4iG — Building a Hungarian-owned national champion

4iG (BSE: 4IG)

Currency in HUF

Last close As at 25/01/2023

HUF701.00

−7.00 (−0.99%)

Market capitalisation

HUF209,352m

Research: TMT

4iG — Building a Hungarian-owned national champion

4iG’s transformation into a leading national and regional telco continues apace. 4iG, together with the Hungarian state, has announced non-binding heads of terms with Vodafone to acquire a 100% stake in Vodafone Magyarország Távközlési (Vodafone Hungary), Hungary’s second-largest telco, for an enterprise value of HUF715bn (€1.8bn), payable in cash. The transaction represents a multiple of 7.7x EV/adj. EBITDA for the 12-month period ending 31 March 2022. Factoring in management’s expected synergies of HUF150bn, the acquisition multiple falls to 6.1x. The deal is expected to close by the end of the year, subject to confirmatory due diligence, final documentation and regulatory approval. On completion, 4iG will take a 51% stake in Vodafone Hungary, with the Hungarian state owning 49%. Funding has not yet been disclosed. We expect to reinstate our forecasts following the Q222 results in September.

Richard Williamson

Written by

Richard Williamson

Director, TMT

TMT

4iG

Building a Hungarian-owned national champion

M&A update

IT services

30 August 2022

Price

HUF822

Market cap

HUF241bn

HUF412/€

Net debt (HUFbn) at 31 March 2022

453

Shares in issue

293.7m

Free float

11.5%

Code

4iG

Primary exchange

Budapest

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

5.9

(8.1)

(29.2)

Rel (local)

4.4

(5.8)

(21.9)

52-week high/low

HUF1094

HUF700

Business description

4iG is a regional ICT/telecoms group, based in Hungary and focused on two core areas: telecoms and infrastructure, built around its acquisition of Antenna Hungária, and investments in the West Balkans; and IT services, where it is the number one IT systems integrator in Hungary.

Next events

Q222 results

1 September 2022

H!22 results

October 2022

Analysts

Richard Williamson

+44 (0)20 3077 5700

Katherine Thompson

+44 (0)20 3077 5730

4iG is a research client of Edison Investment Research Limited

4iG’s transformation into a leading national and regional telco continues apace. 4iG, together with the Hungarian state, has announced non-binding heads of terms with Vodafone to acquire a 100% stake in Vodafone Magyarország Távközlési (Vodafone Hungary), Hungary’s second-largest telco, for an enterprise value of HUF715bn (€1.8bn), payable in cash. The transaction represents a multiple of 7.7x EV/adj. EBITDA for the 12-month period ending 31 March 2022. Factoring in management’s expected synergies of HUF150bn, the acquisition multiple falls to 6.1x. The deal is expected to close by the end of the year, subject to confirmatory due diligence, final documentation and regulatory approval. On completion, 4iG will take a 51% stake in Vodafone Hungary, with the Hungarian state owning 49%. Funding has not yet been disclosed. We expect to reinstate our forecasts following the Q222 results in September.

Year end

Revenue
(HUFbn)

PBT*
(HUFbn)

EPS*
(HUF)

DPS
(HUF)

P/E
(x)

Yield
(%)

12/19

41.1

3.3

30.8

22.0

26.7

2.7

12/20

57.3

4.2

37.7

22.5

21.8

2.7

12/21

93.7

8.7

74.6

29.0

11.0

3.5

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

Combined entity would be a major player

Vodafone Hungary is the second-largest player in the Hungarian telecoms market (after Telekom Hungary) in terms of subscriptions, serving more than 3.8m residential and business subscribers (3.0m mobile, 0.8m fixed). Vodafone Hungary’s FY22 net revenue was HUF278bn with adjusted EBITDA over HUF93bn. As of July 2022, the group also had 5.0m revenue generating units (RGUs) (3.0m mobile, 0.7m TV, 0.7m broadband and 0.6m fixed voice). On a pro forma basis, the combined group would have 5m customers and 7.6m RGUs as of July 2022.

4iG anticipates the NPV of synergies at HUF150bn

4iG’s management estimates the combined NPV of revenue, cost and capex synergies for the planned transaction at more than HUF150bn. This figure includes the potential for further growth through cross-selling and full fixed-to-mobile convergence, as well as through scale, with material B2B and B2C revenue synergies anticipated. Vodafone’s shared services business in Hungary, VOIS, is not included in the transaction.

6.1x FY22 EV/adj. EBITDA factoring in synergies

The transaction represents a multiple of 7.7x EV/EBITDA for the 12-month period ending 31 March 2022, or 9.1x adjusted earnings before interest, tax, depreciation and amortisation after leases (EBITDAaL). If we reduce the headline enterprise value by the net present value of the targeted synergies (HUF150bn), the resultant FY22 EV/adj. EBITDA multiple falls to 6.1x post-synergies, or 2.0x EV/sales. This compares to historic trading multiples across the European telecoms sector of c 1.8–2.3x EV/sales and 6–7x EV/EBITDA. The clear strategic benefits of the transaction would appear to justify the premium price.

Heads of terms agreed for Vodafone Hungary

A clear number two in the Hungarian telecoms market

4iG acquired its wired and satellite infrastructure through the purchase of DIGI Group (January 2022), as well as a strong market presence in wired internet, pay-TV and digital terrestrial broadcasting. The acquisition of Vodafone Hungary would make 4iG a major mobile player in a single step, lifting 4iG to become the clear number two in the Hungarian telecoms market, close on the heels of Telekom Hungary. The transaction would also deliver competencies including data network solutions, virtual data centres and IoT technologies on top of this.

Based on latest data from the National Media and Infocommunications Authority, Hungary (NMHH) for August 2021:

Telekom Hungary is the clear market leader in mobile voice, with a 44% market share (Exhibit 1). Vodafone Hungary has the second-largest market share with 27%, closely followed by Telenor, also with a 27% share of the market.

In wired voice (Exhibit 2), Telekom Hungary retains a 49% market share, while the pro forma combination of 4iG and Vodafone Hungary would hold 42%.

Exhibit 1: Mobile voice market share

Exhibit 2: Wired voice market share

Source: NMHH, Edison Investment Research

Source: NMHH, Edison Investment Research

Exhibit 1: Mobile voice market share

Source: NMHH, Edison Investment Research

Exhibit 2: Wired voice market share

Source: NMHH, Edison Investment Research

In terms of the share of internet services (Exhibit 3), 4iG/Vodafone Hungary together hold a 43% domestic market share, with Telekom Hungary holding a 40% share.

Exhibit 3: Market share for fixed broadband internet subscriptions

Exhibit 4: Market share for internet TV services

Source: NMHH, Edison Investment Research

Source: NMHH, Edison Investment Research

Exhibit 3: Market share for fixed broadband internet subscriptions

Source: NMHH, Edison Investment Research

Exhibit 4: Market share for internet TV services

Source: NMHH, Edison Investment Research

As for internet TV (Exhibit 4), 4iG/Vodafone Hungary will be the clear market leader across mobile and fixed services, with a 47% market share, compared to Telekom Hungary's 33% market share.

Strategic premium helps justify valuation multiple

The terms agreed with Vodafone, value Vodafone Hungary at an enterprise value of HUF715bn, for a company that generated net revenue for the year to 31 March 2022 of HUF278bn and adjusted EBITDA of over HUF93bn. This equates to an EV/sales multiple of 2.6x and an EV/Adj. EBITDA multiple of 7.7x, or 9.1x adjusted earnings before interest, tax, depreciation and amortisation after leases (EBITDAaL), as disclosed by Vodafone (implying FY22 lease payments of c HUF14bn).

However, the envisaged transaction also offers the potential for further growth through cross-selling and full fixed-to-mobile convergence, as well as through scale, with material B2B and B2C revenue synergies anticipated. 4iG’s management estimates combined net present value of revenue, cost and capex synergies at more than HUF150bn.

If we reduce the headline enterprise value by the net present value of the synergies, the resultant FY22 EV/Adj. EBITDA multiple falls to 6.1x post-synergies, or 2.0x EV/sales. This compares to historic trading multiples across the European telecoms sector of c 1.8–2.3x EV/sales and 6–7x EV/EBITDA. Alternate valuation measures would include 7.2x EV/EBITDAaL (post-synergies) or €347 EV/RGU (pre-synergies) and €274 EV/RGU (post-synergies). This analysis assumes that 4iG will be able to deliver the full value of the envisaged HUF150bn of synergies.

It is worth noting the difference between trading and strategic acquisition multiples, with trading multiples currently depressed, reflecting the late stage of the economic cycle. Trading multiples indicate the price that a buyer and seller can agree to trade a small interest in the target company, offering no ability to control or influence the strategic direction of the business. Strategic acquisition multiples will typically be higher than trading multiples, as the buyer is prepared to pay a premium to control the asset and align it to their own strategic business plan.

From a limited analysis of comparable transactions, the multiple that 4iG is intending to pay for Vodafone Hungary does not appear to be out of line with the precedents we have identified:

PPF/O2 CZ, June 2021 – PPF acquired the equity of O2 in the Czech Republic at a share price of CZK264 per share, equating to an LTM EV/EBITDA of 6.8x.

Iliad/Play Communications, September 2020 – French telco, Iliad, acquired Poland's Play for €3.5bn, an EV/EBITDA multiple of 6.8x. Play was the largest mobile operator in Poland.

United Group/Vivacom, November 2019 – United Group acquired Bulgarian telecom Vivacom for consideration of €1.2bn, which puts the EV/EBITDA transaction multiple at 6.5x.

PPF/Telenor CEE, March 2018 – Telenor sold its assets in Central and Eastern Europe to private investment fund PPF Group for an EV of US$3.4bn, an EV/EBITDA of 6.4x.

Exhibit 5: Multiples for select EMEA telco deals 2019-22 (average 8.0x EV/EBITDAaL)

Source: Company press releases, Edison Investment Research

Exhibit 6: Financial summary

31-December

HUF'm

2018

2019

2020

2021

INCOME STATEMENT

IFRS

IFRS

IFRS

IFRS

Revenue

 

 

14,007

41,129

57,300

93,653

Cost of Sales

(8,938)

(30,126)

(41,372)

(59,090)

Gross Profit

5,070

11,003

15,928

34,563

EBITDA

 

 

842

4,075

5,047

12,094

Normalised operating profit

 

 

240

3,332

4,211

7,924

Amortisation of acquired intangibles

0

0

0

0

Exceptionals

0

0

0

0

Share-based payments

0

0

0

0

Reported operating profit

240

3,332

4,211

7,924

Net Interest

(21)

(18)

(36)

814

Joint ventures & associates (post tax)

0

0

0

0

Exceptionals

0

0

0

0

Profit Before Tax (norm)

 

 

219

3,314

4,175

8,737

Profit Before Tax (reported)

 

 

219

3,314

4,175

8,737

Reported tax

(117)

(488)

(736)

(1,576)

Profit After Tax (norm)

102

2,827

3,439

7,161

Profit After Tax (reported)

102

2,827

3,439

7,161

Minority interests

0

66

(46)

(203)

Discontinued operations

0

0

0

0

Net income (normalised)

102

2,893

3,393

6,958

Net income (reported)

102

2,893

3,393

6,958

Basic average number of shares outstanding (m)

91.6

91.7

91.3

96.0

EPS - basic normalised (HUF)

 

 

1.11

30.82

37.68

74.62

EPS - diluted normalised (HUF)

 

 

1.08

30.07

36.58

73.52

EPS - basic reported (HUF)

 

 

1.11

30.82

37.68

74.62

Dividend (HUF)

0.00

22.00

22.49

29.00

Revenue growth (%)

#REF!

#REF!

#REF!

#REF!

Gross Margin (%)

36.2

26.8

27.8

36.9

EBITDA Margin (%)

6.0

9.9

8.8

12.9

Normalised Operating Margin

1.7

8.1

7.3

8.5

BALANCE SHEET

Fixed Assets

 

 

1,571

1,948

3,989

183,505

Intangible Assets

1,221

890

2,043

124,728

Tangible Assets

140

322

777

39,613

Lease rights

0

636

966

17,837

Investments & other

210

101

203

1,325

Current Assets

 

 

6,824

22,161

33,874

316,432

Stocks

242

523

3,360

2,943

Debtors

4,306

12,892

17,494

35,926

Cash & cash equivalents

176

6,238

7,205

266,547

Other

2,101

2,508

5,815

11,015

Current Liabilities

 

 

(5,657)

(18,225)

(29,117)

(58,628)

Creditors

(3,894)

(16,361)

(25,628)

(55,044)

Tax and social security

0

0

0

0

Short term borrowings

(1,758)

(1,500)

(3,019)

(0)

Other (including finance lease liabilities)

(5)

(364)

(470)

(3,584)

Long Term Liabilities

 

 

(18)

(392)

(1,067)

(423,186)

Long term borrowings

0

0

0

(407,739)

Other long term liabilities

(18)

(392)

(1,067)

(15,446)

Net Assets

 

 

2,720

5,493

7,679

18,123

Minority interests

0

64

(376)

(1,641)

Shareholders' equity

 

 

2,720

5,556

7,303

16,482

CASH FLOW

Op Cash Flow before WC and tax

842

4,075

5,047

12,094

Working capital

(1,369)

3,587

(797)

6,729

Exceptional & other

(26)

(5)

91

2,650

Tax

(117)

(415)

(773)

(1,427)

Net operating cash flow

 

 

(671)

7,243

3,568

20,046

Capex

(120)

(1,471)

(1,230)

(9,850)

Acquisitions/disposals

0

3

(383)

(167,182)

Net interest

(11)

(13)

(42)

(2,110)

Equity financing

0

185

(495)

(243)

Change in finance lease

9

(356)

28

(1,078)

Dividends

0

0

(2,001)

(2,212)

Other

(3)

36

(858)

(70)

Net Cash Flow

(795)

5,626

(1,413)

(162,698)

Opening net debt/(cash)

 

 

792

1,587

(4,039)

(2,741)

FX

0

0

30

8

Other non-cash movements

0

0

85

(273)

Closing net debt/(cash)

 

 

1,587

(4,039)

(2,741)

160,222

Source: 4iG accounts, Edison Investment Research

General disclaimer and copyright

This report has been commissioned by 4iG and prepared and issued by Edison, in consideration of a fee payable by 4iG. Edison Investment Research standard fees are £60,000 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 2022 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

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 4iG and prepared and issued by Edison, in consideration of a fee payable by 4iG. Edison Investment Research standard fees are £60,000 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 2022 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

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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Research: Industrials

paragon — Building momentum in Q222

paragon’s Q222 results show an acceleration of revenue growth across the business and, while adjusted EBITDA was modestly lower, management has increased guidance. It now expects FY22 revenues of €170m while continuing to expect an EBITDA margin over 15%, with free cash flow (FCF) of €12m. While the equity value remains subordinate to financing bond redemption issues, we anticipate positive progress by the year end.

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