Numis Corporation — Advancing on all fronts

Numis Corporation (LSE: NUM)

Last close As at 28/03/2024

GBP3.43

0.00 (0.00%)

Market capitalisation

GBP402m

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Research: Financials

Numis Corporation — Advancing on all fronts

Numis made good progress across its business in FY17, started the current year at a similar pace and has a good pipeline of potential deals. Implementation of MiFID II will affect research and sales income, but the evidence so far points to a moderate rather than severe impact on this part of the business. Trading is subject to market trends but, given the strong start to the year and the further development of the firm’s franchise, we have raised both our estimates and valuation.

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Financials

Numis Corporation

Advancing on all fronts

FY17 results

Financial services

20 December 2017

Price

314p

Market cap

£336m

Net cash (£m) at 30 September 2017

95.9

Shares in issue

106.7m

Free float

89%

Code

NUM

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

6.7

16.8

29.1

Rel (local)

4.3

12.6

18.6

52-week high/low

315.2p

231.2p

Business description

Numis is one of the UK's leading independent corporate advisory and stockbroking groups, offering a full range of research, execution, equity capital markets, corporate broking and advisory services. It employs c 235 staff in offices in London and New York, and at the end of September 2017 had 202 corporate clients.

Next events

Interim results

May 2018

Analysts

Andrew Mitchell

+44 (0)20 3681 2500

Martyn King

+44 (0)20 3077 5745

Numis Corporation is a research client of Edison Investment Research Limited

Numis made good progress across its business in FY17, started the current year at a similar pace and has a good pipeline of potential deals. Implementation of MiFID II will affect research and sales income, but the evidence so far points to a moderate rather than severe impact on this part of the business. Trading is subject to market trends but, given the strong start to the year and the further development of the firm’s franchise, we have raised both our estimates and valuation.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

09/16

112.3

32.5

22.4

12.0

14.0

3.8

09/17

130.1

38.3

25.9

12.0

12.1

3.8

09/18e

132.2

38.0

27.0

12.0

11.6

3.8

09/19e

137.1

39.4

28.3

12.0

11.1

3.8

Note: *PBT and EPS are on a reported basis.

FY17 results

Revenues for FY17 were up 16%, with both Corporate Broking and Advisory (+15%) and Equities (+17%) contributing strongly. The number of corporate clients increased modestly, now standing at over 200, and their average market capital has increased by 33% to £728m. The median market cap is much lower at £322m and Numis remains committed to its small- and mid-cap stronghold. Equity raised for corporate clients increased by 33%. Within Equities, market-making revenue rose 39% and the strength of the research and sales team contributed to a 12% increase in institutional commissions in the face of continuing pressure on rates. Pre-tax profit rose by 18% to £38.1m and EPS by 15.6% to 25.9p. The dividend was unchanged at 12p and under a revised dividend policy the board intends to pay a stable dividend and return surplus liquidity through share buybacks (see page 4).

Outlook – positive start to FY18

The current year has started well in terms of corporate transactions and the Equities business revenues are running ahead of the prior year. Encouragingly, the feedback on negotiations with institutions related to MiFID II so far suggest a small impact on revenue and a high rate of client retention. This, the continued development of the corporate client base and the achievement of a smooth management succession give confidence on a longer view, even if market volatility interrupts the earnings progression at some point. Our FY18 revenue estimate is increased by 11%, feeding into a 22% increase in EPS.

Valuation

The shares have performed well over the last year (+31%) but are not expensively rated compared with peers and, reflecting our higher estimate, our central ROE/COE-based valuation increases from 323p to 354p.

FY17 results: Progress across the business

In the year to end-September, Numis recorded good growth across its business with overall revenues up 16%. Revenues for both Equities and Corporate Broking and Advisory were at record levels. Pre-tax profits and earnings per share were 17% ahead. The corporate client list now stands at just over 200. Key points were as follows with comparisons against FY16:

Revenue increased by 16% to £130.1m.

Staff costs rose 17% to £69m, reflecting variable compensation and a 3% increase in the average headcount to 220, while the year-end figure stood at 235 (see Exhibit 1). This reflected selective investment to strengthen capabilities across the company. The compensation ratio for the year was little changed at 53.0% versus 52.4%.

Other costs increased by less than 7% and nudged down one point to 19% as a ratio of revenues, leaving the overall cost/income ratio at 71%. As shown in Exhibit 2, these ratios have been broadly stable since FY13.

Other operating income (net gains on the strategic investment portfolio) was £3.4m versus £3.8m. Most of the gain this year arose from price movements on quoted holdings, which account for half of the portfolio (largely through the Numis mid-cap fund).

Pre-tax profit increased by 18% to £38.1m or, excluding the portfolio gains, by 21% to £34.9m.

Earnings per share increased by 16.6% to 27.4p or, on a diluted basis, by 15.6% to 25.9p.

The full-year dividend of 12.0p was unchanged and Numis indicates that it has adopted a new stance on dividends and share buybacks (see below).

The balance sheet remains strong, with cash increasing from £89.0m to £95.9m after spending £22.9m on share repurchases. There is an estimated regulatory capital surplus of £67m.

The number of corporate clients increased by a net 3 to end the year at 202.

Equity capital raised for clients was £2.5bn, compared with £1.9bn (+33%), and the 45 equity raisings included 7 IPOs. The Corporate Broking and Advisory business also carried out 37 pure advisory roles, and 17 block trades and sell-downs, with a total value of £0.9m.

Numis’s UK equity capital markets share (by calendar year) has risen from 2.6% in 2013 and 9.8% in 2016 to 9.9% at the end of November this year (sources: Numis, Bloomberg).

Exhibit 1: Revenue per head and headcount

Exhibit 2: Cost to revenue ratios

Source: Numis, Edison Investment Research

Source: Numis, Edison Investment Research

Exhibit 1: Revenue per head and headcount

Source: Numis, Edison Investment Research

Exhibit 2: Cost to revenue ratios

Source: Numis, Edison Investment Research

Exhibit 3 shows the segmental composition of revenue for FY17. Compared with the average for the previous five years, there are two changes: the contribution from institutional commissions is 27% compared with 33%, while placing commissions have risen from 37% to 44%. The changes reflect the particularly strong performance in corporate finance activity as the Numis franchise has expanded over the six years concerned.

Franchise development is further illustrated in Exhibit 4, which shows the progression of total revenues for Numis and the aggregate market capital of its clients. The growth in aggregate market capital reflects both the growth in client numbers and an upward trend in the average market capital, which now stands at £726m, up 28% on the prior year. The development in corporate client base feeds into each of the business areas to a greater or lesser extent. Although the increased scale within the client base is valuable for revenue generation, Numis underlines its continuing commitment to the small cap area, which remains an area of strength for the business. This is reflected in the level of median market capital for its clients that, at £322m, is less than half the average figure.

Exhibit 3: Revenue analysis FY17

Exhibit 4: Revenue versus client market capital

Source: Numis

Source: Numis

Exhibit 3: Revenue analysis FY17

Source: Numis

Exhibit 4: Revenue versus client market capital

Source: Numis

Exhibit 5 shows the development of segmental revenues over the past five years. FY17 trading income showed further strong progress (+39% versus FY16) after a marked step-up in FY16. Numis indicates that the FY17 result was achieved with only a limited increase in capital usage. While institutional commission rates remained under pressure in the run up to MiFID, commission income was up 12%, which can be seen as a reflection of a relatively favourable market background in terms of market levels, a contribution from block trades (on the buyer side) and the strength of the Numis institutional franchise.

Corporate retainers, which we see as a relatively sticky source of income, grew by 20%, reflecting a 5% rise in the average corporate client count together with the benefit of progressive fee increases. The level of advisory fees was stable, but taking pure M&A advisory activity within this (excluding some fees related to capital raisings) the increase would have been 16%.

Exhibit 5: Revenue analysis

£m

2013

2014

2015

2016

2017

Change FY17/FY16

Net trading gains

8.5

7.7

4.1

6.5

9.0

39%

Institutional commissions

28.8

31.9

29.3

31.9

35.8

12%

Net Institutional Income

37.2

39.6

33.4

38.4

44.8

17%

Corporate retainers

6.9

7.8

8.9

9.6

11.6

20%

Advisory fees

6.0

9.0

17.9

16.3

16.5

1%

Placing commissions

27.5

36.5

37.7

48.0

57.2

19%

Corporate related

40.4

53.3

64.6

73.9

85.3

15%

Total revenue

77.7

92.9

98.0

112.3

130.1

16%

Source: Numis

Dividend and share buyback policy

Numis has indicated an adjustment in its dividend and share buyback policy. Under this, the aim is to pay a stable ordinary dividend (unchanged at 12p for FY17) with consideration given to investing in the business platform, investing in selective growth opportunities and returning surplus cash to shareholders, subject to liquidity and capital requirements and market conditions. The group intends to buy back shares over the medium term to at least offset any prospective dilution from unvested share awards and potentially to reduce the share count further in order to enhance shareholder returns.

Background and outlook

The UK equity market provided a relatively favourable background for equity issuance during Numis’s FY17, with indices following an upward trend for most of the period (Exhibit 6) while volatility was also comparatively low despite unsettling macro developments (Exhibit 7). Explanations put forward for this pattern include the resilience of the UK economy, sterling weakness and the continuation of historically low policy rates.

Exhibit 6: FTSE AIM, All-Share and Small Cap indices

Exhibit 7: FTSE 100 volatility index

Source: Thomson Datastream. Note: total return series

Source: Thomson Datastream

Exhibit 6: FTSE AIM, All-Share and Small Cap indices

Source: Thomson Datastream. Note: total return series

Exhibit 7: FTSE 100 volatility index

Source: Thomson Datastream

The result has been a strengthening in equity fund-raising (see below) with the value of issuance on the London Stock Exchange Main market up by 6% and AIM by 13% compared with the prior year period. New issuance for both markets was up 27%, while further issuance (over 70% of the total) was only marginally ahead (+2%).

Exhibit 8: AIM and Main market value of issuance

Source: LSE. Note: for year to end September.

While low volatility tends to moderate secondary trading activity, the average daily value of trading on the Main market increased by 6% and for the AIM market there was a substantial (88%) rise for FY17 versus FY16.

Numis reports that it has made a strong start to the current year. There have been 11 fund-raisings to date, including the IPOs of Sabre Insurance Group (£575m) and Ero Copper (C$110m), and placings for Hilton Food Group, IP Group, RWS Group, Keywords Studios and Clinigen Group (all to finance M&A). The run rate of revenues in the Equities business is reported as being ahead of the daily rate for FY17.

This is encouraging, but as usual the macro background has considerable uncertainty and a rise in volatility could have an impact on sentiment and the pace of corporate and institutional investor activity. Alternatively, continuation of economic resilience and better than feared progress in the second stage of Brexit negotiations could ease realisation of the promising pipeline of potential transactions that Numis reports.

With MiFID II coming into force in January 2018, the implications of research unbundling for institutional commissions remains a prominent potential sensitivity for Numis, as for other brokers. Numis remained in discussion with institutional clients at the time of the results release and indicated that institutional retention following the process was likely to be very high. The equities team includes 39 analysts covering 17 sectors and c 370 companies, while institutions are also served by 30 salespeople, 10 sales traders and 14 UK market makers. The research team is well-ranked in institutional surveys. Based on current trends, there seems likely to be a modest negative effect on sales and research-related revenues as a result of MiFID II implementation, with reductions in payments from some institutions mitigated to some extent by new payments from private client brokers and the potential for higher execution flow as broker lists are trimmed.

Numis continues to develop its ability to conduct private placements. The Venture Broking team focuses on advising fast-growing private companies and works with a growing pool of seed, venture capital and growth, listed and private equity investors. The team seek to identify promising companies that it can advise and help introduce to potential investors. This area should continue to increase its contribution to revenue over time while providing a source of potential IPO candidates and new corporate clients as its network expands.

Management succession largely complete

A process of management transition is almost complete following the announcement in May 2016 that Oliver Hemsley would step down as CEO. Alex Ham and Ross Mitchinson took on the role of joint CEOs in September 2016. Oliver Hemsley stepped down from the board in May 2017, although he will remain as an adviser until at least May 2018. There has also been a handover of the non-executive chairman’s role, with Alan Carruthers replacing Gerald Corbett in March this year. Still to take place at the beginning of 2018 is the succession in the finance director role, with Andrew Holloway taking over from Simon Denyer. A summary of board changes is shown in Exhibit 9.

The co-CEOs and FD-designate have been at Numis for between eight and 12 years, while most other senior members of the executive team have similar tenure, pointing to continuity while introducing fresh leadership for the next stage in the development of Numis.

Exhibit 9: Prospective board composition and changes

Board members

Role

Date of joining

Prospective board following announced changes

Executive directors

Alex Ham

Co-CEO

Sep-16

Ross Mitchinson

Co-CEO

Sep-16

Andrew Holloway

CFO

Jan-18

Independent non-executive directors

Alan Carruthers

Chairman

Mar-17

Geoffrey Vero

Apr-03

Robert Sutton

May-14

Catherine James

May-14

Prospective and recent board departures

Date stood/standing down

Oliver Hemsley

Founder and former CEO remains as adviser at least until May 2018

May-17

Marcus Chorley

Chairman of equities stepping down from board but remains in current role

Sep-17

Lorna Tilbian

Head of media sector – leaving company December 2017

Sep-17

Simon Denyer

Group finance director and company secretary – leaving company

Jan-18

Source: Edison Investment Research, Numis Corporation

Financials

With the strong trading seen in H217 continuing at a similar rate at the beginning of the current year, we have materially increased our revenue and profit estimates for FY18. We have also introduced an estimate for FY19. In both cases, the normal caveats relating to the sensitivity to market conditions should be borne in mind. Changes in the key figures from our estimates are shown in Exhibit 10 and further details can be seen in the financial summary (Exhibit 13).

The continued progress in building the corporate client base and the early indication of only moderately negative effects from MiFID II on institutional commissions are encouraging signs for Numis’s longer-term growth through market cycles.

Exhibit 10: Estimate revisions

Revenue (£m)

PBT (£m)

EPS (p)

DPS (p)

Old

New

Change

Old

New

Change

Old

New

Change

Old

New

Change

09/17e/a

129.0

130.1

0.8%

36.5

38.3

5.0%

25.0

25.9

3.6%

12.0

12.0

0.0%

09/18e

119.5

132.2

10.6%

30.8

38.0

23.7%

22.1

27.0

22.2%

12.5

12.0

-4.0%

09/19e

137.1

N/A

39.4

N/A

28.3

N/A

12.0

N/A

Source: Edison Investment Research. Note: for FY17, the ‘old’ column is our estimate and ‘new’ is actual.

Operating cash flow benefited from increased profits and a net realisation of £4.5m from the investment portfolio but, when compared with last year, this was more than offset by broadly unchanged market-making positions in contrast to the significant inflow seen in FY16. As a result, net cash flow from operating activities was somewhat lower at £43.4m, compared with £48.7m for FY16, but this still left room for share repurchases of £22.9m, dividend payments of £13.5m and an increase in cash from £89.0m to £95.9m.

The investment portfolio of strategic investments stood at £28.1m at the year-end, including £14.1m of unquoted investments, £12.4m in the Numis mid-cap fund and £1.6m in listed equities. Net gains on these investments are shown under the other operating income line (£3.4m). The intention is to manage the unlisted investments more actively as Numis looks to provide initial capital and to act as an introducer to follow-on investors, rather than being a longer-term holder itself.

Numis indicates that its qualifying capital stands at £126.7m, while it has an estimated capital requirement including buffer of £60m, leaving a substantial regulatory capital surplus of £67m.


Valuation

We have updated our comparative valuation table below. It includes UK brokers together with a selection of US and European investment banks and advisory firms. The businesses are significantly differentiated but provide a qualified peer group for comparison. In terms of P/Es, Numis is towards the lower end of the range, while both its return on equity and price to book are above average.

Exhibit 11: Peer comparison

Price

(local)

Market cap (£m)

Last reported PER (x)

Current PER (x)

Yield
(%)

Price to book (x)

ROE
(%)

UK brokers

Numis

314.0

340

11.5

11.6

3.8

2.6

23.1

Arden

53.5

17

loss

N/A

0.0

1.8

-14.8

Cenkos

108.5

62

23.1

8.8

5.5

2.2

10.0

Shore Capital

207.5

45

34.6

15.8

2.4

0.8

2.3

WH Ireland

120.0

33

loss

N/A

0.0

2.4

-6.9

UK brokers average

23.0

12.1

2.4

2.0

2.7

US, European IB and advisory

Bank of America

29.5

229,257

18.6

16.2

0.8

1.2

7.6

Evercore

90.2

2,600

32.9

17.1

1.4

7.3

40.5

Goldman Sachs

256.5

74,998

15.5

13.4

1.0

1.3

10.6

Greenhill

19.5

381

10.2

N/A

9.3

2.0

8.1

JP Morgan

106.5

275,812

17.1

15.4

1.8

1.6

10.8

Moelis

47.7

2,386

26.1

20.4

7.0

7.6

25.4

Morgan Stanley

52.9

71,417

17.8

14.9

1.3

1.4

9.5

Stifel

60.3

3,082

52.0

17.3

0.0

1.5

7.8

Credit Suisse

17.6

33,920

loss

23.8

3.8

1.0

-3.3

Deutsche Bank

16.8

30,661

loss

17.5

1.0

0.5

-0.8

UBS

18.4

52,849

loss

14.4

0.0

1.2

7.7

US, European IB and advisory average

23.8

17.1

2.5

2.4

11.3

Source: Bloomberg. Note: priced at 20 December 2017.

For our ROE/COE model, we have used assumptions of an ROE of 21% (equivalent to the 2014-18e average), a cost of equity of 10% and growth of 4%. Applying these to the FY17 NAV gives a central value of 354p (323p previously, with the increase reflecting a higher ROE and NAV base). The sensitivity of this valuation to changing growth and ROE assumptions is illustrated in Exhibit 12.

Exhibit 12: ROE/COE valuation output variations (value per share, p)

Growth rate (right)

Return on equity

2.0%

3.0%

4.0%

5.0%

6.0%

12.0%

156

161

167

175

188

16.0%

219

232

250

275

313

21.0%

297

321

354

400

469

24.0%

344

375

417

475

563

28.0%

406

447

500

575

688

Source: Edison Investment Research

Exhibit 13: Financial summary

£000s

2015

2016

2017

2018e

2019e

Year end 30 September

PROFIT & LOSS

Revenue

 

 

97,985

112,335

130,095

132,157

137,063

Other operating income

 

 

(1,978)

3,759

3,431

2,000

2,000

Total income

 

 

96,007

116,094

133,526

134,157

139,063

Cost of Sales (excl. amortisation and depreciation)

(65,018)

(76,120)

(83,626)

(84,962)

(89,617)

Share based payment

(4,104)

(6,229)

(10,454)

(10,100)

(9,000)

EBITDA

 

 

28,863

29,986

36,015

37,095

38,446

Depreciation

 

 

(882)

(1,126)

(1,226)

(1,230)

(1,230)

Amortisation

(111)

(125)

(89)

(33)

0

Operating Profit

 

 

27,870

28,735

34,700

35,832

37,216

Net finance income

190

37

188

195

205

Other operating income

(1,978)

3,759

3,431

2,000

2,000

Profit Before Tax

 

 

26,082

32,531

38,319

38,027

39,421

Tax

(4,533)

(6,132)

(7,942)

(7,887)

(8,249)

Profit after tax (FRS 3)

 

 

21,549

26,399

30,377

30,140

31,171

Average diluted number of shares outstanding (m)

117.6

118.0

117.2

111.5

110.0

EPS - basic (p)

19.5

23.5

27.4

28.7

30.1

EPS - diluted (p)

 

 

18.3

22.4

25.9

27.0

28.3

Dividend per share (p)

11.50

12.00

12.00

12.00

12.00

NAV per share (p)

102.0

113.5

125.0

138.9

154.3

ROE (%)

19%

22%

23%

22%

20%

EBITDA margin (%)

29.5%

26.7%

27.7%

28.1%

28.0%

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

28.4%

25.6%

26.7%

27.1%

27.2%

BALANCE SHEET

Fixed assets

 

 

6,724

5,522

6,147

5,384

4,654

Current assets

 

 

279,114

312,462

407,850

421,338

435,922

Total assets

 

 

285,838

317,984

413,997

426,722

440,576

Current liabilities

 

 

(170,319)

(188,895)

(280,371)

(280,371)

(280,371)

Long term liabilities

0

(12)

0

0

0

Net assets

 

 

115,519

129,077

133,626

146,351

160,205

CASH FLOW

Operating cash flow

 

 

6,467

48,735

43,369

36,203

36,091

Net cash from investing activities

(3,632)

84

(198)

(200)

(190)

Net cash from (used in) financing

(17,510)

(19,580)

(36,359)

(27,515)

(26,317)

Net cash flow

 

 

(14,675)

29,239

6,812

8,488

9,584

Opening net (cash)/debt

 

 

(74,518)

(59,591)

(89,002)

(95,852)

(104,340)

FX effect

 

 

(252)

172

38

0

0

Closing net (cash)/debt

 

 

(59,591)

(89,002)

(95,852)

(104,340)

(113,924)

Source: Edison Investment Research

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Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Numis Corporation 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 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 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

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 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Numis Corporation 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 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 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

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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Research: Investment Companies

Vietnam Enterprise Investments — Long-established track record and local expertise

Vietnam Enterprise Investments (VEIL) was launched in 1995 and is the largest and longest established, closed-ended investment company, which is focused on Vietnam listed equities. VEIL is listed on the LSE and became a member of the FTSE 250 in July 2017. It has a capital growth objective, managed by an experienced and well-resourced investment team, following a disciplined bottom-up, fundamental approach to stock selection, resulting in a portfolio of c 35-40 holdings. Although Vietnam equities have performed strongly over the past two years, the manager believes the government’s pipeline of privatisations and divestments over the next two years offers excellent investment opportunities, which could continue to attract foreign and domestic investors.

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