Foresight Auto — Time to shine

Foresight Auto — Time to shine

Foresight (FRSX) is an innovator in automotive vision and cellular V2X accident prevention systems. In Q118, the group launched its QuadSight demo system at CES. It expects to have a prototype by mid-2018 and to launch live demonstrations, which should lead to pilot trials later this year. Also launched in Q118 and about to be spun into its own subsidiary, FRSX’s mobile phone-based Eye-Net solution further extends the safety theme, with real-time collision alerts to pedestrians and drivers. Despite this progress, we are concerned that the recent fatalities caused by autonomous vehicles and greater government scrutiny of the tech sector could increase industry caution and set back industry timelines, leading us to push back our FRSX revenue forecasts. We nevertheless see the company as well positioned to benefit from greater industry focus on safety and its primary orientation to ADAS rather than fully autonomous vehicles. We also note its stake in Rail Vision with its highly prospective rail ADAS products. Our DCF valuation remains at NIS4.99 per share.

Analyst avatar placeholder

Written by

Foresight Autonomous Holdings

Time to shine

FY17 results

Software & comp services

17 April 2018

Price per share*

NIS2.09

Price per ADR*

US$3.01

Market cap

NIS230m

Market cap ADR

US$67m

*Priced at 14 April 2018

NIS3.52/US$

Net cash ($m) at 31 December 2017

21.8

Shares in issue

110.0m

Free float

67.3%

Code

FRSX

Primary exchange

TASE

Secondary exchange

NASDAQ

Share price performance

%

1m

3m

12m

Abs

(29.3)

(39.2)

(39.7)

Rel (local)

(27.9)

(36.1)

(43.7)

52-week high/low

NIS8.5

NIS2.0

Business description

Foresight Autonomous Holdings is a technology company in Israel engaged in the design, development and commercialisation of stereo/quad-camera automotive vision systems and V2X cellular-based solutions. It has a 32.6% stake in rail ADAS specialist Rail Vision.

Next events

Q118 results

May 2018

Analysts

Anna Bossong

+44 (0)20 3077 5737

Richard Jeans

+44 (0)20 3077 5700

Foresight (FRSX) is an innovator in automotive vision and cellular V2X accident prevention systems. In Q118, the group launched its QuadSight demo system at CES. It expects to have a prototype by mid-2018 and to launch live demonstrations, which should lead to pilot trials later this year. Also launched in Q118 and about to be spun into its own subsidiary, FRSX’s mobile phone-based Eye-Net solution further extends the safety theme, with real-time collision alerts to pedestrians and drivers. Despite this progress, we are concerned that the recent fatalities caused by autonomous vehicles and greater government scrutiny of the tech sector could increase industry caution and set back industry timelines, leading us to push back our FRSX revenue forecasts. We nevertheless see the company as well positioned to benefit from greater industry focus on safety and its primary orientation to ADAS rather than fully autonomous vehicles. We also note its stake in Rail Vision with its highly prospective rail ADAS products. Our DCF valuation remains at NIS4.99 per share.

Year end

Revenue ($m)

EBITDA*
($m)

PBT*
($m)

EPS*
($)

DPS
($)

EV/revenue
(x)

P/E
(x)

12/16

0.0

(3.3)

(3.4)

(0.05)

0.00

N/A

N/A

12/17

0.0

(6.4)

(5.3)

(0.06)

0.00

N/A

N/A

12/18e

0.0

(10.9)

(13.3)

(0.12)

0.00

N/A

N/A

12/19e

2.6

(13.1)

(11.6)

(0.11)

0.00

23.3

N/A

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

A busy 2017: Market looking for results in 2018

FRSX was extremely busy in 2017, with three pilot trials of automotive vision systems in China and one in Sweden, and ongoing testing of its cellular-based accident alert system, Eye-Net. The group was able to raise $23m from share issues and warrant conversions in FY17, and limit operating and investing capital outflows to $6.3m (2016: $2.5m), helped by strict cost discipline.

Eye-Net spin-off provides funding route for product

Last month, FRSX successfully completed multi-user trials of Eye-Net, its mobile-phone-based V2X accident prevention solution. It also signed an MOU to spin off this IP into a shell company, Tamda. FRSX will have a 74.5% stake in the company, which will have a minimum NIS2m (US$568k) in cash reserves for product development work. Based on the cash balance alone, the deal values the technology at NIS5.8m (US$1.6m). FRSX intends to list the company, providing a route to further equity funding for Eye-Net without tapping FRSX investors.

Valuation: DCF steady at NIS4.99

FRSX’s TASE-listed shares have fallen 29% since the reporting of the Uber autonomous driving death on 18 March. Our expectation of increased industry caution in the auto industry and resulting delays in implementation of new technology has led us to cut our revenue forecasts and increase our loss estimates. Our DCF value has nevertheless remained steady at NIS4.99 per share, due to the countering positive impact of rolling our model forward.

Eye-Net spin-off provides funding route for solution

In March, FRSX announced that it had signed an MOU to spin off Eye-Net’s IP into the TASE-listed shell-company, Tamda. This follows FRSX’s reports of the successful completion of multi-user, in-house trials of Eye-Net, its mobile-device-based V2X accident prevention solution, and of its plans to complete the alpha version of the product by the end of Q118 (see Eye-Net to start trials – alpha version due end Q1, published on 15 February 2018).

In return for transferring its Eye-Net IP into Tamda, FRSX will be given a 74.5% stake in the company, which is to have a minimum NIS2m (US$568k) in cash reserves from the current shareholders. Based on the cash balance before relisting costs (estimated by FRSX at NIS0.4m before VAT), the deal values the technology at NIS5.8m (US$1.7m). This excludes any implicit value from the shell company, which management estimates at c NIS2m, based on recent examples in the TASE market of User Trend (June 2017: implied value NIS1.8m), Direct Capital (March 2018: net of cash implied value NIS2m) and Medivie (November 2017, implied value NIS1.5m). Taking the shell company value into account gives rise to an implied IP value of NIS11.7m (US$3.3m).

As mentioned above, management anticipates that the company will need to lay out c NIS0.4m plus VAT in transaction costs to move the vehicle on to the Main List of the Tel Aviv Stock Exchange. Nevertheless, the spin-off and listing will give cash for immediate development and marketing work without needing further recourse to FRSX shareholders. Once listed, Tamda also has the potential to provide a route to further external funding from equity markets. We understand from management that Tamda’s existing shareholders comprise principally financial investors.

Results summary FY17: Cash discipline remains

Exhibit 1: Earnings summary

$m, US GAAP

2016

Q417

2017

2018e

2019e

Revenues

0.0

0.0

0.0

0.0

2.6

Gross profit

0.0

0.0

0.0

(1.3)

(0.3)

R&D costs

(0.9)

(1.7)

(4.1)

(6.2)

(7.6)

Marketing and sales

(0.2)

(0.2)

(1.0)

(1.8)

(3.4)

General and admin/other

(2.6)

(0.7)

(3.8)

(4.3)

(4.5)

Total opex (incl. D&A)

(3.8)

(2.6)

(8.9)

(12.4)

(15.5)

EBITDA reported

(3.8)

(2.6)

(8.9)

(13.6)

(15.8)

of which exceptionals (incl. SBP)

(0.4)

(0.4)

(2.5)

(2.7)

(2.7)

of which share-based payments

(0.4)

(0.4)

(2.5)

(2.7)

(2.7)

EBITDA normalised

(3.3)

(2.2)

(6.4)

(10.9)

(13.1)

EBITDA margin (%)

N/A

N/A

N/A

N/A

(5.0)

Operating profit normalised

(3.3)

(2.2)

(6.4)

(10.9)

(13.1)

Operating profit reported

(3.8)

(2.6)

(8.9)

(13.6)

(15.8)

Equity accounted profit

(0.1)

0.9

0.2

(2.4)

1.5

Financials

0.1

0.4

1.0

0.1

(0.0)

PBT normalised

(3.4)

(1.0)

(5.3)

(13.3)

(11.6)

PBT reported

(1.9)

6.5

(15.9)

(16.0)

(14.3)

Net income normalised

(3.4)

(1.0)

(5.3)

(13.3)

(11.6)

Net income reported

(1.9)

6.5

(15.9)

(16.0)

(14.3)

EPS normalised basic ($)

(0.05)

(0.01)

(0.06)

(0.12)

(0.11)

EPS normalised diluted ($)

(0.05)

(0.01)

(0.06)

(0.12)

(0.11)

EPS reported basic ($)

(0.03)

0.07

(0.17)

(0.15)

(0.13)

Dividend per share ($)

0.0

0.0

0.0

0.0

0.0

Net debt/(cash)

(3.8)

(21.8)

(21.8)

(8.3)

5.6

Source: Foresight Autonomous, Edison Investment Research

Full-year losses increased by R&D surge in Q4

In Q417, R&D spend was boosted to US$1.7m from a quarterly average of US$0.8m in 9M17, mainly due to an acceleration in company recruitment but also including costs incurred in developing the Eye-Net accident prevention solution and pilot trials of the Eyes-On vision systems in China. This higher-than-expected surge in costs led to a reported operating loss for the year of US$8.9m, compared with our forecast of US$8.3m. With share-based payments in line with our forecast at US$2.5m, the normalised operating loss was also US$0.6m higher than we forecast at US$6.4m.

Use of share-based payments minimised 2017 cash outlay

The results metrics we regard as the most important for FRSX at this pre-revenue stage are the group’s ongoing rate of cash burn and the ability of the balance sheet to sustain the business going forward.

From this perspective, as well as a number of others – most notably product development, and testing and attracting pilot trials – 2017 can be called a success. The sharp increase in spending on R&D from US$0.9m to US$4.1m enabled FRSX to finalise testing and move to pilot trials of its Eyes-on stereo and quad vision algorithms, and to complete development and commence in-house testing of its Eye-Net solution. This additional cost was the principal reason for the increase in operating losses from US$3.8m to US$8.9m. Of this spend, though, it is worth noting that US$2.5m was accounted for by share-based compensation (2016: US$0.4m), which kept operating cash outflows at a relatively low US$6.4m.

In total, the company granted 9.1m options to directors and employees during 2017, bringing the number outstanding to directors and employees to 10.5m, equivalent to 9.6% of total outstanding shares. The options issued during 2017 had an average exercise price of US$0.84, or NIS2.97 (a 49% premium to the current share price) at the current exchange rate, bringing the average exercise price for director/employee warrants at year-end to US$0.69 or NIS2.44.

During the year, helped by a strong share price, the balance sheet was fortified by a net inflow of US$10.7m from share and warrant issues and US$12.0m from the exercise of warrants. This enabled the group to cover operating and investment cash outflows and increase its cash balances from US$3.7m to US$21.8m, while remaining debt-free.

Looking solely at the fourth quarter, the US$2.0m in cash inflows from warrant conversions, US$0.2m in cash inflows from working capital and exchange rate differences of US$0.9m enabled the group to fund normalised opex of US$2.2m and increase cash balances by US$0.3m during the quarter.

So far this year the group has continued with the onward move towards commercialisation of two more products. In Q118 the group launched its QuadSight demo system at CES. It now expects to have a proof of concept by mid-2018 and to launch live demonstrations, which should lead to pilot trials later this year. The group also launched its mobile phone-based Eye-Net solution in Q118, which further extends the safety theme, with real-time collision alerts to pedestrians and drivers. In this case, plans to have it spun into its own 74.5%-owned subsidiary means that commercialisation of this product gives rise to the potential for it to be carried out with no further funding pressure on FRSX’s balance sheet.

At existing funding levels, our model indicates that the group should be able to fund itself through to end-2019 with only US$6.6m, which we show as debt finance for illustrative purposes. In our view, this funding is highly likely to be derived from warrant conversions, assuming a modest recovery in the share price during this period.

Forecast revision

Exhibit 2: Change in forecasts

Revenue ($m)

EBITDA* ($m)

PBT* ($m)

Old

New

% chg.

Old

New

% chg.

Old

New

% chg.

12/17

0.0

0.0

N/A)

(5.8)

(6.4)

10.2

(5.7)

(5.3)

(7.2)

12/18e

1.15

0.00

(100.0)

(11.5)

(10.9)

(5.4)

(12.6)

(13.3)

4.9

12/19e

14.6

2.6

(82.1)

(8.6)

(13.1)

52.4

(7.2)

(11.6)

61.4

Source: Foresight Autonomous Holdings, Edison Investment Research. Note: *Normalised. 2017: old – Edison estimates; new – company reported

Revenue forecasts set back 12 months

We have cut our forecasts for FRSX to reflect recent unexpected setbacks in the ADAS sector, particularly recent fully autonomous vehicle fatalities, but also the increased scrutiny of tech firms by regulators, which we expect to intensify. In our view, both have the potential to force the auto industry and potentially consumers into a more cautious stance, particularly regarding newly developed technology, and to therefore set back key implementation timelines. Fortunately, ADAS technology (for driver assistance), which we see as the main provider of revenues for FRSX for at least the next three years, has experienced much less adverse publicity than fully autonomous vehicle technology. In addition, testing by road-safety bodies consistently demonstrates the safety value of these systems (we discussed this topic in more depth on page three of our report, Nasdaq listing ushers in new era, published on 29 June 2017).

We have nevertheless set back our revenue forecasts by approximately 12 months and now assume that FRSX will generate its first revenues from sales of its aftermarket camera systems to Israeli car importers in 2019 rather than 2018. We forecast US$2.5m in revenues from this product line in 2019 (previously US$11.1m). This is based on the assumption previously employed in our 2018 forecast that it experiences sufficient demand to install its stereo camera units in 3% of vehicles imported by the car dealerships in Israel, which are shareholders in FRSX and which have agreed to market the product. Total revenues are forecast at US$2.6m, including US$0.2m of stereo camera algorithm systems-on-a-chip (SOC) for use in new cars.

In 2020, we now forecast a total of US$14.6m revenues, with sales of aftermarket camera systems rising to US$11.1m revenues, based on the assumption that FRSX experiences sufficient demand to install its aftermarket devices in 10% of cars imported by FRSX’s Israeli car-importer shareholders. We are also looking for sales of the aftermarket product to penetrate US and Chinese markets. As a result, our model now assumes that the group attains a 0.3% overall global market share based on assumed installation of forward camera systems in 40% of new cars, leading to stereo camera algorithm SOC revenues of US$3.5m, from sales of 54k units.

Increased share-based payment expense to put pressure on reported losses

We have further increased our 2018 and 2019 adjusted loss forecasts (see Exhibit 1) to reflect our assumption that FRSX will also recognise higher than previously forecast share-based payments, totalling c US$2.7m per annum over the next two years.

The major driver of this is expected to be the US$3.65m in unrecognised compensation costs relating to non-vested, share-based compensation from previous share-based payment awards, which is noted in the 2017 20F annual report. Management has reported that it expects this to translate into share-based payment expense in the accounts over a weighted average period of 2.08 years from end-2017 based on the share price at the time. We assume that the group will continue to make share-based awards to new employees, as it continues to build employee numbers, to add to the total expense. Our model also assumes that the share price will recover back to the NIS2.77 level of end-2017, which will keep the recorded expense of share-based payments at the level anticipated in the accounts, rather than the lower levels implied by the current share price.

DCF valuation

Exhibit 3: Foresight Autonomous DCF valuation

$m

2018e

2019e

2020e

2021e

2022e

2023e

2024e

2025e

2026e

2026e
norm

Revenue

0.0

2.6

14.6

32.8

78.5

121.1

167.5

221.9

292.8

292.8

change y-o-y

N/A

N/A

458.4%

124.2%

139.4%

54.3%

38.3%

32.5%

32.0%

0.0%

EBITDA reported

(13.6)

(15.8)

(12.8)

(12.3)

6.1

34.0

47.2

62.7

82.9

79.1

EBITDA margin

N/A

N/A

N/A

N/A

7.8%

28.1%

28.2%

28.3%

28.3%

27.0%

Change in working capital

0.0

(0.5)

(2.1)

(2.7)

(7.5)

(8.7)

(7.1)

(8.6)

(11.4)

(5.9)

Capex

(2.7)

(0.4)

(0.4)

(0.9)

(1.2)

(1.6)

(2.1)

(2.6)

(3.3)

(5.9)

EBITDA - Capex

(16.3)

(16.1)

(13.2)

(13.2)

4.9

32.4

45.1

60.1

79.6

73.2

Tax

0.0

0.0

0.0

0.0

0.0

0.0

(11.7)

(15.6)

(21.4)

(19.7)

Change in working capital

0.0

(0.5)

(2.1)

(2.7)

(7.5)

(8.7)

(7.1)

(8.6)

(11.4)

(5.9)

Other non-cash items

2.7

2.7

4.0

0.6

0.6

0.6

0.6

0.7

0.7

0.7

Free cash flow

(13.6)

(13.9)

(11.4)

(15.3)

(2.0)

24.3

27.0

36.6

47.4

48.3

Terminal value

 

 

 

 

 

 

 

 

415.0

 

Total cash flow

(13.6)

(13.9)

(11.4)

(15.3)

(2.0)

24.3

27.0

36.6

462.4

 

Discounted cash flows

(11.8)

(10.5)

(7.5)

(8.7)

(1.0)

10.5

10.1

12.0

131.4

 

Enterprise value

124.5

 

 

 

 

 

 

 

 

 

Equity valuation

148.7

 

Net debt (cash) end 2017

 

 

(21.8)

NIS/USD FX rate applied

3.52

Value of Rail Vision Stake

15.4

 

Adjustment for:

 

 

 

WACC

 

15.0%

Total group value

164.1

 

Equity issues/merger funding 2018 YTD

 

(0.0)

Terminal growth rate

3.0%

Number of shares, diluted

115.7

 

Theoretical cash in-the-money ESOP/warrant exercise

(2.3)

Terminal value/EV

95%

Value per share (NIS)

4.99

 

Adjusted net debt (cash)

 

 

(24.2)

 

 

 

Value per ADR ($)

7.09

 

 

 

 

 

 

 

 

 

Source: Edison Investment Research

We have updated our DCF valuation to reflect the negative impact of the above-mentioned forecast revisions and the positive effects of rolling the model forward to FY18. The net impact has been to leave our DCF valuation unchanged at NIS4.99 per share.

Exhibit 4: Financial summary

$m

2016

2017

2018e

2019e

2020e

31 December

US GAAP

US GAAP

US GAAP

US GAAP

US GAAP

INCOME STATEMENT

Revenue

 

 

0.0

0.0

0.0

2.6

14.6

Cost of Sales

N/A

0.0

(1.3)

(2.9)

(8.9)

Gross Profit

N/A

0.0

(1.3)

(0.3)

5.7

EBITDA (norm)

 

 

(3.3)

(6.4)

(10.9)

(13.1)

(8.8)

Operating profit (norm)

 

 

(3.3)

(6.4)

(10.9)

(13.1)

(8.9)

Amortisation of acquired intangibles

0.0

0.0

0.0

0.0

0.0

Exceptionals

0.0

0.0

0.0

0.0

0.0

Share-based payments

(0.4)

(2.5)

(2.7)

(2.7)

(4.0)

Reported operating profit

(3.8)

(8.9)

(13.6)

(15.8)

(12.9)

Net Interest

0.1

1.0

0.1

(0.0)

(0.1)

Joint ventures & associates (post tax)

(0.1)

0.2

(2.4)

1.5

6.5

Exceptionals

1.8

(8.2)

0.0

0.0

0.0

Profit before tax (norm)

 

 

(3.4)

(5.3)

(13.3)

(11.6)

(2.4)

Profit before tax (reported)

 

 

(1.9)

(15.9)

(16.0)

(14.3)

(6.4)

Reported tax

0.0

0.0

0.0

0.0

0.0

Profit after tax (norm)

(3.4)

(5.3)

(13.3)

(11.6)

(2.4)

Profit after tax (reported)

(1.9)

(15.9)

(16.0)

(14.3)

(6.4)

Minority interests

0.0

0.0

0.0

0.0

0.0

Discontinued operations

0.0

0.0

0.0

0.0

0.0

Net income (normalised)

(3.4)

(5.3)

(13.3)

(11.6)

(2.4)

Net income (reported)

(1.9)

(15.9)

(16.0)

(14.3)

(6.4)

Basic average number of shares outstanding (m)

67.3

94.4

109.7

110.0

110.0

EPS – basic normalised ($)

 

 

(0.050)

(0.056)

(0.121)

(0.106)

(0.022)

EPS – diluted normalised ($)

 

 

(0.050)

(0.056)

(0.121)

(0.106)

(0.022)

EPS – basic reported ($)

 

 

(0.028)

(0.169)

(0.146)

(0.130)

(0.058)

Dividend ($)

0.00

0.00

0.00

0.00

0.00

Revenue growth (%)

N/A

N/A

N/A

N/A

458.4

Gross margin (%)

N/A

N/A

N/A

-11.3

39.3

EBITDA margin (%)

N/A

N/A

N/A

-499.6

-60.4

Normalised operating margin (%)

N/A

N/A

N/A

-501.0

-60.7

BALANCE SHEET

Fixed assets

 

 

1.4

3.4

2.7

4.5

11.4

Intangible assets

0.0

0.0

0.0

0.0

0.0

Tangible assets

0.1

2.0

2.4

2.8

3.1

Investments & other

1.3

1.4

0.2

1.7

8.2

Current assets

 

 

3.9

24.7

13.4

6.1

8.0

Stocks

0.0

0.0

0.0

0.0

0.0

Debtors

0.0

0.5

0.5

0.4

2.4

Cash & cash equivalents

3.8

21.8

8.3

1.0

1.0

Other

0.1

2.4

4.6

4.6

4.6

Current liabilities

 

 

(0.5)

(1.1)

(1.2)

(7.3)

(18.5)

Creditors

(0.5)

(1.1)

(1.2)

(0.6)

(0.5)

Tax and social security

0.0

0.0

0.0

0.0

0.0

Short-term borrowings

0.0

0.0

0.0

(6.6)

(18.0)

Other

0.0

0.0

0.0

0.0

0.0

Long-term liabilities

 

 

(0.1)

(2.1)

(2.1)

(2.1)

(2.1)

Long-term borrowings

0.0

0.0

0.0

0.0

0.0

Warrant conversion and other long-term liabilities

(0.1)

(2.1)

(2.1)

(2.1)

(2.1)

Net assets

 

 

4.7

24.8

12.8

1.2

(1.2)

Minority interests

0.0

0.0

0.0

0.0

0.0

Shareholders' equity

 

 

4.7

24.8

12.8

1.2

(1.2)

CASH FLOW

Operating cash flow before WC and tax

(3.3)

(6.4)

(10.9)

(13.1)

(8.8)

Working capital

0.8

0.3

0.0

(0.5)

(2.1)

Exceptional & other

0.2

0.0

0.0

0.0

0.0

Tax

0.0

0.0

0.0

0.0

0.0

Net operating cash flow

 

 

(2.4)

(6.0)

(10.9)

(13.6)

(11.0)

Capex

(0.1)

(0.3)

(0.5)

(0.4)

(0.4)

Acquisitions/disposals

(1.3)

0.0

(2.2)

0.0

0.0

Net interest

0.0

0.0

0.1

(0.0)

(0.1)

Equity financing

6.3

23.4

0.0

0.0

0.0

Dividends

0.0

0.0

0.0

0.0

0.0

Other

1.2

0.1

0.0

0.0

0.0

Net cash flow

3.8

17.1

(13.5)

(13.9)

(11.4)

Opening net debt/(cash)

 

 

0.0

(3.8)

(21.8)

(8.3)

5.6

FX

0.0

0.9

0.0

0.0

0.0

Other non-cash movements

0.0

0.0

0.0

0.0

0.0

Closing net debt/(cash)

 

 

(3.8)

(21.8)

(8.3)

5.6

17.0

Source: Edison Investment Research and Foresight Autonomous accounts

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. 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

EDISON ISRAEL DISCLAIMER

Disclosure regarding the scheme to enhance the awareness of investors to public companies in the technology and biomed sectors that are listed on the Tel Aviv Stock Exchange and participate in the scheme (hereinafter respectively “the Scheme”, “TASE”, “Participant” and/or “Participants”). Edison Investment Research (Israel) Ltd, the Israeli subsidiary of Edison Investment Research Ltd (hereinafter respectively “Edison Israel” and “Edison”), has entered into an agreement with the TASE for the purpose of providing research analysis (hereinafter “the Agreement”), regarding the Participants and according to the Scheme (hereinafter “the Analysis” or “Analyses”). The Analysis will be distributed and published on the TASE website (Maya), Israel Security Authority (hereinafter “the ISA”) website (Magna), and through various other distribution channels. The Analysis for each participant will be published at least four times a year, after publication of quarterly or annual financial reports, and shall be updated as necessary after publication of an immediate report with respect to the occurrence of a material event regarding a Participant. As set forth in the Agreement, Edison Israel is entitled to fees for providing its investment research services. The fees shall be paid by the Participants directly to the TASE, and TASE shall pay the fees directly to Edison. Subject to the terms and principals of the Agreement, the Annual fees that Edison Israel shall be entitled to for each Participant shall be in the range of $35,000-50,000. As set forth in the Agreement and subject to its terms, the Analyses shall include a description of the Participant and its business activities, which shall inter alia relate to matters such as: shareholders; management; products; relevant intellectual property; the business environment in which the Participant operates; the Participant's standing in such an environment including current and forecasted trends; a description of past and current financial positions of the Participant; and a forecast regarding future developments in and of such a position and any other matter which in the professional view of the Edison (as defined below) should be addressed in a research report (of the nature published) and which may affect the decision of a reasonable investor contemplating an investment in the Participant's securities. To the extent it is relevant, the Analysis shall include a schedule of scientific analysis of an expert in the field of life sciences. An "equity research abstract" shall accompany each Equity Research Report, describing the main points addressed. The full scope reports and reports where the investment case has materially changed will include a thorough analysis and discussion. Short update notes, where the investment case has not materially changed, will include a summary valuation discussion. The Agreement with TASE regarding the participation of Edison in the scheme for the research analysis of public companies does not and shall not constitute an approval or consent on the part of TASE or the ISA or any other exchange on which securities of the Company are listed, or any other securities’ regulatory authority which regulates the issuance of securities by the Company to the content of the Report or to the recommendation contained therein. A summary of this report is also published in the Hebrew language. In the event of any contradiction, inconsistency, discrepancy, ambiguity or variance between the English Report and the Hebrew summary of said Report, the English version shall prevail; and a note to this effect shall appear in any Hebrew summary of a Report. Edison is regulated by the Financial Conduct Authority. According to Article 12.3.2, Chapter 12 of the Conduct of Business Sourcebook, Edison, which produces or disseminates non-independent research, must ensure that it: 1) is clearly identified as a marketing communication; and 2) contains a clear and prominent statement that (or, in the case of an oral recommendation, to the effect that) it: a) has not been prepared in accordance with legal requirements designed to promote the independence of investment research; and b) is not subject to any prohibition on dealing ahead of the dissemination of investment research. The financial promotion rules apply to non-independent research as though it were a marketing communication.

EDISON INVESTMENT RESEARCH DISCLAIMER

Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been 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 Limited (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 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Tel Aviv +44 (0)20 3734 1007
Medinat Hayehudim 60

Herzilya Pituach, 46766

Israel

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 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Tel Aviv +44 (0)20 3734 1007
Medinat Hayehudim 60

Herzilya Pituach, 46766

Israel

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. 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

EDISON ISRAEL DISCLAIMER

Disclosure regarding the scheme to enhance the awareness of investors to public companies in the technology and biomed sectors that are listed on the Tel Aviv Stock Exchange and participate in the scheme (hereinafter respectively “the Scheme”, “TASE”, “Participant” and/or “Participants”). Edison Investment Research (Israel) Ltd, the Israeli subsidiary of Edison Investment Research Ltd (hereinafter respectively “Edison Israel” and “Edison”), has entered into an agreement with the TASE for the purpose of providing research analysis (hereinafter “the Agreement”), regarding the Participants and according to the Scheme (hereinafter “the Analysis” or “Analyses”). The Analysis will be distributed and published on the TASE website (Maya), Israel Security Authority (hereinafter “the ISA”) website (Magna), and through various other distribution channels. The Analysis for each participant will be published at least four times a year, after publication of quarterly or annual financial reports, and shall be updated as necessary after publication of an immediate report with respect to the occurrence of a material event regarding a Participant. As set forth in the Agreement, Edison Israel is entitled to fees for providing its investment research services. The fees shall be paid by the Participants directly to the TASE, and TASE shall pay the fees directly to Edison. Subject to the terms and principals of the Agreement, the Annual fees that Edison Israel shall be entitled to for each Participant shall be in the range of $35,000-50,000. As set forth in the Agreement and subject to its terms, the Analyses shall include a description of the Participant and its business activities, which shall inter alia relate to matters such as: shareholders; management; products; relevant intellectual property; the business environment in which the Participant operates; the Participant's standing in such an environment including current and forecasted trends; a description of past and current financial positions of the Participant; and a forecast regarding future developments in and of such a position and any other matter which in the professional view of the Edison (as defined below) should be addressed in a research report (of the nature published) and which may affect the decision of a reasonable investor contemplating an investment in the Participant's securities. To the extent it is relevant, the Analysis shall include a schedule of scientific analysis of an expert in the field of life sciences. An "equity research abstract" shall accompany each Equity Research Report, describing the main points addressed. The full scope reports and reports where the investment case has materially changed will include a thorough analysis and discussion. Short update notes, where the investment case has not materially changed, will include a summary valuation discussion. The Agreement with TASE regarding the participation of Edison in the scheme for the research analysis of public companies does not and shall not constitute an approval or consent on the part of TASE or the ISA or any other exchange on which securities of the Company are listed, or any other securities’ regulatory authority which regulates the issuance of securities by the Company to the content of the Report or to the recommendation contained therein. A summary of this report is also published in the Hebrew language. In the event of any contradiction, inconsistency, discrepancy, ambiguity or variance between the English Report and the Hebrew summary of said Report, the English version shall prevail; and a note to this effect shall appear in any Hebrew summary of a Report. Edison is regulated by the Financial Conduct Authority. According to Article 12.3.2, Chapter 12 of the Conduct of Business Sourcebook, Edison, which produces or disseminates non-independent research, must ensure that it: 1) is clearly identified as a marketing communication; and 2) contains a clear and prominent statement that (or, in the case of an oral recommendation, to the effect that) it: a) has not been prepared in accordance with legal requirements designed to promote the independence of investment research; and b) is not subject to any prohibition on dealing ahead of the dissemination of investment research. The financial promotion rules apply to non-independent research as though it were a marketing communication.

EDISON INVESTMENT RESEARCH DISCLAIMER

Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been 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 Limited (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 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Tel Aviv +44 (0)20 3734 1007
Medinat Hayehudim 60

Herzilya Pituach, 46766

Israel

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 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Tel Aviv +44 (0)20 3734 1007
Medinat Hayehudim 60

Herzilya Pituach, 46766

Israel

Research: TMT

EQS Group — Grasping the greater opportunity

EQS is investing to take advantage of the opportunity it has to build a far larger enterprise and broaden its client base. The market for cloud-based tech systems to log and control aspects of corporate governance, risk and compliance is attractive and sits comfortably alongside its existing offerings in digital investor relations. The pursuit of this adapted goal, becoming a global tech B2B provider with high levels of recurring income, is costing the group short-term profitability, but the potential rewards are substantial. The share price has performed well over the last year and, if management can deliver on its plan, further upside should result.

Continue Reading

Subscribe to Edison

Get access to the very latest content matched to your personal investment style.

Sign up for free