cannabis-plant-highres

Company update on Folium and Cocoon

Australis Capital 3 March 2020 Update
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Australis Capital

Company update on Folium and Cocoon

Business update

Pharma & biotech

3 March 2020

Price

C$0.19

Market cap

C$32m

C$1.35/US$

Net cash (C$m) at December 2019

19.5

Shares in issue

169.9m

Free float

94.59%

Code

AUSA

Primary exchange

CSE

Secondary exchange

OTCQX

Share price performance

%

1m

3m

12m

Abs

(58.8)

(58.8)

(79.9)

Rel (local)

(56.7)

(58.5)

(81.8)

52-week high/low

US$1.00

US$0.14

Business description

Australis Capital is focused on US cannabis assets that it believes will have staying power in the rapidly developing cannabis market. The company’s goal is to form these assets into a fully operational and integrated business in this highly regulated industry.

Next events

Initial Cocoon revenue

2020

Analyst

Nathaniel Calloway

+1 646 653 7036

Australis Capital is a research client of Edison Investment Research Limited

On 26 February 2020 Australis Capital hosted a corporate update conference call. Management provided more color on the cancelled Folium merger and cited both the declining price of CBD and undisclosed issues that were uncovered during its due diligence process as the reason for the cancelation. Additionally, the company provided an update on Cocoon Technology, which just received its first order for 32 kiosks to be deployed at eight locations in Nevada.

Year end

Revenue (C$m)

PBT*
(C$m)

EPS*
(C$)

DPS
(C$)

P/E
(x)

Yield
(%)

03/19

0.1

(3.5)

(0.04)

0.0

N/A

N/A

03/20e

0.2

(10.3)

(0.06)

0.0

N/A

N/A

03/21e

2.8

(10.5)

(0.06)

0.0

N/A

N/A

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

No big reveal on reason for Folium termination

The company did not provide any more detail regarding what was found during its due diligence on Folium that triggered the decision to terminate the deal, but Australis management did mention that the major decline in CBD prices over the past year was a major contributing factor. The company also stated that it still believes that Folium’s business may have potential even in light of both the public and non-public issues it is facing, but that it chose to remain conservative and terminated the deal.

First orders received for CocoonPods

On the conference call and in a separate press release, Australis announced that its Cocoon Technology subsidiary has received its first orders for CocoonPods, its self-service dispensary platform. The Nevada dispensary chain THRIVE has ordered 32 kiosks that will be deployed in its eight existing stores, and potentially new stores as they open. This is a major catalyst because it represents Australis’s segue into a revenue-generating company. It expects US$1.4m in first-year revenue and US$7.1m over the life of the four-year agreement with THRIVE.

Green Therapeutics deal held up

The company also provided a bit more detail on its Q219 agreement to purchase Green Therapeutics, the Nevada-based grow operation, and the associated brands it has agreed to acquire. The deal has not been completed because of the moratorium on the transfer of licenses in the state of Nevada that has come into effect in late 2019.

Valuation: Cocoon added, bringing total to C$75.98m

Because we imminently expect revenue generation from Cocoon, we have added it to our valuation model. We arrive at a valuation of Cocoon of C$14.61m, which is based on a scenario analysis of the commercial and regulatory risks the subsidiary faces. This brings our total valuation of the company to C$75.98 or roughly twice its current market cap.

Background to the Folium deal

On the conference call, the company provided additional detail regarding the background of the Folium merger and the reasons for its termination. The company revealed that there was a competitive process surrounding Folium (including the participation of a major US investment bank), but that the reverse merger process pursued by Australis was proposed as an alternative to a direct take-out. The company confirmed that management was aware of potential red flags at Folium (presumably its ongoing legal troubles with former employees), but that it was confident in the strength of the underlying business at the time.

As far as the reasons for the termination, the company cited the drop in CBD prices as a significant contributing factor, as we initially suspected. However, Australis did not provide any additional detail regarding what was found during its due diligence of Folium that has been previously cited at the cause for the termination. Australis suggested that it still believes that Folium has the potential for success, but that in light of the lower CBD prices and these undisclosed factors, it was not willing to ‘go all in’ on the merger. Australis has consistently highlighted its conservative approach to reviewing assets, and the process with Folium was no different.

First cocoon units placed

In additional news, the company announced on 26 February 2020 that it received the first orders for its Cocoon self-service technology. The Nevada dispensary chain THRIVE ordered 32 CocoonPod kiosks to service the company’s eight current locations and potential future expansions. THRIVE has a four-year exclusivity contract with Australis, in which Cocoon will be the sole automated service platform used at the dispensary chains.

Australis stated that it expects revenue from these units to be US$1.4m for the first year and US$7.1m over the term of the agreement. This translates to an initial yearly revenue per kiosk of approximately US$44,000, increasing to over US$50,000 over the four-year period. The company has not released the precise terms of its revenue share agreement, but we expect it to be in the single-digit range. Additionally, the company will generate revenue from the sale of the CocoonPod capital equipment, which we estimate in the range of US$15,000 per unit, similar to that of an ATM. Based on the tracking of new dispensary licenses, there are an estimated 7,180 dispensaries operating in the US. This corresponds to an addressable market for Cocoon of approximately US$360m in recurring revenue, assuming an average of one kiosk per store, and similar usage compared to Australis’s estimates.

Other details

The company also provided some small details regarding its other ongoing programs. The company provided a brief update on the Green Therapeutics deal, in which it signed in Q219 a definitive agreement to acquire GT’s cultivation and production business and brands. The company stated that the moratorium on the transfer of licenses in Nevada has prevented the closing of the deal. The moratorium on transfers appears to be in part politically motivated following the revelation that foreign interests were attempting to buy their way into the market. We will be watching the situation closely, and although there can be no guarantees regarding timing, we expect the moratorium to be lifted in due time to allow for the market to continue to develop. The operational costs to Australis for the project are very limited before the closing of the deal, and there is little financial pressure on the company at this time, so we expect Australis to be able to weather these delays. If the deal needs to be terminated, the parcel of land that Australis acquired in North Las Vegas for the expansion is saleable. However, it is worth noting that Australis has already issued almost 8m shares associated with the transaction, although we assume that if the deal falls through there are provisions for their return.

Additionally, the company provided some minor details regarding its recent acquisition of Paytron. The company noted that the value of the transaction was US$120,000, and that the primary purpose of the deal was to acquire the talent at the company (namely Marc Ruben, cited in the initial press release).

Valuation

We have added Cocoon to our model because it is expected to imminently generate revenue through the agreement with THRIVE. We arrive at an initial valuation for this program of C$13.43m. We arrive at this valuation using a DCF methodology of three different scenarios, which we risk adjust. In the best case scenario, the Cocoon product line gains significant commercial traction, and cannabis is federally legalized or decriminalized. For the purposes of this scenario we expect federal legalization or decriminalization to reach full effect in approximately 2023. We assume that the total number of cannabis dispensaries will approach 30,000 in 10 years, which is roughly equal to the number of specialty coffee shops in the US. We assume that the company will be able to achieve 2% penetration in this market (in terms of units per dispensary, encompassing multiple placements). We include C$2m in fixed selling costs and 15% variable selling costs. The DCF for this scenario is C$74.16m and we estimate at 15% probability of its occurrence. We use a 10% discount rate (our standard for commercial products) and a 1% terminal growth rate.

We also include a scenario in which federal legalization or decriminalization does not occur. All of our assumptions for this scenario are the same as the best case scenario, except we expect total dispensaries in the US to approach 15,000. The DCF for this model is C$33.30m with a probability of 15%.

Finally we include the scenario in which Cocoon does not gain commercial traction (either with or without legalization). In this model we do not include revenue outside of the current THRIVE agreement. The DCF for this model is negative C$2.16m, with a 70% probability.

The net value we calculate for Cocoon based on these scenarios is C$14.61m. We expect to adjust these probabilities following developments in the company’s commercial rollout of the product and any changes in the regulatory landscape. This brings our total valuation of the company’s portfolio to C$75.98m, roughly twice the company’s market valuation.

Exhibit 1: Valuation of Cocoon

Scenario

Probability

DCF (C$m)

Risk adjusted DCF (C$m)

Cannabis federally legalized in 2024

15%

74.16

11.12

Cannabis not federally legalized

15%

33.30

4.99

Product does not gain traction

70%

(2.16)

(1.51)

Total

14.61

Source: Edison Investment Research

Exhibit 2: Valuation of Australis portfolio

Asset

Methodology

Value (C$m)

rthm

at cost

3.86

Body & Mind

marked to market

11.11

Wagner Dimas

at cost

3.00

Quality Green

at cost

2.00

Folium Biosciences

at cost

3.99

Mr. Natural

at cost

1.21

Green Therapeutics*

at cost

12.50

Cocoon

DCF

14.61

Core portfolio value

52.28

Legacy portfolio (Australis holdings & SubTerra)

at cost

4.23

Cash for investing

12.67

Other Cash

6.80

Total value

 

75.98

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

Financials

As we expect near-term revenue from Cocoon, we now include this in our financial forecasts. We include C$2.55m in revenue (US$1.8m, US$1.4m from recurring sales and US$400,000 from capital sales) for FY21. We have also included C$3.08m in cost of selling for the same period as we expect the company to expand its sales efforts to promote the CocoonPod product.

Although we no longer expect the Green Therapeutics deal to close in FY20, the company has already invested C$10.89m in the project, which is reflected in the balance sheet (although we have adjusted our cashflow accounting to match Australis).

The company reported a net loss of C$6.89m for Q3 FY20 ending on 31 December 2019, which is a slight increase over the previous quarter (C$5.20m), largely due to one-off items. The operating loss was C$4.2m in Q3 FY20, versus C$3.9m in the Q2 FY20. The company ended the period with C$19.47m in cash, which should be sufficient for its near-term operational goals, but the company may issue more stock or take on debt for future transactions.

Exhibit 3: Financial summary

C$'k

2019

2020e

2021e

Year end 31 March

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

129.8

220.1

2,753.8

Cost of Sales

0.0

0.0

(1,046.2)

Gross Profit

129.8

220.1

1,707.6

EBITDA

 

 

(3,606.8)

(8,585.2)

(10,180.3)

Normalised operating profit

 

 

(3,616.8)

(8,801.0)

(10,396.2)

Amortisation of acquired intangibles

0.0

0.0

0.0

Exceptionals

0.0

0.0

0.0

Share-based payments

(677.5)

(6,253.9)

(6,253.9)

Reported operating profit

(4,294.4)

(15,055.0)

(16,650.1)

Net Interest and financial income

284.9

801.5

(138.3)

Joint ventures & associates (post tax)

0.0

0.0

0.0

Exceptionals

(161.7)

(2,260.8)

0.0

Profit Before Tax (norm)

 

 

(3,493.7)

(10,260.3)

(10,534.4)

Profit Before Tax (reported)

 

 

(4,171.2)

(16,514.3)

(16,788.4)

Reported tax

0.0

0.0

0.0

Profit After Tax (norm)

(3,493.7)

(10,260.3)

(10,534.4)

Profit After Tax (reported)

(4,171.2)

(16,514.3)

(16,788.4)

Minority interests

0.0

132.1

0.0

Discontinued operations

0.0

0.0

0.0

Net income (normalised)

(3,493.7)

(10,128.2)

(10,534.4)

Net income (reported)

(4,171.2)

(16,382.2)

(16,788.4)

Basic average number of shares outstanding (m)

94

170

178

EPS - basic normalised (C$)

 

 

(0.04)

(0.06)

(0.06)

EPS - diluted normalised (C$)

 

 

(0.04)

(0.06)

(0.06)

EPS - basic reported (C$)

 

 

(0.04)

(0.10)

(0.09)

Dividend (C$)

0.00

0.00

0.00

BALANCE SHEET

Fixed Assets

 

 

36,939.9

52,223.6

51,495.9

Intangible Assets

4,048.0

8,991.0

8,479.2

Tangible Assets

120.5

3,888.7

3,672.9

Investments & other

32,771.4

39,343.9

39,343.9

Current Assets

 

 

28,111.5

20,280.0

10,473.3

Stocks

0.0

0.0

258.0

Debtors

273.7

319.8

750.3

Cash & cash equivalents

24,515.5

17,504.9

7,009.7

Other

3,322.3

2,455.3

2,455.3

Current Liabilities

 

 

(1,864.5)

(3,271.3)

(3,271.3)

Creditors

(1,864.5)

(3,159.8)

(3,159.8)

Tax and social security

0.0

0.0

0.0

Short term borrowings

0.0

0.0

0.0

Other

0.0

(111.5)

(111.5)

Long Term Liabilities

 

 

(2,512.6)

(3,139.6)

(3,139.6)

Long term borrowings

0.0

0.0

0.0

Other long term liabilities

(2,512.6)

(3,139.6)

(3,139.6)

Net Assets

 

 

60,674.3

66,092.8

55,558.4

Minority interests

0.0

0.0

0.0

Shareholders' equity

 

 

60,674.3

66,092.8

55,558.4

CASH FLOW

Op Cash Flow before WC and tax

(3,606.8)

(8,585.2)

(10,180.3)

Working capital

833.9

688.5

(688.5)

Exceptional & other

(33.1)

735.4

373.6

Tax

0.0

0.0

0.0

Net operating cash flow

 

 

(2,806.0)

(7,161.3)

(10,495.2)

Capex

(130.6)

(662.0)

0.0

Acquisitions/disposals

(15,789.3)

(6,890.2)

0.0

Net interest

0.0

0.0

0.0

Equity financing

52,386.7

2,682.2

0.0

Dividends

0.0

0.0

0.0

Other

(9,438.5)

5,233.2

0.0

Net Cash Flow

24,222.3

(6,798.1)

(10,495.2)

Opening net debt/(cash)

 

 

0.0

(24,515.5)

(17,504.9)

FX

293.2

(212.5)

0.0

Other non-cash movements

0.0

0.0

0.0

Closing net debt/(cash)

 

 

(24,515.5)

(17,504.9)

(7,009.7)

Source: Australis Capital reports, Edison Investment Research.


General disclaimer and copyright

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

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

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

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

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

Copyright: Copyright 2020 Edison Investment Research Limited (Edison).

Australia

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

New Zealand

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

United Kingdom

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

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

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

United States

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

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

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

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

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

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

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

Copyright: Copyright 2020 Edison Investment Research Limited (Edison).

Australia

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

New Zealand

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

United Kingdom

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

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

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

United States

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

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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