Take Off S p A : MIDCAP Initiation of Coverage “Fasten your seat belts”

EQUITY RESEARCH

TAKE OFF

INITIATION OF COVERAGE

Fasten your seat belts

Fashion becomes accessible to everyone

Be ready to Take Off !

Take off is the first fashion boutique at outlet prices. It offers the experience of the best fashion brands at the best price of the market. The group operates through its two divisions: Take Off, dedicated to adult's clothing, footwear and accessories, sells own and international fashion brands at outlet price; Over, specialised in children's clothing served through a widespread affiliates network.

Crisis Proof business model

In a current disrupted market, when consumption levels are at an all-time low and consumers became more price sensitive, Take Off stands out, offering the best price on the market. It is unique business model is based on an innovative discount method, which gives the customer the sensation of the "deal". Take Off has developed the "divided by" method, which applies a discount on a progressive basis. The product is displayed starting at the retail price "divided by 2" until it reaches "divided by 10". The splitting mechanism allows the customer to easily remark the extent of the discount and have a greater perception of the advantage offered.

Best in Class Profitability

Take Off's success also lies in a unique purchasing policy and an active inventory management, guaranteeing to the group the highest margins in the market. In 2021, Take Off reached an EBITDA margin of 36.1%, higher than both the largest "classic retailers", H&M, Inditex, FAST Retailing and the largest Off-price fashion players such as TJX, Ross, Burlington, Nordstrom.

Attractive Valuation

Supported by a positive Off-price fashion market outlook, Take Off should be able to generate CAGR revenue growth of about 19% over the 21-26E period.

From our analysis we have derived a valuation of €7.6/share, resulting in a EV/Sales 2022E of 3.2x, EV/EBITDA 2022E of 10.9x and P/E 2022E of 20.7x. We are strongly convinced the company current valuation is below its real intrinsic value. Based on this high upside potential, we are initiating our coverage with a Buy recommendation.

Document produced on

5 September 2022 at 5:31pm CET

Document published on

6 September 2022 at 8:52am CET

BUY, TP 7.6€

Up/Downside: 82%

Key data

Price (€)	4.2
Industry	Retailers
Ticker	TKO-IT
Shares Out (m)	15.625
Market Cap (m €)	65.6
Next event	1-22 - 30 September 2022

Ownership (%)

Summit S.p.A.			64.1
A. Piccarreta			5.5
G. L. Zanardi			1.8
Free float			28.5
EPS (€)	12/22e	12/23e	12/24e
Estimates	0.37	0.51	0.60
Change vs previous	na	na	na
estimates (%)
Performance (%)	1D	1M	YTD
Price Perf	-4.5	-4.5	-3.3
Rel FTSE Italy	-4.5	-1.8	21.1

6.0																			180
5.5																			170
5.0																			160
4.5																			150
4.0																			140
3.5																			130
3.0																			120
	21		21		22		22		22		22		22		22		22		22
Nov	-	Dec	-	Jan	-	Feb	-	Mar	-	Apr	-	May	-	Jun	-	Jul	-	Aug	-
						TAKE OFF					Rel. to FTSE Italy

TP ICAP Midcap Estimates	12/21	12/22e	12/23e	12/24e		Valuation Ratio	12/22e	12/23e	12/24e		Consensus FactSet - Analysts:1	12/22e	12/23e	12/24e
Sales (m €)	26.4	33.4	43.1	48.5		EV/Sales	1.5	1.1	0.9		Sales	35.0	44.8	54.1
Current Op Inc (m €)	7.7	7.9	10.8	12.6		EV/EBITDA	5.2	3.8	3.0		EBIT	8.0	10.7	13.4
Current op. Margin (%)	29.1	23.6	25.1	26.0		EV/EBIT	6.5	4.5	3.5		Net income	6.1	7.6	9.5
EPS (€)	0.36	0.37	0.51	0.60		PE	11.4	8.2	7.0
DPS (€)	0.18	0.18	0.26	0.30
Yield (%)	4.3	4.4	6.1	7.1
FCF (m €)	6.1	5.0	6.8	8.6

Analyst Simone Mieli [e-mail] 33149241833

TP ICAP Classification: Public

EQUITY RESEARCH | TP ICAP MIDCAP | 42 rue Washington, 75008 Paris | More on www.midcapp.com

Document downloaded by Simone Mieli (TP ICAP (EUROPE) SA)

	Document published on
	6 September 2022 at 8:52am CET
FASTEN YOUR SEAT BELTS	1
DESCRIPTION	3
SWOT ANALYSIS	3
OVERVIEW	4
FASHION ACCESSIBLE TO EVERYONE	5
A PATENTED DISCOUNT MODEL	7
A PERPETUAL MARK-UP	8
BEST IN CLASS IN TERMS OF PROFITABILITY	10
VALUE CREATION NEEDS A GOOD RECIPE	11
A STORE CENTRED EXPERIENCE	13
STATE OF FASHION	16
OFF-PRICE MARKET IS MASTERING FASHION	20
FILLING A VACANT POSITION GIVES THE LEAD	22
CASH IS KING	24
BUSINESS PLAN	28
OUTLOOK	29
VALUATION: WHAT ARE YOU WAITING FOR?	33
SHARE PRICE AND WARRANTS	37
ANNEXES	38
FINANCIAL DATA	42

TP ICAP Classification: Public

EQUITY RESEARCH | TP ICAP MIDCAP | 42 rue Washington, 75008 Paris | More on www.midcapp.com2 Document downloaded by Simone Mieli (TP ICAP (EUROPE)SA)

Document published on

6 September 2022 at 8:52am CET

Description

Take Off S.p.A. is an Italian company, based in Monopoli (Bari), active in the fashion retail sector. It operates through its two divisions: Take Off, dedicated to adult's clothing, footwear and accessories sold at outlet price; Over, specialised in children's clothing served through a widespread affiliates network. It has a consolidated presence in the Italian territory, with 170 stores, of which 131 in affiliation. Its success lies in an innovative discount method, a flexible cost structure and active inventory management, leading to the highest margins in the market.

SWOT Analysis

Strengths

• Highest margins in the market
• Solid cash positive financial position
• Flexible and efficient cost structure
• Active inventory management leading to no unsold and constant mark-up

Opportunities

• Positive Off-price market outlook
• High expansion potential of the retail network
• Consumption level reduction leads consumer choose best value for money

Weaknesses

• Opportunistic purchasing strategy
• Small size compared to off price sector players
• Still low brand awareness

Threats

• Market disruption
• Covid-19new waves causing activity shutdowns

TP ICAP Classification: Public

EQUITY RESEARCH | TP ICAP MIDCAP | 42 rue Washington, 75008 Paris | More on www.midcapp.com3 Document downloaded by Simone Mieli (TP ICAP (EUROPE)SA)

Overview

Shareholders

Floating

28%

Summit S.p.A.

64%

G. L. Zanardi 2%

A. Piccarreta 6%

2021 Revenue breakdown by business unit

Over 24.6%

Take Off

75.4%

Take Off EBITDA evolution

		7.0
		35%
5.0	22%
	3.2
	22%
FY19	FY20	FY21
	Take Off	%

Document published on

6 September 2022 at 8:52am CET

Revenues and EBITDA evolution

32.1		36.1%
	30.7%	26.4
	21.2
19.3%
	6.5	9.5
6.2
FY19	FY20	FY21
Sales	EBITDA	EBITDA Margin

Revenue evolution by segment (€M)

9.3	21.2	6.5
	6.7
22.8	14.5	19.9
FY19	FY20	FY21
	Take Off	Over

Over EBITDA evolution

	3.3
	49%	2.5
		38%
1.2
	13%
FY19	FY20	FY21
	Over	%

Source: Company, TP ICAP Midcap

TP ICAP Classification: Public

EQUITY RESEARCH | TP ICAP MIDCAP | 42 rue Washington, 75008 Paris | More on www.midcapp.com4 Document downloaded by Simone Mieli (TP ICAP (EUROPE)SA)

Document published on

6 September 2022 at 8:52am CET

Fashion accessible to everyone

Take off is the first fashion boutique at outlet prices. It offers the experience of the best fashion brands at the best price of the market.

The group operates through its two divisions: Take Off, dedicated to adult's clothing, footwear and accessories proposed with the outlet format; Over, specialised in children's clothing served through a widespread affiliates network.

Take off (75% of total sales in FY21)

It is the representative division of the group. It offers adult's fashion at unbeatable price, through the outlet format. It boasts a peculiar business model based on discount and an innovative inventory management to give the best value for money in the market. It has a consolidated presence all over Italy with a retail network of 46 stores, of which 39 direct PoS and 7 affiliated.

Take off proposition

Source: Company

It offers a wide range of solutions under its own and third-party brands, including the best international fashion brands (e.g. Prada, Burberry, Givenchy, Fendi, Valentino).

It has a portfolio of 7 own brands, well diversified in terms of style, price, in order to reach different target segments.

Take off own brand portfolio

HIGH PRICE

RANGEAdult

MID PRICE

RANGE

LOW PRICE

RANGE

Young

Source: Company, TP ICAP Midcap

TP ICAP Classification: Public

EQUITY RESEARCH | TP ICAP MIDCAP | 42 rue Washington, 75008 Paris | More on www.midcapp.com5 Document downloaded by Simone Mieli (TP ICAP (EUROPE)SA)