IKTINOS | Alluring Greek Marble - Issuer Sponsored Research

Vertically integrated marble mining & quarrying company – Iktinos is a marble mining and quarrying company, active in the extraction, cutting, processing and marketing of marble, granites and related materials. The company operates 10 quarries and 3 cutting and processing facilities in Greece and maintains a global sales network, exporting to over 90 countries across the world (c. 85% of revenue generated outside Greece). Iktinos generates revenue in the range of c. €70mn p.a. and EBITDA of c. €30mn (Sales CAGR +11% in 2010-2018, EBITDA CAGR +20%).

Solid organic growth prospects - Marble is seeing a resurgence in popularity and according to industry data, the global marble market is expected to grow at 3% CAGR over the next 5 yrs. Operating vast high-quality marble reserves (>3mn m3), Iktinos is well positioned to compete across international marble markets. As certain highly popular marble varieties, such as Italian Calacatta and Statuario, are gradually becoming scarcer, their demand/supply dynamics become unbalanced driving prices higher and creating opportunities for similar style marble producers, such as Iktinos.

Moves up the value chain – During 2016-2018, Iktinos mostly catered to the Chinese market, which trades in unprocessed marble blocks. With a positive construction outlook in the US, the company now shifts its focus overseas, aiming at increased exports of value-accretive processed marble (US trades mostly in slabs/tiles). This is facilitated by recent investments in a new processing unit in Dramas, which has increased its processed marble production capacity (est. incremental revenue of c. €10mn p.a.) as well as a strategic decision to introduce underground mining in Volakas, which ensures higher product quality and longer excavation periods.

Trades at deep discount to global peers - To put Iktinos’ valuation in context with that of other marble quarrying and mining companies, we compare EV/EBITDA valuations to the respective companies’ historical average. Global peers have traded near the 10x mark on avg over the last three years. Iktinos’ valuation multiples, despite a re-rating in the last year, are well below its peers. Given a positive outlook ahead (avg sales & EBITDA growth of 18-35% in 2020-2021), we believe the market should eventually pay attention to Iktinos healthy profit growth prospects, which warrant even higher multiples than the company’s historical average, thus further convergence towards industry average is likely. These dynamics are further supported by a fair value assessment on the back of a peer multiple and DCF valuation, resulting in a €190-203mn fair value (€1.70-1.80 per share, excluding treasury shares). Meanwhile, potential sale of its 2,800-acre coastal land plot in Crete could enhance value further by as much as €30mn (€0.30 per share).