Mondo TV — Tracking on trading

Mondo TV (MI: MTVI)

Last close As at 03/12/2024

1.09

0.02 (1.48%)

Market capitalisation

50m

More on this equity

Research: TMT

Mondo TV — Tracking on trading

Mondo TV’s Q119 figures are as flagged, tracking to its December 2018 business plan. Our revenue and earnings numbers are unchanged. YooHoo to the Rescue is now airing globally on Netflix, giving a strong start to management’s ambitions to broaden geographic revenue spread. The group has settled with three of the four Asian customers that withdrew in H218, but remains in dispute with one. It has also disclosed that it is subject to a further tax authority investigation, which it is confident will find in its favour. A further mark down in the share price, now off the lows, leaves the valuation at a deep discount to peers and the DCF.

Fiona Orford-Williams

Written by

Fiona Orford-Williams

Director, TMT

TMT

Mondo TV

Tracking on trading

Q1 results

Media

16 May 2019

Price

€1.08

Market cap

€37m

Net cash (€m) at 31 March 2019

6.0

Shares in issue

34.4m

Free float

64%

Code

MTVI

Primary exchange

Borsa Italiana Star

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(17.8)

(24.9)

(78.4)

Rel (local)

(13.5)

(26.9)

(74.8)

52-week high/low

€4.8

€0.9

Business description

Mondo TV is a global media group with a focus on the production, acquisition and exploitation of animated children’s television series. Headquartered in Rome, it also holds controlling stakes in listed subsidiaries Mondo TV France (23%), Mondo TV Suisse (56%) and Mondo TV Iberoamerica (71%). It owns the rights to over 1,600 TV episodes and films, which it distributes across 75 markets. 83% of revenues are generated in Asia, with the remainder from Europe and South America.

Next events

Q2 figures

13 September 2019

Interim results

14 November 2019

Analysts

Fiona Orford-Williams

+44 (0)20 3077 5739

Russell Pointon

+44 (0)20 3077 5700

Mondo TV is a research client of Edison Investment Research Limited

Mondo TV’s Q119 figures are as flagged, tracking to its December 2018 business plan. Our revenue and earnings numbers are unchanged. YooHoo to the Rescue is now airing globally on Netflix, giving a strong start to management’s ambitions to broaden geographic revenue spread. The group has settled with three of the four Asian customers that withdrew in H218, but remains in dispute with one. It has also disclosed that it is subject to a further tax authority investigation, which it is confident will find in its favour. A further mark down in the share price, now off the lows, leaves the valuation at a deep discount to peers and the DCF.

Year end

Revenue (€m)

PBT*
(€m)

EPS*
(c)

DPS
(c)

EV/EBIT
(x)

P/E
(x)

12/17

32.0

15.4

43.0

0.0

1.4

2.5

12/18

18.9

(30.1)

(56.3)

0.0

N/A

N/A

12/19e

20.8

6.0

11.0

0.0

3.8

9.9

12/20e

27.8

7.8

14.0

0.0

3.0

7.7

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

Trading as planned

Although revenue and earnings were well behind Q118 (-47% revenue, -55% EBITDA), this is as expected from the Q418 rebasing of the business (see our previous notes). Production value of €5m and net income of €1m are in line with earlier indications and the planned FY19e targets of €24m and €4m respectively. Net cash of €6.0m at 31 March compares to €8.1m at the year end and we have slightly reined in our year-end projection from €6.3m to €5.9m with investment in production, but this just reflects assumptions on timing. Management’s emphasis on more co-production reduces the production risk but also increases the pool of creativity globally it can draw on. It has stated that it is particularly looking for new industry and commercial partnerships in Germany and Northern Europe.

Corporate issues sorted and outstanding

The Q1 statement included more detail on the Q418 ructions in Asia, where three of the four counterparties (Broadvision Rights, Hong Kong Yiqi Culture and Hong Kong Nine Technology) have now reached terms. The group remains in dispute with New Information Technology. Mondo has also disclosed a new tax investigation that involves verifying offsets made using tax credits from prepaid taxes in 2014, but with the period 2012–18 under scrutiny. The value of these offsets is €13.5m (plus any penalties plus interest). With previous tax authority investigations finding in Mondo’s favour, no provision has been made for the latest.

Valuation: Deep discount

Following the setback, Mondo’s valuation stands at a substantial discount to global peers (parity on EV/EBIT would indicate a share price of €2.89; on a P/E basis €1.95). A DCF at a WACC of 11.5% and terminal growth of 2% suggests a price of €2.11. The average of these three values is €2.32, more than double the current market price.

Tying up loose ends in Asia

Hong Kong Nine Technology, the principal client for Rowly Powly and Dee and Doo, withdrew shortly after the death of Orlando Corradi. Then, in the second half of November, three major Asian customers (Broadvision Rights, Hong Kong Yiqi Culture Film & Television Media and New Information Technology) gave notice that they wished to review their investments following weak demand in their local markets. Consequently, Mondo decided to suspend further investment in these projects, which have now been completely written off. The value of the assets was written down with the FY18 results for a total of 56.8m at the consolidated level. This represents a write-down of the library value of 32.9m, with a further adjustment to working capital in trade receivables (mainly from advance sales on these projects) of 23.9m. Net of the related tax offset, this made a total extraordinary non-recurring charge in FY18 of 43.8m.

Further details of the settlements have now been disclosed.

The third series of Playtime Buddies for Broadvision Rights is cancelled, but Mondo retains ownership and distribution rights without any further payments. The third series of Sissi will now be 26 episodes and Broadvision is halving its contribution to $2.4m and Mondo TV’s minimum revenue guarantee no longer applies.

Mondo TV retains the $11.9m that Hong Kong Yiqi Culture paid for library assets plus the $3.9m for new productions. No further payments will be made and Mondo regains the exploitation rights for both the library assets and the new properties (Duckport, Partidei and Beastkeepers). Contracts for other properties will continue as normal.

Hong Kong Nine Technology has agreed that Rowly Powly and Dee and Doo should be swapped out for other properties currently in negotiation with third-party co-producers.

Mondo TV remains in legal dispute with New Information Technology regarding the contract termination.

Exhibit 1: Financial summary

€'m

2016

2017

2018

2019e

2020e

31-December

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

27.4

32.0

18.9

20.8

27.8

Cost of Sales

(9.3)

(8.3)

(7.7)

(7.0)

(9.2)

Gross Profit

18.1

23.7

11.2

13.9

18.6

EBITDA

 

 

18.1

23.7

11.2

13.9

18.6

Operating Profit (before amort. and except.)

 

12.7

17.6

(30.6)

6.3

8.1

Amortisation of acquired intangibles

0.0

0.0

0.0

0.0

0.0

Exceptionals

0.0

0.0

(23.9)

0.0

0.0

Share-based payments

0.0

0.0

0.0

0.0

0.0

Reported operating profit

12.7

17.6

(54.5)

6.3

8.1

Net Interest

0.0

(2.2)

0.5

(0.3)

(0.3)

Joint ventures & associates (post tax)

0.0

0.0

0.0

0.0

0.0

Exceptionals

0.0

0.0

0.0

0.0

0.0

Profit Before Tax (norm)

 

 

12.7

15.4

(30.1)

6.0

7.8

Profit Before Tax (reported)

 

 

12.7

15.4

(54.0)

6.0

7.8

Reported tax

(4.5)

(3.1)

11.5

(1.6)

(2.0)

Profit After Tax (norm)

8.3

12.3

(22.0)

4.5

5.8

Profit After Tax (reported)

8.3

12.3

(42.5)

4.5

5.8

Minority interests

0.3

0.5

3.0

(0.7)

(1.0)

Discontinued operations

0.0

0.0

0.0

0.0

0.0

Net income (normalised)

8.6

12.8

(19.0)

3.8

4.8

Net income (reported)

8.6

12.8

(39.5)

3.8

4.8

Average Number of Shares Outstanding (m)

27

30

34

34

34

EPS - normalised (c)

 

 

31.1

43.0

(56.3)

11.0

14.0

EPS - normalised fully diluted (c)

 

 

31.1

43.0

(56.3)

11.0

14.0

EPS - (c)

 

 

31.1

43.0

(117.0)

11.0

14.0

Dividend per share (c)

2.0

0.0

0.0

0.0

0.0

Revenue growth (%)

63.2

16.8

(40.9)

10.2

33.2

Gross Margin (%)

66.0

74.0

59.2

66.6

66.9

EBITDA Margin (%)

66.0

74.0

59.2

66.6

66.9

Normalised Operating Margin

46.4

54.9

(162.0)

30.4

29.4

BALANCE SHEET

Fixed Assets

 

 

37.0

47.9

46.0

51.6

52.3

Intangible Assets

31.4

44.1

30.9

36.5

37.1

Tangible Assets

0.3

0.4

0.4

0.4

0.4

Investments & other

5.3

3.4

14.7

14.7

14.7

Current Assets

 

 

37.8

53.6

37.2

36.6

50.7

Stocks

0.0

0.0

0.0

0.0

0.0

Debtors

31.7

47.9

20.6

21.9

29.2

Cash & cash equivalents

1.8

2.4

12.5

10.3

17.1

Other

4.3

3.3

4.2

4.4

4.4

Current Liabilities

 

 

(14.0)

(22.6)

(25.2)

(23.8)

(30.7)

Creditors

(11.7)

(15.0)

(21.6)

(20.3)

(27.2)

Tax and social security

(0.2)

(0.4)

(0.5)

(0.5)

(0.5)

Short term borrowings

(2.1)

(3.6)

(3.1)

(3.1)

(3.1)

Other

0.0

(3.7)

(0.0)

0.0

0.0

Long Term Liabilities

 

 

(0.8)

(1.2)

(1.9)

(1.4)

(1.4)

Long term borrowings

(0.6)

(0.7)

(1.3)

(1.3)

(1.3)

Other long term liabilities

(0.2)

(0.5)

(0.6)

(0.1)

(0.1)

Net Assets

 

 

60.0

77.7

56.1

63.0

70.8

Minority interests

0.0

(0.6)

2.1

0.7

1.0

Shareholders' equity

 

 

60.0

77.1

58.2

63.7

71.9

CASH FLOW

Op Cash Flow before WC and tax

18.1

23.7

11.2

13.9

18.6

Working capital

(1.9)

(11.2)

6.0

(2.6)

(0.4)

Exceptional & other

0.7

(0.8)

(11.0)

0.0

0.0

Tax

(4.5)

(3.1)

11.5

0.0

0.0

Net operating cash flow

 

 

12.5

8.7

17.7

11.2

18.2

Capex

(20.6)

(19.2)

(28.6)

(13.1)

(11.1)

Acquisitions/disposals

0.0

0.0

0.0

0.0

0.0

Net interest

(0.2)

(0.2)

0.0

(0.3)

(0.3)

Equity financing

7.2

9.4

20.9

0.0

0.0

Dividends

0.0

0.0

0.0

0.0

0.0

Other

0.3

0.1

0.0

0.0

0.0

Net Cash Flow

(0.7)

(1.2)

10.1

(2.2)

6.8

Opening net debt/(cash)

 

 

0.2

0.9

2.0

(8.1)

(5.9)

FX

(0.1)

0.1

0.0

0.0

0.0

Other non-cash movements

0.0

0.0

0.0

0.0

0.0

Closing net debt/(cash)

 

 

0.9

2.0

(8.1)

(5.9)

(12.7)

Source: Company accounts, Edison Investment Research

General disclaimer and copyright

This report has been commissioned by Mondo TV and prepared and issued by Edison, in consideration of a fee payable by Mondo TV. 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 Edison analyst 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 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd who holds an Australian Financial Services Licence (Number: 427484). 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

Neither this document and associated email (together, the "Communication") constitutes or form part of any offer for sale or subscription of, or solicitation of any offer to buy or subscribe for, any securities, nor shall it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever. Any decision to purchase shares in the Company in the proposed placing should be made solely on the basis of the information to be contained in the admission document to be published in connection therewith.

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 (nor will such persons be able to purchase shares in the placing).

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

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. 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

1,185 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

1,185 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 Mondo TV and prepared and issued by Edison, in consideration of a fee payable by Mondo TV. 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 Edison analyst 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 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd who holds an Australian Financial Services Licence (Number: 427484). 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

Neither this document and associated email (together, the "Communication") constitutes or form part of any offer for sale or subscription of, or solicitation of any offer to buy or subscribe for, any securities, nor shall it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever. Any decision to purchase shares in the Company in the proposed placing should be made solely on the basis of the information to be contained in the admission document to be published in connection therewith.

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 (nor will such persons be able to purchase shares in the placing).

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

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. 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

1,185 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

1,185 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: Energy & Resources

Egdon Resources — Underwritten open offer announced

Egdon has announced a proposed underwritten open offer of c 43.3m shares (representing 14.29% of the enlarged share capital) at 5p/share to raise £2.17m before expenses. Under the open offer, qualifying shareholders have an opportunity to subscribe to one open offer share for every six existing ordinary shares held at market close on 14 May 2019. Net proceeds will be used to progress Egdon’s Gainsborough Trough shale-gas assets and the Resolution gas discovery (the focus of our last note), and for general working capital purposes. Egdon’s key operational focus is on finalising IGas-operated Springs Road-1 core and log analysis in Q219 and seeking an industry partner to fund the planned 3D seismic and appraisal drilling of the Resolution gas discovery.

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