cannabis-plant-highres

A productive first year to say the least

Australis Capital 7 August 2019 Update
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Australis Capital

A productive first year to say the least

Earnings update

Pharma & biotech

7 August 2019

Price

C$0.94

Market cap

C$159m

C$1.35/US$

Net cash (C$m) at March 2019 + subsequent transactions

24.2

Shares in issue

158.2m

Free float

97.36%

Code

AUSA

Primary exchange

CSE

Secondary exchange

OTCQB

Share price performance

%

1m

3m

12m

Abs

1.3

(1.3)

N/A

Rel (local)

2.7

(1.8)

N/A

52-week high/low

C$3.53

C0.65

Business description

Australis Capital is focused on US cannabis assets and is acquiring a range of low-valuation cannabis assets that it believes will have staying power in the rapidly developing cannabis market. The company’s goal is to form these assets into a fully operational and integrated US cannabis business.

Next events

Green Therapeutics deal closes

Late 2019

Analyst

Nathaniel Calloway

+1 646 653 7036

Australis Capital is a research client of Edison Investment Research Limited

Australis Capital recently reported financial results for its first year of operations. The year was characterized by a vigorous pace of deals to rapidly construct a major cannabis operator. The company now has multiple brands, access to retail spaces and supporting technology, and multiple industry partnerships and is close to completing its acquisition of Green Therapeutics (by the end of 2019), which will provide Australis with additional brands and the production it needs to launch.

Year end

Revenue (C$m)

PBT*
(C$m)

EPS*
(C$)

DPS
(C$)

P/E
(x)

Yield
(%)

03/19

0.1

(3.5)

(0.04)

0.0

N/A

N/A

03/20e

0.1

(5.7)

(0.04)

0.0

N/A

N/A

03/21e

0.1

(5.7)

(0.03)

0.0

N/A

N/A

Note: *PBT and EPS are normalised, excluding amortization of acquired intangibles, exceptional items and share-based payments.

Big plans coming to fruition

Australis reported operational costs of C$4.4m for FY19, driven by the two most recent quarters (Q3 C$2.0m, Q4 C$1.6m), which we are basing our future estimates on. We expect these costs to increase in FY20 with the incorporation of Green Therapeutics, although we currently do not have any additional data on the acquiree’s operations.

BaM sets up its California presence

Australis recently announced it would convert the C$1.6m debenture it previously issued to Body and Mind (BaM). The conversion is scheduled for June 2020 and would bring Australis’s total interest in the company to 38%. BaM is continuing to expand and recently completed its transaction to purchase a stake in the ShowGrow dispensaries in southern California. This transaction was financed by Australis for C$5.34m. BaM reported revenue of US$1.24m for the quarter ending 30 April 2019 and is getting close to break-even with a loss of US$43,871.

The march of progress: Illinois legalizes

The most recent territory to legalize recreational cannabis is Illinois, which will begin sales in January 2020. This brings the total number of states with legalized recreational cannabis to 11. Legalization efforts in New York and New Jersey were stymied in their recent congressional sessions due to disagreements regarding how to regulate the industry, but with both states generally in favor of reform.

Valuation: Trading at a 2.2x premium

Australis is currently trading at a 2.2x premium to our adjusted nominal value of its assets, which implies roughly the same return the company has already seen with its investment in BaM, even after the latter’s share price pulled back by over 50% since our last report. The cannabis sector has similarly pulled back over recent months (HMMJ is down 28% from March highs). We estimate net cash of C$24.2m (as of FY19 plus subsequent transactions), which should be sufficient to finance the company’s near-term development plans.

The first annual report

The company filed its first annual report as a public company at the end of July 2019, which provided the most comprehensive accounting of the company’s acquisitions and operations to date. The report was for the period ending 31 March 2019.

The company reported revenue of C$129,759 for the fiscal year, with C$101,625 of this attributable to consulting fees paid by BaM. The company’s operational expenses for the year were C$4.4m, mostly due to the last two quarters (C$2.0m and C$1.6m for Q3 and Q4, respectively), which we will now use as a base in our forecasts. We expect operational costs to further increase as the company shifts from a focus on acquisition to operational details. The company has a definitive agreement to purchase Green Therapeutics and its existing 8,000 square foot facility, in a deal that is expected to close in 2019. Australis will be breaking ground on its new 55,000 square foot facility in Clark County, Nevada, in the coming year (and guided toward completion in mid-2020). We have included C$20m in capex associated with the new facility in our forecasts at this time, but we have not forecast revenue from the operation yet. Once we have more operational visibility we expect to add this revenue to our models. The company previously stated that it expects US$10–12m in EBITDA from the new facility in the first year it is operational.

The report gave more detail for the first time regarding the operations of rthm, including its previous revenue and losses. Australis announced that the rthm unit had revenue of C$28,133 and losses of C$155,052 in the fiscal year since its incorporation on 2 November. Australis provided additional detail that it would have recorded estimated revenue of C$142,373 and a loss of C$384,008 if it reported the full year of activity. It is unclear why revenue was so much lower in the period following November than prior to it, but we suspect that it was because rthm shifted gears toward the development of the Coil app at that time and reduced other efforts. The company also released additional details regarding the royalties and milestones payable to rthm and Mr. Natural (Exhibit 1).

Exhibit 1: rthm and Mr. Natural royalties and milestones

Company

Payment

Trigger

rthm

C$625,000

1m downloads in the first 2.5 years

C$625,000

C$5m aggregate revenue in the first 2.5 years

Mr. Natural

C$1.05m in cash and stock

C$4m aggregate revenue

2.50% royalty

C$4m aggregate revenue

C$7,500 per month

Three months after closing

Source: Australis reports.

BaM continues the Cali buildout

Australis recently consolidated its stake in BaM. We previously reported on the May exercise of BaM warrants, and the company followed this in July with the announcement that it had signed an agreement to convert the C$1.6m debenture it issued to BaM. The conversion price is C$0.55 and the conversion is scheduled to occur in June 2020. This would bring the total number of shares in BaM held by Australis to 37.8m, or roughly 38%.

This comes at a time when BaM is significantly expanding its operations by establishing a presence in California. Australis originally issued C$5.34m in debt to the company to finance this expansion through the purchase of the ShowGrow dispensaries. BaM reported in July that it reached a definitive agreement with ShowGrow to purchase 100% of one of its dispensaries in Long Beach, and 60% of another in San Diego. This is an important development for the company because California is currently the single largest US cannabis market. The company already has manufacturing up and running in the state.

BaM reported sales of US$1.24m for its Q319 ending 30 April, which is roughly in line with Q2 (US$1.20m). The company has substantially reduced its net loss to US$43,871, from US$1.76m in Q219, although this can largely be attributed to lower stock -based payments (US$10,836 from US$870,808) and US$433,380 in interest payable to BaM associated with the acquisition vehicle Green Light District Holdings, set up by it and Australis.

Regulatory update

Progress continues to be made with cannabis legalization across the country. The newest state to legalize recreational cannabis is Illinois, with the law taking effect in January 2020. New York and New Jersey failed to pass their recreational cannabis bills, although not due to lack of support for legalization, but largely due to disagreements regarding how the industry should be regulated. However, in late July 2019 New York did pass a bill to end penalties on amounts less than two ounces.

In regulatory news important to Australis, authorities in Las Vegas voted to allow recreational cannabis lounges. This would shift the model at least to some degree away from the dispensary model where individuals purchase cannabis to smoke elsewhere, to something closer to the coffeehouse model seen in Amsterdam. This is an important decision because although cannabis has only been available in Nevada for a short time (legalized in 2016, available since 2017), there are early indications that it may be a destination for cannabis tourism. Nevada had over US$500m in recreational sales alone in its first fiscal year following legalization (ending June 2018). This compares to peak market estimates of US$800m based on Colorado per capita data. The most recent recreational use data is from March 2019, which was the biggest recreational use month to date with US$41m attributable to recreational use alone. Moreover, under the current legal regime, it is legal to own cannabis, but not smoke it in public, and cannabis lounges would alleviate this catch 22 for tourists visiting the city.

Valuation

BaM has been trading lower than when our previous report was published (31 May 2019), which has lowered our adjusted nominal value for Australis (to C$88.98m from C$144.37). The lower share prices for both BaM and Australis are consistent with the market, which has trended lower for cannabis stocks. The Horizons Marijuana Life Science ETF (HMMJ) is down 28% from its high in March. At current market prices, Australis is trading with a 2.2x premium to this adjusted value, which is still within the realm of what we consider reasonable. For example, even at this lower share price, the Australis stake in BaM has a market value of C$34.0m compared with the C$17.0m Australis paid for the investment, or a roughly 2x premium. We estimate that Australis has net cash of approximately C$24.2m (as of FY19 plus subsequent transactions), which we believe should be sufficient for it to finance its near-term operational goals.

Exhibit 2: Australis portfolio (C$m)

Asset

Nominal value

Adjusted value

rthm

3.86

 

Body & Mind

17.03

34.00

Wagner Dimas

3.00

 

Quality Green

2.00

 

Folium Biosciences

3.99

 

Mr. Natural

1.21

 

Green Therapeutics*

12.50

 

 

 

Core portfolio value

43.59

60.57

Legacy portfolio (Australis holdings & SubTerra)

4.23

4.23

Cash for investing (FY19 + subsequent transactions)

18.61

18.61

Other cash (FY19)

5.58

5.58

Total value

72.01

88.98

Source: Australis Capital reports, Edison Investment Research. Note: *Definitive agreement signed.

Exhibit 3: Australis market valuation

Shares outstanding (m)

158.17

Share price (C$)

0.94

Market cap (C$m)

158.68

 

 

Dilutive warrants and options (m)

45.74

Weighted average exercise price (C$)

0.22

Diluted shares (m)

203.90

Diluted market cap (C$m)

191.67

Source: Australis Capital reports, as of 6 August 2019

Exhibit 4: Financial summary

C$000s

2019

2020e

2021e

Year end 31 March

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

129.8

129.8

129.8

Cost of Sales

0.0

0.0

0.0

Gross Profit

129.8

129.8

129.8

EBITDA

 

 

(3,606.8)

(4,358.0)

(4,358.0)

Normalised operating profit

 

 

(3,616.8)

(5,699.8)

(5,699.8)

Amortisation of acquired intangibles

0.0

0.0

0.0

Exceptionals

0.0

0.0

0.0

Share-based payments

(677.5)

(677.5)

(677.5)

Reported operating profit

(4,294.4)

(6,377.3)

(6,377.3)

Net Interest

284.9

(45.1)

(45.1)

Joint ventures & associates (post tax)

0.0

0.0

0.0

Exceptionals

(161.7)

0.0

0.0

Profit Before Tax (norm)

 

 

(3,493.7)

(5,744.9)

(5,744.9)

Profit Before Tax (reported)

 

 

(4,171.2)

(6,422.4)

(6,422.4)

Reported tax

0.0

0.0

0.0

Profit After Tax (norm)

(3,493.7)

(5,744.9)

(5,744.9)

Profit After Tax (reported)

(4,171.2)

(6,422.4)

(6,422.4)

Minority interests

0.0

0.0

0.0

Discontinued operations

0.0

0.0

0.0

Net income (normalised)

(3,493.7)

(5,744.9)

(5,744.9)

Net income (reported)

(4,171.2)

(6,422.4)

(6,422.4)

Basic average number of shares outstanding (m)

94

158

166

EPS - basic normalised ($)

 

 

(0.04)

(0.04)

(0.03)

EPS - diluted normalised ($)

 

 

(0.04)

(0.04)

(0.03)

EPS - basic reported ($)

 

 

(0.04)

(0.04)

(0.04)

Dividend ($)

0.00

0.00

0.00

BALANCE SHEET

Fixed Assets

 

 

36,939.9

64,186.7

62,844.9

Intangible Assets

4,048.0

4,048.0

4,048.0

Tangible Assets

120.5

18,784.9

17,443.1

Investments & other

32,771.4

41,353.8

41,353.8

Current Assets

 

 

28,111.5

7,210.2

12,807.1

Stocks

0.0

0.0

0.0

Debtors

273.7

273.7

273.7

Cash & cash equivalents

24,515.5

3,614.2

9,211.1

Other

3,322.3

3,322.3

3,322.3

Current Liabilities

 

 

(1,864.5)

(1,452.7)

(1,452.7)

Creditors

(1,864.5)

(1,452.7)

(1,452.7)

Tax and social security

0.0

0.0

0.0

Short term borrowings

0.0

0.0

0.0

Other

0.0

0.0

0.0

Long Term Liabilities

 

 

(2,512.6)

(2,512.6)

(12,512.6)

Long term borrowings

0.0

0.0

(10,000.0)

Other long term liabilities

(2,512.6)

(2,512.6)

(2,512.6)

Net Assets

 

 

60,674.3

67,431.7

61,686.8

Minority interests

0.0

0.0

0.0

Shareholders' equity

 

 

60,674.3

67,431.7

61,686.8

CASH FLOW

Op Cash Flow before WC and tax

(3,606.8)

(4,358.0)

(4,358.0)

Working capital

833.9

(411.8)

0.0

Exceptional & other

(33.1)

(45.1)

(45.1)

Tax

0.0

0.0

0.0

Net operating cash flow

 

 

(2,806.0)

(4,814.9)

(4,403.1)

Capex

(130.6)

(20,006.2)

0.0

Acquisitions/disposals

(15,789.3)

(8,582.4)

0.0

Net interest

0.0

0.0

0.0

Equity financing

52,386.7

12,502.2

0.0

Dividends

0.0

0.0

0.0

Other

(9,438.5)

0.0

0.0

Net Cash Flow

24,222.3

(20,901.3)

(4,403.1)

Opening net debt/(cash)

 

 

0.0

(24,515.5)

(3,614.2)

FX

293.2

0.0

0.0

Other non-cash movements

0.0

0.0

0.0

Closing net debt/(cash)

 

 

(24,515.5)

(3,614.2)

788.9

Source: Australis Capital reports, Edison Investment Research


General disclaimer and copyright

This report has been commissioned by Australis Capital and prepared and issued by Edison, in consideration of a fee payable by Australis Capital. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

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London +44 (0)20 3077 5700

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Australis Capital and prepared and issued by Edison, in consideration of a fee payable by Australis Capital. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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