Solid positive revaluations in Q420

Georgia Capital 5 March 2021 Review
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Georgia Capital

Solid positive revaluations in Q420

Investment companies
Private equity

5 March 2021

Price

486.5p

Market cap

£223.7m

NAV

£496.9m

NAV*

1,081p

Discount to NAV

55.0%

*At 31 December 2020.

Yield

0.0%

Ordinary shares outstanding

46.0m

Code/ISIN

CGEO/GB00BF4HYV08

Primary exchange

LSE Premium

AIC sector

N/A

52-week high/low

709p

345p

NAV high/low

1,081p

741p

Gross gearing*

44.4%

Net gearing*

36.5%

*As at 31 December 2020

Fund objective

Georgia Capital focuses on scalable private equity opportunities in Georgia. These opportunities have the potential to reach at least GEL0.5bn equity value over the next three to five years and the company can monetise investments through exits as investments mature.

Bull points

Majority of portfolio exposed to resilient and well-established businesses.

Georgia is likely to continue its secular trend with 5%+ real GDP growth after COVID-19.

Regular dividend income from several portfolio companies.

Bear points

No track record of investment realisations.

Concentrated portfolio exposed to a frontier economy is inherently higher risk.

Vaccination rollout in Georgia has not started yet.

Analysts

Milosz Papst

+44 (0)20 3077 5700

Michal Mordel

+44 (0)20 3077 5700

Georgia Capital is a research client of Edison Investment Research Limited

Georgia Capital (GCAP) posted a 27.2% NAV total return (TR) in local currency terms in Q420 on the back of solid valuation uplifts across all key portfolio holdings. This, together with the Q320 revaluation of GHG after it was made private (see our initiation note for details), offset the weak performance of GCAP’s hospitality and commercial real estate business and the subdued share price performance of Bank of Georgia in 2020. Consequently, GCAP’s FY20 NAV TR reached 2.7% in local currency (though -13.3% in sterling terms). The NAV uplift helped reduce GCAP’s loan-to-value (LTV) at the holding level from 44.1% at end-March 2020 to 28.9% at end-2020. GCAP’s new investments remain centred around renewable energy and education.

GCAP’s historical discount to NAV

Source: Refinitiv, Edison Investment Research

Why invest in Georgia Capital now?

While COVID-19 resulted in a real GDP decline of c 6.1% in 2020 (according to estimates from the National Bank of Georgia), the IMF expects a 4.3% rebound in 2021 and a return to the 5%+ pa growth path beyond 2021. Despite the collapse in tourism revenues, Georgia’s fiscal deficit and external balance seem to be covered by support from international financial institutions (the IMF in particular), as well as strong remittances. GCAP provides geared exposure to the Georgian economy at a wide discount to NAV, mostly through resilient, market-leading businesses in the healthcare services, pharmacy, insurance, water utility, renewable energy and education sectors.

The analyst’s view

The market seems to have ignored/overlooked GCAP’s strong 27.2% NAV uplift in Q420 (driven by all major holdings), which led to a further widening of its discount to NAV to 55% (see chart above) vs an average discount for UK-listed private equity trusts of c 10–20%. This may be partially justified by the lack of any major portfolio exits, with management expecting to close the first deal in 18–24 months, which would validate its investment strategy. Having said that, we note that 82% of GCAP’s portfolio is now externally valued and GCAP buyers are currently receiving a wide discount for their patience. Meanwhile, GCAP may use any excess cash for NAV-accretive buybacks (as it has done in the past).

Market outlook: Lockdown measures gradually lifted

Georgia’s real GDP declined by 6.1% y-o-y in 2020 based on estimates from the National Bank of Georgia (NBG), with tourism revenues (representing 11.6% of GDP in 2019) dropping by c 83% yoy. Amid the worsening macro environment and COVID-19 support measures, Georgia’s fiscal deficit reached more than 9% of GDP in 2020, according to NBG. However, support from international financial institutions (in particular, the Extended Fund Facility from the IMF) helped fund the deficit and cover external imbalances. The latter were further mitigated by higher remittances (up 8.8% y-o-y in 2020 based on NBG data on the back of a strong H220), as well as a bigger decline in imports (-15.9% y-o-y) than exports (-12% y-o-y). Consequently, Georgia’s foreign currency reserves reached record-high levels (up 11.5% y-o-y in 2020), allowing the central bank to carry out FX interventions to provide greater stability to the Georgian lari exchange rate after its initial fall during the COVID-19 outbreak (it nevertheless depreciated by c 13% against the US dollar in 2020). The IMF expects Georgia’s real GDP to grow by 4.3% and 5.8% in 2021 and 2022, respectively (and forecasts 5%+ pa for 2023–25). Fitch (which has a similar GDP forecast for 2021) expects this year’s recovery to be mostly driven by domestic demand as it forecasts tourism revenues to reach only 30% of 2019 levels (80% in 2022). Fitch reaffirmed Georgia’s long-term foreign currency issuer default rating of BB with a negative outlook in February 2021.

Georgia is preparing to commence vaccination of medical workers and the most vulnerable sections of the population in March (according to the IMF) following modest deliveries of the Pfizer-BioNTech and AstraZeneca vaccines. A larger vaccine roll-out (possibly around end-March or the beginning of April) will take place after the country receives 1.4m doses as part of the World Health Organization’s COVAX facility (a global initiative aimed at equitable access to COVID-19 vaccines), sufficient to cover c 20% of the country’s population. The government aims to vaccinate 60% of the population by the end of 2021. Meanwhile, it started to gradually lift COVID-19 containment measures in early February in response to a declining number of cases in the country (currently below 1,000 new cases per day vs around 5,000 at the peak of the second wave in December despite an increase in average daily tests). Moreover, Georgia reopened its borders to vaccinated foreign travellers in February.

At the same time, we note the recent political unrest associated with the arrest of the Georgian opposition leader Nika Melia, which triggered Giorgi Gakharia’s decision to resign as prime minister on 18 February 2021.

Performance: Slightly positive NAV TR in Georgian lari

GCAP posted a 13.3% decrease in net asset value (NAV) in FY20 in sterling terms, significantly behind the LPX Europe, which increased by 8% during the period. The weakness of the Georgian lari against sterling played an important role, as GCAP’s NAV in local currency increased by 2.7% y-o-y, broadly in line with the 1.9% posted by the LPX Europe in its base currency (euro). The potential strengthening of Georgian lari would be supportive of GCAPs performance, and we believe this depends on the economy returning to normal, including revival of tourism as the country recovers from the COVID pandemic.

Exhibit 1: Georgia Capital performance to 31 December 2020 in sterling terms

Price, NAV and index total return performance, since IPO rebased

Price, NAV and index total return performance (%)

Source: Thomson Datastream, Edison Investment Research. Note: Performance since IPO annualised.

Most of GCAP’s key portfolio companies withstood the crisis relatively well, with changes in portfolio valuation adding GEL7.86 to its NAV per share in FY20 (16.8pp to NAV TR), although contributions varied across holdings (see Exhibit 2 and Exhibit 3 for current exposures). Major positive drivers include Georgia Healthcare Group’s (GHG’s) revaluation as a result of its delisting (even after accounting for the dilutive effect of the transaction), as well as a combination of earnings growth and valuation multiples expansion in the case of GCAP’s large portfolio holdings. Investment-stage businesses (renewable energy and education) were an additional positive driver. By contrast, GCAP’s hospitality and commercial real estate business, which represents most of the ‘other companies’ pool (and made up c 11% of GCAP’s overall portfolio at end-2019) was visibly affected by COVID-19. Furthermore, the Bank of Georgia (BoG), GCAP’s only listed exposure at present, saw its share price decline by c 25% in 2020.

GCAP’s operating expenses were 6.6% lower year-on-year in FY20 and translated into an ongoing charge ratio of 1.6% of average NAV (2.0% in FY19). The company targets a management fee of below 2% of its market capitalisation, which amounted to 1.8% in FY20 (FY19: 1.8%). Together with administrative expenses, it stood at 2.8% (FY19: 2.4%). GCAP’s NAV in FY20 was also reduced by an FX loss incurred on its US$300m bond.

Exhibit 2: NAV per share development in FY20 (GEL)

Source: Refinitiv, GCAP, Edison Investment Research

82% of portfolio now valued externally

Starting from Q420, all GCAP’s large portfolio companies are valued externally by valuation company Duff & Phelps using a blended DCF and market multiples method. The three GHG business lines (healthcare services, retail pharmacy and medical insurance) were valued externally in Q320 for the purpose of the transaction to make it private, while the water utility and P&C insurance businesses were valued by Duff & Phelps for the first time in Q420. Consequently, after accounting for the stake in the listed BoG (valued based on closing price at the NAV date), around 82% of GCAP’s portfolio was valued externally at end-2020 (see Exhibit 3). Please note that last 12-month (LTM) valuation multiples represent figures implied by the blended valuation approach.

Exhibit 3: GCAP’s portfolio summary at end-December 2020

 

Carrying value

As % of total portfolio

Valuation multiple

Valuation method

(GELm)

(US$m)

Bank of Georgia

532

118

18%

-

Public markets

Large portfolio companies

1,858

414

64%

-

External

Healthcare Services (GHG)

572

127

20%

13.2x LTM EV/EBITDA*

External

Retail (pharmacy, GHG)

553

123

19%

9.1x LTM EV/EBITDA*

External

Water Utility (GGU)

471

105

16%

9.4x LTM EV/EBITDA**

External

Insurance (P&C and Medical (GHG))

263

58

9%

11.6–10.1x LTM P/E***

External

Investment-stage portfolio companies

303

67

10%

-

Internal

Renewable Energy (GGU)

210

47

7%

9.7x EV/EBITDA****

Internal

Education

93

21

3%

12.5x LTM EV/EBITDA

Internal

Other portfolio companies

215

48

7%

-

-

Total portfolio value

2,908

647

100%

-

-

Net debt*****

(698)

Net other assets/liabilities

3

NAV

2,212

NAV per share (GEL)

48.12

Source: Company data. Note: External valuation carried out by Duff & Phelps. *LTM EV/EBITDA multiples for Healthcare Services and Retail (Pharmacy) are presented including the IFRS 16 impact as at end-December 2020. **Calculated based on adjusted LTM EBITDA – reflecting new tariffs announced in 2020 and adjusted for low-volume sales due to COVID-19 reimbursed under the tariff setting methodology. ***11.6x for P&C Insurance business and 10.1x for Medical Insurance. ****Blended multiple for Hydrolea Hydro Power Plants (HPPs) and Qartli wind farm valued using run-rate EBITDA and related EV/EBITDA multiple (Mestiachala HPPs and other pipeline projects valued at cost). *****Cash and equivalents used to calculate net debt include loans issued to portfolio companies as per GCAP’s methodology.

Q420 NAV up 27.2% driven by all major holdings

In Q420 alone, GCAP posted a significant NAV uplift of 27.2%, with the positive revaluation of private companies contributing 19.6pp and the 36.6% increase in the share price of BoG to 1,220p adding 9.9pp (now at 1,010p). We note that the majority (c 72%) of the positive valuation impact in the case of private holdings came from operating performance and 28% came from multiples and FX.

Bank of Georgia: Sustained loan book momentum

According to preliminary figures, the BoG’s loan book increased 18.9% y-o-y in FY20 (10.2% y-o-y at constant currency), supported by strong loan origination in corporates, micro, small and medium enterprises (MSMEs) as well as mortgages in the retail segment (encouraged by government programmes). In the period, client deposits and notes were up 39.1% y-o-y (28.6% y-o-y in constant currency). Return on average equity (ROAE) declined to 13.0% in FY20 from 26.1% in 2019, reflecting COVID-19 related provisions in Q121, with BoG delivering an annualised ROAE in excess of 20% in each of the remaining quarters of 2020. The non-performing loan (NPL) ratio increased to 3.7% from 2.1% at end-FY19. Due to COVID-19, no dividend was paid for 2019 and the resumption of dividend payouts will depend on the new capital requirements scheduled to be released by the NBG (with the next meeting scheduled for 2 June 2021). That said, BoG has confirmed its medium-term targets for ROAE of at least 20%, loan book growth of c 15% pa and a 25–40% dividend payout ratio.

Healthcare services: Higher LTM EBITDA and debt reduction supporting valuation

The healthcare services business (5.7pp NAV TR attribution in Q420) was revalued on the back of positive operating performance (+2.3pp), as the LTM EBITDA used in the multiples valuation (blended with a DCF-derived value) was rolled from end-June 2020 (used in Q320) to end-December 2020. After a weaker Q220 due to lower bed occupancy, its revenues went up by 3.3% y-o-y and 13.3% y-o-y in Q320 and Q420, respectively (adjusted for the High Technology Medical Centre, University Clinic (HTMC) disposal in August 2020), with the latter driven by a 9.3% y-o-y increase in admissions to clinics, a 3.6pp y-o-y increase in occupancy rate in hospitals and strong growth in diagnostics revenues. The business also benefited from income tax relief for businesses that retain workers on low wages. By contrast, material expenses were negatively affected by FX and higher consumption of medical disposables and personal protective equipment at healthcare facilities due to COVID-19.

We note that 10 healthcare facilities (out of 51), four clinics and six hospitals are earmarked exclusively for COVID-19 patients (with another 10 healthcare facilities operating a hybrid set-up). Treatment costs are reimbursed by the government and GCAP’s business also receives a fixed fee for each bed occupied by a COVID-19 patient. However, based on a discussion with management, we understand that the EBITDA margin per ‘COVID-19 bed’ is c 12–15% compared to 25–27% for a ‘non-COVID-19 bed’. After the initial decrease in Q220, occupancy rates at hospitals returned to pre-COVID-19 levels (up 3.6pp y-o-y in Q420). Consequently, EBITDA (ex-IFRS 16) went up in Q320 by 14.0% y-o-y, while declining slightly by 1.6% y-o-y in Q420. The valuation was also supported by a 25.5% y-o-y net debt reduction to GEL211.2m, partially on the back of proceeds from the HTMC disposal completed during 2020.

Other large portfolio holdings also supporting GCAP’s NAV growth

The retail pharmacy business (which contributed 4.5pp to GCAP’s NAV TR in Q420) proved particularly resilient with revenues up 10.5% in FY20 (16.4% y-o-y in Q420) including like-for-like growth of 6.1% (9.2% in Q420), assisted by higher average bills (up 17.9% y-o-y in FY20). The EBITDA margin was down only slightly in FY20 to 10.4% from 10.6% in FY19, still ahead of the company’s target of 9%. On top of this, the implied LTM EV/EBITDA valuation multiple for the business increased in Q420 from 8.7x to 9.1x.

The water utility business contributed 4.0pp to NAV TR after accounting for the new 2021–23 water tariffs approved in December 2020 by the local regulator, which translate into 38% higher allowed water revenues for the business. The tariffs were set at a level that allows the business to recover unearned revenues in the last regulatory period (2018–20), particularly from the 13% y-o-y decline in water supplies in FY20 amid COVID-19 (mainly due to lower demand from corporate clients). The new tariffs assume a return on investment of 14.98%, in line with the business’s mid-term target return on invested capital (ROIC) of 13–15%. We note that its external electricity revenues were down 70.8% in FY20 due to extraordinarily low precipitation-related water inflows to Zhinvali Hydro Power Plant (HPP), leading to a 35% y-o-y decline in electricity generation (while self-produced electricity consumption was up 0.7% in FY20). After retrospectively applying the new tariffs to the business’s results, its operations were valued at an LTM EV/EBITDA of 9.4x at end-2020 (vs 10.0x at end-September 2020).

The P&C insurance business added 3.6pp to GCAP’s NAV TR, and its valuation now translates into an implied LTM multiple of 11.6x at end-December 2020 (vs 8.3x at end-September 2020). Operationally, the business was quite robust with a slight 4.3% y-o-y drop in premiums earned in FY20, mainly due to the impact of COVID-19 travel restrictions on the compulsory border third-party liability insurance (MTPL) line. This was partially offset by an increase in other business lines (eg commercial property and motor insurance). Net underwriting profit and net profit were down in FY20 by 1.8% and 7.2%, respectively, nevertheless translating into a healthy ROAE of 24.8% (vs 30.4% in FY19).

The medical insurance and investment stage companies (renewable energy and education) also contributed positively to Q4 NAV TR in terms of operating development.

Exhibit 4: GCAP’s assets FY20 y-o-y revenue* change

Exhibit 5: GCAP’s assets FY20 y-o-y EBITDA* change

Source: GCAP, BoG, Edison Investment Research. Note: Vertical axis scaled for readability. *Net interest income for BoG; net premiums earned for insurance businesses.

Source: GCAP, BoG, Edison Investment Research. Note: Vertical axis scaled for readability. *Net income for BoG and insurance businesses.

Exhibit 4: GCAP’s assets FY20 y-o-y revenue* change

Source: GCAP, BoG, Edison Investment Research. Note: Vertical axis scaled for readability. *Net interest income for BoG; net premiums earned for insurance businesses.

Exhibit 5: GCAP’s assets FY20 y-o-y EBITDA* change

Source: GCAP, BoG, Edison Investment Research. Note: Vertical axis scaled for readability. *Net income for BoG and insurance businesses.

Retaining a comfortable liquidity position

GCAP continues to focus on investments in renewable energy and education (in line with its cash accumulation and preservation strategy introduced during the COVID-19 pandemic), having earmarked GEL167m or c US$50m over three to five years. This seems already secured by its current liquid position (c GEL173.1m or US$54m at end-2020) and issued loans (GEL109m or c US$33m at end-2020).

GCAP’s management believes there are no major near-term liquidity needs across the portfolio as the aggregate cash balances of its holdings went up significantly in FY20 to GEL392m vs GEL183m in FY19. Nevertheless, it is worth flagging that GCAP’s portfolio companies need to refinance GEL283.9m of debt in 2021. This includes GEL110.3m in the healthcare services and retail pharmacy businesses, which seem to have a strong liquidity profile. Based on a discussion with the management, we understand that a further GEL99m (US$30m) is secured by commercial real estate valued at c US$40m and GEL30m is related to GCAP’s hospitality business where management is in negotiations with banks to restructure the loans and prolong payments until hotels again start generating cash flow.

GCAP received c GEL30m in dividends from private companies (water utility, P&C insurance and renewable energy) in FY20 (vs GEL122m in FY19 including GEL49m non-cash in-kind dividend), in line with management expectations communicated during the capital markets day in November 2020. GCAP also collected GEL40m from the repayment of a loan issued to renewable energy (repaid with proceeds from the Green Bond issued in July 2020). Furthermore, management reiterated the dividend income guidance of GEL60–70m for private companies in FY21. This should largely cover GCAP’s ongoing cash operating expenses (GEL19.5m in FY20) and net interest expense (GEL41.5m in FY20).

Peer group comparison

In Exhibit 6, we show a group of private equity funds specialising in direct investments (including co-investments), which we consider peers for GCAP. The funds differ significantly in terms of geographical and industry exposure and none can act as a close peer to GCAP. Having said that, GCAP’s one-year NAV performance is the second lowest in peer group in sterling terms, which partly stems from weak Georgian lari in 2020 (base currency performance is much closer to the peer average). While GCAP is the only fund in the group that is not paying dividends, we note that it has historically performed NAV accretive buybacks. GCAP trades at the highest discount in the group, which may be due to its exclusive exposure to the Georgian economy and lack for meaningful track record in terms of exits.

Exhibit 6: Listed private equity investment companies peer group at 26 February 2021* (in sterling terms)

% unless stated

Market
cap £m

NAV TR
1 year

NAV TR
3 year

NAV TR
5 year

Discount
(cum-fair)

Ongoing charge

Perf.
fee

Net
gearing

Dividend
yield

Georgia Capital

223.7

(13.3)

N/A

N/A

(55.0)

1.9

No

124

0.0

Wendel SE

3,740.8

(4.4)

(13.2)

37.8

(33.0)

1.0

No

107

2.9

HgCapital Trust

1,449.8

21.1

66.6

141.9

16.4

1.6

Yes

100

1.4

NB Private Equity Partners

542.4

7.4

27.7

80.8

(23.6)

2.2

Yes

118

4.0

Oakley Capital Investments

518.3

4.5

50.7

90.9

(28.8)

1.1

Yes

100

1.6

Princess Private Equity

677.0

12.1

39.3

103.6

(14.8)

1.8

Yes

100

4.5

Symphony International Holding

137.6

(36.1)

(39.5)

(31.1)

(42.6)

2.4

No

100

6.9

Peers average

665.0

1.8

29.0

77.2

(18.7)

1.8

103

3.7

Rank

6

6

N/A

N/A

7

3

1

7

Source: Morningstar, Refinitiv, Edison Investment Research. Note: TR=total return. Net gearing is total assets less cash and equivalents as a percentage of net assets. 100=ungeared. *12-month performance based on latest available ex-par NAV as at end-December (HgCapital Trust, Wendel SE and Symphony International Holding are as at end-September).


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This report has been commissioned by Georgia Capital and prepared and issued by Edison, in consideration of a fee payable by Georgia Capital. 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.

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General disclaimer and copyright

This report has been commissioned by Georgia Capital and prepared and issued by Edison, in consideration of a fee payable by Georgia Capital. 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.

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Copyright: Copyright 2021 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.

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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

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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