Positive outlook for growth

John Laing Group 31 August 2017 Outlook
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John Laing Group

Positive outlook for growth

H117 results

Investment companies

31 August 2017

Price

293p

Market cap

£1,075m

Net debt (£m) at 30 June 2017

60

Shares in issue

367.0m

Free float

100%

Code

JLG

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(5.5)

(1.4)

12.9

Rel (local)

(5.4)

0.6

4.0

52-week high/low

317.8p

252.0p

Business description

John Laing is an originator, active investor in, and manager of greenfield infrastructure projects. John Laing operates internationally and its business is focused on the transport, energy, social and environmental sectors.

Next events

Pre-close update

December 2017

Analysts

Graeme Moyse

+44 (0)20 3077 5700

Roger Johnston

+44 (0)20 3077 5722

John Laing Group is a research client of Edison Investment Research Limited

John Laing Group (JLG) has an established and impressive track record of growth and is well paced to benefit from the strong market that exists for global infrastructure and renewable energy investment. We believe it can deliver a CAGR of 11.1% in NAV per share and 5.2% in DPS in 2016-21e. The combination of NAV per share and DPS growth should continue to provide attractive returns for shareholders and further close the valuation gap to its peers.

Year end

NAV

(p)

EPS*
(p)

DPS**
(p)

P/NAV
(x)

P/E
(x)

Yield
(%)

12/15

242

27.6

6.90

1.2

10.6

2.4

12/16

277

51.9

8.15

1.1

5.6

2.8

12/17e

304

35.4

9.80

1.0

8.3

3.3

12/18e

338

43.9

9.98

0.9

6.7

3.4

Note: *EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments. **DPS includes interim, final and special payments

H117 results extend JLG’s record of growth

In the period 2011-16 JLG achieved a c 17% CAGR in total portfolio value and a c 20% CAGR in the NAV (13.1% CAGR in NAV per share in 2014-16). H117 results show that the NAV per share increased by a further 2.3% (to 284p/share) in the first six months of the year, despite a £25.5m (c 7p/share) reduction in the carrying value of its investment in the Manchester Waste project and the payment of last year’s final and special dividends (£23.1m, c 6p/share). The interim DPS was increased by 3% (vs H116) and further increases over time should be sustained by a growing cash yield on an expanding secondary portfolio.

Strong outlook for infrastructure investment

The outlook for infrastructure investment on a global basis remains encouraging and JLG’s management remains confident of the company’s prospects (pipeline at 30 June 2017 of £1.9bn, including 11 shortlisted PPP projects). JLG’s portfolio is diversified in terms of geography, stage of development, sector allocation and revenue drivers, and we believe it is well positioned to benefit from positive global growth trends. We forecast CAGR in NAV per share of c 11% in the NAV per share (2016-21), with DPS increases of 5.2% pa over the same period.

Valuation: Attractive total return

Over the last year JLG has successfully closed the significant discount to NAV that existed previously. The company now trades at a small premium to its last reported NAV (284p/share), but at a discount to other infrastructure investment groups, which trade at a c 14% premium to NAV currently. We believe that our forecasts for NAV and DPS growth will provide attractive total returns for shareholders and help close the valuation gap to its peers.

Investment summary

Company description: Infrastructure originator and investor

JLG originates, invests in and manages portfolios of infrastructure projects. The business operates in selected geographical markets – Asia-Pacific, North America and Europe – and is focused on the transport, environmental and social sectors. As at 30 June 2017, the value of the investment portfolio of 42 projects and JLG’s holding in JLEN was £1,119.3m. The assets are split between projects under construction, ‘primary’ (c 59%) and operational projects, ‘secondary’ (c 41%). JLG has separately listed two funds on the London Stock Exchange: John Laing Environmental Assets (JLEN in 2014) and John Laing Infrastructure Fund (JLIF in 2010). JLG retains c 2.8% of JLEN.

Valuation: Premium to NAV, but discount to peers

Over the last year JLG has increased its NAV from 263p (30 June 2016) to 284p (30 June 2017). During the same period, the share price moved from a discount to NAV to a small premium. As a result of its strong share price performance, JLG now stands at a premium to its last reported NAV but still at a discount to other infrastructure funds, which currently trade at a 14% premium. We believe that the higher proportion of primary assets, when compared to its peers, should allow for superior NAV growth and help to compensate for the lower yield available to shareholders. The growth that we forecast for the period 2016-21 should provide for an attractive total return for shareholders.

Financials: Further growth in NAV and DPS forecast

Our forecasts for NAV and DPS growth, considered by JLG to be its key performance benchmarks, are shown in Exhibit 1. Our forecasts are constructed on the basis that in the long term annual realisations in the portfolio are equal to annual investments. For the period 2016-21 we expect a CAGR in NAV per share of 11.1%. We expect 3% growth (2016-21e) in the ordinary DPS and assume a special dividend equivalent to c 7.7% of the value of the investment realisations, resulting in a CAGR of 5.2% in DPS for the same period.

Exhibit 1: Movements in portfolio value, NAV and DPS

Total portfolio value (£m)

2014

2015

2016

2017e

2018e

2019e

2020e

2021e

Opening value

684.4

772.0

841.4

1,175.9

1,303.2

1461.6

1,639.1

1,823.0

Cash invested

151.8

142.5

301.5

200.0

200.0

200.0

200.0

200.0

Cash yield

(24.3)

(38.9)

(34.8)

(38.6)

(43.3)

(48.5)

(53.9)

(60.0)

Investment realisations

(198.5)

(86.3)

(146.6)

(200.0)

(200.0)

(200.0)

(200.0)

(200.0)

Assets transfers

0.0

(80.0)

0.0

0.0

0.0

0.0

0.0

0.0

Rebased asset value

613.4

709.3

961.5

1,137.3

1,260.0

1,413.0

1,585.2

1,763.0

Total FV movement

158.6

132.1

214.4

165.9

201.6

226.1

237.8

264.4

Closing value

772.0

841.4

1,175.9

1,303.2

1,461.6

1,639.1

1,823.0

2,027.4

NAV (p/share)

N/A

242

277

304

338

378

420

470

DPS (p/share)

N/A

6.90

8.15

9.80

9.98

10.15

10.33

10.52

Source: Edison Investment Research

Sensitivities: Discount rates and foreign exchange

JLG’s valuation is particularly sensitive to changes in discount rates and foreign exchange rates.

Portfolio valuation: JLG has stated that a 0.75% increase in the discount rate applied to the DCF valuation of its projects would reduce the value of the investment portfolio by £96.6m.

Foreign exchange: JLG has stated that, prior to hedging, +/- 5% in the value of sterling against the relevant currencies would result in a c £30m decline/increase in the value of the portfolio.

Attractive total returns to continue

JLG’s market positioning and track record of delivering growth should allow it to benefit from the strong macro trends for both primary and secondary investment in the infrastructure and renewable energy markets globally. These trends should, in part, also benefit JLEN and JLIF, whose assets are managed by JLG, and whose continued growth will have beneficial impact on JLG. As a result, we expect JLG to continue to deliver strong growth in DPS and NAV over our forecast period, providing an attractive potential total return for shareholders.

Value creation from infrastructure investment

We have already noted that JLG originates, invests in and manages portfolios of infrastructure projects on a global basis. It is also important to recognise that JLG benefits from both a diverse portfolio of projects and a pipeline of potential new projects. The business encompasses infrastructure and renewable energy projects at both the greenfield and operational stage. The diversity of the business, in terms of geography, asset type and stage of development, provides JLG with a strong competitive position compared to some of its more tightly focused peers. In a market where reputation and experience as an investor/developer are important, JLG can also point to a long and successful track record of investment, particularly when compared to some more recently constituted funds. JLG made its first infrastructure project investment in 1969 (over 120 projects since) and has a track record of successful investment in renewable energy since 2011. The existence of JLIF and JLEN provides a market opportunity for JLG to sell its operational projects.

Strategy of origination and project management

JLG’s strategy is to create value by utilising its investment origination and project management skills. JLG pursues this strategy on an international basis and across an array of infrastructure (roads/rails/hospitals) and renewable energy (solar/wind). To deliver its strategy JLG targets growth in primary investment and external AUM and ongoing active management of its portfolio. In keeping with this focused approach, JLG sold its Project Management Services (PMS) activities in the UK in 2016 to concentrate on the origination of greenfield projects and the active management of construction and operational risk.

Management team retains core expertise in all core markets

Phil Nolan remains chairman of JLG and Olivier Brousse and Patrick O’D Bourke stay as CEO and group finance director respectively. Carolyn Cattermole remains as company secretary and Chris Waples remains as MD of asset management and sits on the Executive Committee. Derek Potts, formerly MD of primary investment, retired during the year but remains actively involved in the Investment Committee. The business retains significant experience and expertise in all of its core markets. In addition to Phil Nolan, four other non-executive directors sit on the board of the company.


Active management and embedded growth deliver NAV progression

The combination of embedded growth in its existing portfolio and the active management of the New Royal Adelaide Hospital (NRAH) and Manchester Waste projects enabled JLG to report continued growth in its NAV in H117 (+7p/share). With less onerous dividend payments due in H2 (c £7m versus £23.1m in H1), we expect this combination of structural growth and active value creation to deliver more significant growth in the second half of the year (+19p/share) and enable JLG to achieve an attractive 9.7% in NAV per share for FY17 as a whole. Strong market positioning and a growing demand for infrastructure investment should provide opportunities for investment and enable attractive longer-term growth.

Track record of growth in key benchmarks

JLG measures its success by reference to growth in the DPS and NAV. In FY16, it succeeded in increasing the DPS by 5% (vs a theoretical payment in FY15) and the NAV per share by 14.3% (277p vs 242p). Underpinning the growth in NAV and DPS, JLG has targeted three supporting objectives: growth in primary investment, growth in external assets under management (AUM) and ongoing management and enhancement of the investment portfolio. Successful implementation of its strategic plan has enabled JLG to achieve an impressive track record of growth in these operational benchmarks in the period 2011-16.

Exhibit 2: Progression of significant operational benchmarks (£m)

Growth track record (£m)

2011

2012

2013

2014

2015*

2016

2011-16 CAGR

Pipeline (infrastructure only)

835.0

925.0

986.0

1,067.0

1,135.0

1,408.0

11.0%

Total portfolio value

541.3

575.9

684.8

772.4

902.8

1,175.9

16.8%

NAV

408.0

437.0

528.0

649.8

889.6

1,016.8

20.0%

External AUM

380.0

537.0

796.0

1019.9

1,135.6

1,472.3

31.1%

Source: John Laing, Edison Investment Research. Note: *JLG raised £130m (gross) at the time of its IPO in 2015.

1H17 results extend growth record

In H117 JLG increased the interim DPS by 3%, to 1.91p (Edison estimate 1.89p) and the NAV rose during the period by 2.3% to 284p. The growth in NAV was achieved despite a £25.5m (c 7p/ share) reduction in the valuation of its holding in the Manchester Waste project and the payment (in May) of last year’s final ordinary dividend and special dividend, at a total cost of £23.1m (c 6p/ share). Prior to the payment of the DPS, but not the reduction in the value of the Manchester Waste project, JLG stated that the NAV would have risen by 4.6% (to c 290p/share).

Beyond the headline growth in DPS and NAV, there were further increases (vs FY16) in the investment pipeline (+1.4% to £1,885m) and external assets under management (+7.4% to £1,582m) versus FY16 levels. Investment commitments of £111.3m (post-period end increased to £158.9m as a result of Buckthorn wind farm in the US) also compared favourably to the £76m made in H116. Actual investment in H117 totalled £56.1m, with realisations of £151.3m. The c £95m disparity between investments and realisations contributed the most significant proportion of the reduction in value of investments, from £1,258m to £1,147m, but also a reduction in short-term borrowings by c £100m. JLG has maintained its guidance for FY17 of investment commitments and realisations of c £200m.

Exhibit 3: Principal components of NAV growth in H117

(£m)

Opening
value

FV move
on portfolio

Pension
deficit

Other P&L
items

Dividends
paid

Closing
value

NAV

1,016.8

53.3

7.6

-14.2

-23.1

1,040.4

Source: John Laing Group

The fair value movement on the portfolio in H117 of £53.3m (which also constitutes >95% of the net gain of investments at fair value through the profit and loss account) fell significantly on H116 (£128.2m), in large part due to a £46.0m fall (H117 vs H116) in foreign exchange movements, a decrease in value due to changes in power and gas forecasts (-£6.6m H117 vs H116) and the £25.5m reduction in the carrying value of the Manchester Waste project. Changes in operational discount rates (H117 8.6% versus 8.9% for FY17) contributed £20.2m of the FV movement (£27.5m in H116), while the annual unwinding of discount in the DCF model and the reduction of construction risk premia (“embedded value”) totalled £59.4m (£54m H116). The reduction in the FV movement in H1 contributed to the reduction in PBT from £108.3m to £36.6m and a fall diluted EPS from 28.9p to 10.1p.

We have updated our forecasts to reflect the H1 results and we now expect a FY ordinary DPS of 9.80p versus 9.75p previously (special DPS unchanged at 4.09p) and an FY17 NAV per share of 304p (310p previously). Our forecast NAV per share for FY17 represents year-on-year growth of 9.7%. The changes to the key benchmarks of DPS and NAV per share are shown below (Exhibit 4). Implicit in our forecasts is the expectation of stronger growth in H2 (helped in part by lower DPS payments in H2) and we discuss the assumptions underpinning our forecasts in more detail in a later section of this report.

Exhibit 4: Changes to forecasts

 

FY17

FY18

Old

New

% change

Old

New

% change

NAV (p/share)

310

304

(1.9)

346

338

(2.2)

DPS (p)

9.75

9.80

0.6

9.92

9.98

0.6

Source: Edison Investment Research

Portfolio and pipeline analysis

JLG’s portfolio currently (H117) comprises 43 investments (18 primary investments + 24 secondary investments + £10.1m holding in JLEN), with a total value of £1,119.3m. The portfolio remains well diversified by geography, sector, operational status and revenue drivers (see Exhibits 5 to 8). The investment pipeline, which now stands at c £1.9bn, is also well diversified, split between PPP of £1,383m and Renewable Energy £502m. The total pipeline is geographically divided as follows: North America 36%, Europe 35% and Asia Pacific 29%. In addition, as at 30 June 2017, over 50% of the total portfolio had more than 25 years of concession life remaining, with the five largest investments comprising c 45% of the total portfolio valuation.

Exhibit 5: Portfolio – by stage (30 June 2017)

Exhibit 6: Portfolio – by revenue type (30 June 2017)

Source: John Laing Group

Source: John Laing Group

Exhibit 5: Portfolio – by stage (30 June 2017)

Source: John Laing Group

Exhibit 6: Portfolio – by revenue type (30 June 2017)

Source: John Laing Group

Exhibit 7: Portfolio – by sector (30 June 2017)

Exhibit 8: Portfolio – by geography (30 June 2017)

Source: John Laing Group

Source: John Laing Group

Exhibit 7: Portfolio – by sector (30 June 2017)

Source: John Laing Group

Exhibit 8: Portfolio – by geography (30 June 2017)

Source: John Laing Group

Importance of embedded value to portfolio progression

The value of the portfolio evolves as a result of the addition of new investments, less the value of realised investments and the cash paid out by the underlying investments (cash yield). In addition, the value of the portfolio is significantly influenced by the annual fair value adjustment.

A proportion of the FV adjustment is the product of enhancements made to projects by JLG (‘value enhancement’) and some are the result of exogenous forces such as exchange rate movements. However, a significant proportion of the FV relates to embedded value within the investment portfolio and is generated by the twice-yearly updating of a project’s DCF. In FY16, the unwinding of the discount rate and the reduction of construction risk as the projects neared completion, the two principal constituents of embedded growth, represented a positive increment to the value of the portfolio of c £130m, equivalent to 61% of the total fair value adjustment and 15% of the opening portfolio value. In H117 embedded growth contributed c £59m to the fair value movement. Over the period 2014-16 the value of the embedded adjustments averaged c 12% of the opening portfolio value.

Exhibit 9: Movements in portfolio value (£m)

Total portfolio value

 

FY11

FY12

FY13

FY14

FY15

FY16

H117

Opening value

 

545.4

541.3

575.9

684.8

772.4

841.8

1,176.3

Cash invested

 

74.6

119.7

117.2

151.8

142.5

301.5

56.1

Cash yield

 

-36.2

-38.0

-32.0

-24.3

-38.9

-34.8

(14.7)

Investment realisations

 

-124.9

-135.0

-110.1

-198.5

-86.3

-146.6

(151.3)

Assets transfers

 

0

0

0

0

-80

0

0

Rebased asset value

 

458.9

488.0

551.0

613.8

709.7

961.9

1,066.0

Total FV movement

 

82.4

87.9

133.8

158.6

132.1

214.4

53.3

Closing value

 

541.3

575.9

684.8

772.4

841.8

1,176.3

1,119.3

FV movement – reduction in const. risk & disc rate unwinding only

 

 

69.3

83.8

129.8

59.4

Source: JLG; Edison Investment Research

Active portfolio management

JLG also creates value as a result of active project management, which is also reflected in the FV movement through the P&L. Value enhancement can arise as a result of a variety of actions, for example changes to a project’s financial positioning or bulk purchase of insurance, but can also be delivered as a result of dispute resolution with other interested parties. In H117, JLG was heavily involved in the active management of two projects, in particular the New Royal Adelaide Hospital (NRAH) and Manchester Waste.

The SA Health Partnership consortium achieved financial close on the A$1.85bn NRAH in June 2011. JLG provided private equity for the project to develop the facility, but the project was delayed from the scheduled technical completion date of April 2016. The NRAH project company was subsequently in dispute over the Government of South Australia’s non-acceptance of a cure plan devised to address delays. However, after a period of negotiation with the Government of South Australia, JLG achieved commercial acceptance for the NRAH on 13 June 2017. Contract payments of A$1m a day to the consortium have started and JLG included the investment in its secondary portfolio as at the end of June, resulting in a small, but undisclosed uplift to the valuation.

Similarly, JLG was involved in continuing discussions to resolve the dispute with the Greater Manchester Waste Disposal Authority (GMWDA). JLG’s investment in the Manchester Waste project is held via two vehicles: Manchester Waste VL Co and Manchester Waste TPS Co (waste to energy plant). The two projects are contractually linked. The GMWDA signed a 25-year private finance initiative deal with Viridor Laing in 2009, but in May this year it became known that the GMWDA was seeking to terminate the contract. Since the beginning of May JLG has been in discussions with GMWDA, which have now culminated in legally binding heads of terms between VL Co and its shareholders, the operator Viridor Waste and GMWDA. The transactions involved in the completion of the dispute resolution are expected to complete by the end of September and will result in the termination of the PFI contract and the purchase of VL Co by GMWDA. TPS Co will continue to be held by its existing shareholders. JLG estimates that the financial effect of the transactions will result in a reduction in the value of its two Manchester Waste investments by £25.5m and this has been reflected in the H117 results. While the reduction in the valuation of the investments is clearly unwelcome, JLG believes that by agreeing the deal it has avoided continuing uncertainty and a potentially costly legal dispute. Post the reduction in value, we believe the Manchester Waste investment will amount to c 6% of JLG’s total portfolio (previously 8%) of £1,119.3m (c £67m –still above the original equity investment in the projects).

Primary portfolio and portfolio book evolution

The primary portfolio (£656.5m, c 59% of the total portfolio as at 30 June 2017) contains investments in projects that have yet to reach ‘financial close’ or assets that have reached financial close but are not yet operational. Each year the value of the primary portfolio is boosted by new investment (£55.3m in H117) but diminished by the transfer of investments to the secondary portfolio (£166.7m in H117). Investments are valued using a DCF template with a variety of discount rates applied depending on project type, location and/or state of completion.

Each year, in addition to the effects of new investment and disposals, the value of the primary portfolio is boosted by the impact of portfolio book value evolution (£71.6m in H117) of which embedded value forms a part. This portfolio book evolution effectively captures the progressive reduction in the risk profile between the time of initial investment and commercial operation. Renewable energy projects have a shorter gestation period than infrastructure projects..

The secondary portfolio and cash yield

As we have noted, once operational, projects are transferred to JLG’s secondary investment portfolio (£166.7m in H117) and valued using a market-based discount rate. Secondary assets can either be held to maturity or sold to secondary market investors (disposal of three projects in H117 raising £151.3m). JLIF and JLEN retain the right of first offer in respect of certain assets. In the period 2011-16, on average, JLG made annual disposals equivalent to c 20% of the opening value of the total portfolio (minimum 11%, maximum 29%). Management has guided to disposal for FY17 as a whole of £200m.

While projects are held, JLG receives income from the investments, known as ‘cash yield’ (£14.7m H117). The cash yield takes the form of dividend income and the repayment of subordinate debt and, along with revenue generated from the management of external funds, which we consider in the following section, constitutes the principal source of income for JLG. Management guidance is that, in a normal year, the cash yield on the portfolio should amount to between 6.5% and 8.5% of the average annual value of the secondary portfolio.

Exhibit 10: Evolution of cash yield and disposals

2011

2012

2013

2014

2015

2016

H117

Cash yield (£m)

36.2

38.0

32.0

24.3

38.9

34.8

14.7

Investment realisations (£m)

124.9

135.0

110.1

198.5

86.3

146.6

151.3

Source: John Laing

Revenue from investment and project management services

Beyond the cash yield from the investment portfolio, JLG generates additional revenue (fees) from the provision of investment management services (IMS) to external funds, JLIF and JLEN, as well as its own primary and secondary portfolio. Along with the cash yield on the secondary portfolio of assets, investment management fees comprise a significant proportion of operating cash flow for JLG. In FY16 JLG generated £17.8m from IMS. Of the £17.8m, £2m related to services provided to its own primary and secondary portfolio, with £15.8m (£8.1m H117) generated from the provision of services to JLEN and JLIF. JLG’s management fee is directly linked to the value of the assets under management (AUM) and therefore the financial health of JLIF and JLEN, beyond their ability to acquire secondary assets, is important to JLG. In H117 both funds raised additional capital from investors (£175m). In March JLIF placed 89.8m new shares with investors, raising gross proceeds of c £119.5m (bringing the total raised since launch in 2010 to £1bn). JLEN has carried out two placings so far in 2017, raising £55.5m in February (issuing 55m shares) and a further £40m in July (38.8m shares). The evolution of JLG’s external assets under management can be seen in Exhibit 11. As JLG earns a management fee approximately equivalent to 1% of the AUM, each £100m (6.3%) move in the average aggregate value of the funds is equivalent to c £1m of annual revenue.

Exhibit 11: JLG growth in external assets under management

(£m)

FY12

FY13

FY14

FY15

FY16

H117

AUM

537.0

796.0

1,020.0

1,136.0

1,472..0

1,582.0

Revenue

5.7

8.2

10.3

12.0

15.8

8.1

Source: John Laing Group

In addition to IMS revenue, JLG generates revenue from Project Management Services (PMS) provided under management service agreements to projects in which JLG, JLIF or JLEN hold investments. In 2016 JLG sold the UK activities of the PMS business to HCP. The business sold accounted for £7.9m of the total revenue of £14.9m generated in FY16. The costs associated with this business were c £6m in FY16.

Infrastructure market outlook

The long-term drivers of infrastructure investment; namely population growth and increased urbanisation, remain in place. Long-term forecasts from the McKinsey Global Institute Bridging Global Infrastructure Gaps (June 2016) argues that the world will need to invest $3.3tn pa in the period 2016-30 to meet its needs for transport, power, water and telecoms compared to $2.5tn today. JLG has stated that “we continue to see strong opportunities for growth” and in particular has highlighted a strong market in the US at the city and state level (not yet federal) and some tentative signs of growth in selected European markets (Spain, Germany).

The outlook for investment in renewable energy continues to appear favourable. In its 2017 Energy Outlook, BP revised up its projections for the deployment of renewable power generation over the forecast period (2015-30 and now predicts annual growth of 7.6% (previously 6.6%). The IEA in its World Energy Outlook 2016 forecasts that 60% of all new power generation capacity in 2040 will come from renewable sources. Both bodies anticipate that increased deployment will be driven by falling costs, in particular for solar and wind, which are predicted to comprise the majority of renewable capacity. According to the United Nations Environment Programme , around 94% of all new renewable investment in 2016 was represented by either solar or renewable.

Beyond the scenarios for primary investment, the market for secondary assets remains strong. The Frankfurt School - UNEP Collaborating Centre for Climate & Sustainable Energy Finance has pointed out that the fastest evolving aspect of equity provision for renewable energy projects is at the post-construction stage. Investors (North American yield cos/London-based project funds) have been attracted to the “predictable cash flows and income-producing characteristics of an operational project.”

Management

Derek Potts, formerly MD of primary investment, retired during the year but remains involved in the Investment Committee. Aside from Mr Potts, there have been no other significant changes to the management team and the business retains significant experience in all of its core markets. Phil Nolan remains chairman and Olivier Brousse and Patrick O’D Bourke stay as CEO and group finance director respectively. Carolyn Cattermole remains as company secretary and Chris Waples remains as MD of asset management and sits on the Executive Committee. In addition to Phil Nolan, four other non-executive directors sit currently on the board of the company.

Risks and modelling sensitivities

The value of JLG’s investment portfolio is dependent on a variety of factors beyond discount rates and foreign exchange, which we examine separately below. The portfolio valuation is also sensitive to the underlying forecast of cash flows, the applicable tax rates and regulation of each individual project. A reduction in the construction of infrastructure projects (primary investment) by the public sector, or in the appetite of the secondary market for the acquisition of operational assets, would pose a threat to JLG’s business model.

Discount rate: JLG has stated that a 0.75% rise in the discount rate used in the DCF valuation of its projects would reduce the value of the investment portfolio by £96.6m. However, a 0.75% reduction in the discount rate applied would increase the portfolio value by c £110.8m.

Foreign exchange: the value of JLG’s investment portfolio, of which c 55% is invested in currencies other than sterling (AUS$, NZ$, US$, €) is sensitive to the sterling exchange rate. According to JLG, a ± 5% movement in sterling would decrease/increase the portfolio valuation by c £30m.

Power price forecasts: JLG has stated that a 5% decrease in power price forecasts is estimated to increase or decrease the total portfolio valuation at 30 June by 1.0%.

DPS: a portion of our projected DPS payment is based on a forecast for the special payment, which in turn reflects our forecast for investment realisation in the relevant period. A reduction in investment realisations in FY17 from £200m to £150m would lower our forecast for the special dividend from 4.09p to 3.07p, but would add c 1p to the forecast NAV per share.

Re-presented financial statements

Under IFRS 10, JLG meets the criteria for classification as an investment entity and prepares its statutory accounts accordingly. As such, investment in all subsidiaries, other than those directly owned subsidiaries which provide investment-related services and are not classified as investment entities, is consolidated on a line-for-line basis. This means that subsidiaries which hold non-recourse investments, along with other assets and liabilities, are consolidated on a line-for-line basis.

However, for the purposes of the day-to-day management of the business, the directors use accounts “re-presented” on a management reporting basis. In its 2016 Annual Report and Accounts, JLG set out a re-presented set of financial statements and again reported re-presented figures in H117.

For H117 the changes to the P&L were minimal, with PBT unchanged and EBIT £0.6m higher on the re-presented basis. On the balance sheet there were more significant changes. Among the principal differences were cash balances, which were £3.9m higher (at £5.6m) on the re-presented basis with a further £20.5m of cash collateral balances. The FV of investments was £27.4m lower due to the exclusion of other costs and liabilities in the recourse investment subsidiaries. In total, assets were £8m lower once other smaller differences were accounted for, while liabilities reduced by a corresponding amount, principally as a result of changes to working capital balances. Net debt of £38.6m was calculated as cash of £5.6m, plus cash collateral of £20.5m, less borrowings of £64.7m. Net debt of £38.6m is therefore lower than the figure that would be calculated using the statutory figures (net debt £60m = cash of £1.7m less £61.7m of borrowings).

The most significant discrepancies arise in the cash flow statement. In Exhibit 12 below, we show the major area of differences. Within the operating cash flow the most significant difference is that the re-presented figure includes a cash yield of £15.1m, not included in the statutory figure. The figure for investing activities differs because the re-presented figures exclude FV movements and principally reflect only cash investments and proceeds from the realisation of projects. The financing line in the re-presented accounts also includes finance and dividend costs (£27.5m) and excludes net movement in borrowings of -£100.3m.

Exhibit 12: Statutory vs re-presented cash flow 2016 and 2017

(£m)

Statutory
FY16

Re-presented
FY16

Statutory
H117

Re-presented
FY17

Operating activities

(37.1)

4.6

(37.6)

8.0

Investing activities

(73.5)

(173.3)

165.6

93.6

Financing activities

110.9

33.0

(127.9)

(52.0)

Source: John Laing Group, Edison Investment Research


Valuation

We continue to use NAV per share as the principal benchmark for evaluating JLG’s share price. Exhibit 13 shows that since the beginning of 2015 JLG has achieved growth, both in its NAV/share and its absolute share price. Over the last six months in particular, a strong share price performance has allowed JLG to move to a premium to its historic stated NAV (284p at 30 June 2017).

Exhibit 13: JLG share price and NAV evolution

Source: JLG, Edison Investment Research, Bloomberg

However, as Exhibit 14 shows, despite the strong share price performance, JLG still trades at a discount to its peers when judged on a P/NAV basis. JLG’s yield lags that of comparable companies and while dividend cover remains strong, the early stage nature of JLG’s portfolio, giving rise to a lower cash yield than many of its peers, acts as a short-term restraint to higher DPS payments. In the longer term, we expect an expansion of the secondary portfolio and with it the cash yield, allowing JLG to move towards cash coverage of the DPS. We expect that the lower yield will be compensated for by a higher rate of NAV growth (Edison forecast 2016-21 c 11% CAGR) than conventional infrastructure funds, which have grown at a CAGR of c 10% over the last five years and c 7% CAGR over the last three years (JLG 13% CAGR 2014-16). While JLG has posted strong share price performance in recent months and now stands at a premium to NAV, we expect the superior rate of growth in NAV and ongoing increases in the DPS to continue to deliver an attractive total return for shareholders and close the remaining valuation gap to its peers.

Exhibit 14: Comparable company valuations

Company

Ticker

Price
(p)

Shares (m)

Market cap
(£m)

Yield
(%)

Last reported NAV

Premium/
to NAV (%)

3i Infrastructure Group

3IN

195.4

1000.0

1954.0

3.9

169.0

31/03/17

16

Bilfinger Berger Global Infrastructure

BBGI

148.5

477.3

708.8

4.2

120.8

30/06/16

23

GCP Infrastructure Investments

GCP

125.7

790.7

993.9

6.1

110.0

30/06/17

14

HICL Infrastructures

HICL

161.1

1800.0

2899.8

4.8

147.1

30/12/16

10

International Public Partnerships

INPP

161.6

1300.0

2100.8

4.1

137.4

30/06/16

18

John Laing Infrastructure

JLIF

136

990.6

1347.2

5.1

122.9

31/03/17

11

Weighted average infrastructure

 

 

 

 

4.6

 

 

14

Bluefield Solar Income

BSIF

110.8

369.8

409.6

6.6

100.13

31/03/16

11

Foresight Solar

FSFL

110.5

413.8

457.2

5.6

105.3

31/03/17

5

Greencoat UK Wind

UKW

121.5

737.3

895.8

5.3

109.8

30/06/17

11

John Laing Environmental Assets

JLEN

107.8

378.5

407.8

5.7

100.0

30/06/17

8

NextEnergy Solar Fund

NESF

112.4

571.4

642.3

5.6

103.5

30/06/17

9

The Renewables Infrastructure Group

TRIG

108.0

942.2

1017.6

5.9

100.1

31/12/16

8

Weighted average renewables

 

 

 

 

5.7

 

 

9

Total weighted average

 

 

 

 

4.9

 

 

12

John Laing Group

JLG

303

367

1112.0

1.9

284

30/06/17

7

Source: Bloomberg, company accounts, Edison Investment Research. Note: Prices as at 25 August 2017.

Financials

Below we set out some of the principal assumptions that underpin our forecasts. Our projections for the benchmarks of NAV per share and DPS have changed marginally following the H117 results and are summarised in Exhibit 15.

Investments: we assume new investments of c £200m for FY17 and FY18. (Guidance for FY17 £200m, H117 £57.7m, average 2011-16 £151m.)

Realisations: we forecast investment realisations of £200m in FY17 and FY18. (Guidance for FY17 £200m, H117 £151.3m, average 2011-16 £134m).

Cash yield and fair value adjustments: we use an assumed yield of 7.3% (of average secondary portfolio value) to calculate the cash yield for FY17 of £38.6m and £43.3m for FY18 (FY16: £34.8m). We forecast fair value adjustments for FY17 of £165.9m and £201.6m for FY18 (FY16: £214.4m)

Administration costs: we assume slightly lower administration costs of £56.0m in FY17 (FY16: £58.4m) due to the sale of part of the PMS business in FY16 and £57.1m in FY18.

Pension contributions: we assume pension contributions of £24.5m in FY17 and £26.5m in FY18.

Tax: we assume that JLG does not pay any tax in FY17 (H117: £0.8m receipt) and FY18.

DPS: JLG has a policy of increasing the ordinary DPS “at least in line with inflation.” JLG also pays a special dividend equivalent to 5-10% of the gross proceeds from the sale of investments. For FY17 we forecast a DPS of 9.80p and 9.98p for FY18. Our forecasts are based on a 3% increment in the ordinary DPS in FY17 and a 3% rise in FY18. Our special dividend is based on 7.5% of our assumptions for realisations (see above).

Exhibit 15: Financial summary

Accounts: IFRS, Year-end: December, £m

 

 

2015

2016

2017e

2018e

2019e

2020e

Total revenues

 

 

167.6

260.8

197.6

231.2

256.2

268.4

Cost of sales

 

 

(0.1)

0.0

(0.5)

(0.5)

(0.5)

(0.5)

Gross profit

 

 

167.5

260.8

197.1

230.7

255.7

267.9

SG&A (expenses)

 

 

(54.1)

(57.6)

(55.2)

(56.3)

(57.5)

(58.6)

Other income/(expense)

 

 

0.0

0.0

0.0

0.0

0.0

0.0

Depreciation and amortisation

 

 

(1.2)

(0.8)

(0.8)

(0.8)

(0.8)

(0.8)

Reported EBIT

 

 

112.2

202.4

141.1

173.5

197.4

208.5

Finance income/(expense)

 

 

(11.3)

(10.3)

(11.3)

(12.5)

(14.5)

(16.6)

Other income/(expense)

 

 

0.0

0.0

0.0

0.0

0.0

0.0

Reported PBT

 

 

100.9

192.1

129.8

161.1

182.9

191.9

Income tax expense (includes exceptionals)

 

 

(2.1)

(1.8)

0.0

0.0

0.0

0.0

Reported net income

 

 

104.5

190.3

129.8

161.1

182.9

191.9

Basic average number of shares, m

 

 

358.3

366.9

366.9

366.9

366.9

366.9

Basic EPS

 

 

27.6

51.9

35.4

43.9

49.8

52.3

 

 

 

 

 

 

 

 

 

EBITDA

 

 

113.4

203.2

141.9

174.3

198.2

209.3

NAV (p/share)

 

 

242

277

304

338

378

420

Total DPS (p)

 

 

6.90

8.15

9.80

9.98

10.15

10.33

 

 

 

 

 

 

 

 

 

Balance sheet

 

 

 

 

 

 

 

 

Property, plant and equipment

 

 

1.0

0.3

0.5

0.7

0.9

1.1

Goodwill

 

 

0.0

0.0

0.0

0.0

0.0

0.0

Intangible assets

 

 

0.2

0.0

0.0

0.0

0.0

0.0

Other non-current assets

 

 

966.7

1,258.5

1,385.3

1,544.2

1,732.2

1,940.4

Total non-current assets

 

 

967.9

1,258.8

1,385.8

1,544.9

1,733.1

1,941.5

Cash and equivalents

 

 

1.1

1.6

1.0

1.0

7.1

2.5

Inventories

 

 

0.0

0.0

0.0

0.0

0.0

0.0

Trade and other receivables

 

 

8.3

7.4

9.7

11.4

12.6

13.2

Other current assets

 

 

0.0

0.0

0.0

0.0

0.0

0.0

Total current assets

 

 

9.4

9.0

10.7

12.4

19.8

15.7

Non-current loans and borrowings

 

 

0.0

0.0

0.0

250.0

350.0

400.0

Trade and other payables

 

 

0.0

0.0

0.0

0.0

0.0

0.0

Other non-current liabilities

 

 

46.3

70.8

44.0

19.1

1.5

1.5

Total non-current liabilities

 

 

46.3

70.8

44.0

269.1

351.5

401.5

Trade and other payables

 

 

19.6

14.7

12.7

12.7

12.7

12.7

Current loans and borrowings

 

 

14.9

161.4

222.0

32.9

0.0

0.0

Other current liabilities

 

 

6.9

4.1

1.4

1.4

1.4

1.4

Total current liabilities

 

 

41.4

180.2

236.1

47.0

14.1

14.1

Equity attributable to company

 

 

889.6

1,016.8

1,116.4

1,241.2

1,387.2

1,541.6

Non-controlling interest

 

 

0.0

0.0

0.0

0.0

0.0

0.0

 

 

 

 

 

 

 

 

 

Cashflow statement

 

 

 

 

 

 

 

 

Profit before tax

 

 

100.9

192.1

129.8

161.1

182.9

191.9

Net finance expenses

 

 

11.3

10.3

11.3

12.5

14.5

16.6

Depreciation and amortisation

 

 

1.2

0.8

0.8

0.8

0.8

0.8

Share based payments

 

 

0.7

2.0

0.0

0.0

0.0

0.0

Fair value and other adjustments

 

 

(124.8)

(78.4)

(240.4)

(228.1)

(255.2)

(262.7)

Movements in working capital

 

 

(3.2)

(2.3)

(8.8)

(0.6)

(0.2)

(0.0)

Cash from operations (CFO)

 

 

(13.9)

124.5

(107.3)

(54.4)

(57.1)

(53.4)

Capex

 

 

(0.6)

(0.1)

(1.0)

(1.0)

(1.0)

(1.0)

Cash transf. from inv. held at FV

 

 

(54.0)

(73.4)

38.6

43.3

48.5

53.9

Portfolio Investments – Disposals

 

 

(56.6)

(161.6)

50.0

0.0

0.0

0.0

Cash used in investing activities (CFIA)

 

 

(111.2)

(235.1)

87.6

42.3

47.5

52.9

Net proceeds from issue of shares

 

 

124.7

0.0

0.0

0.0

0.0

0.0

Movements in debt

 

 

19.0

146.0

60.6

60.9

67.1

50.0

Other financing activities

 

 

(19.6)

(35.1)

(41.5)

(48.7)

(51.4)

(54.2)

Cash from financing activities (CFF)

 

 

124.1

110.9

19.1

12.1

15.7

(4.2)

Currency translation differences and other

 

 

0.0

0.0

0.0

0.0

0.0

0.0

Increase/(decrease) in cash and equivalents

 

 

(1.0)

0.3

(0.6)

(0.0)

6.1

(4.6)

Currency translation differences and other

 

 

(0.1)

0.2

0.0

0.0

0.0

0.0

Cash and equivalents at end of period

 

 

1.1

1.6

1.0

1.0

7.1

2.5

Net (debt) cash

 

 

(13.8)

(159.8)

(221.0)

(281.9)

(342.9)

(397.5)

Movement in net (debt) cash over period

 

 

(15.9)

(146.0)

(61.2)

(60.9)

(61.0)

(54.6)

Source: Company accounts, Edison Investment Research

Contact details

Investment portfolio by geography

1 Kingsway
London WC2B 6AN
United Kingdom
+44 (0) 20 7901 3200
www.laing.com

Management team

Chairman: Dr Phil Nolan

Chief Executive Officer: Olivier Brousse

Phil Nolan is currently chairman of Affinity Water and Ulster Bank, Ireland. Previously he was chairman of Infinis and Sepura. He also served as CEO of Eircom, and as an executive director of BG Group and Transco, leading the demerger of the gas network company Lattice as CEO.

Olivier Brousse became CEO of John Laing in March 2014. Prior to joining John Laing, he was at French environmental services company, Saur, first as CEO and then as chairman. Mr Brousse also held senior roles in the transport sector for Veolia, including as deputy CEO of Veolia Transport Group, responsible for French and US businesses.

Group Finance Director: Patrick O’D Bourke

Patrick O’D Bourke joined John Laing in 2011 as group finance director. In addition to a background in accountancy and investment banking, he held senior financial positions with PowerGen as group treasurer and head of mergers and acquisitions. Mr O’D Bourke became CEO of Northern Ireland-based energy company Viridian after it was taken private.

Management team

Chairman: Dr Phil Nolan

Phil Nolan is currently chairman of Affinity Water and Ulster Bank, Ireland. Previously he was chairman of Infinis and Sepura. He also served as CEO of Eircom, and as an executive director of BG Group and Transco, leading the demerger of the gas network company Lattice as CEO.

Chief Executive Officer: Olivier Brousse

Olivier Brousse became CEO of John Laing in March 2014. Prior to joining John Laing, he was at French environmental services company, Saur, first as CEO and then as chairman. Mr Brousse also held senior roles in the transport sector for Veolia, including as deputy CEO of Veolia Transport Group, responsible for French and US businesses.

Group Finance Director: Patrick O’D Bourke

Patrick O’D Bourke joined John Laing in 2011 as group finance director. In addition to a background in accountancy and investment banking, he held senior financial positions with PowerGen as group treasurer and head of mergers and acquisitions. Mr O’D Bourke became CEO of Northern Ireland-based energy company Viridian after it was taken private.

Principal shareholders (taken from Bloomberg on 18 August 2017)

(%)

BlackRock

13.24%

Standard Life

8.97%

Morgan Stanley

5.54%

JO Hambro

5.00%

Schroders

4.97%

Companies named in this report

Bilfinger Berger Global Infrastructure Fund, 3i Infrastructure Fund, International Public Partnership, John Laing Infrastructure Fund, HICL Infrastructure, Bluefield Solar Inc. Fund, Foresight Solar , Greencoat UK Wind, John Laing Environmental Assets Group, The Renewable Infrastructure Group, Next Energy Solar Fund

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 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 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by John Laing 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 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 2017. “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 12, 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 12, 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 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

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Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by John Laing 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 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.
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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 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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