Somec 2021 01 11 Initial Coverage

ValueTrack | Initial Coverage | 11 01 2021
Somec
Sector: Industrials VALUETRACK
Valentina Romitelli
valentina.romitelli@value-track.com
Time to sail on mainland Marco Greco

marco.greco@value-track.com
too Daniel Cotto

daniel.cotto@value-track.com
Somec is a global player specialized in turnkey projects for the Fair Value (€) 25.3
shipping market and a fast-growing actor in the US building Market Price (€)(*) 18.0
façades business. Listed since 2018 on AIM, it recently moved Market Cap. (€m)(*) 124.2
to MTA market with a strong track record of growth.
KEY FINANCIALS (€m) 2020E 2021E 2022E
The stock caught in the 2020 perfect storm REVENUES 214.3 277.9 352.3
Over the latest months the stock was caught by Covid-19 driven volatility. EBITDA 20.1 27.8 36.1
Investors’ concerns were relative to demand in cruise shipping and US EBIT 5.1 13.1 21.7
building, deteriorating financial profile, risk of defaults in the concentrated NET PROFIT 3.0 6.9 12.3
shipping industry. We have analyzed these concerns and believe some were EQUITY 48.7 52.4 62.0
overstated while others have been solved.
NET FIN. POS. -59.6 -53.5 -43.4
EPS ADJ. (€) 0.44 1.00 1.79

Growth story still intact
DPS (€) 0.50 0.50 0.82
We believe the market is still factoring very small medium-term growth,
Source: Somec (historical figures),
while we see the company quickly back to its growth path after the 2020 Value Track (2020E-22E estimates)
hiccup. Indeed, we see plenty of growth potential ahead, supported by solid
track record, strong order backlog (ca.€750mn) and two areas of expansion: RATIOS & MULTIPLES 2020E 2021E 2022E
1) huge market to exploit in the Landscape division; EBITDA MARGIN (%) 9.4% 10.0% 10.2%
2) further growth and portfolio extension in the marine business. EBIT MARGIN (%) 2.4% 4.7% 6.2%
Overall, we forecast 3yrs CAGR into 2023E at 24% for Revenues (ca. €1bn NET DEBT / EBITDA (x) 3.0 1.9 1.2
cumulated revenues in 2021-23E) and at 28% for EBITDA, with €48mn NET DEBT / EQUITY (x) 122% 102% 70%
cumulated FCF. EV/EBITDA (x) 10.2 7.3 5.5
EV/EBIT (x). 40.6 15.6 9.2

There are a number of positives, still underestimated P/E ADJ. (x) 40.9 18.1 10.1
There are a number of other attractive features in Somec investment case: DIV YIELD (%) 2.8 2.8 4.6
good visibility of the two businesses (2-7 yrs backlog); expected acceleration Source: Somec (historical figures),
of FCF after three years of investments (output capacity and differentiation) Value Track (2020E-22E estimates)
and three “options” – not factored in our forecasts yet – which might be
strongly value accretive. We refer to the Chinese cruise market, the US West STOCK DATA
Coast building market and the possible buyout of landscape minorities. FAIR VALUE (€) 25.3
MARKET PRICE (€)(*) 18.0

€25.3 fair value per share and more to come over next years
SHS. OUT. (m) 6.9
Despite an 80% bounce from 2020 lows, the stock market price still MARKET CAP. (€m)(*) 124.2
incorporates very bad news on the shipping business, in our view.
FREE FLOAT (%) 25.0
On the contrary, peers’ analysis, DCF and EV/Backlog ratio drive our €25.3 AVG. -20D VOL. (# shs.) 8,199
fair value per share, implying 9.2x EV/EBITDA’21 fair multiple.
RIC / BBG SOM.MI / SOM IM
Last but not least we note that on a 3yrs holding horizon, investors might 52 WK RANGE 10.5-28.0
earn 42% annualized IRR (ca. 2.5x total cash on cash return) thanks to Source: Stock Market Data
stock re-rating, medium term growth and FCF (€7/share over 2021-23E). (*) Based on Official Close as of Jan 7th 2021
ValueTrack | www.value-track.com | NOT FOR DISTRIBUTION IN OR INTO THE UNITED STATES, CANADA, JAPAN OR AUSTRALIA
Somec | Initial Coverage | 11 01 2021
VALUETRACK
Index of contents
Executive Summary 3
Valuation 6
Somec business profile in a nutshell 18
Covid-19 and other concerns 21
What we like 28
Three “options” not factored yet 40
Forecast 2020-23E 44
Appendix #1: History, Corporate, Governance 49
Appendix #2: Key 2018-19 Financials 50
Appendix #3: Sector Background 53
Appendix #4: Peers’ profile 57
NOT FOR DISTRIBUTION IN OR INTO THE UNITED STATES, CANADA, JAPAN OR AUSTRALIA
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VALUETRACK
Executive Summary
Somec is a leading player in cruise ships and a rising star in building façades.
Somec is a global player specialising in engineering, design and manufacturing for turnkey projects
for the shipping market, and is a fast-growing, emerging actor in the US building façades
business.
For both Business Units, Seascape and Landscape, there is a driving segment (i.e. marine glazing and
façades) and smaller but rapidly growing segments of professional cooking and Public Areas-Interiors,
due to exploit up-selling opportunities.
Current management (and shareholders) are in place since 2013 and drove the company from
€30mn in 2013 to €250mn revenues in 2019 - 42% CAGR with a mix of organic growth and
M&A - and earnings from €1mn to €8mn.
Stock burdened by excessive fears on Covid-19 outbreak

During 2020, Somec shares have been carried away by Covid-19 driven volatility that involved the
whole market, and travelling and cruising sector in particular. Main concerns, directly or indirectly
linked to the pandemic, were:
® Negative short-term impact on demand in the cruising, US new buildings and Ho.Re.Ca. sectors;
® Worsening financial outlook of Somec, in terms of margins deterioration / lower returns on
capital and excessive leverage;
® Risks and implications of a potential default among cruise operators (as cruise lines are “indirect”
clients of Somec via shipyards).
We fully understand the rationale behind these worries but also believe that, in the light of further
analysis and considerations discussed in the present report, they were overstated or have been solved.
The partial share price rebound mirrors this to some extent, but we still see a few positives that market
does not fully appreciate either in consensus or in the stock rating.
Many positives in Somec business case, and not appreciated by investors yet
Rather than focusing on the possible drawbacks related to Covid-19 outbreak, we believe much more
fruitful to have a look at some very positive angles of Somec business case, related to both the current
outlook and to future opportunities / features to be achieved.
Positive angle #1: The Company has built in few years a rare track record
Since the acquisition from the current controlling shareholders in 2013, Somec reported an excellent
track record in terms of:
Business Execution - Management has positioned Somec as a leading Marine Glazing supplier for
Cruise ships with a market share above 60% and a growing share (currently ca. 20%) in Marine
Cooking Equipment;
Business and market diversification - Somec diversified into Marine Cooking Equipment and
then successfully entered the Building Façade business (in 2018), via Fabbrica LLC, that in three years
collected orders for over €263mn. In 2019 and 2020 Somec further diversified into Professional
Cooking Equipment and Public Areas Interiors. As a result, the contribution of Marine Glazing
decreased to ca. 35% of Group Revenues (1H 2020) for the benefit of new business lines.
Top line growth - Company experienced a massive top line growth - Total Revenues from €30.7mn
in 2013 to €251.4mn in 2019 - driven by market share gains in US and Europe and by acquisitions. As
for 2020, 1H top line was supported by acquisitions and down 7.7% YoY; for the full year we see
revenues down to €214mn (-14.7% YoY).
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Positive angle #2: Businesses benefitting from good visibility (2-7 years backlog)
Somec revenues benefit from a good visibility which reflects main features of the two business units:
Seascape shows on average a much higher visibility with order book that span over 7 years,
while Landscape orders span over 2 years. In particular:
® As for Seascape, visibility is high for all segments dealing with new ships, representing the vast
majority of the revenues: Marine Glazing shows orders backlog up to 2027 reflecting marine
industry bottleneck; orders of Cooking Equipment and Public Areas are mostly related to glazing,
but may show shorter maturity in case of large refitting actives, which typically refer to following
12 months vs 2-5 years of new ships;
® Landscape business shows a lower visibility on revenues, with orders due for delivery over 12-24
months, due to absence of any limit in output capacity and to a much higher number of firms
operating in the civil market. As of today, Building Façades is the main, if not the only, element of
Landscape backlog, while Professional Cooking Equipment business is mostly driven by spot
contracts and Public Areas - Interiors business has been entered very recently.
Positive angle #3: Massive top line growth ahead

In light of Somec business model and portfolio of activities, we see a top line potential well beyond its
current order backlog, yet sizeable (ca. €750mn as of Dec 2020E). We estimate cumulated
revenues above €1bn in 2021-23E, 24% CAGR (13% if we include 2020), mostly attributable to:
® Huge markets to exploit in the landscape division, mainly for US Building Construction in
the short term, but also Ho.Re.Ca. and retail markets in the medium term. As far as US Building
Façades business is concerned, we expect it to triple its revenues again by 2023E vs 2019 thus
reaching the $100mn revenues target in 4 years from launch (in 2021E).
An idea of the massive long-term potential comes from the case of Permasteelisa Group,
Italian worldwide leading contractor for architectural envelopes and interiors that enjoyed a
terrific success in terms of revenues and value increase in the twenty years ranging from ’90s to
2009, reaching revenues of €1.2bn in 2009 (50x in 20 years);
® Portfolio extension in marine business, adding Cooking Equipment and Interiors for Public
Areas to offer portfolio has enormous positive effects on Seascape growth and profitability
potential. A further boost may come from the restart of the refitting activities, currently on halt.
Positive angle #4: Cash conversion and FCF at inflection point

We expect 2020E to represent an inflection point for Somec group’s Free Cash Flow generation and
Net Debt evolution. Indeed, while 2018-20 have witnessed intense investing / free cash flow
absorption, we expect Somec to generate over 2021-23E more than €48mn cumulated free
cash flow, thus reducing Net Debt to €28mn by 2023E (or 0.7x Net Debt/EBITDA), while
maintaining a shareholder-generous dividend policy around 50% from 2021E (and flat dividend in
2020E, despite earnings drop).
Three “options” not factored yet

Lastly, it is worth noticing some “options” not included yet either in our forecasts or in market
consensus and that might reveal strongly earnings accretive in the future:
1. Chinese cruise market - The potential of Chinese cruise market is huge and almost totally
unexploited as it is forecasted growing ten folds within 2030, to 20mn passengers and 80-100
large cruise ships, compared to 2.3m total capacity and 16 ships as of 2020;
2. US West Coast building façades market – This market is as interesting as East Coast one
where Somec Group is currently focused on. A geographic extension would thus be very positive;
3. Buy-out of landscape minorities – Fabbrica management owns 49.1% of the company and
there are no further steps formally planned in terms of earnout or buyout. Yet, we believe that in
the long run it would be strongly earnings accretive for Somec to buy out these minorities.
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Financials: Somec is a “growth” company

All taken into consideration, in 2020E-23E forecast period we expect the company to:
® Gain €1.5bn cumulated revenues, growing at 13% top line CAGR19-23E, with Landscape
business accounting for 58% of Total Revenues in 2023E;
® Get back to EBITDA margin above 10.0%, in line with the industry profitability, already as of
2021E;
® Reduce Net Debt down to €28.3mn in 2023E (vs €56.2mn in 2019) thanks to growing Cash
Flow generation (€48.5mn cumulated Free Cash Flow 2020E-2023E) and assuming a steady pay-
out policy.
Stock offers very attractive expected returns into two-three years

We calculate that current €18.0 market price still incorporates major bad news in the
cruising/shipping sector, as for example the default of at least one of the major cruise line operators; a
total freezing of sailing and investing by cruise lines with no order intake for Somec (either in new
ships or refitting) until 2Q 2022 or other extremely negative scenarios.
On the contrary, we set a €25.3 fair value per share, based on three methodologies:
® DCF model (9% WACC and terminal value based on a 1.5% perpetuity growth rate, i.e. 2030E
exit multiple of 6.8x EV/EBITDA) that gives a value of €26.0 per share;
® Peer multiples’ analysis - including only international names operating in similar verticals
(i.e. glazing, professional equipment and interior design/home furniture) - leading to an average
value of €26 per share;
® EV/Backlog ratio analysis which supports a share value of €24.7.
Furthermore, we note that the stock offers an attractive medium-term return in our view, due to
a mix of :
i) potential multiple expansion, as despite its recent rebound from 2020 lows, it still trades at
undemanding 7.3x 2021E EV/EBITDA vs our “fair” 9.2x multiple, based on peers’ analysis;
ii) expected growth: 3 years EBITDA CAGR of 28.5% suggests that shareholders’ exit in two/three
years down the road may offer good returns even assuming unchanged multiples;
iii) FCF generation, i.e. 12% EFCF yield over 2021-23E or €7 per share, of which most to be
returned to shareholders via generous pay-out, without affecting deleveraging path.
We calculate that these elements might bring - on a three-years holding period - an annualized 42%
IRR to SOMEC shareholders (gross of tax and including dividends).
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VALUETRACK
Valuation
Somec shares currently trade at €18, or 0.8x EV/Sales, 7.3x EV/EBITDA and 8.4x EV/OpFCF based
on 2021E forecasts. We initiate coverage with a €25.3 fair value per share, calculated as the simple
average between peers’ multiple estimation, DCF model and backlog valuation analysis.
Current share price is back to €18 subscribed at IPO in May ’18, and still well-off stock’s peaks
achieved pre-pandemic. We believe the increasing penetration in residential & commercial buildings,
together with a steady consolidation in the professional cooking and furniture market, would foster
medium-term growth, and free cash flow acceleration over 2021E-23E would support stock rating in
the medium term.
DCF model, based on 9.0% WACC and terminal value based on a 1.5% perpetuity growth rate (or
2030E exit multiple of 6.8x EV/EBITDA) gives a value of €26.0 per share; our peers’ analysis
includes only international names operating in similar verticals (i.e. glazing, professional equipment
and interior design/home furniture) and leads to an average value of €25.0 per Somec share, while
an EV/Backlog ratio in line with historical average since IPO supports a share value of €24.7.
Furthermore, we estimate the stock offers an attractive medium term return, due to a mix of i)
potential multiple expansion (it trades at undemanding 7.3x 2021E EV/EBITDA vs our “fair” 9.2x);
ii) expected growth (3 years EBITDA CAGR at 28.5%) and iii) FCF generation (12% EFCF yield over
2021-23E). We calculate that these elements on a three-years holding period should bring an
annualized 42% IRR to Somec shareholders (gross of tax and including dividends).
In our view, Somec can be valued trough peers analysis, DCF model and backlog valuation
analysis. As for the relative multiple valuation, it is worth to point out that its business mix is quite
unique, as none of listed peers operates in the marine and landscape divisions with a similar mix.
Thus, we consider companies operating in the three verticals (glazing, professional cooking and
interiors/furniture) rather than the specific end markets (i.e. marine and landscape). As far as DCF
model, we highlight how the company will boast a positive cash generation over the forecast period,
after experiencing some cash absorptions in recent years, linked to the reorganization of its
manufacturing capacities and to a few acquisitions. In addition, we consider the historical valuation of
Somec order backlog since its listing, i.e. from May 2018 t0 Dec 2020.
Value Track fair value range coming from these methodologies is quite narrow, between
€24.7 and €26.0, with an average of €25.3 per share. Here below, we provide a sensitivity analysis
of implied Somec stock trading multiples within a price range between the current market share price
and the top of the fair values emerged in our valuation exercise.
Somec: Sensitivity of implicit stock trading multiples vs stock price
Market Price EV/Sales (x) EV/EBITDA (x) EV/OpFCF (x) P/E (x) P/BV (x)
(€) 2021E 2022E 2021E 2022E 2021E 2022E 2021E 2022E 2021E 2022E
18.4 0.7 0.6 7.4 5.6 6.6 5.1 18.5 10.3 3.0 2.5
20.7 0.8 0.6 8.0 6.1 7.1 5.5 17.3 9.8 3.4 2.8
23.0 0.9 0.7 8.6 6.5 7.6 5.9 19.3 10.9 3.7 3.1
25.3 0.9 0.7 9.2 6.9 8.1 6.3 21.2 12.0 4.1 3.4
27.6 1.0 0.8 9.7 7.4 8.6 6.7 23.1 13.1 4.5 3.7
29.9 1.0 0.8 10.3 7.8 9.1 7.1 25.1 14.2 4.9 4.0
Source: Value Track Analysis
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VALUETRACK
Peers analysis
Choice of comparables
It is not so easy to identify listed peers with business model aligned to Somec, i.e. with a high level of
integration and internalization and with a diversified product offer – ranging from glazing facades, to
professional cooking equipment and interior design – which finds application on both marine and
building constructions.
Albeit shipbuilding companies, e.g. Fincantieri and Sanlorenzo, are for sure Somec’s key clients and
their valuation is a good proxy of investors’ concerns about Somec historical main end-market, we are
not using them as reference cluster for our valuation due to the different level of business
diversification and capital intensity that distinguish Somec’s activities. Moreover, Seascape now
accounts for only half of Somec revenues and we focus on business verticals rather than end markets.
Thus, we selected three clusters of comparables, which focus on Somec three specific vertical
businesses, even if some of these companies display different size, and/or run "lighter" business
models, where part or most of turnover is related to outsourced products.
Somec: Peers’ positioning by end-market and business segment
seascape landscape
ü Balco Group
Glazing ü Balco Group ü Apogee Enterprises
ü Tecnoglass
ü Electrolux Professional ü Electrolux Professional

ü Rational ü Rational
Cooking Equipment ü Welbild ü Welbild
ü Middleby Corporation ü Middleby Corporation
ü Griffon Corporation
ü Steelcase
Public area interiors ü Knoll
ü Stantec
In more details, based on the above business verticals:

® Glazing – we select three leading manufacturers, distributors and installer of highly specific
architectural glass for residential and commercial applications: Apogee Enterprises, Tecnoglass
and Balco Group.
First two names cover a leading position in the US market, in line with Somec growth strategy in
the landscape field, while the last one (Balco Group), market leader in the Nordics region, shares
with Somec three interesting features:
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VALUETRACK
i) it has similar size (2020E Sales expected at SEK €1.2bn, ca. €120mn) if compared to ca.
€130mn we expect for Somec building facades and marine glazing segments;
ii) it is involved on both renovation (refitting) and new building operations;
iii) it has recently developed a new balcony solution in aluminium and glass for the maritime
industry, albeit numbers are still small (i.e. first two projects are on-going, with contribution to
group Sales likely to be below 10% in 2020E).
® Professional Cooking – within this cluster we spot four listed pure professional appliance
peers, namely: Middleby, Welbilt, Electrolux Professional and Rational. However, the latter has
not been used to benchmark Somec professional cooking business line valuation, as Rational’s
sole focus on ovens and very strong profitability make it an aspirational peer at best.
All these companies, similarly to Somec, already develop and commercialize tailor-made solutions
for marine applications.
® Interior & Furnishing – we select four companies (Griffon Corporation, Knoll, Stantec and
Steelcase) which are contractors focusing on interior design and furniture market for both
commercial and residential applications (i.e. with a B2B feature), thus leaving out manufacturers
which operates through E-commerce and retail segments.
However, for the sake of clarity, we underline that none of these companies are directly active in
the marine business as Somec is.
Somec vs. Peers: lower margins, but no capex needs ahead and higher growth
Comparing Somec key financial ratios with those reported by its peers we note the following
differences and similarities:
® Somec boasts an EBITDA margin in the 9-10%, below the median value (15%), lagging behind
professional cooking players, and in line with a few names (Apogee, Griffon and Knoll);
Tecnoglass shows the highest EBITDA margin at 26% thanks to its access to qualified and low-
cost labour in Colombia as well as other manufacturing and shipping efficiencies. These provide a
significant competitive advantage relative to other peers within glazing cluster, partially offset by
higher currency fluctuations and “US-import” risks;
® ROIC b.t. of peers materially differs, ranging from 56% of Rational, undisputed leader in the
provisioning of professional equipment for thermal food preparation, to Welbild and Middleby
which show a return in the high-single / low-double digit region, with returns of the latter also
affected by intangible assets due to its dynamic M&A strategy.
This is also the case for Somec that has successfully finalized several acquisitions since its IPO,
and is expected to deliver 12% ROIC 2021E, with goodwill weighting for 40% of Net Fixed Assets;
® While Somec ROIC is affected by sizeable Intangible Assets, mostly due to M&A, its Return on
tangible capital is estimated at 34% in 2021E. This provides a better indicator of its operational
profitability and medium-term potential. It also places Somec among the best performing
companies (albeit we have not enough information for adjusting all peers’ returns for the
potential non cash impact of recent M&A);
® Capex across peers is on average between 2-4% of Sales, although we acknowledge annual capex
data may be impacted by specific investment plans. Somec is expected to engage low capital
expenditures in coming years, mostly driven by maintenance capex (ca. 1-2% of Sales), following
the recent acquisitions and the capex plan aimed at increasing output capacity;
® Due to recent acquisitions, Somec’s leverage moves from 2.3x 2019A Net Debt/EBITDA to the
high end of peers' group, at 3.0x Net Debt /EBITDA by 2020E, but is expected to improve again
to 1.2x by 2022E.
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Somec: Peers’ key financial ratios

EBITDA Margin (%) ROIC b.t. (%) Capex/Sales Net Debt/EBITDA
Company
2019A 2020E 2021E 2019A 2020E 2021E 2019A 2020E 2021E 2019A 2020E 2021E
Balco Group 14.5 15.1 15.4 20.7 23.9 24.6 0.8 1.2 3.4 0.9 0.2 0.0
Tecnoglass 21.4 25.9 24.2 14.7 18.9 19.3 5.8 4.3 2.2 2.3 1.8 1.4
Apogee Enterprises 11.5 9.9 10.4 16.1 12.2 12.4 3.7 1.7 2.7 1.3 1.5 0.8
Avg. Glazing 15.8 16.9 16.7 17.2 18.3 18.8 3.4 2.4 2.8 1.5 1.2 0.7
Electrolux Professional 13.8 10.5 14.2 26.6 11.9 22.8 2.6 3.5 2.3 0.8 0.8 0.0
Rational 29.4 18.3 24.2 75.5 36.5 56.2 4.8 5.5 5.1 nm 0.0 0.0
Welbild 17.9 13.6 15.6 15.1 3.8 8.6 2.1 2.3 2.4 4.3 8.3 6.2
Middleby Corporation 21.3 19.0 20.5 14.2 9.5 12.2 1.6 1.5 1.4 2.8 3.2 2.0
Avg. Prof. Cooking 20.6 15.4 18.6 32.8 15.4 24.9 2.8 3.2 2.8 2.6 3.1 2.1
Griffon Corporation 8.8 9.7 10.1 10.3 13.5 14.0 2.2 2.7 2.6 4.3 3.2 2.9
Stantec 15.5 15.4 15.0 29.0 26.9 30.4 1.5 1.1 1.6 1.3 1.3 0.7
Steelcase 9.2 6.4 6.0 28.2 8.9 9.6 2.0 1.7 2.3 nm 0.0 0.0
Knoll 14.9 9.0 11.2 17.1 11.3 11.8 3.8 2.3 2.7 2.3 2.4 2.0
Avg. Interior/Furniture 12.1 10.1 10.6 21.1 15.1 16.5 2.4 2.0 2.3 2.6 1.7 1.4
Somec 9.7 9.1 10.0 12.2 4.7 12.4 3.0 1.6 1.3 2.3 3.0 1.9
Source: Market Consensus, Value Track Analysis
Moving to growth expectations for Somec and the other players considered:
® Somec is likely to experience the highest top-line growth in 2021E (+30% YoY) vs. 4% peers’
average, and among the largest EBITDA growth (+39% vs. +15% of peers);
® At EBIT level, Somec is expected to regain back on 2019A level, implying a >100% y/y growth,
while selected peers are expected to deliver a +25% increase on average.
Somec: Expected growth vs. peers’ ones

y/y Sales Growth 2021E (%) y/y EBITDA Growth 2021E (%)
30
49
45
38
13 11 10 9 7 7 27
6 4
1 19
9 7 4 2 2
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VALUETRACK
Peers’ stock multiples

As for trading multiples we consider both 2021E and 2022E, as we believe Somec industry (mostly
based on large orders with long term execution and potential delays in deliveries/billing) and current
specific moment in time (offering low visibility in a few end segments) require a medium-term time
horizon. Also, we focus on the following multiples: EV/EBITDA and EV/OpFCF, as these are better
proxies of the Group free cash flow generation compared to EV/EBIT or P/E.
Sector multiples underline Somec undemanding valuation

A first look at the multiples reported below highlights the following key figures:
® Companies within the glazing cluster are trading on average at 7.6x EV/EBITDA, 9.6x EV/OpFCF
and 13.3x P/E based on 2021E. Balco Group – by far the most comparable to Somec – shows the
highest values, while Tecnoglass is currently trading at undemanding multiples;
® Professional cooking segment highlights (also excluding Rational) the highest multiples (14.6x
EV/EBITDA, 16.8x EV/OpFCF and 30.2x P/E 2021E), driven by the higher EBITDA margins and
growth rates and by digital innovation. We note that all peers in this panel boast revenues in the
€0.5bn-1.5bn range, compared to ca. €70mn 2021E revenues for Somec in this business segment.
We believe this feature calls for a “small size” discount for Somec relative to market leaders, all
the rest being equal;
® Average multiples reported by companies in the interior design and home furnishing market are
in between the other verticals (8.3x EV/EBITDA, 11.2x EV/OpFCF and 19.0x P/E 2021E), with
Knoll trading at lower multiple versus the other peers. Again, the listed names considered are
large, leading companies with strong brands and Somec operations are not as valuable, despite we
consider its exposure to marine sector a material advantage, as a new entrant.
Somec: Peers’ stock trading multiples

EV/Sales (x) EV/EBITDA (x) EV/OpFCF b.t. (x) P/E (x)
Company
2020E 2021E 2022E 2020E 2021E 2022E 2020E 2021E 2022E 2020E 2021E 2022E
Balco Group 1.8 1.6 1.5 11.7 10.5 9.3 12.8 13.4 10.9 19.7 17.5 15.0
Tecnoglass 1.3 1.2 1.1 5.2 4.8 4.5 6.2 5.3 4.9 22.0 7.4 7.2
Apogee Enterprises 0.8 0.8 0.7 8.0 7.5 6.4 9.7 10.2 8.6 14.5 15.0 15.0
Avg. Glazing 1.3 1.2 1.1 8.3 7.6 6.7 9.6 9.6 8.1 18.8 13.3 12.4
Electrolux Professional 1.9 1.7 1.5 18.3 12.0 9.9 27.6 14.3 11.4 42.5 21.0 17.2
Rational (**) >10 >10 >10 >30 >30 >30 >30 >30 >30 >50 >50 >50
Welbild 2.9 2.6 2.4 21.3 16.4 14.5 25.6 19.4 16.9 >50 45.8 31.4
Middleby Corporation 3.6 3.2 2.9 19.1 15.4 14.0 20.7 16.6 15.0 33.0 24.3 23.1
Avg. Prof. Cooking 2.8 2.5 2.3 19.6 14.6 12.8 24.7 16.8 14.4 37.8 30.3 23.9
Griffon Corporation 0.9 0.8 0.8 8.8 8.3 7.6 12.1 11.1 9.9 24.3 17.6 18.3
Stantec 1.5 1.3 1.3 9.6 8.9 8.6 10.3 10.0 9.1 25.1 21.1 17.5
Steelcase 0.6 0.5 0.5 8.9 8.6 6.4 12.2 13.8 9.2 >50 >50 19.8
Knoll 0.7 0.8 0.8 8.2 7.4 6.1 11.0 9.8 8.1 48.5 18.3 13.4
Avg. Interior & Furnishing 0.9 0.9 0.8 8.9 8.3 7.2 11.4 11.2 9.1 32.6 19.0 17.3
Somec 0.9 0.7 0.6 10.2 7.3 5.5 12.4 8.4 6.1 43.6 18.1 10.1
Source: Market Consensus, Value Track Analysis (*) OpFCF defined as (EBITDA - CAPEX) (**) Rational values are not included in the average computation
10
VALUETRACK
What is the “fair” multiple that better fits Somec’s features?

Given the wide range of multiples within each segment and between different segments, we estimate
Somec fair multiple based on its business mix, i.e. on the contribution of each segment to total
revenues 2021-2022E. These weights are shown in the table below (with total glazing counting for at
ca. 60% of revenues).
Moreover, due to the extremely small size of Professional Cooking segment versus the selected peers,
we apply a 30% discount to the average professional cooking multiples. We also apply a 20% discount
to Interior & Furnishing peers, due to the early stage of Somec presence in this segment.
Somec: Segment contribution to Total Revenues

Contribution to Total Revenues (%)
Segment Average
2021E 2022E
Glazing 63% 55% 59%
Professional Cooking 23% 26% 25%
Interior & Furnishing 13% 19% 16%
As a result, we get to “fair” EV/EBITDA of 8.1x for 2021E (7.1x for 2022E) and EV/OpFCF of 10x (8.5x
2022E). These multiples lead to an average of €25.0 of equity fair value per share (i.e. 9.1x
EV/EBITDA 2021E), which is in our view consistent with previous considerations and incorporates
part of the growth we expect in 2022E (this in fact adds ca. €2.6 to fair value).
Somec: Valuation at “Fair” Multiples

EV / EBITDA (x) EV / OpFCF (x)
€mn Average
2021E 2022E 2021E 2022E
Glazing - Peers 7.6 6.7 9.6 8.1
Professional Cooking – Peers @30% discount 10.2 8.9 11.7 10.1
Interior & Furnishing – Peers @20% discount 6.6 5.7 8.9 7.2
Fair Multiple (x) 8.1 7.1 10.0 8.5
EV (€mn) 224.7 257.1 243.4 276.5 250.4

Net Debt (€mn) 53.5 43.4 53.5 43.4
Adj. to EV (€mn) 26.3 32.7 26.3 32.7
Equity Value (€mn) 144.9 180.9 163.7 200.3 172.5

Nosh (mn) 6.9 6.9 6.9 6.9
Equity Value p/s (€) 21.0 26.2 23.7 29.0 25.0
Source: Market Consensus, Value Track Analysis (*) OpFCF defined as (EBITDA - CAPEX)
In order to highlight the implied valuation of Somec - at stock market and at our “fair” multiples -
relative to its peers, we have built the Value Maps below.
The first charts show the correlation between EV/EBITDA multiples and EBITDA Margins, as well as
EV/OpFCF in relation to the ROIC b.t. In particular we highlight:
® Somec is currently trading substantially in line/slight discount to glazing companies based on
EV/EBITDA, i.e. market is pricing Somec as a player only involved in glazing;
11
VALUETRACK
® Somec is the cheapest stock based on EV/OpFCF and this may appear justified by lower ROIC;
however this is no longer the case if we consider that: a) FCF is expected to accelerate sharply in
coming years, following the phase of investments and capacity expansion completed in 2020, and
b) tangible ROIC (i.e. excluding the accounting implications of recent acquisitions) is well above
average (34% in 2021E).
Somec: Peers’ Value Maps

EV / EBITDA vs. EBITDA Margin 2021E EV / OpFCF vs. ROIC b.t. 2021E
16.0x 18.0x
Professional
Professional Cooking
Cooking 15.0x
EV / OpFCF 21E (x)

EV / EBITDA 21E (x)
13.0x
Somec @ fair Interior &
12.0x multiple Furnishing
Somec @ fair
10.0x multiple
Glazing
Interior & 9.0x
Somec
Furnishing Glazing
7.0x Somec
6.0x
4.0x 3.0x
7.0 12.0 17.0 22.0 10.0 12.0 14.0 16.0 18.0 20.0 22.0 24.0 26.0
EBITDA Margin 21E (%) ROIC b.t. 21E (%)
Lastly, the Value Map below shows a positive relationship between EV/EBITDA and EBITDA growth
(2020-2022E CAGR). Again, Somec at market price trades at a lower multiple despite the highest
growth rate we expect for gross margins. If we assume for Somec a value per share based on “fair”
multiples as described above (i.e. €25.0 or 9.1x EV/EBITDA), we align Somec to its closest peers in
terms of financial performances, while it remains at discount to the “high flyers” of professional
cooking.
Somec: EV/EBITDA vs EBITDA CAGR20-22E - Peers(*)
17.0x
Welbild
Middleby Corp.
15.0x
13.0x
EV / EBITDA 21E (x)
Electrolux Pro.
11.0x Knoll Balco Group
Stantec
Griﬀon Corp. Somec @ fair
9.0x
multiple
Steelcase
7.0x
Somec
5.0x
Tecnoglass
3.0x
0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0
EBITDA CAGR20-22E (%)
Source: Value Track Analysis (*) Apogees reports negative CAGR. Rational left out for graphical reason (38% CAGR, >30x
EV/EBITDA)
12
VALUETRACK
Discounted Cash Flow Model

Here below we report our DCF model assumptions:
Unlevered Beta
We estimated Somec Group’s Unlevered Beta at 1.0 based on Damodaran’s estimates and weighting
Betas in line with Somec business model, which sees exposure to Engineering and Construction
(40%), Shipbuilding and Marine (30%) and Construction Supplier (30%) industries.
WACC assumptions
By using an “Expanded CAPM approach”, we derive a 9.0%WACC figure, based on:
® 2.0% risk free rate in line with medium term target inflation;
® Stable unlevered Beta of 1.0, obtained as described above;
® 7.4% Implied Italy Equity Risk premium ERP (see Damodaran on line web site);
® 0.5% Small Size Risk Premium, in line with the Expanded CAPM approach that we consider more
appropriate when dealing with mid-small sized companies;
® 2.9% pre-tax cost of debt implicitly calculated taking into account the above-mentioned 2.0% risk
free rate to which a 0.9% credit spread is added;
® Target D/(D+E) at 40% (vs range 2018-2021E of 30-55%).
Somec: WACC calculation

Components Value
Risk free 2.0%

Risk Premium 7.4%
Credit spread 0.9%
Beta Unlevered 1.00
Beta Levered 1.51
Small Cap Mkt Risk Premium 0.5%
COST OF EQUITY 13.6%

COST OF DEBT after tax 2.2%
Target D/D+E 40.0%
WACC 9.0%
Additional DCF model assumptions

Given our Ke and WACC computations we run a three-stages DCF model based on:
® 2020 year end used as reference point for valuation;
® Explicit 2021E-23E financial statements projections;
® A second stage (2024E-29E) in which company’s growth rate converges to long term values;
® Terminal value at 2030YE obtained applying a 1.5% Perpetuity Growth Rate in order to consider
overall market growth and the Company’s level of maturity;
That said, the result of our calculation is a fair Equity value per share of €26.0, corresponding to
€179.6mn equity value.
13
VALUETRACK
Somec: DCF model

€mn
PV of future cash flows 2021E-2029E 130.2
PV of Terminal value @ 2030E (PGR 1.5%; Implied exit EV/EBITDA 6.8x) 130.6
Fair Enterprise value 260.8
Implied EV/EBITDA 21E (x) 9.4
Net Fin. Position 2020YE -59.6
Other adjustments (Value of minorities) -21.6
Fair Equity value 179.6
Shs. Outstanding (m) 6.9
Fair Equity Value p.s. (€) 26.0
Here we provide a sensitivity analysis on the “Fair Equity Value” for both WACC and PGR.
Somec: Fair Equity Value (€mn) - Sensitivity Analysis
Perpetuity Growth Rate

0.50% 1.00% 1.50% 2.00% 2.50%
8.5% 26.0 27.3 28.8 30.5 32.5
8.8% 24.8 26.0 27.4 28.9 30.8
WACC
9.0% 23.7 24.8 26.0 27.5 29.1
9.3% 22.6 23.6 24.8 26.1 27.6
9.5% 21.6 22.6 22.6 23.6 24.8
14
VALUETRACK
EV / Backlog confirms upside potential

Total order backlog, which also includes a portion of soft backlog (orders under option) has steadily
increased since IPO. From €438mn at the end of 1H18 we expect roughly €750mn at the end of
2020: assuming new order intake to exceed again billing in 2H, backlog should reach a level slightly
higher than June 2020 and up by ca. €112mn YoY.
However, by looking at the evolution of the EV/Backlog ratio – based on the average market price
during the six months period – it has progressively decreased to the average 25% recorded over 2H20,
well below the pre-Covid-19 levels (34-38%).
If we focus on recent share price trends, the stock re-rating from November 2020 bottom levels offers
the first signs of a trend reversal (27% EV/Backlog at current market price vs 20% at 2020 lowest),
albeit these ratings are still far from those observed in the pre-pandemic.
We set our “fair” EV/Backlog ratio at 34%, equal to the historical average valuation since Somec
IPO date, and this points to a value of €24.7 per share, based on our December 2020E order
backlog estimate.
This calculation is supported, in our view, by two assumptions:
1. Somec book to bill ratio to remain solid in the next two years but below 2019-2020 levels;
2. Profitability of the order book to improve slightly in coming years compared to average 2019-
2020E.
Finally, we do not assume any major default in the shipping industry or massive order cancellations.
Somec: EV / Backlog evolution
1000 38% 40%

36% 37%
900
34% 34% 35%
800 32%
700
30%
600
As %
25%
€mn
500 25%
400
720 750 750
638 20%
300
552
200 438 431
15%
235 233 252
100 165 156 186 186
0 10%
1H18 2H18 1H19 2H19 1H20 2H20E @ avg 2H20E @ fair
mkt price price
EV Backlog EV/Backlog
…but what about the downside?

As discussed in previous sections, investors have been particularly concerned about the outlook of the
shipping and cruising sector. But what is the scenario factored by the current price levels?
We estimate that, based on a “normal”, pre-pandemic EV/Backlog average ratio of 36%, Somec
valuation currently implies a backlog of ca €570mn compared to €750mn we estimate.
15
VALUETRACK
In other words, market expects that ca €180mn orders (25% of total as of December 2020E)
disappear. This would correspond to one (or a mix) of the following cases:
® Somec does not acquire any order in the marine division until 2Q 2022 (neither for new ships or
for refitting), which is very cautious considering it secured orders in excess of €150mn also in
2020;
® At least one of the major cruise line operators go bankrupt and all its new ships’ projects are
cancelled (we estimate that none of large clients has outstanding orders above €100-120mn);
® All minor cruise lines default and only the five leaders survive, but again none takes over the
existing contracts with the shipyards (differently from what happened in the past when main
cruise lines defaulted).
In conclusion this exercise seems to suggest that the current market capitalization of Somec already
incorporates a very cautious scenario and that downside risk is limited, despite the recent share price
bounce.
IRR Analysis
We estimate Somec shares offer an attractive medium-term return to shareholders at current price
level. The expected return is a mix of multiple expansion (shares trade at 7.3x 2021E EV/EBITDA vs
implied multiple at “fair” price of 9.2x), expected growth (3 years EBITDA CAGR at 28.5%) and FCF
generation (12% EFCF yield over 2021-23E).
In order to better highlight the potential return of Somec shares, we run an IRR analysis.
Our base case factors a) a rerating based on our “fair” valuation and b) the forecasted medium-term
growth of group financials (namely EBITDA and FCF).
Hence, assuming a 9.0x EV/EBITDA exit multiple, broadly in line with our 2021E fair value, and a
three-years holding period, we calculate an annualized 42% IRR (gross of tax) for Somec
shares.
This exercise implies an Equity Value of €314mn, i.e. €45.5 per share at the end of 2023 and IRR
also incorporates the dividend-payout policy, which generates cumulative €2.5 per share over the
holding period.
Somec: IRR from investing today with exit at 9x EV/EBITDA in 2023

(€mn) 2023E
EBITDA (€mn) 42.5
Exit Market Multiples EV/EBITDA (x) 9.0
Implied Enterprise Value (€mn) 382.7
Net Financial Position (€mn) -28.3
EV Adjustments (€mn) -40.3
Equity value (€mn) 314.2
Fully diluted number of shares (mn) 6.9
Equity value per share at exit (€) 45.5
Dividends - cumulated over 2021-23E (€) 2.5
Annualized IRR (incl. dividends) 42%
16
VALUETRACK
Yet, one could argue that the stock multiple expansion may not occur (also for reasons outside
management’s reach) or that our forecasts may prove too bullish. Hence, in order to give a bit of
sensitivity, we underline that in a more cautious scenario based on an “exit” multiple of 7.0x (below
current EV/EBITDA 2021E), the stock would still provide a remarkable 28% IRR.
In general, the stronger the multiple expansion vs the growth expected, the higher and quicker the
stock return, as growth takes time, while re-rating may be very quick.
On the contrary a different pay-out policy would be neutral, as higher/lower dividends to shareholders
are compensated by higher/lower net debt (given the very marginal financial implications at current
interest rates).
Somec: IRR sensitivity to time to exit and to EV/EBITDA exit multiple

Time to exit (years)
Annualized IRR (gross of tax)
2yy 3yy 4yy
7.0x 24% 28% 28%
8.0x 36% 35% 33%

EV / EBITDA Exit
Multiple (x) 9.0x 48% 42% 38%
10.0x 58% 48% 42%
17
VALUETRACK
Somec business profile in a nutshell

Somec is one of the major global players specializing in engineering, design and manufacturing for
turnkey projects for the shipping market, and is a fast growing, emerging player in the US building
façades business. Current management (and shareholders) are in place since 2013 and have driven
the company from €30mn to €250mn revenues in 2019 - 42% CAGR with a mix of organic growth
and M&A - and earnings from €1mn to €8mn.
One-stop “turnkey projects” shop in Seascape and Landscape businesses

In the latest years Somec has become a global player specialising in engineering, design and
manufacturing of turnkey projects for the shipping market, with an extremely fast-growing presence
in land-based building façades. Overall Group Revenues grew ca.8x in 2013-19 period.
Somec: Total Revenues - historical figures
251.4
Revenues
€ million
165.5
87.0*
Value of production* 75.8*
€ million
49.8*
30.7* 41.7*
2013 OIC 2014 OIC 2015 OIC 2016 OIC 2017 OIC 2018 IFRS 2019 IFRS
Source: Somec (*) Company Estimates
Activities are split in two main business segments: Seascape, i.e. all those activities related to the
cruise shipbuilding market, and Landscape which includes all operations based on the mainland.
In the Seascape, the main business lines are:
® Marine Glazing: activities cover the whole process from design to installation of glass envelops
for cruise ships;
® Marine Cooking Equipment: Somec subsidiaries act as a designer, manufacturer and installer
of professional turnkey equipment for cruise ships galleys. Moreover, with Oxin Megayatch,
Somec has set up a dedicated division to special projects in the luxury yachts sector;
® Marine Public Areas: the company is involved in the construction and refitting of public areas
and living space of cruise ships thanks to the acquisition of TSI in May 2018.
As regards the Landscape segment, we have:
® Building Façades: through Fabbrica LLC, Somec is active in engineering, manufacturing and
installation of special building façades, focused in the East Coast of US. Among major projects:
JFK International Airport (NY), 141 Willoughby Str. Brooklyn (NY), Fenway Center (Boston);
® Professional Cooking Equipment: through the acquisitions of Inoxtrend and Primax
(followed by those of Pizza Group and GICO), the company entered the production of professional
food service equipment, also with turnkey projects;
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VALUETRACK
® Public Areas Interiors: albeit the newest business lunched in 2020, Somec offers contract
solutions for luxury outfitting of boutiques, stores, hospitality and public areas through Skillmax,
acquired in May 2020.
Somec: business segments
Source: Somec
Worthy to note, as of today according to management, Somec holds ca. 62% of market share in the
Marine Glazing segment while it is a relatively smaller player in the Marine Cooking
Equipment business, in which company acquired a 21% market share, thus still having room for
additional expansion.
As for interiors and public areas, representing a significant share of new cruise ships construction
budgets, Somec market share is not material, as it has only recently entered this segment.
In the Landscape business Somec does not hold significant market share in any of the three
segments, as the group entered the Building Facades industry only in March 2018, with the acquisition
of Fabbrica, set up one year earlier.
Despite the tremendous growth of the company, it still retains a small share of the market, but its
recognition among most prestigious US general contractors and architecture firms bodies well for its
growth outlook.
Integrated and synergic business model

Somec business model strongly relies on project management and differentiate from most competitors
thanks to in-house manufacturing, which lets the Company to take care in-house of each step of
projects, preventing critical issues in the installation and offering a top-quality post-sale assistance.
The same “tailor made” approach is adopted in the two Business Units, Seascape and Landscape.
These unites are symmetric, with a driving segment (glazing and façade) and a smaller but fast
growing cooking and catering business in each, as well as a more recent offer in the Public Areas-
Interiors segments (marine and mainland).
All these products are highly synergic in terms of processes (most business is driven by project
management, bidding and execution know-how), supply chain (glass, steel, aluminum and other raw
materials), R&D and last but not least in terms of clients. Now the Group structure is broadly
completed and ready to exploit the sizeable market potential and material cross selling opportunities.
19
VALUETRACK
Somec: Group structure
80% GICO
Source: Somec
Global presence and local production chains

With the Headquarter located near Treviso (Italy), the company has expanded its presence globally,
with branches in Europe, North America and Asia.
The core operations of the Group are in Veneto, Italy, a region characterized by a presence of
multiple local suppliers which represent the “Made in Italy” manufacture (especially in metals) and
that supported Somec growth thanks to a domestic high-quality supply chain.
As far as foreign operations are concerned, we note that:
® In early 2019 Somec opened the first branch in Shanghai through which the company intend
to exploit the acquired know-how over the years to address the growing Asian market;
® In North America, Somec is running a land-based business with two subsidiaries located in
Montreal (Canada) and Windsor (US): most of its business is related to the Building Façades
activities carried out locally by Fabbrica.
Somec: Geographic footprint
Source: Somec
20
VALUETRACK
Covid-19 and other concerns

During 2020 stocks dealing with travelling and other cyclical sectors have been seriously hit by the
pandemic and have been sailing in a perfect storm. Somec share price has also been extremely
volatile among investors’ concerns about a few issues, mostly directly or indirectly driven by Covid-
19, but not only. We fully understand the rationale behind these worries but also believe they were
overstated or have been solved, as the partial share price rebound mirrors to some extent.
In 2020 the company has suffered doubts and fears on: 1) the direct impact of Covid-19 outbreak on
its reference markets, and 2) the indirect impact of Covid-19 on its financial profile. We believe such
worries were overstated or have been solved.
Covid-19: implications not so worrying after all

All the end markets of Somec have been / are going to be somehow impacted by the pandemic:
cruising above all in 2020, building projects in the next future if government subsidies are not enough
to compensate recession driven decrease in private construction spending, and professional cooking
equipment and interiors for public areas, as per their exposure to the retailing and Ho.Re.Ca
industries.
That said, we believe Somec is well-equipped to mitigate such negative burdens. Indeed:
Cruising sector
In 2020 the cruise industry has been severely hit by pandemic, with number of cruises and passengers
dramatically down, following 30 years of steady and impressive growth. However, we note that:
® Main cruise operators have already undertaken massive capital market activity to buy enough
time to wait for demand recovery;
® No one has cancelled orders for new ships;
® Somec has continued to receive new orders, ca. €150mn since February 2020;
® Somec relies on a relatively diversified and balanced order portfolio, with none of cruise operators
accounting more than 20% of the seascape orderbook, and no massive single orders (i.e. 36 new
orders collected in 2019-YTD).
Real estate market and new building activities

US private construction spending market is likely to be negatively impacted by the current gloomy
economy scenario, but this is not going to necessarily impact Somec’s Fabbrica, given its small size
and market share, its management reputation, its recent seamless execution and high tenders’ success
rate, and the positive boost coming from US Government’s fiscal stimulus.
We rather reckon the potentially higher volatility of Fabbrica backlog and revenues recognition, due to
the relatively higher average ticket, if compared to the seascape division. As a matter of facts, the last
three orders released since September, bring out a total €86mn, ca. €28mn each one vs. €8-10mn we
calculate in the seascape field.
Ho.Re.Ca.
Accommodation and traditional food services are among those more exposed to the crisis, and that
will likely have a slower recovery to pre-crisis levels, and higher probability of default amongst players.
So, it is reasonable to predict a business slowdown from GICO and TSI in 2020-21E, only partially
offset by a good performance by Pizza Group, fuelled by a resilient market demand driven by the “new
normal”. The silver line of this situation is that the sector shake-up may offer some opportunities to
new but solid players as Somec to gain market shares.
21
VALUETRACK
Exposure toward Cruise industry: ships will set sail again
Covid-19 rocked the boats…

At worldwide level, the Cruises segment generated $27.4bn in revenues in 2019, with number of
passengers which increased dramatically over the last 10 years and reached 27.5mn in 2019.
On the contrary in 2020, due to the pandemic, all providers had to seize their operations for at least
some months, but most of them had to keep their ships in harbours for the larger part of 2020. This
caused a decrease to 7.1mn passengers carried out in 2020 (-74% YoY).
Cruise Market: Worldwide Passengers Carried 1990 - 2020

Worldwide Passengers Carried (mn)
27.5
26.5
25.2
24.2
22.6
21.6
21.0
20.3
19.4
18.4
17.2
15.8
14.6
12.0
11.2
10.5
9.5
8.6
7.5
7.2
7.1
6.3
5.9
5.4
5.0
4.7
4.8
4.7
3.8
4.2
4.4
1990 1995 2000 2005 2010 2015 2020
Source: Cruise Market Watch
As a result, revenues of the world’s largest cruise line operators decreased on average by more than
70% in the first nine months of 2020.
Cruise market: Main operators’ revenues 9m20 vs 9m19

($bn) 9m19 9m20 Change (%)
Carnival Corporation 16.04 5.56 -65%

Royal Caribbean Group 8.43 2.18 -74%
Norwegian Cruise Line 4.99 1.27 -75%
Source: Corporates presentations
…but did not stop long-term plans…

New ships investments are suffering an inevitable drop in 2020, due to halt in operations and
some order shifts. However, a recovery should take place in 2021 ($13bn) and, a new peak should
be achieved in 2022 at ca. $16bn, with 30 new ships confirmed.
After peak in 2022E a decrease in investment capex is foreseen, but we believe that the higher
uncertainty on the short-term outlook (linked to negative market stance), and the lower visibility on
longer-term investment capex, may suggest current prediction on 2024-27 new ships’ orderbook is
conservative, and a continuous rollover is needed.
22
VALUETRACK
Global Cruising Industry - #103 new ships and $61bn investment capex expected in 2021E-
27E
Total Capex ( $bn) Number of new ships

30
26
23
20
18
16
10 9
16.0 5
13.5 3
8.7 9.9 10.3 8.2
7.3 7.1 3.1 2.5
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
Source: Cruise Industry News. (*) Excluding Vard Order book as made of lower-size orders
This is also confirmed by Fincantieri in 3Q20 interim results, according to which no orders were
cancelled, while a rescheduling of production programs took place.
Moreover, we note that over the first half 2020:
® Main cruise operators have already undertaken massive capital market activity to buy enough
time to wait for demand recovery;
® No one has cancelled orders for new ships;
® Somec has continued to receive new orders, ca. €150mn since February 2020.
…and the outlook remains positive

Also in the light of Covid-19 vaccine news flow, the cruise segment is seen to grow to $33.7bn by
2025. United States is expected to stay the largest market, followed by Europe where German holds a
leading position (with $2.9bn Revenues in 2019) and China which, according to conservative
assumptions of Statista, is expected to have a smaller market size ($2.9bn in 2025) but the highest
growth rate (7.6% CAGR2017-25). However, the recovery in the industry revenues seems to be much
slower than the capex cycle.
Cruise Market: Worldwide Cruise Revenues 2017 – 2025E
Pre Covid-19 Post Covid-19 34

32 33
30 31
29
27
34
31
26 27 27
$bn
24 23
17
2017 2018 2019 2020 2021 2022 2023 2024 2025
Source: Statista
23
VALUETRACK
What if bankruptcies occur in the highly concentrated cruise market?
Cruise market concentration: few cruise line operators and even less shipyards
In the Cruise market, we see Carnival Corp., Royal Caribbean Corp. and Norwegian Cruise
Line holding more than 75% of the entire market in terms of global 2019 passengers while at
shipyard level, Fincantieri Group and Meyer Group hold 41% and 15% of the current global
order book respectively.
Somec has a good client diversification, from our Seascape orders analysis
We note that over the past two years Somec acquired well-diversified orders and none of
cruise operators accounts for more than 25% of cumulated new orders (from January 2019 to
date). Also, the total order portfolio covers the vast majority of cruise operators, from the
largest to niche players and includes also recently founded cruise lines like Virgin Voyage, confirming
Group capability not only to improve portfolio diversification but also to defend its
leadership. Starting from company’s press releases, we rebuilt cumulated order intake from January
2019 to date and crosschecked orders with global cruise ships orderbook list by Cruise Industry News.
In case of missing data or undisclosed information, we relied on the “rule-of-thumb” that Glazing,
Professional Cooking and Public Areas account for 1%, 2% and 5% of total ship’s cost respectively. This
exercise refers to the 2019-2020YTD period only and we have estimated the gross order intake,
i.e. these data do not consider the possible partial deliveries and progress in works under construction,
which are not deducted (i.e. it is not a backlog), but we believe the outcomes are still very indicative.
Based on cruise lines orders show a very balanced picture

What emerges from our analysis is the following, in relation to cruise operators:
® Orders reflecting cruise lines’ market shares: Norwegian, Carnival and Royal Caribbean
cruise lines, i.e. the largest cruise operators, account for 20.6%, 16.8% and 16.5% of cumulated new
orders respectively. Thus, gross orders intake reflects cruise operators’ market shares;
® Good portfolio diversification: none of cruise operator weights more than 25% of cumulated
orders. Thus, limiting Group excessive exposure toward a single cruise operator;
® De-risking portfolio: current orders intake includes a multitude of cruise line operators,
including also the new entrants like Virgin Voyage. This confirms a trend of further de-risking of
the current backlog, also within the Seascape division;
® No single massive order: with a total of 36 orders, Somec shows a good risk diversification at
single order level and a stronger Group resiliency in case of rescheduling (if not cancelling) of
global cruise order book, as it seems to be the case at the moment, due to pandemic.
Somec: Order intake 2019A – 2020YTD per Cruise Line

Cruise Line Operator # Orders Order Intake (€mn) % of Total
Norwegian Cruise Line 6 68.0 20.6%

Viking Cruises 4 74.0 22.4%
Carnival Cruise Line 7 55.5 16.8%
Royal Caribbean International 5 54.5 16.5%
Virgin Voyages 3 30.0 9.1%
MSC Cruises 4 24.0 7.3%
Disney Cruise Line 3 20.3 4.8%
Ponant 2 7.1 2.1%
Mystic Cruises 2 1.6 0.5%
Total 36 335.0 100%
Source: Value Track Analysis (based on orders announced)
24
VALUETRACK
We believe that the cruise line concentration arising from the above exercise could be used as a good
proxy of total marine backlog, despite the latter normally includes orders collected over a time
horizon of 7 years, while the former refers to a period of less than 2 years, and hence it may be affected
by “single” orders. In fact, the orders considered above (i.e. announced after January 2019) represent
less than half the last backlog announced by the company (€720mn in June 20, of which €585mn in
Seascape). Assuming that the older backlog (built over 2014-2018) was more aligned to final clients’
market shares, we have adjusted the above reported percentages accordingly, and we get to the
concentration shown below. Seascape backlog seems definitively quite balanced.
Somec: Total Backlog Breakdown and Seascape Backlog concentration per cruise line
Total Backlog as of Jun. 2020 Seascape Backlog concentration (*)
Others
12%
Norwegian
19%
Viking
Seascape 16%
Landscape
19% 81%
Carnival
19%
MSC
16%
Royal C.
18%
Source: Somec (*)Value Track Estimates
Based on shipyards: Fincantieri is “the client”.

As for exposure to shipyards, Fincantieri is inevitably the largest client, due to its global
leading positioning and strong presence in Italian yards: with 18 out of 36 total orders received it
accounts for 62% of all recent orders’ value (including Vard and the JV with CSSC). Somec has also a
good exposure to Group Meyer’s shipyards from which has received 10 new orders over the last two
years, which weight for 25% of cumulated order intake.
Somec: Order intake 2019A – 2020YTD per Shipyard

Shipyard # Orders Order Intake (€mn) % of Total
Group Fincantieri 18 206 62%

o/w Fincantieri 15 192 57%
o/w Fincantieri/CSSC JV 1 7 2%
o/w Vard 2 7 2%
Group Meyer 10 84 25%

o/w Meyer 4 29 9%
o/w Meyer Turku 3 35 10%
o/w Meyer Werft 3 20 6%
Chantiers 6 44 12%
West Sea 2 2 1%
Total 36 335.0 100%
25
VALUETRACK
Appeal of Somec financial profile not impacted, but for the very short term
Covid-19 outbreak has taken place at the end of an intense investment cycle for Somec and has, as
consequence, prevented the company from immediately capitalizing on its effort. Indeed, it has raised
fears of margins deterioration and possible strains on debt covenants.
Deteriorated Return – RoCE affected by sizeable intangibles (driven by M&A)

Return on capital of Somec worsened in 1H2020 and it is expected to reach a bottom in FY 2020E at
5%, down from 21% as of 2018 and 15% as of 2019, mainly due to the expansion of invested capital,
driven by acquisitions and development capex aimed at increasing output capacity, combined with
lower earnings in 2020.
Somec: Balance Sheet 2018 – 1H20

(€mn) 2018A 2019A 1H20
Net Fixed Assets 53.0 81.5 89.2

o/w Goodwill 17.2 28.5 33.6
o/w other intangible 22.5 29.5 26.7
Net Working Capital 12.2 25.9 29.4
Severance pay and other funds 2.1 2.6 4.1
Total Capital Employed 63.1 104.8 114.4
In particular, intangible and goodwill following M&A stand at ca. €58mn (FY 2019) or 54% of total
Net Invested Capital, making ROIC computed on reported Net Invested Capital not a fully reliable
indicator of real cash return on capital or operational profitability of Somec business. It is neither a
good proxy of the medium-term return of Somec business, when recent M&A will be “digested”.
For this reason, we believe it is useful to consider also the return on tangible capital,
measured as EBITA on Tangible Invested Capital: this is the level of returns Somec will converge to in
the medium term, assuming organic growth only.
Return on tangible capital should double to 50% as of 2023E thanks to:
® Margins recovery from weak 2020E momentum and back to pre-covid-19 levels;
® Capital intensity reduction as capex is expected to normalize.
Somec: Analysis of ROIC b.t. in 2018A-23E vs. Net Invested Capital
54%
47% 50%
43%
34%
24%
as %
€mn
27%
21% 21%
15%
12%
5%
63 23 105 47 108 58 106 63 105 69 102 72
2018 2019 2020E 2021E 2022E 2023E
Net Invested Capital Tangible Net Invested Capital RO IC (rhs) RO IC (on Tangible, rhs)
26
VALUETRACK
Cash: liquidity is under control though

Earnings slow down and increased debt exposure reported at the end of 1H20 may have raised fears
for existing covenants (negotiated under the Italian GAAP reporting) to be at risk. These worries were
prompted also by a generalized panic in the travel and cruising industry, with major players tapping
into new sources of liquidity. Yet, we note that:
® Cash flow generation should reduce already in 2H2020 the Net Debt from its 1H20 €66mn peak;
® Main covenants have been recently revised at 4.0x-4.5x Net Debt/EBITDA ratio (under the new
IFRS reporting) and offers more flexibility;
® Around 60% of reported Net Debt is related to leasing contracts and to Put&Call agreements to
buy-out minorities;
® The company has plenty of room with medium term loans already secured and management has
also promptly negotiated new sources of funding in 1H 2020, with spreads between 80bps and
125bps and 5-6 years duration (see table below).
Somec: Net Debt/EBITDA 2019-2023E
70.0 3.47
2.97
59.6
60.0 56.2 2.97
53.5
50.0 2.47
43.4 42.5
2.30 1.93
40.0 36.1 1.97
As (x)
27.8 28.3
€mn
30.0 24.4 1.20 1.47

20.1
20.0 0.97
0.67
10.0 0.47
0.0 -0.03
2019FY 2020E 2021E 2022E 2023E
Net Debt (lhs) EBITDA (lhs) Net Debt / EBITDA (rhs)
Somec: Gross Debts as of Dec 2019, updated Covenants and new sources
Covenants (revised)
Description Residual (€mn) Maturity
Net Debt/EBITDA Net Debt/Equity
Unicredit – €9.2mn 6.9 30/09/2023 £4.0x £1.6x
UBI - €4.0mn 2.9 07/08/2023
MPS – €5.0mn 4.5 30/06/2024
UBI – €4.0mn 3.4 07/01/2024 £4.5x £2.0x
UBI - €4.0mn 4.0 16/01/2022 £4.5x £2.0x
Unicredit – €3.0mn 3.0 30/11/2021
Unicredit – €10.0mn 10.0 31/12/2024 £4.0 £1.6x
BNL – €8.2mn 4.4 30/05/2022 £1.2x (*) £1.0x
WFSLA Equipment notes– $4.8mn 3.9 15/12/2024 DSCR(**) ³1.25x Equity³ €2.2mn
Total (as of 31.12.2019) 43.0
CA Friuladria – €5mn 5.0
BNL – €5mn 5.0 £2.8x £1.6x
Intesa Sanpaolo – €5mn 5.0
WFSLA Term note (PPP)– $3.0mn 2.8
Total New Sources (1H 2020) 17.8
Source: Somec. (*)Oxin financials, (**) Fabbrica financials US GAAP
27
VALUETRACK
What we like
Somec business case has very interesting angles, in our view, related to both the current outlook and
to future opportunities / features to be achieved. These viewpoints confirm a “growth” profile for
Somec already as of 2021E and are almost equally distributed in the Seascape and Landscape
businesses.
Rather than focusing on the possible drawbacks related to Covid-19 outbreak, we believe to be much
more fruitful to have a look at some very positive angles of Somec business case, related to both the
current outlook and to future opportunities / features to be achieved. Among the positive angles we
would highlight the following:
# 1. A rare track record;
# 2. Good visibility of both businesses;
# 3. Massive top line growth potential ahead;
# 4. Cash conversion and FCF at inflection point.
And we also underline some further growth opportunities not factored in our estimates, such as:
® Chinese shipbuilding market;
® US West Coast building façade business;
® Partial/Total buyout of Fabbrica minorities.
Positive angle #1: A rare track record

Since the acquisition from the current controlling shareholders back in 2013, Somec reported an
excellent track record in terms of business execution, diversification, growth and M&A.
Business Execution
Since entrance in 2013 new management has positioned Somec as a leading Marine Glazing supplier
for Cruise ships, establishing solid partnerships with largest cruise operators and the most important
shipbuilders. As of today, the company holds ca. 62% of market share in the Marine Glazing business
and a growing ca. 21% in Marine Cooking Equipment.
Somec: Group’s clients and partners
Source: Somec
28
VALUETRACK
In this industry Somec has managed to build a unique know-how and leadership, but it has also
managed to execute orders (often very complex, highly innovative and with crucial timely delivery)
with a relatively low volatility in terms of margins and without material legal issues or damages.
This is crucial (albeit not so common) for a business based on project management and timely
execution and is definitely true in the marine division, but the seamless execution is also a strength
point for the more recent Landscape business, entered in 2018.
Business and market diversification

In less than six years, Somec has not only strengthened its position in the Marine Glazing and Marine
Cooking Equipment, but it also successfully entered the US Building Façade business in 2018, via
Fabbrica LLC.
In three years Fabbrica has collected orders for over €263mn and secured prestigious projects in the
US East Coast area, as it can count on a highly renown top management team previously in
Permasteelisa US, a leading global contractor in the architectural envelops and interiors.
Later on, in 2019 and 2020 Somec has further diversified to fill the key areas related to main
businesses of marine glazing and building facades. Hence today Somec is also active in Professional
Cooking Equipment and Public Areas Interiors for Civil and Marine markets.
Also, throughout strategic M&A activities, Somec acquired both leading brands (e.g. GICO) to position
as a high-end professional cooking equipment supplier and younger and innovative teams (e.g.
Skillmax) to enter the interiors segment. These assets will leverage on massive cross selling potential
with core activities.
All these moves have also implied the opening of new subsidiaries or local organizations around the
world, including the Shanghai subsidiary in early 2019.
As a result of the above the contribution of Marine Glazing decreased to ca. 35% of Group Revenues,
(1H 2020) for the benefit of new business lines.
Somec: Revenues Breakdown by Business Line (%)

Marine Glazing Marine Cook. Eq. Marine Public Area Building Facades Professional Cook. Eq. Public Area
2018 2019 1H20
3% 0.5%
4% 7%
32%
26% 30%
36% 34%
50%
1%
10%
20% 15%
18% 14%
Marine Glazing Marine Cook. Eq. Marine Public Area Building Facades Professional Cook. Eq. Public Area
3% 0.5%
Source: Somec 4% 7%
32%
26% 30%
Top Line Growth 36% 34%

50%
Company1%experienced a massive top line growth, with Value of Production increasing from €30.7mn
10%
in 2013 to €251.4mn
20%
as of 2019. This growth record was driven by market
15% share gains in North
America and Europe and by additional stream of 18%
revenues from M&A activities. 14%
In the latest years,
Seascape sales grew at double-digit rate, mainly supported by the material increase of revenues
from Marine Cooking Equipment and Public Interiors, boosted by a few small acquisitions.
The Landscape business witnessed an even stronger trend, with Building Façades and
Professional Cooking Equipment revenues reaching €94mn from scratch.
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VALUETRACK
Somec: Revenues Breakdown

(€mn) 2016(*) 2017 2018 2019 2020E
Seascape Sales 75.8 83.4 116.8 158.5 120.5

Change YoY (%) nm 10.0% 40.0% 35.7% -24.0%
o/w Marine Glazing 59.7 83.3 89.8 64.3
o/w Marine Cooking Equipment 23.7 32.4 44.6 30.6
o/w Public Interiors 1.1 24.1 25.6
Landscape Sales nm 4.2 48.7 92.9 93.8

Change YoY (%) nm nm 90.6% 1.0%
o/w Building Façades 43.8 (**) 81.6 71.8
o/w Professional Cooking Equipment 4.2 4.9 11.3 18.5
o/w Public Areas 3.5
Other 0.5 1.2 0.0 0.0

Total Revenues 75.8 88.1 165.5 251.4 214.3
Source: Somec (*) Company estimated VoP (**) Fabbrica Consolidated from April 2018
Despite Covid-19 outbreak and suspension of operating activities as a result of Governments

restrictions, Somec business showed a good level of resiliency: order deliveries in the marine glazing
suffered from a few weeks’ delays, revenues were down 27% (compared to cruise business collapse)
but operations were promptly recovered over the summer; in the building facades division the impact
was less marked and revenues were down by 12%, with marginal delays in deliveries fully recovered in
the second half.
First half revenues were supported by the increased area of consolidation following the acquisition
policy and as a result 1H top line decreased by only 7.7% with respect to 1H19 and we expect for the
full year it to drop to ca. €214mn (-15% YoY) as shown above, due to a lower contribution from
external growth.
Somec: Revenues Breakdown and trend over 2020E

(€mn) 1H19 1H20 Change (%) 2H20E Change (%)
Seascape Sales 78.6 71.4 -9.2% 49.1 -38.5%

o/w Marine Glazing 52.9 38.6 -27.0% 25.7 -30.3%
o/w Marine Cooking Equipment 23.8 16.3 -31.5% 14.3 -31.3%
o/w Public Interiors 1.9 16.5 nm 9.1 -59.0%
Landscape Sales 44.4 42.2 -5.1% 51.6 6.5%

o/w Building Façades 38.5 33.7 -12.5% 38.1 -11.6%
o/w Professional Cooking Equipment 5.9 7.9 33.9% 10.6 96.3%
o/w Public Areas 0.0 0.6 nm 2.9 nm
Other 0.0 0.0 nm 0.0 nm
Total Revenues 123.0 113.6 -7.7% 100.8 -16.0%
Source: Somec
30
VALUETRACK
M&A activity
So far Somec has completed a multitude of highly synergic and revenue enhancing M&A deals such as:
® Oxin (May 2016) is active in the Marine Cooking Equipment business. The acquisition
represented Somec first step toward a diversification of business and portfolio solution.
® Inoxtrend (September 2017), strengthens Group’s portfolio in professional Cooking Equipment
(ovens) and increases Somec diversification out of marine and towards Ho.Re.Ca industry.
® Fabbrica (February 2018) operates in the Building Façades business in US (mainly the East
Coast). It was a new venture launched with a strong top management team coming from
Permasteelisa US. Fabbrica was the entry into the landscape business.
® Primax (October 2018) is a manufacturer on the professional catering equipment focused on
solutions for professional cold (blast chillers). Core business is highly synergic with both the
Marine and Professional Cooking Equipment.
® Total Solution Interiors - TSI (May 2019) is specialized in the supply of interiors and
common areas for cruise ships, both in new constructions and refitting. TSI added the third
segment to marine unit after glazing and cooking.
® Pizza Group (January 2020) operates in professional ovens for pizzas and other equipment and
allows Somec to enlarge its offer to ovens niche, side by side to Inoxtrend and Primax, completing
the value proposition for civil/naval catering.
® Skillmax (May 2020) provides a range of furnishing solutions for luxury private residences,
stores, offices, hotels and other public areas. It will support Somec positioning in the luxury
segment with potential cross selling opportunities within the construction building business.
® GICO (July 2020), leading player in the design and production of turnkey, high-end professional
kitchens with an internationally recognized brand. The deal aims to exploit marketing and
operative synergies with Inoxtrend, Primax, Pizza Group and the whole building division.
Somec: M&A companies by Business Lines

Seascape and Landscape: Seascape and Landscape: Landscape:
Professional Cooking Equipment Public Areas Interiors Building Façades
Source: Somec
Somec: Impact of M&A on Top Line growth

Revenues (€mn) Business Consolidation 2018 2019 2020E
Fabbrica Building Facades Apr-18 43.8 7.7
Primax Prof. Cooking Jan-19 6.4
TSI Marine P. Areas Jul-19 19.6 17.4
Pizza Group Prof. Cooking Jan-20 10.5
Skillmax Public Areas Jun-20 3.5
GICO Prof. Cooking Jul-20 1.5
Total impact of acquisitions 43.8 33.7 32.9
Total Reported Revenues 165.5 251.4 214.3
Total reported growth YoY (%), o/w 89% 52% -15%
Organic growth 39% 31% -28%
M&A growth 50% 20% 13%
Source: Value Track estimates
31
VALUETRACK
Positive angle #2: Good visibility of both businesses

Somec revenues benefits from a good visibility which reflects main features of the two business units:
Seascape shows on average a much higher visibility with respect to the Landscape, with
order books that span over 7 years for the former and 2 years for the latter.
Seascape market
As far as Seascape is concerned, visibility is high for all segments dealing with new ships,
representing the vast majority of the revenues:
® Marine Glazing shows the highest visibility, with orders backlog up to 2027 reflecting marine
industry bottleneck. Indeed, due to the limited number of yards in the world and thus the limited
industry output capacity, cruise operators have to plan well ahead new orders for new ships. This
thereby implies a long maturity backlog for shipyards and for the entire supply chain.
Furthermore, we underline that the limited output capacity of the industry makes orders
cancellations unlikely even in extreme situations (as it has been the case of pandemic), when
delays or orders rescheduling may rather represent an agreed way-out;
® Marine Cooking Equipment visibility mainly depends on the Marine Glazing one as this
segment is usually driven by the Marine Glazing activities, however, it may show a backlog with a
shorter maturity in case of prevailing refitting actives on new-buildings one;
® Public areas and interiors if linked to the new building activity have also long maturity
orders, while in the refitting activities – strengthened following the acquisition of TSI - orders
typically refer to the following 12 months compared to ca. 2-5 years of new ships.
Somec: Seascape new orders announced in 2020

Amount
Announcement Description
(€mn)
August 3, 2020
Marine Glazing Glass envelopes of 2 cruise ships, with delivery in 2023 and 2025 20
Marine Cooking Eq. Options for catering areas of six vessels for Viking Cruises 40
June 17, 2020
Marine Glazing
Glass envelopes and the catering areas of four luxury cruise ships, 60
Marine Cooking Eq.
in production starting from 2022
Public Areas
February 19, 2020
Manufacturing and installation of Catering areas for three cruise ships

Marine Cooking Eq. 30
with delivery between 2021 and 2023
Source: Somec
In the marine market, visibility is further strengthened by high market share which Somec holds and
by the industry high barriers to entry due to:
® Strong market concentration, with few shipbuilders and cruise operators in the world;
® Highly technical know-how required in project and execution;
® Need for track record in terms of quality, innovation and timely delivery.
32
VALUETRACK
Landscape business
Landscape business shows a lower visibility on revenues, with orders due for delivery over 12-24
months in Building Façades, due to absence of any limit in the output capacity for the industry and to
the much higher number of firms operating in the civil market.
® Building Façades is the main, if not the only, element of Landscape backlog as of today. In this
business, and more specifically in the East Coast of US, orders are set with shorter time horizon
and usually show an average maturity of 18-24 months.
® Professional Cooking Equipment business is mostly driven by spot contracts which do not
usually contribute to Somec backlog. Some exceptions may arise in case of large projects deriving
from joint projects with other units (e.g. Building Façade Business).
® Public areas - Interiors businesses have been entered very recently but they are also based on
tenders for larger contracts and order execution remains key, especially because Somec focuses on
the top-end of the market.
Somec: Landscape new orders announced in 2020

Announcement Description Amount ($mn )
October 19, 2020

New project for the design and manufacturing of the curtainwalls
Building Façades for Fenway Center, Boston, with delivery from 2021 to 2022 35
September 3, 2020
2 new projects for office and residential building in New York, both
Building Façades
with expected delivery by 2021 51
February 11, 2020
2 new projects in Boston and 1 in Manhattan with expected delivery

Building Façades 36
in 2020,2021 and 2023 respectively.
Source: Somec
The building facades business perfectly fit into Somec historical marine business and Fabbrica’s top
management know-how is playing a key role for a quick take-off of the business. Also, it is important
to point out that the average size of orders has gradually increased and this paves the way for further
growth.
Somec: News Orders 2020 Backlog as of 1H20
€720mn
19%
Seascape €153mn
7%
54%
20%
Landscape €102mn
Marine Glazing Marine Cook. Eq.

Marine Public Area Building Facades
Source: Somec
33
VALUETRACK
Positive angle #3: Massive top line growth potential ahead

In the light of current Somec business model and portfolio of activities, we see a massive top line
potential beyond its current order backlog, yet sizeable (ca. 750mn as of Dec 2020E at Group level),
mostly attributable to:
® Huge markets to exploit in the landscape division, mainly for US Building Construction in
the short term, but also Ho.Re.Ca. and retail markets in the medium term, which may support
Landscape growth at double digit rate in the following years. Also, Fabbrica is building a solid
track record which would allow the company to gain increasingly large-size orders as, after three
years from launch, it has started to capitalize on its strong execution.
® Portfolio extension in marine business, adding Cooking Equipment and Interiors for Public
Areas to offer portfolio has enormous positive effects on Seascape top line growth and
profitability potential. In addition to this, a further boost to growth in Seascape may come from
the restart of the refitting activities, currently on halt.
Landscape Business: a market with enormous potential

Focusing on the mainland-based business, we believe Somec to be well equipped to unlock its top line
potential driven by a few factors:
1. Deep knowledge of the US construction market and strong relationships/networking;
2. Large size of reference market vs a relatively small and rising player;
3. Chance of bucking the trend should the US Construction sector prove challenging.
1. Deep knowledge of the US construction market

With the former top management of Permasteelisa US having joined Somec, we believe the
group to be optimally positioned in order to increase its market share and scout new potential
opportunities. The company business is highly tied with co-founder and CEO of Fabbrica, Mr. Alberto
De Gobbi, who has an extensive career in the curtainwall industry. He and his team form a group of
experienced professionals that has collaborated for more than 30 years in the design and
manufacturing of bespoke building façades space.
2. New entrant in a huge market

Somec operates in the Building Façade since the acquisition of Fabbrica in 2018 and Fabbrica at the
time was a start-up - founded in 2017 by Mr. De Gobbi and Mr. Marchetto (Somec CEO) – with
Revenues below $30mn. Although the company has tripled its size with more than $90mn Revenues
in 2019, Fabbrica is still a relatively small player in the US market, which is characterized by
larger-size operators. Furthermore, as already said, this business highly relies on operators’ track
record: being founded only a few years ago, Fabbrica has been initially limited from the lack of a direct
track record, making it harder to acquire sizeable orders. Today, with growing references and list of
projects successfully delivered, Fabbrica has started to gain an increasing number of larger
size projects.
3. Exposure to a critical market: can Fabbrica buck the trend?

The US Construction industry is currently expected to decrease by ca. 10% in the next two years due to
the pandemic-induced recession. This may not be a problem for Fabbrica thanks to: 1) its small
market share implying absence of correlation from market trends and, 2) Government led fiscal
stimulus to the sector. Indeed:
® Decorrelation from market trends. The small size and tiny market share of Fabbrica may
also imply that the macroeconomic environment and general sector trends may be less relevant.
This may prove true over the next quarters, when the business will be supported by a strong
order book (at year end again up YoY);
34
VALUETRACK
® Fiscal stimulus measures. The construction sector plays a pivotal role in the
recovery process of US economy, and during recessions the US Government usually
increases Public spending to support it, thus driving a decoupling vs. Private spending.
This appears true when looking at the US construction spending over the latest 2007-08 financial
crisis, and again appears true when looking at latest months statistics.
Indeed, in March 2020 the US government announced a $2 trillion stimulus package (CARES
Act.) to revive the economy from coronavirus crisis, with a significant share of it dedicated to uses
from which construction industry directly and indirectly benefits.
US Construction spending 2002-20: Public vs Private Construction Index (2002 =100%)
175% Public Private
155%
135%
115%
95%
75%
2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
Source: US Census Bureau
US Construction spending in 2020: Public vs Private Construction Index (Jan 2020 = 100%)
170% Public Private
160%
150%
140%
130%
120%
110%
100%
90%
80%
Jan Feb Mar Apr May Jun Jul Aug Sep Oct
Source: US Census Bureau
Cross checking with Permasteelisa business case

In order to give an idea of the growth potential of the landscape business, it’s worth analysing the case
of Permasteelisa Group, worldwide leading contractor for engineering, manufacturing and installation
of architectural envelopes and interior systems, that enjoyed a terrific success in terms of revenues
growth and value increase in the twenty years ranging from ’90s to 2009 and that finalized iconic
projects such as Sydney Opera House, London Shard tower, Apple’s Cupertino headquarter, New York
Moma.
Permasteelisa Group was originally incorporated in 1973 in Italy, and during ’80s and ’90s started an
aggressive international expansion that drove it from €24mn revenues in 1988 to €285mn
35
VALUETRACK
revenues in 1998 and then to €1.2bn in 2009 (50x in 21 years!), achieving a solid presence in
US, Europe, Asia and Middle East.
It is worth to note that Fabbrica is expected to reach the USD100mn revenues target in 4 years
(2021E), with an initial take-off much quicker than Permasteelisa. And we expect Fabbrica to triple its
revenues again by 2023E.
Permasteelisa: Revenues and Backlog 1988 – 2009
1,600
Backlog Revenues
1,400
1,200
1,000
(€mn)
800
600
400
200
-
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Source: Permasteelisa, Value Track Analysis
Also impressive was the increase in terms of economic value. Indeed:

® In 1999 Permasteelista went public with ca. €220mn market capitalization;
® In 2009, the company got acquired for €350mn consideration by Alpha Private Equity and
Investindustrial;
® In 2011, Lixil Group acquired Permasteelista for €573mn and we note that in the previous year,
the company reported €1.28bn revenues and ca. €80mn EBITDA;
® In 2018, the €467mn transaction for the sale to the Chinese group Grandland Holding was
blocked by the Committee on Foreign Investment in the United States-CFIUS.
Seascape: Leading position and up-selling opportunities

The growth outlook of the Marine Glazing business is strictly correlated to the trend in new cruise ship
building, as Somec here enjoys a dominant competitive position.
In addition to the new ships that are going to be built, we believe that some upside opportunities are
likely to materialize in refitting business and in marine cooking and public areas’ interiors ones.
Upside opportunity # 1: Refitting

With the cruise industry under almost total lockdown since March 2020, refitting activities suffered a
halt. However, we expect refitting to start back generating revenues as of 2021 onwards due to:
® Technical reasons i.e. need for refitting operations before sailing again;
® Competitive reasons, i.e. need to undergo renovation process in order to remain attractive and
satisfy ever-evolving clients’ preferences;
® Legal reasons, as many ships built over record 2018-2019 years will have to meet legal refitting
obligations in 2023-24.
36
VALUETRACK
Upside opportunity # 2: Up-selling

Thanks to its strong market positioning in the Marine Glazing Market (ca. 62% global market share),
Somec could increase sales in the Marine Cooking Equipment and Public Areas
businesses with a relatively limited effort.
It is noteworthy that on average Marine Glazing account for 1% of total ship’s cost, while Marine
Cooking Equipment and Public Areas count for 2% and 5% respectively of total ship’s budget.
Somec: percentage of budget spending per areas on total ship’s cost
Glazing
Cooking Equipment
Public Areas
Source: Somec
As far as the marine cooking equipment market is concerned, it is expected to decrease by 2.84%
in 2020E due to Covid-19 impact while rebounding in the next years up to $1.33bn by 2024 (3%
CAGR 2019-24) driven by:
® A growing need for reduction in fuel consumption, generating demand for new lightweight
equipment;
® Client request for customizable solutions, forcing operators to work on the design, construction
and technology to tailor products on their end-use needs.
On the offer side, we note that this market is very fragmented, with Aerolux Ltd., Astronics Corp., and
Bucher Leichtbau AG among the major market participants, while Somec differentiates itself from
competitors thanks to in-house manufacturing.
Indeed, through its subsidiaries, the firm has developed a business model that takes care in-house of
each step of a project, from design to installation.
As far as it regards the marine public areas’ interiors market, it is expected to grow at a very high
11.5% CAGR in the next few years reaching $5.8bn by 2027E, up from $2.7bn in 2020E, driven
by:
® Orders for new cruise ships and yachts;
® Refurbishment projects which cruiseships undergo every 3-5 years by law and to remain
competitive in the market.
The European market accounted for 28% of global ships in 2019 and is expected to account for the
largest share in 2020-27 period, with R&M Group, Alamaco and Trimline as major players.
We believe that Somec, through its subsidiary TSI, is optimally positioned to satisfy the most
sophisticated clients’ requests with customized solutions thanks to:
® Bulk of its activities being based in Italy;
® Longer than 20 years’ experience in the marine interiors outfitting;
® Capability to follow entire projects throughout all the phases, from initial sketches to completion.
37
VALUETRACK
Positive angle #4: Cash conversion and FCF at inflection point

We expect 2020E to represent an inflection point for Somec group’s Free Cash Flow generation and
Net Debt evolution. Indeed, while 2018-20 have been years of intense investing / free cash flow
absorption, on the contrary we expect Somec to generate €48mn cumulated free cash flow over
2021E-23E, thus reducing Net Debt down to €43mn by 2023E, i.e. 0.7x Net Debt/EBITDA.
2018-20E: The investing period

In the latest years the company has invested a significant amount of cash in both organic (capex +
working capital) and M&A driven growth. Indeed:
® Capital Expenditures. Somec invested ca. €13mn between 2018 and June 2020 to increase
output capacity of Seascape and Landscape business units, even not including the financial
impact of the leasing contracts from M&A activities. Out of this amount some €5.3mn were
devoted in 2019 for Fabbrica;
® M&A deals. Somec has invested in acquisitions to expand and diversify its business more than
€42mn between 2018 and July 2020, (€60mn including put&call agreements and earn-outs),
acquiring companies operating in Professional Cooking, Interiors and Building Façade. Out of this
amount some €20mn (including earn-out) were devoted to the acquisition of Fabbrica in 2018,
and €12mn to the acquisition and consolidation of Pizza Group and Skillmax;
® Net Working Capital. While in 2018 it benefitted from the consolidation of Fabbrica, whose
business was featured by negative NWC, on the contrary in 2019-1H20 it increased back due to
higher receivable attributable to refitting activities and to lower payables as Somec has supported
its entire supply chain within Covid-19 crisis.
We also remind that Somec adopted IFRS accounting at the end of 2019 (2018 data are restated
accordingly) and this had a material effect on reported financial liabilities (IFRS 16 liabilities
accounting for €19.1mn value at the end of June 2020).
Somec: Cash Flow 2018 – 1H20

(€mn) 2018A 2019A 1H20
EBITDA 19.1 24.4 10.7

Op. NWC requirements 22.7 -13.7 -3.5
Capex (excl. Fin. Inv.) -2.8 -7.5 -2.7
Change in provisions 0.0 0.5 1.5
Cash Taxes and others -4.2 -6.1 -0.8
OpFCF a.t. 34.9 -2.3 5.1
Capital Injections (IPO) 21.6 0.0 0.0
Other (incl. Fin. Inv. and IFRS16) -26.0 -31.2 -10.9
Net Financial Charges -0.6 -1.3 -0.9
Dividend paid by Somec SpA -2.7 -3.5 -3.5
Change in Net debt 27.3 -38.2 -10.2
Net Fin. Position [Net debt (-) / Cash (+)] -18.0 -56.2 -66.4
o/w IFRS 16 -7.7 -17.2 -19.1
o/w Put&Call Minorities -2.5 -11.8 -15.4
38
VALUETRACK
2021E-23E: The harvesting period

Contrary to the 2018-20 period, we expect Somec to generate €48mn cumulated free cash flow
over 2021-23E, thus reducing Net Debt down to €43mn by 2023E, i.e. 0.7x Net Debt/EBITDA.
Indeed, thanks to the investments made over 2018-2020 output capacity now exceeds the company’s
current needs and as a consequence the Group should be able to support significant top line growth
without additional sizeable investments. More in detail, Free Cash Flow generation should be
supported by:
® Capital expenditure to converge towards maintenance levels, i.e. ca. €3.5mn per year;
® Net Working Capital under control, as we expect NWC to increase in line with business
expansion but to remain stable around 15% of Total Revenues.
Somec: Net Debt, EBITDA and FCF 2019-2023E
70.0 25.0
59.6 22.7
20.0
60.0 56.2 15.1
53.5 15.0
10.7
50.0 10.0
43.4 42.5
0.0 36.1 5.0
40.0
0.0
27.8 28.3
€mn
30.0 24.4 -5.0

20.1
20.0 -10.0
-15.0
10.0
-20.0
0.0 -20.8 -25.0
2019FY 2020E 2021E 2022E 2023E
Net Debt EBITDA Free Cash Flow
We underline that our forecasts are assuming Somec to maintain a shareholder-generous

dividend policy: cash generation improvements would allow the Group to maintain a dividend
payout ratio around 50%, in line with what has been observed between 2018 and 2019, without
affecting the de-leveraging path and, as for 2020, we assume flat dividends despite the earnings drop.
Actual pay-out policy will also depend upon the future M&A strategy, however, should not occur any
sizeable deal we see room of further increase in payout as it expected to account for less than 30% free
cash flow after 2021E.
Somec: Dividend Yield and Dividend as % of FCF 2019 – 2023E

60.0% 7.0%
Dividen % FCF
50.0% 6.7% 6.0%
Dividend Yield
50.2% 5.0%
40.0%
4.6% 4.0%
30.0% 36.0%
3.0%
20.0% 25.6% 27.2%
2.8% 2.8% 2.0%
2.5%
10.0% 1.0%
9.9%
0.0% 0.0%
2019 2020E 2021E 2022E 2023E
Source: Value Track Analysis (*) Free Cash Flow before Dividend payment
39
VALUETRACK
Three “options” not factored yet

In addition to what we have already described, it is worth noticing some “options” not included in our
forecasts yet and that might reveal strongly earnings accretive in the future:
1. Chinese cruise / shipbuilding market;
2. US West Coast building façades market;
3. Squeeze out of Fabbrica minorities.
Option #1: Chinese cruise / shipbuilding market

The potential of Chinese cruise market is huge and almost totally unexploited as it is currently
forecasted growing ten folds within 2030, to 20mn passengers and 80-100 large cruise ships
compared to 2.3m total capacity and 16 ships as of 2020.
Yet, we believe three points are worth being analyzed in order to preliminary assess such an option: 1)
2017-20 disappointment; 2) Government recent push; 3) Somec market positioning.
2017-20 disappointment
Between 2012-2017, Chinese cruising tourism rose by 70% YoY. In response to such a growing market
and in anticipation to the huge potential, major cruise lines entered into a multitude of JV and
strategic partnerships in China and started the construction of cruise ships for the Chinese market.
However, contrary to expectations, cruising rebounded down at unexpected rate with Chinese cruise
travelers dropping to 2.4mn (-14.3% YoY) in 2018 and to 1.9mn (-20% YoY) in 2019, also affected by
tourism bans.
The market was expected to see a growth rebound in 2020 with the deployment of new ships but got
disrupted by global Covid-19 pandemic.
China: Number of Chinese Cruise passengers from 2012 to 2019 (mn)
2.8
2.4
Number of passenger
7 2.1
12-1
RG'
1.9
CA
70%
(mn)
1.1
0.7
0.6
0.2
2012 2013 2014 2015 2016 2017 2018 2019
Source: Statista
Government recent push

Chinese Government has earmarked cruise industry as a major objective in “Made in China
2025” programme to upgrade its domestic manufacturing and support jobs at its shipyards.
In line with the Chinese strategic plan, in 2019 it took place the creation of a strategic JV between
China State Shipbuiding Corporation (CSSC) and the leading global shipbuilder Fincantieri
40
VALUETRACK
S.p.A. to support the creation of a cruise shipbuilding industry in China and purpose-built ships for
the China market, withdrawing those ships less adapted to Chinese customers preferences.
Another JV between Carnival group and CSSC (CSSC-Carnival Corp.) is currently operating with two
old ships and has ordered two new cruise ships (plus the option to order four additional China-
built ships) that will be the first to be built in China and serve the Chinese cruise market. The first ship
is expected to be delivered in 2023.
The Chinese government is also helping to accommodate the growth by paying to overhaul and
expand many of country’s ports: today, China has seven international cruise ports, with three
more under construction.
China: Main current ports in China 2020
Source: CruiseAsia
Somec market positioning

As a sub-supplier, Somec has two key competitive advantages to benefit from Chinese
Cruise market growth:
® Local based first mover advantage as Somec set up its subsidiary in Shanghai in early 2019,
named Somec Shanghai, that can offer a local presence with an Italian-Chinese team;
® Long-lasting relationship with Fincantieri and Carnival Corp., which are the
technology partners and the forefront of Chinese cruise industry.
As an evidence of this, Somec has already been awarded two orders for the first two ships for
delivery from 2023 (for €7mn), with an option for the other four ships, which has not been formalized
in the order backlog yet.
41
VALUETRACK
Option #2: US West Coast Building Façades

So far management has been able to secure diversification and extra-growth via M&A, executing the
strategy outlined at the time of its listing, back in 2018. We believe this has not come to an end and
that further targets may be identified in order to consolidate Somec presence worldwide.
In this sense, we see the US West Coast Building Façades business as a great opportunity to tackle
ahead. Indeed, as of today, Fabbrica is mainly active in Boston, New York and Washington D.C. and
may benefits from the West Coast positive outlook by expanding its presence either organically or via
M&A. The latter would generate a twofold benefit for the Group:
® Acquire a ready-to-go production and execution structure: although Building Façades
is an asset-light business which requires a low-size investment, a new production site may take
time before being ready and a middle management team with a strong execution know-how is
important to secure projects’ profitability while expanding business;
® Acquire track record and skilled people: by acquiring an already active company, Somec
would immediately benefits from an increase on Landscape Backlog, but more importantly, it
would strengthen Group track record in those geographic areas where Fabbrica is not well known
yet.
We underline that US West Coast shows a good growth potential: Arizona, California and
Washington report a long term growing construction spending trend, despite business cyclicality. On
other hand, States located in the East Coast are expected to have a construction spending level below
2011 levels in the near term.
Construction Spending Index by States 2011-2022E (2011 = 1)
2
Arizona
1.8
1.6
California
1.4
Washington
1.2
US
Massachusetts
1
Illinois
New York
0.8
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020E 2021E 2022E
Source: IHS – Markit
West Coast potential is also confirmed by the recent report published by PwC “Emerging Trend in Real
Estate 2021 US and Canada” which classified Portland and Seattle among the six favorite boom-towns,
attracting far more than their share of smart young workers.
West Coast areas are already starting to recover from massive job losses due to COVID
and John Burns Real Estate Consulting classified them as in high demand and rapid appreciation, also
supported by pro-growth government spending.
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VALUETRACK
Construction Spending Index by City 2011-2022E (2011 = 1)
Phoenix
2
1.8
San Francisco
1.6
1.4 Seattle
1.2 US
Boston
1 Chicago
NYC
0.8
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020E 2021E 2022E
Source: IHS – Markit
#3 Fabbrica minorities’ buy-out: a deal in the cards?

Fabbrica is owned jointly by Somec (50.9% via a 100% owned vehicle) and by its managers (49.1%).
The original agreements in 2018 involved a cash payment and two earn-outs due in 2019 and 2020
which have been paid, as expected, and management is delivering a great job.
At this point there are no further steps formally planned. Yet, we believe that in the long run it makes
sense for Somec to buy out these minorities and we expect some talks in this direction to start in
the next year and we do not rule out the buy-out may occur with paper, in part or in full.
The attractive growth prospects of the Building Facades business, the potential leakage of dividends to
Fabbrica minorities (estimated at €4.7mn over 2021-23E), combined with a Group FCF of more than
€25mn in 2021-212E suggest this deal is to be considered rather sooner than later, in our view.
43
VALUETRACK
Forecasts 2020-2023E
In 2020E-23E forecast period we expect the company to start growing again, at a healthy 13% top
line CAGR (€1.3bn cumulated revenues) with Landscape business (Building Façades and
Professional Cooking) accounting for 58% of Total Revenues in 2023E. Such Revenue increase
should lead to higher than 10.0% EBITDA margin, in line with the industry profitability, already as
of 2021E. More important, €48mn cumulated Free Cash Flow 2020E-2023E should drive Net Debt
down to €28.3mn in 2023E (vs €56.2mn in 2019), even assuming a steady pay-out policy.
Estimates at glance: assumptions and key items

As far 2020E-2023E financial forecasts are concerned, we note the following assumptions:
® Forecast are based on order backlog, order announced in 2020 YTD and order intake estimates
between 2021E-23E for all business units but for Professional Cooking Equipment;
® No major orders is going to be cancelled and options are confirmed, albeit no major options are
expected to be delivered within the forecast horizon;
® No future M&A is considered.
That said, in the 2020E-23E forecast period we expect the company to:
® Gain €1.3bn cumulated revenues, growing at 13% top line CAGR19-23E, with Landscape
business accounting for 58% of Total Revenues in 2023E;
® Get back to a higher than 10.0% EBITDA margin, in line with the industry profitability,
already as of 2021E;
® Reduce Net Debt down to €28.3mn in 2023E (vs €56.2mn in 2019) thanks to growing Cash
Flow generation.
Top line: diversifying business to drive growth

Overall, we forecast Total Revenues to grow at ca. 13% CAGR between 2019-23E, from
€251.4mn in 2019 to ca. €409mn as of 2023E thus successfully rebounding from 2020E decrease
(due to Covid related delays in marine business) already as of 2021E.
In particular, we foresee Landscape business growing at double-digit rate over the next three years
and accounting for 58% of total revenues by the end of 2023E vs 37% in 2019 mainly thanks
to increasing Building Façade activity, which is expected to get to ca. €153mn revenues in 2023E,
followed by the Professional Cooking Equipment business line that, albeit smaller, is reasonable to see
at €52mn revenues in 2023E (46% CAGR 2019-23E, boosted also by 2019-2020 acquisitions).
Somec: Landscape Revenues Breakdown

(€mn) 2019A 2020E 2021E 2022E 2023E
Landscape Revenues 92.9 93.8 137.2 188.0 236.8

Change YoY (%) nm 1.0% 46.2% 37.0% 26.0%
o/w Building Façades 81.6 71.8 95.2 119.8 152.5
o/w Professional Cooking Equipment 11.3 18.5 32 43.2 51.8
o/w Public Areas 0.0 3.5 10.0 25.0 32.5
Total Revenues 251.4 214.3 277.9 352.3 408.5

Landscape as % Tot Revenues 37.0% 43.8% 49.4% 53.4% 58.0%
44
VALUETRACK
As far Seascape is concerned, we forecast a more modest growth for the business unit, i.e. 2% CAGR
2019-23E, due to the expected slow down in the Cruise industry Capex between 2022E-23E.
In accordance with that, we estimate Marine Glazing not reaching back its 2019 peak revenues by
2023E but fostering cross-selling opportunities in Marine Cooking Equipment and Public Interiors
(6% and 19% CAGR 2019-23E respectively).
Somec: Seascape Revenues Breakdown

(€mn) 2019A 2020E 2021E 2022E 2023E
Seascape Revenues 158.5 120.5 140.7 164.3 171.7

Change YoY (%) nm -24.0% 16.7% 16.8% 4.5%
o/w Marine Glazing 89.8 64.3 80.3 74.2 66.6
o/w Marine Cooking Equipment 44.6 30.6 33.2 48.8 56.9
o/w Public Interiors 24.1 25.6 27.3 41.3 48.2
Total Revenues 251.4 214.3 277.9 352.3 408.5

Seascape as % Tot Revenues 63.0% 56.2% 50.6% 46.6% 42.0%
Somec: Total Revenues Breakdown
100% Marine Glazing
80% Marine Cooking
60% Marine Public

Area
40% Building Facades
20% Prof. Cooking
0% Public Area
2019FY 2020E 2021E 2022E 2023E
Somec: Backlog and order intake breakdown 2019A – 2023E

(€mn) 2019A 2020E 2021E 2022E 2023E
Order Intake 302 255 290 325 335

o/w Seascape 184 153 170 160 160
o/w Landscape 118 102 120 165 175
Total Backlog (year end) 638 750 794 810 788
Seascape Book/Bill ratio 1.2 1.3 1.2 1.0 0.9

Landscape Book/Bill ratio 1.4 1.4 1.1 1.1 0.9
45
VALUETRACK
Net Profit to double in 2019A-23E period

We expect Somec to rebound from 2020E “lows” reaching 10.4% and 7.0% EBITDA -EBIT
margin respectively in 2023E (EBITDA at €42.5mn in 2023E). While 2019 and 2020E
margins have been affected by the efforts to strengthen corporate structure / MTA translisting costs
and by the pandemic, on the contrary in the next years we expect cross-selling, synergies and scale to
boost margins of the “new” segment of Professional Cooking Equipment towards the industry
standards (15%-20%). As consequence, both Landscape and Seascape profitability should converge
above 10%. At bottom line, we foresee Net Profit to increase up to €16.1mn in 2023E, mirroring EBIT
increase as well as slight improvement in net financial charges, with flattish tax rate around 27%.
Somec: Profitability evolution 2019-2023E

45.00 42.5 11.0%
40.00 36.1
10.5%
35.00 10.4%
30.00 27.8 10.2% 28.4
10.0%
24.4 9.7% 10.0%
25.00 21.7
As %
20.1 9.5%
€mn
20.00 16.1
9.4%
15.00 12.8 13.1 12.3 9.0%
10.00 7.9 6.9
5.1 8.5%
5.00 3.0
0.00 8.0%
2019FY 2020E 2021E 2022E 2023E
EBITDA (lhs) EBIT (lhs) Net Income (lhs) EBITDA margin (rhs)
Somec: P&L 2019A – 2023E

(€mn) 2019A 2020E 2021E 2022E 2023E
Total Revenues 251.4 214.3 277.9 352.3 408.5

COGS -187.3 -155.2 -201.5 -254.1 -293.2
Labour costs -39.7 -39.0 -48.6 -62.1 -72.8
EBITDA 24.4 20.1 27.8 36.1 42.5
o/w Seascape 16.1 10.3 13.8 16.9 18.4
o/w Landscape 8.3 9.8 14.0 19.2 24.2
EBITDA Margin (%) 9.7% 9.4% 10.0% 10.2% 10.4%
o/w Seascape 10.2% 8.6% 9.8% 10.3% 10.7%
o/w Landscape 9.0% 10.4% 10.2% 10.2% 10.2%
EBITDA Adj.(*) 24.4 21.2 27.8 36.1 42.5
EBITDA Margin Adj. 9.7% 9.9% 10.0% 10.2% 10.4%
D&A -11.7 -15.0 -14.7 -14.4 -14.1
EBIT 12.8 5.1 13.1 21.7 28.4
EBIT Adj.(*) 12.8 6.2 13.1 21.7 28.4
EBIT Margin Adj (%) 5.1% 2.9% 4.7% 6.2% 7.0%
Net Fin Charges / Other -1.2 -0.3 -1.8 -1.7 -1.7
Pre-tax profit 11.7 4.8 11.3 20.0 26.7
Taxes -3.1 -1.2 -3.0 -5.4 -7.2
Minorities -0.7 -0.5 -1.4 -2.2 -3.4
Net Profit 7.9 3.0 6.9 12.3 16.1
Net Adj. Profit 7.9 3.8 6.9 12.3 16.1
Source: Value Track Analysis. (*)Adjusted for MTA translisting ca. €1.1mn
46
VALUETRACK
Balance Sheet and Cash Generation

At the Balance Sheet / Cash Flow level we expect Net Financial Position at €59.6mn by the end of
2020E (vs. €66.4mn in 1H20) and at €28.3mn in 2023E thanks to ca. €48mn cumulated Free
Cash Flow between 2020E-2023E, and despite an average 50% pay-out at both holding and
Fabbrica level.
Such an outstanding cash flow generation is not only due to EBITDA performance but also to:
® Net Working Capital gradually levelling off at 15% Total Revenues, consistently to company’s
business expansion;
® Net Fixed Assets progressively decreasing from €81mn in 2019 to €48mn in 2023E, as results
of €3.5mn average capital expenditure, reflecting no sizable investments over the forecast period
(see “3 What we like: Cash Generation” for more details).
Somec: Balance Sheet 2019A – 2023E

(€mn) 2019A 2020E 2021E 2022E 2023E
Net Fixed assets 81.5 82.4 71.2 60.3 49.7

o/w Goodwill 28.5 28.5 28.5 28.5 28.5
Net Working Capital 25.9 30.4 40.1 51.9 60.4
Severance pay and other funds 2.6 4.5 5.5 6.9 8.0
Total Capital Employed 104.8 108.3 105.8 105.4 102.2

Shareholders’ Equity 39.4 39.0 42.4 51.3 61.8
Minorities 9.2 9.7 10.0 10.7 12.1
Group Net Equity 48.6 48.7 52.4 62.0 73.9
Net Fin. Position [Net debt (-) / Cash (+)] -56.2 -59.6 -53.5 -43.4 -28.3
Somec: Cash Flow 2019A – 2023E

(€mn) 2019A 2020E 2021E 2022E 2023E
EBITDA 24.4 20.1 27.8 36.1 42.5

Op. NWC requirements -13.7 -4.5 -9.7 -11.8 -8.5
Capex (excl. Fin. Inv.) -7.5 -3.5 -3.5 -3.5 -3.5
Change in provisions 0.5 1.9 1.0 1.4 1.1
Cash Taxes and others -6.0 -1.2 -3.0 -5.4 -7.2
OpFCF a.t. -2.3 12.7 12.5 16.8 24.4
As % of EBITDA -9% 63% 45% 46% 57%
Other (incl. Fin. Inv. and IFRS16) -31.2 -11.0 -1.1 -1.5 -2.0
Net Financial Charges -1.3 -1.7 -1.8 -1.7 -1.7
Dividend paid -3.5 -3.5 -3.5 -3.5 -5.7
Change in Net Fin Position -38.2 -3.4 6.1 10.0 15.1
47
VALUETRACK
Value Track estimates vs. Market Consensus

Comparing Value Track (VT) estimates to market consensus we see that:
® Our Top line estimates are more conservative only as for 2020E relative to market consensus,
while we see stronger growth already in 2021E;
® Despite larger Revenues increase, we follow a more prudent approach at EBITDA level over the
medium term, estimating a margin almost flat at 10%;
® We are more conservative on cash generation over the next two years as we expect Somec to face
acceleration in top line growth, which may cause higher cash absorption in the near term, while
higher free cash flow would come later on. We also expect higher pay-out than consensus.
As a result, we foresee a slower decrease of Net Debt to €43.4mn in 2022E (vs €32.5mn
consensus).
Somec: Value Track Estimates vs. Market Consensus

2020E 2021E 2022E
€mn VT Est. Mkt Est. VT Est. Mkt Est. VT Est. Mkt Est.
Total Group Revenues 214.3 226 277.9 264.5 352.3 275

EBITDA 20.1 20.0 27.8 26.0 36.1 31.0
EBITDA Margin (%) 9.4% 8.8% 10.0% 9.8% 10.2% 11.3%

EBIT 5.1 6.0 13.1 12.5 21.7 17.5
Net Profit 3.0 4.0 6.9 7.0 12.3 11
Net Financial Position -59.6 -62.0 -53.5 -48.5 -43.4 -32.5
Source: Value Track analysis
48
VALUETRACK
Appendix #1: History, Corporate Governance

Main historical milestone
While the origins of Somec can be found back on late ’70, the company experienced a deep
reorganization in terms of corporate structure and reference markets after 2013. Here below we
highlight the four main steps that lead the Somec Group to its current features:
® 2013: It is the new foundation date of Somec as it was acquired by current management:
Oscar Marchetto (CEO), Alessandro Zanchetta (CFO) and Giancarlo Corazza (COO) became
shareholders and board members. Since then Somec undertook a path of strong growth,
increasing market share in Marine Glazing and driving revenues from €31mn to €50m in 2015;
® 2016: Company started its business diversification process by acquiring Oxin in 2016, active
in Marine Cooking Equipment, and Inoxtrend (Professional Cooking Equipment) in 2017. These
acquisitions were strategic and allowed Somec to exploit the market positioning achieved in the
Marine Glazing and generate new cross-selling opportunities with limited efforts;
® 2018: the Company kept looking at the mainland to further diversify in highly synergic segments
and acquired Primax, another player in Professional Cooking Equipment, and more importantly
Fabbrica LLC, a US startup active in the Building Façades business. To fund the latter
acquisition Somec got listed in the AIM market, Italian Stock Exchange;
® 2019-20: the Group completed a series of acquisitions to consolidate know-how and product
offer in Professional Cooking Equipment - Pizza Group Srl and GICO - and to enter the Public
Areas-Interiors segment - Skillmax. With Skillmax and TSI (acquired in 1H2019), Somec
became a fully integrated operator in interiors for Public Areas in both marine and mainland.
Shareholders and Top Management structure

As in most of mid-size Italian companies, Somec managers are also relevant shareholders, while free
float accounts for 25% of total shares, i.e. ca. 1.7mn shares. Indeed, the top management includes:
® Oscar Marchetto, Chairman and CEO of Somec;
® Giancarlo Corazza, Chief Operating Officier;
® Alessandro Zanchetta, Chief Financial Officier.
Somec: Group Shareholding and Top Management structure
Source: Somec
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Appendix #2: Key 2018-19 Financials

Somec top line grew massively in the latest years, moving from ca. €30mn in 2013 to €251mn
revenues in 2019, i.e. 42% CAGR 2013-19, driven by:
® Growing demand for cruising which has pushed cruise operators to dramatically invest in new
ships, driving the entire industry Capex up to unprecedented levels;
® Impressive organic growth of Fabbrica in the US;
® Intense acquisition effort.
Somec: Revenues 2018-19

(€mn) 2018 2019
Seascape Sales 115.6 158.5

Landscape Sales 48.7 92.9
Total Revenues 165.5 251.4
Source: Somec
As far profitability is concerned, Somec has historically reported EBITDA Margin in the 11%-12%
range, even if 2019FY closed lower due to:
® Indirect M&A effects i.e. integration costs and need to restructure the acquired businesses;
® Need of building a corporate structure to support growth and costs for initial listing in 2018.
The same is true for the EBIT which remained almost flat at ca €12.5mn also because D&A were up,
driven by acquisitions and to a lesser extent by some capex expansion. By the way, we note that since
FY2019 Somec moved from ITA GAAP to IFRS (all 2018 data have been restated accordingly),
undoing any potential bias arising from Goodwill amortization enabled by Italian accounting principle
(but inflating depreciations and net debt compared to the past).
Somec: P&L 2018 vs 2019

(€mn) 2018 2019
Total Revenues 165.5 251.4

Opex -146.4 -227.0
EBITDA 19.1 24.4

EBITDA Margin (%) 11.6% 9.7%
D&A -6.7 -11.7
EBIT 12.4 12.8
Net Financial Charges -0.6 -1.3
Pre-tax profit 11.9 11.5

Taxes -2.6 -3.1
Group Profit before minorities 8.9 8.6

Minorities -0.9 -0.7
Net Profit 8.1 7.9
Source: Somec
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At Balance Sheet level, Net Financial Debt 2019 increased by €38mn vs 2018 due to:
® Net Working Capital at €25.9mn vs. €12.2mn in 2018, mainly driven by an increase in
inventories (in particular those required by the refitting projects planned over year end) and in
trade receivables, only partially offset by a parallel growth in trade payables;
® Net Fixed Assets at €81.5mn (up by almost €30mn vs. 2018 year end) due to i) the acquisition
of TSI for €20.4mn, including the €9.3mn attributable to the put&call on minorities, ii) €5.3mn
for capex aimed at increasing output capacity of Fabbrica; iii) €8.4mn increase due to IFRS 16
effect resulting from capacity expansion and acquisition of TSI. We note that overall, Goodwill
resulting from M&A activity accounted for €28.5mn (vs 17.2mn in 2018) and Tangible Assets for
€31mn (vs €17.0mn in 2018), with the remaining part being €29.5mn of Intangible Assets (+30%
YoY) which are also the outcome of acquisitions;
® Payment of dividends (€3.5mn to Somec shareholders and €1.8mn to Fabbrica minorities).
We note that a big part of 2019 Net Debt was due to leasing contracts and to Put&Call agreements to
buy-out minorities (not including Fabbrica as there are no agreements on the 49.1% minority stake.
Somec: Balance Sheet 2018 - 2019

(€mn) 2018 2019
Net Fixed assets 53.0 81.5

Net Working Capital 12.2 25.9
Severance pay and other funds 2.1 2.6
Total Capital Employed 63.1 104.8
Group Net Equity 45.1 48.6
Net Fin. Position [Net debt (-) / Cash (+)] -18.0 -56.2
o/w IFRS 16 -7.7 -17.2
o/w Put&Call Minorities -2.5 -11.8
Source: Somec
Increasing backlog mirrorring business growth, not future split of revenues

In 2018, 2019, and 1H20 the company reported a backlog made of marine activities for ca. 80%, with
Glazing as the predominant item, while Landscape accounted for the remaining ca. 20% of total.
Somec: Backlog breakdown 2018 – 1H20

(€mn) 2018 2019 1H20
Seascape 345 506 585

As % of Total 80% 79% 81%
Landscape 86 131.6 135
As % of Total 20% 21% 19%
Total Order Backlog (including options) 431 638 720
Source: Somec
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We note that the current 80%-20% split of accrued orders is not necessary a good proxy of expected
split of future revenues stream, as consequence of:
® Delivery times. Building Façades projects, that represent the main Landscape component in
2019 backlog, have an average expected delivery of two years. On the contrary, Seascape is usually
characterized by longer delivery time. This happens because cruise operators have to plan and
order new ships at least two years in advance to their needs;
® Options. It is common for cruise operator to ask for soft order (options), i.e. marine new
building projects which can be withdrawn within six months from the start, but which are mainly
used for order with longer time horizon. They accounted of ca. 23% of backlog as of 2019 and
most of them refer to projects after 2025.
Somec: Backlog analysis as of Dec. 2019
638 €m Seascape
Landscape
Backlog (31.12.2019)
20.6%
building façades
132 €m 211 €m 295 €m
52.3%
marine
Landscape 2020-2022 new building
4.4%
marine
211 €m refitting
Seascape 2020-2021
22.7%
marine
295 €m new building
in option
Seascape 2022-2027
Source: Somec
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Appendix #3: Sector Background

Here below some additional details on main reference markets for Somec, i.e.:
® Cruise Shipbuilding (which drives the whole Seascape division);
® Building Construction (driving Building facades but also the Public Areas-Interiors business);
® Professional Cooking equipment.
Cruise Shipbuilding
High concentration along the whole supply chain of the cruise market
Cruise market is highly concentrated with few key players which hold more than 75% share. Among
the leading players, we see Carnival Corp, Royal Caribbean Corp. and Norwegian Cruise Line with
42%, 24% and 9.5% market share respectively. These are Somec clients in the refitting business
(ranging between 10-20% of the seascape division turnover). Market concentration increases when we
retrace the supply chain at shipbuilding level with Fincantieri Group and Meyer Group that hold 41%
and 15% of the current global order book respectively and which delivered ca.67% of global new ships
historically. These are Somec clients in the new ships business (80-90% of seascape) and Fincantieri is
in fact the largest single client of the company.
Cruise Shipbuilding: Global Order book as of Nov. 2020

2020E 2021E 2022E 2023E 2024E 2025-27E
Fincantieri (*)
# of ships to be delivered 5 6 6 7 4 10
Average cost ($mn) 619 645 644 755 616 661
Meyer Group
# of ships to be delivered 2 4 5 3 2 2
Average cost ($mn) 650 950 983 800 1000 1000
Total Value ($mn) 7,416 9,932 18,240 14,560 6,448 13,362

Total Ships to be delivered 18 26 30 20 8 17
Average cost ($mn) 412 382 608 728 806 786
Source: Cruise Industry News. (*) Excluding Vard Order book as made of lower-size orders
Moreover, according to the Global cruise ship orderbook reported as of November 2020, the number
of ships delivered slightly decreased in 2020 (but deliveries are seen up strongly over 2021 and 2022)
and the average cost per ship is seen further decreasing in 2020 and 2021, which reflects a trend
toward lower-size ships in the near term.
Cruise Market: Cruise Ship Orderbook as of Nov. 2020

Total Number of Ships (lhs) Average Cost per Ship (rhs)
40 900
800
30
700
($mn)
20 600
500
10
400
0 300
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
Source: Cruise Industry News
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Marine Glazing: main competitors of Somec

Due to the high technical and quality requirements, also the Marine Glazing segment shows a certain
level of concentration. Here below we reported main Somec competitors which design, manufacture
and install glass and glazing products for Civil and Marine Applications.
Cruise market: main Marine Glazing competitors of Somec

Name Business Profile Main markets
From design to installation of special glazing architectures for Civil and US, Europe and
Novum Structure
Marine applications China
BSS Metallbau- From design to installation of windows, facades and balconies for Civil
Germany
Schiffsausbau and Marine
From design to installation of windows bands and glass facades in

Brombach + Gess Germany
Shipbuilding
Fincantieri subsidiary,active in marine glazing through division lease of US, Europe and
Marine Interios SpA
Metalsigma Tunesi China
From design to installation of glazed balconies for Civil and Marine Northern
Balco Group
applications Europe
Pilkington Automotive Major manufacturer of glass and glazing products for building, Northern
Finland automotive and marine applications Europe
Source: Companies websites
Building Constructions
The Building construction industry in United States is expected to record a slowdown for 2020
and 2021, driven by economic downturn triggered by Covid-19 outbreak. In accordance with
American Institute of Architect’s, spending on non-residential facilities is expected to decline by 8%
this year and by another 5% in the next one. The commercial building sector seems to be the hardest
hit, with spending projection down by 10% in the next two years. Institutional sector is expected
to be the most resilient one, with spending on facilities projected to fall only by 5% in
2020 and by 2% in 2021.
Despite near term issues due to pandemic, long term sentiment remains positive, albeit US
construction industry expected to stay below 2020E levels in 2024E, at $1,230bn. Non residential
building construction market is expected to start recovering in 2023E and to reach $473bn by 2024E.
Construction Market: Construction Spending in the US 2015 – 2024E ($mn)

1,600,000 Total Residential Buildings Total Nonresidential Buildings Total Nonbuilding Structures
1,400,000
1,200,000
1,000,000
800,000
600,000
400,000
200,000
0
2015 2016 2017 2018 2019 2020E 2021E 2022E 2023E 2024E
Source: U.S. Census and FMI Forecast - Q3 2020 Engineering and Construction Outlook | United States
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US Construction Market: Construction spending Change YoY in Non Residential Buildings (*)
Office Commercial Educational Amusement and Recreation Health Care

23%
18%
13%
8%
3%
-2%
-7%
-12%
-17%
-22%
2015 2016 2017 2018 2019 2020F 2021F 2022F 2023F 2024F
Source: U.S. Census and FMI Forecast - Q3 2020 US Engineering and Construction Outlook (*) Reported only main segments
Interior Design: market overview

Construction and renovation of residential and non-residential buildings drive demand for interior
design services and furniture. Albeit Somec just entered in the Public Areas business, we briefly
describe the two main market segments to which the company is exposed: Interior Design Service and
Furnishing market.
Interior Design Services which comprise all companies that plan and design public areas for
hotels, stores and other commercial business. In US, the market appears remarkably fragmented with
top largest firms accounting for ca. 10% of revenues. Although no leader companies emerge, some
large architecture firms such as AECOM, Gensler and HOK stand out in the market.
Interior Design: main interior design firms

Name Business Profile Revenues 2019
($bn)
AECOM One of the world's top engineering and design groups 20.17
Gensler Consistently ranks among the largest architectural firms in the US 1.43
Hock Inc. US maker of furniture for for corporate, government and leisure clients 2.49
Source: Corporate Accounts
Despite Covid-19 crisis, according to the “Global Interior Design Services Industry” published by
Global Industry Analyst in September 2020, Global interior design services market is
estimated at $150.7bn in 2020, with US accounting for $40.7bn. Market is expected to reach
$255bn in 2027, reporting a 7.8% CAGR 2020-27. Residential segment is projected to grow at 8.1%
CAGR while Commercial segment, as result of pandemic implication, is now expected to grow by 7.5%
for the next seven years.
Also the Contract Furniture and Furnishing Market shows a high level of fragmentation with
Knoll, Steelcase and Herman Miller as main global players. Demand for business furniture and
fixtures is driven by corporate and commercial construction spending. Companies’ profitability is
closely linked to volume and economies of scale, as business model shows a high level of fixed costs.
While large companies leverage on developed partnerships and brand-awareness, small firms compete
effectively on specialty items or products with high-quality workmanship sold at premium price.
From the last Technavio research report (Contract Furniture and Furnishing Market in Europe 2020-
2024) contract furniture and furnishing market in Europe is supposed to grow at 3% p.a. between
2020 and 2024, reaching a market size of $2.64bn.
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Interior Design: main contract furniture makers

Name Business Profile Revenues 2019
($bn)
Steelcase Top maker of chairs and other office furniture for worldwide customers 3.72
Knoll Leading global manufacturers of commercial and residential furniture 1.43
Herman Miller US maker of furniture for corporate, government and leisure clients 2.49
Source: Corporate Accounts
Professional Cooking
The global market of Professional Cooking Equipment is expected to increase by $4.8bn into 2024E,
progressing at a 2.8% CAGR over 2020-24E, with 31% of market growth originated from North
America. The market is fragmented and, according to Technavio, albeit it is expected a growing
preference of energy-efficient cooking equipment, the high installation costs and maintenance
requirements may challenge the growth of the market participants and thus leading vendors would
focus on the fast-growing emerging segments. As of today, the main players are Electrolux
Professional, Middleby Corp., Rational Group and Welbilt Inc. which in general reported a decrease in
revenues in 2020, due to the sanitary emergency.
Professional Cooking market: Main operators’ revenues 9m20 vs 9m19

(€mn) 9m19 9m20 Change (%)
Rational Corporation 613 466 -24%

Welbilt Inc.(*) 1,010 695 -31%
Middleby Corp. (*) 1,811 1,488 -18%
Electrolux professional (**) 679 521 -23%
Source: Corporate presentations. (*) EURUSD at 1.20 (**) EURSEK at 10.23
Pandemic hardly hit the restaurant segment, but according to the MillerPulse report, it also
accelerated some trends. In the US, as the chart below shows, restaurants have rapidly adapted to the
new normal, expanding to-go options with curb side pick-up and third-party delivery. Also, the recent
phenomenon of the so called dark or ghost kitchens – i.e. kitchen (cooking or catering) facilities leased
“as a service” like in the cloud model, a trend moving from the Asian markets to the US and still at
initial stage in Europe – may be a further driver, as they are based on the delivery model and by-pass
the current uncertainties of the traditional dining segment.
Commercial Cooking MillerPulse Weekly Same-Store Sales (YoY change)
Source: MillerPuls, Welbilt
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Appendix #4: Peers’ profiles
Somec Peers’ Business Profiles in the glazing business line
Balco Group (BALCO) (Sweden, Revenues 2020E SEK1.2bn / Mkt Cap SEK2.1bn)
Based in Sweden and market leader in the Nordic region, Balco Group is a leading supplier of innovative and high-quality
glazed balcony solutions. Balco’s operations are divided into two business segments: Renovation, which accounted for
approximately 86% of 2019A Sales), and New Build for the remaining 14%. The Group has recently developed a new balcony
solution in aluminium and glass for the maritime industry.
Tecnoglass (TGLS) (US, Revenues 2020E $373mn / Mkt Cap €332mn)

Listed in the US, Tecnoglass is a leading manufacturer, distributor and installer of high-spec architectural glass and windows
for residential and commercial applications. It relies on a global footprint, with a leadership position in the US market (90% of
revenues) while production capacity is concentrated in Colombia, granting material cost advantages.
Apogee Enterprises (APOG) (US, Revenues 2020A $1.4bn / Mkt Cap $898mn
Apogee Enterprises is a US-based company engaged in the design, development of value-added glass solutions for enclosing
commercial buildings and framing arts. The company offers glass and aluminium windows, storefront and curtainwall
systems, and glass for framed art and pictures, serving its customers in the US, Canada and Brazil.
Source: Various, Value Track Analysis
Somec Peers’ Business Profiles in the professional cooking business line
Electrolux Professiona (EPRO) (Sweden, Revenues SEK2020E €7.3bn / Mkt Cap SEK13.3bn)
Electrolux Professional is a provider of professional food, beverage and laundry equipment to customers such as restaurants,
hotels, hospitals, schools, and other service facilities. Regionally Europe represents the main market (66% of Sales in 2019A),
although the US (15%) remains its single-largest country exposure, followed by Italy (14%), Sweden (9%) and France (8%).
Rational (RAA) (Germany, Revenues 2020E €627mn / Mkt Cap €8.4bn)

Rational is a German manufacturer of combi steamers and ovens, cooking appliances suitable for large and commercial
kitchens, providing high-technology products for the thermal food preparation. It has a local presence in more than 120
countries, with customers ranging from restaurants (50%), to mass catering (40%), and lastly retail (10%).
Welbilt (WBT) (US, Revenues 2020E $1.1bn / Mkt Cap €1.9bn)

Welbilt designs, manufactures and supplies equipment for the global commercial foodservice market which is used by
commercial and institutional foodservice operators: restaurants, hotels, resorts, cruise ships, caterers, supermarkets,
hospitals, schools and other institutions.
The Middleby Corp. (MIDD) (US, Revenues 2020E $2.5bn / Mkt Cap €7.5bn)
The Middleby Corporation is engaged in the design, manufacture, marketing and distribution of a broad line of foodservice
equipment, offering the most advanced innovations for cooking and warming, refrigeration, freezing and beverage solutions
for top restaurants and institutional customers.
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Somec Peers’ Business Profiles in the home furniture / interior design business line
Stantec (STN) (CAD, Revenues 2020E $3.7bn / Mkt Cap €730mn)

Stantec Inc. is a provider of professional services in infrastructure and facilities for clients in the public and private sectors.
The company’s services include engineering, architecture, interior design and landscape architecture, from initial project
concept to the design and commissioning. The company' is mainly active in US (55% Rev. 20) and Canada (30% Rev. 20),
Knoll (KNL) (US, Revenues 2020E $1.4bn / Mkt Cap €730mn)

Knoll is a manufacturer of commercial and residential furniture, accessories, lighting and coverings, including textiles, felt and
leather. The company sells its products through showrooms, sales offices, and dealerships.
Griffon Corp. (GFF) (US, Revenues 2020A $2.4bn / Mkt Cap $1.2bn)
Headquartered in New York City, Griffon operates as a diversified management and holding company, operating in three main
segments: i) Consumer and Professional Products (CPP), ii) Home and Buildings Products (HBP) and iii) Defense Electronics.
Steelcase Inc (SCS) (US, Revenues 2020A $2.7bn / Mkt Cap $1.5bn)
Steelcase provides an integrated portfolio of furniture settings, user-centered technologies and interior architectural products.
The company' is active in Americas (72% Rev. 20) and EMEA (18% Rev. 20), and its furniture portfolio includes panel-based
and freestanding furniture systems and complementary products, such as storage, tables and ergonomic work tools.
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Somec 2021 01 11 Initial Coverage

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ValueTrack | Initial Coverage | 11 01 2021

Time to sail on mainland Marco Greco

too Daniel Cotto

EPS ADJ. (€) 0.44 1.00 1.79

cumulated FCF. EV/EBITDA (x) 10.2 7.3 5.5

EV/EBIT (x). 40.6 15.6 9.2

MARKET PRICE (€)(*) 18.0

Somec business profile in a nutshell 18

Covid-19 and other concerns 21

Three “options” not factored yet 40

Appendix #1: History, Corporate, Governance 49

Appendix #2: Key 2018-19 Financials 50

Appendix #3: Sector Background 53

Appendix #4: Peers’ profile 57

Stock burdened by excessive fears on Covid-19 outbreak

Positive angle #3: Massive top line growth ahead

Positive angle #4: Cash conversion and FCF at inflection point

Three “options” not factored yet

Financials: Somec is a “growth” company

Stock offers very attractive expected returns into two-three years

Somec: Sensitivity of implicit stock trading multiples vs stock price

Source: Value Track Analysis

Somec: Peers’ positioning by end-market and business segment

ü Electrolux Professional ü Electrolux Professional

Source: Value Track Analysis

In more details, based on the above business verticals:

Somec: Peers’ key financial ratios

Source: Market Consensus, Value Track Analysis

Somec: Expected growth vs. peers’ ones

Source: Market Consensus, Value Track Analysis

Peers’ stock multiples

Sector multiples underline Somec undemanding valuation

Somec: Peers’ stock trading multiples

What is the “fair” multiple that better fits Somec’s features?

Somec: Segment contribution to Total Revenues

Source: Value Track Analysis

Somec: Valuation at “Fair” Multiples

EV (€mn) 224.7 257.1 243.4 276.5 250.4

Equity Value (€mn) 144.9 180.9 163.7 200.3 172.5

Equity Value p/s (€) 21.0 26.2 23.7 29.0 25.0

Somec: Peers’ Value Maps

EV / OpFCF 21E (x)

Source: Market Consensus, Value Track Analysis

Somec: EV/EBITDA vs EBITDA CAGR20-22E - Peers(*)

Discounted Cash Flow Model

Somec: WACC calculation

Risk free 2.0%

COST OF EQUITY 13.6%

Additional DCF model assumptions

Somec: DCF model

PV of future cash flows 2021E-2029E 130.2

Fair Enterprise value 260.8

Implied EV/EBITDA 21E (x) 9.4

Net Fin. Position 2020YE -59.6

Other adjustments (Value of minorities) -21.6

Fair Equity value 179.6

Shs. Outstanding (m) 6.9

Fair Equity Value p.s. (€) 26.0

Source: Value Track Analysis

Somec: Fair Equity Value (€mn) - Sensitivity Analysis

Perpetuity Growth Rate

Source: Value Track Analysis

EV / Backlog confirms upside potential

Somec: EV / Backlog evolution