2 stock ideas presented at Value Seminar Italy Summer 2011

1. SOLID CASH FLOWS STRESS LESS -
TWO OF OUR HOLDINGS
Don Fitzgerald, CFA Sebastien Lemonnier
dfitzgerald@tocquevillefinance.fr slemonnier@tocquevillefinance.fr
8th Value Investing Seminar
Trani, Italy, July 2011

2. « ROBUST CASHFLOW DESPITE TURBULENCE »
Airline Catering and Related Services
Listed: Zurich
Market Cap: CHF 950m
ISIN: CH0100185955
Free Float: 100% - Daily Volume – CHF 3m

3. GATEGROUP IS...
AIRLINE CATERING
3

4. GATEGROUP IS...
PROVISIONING & LOGISTICS
…
4

5. GATEGROUP IS...
AIRPORT HOSPITALITY & ON-BOARD RETAIL
5

6. GATEGROUP – WHERE THEY MAKE MONEY
Revenue by Region Revenue by Activity
2010 2010
North America 27%
Europe 54% Other
20%
Catering & Provisioning
80 %%
Asia-Pacific 13%
Other 6%
Source: Company data 6

7. GATEGROUP – WHAT IS THE BUSINESS?
Industry Leader
Locations - global Hubs & regional airports
Manages Complexity - 10k flights daily
Costs - Raw Materials + Staff
Economics - Ca. 5% EBIT Margin, 15% ROIC
Source: Company data & Tocqueville estimates
7

8. GATEGROUP – THE AIRLINE CONTRACTS
3 to 7 years:
Visibility - 90% 2010 sales - contracts valid
through 2012
75% Renewal rate
Fee Structure
Fixed Cost Recovery
Handling per Plane
Consumption per Passenger
Minimum Contract Revenues Cover Fixed Costs
Cost-plus – materials & labour
Source: Company data & Tocqueville estimates
8

9. GATEGROUP – DOES IT HAVE A MOAT?
Location at Hubs
Local Economies of Scale at Hubs
Client Switching Costs
Reputation
Global Network
Example – Swissair (Lufthansa Group)
recently preferred to renew hub contract
with Gategroup at Zurich rather than switch to its
sister company Lufthansa Skychefs.
9

10. GATEGROUP – IN GROWTH OR DECLINE?
Global Passenger Volumes - Gravitational Growth Pull
Source: Gategroup, ICAO (International Civil Aviation Organization), IATA, World Bank, IMF
Note: 2010-2012 based on management and IATA estimates
10

11. GATEGROUP – GROWTH HEADWINDS
HEADWIND MITIGANT
De-contenting Largely played out
Low Cost Model On Board Retail Solutions
Adjacent sectors – e.g. trains
Cross-sell non-catering lines
Geographic Footprint Selective Acquisitions
11

12. GATEGROUP – END OF DE-CONTENTING?
$ / pax FOOD SPEND PER PASSENGER BY US AIRLINES
$4,50
$4,00
$3,50
$3,00
$2,50
$2,00
$1,50
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Source: U.S. Department of Transportation (US DOT), UBS Research
12

13. GATEGROUP – A GOOD BUSINESS?
Has Moat
Contracts Assure Visibility
Should Grow
Flexible Cost Structure
Decent Returns on Capital
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14. GATEGROUP – A GOOD BUSINESS?
BUT...
Clients are Airlines
Concentrated Client Base
Top 5 – ca. 45% of sales
Volatility - Event Risk & Cycle
14

15. GATEGROUP – WHAT CAN GO WRONG?
Contract Loss / Client Failure
Waste the CHF 500m War-Chest
Economic Environment
Oil price
Load factors
Labour Dispute
Event Risk
15

16. GATEGROUP – WHAT CAN GO RIGHT?
Airlines Invest in Capacity & Service
Value-creative M+A
Pays Dividend
16

17. GATEGROUP MEETS……MR. MARKET
Japan tragedy
Broker coverage
Oil at $ 115
CHF Extensive Investor Relations
Fraud
Raises CHF 240m at 43 CHF
55
CEO resigns
50 CLOUD ASH
45 Company unknown
Motivated Sellers
40
No Listed Peers
EXIT
35
30
BUY
25
BUY
20
BUILD POSITION
15
10
May-09 August-09 November-09 February-10 May-10 August-10 November-10 February-11 May-11
Source: Bloomberg
17

18. GATEGROUP – STILL UNDER-EARNING
Underlying growth to
continue despite CHF
CHF m 2009A 2010A 2011E translation effect
Sales 2712 2700 2800
EBITDA 189 217 225
EBITDA Margin 7,0% 8,0% 8,0%
Effects of:
Adjusted EBIT 123 157 163 Recession, volcano ash
Capex -58 -47 -45 , fraud, japan quake…..
Normative margins – ca 9%
less taxes -21 -15 -15
FCF to Firm 110 155 165
Reported EBIT understates earnings power due to:
Ca. 25m p.a. Share-based payments in 09 / 10 (since vested)
Ca. 15m p.a. Amortization of customer relationships
Modest operating working capital requirements
Low cash Tax rate - Swiss HQ; CHF 600m tax loss carry-forwards
Maintenance Capex 1,5% of sales
Source: Company data & Tocqueville estimates 18

19. GATEGROUP – MR. MARKET’S PRICE
Assume no cash
generation in seasonally
Market Cap 985 weak H1.
Cash balance largely CHF
Cash -460
Debt 570
Pension Liabilities 40 60% EUR, 40% USD
Minorities 24
Estimate EV per June 30 1159
Share Price June 30 (CHF) 37
Shares Outstanding (m) 27
985
Note : Mid Year is seasonal weak-point in cash generation
Source: Company data & Tocqueville estimates 19

20. GATEGROUP – IS IT CHEAP?
2009 2010 2011E
FCF Yield to Firm 9% 13% 14%
Current EV / EBITDA 6,1 5,3 5,2
Current EV / Adjusted EBIT 9,4 7,4 7,1
Source: Company data & Tocqueville estimates 20

21. GATEGROUP – WHY WE OWN IT?
Reasonable Business
Cash Generator
Still Under-Earning
Modest Valuation
21

22. Commercial Break – Tocqueville Value Europe
Don Fitzgerald
Sébastien Lemonnier
Citywire – Category European Equities
Europerformance
Ranked 5th/114 in category since inception (from 31/03/00 to 30/06/2011)

23. « A stress less stock »
Home furnishing manufacturer - Norway
€ 565m market cap (30/06/11 - €/NOK 7.78)
Isin: NO0003035305
Free float 82% - Daily liquidity €300k

24. EKORNES
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25. EKORNES
1971……………………………………..1981…………….
1991……………………………….2001……………………………………..2011
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26. EKORNES
26

27. EKORNES
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28. EKORNES – BUSINESS BREAKDOWN
Revenue by activity 2010 Revenue by region 2010
4% 8%
9%
21%
Stressless chairs 19% Nordic
Sofa Europe
28% 59% Mattresses US-Canada
Foam, tables, etc… 53% ROW
Source: Company data 28

29. EKORNES – WHAT IS THE BUSINESS?
Ergonomic furniture
Stressless brand
All production in Norway
2,500 partner outlets
€230k sales per employee
Source: Company data 29

30. EKORNES – OVER LAST 10 YEARS
Av. annual turnover growth > 5%
19.2% av. EBIT margin
Net profit margin > 12%
Annual ROCE > 25%
Source: Company data 30

31. EKORNES - Does it have a moat?
Niche focus
Efficient production
Loyal partners
Loyal partners
Strong corporate culture
Strong corporate culture
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32. EKORNES - Does it have a moat?
Niche focus: ergonomic design
Patented innovation: comfort focus
Brand building
+ +
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33. EKORNES - DOES IT HAVE A MOAT?
Efficient production:
Automated production
In-house components
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34. EKORNES - DOES IT HAVE A MOAT?
Loyal partners:
Most profitable per sqm
Exclusivity / Most effective display
Commitment to share marketing costs
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35. EKORNES - DOES IT HAVE A MOAT?
Strong corporate culture:
Disciplined management
High staff loyalty
Bonus scheme (> 1 month salary)
35

36. EKORNES – GROWTH OR JUST
CYCLICAL?
Grow distribution network
50 net new stores / annum
Grow product portfolio
Expand Stressless business
Grow in emerging countries
Strict criteria
36

37. EKORNES – A COMFORTABLE BUSINESS?
Industry winner
Hard to duplicate
Proven growth
Good returns on capital
Disciplined management
37

38. EKORNES – FINANCIALS
Below management targets
NOK - millions 2000-2010 av. 2007 2008 2009 2010 2011e 2012e
Sales 2574 2673 2588 2869 2969 3103
growth % 6,5% 9,4% 3,9% -3,2% 10,9% 3,5% 4,5%
Material cost 647 676 620 663
Gross profit % 75% 75% 76% 77%
Salaries 701 677 686 775
Others 665 751 673 780
Depreciation 96 106 110 116
EBIT 465 463 500 534 543 590
% 19,2% 18,1% 17,3% 19,3% 18,6% 18,3% 19,0%
NOPAT 326 324 350 374 380 413
Capex 191 191 103 117 120 120
FCF 231 239 356 373 380 413
ROCE - after tax 27,9% 29,1% 31,3% 28,4% 27,3% 26,8% 28,0%
NOPAT: EBIT – (1 -Tax rate)
Operating CF: NOPAT + Depreciation
FCF (after tax): Op. CF – Capex
Source: Company data & Tocqueville estimates 38

39. EKORNES – IS IT CHEAP?
Stock price @ NOK 122 (as of June 30th, 2011)
Valuation multiples
2010 2011e 2012e
EV/EBIT 7,7 7,6 7,0
FCF yield % 9,1% 9,2% 10,0%
Div yield 5,7% 6,6% 7,4%
Top line: 3.5-4.5% / year – below management aim
2011 EBIT @ 18.3% - raw mat. + MKT temporary increase
2012 EBIT @ 19% - below historical av.
Capex @ NOK 120m (management guidance)
Net cash, post dividend payment
Source: Company data & Tocqueville estimates 39

40. EKORNES – IS IT CHEAP?
Stock price @ NOK 122 (as of June 30th, 2011)
8.9x hist. EV/EBIT 10x EV/EBIT
Sales av 2010-12 2980 Sales av 2010-12 2980
EBIT % 19,2% EBIT % 19,2%
Entreprise Value 5093 Entreprise Value 5722
Market cap. 5638 Market cap. 6267
Implied stock price 153 Implied stock price 170
Source: Company data & Tocqueville estimates 40

41. Q&A

42. WHY WE OWN EKORNES?
Unique business model
Industry gainer
Robust cash generator
Attractive dividend yield
Good risk / reward – Margin of safety
42

43. Disclaimer
• This document is strictly confidential and for the use of intended recipients only. It may not be reproduced,
communicated or published in its entirety or in part, without the prior written authorisation of Tocqueville Finance S.A.
• This commercial document should not be interpreted as a contractual or pre-contractual commitment on the part of
Tocqueville Finance S.A. It is produced purely for illustrative purposes and may be amended at any time without previous
notice.
• The information/analyses contained in this document, particularly figures, have come partly from external sources
considered to be trustworthy. However, Tocqueville Finance SA cannot guarantee that the information/analyses are
complete, accurate and up-to-date.
• Tocqueville Finance S.A. draws investors’ attention to the fact that past performances are presented on the basis of
figures relating to previous years and are not an indication of future performance.
• Moreover, Tocqueville Finance S.A. in no way guarantees the current or future performances of funds cited in this
document
• Investors are reminded that any financial investment includes risks (market risks, capital risk, foreign exchange risk) that
may result in financial losses. Therefore, Tocqueville Finance S.A. recommends that prior to any investment, the recipient
of this document carefully reads the prospectuses of the cited funds which are available free of charge at its head office
located 8 rue Lamennais, Paris 75008 or on its website www.tocquevillefinance.fr and ensures that they have the
experience and knowledge needed to make an investment decision, particularly with regard to the legal and tax
implications.

44. TRANI
un GRAN POSTO, un GRANDE EVENTO
GRAZIE CICCIO & TEAM
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