Beacon Securities Ltd.| 66 Wellington Street West, Suite 4050, Toronto, Ontario, M5K 1H1 |416.643.3830|www.beaconsecurities.ca

Firan Technology Group Corp. (FTG–T)

January 11, 2017

Not Just A Roll Up Story

- FTG announced that it has been awarded a new three-year Long

Term Agreement (“LTA”) from one of the leading global Original

Equipment Manufacturers supporting the Aerospace Market (also

an existing customer).

- The agreement incorporates a variety of high technology, Printed

Circuit boards for use on key fixed wing platforms including

Boeing 787, Airbus A350, A400M, and the Bombardier C-Series.

FTG will manufacture the product at its FTG Circuits Division

located in Toronto, as well as in China.

- The new LTA is estimated at over US$12M, which, based on our

discussions with management, represents a ~15% increase over

the previous agreement.

- In our opinion, this announcement is meaningful for a couple of

reasons:

o First, at US$4M a year, this contract represents ~5% of

revenues, so it is good to see the renewal.

o Second, FTG’s ability to maintain historical programs, while

capturing new scope across key programs highlights the

company’s ability to grow organically within its core

business.

- Bottom-line, while there is a lot of attention around Firan’s

integration efforts around the acquisitions of Photo Etch and

Teledyne PCT, we believe there is still a very good organic growth

story given the company’s strong product and service portfolio

and the positive tailwinds underlying the company’s key

aerospace and defence markets.

- As it relates to the integration efforts, we believe the company

continues to hit key milestones such as customer retention and re-

certifications. With Photo Etch’s facility closed (and business

transferred to FTG’s facilities) as of the end of CY16 and Teledyne

expected around the end of Q1 CY17, we believe the company

remains on track to hitting our $15.5M EBITDA estimate for FY18,

and to possibly be on this run-rate basis by H2 CY17, which we

view as key catalyst for the stock.

- We reiterate our Buy rating, but are increasing our target to $5.50

(was $5.00), which is based on 9x (was 8x) reflecting a general

industry multiple expansion.

$3.95

$5.50

39%

YE: Nov FY16E FY17E FY18E

Revenue (M) 86.5 99.6 102.0

EBITDA (M) 8.1 11.8 15.5

GAAP EPS ($) 0.31 0.25 0.36

FY16E FY17E FY18E

EV/Sales 1.2x 1.1x 1.0x

EV/EBITDA 13.1x 9.0x 6.8x

P/E 12.7x 15.8x 11.0x

22.2

Shares O/S (FD)1 24.2

Market Cap (Basic) $87.6

Market Cap (FD) $95.7

Cash $3.1 $0.13/sh

Debt $12.8 $0.53/sh

EV $105.4

gleung@beaconsecurities.ca

Stock Performance (1 year)

Stock Data (M)

Shares O/S (Basic)

Gabriel Leung 416-507-3963

Target Price Increase

Previous Close

12-month Target Price

Potential Return

Estimates (C$)

Valuation

Company Description

Toronto-based Firan Technology Group is a leading global supplier

of aerospace and defence electronic products and subsystems

and has two main operating segments: FTG Aerospace (~35% of

revenues) and FTG Circuits (~65% of revenues)

Research Team

Buy (unch) $5.50 (was $5.00)

January 11, 2017 | Page 23 Gabriel Leung| 416.507.3963 | gleung@beaconsecurities.ca

Firan Technology Group Corp.

2-Year 2-Year

Ticker FY - 1 FY1 FY + 1 Revenue CAGR FY - 1 FY1 FY + 1 EBITDA CAGR FY -1 FY1 FY + 1

Comps

CAE CAE.TO 2.4 x 2.2 x 2.1 x 7% 11.9 x 9.8 x 9.0 x 15% 20.9 x 19.0 x 17.2 x

Lockheed Martin LMT 1.9 x 1.9 x 1.7 x 4% 13.3 x 12.6 x 12.0 x 5% 22.4 x 21.0 x 20.0 x

General Dynamics GD 1.8 x 1.8 x 1.7 x 1% 11.9 x 11.5 x 11.4 x 2% 19.4 x 18.1 x 17.5 x

United Technologies UTX 1.9 x 1.9 x 1.8 x 2% 10.0 x 9.8 x 10.0 x 0% 24.6 x 16.9 x 17.0 x

Northrop Grumman NOC 2.0 x 1.9 x 1.9 x 3% 13.1 x 13.1 x 12.2 x 3% 22.4 x 20.0 x 19.3 x

Raytheon RTN 2.0 x 1.9 x 1.8 x 5% 13.0 x 12.1 x 12.0 x 4% 21.7 x 19.7 x 19.7 x

Airbus AIR.PA 1.0 x 1.0 x 0.9 x 3% 9.4 x 10.2 x 9.3 x 1% 19.0 x 20.9 x 18.1 x

Boeing BA 1.0 x 1.0 x 1.1 x -2% 10.3 x 13.0 x 9.4 x 5% 21.4 x 22.4 x 17.1 x

Average 1.7 x 1.7 x 1.6 x 3% 11.6 x 11.5 x 10.7 x 4% 21.5 x 19.7 x 18.2 x

Celestica CLS 0.2 x 0.2 x 0.2 x 4% 4.8 x 4.3 x 4.2 x 7% 29.0 x 9.5 x 9.8 x

Benchmark BHE 0.4 x 0.5 x 0.5 x -4% 7.1 x 7.6 x 7.5 x -3% 16.9 x 22.2 x 19.6 x

Flextronics FLEX.O 0.4 x 0.4 x 0.4 x 0% 7.3 x 7.1 x 6.7 x 5% 18.6 x 12.5 x 10.8 x

Sanmina SANM.O 0.4 x 0.4 x 0.4 x 3% 7.5 x 7.5 x 7.1 x 3% 15.3 x 13.3 x 12.5 x

Plexus PLXS.O 0.6 x 0.6 x 0.6 x 8% 10.6 x 9.0 x 8.4 x 12% 24.2 x 16.6 x 15.0 x

Jabil JBL 0.3 x 0.3 x 0.3 x 2% 4.4 x 4.1 x 3.9 x 6% 17.7 x 11.4 x 9.7 x

Astronics ATRO.O 1.2 x 1.3 x 1.2 x -1% 6.5 x 7.9 x 7.0 x -3% 13.2 x 19.4 x 16.5 x

TTM Technologies TTMI.O 1.0 x 0.9 x 0.8 x 11% 7.6 x 5.9 x 5.6 x 17% -49.7 x 10.9 x 10.0 x

Esterline ESL 1.6 x 1.6 x 1.6 x 2% 10.7 x 10.4 x 9.7 x 5% 22.5 x 18.8 x 16.9 x

Average 0.7 x 0.7 x 0.7 x 3% 7.4 x 7.1 x 6.7 x 5% 12.0 x 15.0 x 13.4 x

Average 1.2 x 1.2 x 1.1 x 3% 9.5 x 9.3 x 8.7 x 5% 16.7 x 17.4 x 15.8 x

Firan FTG.TO 1.2 x 1.1 x 1.0 x 9% 13.0 x 9.0 x 6.8 x 39% 12.7 x 15.8 x 11.0 x

Source: Company filings, Thomson, Beacon Securities

Firan Technology Group: Peer Group Analysis

EV/Sales EV/EBITDA P/E

January 11, 2017 | Page 24 Gabriel Leung| 416.507.3963 | gleung@beaconsecurities.ca

Firan Technology Group Corp.

Firan Technology Group - Income Statement

FY13 FY14 FY15 Q1 FY16 Q2 FY16 Q3 FY16 Q4 FY16 FY16 FY17 FY18

(C$000) 27-Feb-16 29-May-16 29-Aug-16 30-Nov-16

Revenues:

Circuit Segment Sales 37,728 45,055 54,315 12,560 14,168 14,729 16,663 58,120 64,255 65,540

Aerospace 18,270 15,644 17,730 4,369 5,597 8,458 9,929 28,353 35,378 36,439

Total revenues 55,998 60,699 72,045 16,929 19,765 23,187 26,592 86,473 99,633 101,980

Cost of sales:

Cost of sales 42,914 43,867 52,048 12,664 14,378 17,567 20,077 64,686 72,796 71,386

Depreciation of plant and equipment 1,688 1,646 1,963 513 527 609 609 2,258 2,436 2,436

Total cost of sales 44,602 45,513 54,011 13,177 14,905 18,176 20,686 66,944 75,232 73,822

Cost of sales % of revenues 76.6% 72.3% 72.2% 74.8% 72.7% 75.8% 75.5% 74.8% 73.1% 70.0%

Gross profit 11,396 15,186 18,034 3,752 4,860 5,011 5,906 19,529 24,401 28,158

Gross margins 20.4% 25.0% 25.0% 22.2% 24.6% 21.6% 22.2% 22.6% 24.5% 27.6%

Operating expenses:

SG&A 8,747 9,430 10,018 2,452 2,858 2,595 2,800 10,705 12,000 12,000

R&D 3,046 3,777 5,558 787 877 818 850 3,332 3,400 3,400

Recovery of R&D costs -280 -418 -492 -70 -70 -70 -70 -280 -280 -280

Depreciation of PP&E, amortization of intangibles 156 168 156 40 58 184 190 472 760 760

Recovery of investment tax credits -6,736 -167 -180 -152 0 -499 0 0

Goodwill impairment 1,039 0 0 0 0 0 0 0 0

Interest expense on short-term debt 67 29 34 0 20 31 31 82 124 124

Interest expense on long-term debt 328 364 413 40 44 46 96 226 383 383

Interest accretion due to early repayment of AMIS loan 556 0 0 0 0 0 0 0

Bargain in purchase gain -1,611 -5,578 0 -7,189 0 0

Severance and restructuring expenses 299 0 670 3,245 0 3,915 0 0

Foreign exchange loss (gain) -27 -610 -2,054 -55 360 13 0 318 0 0

Total expenses 13,375 12,740 7,453 3,027 3,026 1,132 3,897 11,082 16,387 16,387

Income before taxes -1,979 2,446 10,581 725 1,834 3,879 2,009 8,447 8,014 11,771

Current income tax expense 69 48 9 16 15 15 502 548 2,003 2,943

Deferred income tax expense -1,010 240 1,024 259 463 368 0 1,090 0 0

-941 288 1,033 275 478 383 502 1,638 2,003 2,943

Tax rate 47.5% 11.8% 9.8% 37.9% 26.1% 9.9% 25.0% 19.4% 25.0% 25.0%

Net income -1,038 2,158 9,548 450 1,356 3,496 1,507 6,809 6,010 8,828

Attributable to :

Non-controlling interest -40 35 11 0 0 11 0 11 0 0

Equity holders of FTG -998 2,193 9,537 450 1,356 3,485 1,507 6,798 6,010 8,828

EPS :

Basic -0.06 0.12 0.53 0.02 0.07 0.17 0.07 0.34 0.27 0.40

FD -0.06 0.11 0.47 0.02 0.07 0.15 0.06 0.31 0.25 0.36

EBITDA 1,613 4,107 4,964 1,108 1,734 2,288 2,946 8,076 11,761 15,518

EBITDA margins 2.9% 6.8% 6.9% 6.5% 8.8% 9.9% 11.1% 9.3% 11.8% 15.2%

Source: Company filings, Beacon Securities

Beacon Securities Ltd.| 66 Wellington Street West, Suite 4050, Toronto, Ontario, M5K 1H1 |416.643.3830|www.beaconsecurities.ca

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As at December 31, 2016 #Stocks Distribution

Buy 67 77% Buy Total 12-month return expected to be > 15%

Speculative Buy 12 14% Speculative Buy Potential 12-month return is high (>15%) but given elevated risk, investment could result in a material loss

Hold 3 3% Hold Total 12-month return is expected to be between 0% and 15%

Sell 0 0% Sell Total 12-month return is expected to be negative

Under Review 5 6%

Tender 0 0% Tender Clients are advised to tender their shares to a takeover bid or similar offer

Total 87 100%