ValueTrack | Update Report | 12 April 2024

Reway Group SPA

Sector: Infrastructures maintenance and reparation

Sound FY23 results to celebrate IPO anniversary

Reway Group (RWG) is a leading Italian company active in viaduct, tunnel and bridges rehabilitation, installation of safety and sound-absorbing barriers, seismic upgrading, and various other activities related to extraordinary maintenance of highways / roads.

One year since the IPO: Well done

In March 2023, Reway Group made its debut on the EGM. Since IPO, we believe news flow has been pretty good: 1) Corporate development. The acquisition of Gema stands out as one of the most significant transactions of EGM during 2023, and marks RWG's entry into the "high margins" Railway infrastructures maintenance and reparation market, while bolstering its certification portfolio which is the real entry barrier in the railways sector;

  1. Business development. RWG has proven its ability to expand its order portfolio, with our estimates suggesting it is on the brink of reaching €1bn backlog, of which roughly 1/3 related to the newly acquired Gema.

FY23: VoP / Backlog in line, margins and cash outperform

FY23 came in substantially line with our expectations in terms of top line and order intake, while margins were a bit above our estimates, positively affected by most lucrative yearly works executed in 2H23. Net Financial Position stood at € -34.6mn (i.e., Net Debt), temporarily burdened by ca. €48.6mn Gema Trade Receivables due to be cashed in by 2025E and only partially offset by ca. €14mn cash endowment to finance working capital.

2024E-25E Estimates revised upward

We are changing our 2024E-25E estimates (and adding 26E) to take into account of the updated backlog figures and recent news flow. Our new 2024E-26E estimates are: 1) Revenues up at 23.9% CAGR23-26E, to ca. €251mn in 2025E; 2) EBITDA and EBIT margins at 21.4% and 19.6% respectively in 2025E; 3) Net Financial Position reaching break-even in 2026E, thanks to €48.6mn receivables cash -in within FY25E, as well as cumulative €39.4mn Net Cash Generated in the forecast period.

Fair value at €6.90 per share (from €6.33)

Taking into account the updated estimates and peers multiples rerating, we update our fair value at € 6.90 per share (from € 6.33), as average of DCF (€7.50 p.s.) and Peers' analysis (€6.29 p.s.). At fair value, Reway Group would trade at 7.0x EV/EBITDA, 9.3x EV/EBIT, 11.5x Adj. P/E 2024E multiples.

VALUETRACK

Analysts Marco Greco +39 02 80886654 marco.greco@value-track.com Luca Bernini

luca.bernini@value-track.com

Fair Value (€)

6.90

Market Price (€)

5.20

Market Cap. (€m)

200.2

KEY FINANCIALS (€m)

2023

2024E

2025E

VALUE OF PRODUCTION

132.3

199.6

230.7

EBITDA

26.4

42.4

49.3

EBIT

22.2

32.0

39.4

NET PROFIT

13.9

19.1

24.6

OPFCF a.t.

-17.2

25.3

23.2

NET INV. CAP.

124.1

121.5

126.0

EQUITY

89.5

90.5

115.2

NET FIN. POS.

-34.6

-30.9

-10.9

Source: Reway Group S.p.A. (historical figures),

Value Track (2023E-24E estimates),

KEY RATIOS

2023

2024E

2025E

EBITDA MARGIN (%)

20.0

21.2

21.4

EBIT MARGIN (%)

18.1

18.9

19.6

NET DEBT / EBITDA (x)

1.3

0.7

0.2

NET DEBT / EQUITY (x)

0.4

0.3

0.1

EV/SALES (x)

1.5(*)

1.2

1.0

EV/EBITDA (x)

7.0(*)

5.7

4.5

EV/EBIT (x).

8.5(*)

6.3

4.9

P/E ADJ. (x)

9.2(*)

9.0

7.3

Source: Reway Group S.p.A. (historical figures),

Value Track (2023E-24E estimates) (*)12 months Gema

STOCK DATA

FAIR VALUE (€)

6.90

MARKET PRICE (€)

5.20

SHS. OUT. (m)

38.5

MARKET CAP. (€m)

200.2

FREE FLOAT (%)

16.8

AVG. -20D VOL. ('000)

23,225

RIC / BBG

RWY.MI / RWY IM

52 WK RANGE

3.16-5.42

Source: Stock Market Data

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Reway Group SpA | Update Report | 12 April 2024

Business Description

Reway Group (RWG) is a leading Italian company active in: 1) Viaduct and tunnel rehabilitation; 2) Installation of safety and sound-absorbing barriers;

  1. Seismic upgrading of viaducts; 4) Various other activities related to extraordinary maintenance of highways / roads.

RWG is the only Italian player covering all stages of the restoration chain and offering a "One stop shop" service, highly valued from clients who only have to deal with a single counterpart.

VALUETRACK

Shareholders Structure

Others,

16.8%

  1. Casillo,
    7.3%

Elocyn

Luccini

L.t.d.,

S.r.l.,

11.0%

64.9%

Source: Reway Group SpA

Key Financials

€mn

2023

2024E

2025E

2026E

Net Revenues

124.6

198.6

229.7

250.4

Chg. % YoY

35.3%

nm

15.7%

9.0%

EBITDA

26.4

42.4

49.3

53.5

EBITDA Margin (%)

21.2%

21.3%

21.5%

21.4%

EBIT

22.2

32.0

39.4

42.6

EBIT Margin (%)

17.8%

16.1%

17.2%

17.0%

Net Profit

13.9

19.1

24.6

27.4

Chg. % YoY

65.8%

nm

28.8%

11.1%

Adjusted Net Profit

15.7

23.2

28.7

31.4

Chg. % YoY

51.1%

nm

23.7%

9.6%

Net Fin. Position

-34.6

-30.9

-10.9

4.8

Net Fin. Pos. / EBITDA (x)

1.3

0.7

0.2

nm

Capex

-6.0

-6.5

-7.5

-10.1

OpFCF b.t.

-10.4

35.5

35.8

31.8

OpFCF b.t. as % of EBITDA

-39.3%

83.7%

72.5%

59.4%

Source: Reway Group SpA (historical figures), Value Track (estimates), (*) Gema 12 months

Investment case

Strengths / Opportunities

  • High visibility of future business resulting from the combination of market growth rate and works assignment defined on good notice;
  • Strongly cash generative business model with low capital requirements;
  • Italian road infrastructure benefitting from multi-year investment plans.

Weaknesses / Risks

  • Revenue concentration on a very few clients, with top 3 customers accounting for ca. 95% of FY22PF revenues;
  • Limited operating leverage due to the high incidence of costs that are proportional to VoP;
  • Exposure to volatility of raw materials prices (20% of VoP).

FY22 Revenues by geography

TLS, 6.1%

SOTECO,

18.2%

MGA,

75.6%

Source: Reway Group SpA

FY22 Revenues by business line

Barriers, 7%

Viaducts,

40%Seismic, 2%

Others, 4%

Tunnels,

47%

Source: Reway Group SpA

Stock multiples @ €6.90 Fair Value

2024E

2025E

EV / SALES (x)

1.5

1.2

EV / EBITDA (x)

7.0

5.6

EV / EBIT (x)

9.3

7.0

EV / CAP.EMP. (x)

2.4

2.2

OpFCF Yield (%)

12.0

12.9

P / E Adj. (x)

11.5

9.3

P / BV (x)

2.9

2.3

Div. Yield. (%)

0.0

0.0

Source: Value Track

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2

Reway Group SpA | Update Report | 12 April 2024

VALUETRACK

One year after the IPO: so far so good

In March 2023, Reway Group made its debut on the Euronext Growth Milan. Just over a year following RWG's initial public offering, we believe news flow is pretty good from both a corporate and business development point of view.

1# Corporate development. The acquisition of Gema stands out as one of the most significant transactions of EGM during 2023, and marks RWG's entry into the "high margins" Railway infrastructures maintenance and reparation market, while bolstering its certification portfolio (SOA and RFI-SQ), which is the real entry barrier in the railways sector;

2# Business development. RWG has demonstrated ability to expand its order portfolio, with our estimates suggesting it is on the brink of reaching €1bn backlog, of which roughly 1/3 should be related to the newly acquired Gema.

1# Gema S.p.A. acquisition: a complex, yet highly valuable deal

Signing and rationale

In October 2023, RWG has signed the acquisition of a 70% stake of Gema SpA, Italian-based player active in the design, construction, and maintenance of large civil and industrial projects, with a focus on railway infrastructures. By doing so, RWG has entered into the "high margins" Railway infrastructures maintenance and reparation market and has gained a noteworthy certification portfolio (SOA and RFI-SQ), which is the real entry barrier in the railways sector.

1st step: closing of the 70% stake acquisition

In November 2023, RWG completed the acquisition under the following terms.

  • Entirely cash made purchase of 70% of Gema share capital for a price of ca. €63mn, implying a Total Equity Value of €90mn for the 100% of the Target's share capital;
  • Up to €47mn further cash out related to Trade Receivables due to be cashed in in 2024E, and contextually to their actual cash in, to be pari-passu transferred t to the seller;
  • An additional cash endowment of €14mn to finance working capital;
  • Put & Call option on the remaining 30% of share capital, implying a cash out of €27mn.

2nd step: early exercise of the P&C option and €24.3mn price adjustment

In March 2024, RWG has declared its will to expedite the acquisition of the residual 30% minority interest, by no later than May 30, 2024, ahead of the originally scheduled date in 2026.

The second part of the transaction will boast the following terms:

  • The cost for the minority stake acquisition remains substantially fixed at €26.2mn;
  • Additionally, RWG has successfully renegotiated certain financial aspects of the agreement, referred to as the Price Adjustment. Notably, Gema is expected to collect approximately €48.6mn in trade receivables in 2024, which RWG had initially agreed to distribute to the seller on a proportional basis upon receipt. Under the revised terms, RWG will now only transfer 50% of these receivables to the seller, thereby retaining an unexpected €24.3mn in cash.

In summary, the overall transaction results in the following:

  • Gema's EV at €89.2mn, i.e. €63mn for the 70% stake and €26.2mn for the remaining interest;
  • Gema's Adj. EV at €64.9mn, factoring additional €24.3mn to be cashed in during the FY2024.

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3

Reway Group SpA | Update Report | 12 April 2024

VALUETRACK

2# Outstanding order intake

Business wise, RWG has demonstrated a remarkable ability to expand its order portfolio, with our estimates suggesting it is on the brink of reaching €1bn backlog, of which roughly 1/3 should be related to the newly acquired Gema.

Indeed, since its IPO, RWG has announced the acquisition of key contracts totalling €337mn. In our view, three implications arise from the analysis of this substantial order book:

  1. RWG confirms being the right company at the right time, within a market that is, and will continue to be, subject to a significant investment cycle aimed at the rehabilitation of the country's infrastructures. Note that all major operators (ANAS, RFI, Autostrade per l'Italia) have confirmed higher investment forecasts for the coming years;
  2. With €84mn in orders secured shortly after its integration into the group, Gema is already showing greater order acquisition capability than expected, confirming also the solid rationale of the transaction;
  3. Reway is further diversifying its business by venturing into new, adjacent fields, such as receiving its first order in the design and construction of infrastructure projects, as well as in routine railway maintenance areas (note that RWG has, until now, exclusively focused on extraordinary maintenance).

Reway Group: Main Orders acquired

Date

Contract Value (€mn)

Subsidiary

Client

Type

Apr 2023

123

TLS

ASPI

Restoration of viaducts/tunnels

Dec 2023

35

SOTECO

Steelconcrete

Installation of barriers

Jan 2024

62

MGA

ANAS

Design and construction

Feb 2024

33

MGA

Webuild

Highway restoration

Mar 2024

84

GEMA

RFI

Ordinary / extraordinary maintenance

TOTAL

337

Source: Reway Group, Value Track Analysis

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4

Reway Group SpA | Update Report | 12 April 2024

VALUETRACK

FY2023 Results: Margins above estimates

Introduction

RWG's FY23 results came out broadly line with our estimates in terms of top line, demonstrating robust organic growth complemented to a lesser extent by external growth, as Gema's was consolidated from 21 November 2023.

Margins delivered a positive surprise, buoyed by a focus on higher-value-added projects (e.g., tunnel rehabilitation) in the second half of the year.

Cash generation was impacted by both capital expenditures and the accounting effect of the deal, which resulted in the recognition of approximately €48.6mn in trade receivables that are expected to be progressively cleared.

Orders intake and backlog

Reway Group FY23 order intake and net backlog in-house (namely secured future revenues from already won-tenders) as of 30 December 2023, came out closely in line to our full year's estimates.

  • Order intake stood at €421mn (est. €424mn);
  • Net backlog (considering orders already delivered) at €818mn (est. €821mn).

VoP +19.7% in line with our estimates

FY23 Value of Production stood at €132.3mn (+19.7% y/y), result of both organic growth and the consolidation of the economic data of the subsidiary Gema S.p.A. from 21 November 2023 (which we estimate to account for ca. 5%).

The consolidated Value of Production includes:

  • €124.6mn Sales revenues, with a substantially unchanged mix (detailed in the table below);
  • €2.4mn WIP, typical for the company's business model;
  • €1.8mn Internally Generated Fixed Assets, related to internal R&D projects;
  • €3.4mn Other Revenues, primarily derived from charges for personnel secondment, rentals of company-owned machinery to other entities, and, to a lesser extent, grants associated with investment incentives for the acquisition of interconnected and automated machinery categorized as "Industry 4.0" assets.

Reway Group: Revenues from Sales evolution FY19-FY23

140

132 70%

5

120

100

80

60

40

20

0

92

25%

111

20%

127

20%

60%

50%

40%

30%

20%

10%

0%

67%

55%

73

44

20192020

Organic Revenues

2021

2022

2023

Revenues acquired via M&A (est.)

y/y change (%)

Source: Value Track Analysis

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5

Reway Group SpA | Update Report | 12 April 2024

VALUETRACK

Margins positively affected by most lucrative yearly works executed in 2H23

  • FY23 EBITDA amounted to €26.4mn (+34.7% y/y), with EBITDA margin reaching the 20.0% threshold (+226bps) driven by the focus on higher-value-addedprojects (e.g., tunnel rehabilitation), executed mainly in the second half of the year in response to institutional and regulatory push aimed at reducing traffic congestion during peak periods.
  • On the cost side, we observe a reshuffling due to an increased reliance on subcontracting, driven by the need to manage the substantial order intake received. This has resulted in a significant rise in the cost of Rent (12.0% of VoP; 9.3% in FY22), offset by a decrease in the incidence of Labour Costs (27.6% of VoP; 29.1% in FY22) and Raw Materials Costs (23.5% of VoP; 25.8% in FY22), as resources are typically supplied by subcontractors.
  • FY23 EBIT stood at €22.2mn (+34.7% y/y), with EBIT Margin improving at 16.8% (+62bps) despite growing less than proportionally due to higher incidence of D&A related to significant investments in tangible assets, as well as goodwill generated by the acquisition of minority shares in MGA, Soteco, TLS, as well as the acquisition of a 70% stake in Gema (pro-quota);
  • FY23 Net profit stood at € 13.9mn (+19.9% y/y), as a results of the above, together with higher financial charges related to an increased debt level (+€611k y/y) and lower tax rate at ca. 32% (vs. 34% in FY22). Noteworthy, as the €600k minorities will not be distributed and the remaining share of Gema is set to be acquired shortly, these funds will be retained within the company, thereby contributing to the build-up of RWG's Equity.

Reway Group: Profit & Loss FY21 - FY22 - FY23

(€mn)

2021

2022

2023

∆ YoY

Value of Production

91.8

110.5

132.3

19.7%

Raw Materials, Δ Inventory (Finished Goods)

-17.7

-28.5

-31.1

8.9%

Gross Profit

74.1

82.0

101.2

23.4%

Gross Margin (%)

80.7%

74.2%

76.5%

233bps

Costs of Services

-28.7

-32.2

-36.5

13.2%

Costs of Rent

-10.5

-10.3

-15.9

53.9%

G&A

-0.6

-1.1

-0.5

-50.8%

Labour Costs

-17.4

-18.8

-21.9

16.4%

EBITDA

16.9

19.6

26.4

35.0%

EBITDA Margin (%)

18.4%

17.7%

20.0%

226bps

D&A (excl. goodwill)

-1.9

-1.5

-3.7

147.6%

Provisions

0.0

-0.2

-0.5

133.2%

EBIT

15.0

19.5

23.9

22.5%

EBIT Margin (%)

16.4%

17.7%

18.1%

42bps

Goodwill amortization

-2.0

-1.7

-1.7

3.7%

EBIT

13.1

17.9

22.2

24.3%

Interest Expenses

-0.1

-0.2

-0.8

342.7%

Pre-Tax Profit

12.9

17.7

21.4

21.0%

Taxes

-4.5

-6.1

-6.8

12.6%

Group Net Profit

8.4

11.6

13.9

19.9%

Minorities

0.0

0.0

-0.6

nm

Net Profit

8.4

11.6

13.9

19.9%

Adjusted Net Profit

9.2%

10.5%

10.5%

2bps

Source: Reway Group, Value Track Analysis

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6

Reway Group SpA | Update Report | 12 April 2024

Cash Flow & Balance Sheet

VALUETRACK

Cash Flow and Balance Sheet are significantly affected by the full consolidation of Gema S.p.A. as of 31 December 2023. More in specific, we highlight:

  • Net fixed assets at € 73.5mn, an increase compared to €22.9mn as of Dec 2022, with the difference primarily attributable to ca. €58mn goodwill-related accounting effect;
  • Working capital at € 78.6.mn (vs. €21.2mn in Dec 202 2), including ca. €48.6mn trade receivables stemming from Gema transaction and due to be cashed in 2024E;
  • Provision at €28.1mn vs €1.6mn as of Dec 2022 , with this exceptional value amount being mainly composed by ca. €24mn price adjustment, recognized as a "contingen cy" and therefore excluded from the reported Net Debt;
  • Reported Net Debt standing at €34.6mn vs Net Debt of €3.9mn as of Dec 2022, as a results of the Gema deal and related effects and post €18.1mn net IPO proceeds.

Reway Group: Balance Sheet FY21 - FY22 - FY23

(€mn)

2021

2022

2023

Net Fixed Assets (incl. Goodwill)

23.6

22.9

73.5

Net Working Capital

19.1

21.2

78.6

Provisions

1.6

1.6

28.1

Total Capital Employed

41.1

42.6

124.1

Group Net Equity

32.3

38.7

89.5

Net Fin. Position [i.e. Net Debt (-) Cash (+)]

-8.8

-3.9

-34.6

Source: Reway Group, Value Track Analysis

Reway Group: Cash Flow Statement FY21 - FY22 - FY23

(€mn)

2021

2022

2023

EBITDA

16.9

19.6

26.4

Δ NWC

-7.5

-2.1

-57.4

Capex (excl. Financial Inv.)

-1.5

-3.3

-6.0

Δ Provisions

0.6

0.0

26.5

OpFCF b.t.

8.5

14.1

-10.4

As a % of EBITDA

50.2%

71.9%

-39.3%

Cash Taxes

-4.5

-6.1

-6.8

OpFCF a.t.

3.9

8.0

-17.2

Capital Injections

-1.3

0.0

18.1

Others (incl. Financial Inv.)

-0.6

0.4

-30.8

Net Financial Charges

-0.1

-0.2

-0.8

Dividends Paid

-6.4

-3.3

0.0

Δ Net Financial Position

-4.5

4.9

-30.7

Net Financial Position

-8.8

-3.9

-34.6

Source: Reway Group, Value Track Analysis

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7

Reway Group SpA | Update Report | 12 April 2024

VALUETRACK

2023E-26E Estimates revision

We are changing our 2024E-25E estimates (and adding 26E) to take into account of the updated backlog figures and recent news flow. As a result, the RWG's projected earnings and FCF outlook compares to previous forecasts as follows:

  • Higher Backlog supporting future revenues, now expected to grow at a 23.9% CAGR 2023- 26E and reaching €2 51.4mn at the end of forecast period. This growth is driven by existing >€900mn net backlog and more than €1bn to be received in the following three years;
  • Improving Profitability, thanks to Gema's positive contribution on margins: EBITDA - EBIT margin at ca. 21.4 % - 19.6% in FY25E, leading to €49.3mn - €45.2mn EBITDA - EBIT respectively;
  • Net Debt at €30.9 in FY24E, factoring cumulative €64.9mn acquisition cash-out (net of price adjustment); deleveraging is expected to occur rapidly, thanks to €48.6mn receivables cash-in within FY25E, as well as cumulative €39.4mn Net Cash Generated in the forecast period.

Reported EBIT and Net Profit for FY23-25E are impacted by approximately €5.8mn/year in non-tax- deductible goodwill related to MGA's and Gema's acquisitions, while EBITA (or Adjusted EBIT before goodwill) and Adjusted Net Profit estimates remain unaffected by these non-cash accounting items.

Reway Group: Old vs. New Estimates 24A-25E

2024E

2025E

€mn

Old

New

Δ(%)

Old

New

Δ(%)

Total Revenues

198.6

198.6

0.0%

218.3

229.7

5.2%

EBITDA

42.4

42.4

0.1%

46.8

49.3

5.4%

EBITDA Margin (%)

21.2%

21.2%

2bps

21.3%

21.4%

3bps

EBIT

37.8

37.8

0.1%

42.7

45.2

5.8%

EBIT Margin (%)

18.9%

18.9%

2bps

19.5%

19.6%

11bps

Net Profit Adj.

19.2

23.2

21.0%

23.0

28.7

24.4%

Net Margin Adj. (%)

9.6%

11.6%

201bps

10.5%

12.4%

192bps

Net Fin. Position

-41.9

-30.9

11.0

-14.9

-10.9

4.0

Source: Value Track Analysis

Reway Group (New Perimeter): Backlog and Orders' intake evolution 2023-25E

(€mn)

2023

2024E

2025E

2026E

Backlog BoP (Beginning of Period)

572.0

818.5

947.3

1,068.6

(+) Orders Intake

420.5

327.5

351.0

370.8

Book-to-Bill

2.42

1.65

1.53

1.48

(-) Orders Delivered (*)

-174.0

-198.6

-229.7

-250.4

Backlog EoP (End of Period)

818.5

947.3

1,068.6

1,189.0

Source: Value Track analysis, (*) = Value of Production

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8

Reway Group SpA | Update Report | 12 April 2024

Reway Group: Profit & Loss 2023-25E

VALUETRACK

(€mn)

2023

2024E

2025E

2026E

Value of Production

132.3

199.6

230.7

251.4

Raw Materials, Δ Inventory (Finished Goods)

-31.1

-46.9

-56.5

-62.8

Gross Profit

101.2

152.8

174.2

188.5

Gross Margin (%)

76.5%

76.5%

75.5%

75.0%

Costs of Services

-36.5

-55.0

-63.6

-67.9

Costs of Rent

-15.9

-20.0

-20.8

-23.3

G&A

-0.5

-1.9

-2.2

-2.5

Labour Costs

-21.9

-33.4

-38.0

-41.4

EBITDA

26.4

42.4

49.6

53.5

EBITDA Margin (%)

20.0%

21.2%

21.5%

21.3%

D&A (excl. goodwill)

-3.7

-3.9

-4.1

-5.1

Provisions

-0.5

-0.7

0.0

0.0

EBITA

23.9

37.8

45.2

48.4

EBITA Margin (%)

18.1%

18.9%

19.6%

19.3%

Goodwill amortization

-1.7

-5.8

-5.8

-5.8

EBIT

22.2

32.0

39.4

42.6

Interest Expenses

-0.8

-2.7

-2.3

-1.6

Pre-Tax Profit

21.4

29.3

37.1

41.1

Taxes

-6.8

-10.2

-12.5

-13.7

Minorities

-0.6

0.0

0.0

0.0

Net Profit

13.9

19.1

24.6

27.4

Adjusted Net Profit

15.7

23.2

28.7

31.4

Source: Reway Group, Value Track Analysis

Reway Group: Balance Sheet 2023-25E

(€mn, IT GAAP)

2023

2024E

2025E

2026E

Net Fixed Assets (incl. Goodwill)

73.5

70.5

69.0

69.1

Net Working Capital

78.6

56.3

63.1

75.5

Provisions

28.1

5.4

6.0

6.8

Total Capital Employed

124.1

121.5

126.0

137.8

Group Net Equity

89.5

90.5

115.2

142.5

Net Fin. Position [i.e. Net Debt (-) Cash (+)]

-34.6

-30.9

-10.9

4.8

Source: Reway Group, Value Track Analysis

Reway Group: Cash Flow Statement 2023-25E

(€mn)

2023

2024E

2025E

2026E

EBITDA

26.4

42.4

49.3

53.5

Δ NWC

-57.4

22.3

-6.8

-12.4

Capex (excl. Financial Inv.)

-6.0

-6.5

-7.5

-10.1

Δ Provisions

26.5

-22.7

0.7

0.8

OpFCF b.t.

-10.4

35.5

35.8

31.8

As a % of EBITDA

-39.3%

83.7%

72.5%

59.4%

Cash Taxes

-6.8

-10.2

-12.5

-13.7

OpFCF a.t.

-17.2

25.3

23.2

18.1

Capital Injections

18.1

0.0

0.0

0.0

Others (incl. Financial Inv.)

-30.8

-18.9

-0.9

-0.9

Net Financial Charges

-0.8

-2.7

-2.3

-1.6

Dividends Paid

0.0

0.0

0.0

0.0

Δ Net Financial Position

-30.7

3.7

20.1

15.6

Net Financial Position

-34.6

-30.9

-10.9

4.8

Source: Reway Group, Value Track Analysis

NOT FOR DISTRIBUTION IN OR INTO THE UNITED STATES, CANADA, JAPAN OR AUSTRALIA

9

Reway Group SpA | Update Report | 12 April 2024

VALUETRACK

Valuation Update

Taking into account updated RWG's financial forecasts and comparable stocks' rerating, we update our fair value at €6.90 p.s. (from €6.33), as average of DCF based fair value (€7.50 p.s.) and Peers' based analysis (€6.29 p.s.).

At €6.90 fair value, RWG would trade at 7.0x EV/EBITDA, 9.3x EV/EBIT, 11.5x Adj. P/E 2024E multiples, at discount vs. peers on P/E Adj, at premium on EV/EBITDA, in line on EV/EBIT.

Reway Group: Valuation Summary

Valuation Methodologies

Fair Equity Value (€mn)

Fair Equity Value p.s. (€)

DCF Model

288.9

7.50

Current Market Multiples

242.3

6.29

Fair Equity Value (avg.)

265.6

6.90

Source: Value Track Analysis

Reway Group stock multiples at current market price and at fair value

EV/Sales

EV/EBITDA

EV/EBIT

P/E Adj.

Per Share

2024

2025

2026

2024

2025

2026

2024

2025

2026

2024

2025

2026

€ 5.20

1.19

0.95

0.81

5.7

4.5

3.8

7.5

5.6

4.8

9.0

7.3

6.6

€ 6.90

1.49

1.20

1.04

7.0

5.6

4.9

9.3

7.0

6.1

11.5

9.3

8.5

Source: Value Track Analysis

Discounted Cash Flow Model

Our DCF model is built on a "Rolling capital structure" with WACC 2024 at 9.0%, then progressively increasing up to 9.6% (Ke), based on the following assumptions:

  • 2024E - 30E time horizon for explicit forecasts;
  • 2.0% Risk Free Rate in line with medium term inflation target;
  • Unlevered Beta at 0.82, (Source: Damodaran web site, Construction / Engineering companies);
  • Implied Italian Equity Risk premium at 5.6% (Source: Damodaran web site, Jan '24 Update);
  • 3.0% Company specific Risk Premium (2.5% small-size + 0.5% client concentration);
  • 5.0% Pre-Tax Cost of Debt, with higher debt level supported by an optimal interest coverage ratio;
  • 2.0% Perpetuity Growth Rate ("g").

Reway Group: DCF Model with Rolling Capital Structure

(€mn, g = 2.0%)

(€mn)

PV of Future Cash-Flows2024E-2030E

144.8

PV of Terminal Value 2030E

205.7

Fair Enterprise Value

350.5

Net Financial Position 2023

-34.6

Minorities, Other Liabilities / Assets

-27.0 (*)

100% Fair Equity Value

288.9

Fair Equity Value per share (€)

7.50

Source: Value Track Analysis (*) 30% of Gema to be acquired in 1H24

NOT FOR DISTRIBUTION IN OR INTO THE UNITED STATES, CANADA, JAPAN OR AUSTRALIA

10

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Reway Group S.p.A. published this content on 11 April 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 12 April 2024 15:29:03 UTC.