Epwin Group — Doing a decent job in tough markets

Epwin Group (AIM: EPWN)

Last close As at 27/03/2024

GBP0.77

1.50 (1.99%)

Market capitalisation

GBP108m

More on this equity

Research: Industrials

Epwin Group — Doing a decent job in tough markets

FY17 was a difficult trading year for Epwin – and some effects flow into this financial year – but management has stuck resolutely to a business improvement programme from which the benefits should also be progressively felt. Slightly lower estimates and a reduced prospective near-term dividend payout are our interpretation of the latest newsflow. As before, Epwin does have the financial flexibility to enhance earnings prospects via acquisitions, which may refocus investor attention back on to low current earnings multiples.

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Written by

Industrials

Epwin Group

Doing a decent job in tough markets

FY17 results

Construction & materials

24 April 2018

Price

83.9p

Market cap

£120m

Net debt (£m) at end-December 2017

25.1

Shares in issue

142.9m

Free float

67%

Code

EPWN

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

5.5

(0.7)

(30.1)

Rel (local)

(0.9)

3.3

(32.9)

52-week high/low

128.5p

65.5p

Business description

Epwin supplies functional low-maintenance exterior building products (including windows, doors, roofline and rainwater goods) into a number of UK market segments and is a modest exporter. It has a vertically integrated model in windows and doors and a leading market position in roofline products.

Next events

FY17 final DPS 4.46p ex dividend

10 May 2018

AGM

22 May 2018

FY17 final DPS paid

4 June 2018

Analyst

Toby Thorrington

+44 (0)20 3077 5721

Epwin Group is a research client of Edison Investment Research Limited

FY17 was a difficult trading year for Epwin – and some effects flow into this financial year – but management has stuck resolutely to a business improvement programme from which the benefits should also be progressively felt. Slightly lower estimates and a reduced prospective near-term dividend payout are our interpretation of the latest newsflow. As before, Epwin does have the financial flexibility to enhance earnings prospects via acquisitions, which may refocus investor attention back on to low current earnings multiples.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

12/16**

293.2

24.3

14.7

6.6

5.7

7.9

12/17**

298.3

20.5

12.4

6.7

6.8

8.0

12/18e

282.6

18.1

10.3

5.3

8.1

6.3

12/19e

285.8

19.1

10.9

5.5

7.7

6.5

Note: *PBT and EPS (fully diluted) are normalised, excluding intangible amortisation and exceptionals. ** FY16 and FY17 EPS benefited in part from recovered tax losses.

Lower profitability, but some operational progress

On a normalised basis, FY17 PBT came in 14.2% lower y-o-y with EPS fully diluted -10.1% and DPS +1.4%. Compared to our expectations, this outturn was slightly better at the EPS (due to a lower underlying tax charge) and DPS levels. Market conditions have been well flagged, as have specific customer issues that added to management challenges during the year. An existing programme of site consolidation and operational improvement continued. Trading highlights included progress from most of the Extrusion & Moulding divisional product lines and a post-consolidation improvement in the Epwin Glass performance. Year-end net debt was broadly as expected – with increased working capital and exceptional cash items – and the company remains conservatively geared, in our view.

Tough markets, dividends rebased

Market conditions are not expected to change materially in 2018 or 2019, with some growth segments (in newbuild) probably more than offset by ongoing weakness in secondary demand for building products. Epwin should see some benefit from the footprint actions taken to date, although the annualised customer effects referred to above will also be washing through. We have elected to trim margin expectations slightly in both divisions based on higher input costs at the beginning of the year. The re-framed c 2x dividend cover policy implies c 20% reductions in dividends compared to our previous expectations and this is now reflected in our model.

Valuation: Near-term yield attraction dominates

The 4.46p final dividend alone represents a 5.3% yield. While our future dividend expectations have been reduced, the prospective FY18 yield is still 6.3%. In terms of earnings multiples, the current year P/E and EV/EBITDA of 8.1x and 5.1x, respectively, are low by conventional standards. A period of trading stability will help to restore investor confidence in the earnings outlook once the immediate income attraction on the FY17 final dividend has passed.

FY17 results overview

The financial performance in FY17 was primarily affected by rising input costs. A change of ownership at two significant customers and soft market conditions were also unhelpful. Broadly flat revenues and mitigated EBIT reduction through consolidation and cost-saving activities was a reasonable outturn in these circumstances. We have modestly reduced our estimates for FY18 and FY19; under a revised dividend policy, this implies a c 20% reduction in dividend declarations compared to our previous FY18 and FY19 expectations. That said, Epwin has financial headroom to make further acquisitions to boost earnings and dividend prospects.

Exhibit 1: Epwin Group divisional and interim splits

Year-end December ( £m)

H1

H2

2016

H1

H2

2017

% chg y-o-y

H117

H217

FY17

Group revenue

143.3

149.9

293.2

149.9

148.4

298.3

4.6%

(1.0%)

(1.8%)

Extrusion & Moulding

90.5

91.4

181.9

91.5

92.1

183.6

1.1%

0.8%

0.9%

Fabrication & Distribution

52.8

58.4

111.3

58.4

56.3

114.7

10.6%

(3.7%)

3.1%

Group operating profit

11.8

13.8

25.6

11.1

11.2

22.3

(5.9%)

(18.5%)

(12.7%)

Extrusion & Moulding

11.6

12.9

24.5

10.9

10.6

21.5

(6.0%)

(17.5%)

(12.1%)

Fabrication & Distribution

1.1

1.8

2.9

1.1

1.3

2.4

0.0%

(27.8%)

(17.2%)

Group costs

(0.9)

(0.9)

(1.8)

(0.9)

(0.7)

(1.6)

Source: Company, Edison Investment Research

Extrusion & Moulding (E&M): primarily PVC-based window profile systems, roofline and rainwater goods extrusion activities, with wood composite decking products and glass reinforced plastic building products also in the portfolio.

E&M’s FY17 revenues were slightly above the prior year but operating margin experienced a 170bp reduction in the year (to 11.7%), including a 260bp reduction in the seasonally important H2 trading period. Input cost price inflation affected both metrics, contributing c £1.5m to top-line growth, but was this was only a partial pass through to customers of the underlying increase. In this regard lags are common (in both rising and falling price environments), but we believe that competitive markets also made for a challenging customer pricing environment. In addition, SIG’s disposal of its 66 depot building plastics distribution business to vertically integrated competitor GAP Plastics (46-depot, pre-deal network) has resulted in a lower rate of product sales to a previously important customer. The main casualty appeared to be roofline extrusion (volumes -2% y-o-y). Taking this into account and noting increased volumes in other categories (eg decking +16%, rainwater/drainage +9% and window systems +4%), underlying activity showed signs of good progress in rather flat overall markets. Within window systems, the relatively new Profile 22 Optima line appears to have been well received with volumes up 10% y-o-y; implicitly, other window systems lines were flat overall and we believe that this was due to some impact from lower sales to Entu (see below). Stormking’s trading performance is understood to have been comparable to the prior year. During the year, E&M moved to an enhanced warehouse facility at Scunthorpe and began the relocation of lines at Macclesfield into other group facilities which, when complete, will consolidate extrusion activities on to three sites (ie Telford, Scunthorpe and Tamworth). Further warehousing consolidation in Telford is planned for FY18/FY19.

Fabrication & Distribution (F&D): downstream manufacture of glass sealed units and finished windows and doors (using profiles from E&M) and multi-channel B2B distribution – including own branches – of these and other group finished products.

Full-year effects from the acquisition of National Plastics (in June 2016) benefited reported F&D results. We estimate that this added an incremental £6.2m revenue and £0.2m operating profit (obviously with a more pronounced H1 benefit, supporting divisional revenue +10.6%, EBIT flat). On this basis, underlying FY17 revenues declined by c 3% and EBIT by c 21%, respectively, versus reported +3.1% and -17.2%, respectively.

Revenue from fabrication activities fell by 4% y-o-y as a result of two unrelated factors. Weaker glazed sealed unit trading in H1 led to the consolidation of production and increased market focus during Q3. Sales of window frames from Indigo Product’s Walsall fabrication facility to Entu, its leading customer, were disrupted in the run up to Entu’s Q3 administration and sale process. As reported in December, Indigo was sold to Kairos (the new owners of some of the Entu businesses) and a new three-year window profile supply agreement was put into place alongside the transaction. In terms of profitability, including exceptional items Indigo incurred a £2.7m pre-tax loss in the year, which included a small trading profit. We believe that the financial performance of Epwin Glass was much improved in H2.

Underlying distribution revenue rose by c 3% overall in the year and so, implicitly, was slightly lower y-o-y in underlying terms (ie excluding National Plastics). We have already referred to competitive market conditions in this channel in the E&M section due to a combination of soft demand, rising input prices and pricing behaviour across a very fragmented independent distributor industry spectrum. Epwin has been selectively expanding here in order to sustain a strong presence for its products in a changing environment. The post-year-end acquisition of Amicus Building Plastics (15 branches, broadening regional coverage) takes the total number of owned trade outlets to c 80, adding to the c 30 brought in by National Plastics.

Net debt up; gearing levels modest and expected to reduce

Year-end net debt was £1m lower than we had anticipated at £25.1m, but increased £4.5m y-o-y. In summary, this increase was similar to but slightly higher than deferred cash consideration for acquisitions, although there were a number of differences compared to prior year performances, which we discuss below.

We have already noted the decline in operating profit in earlier sections and corresponding EBITDA was £3m lower y-o-y at £30.3m. In keeping with most companies in the UK building materials space, Epwin has a seasonal trading pattern, with the middle two quarters of the year typically being the largest. In prior years, Epwin’s working capital profile has seen a material H1 working capital outflow substantially reversing in H2. This effect was not seen in FY17, with a much lower second-half receivables flow back resulting in a £5.6m working capital outflow for the year overall. Coupled with a net c £3.5m+ cash outflow relating to exceptional items (ie relocation and redundancy costs), group operating cash flow was £19.9m versus the c £31m achieved in FY16.

With similar average net debt, cash interest costs were in line with the prior year at £1m while cash tax payments were lower at £2.7m, consistent with the underlying tax charge in the year. Following the development and introduction of the new Profile 22 Optima window system over the previous two years (aggregate capital cost c £9.5m, including c £5m in FY16), capex stepped down to similar underlying levels to FY17 at £7.1m. Just over half of this represented maintenance capex spend and c 10% on intangibles, relating to IT systems. In the event, total capex was below the level that we had anticipated and, taking all of the above items into account, free cash flow (FCF) for the year came in at just over £9m. Hence, the committed £9.5m cash dividend payment (ie FY16 final and H117 interim) and £3.9m deferred acquisition payments (for Ecodeck and Stormking, seen in the first half), drove the full-year cash movement noted at the beginning of this section.

Cash flow outlook: net debt of £25.1m represented 0.8x FY17 EBITDA, while gross debt of c £32m was well within year-end banking arrangements (being a £35m RCF, £15m amortising term loan and £5m overdraft facility, all out to December 2019). On our revised estimates (see below), FCF is little changed at £15m or above in each of our forecast years. Given that more strategic site consolidation moves have been flagged – to include certain window and door fabrication and warehousing operations – our £0.5m expected exceptional cash outflow could possibly be exceeded. We have included a £0.5m cash cost related to the post year-end acquisition of Amicus Building Products. We discuss the prospective profile of dividend payments below Exhibit 2; based on our new earnings estimates and 2x dividend cover guidance cash dividends are currently set to step down in FY19 and allow Epwin to have only modest gearing by the end of FY20.

Similar market themes, slightly reduced estimates

Continuing recent market themes, the latest Construction Product Association forecasts project subdued repair, maintain and improvement spending and low single-digit growth in newbuild starts (for both private and social sectors) over the next two years. Epwin management has flagged higher virgin PVC costs at the beginning of 2018 and an intention to pass these through to customers, albeit with a lag.

Taking these market comments and reported FY17 performance into account, we have trimmed our divisional profit expectations slightly on modestly higher revenues. We have included small expected contributions from Amicus within these headline movements, so our underlying profit reduction is a little understated compared to the figures in Exhibit 2 (on broadly flat revenues).

Exhibit 2: Epwin Group revised estimates

EPS (p)

PBT (£m)

EBITDA (£m)

Old

New

% chg.

Old

New

% chg.

Old

New

% chg.

2017

11.9

12.4

3.7%

20.8

20.5

(1.4%)

30.6

30.3

(1.0%)

2018e

10.5

10.3

(2.0%)

18.8

18.1

(3.7%)

28.5

27.8

(2.5%)

2019e

11.2

10.9

(2.8%)

19.7

19.1

(3.3%)

29.5

28.9

(2.2%)

2020e

N/A

11.3

N/A

N/A

19.7

N/A

N/A

29.6

N/A

Source: Epwin accounts, Edison Investment Research. Note: PBT and EPS (fully diluted) are normalised. Normalised excludes amortisation of acquired intangibles and exceptionals. 2017 old = expected, new = actual.

Dividends policy amended: following a board review, a revised dividend policy is now in place, which is ‘progressive, while being approximately twice covered by earnings’. On our new estimates, this implies a rebasing to levels c 20% below our previous estimates. Up until the end of Q317, our DPS projections were almost twice covered but the September update reduced prospective cover to around 1.6x.

Our rebased dividends only have a modest cash impact in FY18 (as it includes the FY17 final) but knocks just over £2m pa compared to our previous estimates thereafter. Therefore, while we can understand the move it does not significantly change the balance sheet funding position – which was already conservative – over the next couple of years, in our view.

We note that Epwin’s year-end balance sheet gross debt duration had shortened (ie with £21m current and £11.4m under longer liabilities). Any prospective review of banking facilities – due to expire in December 2019, as noted above – will be closely linked to discretionary capital allocation decisions including growth capex, dividends and expected acquisition activity over the short and medium terms. It seems reasonable to expect greater clarity on intentions here to emerge over the next six to 12 months. So, while our ‘as presented’ estimates indicate a lower dividend y-o-y in FY18, any acquisition(s) could of course boost earnings.


Exhibit 3: Financial summary

£m's

2012

2013

2014

2015

2016

2017

2018e

2019e

2020e

December

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

 

 

 

Restated

 

 

 

 

 

 

 

Revenue

 

 

294.4

255.3

259.5

256.0

293.2

298.3

282.6

285.8

289.8

Cost of Sales

 

 

(209.9)

(185.8)

(186.7)

(178.6)

(200.6)

(207.5)

(197.2)

(199.5)

(202.3)

Gross Profit

 

 

84.5

69.5

72.8

77.4

92.6

90.8

85.3

86.3

87.5

EBITDA

 

 

21.8

21.4

24.5

25.6

33.3

30.3

27.8

28.9

29.6

Operating Profit (before GW and except.)

15.4

15.6

19.5

20.1

25.6

22.3

19.6

20.4

20.8

Intangible Amortisation

 

 

(1.7)

(1.7)

(1.7)

(0.0)

(1.1)

(1.1)

(1.1)

(1.1)

(1.1)

Exceptionals

 

 

(4.3)

(5.1)

2.3

(0.6)

(0.2)

(7.4)

0.0

0.0

0.0

Other

 

 

0.0

0.0

(0.8)

(0.4)

(0.3)

(0.6)

(0.3)

(0.3)

(0.3)

Operating Profit

 

 

9.4

8.8

19.3

19.1

24.0

13.2

18.2

19.0

19.4

Net Interest

 

 

(1.9)

(1.0)

(0.7)

(0.5)

(1.0)

(1.2)

(1.2)

(1.0)

(0.8)

Profit Before Tax (norm)

 

 

13.5

14.6

18.0

19.2

24.3

20.5

18.1

19.1

19.7

Profit Before Tax (FRS 3)

 

 

7.5

7.9

18.6

18.6

23.0

12.0

17.0

18.0

18.6

Tax

 

 

(2.2)

(1.3)

(3.5)

(3.3)

(3.4)

(1.9)

(3.3)

(3.4)

(3.5)

Profit After Tax (norm)

 

 

10.4

12.4

14.4

15.9

20.9

17.6

14.8

15.6

16.2

Profit After Tax (FRS 3)

 

 

4.5

5.1

15.1

15.3

19.6

10.1

13.7

14.5

15.1

 

 

 

 

 

 

 

 

 

 

 

 

Average Number of Shares Outstanding (m)

 

122.3

122.3

128.0

135.2

141.5

142.6

143.2

143.2

143.2

EPS - normalised (p)

 

 

8.5

10.1

11.2

11.8

14.8

12.4

10.3

10.9

11.3

EPS - normalised (p) FD

 

 

 

 

11.2

11.7

14.7

12.4

10.3

10.9

11.3

EPS - FRS 3 (p)

 

 

3.7

4.2

11.8

11.3

13.8

7.1

9.6

10.1

10.5

Dividend per share (p)

 

 

0.0

0.0

4.2

6.4

6.6

6.7

5.3

5.5

5.7

 

 

 

 

 

 

 

 

 

 

 

 

Gross Margin (%)

 

 

28.7

27.2

28.1

30.2

31.6

30.4

30.2

30.2

30.2

EBITDA Margin (%)

 

 

7.4

8.4

9.4

10.0

11.3

10.2

9.8

10.1

10.2

Operating Margin (before GW and except.) (%)

5.2

6.1

7.5

7.9

8.7

7.5

6.9

7.1

7.2

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE SHEET

 

 

 

 

 

 

 

 

 

 

 

Fixed Assets

 

 

56.9

54.7

53.8

93.5

108.5

106.2

105.1

103.8

102.2

Intangible Assets

 

 

27.9

26.4

24.7

59.7

70.2

69.6

68.5

67.4

66.3

Tangible Assets

 

 

26.1

25.1

26.2

33.1

37.9

36.0

36.0

35.8

35.3

Other

 

 

2.8

3.2

2.9

0.7

0.4

0.6

0.6

0.6

0.6

Current Assets

 

 

59.9

62.1

62.3

87.2

82.6

82.2

81.6

82.4

83.4

Stocks

 

 

20.9

21.7

22.4

23.6

28.2

29.6

30.1

30.5

30.9

Debtors

 

 

37.4

40.1

37.6

41.5

41.4

45.3

44.2

44.6

45.2

Cash

 

 

1.6

0.3

2.3

22.1

13.0

7.3

7.3

7.3

7.3

Current Liabilities

 

 

(53.2)

(54.5)

(49.0)

(68.8)

(79.2)

(79.2)

(78.0)

(75.6)

(69.1)

Creditors

 

 

(49.1)

(51.5)

(48.6)

(53.2)

(62.9)

(58.2)

(54.4)

(54.9)

(55.9)

Short term borrowings

 

 

(4.1)

(3.0)

(0.4)

(15.6)

(16.3)

(21.0)

(23.6)

(20.7)

(13.2)

Long Term Liabilities

 

 

(32.0)

(25.7)

(4.3)

(31.8)

(21.0)

(15.5)

(10.5)

(5.5)

(4.1)

Long term borrowings

 

 

(20.6)

(16.0)

(0.8)

(20.9)

(17.3)

(11.4)

(6.4)

(1.4)

0.0

Other long term liabilities

 

 

(11.4)

(9.7)

(3.5)

(10.9)

(3.7)

(4.1)

(4.1)

(4.1)

(4.1)

Net Assets

 

 

31.5

36.6

62.8

80.1

90.9

93.7

98.2

105.1

112.3

 

 

 

 

 

 

 

 

 

 

 

 

CASH FLOW

 

 

 

 

 

 

 

 

 

 

 

Operating Cash Flow

 

 

15.7

12.1

19.8

23.8

30.8

19.9

24.6

28.0

29.1

Net Interest

 

 

(1.4)

(0.9)

(0.7)

(0.5)

(1.0)

(1.0)

(1.2)

(1.0)

(0.8)

Tax

 

 

(1.6)

(0.9)

(1.7)

(2.3)

(3.8)

(2.7)

(2.8)

(2.9)

(3.0)

Capex

 

 

(4.6)

(4.9)

(5.6)

(9.0)

(12.7)

(7.1)

(8.5)

(8.5)

(8.5)

Acquisitions/disposals

 

 

(28.2)

(0.2)

0.0

(20.9)

(10.2)

(3.9)

(0.5)

0.0

0.0

Financing

 

 

0.0

0.0

10.0

0.0

0.0

0.0

0.0

0.0

0.0

Dividends

 

 

0.0

0.0

(1.9)

(6.7)

(9.1)

(9.5)

(9.3)

(7.6)

(7.9)

Net Cash Flow

 

 

(20.2)

5.2

19.9

(15.6)

(6.1)

(4.3)

2.4

7.9

8.9

Opening net debt/(cash)

 

 

0.5

23.2

18.7

(1.1)

14.4

20.6

25.1

22.7

14.8

HP finance leases initiated

 

 

(2.5)

(0.5)

(0.3)

0.4

1.9

(1.4)

0.0

0.0

0.0

Other

 

 

0.0

(0.1)

0.2

(0.3)

(2.1)

1.2

0.0

(0.0)

0.0

Closing net debt/(cash)

 

 

23.2

18.6

(1.1)

14.4

20.6

25.1

22.7

14.8

5.9

Source: Epwin accounts, Edison Investment Research. Note: FY13 to FY16 EPS benefited in part from recovered tax losses.

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Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Epwin Group and prepared and issued by Edison for publication globally. 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. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US 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. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and 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 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. This document is provided 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.
Edison has a restrictive policy relating to personal dealing. 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. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. 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. 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 (ie 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. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2018. “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.

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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, 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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Pty Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Epwin Group and prepared and issued by Edison for publication globally. 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. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US 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. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and 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 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. This document is provided 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.
Edison has a restrictive policy relating to personal dealing. 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. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. 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. 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 (ie 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. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2018. “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.

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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, 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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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