Phoenix Spree Deutschland — Delivering on reversion strategy

Phoenix Spree Deutschland (LSE: PSDL)

Last close As at 24/04/2024

GBP1.49

1.50 (1.02%)

Market capitalisation

GBP137m

More on this equity

Research: Real Estate

Phoenix Spree Deutschland — Delivering on reversion strategy

With rent restrictions (the ‘Mietendeckel’) repealed, the Berlin residential property market has remained robust, with free market rents and condominium prices increasing further amid a continuing housing shortage. FY21 performance for Phoenix Spree Deutschland (PSD) mirrors these trends and its extensive refurbishment programme targets further release of the strong rent reversion potential of its portfolio.

Martyn King

Written by

Martyn King

Director, Financials

Real Estate

Phoenix Spree Deutschland

Delivering on reversion strategy

Business update

Real estate

11 February 2022

Price

389p

Market cap

£361m

€1.18/£

Net debt (€m) at 30 June 2021

261.8

Net LTV as at 30 June 2021

33.7%

Shares in issue

92.7m

Free float

100%

Code

PSDL

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(0.3)

(3.2)

16.1

Rel (local)

(2.1)

(5.7)

(0.6)

52-week high/low

413p

320p

Business description

Phoenix Spree Deutschland is a long-term investor in mid-market residential property in Berlin, targeting reliable income and capital growth. Its core strategy is to acquire unmodernised apartment blocks that may be improved to the benefit of tenants, generating attractive returns for shareholders based on improved rents and capital values.

Next events

FY21 results

Expected late March 2022

Analyst

Martyn King

+44 (0)20 3077 5745

Phoenix Spree Deutschland is a research client of Edison Investment Research Limited

With rent restrictions (the ‘Mietendeckel’) repealed, the Berlin residential property market has remained robust, with free market rents and condominium prices increasing further amid a continuing housing shortage. FY21 performance for Phoenix Spree Deutschland (PSD) mirrors these trends and its extensive refurbishment programme targets further release of the strong rent reversion potential of its portfolio.

Year end

PBT*
(€m)

EPS
(c)

NAV**/
share (€)

DPS
(c)

P/E
(x)

P/NAV
(x)

Yield
(%)

12/19

28.6

22

4.92

7.5

21.1

0.93

1.6

12/20

37.9

30

5.28

7.5

15.5

0.87

1.6

12/21e

41.4

35

5.65

7.5

12.9

0.81

1.6

12/22e

44.2

40

6.04

7.5

11.5

0.76

1.6

Note: *As reported including realised and unrealised gains. **Measured as EPRA net tangible assets per share.

Portfolio valuation indicates FY21 total return of c 8%

At 31 December 2021 (end-FY21) PSD’s property portfolio was externally valued at €801.5m, an increase of 4.3% versus end-FY20. Net of acquisitions and disposals the movement included a 6.3% like-for-like valuation increase (of which 3.7% in H221). Valuation uplifts reflect rent growth, improvements in particular locations and further progress with splitting certain assets into condominiums that may be individually sold where appropriate. Notarisations for sale increased 4.1% to a record level of €15.2m (of which €10.9m in H221) at an average 19.1% premium to book value. Based on the portfolio valuation and supported by accretive share repurchases, PSD expects EPRA NTA to fall within a range of €5.60–€5.66 (FY20: €5.28), in line with our forecast (€5.65). Including DPS paid this would represent an FY21 EPRA NTA total return of 7.5–8.6%. During the year PSD acquired c 4.5m shares (c 4.5% of the total) at an average 16% discount to end-FY21e NAV.

Significant embedded value

There is significant value embedded in PSD’s portfolio, not reflected in current income or net asset value. PSD estimates market rents are c 30% above average portfolio rents, representing a substantial income reversion potential. While 75% of the Berlin portfolio has been legally split into condominiums, less than 5% is valued as such, and condominium values are typically 30–35% higher than the rental-based valuations applied to most of the portfolio. New legislation makes splitting more difficult and may increase the scarcity and price of condominiums available for sale in the market. Following Mietendeckel repeal, the rent premium achieved on new lettings has re-emerged. New leases signed during December 2021 were at an average 28.2% premium to passing rents, enabling PSD to resume its comprehensive programme of vacant apartment renovations and modernisations.

Valuation: Not capturing value potential

The wide discount to NAV that emerged with the Mietendeckel has narrowed since June as PSD has stepped up share repurchases, but remains at c 20% based on FY21e EPRA NTA per share. With a continuing premium being achieved on condominium sales, we estimate that the discount may be c 25% on a ‘condominium valuation’ basis.

Further details on the portfolio development and performance

The 31 December 2021 (end-FY21) portfolio valuation of €801.5m comprises investment properties and properties held for sale (which includes properties where sales have been notarised or where there is a clear intention to sell). The valuation reflects a gross fully occupied yield of 2.8%, higher than the end-FY20 yield of 2.4%, which reflected the negative impact of the Mietendeckel on rents1 prior to repeal in April 2021, and in line with H121. Prior to repeal, PSD had structured rental agreements to allow for back-payment of the higher rents that again became due and has now collected more than 95% of the €2.1m due. Meanwhile, COVID-19 has continued to have a limited impact on rent collection, with more than 97% of all residential and commercial rents collected by PSD during FY21 and collection rates stable through early 2022.

  Reflecting concern at the pace of rent growth over recent years and a desire by local authorities to maintain Berlin as a city of affordable rented accommodation, the Berlin state authority introduced the ‘Mietendeckel’, significantly limiting rental growth and in some cases imposing rent reductions, in stages during 2020, becoming fully effective in November 2020. It was repealed in April 2021 having been ruled unconstitutional. Prior to repeal, PSD published end-FY20 annualised contracted rents of €20.3m but this was reduced to €16.4m on a ‘collected basis’ by the Mietendeckel until April 2021.

Included within the portfolio valuation are eight properties that are valued as condominiums2 with an aggregate valuation of €38.8m (end-FY20: nine properties with an aggregate value of €52.4m). The reduction in the value of held for sale assets during the year primarily reflects completed disposals. Notarisations for sale increased materially in H221 compared with H121, amounting to 23 condominium units with an aggregate value of €10.9m (H121: 13 residential units with an aggregate value of €4.3m). Condominium pricing remained strong during FY21 supported by demand from residential buyers and investors, particularly following the repeal of the Mietendeckel and completion of the German federal elections. On its FY21 notarisations, PSD achieved an average €5,031 per square metre or a 19.1% premium to end-FY20 book value.

  Created by the splitting of apartment blocks into individual units.

High proportion of condominium designated assets is a strategic benefit

The German Federal Elections, held at the end of September 2021, have not led to significant changes to housing policy, not least because the tightness of the result suggests the necessity of seeking consensus and common ground, making radical policy shifts less likely. There is a consensus across parties for the need to reduce CO2 emissions, of which housing will need to be a significant contributor. With private landlords representing around two-thirds of the total, their ability to support this goal will be of importance. Another area of the residential property market where the federal government has acted is the granting of legal powers to state authorities to ban the conversion of rental apartments into condominiums. With 75% of its portfolio already legally designated as condominiums, PSD is well placed for any change. It is also hopeful that existing applications covering a further 10% of the portfolio, more than half of which in the late stages, may also still proceed. PSD expects the new measures to increase the scarcity of condominiums available for sale across the market, further exacerbating the supply-demand imbalance that currently exists, with a likely positive valuation impact on its condominium assets.


Planned investments to unlock value

PSD’s core strategy for organic growth strategy is based on reversionary re-letting, the preparation and sale of condominiums, and the construction of new rentable attic living space. While the division and subsequent resale of selected apartment blocks as condominiums at market-level valuations, significantly above their value as apartments and carried book value, has generated strong returns, it is supplementary to this core strategy.

Although the Mietendeckel has been repealed, the ability to increase rents on existing tenancies remains significantly restricted in Berlin. Refurbishment and subsequent re-letting of vacated units at a premium to existing rents, and closer to market rent levels, is the key driver of reversionary capture. The Mietendeckel led to a temporary deferral of refurbishment projects on economic grounds and PSD expects a significant increase as deferred projects are reinstated, supported by the continuing premium of market rents to passing rents.

In addition to refurbishment, PSD’s asset management strategy includes exploiting underutilised space within the footprint of the existing portfolio. It currently plans two new construction projects, for which planning approval has been granted.

In addition to its organic growth strategy, PSD continues to consider opportunities for asset acquisitions.

Share buybacks and financing growth

Reflecting its renewed confidence in the outlook following the Mietendeckel repeal, and disappointed with the continuing discount to EPRA net tangible assets (NTA), in June 2021 PSD adopted a significantly more proactive share buyback strategy. Up until the end of FY21 it had bought back c 4.5m shares, representing 4.5% of the shares outstanding, for an aggregate consideration of £17.7m. The average price paid represents a c 16% discount to the end-FY21e EPRA NTA per share.

The capital allocation to share buybacks has not compromised the organic growth of the company and has been funded by a combination of existing cash balances, refinancing, and condominium sales. In late January 2022 PSD completed a new €60m loan facility with Natixis Pfandbriefbank and a further refinancing of existing debt with Berliner Sparkasse that provides an additional c €15m of debt capital resources. Both are existing lenders to the company. The Natixis facility comprises two components: a €45m acquisition facility providing additional flexibility for PSD to pursue potential future acquisitions; and a €15m capex facility to provide additional support for PSD’s comprehensive programme of vacant apartment renovations and modernisations. The Berliner Sparkasse refinancing of c €50m of existing debt provides an additional c €15m of funding for reinvestment.

Forecasts and valuation

We have made no changes to our forecasts set out in detail in our October 2021 update and will review these with the publication of the FY21 results, which we expect may be released in late March. Our forecast end-FY21 EPRA NTA of €5.653 is near the top of the range (€5.60–5.66) expected by PSD.

  Our last published EPRA NTA per share forecast was €5.64 but this has been enhanced by continuing accretive share repurchases.

With so much of the reversionary income potential within the portfolio yet to be realised, the primary driver of valuation is capital growth rather than immediate dividend income. Our forecast of an unchanged FY21 aggregate DPS of 7.5 cents represents a yield of 1.6% and with the shares trading at a c 20% discount to FY21e EPRA NTA per share, there is potential for investors to benefit from both NTA growth and a re-rating of the shares.

Exhibit 1: Price to EPRA NAV/NTA history

Source: Refinitiv data as at 8 February 2022.

Larger discount on a ‘condominium basis’ valuation

We estimate that the P/NTA would be lower still if the NTA were adjusted to include all condominium-designated assets at market values. Exhibit 2 shows the historical data for notarisations. The average notarised values per square metre are specific to the mix of assets (different locations, floor space, etc) sold in that period and estimating the value of the portfolio on a full condominium basis is difficult.

Exhibit 2: Condominium notarisations

FY17

FY18

FY19

FY20

FY21

Sales value of notarisations (€m)

9.1

9.9

8.8

14.6

15.2

Average notarised value per sqm (€)

4,352

4,566

4,711

4,320

5,031

Portfolio average value per sqm at beginning of year (€)

1,965

2,854

3,527

3,741

3,977

Premium to portfolio average

121.5%

60.0%

33.6%

15.5%

26.5%

Source: Phoenix Spree data

The average notarised value over the past three years has been c €4,600 per square metre. We estimate that applying a value of c €4,500 per square metre (as we have done previously) to the c 75% of the portfolio that is designated as condominiums (and which may increase further) and excluding those assets that are already valued on a condominium basis, would lift the reported EPRA NTA per share by c 8%, implying an underlying discount to NTA of c 25%.

Exhibit 3: Net asset sensitivity to condominium valuation*

Average condominium value (€ per sqm)

4,000

4,250

4,500

4,750

5,000

Premium to FY21e portfolio average value (€ per sqm)

-5%

1%

7%

13%

19%

Implied uplift to FY21e NTA

-5%

1%

8%

14%

20%

Implied P/NTA based on current price (x)

0.84

0.79

0.75

0.70

0.67

Source: Edison Investment Research. Note: Based on Edison end-FY21 forecasts.

Exhibit 4: Financial summary

Year ending 31 December, €m unless stated otherwise

2015

2016

2017

2018

2019

2020

2021e

2022e

INCOME STATEMENT

Revenue

12.1

15.9

23.7

22.7

22.6

23.9

25.9

27.5

Total property expenses

(6.0)

(7.0)

(12.6)

(15.8)

(14.2)

(16.4)

(15.5)

(16.8)

Gross profit

6.1

8.9

11.1

6.9

8.4

7.5

10.3

10.7

Administrative expenses

(2.1)

(3.0)

(3.0)

(3.2)

(3.1)

(3.3)

(3.0)

(3.0)

Gain on disposal of investment property

0.7

0.8

5.3

1.0

0.9

2.2

1.9

1.3

Fair value movement on investment property

18.1

55.2

157.4

66.1

41.5

41.5

36.6

42.7

Property advisor performance fee

(1.3)

(6.4)

(26.3)

(4.0)

(2.8)

0.4

(0.6)

(0.1)

Separately disclosed items

(6.7)

0.0

0.0

(1.0)

(0.3)

0.0

0.0

0.0

Operating profit

14.7

55.6

144.5

65.9

44.6

48.3

45.1

51.6

Net finance charge

(3.2)

(6.8)

(6.0)

(9.5)

(16.0)

(10.4)

(3.8)

(7.4)

Gain on financial asset

1.4

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Profit before tax

13.0

48.9

138.5

56.4

28.6

37.9

41.4

44.2

Tax

(2.6)

(10.9)

(26.2)

(11.1)

(5.8)

(7.6)

(7.4)

(6.7)

Profit after tax

10.3

38.0

112.3

45.4

22.7

30.3

33.9

37.4

Non-controlling interest

(0.6)

(1.0)

(0.8)

(0.3)

(0.5)

(0.5)

(0.3)

(0.6)

Attributable profit after tax

9.7

37.0

111.5

45.1

22.3

29.8

33.6

36.9

Closing basic number of shares (m)

69.9

92.5

92.5

100.8

97.8

96.1

92.9

92.8

Average diluted number of shares (m)

70.5

91.5

100.2

99.0

102.1

98.9

95.0

92.8

IFRS EPS, diluted (c)

14

40

111

46

22

30

35

40

DPS declared (c)

5.7

6.2

6.9

7.5

7.5

7.5

7.5

7.5

DPS declared (sterling pence equivalent)

4.2

5.3

6.4

6.7

6.5

6.8

6.4

6.4

EPRA NTA total return

11.8%

22.2%

52.6%

13.1%

9.3%

8.8%

8.4%

8.3%

BALANCE SHEET

Investment properties

283.6

395.8

502.4

632.9

719.5

749.0

783.0

834.5

Properties under construction

0.0

0.0

0.0

0.0

2.0

0.0

Other non-current assets

1.7

3.1

2.9

3.4

3.5

3.8

5.3

3.3

Total non-current assets

285.3

398.9

505.3

636.4

723.0

752.8

788.3

837.8

Investment properties held for sale

0.0

28.0

106.9

12.7

10.6

19.3

8.7

8.7

Cash & equivalents

12.8

18.5

27.2

26.9

42.4

37.0

22.2

10.5

Other current assets

2.3

7.5

14.4

7.5

9.5

8.4

9.3

10.1

Total current assets

15.0

53.9

148.5

47.1

62.6

64.7

40.3

29.3

Borrowings

(11.5)

(9.2)

(2.6)

(3.6)

(17.8)

(1.0)

0.0

0.0

Other current liabilities

(2.7)

(1.7)

(9.4)

(13.2)

(15.6)

(9.6)

(10.3)

(11.2)

Total current liabilities

(14.2)

(10.9)

(12.1)

(16.8)

(33.4)

(10.6)

(10.3)

(11.2)

Borrowings

(122.3)

(176.4)

(219.6)

(191.6)

(258.5)

(286.5)

(287.0)

(287.7)

Other non-current liabilities

(12.7)

(30.2)

(54.1)

(65.2)

(76.8)

(86.5)

(89.7)

(96.4)

Total non-current liabilities

(134.9)

(206.6)

(273.8)

(256.9)

(335.3)

(373.0)

(376.7)

(384.1)

Net assets

151.2

235.3

367.9

409.8

416.9

434.0

441.6

471.8

Non-controlling interest

(2.6)

(0.9)

(1.7)

(2.0)

(3.0)

(3.5)

(3.8)

(4.4)

Net attributable assets

148.5

234.3

366.2

407.9

413.9

430.4

437.7

467.4

Adjust for:

Deferred tax assets & liabilities

10.5

21.4

44.6

52.5

58.3

65.4

72.8

79.6

Derivative financial instruments

1.9

4.9

3.3

6.0

16.0

18.2

14.6

14.6

Other EPRA adjustments

(1.3)

(7.6)

(34.0)

(5.4)

(6.8)

(6.4)

(0.6)

(0.7)

EPRA net tangible assets (NTA)

159.6

253.0

380.2

461.0

481.4

507.6

524.5

560.8

IFRS NAV per share (€)

2.13

2.53

3.96

4.05

4.23

4.48

4.71

5.04

EPRA NTA per share (€)

2.28

2.73

4.11

4.58

4.92

5.28

5.65

6.04

CASH-FLOW

Cash flow from operating activity

4.7

0.8

5.9

13.2

1.5

8.1

7.2

7.7

Income tax paid

0.0

0.0

(0.1)

(4.7)

(0.0)

(1.3)

(0.0)

0.0

Net cash flow from operating activity

4.7

0.8

5.8

8.5

1.4

6.7

7.2

7.7

Property additions

(17.4)

(72.8)

(76.5)

(47.3)

(32.2)

0.0

(2.0)

(9.8)

Proceeds from disposal of investment property

5.5

4.3

60.4

86.0

13.5

7.2

21.5

11.3

Capital expenditure on investment property

(3.9)

(4.2)

(6.7)

(7.9)

(6.5)

(4.2)

(6.2)

(7.0)

Other cash flow from investing activity

(0.2)

(0.7)

0.0

0.0

0.1

(5.9)

0.0

0.0

Cash flow from investing activity

(16.1)

(73.4)

(22.7)

30.8

(25.1)

(2.9)

13.3

(5.5)

Interest paid

(4.0)

(3.2)

(5.1)

(5.1)

(6.2)

(7.5)

(7.0)

(6.7)

Bank debt drawn/(repaid)

26.3

39.4

36.7

(27.0)

64.6

11.2

(1.3)

0.0

Share issuance/repurchase

0.0

47.5

0.0

0.0

(11.5)

(6.0)

(19.4)

(0.2)

Dividends paid

(1.2)

(5.0)

(6.0)

(7.5)

(7.7)

(7.0)

(7.5)

(7.1)

Other cash flow from financing activity

(0.6)

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Cash flow from financing activity

20.5

78.6

25.6

(39.6)

39.2

(9.3)

(35.2)

(14.0)

Change in cash

9.2

6.0

8.7

(0.3)

15.5

(5.4)

(14.7)

(11.8)

FX

0.0

(0.3)

(0.0)

(0.0)

(0.0)

(0.0)

0.0

0.0

Opening cash

3.6

12.8

18.5

27.2

26.9

42.4

37.0

22.3

Closing cash

12.8

18.5

27.2

26.9

42.4

37.0

22.3

10.5

Closing debt

(133.8)

(185.6)

(222.3)

(195.3)

(280.2)

(291.4)

(290.2)

(290.2)

Closing net debt

(121.0)

(167.1)

(195.1)

(168.4)

(237.8)

(254.4)

(267.9)

(279.7)

LTV

42.7%

39.4%

32.0%

26.1%

32.6%

33.1%

33.9%

33.7%

Source: Phoenix Spree historical data, Edison Investment Research forecasts

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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 Phoenix Spree Deutschland and prepared and issued by Edison, in consideration of a fee payable by Phoenix Spree Deutschland. 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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