Analyst                                                                              Pablo Mañueco Galindo                ...
Analyst                                                                                                        Pablo Mañue...
Analyst                                                                            Pablo Mañueco Galindo                  ...
Analyst                                                                            Pablo Mañueco Galindo                  ...
Analyst                                                                                               Pablo Mañueco Galind...
Analyst                                                                                                   Pablo Mañueco Ga...
Analyst                                                                                                Pablo Mañueco Galin...
Analyst                                                                                              Pablo Mañueco Galindo...
Analyst                                                                                             Pablo Mañueco Galindo ...
Analyst                                                                               Pablo Mañueco Galindo               ...
Analyst                                                                        Pablo Mañueco Galindo                      ...
Analyst                                                                               Pablo Mañueco Galindo               ...
Analyst                                                                                                 Pablo Mañueco Gali...
Analyst                                                                            Pablo Mañueco Galindo                  ...
Analyst                                                                              Pablo Mañueco Galindo                ...
Analyst                                                                                   Pablo Mañueco Galindo           ...
Analyst                                                                         Pablo Mañueco Galindo                     ...
Analyst                                                                                               Pablo Mañueco Galind...
Analyst                                                                                                    Pablo Mañueco G...
Analyst                                                                            Pablo Mañueco Galindo                  ...
Analyst                                                                           Pablo Mañueco Galindo                   ...
Analyst                                                                                            Pablo Mañueco Galindo  ...
CREATED BY:Pablo Mañueco GalindoThis report has been prepared by Pablo Mañueco Galindo, Partner of Analistas Financieros I...
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GOWEX coverage analysis by AFI - Oct 2012


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GOWEX (GOW-MAB, ALGOW-NYSE Euronext) it’s been 13 years operating in the Telecommunication sector and it’s currently leading the creation of WiFi Cities offering Free & Premium WiFi connectivity in streets and transportation. The company is now exporting the innovative business models in many cities in Europe, Latin America, Asia and in emerging countries.

In 2010, it has become the first and only Spanish SMB to make a “dual listing”, publicly traded in the MAB (GOW) and the NYSE-Euronext (ALGOW). The company's total revenue in 2011 amounted to 66,7 million euros. On July 2011 GOWEX subscribed a 7 million € capital increase with a 100 % over-demand (doubling expectations).

With offices in Madrid, Burgos, Buenos Aires, London, San José (Costa Rica), Paris and Shanghai, GOWEX develops a sustainable business model in their WiFi networks, based in efficient and technical quality of their patented platforms: The Roaming platform, which allows users to connect freely in all the cities, the Geolocalization Content and Advertisement platform, which provides a financing business through marketing and advertisement agreements.

In 2011, GOWEX joined the Wireless Broadband Alliance and received a prize for the “Best Web Company” in the Internet Day

In February 2012, Jenaro Garcia GOWEX CEO, received the “Entrepreneur of the Year Award” by Ernst & Young in the category of Innovation

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GOWEX coverage analysis by AFI - Oct 2012

  1. 1. Analyst Pablo Mañueco Galindo Analistas Financieros Internacionales GOWEX is a company which operates in the telecommunications sector, and BASIC LISTING DATA which has a position as a leading company in the Spanish market in installing and (22nd October 2012) TICKER GOW managing networks for WiFi access points. GOWEX is listed on the Alternative PRICE (EUR) 11.23 Stock Market (Mercado Alternativo Bursátil, MAB) of the Spanish Stock Market. SECTOR TELECOMMUNICATIONS No. OF SHARES ISSUED The company has focused its business model towards the Wireless division, which 12,934,268 (No. SHARES) accounts for 86% of the companys gross margin, as against the MARKET CAP. (EUR) 143,823,609 telecommunications market, which was the companys original core business. FREE FLOAT (%) 25.3% AVERAGE DAILY VOLUME 2012 11,047 (No. SHARES) GOWEX is a pioneering company, which so far does not face significant MAX / MIN PRICE 12 MONTHS competition in Spain, and whose international presence is reporting gradual 11.30 / 4.33 (EUR) growth. The main threat to the company is the possibility of major operators COMPARATIVE PERFORMANCE (GOWEX vs. IBEX 35) entering the market. 3M 6M 12M YTD Since 2008, the company has reported recurrent and growing profits at all levels of ABSOLUTE 88.0% 84.0% 129.2% 135.9% RELATIVE 68.7% 69.5% 139.3% 144.7% the Income Statement, and reported important growth in 2011 (+34% in revenue, +76% in EBITDA and +41% in net profit). Business margins and profit indicators GOWEX vs. IBEX 35 since start of trading are high. This positive trend has continued in the first half of 2012, with heavy growth in Gowex vs. IBEX 35 since start of both revenue (+60% against the first half of 2011) and in profits (+62% in EBITDA trading and +70% in net profit). GOWEX commands a healthy financial position, with low debt (€12.0 million) and high liquidity (€31.4 million), so that the net cash position stands at €19.4 million. AFI has carried out a valuation of GOWEX which shows a value of €12.55/ share, KEY FINANCIAL FIGURES (EUR) 2008 2009 2010 2011 meaning that the target price has risen 22% compared to our report in May SALES 24,191,422 35,179,613 49,640,989 66,697,902 2012, offering upside potential of 12% from the current share price. However, EBITDA 2,307,690 5,518,174 9,371,277 16,517,015 our outlook is less favourable than that published by the company. The implicit NET PROFIT 862,191 2,876,561 5,130,355 7,220,340 ROE 9.1% 23.0% 22.4% 20.5% ratios in the valuation (EV/ EBITDA 2012e x6.3 and PER 2012e x10.1) are DATA PER SHARE (EUR) compelling, in our opinion, for a company with GOWEXs growth potential. 2009 2010 2011 DIVIDEND PER SHARE 0.0000 0.0784 0.0783 In short, we believe that GOWEX is an attractive investment opportunity, EARNINGS PER SHARE 0.29 0.45 0.57 given its appropriate strategic positioning, its recurrent capacity to generate cash VALUATION RATIOS (x / %) 2010 2011 2012e and the liquidity available to finance its growth process at international level. PER (PRICE/ EARNINGS) 13.5 x 10.1 x 10.1 x EV/ EBITDA (MARKET CAP. + The valuation of €12.55/ share is the central scenario of a broad range of NET DEBT/ EBITDA) 3.1 x 2.6 x 6.3 x prices, considering the volatility which could affect GOWEXs results due to PRICE/ BOOK VALUE 3.0 x 2.1 x 3.2 x DIVIDEND YIELD 1.54% 3.31% 0.70% the nature of its business. Over the next few months, the share price could Source: Factset be affected by M&A transactions, relating to the rights issue under way and its positioning in the American market through the issue of ADRs.OCTOBER 2012 - ANALYSIS OF GOWEX 1
  2. 2. Analyst Pablo Mañueco Galindo Analistas Financieros Internacionales CONTENTS Description of the company ..................................................................................................................................................... 3 Analysis of GOWEX business ................................................................................................................................................. 4 Gowex Wireless .......................................................................................................................................................................... 4 Gowex Telecom .......................................................................................................................................................................... 7 SWOT ................................................................................................................................................................................... 10 Economic-financial analysis .................................................................................................................................................. 11 Profit and loss account ............................................................................................................................................................. 11 Profit and loss account 2008 - 1H 2012 ................................................................................................................................ 11 Balance sheet ........................................................................................................................................................................... 14 Balance sheet 2010- 1H 2012 ............................................................................................................................................... 14 Valuation ............................................................................................................................................................................... 17 Valuation assumption ............................................................................................................................................................... 17 Result of valuation .................................................................................................................................................................... 21 VALUATION .......................................................................................................................................................................... 21OCTOBER 2012 - ANALYSIS OF GOWEX 2
  3. 3. Analyst Pablo Mañueco Galindo Analistas Financieros Internacionales DESCRIPTION OF THE COMPANYGOWEX is a company which operates in the telecommunications sector, whichspecialises in the neutral management of infrastructures and offering carrierinterconnection services, and which has taken up a position as a leading company in SHAREHOLDERSthe Spanish market in the installation and management of WiFi access points. Gowex SHAREHOLDER No. SHARES % JENARO GARCÍA MARTÍN 7,718,285 59.7%also manages a wireless Roaming platform, and exploits the geolocalised advertising REST OF MANAGEMENT 1,377,176 10.6%business over Wireless networks, which consists of sending each client advertising TEAMcorresponding to the location where he/she is to be found. SHIN HEE CHO 572,649 4.4% FREE-FLOAT 3,266,158 2.,3% 12,934,268 100.0%The company was incorporated in 1999 under the name of Iber Band Exchange, S.A, Source: Factsetand changed its name to its current one in 2007. GOWEXs shareholders consistmainly of Jenaro García (CEO) and the rest of the management team, who control70.3% of the group, with a market free-float of 25.3%. The 12.3% free-floatcorresponds to institutional investors. REVENUE AND EBITDA 2006-2011Jenaro García began his career in the financial institution FA Smith Barney. His Amounts in € Mnenterprising spirit has led him to work in the telecommunications sector.On 12 March 2010, the company joined the Alternative Stock Market (MaB), through Revenue EBITDAan Initial Public Offering in which it secured funds of € 6.0 million, with a floatationprice of €3.5 / share. On 15 June 2010, it also joined Alternext, the alternative Frenchmarket, which belongs to NYSE Euronext. In January 2012, GOWEX began trading Revenuecontinuously on the MaB.In 2011, the company posted consolidated revenue of € 66.7 million, and in the firstsix months of 2012 it has reported €41.0 million. Gross operating profit (EBITDA) Source: GOWEXamounted to €16.5 million in 2011, and at 30 June the figure stood at €10.6 million. In2011, net profit amounted to €7.2 million, and at 30 June it stood at €5.5 million.At 30 June 2012, the shareholders equity of GOWEX amounts to €40.1 million. Grossfinancial debt stands at €12.0 million, and cash and liquid assets at €31.4 million,which means the company has a positive net financial position of €19.4 million. BREAKDOWN OF GROSS MARGIN Jun-12 Amounts in %The company operates in two core businesses: GOWEX Wireless specialises in offering wireless telecommunications services. Gross Margin Specifically, it consists of Wifi network management and operation services, the Wireless wireless Roaming and 3G platform and 3G Offloading, and electronic advertising and geolocalised e-commerce of Wireless networks. GOWEX Telecom is responsible for managing and operating a commercial exchange platform of products and services of the B2B telecommunications market, and also for offering accessory services to companies. Gross Margin Telecom Source: GOWEX Gross Margin TelecomOCTOBER 2012 - ANALYSIS OF GOWEX 3
  4. 4. Analyst Pablo Mañueco Galindo Analistas Financieros Internacionales ANALYSIS OF GOWEX BUSINESSInitially, the company focused its activity on the Telecom business line. In recent years, in light of the growth potential in the Wirelesssector, the company has refocused its business, and reported significant growth in this division. At June 2012, 86% of gross marginwas produced by GOWEX Wireless and 14% by GOWEX Telecom.GOWEX WIRELESSThis division contains the three businesses which provide the company with the greatest growth: the Roaming platform and 3GOffloading, WiFi networks engineering and consulting services, and GOWEX Media and Mobile. As of June 2012, this division accountsfor 78% of consolidated revenue and 86% of gross margin.GOWEXs growth in this business will largely be leveraged through its alliance with a major carrier in the media sector with which theyhope to move into 300 large cities all over the world, within a timeframe of 3 years.Currently Google, in partnership with Boingo, has begun to develop the same business model as GOWEX Wireless in the city of SanFrancisco and in New York Airport, thus confirming the strength of GOWEX Wirelesss business model.Roaming Platform and 3G OffloadingDue to the exponential growth occurring in the wireless telecommunications market, GOWEX decided to refocus the companysstrategy, and reinforced this business line from 2004 on.The Roaming platform allows the different fixed, mobile and wireless operators to interconnect, sharing their infrastructures and accesspoints, and thus increasing the Internet cover area for their customers, both nationally and internationally. GOWEX charges f orconnections to the platform and for each of the transactions made.This is a low capital intensive model, with strong margins, as it is carried out through Internet and does not require physicalinterconnected circuits, reducing the investments required. The platform acts transparently and in a neutral way, without competing withcarriers, because it does not require a license and does not contact the final users or their customers.The platform has a similar structure which it offers wireless Internet service providers (WISPs). 106 carriers from different countriescurrently use the platform, creating a network with over 450,000 access points. This means that all the customers of these carriers arepotential consumers of the Roaming service supplied by GOWEX.The platform is also operated in 3G Offloading mode. 3G is one of the most commonly used technologies by mobiletelecommunications companies. Because of its intensive use for data connection by smartphone users, 3G networks are increasinglysaturated. Carriers are currently deploying a new generation technology, 4G, which increases the capacity of data transmission. This isa temporary solution, but does not resolve the problem in the mid and long term. The solution to the problem consists of using WiFinetworks, with two purposes: to relieve mobile networks so that they can continue to offer the voice service for which they weredesigned, and to permit the traffic of faster and higher quality data than the saturated 3G networks. Therefore, because the GOMEXWiFi network is a non-exclusive neutral network, the company is considering the possibility of other carriers using its network, charginga fee to use it, instead of deploying antennas on a massive scale (one for each carrier in each traffic light or lamppost).OCTOBER 2012 - ANALYSIS OF GOWEX 4
  5. 5. Analyst Pablo Mañueco Galindo Analistas Financieros InternacionalesBy this means all participants will benefit: Carriers can avert the collapse of their 3G networks and increase the depreciation periods of the costly investments they made to deploy 3G networks, delaying the rollout of the new 4G networks. They also give their users a higher quality service, by allowing them to connect to a network which is not saturated. Town councils prefer a single neutral network to be deployed which can be accessed by all carriers, thus preventing the environmental and visual impacts which would be caused by each carrier installing their own antenna network. GOWEX would increase its revenue by acting as an intermediary and charging an intermediation fee.GOWEX also allows users who are not customers of a member carrier to access the network, for which purpose it needs to open anaccount with GOWEX, with two options: free service, with limited connection speed, restriction to certain contents and publicity, and thePremium or payment service, allowing all the bandwidth to be used without advertising. The company has over 950,000 registeredusers under the two types of service.Revenues from the Roaming platform and 3G Offloading stem from: A one-off installation fee (not recurrent): charged to new customers who connect to the platform. Monthly subscription fees (recurrent): carriers make a variable monthly payment in accordance with their size, to maintain their connection to the platform and take advantage of the support services offered. Roaming fees (recurrent): for each Roaming transaction made between different carriers, GOWEX charges a fee. 3G Offloading fees (recurrent): fees for use of the network by carriers, to prevent saturation of their 3G networks.This business line accounts for 32% of revenue in the Wireless division.Engineering and consultingGOWEX offers consulting, installation and maintenance services for access points to WiFi networks. This line of business is gearedtowards all kinds of agents interested in developing a WiFi access point network, such as public authorities, public transpor tcompanies, universities or private companies.The company divides the process into three different parts: project design (consulting), development supervision (installation) andnetwork maintenance (management). In this regard, the company focuses on high value added activities, completely carrying out theconsulting phase, outsourcing the installation and management. For installation, the company has agreements with companies such asIndra or the Chinese company CRSCS, while physical maintenance is subcontracted to specialised companies.Engineering and consulting revenues stem from: Consulting and study fee following network installation (non-recurrent): the amount of these transactions depends on the size and complexity of the project in question. Revenue from execution of installation (non recurrent), the amount of which depends on the number of accesses and their term of development. These revenues are mainly billed by companies responsible for the physical installation; and GOWEX receives a small part for the technical project management. Network maintenance fees (recurrent): GOWEX receives an annual fee for network maintenance; the fee is estimated as a percentage of the initial installation payment. Remote maintenance via Internet is carried out by GOWEX, and repairs of physical facilities are subcontracted.GOWEX currently manages 32,000 access points, over 450,000 of which comprise its global network. In our opinion, the number ofaccess points is one of the key business variables. These access points are used by almost one million users.The company has positioned itself as a leader in consulting and management of WiFi municipal networks. Particularly importantprojects have been “La Vida WiFi” or “Mantente WiFi Ciudad” developed in Madrid, Malaga, Burgos, Avilés and Ávila, for creatingmunicipal WiFi networks.OCTOBER 2012 - ANALYSIS OF GOWEX 5
  6. 6. Analyst Pablo Mañueco Galindo Analistas Financieros InternacionalesThis business line accounts for 59% of revenue in the Wireless division.The patents which Gomex has registered for its technology and trade secret are the main forms of protection of industrial property. Thenetwork effect also gives the company a certain competitive advantage, but the fact that there are networks of networks which can beinterconnected, limits the impact of this kind of defence.GOWEX Media and GOWEX MobileGOWEX Media is a publicity content and geolocalised ecommerce platform, which allows GOWEX to take advantage of the number offinal users which use its network access points. This platform is used to make adverts according to the location of the final user, helpingcompanies to engage in geomarketing. This business line generates recurrent revenue.The geolocalised advertising platform currently operates 32,000 connection points managed by GOWEX, although the company isnegotiating that it be introduced in all members of the Roaming platform, sharing the benefits produced.This area of the company also carries out street-marketing events combined with virtual marketing over the platform.GOWEX Mobile is the subsidiary of GOWEX created to offer innovative services using mobile devices, such as smartphones or tablets.The services provided include the following: Development of mobile applications: GOWEX can develop tailor-made applications for all operating systems for any client. Mobile ticketing: the user can acquire and receive tickets for an event in his/her mobile, storing them in a digital portfolio (e- wallet), and presenting them in the entrance to the event, without having to print them out on paper. Mobile couponing: sending electronic coupons with customised discounts, which are stored in a special section for these titles, without needing to print them. Mobile loyalty cards: GOWEX offers the possibility of making loyalty or club membership cards without needing to carry the plastic card, using the e-wallet. Segmented communication to mobiles: a "push" channel with messages segmented in accordance with preferences and behaviour patterns. Communication is established based on the clients geolocalisation.This business line accounts for 9% of revenue in the Wireless division.Although the WiFi global platform has the equivalent of 450,000 access points, GOWEX manages only 32,000; the rest are managedby carriers associated with GOMEX, significantly reducing the cost of creating a new network, but also making the company dependenton these associations.Due to the rapid development of WiFi networks in Spanish municipalities, GOWEX has been able to reach a critical volume in Spain,allowing it to generate a network effect. Cities with WiFi networks managed by GOWEX worldwide represent over 70 million inhabitantsthereby making them potential users of its different platforms. This makes GOWEX sufficiently attractive from a commercial standpointfor new carriers to join its WiFi networks, and for its geolocalised advertising network to enough reach for companies to consideradvertising in it.National and international municipal concessions for operation of WiFi networks developed by GOWEX last 3-5 years in the major citiesand between 5-10 years for smaller-sized cities. Therefore, although GOWEX has reached the critical mass of users in Spain to beable to create a sufficiently attractive network effect, the ability to maintain this effect will largely depend on renewing the managementcontracts these municipalities have once they are completed. The company does not disclose the exact dates on when each contractwith public authorities expires, so it is not possible to accurately estimate until when the company has this recurrent source of income.Part of GOWEXs revenue stems from Spanish town councils. According to the information provided by the company, there have beenno defaults, but it is important to note that this is a risk that the company could face in the future, due to the limited solvency of many ofthese councils.OCTOBER 2012 - ANALYSIS OF GOWEX 6
  7. 7. Analyst Pablo Mañueco Galindo Analistas Financieros InternacionalesGOMEXs international expansion is being helped by the large amount of experience gained with developing WiFi networks in Spanishmunicipalities and the associated positive impact on its reputation. The company is developing projects in the South American market,where it has obtained particularly important contracts for installing WiFi access points in Buenos Aires, Costa Rica and Panama. Thecompany has also signed a strategic alliance with CRSCS, the Chinese company, for developing joint projects in China. The firstproject arising from the agreement has been the installation of WiFi in the high speed railway lines between Shanghai and Peking.GOWEX is in the process of deploying its network in the city of Nanjing, the first Chinese city in its portfolio, where it is working withlocal carriers.Furthermore, in the first half of 2012, GOWEX secured the concession to install the free WiFi network in Paris public transport system,which will begin to operate next year, and it reached an agreement with SNCF (Sociedad Nacional de Ferrocarriles Franceses) t o offerfree WiFi in its railway stations.In the first six months of 2012, the company also concluded a contract with Skype, allowing Skype users to connect to Internet usingthe WiFi networks provided by GOWEX.GOWEX includes the aforementioned services in its wireless business within the GOWEX Wireless Smart Cities 2.0 strategicconceptGOWEX offers cities the possibility of creating Wireless Smart Cities offering free wireless Internet to the general public, and improvingthe services offered via Wireless connectivity. The Smart City is a tool which allows more efficient systems to be created for electronicadministration, better transport and good communication between members of the public, improved energy management systems,more efficient security systems, better public and private transport infrastructures, and many other applications.A Smart City provides the following benefits or improvements: The Wireless Roaming and 3G Offloading platform allowing municipal residents to access the dozens of WiFi cities in the Wireless Smart Cities system free of charge, thereby promoting the city as a tourism destination and also public mobility. Citizens will also be able to access the networks of the carriers who are interconnected to that platform, with access to countries in the five continents. The proprietary content and publicity geolocalisation platform, enabling contents to be segmented in accordance with the different WiFi zones (Smart Zones) where citizens can connect at any time. This provides a business model which generates recurrent income through the sale of advertising services and geolocalised contents. The neutrality of the technological solution and GOWEXs positioning, in comparison with other carriers, means data transmission networks on radio technologies in the city can be optimised. By this means, the use of antennas can be unified, dramatically reducing the investment needed as well as visual and acoustic pollution of these infrastructures in public thoroughfares. The use of only one antenna on each piece of street furniture by several carriers, given that GOWEX has the necessary technology and its position is one of a neutral operator. Integration with different e-Goverment or e-Administration systemsThe GOWEX Smart Cities 2.0 platform (patent pending) is a set of systems and sub-systems designed to facilitate implementation andintegration of all types of Smart Services within an innovative Smart City environment.GOWEX TELECOMGOWEX Telecom is the line of business on which the company focused its operations at the beginning. It consists of management andoperation of a platform or neutral pool of various products and services of the telecommunications market called “Iber-X”, as well asoffering complementary services.The exchange takes place between different suppliers (operators, carriers) and sources of demand (other carriers, ISP, ASP andcompanies in the telecommunications sector), which largely buy and sell Internet bandwidth, communications lines, voice services(traditional and VoIP) or virtual private networks.OCTOBER 2012 - ANALYSIS OF GOWEX 7
  8. 8. Analyst Pablo Mañueco Galindo Analistas Financieros InternacionalesThe platform offers the following B2B connectivity solutions and services, inter alia: Bandwidth: allows operators to buy and sell bandwidth, with the possibility of selecting the quality of bandwidth to meet carriers’ specific requirements. Point-to-point circuits: allows data transmission circuits to be bought and sold, thus making it possible to exchange private data. Virtual private networks (VPN): offers a consulting service for creating optimum VPN networks, by aggregating and organising different carriers VPN components marketed through the Telecommunications Market. This type of VPN allows the local area network of a company to be extended to a public network, such as Internet. Management and monitoring panels: provides a management and monitoring system called Telecom Service Manager (TSM), which allows carriers to access a transaction prices index or to obtain information about the amount and quality of available bandwidth, inter alia, also enabling multi-criteria searches to be made (origin of circuit, available distance, capacity or price). Remote access VPN network control panel: allows clients to manage their remote VPN network autonomously. Balancing and settlement of transactions: it has developed a transaction system between carriers so that all transactions can be reserved and billed and for the payment to be made electronically.GOWEX Telecom also offers complementary services to its clients, such as technical assistance, infrastructure (housing) or advisoryservices in areas such as strategic planning, international growth or the regulatory environment.On the Iber-X platform, Gowex is the only neutral carrier in the Spanish telecommunications market, acting as a hub between all theinterconnected agents and centralising transactions more efficiently. By this means, it enables members using Iber-X to carry outtransactions in real time, allowing them to save costs, resources and time compared with traditional bilateral agreements. The platformalso enables the company to obtain additional revenues from carriers through by selling its idle capacity in a flexible way.Revenues of this division stem mainly from: Members subscription fee (recurrent)): the platform clients pay a monthly subscription fee for access to the platform, and to be able to benefit from the different services provided by the company. Fees on transactions between members (recurrent)): GOWEX receives a fee for each sale transaction carried out on the platform, being defined as a percentage on the nominal amount of the transaction.OCTOBER 2012 - ANALYSIS OF GOWEX 8
  9. 9. Analyst Pablo Mañueco Galindo Analistas Financieros Internacionales Installation of new members (non recurrent): the company charges new clients for installation and adjusting the connection to the platform.Some of the similar existing platforms in Europe were acquired by large telecommunications companies. For example, Trading ComEurope, which was bought by Neuf Cegetel in 2007, or US Arbinet in the US, bought by Primus Telecom in 2010.The company boasts a customer base of over 90 entities, including telecommunications carriers (Level3, Comcast, IPSA) andcompanies such as Acciona, Telefónica, El Corte Inglés, Unión Fenosa and Suzuki.In recent years, this company has gradually become less relevant within the company due to the significant growth in the Wirelessdivision. As of June 2012, GOMEX Telecom accounted for 22% of revenue and 14% of gross margin.GOWEXs peersGOMEX operates in a very particular way, and there are no peers which are perfectly comparable, although some of these competitorsare integrated in more diversified companies.However, integrators offer one of the alternatives to the Roaming Wireless business: these companies aggregate carriers’ networks tooffer Wireless services. Boingo and iPass, which are both US companies, are examples. Boingo: a company founded in 2001 in the US, which manages 500,000 hotspots around the world, in leading airports, hotel chains, cafés or conference centres, inter alia, through which clients can access Internet. iPass: A company founded in 1996 in the United States, providing mobile services to companies, with a WiFi network comprising over 750,000 hotspots in 120 countries.OCTOBER 2012 - ANALYSIS OF GOWEX 9
  10. 10. Analyst Pablo Mañueco Galindo Analistas Financieros Internacionales SWOT STRENGTHS WEAKNESSES  Low-intensive capital growth  GOWEX only owns part of its network of access points  Generation of recurrent profits at all levels of the income  Dependence on external suppliers for managing infrastructure statement in new markets  High business margins  Telecom Division with mature business  Solid financial position  Part of revenue stems from Spanish Public Administration  Leader in the Spanish and South American market  Stable relations with local Administrations  Management experience to reproduce the growth model at international level  65% of revenues are recurrent, and international revenue accounts for 51% of the total at June 2012 OPPORTUNITIES THREATS  It has high liquidity to be able to engage in new investments  Entry of new competitors on the market, particularly mobile  Strong international development potential telephony carriers which might be able to develop WiFi access point networks to offset the saturation in mobile networks  Exponential growth in smart-phones implies an increase in the volume of data exchange and to saturation in mobile networks  Need to negotiate migration to EAP-SIM cards with teleco carriers to offer transparent WiFi-3GRoaming solutions  Possibility of growth through business acquisitions  The capital investment business model generates high returns  Risk of losing municipal network management concessions and the necessary volume to create a network effect  Leveraging growth in new cities via alliances with carriers in media sector  New drastic reduction of prices in the online publicity marketOCTOBER 2012 - ANALYSIS OF GOWEX 10
  11. 11. Analyst Pablo Mañueco Galindo Analistas Financieros Internacionales ECONOMIC-FINANCIAL ANALYSISPROFIT AND LOSS ACCOUNT PROFIT AND LOSS ACCOUNT 2008 - 1H 2012 Amount in thousands of € 2008 2009 200 2011 Jun-12 Net turnover 24,191 35,180 49,641 66,698 40,985 % growth 2.6% 45.4% 41.1% 34.4% 59.8% Capitalisation of expenses 70 876 999 667 0 Operating grants 231 22 255 479 0 Other operating income 49 0 40 113 158 Supplies (18,547) (24,478) (31,118) (36,943) (23,396) Personnel expenses (902) (995) (1,549) (2,152) (1,367) Other Operating Expenses (3,423) (5,337) (8,897) (12,344) (8,306) EBITDA 2,308 5,518 9,371 16,517 8,074 % growth 107.4% 139.1% 69.8% 76.3% 61.8% % EBITDA margin 9.5% 15.7% 18.9% 24.8% 19.7% Depreciation (760) (1,035) (1,563) (3,419) (2,992) Provisions (285) (901) (1,552) (3,594) 2,556 EBIT 1,262 3,582 6,256 9,504 7,638 % growth 530.0% 183.8% 74.7% 51.9% 67.8% % EBIT margin 5.2% 10.2% 12.6% 14.2% 18.6% Financial income (24) (80) 53 131 161 Extraordinary results (104) 2 0 0 0 Profit before tax 1,133 3,503 6,309 9,635 7,799 Corporation tax (270) (627) (1,179) (2,415) (2,342) Post-tax profit 863 2,877 5,130 7,220 5,458 % growth -25690.8% 233.4% 78.4% 40.7% 69.9% % net margin 3.6% 8.2% 10.3% 10.8% 13.3% Source: GOWEXThere has been significant growth in GOWEXs revenue in recent years, largely WIRELESS VS. TELECOM 2008-2012underpinned by the growth in the Wireless business. Amounts in € MnIn 2011, consolidated revenue amounted to €66.7 million, 34% higher than 2010. At Wireless Revenues Telecom Revenues30 June 2012, consolidated revenue amounted to €41.0 million, up 60% against thefirst half of 2011. €31.9 million of this revenue stemmed from GOWEX Wireless (78%)and €9.1 million from GOWEX Telecom (22%). Gross Margin Telecom Gross Margin TelecomIn the Wireless division, 59% of revenue stems from engineering and consultingservices, 32% from the Roaming platform and 3G Offloading, and the remaining 9%from GOWEX Mobile and GOWEX Media. 51% of revenue for the first half of 2012 is Source: GOWEXfrom outside Spain and 65% of revenue is recurrent.OCTOBER 2012 - ANALYSIS OF GOWEX 11
  12. 12. Analyst Pablo Mañueco Galindo Analistas Financieros InternacionalesResults reported by GOWEX in the first half of the year outstripped estimates. Revenue was higher than initially estimated, not becausemore cities than expected were obtained (10 cities in the first half), but because it has made a greater return on each of them, due tothe network effect generated through having more users with each city, thereby creating a higher quality network. In this regard, wehave adjusted our revenue estimates for the 2012-2017 period, assuming a higher return for cities.In the GOWEX Telecom division, since 2010 the company has been modifying the way revenue and expenses from mereintermediation are registered; this process is expected to be completed in 2013.GOWEX Telecoms activity basically corresponds to the intermediation business in the purchase and sale of wholesaletelecommunications services. Since 2010, they have ceased to record part of the expenses corresponding to the purchase of servicesfor sale, and revenue arising from the aforesaid sales, for the same amount, on the income statement. When the accounting treatmenthas been fully modified (2013), only fees charged for intermediation services and revenue showing value added for the company, andexpenses corresponding to the cost of sale of these value added services shall be registered on the income statement.The point of this measure is to adjust the companys accounting to the real situation of intermediation in the purchase and s ale ofwholesale telecommunications capacity services.Consequently, the income statement has gradually begun to show a reduction in income from sales and a fall in expenses for th e sameamount, which will continue to be recorded until the modification process for the accounting treatment in this division is completed in2012. However, gross margin, in absolute terms, has not been affected. TELECOM REVENUE 2008-2011 Amounts in € Mn Telecom Revenues if revenue and expenses had not stopped being registered Telecom Revenues Gross Margin Telecom Gross Margin Telecom Source: GOWEXThe proportion of procurement over income has gradually fallen in recent years, and in June 2012 gross margin stood at €17.6 million,43% of revenue and tantamount to growth of 64% against the following year, above the increase recorded in revenue.Personnel expenses represent a low weight of revenue (3.2% in 2011 and 3.3% at June 2012), although the company estimates that itwill increase in future years, due to the companys growth plan. The other operating expenses (R&D expenses, professional services,advertising or maintenance, inter alia) account for 18%-20% of the companys revenue (18.5% in 2011 and 20.3% at June 2012).Gross operating profit (EBITDA) has grown significantly in recent years, due to the increase in revenue and the improvement inoperating margins, and at 2011 year end it stood at €16.5 million (EBITDA/Sales margin of 24.8%) and at June 2012 at €8.1 million(EBITDA/Sales margin of 19.7%). The growth in EBITDA margin in recent years has also been underpinned by the change inaccounting of Telecom sales.OCTOBER 2012 - ANALYSIS OF GOWEX 12
  13. 13. Analyst Pablo Mañueco Galindo Analistas Financieros InternacionalesThe level of depreciation of the company has increased insofar as the new investments have come into operation, amounting to €3.4million in 2011 and to €3.0 million at June 2012. In the first half of the year, investment in fixed assets has been higher than estimated,and thus the estimates for the 2012-2017 period have been revised upward.Since 2008, the company has allocated a provision for the impairment of commercial loans; in 2012, this provision was reversed by€2.6 million.Net operating profit (EBIT) grew strongly since 2008, reaching €9.5 million in 2011, 14.2% of sales. At June 2012, EBIT stood at €7.6million, 18.6% of revenues. EBITDA 2008-2012 EBIT 2008-2012 Amounts in € Mn Amounts in € Mn Source: GOWEX Source: GOWEXThe company has a net cash position, and thus obtains a positive financial income, which at June 2012 amounted to €160,998.In 2011, pre-tax profit amounted to €9.6 million, and net profit to €7.2 million, tantamount to an effective tax rate of 25%. In 2011, netmargin amounted to 10.8%. As of June 2012, pre-tax profit amounted to €7.8 million, up 70% against the figure reported in the first halfof 2011.OCTOBER 2012 - ANALYSIS OF GOWEX 13
  14. 14. Analyst Pablo Mañueco Galindo Analistas Financieros InternacionalesBALANCE SHEET BALANCE SHEET 2010- 1H 2012Amount in thousands of € 2010 2011 Jun12 2010 2011 Jun12 Shareholders equity 22,918 35,141 40,084 Parent company shareholders equity 22,918 35,141 40,067 Equity 22,111 34,600 39,661 Share capital 57 64 647Non-current assets 8,332 15,998 22,897 Reserves 16,883 27,829 34,631Intangible fixed assets 2,041 2,001 1,676 Treasury stock (478) (1,095) (1,045)Tangible fixed assets 5,769 13,285 20,804 Result of the financial year 5,130 7,220 5,428Long term financial investments 59 349 414 Adjustments from change of value 0 4 (2)Assets from deferred tax 463 363 3 Subsidies 807 536 408 Minority interests 0 0 17 Non-current liabilities 4,804 8,980 11,243 Long-term debts 3,346 6,216 8,875 Long term debts with credit entities 2,977 2,075 5,042 Long term creditors, financial leasing 91 0 0Current assets 41,173 41,294 42,351 Other long-term financial liabilities 277 4,141 3,833Stocks 0 53 66 Liabilities from deferred tax 1,458 2,764 2,369Trade debtors and other accounts 25,932 9,893 10,757receivableShort-term financial investments 11,076 28,342 26,277 Current liabilities 21,784 13,171 13,922Current prepayments/accrued income 2 34 58 Short-term debts 2,628 2,948 3,170Cash and other liquid assets 4,163 2,971 5,192 Short term debts with credit entities 1,102 807 553 Short term creditors, financial leasing 109 91 36 Other short-term financial liabilities 1,417 2,050 2,580 Trade creditors and other accounts 19,156 10,190 10,717 payable Current prepayment/accrued income 0 33 35ASSETS 49,505 57,292 65,248 LIABILITIES 49,505 57,292 65,248Source: GOWEXGOMEXs total assets at June 2012 amounted to €65.2 million, SHORT TERM FINANCIAL INVESTMENTS AND CASH65% of which corresponds to current assets (€42.4 million) and Amount in thousands of € Jun-1235% to non-current assets (€22.9 million). Fixed-term deposits 24,853 Guarantees and Deposits 940The main item of non-current assets is tangible assets, which Mutual funds 300amounted to €20.8 million at June 2012. This basically refers to Other financial assets 149technical installations and IT equipment. CAM participating shares 34 Cash 5,192The main items of current assets are short term financial Short-term financial investments and cash 31,470investments and cash, which total €31.5 million, and which Source: Gowexjointly account for 74% of current assets.OCTOBER 2012 - ANALYSIS OF GOWEX 14
  15. 15. Analyst Pablo Mañueco Galindo Analistas Financieros InternacionalesThese liquid assets correspond to cash generated by the different projects and which has yet to be invested.Another relatively important item of current assets is the trade debtors account, which amounts to €10.7 million and which ac counts for25.4% of current assets.At June 2012, the company had client accounts (mainly Public Authorities) amounting to €12.9 million, €4.6 million of which wereallocated to provisions for potential insolvencies. According to the company, GOWEX has not yet had any problem in collecting billsfrom Spanish public authorities, and this is proved by the reversal of the provision of €2.6 million carried out in the first half of 2012 (theprovision was made in 2011).The company also has other credits with the Public Administration for €2.2 million, including debts for VAT, inter alia. TRADE DEBTORS AND OTHER ACCOUNTS RECEIVABLE Amount in thousands of € Jun-12 Clients 12,855 Provision for bad debts (4,551) Credits with Public Administrations 2,185 Sundry debtors 268 Commercial debtors and other accounts receivable 10,757 Source: GOWEXGOWEX has a financial position with a low level of leverage, with equity representing approximately 60% of the balance sheet. Thecompany carried out two rights issues in 2010 and 2011, and secured €6.0 million and €6.9 million, respectively, used to finance thecompanys organic and inorganic growth in future years. The company is still planning to invest a relevant part of the funds secured(pending).In 2011, the company paid €1.0 million in dividends, charged to the 2010 financial year. According to information provided by thecompany, GOMEX expects to be able to maintain the dividend distribution policy.In the order of the day of the Shareholders Meeting to be held on 5 November 2012, the company will consider carrying out anadditional rights issue, through which the company expects to gather more funds to be able to carry out its business plan. The companyalso plans to ask the SEC for it to issue ADR (American Depositary Receipts), in order to raise its profile in the United States.GOWEX has 127,179 own shares in treasury stock, as a result of transactions used to provide liquidity. The companys suppliers ofliquidity are Bankia Bolsa (MaB) and Aurel BGC (Alternext).The company has gross financial debt of €12.0 million. As it has cash and short term financial investments of €31.4 million, it has a netcash position of €19.4 million.OCTOBER 2012 - ANALYSIS OF GOWEX 15
  16. 16. Analyst Pablo Mañueco Galindo Analistas Financieros Internacionales NET FINANCIAL POSITION Amount in thousands of € Jun-12 Long-term debts 8,875 Short-term debts 3,170 Gross financial debt 12,044 Cash and other equivalent liquid assets + short term 31,435 financial investments Net financial position 19,391 Source: GOWEXOCTOBER 2012 - ANALYSIS OF GOWEX 16
  17. 17. Analyst Pablo Mañueco Galindo Analistas Financieros Internacionales VALUATIONThe valuation methodology used has been Discount Cash Flow (DFC), based on the estimates for operating free cash flow for the2012-2017 period.VALUATION ASSUMPTIONThe Reduced Expansion Document (DAR) drawn up by the company in June 2011 contained estimates for the 2011 and 2012 financialyears, which have been fulfilled in 2011 and we have used as guidance for preparing estimates for 2012-2017.RevenueWe have estimated GOMEXs revenues for the 2012-2017 period, differentiating by business lines: GOWEX Wireless: At June 2012, GOWEX operates its networks in 60 cities. We have estimated the revenues using the assumption that the company will have reached 142 cities by 2017 and that the number of cities will be maintained from that point on. Based on our estimates, the projected revenue figure for 2012 accounts for 70% of revenue projected by the company in the DAR. These estimates are also more conservative than the companys current estimates, which indicate that it expects to reach 300 cities over a period of 3 years. GOWEX Telecom: We have estimated revenue by carrying out a straight-line annualisation of those obtained to June 2012 and have assumed that they will remain stable during the projected period (zero growth). GOWEX REVENUES 2011-2017 Amount in thousands of € 2011 2012e 2013e 2014e 2015e 2016e 2017e Wireless Income 46,529 75,330 96,251 111,766 128,408 145,444 163,110 % growth 75.0% 61.9% 27.8% 16.1% 14.9% 13.3% 12.1% Telecom Revenue 20,169 18,145 18,145 18,145 18,145 18,145 18,145 growth -12.4% -10.0% 0.0% 0.0% 0.0% 0.0% 0.0% Total revenues 66,698 93,475 114,395 129,910 146,553 163,588 181,254 Source: AFIWe assume that all the projected revenues generate receivables, so we do not estimate provisions on potentially unpaid com mercialloans.CostsWe have estimated procurement costs for the 2012-2017 period, differentiating by business lines: GOWEX Wireless: The weight of procurement on revenue entered in the DAR has been maintained, as it has been fulfilled in 2011 and at June 2012. GOWEX Telecom: We have maintained the weight of average procurements on revenue, obtained between 2011 and June 2012.OCTOBER 2012 - ANALYSIS OF GOWEX 17
  18. 18. Analyst Pablo Mañueco Galindo Analistas Financieros Internacionales GOMEX PROCUREMENT 2011-2017 Amount in thousands of € 2011 2012e 2013e 2014e 2015e 2016e 2017e Wireless Procurement 22,633 39,213 50,103 58,179 66,842 75,710 84,906 % of Wireless Income 48.6% 52.1% 52.1% 52.1% 52.1% 52.1% 52.1% Telecom Procurement 14,310 13,102 13,102 13,102 13,102 13,102 13,102 % Telecom revenue 71.0% 72.2% 72.2% 72.2% 72.2% 72.2% 72.2% Source: AFIFor the rest of operating costs the weights of gross margin reported for the company in 2011 have been maintained, which impliesassuming that the company will have to reinforce its costs structure in line with the increase in gross margin. GOWEX OPERATING EXPENSES 2011-2017 Amount in thousands of € 2011 2012e 2013e 2014e 2015e 2016e 2017e Personnel expenses 2,152 2,964 3,686 4,221 4,796 5,384 5,994 % of total gross margin 7.2% 7.2% 7.2% 7.2% 7.2% 7.2% 7.2% Other operating expenses 11,085 15,353 19,094 21,869 24,845 27,892 31,051 % of total gross margin 37.3% 37.3% 37.3% 37.3% 37.3% 37.3% 37.3% Source: AFIInvestment in fixed assets (Capex)We have estimated investment in fixed assets as a percentage of sales, assuming that the company will have to increase isexpenditure in order to meet its future revenue estimates. Estimated investments in fixed assets were as follows: GOWEX CAPEX 2011-2017 Amount in thousands of € 2011 2012e 2013e 2014e 2015e 2016e 2017e Intangible fixed assets capex 883 1,869 2,288 2,598 2,931 3,272 3,625 Tangible assets capex 9,777 14,956 14,871 12,991 8,793 6,544 3,625 Total Capex 10,660 16,825 17,159 15,589 11,724 9,815 7,250 Source: AFIInvestments in tangible fixed assets correspond to growth in the platform and the expansion of WiFi networks. Investments in intangiblefixed assets correspond to capitalisations of research and development expenses.We have assumed that these investments will be depreciated over a 10-year period, on a straight-line basis.Investment in working capitalWe have estimated investment in working capital, taking into account the items of Trade debtors in current assets and Trade creditorsin current liabilities, applying average collection and payment periods in accordance with those historically registered by t he company.Estimated investments in working capital were as follows:OCTOBER 2012 - ANALYSIS OF GOWEX 18
  19. 19. Analyst Pablo Mañueco Galindo Analistas Financieros Internacionales GOMEX INVESTMENT IN WORKING CAPITAL 2011-2017 Amount in thousands of € 2011 2012e 2013e 2014e 2015e 2016e 2017e Trade debtors 17,001 23,826 29,158 33,113 37,355 41,697 46,200 Trade creditors 10,190 14,357 17,461 19,763 22,233 24,761 27,382 Working capital 6,810 9,469 11,697 13,349 15,122 16,936 18,818 Investment in Working capital 2,658 2,228 1,652 1,772 1,814 1,881 Source: AFITax RateWe have applied a 25% rate of tax during the explicit projection period, in line with that recorded in 2011, and reflecting the bonusesfrom which the company benefits. To calculate perpetual growth, we have applied a tax rate of 30%.We subtract the deferred tax liabilities existing at June 2012, for the sum of €2.4 million, as the lower value of the equity of GOMEX.Cash flows projection CASH FLOWS PROJECTION 2011-2017 Amount in thousands of € 2011 2012e 2013e 2014e 2015e 2016e 2017e Revenue 66,698 93,475 114,395 129,910 146,553 163,588 181,254 % growth 34.4% 40.1% 22.4% 13.6% 12.8% 11.6% 10.8% Procurement (36,943) (52,315) (63,205) (71,281) (79,944) (88,812) (98,008) % of revenue 55.4% 56.0% 55.3% 54.9% 54.5% 54.3% 54.1% Gross margin 29,755 41,160 51,191 58,629 66,609 74,777 83,247 % growth 60.6% 38.3% 24.4% 14.5% 13.6% 12.3% 11.3% Personnel expenses (2,152) (2,964) (3,686) (4,221) (4,796) (5,384) (5,994) % of revenue 7.2% 7.2% 7.2% 7.2% 7.2% 7.2% 7.2% Other operating expenses (11,085) (15,353) (19,094) (21,869) (24,845) (27,892) (31,051) % of revenue 37.3% 37.3% 37.3% 37.3% 37.3% 37.3% 37.3% EBITDA 16,517 22,844 28,411 32,539 36,968 41,501 46,202 % growth 76.3% 38.3% 24.4% 14.5% 13.6% 12.3% 11.3% % EBITDA margin 24.8% 24.4% 24.8% 25.0% 25.2% 25.4% 25.5% Depreciation (3,419) (4,230) (5,946) (7,505) (8,678) (9,659) (10,384) Provisions (3,594) 2,556 0 0 0 0 0 EBIT 9,504 21,170 22,465 25,034 28,290 31,842 35,818 % growth 51.9% 122.7% 6.1% 11.4% 13.0% 12.6% 12.5% % EBIT margin 14.2% 22.6% 19.6% 19.3% 19.3% 19.5% 19.8% Tax on EBIT (5,292) (5,616) (6,259) (7,073) (7,960) (8,954) EBIT after tax 15,877 16,848 18,776 21,218 23,881 26,863 Depreciation 4,230 5,946 7,505 8,678 9,659 10,384 Provisions (2,556) 0 0 0 0 0 CAPEX (16,825) (17,159) (15,589) (11,724) (9,815) (7,250) Investment in Working capital (2,658) (2,228) (1,652) (1,772) (1,814) (1,881) Operating free cash flow (1,932) 3,407 9,039 16,399 21,911 28,116 Source: AFIOCTOBER 2012 - ANALYSIS OF GOWEX 19
  20. 20. Analyst Pablo Mañueco Galindo Analistas Financieros InternacionalesDiscount rate (WACC)We have applied a WACC discount rate of 15.6%, based on the following parameters. DISCOUNT RATE (WACC) Cost of equity (Ke) 18.1% Cost of debt 7.5% Cost of capital net of tax (Kd) 5.6% Shareholders equity 80% External funds 20% Weighted average cost of capital (WACC) 15.6% Source: AFIResidual ValueWe have estimated the residual value in 2017 as perpetual growth of the last estimated cash flow, normalised assuming a depreciationlevel equivalent to investments (Capex) planned and an investment in working capital in accordance with estimated perpetual growth.The "g" perpetual growth rate used was 2%, in line with the inflation trend scenario.OCTOBER 2012 - ANALYSIS OF GOWEX 20
  21. 21. Analyst Pablo Mañueco Galindo Analistas Financieros InternacionalesRESULT OF VALUATION VALUATION Amount in thousands of € 2011 2012e 2013e 2014e 2015e 2016e 2017e Norm. F.EBITDA 16,517 22,844 28,411 32,539 36,968 41,501 46,202 46,202 % growth 76.3% 38.3% 24.4% 14.5% 13.6% 12.3% 11.3% % EBITDA margin 24.8% 24.4% 24.8% 25.0% 25.2% 25.4% 25.5%Depreciation (3,419) (4,230) (5,946) (7,505) (8,678) (9,659) (10,384) (7,250)Provisions (3,594) 2,556 0 0 0 0 0 0EBIT 9,504 21,170 22,465 25,034 28,290 31,842 35,818 38,952 % growth 51.9% 122.7% 6.1% 11.4% 13.0% 12.6% 12.5% % EBIT margin 14.2% 22.6% 19.6% 19.3% 19.3% 19.5% 19.8%Tax on EBIT (5,616) (6,259) (7,073) (7,960) (8,954) (11,686)EBIT after tax 16,848 18,776 21,218 23,881 26,863 27,266Depreciation 5,946 7,505 8,678 9,659 10,384 7,250Provisions 0 0 0 0 0 0CAPEX (17,159) (15,589) (11,724) (9,815) (7,250) (7,250)Investment in Working capital (2,228) (1,652) (1,772) (1,814) (1,881) (376)Operating free cash flow 3,407 9,039 16,399 21,911 28,116 26,890Residual Value 202,045Flow to be discounted 3,407 9,039 16,399 21,911 230,161Net Asset Value (VAN) of flows 144,230(+) Long term financial investments 414Enterprise Value 144,644 (+) Net financial position 1H12 19,391 (+) Operating free cash flow 2H12 (966)(+) Net financial position close 2012e 18,425(-) Deferred tax liabilities (2,366)Equity Value 160,703No. shares in circulation* (in shares) 12,807,089Value per share (in €) 12.55Source: AFI * Subtracting the number of treasury sharesAccording to the valuation carried out, the value of GOWEXs equity stands at €160.7 million. Estimated value per share is €12.55 /share. The estimated valuation of GOWEX shares is above the company share price on the date this report was drawn up (22 October2012), which is €11.23 / share, offering upside potential of 12%.The estimated valuation of GOWEX at €12.55 / share implies an implicit EV/ EBITDA ratio of 6.3x and a PER of 10.1x, calculated onthe estimated 2012 results, which in our opinion is reasonable for a company with significant growth potential.As far as peers are concerned, the implicit EV/ EBITDA ratio in the Boingo share price at 22 October 2012 amounts to 6.0x, in line withthat of GOWEX. iPass expects to report negative results in 2012, so we have not been able to calculate a valuation ratio.OCTOBER 2012 - ANALYSIS OF GOWEX 21
  22. 22. Analyst Pablo Mañueco Galindo Analistas Financieros InternacionalesWe have also carried out a sensitivity analysis to the Ke discount rate, and have increased it by and reduced it by 10% and 20%. Theshare price would be in the range of €10.17-16.27 / share. SENSITIVITY ANALYSIS TO Ke ( Amounts in thousands of €) ke WACC EV EqV €/ share 21.7% 18.5% 114,166 130,226 10.17 19.9% 17.0% 127,876 143,935 11.24 18.1% 15.6% 144,644 160,703 12.55 16.3% 14.1% 165,572 181,632 14.18 14.5% 12.7% 192,362 208,421 16.27 Source: AFIOCTOBER 2012 - ANALYSIS OF GOWEX 22
  23. 23. CREATED BY:Pablo Mañueco GalindoThis report has been prepared by Pablo Mañueco Galindo, Partner of Analistas Financieros Internacionales (hereinafter, AFI).In drawing up this report, the author has made use of information provided by Gowex, and public information concerning the correspondingbusiness sectors. AFI has not verified the accuracy of the information provided. Therefore, AFI shall not be held responsible for theaccuracy of the figures used or the consequences of this report.The scope of our work does not include revising and assessing the companys fiscal, legal or labour situation, nor its accounting records.Thus the risks, were they to exist, arising from the aforesaid situations, have not been taken into account in our valuation exercise.The opinions and recommendations set out in this report cannot be considered to be an offer for the purchase or sale of shares. AFI doesnot accept any liability whatsoever arising from the content of this document.The Spanish Financial Analysts Institute (hereinafter “IEAF”) offers the IN RESEARCH service in collaboration with Bolsas y MercadosEspañoles Sistemas de Negociación S.A. (hereinafter, “BME”) . Neither BME nor IEAF have taken part in the creation of this report whichthey acknowledge belongs to the issuer of the stock or financial instrument analysed and/or the analyst or company subscribing it.Therefore, BME and IEAF shall not be held responsible in any way in relation to the investment decisions which might be adopted,considering it and/or the direct damages which might be incurred by those persons who might arrange transactions based on the aforesaidreport.The purpose of IN RESEARCH is to provide issuers of stocks included in the Companies under Expansion segment of the Alternative StockMarket with access to independent analysts. The analysis reports are created by independent analysts, and therefore neither the SpanishFinancial Analysts Institute, nor BME, take part in preparing the aforesaid reports. The reports are paid for by the issuer of the analysedstock, which has had access to its content before being published.This report is not a recommendation to invest, nor an invitation, offer, request or obligation by BME or by the IEAF to carry out anyoperation or transaction whatsoever in respect of the securities or financial instruments which are the object of the Report. Neither BMEnor IEAF are responsible for the content, accuracy or truthfulness of the report, nor any financial loss, or decision taken on the basis of theinformation contained in the report. Neither BME nor IEAF, its administrators, representatives, associates, subsidiaries, directors,shareholders, employees or advisors accept any responsibility whatsoever in relation to the information contained in the report, nor forany use thereof.OCTOBER 2012 - ANALYSIS OF GOWEX 23