SDX Energy — FY19 management guidance reset

SDX Energy (LN: SDX)

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Research: Energy & Resources

SDX Energy — FY19 management guidance reset

Despite our last published FY19 forecasts reflecting a more conservative production ramp-up than management guidance, SDX’s guidance revisions have resulted in a further downgrade to our short-term cash flow forecasts and NAV. We reduce FY19e production from 4.3kboed to 3.4kboed (-21%) and project more moderate growth in SDX’s Morocco gas demand with an associated RENAV impact of -42%. Key drivers of management’s downgrade include lower Sebou gas demand growth, a higher than anticipated water cut at North West Gemsa and a delay to production ramp-up at South Disouq. Our valuation falls from RENAV 86.5p/share to 49.8p/share (-42%), while our core NAV (producing assets and South Disouq) falls from 70.1p/share to 45.0p/share (-36%). Based on our latest estimates, we expect SDX to end FY19 with c $4.9m of net cash on the balance sheet.

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Energy & Resources

SDX Energy

FY19 management guidance reset

Forecast and valuation update

Oil & gas

20 June 2019

Price

21p

Market cap

£43m

US$/£0.77

Net cash ($m) at end March 2019

11.4

Shares in issue

204.7m

Free float

91%

Code

SDX

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(12.2)

(46.9)

(64.8)

Rel (local)

(12.6)

(47.3)

(63.5)

52-week high/low

61.5p

20.8p

Business description

SDX Energy is a North African E&P listed in London. SDX produces oil and gas in Egypt and gas in Morocco.

Next events

H119 results

August 2019

Analysts

Sanjeev Bahl

+44 (0)20 3077 5700

Carlos Gomes

+44 (0)20 3077 5700

SDX Energy is a research client of Edison Investment Research Limited

Despite our last published FY19 forecasts reflecting a more conservative production ramp-up than management guidance, SDX’s guidance revisions have resulted in a further downgrade to our short-term cash flow forecasts and NAV. We reduce FY19e production from 4.3kboed to 3.4kboed (-21%) and project more moderate growth in SDX’s Morocco gas demand with an associated RENAV impact of -42%. Key drivers of management’s downgrade include lower Sebou gas demand growth, a higher than anticipated water cut at North West Gemsa and a delay to production ramp-up at South Disouq. Our valuation falls from RENAV 86.5p/share to 49.8p/share (-42%), while our core NAV (producing assets and South Disouq) falls from 70.1p/share to 45.0p/share (-36%). Based on our latest estimates, we expect SDX to end FY19 with c $4.9m of net cash on the balance sheet.

Year end

Revenue ($m)

PBT*
($m)

Operating cash flow ($m)

Net cash
($m)

Capex
($m)

Production
(kboed)

12/17

39.2

32.8

21.6

25.8

(24.9)**

3.2

12/18

53.7

7.1

36.2

17.3

(44.8)

3.6

12/19e

45.3

8.3

22.3

4.9

(36.1)

3.4

12/20e

51.5

14.0

31.7

17.2

(20.3)

6.7

Note: *PBT is normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments. **Excludes Circle acquisition ($28.1m).

Pragmatic FY19 guidance

SDX’s latest guidance appears to be realistic, with the South Disouq timeline to first gas including an eight-week contingency and Sebou production estimates assuming minimal growth over the course of 2019. Equally, we do not believe guidance is overly conservative given the remaining customer connection/project execution risks. Our forecasts assume South Disouq first gas in January 2020 with a plateau of 50mmscfd reached in Q220 (management guidance first gas in November 2019 and plateau in Q120). At 6.0mmscfd, our Moroccan FY19 production forecast is at the lower end of company guidance at 6.0–6.5mmscfd.

H219 and H120 still an active period for the drill bit

Exploration drilling will focus on Ibn Yunus lookalikes in Egypt, with at least two wells planned for H219. In Morocco, SDX has an 87% appraisal/development well success rate based on calibrated 3D seismic and is looking to leverage this success, targeting c 20bcf of gross unrisked resource in H219/2020. Of the total 12-well programme planned for Morocco, three to four are expected in H219. We include risked exploration/appraisal potential in our valuation.

Valuation: 36% core NAV reduction

Our valuation has been reset to reflect new management guidance for FY19 and moderated production growth expectations. SDX remains fully funded for planned FY19 capital expenditure, and we expect year-end net cash of c $4.9m. SDX’s $10m credit facility with the EBRD remains undrawn as of end March 2019.

FY19 company guidance downgrade

Management has reset market guidance for FY19, reflecting asset performance to date, South Disouq project execution and Morocco gas demand growth projections. As a result, our FY19 forecast net production falls from 4.3kboed to 3.4kboed (-21%). In this note, we look at the short-term financial and NAV impact of these movements.

A summary of key changes in management guidance from the start of FY19 and the company’s AGM in May 2019 are provided in Exhibit 1 below.

Exhibit 1: Change in company guidance

Source: SDX Energy

NW Gemsa (50% working interest) – higher water cut

SDX is targeting FY19 average gross production of 3,000–3,200boed, which is a reduction from previous guidance due to an increased water cut. Pump replacements and workovers have affected producer availability year to date, and SDX expects to provide further guidance on the AASE-5 well recompletion at the end of Q219. We currently assume field abandonment at the end of FY20.

Meseda (50% working interest) – lower capex

SDX’s guidance for Meseda remains unchanged, other than a reduction in 2019 capex. Net capex of US$2.7m includes two planned wells and two water injection wells and US$1.1m net for ESP replacement/facility upgrades. We see upside to our production forecasts assuming Rabul production rates are in line with competent person report (CPR) forecasts.

South Disouq (55% working interest) – slower ramp-up

Management expects first gas in Q419 (mid-November 2019), with production expected to ramp up to 50mmscfd by Q120. SDX outlines the key activities ahead of first gas as: 1) factory acceptance testing on completion of central processing facility (CPF) fabrication in Abu Dhabi at the end of June 2019; 2) transportation of the CPF from Abu Dhabi and customs clearance in Egypt, with transportation to site expected in mid-August 2019; and 3) management expects completion of installation and commissioning with first gas by mid-November 2019 (assuming an eight-week overall contingency). Gas prices remain fixed at US$2.85/mcf, but netbacks are expected to remain high based on unit operational costs of less than US$0.2/mcf at plateau production.

We assume start-up in January 2020, with production ramping over the course of the year reaching a 50mmscfd plateau.

Exhibit 2: South Disouq gross production

Exhibit 3: South Disouq cash flow forecasts

Source: Edison Investment Research

Source: Edison Investment Research

Exhibit 2: South Disouq gross production

Source: Edison Investment Research

Exhibit 3: South Disouq cash flow forecasts

Source: Edison Investment Research

Morocco (75% working interest) – lower demand growth

SDX is now targeting 2019 average annual guidance of 6.0–6.5mmscfd (a change from a guidance exit rate of 9–11mmscfd by end 2019). Company guidance is based on customers under contract, in addition to a reduction in gas offtake by SDX’s second largest customer, CMPC, a large pulp and paper company, reallocated a production line from Morocco to Spain and, as a result, reduced gas offtake by 30% in 2019 relative to 2018 levels. There has also been a slowdown in setting up the Atlantic Free Zone (AFZ), which will likely affect future forecasts of gas offtake.

Sebou gross production through to 28 February 2019 is shown in Exhibit 8, demonstrating a recent increase in offtake driven by new customer connections including Omnium Plastic and Citic Dicastal. GPC and Extralait have also increased gas demand since the end of 2018.

Exhibit 4: Morocco gross production and price forecast

Exhibit 5: Morocco cash flow forecasts

Source: Edison Investment Research

Source: Edison Investment Research

Exhibit 4: Morocco gross production and price forecast

Source: Edison Investment Research

Exhibit 5: Morocco cash flow forecasts

Source: Edison Investment Research

We have updated our supply/demand model for gas in Kenitra to reflect SDX’s latest comments in respect to existing customer offtake and potential demand growth from the AFZ. Based on Sebou production data year to date and 2019 guidance of 6.0–6.5mmscfd, we take a conservative approach and estimate average gas sales of 6.0mmscfd in FY19, growing to 6.7mmscfd in FY20, as shown in Exhibit 6. This is a reduction in growth compared to our previous forecasts and reflects a slowdown in new customers entering the AFZ. Incremental gas discoveries are required to infill our forecast risked demand through to 2022 but, based on SDX’s high exploration success rate (c 80% chance of success) and proposed 12-well drilling programme starting in Q419, we do not see supply shortfall as a significant risk at this stage.

Exhibit 6: Edison risked demand forecasts by customer

Exhibit 7: Edison risked demand forecast compared to existing 2P volumes + Sebou discoveries

Source: Edison Investment Research

Source: Edison Investment Research

Exhibit 6: Edison risked demand forecasts by customer

Source: Edison Investment Research

Exhibit 7: Edison risked demand forecast compared to existing 2P volumes + Sebou discoveries

Source: Edison Investment Research

We remain confident in management’s 2019 guidance of 6.0–6.5mmscfd based on volumes produced year to date and a February 2019 exit rate of just over 7mmscfd. Production data are available on the SDX website.

Exhibit 8: Sebou production (mmscfd)

Source: SDX Energy

Impact on forecasts and valuation

SDX’s revised guidance has a material impact on our core valuation, in particular a reduction in FY19 Moroccan gas sales. A summary of key changes to our valuation is shown in Exhibit 9 below.

Exhibit 9: NAV old vs new

New
(GBp/share)

Old
(GBp/share)

Change
(%)

Comment

Cash net of admin

3.9

6.9

(43%)

Absolute change reflecting latest reported data, G&A forecast and reduced pipeline residual value.

Production/development

41.1

63.2

(35%)

Reduction in Morocco gas sales growth forecast, and lower South Disouq production plateau.

Core NAV

45.0

70.1

(36%)

Exploration & Development

4.7

16.3

(71%)

Management now expects Young prospect to be gas rather than oil.

Group RENAV

49.8

86.5

(42%)

Source: Edison Investment Research


Our updated NAV is provided in the table below.

Exhibit 10: SDX Energy detailed valuation

Asset

Recoverable reserves

Net risked value @12.5%

Country

Diluted WI

CoS

Gross

Net WI

Net

NPV

Absolute

GBp/share

%

%

mmboe

mmboe

mmboe

$/boe

$m

Net cash at December 2018

17.3

6.6

SG&A - NPV12.5 of 3yrs

(19.4)

(7.3)

E&A expense for exploration prospects

(14.2)

(5.4)

NPV of net receivable recovery

16.8

6.3

Sebou Pipeline residual value (30% cost)

9.8

3.7

Production

Meseda Base + Workovers + Rabul

Egypt

50%

90%

8.0

4.0

1.5

6.9

24.7

9.3

Gemsa – abandoned end 2020

Egypt

50%

100%

1.8

0.9

0.9

0.8

0.7

0.3

Sebou 2P + discoveries to be booked

Morocco

75%

100%

0.9

0.7

0.7

33.4

22.0

8.3

LM discoveries and 2019/2020 10 shallow wells

Morocco

75%

75%

3.2

2.4

2.4

22.8

40.9

15.5

South Disouq/Ibn Yunus

Egypt

55%

100%

17.7

9.7

9.7

2.1

20.3

7.7

Core NAV

31.5

17.6

15.2

119.1

45.0

Exploration (known)

Lalla Mimouna 2 wells

Morocco

75%

23%

1.7

1.3

1.36

22.8

6.4

2.4

Kafr el Sheik prospect x2

Egypt

55%

27%

15.3

8.4

8.4

1.6

3.6

1.4

Abu Madi prospect x2

Egypt

55%

23%

1.1

0.6

0.6

1.6

0.3

0.1

Young gas prospect

Egypt

55%

19%

13.5

7.4

7.4

1.6

2.2

0.8

Group RENAV

63.1

35.3

32.9

131.7

49.8

Source: Edison Investment Research. Note: Number of shares = 204.7m, FX = US$/£0.77.

Our key forecast changes are highlighted in the table below. Lower production forecasts for 2019, 2020 and 2021 are the key driver of lower revenues, EBITDA and FCF for this period. Production downgrades are driven by a lower South Disouq gross production plateau (50mmscfd from 60mmscfd) and a decline in forecast Morocco gas sales.

Exhibit 11: Edison updated forecasts

New

Old

Change

2019e

2020e

2021e

2019e

2020e

2021e

2019e

2020e

2021e

Production (kboed)

3.4

6.7

6.3

4.3

9.7

9.4

(21%)

(32%)

(33%)

Revenue ($m)

45.3

51.5

46.0

57.8

79.3

78.9

(22%)

(35%)

(42%)

EBITDA ($m)

19.5

29.7

28.4

35.8

53.9

53.8

(46%)

(45%)

(47%)

FCF ($m)

(12.5)

12.4

27.4

(6.1)

25.2

52.8

N/M

(51%)

(48%)

Brent ($/bbl)

65.15

62.00

65.92

65.15

62.00

65.92

0%

0%

0%

SD gas price ($/mcf)

2.85

2.85

2.85

2.85

2.85

2.85

0%

0%

0%

Sebou gas price ($/mcf)

10.59

10.85

11.12

10.47

10.55

10.44

1%

3%

7%

Source: Edison Investment Research

Our valuation has been reset to reflect new management guidance for FY19 and moderated production growth expectations, and is now at 45.0p/share fully funded core NAV. This is materially different to the current share price of 21p. As it can be seen in Exhibit 12, based on the current share price, the market is pricing in the bulk of SDX’s existing producing assets, but allocating minimal value for its Sebou exploration/development programme, South Disouq (management expects onstream in November 2019) or risked prospective resource.

Exhibit 12: SDX Energy valuation waterfall

Source: Edison Investment Research

Financials

We forecast year-end 2019 net cash of c $4.9m and, as of end March 2019, SDX’s EBRD loan facility of $10m remains undrawn. Based on the capex projections that underpin our production forecasts and SDX’s committed exploration programme, we forecast positive FCF after South Disouq first gas (we forecast first gas at the start of FY20). We do not foresee the need for further equity capital at this stage, unless incremental growth capex, over and above our forecasts, is dedicated to new projects or acquisitions. We also note that SDX’s recently announced capital reduction programme paves the way for the payment of dividends as and when management feels it is appropriate to do so.

Exhibit 13: Capex and cash flow forecasts

Exhibit 14: Production expectations

Source: Edison Investment Research

Source: Edison Investment Research

Exhibit 13: Capex and cash flow forecasts

Source: Edison Investment Research

Exhibit 14: Production expectations

Source: Edison Investment Research

Exhibit 15: Financial summary

Accounts: IFRS, year-end: December, US$000s

 

2015

2016

2017

2018

2019e

2020e

2021e

INCOME STATEMENT

Total revenues

 

 

11,372

12,914

39,166

53,679

45,317

51,509

46,001

Cost of sales (direct expense)

 

 

(4,973)

(5,282)

(10,254)

(11,934)

(18,360)

(13,598)

(8,784)

Gross profit

 

 

6,399

7,632

28,912

41,745

26,957

37,911

37,218

SG&A (expenses)

 

 

(4,770)

(3,679)

(8,793)

(7,270)

(7,634)

(8,015)

(8,416)

Other income/(expense)

 

 

1,021

1,701

1,820

1,025

1,333

1,018

751

Exceptionals and adjustments

 

(7,676)

(29,089)

(725)

(10,458)

(1,194)

(1,194)

(1,194)

Depreciation and amortisation

 

 

(2,057)

(3,266)

(17,824)

(17,268)

(10,948)

(15,558)

(13,788)

Reported EBIT

 

 

(7,083)

(26,701)

3,390

7,774

8,515

14,162

14,571

Finance income/(expense)

 

 

(96)

4

(129)

(542)

0

0

0

Other income/(expense)

 

 

18,289

0

29,558

(174)

(174)

(174)

(174)

Exceptionals and adjustments

 

0

0

0

0

0

0

0

Reported PBT

 

 

11,110

(26,697)

32,819

7,058

8,341

13,988

14,397

Income tax expense (includes exceptionals)

 

 

(1,063)

(1,503)

(4,541)

(7,021)

(1,543)

(1,849)

(1,475)

Reported net income

 

 

10,047

(28,200)

28,278

37

6,798

12,139

12,922

Shares at end of period - basic

 

 

38

80

204

205

205

205

205

BALANCE SHEET

 

 

 

 

 

 

 

 

 

Property, plant and equipment

 

 

18,401

12,605

54,445

48,680

68,349

70,009

59,349

Goodwill

 

 

0

0

0

0

0

0

0

Intangible assets

 

 

23,473

10,623

15,231

39,128

44,612

47,696

48,256

Other non-current assets

 

 

2,106

2,503

2,724

3,394

3,394

3,394

3,394

Total non-current assets

 

 

43,980

25,731

72,400

91,202

116,354

121,099

110,998

Cash and equivalents

 

 

8,170

4,725

25,844

17,345

4,867

17,245

44,626

Inventories

 

 

1,188

1,698

5,157

5,236

5,000

3,703

2,392

Trade and other receivables

 

 

6,678

9,463

37,656

24,324

19,459

15,567

12,454

Other current assets

 

 

0

0

0

0

0

0

0

Total current assets

 

 

16,036

15,886

68,657

46,905

29,327

36,515

59,472

Non-current loans and borrowings

 

 

0

0

0

0

0

0

0

Other non-current liabilities

 

 

286

290

4,506

4,572

4,572

4,572

4,572

Total non-current liabilities

 

 

286

290

4,506

4,572

4,572

4,572

4,572

Trade and other payables

 

 

3,556

3,674

19,459

14,418

14,000

12,600

11,340

Current loans and borrowings

 

 

0

0

0

0

0

0

0

Other current liabilities

 

 

928

389

2,473

3,078

3,078

3,078

3,078

Total current liabilities

 

 

4,484

4,063

21,932

17,496

17,078

15,678

14,418

Equity attributable to company

 

 

55,246

37,264

114,619

116,039

124,031

137,364

151,480

Non-controlling interest

 

 

0

0

0

0

0

0

0

CASH FLOW STATEMENT

 

 

 

 

 

 

 

 

 

Profit before tax

 

 

11,110

(26,697)

32,819

7,058

8,341

13,988

14,397

Net finance expenses

 

 

0

0

0

0

0

0

0

Depreciation and amortisation

 

 

2,057

3,266

17,824

17,268

10,948

15,558

13,788

Share based payments

 

 

761

(47)

538

1,194

1,194

1,194

1,194

Other adjustments

 

 

(12,281)

25,742

(34,613)

3,224

(1,333)

(1,018)

(751)

Movements in working capital

 

 

(2,183)

(3,440)

5,412

8,584

4,683

3,789

3,164

Interest paid / received

 

 

0

0

0

0

0

0

0

Income taxes paid

 

 

(4,678)

(766)

(364)

(1,091)

(1,543)

(1,849)

(1,475)

Cash from operations (CFO)

 

 

(5,214)

(1,942)

21,616

36,237

22,289

31,662

30,317

Capex

 

 

(5,120)

(11,890)

(24,917)

(44,810)

(36,100)

(20,303)

(3,688)

Acquisitions & disposals net

 

 

0

0

(24,948)

0

0

0

0

Other investing activities

 

 

4,836

825

760

525

1,333

1,018

751

Cash used in investing activities (CFIA)

 

(284)

(11,065)

(49,105)

(44,285)

(34,767)

(19,284)

(2,936)

Net proceeds from issue of shares

 

 

0

10,127

48,510

114

0

0

0

Movements in debt

 

 

(3,702)

(96)

(43)

(197)

0

0

0

Other financing activities

 

 

0

0

0

0

0

0

0

Cash from financing activities (CFF)

 

 

(3,702)

10,031

48,467

(83)

0

0

0

Increase/(decrease) in cash and equivalents

 

 

(9,200)

(2,976)

20,978

(8,131)

(12,478)

12,377

27,381

Currency translation differences and other

 

 

(565)

(469)

141

(368)

0

0

0

Cash and equivalents at end of period

 

8,170

4,725

25,844

17,345

4,867

17,245

44,626

Source: Company accounts, Edison Investment Research


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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

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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.

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

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd who holds an Australian Financial Services Licence (Number: 427484). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

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

United Kingdom

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

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

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

United States

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

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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