Cash burn up slightly, stronger balance sheet

Foresight Autonomous 12 December 2017 Update
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Foresight Autonomous Holdings

Cash burn up slightly, stronger balance sheet

Q317 results

Software & comp services

12 December 2017

Price per share*

NIS2.60

Price per ADR*

$3.54

Market cap

NIS284m

Market cap ADR

$78m

*Priced at 06 December 2017

NIS3.4955/US$

Net cash ($m) at 30 September 2017

21.5

Shares in issue

109.4m

Free float

67.2%

Code

FRSX

Primary exchange

TASE

Secondary exchange

Nasdaq

Share price performance

%

1m

3m

12m

Abs

(33.4)

(35.6)

32.6

Rel (local)

(34.1)

(38.2)

27.1

52-week high/low

NIS8.5

NIS1.7

Business description

Foresight Autonomous (FRSX) is a development-stage technology company in Israel developing ADAS systems based on technology developed by its parent company Magna BSP. FRSX also has a 24.8% stake in rail ADAS specialist Rail Vision.

Next events

FY17 results

February, 2018

Analysts

Anna Bossong

+44 (0)20 3077 5737

Richard Jeans

+44 (0)20 3077 5700

Foresight Autonomous (FRSX) was able to achieve a number of milestones during Q317. These included tests with two major Chinese auto manufacturers, demonstration of a proof of concept for FRSX’s road traffic preventions system using thermal and visible light cameras and a successful system demonstration of its all-weather ADAS system for use in electric vehicles with Uniti Sweden. With higher R&D spend, cash burn rose slightly to $1.5m in the third quarter, up from a quarterly average of $1.2m in H1. The group nevertheless ended the quarter with $3.2m higher net cash balances helped by $5.0m cash inflow from warrant conversions during the period.

Year end

Revenue ($m)

EBITDA*
($m)

PBT*
($m)

EPS*
($)

DPS
($)

EV/revenue
(x)

P/E
(x)

12/16

0.0

(3.3)

(3.4)

(0.05)

0.00

N/A

N/A

12/17e

0.0

(5.8)

(5.7)

(0.06)

0.00

N/A

N/A

12/18e

1.1

(11.5)

(11.5)

(0.10)

0.00

71.0

N/A

12/19e

14.6

(8.6)

(8.7)

(0.08)

0.00

5.6

N/A

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

Mostly non-cash swings

FRSX reported a normalised Q3 net loss of $2.1m principally due to a boost to spending on R&D to $1.0m, which, stripping out employee share option payment (ESOP) outlays, almost equalled the entire H1 spend of $1.1m. The group nevertheless reported a net profit of $4.5m in Q317 after a $7.0m boost from the revaluation of warrant liabilities. We have maintained our FY17 normalised loss forecast of $5.7m, but on the back of this revaluation of warrant liabilities and an increase in our ESOP payment forecasts of $0.9m, we have reduced our reported net loss forecast by $6.1m to $24.3m.

Warrants a good source of cash

The third quarter results show the potential earnings volatility arising from the share price changes given the group’s high level of warrant issuance. At the underlying level, however, the high warrant issuance has helped create a strong balance sheet and should help fund further growth. Even at a NIS3.05 share price, we estimate a further $21.5m in potential fund inflows from conversion of in-the-money warrants.

Valuation: 2% dip to NIS5.05 on warrant dilution

Our underlying $131m DCF enterprise value estimate for FRSX has remained unchanged despite the revisions made to our forecasts. Nevertheless, our DCF share valuation has been reduced from NIS5.15 per share to NIS5.05 due to the impact of the recent decline in the share price on the dilution for full conversion of in-the-money warrants.

Quarterly earnings update

Foresight Autonomous demonstrated continued progress in bringing the group’s ADAS product to market, with the addition of two further successful Chinese pilot trials, bringing the total to three, as well as a demonstration of capability with electric car start-up Uniti Sweden. Another milestone achievement was the demonstration of proof of concept of a multispectral advanced driver assistance system (ADAS) utilising both infrared and visible light cameras to provide superior all-weather capabilities. (For further information, please see our outlook note Well placed for China’s ADAS revolution, 31 October 2017).

Exhibit 1: Foresight Autonomous quarterly earnings summary

$000s, US GAAP

2016

H116

H117

Q316

Q317

9M16

9M17

2017e

Profit and loss statement

 

 

 

 

 

 

 

 

Revenue

0

0

0

0

0

0

0

0

R&D costs

(904)

(319)

(1,275)

(277)

(1,144)

(596)

(2,419)

(3,355)

R&D excluding ESOP payments

(904)

(319)

(1,092)

(277)

(982)

(596)

(2,074)

(2,822)

Marketing and Sales

(224)

(105)

(513)

(55)

(263)

(160)

(776)

(750)

M&S excluding ESOP payments

(224)

(105)

(253)

(55)

(169)

(160)

(422)

(290)

General and admin expenses (net of D&A)

(2,627)

(1,484)

(2,337)

(498)

(684)

(1,982)

(3,021)

(4,204)

G&A excluding ESOP payments

(2,627)

(1,484)

(1,141)

(387)

(516)

(1,658)

(1,657)

(2,658)

Other

0

0

0

0

0

0

0

(6)

Total opex

(3,755)

(1,908)

(4,125)

(830)

(2,091)

(2,738)

(6,216)

(8,315)

EBITDA reported

(3,755)

(1,908)

(4,098)

(827)

(2,076)

(2,733)

(6,186)

(8,305)

EBITDA reported margin (%)

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

Of which share based payments, exceptionals

(405)

(213)

(1,639)

(111)

(424)

(324)

(2,063)

(2,539)

EBITDA normalised

(3,350)

(1,695)

(2,459)

(716)

(1,652)

(2,409)

(4,123)

(5,766)

Depreciation and amortisation

0

0

(27)

(3)

(15)

(5)

(30)

(10)

Operating profit reported

(3,755)

(1,908)

(4,125)

(830)

(2,091)

(2,738)

(6,216)

(8,315)

Operating profit normalised

(3,350)

(1,695)

(2,486)

(719)

(1,667)

(2,414)

(4,153)

(5,776)

Finance income (expenses)

103

53

656

38

(76)

91

580

793

Equity accounted profit

(108)

0

(383)

0

(343)

0

(726)

(700)

Revaluation of derivative warrant liability income

1,847

438

(16,050)

1,315

6,976

1,753

(16,074)

(16,050)

Profit before tax reported

(1,913)

(1,417)

(19,902)

523

4,466

(894)

(22,436)

(24,272)

add back Total exceptional items

(1,442)

(225)

17,689

(1,204)

(6,552)

(1,429)

18,137

18,589

Profit before tax normalised

(3,355)

(1,642)

(2,213)

(681)

(2,086)

(2,323)

(4,299)

(5,683)

Tax

0

0

0

0

0

0

0

0

Net profit reported

(1,913)

(1,417)

(19,902)

523

4,466

(894)

(22,436)

(24,272)

Net profit normalised

(3,355)

(1,642)

(2,213)

(681)

(2,086)

(2,323)

(4,299)

(5,683)

Key cash flow/balance sheet data

 

 

 

 

 

 

Total operating cash flows

(3,458)

(1,793)

(2,757)

(443)

(1,464)

(1,665)

(3,794)

(5,757)

Cash incr. (burn) for period – operating + investing

(3,747)

(1,793)

(2,561)

(1,098)

(1,533)

(2,329)

(3,943)

(5,364)

Share issue/(repurchase)/warrant issue and exercise

6,256

4,940

16,300

845

5,050

5,052

21,391

22,012

Closing net debt/(cash)

(3,754)

(5,042)

(18,277)

N/A

(21,524)

N/A

(21,524)

(20,570)

Per share calculations

 

 

 

 

 

 

EPS normalised basic ($)

(0.05)

(0.03)

(0.03)

(0.01)

(0.02)

(0.03)

(0.05)

(0.06)

EPS reported basic ($)

(0.03)

(0.02)

(0.24)

0.01

0.04

(0.01)

(0.25)

(0.26)

DPS ($)

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

Shares at period end (m)

73.1

70.0

100.0

71.9

106.1

71.9

106.1

109.4

Average number of shares over period (m)

67.3

64.6

82.1

70.9

103.1

69.3

89.6

93.4

Source: Foresight Autonomous accounts, Edison Investment Research

The group reported a Q3 normalised net loss of $2.1m (H117: $2.2m) on the back of a normalised operating loss of $1.7m (H117: $2.5m). The increased quarterly loss principally arose from increased spending on R&D. This climbed to $1.0m after stripping out ESOP outlays, almost reaching the entire H1 R&D spend of $1.1m, and reflecting the work undertaken to demonstrate the multispectral proof of concept and further input into pilot trials. This was partly offset by sharply lower G&A costs, which excluding ESOP were reigned in to one-third of the H1 spend, at $0.5m.

The share of losses of associate Rail Vision also increased in Q3 to $0.3m from a quarterly average of $0.2m in H117. Similar to FRSX, the group is at the high spending stage of product finalisation and demonstration and marketing, resulting in surging costs ahead of becoming revenue generative. In November, Rail Vision announced that it was considering a Nasdaq listing.

As mentioned above, the group generated operating cash outflows of $1.5m in Q317 as compared with an average quarterly outflow of $1.4m in H1. Taking capex into account, total cash burn was $1.5m after a quarterly average of $1.3m in H117. These costs were more than met by $5.0m in cash inflows arising from warrant conversion during the period, which were boosted by the strong share price performance in the early part of the quarter, which sharply increased the total pool of in-the-money warrants.

Changes in forecasts

We have updated our 2017 forecasts, with the most impact at the reported net income line, where we have reduced our loss forecast by 20% to $24.3m. The key factors in this revision are the addition of the $7.0 revaluation of warrant liability income item in Q317 into our full year forecast, reflecting the impact of the falling share price since late July and the fact that the share price remains below the end-Q3 level. These sums are excluded from the adjusted earnings totals.

We also assume an increase in our forecast of employee share option payments (ESOP) by $0.9m in 2017 to reflect further payouts of $0.4m in Q3 after $1.6m in H117. These sums are excluded from the adjusted earnings totals.

An additional factor is continued conversions of warrants, which have increased the number of shares in issue by 2.1m or 1.9% since our last note on 31 October, with a slight dilutive effect on forecast EPS.

Exhibit 2: Change in forecasts

EPS* ($ per share)

PBT* ($m)

Net income reported ($m)

EBITDA ($m)

 

Old

New

% chg.

Old

New

% chg.

Old

New

% chg.

Old

New

% chg.

12/16

(0.077)

0.0

(3.35)

0.0

(1.90)

0.0

(3.34)

(3.34)

0.0

12/17e

(0.061)

(0.061)

0.0

(5.68)

(5.68)

0.0

(30.37)

(24.27)

(20.1)

(5.77)

(5.77)

0.0

12/18e

(0.107)

(0.106)

0.0

(11.45)

(11.45)

0.0

(12.31)

(12.31)

0.0

(11.50)

(11.50)

0.0

12/19e

(0.081)

(0.081)

0.0

(8.70)

(8.70)

0.0

(9.77)

(9.77)

0.0

(8.58)

(8.58)

0.0

Source: Edison Investment Research. Note *Normalised.

Valuation: Dilution calculation brings DCF down 2% to NIS5.05

As can be seen from Exhibit 3, we continue to derive a materially unchanged enterprise value for FRSX of $131m after our forecast revisions. However, the use of the currently lower NIS2.60 share price for the calculation of dilution impact inclusion of in-the-money warrants results in a reduction in our per share DCF valuation from NIS5.15 to NIS5.05 (see Exhibit 3).

Exhibit 3: DCF valuation

$m

2017e

2018e

2019e

2020e

2021e

2022e

2023e

2024e

2025e

2026e

2026e norm.

Revenue

0.0

1.1

14.6

42.1

65.1

102.6

144.0

186.5

224.4

262.3

262.3

change y-o-y

N/A

N/A

1175.6%

188.0%

54.5%

57.7%

40.3%

29.5%

20.4%

16.9%

0.0%

EBITDA reported

(8.3)

(12.4)

(9.6)

0.7

9.8

30.0

41.0

53.1

64.0

74.8

70.8

EBITDA margin

N/A

N/A

N/A

1.6%

15.1%

29.2%

28.5%

28.5%

28.5%

28.5%

27.0%

Change in working capital

0.0

0.0

(2.8)

(4.3)

(3.5)

(6.5)

(5.6)

(6.6)

(6.0)

(6.4)

(5.2)

Capex

(0.4)

(0.2)

(0.3)

(0.4)

(1.4)

(1.4)

(1.8)

(2.3)

(2.6)

(3.0)

(5.2)

EBITDA - capex

(8.7)

(12.6)

(9.9)

0.3

8.4

28.5

39.2

50.9

61.3

71.7

65.6

Tax

0.0

0.0

0.0

0.0

0.0

0.0

(10.2)

(13.2)

(15.9)

(19.3)

(17.6)

Change in working capital

0.0

0.0

(2.8)

(4.3)

(3.5)

(6.5)

(5.6)

(6.6)

(6.0)

(6.4)

(5.2)

Other non-cash items

2.5

0.9

1.1

1.5

2.0

2.2

2.5

2.6

2.5

2.5

2.5

Free cash flow

(6.2)

(11.7)

(11.6)

(2.5)

6.9

24.2

25.8

33.6

42.0

48.5

45.2

Terminal value

 

 

 

 

 

 

 

 

 

388.0

 

Total cashflow

(6.2)

(11.7)

(11.6)

(2.5)

6.9

24.2

25.8

33.6

42.0

436.5

 

Discounted cashflows

(5.4)

(8.8)

(7.7)

(1.4)

3.4

10.5

9.7

11.0

11.9

107.9

 

Enterprise value

131.0

 

 

 

 

 

 

 

 

 

 

Equity valuation

177.8

 

Net debt/(cash) end 2016

 

 

(3.8)

NIS/US$ FX rate applied 

3.4934

Value of Rail Vision Stake

19.6

 

Adjustment for:

 

 

 

WACC

 

 

15.0%

Total group value

197.5

 

Equity issues/merger funding 2017 ytd 

(23.9)

Terminal growth rate 

3.0%

Number of shares, diluted (m)*

136.5

 

Theoretical cash in-the-money ESOP/warrant exercise

(19.1)

Terminal value/EV

 

73%

Value per share (NIS)

5.05

 

Adjusted net debt (cash)

 

 

(46.8)

 

 

 

 

Source: Edison Investment Research. Note *Diluted for in-the-money warrants. Value of Rail Vision stake is as per our 31 October 2017 note.


Exhibit 4: Financial summary

$m

2016

2017e

2018e

2019e

2020e

Year end 31 December

US GAAP

US GAAP

US GAAP

US GAAP

US GAAP

INCOME STATEMENT

Revenue

 

 

0.0

0.0

1.1

14.6

42.1

Cost of Sales

N/A

0.0

(1.7)

(9.4)

(20.2)

Gross Profit

N/A

0.0

(0.6)

5.2

21.9

EBITDA

 

 

(3.3)

(5.8)

(11.5)

(8.6)

2.2

Normalised operating profit

 

 

(3.3)

(5.8)

(11.5)

(8.6)

2.1

Amortisation of acquired intangibles

0.0

0.0

0.0

0.0

0.0

Exceptionals

0.0

0.0

0.0

0.0

0.0

Share-based payments

(0.4)

(2.5)

(0.9)

(1.1)

(1.5)

Reported operating profit

(3.8)

(8.3)

(12.4)

(9.7)

0.6

Net Interest

0.1

0.8

0.1

(0.1)

(0.3)

Joint ventures & associates (post tax)

(0.1)

(0.7)

0.0

0.0

0.0

Exceptionals

1.8

(16.1)

0.0

0.0

0.0

Profit before tax (norm)

 

 

(3.4)

(5.7)

(11.5)

(8.7)

1.8

Profit before tax (reported)

 

 

(1.9)

(24.3)

(12.3)

(9.8)

0.3

Reported tax

0.0

0.0

0.0

0.0

0.0

Profit after tax (norm)

(3.4)

(5.7)

(11.5)

(8.7)

1.8

Profit after tax (reported)

(1.9)

(24.3)

(12.3)

(9.8)

0.3

Minority interests

0.0

0.0

0.0

0.0

0.0

Discontinued operations

0.0

0.0

0.0

0.0

0.0

Net income (normalised)

(3.4)

(5.7)

(11.5)

(8.7)

1.8

Net income (reported)

(1.9)

(24.3)

(12.3)

(9.8)

0.3

Basic average number of shares outstanding (m)

67.3

93.4

109.4

109.4

109.4

EPS – basic normalised ($)

 

 

(0.050)

(0.061)

(0.105)

(0.080)

0.017

EPS – diluted normalised ($)

 

 

(0.050)

(0.061)

(0.105)

(0.080)

0.013

EPS – basic reported ($)

 

 

(0.028)

(0.260)

(0.113)

(0.089)

0.003

Dividend ($)

0.00

0.00

0.00

0.00

0.00

Revenue growth (%)

N/A

N/A

N/A

1,175.6

188.0

Gross margin (%)

N/A

N/A

-51.8

35.6

52.1

EBITDA margin (%)

N/A

N/A

-1002.9

-58.6

5.1

Normalised operating margin (%)

N/A

N/A

-1004.9

-58.9

5.0

BALANCE SHEET

Fixed assets

 

 

1.4

0.5

0.7

1.0

1.3

Intangible assets

0.0

0.0

0.0

0.0

0.0

Tangible assets

0.1

0.5

0.7

1.0

1.3

Investments & other

1.3

0.0

0.0

0.0

0.0

Current assets

 

 

3.9

22.5

10.9

3.5

8.0

Stocks

0.0

0.0

0.0

0.0

0.0

Debtors

0.0

0.4

0.4

2.4

6.9

Cash & cash equivalents

3.8

22.0

10.4

1.0

1.0

Other

0.1

0.1

0.1

0.1

0.1

Current liabilities

 

 

(0.5)

(0.5)

(0.5)

(2.1)

(5.1)

Creditors

(0.5)

(0.5)

(0.5)

(0.1)

(0.3)

Tax and social security

0.0

0.0

0.0

0.0

0.0

Short-term borrowings

0.0

0.0

0.0

(2.0)

(4.8)

Other

0.0

0.0

0.0

0.0

0.0

Long-term liabilities

 

 

(0.1)

(15.2)

(15.2)

(15.2)

(15.2)

Long-term borrowings

0.0

0.0

0.0

0.0

0.0

Warrant conversion and other long-term liabilities

(0.1)

(15.2)

(15.2)

(15.2)

(15.2)

Net assets

 

 

4.7

7.3

(4.1)

(12.8)

(11.0)

Minority interests

0.0

0.0

0.0

0.0

0.0

Shareholders' equity

 

 

4.7

7.3

(4.1)

(12.8)

(11.0)

CASH FLOW

Operating cash flow before WC and tax

(3.3)

(5.8)

(11.5)

(8.6)

2.2

Working capital

0.8

(0.4)

0.0

(2.4)

(4.3)

Exceptional & other

0.2

0.0

0.0

0.0

0.0

Tax

0.0

0.0

0.0

0.0

0.0

Net operating cash flow

 

 

(2.4)

(6.1)

(11.5)

(11.0)

(2.1)

Capex

(0.1)

(0.4)

(0.2)

(0.3)

(0.4)

Acquisitions/disposals

(1.3)

0.0

0.0

0.0

0.0

Net interest

0.0

0.8

0.1

(0.1)

(0.3)

Equity financing

6.3

23.8

0.0

0.0

0.0

Dividends

0.0

0.0

0.0

0.0

0.0

Other

1.2

0.0

0.0

0.0

0.0

Net cash flow

3.8

18.1

(11.6)

(11.4)

(2.8)

Opening net debt/(cash)

 

 

0.0

(3.8)

(22.0)

(10.4)

1.0

FX

0.0

0.2

0.0

0.0

0.0

Other non-cash movements

0.0

0.0

0.0

0.0

0.0

Closing net debt/(cash)

 

 

(3.8)

(22.0)

(10.4)

1.0

3.8

Source: Foresight Autonomous accounts, Edison Investment Research

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. 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 Pty Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

EDISON ISRAEL DISCLAIMER

Disclosure regarding the scheme to enhance the awareness of investors to public companies in the technology and biomed sectors that are listed on the Tel Aviv Stock Exchange and participate in the scheme (hereinafter respectively “the Scheme”, “TASE”, “Participant” and/or “Participants”). Edison Investment Research (Israel) Ltd, the Israeli subsidiary of Edison Investment Research Ltd (hereinafter respectively “Edison Israel” and “Edison”), has entered into an agreement with the TASE for the purpose of providing research analysis (hereinafter “the Agreement”), regarding the Participants and according to the Scheme (hereinafter “the Analysis” or “Analyses”). The Analysis will be distributed and published on the TASE website (Maya), Israel Security Authority (hereinafter “the ISA”) website (Magna), and through various other distribution channels. The Analysis for each participant will be published at least four times a year, after publication of quarterly or annual financial reports, and shall be updated as necessary after publication of an immediate report with respect to the occurrence of a material event regarding a Participant. As set forth in the Agreement, Edison Israel is entitled to fees for providing its investment research services. The fees shall be paid by the Participants directly to the TASE, and TASE shall pay the fees directly to Edison. Subject to the terms and principals of the Agreement, the Annual fees that Edison Israel shall be entitled to for each Participant shall be in the range of $35,000-50,000. As set forth in the Agreement and subject to its terms, the Analyses shall include a description of the Participant and its business activities, which shall inter alia relate to matters such as: shareholders; management; products; relevant intellectual property; the business environment in which the Participant operates; the Participant's standing in such an environment including current and forecasted trends; a description of past and current financial positions of the Participant; and a forecast regarding future developments in and of such a position and any other matter which in the professional view of the Edison (as defined below) should be addressed in a research report (of the nature published) and which may affect the decision of a reasonable investor contemplating an investment in the Participant's securities. To the extent it is relevant, the Analysis shall include a schedule of scientific analysis of an expert in the field of life sciences. An "equity research abstract" shall accompany each Equity Research Report, describing the main points addressed. The full scope reports and reports where the investment case has materially changed will include a thorough analysis and discussion. Short update notes, where the investment case has not materially changed, will include a summary valuation discussion. The Agreement with TASE regarding the participation of Edison in the scheme for the research analysis of public companies does not and shall not constitute an approval or consent on the part of TASE or the ISA or any other exchange on which securities of the Company are listed, or any other securities’ regulatory authority which regulates the issuance of securities by the Company to the content of the Report or to the recommendation contained therein. A summary of this report is also published in the Hebrew language. In the event of any contradiction, inconsistency, discrepancy, ambiguity or variance between the English Report and the Hebrew summary of said Report, the English version shall prevail; and a note to this effect shall appear in any Hebrew summary of a Report. Edison is regulated by the Financial Conduct Authority. According to Article 12.3.2, Chapter 12 of the Conduct of Business Sourcebook, Edison, which produces or disseminates non-independent research, must ensure that it: 1) is clearly identified as a marketing communication; and 2) contains a clear and prominent statement that (or, in the case of an oral recommendation, to the effect that) it: a) has not been prepared in accordance with legal requirements designed to promote the independence of investment research; and b) is not subject to any prohibition on dealing ahead of the dissemination of investment research. The financial promotion rules apply to non-independent research as though it were a marketing communication.

EDISON INVESTMENT RESEARCH DISCLAIMER

Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been 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 Investments Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. 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 2017. “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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Tel Aviv +44 (0)20 3734 1007
Medinat Hayehudim 60

Herzilya Pituach, 46766

Israel

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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Tel Aviv +44 (0)20 3734 1007
Medinat Hayehudim 60

Herzilya Pituach, 46766

Israel

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. 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 Pty Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

EDISON ISRAEL DISCLAIMER

Disclosure regarding the scheme to enhance the awareness of investors to public companies in the technology and biomed sectors that are listed on the Tel Aviv Stock Exchange and participate in the scheme (hereinafter respectively “the Scheme”, “TASE”, “Participant” and/or “Participants”). Edison Investment Research (Israel) Ltd, the Israeli subsidiary of Edison Investment Research Ltd (hereinafter respectively “Edison Israel” and “Edison”), has entered into an agreement with the TASE for the purpose of providing research analysis (hereinafter “the Agreement”), regarding the Participants and according to the Scheme (hereinafter “the Analysis” or “Analyses”). The Analysis will be distributed and published on the TASE website (Maya), Israel Security Authority (hereinafter “the ISA”) website (Magna), and through various other distribution channels. The Analysis for each participant will be published at least four times a year, after publication of quarterly or annual financial reports, and shall be updated as necessary after publication of an immediate report with respect to the occurrence of a material event regarding a Participant. As set forth in the Agreement, Edison Israel is entitled to fees for providing its investment research services. The fees shall be paid by the Participants directly to the TASE, and TASE shall pay the fees directly to Edison. Subject to the terms and principals of the Agreement, the Annual fees that Edison Israel shall be entitled to for each Participant shall be in the range of $35,000-50,000. As set forth in the Agreement and subject to its terms, the Analyses shall include a description of the Participant and its business activities, which shall inter alia relate to matters such as: shareholders; management; products; relevant intellectual property; the business environment in which the Participant operates; the Participant's standing in such an environment including current and forecasted trends; a description of past and current financial positions of the Participant; and a forecast regarding future developments in and of such a position and any other matter which in the professional view of the Edison (as defined below) should be addressed in a research report (of the nature published) and which may affect the decision of a reasonable investor contemplating an investment in the Participant's securities. To the extent it is relevant, the Analysis shall include a schedule of scientific analysis of an expert in the field of life sciences. An "equity research abstract" shall accompany each Equity Research Report, describing the main points addressed. The full scope reports and reports where the investment case has materially changed will include a thorough analysis and discussion. Short update notes, where the investment case has not materially changed, will include a summary valuation discussion. The Agreement with TASE regarding the participation of Edison in the scheme for the research analysis of public companies does not and shall not constitute an approval or consent on the part of TASE or the ISA or any other exchange on which securities of the Company are listed, or any other securities’ regulatory authority which regulates the issuance of securities by the Company to the content of the Report or to the recommendation contained therein. A summary of this report is also published in the Hebrew language. In the event of any contradiction, inconsistency, discrepancy, ambiguity or variance between the English Report and the Hebrew summary of said Report, the English version shall prevail; and a note to this effect shall appear in any Hebrew summary of a Report. Edison is regulated by the Financial Conduct Authority. According to Article 12.3.2, Chapter 12 of the Conduct of Business Sourcebook, Edison, which produces or disseminates non-independent research, must ensure that it: 1) is clearly identified as a marketing communication; and 2) contains a clear and prominent statement that (or, in the case of an oral recommendation, to the effect that) it: a) has not been prepared in accordance with legal requirements designed to promote the independence of investment research; and b) is not subject to any prohibition on dealing ahead of the dissemination of investment research. The financial promotion rules apply to non-independent research as though it were a marketing communication.

EDISON INVESTMENT RESEARCH DISCLAIMER

Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been 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 Investments Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. 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 2017. “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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Tel Aviv +44 (0)20 3734 1007
Medinat Hayehudim 60

Herzilya Pituach, 46766

Israel

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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Tel Aviv +44 (0)20 3734 1007
Medinat Hayehudim 60

Herzilya Pituach, 46766

Israel

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