DeA Capital — Expanded platform continuing to grow

DeA Capital (MI: DEA)

Last close As at 22/05/2024

1.32

0.01 (0.61%)

Market capitalisation

352m

More on this equity

Research: Financials

DeA Capital — Expanded platform continuing to grow

During the past year, DeA Capital has exploited its financial strength and leading Italian position in alternative asset management (AAM) to grow and internationalise its AAM platform, extend its customer reach and enhance its product capability. The late 2019 agreements with Quaestio Group marked a further important step in this process and, despite COVID-19, the expanded platform has continued to grow AUM organically year to date.

Martyn King

Written by

Martyn King

Director, Financials

Financials

DeA Capital

Expanded platform continuing to grow

Q320 results update

Financial services

15 December 2020

Price

€1.13

Market cap

€301m

Consolidated net financial position (€m) at 30 September 2020

118.6

Shares in issue (exc. treasury)

261.2m

Free float

30.6%

Code

DEA

Primary exchange

BIT

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

5.8

(3.9)

(19.8)

Rel (local)

1.4

(12.2)

(13.8)

52-week high/low

€1.50

€0.97

Business description

DeA Capital, a De Agostini group company, is Italy’s leading alternative asset manager of real estate, private equity and non-performing loans. The 30 September 2020 combined AUM (including associates of €7.7bn) was c €23.0bn and the investment portfolio, comprising co-investment in funds managed, investment in the asset management platform, and direct investment, amounted to c. €340m.

Next events

Approval FY20 results

Exp. March 2021

Analyst

Martyn King

+44 (0)20 3077 5745

DeA Capital is a research client of Edison Investment Research Limited

During the past year, DeA Capital has exploited its financial strength and leading Italian position in alternative asset management (AAM) to grow and internationalise its AAM platform, extend its customer reach and enhance its product capability. The late 2019 agreements with Quaestio Group marked a further important step in this process and, despite COVID-19, the expanded platform has continued to grow AUM organically year to date.

Year end

Closing AUM* (€m)

AUM fees**
(€m)

NAV/share
(€)

DPS
(€)

P/NAV
(x)

Yield
(%)

12/18

11.9

63.3

1.84

0.12

0.61

10.6

12/19

14.8

66.4

1.76

0.12

0.64

10.6

12/20e

15.3

69.3

1.64

0.12

0.69

10.6

12/21e

15.7

70.9

1.55

0.12

0.73

10.6

Note: NAV as reported, including goodwill. *Consolidated, exc. Quaestio associate **Platform AAM fees, before group consolidation adjustment for own funds managed, and including ‘Other AAM’.

Accelerating AAM growth in Q320

The 93.6% growth in combined AUM between the end of Q319 and the end of Q320 significantly reflects the Quaestio transaction in November 2019, but organic growth is continuing despite COVID-19, driven by new fund launches. New fund launches completed in Q320 added €640m gross to AUM across real estate, credit and private equity. Net of fund maturities and including €7.7bn of assets managed by the equity accounted associate Quaestio Capital, ‘combined AUM’ was €23.0bn (end-H120: €22.5bn). Consolidated revenues increased by 7.3% in the first nine months of 2020 and 16.2% in Q320, compared with similar periods in 2019, while the Q320 AAM net operating result (‘core’ underlying earnings) of €5.5m took the year-to-date total to €13.0m (the first nine months (9m) of 2019: €11.2m). Our forecast for the AAM division and group NAV are little changed.

Increased presence and scale in alternatives

Alternative investments have taken an increasing share of the investment market in recent years. Although weaker economies and more volatile markets may still be a drag on future sales of AAM products and new fund launches, this has not yet been the case. The 2019 Quaestio transactions provide support in a larger base of fee-earning AUM and give DeA access to a wider customer base and Quaestio’s added-value investment solutions and capital allocation capabilities. The continued growth and enhancement of DeA’s AAM platform should leave it well positioned to capitalise on future market opportunities. Meanwhile, liquidity remains high (c 19% of NAV) and the strong balance sheet is well able to withstand any set back in investment portfolio valuations. We estimate a 10% increase/decrease in portfolio valuation increases/reduces NAV by c €0.05 per share.

Valuation: Low P/NAV and high yield

At c 0.7x Q320 IFRS NAV of €1.63, DeA has the lowest P/NAV of a range of peers and the highest yield. Our P/E ratio valuation of the AAM business supports the carried value of the businesses, including intangibles, and the group NAV.

Leader in Italian alternative asset management

DeA is the leading independent (non-bank) platform operator in AAM in Italy, providing a broad range of products and services for institutional investors. At 30 September 2020, combined AUM (including c €7.7bn managed by Quaestio Capital Management, in which DeA is the largest shareholder, acquiring a 38.8% stake in November 2019) were c €23.0bn.

DeA shares are listed on the FTSE Italia STAR section of the Milan Stock Exchange and the company is majority owned by De Agostini, a large Italian private group of companies owned by the Boroli and Drago families, with operations in the media, gaming and services sectors. De Agostini owns 67.1% of DeA and the free float is 30.4%.

Within the alternative investment area, DeA is engaged in the promotion, management and development of real estate, credit and private equity funds, as well as multi-asset/multi-manager investment solutions. Its growing AAM platform combines experience, knowhow and market reach to support the sourcing of investments, the structuring of often complex transactions and the ability to distribute these to a broad investor base.

The growth and development of DeA’s AAM business is supported by a strong and liquid balance sheet. The end-Q320 NAV of €426.0m or €1.63 per share comprised the equity of the AAM businesses (€211.5m), a portfolio of alternative investments (€126.0m), mainly ‘platform investments’ or seed capital/co-investment in own-managed funds, and a strong holding company net financial position of €81.7m or €0.31 per share (the consolidated financial position, including subsidiary liquidity, was €118.6m).

Exhibit 1: DeA Capital group financial position at 30 September 2020

Net assets (%)

Net assets (€m)

Net assets per share (€)

Sep-20

Sep-20

Dec-19 (adjusted*)

Sep-20

Dec-19 (adjusted*)

– DeA Capital Real Estate

30.7

130.8

141.2

0.50

0.54

– DeA Capital Alternative Funds

13.9

59.2

55.6

0.23

0.21

– Quaestio Capital

3.3

13.9

14.3

0.05

0.06

– Other (YARD, DeA Cap. RE Trance, Iberia, Poland)

1.8

7.6

6.6

0.03

0.03

Total alternative asset management (A)

49.6

211.5

217.7

0.81

0.84

– Platform investments

23.9

101.8

118.0

0.39

0.45

– Other alternative investments

5.7

24.2

51.4

0.09

0.20

Total alternative investments (B)

29.6

126.0

169.4

0.48

0.65

Investment portfolio (A + B)

79.2

337.5

387.1

1.29

1.49

Other net assets/(liabilities)

1.6

6.8

4.6

0.03

0.02

Holding co. net financial position

19.2

81.7

34.5

0.31

0.13

NAV

100.0

426.0

426.2

1.63

1.64

Source: DeA Capital. Note: *December 2019 (FY19) adjusted for subsequent payment of shareholder distribution relating to FY19 financial year (€0.12 per share/c €30m).

The significance of the AAM business, with its growing stream of recurring income, as the driver of the group financial performance and valuation can be seen in Exhibit 2. We examine the progress of the AAM business, with the underlying, core ‘net operating result’ increasing to €13.0m in the first nine months of 2020 (9m 2019: €11.2m), in the following section.

Exhibit 2: Management income statement

€m

9M 2020

9M 2019

FY19

Net result AAM division as reported

10.6

9.5

11.7

Other AAM

(2.4)

(1.7)

(2.9)

Net operating result AAM*

13.0

11.2

14.6

Alternative investment

(8.7)

2.4

5.3

Holding cost

(7.0)

(6.0)

(6.3)

Tax

3.7

0.6

1.6

Net group results

(1.4)

6.5

12.3

Source: DeA Capital. Note: *The net operating result AAM includes the net result attributable to DeA from the three platform management companies, DeA Capital Real Estate (100% owned), DeA Capital Alternative Investments (100% owned) and Quaestio Holding (38.8% owned), adjusted purchase price allocation amortisation (PPA) and other non-recurring items. PPA is an intangible asset established on acquisition, allocating the purchase price into various assets and liabilities.

Continuing AAM growth, supported by fund launches

Although the 93.6% growth in combined AUM between the end of Q319 and the end of Q320 significantly reflects the Quaestio transaction in November 2019, organic growth is continuing despite COVID-19, driven by new fund launches. The Quaestio transactions added €2.5bn directly to consolidated ‘credit’ AUM and €7.6bn of multi-asset/multi-manager non-consolidated AUM managed by the Quaestio associate.

Exhibit 3: AUM and combined AUM development

€bn unless stated otherwise

Q320

Q220

Q120

Q419

Q319

12-month change

Quarterly change

30-Sep-20

30-Jun-20

31-Mar-20

31-Dec-19

30-Sep-19

Real estate

10.0

9.9

9.6

9.9

9.2

8.7%

1.0%

Credit

3.2

3.2

3.2

3.2

0.8

310.7%

0.3%

Private equity

2.0

1.8

1.8

1.8

1.8

12.5%

11.5%

Consolidated AUM

15.2

14.9

14.6

14.8

11.9

28.3%

2.1%

Quaestio Capital

7.7

7.6

7.5

7.8

N/A

N/A

2.6%

Combined AUM*

23.0

22.5

22.1

22.6

11.9

93.6%

2.2%

Source: DeA Capital data. Note: *Combined AUM includes the AUM of the 38.8%-owned associate Quaestio Holdings.

During Q320 the DeA Capital real estate segment completed the launch of new funds in Italy and a new project for the Iberian market, adding €200m in AUM. In the credit segment, the seventh and eighth closings of the Corporate Credit Recovery Fund II were finalised, adding €40m to AUM and increasing the fund size to c €615m. New private equity funds were c €400m, of which the largest component was €330m relating to the closing of the Taste of Italy II fund, to which DeA has committed €25m. Just after the period end, a new closing of €20m for the multi-manager DeA Endowment Fund, dedicated to foundations, was finalised.

Consolidated revenues increased by 7.3% in the first nine months of 2020 and 16.2% in Q320, compared with similar periods in 2019. The rate of change in year-on-year change in revenues is below that of AUM because of the significant shift in AUM mix. In Q320, the increase in revenues was above the growth in AUM and was above H120 quarterly average both on a consolidated basis (c €16.3m per quarter) and on a combined basis (c €6.4m per quarter) with the average revenue margin increasing very slightly. We understand that fund launches in Q320 had a positive impact on revenues in the period.

Exhibit 4: Asset management revenue development

€m unless stated otherwise

9M 2020

Q320

H120

9M 2019

Q319

H119

12-month change

Quarterly change

30-Sep-20

30-Sep-20

30-Jun-20

30-Sep-19

30-Sep-19

30-Jun-19

Real estate

28.4

9.8

18.6

29.9

10.2

19.7

-5.0%

-3.9%

Credit

12.4

4.5

7.9

7.3

3.3

4.0

69.9%

36.4%

Private equity

10.7

4.6

6.1

10.8

2.8

8.0

-0.9%

64.3%

Consolidated revenues

51.5

18.9

32.6

48.0

16.3

31.7

7.3%

16.2%

Quaestio Capital

19.4

6.6

12.8

N/A

N/A

N/A

N/A

N/A

Combined revenues*

70.9

25.5

45.4

48.0

16.3

31.7

47.7%

56.8%

Source: DeA Capital data. Note: *Combined AUM includes the AUM of the 38.8%-owned associate Quaestio Holdings.

The AAM net operating result shown in Exhibit 2 includes DeA Capital Real Estate, DeA Capital Alternative Funds and DeA’s share of earnings from Quaestio Capital, all adjusted for amortisation of PPA and other non-recurring items, including the investment result from fund holdings. ‘Other’ AAM includes the contribution from the 41%-owned property services associate YARD and the newly created pan-European real estate platform subsidiaries/associates in France, Spain, Germany and Poland, all of which are in the investment phase and loss-making. ‘Other AAM’ also includes (adds back) the adjustments for PPA and non-recurring items that are made to the core net operating result.

Exhibit 5: AAM divisional forecast

€m unless stated otherwise

2018

2019

2020e

2021e

Period-end AUM (€bn)

DeA Capital Alternative Funds

2.430

4.942

5.224

5.224

DeA Capital Real Estate

9.451

9.888

10.094

10.451

Total consolidated AUM (€bn)

11.881

14.830

15.318

15.675

Quaestio AUM (€bn)

7.779

Total period-end Platform AUM (€bn)

11.881

22.609

15.318

15.675

Growth in consoidated AUM (y-o-y)

DeA Capital Alternative Funds

11%

103%

6%

0%

DeA Capital Real Estate

-1%

5%

2%

4%

Total growth in consolidated AUM

1%

25%

3%

2%

Period average consolidated AUM (€bn)

DeA Capital Alternative Funds

2.230

2.722

5.083

5.224

DeA Capital Real Estate

9.266

9.352

9.864

10.251

Total period average consolidated AUM (€bn)

11.495

12.074

14.947

15.475

Management fees/AUM bps

DeA Capital Alternative Funds

105.3

89.9

60.3

56.0

DeA Capital Real Estate

42.9

43.2

38.2

40.0

Asset management revenues

DeA Capital Real Estate

39.8

40.4

37.7

41.0

DeA Capital Alternative Funds

23.5

24.5

30.7

29.3

Total alternative asset management fees (before group consolidation adjustments)

63.3

64.9

68.3

70.3

Quaestio

0.0

(0.2)

(0.4)

0.0

Other investment income/expense

(4.5)

2.0

(0.5)

0.0

Income from services

0.1

0.0

0.2

0.0

Total revenue

58.8

66.7

67.7

70.3

Total expenses

(45.3)

(45.9)

(48.0)

(47.8)

Finance income/expense

0.0

(0.1)

(0.1)

(0.1)

Profit before tax

13.5

20.6

19.5

22.4

Taxation

(4.8)

(6.6)

(4.0)

(6.7)

Profit after tax

8.7

14.0

15.5

15.7

Minority interests

0.2

(0.1)

0.0

0.0

Profit after tax

8.9

13.9

15.5

15.7

Adjustments:

PPA

0.6

1.3

1.3

(Gain)/loss on real estate fund valuation

(2.0)

0.5

0.0

Real estate fund provisions

0.5

0.0

0.0

Quaestio non-recurring (post tax)

0.0

0.4

0.0

Other non-recurring

1.7

0.9

0.0

Tax effects

(0.3)

(2.7)

(0.4)

Total after-tax adjustments

6.4

0.6

0.4

0.9

AAM net operating result

15.3

14.6

15.9

16.6

Other AAM (underlying)

0.2

(2.2)

(2.3)

(3.2)

Adjustments/non-recurring items

(6.4)

(0.6)

(0.4)

(0.9)

AAM division on reported IFRS basis

9.1

11.7

13.2

12.5

Source: DeA Capital historical data, Edison Investment Research forecasts

The Q320 AAM net operating result was €5.5m compared with €7.5m in H120. The other AAM contribution was a negative €1.5m in Q320 compared with €0.9m in H120 and included reduced revenues (transaction driven) from the pan-European real estate subsidiaries and increased negative valuation adjustments for the platform real estate fund investments.

Our AAM divisional forecasts are little changed from those detailed in our Outlook note. We continue to a forecast AAM net operating result of €15.9m in FY20 and €16.6m in FY21. Within the result, higher AUM and asset management revenues are offset by higher expenses and other items. Within other AAM, our forecast loss is slightly reduced as a result of higher revenues (although lower in Q3, it was above our assumption) and slightly lower costs.

Good cash flow and robust net asset value in quarter

During Q320 the holding company’s net financial position increased from €71.3m at H120 to €81.7m. Including balances within the subsidiaries, the consolidated net financial position increased from €97.2m to €118.6m. During the quarter, capital calls on DeA’s fund commitments were €2.1m (€5.8m for 9m 2020) and capital reimbursements were €3.4m (€10.4m for 9m 2020). Additionally, DeA received €5.7m (making a total of €22.2m) from the liquidation of its investment in the special purpose acquisition vehicle IDeaMI.

Net asset value per share was unchanged in Q320 compared with H120 at €1.63 per share, with the retained earnings of the AAM business offset by the net effect of alternative investment (the alternative investment asset portfolio) and holding costs and a positive tax contribution (Exhibit 2).

The Q320 NAV per share is up slightly on end-2019, adjusted for the €0.12 distribution paid during H120. The NAV total return (change in NAV plus dividends paid) for 9m 2020 was 1.2%.

NAV captures AAM valuation fairly

The current equity of the AAM platform companies is carried at €211.5m, similar to H120 (€207.5m) and includes c €126m of goodwill and intangible assets. This is equivalent to a 13.0x multiple of the FY20e net operating result and 12.5x the FY21e result.

Obviously, an investor cannot access the core platform earnings in isolation so it is reasonable to include the other AAM result, although noting this is burdened by investment costs related to the pan-European real estate build-out. Based on the underlying earnings for the total AAM division (including ‘other AAM’ but excluding PPA, investment gains/losses and other non-recurring items), the AAM equity is equivalent to a 16.0x multiple for FY20 and 15.4x for FY21.

This suggests that in broad terms the AAM equity carried within the NAV of the group fairly matches the underlying fair value of the AAM platform, measured in terms of earnings capacity and fair market multiples.

Exhibit 6: AAM platform valuation

FY20e

FY21e

AAM net operating result (€m)

15.9

16.6

Implied P/E ratio based on AAM net operating result (x)*

13.0

12.7

Underlying AAM result including ‘Other AAM’ (€m)

13.0

13.4

Implied P/E ratio based on underlying total AAM result (x)*

16.0

15.7

Source: Edison Investment Research. Note: *Ratio of carried AAM NAV to earnings.

Our group NAV per share forecasts are little changed and as discussed in our Outlook note, DeA’s P/NAV of c 0.7x is the lowest in its peer group and at c 10% (with distributions supported by a strong holding company financial position rather than recurring earnings) its yield is the highest. This suggests there is significant value potential not captured in the current share price. In part, this reflects a low return on equity (ROE) compared with the peer group (compound annual average NAV total return of 1.1% over the five years to end-FY19), partly but not wholly explained by the depressing effect of high liquidity. A continued successful deployment of resources into the further growth of the low capital intensity AAM platform, while continuing to reward shareholders with attractive distributions, should enhance ROE.

Share buy-back programme to manage P/NAV discount

Recognising the significant discount to NAV at which the shares trade, DeA has a share repurchase programme in place with a target of acquiring up to 20% of the ordinary shares outstanding. Since starting the buy-back in November, DeA has acquired almost one million shares, increasing the end-Q320 treasury share position of c 5.6m shares (c 2.1%) to c 6.6m shares or c 2.5% of the total. The shares were acquired at an average c €1.11, a more than 30% discount to NAV. Further accretive repurchases are likely although currently reduced trading liquidity in the shares and limitations on the proportion of daily volumes that repurchases may represent are limitations.

Exhibit 7: Financial summary

Period ending 31 December (€000's)

2015

2016

2017

2018

2019

2020e

2021e

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Alternative Asset Management fees (after inter-company eliminations)

62,416

59,114

57,944

62,422

66,117

69,136

70,717

Income (loss) from equity investments

(539)

524

3,898

(59)

(647)

(472)

400

Other investment income/expense

72,464

12,338

8,633

37,848

6,832

(11,692)

0

Income from services

18,496

8,509

2,208

2,505

378

69

0

Other income

3,204

288

144

141

63

390

0

Revenue

156,041

80,773

72,827

102,857

72,743

57,431

71,117

Expenses

(128,514)

(66,888)

(98,616)

(56,232)

(59,475)

(62,275)

(60,988)

Net Interest

4,982

(1,220)

(84)

485

2,791

(2,375)

(260)

Profit Before Tax

32,509

12,665

(25,873)

47,110

16,059

(7,219)

9,869

Tax

6,452

(199)

(420)

(5,765)

(5,003)

448

(3,442)

Profit After Tax

38,961

12,466

(26,293)

41,345

11,056

(6,771)

6,427

Profit from discontinued operations

286

0

682

0

0

0

0

Profit after tax

39,247

12,466

(25,611)

41,345

11,056

(6,771)

6,427

Minority interests

1,825

(39)

13,959

(30,275)

1,200

6,471

0

Net income (FRS 3)

41,072

12,427

(11,652)

11,070

12,256

(300)

6,427

Profit after tax breakdown

Private equity

78,322

7,859

8,327

39,152

4,896

(14,475)

0

Alternative asset management

(37,304)

7,309

(31,073)

9,228

10,920

12,573

12,499

Holdings/Eliminations

(1,771)

(2,702)

(2,865)

(7,035)

(4,760)

(4,308)

(6,072)

Total

39,247

12,466

(25,611)

41,345

11,056

(6,210)

6,427

Average Number of Shares Outstanding (m)

266.6

263.1

258.3

253.9

258.9

260.0

260.0

IFRS EPS (cents)

15.4

4.7

(4.5)

4.4

4.7

(0.1)

2.5

Paid distributions per share (cents)

30.0

12.0

12.0

12.0

12.0

12.0

12.0

BALANCE SHEET

Fixed Assets

558,086

559,335

454,156

390,278

420,644

346,191

346,591

Intangible Assets (inc. goodwill)

167,134

156,583

117,233

114,768

147,559

125,938

125,938

Other assets

38,590

35,244

10,305

26,567

25,494

23,550

23,550

Investments

352,362

367,508

326,618

248,943

247,591

196,703

197,103

Current Assets

173,882

141,521

178,161

185,686

171,937

184,199

159,029

Debtors

20,694

15,167

32,955

18,729

16,860

15,159

15,159

Cash

123,468

96,438

127,916

143,767

99,511

119,012

93,842

Other

29,720

29,916

17,290

23,190

55,566

50,028

50,028

Current Liabilities

(31,294)

(26,979)

(34,783)

(40,720)

(85,020)

(58,517)

(58,517)

Creditors

(30,643)

(25,757)

(34,583)

(40,516)

(68,498)

(58,507)

(58,507)

Short term borrowings

(651)

(1,222)

(200)

(204)

(16,522)

(10)

(10)

Long Term Liabilities

(15,514)

(12,830)

(12,475)

(29,464)

(26,463)

(27,890)

(27,890)

Long term borrowings

0

(19)

0

(2,859)

(1,020)

(3,211)

(3,211)

Other long term liabilities

(15,514)

(12,811)

(12,475)

(26,605)

(25,443)

(24,679)

(24,679)

Net Assets

685,160

661,047

585,059

505,780

481,098

443,983

419,213

Minorities

(138,172)

(131,844)

(95,182)

(39,299)

(23,634)

(16,635)

(16,635)

Shareholders' equity

546,988

529,203

489,877

466,481

457,464

427,348

402,578

Year-end number of shares m

263.9

261.2

255.7

253.8

260.0

260.0

260.0

NAV per share (€)

2.07

2.03

1.92

1.84

1.76

1.64

1.55

CASH FLOW

Operating Cash Flow

188,492

19,148

91,146

96,408

9,151

50,933

6,027

Acquisitions/disposals

70

(290)

(633)

(275)

(6,640)

5,190

0

Financing

(38,148)

(4,362)

(26,073)

(46,994)

(11,840)

(4,092)

0

Dividends

(82,432)

(33,494)

(32,962)

(33,098)

(37,531)

(32,531)

(31,197)

Other

Cash flow

67,982

(18,998)

31,478

16,041

(46,860)

19,500

(25,170)

Other items

(97)

(8,032)

0

(190)

2,604

0

0

Opening consolidated cash

55,583

123,468

96,438

127,916

143,767

99,511

119,011

Closing consolidated cash

123,468

96,438

127,916

143,767

99,511

119,011

93,841

Financial debt

(651)

(1,241)

(200)

(3,063)

(17,542)

(3,221)

(3,221)

Closing consolidated net (debt)/cash

122,817

95,197

127,716

140,704

81,969

115,790

90,620

Consolidated net financial position

133,816

103,139

128,901

100,994

105,579

116,002

90,932

Source: Company data, Edison Investment Research


General disclaimer and copyright

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

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

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 DeA Capital and prepared and issued by Edison, in consideration of a fee payable by DeA 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.

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

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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