AJ-Lucas-Group

Positive momentum in drilling services

AJ Lucas Group 24 September 2018
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AJ Lucas Group

Positive momentum in drilling services

Business update

Oil & gas

24 September 2018

Price

A$0.36

Market cap

A$270m

US$/A$1.30

Net debt (A$m) at 30 June 2018

75

Shares in issue

750.1m

Free float

32%

Code

AJLX

Primary exchange

ASX

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

10.8

7.5

59.6

Rel (local)

12.1

7.9

44.7

52-week high/low

A$0.5

A$0.2

Business description

AJ Lucas has investments in the exploration and commercialisation of shale gas in the UK through licence equity interests and a stake in Cuadrilla. AJL also has two Australia-based operating business units: Drilling Services (LDS) and Engineering & Construction (LEC).

Next events

Interim results

February 2019

Analysts

Sanjeev Bahl

+44 (0)20 3077 5742

Elaine Reynolds

+44 (0)20 3077 5713

Carlos Gomes

+44 (0)20 3077 5722

AJ Lucas Group is a research client of Edison Investment Research Limited

AJ Lucas’s FY18 (to end June 2018) results highlighted a material increase in drilling service revenues (+70%) and margins (+635% EBITDA). Based on AJL’s current order book and leading indicators, management expects rig utilisation and mining sector drilling activity to be sustained in FY19 with robust margins after AJL’s exit from legacy contracts in the coal seam gas and water markets. Our updated valuation reflects expected engineering and construction sales proceeds of A$25m and an increased valuation for drilling services. The net result is an increase in our P50 valuation for AJL Lucas of A$0.93/share (from A$0.86/share).

Year end

Revenue
(A$m)

Gross profit (A$m)

Underlying EBITDA* (A$m)

Capex
(A$m)

Net debt
(A$m)

06/17

122.6

1.4

(3.8)

(12.8)

85.1

06/18

127.1

21.6

15.4

(13.5)

75.0

06/19e**

127.2

17.8

13.5

(23.0)

86.3

06/20e

129.7

18.2

13.9

(3.0)

77.7

Note: *Before share of loss from equity accounted investees, UK investment overhead, asset sales and one-off costs. **Assumes sale of Lucas Engineering & Construction.

Drilling services recovery

A reported step-change in drilling services profitability was well ahead of the prior year, with underlying FY18 EBITDA growing from a low base to A$19.7m (from FY17 A$2.7m). Higher rig utilisation and a shift away from low/negative margin contracts in the coal seam gas and water sectors were key drivers. We concur with management that current profitability appears to be sustainable in FY19 based on leading (exploration metres drilled) and lagging indicators (coal shipments) in the coal sector. Our drilling services valuation at 6x EBITDA (three-year average underlying drilling services EBITDA) increases to A$54m from A$34m previously.

Improved outlook provides options for re-finance

An improved outlook for AJL’s underlying drilling services business, combined with successful gas flows at Preston New Road, should provide the company with opportunities to recapitalise. Current debt facilities remain onerous at an interest rate of 18%, and sustained drilling services performance may provide access to more conventional and less expensive debt instruments.

Valuation: P50 valuation dominated by UK shale

Our updated AJL valuation at $A0.93/share is dominated by our P50 valuation of the company’s UK shale exposure. Ongoing maintenance capex and net share of UK shale capex through to end FY19 is likely to be funded through a combination of cash generated from drilling services, E&C sale proceeds and drawdown on available credit of US$9m. In addition, under Cuadrilla’s farm-in agreement with Spirit Energy (a subsidiary of Centrica), in order for Spirit to maintain its 25% interest in the PEDL165 licence it is obliged to fund a further £46.7m (gross) of costs once first gas has been flowing for six months.

Drilling services: Recovery underway

AJL’s drilling division had a significantly improved FY18 driven by coal mine de-gassing and directional drilling demand from tier 1 clients in Australia. Drilling revenues grew by 70% to A$124m with underlying EBITDA of A$19.7m (+635%), generating an EBITDA margin of 15.9%. This step change in revenues and profitability was driven by several factors: AJL’s rig fleet utilisation was materially higher year-on-year and margins benefitted from the completion of lower margin legacy contracts in the coal seam gas and water markets. Management shifted drilling rigs back to the company’s core competency, mine de-gassing, while allocating under-utilised rigs to the mining exploration and production sector. AJL’s strong customer relationships, track record of delivery, focus on efficiency improvement and safety have helped drive order book growth and make AJL well placed to continue to benefit from a recent up-tick in coal mine activity. We continue to track data on shipped coal tonnage from ports in New South Wales and Queensland as well as mining exploration expenditure/metres drilled, in order to take a view on the sustainability of current drilling activity. Mining exploration expenditure saw material uptick in 2018, while shipped coal tonnage from port data we analysed appears to have stabilised (six-month average) close to historic highs.

Exhibit 1: Australian mining exploration expenditure and metres drilled

Exhibit 2: Shipped coal tonnage from three major ports*

Source: Australian Bureau Statistics, Edison Investment Research

Source: Edison Investment Research. Note: *Dalrymple bay, Hay point and Abbot point coal terminals.

Exhibit 1: Australian mining exploration expenditure and metres drilled

Source: Australian Bureau Statistics, Edison Investment Research

Exhibit 2: Shipped coal tonnage from three major ports*

Source: Edison Investment Research. Note: *Dalrymple bay, Hay point and Abbot point coal terminals.

We continue to value drilling services based on three-year average underlying EBITDA and an EV/EBITDA multiple based on the company’s ASX listed peers. Given the volatility in both revenues and margins, we use an average of EBITDA for FY17, FY18 and FY19e and apply a valuation multiple of 6x EBITDA which values drilling services at A$54m (Book value of drilling service plant and equipment stands at A$26.6m and receivables at A$27.2m). We see room to increase our valuation as activity levels and margins stabilise and a higher EBITDA multiple is justified. Management currently guides at a similar outturn for FY19e as FY18 based on the group’s order book and coal mining activity levels. Current rig utilisation stands at c 28 rigs out of a fleet of 39 providing scope for top-line growth if activity levels continue to rise.

Exhibit 3: Drilling EBITDA and margin expectations

Exhibit 4: ASX-listed comparables

Source: Edison Investment Research

Source: Edison Investment Research

Exhibit 3: Drilling EBITDA and margin expectations

Source: Edison Investment Research

Exhibit 4: ASX-listed comparables

Source: Edison Investment Research

UK shale: Potential gas flows in Q418

Cuadrilla (47.45% owned by AJ Lucas) completed drilling the UK’s first ever horizontal shale wells earlier this year. The first of two horizontal wells at Preston New Road (PNR) was completed in April 2018, penetrating the Lower Bowland shale to a depth of 2,300m and extended laterally by 782m. The second well at PNR was completed in July 2018 penetrating the Upper Bowland shale at 2,100m and extended horizontally for 743m. Cuadrilla has consent to hydraulically fracture the first of the two laterals (due imminently) and has submitted an application for consent to fracture the second horizontal.

Under Cuadrilla’s farm-in agreement with Spirit Energy, for Spirit to maintain its 25% interest in the PEDL165 licence it is obliged to fund a further £46.7m (gross) of costs once first gas has been flowing for six months. Our financial forecasts assume a net A$20m contribution to fund ongoing activity at Cuadrilla in FY19 prior to the drawdown of the outstanding Spirit Energy carry.

Edison recently carried out a probabilistic valuation of Cuadrilla’s UK shale acreage; this analysis can be found in our initiation report. Key outputs from our analysis include an estimated 67% chance of commercial success for UK shale based on input distributions for type curve (Anderson Thompson type curve as published by Cuadrilla), well cost (US analogues adjusted for UK), gas price (forward curve), activity rates and a risked valuation of US$2,142/acre.

UK shale unit NPV of risked diluted P50 US$2,142/acre

Exhibit 5: Bowland implied US$/acre values (commercial success case)

The mean implied unrisked US$/acre value from our analysis is US$7,675/acre with P50 of US$6,418/acre.

This only assumes positive values for US$/acre, ie a commercial success case.

Including a commercial success risking of 67%, this drops to P50 US$4,284/acre. Reducing again by 50% to reflect potential farm-out dilution, this falls to US$2,142/acre.

Edison’s calculated unit value range and P50 value is comparable to historical UK shale transaction values.

Source: Edison Investment Research

Valuation sensitivities – type curve a key driver

Exhibit 6 below provides an insight into key valuation sensitivities. IP (initial production) rate, estimated ultimate recovery (EUR), gas price and well cost are key sensitivities. The sensitivity tornado shows the impact on our unrisked P50 UK shale valuation when the top and bottom 10% of our input distributions are used in our valuation. This demonstrates that given the known uncertainty ranges for key inputs the most sensitive factor from a valuation perspective is IP rate with low initial rate scenarios driving negative NPVs. We believe that Cuadrilla’s upcoming appraisal programme at Preston New Road will reduce uncertainty on the IP rate and EUR, providing for a tighter valuation range.

Exhibit 6: Key sensitivities to NPV distribution (US$m) – sensitivity bounded by top/bottom 10% point values from assigned input distributions (ranked by effect on output P50)

Based on assigned distributions, the key sensitivities for NPV are well IP rate, EUR, gas price and well cost.

We expect uncertainty over IP rate to be reduced once the Preston New Road flow tests are concluded in late 2018, early 2019.

Recovery factor (ranging from 3% to 13%) is less of a driving factor over our modelling period out to 2050.

Negative values shown in dark green.

Source: Edison Investment Research

Our analysis also suggests that in generating a positive NPV15, IP rate needs to be at a minimum 5mmscfd and EUR at least 2.3bcf for a 2.5km lateral. We expect initial test rates from the first well at Preston New Road to be greater than those seen at the 2011 Preese Hall-1 vertical exploratory with 3 frac-stages at 400-500mscfd.

Valuation

Key changes to our valuation from our April 2018 initiation are highlighted below:

Mark to market for net debt positon at FY18 (June 2018)

Inclusion of expected cash proceeds from the sale of engineering and construction of A$25m

Higher valuation for drilling services based on 6x three-year average EBITDA (FY17, FY18 and FY19).

No changes to our UK shale gas P50 probabilistic valuation.

FX rate of A$/US$ of 1.3 (reflecting the six-month average rate to end June 2018).

A waterfall chart of our update valuation is provided in the Exhibit below.

Exhibit 7: AJL group valuation waterfall

Source: Edison Investment Research

P50 (mid-case) group valuation

Our sum of the parts (SOTP) group valuation incorporates a risked P50 commercial success case UK shale valuation, a deduction for UK shale overheads, balance sheet adjustments and valuation of Lucas Drilling Services (LDS). This equates to a group valuation of A$0.93/share, as broken down in Exhibit 8 below.

Exhibit 8: AJL SOTP valuation

Recoverable reserves

 

Net risked

Value per share

Asset

Country

Diluted WI

CoS

Gross

Net

NPV/mcf

value

risked

 

 

%

%

bcf

bcf

A$/mcf

A$m

A$/share

Net (debt) at end 2018 actual

100%

(75)

(0.10)

UK SG&A - NPV10 of 2yrs

UK

100%

(4)

(0.01)

Lucas E&C sales proceeds

Australia

100%

25

0.03

Lucas Drilling Services 6x 3yr avg EBITDA

Australia

100%

54

0.07

Lucas net UK shale appraisal costs ex Spirit Energy carry

UK

100%

(20)

(0.03)

Net UK shale valuation P50*

UK

50%

67%

10,446

2,279

0.45

716

0.96

Valuation

 

 

 

 

 

 

696

0.93

Source: Edison Investment Research. Note: *Based on risked P50 NPV output from probabilistic model.

Financials and funding

Following a A$51.2m equity fundraise in February 2018, which included partial conversion of the Kerogen loan facility and a A$11.3m repayment of AJL’s senior loan note, total debt was reduced to A$84m (net debt A$75m) from A$107m at FY17.

Following the end of the reported financial year, AJL reached agreement with OCP Asia to increase the headroom on its senior loan note facility to allow the ability to draw down an additional US$9m and to extend the maturity of the facility to 31 January 2020 (from July 2019). The requirement to reduce the facility principal by US$20m was also deferred to 30 June 2019 (from 30 September 2018). In addition, Kerogen has agreed to extend the term of its loan facility from 31 December 2019 to the earlier of 31 July 2020 or six months from the full repayment of senior loan notes.

Outstanding debt instruments command an 18% interest rate, therefore cost of capital is high relative to the company’s drilling service and E&P peers. We would expect re-financing to deliver a significantly lower cost of debt as drilling service profitability stabilises and in the event of successful gas flows from Cuadrilla. Both senior and subordinated are provided by material, supportive shareholders in AJL.

Exhibit 9: Debt instruments

Debt instrument

Amount outstanding*

Maturity

Rate

Kerogen Subordinated (US$)

A$40.3m

July 2020 or three months from full repayment of senior loan notes

16% initially increasing to 18% from June 2018

Senior Loan note Senior Secured (US$)

A$44.6m

January 2020

18% paid 12% quarterly and 6% accruing until termination

Source: Edison Investment Research. Note: Kerogen is AJL’s largest shareholder. *Carrying amount including interest bearing liability.

Short-term liquidity

At the end of FY18 (end June 2018), AJL had A$9.8m of cash and is expected to receive A$25m cash from the sale of engineering and construction (E&C) over the course of FY19. Depending on the timing of E&C, sale cash receipts and cash outflows (capex A$4m on drilling maintenance and A$20m contribution to Cuadrilla) we see a potential need for drawdown on AJL’s OCP debt headroom (US$9m) or an equity raise in the event of UK shale appraisal success. We provide a cash flow bridge below based on our modelled assumptions (which do not include any dividends from Cuadrilla in the event of gas sales).

Exhibit 10: Short-term net debt evolution*

Exhibit 11: FY18 to FY19 cash flow bridge*

Source: Edison Investment Research. Note: *Assumes net UK shale capex funded through farm-out in 2020.

Source: Edison Investment Research. Note: *Assumed drawdown of $9m available under OCP facility and excludes accrued interest.

Exhibit 10: Short-term net debt evolution*

Source: Edison Investment Research. Note: *Assumes net UK shale capex funded through farm-out in 2020.

Exhibit 11: FY18 to FY19 cash flow bridge*

Source: Edison Investment Research. Note: *Assumed drawdown of $9m available under OCP facility and excludes accrued interest.

Exhibit 12: Financial summary

June

 

A$m

2016

2017

2018

2019e

2020e

 

 

 

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue (continuing operations)

 

 

126.0

122.6

127.1

127.2

129.7

Cost of Sales

(105)

(121)

(106)

(109)

(112)

Gross Profit

21

1

22

18

18

Underlying EBITDA*

 

 

14.6

(3.8)

15.4

13.5

13.9

Operating Profit (before amort. and except.)

 

 

(11)

(12)

7

6

9

Intangible Amortisation

0

0

0

0

0

Exceptionals

0

0

0

0

0

Other / P&L equity accounted investees

(7)

(3)

8

(2)

56

Operating Profit

(17)

(15)

16

4

64

Net Interest

(2)

(24)

(24)

(15)

(13)

Profit Before Tax (norm)

 

 

(12.7)

(36.3)

(16.7)

(8.9)

(4.0)

Profit Before Tax (FRS 3)

 

 

(19)

(39)

(9)

(11)

52

Tax

0

0

0

0

0

Profit After Tax (norm)

(19)

(39)

(9)

(11)

52

Profit After Tax (FRS 3)

(19)

(39)

(9)

(11)

52

Average Number of Shares Outstanding (m)

395.0

585.0

749.9

749.9

749.9

EPS - normalised (c)

 

 

(4.93)

(6.67)

(1.14)

(1.47)

6.89

EPS - normalised fully diluted (c)

 

 

(4.93)

(6.67)

(1.14)

(1.47)

6.89

EPS (IFRS) (c)

 

 

(0.00)

(0.01)

(0.00)

(0.00)

0.01

Dividend per share (c)

0.0

0.0

0.0

0.0

0.0

Gross Margin (%)

16.9

1.1

17.0

14.0

14.0

EBITDA Margin (%)

-1.9

-7.1

-4.2

0.9

1.6

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

-8.4

-9.9

5.8

5.0

6.7

BALANCE SHEET

Fixed Assets

 

 

164

164

184

199

253

Intangible Assets

18

21

36

36

36

Tangible Assets

39

38

28

45

43

Investments

106

105

121

118

174

Current Assets

 

 

66

77

83

75

65

Stocks

16

31

41

36

31

Debtors

26

22

27

22

17

Cash

23

22

10

16

16

Other

1

1

5

0

0

Current Liabilities

 

 

(70)

(35)

(59)

(59)

(59)

Creditors

(36)

(34)

(42)

(42)

(42)

Short term borrowings

(35)

(1)

(17)

(17)

(17)

Long Term Liabilities

 

 

(72)

(107)

(69)

(86)

(78)

Long term borrowings

(71)

(106)

(68)

(86)

(77)

Other long term liabilities

(1)

(1)

(1)

(1)

(1)

Net Assets

 

 

87

98

139

128

180

CASH FLOW

Operating Cash Flow

 

 

(25)

(27)

(13)

22

12

Net Interest

0

0

0

0

0

Tax

0

0

0

0

0

Capex

(6.6)

(12.8)

(13.5)

(23.0)

(3.0)

Acquisitions/disposals

0

0

0

0

0

Financing

5

15

15

0

0

Dividends

0

0

0

0

0

Net Cash Flow

(26)

(25)

(11)

(1)

9

Opening net debt/(cash)

 

 

63

83

85

75

86

HP finance leases initiated

0

0

0

0

0

Other

6

23

22

(10)

(0)

Closing net debt/(cash)

 

 

83.2

85.1

75.0

86.3

77.7

Source: AJ Lucas accounts, Edison Investment Research. Note: *Before share of loss from equity accounted investees, UK investment overhead, asset sales and one-off costs.

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by AJ Lucas Group and 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 Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2018. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

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Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by AJ Lucas Group and 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 Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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