EnVent: “Brilliant operating performance drives outstanding financials”

OUTPERFORM

Current Share Price (€): 4.84

Target Price (€): 8.03

Take Off - Performance since IPO

Take Off Share PriceFTSE Italia Growth Index

Source: S&P Capital IQ - Note: 25/11/2021 (IPO offer price)=100

Company data

EQUITY RESEARCH - FY21 Update

April 25th, 2022

Brilliant operating performance drives outstanding financials

Revenues, profitability, cash flow at the edge of industry standards

FY21 consolidated sales were €26.4m, +25% YoY. Take Off revenue share has been €19.9m, 37% over the 2020 €14.5m, while Over had €6.5m revenues, close to the 2020

€6.7m. These results were respectively sustained by a 13% and 10% increase of store opening time in 2021 vs 2020. As such, Over has had a slightly worsening performance, differently from Take Off well sustained steps up. EBITDA at €9.5m showed a remarkable 47% increase on 2020 €6.5m, 36% on sales, up from prior year 31%. EBIT at €7.7m, more than 50% better than 2020. Consequently, Net Income of €5.6m is too nearly 50% over €3.8m of 2020. Net cash of €12.1m at FY21 year-end comes from €12m net IPO proceeds, €6.8m dividend distribution and €6.3m cash flow from operations.

Operating indicators reflect an effective business model

Management workout in progress for the entire organization is having a prompt payback: store closures and openings work in the direction of higher sales per store and margins. Take Off had 30 stores in 2020 and 32 at 2021 year-end, Over had 114 stores in 2020, nearly stable in 2021, net of dismissal of those underperforming. We recall that the pandemic and store closures had an effect not only on revenues, but also through a reduction in personnel, network and other operating costs in 2021. Take Off sales per store, although adjusted per the higher opening time, have grown from roughly €500+k of

2020, to €600+k in 2021, so retargeting the over €700+k experienced in 2019. Average

ISIN number

IT0005467425

Bloomberg code Reuters code Industry Stock marketTKO IM

Share Price (€)

Date of Price

TKO.MI Apparel retail Euronext Growth Milan 4.84 22/04/2022

Shares Outstanding (m) 15.6

Market Cap (€m) 75.6

Market Float (%) 20.0%

Daily Volume 14,800

Avg Daily Volume YTD 10,041

Target Price (€) 8.03

Upside (%) 66%Recommendation

OUTPERFORM

Share price performance

Take Off - Absolute (%)

FTSE Italia Growth (%)

1M 20% -2%

• 3M IPO

• 19% 21%

• -8% -8%

• Range H/L (€) since IPO 4.84 3.32

• YTD Change (€) / % 0.50 11%

Source: S&P Capital IQ

Analysts

Franco Gaudenti - Head of [e-mail] Tardella - Co-Head of [e-mail]

EnVent Capital Markets Limited

42, Berkeley Square - London W1J 5AW (UK) Phone [phone]

This Note is issued by arrangement with MIT SIM,

Issuer's Specialist

This document may not be distributed in the United States, Canada, Japan or Australia or to U.S. persons.

price per item, according to management, in FY21 rose to €29 over €24 in FY20 and €25 in

FY19 for Take Off and from €9 in FY19 to €10 and €10.5 in FY20 and FY21 for Over.

Outlook

Exiting pandemic restrictions should support consumer spending return to 2019 levels. Geographical coverage will see 10 more Take Off store openings, while 15 Overkids stores will replace 14 closedowns made in Q1 2022. The new Take Off stores, mostly located in Northern and Central Italy, are roughly a 30% growth over the 2021 coverage, an increase consistent with our 2022 sales growth assumption, also expecting an increase in e-commerce. Q1 2022 KPIs anticipate a 13% sales growth during sales period with 6 additional stores and 43% increase in volumes. The management sentiment on the near future perspective considers unexpected troubles of the global economy, with confidence of being able to face difficulties as done in the past. It is worth to point out that there is no direct dependance on materials or goods subject to sudden scarcity or exceptional price increases. Based on our understanding of the industry, we overall concur with such views, not seeing for the time being ground or reason to change our assessment.

Target Price €8.03 per share (from €7.11), OUTPERFORM rating confirmed

Our updated valuation yields an upgrade in target price, from €7.11 to €8.03 per share, corresponding to 3.3x 2022 EV/Revenues, while Take Off currently trades at 1.9x. Given the 66% upside potential on current share price, we confirm the OUTPERFORM rating.

KEY FINANCIALS AND ESTIMATES

€m

2019 33.1

2020 22.3 -32.6% 6.5 30.7% 5.0 23.7% 3.8 0.1 11.8

2021 28.0

2022E 34.2 22.0% 11.9 36.0% 9.4 28.5% 6.4 13.2 27.3

• 2023E 2024E

  Revenues YoY % EBITDA

  Margin on Sales EBIT

• 47.8 56.0

  - 6.2 19.3% 4.6 14.4% 3.5 4.7 12.8

  25.3% 9.5 36.1% 7.7 29.1% 5.6 12.1 23.7

• 39.8% 17.2%

• 17.1 20.8

• 36.7% 37.8%

• 13.4 16.2

  Margin on Sales Net Income Net (Debt) Cash Equity

• 28.7% 29.4%

• 9.3 11.3

• 22.1 31.3

• 39.4 50.6

Source: Company data 2019-21A, EnVent Research 2022-24E

The Issuer is a corporate client of EnVent Capital Markets Ltd., thus this Note is to be intended as a marketing communication, not an independent research. See final two pages for important disclosures.

Market update

Take Off - Share price performance and trading volumes since IPO

Trading price range €3.32-4.84 per share

+21% for Take Off since IPO, in the same period the Italia Growth Index lost -8%

Take Off outperforming industry peers +21% vs -17%

Source: EnVent Research on S&P Capital IQ - Note: 25/11/2021 (IPO offer price)=100

1,200,000 1,000,000 800,000 600,000 400,000 200,000 0

Industry peers - Market performance since Take Off IPO

130

120

110

100

90

80

70

60

50

Nov-21

Dec-21	Jan-22	Feb-22 Mar-22
Take Off	Mean of industry peers

Source: EnVent Research on S&P Capital IQ - Note: 25/11/2021 (IPO offer price)=100

Industry peers - Regression analysis and Take Off target positioning

3.0x 2.5x

2022EEV/Revenues

2.0x 1.5x 1.0x 0.5x 0.0x

5% 7% 9% 11% 13% 15% 17%

Avg. 5Y EBIT margin

Source: EnVent Research on S&P Capital IQ, April 2022

19%

21%

23%

25%

Investment case

The Italian fashion outletGeographically focusedDifferentiated business model

Take Off, listed on Euronext Growth Milan since November 2021, is an Italian fashion value-for-money retailer which operates through a chain of 31 stores selling women and men apparel and 109 stores selling childrenswear. Central-Southern Italy is presently its core geolocation scope and organic growth over the medium-term will be supported also by increasing territorial coverage.

The Group operates with a joint business model, being an off-price retailer of products from designer brands and a typical vertically integrated apparel retailer with an internal team in charge of development of own brands and merchandise mix through external suppliers, with in-house logistics management.

Strategy

Take Off intends to pursue opportunities in current market areas and unexplored geographies, especially Northern Italy regions, also through acquisition of small retail fashion networks. Overall mid-term targets could be doubling Take Off and Overkids stores.

Historical Sales and EBITDA

40

30

20

10

0

2019

Sales (€m)

Source: Company data

Industry and Company drivers

2020

2021

EBITDA Margin %

• • Fashion goods is a market driven by both need and impulse

  40%

  30%

  20%

  10%

  0%

• • Resilient demand for value and quality goods: a countercyclical and defensive market segment

• • Making the most of apparel inventory, a burden typical of manufacturers and other retailers

• • Diversified and balanced brand portfolio

• • Selling proposition to serve a wide category of customers

• • Growth without huge capex

• • Opportunistic merchandise acquisition

• • Customers' preferences analytics

• • Efficient franchising network

Challenges

• • Brand awareness and reputation buildup

• • Market competitiveness and price pressure within the industry

• • Geographic presence

• • Rise of e-tailers offering branded products at discount

• • Inventory requirement

Historical aggregated revenues

Take OffOver

Source: Company data

Industry outlook

According to McKinsey, the off-price segment is destined to grow in the next years: if before the pandemic it grew faster than full-price fashion and during the pandemic apex suffered a less pronounced slowdown, the new estimates predict 2025-30 growth 5x faster than full-price segment.

Total revenue for the EU fashion industry was €368bn in 2021, of which off-price segment accounted for 11% (€40bn) and it's expected to rise to 12% in 2025. Online channel hit about 40% of the off-price market, a far higher share than fashion overall. In the coming years, almost all the growth will come from the online channel because of its greater convenience, simplicity in filtering and browsing, and breadth of assortment. Off-price is very suitable for online sales, so it has been well positioned to capture the increasing percentage of shoppers moving online and the online channel has achieved impressive growth: it racked up estimated sales of €17bn in 2021 and is forecast to grow with a 2021-25 CAGR of 13%, compared to 1% for offline channel. According to McKinsey, the Italian online off-price market grew by 21% during the pandemic and is estimated to grow by a 2021-25 CAGR of 14% (Source: McKinsey, Mastering off-price fashion in an omnichannel world, March 2022).

Estimates revision

On the back of FY21 results, we have fine-tuned operating costs, bringing to an expectation of higher operating margins, and TWC indicators.

Change in estimates

Previous vs. Revised Revenues and EBITDA estimates (€m)

60

50

40

30

20

10

0

2021A 2022EPrevious Revenues (left)Previous EBITDA (right)

Revised Revenues (left)

Revised EBITDA (right)

24

20

16

12

8

4

0

2023E

2024E

Source: EnVent Research

Revised	Previous
€m	2021A	2022E	2023E	2024E	2022E	2023E	2024E	2021A	2022E	2023E	2024E
Revenues	28.0	34.2	47.8	56.0	33.1	46.7	54.9	5%	3%	2%	2%
EBITDA	9.5	11.9	17.1	20.8	10.4	14.5	17.7	13%	15%	18%	17%
Margin	34%	35%	36%	37%	31%	31%	32%
EBIT	7.7	9.4	13.4	16.2	7.8	10.8	13.2	16%	21%	24%	23%
Margin	27%	28%	28%	29%	24%	23%	24%
Net Income (Loss)	5.6	6.4	9.3	11.3	5.5	7.7	9.4	21%	16%	21%	20%
Net (Debt) Cash	(12.1)	(13.2)	(22.1)	(31.3)	(16.7)	(22.8)	(27.5)	-12%	-21%	-3%	14%

Change % (Rev vs Prev)

Source: EnVent Research

2021E 26.7 8.4

32% 6.6

25% 4.7 (13.8)

0