19 May 2014

Summary company financials (m)

Year end December FY2011 FY2012 FY2013 FY2014E
Price 60.51 Revenue 2,300.3 2,502.3 2,633.1 2,795.0
Market cap (m) 783.7 11.8% 8.8% 5.2% 6.1%
Enterprise value (m) 1,119.7 EBITDA 151.7 159.7 163.8 191.0
6.6% 6.4% 6.2% 6.8%
Free float 33.3% Net income 49.7 54.2 60.2 68.5
Net debt (cash) 471.7 419.3 460.7 336.0
Shares outstanding 12.9 12.9 13.0 13.0
EV/Sales 0.40 0.36 0.44 0.41
EV/EBITDA 6.0 5.6 7.0 6.0
PE 9.1 9.1 11.5 11.4
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Stef SA
Revenue growth
EBITDA margin
Stef is Europe's leading operator in temperature controlled food transportation offering customised transport and logistics services to the
food, retail and out of home catering industries. As part of these activities, Stef owns a network of 235 warehouse properties, with total space
of more than 450 square kilometres, together with a fleet of more than 4,000 vehicles. In addition, Stef also provides maritime passenger and
freight transportation services.

Since 2002, Stef has grown revenue per share by 7.3% per annum and EBIT per share by 18.0% per annum. The company's return on equity has
averaged 17.6% over the same period as its expertise in cold logistics and its property infrastructure have offered a competitive moat. The
investment proposition for Stef equity today is for continued steady revenue growth, combined with potential margin expansion as Stef builds
its scale in periphery regions. Stef's property assets are worth up to 90% of its Enterprise Value, according to our analysis, and the company is
operated by an equity-incentivised managment and employees. Stef equity is available at a rating of 11.4x P/E FY2014, the bottom quartile of
the group's trading trading range since 2002 of between 9.1x and 21.1x PE.

By its very nature, the logistics and transportation market is competitive given the many players. In this environment Stef has chosen to
specialise in cold logistics, a market representing around 10% of the overall logistics market. The barriers to entry are more significant in cold
logistics due to the specific cold chain regulations, more capital-intensive infrastructure requirement, the higher granularty of demand, and
the greater need for a partnership relationship with customers.

Stef derives approximately 80% of its revenue from its business in France. However, revenue growth at Stef will be driven primarily by the
expansion of operations in countries including Italy and Spain which currently contribute the bulk of the remainder of group revenue. Stef's
operations in these countries deliver an average 3.5% EBIT margin, versus the more mature French operations delivering an EBIT margin
ranging between 5-6%. As Stef's operations in countries such as Italy and Spain mature, these divisions are likely to benefit from economies of
scale, leading to higher regional and ultimately, group, margins.

The business model is based on a services offer around a reliable national warehouse infrastructure which is difficult to replicate given the
level of investment and time required to build a network of sufficient scale to justify a comparative advantage. The competition generally
comes from smaller regional structures with in-depth, local knowledge. Stef's main marketing argument within an increasingly international
agro-foods environment is the breadth of its nationwide network.

Stef also owns a marine transportation business (La Meridionale). This division, which is not slated for expansion, operates four vessels
carrying mostly freight and some passengers as part of a public services concession linking Corsia to the French mainland. The business
generated c. 2% of group EBIT in 2013 and whilst it appears to be reasonably run, it is currently not material to group profitability.

Stef owns its property, warehouses and platforms. Unusually, however, Stef depreciates its land and building assets, a conservative approach
given the market value of well maintained warehouses such as those operated by Stef will normally appreciate over time. As part of Stef's
active approach to its property management, the group typically sells properties representing 1-4% of its asset base per annum. These
transactions are arguably indicative of the market value of Stef's property assets and from 2003-2013 have occured at a premium of 1.75x
book value, according to our analysis. Applying the same multiple to Stef's fully depreciated book value of land and buildings of 568m
increases it to 992m, not far from Stef's original undepreciated land and buildings value of 945m. Stef's EV, by comparison, is 1.12bn.

Stef appears conservatively managed, and with an equity-incentivised culture. Net debt, at 460m, is around half our estimate of the market
value of the group's properties, giving room for additional debt financing should capital allocation opportunities arise. Interest is 6x covered by
operating earnings. The Stef shareholder base is 50.7% controlled by a concert party of shareholders including its management team.
Somewhat uniquely for its sector, Stef also has established a mutual fund of employee capital from more than 8,500 employees. This fund now
owns an additional 16% of the company's shares. The level of overall management and employee profit sharing is fairly exceptional and is a
likely contributor not only to the quality of Stef's long term growth, but also to management at the company having the ability to generate
wealth through equity appreciation, rather than excessive salaries. Stef's CEO was paid a 400,000 salary in 2013 but has authorised share
buybacks in 2014 of 5.85% of Stef's shares outstanding.

Overall, the Stef proposition is one of steady growth within an admittedly competitive universe but where the scale acquired, the property
infrastructure, and regulatory-type barriers to entry are enough to preserve attractive levels of return on equity.

Stef equity is available at a rating of 11.4x P/E FY2014, the bottom quartile of the group's trading range since 2002 of between 9.1x and 21.1x
PE. Investors buying into the company at current levels are arguably paying little premium for the group's property asset infrastructure, long
term profit growth track record, nor likelihood of continued revenue growth and margin expansion as Stef's economies of scale build in
regions outside of France.