Piteco — Resilience demonstrated

Piteco (MI: PITE)

Last close As at 28/03/2024

EUR9.48

0.24 (2.60%)

Market capitalisation

EUR192m

More on this equity

Research: TMT

Piteco — Resilience demonstrated

Piteco SpA once again generated good revenue and EBITDA growth in H1, of 11% and 24%, respectively. FY20 had an excellent start, although the COVID-19 pandemic subsequently slowed down progress. While Piteco’s products can help steer financial and treasury decision-making at times of crisis, at the height of lockdown, the acquisition of new clients slowed. During H1 Piteco acquired EveryMake for an initial €0.55m in cash, which has been integrated into the Piteco SpA business. A new product in the data matching space is planned for launch in H2, and there will also be a major release of Piteco SpA’s existing software. At 13.6x FY21 EV/EBITDA, Piteco continues to trade at a discount to its international software peers.

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Written by

TMT

Piteco

Resilience demonstrated

H120 results

Software & comp services

29 September 2020

Price

€7.68

Market cap

€139m

Net debt (€m) H120, excluding value of put options

11.5

Shares in issue

18.0m

Free float

27%

Code

PITE

Primary exchange

Borsa Italiana

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(1.0)

20.0

49.1

Rel (local)

2.2

19.4

70.2

52-week high/low

€8.50

€4.54

Business description

Piteco is Italy’s leading company in designing, developing and implementing software for treasury, finance and financial planning management. Piteco Spa offers core corporate treasury software, Myrios specialises in finance and risk management, and Juniper in digital payments and clearing houses.

Next events

FY20 results

20 February 2021

Analysts

Sara Welford

+44 (0)20 3077 5700

Dan Ridsdale

+44 (0)20 3077 5729

Piteco is a research client of Edison Investment Research Limited

Piteco SpA once again generated good revenue and EBITDA growth in H1, of 11% and 24%, respectively. FY20 had an excellent start, although the COVID-19 pandemic subsequently slowed down progress. While Piteco’s products can help steer financial and treasury decision-making at times of crisis, at the height of lockdown, the acquisition of new clients slowed. During H1 Piteco acquired EveryMake for an initial €0.55m in cash, which has been integrated into the Piteco SpA business. A new product in the data matching space is planned for launch in H2, and there will also be a major release of Piteco SpA’s existing software. At 13.6x FY21 EV/EBITDA, Piteco continues to trade at a discount to its international software peers.

Year end

Net sales* (€m)

EBITDA**
(€m)

EPS**
(c)

DPS
(c)

P/E
(x)

Yield
(%)

12/18

19.4

8.3

31.5

15.0

24.4

2.0

12/19

22.8

10.2

33.5

15.0

22.9

2.0

12/20e

24.9

11.0

40.4

15.0

19.0

2.0

12/21e

27.2

12.2

45.6

17.5

16.8

2.3

Note: *Excludes the capitalisation of development costs, change in work in progress and other revenues (largely expenses charged back to customers). **Normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Continued growth, albeit at a lower level

During H120 Piteco Group reported 8% revenue and 12% EBITDA growth. Group EBITDA margin was 41% during the period, and recurring fees made up 68% of net revenues, demonstrating the group’s robust business model. While Piteco continued to operate throughout the lockdown, the acquisition of new contracts was pushed back as some customers chose to preserve cash at an uncertain time. This had an adverse effect on Piteco’s growth, though we expect the group to catch up on this in FY21 and beyond.

The underlying business model is strong

H120 demonstrated the strength of the corporate treasury core business (Piteco SpA), while Myrios (finance and risk management solutions) and Juniper (digital payments) slowed down due to some new contracts being delayed. The acquisition of EveryMake has been integrated and will enable cross-selling opportunities, and we believe further acquisitions are likely. Based on our FY20 forecasts, we estimate balance sheet headroom of at least €20–30m. We raise our group top line forecasts for FY20–23 by 1–4% as we expect a bounce back from the delayed new contracts.

Valuation: At a discount to peers

We believe Piteco has a strong business model, with its ability to generate high profit margins while providing customers with a flexible and cost-effective solution. We expect robust group revenue growth (7.5% CAGR 2020–23e) to translate into solid earnings progression (normalised EPS CAGR of 16%). The stock is trading on 13.6x EV/EBITDA and 16.8x P/E for FY21, at a discount to large international software providers. Our DCF-based valuation rises to €8.20/share (from €6.0 previously) as we roll forward our DCF to start in 2021 and upgrade our forecasts.

H120 strong despite COVID-19 pandemic

During H120 Piteco SpA was the star performer within the group. It generated strong revenue and EBITDA growth of 11% and 24%, respectively, as the business continued to deliver good growth and to benefit from recent acquisitions. While the COVID-19 pandemic slowed growth somewhat, the business performed well. Although the economic environment remains uncertain, we expect the business to return to its prior growth trajectory in FY21 if there are no further lockdowns in its main markets. We continue to see balance sheet headroom for further M&A, which could strengthen the growth outlook (albeit with execution risks). Piteco continues to trade at a discount to Italian and international software players.

Piteco SpA was the star performer

Piteco Group reported strong revenue and EBITDA growth during H120. We provide more detail on the key takeaways from the H1 results below. Piteco SpA confirmed its leadership in the Italian market, with excellent growth (revenues up 11%, EBITDA up 24%). The COVID-19 pandemic temporarily slowed growth in the banking digital payments segment, and hence Juniper. This business grew revenues by only 1% vs H119. Myrios also witnessed a sector slowdown in the financial risk management segment, and hence its revenues were only up 4% in H120.

Group revenues grew 8% y-o-y to €12.0m, with the growth principally stemming from subscription fees, which in H120 accounted for 68% of total revenues (vs 63% in H119).

EBITDA growth of 12% y-o-y to €4.8m was driven by strong revenue growth and margin expansion (to 41% in H120 from 39% in H119) as costs were kept under tight control.

Pre-tax profit of €2.8m was up 23% y-o-y, and net income of €2.3m was up 13% vs H119.

Net debt (excluding put options) was down to €11.5m at the end of H120, from €14.8m at end H119 and €14.6m at end FY19. Including the value of put options, net debt was €24.4m. The net debt reduction was driven by strong free cash flow generation, partly offset by the dividend payment (€2.7m).

Piteco growth to continue, recovery expected in FY21

We recognise the strength of H1 despite the COVID-19 pandemic and therefore raise our forecasts. While Piteco Group did experience a pandemic-related slowdown across all its divisions, Myrios and Juniper were the most heavily affected, as expected. Their greater exposure to the financial segment resulted in more of the new projects being pushed back and delayed, as detailed below.

Piteco SpA

Piteco SpA is the core corporate treasury business, which includes the group’s treasury management software activities. Before the pandemic we expected Piteco SpA to sign 44 new clients in FY20, compared to 40 new clients in FY19. In March we cut our forecast to a conservative 38, and now believe the business is on track to replicate the FY19 result, and hence forecast 40 new clients. We note 21 new clients were signed during H120.

At the height of the lockdown, Piteco’s employees were not visiting client sites and all work was either paused or done remotely. Client visits have now resumed. Piteco is gearing up for a major release, with Piteco Evo 5.0 due to be rolled out in H2. Existing clients can request an upgrade to Piteco Evo 5.0, and we believe there will be a sales opportunity, as the upgrade will require a visit by a Piteco team member, who could upsell further services and modules. This could, of course, be disrupted by a second wave of the pandemic requiring further lockdowns. EveryMake was acquired in March and has been fully integrated into Piteco SpA. A new product has been launched recently called Intelligent Data Matching (IDM) aimed at financial companies.

Myrios

Myrios offers financial risk management solutions, with its business targeted at banks (60% of revenue) and large corporates (40% of revenue). Myrios Switzerland was set up in February 2019 to help internationalise Piteco’s existing products. Myrios’s growth was subdued in H120, with revenues up 4% (vs revenues up 33% in FY19). We expect growth to accelerate in H2 and return to double digits, and a bounce back in FY21 unless there are further lockdowns in Myrios’s main markets.

Myrios’s growth in the banks business is outstripping that with large corporates, and hence we expect the proportion of business targeted at banks to grow over time. A large number of contracts with banks have been pushed back or put on hold due to the COVID-19 pandemic, and hence we expect a bounce back in FY21.

Juniper

Juniper is a US digital payments software business focused on the correspondent banking space. We continue to forecast a flat year in FY20 as new clients choose to conserve cash and defer projects to FY21, but we expect a bounce back in FY21. Similarly to Myrios, a new contract has been pushed back, and hence we expect an element of catch-up in FY21.

Piteco Group

We expect robust group revenue growth (7.5% CAGR 2020–23e) to translate into solid earnings progression (normalised EPS CAGR of 16%). A favourable business mix should continue to help drive EBITDA margin improvement (Myrios has higher margins and a higher growth rate than the Piteco base business). Our forecasts only reflect organic growth for the group, but we believe further acquisitions could strengthen the outlook.

Exhibit 1: Revenue breakdown by business

Exhibit 2: Group EBITDA and EBITDA margin

Source: Company data, Edison Investment Research

Source: Company data, Edison Investment Research

Exhibit 1: Revenue breakdown by business

Source: Company data, Edison Investment Research

Exhibit 2: Group EBITDA and EBITDA margin

Source: Company data, Edison Investment Research

Piteco Group has expanded significantly via acquisitions over the last few years with four deals in five years (Centro Data in 2015, Juniper in 2017, Myrios in 2018 and EveryMake in March 2020). With good cash flow generation, leverage ratios well below the covenant thresholds and the prospect of further organic growth in the next few years, we expect the company to continue to consider further acquisitions.

Existing bank loans have the covenants of net debt/EBITDA <3x and net debt/equity <1x. Hence, based on our FY20 forecasts, both covenants suggest a net debt ceiling of c €30–40m (assuming no new EBITDA contribution from acquisitions) versus our year-end FY20 forecast of c €10m (excluding the value of the put options related to Myrios and Juniper, which are not considered in the covenant calculations and are worth c€13m), leaving c €20–30m of balance sheet headroom.

Exhibit 3: Leverage and FCF yield

Source: Piteco data, Edison Investment Research

Forecasts

We raise our revenue and EBITDA forecasts. While there remains uncertainty about any future lockdowns in Piteco’s markets, the group has fared well in the pandemic. Piteco’s business was not directly affected by the coronavirus outbreak; indeed, its products can help steer financial and treasury decision making at times of crisis. That said, the uncertainty of the lockdowns caused a softening in demand for Piteco’s products, as new and existing customers chose to conserve cash and delay upgrading their internal systems. As a reminder, Piteco’s customers are medium- and large-scale corporates, so are less likely to face a longer-term liquidity crisis. In addition, its customers do not operate in the sectors that were most affected by the temporary restrictions, such as leisure and tourism.

We now assume that FY20 growth is stronger than we had feared back in March. We still forecast a reduced growth rate compared to FY19, but H1 has amply demonstrated Piteco’s capability of weathering the COVID-19 pandemic. We also raise our FY21 forecasts as we expect the business to bounce back. We illustrate the main changes to our forecasts below, with the strongest upgrade to FY21 as we expect it to benefit from the contracts that were delayed during FY20.

Exhibit 4: Forecast changes

€000s

2020e

2021e

2022e

Net sales revenue

NEW

24,917

27,247

29,078

OLD

24,568

26,450

28,046

% change

1%

3%

4%

EBITDA

NEW

11,016

12,177

13,179

OLD

10,484

11,722

13,179

% change

5%

4%

0%

Operating profit (before amort. and exceptionals)

NEW

9,053

10,272

11,330

OLD

8,521

9,819

11,335

% change

6%

5%

0%

Net income

NEW

7,311

8,255

9,252

OLD

6,733

7,693

8,454

% change

9%

7%

9%

Source: Piteco data, Edison Investment Research

Valuation: Discount to international and Italian players

We believe the key attractiveness of Piteco is its ability to generate high profit margins while providing customers with a flexible and cost-effective solution. The historical growth track record, earnings growth outlook and sustained cash-flow generation support further investment opportunities that could strengthen the growth outlook. The stock is trading on 13.6x EV/EBITDA and 16.8x P/E for FY21, at a discount to large international software peers, and smaller Italian software peers. We have updated our Italian software peer group to better reflect Piteco’s competitors.

Our DCF-based valuation rises to €8.20/share as we raise our forecasts and also roll forward our DCF to start in FY21. This is based on a 5% CAGR for net revenues over 10 years, a long-term EBITDA margin of 42%, a WACC of 9% and a terminal growth rate of 2%. We have revised and adjusted our cash flow assumptions based on Piteco’s strong track record on cash conversion.

Exhibit 5: Peer valuation metrics

Share price

Market cap

EV/sales (x)

EV/EBITDA (x)

P/E (x)

Local currency

Local currency

Year 1

Year 2

Year 1

Year 2

Year 1

Year 2

Piteco

€ 7.68

€ 147

6.7

6.1

15.1

13.6

19.0

16.8

Large global ERP/accounting software providers

Microsoft

$209.44

$1,584,969

9.7

8.6

20.6

18.2

32.2

28.1

Oracle

$59.58

$179,167

5.2

5.1

10.5

10.3

14.1

13.0

SAP

$134.66

$164,947

6.2

5.8

18.1

16.6

26.6

23.5

Intuit

$325.55

$85,231

9.9

8.9

26.1

23.5

38.4

34.1

Workday

$220.34

$52,221

12.0

10.2

48.2

42.8

86.7

73.9

Sage

£727.60

£7,898

4.3

4.3

17.0

17.2

27.7

27.1

Xero

A$101.37

A$14,479

18.3

15.6

81.4

63.9

352.8

199.8

Median

 

 

9.3

8.4

19.9

17.6

31.1

27.2

Smaller software companies quoted in Italy

TXT e-solutions

€ 7.40

€ 96

0.9

0.8

7.2

6.5

23.7

19.0

Wiit

€ 175.50

€ 464

9.4

6.7

26.3

17.8

64.7

48.1

Expert System

€ 2.31

€ 116

3.7

3.5

70.4

N/A

N/A

N/A

Tas Tecnologia Avanzata dei Sistemi

€ 1.59

€ 132

N/A

N/A

N/A

N/A

N/A

N/A

Reply

€ 99.05

€ 3,695

2.9

2.6

18.6

16.2

34.0

29.9

Sesa

€ 83.00

€ 1,282

0.7

0.6

10.7

9.3

26.0

22.6

IT Way

€ 0.82

€ 6

N/A

N/A

N/A

N/A

N/A

N/A

Exprivia

€ 0.64

€ 33

1.6

1.5

13.8

14.6

N/A

7.1

Techedge

€ 5.38

€ 138

N/A

N/A

N/A

N/A

N/A

N/A

Median

 

 

2.2

2.1

16.2

14.6

30.0

22.6

Source: Refinitiv, Edison Investment Research. Note: Priced at 28 September 2020.

The key upside or downside risks to our forecasts are higher or lower customer acquisitions at Piteco Spa, stronger or slower than expected revenue acceleration at Myrios or Juniper, higher or lower contributions from international clients (Myrios Switzerland) and higher or lower margins. Furthermore, we believe M&A activity would represent a significant growth opportunity and generate execution risks. The COVID-19 pandemic is the largest unknown at present, with the scale and duration of any further lockdowns – and related economic downturn – potentially affecting the business.


Exhibit 6: Financial summary

€'000s

2016

2017

2018

2019

2020e

2021e

2022e

2023e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

14,122.5

17,046.1

20,214.0

24,038.6

25,909.0

28,315.8

30,207.7

32,132.3

Net sales revenue

13,477.4

16,374.1

19,374.0

22,773.6

24,916.8

27,247.5

29,077.9

30,940.4

Cost of Sales

481.8

405.0

534.0

1,119.0

834.9

896.4

946.3

996.8

Gross Profit

14,604.2

17,451.1

20,748.0

25,157.6

26,743.9

29,212.1

31,154.0

33,129.1

EBITDA

 

 

5,606.3

6,457.1

8,266.0

10,237.6

11,015.9

12,177.2

13,179.4

14,250.1

Normalised operating profit

 

 

5,309.3

6,110.1

6,471.0

7,301.6

9,052.9

10,272.3

11,330.3

12,456.6

Amortisation of acquired intangibles

0.0

(956.0)

(67.0)

0.0

0.0

0.0

0.0

0.0

Exceptionals

0.0

(180.0)

(5.0)

(47.0)

0.0

0.0

0.0

0.0

Share-based payments

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Reported operating profit

5,309.3

4,974.1

6,399.0

7,254.6

9,052.9

10,272.3

11,330.3

12,456.6

Net Interest

(364.5)

(537.0)

(340.0)

(612.0)

(452.0)

(327.0)

(182.8)

(30.7)

Fair value adjustments

105.6

(980.0)

(327.0)

(270.0)

0.0

0.0

0.0

0.0

Profit Before Tax (norm)

 

 

4,944.8

5,573.1

6,131.0

6,689.6

8,600.9

9,945.3

11,147.6

12,425.8

Profit Before Tax (reported)

 

 

5,050.4

3,457.1

5,732.0

3,678.6

8,600.9

9,945.3

11,147.6

12,425.8

Reported tax

(547.2)

(72.0)

(467.0)

(662.0)

(1,290.1)

(1,690.7)

(1,895.1)

(2,112.4)

Profit After Tax (norm)

4,397.6

5,501.1

5,664.0

6,010.6

7,310.8

8,254.6

9,252.5

10,313.4

Profit After Tax (reported)

4,503.2

3,385.1

5,265.0

3,016.6

7,310.8

8,254.6

9,252.5

10,313.4

Net income (normalised)

4,397.6

5,501.1

5,664.0

6,010.6

7,310.8

8,254.6

9,252.5

10,313.4

Net income (reported)

4,503.2

3,385.1

5,265.0

3,016.6

7,310.8

8,254.6

9,252.5

10,313.4

Basic average number of shares outstanding (m)

18

18

18

18

18

18

18

18

EPS - basic normalised (€)

 

 

0.24

0.30

0.31

0.33

0.40

0.46

0.51

0.57

EPS - diluted normalised (€)

 

 

0.24

0.30

0.31

0.33

0.40

0.46

0.51

0.57

EPS - basic reported (€)

 

 

0.25

0.19

0.29

0.17

0.40

0.46

0.51

0.57

Dividend (€)

0.15

0.15

0.15

0.15

0.15

0.18

0.18

0.20

Revenue growth (%)

5.0

21.5

18.3

17.5

9.4

9.4

6.7

6.4

Gross Margin (%)

103.4

102.4

102.6

104.7

103.2

103.2

103.1

103.1

EBITDA Margin (%)

39.7

37.9

40.9

42.6

42.5

43.0

43.6

44.3

Normalised Operating Margin

37.6

35.8

32.0

30.4

34.9

36.3

37.5

38.8

BALANCE SHEET

Fixed Assets

 

 

30,090.5

39,348.0

60,884.0

62,088.0

59,865.9

57,394.7

54,941.5

52,505.3

Intangible Assets

27,690.8

37,416.0

58,301.0

56,900.0

56,537.0

56,132.1

55,683.1

55,189.5

Tangible Assets

1,365.3

1,486.0

2,098.0

4,015.0

2,155.9

89.6

(1,914.6)

(3,857.2)

Investments & other

1,034.4

446.0

485.0

1,173.0

1,173.0

1,173.0

1,173.0

1,173.0

Current Assets

 

 

15,531.1

9,526.0

11,171.0

10,742.0

16,202.3

22,534.5

29,632.4

37,071.7

Stocks

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Debtors

4,523.7

4,096.0

4,808.0

6,475.0

6,995.4

7,362.1

7,551.9

7,711.8

Cash & cash equivalents

10,869.6

5,154.0

5,834.0

3,754.0

8,693.9

14,659.4

21,567.5

28,847.0

Other

137.8

276.0

529.0

513.0

513.0

513.0

513.0

513.0

Current Liabilities

 

 

(5,022.9)

(8,425.0)

(10,439.0)

(16,044.0)

(16,922.5)

(17,893.9)

(18,741.3)

(19,617.4)

Creditors

(392.4)

(746.0)

(972.0)

(927.0)

(1,299.1)

(1,719.8)

(2,134.7)

(2,570.7)

Tax and social security

(2,911.2)

(5,354.0)

(3,388.0)

(5,381.0)

(5,887.4)

(6,438.1)

(6,870.6)

(7,310.7)

Short term borrowings

(1,719.3)

(2,325.0)

(6,079.0)

(9,736.0)

(9,736.0)

(9,736.0)

(9,736.0)

(9,736.0)

Long Term Liabilities

 

 

(8,576.3)

(10,533.0)

(30,480.0)

(25,367.0)

(25,367.0)

(25,367.0)

(25,367.0)

(25,367.0)

Long term borrowings

(7,204.2)

(9,354.0)

(26,549.0)

(21,476.0)

(21,476.0)

(21,476.0)

(21,476.0)

(21,476.0)

Other long term liabilities

(1,372.1)

(1,179.0)

(3,931.0)

(3,891.0)

(3,891.0)

(3,891.0)

(3,891.0)

(3,891.0)

Net Assets

 

 

32,022.3

29,916.0

31,136.0

31,419.0

33,778.7

36,668.3

40,465.6

44,592.6

Shareholders' equity

 

 

32,022.3

29,916.0

31,136.0

31,419.0

33,778.7

36,668.3

40,465.6

44,592.6

CASH FLOW

Op Cash Flow before WC and tax

5,606.3

6,457.1

8,266.0

10,237.6

11,015.9

12,177.2

13,179.4

14,250.1

Working capital

199.6

586.0

(93.0)

(887.0)

(892.6)

(787.3)

(604.7)

(595.9)

Exceptional & other

(690.5)

(2,392.0)

(1,286.0)

(1,758.0)

0.0

0.0

0.0

0.0

Tax

(944.0)

(187.0)

(648.0)

(336.0)

(1,290.1)

(1,690.7)

(1,895.1)

(2,112.4)

Net operating cash flow

 

 

4,171.4

4,464.1

6,239.0

7,256.6

8,833.2

9,699.1

10,679.6

11,541.9

Capex

(21.0)

(9,807.0)

(758.4)

(396.0)

(259.1)

(566.3)

(604.2)

(642.6)

Acquisitions/disposals

0.0

(17.0)

3.0

262.0

0.0

0.0

0.0

0.0

Equity financing

0.0

(375.0)

0.0

0.0

0.0

0.0

0.0

0.0

Dividends

(1,813.0)

(2,719.0)

(2,698.0)

(2,688.0)

(2,714.8)

(3,167.3)

(3,167.3)

(3,619.8)

Other

(1,665.5)

2,737.0

(2,366.6)

(7,172.0)

0.0

0.0

0.0

0.0

Net Cash Flow

671.9

(5,716.9)

419.0

(2,737.4)

5,859.3

5,965.5

6,908.1

7,279.5

Opening net debt/(cash)

 

 

346.8

(1,956.1)

6,497.1

26,794.1

27,458.0

22,518.2

16,552.7

9,644.6

FX

(0.6)

1.5

(1.0)

0.4

(0.5)

0.0

0.0

0.0

Other non-cash movements

1,631.7

(2,737.7)

(20,715.0)

2,073.0

(919.0)

0.0

0.0

0.0

Closing net debt/(cash)

 

 

(1,956.1)

6,497.1

26,794.1

27,458.0

22,518.2

16,552.7

9,644.6

2,365.1

Source: Company data, Edison Investment Research


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

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Copyright: Copyright 2020 Edison Investment Research Limited (Edison).

Australia

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

New Zealand

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

United Kingdom

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

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

United States

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

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

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

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

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

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

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

Copyright: Copyright 2020 Edison Investment Research Limited (Edison).

Australia

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

New Zealand

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

United Kingdom

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

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

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

United States

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

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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