Keywords Studios — Compelling game plan, executed well

Keywords Studios (LN: KWS)

Last close As at 27/03/2024

2,920.00

50.00 (1.74%)

Market capitalisation

2,207m

More on this equity

Research: TMT

Keywords Studios — Compelling game plan, executed well

FY16 was a strong year for Keywords Studios both financially and operationally, with EPS growing by 61% and acquisitions strengthening the business across a number of service lines and geographies. It has also invested into key staff and core systems to support continued growth and we fully expect the growth trajectory to continue from here. We see scope for further upgrades through organic performance, further acquisitions and potentially larger outsourcing deals. Given the recent run, we feel the valuation prices in strong progress this year but believe that sustained execution of the strategy will continue to create shareholder value.

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Written by

TMT

Keywords Studios

Compelling game plan, executed well

Full year results

Software & comp services

7 April 2017

Price

723p

Market cap

£393m

€1.16/£

Net cash (€m) as at 31 December 2016

8.7

Shares in issue

54.4m

Free float

68%

Code

KWS

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

17.0

41.2

209.6

Rel (local)

17.0

38.6

163.1

52-week high/low

723p

229p

Business description

Keywords Studios provides localisation, testing, artwork and community support services exclusively to the video games industry. It provides services to 20 of the top 25 games developers and is looking to consolidate the currently fragmented industry.

Next events

AGM

Late May

Analysts

Dan Ridsdale

+44 (0)20 3077 5729

Victoria Pease

+44 (0)20 3077 5700

Keywords Studios is a research client of Edison Investment Research Limited

FY16 was a strong year for Keywords Studios both financially and operationally, with EPS growing by 61% and acquisitions strengthening the business across a number of service lines and geographies. It has also invested into key staff and core systems to support continued growth and we fully expect the growth trajectory to continue from here. We see scope for further upgrades through organic performance, further acquisitions and potentially larger outsourcing deals. Given the recent run, we feel the valuation prices in strong progress this year but believe that sustained execution of the strategy will continue to create shareholder value.

Year end

Revenue (€m)

PBT*
(€m)

EPS*
(c)

DPS
(p)

P/E
(x)

Yield
(%)

12/15

58.0

8.0

12.6

1.2

66.5

0.4

12/16

96.6

14.9

20.3

1.3

41.4

0.5

12/17e

116.7

17.6

24.5

1.5

34.2

0.5

12/18e

126.1

19.0

26.3

1.6

31.9

0.6

Note: *PBT and EPS (fully diluted) are normalised, excluding intangible amortisation, exceptional items and share-based payments.

Another strong year – some exceptional strength

FY16 results were in line with our estimates, upgraded at the time of the February trading update (see Another beat and raise). Revenues of €96.6m, up from €58.0m last year, reflect the contribution from the eight acquisitions made over the course of the year and 24% like-for-like growth, with the exceptionally strong trading at Synthesis (acquired in April 2016) boosting revenues by c €4m above run rate. PBT increased by 84% y-o-y to €14.9m, but EPS was not far behind, growing by 61% to 20.3c, highlighting the accretive nature of the acquisitions. The company generated free cashflow of €12.7m while net cash stands at €8.7m. A heads of terms agreement has been reached with Barclays for a €35m revolving credit facility, reducing the near-term likelihood of equity dilution to support acquisitions.

We expect continuation in the same vein in FY18

In our view, one of the key attractions of Keywords’ investment case is its scope to continue growing earnings at a double-digit rate without substantially deviating from the existing strategy. We have nudged our FY17 EPS estimate up 3%, but buoyant games industry dynamics and a strengthened platform for cross-selling could drive organic upside. Further accretive acquisitions should clearly be expected, with a first move into engineering (coding) being a key strategic priority for FY17. A strategic outsourcing deal with a games developer also remains a management goal and could be a catalyst for upgrades.

Valuation: Returns from continued execution

At 34x FY17 earnings dropping to 32x in FY18, Keywords’ rating is a substantial premium to peers (average 18x for FY18). However, it has a compelling platform and strategy for growth within a games industry growing at a healthy 6.6% pa. Further accretive acquisition activity or upgrades could quickly bring the rating more in line. So, while we believe that strong progress is now priced in for this year, continued execution should continue to deliver share price value.

Investment summary

Some exceptional trading, but strength across the board

FY16 was a strong year for Keywords Studios, both operationally and financially. Like-for-like growth (calculated as if acquisitions had been included for equivalent prior year periods) was a very healthy 24%, with all service lines bar localisation testing (8%) growing like-for-like revenues at a strong double-digit rate. As previously flagged, performance across localisation and audio was boosted by a particularly strong performance from Synthesis, acquired in April, during the second and third quarters, which management estimates boosted revenues by c €4m above the usual run rate.

Exhibit 1: Revenue progression by service line. Acquisitions labelled, positioned in period of acquisition and by service line or lines of revenue contribution.

Source: Keywords Studios data, Edison Investment Research

Buoyant industry, market share gains and cross selling

Growth is being supported by a generally buoyant environment in the global games development industry; market analyst Newzoo estimates the industry grew 8.5% in 2016 and will expand at an annual rate of 6.6% through to 2019. We believe that Keywords’ more rapid growth rate is being driven by a combination of factors:

Increased outsourcing – Developers outsource non-core functions to providers with dedicated expertise and scale benefits.

Market share gains – Market share gains are supported by Keywords’ ability to leverage its status as the largest outsourced supplier operating in a fragmented competitive market. While ongoing consolidation among the developer/publisher communities carries some risk of disruption, Keywords should be a net beneficiary of this trend through the cycle.

Cross selling – While acquisitions were also a factor in this, the company recorded 25% of clients using three of more of the group’s services, from 51 to 64 over the course of the year.

Acquisitions strengthening capability and geographic footprint

Keywords Studios made eight acquisitions over the course of the year, paying a total of €20.1m cash, 585.6k shares with a total c €2.1m deferred or contingent consideration for the acquired companies. Whereas in FY15 the company established two new service lines through acquisition, in FY16 the focus was on strengthening its position in established service lines.

The largest acquisition, Synthesis (€10.2m plus 2.4m shares), boosted the company’s position across translation, audio and to a lesser extent localisation testing. It performed particularly well, with the business contributing €18m revenues and €3.5m PBT over the period, well above the €10m and €1m respective figures we forecast at the time of the acquisition.

The company extended its position in art, adding early stage concept art studio Volta. Since year-end, the acquisition of Spov for up to £1.2m adds cinematics, user interface, visual effects and motion graphics capability to the equation.

The acquisition of Enzyme boosted the company’s position in localisation and functional testing. The studio also provides focus group testing services for optimising game design and user experience. This is a new domain for Keywords, but should complement the activities of its Player Research operations, acquired in October, and support the company’s drive to build more comprehensive, retained, strategic relationships with clients.

Exhibit 2: Acquisitions in FY16

Name

Date

Business segment

Cost

Reported

Pro forma

Sales contribution (€k)

PBT contribution

(€k)

Sales contribution (€k)

PBT contribution

(€k)

Ankama Asia

22/03/2016

Customer care

N/A

528

(17)

541

(0)

Synthesis

14/03/2016

Audio, localisation and localisation testing

€18m

18,013

3,494

20,662

3,887

Mindwalk

01/04/2016

Art

$5.5m

3,166

228

4,825

301

Volta

29/07/2016

Art

$5.25m

1,181

209

2,407

278

Player Research

26/10/2016

Player research

1.3m

183

65

921

308

Enzyme Testing Labs

17/11/2016

Localisation and functional testing

C$5.4m

1,095

60

8,632

934

Sonox

22/12/2016

Localisation

£650,000

52

88

1,308

455

Total

24,217

4,126

39,297

6,163

Source: Keywords Studios

Pace of M&A to continue – funds/facilities to support €50m of acquisitions

We expect the pace of M&A to continue, and perhaps accelerate. The company has €17m of cash on the balance sheet with borrowings of €8.4m but has also announced that it has reached a heads of terms agreement with Barclays for a €35m revolving credit facility. Taking into account our forecast that the company will generate net cash flow of €10.9m of cash in FY17, the company has the firepower to spend circa €50m on acquisitions over the course of the year without requiring equity or stretching net/debt to EBITDA beyond a reasonable 2x threshold.

Entry into engineering the priority

The key strategic priority, from an M&A standpoint, is likely to be the addition of capability in engineering (ie coding, for example to port games to different platforms, etc), which has the potential to grow into a major service line and which management believes is ripe for outsourcing with strong cross-sell potential. The company is also looking at opportunities in games analytics, an area that is seen as offering strong growth potential.

Following on from the acquisition of Spov, the company plans to extend its capabilities in areas such as visual special effects, user interface design, cinematics and motion graphics. The Spov acquisition also give Keywords a toe hold in the film/video production industry, where management also sees opportunities for localisation and audio as production cycles accelerate and the rise of global players such as Amazon and Netflix drive demand for localisation services.

Investing to scale

Management is taking steps to ensure the model continues to scale, through investment in core platforms in some areas and increased decentralisation in others. These are summarised below:

Group level – The company is investing in a new accounting platform, which will be rolled out across the group over the next 12-18 months. Over the course of the year, the executive team was strengthened with the addition of David Broderick as CFO and Jaime Gine as chief commercial officer. A global director of IT has been appointed and the company is recruiting a group head of HR. A unified sales team also facilitates cross selling.

Service line – Each service line (which comprises a number of studios) is run on a global basis, led by a global service head, whose responsibilities include defining and executing the M&A strategy for the segment. All service lines other than Art now use a common operating platform across their studios for project management, workforce and operational reporting.

Regional – Service lines are supported by regional management teams. The company is generating cost synergies through consolidating studios into shared offices in Montreal and Madrid and with plans for London as well.

Financials and estimates

Scope for upside in revenues and margins

We have nudged up our FY17 estimates slightly (detailed in Exhibit 3), while our FY18 estimates are new. We believe that they remain conservative at all levels. Our FY17 revenue estimate implies a mere 3% like-for-like growth – although if we adjust for the circa €4m of above run rate revenues from Synthesis this increases to 7% – still significantly below the 20% (Synthesis adjusted) level from FY16. We assume 8% like-for-like growth in FY18.

Gross margins in FY16 were 35.6% (38% including games development tax credit), up from 35.4% last year, although the exceptional trading and utilisation at Synthesis did boost this figure. We are forecasting a return to previous levels in FY17 due to this not repeating, although there may be scope for some upside, as on a blended group basis, the company is not seeing any significant changes in either price or cost pressure.

We expect to see some benefits from operational gearing at the admin expenses level, which we forecast dropping to c 20% of revenues versus the 22% level in FY16.

We also forecast a progressive 1% pa reduction in tax rate over the period (21.7% in FY16) as the company leverages its diverse geographical footprint to improve tax efficiency.

Operating model generates healthy cash flows

The company generated free cash flow (including capex, tax, interest but not acquisitions) of €12.7m over the period although this figure was supported by a catch up in multimedia tax credits (€1.6m), Adjusting for this, free operating cash flow per share (19.2c) was within 6% of EPS adj (20.3c). Keywords’ business model requires only modest working capital and capex investment and hence we expect the company to continue generating healthy cash flows on an underlying basis.

Exhibit 3: Estimate changes

€000s

2015

2016e

2016

Change

2017e

2017e

Change

2018e

Year end 31 December

Actual

Est

Actual

Old

New

New

Revenue

57,951

96,600

96,585

0%

115,248

116,671

1%

126,096

Cost of sales

(36,172)

(60,671)

(59,907)

 

(70,301)

(73,203)

4%

(79,314)

Gross profit

21,779

35,929

36,678

2%

44,947

43,468

-3%

46,782

EBITDA

9,459

16,544

16,951

2%

18,984

19,919

5%

21,556

Operating profit (before amort. and except.)

8,162

15,044

15,090

0%

17,224

17,845

4%

19,274

Profit before tax (norm)

8,007

14,784

14,864

1%

16,974

17,558

3%

18,987

Profit after tax (norm)

6,175

11,679

11,641

0%

13,581

13,871

2%

15,190

EPS - normalised fully diluted (c)

12.6

20.9

20.3

-3%

24.0

24.5

2%

26.3

EPS - (IFRS) (c)

7.0

13.2

11.2

-15%

21.4

20.9

-2%

22.8

Dividend per share (pence)

1.2

1.3

1.3

0%

1.5

1.5

0%

1.6

Closing net debt/(cash)

(17,284)

(9,032)

(8,650)

-4%

(17,939)

(19,538)

11%

(29,858)

Source: Keywords Studios data, Edison Investment Research


Valuation

Execution on plan should create further value

At 34x FY17 earnings dropping to 32x in FY18, Keywords’ rating is a substantial premium to peers (average 18x for FY18).

However, the company has a compelling platform and strategy for growth within a games industry growing at a healthy 6.6% pa, with a strong track record of execution. Further accretive acquisition activity should be expected. Our organic estimates are conservative given historical and market growth rates, and the securing of a major strategic outsourcing deal could provide a further boost to forecasts. So while we believe that strong progress is now priced in for this year, if the company executes to plan it should grow into this valuation and continued execution should continue to deliver upside for shareholders.

Exhibit 4: Peer valuation table

Name

Current price (ccy value)

Quoted currency

Market cap (m)

EV/sales 1FY (x)

EV/sales 2FY (x)

EV/ EBITDA 1FY (x)

EV/ EBITDA 2FY (x)

P/E 1FY (x)

P/E 2FY (x)

Outsourced services

KEYWORDS STUDIOS PLC

KWS LN EQUITY

723

£

393

3.9

3.6

22.6

20.9

34.2

31.9

LIONBRIDGE TECHNOLOGIES INC

liox us equity

6

US$

350

0.8

0.7

8.6

7.2

11.6

8.6

SDL PLC

sdl ln equity

580

£

593

1.6

1.6

13.6

12.2

21.2

19.4

RWS HOLDINGS PLC

rws ln equity

330

£

941

4.8

4.4

18.1

16.5

23.7

23.1

CAPITA PLC

cpi ln equity

567

£

4,759

1.3

1.3

9.4

9.2

10.4

10.0

SERCO GROUP PLC

srp ln equity

116

£

1,592

0.5

0.4

11.7

10.8

42.9

32.1

WIPRO LTD-ADR

wit us equity

10

US$

24,868

2.7

2.5

12.9

12.0

19.7

18.1

POLETOWIN PITCREW HOLDINGS

3657 JT equity

1,221

JPY

209

0.8

0.8

N/A

N/A

13.2

11.8

CAPGEMINI

cap fp equity

86

15,600

1.2

1.2

9.1

8.5

14.5

13.3

Average

1.8

1.7

11.9

10.9

20.8

17.0

Games industry

MICROSOFT CORP

MSFT US Equity

66

US$

508,935

4.9

4.6

13.1

11.8

22.3

20.2

SONY CORP

6758 JT Equity

3,664

JPY

41,553

0.6

0.6

7.6

5.4

93.8

17.7

SQUARE ENIX HOLDINGS CO LTD

9684 JT Equity

3,180

JPY

3,493

1.1

1.1

7.2

5.7

18.8

14.4

UBISOFT ENTERTAINMENT

UBI FP Equity

40

4,826

2.9

2.6

6.8

5.3

30.1

23.4

BANDAI NAMCO HOLDINGS INC

7832 JT Equity

3,350

JPY

6,675

1.0

0.9

6.9

6.3

17.7

15.7

KONAMI HOLDINGS CORP

9766 JT Equity

4,735

JPY

6,098

2.6

2.3

11.2

9.6

25.9

21.6

ELECTRONIC ARTS INC

EA US Equity

90

US$

27,596

4.9

4.7

14.1

13.6

23.2

21.5

Average

2.6

2.4

9.6

8.2

33.1

19.2

Source: Bloomberg consensus, Edison Investment Research estimates. Note: Share prices as of 6 April 2017.

Exhibit 5: Financial summary

€'000s

2014

2015

2016

2017e

2018e

31-December

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

37,293

57,951

96,585

116,671

126,096

Cost of Sales

(24,566)

(36,172)

(59,907)

(73,203)

(79,314)

Gross Profit (inc multimedia tax credits)

12,727

21,779

36,678

43,468

46,782

EBITDA

 

 

6,027

9,459

16,893

19,919

21,556

Operating Profit (before amort. and except.)

 

 

5,159

8,162

15,090

17,845

19,274

Intangible Amortisation

(468)

(857)

(1,629)

(1,629)

(1,629)

Exceptionals

(1,461)

(1,089)

(1,316)

0

0

Other

(156)

(392)

(686)

(686)

(686)

Operating Profit

3,074

5,824

11,459

15,530

16,959

Net Interest

(106)

(264)

(287)

(287)

(287)

FOREX

467

(474)

(1,737)

0

0

Profit Before Tax (norm)

 

 

5,053

8,007

14,864

17,558

18,987

Profit Before Tax (FRS 3)

 

 

3,435

5,086

9,435

15,243

16,672

Tax

(1,215)

(1,832)

(3,223)

(3,687)

(3,797)

Profit After Tax (norm)

3,838

6,175

11,641

13,871

15,190

Profit After Tax (FRS 3)

2,220

3,254

6,212

11,556

12,875

Average Number of Shares Outstanding (m)

45.0

48.2

55.9

55.3

56.5

EPS - normalised (c)

 

 

8.5

12.8

20.9

25.1

26.9

EPS - normalised fully diluted (c)

 

 

8.5

12.6

20.3

24.5

26.3

EPS - (IFRS) (c)

 

 

4.9

7.0

11.2

20.9

22.8

Dividend per share (p)

1.10

1.21

1.33

1.46

1.61

Gross Margin (%)

34.1%

37.6%

38.0%

37.3%

37.1%

EBITDA Margin (%)

16.2%

16.3%

17.5%

17.1%

17.1%

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

13.8%

14.1%

15.6%

15.3%

15.3%

BALANCE SHEET

Fixed Assets

 

 

20,874

32,132

61,873

60,412

61,204

Intangible Assets

17,677

27,675

55,495

54,191

52,562

Tangible Assets

2,761

3,486

5,498

5,341

7,762

Investments

436

971

880

880

880

Current Assets

 

 

23,120

34,884

38,677

53,562

66,228

Stocks

0

0

0

0

0

Debtors

6,203

7,519

13,879

16,655

18,000

Cash

11,014

19,018

17,020

27,908

38,228

Other

5,903

8,347

7,778

9,000

10,000

Current Liabilities

 

 

(9,746)

(13,128)

(27,830)

(31,048)

(32,138)

Creditors

(9,746)

(11,965)

(19,805)

(23,023)

(24,113)

Short term borrowings

0

(1,163)

(8,025)

(8,025)

(8,025)

Long Term Liabilities

 

 

(2,607)

(3,294)

(6,016)

(6,190)

(6,190)

Long term borrowings

0

(571)

(345)

(345)

(345)

Other long term liabilities

(2,607)

(2,723)

(5,671)

(5,845)

(5,845)

Net Assets

 

 

31,642

50,594

66,704

76,737

89,104

CASH FLOW

Operating Cash Flow

 

 

2,412

4,768

17,168

20,205

21,522

Net Interest

11

(58)

(58)

(287)

(287)

Tax

(522)

(1,362)

(2,129)

(3,687)

(3,797)

Capex

(1,252)

(1,635)

(2,306)

(3,618)

(4,703)

Acquisitions/disposals

(8,889)

(7,409)

(21,104)

(900)

(1,500)

Financing

7,342

14,199

643

0

0

Dividends

(609)

(737)

(825)

(814)

(915)

Net Cash Flow

(4,256)

7,194

(8,611)

10,898

10,320

Opening net debt/(cash)

 

 

(15,271)

(11,014)

(17,284)

(8,650)

(19,538)

Forex gain on cash

0

0

1

0

0

Other

(1)

(924)

(24)

(11)

0

Closing net debt/(cash)

 

 

(11,014)

(17,284)

(8,650)

(19,538)

(29,858)

Source: Keywords Studios data, Edison Investment Research estimates


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Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Keywords Studios 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 Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. 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 2017. “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

245 Park Avenue, 39th Floor

10167, 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

245 Park Avenue, 39th Floor

10167, 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, advisors 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 (www.fsa.gov.uk/register/firmBasicDetails.do?sid=181584). 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 Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Keywords Studios 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 Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. 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 2017. “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

245 Park Avenue, 39th Floor

10167, 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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205, 95 Pitt Street

Sydney, NSW 2000

Australia

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