Big (user) Friendly GIANT

Fusionex International 15 September 2016 Outlook

Fusionex International

Big (user) Friendly GIANT

Reinitiation of forecasts

Software & comp services

15 September 2016

Price

159p

Market cap

£75m

£0.18/MYR

Net cash (MYRm) at end March 2016

105

Shares in issue

47.3m

Free float

52%

Code

FXI

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(7.3)

12.4

(53.2)

Rel (local)

(4.3)

0.5

(57)

52-week high/low

380.0p

115.0p

Business description

Fusionex International’s main product is GIANT, a big data analytics solution. Headquartered in Malaysia, Fusionex also has offices in five other Asian markets, the UK and the US. It sells its product through both direct and indirect channels to an international client base including Intel, DHL, Las Vegas Sands Corp and GroupM.

Next event

Full year results

January 2017

Analysts

Bridie Barrett

+44 (0)20 3077 5757

Dan Ridsdale

+44 (0)20 3077 5729

Fusionex International is a research client of Edison Investment Research Limited

Fusionex’s big data analytics solution, GIANT, has demonstrated that it can compete against the major industry vendors. The launch of GIANT 2016 further enhances the offering, including improved support for SaaS delivery to open up the largely unaddressed SME market. Enabled by the £14m fund-raising last October, investment has been stepped up to support a more ambitious growth strategy. While margins will be affected, the market opportunity is significant, GIANT’s reputation is building and this should provide the impetus for ongoing strong growth. This is not yet reflected in the shares, which discount a fairly benign outlook.

Year
end

Revenue
(MYRm)

Revenue
(£m)

EBITDA
(MYRm)

PBT
(MYRm)

EPS*
(sen)

DPS
(p)

EV/Sales
(x)

Yield
(%)

09/14

57.1

10.5

25.8

21.4

42.1

2.0

5.4

1.3

09/15

77.0

14.1

33.2

26.3

53.3

2.1

4.0

1.3

09/16e

89.5

16.4

3.9

(9.1)

(17.2)

2.2

3.4

1.4

09/17e

133.7

24.5

9.7

(6.8)

(12.6)

2.2

2.3

1.4

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

GIANT steps forward

Since launch in 2013, Fusionex’s GIANT has established an early foothold in the rapidly growing market of big data analytics. The strategy now is to capitalise on GIANT’s growing reputation as a usable and affordable alternative to the high-cost offerings of the software industry majors. Version two of the software, GIANT 2016, was launched at the end of June. It adds new features and can be configured on a self-service basis, opening up the addressable market beyond the enterprise to SMEs. The company is widening its reach by increasing the use of indirect sales channels, establishing additional offices overseas and stepping up marketing.

Capitalising on GIANT’s strong momentum

The company announced a step change in investment to support a more ambitious growth strategy in January, which is affecting the group’s historically high margins near term. However, the potential market is significant – IDC forecasts that it will be worth $49bn in 2019 and GIANT has strong momentum. It reported 79 customers in June 2016 vs 36 in September 2015, when management also stated there were “no signs of growth slowing”, and three contracts have since been announced. We reinitiate forecasts, which look for 35% CAGR in revenues to FY18 and EBITDA break-even this year, with margins rebuilding rapidly in FY17 and FY18.

Valuation: Opportunity in big data

Our reverse DCF suggests the current share price is discounting our forecasts, followed by revenue growth of around 10% to FY25. While not insignificant, this is fairly benign for a high-quality product so early in its sales cycle (we forecast GIANT sales to double this year), in a rapidly growing global market. Evidence that the current momentum can be maintained could lead to considerable upside. For this, we look for news of major client wins – both within the enterprise and SME market – and progress with the indirect channel strategy, which is key to cost-efficient scaling.

Investment summary

Company description: GIANT leaps forward

Fusionex is a global big data software business headquartered in Malaysia. It listed on AIM in 2012, and the £12m proceeds of the IPO have been used to support the development and launch in 2013 of GIANT, its big data analytics solution. The company now also has operations in Indonesia, Hong Kong/Macau, Thailand, Singapore, the Philippines and soon Vietnam, Greater China and Australia. GIANT enables organisations to collect and process their data no matter what the format, and to present the information via powerful and useful visuals for analysis. This is a market that is widely forecast to show dramatic growth over the coming years and GIANT has had considerable early success. Notable industry relationships include those with Microsoft, Dell, Hortonworks and Cloudera, as well as its indirect channel partners Avnet and Mesiniaga Berhad. Globally recognised customers include Intel, DHL and Las Vegas Sands Corp.

Financials: More ambitious plan, strong growth forecast

GIANT reported 79 customers in June 2016, up from 68 in March 2016, leaving it on track to hit its targeted 90 for 2016. Having proven GIANT can compete at the enterprise level against the larger vendors, management has now committed to scaling the product. Following the £14m fund-raising in October 2015, investment has been increased to enable Fusionex to raise its profile through additional sales and marketing initiatives, expand its international reach with new offices planned, and invest in the acquisition of storage to ensure it has the appropriate capacity to take on new customers at short notice. We believe the recent launch of GIANT 2016, a significant upgrade that includes a number of functional and user interface-related improvements in June of this year, will provide an additional impetus to growth and we forecast a CAGR in revenues of 35% for the FY15-18 forecast period. The increased investment means EBITDA margins will be compressed this year and next. However, we forecast margins to rapidly rebuild and a return to profitability at the net earnings level by FY18.

Valuation: Shares discount fairly benign rate of growth

The shares have been marked down since the group announced the increased investment required to execute its more ambitious growth strategy. However, given the potential opportunity, we consider this strategy appropriate. We believe that EBITDA margins have the potential to grow to c 35% on a revenue base of c MYR500m. If this is the case, and assuming our forecasts to FY18, the current share price implies a revenue growth (FY19- FY25e) of c 10% pa.

Given GIANT is only three years old, the product is gaining recognition in a rapidly growing industry (20% plus pa) and customer wins are showing strong momentum (we expect GIANT sales to double this year), 10% growth appears to be rather conservative. Taking our forecasts to FY18 followed by 15% revenue growth to FY26, our DCF returns a value of 325p. We believe that the market and current momentum could support even more aggressive growth than this. However, before using this as a base case, we will need to see clear evidence that GIANT 2016 is well received by the market and that the indirect sales channel strategy, which is the lower cost route to scaling, is delivering a strong pipeline of new customers.

Key sensitivities include the MYR exchange rate against local trading currencies as well as sterling. There is also a trade-off between revenue growth and margins and we do not regard the exact margin structure as being set in stone. In addition, the big data analytics arena involves a number of evolving and interwoven technologies and Fusionex must keep up with the changing requirements of the market.

Company description: Big data analytics

Introduction: GIANT 2016

Fusionex provides big data analytics software to enterprises and SMEs, both within its local markets in South-East Asia and globally. Its main product is GIANT, a user-friendly, competitively priced product that gives users the ability to collect, process and analyse their data. Since its launch in 2013, GIANT has had good momentum, deployed by 68 customers in March 2016. The launch of version two of this software, GIANT 2016, in June, which added additional features and opens up the market to SMEs, is already seeing very encouraging early commercial success, as illustrated by the announcement of two major contract wins worth several millions, and we expect it to give further impetus to this growth.

History and management

Fusionex was founded in 2005 by a group of entrepreneurial IT professionals led by Ivan Teh. The initial focus of the business was on consultancy, systems integration and solutions, but soon Fusionex had begun developing its own software. The first product was the Core Transactional Engine (CTE), launched in 2009, followed by the Business Intelligence (BI) offering in 2011. In December 2012, Fusionex floated on AIM and management stepped up the geographic sales expansion and the investment in new product development. Subsequently, the company began building a global distribution capability with partners and, most importantly, it launched the GIANT big data analytics solution in late 2013. Fusionex no longer markets its BI and CTE products. The company’s focus is centred entirely on its big data platform.

The group is run by Ivan Teh, CEO and managing director (46.15% shareholding), a well-known figure in the Asian technology sector having won numerous awards for entrepreneurship and leadership. He has almost 20 years’ experience in the IT sector which, prior to Fusionex, included positions at Hewlett-Packard and Accenture. The CFO, Yuen Choong Lai, is a qualified chartered accountant with over 20 years of finance and investment experience. Fusionex has four non-executive directors who combine UK, Asian, financial and technology industry experience: John Croft (non-executive chairman), Robin Taylor, Calvin Chun and Alan Lim.

Big data market is forecast to grow rapidly

With more computing and mobile devices in use, the amount of data being generated is growing exponentially. This data is potentially incredibly valuable to companies. If properly curated, they can enable companies to develop an integrated view of customer activities and business operations, which can lead to competitive advantage, or operational efficiencies.

However, much of these data are hard to store, access and process with traditional database management tools. The data generated may be in such high volumes, in a wide variety of formats and received at a very rapid rate. Big data technologies can help release the value in these accumulations of data.

Big data solutions are of use across many industry sectors; however, according to global technology market data and analysis by the International Data Corporation (IDC), the largest industries for big data spending in 2014 were discrete manufacturing ($2.1bn), banking ($1.8bn) and process manufacturing ($1.5bn). The industries with the fastest growth rates include securities and investment services, banking and media. IDC forecasts that the big data technology and services market will grow at a CAGR of 23.1% from 2014-19, with annual spending reaching $48.6bn in 2019, and software and services accounting for roughly half of this. It predicts that the Internet of Things (IoT) will be the next primary area of focus for data/analytics services with a 30% CAGR forecast over that time period. Although definitions and levels of enthusiasm vary across the forecasters, these figures are indicative of the size and expectations for big data technologies.

Exhibit 1: Global market for big data products

Source: IDC

GIANT: Helps companies access and understand their data

GIANT gives users the ability to collect, process and analyse their data. Whether structured, semi-structured or unstructured, data can be consolidated in one place, processed (in parallel and on a real-time basis if required) and accessed in a user-friendly way, removing the need for any real knowledge of the plethora of file structures, processing, scripts or languages that are being applied.

GIANT has three key elements:

Fusionex Data Extractor and Connector allows customers to extract data from a wide variety of sources without requiring knowledge of the format and structure of the data and puts it into a format in which it can be processed.

Fusionex Data Processor processes the data to render it useful. This can involve several stages including data validation, translation to a standard format and the application of meta data.

Fusionex Visualisation Renderer gives the user the ability to present the data in a wide range of ways to make the results clearer, or perhaps just more visually striking. Created in standard formats, the output of the renderer can be displayed, and in most cases manipulated, on a wide array of devices and end-applications including desktop, mobile and tablet.

GIANT can be provided to customers either on their premises, on a hosted basis (by third parties or by Fusionex) or a hybrid of these options. It is sold either with an upfront licence fee plus ongoing maintenance, or on a SaaS subscription basis. Contracts are generally between three and five years. Fusionex has increased the effort to raise the proportion of its income from periodic subscriptions, rather than on a traditional licence basis and we understand that the vast majority of new GIANT customers over the last 12 months are contracting on this basis. Although this move depresses revenues in the short term, it moves the company to a smoother revenue and cash flow path in the longer term.

Exhibit 2: Overview of GIANT

Source: Fusionex

GIANT 2016: SaaS solution opens up SME market

Three years after the launch of the original GIANT product, Fusionex has launched version two of its platform, GIANT 2016. Improvements include simpler and faster navigation, with natural language features added to the interface making the product easier to use. Support for R, a specialist programming language for data analytics, and Python, a general programming language that is increasing in popularity, have been improved. Fusionex has also added smart maps features, the ability to make parallel queries, along with streaming insights and more charting functions.

With GIANT 2016, management hopes to open up the big data analytics market to companies of all sizes by enabling functionality to be tailored appropriately (eg some of the high-end features like real-time processing are not required by all companies).

Launched in June 2016, GIANT 2016 has already announced three significant contract wins with an integrated holiday resort in Asia to use GIANT 2016 to optimise marketing strategy, a Japan-based international travel, leisure and hospitality group, to use GIANT 2016 to support its operations in the Philippines and, most recently, with Bursa Malaysia Berhad, Kuala Lumpur's Stock Exchange, where GIANT will enable it to keep track of the multitude of stock and price movements in the market.

GIANT differentiates on price, ease of use and completeness

Big data solutions are built on a growing number of crucial and evolving software elements (Exhibit 3). Typically, the cost to the user of setting up systems and understanding the various software elements is considerable. Big data projects with the major vendors, such as IBM, SAP, SAS and Oracle, generally command multi-million dollar price tags and yet the customer can still be left with a solution that is difficult to use and adapt. GIANT has been designed to be self-serve and intuitive to use by anyone in an organisation – not just those with database management or coding experience. It was recently made even easier by the integration of natural language processing (much like Google Search).

Based on average customer numbers, we estimate that Fusionex charges average annual subscriptions of approximately $300,000 per implementation compared to millions of dollars charged by the US and European industry majors to set up and license a big data solution. The SaaS version targeted at SMEs will have a considerably lower entry level price point. A key part of Fusionex’s ability to create and deliver products that are very cost competitive against the US and Europe-based major software vendors has been its lower cost of product development and, most importantly within this, the lower cost of local labour. Management states that it does not experience any significant problems in recruiting staff of the right calibre either in Malaysia or internationally, but some training is often required for some of the more specific applications and areas, particularly in the big data environment. There is also likely to be a cost advantage flowing from the fact that Fusionex’s product includes a number of layers in the big data supply chain.

There are many competitors for all of the elements of the GIANT product. However, products from the market leaders such as oracle, SAP and IBM combine a number of solutions. We are not aware of any similar solution that covers such a range of big data system elements in one package. In the area of data management tools companies like IBM, DataStax, Informatica and Syncsort have strong positions. In the visualisation and analytics area Tableau, Karmasphere, Datameer, Tresata and SAS Institute are among the leading names. These players in general have narrowly defined products and reach their markets only via larger resellers or software companies. These resellers will in turn place the product alongside other technologies, from their own library, from other vendors or from open source.

Exhibit 3: Big data supply chain

Source: Edison

Customers – blue chip names across many sectors

Fusionex’s customer list is a mix of quality names across a wide range of segments ranging across finance, electronics manufacturing, hospitality and media. Customers are both local and international names and include DHL, Las Vegas Sands, Starwood Hotels & Resorts, Lotus, Intel, Yeo’s, Aeon, Dell, TNS Group (Taylor Nelson Sofres), Brother Industries, Canon, Siam Cement, Air Asia, Hewlett-Packard, CIMB Bank, Takaful Insurance, MetLife, Resorts World Singapore, Volvo, Carrefour. GroupM, Jones Lang LaSalle, UEM Sunrise and Mitsui, among others.

Many of Fusionex’s implementations have been for local subsidiaries of global businesses that would typically be expected to choose solutions from the majors. Having proved itself capable at the local level, Fusionex is increasingly providing similar services to other local operations of these customers across South-East Asia and globally.

It has also received a number of accolades from industry bodies including Most Outstanding ICT Company in Asia by the Asian-Oceanic Computing Industry Organisation (ASOCIO) in 2015 and the Innovation Award at the 2015 Microsoft Worldwide Partner Conference. The inclusion of Fusionex as another “relevant vendor” for the first time in Gartner’s February publication of Magic Quadrant for Business Intelligence and Analytics Platforms is an encouraging signal that the company is making its presence felt on a global basis, despite its relatively small size.

Applications and efficiencies – case studies

Fusionex asserts that for a typical customer, it will derive approximately 10-30% savings on down time, 10-35% operation expenditure efficiencies, or drive double-digit increases in sales growth via customer profiling and product analysis. A good way to illustrate the power and potential of GIANT is by describing some of its applications.

Semiconductor manufacturing

The work undertaken with Intel is probably the highest profile and best documented of GIANT’s applications, with the implementation being the subject of a white paper. Intel worked with Fusionex, Cloudera, Dell, Mitsubishi Electric and Revolution Analytics (now part of Microsoft) on an IoT big data analytics project.

Semiconductor manufacturing is probably the most technically demanding manufacturing environment. Semiconductors, and particularly those that Intel makes, are high-value, ultra-high precision items that are manufactured in bulk on extremely expensive capital equipment in a highly complex process. Downtime can cost millions of dollars per hour, reworks and repairs of defective products are impossible and manufacturing equipment failure can be not only expensive but also dangerous. There is a vast amount of data generated within a semiconductor manufacturing facility. Historically, however, much of this data has been applied in a single use, for example to find out if a temperature is too high or too low, but big data technologies provide the ability to better consider these variables over time and to understand how they relate to each other.

Together with its partners, Intel gathered the data from its plethora of sensors over a period of time and looked at it alongside metrics such as equipment fail rates and product testing accuracy. A number of uses were found and applied over the life of the project, including predicting the failure of key components in manufacturing equipment, identifying where chips have not been successfully attached to substrates and using image analytics to identify and predict faulty products.

Intel’s use of Fusionex technology demonstrates that, despite its substantially lower price tag, GIANT can deliver an application where one might normally expect to find a US or European industry major’s product and, just as important, that global corporations with bleeding-edge technology skills recognise this.

Although the applications made by Intel are industry specific, it is clear that the streaming analysis of volumes of data and allowing users to simply manage and apply data is applicable across many manufacturing, process or extractive industries from semiconductors to food to oil. In fact, it is difficult to identify a large-scale manufacturing process for which it would not be relevant.

Hotels, resorts and theme parks

Fusionex has a GIANT customer that is a leading player in the Asian hotels and resorts market offering travel, hospitality, theme parks and conference facilities in a number of countries. Handling hundreds of thousands of visitors every year, both corporate and private, the company has a vast amount of information about its customers’ behaviour.

There are clear peaks and troughs in demand, across each day, week and year, and a high fixed-cost base. This means that there are significant potential benefits from managing occupancy and utilisation in hotels, theme parks and resorts. With GIANT from Fusionex, the client was able to bring together the masses of data to which it has access, from bookings, customer preferences, social media and even weather data, to analyse it and extract useful information and insight. As a result, the client is better able to predict and manage demand, yielding occupancy rate improvements of over 20%, with resulting operational efficiency gains of over 60%.

As for Intel, this is just the start for this client and, more importantly, for this application. We believe that this client intends to roll out the GIANT solution to a number of its sites across Asia as a result of the success it has seen with its initial implementations. Although we believe the scale of this client’s sites is large (including some of the biggest and best known in Asia), the relatively low cost of GIANT suggests that it is a relevant solution for worldwide hotels, resorts, conference facilities and theme parks.

Widening its addressable market

The market opportunity is significant. Management is widening its sales capabilities by increasing its international presence directly, as well as by establishing an increasing number of indirect sales channel partners.

Greater emphasis being placed on indirect channels

Fusionex makes most of its sales directly and works in tandem with Dell, Hewlett-Packard, Accenture, Microsoft, IBM and EMC for projects where these leading vendors see opportunities to increase their sales by working alongside or promoting Fusionex. These sorts of relationships now extend deep into the big data ecosystem. Fusionex also has partnerships and certifications with both Cloudera and Hortonworks, the leaders in providing big data platforms based on Hadoop, and Revolution Analytics, the leader in software and services relating to the R data analytics language. Fusionex’s c 15 sales representatives work directly with these partners and these sales are regarded as direct sales.

Since 2015 Fusionex has also been focusing on increasing its use of indirect sales channels as a way to cost-effectively scale its reach. The proportion of sales coming from indirect channels is currently 30-35%, and in the past management has indicated that it hopes to see this increase to 70%. The impact of this on gross margins could well be negative, if margin is sacrificed to partners, but the increased revenues should more than offset the added cost. In mid-2014, it was announced that the global technology distribution giant Avnet had joined Fusionex in a partnership arrangement and it has since announced partnerships with Mesiniaga Berhad (one of the biggest ICT solutions provider and systems integrators in Asia) and VADS (one of Malaysia’s leading integrated managed ICT service providers).

Establishing channel relationships is a key step in growing the overall customer base. However, motivating these channel partners to actively market a vendor’s products can be harder. Fusionex has decided to support its product visibility by launching a significant digital marketing campaign, and enhanced use of conferences and exhibitions to drive awareness and sales.

Internationalising the business

In FY15, 24% of sales were from beyond the ASEAN market, compared to 21% in FY14. While Asian markets are considered to be at a fairly early stage of development when it comes to the deployment of big data solutions, it is evident that interest for big data solutions in ASEAN nations is growing, as evidenced by the first Strata Hadoop World, the leading global big data industry event, in Singapore in December 2015. Since the IPO in 2012, the company has established offices in Indonesia, Hong Kong/Macau, Thailand and Singapore. We believe that the recent fund-raising will be applied in part to taking the international expansion a step further, with the establishment of a significant sales and development presence in the Philippines and plans to expand into Australia, Greater China and Vietnam.

Sensitivities

Fusionex is still a relatively small company, operating in a rapidly evolving industry, so it is difficult to predict its future path or its share price. There are several key sensitivities for both the company and its shares that should be considered.

Single product: a great deal of the long-term success of the company is reliant on the continuing success of one product – GIANT.

Competing products: management does not believe there are similar products that can offer the breadth of application, ease of use or competitive pricing that GIANT does. This may change as big data becomes more settled and mainstream, and perhaps as the appetites of VCs and major vendors to invest in such products develop.

As with all growing software businesses there is a trade-off between revenue growth and margins and we do not regard the exact margin structure as being set in stone. The flexible way that GIANT can be provided, most notably the hosted and ‘in a box’ formats, reduces the human resource constraints on rapidly growing sales, giving Fusionex more options on how and where to drive growth. This is an ambitious and rapidly moving company and we believe that if management identifies greater long-term value from a more aggressive pricing or product development strategy, short- to medium-term margins may be held back.

Exchange rates: Fusionex undertakes most of its work in ASEAN markets and prices products in local currencies. UK investors are therefore exposed to currency movements between Malaysian ringgits (MYR) and sterling. However, Fusionex effectively prices against US dollar competitors and has a principally MYR cost base, providing something of a natural hedge.

Key shareholder and management: Ivan Teh is the majority shareholder (46.15%), the CEO and managing director. The company is therefore dependent on him to an extent, although we believe he has put in place a solid and effective management structure beneath him. Given his evident commitment to the group, we do not expect Mr Teh to significantly reduce his absolute shareholding.


Financials: Forecasts reinitiated

Group revenue profile has transformed with GIANT

Over the last three years Fusionex has transformed its revenue profile from predominantly the legacy CTE and BI solutions (100% of revenues in FY12) to being almost entirely from its big data analytics solution in FY16e (a breakdown of revenues by product is not given, but we estimate c 80% of revenues will be from GIANT in FY16). Management has taken the strategic decision to no longer actively promote the legacy products – despite this drag on revenues, Fusionex has achieved a CAGR of 35% over the last three years to 2015.

Progress with GIANT has been impressive. From 12 customers at the end of FY14, it reported 36 at September 2015, 68 in March 2016 and 79 in June 2016, and with “no sign of slowing down” (27 June statement) Fusionex appears on track to hit its targeted 90 for FY16. With the additional impetus that we expect to arise from GIANT 2016 and the SME market, coupled with the more ambitious sales and marketing effort, we expect the strong growth of GIANT to continue and forecast a CAGR in revenues of 35% for the FY15-18 forecast period despite the impact the discontinuation of the legacy products will have in FY17.

The shift in product mix towards the “easy to implement” GIANT would suggest that services revenue (12% FY15) might decline sharply, but this has not entirely been the case to date. Bringing on board new channel partners does require a significant level of initial support from Fusionex. Our forecasts assume services revenues continue at broadly the same absolute level going forward.

Investing in growth will affect profitability in the near term

The majority of costs relate to staff (c 60% of which are devoted to product development which is capitalised), amortisation of R&D expenses (principally staff costs), data hosting costs, marketing and general overheads. Hosting and marketing costs are set to see a steep increase in 2016 as Fusionex raises its profile and invests in the acquisition of storage to ensure it has the appropriate capacity to take on new customers at short notice.

Operating expenses more than doubled in H116 and we expect a full year increase in operating expenses of 120%, pushing Fusionex into losses this year. Looking ahead to FY17 and FY18, we do not expect this kind of step change in the cost base to be repeated. Upfront investment in hosting may be required each time Fusionex enters a new market, otherwise costs should be more closely aligned to the increase in sales. With a c 74% gross margin, this profile of operating expenses should support strong operational gearing effects and we forecast a return to operating profitability by FY18.

Exhibit 4: Revenues and margins – historical and forecast

(MYRm)

2012

2013

2014

2015

2016e

2017e

2018e

Services

9.5

7.6

9.2

9.0

9.0

9.0

9.0

Growth (%)

(17.5)

(20.8)

22.1

(2.2)

0.0

0.0

0.0

CTE

12.5

14.7

12.5

6.9

1.7

-

-

Growth (%)

25.0

18.0

(15.0)

(45.0)

(75.0)

(100.0)

BI

9.3

22.1

25.4

23.8

7.2

-

-

Growth (%)

218.6

138.4

15.0

(6.3)

-70.0

-100.0

GIANT

0.0

0.0

9.9

37.3

71.6

124.7

181.8

Growth (%)

N/A

N/A

N/A

276.7

92.0

72.7

45.8

Total revenues

31.3

44.4

57.1

77.0

89.5

133.7

190.8

Gross profit

23.2

34.3

44.3

58.9

66.9

100.1

144.1

Gross margin (%)

74

77

78

76

74%

75%

75%

EBITDA

16.4

22.5

25.8

33.2

3.9

9.7

30.2

EBITDA margin (%)

52

51

45

43

4

7

16

Operating profit

15.4

20.8

21.8

26.4

(9.1)

(6.8)

10.2

Operating margin (%)

49

47

41

37

(10)

(5)

5

Source: Fusionex (historic), Edison Investment Research (forecast)

As a growing technology company that is investing heavily in product development, Fusionex benefits from a number of tax and other financial incentives, notably the tax exemption that goes with its Multimedia Super Corridor (MSC) status in Malaysia. The MSC tax status is due to expire this year; however, in our forecasts we assume that this will be extended and forecast a 12% effective tax rate, in line with FY15.

Foreign exchange considerations

Fusionex reports in Malaysian ringgit and the share priced in sterling. It bills its clients in local currencies, while most of its costs are ringgit based. Over the last year the ringgit has appreciated against most of its trading currencies, as it has against sterling. The accounting impact of this is to reduce ringgit revenues, with a significantly smaller movement in the costs lines. This may add to margin pressure, and potentially erodes some of the price advantage Fusionex has versus the majors (which typically base prices in US dollars). However, as this appreciation has been gradual and reverses the sudden depreciation seen over the summer of 2015, we are not overly concerned.

Exhibit 5: Two-year exchange rate MYR against key trading currencies and GBP

Source: Bloomberg

Cash flow – adequately funded

In addition to the forecast operating losses, cash absorption is principally affected by:

trade receivables: Fusionex’s increasing use of indirect sales channels, where partners receive the payments before passing it on to Fusionex, is likely to exacerbate the already relatively long receivables cycles in many Asian markets. That said, we do not anticipate trade debtor days to remain at the level seen at the end of FY15 (135 days), which was also affected by the timing of two large sales just before the year end. At the interim, most of this balance had been recouped and trade debtors were a more normalised 80 days. We forecast 90 days on an ongoing basis and, as a strongly growing company in a typical year, therefore, we would expect a working capital outflow of approximately 30 days of sales;

capital expenditure: Fusionex capitalises its development work, which we expect to be ongoing in line with its strategy to stay ahead of the market in terms of the usability and feature sets of its products. In addition, as it increases its geographic footprint there will be the costs associated with opening and furnishing new offices. Total capital expenditure in FY15 was MYR16m. We forecast this to increase to MYR30m in FY16; and

dividends: Fusionex paid a dividend of 2.1p in FY15. During the current investment phase, we forecast the dividend per share to remain broadly flat in sterling terms although, owing to the depreciation of sterling, this equates to a decline on a local currency basis.

Fusionex reported net cash of MYR105m at March 2016 (£19m). We believe this should provide adequate funding through the forecast period.


Valuation

For high-growth technology companies that are in an investment phase, we prefer to use a DCF as the basis for our valuation.

DCF scenario analysis: Revenues vs EBITDA margin

We use a DCF to estimate what the shares could be worth under varying medium- and longer-term revenue and EBITDA margin assumptions. Our DCF model assumes:

our three-year explicit forecasts to FY18 (ie CAGR in revenues of 35% with EBITDA break-even in FY16 increasing to an EBITDA margin of 16% in FY18 (vs 43% in FY15);

we then factor in a further seven years of stable revenue growth where EBITDA margins increase gradually to a peak when the revenue base reaches c MYR500m and are maintained at this rate. We change the rate of growth in revenues (and consequently the year in which peak margins are achieved) to estimate what the shares might be worth under differing revenue/margin scenarios; and

we apply a terminal growth rate of 2%, a WACC of 11%, 30 days’ working capital absorption and that capital expenditure stabilises at approximately 12% of sales.

Exhibit 6 presents what different medium term revenue/growth and EBITDA margin mix scenarios could mean for the share price.

Exhibit 6: DCF scenario analysis – derived share value (£)

Revenue in year 10 (FY26e)

Peak EBITDA margin (at c MYR500m revenue)

MYR (m)

22.5%

25%

30%

35%

40%

45%

CAGR revenues

(FY18-26e)

10%

410

0.67

0.90

1.37

1.85

2.32

2.79

12%

472

0.86

1.13

1.68

2.22

2.77

3.31

15%

584

1.43

1.80

2.52

3.25

3.98

4.70

18%

717

1.91

2.35

3.24

4.13

5.02

5.92

20%

821

2.22

2.73

3.73

4.74

5.74

6.75

25%

1,137

3.29

3.97

5.34

6.71

8.07

9.44

30%

1,557

4.71

5.63

7.47

9.31

11.14

12.98

35%

2,105

6.54

7.76

10.19

12.62

15.05

17.48

Source: Edison. Note exchange rate £/MYR5.45.

There are of course many ‘ifs’ in this kind of analysis. We believe it is important that investors consider the following:

Margin profile: in the past, Fusionex enjoyed EBITDA margins of 45% to 50%. Given management’s ambitions to scale Fusionex, returning to margins of this level on a sustainable basis is unlikely. However, as Fusionex scales, efficiencies are likely in the cost of hosting, sales and in the more discretionary marketing costs. We believe EBITDA margins of c 35% could be comfortably achievable on a revenue base of MRY500m (approximately £100m). 35% is consistent with the EBITDA margins seen by a number of larger global software vendors and the medium-term target figures referred to by leading pure-play SaaS vendors. Under this scenario, the current share price appears to be discounting that revenue growth can be maintained over the medium term at c 10%.

Early stage of the market and Fusionex: GIANT is a relatively young product and Fusionex is early in its strategy to widen its reach through marketing, geographic expansion and increased use of indirect channels. We forecast a relatively high share of R&D capital expenditure and it is probable that additional products and feature sets will be launched. If GIANT 2016 proves a success, as we anticipate, particularly with the SME market, we would expect to see considerably higher growth sustained through the medium term than that implied by the current share price.

Revenue visibility: with contract lengths of three to five years, and an increasing share of customers signed on a subscription basis, there is relatively good revenue visibility.

Base case DCF of 325p: while deciding the mid- to long-term revenue growth rate is fairly arbitrary, as outlined above, 10% seems low for the stage of development of GIANT (where we expect revenue to double this year) in a rapidly growing market. If we assume our forecasts to FY18 followed by c 15% CAGR in revenues to FY26, with margins peaking at 35% (in FY25), our DCF returns a per share value of 325p. We believe that the market could support more aggressive growth (at 20%, our DCF returns 474p), but we need more visibility of partner bookings coming through strongly before using this as a base case. Peer multiples comparison has only have limited use

Like Fusionex, many of its listed peers are currently in an investment phase, and so peer multiples comparison adds little, other than to show that on EV/sales multiples of 2.3x in FY17, Fusionex trades at the lower end of the range (Hortonworks at the lower end on 1.5x and NetSuite at the higher end on 7.2x).

Exhibit 7: Peer comparison

Reporting CCY

Share price

Mkt
cap (m)

Sales

Sales growth

EBITDA
margin (%)

EV/Sales
(x)

EV/EBIT
(x)

EV/EBITDA
(x)

this

next

this

next

this

next

this

next

this

next

this

next

Fusionex*

MRY

1.58

80

95

134

23%

41%

-2

3

3.4

2.3

(45.3)

29.9

78.4

31.4

Splunk

USD

58.2

7,829

914

1,172

37%

28%

-29

6

7.5

5.8

(23.7)

148.9

(25.5)

91.0

Hortonworks

USD

7.4

438

178

234

46%

32%

-98

-27

1.9

1.5

(1.9)

(2.2)

(2.0)

(5.5)

Tableau

USD

55.5

3,161

836

1,029

28%

23%

-3

6

2.8

2.3

(45.5)

85.7

(83.4)

36.5

NetSuite

USD

110.2

8,918

966

1,222

30%

27%

-7

7

9.1

7.2

(76.3)

192.2

(130.8)

108.6

salesforce.com

USD

73.1

50,046

8,314

10,075

25%

21%

8

17

5.8

4.8

423.0

45.2

75.9

29.2

GB Group

GBP

313.5

419

91

106

24%

17%

15

17

4.5

3.9

42.9

24.5

30.6

22.7

Source: Bloomberg. Note: *Edison Forecasts. Prices as at 14 September 2016.

Valuation conclusion – benign outlook being priced in

While both valuation methods are highly subjective, they serve to demonstrate the significant upside potential to the share price if Fusionex can execute on its strategy to scale GIANT.

Given GIANT 2016 has only recently launched and the new emphasis on the SME market, the coming months will be very important in determining where medium-term growth expectations should be set. Initial evidence is encouraging; in its 27 June statement, Fusionex announced 79 customers stating that “it is showing no signs of slowing”. It has subsequently announced three new customers, putting it on track to reach its target of 90 by the end of 2016.

Exhibit 8: Financial summary

Year end 30 September

MYR '000s

2013

2014

2015

2016e

2017e

2018e

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

44,423

57,106

77,044

89,500

133,719

190,831

Cost of Sales

(10,090)

(12,793)

(18,191)

(23,020)

(33,641)

(46,777)

Gross Profit

34,333

44,312

58,853

66,480

100,077

144,054

EBITDA

 

 

22,478

25,816

33,195

3,881

9,733

30,248

Operating Profit (before amort. and except.)

20,840

21,797

26,376

(9,114)

(6,767)

10,248

Intangible Amortisation

0

0

0

0

0

0

Exceptionals

0

1,365

2,037

0

0

0

Other

0

0

0

0

0

0

Operating Profit

20,840

23,162

28,412

(9,114)

(6,767)

10,248

Net Interest

(340)

(381)

(41)

(8)

(8)

(8)

Profit Before Tax (norm)

 

 

20,500

21,415

26,334

(9,122)

(6,775)

10,240

Profit Before Tax (FRS 3)

 

 

20,500

22,780

28,371

(9,122)

(6,775)

10,240

Tax

(1,488)

(3,320)

(3,424)

1,095

813

(1,229)

Profit After Tax (norm)

19,012

18,095

22,910

(8,027)

(5,962)

9,012

Profit After Tax (FRS 3)

19,012

19,460

24,947

(8,027)

(5,962)

9,012

Average Number of Shares Outstanding (m)

41.9

43.0

43.0

46.7

47.3

47.3

EPS - normalised (sen)

 

 

45.3

42.1

53.3

(17.2)

(12.6)

19.1

EPS - normalised and fully diluted (sen)

 

45.3

42.1

53.3

(17.2)

(12.6)

19.1

EPS - (IFRS) (sen)

 

 

45.3

45.3

58.0

(17.2)

(12.6)

19.1

Dividend per share (p)

2.0

2.0

2.1

2.2

2.2

2.3

Gross Margin (%)

77.3

77.6

76.4

74.3

74.8

75.5

EBITDA Margin (%)

50.6

45.2

43.1

4.3

7.3

15.9

Operating Margin (before GW and except.) (%)

46.9

38.2

34.2

-10.2

-5.1

5.4

BALANCE SHEET

Fixed Assets

 

 

49,077

57,761

73,605

90,110

109,610

130,610

Intangible Assets

13,642

22,125

34,742

45,492

56,992

66,992

Tangible Assets

35,435

35,194

38,031

43,786

51,786

62,786

Investments

0

442

831

831

831

831

Current Assets

 

 

72,678

79,467

94,140

149,368

123,369

110,302

Stocks

0

0

0

0

0

0

Debtors

10,287

12,312

36,412

33,682

42,881

54,666

Cash

62,392

64,021

57,728

115,686

80,488

55,636

Other

0

3,134

0

0

0

0

Current Liabilities

 

 

(7,345)

(12,190)

(13,408)

(14,443)

(20,224)

(25,739)

Creditors

(6,377)

(8,856)

(12,588)

(13,623)

(19,405)

(24,919)

Short term borrowings

(969)

(3,334)

(819)

(819)

(819)

(819)

Long Term Liabilities

 

 

(27,894)

(23,645)

(25,664)

(24,814)

(23,964)

(23,114)

Long term borrowings

(26,776)

(20,224)

(19,446)

(18,596)

(17,746)

(16,896)

Other long term liabilities

(1,117)

(3,421)

(6,218)

(6,218)

(6,218)

(6,218)

Net Assets

 

 

86,516

101,393

128,672

200,221

188,790

192,059

CASH FLOW

Operating Cash Flow

 

 

21,459

25,869

13,071

7,645

6,316

23,978

Net Interest

3

(239)

227

(8)

(8)

(8)

Tax

(1,643)

(1,115)

(1,651)

1,095

813

(1,229)

Capex

(35,185)

(14,132)

(16,105)

(29,500)

(36,000)

(41,000)

Acquisitions/disposals

0

0

0

0

0

0

Financing

52,789

0

0

84,785

0

0

Dividends

(5,959)

(4,795)

(4,961)

(5,209)

(5,469)

(5,743)

Net Cash Flow

31,464

5,588

(9,419)

58,808

(34,348)

(24,001)

Opening net debt/(cash)

 

 

(4,153)

(34,646)

(40,463)

(37,462)

(96,271)

(61,923)

HP finance leases initiated

0

0

0

0

0

0

Other

(971)

229

6,418

0

0

0

Closing net debt/(cash)

 

 

(34,646)

(40,463)

(37,462)

(96,271)

(61,923)

(37,921)

Source: Fusionex, Edison Investment Research

Contact details

Revenue by geography

Unit TA-12-1, Level 12, Tower A, Plaza 33
No 1, Jalan Kemajuan, Section 13
46200 Petaling Jaya, Selangor
Malaysia
+603 77115200
www.fusionex-international.com

Contact details

Unit TA-12-1, Level 12, Tower A, Plaza 33
No 1, Jalan Kemajuan, Section 13
46200 Petaling Jaya, Selangor
Malaysia
+603 77115200
www.fusionex-international.com

Revenue by geography

Management team

CEO and Managing Director: Ivan Teh

Chairman: John Croft

The heart and soul of Fusionex is Ivan Teh. Before establishing Fusionex, Ivan worked and trained in the US, Europe, Hong Kong and Singapore and worked in management functions at Hewlett-Packard, Intel and Accenture.

Mr Croft has extensive experience in technology companies and other AIM-listed and Asian businesses.

CFO: Yuen Choong Lai

Mr Choong Lai is a qualified accountant with over 20 years of experience in finance and investment, having worked with PwC, HSBC and the Kuala Lumpur Stock Exchange.

Management team

CEO and Managing Director: Ivan Teh

The heart and soul of Fusionex is Ivan Teh. Before establishing Fusionex, Ivan worked and trained in the US, Europe, Hong Kong and Singapore and worked in management functions at Hewlett-Packard, Intel and Accenture.

Chairman: John Croft

Mr Croft has extensive experience in technology companies and other AIM-listed and Asian businesses.

CFO: Yuen Choong Lai

Mr Choong Lai is a qualified accountant with over 20 years of experience in finance and investment, having worked with PwC, HSBC and the Kuala Lumpur Stock Exchange.

Principal shareholders

(%)

Ivan Teh

46.2

Quek Tuck Loong

6.5

Standard Life

5.9

JP Morgan Asset Management

3.8

Yuen Choong Lai

1.6

Companies named in this report

Mesiniaga (5011), SAP (SAP) , IBM (IBM), Splunk (SPLK), NetSuite (N), Oracle (ORCL), HP (HPQ), Yahoo (YHOO), Google (GOOG), Microsoft (MSFT), Tableau Software (DATA)

Edison, the investment intelligence firm, is the future of investor interaction with corporates. Our team of over 100 analysts and investment professionals work with leading companies, fund managers and investment banks worldwide to support their capital markets activity. We provide services to more than 400 retained corporate and investor clients from our offices in London, New York, Frankfurt, Sydney and Wellington. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2016 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Fusionex International and prepared and issued by Edison for publication globally. 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. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US 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. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and 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 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. This document is provided 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.
Edison has a restrictive policy relating to personal dealing. 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. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. 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. 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 (ie 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. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2016. “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.

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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

Edison, the investment intelligence firm, is the future of investor interaction with corporates. Our team of over 100 analysts and investment professionals work with leading companies, fund managers and investment banks worldwide to support their capital markets activity. We provide services to more than 400 retained corporate and investor clients from our offices in London, New York, Frankfurt, Sydney and Wellington. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2016 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Fusionex International and prepared and issued by Edison for publication globally. 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. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US 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. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and 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 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. This document is provided 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.
Edison has a restrictive policy relating to personal dealing. 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. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. 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. 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 (ie 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. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2016. “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.

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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

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