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Moving on from accounting irregularities

Codere 18 November 2019 Update
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Codere

Moving on from accounting irregularities

Q319 results

Travel & leisure

18 November 2019

Price

€3.00

Market cap

€356m

Adjusted net debt (post IFRS 16) (€m) at 30 September 2019

1,078

Shares in issue

118.5m

Free float

5%

Code

CDR

Primary exchange

IGBM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(2.1)

(2.7)

(23.7)

Rel (local)

(1.3)

(9.6)

(24.3)

52-week high/low

€4.4

€2.9

Business description

Codere is an international gaming company that manages c 57,000 gaming machines, 30,000 bingo seats and 7,600 sports betting terminals across Latin America, Spain and Italy. It was founded in 1980, listed in 2007 and completed a successful debt for equity swap in 2016.

Next events

FY19 results

March 2020

Analysts

Victoria Pease

+44 (0)20 3077 5740

Richard Williamson

+44 (0)20 3077 5700

Codere is a research client of Edison Investment Research Limited

Q319 results were dominated by previously announced accounting irregularities in the Mexico, Panama and Colombia divisions. These have been confirmed as one off and confined to H119 but, as a direct result, management has lowered FY19 EBITDA guidance by c €10m to €250–255m (pre-IFRS 16). As a positive, the Spanish division is developing strongly, with encouraging momentum in online. Codere’s focus is now on refinancing the senior notes and rebuilding trust with the investment community. We have lowered our FY19 EBITDA by 8.7% and our FY20 EBITDA by 8.0%. The stock is very illiquid and trades at 4.2x EV/EBITDA for FY20e, which is at a deep discount to peers.

Year end

Revenue (€m)

Adjusted EBITDA** (€m)

EPS*
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/17

1,638.2

273.5

0.01

0.0

N/A

N/A

12/18

1,476.4

282.9

0.48

0.0

6.3

N/A

12/19e***

1,406.7

321.8

(0.19)

0.0

N/A

N/A

12/20e***

1,443.9

338.8

(0.09)

0.0

N/A

N/A

Note: *EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments. **Adjusted EBITDA excludes non-recurring items. ***Includes IFRS 16 adjustments; FY19 EBITDA is c €70m higher due to IFRS 16.

FY19 EBITDA guidance lowered by c €10m

Codere has restated H119 results, with EBITDA reduced by €16.5m (€14.5m from Mexico, €1.3m in Colombia and €0.4m in Panama) and has lowered its pre IFRS 16 FY19 EBITDA guidance by c €10m (€250–255m from €260–270m in October). This compares to initial guidance of €280–290m. At end Q319, Mexico comprised 22% of revenues and 30% of EBITDA. We have lowered our Mexican revenues by 8.0% and our Mexican FY19 EBITDA goes from €161.3m to €126.6m (c €90m pre IFRS 16). Altogether we are lowering our group FY19 revenues by 1.4% and our adjusted EBTIDA goes from €352.4m to €321.8m, which is in line with company guidance (€70m higher due to IFRS 16 accounting changes).

Focus on refinancing during H120

At the end of Q319, Codere reported net debt of €1,078m, which equates to a net debt/adjusted LTM EBITDA of 3.2x (or 3.1x before IFRS 16 adjustments). The company posted a small net cash outflow for 9M19 (including FX variations) and we now forecast a net cash outflow of €10.6m for FY19 (rather than a positive inflow previously). We expect Codere to focus on refinancing its €792m senior notes during H120.

Valuation: Illiquid, at deep discount for EV/EBITDA

As a result of a restrictive shareholders’ agreement, Codere’s stock is highly illiquid and trades at 4.2x EV/EBITDA for FY20, which is a deep discount to peers. Catalysts include stabilisation in Argentina, a return to confidence in Mexican growth, demonstrable net cash flow, successful debt refinancing and a resolution of the complex shareholders’ agreement (which includes a possible share placing).

Mexican pressures lead to weaker Q319

Results highlights

9M19 revenue declined by 6.3% to €1,045.3m, mostly due to the devaluation of the Argentine peso (83.6m lower revenues from Argentina) and was lower than our forecasts due to Mexican accounting irregularities. Positive momentum was achieved in Online, Spain, Italy and Uruguay. It is important to note that Mexican revenues were particularly weak in Q319, falling by 6.5% to €75.9m, as management was focusing on mitigating damage and implementing organisational changes and therefore this is not likely to be a run-rate level going forward.

9M19 adjusted EBITDA declined from 203.6m to €184.4m (pre IFRS 16), again largely due to the devaluation of the Argentine peso, increased taxes and accounting irregularities in Mexico, Colombia and Panama (see below for more details). Adjusted EBITDA (post-IFRS 16) was €237.2m. Q319 pre IFRS 16 EBITDA from Mexico was €19.8m vs €24.8m in the previous year. As above, we believe this is lower than the run-rate, given the focus on provisions and organisational changes in the period.

Net cash flow breakeven (prior to FX): For 9M19 Codere generated operating cash flow of €122.3m, with FCF of €83.4m (prior to €37.3m interest payments, €20.2m growth capex and €16.9m of deferred capex). Net cash flow (excluding repayment of financial debt and FX variations) was €4.3m.

Increasing gaming capacity: The total number of slots increased 0.7% to 56,617 in 9M19, mainly driven by growth in Mexico. In terms of venues, gaming halls increased from 144 to 150.

Exhibit 1: Q319 revenue split

Exhibit 2: Q319 adjusted EBITDA split

Source: Codere

Source: Codere

Exhibit 1: Q319 revenue split

Source: Codere

Exhibit 2: Q319 adjusted EBITDA split

Source: Codere

Accounting irregularities

As announced in October, Codere has detected inconsistencies in the financial reporting of some of its Latam subsidiaries during 2019 (Mexico, Colombia and Panama). These inconsistencies were intentional, coordinated in Mexico by a small group of individuals and performed through inappropriately inflating revenue and delaying costs recognition. Codere has subsequently introduced organisational changes and reinforced internal controls to strengthen operational systems and enhance accounting and reporting robustness. Codere has restated H119 results, with EBITDA lowered by €16.5m (€14.5m from Mexico, €1.3m in Colombia and €0.4m in Panama). Furthermore, management has lowered its pre IFRS 16 FY19 EBITDA guidance by c €10m (€250–255m from €260-270m in October and €280–290m initially).

Net debt/LTM EBITDA of 3.1x

At Q319, Codere reported net debt of €1,078m, which equates to a net debt/adjusted LTM EBITDA of 3.2x (or 3.1x before IFRS 16 adjustments). Despite the lower EBITDA, this remains well within banking covenants (based on pre IFRS 16) and Codere has sufficient funds to service the debt, with comfortable interest service ratios. Within this amount, Codere had €90.5m cash and €138.1m liquidity (including liquidity from the credit facility).

We expect the company to refinance the €792m senior notes in the near term (H120) and note that licence renewals are due in Argentina and Italy in the years 2021–24 (c €60–80m), although refinancing terms may be affected by Moody’s and S&P’s recent ratings and outlook changes. In October, S&P assigned a B- rating with negative outlook to the company and its senior secured notes. Prior to the announcement regarding accounting irregularities, Moody’s changed the Codere Corporate Family Rating from B2 to B3 and Probability of Default Rating from B2-PD to B3-PD, with the outlook maintained as stable. At the same time, Moody’s also changed the rating on the senior secured notes B2 to B3, with the outlook maintained as stable.

In terms of Argentina, we note that Codere has a long history of managing Argentine FX and inflation fluctuations, including capital controls. As an example, at Q319, more than 95% of cash to be repatriated in 2019 was already in Madrid.

Estimate changes

Lowering estimates largely due to Mexico

We have lowered our FY19 revenue forecast by 1.4% to €1406.7m, largely on the back of Mexican accounting irregularities. Q319 Mexican results were affected by the need for damage limitation and we are forecasting a small uptick in Mexican revenues for Q419, retuning to mid-single digit growth thereafter as the opening of new halls contributes to growth.

Our EBITDA goes from €352.4m to €321.8m, which is in line with company guidance. Our Mexican FY19 EBITDA goes from €161.3m to €126.6m (which equates to c €90m pre IFRS 16).

Our summary divisional table and estimate changes are below:

Exhibit 3: Summary income statement (m)

 

2014

2015

2016

2017

2018

2019e

2020e

2021e

Mexico

342

355

330

340

328

317

333

349

Argentina

489

682

535

582

408

308

271

298

Spain

150

156

170

188

220

196

225

259

Italy

264

284

322

336

337

349

361

372

Other

141

162

190

192

184

238

254

269

Revenue

1,386

1,640

1,546

1,638

1,476

1,407

1,444

1,547

growth

0%

18%

-6%

6%

-10%

-5%

3%

7%

Gaming taxes

(469)

(572)

(551)

(597)

(528)

(499)

(517)

(560)

Gross profit

871

1,018

947

986

896

855

874

930

One-off items

(67)

(34)

(52)

(29)

(53)

(37)

(10)

(10)

Adjusted EBITDA

213

280

268

274

283

322

339

371

margin

15%

17%

17%

17%

19%

23%

23%

24%

Mexico

75

92

89

93

106

127

143

151

Argentina

93

146

131

134

96

75

64

70

Spain

18

25

30

25

26

48

60

76

Italy

29

27

26

24

28

28

28

30

Other

19

14

23

28

40

57

58

60

Corporate costs

(21)

(23)

(31)

(30)

(13)

(12)

(14)

(16)

Adjusted EBITDA

213

280

268

274

283

322

339

371

Normalised operating income (pre inflation adj)

88

158

160

161

169

136

151

182

Inflation Adjustment

0

0

0

0

(20)

(17)

(5)

0

Operating income (post inflation adj)

21

125

108

131

97

83

136

172

Net finance costs

(129)

(132)

(129)

(64)

(67)

(113)

(113)

(109)

Associates & joint ventures (post-tax share)

3

3

(0)

(0)

(0)

(0)

(0)

(0)

One-off items

(61)

(72)

(1,096)

17

(33)

(19)

0

0

Normalised PBT

(39)

29

31

96

102

24

38

72

PBT

(167)

(76)

(1,116)

84

(3)

(49)

23

62

Tax

(41)

(63)

(37)

(64)

(30)

(38)

(40)

(43)

Normalised profit after tax

(5)

32

(5)

32

63

(14)

(2)

30

Profit after tax

(208)

(139)

(1,153)

20

(34)

(87)

(17)

20

Minority Interest

35

26

31

(17)

(7)

(8)

(9)

(10)

Net income for equity

(173)

(113)

(1,122)

3

(40)

(94)

(26)

10

Source: Codere, Edison Investment Research. Note: Online is included in other operations from FY19 onwards. EBITDA is post IFRS 16 from FY19 onwards.

Exhibit 4: Estimate changes

Revenue (€m)

EBITDA (€m)

EPS (€)

Old

New

% chg.

Old

New

% chg.

Old

New

% chg.

2019e

1426.2

1406.7

(1.4)

352.4

321.8

(8.7)

0.20

(0.19)

NM

2020e

1472.8

1443.9

(1.9)

368.4

338.8

(8.0)

0.26

(0.09)

NM

2021e

1577.4

1546.9

(1.9)

403.7

371.0

(8.1)

0.55

0.17

(69.1)

Source: Edison Investment Research


Exhibit 5: Financial summary

€m

2015

2016

2017

2018

2019e

2020e

2021e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

1,639.5

1,545.8

1,638.2

1,476.4

1,406.7

1,443.9

1,546.9

Cost of Sales

(621.7)

(599.3)

(651.8)

(580.9)

(551.7)

(570.3)

(617.0)

Gross Profit

1,017.8

946.5

986.4

895.5

855.0

873.6

929.9

Adjusted EBITDA

 

 

280.1

267.7

273.5

282.9

321.8

338.8

371.0

Normalised operating profit

 

 

158.1

159.7

160.5

169.0

136.5

151.5

181.7

Amortisation of acquired intangibles

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Exceptionals, including inflation accounting

(33.6)

(51.5)

(29.4)

(72.2)

(53.6)

(15.0)

(10.0)

Share-based payments

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Reported operating profit

124.5

108.2

131.1

96.9

82.9

136.5

171.7

Net Interest

(131.7)

(128.5)

(64.2)

(67.2)

(112.5)

(113.2)

(109.1)

Joint ventures & associates (post tax)

2.7

(0.2)

(0.1)

(0.1)

(0.3)

(0.3)

(0.3)

Exceptionals

(71.7)

(1,095.9)

17.2

(32.7)

(18.7)

0.0

0.0

Profit Before Tax (norm)

 

 

29.1

31.0

96.2

101.7

23.7

38.0

72.2

Profit Before Tax (reported)

 

 

(76.2)

(1,116.4)

83.9

(3.1)

(48.6)

23.0

62.2

Reported tax

(63.2)

(36.5)

(64.2)

(30.4)

(38.0)

(40.0)

(42.6)

Profit After Tax (norm)

(34.1)

(5.5)

32.0

63.3

(14.3)

(2.1)

29.6

Profit After Tax (reported)

(139.4)

(1,152.9)

19.8

(33.6)

(86.6)

(17.1)

19.6

Minority interests

26.3

31.2

(17.0)

(6.8)

(7.8)

(8.8)

(9.8)

Discontinued operations

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Net income (normalised)

(7.8)

25.7

15.0

56.5

(22.1)

(10.9)

19.8

Net income (reported)

(113.1)

(1,121.7)

2.8

(40.4)

(94.4)

(25.9)

9.8

Basic average number of shares outstanding (m)

55

1,879

2,254

119

119

119

119

EPS - basic normalised (€)

 

 

(0.14)

0.01

0.01

0.48

(0.19)

(0.09)

0.17

EPS - diluted normalised (€)

 

 

(0.14)

0.01

0.01

0.48

(0.19)

(0.09)

0.17

EPS - basic reported (€)

 

 

(2.07)

(0.60)

0.00

(0.34)

(0.80)

(0.22)

0.08

Dividend (€)

0.00

0.00

0.00

0.00

0.00

0.00

0.00

Revenue growth (%)

18.3

(-5.7)

6.0

(-9.9)

(-4.7)

2.6

7.1

Gross Margin (%)

62.1

61.2

60.2

60.7

60.8

60.5

60.1

Adjusted EBITDA Margin (%)

17.1

17.3

16.7

19.2

22.9

23.5

24.0

Normalised Operating Margin

9.6

10.3

9.8

11.4

9.7

10.5

11.7

BALANCE SHEET

Fixed Assets

 

 

1,069.9

1,051.4

988.8

1,137.1

1,356.5

1,286.2

1,232.9

Intangible Assets

606.9

566.8

528.2

613.1

599.6

587.2

577.6

Tangible Assets

385.0

414.4

388.9

453.6

684.1

626.2

582.5

Investments & other

77.9

70.2

71.8

70.4

72.8

72.8

72.8

Current Assets

 

 

371.2

428.1

346.8

307.5

309.6

297.6

304.6

Stocks

11.6

11.4

10.0

10.9

11.0

11.0

11.0

Debtors and taxes receivable

188.4

209.3

178.3

163.6

158.6

153.6

148.6

Cash & cash equivalents

110.3

142.1

104.5

81.8

85.0

78.0

90.0

Other

60.9

65.3

54.0

51.2

55.0

55.0

55.0

Current Liabilities

 

 

(1,807.3)

(408.7)

(384.2)

(388.4)

(445.0)

(420.0)

(415.0)

Creditors

(338.5)

(160.2)

(158.4)

(169.6)

(144.6)

(119.6)

(114.6)

Tax and social security

(35.6)

(198.7)

(158.7)

(147.9)

(147.9)

(147.9)

(147.9)

Short term borrowings

(1,423.7)

(40.0)

(58.0)

(60.4)

(142.0)

(142.0)

(142.0)

Other

(9.4)

(9.8)

(9.1)

(10.5)

(10.5)

(10.5)

(10.5)

Long Term Liabilities

 

 

(249.6)

(997.1)

(946.5)

(964.0)

(1,186.0)

(1,156.0)

(1,106.0)

Long term borrowings

(76.4)

(840.1)

(795.1)

(803.1)

(1,025.1)

(995.1)

(945.1)

Other long term liabilities

(173.2)

(157.0)

(151.4)

(160.9)

(160.9)

(160.9)

(160.9)

Net Assets

 

 

(615.8)

73.7

5.0

92.2

35.1

7.8

16.5

Minority interests

6.3

24.8

(83.8)

(83.4)

(85.0)

(85.0)

(85.0)

Shareholders' equity

 

 

(609.5)

98.5

(78.8)

8.8

(49.9)

(77.2)

(68.5)

CASH FLOW

Op Cash Flow before WC and tax

280.1

267.7

273.5

282.9

251.8

268.8

301.0

Working capital

(8.3)

18.9

(13.8)

(4.8)

(30.0)

(30.0)

(10.0)

Exceptional & other

(21.8)

(59.6)

(21.3)

(43.5)

(37.6)

(15.0)

(10.0)

Tax

(43.2)

(48.8)

(70.9)

(51.8)

(38.0)

(40.0)

(42.6)

Net operating cash flow

 

 

206.8

178.2

167.5

182.8

146.2

183.7

238.4

Maintenance capex

(47.0)

(80.4)

(87.1)

(82.1)

(68.0)

(68.0)

(73.0)

Growth capex inc acquisitions

(18.9)

(47.0)

(61.6)

(81.2)

(20.0)

(20.0)

(29.0)

Net interest

(31.0)

(77.8)

(67.7)

(67.1)

(60.5)

(63.2)

(64.1)

Equity financing

0.1

0.0

2.1

(0.4)

0.0

0.0

0.0

Dividends

(2.4)

(4.6)

(5.8)

(7.5)

(8.3)

(9.1)

(10.0)

Other

(47.2)

(21.6)

14.4

46.2

0.0

0.0

0.0

Net Cash Flow

60.4

(53.2)

(38.2)

(9.3)

(10.6)

23.5

62.3

Opening net debt/(cash)

 

 

1,305.5

1,389.8

738.1

748.6

781.6

1,081.8

1,058.3

FX (cash balance)

(8.9)

0.0

(10.3)

(8.3)

(3.0)

0.0

0.0

Other non-cash movements (inc equity swap, FX on debt)

(135.8)

704.9

37.9

(15.4)

(286.6)

0.0

0.0

Closing net debt/(cash)

 

 

1,389.8

738.1

748.6

781.6

1,081.8

1,058.3

996.0

Source: Codere, 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

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

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

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

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

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

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

Australia

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

New Zealand

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

United Kingdom

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

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

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

United States

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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