Giglio S p A : 30/06/21 - Equity Research

Date of production: 29 June 2021 - h. 6,30pm		Date of publication: 30 June 2021 - h. 7,00am
Giglio Group				Italy	FTSE STAR Italia Advertising and marketing
Rating: BUY			Target Price: € 3,70	Initiation of Coverage	Risk: Medium
Stock performance	1M	3M	6M	1Y	Stocks performance relative to FTSE STAR Italia

absolute	-9,51%	-13,72%	-19,09%	-26,55%
to FTSE AIM Italia	-13,63%	-30,92%	-56,27%	-70,02%
to FTSE STAR Italia	-13,38%	-29,82%	-45,69%	-87,83%
to FTSE All-Share	-10,21%	-18,24%	-33,80%	-57,61%
to EUROSTOXX	-11,26%	-19,57%	-33,85%	-53,73%
to MSCI World Index	-11,18%	-21,32%	-31,88%	-65,55%

Stock Data

Price Target price Upside/(Downside) potential Bloomberg Code

Market Cap (€m)

EV (€m)

Free Float

Share Outstanding 52-week high 52-week low

Average daily volumes (3m)

€ 1,95 € 3,70 89,7%

1. IM Equity
2. • 42,84
   • 53,55

44,34%

21.968.022 € 2,89 € 1,85 85.000

Company Overview

Giglio Group Spa ("Giglio"), founded by Alessandro Giglio in 2003 and listed on the STAR segment since 2018, is a leader in Italy in the design, implementation and management of high-value-added e- commerce platforms for fashion, design, and, more recently, food, and healthcare. Its headquarters are in Milan with branches in New York, Shanghai, Rome, Lugano, and Genoa.

In recent years, the Group has undertaken important changes both at the structural level and at the level of activities carried out, as a result of which it is able to offer services in four categories: E-Commerce Full Outsourcing, E-Distribution Full Outsourcing, Engagement and Marketing Automation and Travel Leisure Selective Distribution.

Key Financials (€m ) FY19A FY20A FY21E FY22E

Market

Revenues	37,7	41,3	48,0	59,0
VoP	40,2	42,3	49,5	60,8
EBITDA	-0,2	1,9	2,5	4,2
EBIT	-2,0	-2,3	1,3	3,0
Net Profit	-4,8	-2,6	-0,1	1,2
EBITDA margin	-0,6%	4,6%	5,1%	6,9%
EBIT margin	-5,0%	-5,5%	2,5%	4,9%
Net Profit margin	-11,9%	-6,3%	-0,1%	2,0%

Pictet reports eMarketer's estimates of global sales through platforms, according to which, after a 27.6% growth achieved during 2020, a further jump of 14.5% to $611 billion is expected. According to Pictet, market growth will be driven by the effect of the pandemic on consumption and the adoption of new consumption behaviours that are now consolidated in users.

In addition, it is estimated that at least one in five products will be purchased online this year, with 19.5% of purchases made through e- commerce platforms. This estimated value is up compared to 18% observed in 2020 and 13.6% observed in 2019.

Main Ratios	FY19A	FY20A	FY21E	FY22E
EV/EBITDA (x)	N/A	27,5	21,4	12,7
EV/EBIT (x)	N/A	N/A	42,8	18,2
P/E (x)	N/A	N/A	N/A	35,7

Mattia Petracca

[phone]

[e-mail]

Valuation Update

We conducted the equity value valuation of Giglio Group based on the

DCF methodology. The DCF method (which in the calculation of the

WACC includes for prudential purposes also a specific risk of 2.5%)

provides an equity value of € 81.3 million. The target price is € 3.70

rating BUY and MEDIUM risk.

Contents
1.	Company overview...............................................................................	3
1.1	Business activities ................................................................................	3
1.2	Company history ..................................................................................	4
1.3	Shareholders and Structure .................................................................	6
1.4	Key people............................................................................................	7
2.	Business model ....................................................................................	8
2.1	Value Proposition.................................................................................	8
2.2	Business process ..................................................................................	9
2.3	Portfolio of Products and Services.....................................................	10
2.4	Clients and Providers .........................................................................	13
2.5	Case Study..........................................................................................	15
3.	The market .........................................................................................	17
3.1	Global E-commerce............................................................................	17
3.2	E-commerce Italy ...............................................................................	18
3.3	E-commerce Italy: Estimates..............................................................	19
4.	Competitive positioning.....................................................................	20
4.1	Swot ...................................................................................................	21
5.	Economics & Financials ......................................................................	22
5.1	FY20A Results.....................................................................................	23
5.2	FY21E - FY23E Estimates ...................................................................	25
5.3	Use of proceeds .................................................................................	28
6.	Valuation ............................................................................................	29
6.1	DCF Method .......................................................................................	29

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1. Company overview

1.1 Business activities

Giglio Group Spa ("Giglio"), founded by Alessandro Giglio in 2003 and listed on the STAR segment since 2018, is a leader in Italy in the design, implementation, and management of high-value-addede-commerce platforms for fashion, design, and, more recently, food, and healthcare. Its headquarters are in Milan with branches in New York, Shanghai, Rome, Lugano, and Genoa.

In recent years, the Group has undertaken important changes both at the structural level and at the level of activities carried out. In fact, in October 2019, the acquisition of the company E- Commerce Outsourcing Srl (owner of the Terashop trademark) was concluded, one of the most important players in the provision of E-commerce services in full outsourcing. Subsequently, in the course of 2021, two other important transactions were concluded. In particular, on 12 January, the Group signed a binding agreement for the purchase of the company Salotto di Brera - Duty Free Srl, a company that operates nationally and internationally in the distribution and marketing of products in the fashion and food sector. Then, on 23 February 2021, E-Commerce Outsourcing Srl, a subsidiary of Giglio Group, signed an agreement with 7Hype Srl, aimed at integrating a 7Hype business branch into its company organization. The latter agreement consists in a lease agreement for a business unit of 7Hype with the sole purpose of marketing automation, lasting thirty months. At the end of the lease, E-Commerce Outsourcing will have the right to purchase the business unit.

As a result of these major corporate changes, the Group is able to offer a wide range of services falling into four main categories:

• E-CommerceFull Outsourcing: activity carried out through Terashop that consists in the creation and management of e-commerce activities through a full outsourcing approach and the development of advanced omnichannel projects, which allow the integration of physical stores with virtual stores;
• E-DistributionFull Outsourcing: activity carried out through Giglio eDistribution which consists in the management and distribution of online sales on the main marketplaces in the world, both for on-season and off-season collections;
• Engagement and Marketing Automation: through 7Hype the Group deals, for its customers, with marketing automation, engagement and loyalty and conversational marketing;
• Travel Leisure Selective Distribution: activity carried out through Salotto di Brera that consists in the distribution of products belonging to the luxury sector in selected and high standing touchpoints, such as cruise ships, ports, airports, military, and diplomatic bases.

Chart 1 - Giglio Group

Source: Giglio Group

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1.2 Company history

Chart 2 - Company Story

		2020 -2021
	2019		New CEO, 7
	2018		Hype and
	Acquisition of Salotto di
	Switching to	Terashop	Brera
2011-2018	STAR	and sale of
		Media

Acquisitions, expansion and

2003 -2010listing

Establishment

e growth

Source: Giglio Group

• In 2003, the Company was established by Alessandro Giglio, current President of the BoD, taking advantage of his previous long experience in the design and implementation of major events and theater and television shows. In addition, in 2003, the Company inaugurated the television channel Music Box (broadcasted on Sky), an interactive channel that allowed viewers to vote from home on the broadcasted content. In the following years, the business volume grew and, in 2008, Dada.net SpA decided to invest in the share capital of Giglio Group in order to strengthen its position in the music content sector. In addition, in 2008 a thematic television channel dedicated to live concerts was created, called "live!", broadcasted on SKY, whose contents became, starting in 2010, part of the schedule of the television channel "Play.me" (broadcasted on channel 68 of the national digital TV).
• In 2011, Digicast SpA was acquired, a company active in the development and management of thematic television channels, in particular, dedicated to the creation, production and broadcasting of the television channel "Yacht and Sail" (broadcasted on Sky) and Y&S International (broadcasted in 55 countries and 5 continents) and, subsequently, the activation of the television channel Acqua (broadcasted on 65 of the national digital TV). Subsequently, the Group focuses on expansion to international markets. As part of this strategy, in 2013, it established the first partnerships with Chinese companies and public institutions (such as CIBN and CCTV). With the same goal, in 2014, Giglio TV HK Ltd was established in Hong Kong. In 2015, the Extraordinary Shareholders' Meeting of Giglio Group and MusicBox Factory Srl, a company wholly owned by Alessandro Giglio, decided for the merger by incorporation of MusicBox Factory Srl into the Company. In 2015 it was listed on the
  AIM Italia market, admission to the market led to a collection of about € 6 million. In the same year, 100% of M-Three Satcom SpA, a company operating in the Broadcasting sector, was acquired. In addition, in 2016, the Company purchased 100% of MF Fashion SpA (then Giglio Fashion SpA), a Business-to-Business distributor entirely specialized in online fashion. In the same period, between 2015 and 2016, Giglio Shanghai and Giglio USA were established, in order to develop and manage e- commerce in China and the USA, respectively. In addition to this, in 2017, Giglio purchased, through the subscription of a capital increase, a share equal to 50% of the company Class Tv Moda Holding Srl which in turn held 51% of the company Class Tv Moda. Finally, in the same year, it purchases 100% of Evolve Service SA (then Ibox

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SA), a player in the e-commerce sector on the international market and support for online shops of some major fashion and design brands.

• In 2018, at the end of a process begun during the previous year, Borsa Italiana arranged for the start of negotiations on the STAR segment of the Giglio Group shares. This process was aimed at increasing the liquidity of the security, strengthening relations with its strategic partners, involving additional institutional investors, and obtaining greater visibility in the national and international reference markets, resulting in further advantages in terms of competitive positioning.
• On 8 July 2019, in order to complete the transformation from a media company to a global E-commerce group, the Group finalized the sale of the assets of the Media segment, which were no longer strategic. In addition, on October 31, Giglio announced the closing of the acquisition operation of E-Commerce Outsourcing Srl (owner of the Terashop trademark). During the same year, Giglio began its activity of providing digital services to China, developing all the necessary structure to enable brands to be present in the market, where many Made in Italy brands are not yet present, both online and in physical stores.
• During 2020, Marco Riccardo Belloni was appointed new CEO of the Group, thus becoming the youngest CEO of Companies listed on MTA. During 2021, Giglio continued its transformation process by purchasing Salotto Brera - Duty Free Srl and renting a 7Hype business unit whose sole purpose is marketing automation.

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