COMPANY NOTE - RoulartaCOMPANY NOTE 16 December 2015 THIS DOCUMENT IS NOT PRODUCED BY KBC SECURITIES USA, INC. kbcsecurities.com Refer to important disclosures, disclaimers and analyst

COMPANY NOTE

16 December 2015

THIS DOCUMENT IS NOT PRODUCED BY KBC SECURITIES USA, INC.

kbcsecurities.com Refer to important disclosures, disclaimers and analyst certifications at the end of the body of this research.

ROULARTA Turning the page to its next chapter

MEDIA CURRENT PRICE € 22.80 BUYBELGIUM TARGET PRICE € 27.00 RATING UNCHANGED

FY/e 31.12 2014 2015E 2016E 2017E

Sales (€ m) 299.6 296.1 296.2 297.8 REBITDA (€ m) 39.3 47.1 48.0 48.7

Net earnings (€ m) -142.5 18.5 25.1 29.3

Diluted adj. EPS (€) 1.56 1.93 2.04 2.39

Dividend (€) 0.00 0.44 0.60 0.70

P/E 7.94 11.79 11.19 9.54

EV/REBITDA 5.79 7.15 6.61 6.08

Free cash flow yield 8.6% 5.4% 8.8% 10.1%

Dividend yield 0.0% 1.9% 2.6% 3.1%

Source: Thomson Reuters Datastream Source: KBC Securities

Bloomberg ROU BB

We reiterate our Buy rating on Roularta and raise our TP from€ 19 to € 27 based on our assumption of 1) brighter prospects ofFlemish broadcaster Medialaan, 2) the expiry of its pricey operating lease contract, which should free up EBIT of approx.€ 10m/annum (assets fully depreciated in Aug-18 but 10-year remaining economic useful life), and 3) an incremental value for Medialaan’s new mobile activities of € 1.2ps. Due to its diversified profile, we believe Roularta will be able to capture adbudgets, which are increasingly shifting from print towardsonline, video and mobile, via its JV in Medialaan. Overall, ad spending growth should accelerate on the back of a recoveringmacro-economic picture and improved producer confidence.Furthermore, the latest figures from CIM suggest that solid 1H15trends are continuing in to the second half, marking 2015 as a tipping point since the l’Express acquisition in 2006.

Medialaan propels performance: In addition to the market share gains of the flagship TV and radio channels, the company is tapping into the online and mobile ad markets, opening up new areas of growth. 30 more months paying the piper: The expiry of Roularta’s costly operating lease contract (€ c10m/annum) in August 2018 should boost group earnings by 41% as of 2019. Venturing into telecom: Based on our blue sky scenario (50% probability), we estimate “Medialaan Mobile” will contribute a net profitof € 3.3m by 2019. Applying a P/E multiple of 15x and assuming an80% probability that the Telenet/BASE transaction gets a regulatorygreen light, we value the telecom activities at € 1.2ps.

Reuters RLRT.BR

www.roularta.be

Market Cap € 299mShares outst. 13.1m

Volume (Daily) € 0.13m

Free float 26.36%

Next corporate event

Results FY15: 14 March 2016

Performance 1M 3M 12MAbsolute 14% 40% 97%

Rel. BEL20 14% 34% 72%

12-m Hi/Lo € 22.94/10.79

Ruben Devos

Financial Analyst - Brussels

KBC Securities NV

+32 2 429 58 43

[email protected]

9

11

13

15

17

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21

23

25

D J F M A M J J A S O N D

Share performance BEL20 performance

COMPANY NOTE

16 December 2015


2

CONTENTS

MEDIALAAN PROPELS PERFORMANCE ......................................... 3

Strong YE programming lifts TV audience share 3

Tapping the online market 4

Radio 5

TURNAROUND YEAR IN PRINT ........................................................ 6

Update circulation figures 6

Widening its reach 8

Printed media forecasts 8

VENTURING INTO TELECOM .......................................................... 10

Strategic fit 10

Financial impact 14

30 MORE MONTHS PAYING THE PIPER ........................................ 16

VALUATION ....................................................................................... 18

DCF printed media (excl.JV) 18

Peer group multiples 19

Sum-of-the-parts 22

COMPANY NOTE

16 December 2015


3

MEDIALAAN PROPELS PERFORMANCE

STRONG YE PROGRAMMING LIFTS TV AUDIENCE SHARE

Medialaan expands commercial market position YTD

Collecting market data of the last two years, it appears thatMedialaan’s largest channels – VTM (+0.6ppt) and 2BE (+0.2ppt) –expanded their respective audience shares over the period January-October 2015, whereas female-oriented channel, Vitaya lost some ofits share (-.0.3ppt). In the first half-year, shows such as “Belgium’s GotTalent” and “Tegen de Sterren op” supported audience levels with thesecond-half performance highlighted by the search for a new K3Belgian-Dutch girl band (“K3 zoekt K3”). The latter recorded severalimpressive ratings, with ~3.6m viewers tuning in to the final show(>25% of Flemish population) and 170k tweets, making it the second-most discussed topic worldwide on Twitter. Furthermore, Medialaanstressed that the final episode was the most viewed VTM-show in thelast 20 years with an audience share of 71.1%. Following this, wewould expect ad revenues to fare well in the second half of the year.Men’s channel 2BE showed a stable performance with an occasionalentry in to the top 20 of the most-viewed channels on the back of itslive UEFA Cup broadcasting.

MARKET SHARE TV CHANNELS (NORTH) - 2014 MARKET SHARE EVOLUTION BROADCASTERS (PPT)

Source: KBC Securities, CIM Source: KBC Securities, CIM

AUDIENCE SHARE MEDIALAAN (JAN.-OCT. 201X) BROADCASTERS MARKET SHARE (NORTH) - 2014


-3%

-2%

-1%

0%

1%

2%

3%

Public broadcasters Medialaan (excl.JIM,VTMKZOOM)

De Vijver Media Other (incl. JIM,VTMKZOOM)

2012 2013 2014

25.5% 25.9%

9.2% 9.4%

7.3% 7.0%

0%

5%

10%

15%

20%

25%

30%

Jan-Oct'14 Jan-Oct'15

VTM 2BE Vitaya

COMPANY NOTE

16 December 2015


4

Medialaan ends JIMtv and introduces children’s channel “Kadet”

In mid-September Medialaan announced it would abandon its youthchannel (12-18 years), JIMtv, as of 16 December 2015. The rationaleis that the target group of teenagers no longer consumes linear TV butincreasingly opts to view content on-demand via the internet. Inresponse to this trend, Medialaan has placed emphasis on providingcross-media content. This has led to the signing of a contract with anew production house (operational as of 2016) that will be fullydedicated to offering online content. Given the high costs of contentproduction, Medialaan has reduced outsourcing to a minimum,currently sourcing 60% of all content in-house. Two weeks ago, thegroup launched another children’s channel, “Kadet”, which targets the4-9 age group. The channel will feature international animation seriesand has entered a partnership with Disney. Management believes thatthe launch of the new channel addresses an untapped market. Kadetwill be complementary to its other child channel, VTMKZOOM, whichtargets 2-12 year olds.

TAPPING THE ONLINE MARKET

Tapping the online market Since the Summer of 2014, Medialaan has offered output from all of itschannels online for up to 30 days after the initial broadcast date.According to Medialaan, >550k viewers (roughly 9% of Flemishpopulation) have explored its TV platform in the space of a year, 75%of which were young people aged up to 24 (1/3 of those aged 15-24 inFlanders). Furthermore, according to a survey, 70% of viewers believethat advertising in exchange for content is “fair” and 60% of onlineviews are caused by the missing of episodes.

New online content offering Stievie Free launched

Next to the traditional TV ad revenues, Medialaan is exploring theonline and mobile space to distribute its content. Last week it launchedits online TV platform, Stievie Free, which offers a catch-up option (6days), and its five Flemish channels online in exchange for targetedadvertising. Since the announcement back in Mid-August, 10,000viewers were selected to test the new offering. According toMedialaan, 98% of them were enthusiastic about the service, while75% indicated that they could no longer live without it. Furthermore,management noted that 600k individuals have already registered onthe website with the commercial launch coming very soon. Theplatform should attract a younger audience, and those who arereassessing the appeal of their traditional TV subscription.

What about Stievie on a subscription basis?

Recall that Medialaan launched the OTT service, Stievie, two yearsago, providing all Flemish channels for a fixed monthly subscriptionfee. Stievie has never really taken off commercially due to a slimmarketing budget, a selective channel offering, and copyrights limitingviewing abroad. At the interim results, Roularta’s management guidedfor further investments in Stievie, indicating that it will play a biggerrole in Medialaan’s strategy to provide content next to the traditionalTV set. Today, the company is re-evaluating the look and feel of theservice and its go-to-market strategy.

COMPANY NOTE

16 December 2015


5

The advantages of Stievie The shift of advertising budgets to online has been underway for years

and we believe that video will remain the main advertising mediumgoing forward. Online advertising also provides ad agencies with theoption to distill viewing profiles based on various traits. For instance,cookies are attached to the vtm.be website and online viewers areasked to fill in a short questionnaire at registration. In addition, unliketraditional TV, ads must be watched in their entirety in order to be ableto view content. We estimate that fast-growing ad revenues fromonline will support the bottom-line as VTM’s website (vtm.be) alonegenerated >€ 2m in EBITDA in the first year after launch.

Roularta benefits from flourishing SVoD market

Although the details of the copyright agreement and the resultingdistribution has not been made public by Telenet and Roularta, wethink it’s fair to assume that Roularta’s distribution revenues willincrease as subscribers are added to Telenet’s Play&Play More SVoDoffering. Since the conclusion of the agreement in March 2014,Telenet has added 141k subs to its SVoD platform.

RADIO

Q-music and JOE FM gain market share

.

According to the latest figures provided by CIM, Medialaan managedto grow its market share (audience 12+), reducing the gap with thedominant footprint of the public broadcaster. Both radio channels, Q-music and JOE FM, increased their market shares by 1ppt and 0.5pptrespectively (over the period 05/14-05/15). This brings Medialaan’stotal radio market share to 29.4%, which compares to 57.4% for thepublic stations. We are optimistic on the prospects for radio, afterRoularta indicated that it saw strong audience ratings with growing adrevenues in Q3, while the latest market figures show that it hasexpanded its commercial market leadership position. Note thatMedialaan generates one third of its EBIT from radio, indicating that itsmargins are far higher than those of TV, Line extensions, VOD, etc.After all, radio revenues represent only c13.5% of group revenueswhereas TV revenues account for c.67.2%.

RADIO MARKET SHARE EVOLUTION (FLANDERS) FLANDERS RADIO MARKET SHARE (MAR’15-JUN’15)


60% 59% 60% 58% 60% 58% 60% 57%

27% 27% 28% 29% 28%29% 27% 29%

12% 14% 13% 13% 12% 14% 13% 13%

Feb-13 May-13 Aug-13 Feb-14 May-14 Aug-14 Feb-15 May-15

Public broadcaster Medialaan Other

COMPANY NOTE

16 December 2015


6

Medialaan not a big fan of next generation DAB+ standard

As with TV, radio can now also be accessed online or via the TV set.For instance, internet radio has made headway in the last couple ofyears with the surge of mobile data traffic and the introduction of radioapps, thereby also servicing those listeners abroad. Another feat is theroll-out of the new digital radio network, DAB(+) which should coverFlanders by 2017. The new digital standard however requires alllisteners to switch to a new radio device and offers reduced soundquality (64-96Kbps). Only the public stations and eight commercialchannels are so far scheduled to air on DAB+. The other commercialradio broadcasters, Medialaan and Nostalgie, have not yet committedthemselves, given that they would lose their privileged position in theheavily-congested FM-band (DAB+ would free up much more capacityfor alternative radio channels to enter the market). Note that the publicradio stations have been broadcasting on DAB for years already,whereas only a few smaller players are nowadays aiming for nationalcoverage.

Start of FM frequency redistribution scheduled in 2016

With the redistribution of FM-frequencies in 2016, other media playerssuch as Mediahuis (Concentra & Corelio) and SBS (TV channels Vierand Vijf) are also looking to get a piece of the radio advertising pie. However, before venturing into the radio space, entrants will be facedwith high start-up costs in the initial years; these could run up to € 25mover a period of 2-3 years. The FM frequency distribution is scheduledto be finalized in 2017 but will be conditional on the acquirer investingin DAB+. This is consistent with Media Minister Sven Gatz’s aim for afull switch-over from FM to DAB+ radio by 2025..

TURNAROUND YEAR IN PRINT

UPDATE CIRCULATION FIGURES

Print subscriptions keep Roularta afloat Last month, CIM released LTM figures for the Belgian printing market.Key conclusions are that 1) the general market decline of printcirculation is continuing, 2) Roularta outperformed the market in termsof distribution of weeklies (print + digital), but posted a 1.2% decliney/y in print, which compares to -2.0% y/y for the overall market, whiledigital circulation rose by 34.4% y/y compared to +31.7%, 3)circulation of monthly magazines was hit by a sharp decline of Royalsmagazines (-12.9% y/y) and Nest (-8.1%), whereas “Data news” and“Ik ga bouwen” grew by 14.0% and 9.8% respectively. The followingtable shows the y/y evolution of Roularta’s titles compared to themarket.

COMPANY NOTE

16 December 2015


7

PRINT + DIGITAL CIRCULATION FIGURES IN BELGIUM – COMPARISON OF ROULARTA VS MARKET

Title Oct'14-Oct'15 Oct'13-Oct'14 Abs. change % change

We

ekl

ies

- P

rint

Focus Knack

100,101 100,306 -205 -0.2% Knack Magazine

Weekend Knack

KW 68,757 70,595 -1,838 -2.6%

Streekkrant 2,213,099 2,241,022 -27,923 -1.2%

Weekkrant 335,520 333,732 1,788 0.5%

Roularta NL 2,717,477 2,745,655 -28,178 -1.0%

Total NL 7,180,461 7,317,034 -136,573 -1.9%

Focus Le Vif

62,901 63,503 -602 -0.9% Vif/Express

Weekend - L'Express

Télépro 112,517 114,242 -1,725 -1.5%

Vlan et Vlan Spectacle 779,502 792,220 -12,718 -1.6%

Roularta FR 954,920 969,965 -15,045 -1.6%

Total FR 4,393,559 4,493,016 -99,457 -2.2%

Artsenkrant (NL+FR) 21,102 22,722 -1,620 -7.1%

Sport/Voetbal Magazine (NL+FR) 43,230 45,188 -1,958 -4.3%

Trends (NL+FR) 44,726 43,836 890 2.0%

Roularta Other 109,058 111,746 -2,688 -2.4%

Total Other 275,730 283,129 -7,399 -2.6%

Roularta Belgium 3,781,455 3,827,366 -45,911 -1.2%

Total Belgium 11,849,750 12,093,179 -243,429 -2.0%

Wee

klie

s -

Dig

ital

Knack Magazine 785 629 156 24.8%

KW 368 211 157 74.4%

Vif/Express 452 341 111 32.6%

Sport/Voetbal Magazine (NL+FR) 306 239 67 28.0%

Trends (NL+FR) 826 617 209 33.9%

Roularta Belgium 2,737 2,037 700 34.4%

Total Belgium 3,611 2,741 870 31.7%

Mon

thlie

s

Royals nl 10,744 12,336 -1,592 -12.9%

Royals fr 10,548 11,497 -949 -8.3%

Data news (NL+FR) 21,684 19,017 2,667 14.0%

Ik ga bouwen (NL+FR) 15,755 14,354 1,401 9.8%

Nest (NL+FR) 84,329 91,781 -7,452 -8.1%

Plus (NL+FR) 100,652 101,898 -1,246 -1.2%

Roularta Belgium 243,712 250,883 -7,171 -2.9%

Total Belgium 2,746,441 2,803,655 -57,214 -2.0%

Oth

er Steps 469,767 634,365 -164,598 -25.9%

De Zondag 553,800 570,495 -16,695 -2.9%

De Apotheker/Le Pharmacien 8,614 8,728 -114 -1.3%

Source: KBC Securities, CIM

COMPANY NOTE

16 December 2015


8

WIDENING ITS REACH

Roularta widens print & digital reach Another metric that advertisers take into account before making theirdecisions is the total reach of each title both in print and digital.According to figures provided below, Roularta has been successful inincreasing its reach as it progressively expands into digital and onlinealternatives to spread its content. All titles are in the green y/y, exceptRoyals, Nest and Steps, whose circulation, unsurprisingly, has been insteep decline as well. Roularta’s flagship Knack magazines areperforming strongly both in the north and south of the country.

OVERVIEW ROULARTA REACH PAPER + DIGITAL

Title 2014-2015 2013-2014 Abs. change % change

Wee

klie

s

Knack Focus + Focus Vif 402.1 379.8 22.3 5.9%

Knack + Vif 914.3 843.5 70.8 8.4%

Weekend Knack + Vif 593.3 561.6 31.7 5.6%

KW 376.7 354.8 21.9 6.2%

Streekkrantgroep 2751.2 2719.9 31.3 1.2%

Télépro 428.4 407.3 21.1 5.2%

Vlan et Vlan Spectacle 2001.7 1935.7 66 3.4%

Sport/Voetbal Magazine (NL+FR) 603.5 547 56.5 10.3%

Trends (NL+FR) 241.9 233.4 8.5 3.6%

Mon

thlie

s

Royals NL + FR + Point De Vue 266.9 285 -18.1 -6.4%

Data news (NL+FR) 55.3 45.7 9.6 21.0%

Ik ga bouwen + Beter Bouwen en verbouwen (NL+FR)

302.8 NA

Nest (NL+FR) 488 500.5 -12.5 -2.5%

Plus (NL+FR) 372.1 348.3 23.8 6.8%

Oth

er

Steps 474.1 531 -56.9 -10.7%

De Zondag 1545.1 1637.5 -92.4 -5.6%

Source: KBC Securities, CIM

PRINTED MEDIA FORECASTS

Roularta’s diversified product portfolio captures shifting ad budgets

Although we argue that print ad revenues will remain in structuraldecline going forward, Roularta is able to capture those revenues as itshifts from print to digital and online via its JV in Medialaan. As such,the majority of the Flanders advertising pie remains within the groupexcept for ad budgets which find their way to social media andadvertising mastodons like Google and Facebook. This does not meanthat the advertising market as a whole will not advance in parallel withan improving macroeconomic picture.

COMPANY NOTE

16 December 2015


9

Tailwind from declining paper prices At the 1H15 results, management indicated that 1/3 of the EBIT

recovery in print media was explained by lower paper prices. Thewaterfall below illustrates this effect, bearing in mind that the annualpaper bill is roughly € 50m. Recent paper data suggests that thedecline in paper pricing has continued in 2H, whereas the papermarket as a whole is suffering from overcapacity. The primary cause isdue to the ongoing slowdown of the Chinese economy, with major endusers for market pulp and paper remaining oversupplied. Note that thishas a direct impact on margins for the magazines and free sheetsactivities as a drop in paper prices will not be followed by lower salesprices. This is not the case for third-party printing where end-productprices move in parallel with underlying paper prices.

WATERFALL COMBINED REBITDA 1H 2014-2015 PRINTING AND WRITING PAPER PRICING INDEX

Source: KBCS, RMG. (*Grey) Mainly lower price of paper Source: KBC Securities, ForestWeb

Restructuring costs gradually phasing out

Roularta has made significant headway in restructuring its printingbusiness, of which we have saw the first effects in the 1H15 results(net current result was up 153bps despite 3.4% revenue decline). Asfree dailies are still experiencing the biggest drop in both circulationand ad budgets, most of the ongoing restructuring will be focused onthese activities. We estimate that one-off restructuring charges willgradually phase-out, which should lead to convergence of (R)EBITlevels in the medium-term. On our projections, the gap between thetwo should close from 271 margin bps in 2013 to 80bps in 2017.

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COMPANY NOTE

16 December 2015


10

PRINTED MEDIA P&L

2013A 1H14A 2H14A 2014A 1H15A 2H15E 2015E 2016E 2017E

Sales 328.0 163.8 155.6 319.5 158.3 155.3 313.6 309.0 307.4

% of net sales 66.8% 66.3% 67.7% 67.0% 66.5% 66.6% 66.5% 65.5% 65.0%

% growth 0.0% 0.0% 0.0% -2.6% -3.4% 0.0% -1.8% -1.5% -0.5%

EBITDA 19.7 10.3 12.4 22.6 12.4 12.8 25.2 27.0 29.3

% margin 6.0% 6.3% 7.9% 7.1% 7.8% 8.3% 8.0% 8.7% 9.5%

REBITDA 22.0 11.5 14.4 25.9 14.5 16.4 30.8 30.7 30.7

% margin 6.7% 7.0% 9.2% 8.1% 9.1% 10.5% 9.8% 9.9% 10.0%

One-offs -2.3 -1.2 -2.0 -3.2 -2.1 -3.6 -5.6 -3.7 -1.4

EBIT 4.9 5.7 3.0 8.6 8.7 7.0 15.7 17.0 19.8

% margin 1.5% 3.5% 1.9% 2.7% 5.5% 4.5% 5.0% 5.5% 6.5%

REBIT 13.8 7.3 10.5 17.8 9.9 12.0 22.0 21.9 22.3

% margin 4.2% 4.5% 6.7% 5.6% 6.3% 7.7% 7.0% 7.1% 7.3%

One-offs -8.9 -1.7 -7.5 -9.2 -1.2 -5.1 -6.3 -4.9 -2.5

Financial result -7.0 -3.1 -3.3 -6.4 -3.0 -2.4 -5.4 -4.4 -3.3

PBT -2.1 2.5 -0.3 2.2 5.7 4.6 10.3 12.6 16.5

Current PBT 6.8 4.2 7.2 11.4 6.9 9.6 16.5 17.5 18.9

Income taxes 0.6 -2.2 -2.3 -4.5 -2.8 -2.8 -5.6 -6.0 -6.4

Net result from cont. operations -1.6 0.3 -2.6 -2.3 2.9 1.7 4.6 6.6 10.0

Net result from disc. operations -68.3 -4.7 -150.5 -155.2 -3.9 0.0 -3.9 0.0 0.0

Net current result 4.3 1.3 2.4 3.7 3.7 2.6 6.3 6.8 10.6

% margin 1.3% 0.8% 1.5% 1.1% 2.3% 1.7% 2.0% 2.2% 3.4%

Source: KBC Securities, Company data

VENTURING INTO TELECOM

STRATEGIC FIT

Becoming a full MVNO On 19 November, Roularta announced the acquisition of JIM Mobileand Mobile Vikings, making them the fourth largest mobile operator inBelgium. The latter, which is 50%-owned by BASE, has 240kcustomers and 60 employees, while the former services 200kcustomers. Pre-transaction, Medialaan worked on a commission basiswith BASE, taking care of the marketing aspect of the JIM Mobilebrand, while BASE owned the subscriber base. After the approval ofthe transaction, all of JIM Mobile’s customers will be taken up byMedialaan within a maximum two years. Recall that in June 2014 thetelecom operator Telenet bought a 50% stake in broadcaster De VijverMedia (owner of TV channels Vier and Vijf), a first in Europe. Now theroles are reversed, with Medialaan entering the telecom landscape asFlanders’ largest commercial broadcaster.

COMPANY NOTE

16 December 2015


11

“Forced” sale of VOs at attractive conditions

The transaction, which would lead to Medialaan becoming the fourthlargest mobile operator (largest VO) in Belgium, is dependent on theacquisition of BASE by Telenet. The European Commission iscurrently reviewing the link-up of the two telecom operators (phase II)after raising concerns about reduced competition in the mobile market,with access to the wholesale market becoming more difficult. In thatcontext, we believe that the agreed price tag of the VO assets shouldbe at the low-end of sector transaction multiples (1.0x EV/sales) andthat MVNO tariffs set by Telenet/BASE will be sufficiently attractive forMedialaan to be competitive in the current telco landscape. Note thatthe MVNO conditions with BASE have been determined for the nextthree years (pending the regulatory green light).

Light MVNO Mobile Vikings builds on “community”-model

Currently, light MVNO Mobile Vikings is positioned as a mobilechallenger in the Belgian mobile market, where it provides prepaidsubscriptions with high data at competitive prices. Furthermore, theVO signs partnerships with various retailers, caterers, bars, andSMEs, enabling it to offer customers discounted top-ups, called “VikingDeals”, in exchange for commissions. These Viking Deals can also beused as additional credit for its Viking Talk VoIP service.

Transaction rationale The acquisition of both MVNO brands is consistent with Medialaan’s

latest initiatives that have mostly targeted the younger generation. Forinstance, it placed all of its TV content online, launched the Kadetyouth channel and announced the launch of its OTT service, StievieFree. In our view, the acquisition of Mobile Vikings and JIM Mobilemakes strategic sense based on the following: Strengthening the direct relationship with the end-user provides a

more detailed picture of the customer’s profile. Medialaan canthen use this information to offer targeted advertising services,which ad agencies like.

By sharing its content across various media channels (incl.mobile) Medialaan widens its reach, which should in turn lift adrevenues.

Leveraging its brand positioning, Medialaan can attract targetclusters such as millennials, who are a niche group that is notproperly served at present. French broadcaster M6 (with M6Mobile) and Virgin media in the UK are popular examples ofMVNOs in the media/entertainment industry who primarily addressyoungsters.

As the largest commercial media player in Flanders, Medialaanhas extensive expertise to integrate its audiovisual content intomarketing campaigns, thereby boosting its presence as the newkid on the block.

COMPANY NOTE

16 December 2015


12

As video content is no longer distributed solely via traditional TV

sets but also via laptops, tablets, and smartphones, Medialaanaims to serve customers across all media channels. Given thehigh-data demands of video streaming, Medialaan could providecheap mobile tariff plans for those who increasingly stream videovia their smartphone. Radio is also becoming ever more digital(and thus more mobile-based). CEO Peter Bossaert aims tolaunch internet-based radio stations in the near future.

Given the encouraging prospects for mobile with surging datatraffic, the growing mobile market, and the access of MVNOs tothe Belgian telecom market, we think “Medialaan Mobile” hasample leeway to expand its current 17% MVNO market share.Timing-wise as well Medialaan struck a good deal, as it can buildon a >20% margin telecom business with plenty of cross-businesssynergies with its core media activities.

The prospects for mobile advertising are very bright according toworldwide forecasts by ZenithOptimedia. The media agencyexpects mobile advertising budgets to grow on average 32% over2015-2018. It further added that mobile advertising will capture allgrowth in ad budgets and that it will surpass desktop advertisingas early as 2018.

Transforming from light to full MVNO With the acquisition of branded reseller JIM Mobile and light MVNO

Mobile Vikings, Medialaan intends to ultimately become a full MVNOon the Belgian market. This way, it will gain control of the entire valuechain except for the mobile operator’s radio access network. As such,Medialaan will have additional control over the back office and theprovision of value-added services. A plus for full MVNOs is that theycan easily switch from being a host MNO whenever they deem itappropriate. In general, costs will break down as interconnection andwholesale costs (50-60%), sales and marketing (15-20%), andcustomer care (10-15%). The higher the MVNO moves up the valuechain, the higher its capex requirements will be. Nevertheless, thisalso implies higher EBITDA margins. For instance, we estimate that itcan achieve margins of 25-30% in the long-run, compared to only 15-20% for the light MVNO.

COMPANY NOTE

16 December 2015


13

MVNO BUSINESS MODELS

Source: Valoris Telecom Practice

Update MVNO market According to the latest study of independent research company,

Telecompaper, MVNOs accounted for 22% of Belgian mobilecustomers in 3Q15. Growth of total MVNO subscribers (operatorsecond brands + branded resellers) slowed, rising only 1% y/y, mostlydue to the two largest VOs, Telenet and Lycamobile. In total, theBelgian market has 42 active virtual operators and is dominated byfive (who control 84% of the market). Mobile Viking and JIM Mobiletogether represent 17% of the MVNO market (500k subs) and take 3rd

and 4th place in the VO size rankings. In 3Q15, excluding the fact thatTelenet becomes a mobile operator with its own nation-wide network,we believe the MVNO market will continue to grow on the back offurther mobile penetration and the progressive increase of its mobilemarket share.

MARKET SHARE EVOLUTION MVNO/MNO (BELGIUM) MARKET SHARE SIM CARDS (BELGIUM)

Source: KBC Securities, BIPT Source: KBC Securities, BIPT

2% 4% 8% 14%

31% 31% 27%23%

27% 25% 25% 23%

41% 40% 41% 40%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2011 2012 2013 2014

Full MVNO Mobistar BASE Proximus

COMPANY NOTE

16 December 2015


14

FINANCIAL IMPACT

Price tag of € 43.7m According to a recent article in the business magazine, “Trends”, theprice tag of a typical prepaid MVNO is about 1.0x-1.2x EV/Sales.However, due to Telenet’s unfavourable negotiating position and thefact that Mobile Vikings was cash flow negative in 2014, we believethe transaction multiple would be closer to the low-end of 1.0x.Applying this to our 2015 sales estimates of € 31.5m for MobileVikings and € 12.2m for JIM Mobile (we assume Medialaan and BASEhad a 50/50 JV), we obtain an offer price of € 43.7m for both VOs.

Assessing Mobile Viking economics

The terms of the contract with host MNO, BASE are crucial toMedialaan’s success. Given Telenet’s ‘forced seller’ position and thefact that it needs to appease the competition authorities, we believethat the MVNO wholesale cost should give Medialaan ampleheadroom to be competitive. In a press conference in May 2015,Mobile Vikings CEO Frank Bekkers said that he expected the businessto turn profitable in 2018. Additionally, the CFO noted that thecompany wants to fully invest its EBITDA in innovation and newconcepts and that excluding this investment, the business would bebottom-line positive. Based on our blue sky scenario, we think thatMobile Vikings will be profitmaking from 2017 onwards given thechange of ownership, greater scale, and renegotiated MVNO tariffs.We see EBITDA margins rising from 5% today to 19% by 2019 on theback of a growing customer base (c300k in 2019).

MOBILE VIKINGS – HEADLINE P&L ESTIMATES

2015E 2016E 2017E 2018E 2019E

Revenues (€ m) 31.5 35.9 39.5 42.8 45.6

% growth 12.9% 14.1% 10.1% 8.1% 6.6%

Subs (th) 245 265 280 292 300

ARPU (€/month) 11.4 11.7 12.1 12.5 12.8

EBITDA (€ m) 1.6 3.1 4.8 6.6 8.7

% margin 5% 9% 12% 16% 19%

Net profit (€ m) -0.9 -0.4 1.2 3.0 5.0

Source: KBC Securities

JIM Mobile

In 2007, Medialaan together with BASE founded the telecom brandJIM Mobile. While Medialaan tackled the commercial aspects, beingremunerated on a commission basis, BASE owned the client base andtook care of the operational side of the business. The MVNO primarilyaddresses the telecom needs of young people and was the first tointroduce unlimited messaging in Belgium. JIM Mobile offersaffordable subscriptions and prepaid cards, with free text messages,calling minutes and high data allowances. Pending Telenet’sacquisition of BASE, the branded partner agreement would stillcontinue for some time, but BASE would transfer all customers toMedialaan within two years. As we assume that Medialaan and BASEhad joint 50/50 control of JIM Mobile, our assumptions take intoaccount the incremental 50% impact.

COMPANY NOTE

16 December 2015


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JIM MOBILE – HEADLINE P&L ESTIMATES

2015E 2016E 2017E 2018E 2019E

Total Revenues (€ m) 24.5 27.4 29.9 32.4 34.4

Incremental Revenues (€ m) 12.2 13.7 14.9 16.2 17.2

% growth 11.8% 9.2% 8.4% 6.4%

Subs (k) 200 217 230 242 250

ARPU (€/month) 10.2 10.5 10.8 11.1 11.5

Incremental EBITDA (€ m) 0.9 1.3 1.7 2.2 2.8

% margin 7% 9% 12% 14% 16%

Incremental net profit (€ m) 0.4 0.6 0.9 1.2 1.5


Consolidated accounting Recall that Roularta consolidates its JVs (Medialaan, Belgomedia,

Plus Magazine, etc.) by the equity method and not the proportionateconsolidation method. The related asset/liabilities disappear from thebalance sheet while equity will be replaced by the asset value of theseparticipations. Additionally, Roularta makes use of an exceptional rulewhich allows the net result of all its JV’s to be reflected on the EBITDAline, which obviously works its way to the bottom-line. As such, bear inmind that the contribution in cash from JV’s Medialaan is received inthe form of dividends, while the remaining FCF remain in the operatingcompanies and no debt is involved.

Impact on Roularta’s accounts From the above paragraph we can see that the single impact on

Roularta’s consolidated accounts would be visible on the bottom-lineincluding contributions from associates (and thus also the JV inMedialaan). For combined reporting, the acquisition will be visible onall P&L accounts (proportionally adjusted for the 50% stake).Assuming a price tag of € 43.7m, the transaction represents 0.9x ofMedialaan’s EBITDA. Given the company’s net cash position of € ~9m(based on NBB accounts), it therefore has substantial leeway to copewith the transaction price. In light of the deal, we trimmed the dividendcontribution paid out to Roularta from € 23m to € 18m for FY15, butrecovering to € 23m / € 24m in FY16/FY17. On a combined basis, weforecast “Medialaan Mobile” will contribute 6.5% in revenues and 7.6%in EBITDA by 2019, while net profit is expected to advance by 8.1%both in terms of consolidated and combined accounting.

COMPANY NOTE

16 December 2015


16

IMPACT MEDIALAAN MOBILE ON ROULARTA

2015E 2016E 2017E 2018E 2019E

Total subscribers 445.0 482.0 510.0 534.0 550.0

Revenues (combined) 471.4 471.5 474.0 478.9 484.6

VOs contribution 21.9 24.8 27.2 29.5 31.4

VOs contribution (%) 4.6% 5.3% 5.7% 6.2% 6.5%

Post-deal revenues 493.3 496.3 501.3 508.4 516.0

EBITDA (combined) 57.5 60.6 63.9 67.2 76.4

VOs contribution 1.2 2.2 3.2 4.4 5.7

VOs contribution (%) 2.1% 3.6% 5.1% 6.6% 7.5%

Post-deal EBITDA 58.8 62.7 67.1 71.6 82.2

% margin 11.9% 12.6% 13.4% 14.1% 15.9%

Net profit (combined) 22.4 25.1 29.3 33.1 41.2

VOs contribution -0.3 0.1 1.0 2.1 3.3

VOs contribution (%) -1.3% 0.5% 3.6% 6.4% 8.0%

Post-deal net profit 22.1 25.2 30.3 35.2 44.4

Source: KBC Securities 30 MORE MONTHS PAYING THE PIPER

Sale-and-lease back contract weighs on performance. But not for long…

Back in 2008, in the midst of the financial crisis and post theacquisition of the French printing group Express-Expansion, Roulartareverted to a sale-and-rent back contract with Econocom. The off-balance sheet transaction assured that Roularta would not breach itsbank covenants and supported the group’s liquidity and credit metrics.Although the operational lease alleviated credit concerns, the price atwhich it signed the deal would weigh on its operational performancefor the next 10 years to come. Econocom took over several assets (ofwhich nine printing presses, 6000 ICT assets, eight finishing lines, and10 business centres) for € 57m in return for nearly 10% financing andaround € 10m of annual lease payments.

Other operational leases Roularta also has two other contracts running. The first entails the

lease of its company car fleet, for which we estimate an annual leasepayment of roughly € c1m with renewal every five years. The secondcontract (with Ricoh) covers the office equipment, representing just€ 75k of leasing costs per annum, with renewal expected every 10years.

Econocom contract expiration would boost group profits by 41% as of 2019.

On our estimates, we reckon the Econocom contract holds an averageof approx. € 10m in operational lease costs. Given that Roularta wouldonce again become the owner of the assets at expiry (August 2018)and that the assets would have on average a remaining useful life of10 years (i.e. until 2028), we forecast print REBIT will increase by 47%while profits (of print) should nearly double from 2019. From that point,the only relevant cost will be maintenance capex, which should risefrom € 7.4m today to € 9.5m in 2019.

COMPANY NOTE

16 December 2015


17

Whether Roularta will renew the underlying assets in 2028 is unsure

as the company by then could opt to either outsource or sell, as theassets might become redundant. Given that our DCF model banks ona stable EBIT margin from 2019 onwards, we reckon that futureoutsourcing cost is captured in our limited EBIT upside. In the secondscenario, we argue the differential from the proceeds from a sale andthe cost of a possible renewal would become marginally small afteradjusting for 13 years of time value.

Assessing off-balance sheet operating lease liability

Below we outline the impact on headline P&L figures and debt if wewere to convert Roularta’s operational lease to a capital lease. Weassume a pre-tax cost of debt of 5.125%, equal to the gross interestrate on Roularta’s outstanding € 100m October 2018 bond.Additionally, we model a € 5.75m renewal cost for the company carfleet and office equipment as of year six. Adjusting for operatingleases, we can see that Roularta’s leverage bumps up slightly from1.3x (unadjusted) to 1.6x in 2015. Nevertheless, given the deferredannual payments of € 16m arising from the sale of groupe l’Express,the > € 20m annual dividend from Medialaan, and double-digitoperational earnings growth, we forecast rapid deleverage of thebalance sheet to create a net cash position by YE17. In terms ofvaluation multiples, both EV/EBITDA and EV/OpFCF look cheaper,landing at 6.0x and 7.0x respectively for 2016. EV/EBIT is a tad morestretched (9.5x) as the relatively low principal (financing proved veryexpensive for the Econocom contract) does not make up for theincrease in debt.

COMPANY NOTE

16 December 2015


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HEADLINE FIGURES - CONVERTING OPERATING LEASE INTO CAPITAL LEASE

2014 2015 2016 2017 2018 2019

Operating lease commitment 13.74 12.65 11.85 11.05 10.05 0.95

Discounted lease pmt 12.03 10.72 9.51 8.23 0.74

Debt value of leases 45.07 33.03 22.31 12.80 4.57 3.83

Net debt 82.0 54.5 18.9 -18.3 -58.5 -88.0

Adjusted net debt 127.1 87.6 41.2 -5.5 -53.9 -84.1

EBITDA 34.87 43.06 45.33 47.80 50.31 56.23

% margin 11.6% 14.5% 15.3% 16.1% 16.7% 18.5%

Adjusted EBITDA 48.61 55.71 57.18 58.85 60.36 57.18

% margin 16.2% 18.8% 19.3% 19.8% 20.1% 18.8%

EBIT 21.93 32.86 34.79 37.75 40.81 47.14

% margin 7.3% 11.1% 11.7% 12.7% 13.6% 15.5%

Adjusted EBIT 24.24 34.55 35.93 38.41 41.04 47.33

% margin 8.1% 11.7% 12.1% 12.9% 13.6% 15.5%

Financing result -6.73 -5.71 -4.79 -3.70 -2.54 -0.35

Adjusted financing result -9.04 -7.40 -5.94 -4.36 -2.78 -0.55

Profit before tax 15.20 27.15 30.00 34.05 38.27 46.78

Adjusted net profit 15.20 27.15 30.00 34.05 38.27 46.78

Net debt / EBITDA 2.4x 1.3x 0.4x -0.4x -1.2x -1.6x

Adjusted net debt / EBITDA 2.6x 1.6x 0.7x -0.1x -0.9x -1.5x

EV/EBITDA 6.5x 7.8x 6.9x 6.1x 5.4x 4.2x

Adjusted EV/EBITDA 5.6x 6.6x 5.9x 5.2x 4.5x 4.2x

EV/OpFCF 8.3x 9.4x 8.5x 7.4x 6.4x 5.0x

Adjusted EV/OpFCF 6.6x 7.6x 6.9x 6.1x 5.3x 5.0x

EV/EBIT 10.4x 10.2x 9.0x 7.8x 6.6x 5.0x

Adjusted EV/EBIT 11.3x 10.6x 9.4x 8.0x 6.7x 5.0x


VALUATION

DCF PRINTED MEDIA (EXCL.JV)

Given that Roularta consolidates its JVs (Medialaan, Belgomedia, PlusMagazine, etc.) by the equity method instead of the proportionateconsolidation method, the related asset/liabilities disappear from thebalance sheet while equity will be replaced by the asset value of theseparticipations. As such, we’ve used a DCF valuation for printed mediaas a stand-alone. Our DCF is based on an explicit 10-year forecastperiod spanning 2016-2024 and terminal free cash flow growth of1.0% thereafter.

COMPANY NOTE

16 December 2015


19

The assumptions underlying our free operating cash flows are as

follows: Sales CAGR 2020-2024 of 1.1%, above the CAGR 2015-2019 of

1.0% Operating profit after 2025 of 8.2% Tax rate of 33.99% Long-term capex of sales at 3.1%

DCF MODEL – CASH FLOWS (€ m)

2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E

Sales 296.2 297.8 300.8 304.4 308.3 312.4 316.4 320.5 323.7 327.0

Operating profit 13.8 16.3 18.8 25.6 25.0 25.3 25.6 26.0 26.5 26.8

Taxes -4.7 -5.5 -6.4 -8.7 -8.5 -8.6 -8.7 -8.8 -9.0 -9.1

D&A 10.5 10.0 9.5 9.1 9.3 9.4 9.5 9.6 10.0 10.1

WC changes -4.3 -4.8 -4.1 -4.0 -3.7 -3.7 -3.8 -3.8 -2.6 -2.6

Capex -8.1 -8.3 -8.4 -9.4 -9.9 -10.0 -10.1 -10.3 -10.0 -10.1

FCF 7.2 7.7 9.4 12.6 12.2 12.4 12.5 12.7 15.0 15.1

Present Value FCF 6.7 6.7 7.6 9.4 8.5 8.0 7.5 7.1 7.8 7.3

Terminal Value 130.1

Enterprise Value 214.2


The first five years make up 18.1% of our enterprise value (EV)

estimate, the 2021-2025 period 17.6%, and our terminal value 60.7%.Note that cash flows are generated throughout the year, and not as alump sum, while discounting full-year increments understates theappropriate discount factor. We assume cash flow is generatedsymmetrically around the midyear point. Our model uses an equity riskpremium of 6.0%, a leveraged beta of 0.78 (unlevered beta 0.93),resulting in a 7.7% cost of equity. Furthermore we have included adebt/equity ratio of 22%/78%, a tax rate of 34%, and a cost of net debtof 10.6%. This translates into a WACC of 7.55%.

DCF valuation of print stand-alone points to € 9.4ps

So far, our projections do not take into account the operating leaseexpiry. Including this impact and also accounting for the off-balancesheet liability, our DCF model for print stand-alone now points to€ 9.4ps.

PEER GROUP MULTIPLES

Our P/E analysis suggests Roularta trades at 20% discount

The company’s use of the equity accounting method rather than theproportionate consolidating method means that the enterprise valuemultiples are not an accurate reflection of Roularta’s valuation. Forinstance, EV/EBITDA takes into account the JV’s net profit on theEBITDA line (exceptional rule as explained in the Consolidatedaccounting section) while the EV does not include any liability or assetline related to the JVs.

COMPANY NOTE

16 December 2015


20

If we were to adjust for both anomalies, valuation would look even

cheaper, given higher EBITDA and reduced EV, particularly sinceaccording to NBB 2014 accounts, Medialaan had a net cash positionof € 8.8m with another € 34.5m of financial assets, only partly offset by€ 19.4m in non-operating liabilities. As such, if we were to valueRoularta on a multiples basis, we believe P/E would be the mostaccurate measure. The company currently trades at P/E 16e/17e of11.1x/9.5x which does not yet take into account the expiry of theoperating lease contract. Given that most earnings are generated byRoularta’s audiovisual segment (74% in 2015E) and only a smallproportion by print (26%), we looked at weighted average P/Emultiples consisting of print-based and free-to-air broadcasters’ peermultiples. Applying a 15% liquidity discount, we find that Roularta stilltrades at an unwarranted average discount of 20% to peers. Note thatour discount takes into account that the broadcasting peer group ismade up of large-scale European broadcasters with a diversifiedproduct portfolio and increased exposure to video/online.

P/E-BASED VALUATION

2015E 2016E 2017E 2018E 2019E

Earnings (€ m)

Group 24.2 25.5 29.9 33.1 41.2

Audiovisual 17.9 18.7 19.3 20.1 20.8

Print 6.3 6.8 10.6 12.9 20.4

Share of Earnings (%)

Audiovisual 74% 73% 65% 61% 50%

Print 26% 27% 35% 39% 50%

P/E multiple

Audiovisual 20.7x 16.8x 14.9x 13.3x 12.1x

Print 15.4x 12.0x 10.4x 9.0x 8.0x

Weighted Average 19.3x 15.5x 13.3x 11.6x 10.0x

Implied valuation

Group (€ m) 467 395 398 383 413

Liquidity discount (%) 15% 15% 15% 15% 15%

Fair value (€ m) 397 336 338 326 351

Fair value ps 31.8 26.9 27.0 26.1 28.1

Target price 27.0

Upside potential (%) 20%

Source: KBC Securities, Factset

COMPANY NOTE

16 December 2015


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PEER GROUP MULTIPLES (PRINT / FTA BROADCASTERS)

Company CCY Price MC (€) Ev/EBITDA EV/OpFCF Net Div Yield P/E

2016E 2017E 2016E 2017E 2016E 2017E 2016E 2017E

Mondadori EUR 1.0 261.2 6.3 x 4.9 x 8.1 x 6.4 x 0.0% 0.0% 9.3 x 7.1 x

Connect GBP 1.6 549.7 6.4 x 6.0 x 8.4 x 7.7 x 6.0% 6.2% 8.2 x 7.9 x

Inpendent News EUR 0.2 246.8 3.6 x 2.9 x na na 0.0% 0.0% 6.4 x 6.2 x

TMG EUR 3.7 173.6 4.9 x 3.3 x na na 1.8% 1.9% 12.5 x 18.4 x

Trinity Mirror GBP 1.7 654.3 3.4 x 3.1 x na na 3.3% 3.7% 5.3 x 5.1 x

Wilmington GBP 2.7 322.4 10.6 x 9.6 x 11.1 x 10.0 x 3.0% 3.1% 15.0 x 13.6 x

Sanoma EUR 4.1 662.3 3.8 x 3.6 x -17.9 x 10.6 x 3.6% 4.8% 11.5 x 10.5 x Editoriale l'Espresso

EUR 0.9 367.7 5.2 x 4.5 x 6.3 x 6.1 x 2.2% 4.8% 10.4 x 10.4 x

Spir EUR 9.0 55.1 9.1 x 5.7 x na na 0.0% 0.0% 38.1 x

Tarsus GBP 2.2 316.1 12.7 x 7.8 x na na 3.9% 4.0% 17.2 x 10.1 x

Vocento GBP 1.5 243.1 5.4 x 4.7 x 6.3 x 5.5 x 0.0% 0.0% 14.5 x 10.6 x

Agora EUR 12.5 554.5 5.2 x 4.6 x 14.4 x 9.1 x 4.0% 4.0% 41.1 x 8.7 x

Solocal DKK 6.8 35.4 4.8 x 4.5 x 6.3 x 6.0 x 0.0% 0.0% 3.5 x 3.3 x

Dun & Bradsheet EUR 104.4 3771.9 na na na na 1.8% 1.8% 13.7 x 12.5 x

Eniro SEK 1.0 52.3 4.8 x 4.5 x 5.5 x 6.1 x na na 26.2 x 23.8 x

Roularta EUR 22.7 282.7 6.6 x 6.0 x 7.9 x 7.3 x 1.9% 2.6% 11.1 x 9.5 x

Average Print 342 6.1 x 5.0 x 5.4 x 7.5 x 2.1% 2.5% 13.9 x 12.4 x

Median Print 316 5.2 x 4.6 x 6.3 x 6.4 x 2.0% 2.5% 12.0 x 10.4 x

TF1 EUR 10.8 2272.4 6.9 x 5.3 x 8.7 x 7.1 x 4.1% 4.9% 20.5 x 15.4 x

M6 EUR 16.4 2073.2 5.9 x 5.4 x 8.7 x 7.7 x 5.4% 5.9% 16.8 x 14.9 x

ITV GBP 2.6 14713.1 11.0 x 10.3 x 11.8 x 10.9 x 2.7% 3.2% 14.9 x 14.0 x

Pro7Sat EUR 47.3 10383.0 12.1 x 11.4 x -4.3 x 7.1 x 4.4% 4.7% 18.3 x 17.1 x

MTG SEK 236.5 1713.3 10.2 x 9.3 x 11.9 x 10.8 x 5.1% 5.3% 16.3 x 15.0 x

Mediaset EUR 3.8 4623.3 9.9 x 7.1 x -21.8 x -79.8 x 2.3% 4.1% 35.6 x 19.6 x

A3M EUR 10.6 2340.8 10.5 x 8.9 x 11.9 x 10.3 x 5.8% 7.4% 13.9 x 11.8 x

Mediaset Espana EUR 10.2 3747.8 13.3 x 11.2 x 60.1 x 43.7 x 4.9% 5.9% 17.0 x 14.6 x

RTL EUR 78.8 12151.5 9.2 x 8.6 x 10.8 x 10.2 x 5.7% 5.4% 15.9 x 14.9 x

Roularta EUR 22.7 282.7 6.6 x 6.0 x 7.9 x 7.3 x 1.9% 2.6% 11.1 x 9.5 x

Average FTA Broadcasting 6002 9.9 x 8.6 x 10.8 x 3.1 x 4.5% 5.2% 18.8 x 15.3 x

Median FTA Broadcasting 3748 10.2 x 8.9 x 10.8 x 10.2 x 4.9% 5.3% 16.8 x 14.9 x

Source: KBC Securities, Factset

COMPANY NOTE

16 December 2015


22

SUM-OF-THE-PARTS

We favour our sum-of-the-parts model which relies on a combinationof adjusted P/E, EV/EBITDA, EV/OpFCF, DCF, and DDM valuation.Bear in mind that the contribution in cash from JV’s Medialaan isreceived in the form of dividends, which we estimate to be € 18m in2015 (lower y/y due to the acquisitions of VOs Mobile Vikings and JIMMobile). As the remaining free cash flows remain in the operatingcompanies and no debt is involved, we applied a DDM valuation.Cross-checking this with an adjusted P/E multiple of 15.0x forAudiovisual we obtain a valuation of € 270m. Next, we valued printthrough a combination of DCF, EV/REBITDA (5.2x), and EV/OpFCF(6.3x), averaging an equity value of € 171m. Notice that only our DCF-based print valuation captures the positive impact of the operatinglease expiry in August 2018. As such, notice that this effect is partlyaveraged out due to the combination with the EV/EBITDA &EV/OpFCF-based enterprise valuation in our SOTP.

Deferred payments of l’Express sale and “Medialaan Mobile” provide further upside

Referring to our blue sky scenario for “Medialaan Mobile”, weestimated a net profit contribution of € 3.3m by 2019. Applying a P/Emultiple of 15x, valuation would stand at roughly € 49m. However,assuming an 80% probability that the Telenet/BASE transaction will beapproved and a 50% probability that our blue sky scenario comes true,we value the telecom activities at € 1.2ps (adjusted for time value). Aspart of our DCF, we have taken into account a remaining Frenchdisposal value, equal to NAV, of € 32m (€ 2.6ps).

COMPANY NOTE

16 December 2015


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SOTP 2016 VALUATION

Method Multiple Driver EV

EV/REBITDA 5.2x € 27.0 € 140.3

DCF-based EV € 214.2

EV/OpFCF 6.3x € 18.8 € 118.6

Average Enterpise Value (RMG ex. JV) € 166.4

Adjusted P/E 15.0x € 18.7 € 280.1

DDM 7.7% € 20.0 € 259.7

Average Equity Value (Audiovisual) € 269.9

"-" Provisions -€ 16.0

"-" Net financial debt -€ 19.0

"-" Off-balance sheet liabilities -€ 22.3

"-" Non-operating liabilities -€ 33.4

"-" Minorities -€ 2.4

"+" Financial assets € 0.8

"+" Non-operating assets € 6.2

"+" Deferred payments sale of France € 32.0

"+" MVNO option € 14.7

Total (€m) € 397.0

Conglomeration + liquidity discount (%) 15%

RMG Equity value € 337.5

Number of shares (m) 12.5

Target price € 27.0


COMPANY NOTE

16 December 2015


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SOTP WATERFALL – VALUATION PER SHARE


Don’t forget deferred tax assets Note that Roularta has experienced severe losses arising from the

weak performance of its French activities. Given the substantialimpairment booked in 2013 and 2014 and the estimated price tag of€ 60m, we believe Roularta can fall back on substantial tax losscarryforwards. Today, the deferred tax assets from Groupe Express donot show on the Roularta balance sheet. However, the tax losses stillneed to be released from the holding level in France, which we believewill be incorporated in the books in the YE15 results. Once the DTAfrom the disposal of the French activities is known, we’ll include it inour DCF model. For the time being, we estimate a DTA account of€ 35-40m, which implies no cash-tax payments for the next five years.

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COMPANY NOTE

16 December 2015


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FINANCIAL DATA Income statement (€ m) 2014 2015E 2016E 2017E 2018E 2019E Sales 299.6 296.1 296.2 297.8 300.8 304.4 COGS -82.0 -75.5 -74.8 -74.4 -74.5 -74.6 Gross profit 217.5 220.6 221.4 223.3 226.4 229.8 Operating costs -211.4 -206.8 -207.2 -207.5 -206.7 -201.0 Other income & costs 15.8 19.0 20.6 21.9 21.1 19.3 EBIT 21.9 32.9 34.8 37.8 40.8 48.1 Net interest -6.7 -5.8 -4.8 -3.7 -2.6 -0.4 Other non-operating 0.0 0.0 0.0 0.0 0.0 0.0 Pre-tax earnings 15.2 27.1 30.0 34.0 38.3 47.8 Taxes -2.5 -4.8 -4.9 -4.8 -5.2 -6.6 Associates 0.0 0.0 0.0 0.0 0.0 0.0 Discontinued & other -155.2 -3.9 0.0 0.0 0.0 0.0 Consolidated earnings -142.5 18.4 25.1 29.3 33.1 41.2 Minority interests 0.1 0.1 0.1 0.1 0.1 0.1 Net earnings -142.5 18.5 25.1 29.3 33.1 41.2

Depreciation and amortisation -13.0 -10.1 -10.5 -10.0 -9.5 -9.1 Amortisation other intangibles/ Impairments 0.0 0.0 0.0 0.0 0.0 0.0 Non recurring elements included in EBIT -2.7 -2.0 -0.9 -0.1 -1.4 -3.7

REBITDA 39.3 47.1 48.0 48.7 50.7 57.2 EBITDA 34.9 43.1 45.3 47.8 50.3 57.2 REBITA 31.6 37.6 38.6 39.5 41.7 48.3 EBITA 21.9 32.9 34.8 37.8 40.8 48.1 Net earnings from continued operations - - - - - - Adjusted net earnings 19.4 24.2 25.5 29.9 33.1 41.2

Balance sheet (€ m) 2014 2015E 2016E 2017E 2018E 2019E Intangible assets 87.6 86.3 85.3 84.7 84.5 85.1 Tangible assets 60.9 57.7 56.3 55.2 54.4 54.0 Financial assets 0.8 0.8 0.8 0.8 0.8 0.8 Other assets 278.5 183.1 165.1 146.6 127.6 124.1 Inventories 6.2 6.1 6.1 6.1 6.2 6.2 Receivables 66.2 70.4 68.4 73.7 74.5 76.8 Cash & equivalents 33.0 58.7 94.3 131.5 171.7 202.0 TOTAL ASSETS 533.2 463.0 476.2 498.6 519.6 549.1

Equity 143.3 161.5 180.6 202.0 226.0 256.8 Minorities 2.5 2.0 2.4 2.7 3.0 3.4 Provisions 16.8 16.0 16.0 16.0 16.0 16.0 LT financial debt 113.4 112.0 112.0 112.0 112.0 112.0 Other liabilities 187.9 97.2 97.2 97.5 98.0 98.7 Payables 66.8 72.4 66.1 66.4 62.6 60.3 ST financial debt 2.5 2.1 2.1 2.1 2.1 2.1 TOTAL LIABILITIES 533.2 463.0 476.2 498.6 519.6 549.1

Net working capital 5.5 4.1 8.4 13.4 18.0 22.7 Capital employed 216.7 213.2 213.1 213.6 213.7 214.6 Net debt 82.9 55.4 19.8 -17.4 -57.6 -88.0 Net debt, incl. off-balance items 82.9 55.4 19.8 -17.4 -57.6 -88.0

Cash flow statement (€ m) 2014 2015E 2016E 2017E 2018E 2019E Consolidated earnings -142.6 18.4 25.1 29.3 33.1 41.2 Depreciation, amortisation & impairment 220.4 5.9 10.5 10.0 9.5 9.1 Other cash flow from operations -62.1 1.5 2.0 2.5 3.0 3.5 Change in working capital 5.0 -3.0 -4.3 -4.8 -4.1 -4.0 CASH FLOW FROM OPERATIONS 20.7 22.8 33.3 37.1 41.5 49.7

Net capital expenditure -7.4 -7.4 -8.1 -8.3 -8.4 -9.4 Acquisitions / disposals -10.0 12.0 16.0 16.0 16.0 0.0 Other cash flow from investments 18.6 -1.2 0.0 0.0 0.0 0.0 CASH FLOW FROM INVESTMENTS 1.2 3.3 7.9 7.7 7.6 -9.4

Dividend payments 0.0 0.0 -5.6 -7.6 -8.8 -9.9 Shares issues 0.0 0.0 0.0 0.0 0.0 0.0 New borrowings / reimbursements -8.7 -2.3 0.0 0.0 0.0 0.0 Other cash flow from financing -0.3 0.0 0.0 0.0 0.0 0.0 CASH FLOW FROM FINANCING -9.1 -2.3 -5.6 -7.6 -8.8 -9.9

Fx and changes to consolidation scope -7.8 1.8 0.0 0.0 0.0 0.0 CHANGE IN CASH & EQUIVALENTS 5.0 25.7 35.6 37.2 40.2 30.3

Free cash-flow 13.3 15.4 25.2 28.7 33.0 40.3 Change in net debt -16.4 -27.5 -35.6 -37.2 -40.2 -30.3

COMPANY NOTE

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Performance criteria 2014 2015E 2016E 2017E 2018E 2019E

Sales growth -1.8% -1.2% 0.0% 0.5% 1.0% 1.2% Gross profit growth -1.3% 1.4% 0.4% 0.9% 1.4% 1.5% REBITDA growth 13.6% 19.6% 1.9% 1.6% 4.1% 12.6% EBITDA growth 17.4% 23.5% 5.3% 5.4% 5.2% 13.7% REBITA growth 18.4% 19.0% 2.4% 2.4% 5.5% 15.9% EBIT growth 45.1% 49.8% 5.9% 8.5% 8.1% 18.0% Pe-tax earnings growth 93.6% 78.1% 10.7% 13.5% 12.4% 24.9% Net earnings growth 146.0% -113.0% 35.9% 16.6% 13.0% 24.4% Earnings growth from continued operations - - - - - - Adjusted earnings growth 5.8% 24.3% 5.4% 17.3% 10.7% 24.5%

Gross margin 72.6% 74.5% 74.8% 75.0% 75.3% 75.5% REBITDA margin 13.1% 15.9% 16.2% 16.4% 16.9% 18.8% EBITDA margin 11.6% 14.5% 15.3% 16.1% 16.7% 18.8% REBITA margin 10.6% 12.7% 13.0% 13.3% 13.9% 15.9% EBIT margin 7.3% 11.1% 11.7% 12.7% 13.6% 15.8% Net working capital / sales 1.8% 1.4% 2.8% 4.5% 6.0% 7.5% CAPEX/ Sales 2.5% 2.5% 2.8% 2.8% 2.8% 3.1% FCF / Sales 4.4% 5.2% 8.5% 9.6% 11.0% 13.2% Depreciation / Capital Expenditure 174.8% 136.3% 129.4% 120.5% 112.8% 96.2% Capital expenditure / EBITDA 21.3% 17.2% 18.0% 17.4% 16.7% 16.5%

Net debt / Equity + Minorities 56.8% 33.9% 10.8% -8.5% -25.2% -33.8% Net debt / EBITDA 2.4 1.3 0.4 -0.4 -1.1 -1.5 EBITDA / net interest 5.2 7.4 9.4 12.9 19.7 159.9 Pay-out ratio - - - - - -

Net earnings margin -47.6% 6.2% 8.5% 9.8% 11.0% 13.5% x CE turnover (Sales / avg. CE) 0.8 1.4 1.4 1.4 1.4 1.4 x Leverage (avg. CE / avg. equity) 2.6 1.3 1.2 1.1 1.0 0.9 = Return on Equity (avg) -99.4% 11.5% 14.7% 15.3% 15.5% 17.1% Return on Equity - adjusted 13.6% 15.0% 14.9% 15.6% 15.5% 17.1% Return on Capital Employed 3.9% 10.1% 10.8% 11.7% 12.6% 14.9% Return on Capital Employed - adjusted 5.7% 11.6% 12.0% 12.2% 12.9% 14.9%

Per share data (€) 2014 2015E 2016E 2017E 2018E 2019E weighted average # shares (m) 12.48 12.48 12.48 12.48 12.48 12.48 weighted average # shares, diluted (m) 12.48 12.50 12.50 12.50 12.50 12.50

Basic EPS -11.41 1.48 2.01 2.35 2.65 3.30 Adjusted EPS 1.56 1.94 2.04 2.39 2.65 3.30 Diluted EPS -11.41 1.48 2.01 2.35 2.65 3.30 Diluted, adjusted EPS 1.56 1.93 2.04 2.39 2.65 3.29

Diluted EPS: y/y growth - - 35.9% 16.6% 13.0% 24.4% Diluted EPS: CAGR 3Y - - 21.4% 17.9% -100.0% -100.0% Adjusted, diluted EPS: y/y growth 5.8% 24.2% 5.4% 17.3% 10.7% 24.5% Adjusted, diluted EPS: CAGR 3Y 11.5% 15.4% 11.0% 17.4% -100.0% -100.0%

REBITDA / share 3.15 3.77 3.84 3.90 4.06 4.57 EBITDA / share 2.79 3.45 3.63 3.82 4.02 4.58 REBITA/share 2.53 3.01 3.09 3.16 3.33 3.86 EBIT/ share 1.76 2.63 2.78 3.02 3.26 3.85

Net book value / share 11.48 12.93 14.46 16.18 18.10 20.57 Free cash flow / share 1.07 1.24 2.02 2.30 2.65 3.23 Dividend (€) 0.00 0.44 0.60 0.70 0.80 0.99

Valuation data 2014 2015E 2016E 2017E 2018E 2019E Max share price (€) 14.10 22.94 - - - - Min share price (€) 10.77 10.79 - - - - Reference share price (€) 12.36 22.80 22.80 22.80 22.80 22.80 Reference market capitalisation 162.5 299.6 299.6 299.6 299.6 299.6 Enterprise value (€ m) 227.7 336.4 317.2 296.3 272.3 242.4

P/E 7.9 11.8 11.2 9.5 8.6 6.9 EV/sales 0.8 1.1 1.1 1.0 0.9 0.8 EV/REBITDA 5.8 7.1 6.6 6.1 5.4 4.2 EV/EBITDA 6.5 7.8 7.0 6.2 5.4 4.2 EV/REBITA 7.2 8.9 8.2 7.5 6.5 5.0 EV/EBIT 10.4 10.2 9.1 7.8 6.7 5.0 EV/Capital employed 1.1 1.6 1.5 1.4 1.3 1.1 P/ NBV 1.1 1.8 1.6 1.4 1.3 1.1 Free cash flow yield 8.6% 5.4% 8.8% 10.1% 11.6% 14.2% Dividend yield 0.0% 1.9% 2.6% 3.1% 3.5% 4.3% Source: KBC Securities *Historic valuation data are based on historic prices

COMPANY NOTE

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27

DISCLOSURE & DISCLAIMER SECTION The company disclosures can also be consulted on our website http://www.kbcsecurities.com/disclosures. KBC Securities uses an absolute rating system including terms such as Buy, Accumulate, Hold, Reduce and Sell (see definitions below).

Definition

BUY Expected total return (including dividends) of 10% or more over a 6-month period

ACCUMULATE Expected total return (including dividends) between 0% and 15% over a 6-month period

HOLD Expected total return (including dividends) between -5% and 5% over a 6-month period

REDUCE Expected total return (including dividends) between –15% and 0% over a 6-month period

SELL Expected total return (including dividends) of -10% or worse over a 6-month period

Due to external factors and in exceptional cases, KBC Securities allows the use of ratings such as Accept the Offer, Black Out, No Recommendation or Suspended. Our analysts assign one of those ratings based on their investment outlook and valuation for the concerned stock. The valuation can be based on different methodologies such as DCF (discounted cash flow), absolute multiples, peer group multiples, sum-of-parts or NAV (Net Asset Value). The valuation is reflected in a 6-month target price. Occasionally, the expected total return may fall outside of these ranges because of price movement and/or volatility. Such deviations will be permitted but will be closely monitored. Investors should carefully read the definitions of all ratings used in each research report. In addition, since the report contains more complete information concerning the analyst’s view, investors should carefully read the entire report and not infer its contents from the rating alone. KBC Securities may disclose the drafts of its reports to the issuers before their dissemination for the purpose of verifying the accuracy of factual statements, except when the draft includes a rating or a target price. In case the draft has been amended following this disclosure, such amendments will be indicated in the concerned report.

Stock rating % of covered universe % of covered universe with investment banking relationship during last year

BUY 35.60% 58.33%

ACCUMULATE 26.30% 25.00%

HOLD 34.70% 16.67%

REDUCE 2.50% 0.00%

SELL 0.80% 0.00%

RMG is a Belgian-French publishing and printing firm with over 2,000 FTEs and a combined turnover of €477m operating in BE, the Neths, GE, SVN and SRB. RMG holds 50% of the shares of the Flemish broadcaster Medialaan which includes TV and radio activities The price target for Roularta is based on following parameters: Absolute Multiples, Peer Group Multiples The risks which may impede the achievement of our price target are: Cyclical nature of advertising spend, drop in audience figures, programme cost inflation, integration risk of GEE acquisition Below is an overview of the stock ratings and target price history in the last 12 months for the stock described in this report.

Date Rating Target price

2015-12-15

2015-08-27

2015-03-25

2015-02-13

2015-01-09

Buy

Buy

Buy

Hold

Hold

€ 27.00

€ 19.00

€ 18.00

€ 12.00

€ 12.50

KBC Securities will provide periodic updates on companies/industries based on company-specific developments or announcements, market conditions or any other publicly available information. KBC Securities policy prohibits its analysts and members of their households from owning securities of any company in the analyst's area of coverage.

COMPANY NOTE

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28

CONTACT DETAILS

ANALYST TEAM

Analyst Contact Coverage

Wouter Vanderhaeghen (Head of Research) +32 2 429 37 30 Shipping & Industrials

Jan De Kerpel +32 2 429 84 67 Biotech & Pharma

Ruben Devos +32 2 429 58 43 Telco & Media

Matthias De Wit +32 2 429 37 17 Financials

Yves Franco +32 2 429 45 04 Holdings & Staffing

Dieter Furniere +32 2 429 18 96 Engineering, Transport & Utilities

Wim Hoste +32 2 429 37 13 Chemicals & Breweries

Guy Sips +32 2 429 30 02 Small & Midcaps Benelux

Koen Overlaet-Michiels +32 2 429 37 21 Real Estate

Alan Vandenberghe +32 2 429 18 06 Food Retail & Credit Research

Dirk Verbiesen +32 2 429 39 41 Oil Services & Construction

EQUITY SALES TEAM

Sales Contact

Sebastien Fuki (Head of Sales) +32 2 417 53 43

Stefaan De Lathouwer +32 2 417 44 68

Xavier Gossaert +32 2 417 53 68

Margo Joris +32 2 417 25 66

Kris Kippers +32 2 417 28 08

Agustin Lanne +32 2 417 51 45

Tim Leemans +32 2 417 32 28

Marco Miserez +32 2 417 36 81

Sales (US)

Sebastiaan Pol +1 212 845 20 52

Sofie Van Gijsel +1 212 541 06 48

Sales Trading

Isabel Sebreghts +32 2 417 63 63

Tim Leemans +32 2 417 32 28

Marco Miserez +32 2 417 36 81

Loïc De Smet +32 2 417 36 99

BOND SALES TEAM

Sales Contact

Alexander Lehmann (Head of Sales) +32 2 417 46 25

Maurizio Bartolo +32 2 417 48 02

Bert Beckx +32 2 417 31 57

Toon Boyen +32 2 417 25 65

Alban Kerdranvat +32 2 417 25 45

Bart Mathijssen +32 2 417 57 12

Pranab Patel +32 2 417 46 75

Koen Princen +32 2 417 44 65

COMPANY NOTE

16 December 2015

Copyright © 2015 KBC Securities

The company disclosures can be consulted on our website http://www.kbcsecurities.com/disclosures.

KBC Securities NV Havenlaan 12 Avenue du Port 1080 Brussels Belgium +32 2 417 44 04 Regulated by FSMA and NBB

KBC Securities USA, Inc. 1177 Avenue of the Americas New York, NY 10036 US +1 212 845 2200 Regulated by FINRA

KBC Securities NV Hungarian Branch Lechner Ődőn fasor 10 1095 Budapest Hungary +361 483 4005 Regulated by PSZAF

Analyst certification: The analysts identified in this report each certify, with respect to the companies or securities that the individual analyses that (i) the viewsexpressed in this publication reflect his or her personal views about the subject companies and securities, and (ii) he or she receives compensation that is based upon various factors, including his or her employer’s total revenues, a portion of which are generated by his or her employer’s investment banking activities, but not in exchange for expressing the specific recommendation(s) in this report. This publication has been prepared by KBC Securities NV which is regulated by FSMA (Financial Services and Markets Authority) and by NBB (National Bank of Belgium). This publication is provided for informational purposes only and is not intended to be an offer, or the solicitation of any offer, to buy or sell the securities referred to herein. This document is not produced by KBC Securities USA, Inc. No part of this publication may be reproduced in any manner without the prior written consent of KBC Securities.

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Documents

COMPANY NOTE - RoulartaCOMPANY NOTE 16 December 2015 THIS DOCUMENT IS NOT PRODUCED BY KBC SECURITIES USA, INC. kbcsecurities.com Refer to important disclosures, disclaimers and analyst