On the charge

Paragon 26 October 2016 Update

paragon

On the charge

H116 results and contract round up

Automobiles and parts

26 October 2016

Price

€40.88

Market cap

€184m

Net debt (€m) at 30 June 2016

45.5

Shares in issue

4.5m

Free float

50%

Code

PGN

Primary exchange

Frankfurt

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

25.8

19.3

71.3

Rel (local)

24.2

13.1

71.9

52-week high/low

€40.90

€21.70

Business description

paragon designs and manufactures advanced automotive electronics solutions as a direct supplier to the automotive industry. Products include sensors, acoustics, cockpit, electromobility and body kinematics. Production facilities are in Germany, the US and China.

Next events

Q316 results

18 November 2016

EKF

12-22 November 2016

Analyst

Roger Johnston

+44 (0)20 3077 5722

paragon is a research client of Edison Investment Research Limited

paragon has delivered several announcements over the last few months that have strengthened the medium-term investment case and highlighted the group’s significant growth potential. H116 results highlight the rapid increase in the group’s Electromobility division; all others apart from Body Kinematics also grew, generating a 9% increase in total revenues. Subsequently, the group has announced a series of contracts with significant blue-chip customers while also achieving a capital increase that was oversubscribed more than three times, which further strengthens the balance sheet and supports growth objectives.

Year end

Revenue (€m)

PBT*
(€m)

EPS*
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/15

95.0

5.0

0.83

0.0

49.2

N/A

12/16e

103.0

6.4

1.02

0.0

40.1

N/A

12/17e

123.7

9.4

1.39

0.0

29.4

N/A

12/18e

159.2

13.3

1.97

0.0

20.8

N/A

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

H116 results showed benefits of investment

H1 revenues were up 9.4% to €48.8m (H115: €44.6m) driven by substantial increases in Electromobility (+235%) and Acoustics (+17%) and more moderate growth in Sensors (+4%) and Cockpit (+1%). Body Kinematics was held back by the transition from development to serial production. With increased depreciation and amortisation, EBIT eased slightly to €3.5m (H115: €3.8m) resulting in a margin of 7.2% (H115: 8.6%). Management maintains FY16 guidance for c 8% revenue growth and c 9% EBIT margin; our forecasts have been reduced to reflect this.

Strategic evolution continues with further contracts

The group’s position, particularly with respect to electromobility, continued to progress at pace with a further strategic partnership with Joy Global signed in June, the group’s largest electromobility contract to date, followed by a strategically important deal announced in October with Kuka for a long-term partnership in the rapidly growing industrial automation market. With each such agreement, paragon is showing its ability to design, develop and agree contacts to deliver long-term sustainable growth partnerships with global blue chip customers. Each deal also supports our growth assumptions from late 2017 onwards.

Valuation: Upside as the group delivers ramp-up

With substantial contacts in place, good long-term visibility in its order book and the recent successful €13.4m (gross) capital raise providing funding, we believe that paragon is well positioned for further growth. While the group is already delivering significant revenue and profit growth, we believe the real acceleration will kick-in from 2018 onwards. As the group delivers the ramp-ups called for in its order book, we believe further upside potential exists. Our updated fair value increases to €40.1/share (previously €33.8/share) to reflect the new contracts and the October capital increase, which provides further funding confidence.

Delivering growth paths

Over the past few months, paragon has demonstrated a combination of delivery of growth in its existing core businesses as well as the positioning of its electromobility platform for a solid acceleration from 2018 with several new contracts and partnerships. This has also shown that the business is not overly reliant on any particular end market to deliver this electromobility growth, a key strategy we highlighted in our September 2015 initiation note and one that the group is now demonstrating with a blue chip rosta of partners such as Vossloh, Triathlon, Joy Global and, most recently, Kuka.

At the same time, paragon continues to innovate and deliver in its core automotive related businesses and, while phasing can have an impact such as in the Body Kinematics division, as programmes ramp-up the medium-term prognosis across all divisions is positive. With the recent capital raise strengthening the balance sheet to support growth, we believe paragon is set to continue its trajectory of accelerating growth.

H116 show results of investments

paragon’s H1 results released in August highlighted the group is continuing its rapid growth:

Revenues increased by 9.4% to 48.8m (H115: 44.6m) driven by growth across all divisions except Body Kinematics, where programmes are maturing from development to production and several products are in parallel R&D before ramping up again throughout 2017.

Consolidated EBITDA rose slightly to 6.8m (H115: 6.7m) despite a step-up in personnel expense as a result of the expansion of the business, corresponding to an EBITDA margin of 13.9% (H115: 15.0%).

With increased depreciation and amortisation and other operating expenses, consolidated EBIT reduced slightly to 3.5m (H115: 3.8m) corresponding to an EBIT margin of 7.2% (H115: 8.6%). A reduced financial income and higher tax burden led to the net income for the period falling to 0.7m (H115: 1.9m) or an EPS of 0.16 (H115: €0.46).

Cash flow from operating activities decreased to 4.7m (H115: 8.0m) largely due to a reduction in trade payables following a significant increase in the previous year from higher inventories in the new divisions.

Management maintained its guidance for c 8% revenue growth and c 9% EBIT margin for 2016.

After the half-year results, the group launched and completed a successful capital increase in October, enlarging the share capital by 10% at a placement price of €32.50, which was three and half times oversubscribed. The raised gross proceeds of €13.37m will be used to support the ongoing growth trajectory. CEO Klaus Frers maintained his majority shareholding with 50% plus one share.

Recent contract wins support the medium-term growth

There have been several significant contract wins and announcements over the past five months, demonstrating that the group is making significant commercial progress and supporting our medium-term revenue growth assumptions with ramp up from late 2017 and early 2018:

Joy Global (June 2016). paragon has announced that its Voltabox of Texas subsidiary had entered into a strategic partnership with Joy Global, a leading mining equipment and services provider. Voltabox is to develop a range of smart battery systems for various mining equipment with first deliveries expected in fiscal year 2017. This is the largest single electromobility contract win by the group and in the first stage the group will develop batteries for use in the underground mining equipment. The subsequent announced takeover of Joy Global by Komatsu provides an expanded opportunity for the group.

Extension of series production of Air Quality Sensors in Kunshan (September 2016). The group announced that it was extending series production of its Air Quality Sensors (AQS) in its Kunshan production facility in China to a number of new Chinese Automotive OEMs customers. This is set to increase utilisation at the plant and start to make a contribution to group results from late 2017. It also demonstrates that the group is not only focusing on the growth in electromobility, but also in its traditional areas of the business.

Kuka (October 2016). We see the announcement of the strategic partnership with Kuka’s robotics business as a key indication of the importance placed on electromobility globally. Kuka is a clear leader in the field of industrial automation and the partnership is for the group’s Voltabox Deutschland subsidiary to develop supply batteries to power Kuka’s automated guided vehicle, which is used in areas such as automotive production. First deliveries of 96V batteries will begin in Q117 and, given the increasing use of networked production, we see this as another significant step forward for the group.

We believe each of these announcements has further supported the growth expectation from late 2017 and continues to de-risk the group’s business as it is reducing overdependence on any one end market for its electromobility business. In addition, as exemplified by the Chinese AQS expansion, the group is able to deliver existing core business growth in new areas.

Financials adjusted to reflect shape of ramp up

Following half-year results where timing of certain ramp ups are more skewed to 2017 and 2018, in conjunction with the recently announced contract agreements, we are adjusting our forecasts more in line with management’s guidance for 2016 and 2017 with a greater ramp up in 2018 (where we introduce forecasts for the first time) supported by the new contracts. We have also adjusted for the recent capital increase. The forecast changes are shown in Exhibit 1.

Exhibit 1: Edison forecast revisions

FY14

FY15

FY16e 'old'

FY16e 'new'

Change

FY17e 'old'

FY17e 'new'

Change

FY18e 'new'

Growth

Revenue

Sensors

31

35

35

35

0.0%

36

36

0.0%

40

10.0%

Acoustics

14

16

16

18

10.5%

17

19

9.2%

19

5.0%

Cockpit

28

32

33

32

-3.3%

34

33

-2.3%

35

5.0%

Body Kinematics

4

5

7

4

-39.8%

14

6

-59.3%

14

150.0%

Voltabox (Germany)

1

4

5

4

-20.0%

15

8

-46.7%

16

100.0%

Voltabox (US)

1

4

10

10

0.0%

19

22

15.8%

35

58.0%

Group

79

95

106

103

-2.9%

135

124

-8.7%

159

28.7%

Other income

7

17

14

14

-2.7%

9

14

57.9%

14

-1.3%

Group operating performance

86

112

119

117

-1.7%

144

138

-4.3%

173

25.6%

COGS

-42

-56

-60

-58

-2.9%

-75

-68

-9.5%

-87

28.7%

Gross Profit

44

57

59

59

-0.4%

69

70

1.5%

86

22.6%

Personnel expenses

-22

-26

-27

-27

-3.3%

-32

-32

-0.4%

-41

28.0%

Depreciation of PPE & amortisation of intangibles

-4

-6

-6

-7

14.3%

-6

-7

22.3%

-8

5.0%

Impairment of PPE & intangibles

0

0

0

0

n/m

0

0

n/m

0

5.0%

Other operating expenses

-12

-16

-16

-16

2.1%

-17

-19

9.5%

-21

15.0%

Group EBIT

6

8

9

9

-1.2%

13

12

-7.1%

16

31.1%

Underlying Net Interest

-2.0

-2.8

-2.1

-2.5

19.0%

-2.0

-2.7

35.0%

-2.5

-7.4%

PBT (EBT)

4.3

5.0

7.4

6.4

-13.6%

11.4

9.4

-17.8%

13.3

42.1%

Tax

-1.5

-1.6

-2.4

-2.1

-12.1%

-3.8

-3.1

-18.9%

-4.4

42.4%

Net Profit

2.8

3.4

4.9

4.3

-12.5%

7.7

6.3

-18.8%

8.9

42.0%

EPS (normalised)

0.67

0.83

1.20

1.02

-15.3%

1.86

1.39

-25.4%

1.97

42.0%

Source: Edison Investment Research

Valuation supported by increasing visibility, ramp up key

With a stronger balance sheet and increasing medium-term contract revenue visibility, we believe that paragon is well set to deliver accelerating growth to 2018 and beyond. As a result, our DCF-derived fair value has increased to €40.1/share (previous €33.8/share), reflecting the acceleration of growth from 2018 and increasing visibility provided both by the lifetime order backlog and new partnership agreements. Our updated DCF based fair value is shown in Exhibit 2 below.

Exhibit 2: Edison DCF-derived fair value for paragon

Year ended 31 December (€m)

2016e

2017e

2018e

2019e

2020e

2021e

2022e

2023e

2024e

2025e

2026e

Assumptions

 

 

 

 

 

 

 

 

 

 

 

Sales

103

124

159

183

201

211

222

229

236

240

245

% change

n/a

20.1%

15.00%

15.00%

10.00%

5.00%

5.00%

3.00%

3.00%

2.0%

2.0%

EBIT

9

12

16

19

21

22

23

24

25

25

26

% margin

8.6%

9.8%

9.9%

10.3%

10.5%

10.5%

10.5%

10.5%

10.5%

10.5%

10.5%

% change

n/a

35.7%

31.1%

19.2%

12.1%

5.0%

5.0%

3.0%

3.0%

2.0%

2.0%

Tax

(2)

(3)

(4)

(6)

(7)

(7)

(8)

(8)

(8)

(8)

(8)

% tax rate

33.0%

33.0%

33.0%

33.0%

33.0%

33.0%

33.0%

33.0%

33.0%

33.0%

33.0%

NOPAT

7

9

11

13

14

15

16

16

17

17

17

% margin

6.6%

7.3%

7.2%

6.9%

7.0%

7.0%

7.0%

7.0%

7.0%

7.0%

7.0%

% change

n/a

32.4%

27.1%

10.6%

12.1%

5.0%

5.0%

3.0%

3.0%

2.0%

2.0%

Depreciation & Amortisation

7

7

8

8

8

8

9

9

9

10

10

Change in working capital

(7)

(5)

(5)

(5)

(5)

(5)

(4)

(4)

(4)

(4)

(4)

Capex

(14)

(12)

(8)

(4)

(4)

(4)

(4)

(4)

(4)

(4)

(4)

Free Cash Flow to Firm

(7)

(1)

6

12

13

14

17

17

17

19

19

WACC

8.0%

8.0%

8.0%

8.0%

8.0%

8.0%

8.0%

8.0%

8.0%

8.0%

8.0%

Year

1

2

3

4

5

6

7

8

9

10

11

Discount factor

1.08

1.17

1.26

1.36

1.47

1.59

1.71

1.85

2.00

2.16

2.33

Present Value Free Cash Flow

(6)

(1)

5

8

9

9

10

9

9

9

8

Cumulative present value

(6)

(7)

(2)

6

15

24

33

43

51

60

68

 

 

 

Net present value - forecast FCF

68

 

 

 

 

WACC 

 

 

Net present value - terminal year

139

 

 

6.0%

7.0%

8.0%

9.0%

10.0%

Enterprise Value

208

 

Terminal growth

0.0%

49.5

39.7

32.4

26.8

22.4

 

 

1.0%

57.1

44.6

35.7

29.1

24.1

Net debt (end FY15 adjusted for capital increase)

(26)

 

2.0%

68.4

51.4

40.1

32.1

26.2

Minorities

0

 

3.0%

87.3

61.6

46.3

36.1

28.9

Value attributable to shareholders

182

 

4.0%

125.1

78.6

55.5

41.7

32.5

 

 

Shares outstanding (m)

4.5

 

Value per share (€)

40.1

 

Source: Edison Investment Research

Key to supporting this fair value will be the group’s ability to affect the necessary operational ramp-up in production, particularly in electromobility. paragon has invested in automated production to ensure repeatability, efficiency and operational scale up to support this.


Exhibit 3: Financial summary

€m

2011

2012

2013

2014

2015

2016e

2017e

2018e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

67.1

70.4

73.9

79.0

95.0

103.0

123.7

159.2

Other operating income

1.9

2.0

1.1

1.4

3.2

3.5

3.7

3.5

Increase or decrease in inventory of finished goods / WIP

0.1

0.6

0.3

0.8

1.4

0.5

0.5

0.5

Other own work capitalised

1.3

2.0

1.7

5.2

12.8

10.0

10.0

10.0

Group operating performance

 

 

70.3

75.1

76.9

86.3

112.4

117.0

137.9

173.2

Cost of Sales

(33.7)

(37.0)

(36.3)

(41.8)

(55.5)

(58.2)

(67.8)

(87.3)

Gross Profit

36.7

38.1

40.6

44.5

56.9

58.8

70.0

85.9

EBITDA

 

 

12.9

11.7

12.2

10.5

14.1

15.8

19.4

23.5

Operating Profit (before amort. and except.)

 

 

8.8

7.8

7.9

6.2

7.8

8.9

12.1

15.8

Intangible Amortisation

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Exceptionals

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Other

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Operating Profit

8.8

7.8

7.9

6.2

7.8

8.9

12.1

15.8

Net Interest

(1.3)

(1.1)

(1.5)

(2.0)

(2.8)

(2.5)

(2.7)

(2.5)

Profit Before Tax (norm)

 

 

7.5

6.7

6.4

4.3

5.0

6.4

9.4

13.3

Profit Before Tax (FRS 3)

 

 

7.5

6.7

6.4

4.3

5.0

6.4

9.4

13.3

Tax

(2.2)

(2.1)

(2.5)

(1.5)

(1.6)

(2.1)

(3.1)

(4.4)

Profit After Tax (norm)

5.3

4.6

3.9

2.8

3.4

4.3

6.3

8.9

Profit After Tax (FRS 3)

5.3

4.6

3.9

2.8

3.4

4.3

6.3

8.9

Average Number of Shares Outstanding (m)

4.1

4.1

4.1

4.1

4.1

4.2

4.5

4.5

EPS - normalised (€)

 

 

1.30

1.13

0.96

0.67

0.83

1.02

1.39

1.97

EPS - normalised fully diluted (c)

 

 

1.30

113

96

67

83

102

139

197

EPS - (IFRS) (€)

 

 

1.30

1.13

0.96

0.67

0.83

1.02

1.39

1.97

Dividend per share (€)

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

Gross Margin (%)

54.7

54.1

55.0

56.3

59.8

57.1

56.6

54.0

EBITDA Margin (%)

19.2

16.6

16.6

13.3

14.8

15.3

15.7

14.8

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

13.2

11.0

10.7

7.9

8.2

8.6

9.8

9.9

BALANCE SHEET

Fixed Assets

 

 

17.1

18.6

18.8

30.1

59.7

63.8

65.5

62.8

Intangible Assets

3.3

4.9

5.6

9.4

24.7

22.7

20.7

18.7

Tangible Assets

13.3

13.5

13.0

20.2

34.6

40.7

44.4

43.6

Investments

0.6

0.1

0.2

0.5

0.4

0.4

0.4

0.4

Current Assets

 

 

24.3

25.4

33.1

32.3

32.9

39.4

45.4

51.4

Stocks

6.9

7.3

7.5

6.9

11.2

14.2

17.2

20.2

Debtors

2.1

4.0

8.0

12.2

13.2

16.7

19.7

22.7

Cash

11.2

10.1

16.3

11.8

8.5

8.5

8.5

8.5

Other

4.1

4.0

1.3

1.5

0.0

0.0

0.0

0.0

Current Liabilities

 

 

(14.4)

(13.9)

(12.2)

(16.2)

(27.1)

(16.4)

(15.4)

(14.4)

Creditors

(11.7)

(11.5)

(9.3)

(10.7)

(17.8)

(7.1)

(6.1)

(5.1)

Short term borrowings

(2.7)

(2.4)

(2.9)

(5.5)

(9.3)

(9.3)

(9.3)

(9.3)

Long Term Liabilities

 

 

(17.2)

(17.1)

(33.6)

(41.9)

(59.2)

(56.2)

(60.7)

(58.2)

Long term borrowings

(12.5)

(12.3)

(20.2)

(24.7)

(38.5)

(35.5)

(40.0)

(37.6)

Other long term liabilities

(4.7)

(4.8)

(13.4)

(17.1)

(20.7)

(20.7)

(20.7)

(20.7)

Net Assets

 

 

9.8

13.0

6.2

4.3

6.2

30.6

34.7

41.5

CASH FLOW

Operating Cash Flow

 

 

11.4

9.2

8.4

10.3

16.4

9.3

14.4

18.5

Net Interest

(1.2)

(1.0)

(1.4)

(1.9)

(2.9)

(2.5)

(2.7)

(2.5)

Tax

(1.6)

(2.4)

(1.9)

(1.4)

(0.7)

(2.1)

(3.1)

(4.4)

Capex

(2.0)

(2.7)

(2.3)

(10.5)

(18.8)

(14.0)

(12.1)

(8.1)

Acquisitions/disposals

(1.3)

(3.5)

(2.5)

(5.2)

(13.5)

0.0

0.0

0.0

Financing

0.0

0.0

0.0

0.0

0.0

13.4

0.0

0.0

Dividends

0.0

0.0

(1.4)

(1.0)

(1.0)

(1.0)

(1.0)

(1.0)

Net Cash Flow

5.3

(0.3)

(1.2)

(9.7)

(20.5)

3.0

(4.5)

2.5

Opening net debt/(cash)

 

 

13.6

4.0

4.6

6.7

18.4

39.4

36.4

40.9

HP finance leases initiated

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Other

4.4

(0.2)

(1.0)

(1.9)

(0.5)

(0.0)

(0.0)

0.0

Closing net debt/(cash)

 

 

4.0

4.6

6.7

18.4

39.4

36.4

40.9

38.4

Source: paragon, Edison Investment Research

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

DISCLAIMER
Copyright 2016 Edison Investment Research Limited. All rights reserved. This report has been commissioned by paragon paragonand prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2016. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

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

DISCLAIMER
Copyright 2016 Edison Investment Research Limited. All rights reserved. This report has been commissioned by paragon paragonand prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2016. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

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