions. IGD is also present in Romania, where it owns 100% of Winmarkt, a chain of 14 shopping centers.

■ IGD emerged from a transfer of a large part of real estate assets owned by Coop Adriatica and Unicoop Tirreno. The company developed an ambitious investment program, starting from the IPO in February 2005 and running intensively to end-2011. After a short consolidation period during 2012 and 2013 accompanied by asset rotation, the company’s investments started rising again In 2005, IGD was listed on the Italian Stock Exchange and became an SIIQ (Societa di Investimento Immobiliare Quotate, the Italian version of a REIT) in 2008 – one of a few companies benefitting from tax advantages in the Italian real estate market.

■ Market capitalization stood at over EUR 720.8mn in 4Q15. Registered shares are held mainly by Coop Adriatica (holding 40.92%). Unicoop Tirreno owns 12.03% of shares. Free-float is equal to 47.05%, of which Quantum Strategic Partners Ltd accounts for 5.39%, as of May 2016.

■ The company’s core business is commercial real estate in Italy. As of 31 December, 91.8% of IGD’s real estate portfolio was located in Italy and the remaining 8.2% in Romania. Investment properties represent 98% of the company’s total portfolio. Out of this, Italian shopping malls and hypermarkets represent 84% of total investment properties. Development initiatives and trading properties, together with ongoing projects, account for about 5.4% of IGD’s total investment property. This strategy is in line with economic and real estate developments in Italy and in Romania.

■ A good track record in the Italian commercial real estate market as well as its recognition as an SIIQ company gives IGD an advantage over its competitors. Knowledge of the Italian market and regional diversification within Italy are advantages. While operating concentration in the cyclical retail segment might be a disadvantage, IGD history shows high occupancy rates and relatively long-term rental contracts. The presence of a strong food anchor (COOP), historically completely integrated in the territory, guarantees a stable presence.

■ The company has a diversified debt structure and good access to capital markets, solid funding and adequate liquidity resources, and a well-diversified debt structure with good access to capital markets.

■ IGD received a provisional first-time long-term issuer rating of (P)Baa3 by Moody's on 17 May 2016. Concurrently, Moody's assigned a provisional (P)Baa3 rating to the proposed senior-unsecured notes to be issued by IGD. Moody’s outlook on the ratings is stable. The (P)Baa3 issuer rating is provisional pending IGD's successful completion of the envisaged refinancing plan in the near term. According to Moody’s, “the rating to IGD primarily reflects its focus on stable and food anchored retail properties, its defensive lease maturity schedule and moderate leverage.”

Contents Immobiliare Grande Distribuzione SIIQ SpA_______ 3 SWOT-analysis ___________________________ 5 Market overview___________________________ 6 Financial analysis__________________________ 8 APPENDIX ______________________________ 9 Issuer ratings (P)Baa3 by Moody's, stable outlook Bloomberg IGD IM Company website http://eng.gruppoigd.it/ Financial calendar 10 May 1Q16 results 5 August 2Q16 results 8 November 3Q16 results

Author Dr. Martina v on Terzi (UniCredit Bank) +49 89 378-14245 [email protected] Bloomberg UCCR Internet www.research.unicredit.eu

http://eng.gruppoigd.it/

http://www.research.unicredit.eu/


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Immobiliare Grande Distribuzione SIIQ SpA History and regional exposure: SIIQ, core market in Italy

IGD SIIQ, with total assets of EUR 2.2bn and real estate property portfolio value of EUR 2.1bn, is a listed Italian real estate company with its headquarters in Bologna. IGD is one of the main players in the Italian retail real estate sector, where it develops and manages shopping centers across Italy. Since 2008, the company has also a significant presence in retail distribution in Romania. IGD’s development activity is mainly focused on the development of new shopping malls within Italy. IGD's portfolio is a balanced mix between different types of properties, which helps to stabilize the company’s risk profile.

IGD is one of the main players in the Italian real estate market. The company was listed on the Italian stock exchange in 2005, and in 2008 became the first Italian SIIQ. Italian real estate investment companies, which opt for the SIIQ qualification and prevalently exercise the real estate rental activity, are granted a particular exemption in direct taxation. Once opted for the SIIQ qualification within the fiscal year, these companies enjoy the privilege of a favorable tax treatment for real estate properties held for rental purposes for this particular fiscal year, while the shareholders themselves (other than the companies) are subject to a definitive withholding tax equal to 26% of the dividend paid to the company. In contrast, no benefit is provided to the real estate investors who acquires real estate properties for trading, or to real estate developers. In return, Italian SIIQ must generate at least 80% of their income from rental properties and distribute at least 70% of their income to shareholders. Since its IPO in 2005, IGD has increased fourfold the portfolio of assets from a market value of EUR 585mn and is well positioned on the Italian real estate market. Apart from Italy, the Group is also present in Romania where it owns the Winmarkt chain of department stores through the subsidiary WinMagazin SA (for the Group’s structure see Chart 1 below).

CHART 1: THE GROUP’S STRUCTURE

Source: company data, UniCredit Research


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Core business: Retail real estate sector

The Group is mainly active in the Italian retail real estate market. IGD’s goal is to confirm its position as a leading owner and manager of shopping centers in Italy. The property management and leasing of all the Group’s freehold properties, as well as of some third party assets, represents IGD’s core business, with the main objective to enhance the long-term value of its portfolio. In Romania, the Group is invested with 8.2% of its property. The company’s real estate asset value increased from EUR 647mn in FY05 to almost EUR 2.1bn in FY15, accompanied by a reasonable increase of net debt (chart 2A). In October 2014, a capital increase of EUR 200mn was made and the number of shares doubled.

According to the new business plan (BP), investment activity will continue to be strong in the BP horizon 2016-2018, dedicated in particular to the development of new shopping malls and renewals of the company’s existing properties.

To achieve its goals, IGD is focused on three types of business:

■ Acquisition and lease of investment properties: includes individual properties and portfolios with the objective to generate sustainable income, steady cash flows and long-term capital appreciation. Disposal of freehold assets.

■ Project development: to a lesser extent, around 5.4% of IGD’s investment property.

■ Active management and services: letting and renting, facility management, and coordination and supervision of operational activities of shopping centers, marketing. By increasing sustainable earnings power, an increase in property values can be achieved.

Core business: Retail real estate sector

The Group is mainly invested in malls and retail parks, creating 58.7% of its total rental revenues and in hypermarkets (32.8% of total rental revenues). In Romania, almost the entire rental results from retail sector renting activity (Chart 2B).

CHART 2A: REAL ESTATE ASSET VALUE CHART 2B: RENTAL REVENUES BY ASSETS (FY15)


Company strategy IGD latest strategy, newly updated for the planning horizon until 2018, is focused on a steady increase of the company’s profitability, while the continuous improvement of the group’s sustainable cash flow remains the company’s priority. This strategy is aimed at strengthening IGD’s position as a leading owner and manager of shopping centers in Italy. This strategy has been followed continuously and coherently since the IPO in 2005, as demonstrated by a steady increase in real estate asset value from EUR 585mn in FY15 to almost EUR 2.1bn as of end-2015.

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FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15

Real Estate Asset Value (mn EUR) Net debt (mn EUR)NNAV / share (RS)

Malls58.7%

Hypermarkets 32.8%

Romania7.1%

Other1.4%


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Company outlook: Business Plan 2016-2018

In May, the Business Plan (BP) for 2016-2018 was updated in order to reflect both changing global market conditions and, in particular, the acquisition and capital increase completed in FY15. The targets have been either confirmed or even raised compared to the prior version of the BP:

■ CAGR for rental income is expected to reach around 7%, while like-for-like revenue is projected to grow at a CAGR of around 2%. Overall, rental income is expected to increase by more than 20% by the end of the plan period.

■ Regarding profitability, the Group expects the freehold EBITDA margin to reach 80% by end-2016: revenue will increase more than proportionately with respect to the increased operating costs (due to the expanded perimeter). The company plans a noticeable improvement in financial management thanks to a further reduction in the cost of debt (estimated to be lower than 3% by the end of the BP period with the interest cover ratio above 3x).

■ The goal to obtain a rating from a premiere rating agency to access the bond market at even more favorable conditions was confirmed – see below for more information.

■ The Group intends to complete the committed pipeline with investments of around EUR 195mn, approximately EUR 145mn of which relates to expansions and development projects with a focus on the quality, as well as the efficiency, of the shopping centers and enhancement of the “spaces to be lived in” concept. New GLA of more than 70 thousand sqm will be added with yields on cost above 7%.

■ The Loan to Value ratio is expected to remain between 45% and 50%, reaching the low end of the range by 2018.

■ Funds from Operations (FFO) are expected to rise significantly at a CAGR of more than 18% (target FFO by 2018 of EUR 75mn); toward this end, of note is the positive result recorded between 2014 and 2015 (FFO rose +28.5% to EUR 45.1mn).

■ IGD intends to distribute approximately 2/3 of the FFO as a dividend, reserving the right to propose a Dividend Reinvestment Option as it has in the past if market conditions permit.

Credit rating by Moody’s

On 17 May 2016, IGD received a provisional first-time long-term issuer rating of (P)Baa3 (with a stable outlook) by Moody's. The stable outlook on IGD's ratings mainly reflects Moody's expectations of stable-to-slightly-improving operating performance, as a result of overall stable rental income and unchanged occupancy rates throughout the next two years. In terms of key debt metrics, the stable outlook is based on expectations of fixed-charge cover sustained between 2.25x and 2.75x and leverage (gross debt to total assets) between 45% and 50% over the next two years. According to Moody’s, positive rating pressure is currently unlikely to develop given the constraint posed by Italy's current sovereign rating of Baa2s. Otherwise, it could develop if IGD's leverage would decline sustainably below 45% and its fixed-charge cover to exceed 2.75x, also conditional on maintaining sound liquidity. Negative rating pressure, as stated by Moody’s, could develop if IGD's operating performance, debt metrics or liquidity would materially deteriorate to leverage remaining above 50% and fixed-charge cover remaining below 2x for a prolonged period.

SWOT-analysis IGD: STRENGTHS AND WEAKNESSES

Strengths/Opportunities Weaknesses/Threats Good track record in the Italian commercial real estate business and SIIQ recognition giv e IGD an adv antage ov er its competitors

Large operating concentration risk in the cy clical retail segment - subject to v olatility in the Italian real estate sector

Well-balanced and increasing regional presence in relativ ely stable Italian retail property market, clear operating strategy and ambitious but achiev able f inancial targets.

Regional exposure to the Romanian retail real estate market – limited risks as long as contracts remain euro-denominated

Low exposure to commercialization risks related to dev elopment activ ities

Solid f unding and adequate liquidity resources, well div ersif ied debt structure with good access to capital markets



Credit View



Market overview Core market: Italy IGD is mainly active in the domestic Italian retail real estate market, representing 91.8%

of its total investment portfolio. IGD plans to expand further in Italy. Consequently, the company’s results are sensitive to market developments in Italy. For example, looking at debt developments over the five largest euro area countries, the debt-to-financial assets ratios of non-financial corporations (i.e. typical rentals of IGD’s premises) has been increasing at the fastest pace in Italy. Debt-to-equity ratios of non-financial corporations increased in Italy to just below 100%, higher than the rest of the core euro area. Because of its limited diversification, IGD’s portfolio is sensitive to economic headwinds in Italy.

The Italian economy grew modestly in 2015, with GDP up 0.8%, and it will likely gain more momentum in 2016 and 2017 as domestic demand strengthens. We see GDP up by an annualized 1.2% in both years. After prices increased by a mere 0.1% in 2015, inflation is projected to remain low in the next two years, also due to continuously low energy prices, still relatively high unemployment and limited labor cost pressures. Italian house prices have been falling in 2015 (by around 2.4% yoy when adjusted for inflation). While a better outlook is expected for the Italian property market in 2016 than in previous years, growth is expected to be lower than that of the European average, in terms of prices and turnover.

A low interest rate environment continues to make real estate markets an attractive investment opportunity. The Italian retail real estate market is highly diversified. Chart 4A shows the top three retailers’ market share in Italy (COOP, Conad and Selex) and compares them with France (Carrefour, Leclerc and Casino), Spain (Mercadonia, Carrefour and Eroski Group), Germany (Edeka, Rewe, Aldi), and UK (Tesco, Asda, Sainsbury’s). While these in 2013 represented over 50% in France and Spain and over 60% in the UK and Germany, the share of 34.8% is much lower in Italy. Chart 4B confirms the diversification, showing that in Italy hypermarkets and supermarkets account together for about 53% of market shares, while France and UK have been dominated by the hypermarket type of business for years. According to IGD’s BP, hypermarkets weight on rental revenues is declining over the next two years.

IGD is also well positioned in terms of business sector breakdown perspective (chart 4D). Although clothing types of business represent a clear majority among all IGD’s mall tenants, its proportion doesn’t exceed 50%. Despite the economic slowdown, the sales trend has been positive over the past two years and is likely to continue its upward slope. In 2015, all business sectors developed positively, increasing their sales by over 3% on average. Financial occupancy rate in Italy increased from an already high level of 96.9% as of 31 December 2015 to 97.2% as of 31 March 2016.

In 2016-2018 timespan, there will be several important new openings in Italy: ■ The mall in the Grosseto shopping center - expected to open in November 2016. Pre-

letting is underway, IGD expects full occupancy by the opening.

■ The extension of the ESP shopping center in Ravenna - expected to open 1H17. Pre-letting is going well, IGD’s goal is 100% occupancy by the opening.

■ The shopping mall at Officine Storiche in Livorno - expected to open 2H18. First inquiries have already been received.

Non-core: Romania In Romania, IGD is only invested with 8.2% of its property assets in thirteen medium-sized cities. Economic growth in Romania is forecast to peak in 2016 before moderating somewhat in 2017. Inflation is projected to accelerate as of mid-2016, partially driven by wage increases. Due to tax cuts and expenditure increases, the fiscal deficit is set to increase substantially. New legal initiatives in the Romanian financial sector pose risks to the macroeconomic outlook.

Retail real estate sector in Romania has been developing rapidly, catching up with the retail real estate sector in the euro area. The vibrant market attracted many new shops and brands and made the Romanian retail sector more diversified (Chart 4C).


Credit View



In line with this positive development, financial occupancy of IGD’s properties in Romania has been improving to 93.9% as of end-2015 and even further to 94.2% in 1Q16, benefitting from investments that were made. Looking ahead, positive economic developments in 2016 and 2017, an increase in consumer spending, fiscal relaxation and the increase of income availability for purchases should all support the attractiveness of the Romanian retail real estate market, likely bringing more international brands into the country. This might put upward pressure on rental prices in the retail real estate sector.

Romania’s housing market has been growing strongly, with low interest rates and improving economic conditions. House prices have been rising robustly and the danger that the Romanian mortgage market could overheat remains.

TABLE 1: CORE MARKETS MACRO DATA

Italy Romania Rating (Moody 's/S&P/Fitch) Baa2/BBB-u/BBB+ Baa3/BBB-/BBB-

Population 2015 (mn) 60.8 19.9

GDP 2014 (current prices, EUR bn) 2915.7 150.2

GDP per capita 2014 (PPP) 35,402 7,521

Real GDP (% y oy ) 2015 0.8 3.6

Real GDP (% y oy ) 2016 and 2017* 1.2 4.2 and 3.7

CPI inf lation (% y oy ) 2015* 0.1 -0.4

CPI inf lation (% y oy ) 2016 and 2017* 0.0 and 1.1 -0.3 and 2.3

Central bank rate (EoP) 2015 and 2016* 0.00 1.75

House prices (% y oy ) 2015* -2.3 2.9

*UniCredit f orecasts Source: Bloomberg, Eurostat, European Commission 2016 Winter Forecast, UniCredit Research

CHART 4A: TOP 3 RETAILERS’ MARKET SHARES (FY13) CHART 4B: MARKET SHARE BY SHOP TYPES (FY12)

CHART 4C: OCCUPANCY


61.0% 61.0%

54.0% 53.0%

34.8%

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UK Germany Spain France Italy

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29% 24%

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9%

54% 19%

18%

26%

11%19%

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UK Germany Spain France Italy

Mini-mart Small supermarkets Large supermarkets Hypermarkets

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120.0%

2010 2011 2012 2013 2014 2015

Italy - malls Italy - hypermarkets Romania

Clothing46.7%

Household goods6.8%

Culture / leisure11.3%

Personal care / Healthcare

9.4%

Electronics15.9%

Restaurant7.8%

Services2.1%


Credit View



Financial analysis Balance sheet Total assets increased by 6.1% yoy to EUR 2.17bn in 1Q16. Real estate long-term assets

amounted to over EUR 2bn in FY15 (up 8% yoy), representing around 94% of total assets.

Income statement The Group’s net profit increased by 37.4% yoy to EUR 12.7mn in 1Q16. Core business revenue increased by 8.7% yoy to EUR 33.8mn. Rental income rose by 9.1% yoy to EUR 32.6mn. Like-for-like revenue in Italy (up by 1.6% yoy), new openings and acquisitions made in FY15 and higher revenue in Romania (+2.3% yoy) contributed to the increase of rental income. Sales of retailers in Italian malls increased by 6% yoy and footfalls were up by 2.4% yoy. In Romania, footfalls increased by 1% yoy. The average occupancy also rose further, reaching 97.2% in Italy (up from 96.9% in FY15) and 94.2% (up from 93.9% in FY15) in Romania. Operating costs dropped significantly in 1Q16, boosting the core business EBITDA margin which amounted to 69.9%, while the freehold EBITDA margin came to 79.2%. The Group expects the freehold EBITDA margin to reach 80% by end-2016. Financial expenses also fell noticeably, down by 9.3% yoy to EUR 9.4mn, with the average cost of debt falling to 3.26%. In April, the company completed a swap of two prior bond issues (with coupon rates of 4.335% and 3.875%, respectively) for a new senior issue, with a coupon rate of 2.65%. This also made it possible to extend the debt’s maturity to a more favorable period of the year at historically low rates: a benefit which was reflected in the Interest Cover Ratio (ICR) which rose from the 1.77x posted at the end of 2014 to 2.15x at the end of 2015. During 1Q16 the ICR increased further to 2.52x. The breakdown of IGD’s debt at end-2015 reflects a good balance between bank debt (56.3% of total debt) and funds raised on debt capital markets (bonds represent the remaining 43.7%).

Cash flow & Key ratios Even more significant than the comparison with net profit is the trend in Funds from Operations (FFO), an indicator that measures the cash flow generated by a company’s core business. FFO increased by 33.7% yoy to EUR 14.1mn in 1Q16, showing how new investments helped to strengthen the cash flow generated by operations.

Financial solidity improved, as demonstrated by a decline in gearing. Debt-to-equity ratio improved to EUR 0.92 in 1Q16 from EUR 0.93 in FY15. Loan-to-value remained at 47.3% in 1Q16, compared to 48.3% in FY14. Net debt declined slightly to EUR 984.2mn in 1Q16. The average cost of debt in FY15 (without recurring and non-recurring transaction costs) was down by 36pp yoy to 3.67%, while the weighted average effective cost of debt went from 4.27% to 4%. During 1Q16, the average cost of debt declined further to 3.26%. Credit risks or FX risks are not significant as rental contracts in Romania are euro-denominated.

Financial highlights At present, three IGD corporate bonds are registered for trading. The 2.65% IGD bond 04-22 (ISIN: XS12221097394), listed on securities market with a current outstanding amount of EUR 162mn. The 4.335% IGD bond 05-17 (ISIN: XS0927738418) has a nominal value of EUR 144.9mn and outstanding amount of EUR 8mn. The 3.875% IGD bond 01-19 (ISIN: XS1059383064) has a current outstanding amount of EUR 124.9mn (out of EUR 150mn issued). The average length of long-term debt (including bonds) declined to 6 years in 1Q16 from 6.3 years at end-2015. Hedging on long-term debt increased from 91.6% in December 2015 to 93.7% in March 2016. Credit lines accounted in total for EUR 301.5mn at the end of March, of which EUR 114mn is available.

The envisaged issuance of a five or seven-year unsecured bond is aimed at the refinancing of existing indebtedness at a lower cost. Maturity of repayment would then be prolonged and IGD’s investment funding would be cheaper. CMBS at EUR 135mn and approximate cost of 5.2% might be then repaid earlier than in 2018 as originally planned.

Div idend IGD shareholders approved a dividend of EUR 0.04 per share, per each of the 813,045,631 shares outstanding, payable as from 25 May 2016 with shares going ex-div on 23 May 2016. This represents an increase of 6.7% versus the dividend paid in 2014 and - when adjusted to reflect the new December issuance – the increase amounts to 14.3%.


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APPENDIX TABLE A1: BALANCE SHEET (IFRS)

EUR thousands

Assets 2013 2014 2015 Intangible Assets 11,519 12,744 12,736

Property , plant and equipment 1,837,535 1,877,408 2,032,460

Equity inv estments 309 408 6,366

Financial assets 850 1,128 493

Other assets 8,818 9,846 5,489

Assets av ailable f or sale 0 28,600 0

Non-current assets 1,859,031 1,901,534 2,057,544 Inv entory 73,009 69,355 67,068

Receiv ables 14,643 14,036 12,963

Receiv ables - related parties 887 1,530 1,111

Other assets 3,669 3,623 3,132

Financial assets 373 151 9,174

Cash & cash equiv alents 8,446 15,242 23,603

Current Assets 101,027 103,937 117,051 Total Assets 1,960,058 2,034,071 2,174,595

Liabilities

Share capital 325,052 549,760 599,760

Reserv es 394,646 379,548 363,886

Net income 33,152 20,921 58,407

Total Equity 752,850 950,229 1,022,053 Minorities 10,842 10,589 10,150

Pension liabilities 1,403 1,910 2,046

Financial liabilities 817,406 850,466 764,930

Prov isions 1,809 1,827 4,688

Other liabilities 77,661 88,993 85,096

Non-current Liabilities 909,121 953,785 866,910 Financial liabilities 277,150 108,150 253,155

Trade pay ables 12,083 14,512 14,372

Trade pay ables - related parties 2,475 522 432

Other liabilities 6,379 6,873 17,673

Current Liabilities 298,087 130,057 285,632

Total Liabilities 1,960,058 2,034,071 2,174,595


TABLE A2: CORE BUSINESS FUNDS FROM OPERATIONS (EXCL. DEVELOPMENT PROJECT PORTA A MARE)

EUR thousands 2013 2014 2015 Pre-tax prof it 6,584 12,925 47,290

Depreciation, amortization and other prov isions 1,446 1,537 1,670

Change in FV and impairments 28,467 20,604 -3,196

Extraordinary management 498 16 168

Gross margin f rom trading activ ities 0 0 0

Financial management adjustment 0 733 87

Current tax -1,531 -673 -872

FFO 35,464 35,143 45,146



Credit View



TABLE A3: INCOME STATEMENT (IFRS)

EUR thousands 2013 2014 2015 Rev enues - rental income 115,529 115,506 121,142

Rev enues - serv ices 5,303 5,362 5,085

Rev enues - trading and others 6,917 395 1,730

Total revenues 127,749 121,263 127,957 Operating costs 14,942 9,233 11,017

Serv ices costs 19,611 23,180 22,260

Personnel costs 8,432 8,665 8,813

Total operating costs 42,985 41,078 42,090

EBITDA 84,764 80,185 85,867 D&A 3,531 3,102 3,173

Impairments 1,015 2,406 2,240

Change in f air v alue 34,502 20,695 3,778

EBIT 47,746 53,982 84,232 Financial expense 46,666 44,904 39,624

Financial income 338 164 92

Other f inancial income -498 124 190

EBT 920 9,366 44,890 Taxes 3,244 -2,317 310

Net income 4,164 7,049 45,200


TABLE A4: FINANCIAL HIGHLIGHTS

2013 2014 2015 Gearing ratio (D/E) 1.38 0.95 0.93

Loan to v alue 57.4% 48.3% 47.3%

Av erage cost of debt* 3.80% 4.03% 3.67%

Interest cov er ratio 1.90 1.77 2.15

LT debt av erage maturity (y ears) 7.7 6.2 6.3

Share of medium / LT debt 75.3% 90.2% 77.6%

Hedging on LT debt + bond 79.3% 90.9% 91.6% Credit lines - total 273.5 267.5 302.5

Credit lines - available 86.6 234 120 Unencumbered assets 347.7 618.9 867.6

*Net of charges on loan (both recurring and not recurring) Source: company data, UniCredit Research


Credit View


. NOT FOR DISTRIBUTION IN THE UNITED STATES, CANADA OR JAPAN OR TO A U.S. PERSON

Disclaimer Our recommendations are based on information obtained from, or are based upon public information sources that we consider to be reliable but f or the completeness and accuracy of which we assume no liability. All estimates and opinions included in the report represent the independent judgment of the analysts as of the date of the issue. This report may contain links to websites of third parties, the content of which is not controlled by UniCredit Bank. No liability is assumed for the content of these third-party websites. We reserv e the right to modify the views expressed herein at any time without notice. Moreover, we reserve the right not to update this information or to discontinue it altogether without notice. This analy sis is for information purposes only and (i) does not constitute or form part of any offer for sale or subscription of or solicitation of any offer to buy or subscribe f or any f inancial, money market or investment instrument or any security, (ii) is neither intended as such an offer for sale or subscription of or solicitation of an offer to buy or subscribe f or any financial, money market or investment instrument or any security nor (iii) as an advertisement thereof. The investment possibilities discussed in this report may not be suitable f or certain investors depending on their specific investment objectives and time horizon or in the context of their overall financial situation. The inv estments discussed may fluctuate in price or value. Investors may get back less than they invested. Changes in rates of exchange may hav e an adv erse ef f ect on the v alue of inv estments. Furthermore, past performance is not necessarily indicative of future results. In particular, the risks associated with an investment in the financial, money market or inv estment instrument or security under discussion are not explained in their entirety . This inf ormation is given without any warranty on an "as is" basis and should not be regarded as a substitute for obtaining indiv idual adv ice. Inv estors must make their own determination of the appropriateness of an investment in any instruments referred to herein based on the merits and risks involved, their own investment strategy and their legal, f iscal and financial position. As this document does not qualify as an investment recommendation or as a direct investment recommendation, neither this document nor any part of it shall form the basis of, or be relied on in connection with or act as an inducement to enter into, any contract or commitment whatsoever. Investors are urged to contact their bank's inv estment adv isor f or indiv idual explanations and adv ice. Neither UniCredit Bank nor any of their respective directors, officers or employees nor any other person accepts any liability whatsoever (in negligence or otherwise) for any loss howsoev er arising f rom any use of this document or its contents or otherwise arising in connection therewith. This analy sis is being distributed by electronic and ordinary mail to professional investors, who are expected to make their own investment decisions without undue reliance on this publication, and may not be redistributed, reproduced or published in whole or in part f or any purpose. Responsibility for the content of this publication lies with: UniCredit Group and its subsidiaries are subject to regulation by the European Central Bank a) UniCredit Bank AG (UniCredit Bank), Am Tucherpark 16, 80538 Munich, Germany, (also responsible for the distribution pursuant to §34b WpHG). The company belongs to UniCredit Group. Regulatory authority : “BaFin“ – Bundesanstalt f ür Finanzdienstleistungsauf sicht, Lurgiallee 12, 60439 Frankf urt, Germany . b) UniCredit Bank AG London Branch (UniCredit Bank London), Moor House, 120 London Wall, London EC2Y 5ET, United Kingdom. Regulatory authority: “BaFin“ – Bundesanstalt für Finanzdienstleistungsaufsicht, Lurgiallee 12, 60439 Frankf urt, Germany and subject to limited regulation by the Financial Conduct Authority, 25 The North Colonnade, Canary Wharf, London E14 5HS, United Kingdom and Prudential Regulation Authority 20 Moorgate, London, EC2R 6DA, United Kingdom. Further details regarding our regulatory status are av ailable on request. c) UniCredit Bank AG Hong Kong Branch (UniCredit Bank Hong Kong), 25/F Man Yee Building, 68 Des Voeux Road Central, Hong Kong. Regulatory authority : Hong Kong Monetary Authority , 55th Floor, Two International Financial Centre, 8 Finance Street, Central, Hong Kong d) UniCredit Bank AG Singapore Branch (UniCredit Bank Singapore), Prudential Tower, 30 Cecil Street, #25-01, Singapore 049712 Regulatory authority : Monetary Authority of Singapore, 10 Shenton Way MAS Building, Singapore 079117 e) UniCredit Bank AG Toky o Branch (UniCredit Toky o), Otemachi 1st Square East Tower 18/F, 1-5-1 Otemachi, Chiy oda-ku, 100-0004 Toky o, Japan Regulatory authority: Financial Services Agency, The Japanese Government, 3-2-1 Kasumigaseki Chiy oda-ku Toky o, 100-8967 Japan, The Central Common Gov ernment Of f ices No. 7.

POTENTIAL CONFLICTS OF INTERESTS – Key 1a: UniCredit Bank AG and/or any related legal person owns at least 2% of the capital stock of the analy zed company . Key 1b: The analy zed company owns at least 2% of the capital stock of UniCredit Bank AG and/or any related legal person. Key 2: UniCredit Bank AG and/or any related legal person has been lead manager or co-lead manager over the previous 12 months of any publicly disclosed of f er of f inancial instruments of the analy zed company , or in any related deriv ativ es. Key 3: UniCredit Bank AG and/or any related legal person administers the securities issued by the analyzed company on the stock exchange or on the market by quoting bid and ask prices (i.e. acts as a market maker or liquidity prov ider in the securities of the analy zed company or in any related deriv ativ es). Key 5: The analy zed company and UniCredit Bank AG and/or any related legal person hav e concluded an agreement on the preparation of analy ses. Key 6a: Employees or members of the Board of Directors of UniCredit Bank AG and/or any other employee that works for UniCredit Research (i.e. the joint research department of the UniCredit Group) and/or members of the Group Board (pursuant to relevant domestic law) are members of the Board of Directors of the analyzed company . Members of the Board of Directors of the analyzed company hold office in the Board of Directors of UniCredit Bank AG (pursuant to relevant domestic law). The application of this Key 6a is limited to persons who, although not involved in the preparation of the analysis, had or could reasonably be expected to have access to the analysis prior to its dissemination to customers or the public. Key 6b: The analy st is on the Superv isory Board/Board of Directors of the company they cov er.

RECOMMENDATIONS, RATINGS AND EVALUATION METHODOLOGY Company Date Rec. Company Date Rec. Company Date Rec. – – – – – – – – – Overview of our ratings You will f ind the history of rating regarding recommendation changes as well as an overview of the breakdown in absolute and relative terms of our inv estment ratings on our website www.disclaimer.unicreditmib.eu/credit-research-rd/Recommendations_CR_e.pdf . Note on the evaluation basis for interest-bearing securities: Recommendations relativ e to an index: For high grade names the recommendations are relative to the "iBoxx EUR Benchmark" index family, for sub investment grade names the recommendations are relativ e to the "iBoxx EUR High Yield" index f amily . Marketweight: We recommend having the same portfolio exposure in the name as the respective iBoxx index. We expect that the average total return of the instruments of the issuer is equal to the total return of the index. Overweight: We recommend having a higher portfolio exposure in the name as the respective iBoxx index. We expect that the average total return of the instruments of the issuer is greater than the total return of the index. Underweight: We recommend having a lower portfolio exposure in the name as the respective iBoxx index. We expect that the average total return of the instruments of the issuer is less than the total return of the index. Outright recommendations: Hold: We recommend holding the respective instrument for investors who already have exposure. We expect that the total return of the instruments of the issuer is equal to the y ield. Buy: We recommend buying the respective instrument for investors who already have exposure. We expect that the total return of the instruments of the issuer is greater than the y ield. Sell: We recommend selling the respective instrument for investors who already have exposure. We expect that the total return of the instruments of the issuer is less than the y ield. We employ three f urther categorizations f or interest-bearing securities in our cov erage: Restricted: A recommendation and/or financial forecast is not disclosed owing to compliance or other regulatory considerations such as a blackout period or a conflict of interest.


Credit View



Coverage in transition: Due to changes in the research team, the disclosure of a recommendation and/or financial information are temporarily suspended. The interest-bearing security remains in the research univ erse and disclosures of relev ant inf ormation will be resumed in due course. Not rated: Suspension of cov erage. Trading recommendations for fixed-interest securities mostly focus on the credit spread (yield difference between the fixed-interest security and the relevant government bond or swap rate) and on the rating views and methodologies of recognized agencies (S&P, Moody’s, Fitch). Depending on the type of investor, investment ratings may refer to a short period or to a 6 to 9-month horizon. Please note that the provision of securities services may be subject to restrictions in certain jurisdictions. You are required to acquaint y ourself with local laws and restrictions on the usage and the availability of any services described herein. The information is not intended for distribution to or use by any person or entity in any jurisdiction where such distribution would be contrary to the applicable law or prov isions. If not otherwise stated daily price data ref ers to pre-day closing lev els and iBoxx bond index characteristics ref er to the prev ious month-end index characteristics. Coverage Policy A list of the companies cov ered by UniCredit Bank is av ailable upon request. Frequency of reports and updates It is intended that each of these companies be cov ered at least once a y ear, in the ev ent of key operations and/or changes in the recommendation.

SIGNIFICANT FINANCIAL INTEREST UniCredit Bank AG and/or other related legal persons with them regularly trade shares of the analyzed company. UniCredit Bank AG and/or other related legal persons may hold signif icant open deriv ativ e positions on the stocks of the company which are not delta-neutral. UniCredit Bank AG and/or other related legal persons have a significant financial interest relating to the analyzed company or may have such at any future point of time. Due to the f act that UniCredit Bank AG and/or any related legal person are entitled, subject to applicable law, to perform such actions at any future point in time which may lead to the existence of a significant financial interest, it should be assumed for the purposes of this information that UniCredit Bank AG and/or any related legal person will in f act perf orm such actions which may lead to the existence of a signif icant f inancial interest relating to the analy zed company . Analy ses may refer to one or several companies and to the securities issued by them. In some cases, the analyzed companies have actively supplied inf ormation f or this analy sis.

INVESTMENT BANKING TRANSACTIONS The analy zed company and UniCredit Bank AG and/or any related legal person concluded an agreement on services in connection with investment banking transactions in the prev ious 12 months, in return for which the Bank and/or such related legal person received a consideration or promise of consideration or intends to do so. Due to the f act that UniCredit Bank AG and/or any related legal person are entitled to conclude, subject to applicable law, an agreement on serv ices in connection with inv estment banking transactions with the analyzed company at any future point in time and may receive a consideration or promise of consideration, it should be assumed f or the purposes of this inf ormation that UniCredit Bank AG and/or any related legal person will in f act conclude such agreements and will in f act receive such consideration or promise of consideration.

ANALYST DECLARATION The author’s remuneration has not been, and will not be, geared to the recommendations or v iews expressed in this study , neither directly nor indirectly .

ORGANIZATIONAL AND ADMINISTRATIVE ARRANGEMENTS TO AVOID AND PREVENT CONFLICTS OF INTEREST To prev ent or remedy conflicts of interest, UniCredit Bank has established the organizational arrangements required from a legal and supervisory aspect, adherence to which is monitored by its compliance department. Conflicts of interest arising are managed by legal and physical and non-physical barriers (collectively ref erred to as “Chinese Walls”) designed to restrict the flow of information between one area/department of UniCredit Bank and another. In particular, Investment Banking units, including corporate f inance, capital market activities, financial advisory and other capital raising activities, are segregated by phy sical and non-phy sical boundaries f rom Markets Units, as well as the research department. Disclosure of publicly available conflicts of interest and other material interests is made in the research. Analysts are supervised and managed on a day-to-day basis by line managers who do not have responsibility for Investment Banking activities, including corporate f inance activ ities, or other activ ities other than the sale of securities to clients.

ADDITIONAL REQUIRED DISCLOSURES UNDER THE LAWS AND REGULATIONS OF JURISDICTIONS INDICATED You will find a list of further additional required disclosures under the laws and regulations of the jurisdictions indicated on our website www.cib-unicredit.com/research-disclaimer. Notice to Austrian investors: This analysis is only for distribution to professional clients (Professionelle Kunden) as def ined in article 58 of the Securities Superv ision Act. Notice to investors in Bosnia and Herzegovina: This report is intended only for clients of UniCredit in Bosnia and Herzegovina who are institutional inv estors (Institucionalni inv estitori) in accordance with Article 2 of the Law on Securities Market of the Federation of Bosnia and Herzegov ina and Article 2 of the Law on Securities Markets of the Republic of Srpska, respectively, and may not be used by or distributed to any other person. This document does not constitute or form part of any offer for sale or subscription f or or solicitation of any offer to buy or subscribe for any securities and neither this document nor any part of it shall form the basis of, or be relied on in connection with or act as an inducement to enter into, any contract or commitment whatsoev er. Notice to Brazilian investors: The individual analyst(s) responsible for issuing this report represent(s) that: (a) the recommendations herein ref lect exclusiv ely the personal v iews of the analysts and have been prepared in an independent manner, including in relation to UniCredit Group; and (b) except for the potential conflicts of interest listed under the heading “Potential Conflicts of Interest” above, the analysts are not in a position that may impact on the impartiality of this report or that may constitute a conflict of interest, including but not limited to the following: (i) the analysts do not have a relationship of any nature with any person who works for any of the companies that are the object of this report; (ii) the analysts and their respective spouses or partners do not hold, either directly or indirectly, on their behalf or for the account of third parties, securities issued by any of the companies that are the object of this report; (iii) the analysts and their respective spouses or partners are not involved, directly or indirectly, in the acquisition, sale and/or trading in the market of the securities issued by any of the companies that are the object of this report; (iv) the analysts and their respective spouses or partners do not have any f inancial interest in the companies that are the object of this report; and (v) the compensation of the analysts is not, directly or indirectly, affected by UniCredit’s revenues arising out of its businesses and financial transactions. UniCredit represents that: except for the potential conflicts of interest listed under the heading “Potential Conf licts of Interest” abov e, UniCredit, its controlled companies, controlling companies or companies under common control (the “UniCredit Group”) are not in a condition that may impact on the impartiality of this report or that may constitute a conflict of interest, including but not limited to the following: (i) the UniCredit Group does not hold material equity interests in the companies that are the object of this report; (ii) the companies that are the object of this report do not hold material equity interests in the UniCredit Group; (iii) the UniCredit Group does not have material financial or commercial interests in the companies or the securities that are the object of this report; (iv) the UniCredit Group is not involv ed in the acquisition, sale and/or trading of the securities that are the object of this report; and (v ) the UniCredit Group does not receiv e compensation f or serv ices rendered to the companies that are the object of this report or to any related parties of such companies. Notice to Canadian investors: This communication has been prepared by UniCredit Bank AG, which does not hav e a registered business presence in Canada. This communication is a general discussion of the merits and risks of a security or securities only, and is not in any way meant to be tailored to the needs and circumstances of any recipient. The contents of this communication are for information purposes only, theref ore should not be construed as adv ice and do not constitute an of f er to sell, nor a solicitation to buy any securities. Notice to Cyprus investors: This document is directed only at clients of UniCredit Bank who are persons falling within the Second Appendix (Section 2, Professional Clients) of the law f or the Provision of Investment Services, the Exercise of Investment Activities, the Operation of Regulated Markets and other Related Matters, Law 144(I)/2007 and persons to whom it may otherwise lawfully be communicated who possess the experience, knowledge and expertise to make their own investment decisions and properly assess the risks that they incur (all such persons together being referred to as “relevant persons”). This document must not be acted on or relied on by persons who are not relev ant persons or relevant persons who have requested to be treated as retail clients. Any investment or investment activity to which this communication related is av ailable only to relev ant persons and will be engaged in only with relevant persons. This document does not constitute an offer or solicitation to any person to whom it is unlawful to make such an of f er or solicitation. Notice to Hong Kong investors: This report is for distribution only to “professional inv estors” within the meaning of Schedule 1 to the Securities and Futures Ordinance (Chapter 571, Laws of Hong Kong) and any rules made thereunder, and may not be reproduced, or used by or further distributed to any other person, in whole or in part, for any purpose. This report does not constitute or form part of an offer or solicitation of any offer to buy or sell any securities, nor should it or any part of it form the basis of, or be relied upon in connection with, any contract or commitment whatsoever. By accepting this report, the recipient represents and warrants that it is entitled to receiv e such report in accordance with, and on the basis of , the restrictions set out in this “Disclaimer” section, and agrees to be bound by those restrictions. Notice to investors in Ivory Coast: The information contained in the present report have been obtained by Unicredit Bank AG from sources believed to be reliable, however, no express or implied representation or warranty is made by Unicredit Bank AG or any other person as to the completeness or accuracy of such inf ormation. All opinions and estimates contained in the present report constitute a judgement of Unicredit Bank AG as of the date of the present report and are subject to change without notice. They are prov ided in good faith but without assuming legal responsibility. This report is not an offer to sell or solicitation of an offer to buy or invest in securities. Past performance is not an


Credit View



indicator of future performance and future returns cannot be guaranteed, and there is a risk of loss of the initial capital invested. No matter contained in this document may be reproduced or copied by any means without the prior consent of Unicredit Bank AG. Notice to New Zealand investors: This report is intended for distribution only to persons who are “wholesale clients” within the meaning of the Financial Adv isers Act 2008 (“FAA”) and by receiving this report you represent and agree that (i) you are a “wholesale client” under the FAA (ii) you will not distribute this report to any other person, including (in particular) any person who is not a “wholesale client” under the FAA. This report does not constitute or form part of, in relation to any of the securities or products covered by this report, either (i) an offer of securities for subscription or sale under the Securities Act 1978 or (ii) an offer of financial products for issue or sale under the Financial Markets Conduct Act 2013. Notice to Omani investors: This communication has been prepared by UniCredit Bank AG. UniCredit Bank AG does not have a registered business presence in Oman and does not undertake banking business or provide financial services in Oman and no advice in relation to, or subscription for, any securities, products or financial services may or will be consummated within Oman. The contents of this communication are for the information purposes of sophisticated clients, who are aware of the risks associated with inv estments in foreign securities and neither constitutes an offer of securities in Oman as contemplated by the Commercial Companies Law of Oman (Royal Decree 4/74) or the Capital Market Law of Oman (Royal Decree 80/98), nor does it constitute an offer to sell, or the solicitation of any offer to buy non-Omani securities in Oman as contemplated by Article 139 of the Executive Regulations to the Capital Market Law (issued vide CMA Decision 1/2009). This communication has not been approved by and UniCredit Bank AG is not regulated by either the Central Bank of Oman or Oman’s Capital Market Authority . Notice to Pakistani investors: Investment information, comments and recommendations stated herein are not within the scope of investment advisory activ ities as def ined in sub-section I, Section 2 of the Securities and Exchange Ordinance, 1969 of Pakistan. Investment advisory services are provided in accordance with a contract of engagement on inv estment advisory services concluded with brokerage houses, portfolio management companies, non-deposit banks and the clients. The distribution of this report is intended only f or informational purposes for the use of professional investors and the information and opinions contained herein, or any part of it shall not form the basis of, or be relied on in connection with or act as an inducement to enter into, any contract or commitment whatsoev er. Notice to Polish Investors: This document is intended solely for professional clients as defined in Art. 3.39b of the Trading in Financial Instruments Act of 29 July 2005 (as amended). The publisher and distributor of the document certifies that it has acted with due care and diligence in preparing it, however, assumes no liability for its completeness and accuracy . This document is not an adv ertisement. It should not be used in substitution f or the exercise of independent judgment. Notice to Serbian investors: This analysis is only f or distribution to prof essional clients (prof esionalni klijenti) as def ined in article 172 of the Law on Capital Markets. Notice to UK investors: This communication is directed only at clients of UniCredit Bank who (i) have prof essional experience in matters relating to inv estments or (ii) are persons f alling within Article 49(2)(a) to (d) (“high net worth companies, unincorporated associations, etc.”) of the United Kingdom Financial Serv ices and Markets Act 2000 (Financial Promotion) Order 2005 or (iii) to whom it may otherwise lawf ully be communicated (all such persons together being ref erred to as “relev ant persons”). This communication must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this communication relates is available only to relev ant persons and will be engaged in only with relev ant persons. CR e 9


Credit View



UniCredit Research* Erik F. Nielsen Group Chief Economist Global Head of CIB Research +44 207 826-1765 [email protected]

Dr. Ingo Heimig Head of Research Operations +49 89 378-13952 [email protected]

Credit Research

Luis Maglanoc, CFA, Head +49 89 378-12708 [email protected]

Credit Strategy & Structured Credit Research

Dr. Philip Gisdakis, Head Credit Strategy +49 89 378-13228 [email protected]

Dr. Christian Weber, CFA, Deputy Head Credit Strategy +49 89 378-12250 [email protected]

Dr. Tim Brunne Quantitative Credit Strategy +49 89 378-13521 [email protected]

Holger Kapitza Credit Strategy & Structured Credit +49 89 378-28745 [email protected]

Dr. Stefan Kolek EEMEA Corporate Credits & Strategy +49 89 378-12495 [email protected]

Manuel Trojovsky Credit Strategy & Structured Credit +49 89 378-14145 manuel.trojovsky@unicredit .de

Financials Credit Research Franz Rudolf, CEFA, Head Covered Bonds +49 89 378-12449 [email protected]

Dr. Tilo Höpker Banks +49 89 378-12960 [email protected]

Luis Maglanoc, CFA Regulatory & Accounting Service +49 89 378-12708 [email protected]

Natalie Tehrani Monfared Regulatory & Accounting Service +49 89 378-12242 [email protected]

Dr. Michael Teig Banks +49 89 378-12429 [email protected]

Emanuel Teuber Covered Bonds +49 89 378-12961 [email protected]

Robert Vielhaber Sub-Sovereigns & Agencies, Green Bonds +49 89 378-12004 [email protected]

Dr. Martina von Terzi Banks, Financial Services, Insurance +49 89 378-14245 martina.vonterzi@unicredit .de

Corporate Credit Research Stephan Haber, CFA, Co-Head Telecoms, Technology +49 89 378-15192 [email protected]

Dr. Sven Kreitmair, CFA, Co-Head Automotive & Mobility +49 89 378-13246 [email protected]

Christian Aust, CFA Industrials +49 89 378-12806 [email protected]

David Bertholdt Capital Goods & Services +49 89 378-13211 [email protected]

Mehmet Dere Oil & Gas, EEMEA Energy, Consumer +49 89 378-11294 [email protected]

Michael Gerstner Utilities, Hybrids +49 89 378-15449 [email protected]

Alexander Rozhetskin EEMEA (Banks, Oil & Gas, Basic Resources, Telecoms) +44 207 826-7953 [email protected]

Jonathan Schroer, CFA Media/Cable, Logistics, Business Services +49 89 378-13212 [email protected]

Dr. Silke Stegemann, CEFA Health Care & Pharma, Food & Beverage, Personal & Household Goods +49 89 378-18202 [email protected]

Publication Address

UniCredit Research Corporate & Investment Banking UniCredit Bank AG Arabellastrasse 12 D-81925 Munich [email protected]

Bloomberg UCCR Internet www.research.unicredit.eu

*UniCredit Research is the joint research department of UniCredit Bank AG (UniCredit Bank), UniCredit Bank AG London Branch (UniCredit Bank London), UniCredit Bank AG Milan Branch (UniCredit Bank Milan), UniCredit Bank New York (UniCredit Bank NY), UniCredit Bulbank, Zagrebačka banka d.d., UniCredit Bank Czech Republic and Slovakia, Bank Pekao, ZAO UniCredit Bank Russia (UniCredit Russia), UniCredit Bank Romania. CR 23

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