Record — Highest AUME yet

Record (LSE: REC)

Last close As at 28/03/2024

GBP0.62

−0.60 (−0.96%)

Market capitalisation

GBP125m

More on this equity

Research: Financials

Record — Highest AUME yet

Record reported assets under management equivalent (AUME) at a record level at the end of March reflecting positive market and currency moves in the company’s final quarter. While flows have fluctuated during FY17, the uncertain macro background is contributing to good levels of interest in Record’s currency management products and this should also be supported by a lengthening period of positive performance from the currency for return products.

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Financials

Record

Highest AUME yet

Q417 trading update

Financial services

24 April 2017

Price

41.00p

Market cap

£91m

Net cash and money market instruments (£m) at 30 September 2016, excluding cash consolidated from seed funds.

28.8

Shares in issue

221.4m

Free float

32%

Code

REC

Primary exchange

LSE

Secondary exchange

NA

Share price performance

%

1m

3m

12m

Abs

(8.6)

9.3

56.2

Rel (local)

(6.3)

9.1

39.4

52-week high/low

47.2p

24.0p

Business description

Record is a specialist independent currency manager that provides a number of products and services, including passive and dynamic hedging, and a range of currency for return strategies, including funds and customised segregated accounts.

Next events

FY17 figures

16 June 2017

AGM

21 July 2017

Analysts

Andrew Mitchell

+44 (0)20 3681 2500

Julian Roberts

+44 (0)20 3077 5748

Record is a research client of Edison Investment Research Limited

Record reported assets under management equivalent (AUME) at a record level at the end of March reflecting positive market and currency moves in the company’s final quarter. While flows have fluctuated during FY17, the uncertain macro background is contributing to good levels of interest in Record’s currency management products and this should also be supported by a lengthening period of positive performance from the currency for return products.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

03/15

20.9

7.5

2.65

1.65

15.5

4.0

03/16

21.2

7.0

2.54

1.65

16.1

4.0

03/17e

22.6

7.9

2.84

1.65

14.4

4.0

03/18e

24.1

8.5

3.03

1.65

13.5

4.0

Note: *PBT and EPS exclude non-controlling interests relating to seed investments. Prospective DPS excludes any special dividends.

Q417 trading update

AUME at the end of March stood at $58.2bn, the highest level yet and 10% ahead of the prior year figure or up 26% in sterling terms. In Q4, net flows were a negative $0.5bn including a $0.9bn reduction in allocation by a client operating a specific variable multi-product mandate. The number of clients was lower in the quarter on the termination of six linked accounts but just ahead for the year at 59. Market and currency movements in the quarter both had a positive impact on AUME, more than offsetting the small net outflow. The currency for return strategies extended their period of positive performance with the longest standing multi-strategy mandate recording a gain of 0.64% and an annualised gain of 1.8% since inception (page 3).

Outlook and estimate changes

The changing macroeconomic and political background over the last year has created a fertile environment for Record to attract new clients and further allocations for its currency management services. The company reports that interest remains strong across a range of countries and products providing a promising background for the current year. We have increased our revenue estimates to reflect the higher than forecast year end AUME while also allowing for the termination of a $1.2bn passive hedging mandate since the year end. As a result our EPS estimates increase by 7% and 2% respectively for FY17 and FY18. Our dividend forecast is unchanged at 1.65p but we note that the board will consider returning excess earnings to shareholders through a special dividend which, we estimate, could take the total dividend to 2.75p, giving a yield of 6.7%.

Valuation

Record trades on an estimated calendar 2016 P/E multiple of just below 15x compared with the average of 14x for its asset manager comparators, but in terms of EV/EBITDA it trades below the peer average and, given its strong capital position and the potential to pay out surplus earnings, there would seem good scope for its rerating to resume following a share price dip following the Q4 update.

Q417 trading update: AUME reaches new high point

The quarterly update to the end of March 2017 showed a further increase in AUME reflecting positive market and exchange rate moves offset by a modest net outflow. Client numbers were down on the quarter but up from the level following a previously announced termination of six related passive mandates. Record reports that there is a good level of interest from potential clients spread across product and geography. Supporting this are both an uncertain macro background and a continuing positive performance in the currency for return strategies.

Exhibit 1: AUME changes

Year to end March

Q416

Q217

Q317

Q417

Q317

Q417

$bn

AUME

AUME

AUME

AUME

Net flows

Net flows

Dynamic hedging

6.1

5.7

6.1

6.3

0.5

0.1

Passive hedging

43.4

45.6

46.3

48.2

1.3

0.3

Currency for return

0.6

0.9

1.0

1.0

0.0

0.0

Multi-product

2.6

2.6

3.0

2.5

0.4

(0.9)

Cash

0.2

0.2

0.2

0.2

0.0

0.0

Total

52.9

55.0

56.6

58.2

2.2

(0.5)

Markets

1.8

1.4

FX effects

(2.4)

0.7

Total change

1.6

1.6

Source: Record company data

Looking at the release more closely:

AUME at the period end was at a record level of $58.2bn, an increase of 3% from end December 2016 or 10% from the March 2016 year end (in sterling terms the increases were 2% and 26%, respectively). See Exhibit 1 for details of the evolution of AUME. A client has notified the termination of a $1.2bn passive hedging mandate which is expected to take place in the current quarter (Q118).

Net flow in Q417 was a net negative $0.5bn. Within this overall movement there was a $0.3bn inflow in the passive hedging category despite a $0.6bn outflow from six connected clients which had been flagged at the time of the last update. The gain reflected a new client win of $0.2bn and additional allocations from existing clients ($0.7bn). The $0.9bn outflow in the multi-product area arose when one client reduced its allocation: a demonstration of the variable nature of this bespoke mandate. In the prior quarter there had been an inflow of $0.4bn in this area.

The number of clients at the end of the quarter was 59 compared with 64 at the beginning of the period or 58, allowing for the departure of the six linked clients mentioned above. As we have noted previously, there is a degree of judgement in defining a separate client (Record counts separate legal entities), so the client count is only a qualified indicator for the business. Nevertheless, the number of clients has increased by over a third since the end of FY13 when there were 44.

On Q417 performance, Record notes that US dynamic hedging programmes performed as intended while the UK programmes were affected by volatility and the resulting cash costs associated with changing hedging levels. Encouragingly, performance in the currency for return strategies shown in Exhibit 2 remained positive in the quarter extending the track record for the products. Within the multi-product category positive performances from FRB10 and emerging market strategies more than offset weakness in momentum and value. No performance fees were earned in Q417 or FY17.

There has been no significant change in fee rates in the quarter and we assume 13bp for dynamic hedging, 17bp for currency for return, 20bp for multi-product and 4bp for passive mandates.

Exhibit 2: Currency for return products – performance data

Year to end March 2017

Q1

Q2

Q3

Q4

Annualised since inception

Inception

FTSE FRB10 Currency Index

+0.78

+1.37

+1.96

+0.27

Emerging market product (ungeared)

+0.63

+2.51

+4.02

+2.85

+2.22

30/11/2009

Multi-strategy product (ungeared)

+1.48

+1.03

+1.11

+0.64

+1.82*

31/07/2012

Source: Record company data. Note: *Annualised performance since inception for the longest standing multi-strategy mandate.

The next two exhibits show the percentage split between product categories by AUME, as reported, and for fee income (our estimate is based on Q417 AUME and indicated average fee rates for each area). The AUME split has barely changed over the year and the fee income analysis highlights that, even with the relatively low fee rates applied to passive hedging, the two hedging strategies account for 80% of fee income.

Exhibit 3: AUME analysis

Exhibit 4: Estimated fee income analysis

Source: Record, Edison Investment Research

Source: Edison Investment Research

Exhibit 3: AUME analysis

Source: Record, Edison Investment Research

Exhibit 4: Estimated fee income analysis

Source: Edison Investment Research

In terms of outlook, Record continues to highlight macroeconomic and political factors as drivers of recent and potential volatility. This creates a favourable background for potential client interest in Record’s services. This interest is diversified by geography and product type although management indicates the environment is somewhat less favourable in the UK reflecting recent negative returns on hedging.

Estimate changes

We have updated our estimates with changes primarily related to the increase in AUME during Q417 and allowing for the termination of the $1.2bn passive hedging contract in Q118. Otherwise we have made adjustments for exchange rate movements and allowed slightly higher costs in FY18 to reflect costs associated with managing the effect of regulatory requirements in different territories for clients. As a result our profit and EPS estimates increase by 7% and 2% for FY17 and FY18 respectively (Exhibit 5).

Exhibit 5: Estimate changes

 

Revenue* (£m)

% chg.

PBT* (£m)

% chg.

EPS (p)

% chg.

DPS (p)

% chg.

 

Old

New

 

Old

New

 

Old

New

 

Old

New

 

03/17e

21.9

22.6

4%

7.4

7.9

7%

2.64

2.84

7%

1.65

1.65

0%

03/18e

23.5

24.1

3%

8.4

8.5

2%

2.97

3.03

2%

1.65

1.65

0%

Source: Edison Investment Research. Note: *normalised.

Valuation

We have updated our valuation comparison with UK asset managers in Exhibit 6 while noting that Record is differentiated by its focus on foreign currency and hedging strategies. The level of AUME is linked to stock and other market levels (this applies to almost all hedging programmes and some of the multi-product and currency for return products), while fees are related to the level of AUME, as for asset managers with AUM.

Record is trading at modestly above the average calendar 2016 P/E ratio (at nearly 15x versus a range between c 10x and c 18x) and below the average EV/EBITDA ratio at below 8x. The shares have shown some weakness since the trading update but even so are up approximately 45% on a six month view. Given the strength of the capital position, with £28.8m of cash and marketable securities and shareholders’ funds of £35m at the half year end the board may feel it appropriate to return excess earnings to shareholders. On our revised earnings estimate this could mean a special dividend of 1.1p taking the yield from 4% to c 6.7% at a price of 41p.

Exhibit 6: Earnings and EBITDA multiples for UK fund managers

Price
(p)

Market capitalisation (£m)

P/E ratio*
(x)

EV/EBITDA
(x)

Aberdeen Asset Management

276.8

3,648

13.2

9.0

Ashmore

347.0

2,473

16.6

10.7

City of London Inv Group

368.5

99

10.3

8.0

Henderson

228.9

2,591

13.8

10.2

Impax Asset Management

90.8

116

18.3

13.6

Jupiter

456.3

2,088

14.0

9.3

Liontrust

425.0

211

12.6

9.3

Man Group

149.2

2,483

9.8

6.7

Polar Capital

381.3

349

16.2

11.3

Schroders

3,069.0

8,190

15.6

8.4

Average

14.0

9.7

Record

41.0

91

14.9

7.9

Source: Bloomberg, Edison Investment Research. Note: *Using calendar 2016 actual/estimated earnings. Priced as at 21 April 2017.

Exhibit 7: Financial summary

Year to March

£'000s

 

2015

2016

2017e

2018e

 

 

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

 

 

 

 

 

 

Revenue

 

 

21,057

21,134

22,641

24,107

Operating expenses

 

 

(13,521)

(14,344)

(14,863)

(15,722)

Operating Profit (before amort. and except.)

 

 

7,536

6,790

7,778

8,386

Finance income

 

 

146

143

142

146

Profit Before Tax

 

 

7,682

6,933

7,920

8,532

Taxation

(1,708)

(1,523)

(1,663)

(1,792)

Minority interests

 

 

(192)

131

0

0

Attributable profit

 

 

5,782

5,541

6,257

6,740

 

 

 

 

 

 

 

Normalised revenue (underlying)

 

 

20,865

21,246

22,641

24,107

Operating expenses (excl. dep'n and amortisation)

 

 

(13,206)

(14,023)

(14,542)

(15,401)

EBITDA

 

 

7,659

7,223

8,099

8,707

Depreciation and amortisation

 

 

(315)

(321)

(321)

(321)

Normalised Operating profits

 

 

7,344

6,902

7,778

8,386

Finance income

 

 

146

143

142

146

Profit Before Tax (norm)

 

 

7,490

7,045

7,920

8,532

 

 

 

 

 

 

 

Normalised revenue/AUME (excl. perf fees) bp

 

 

6.0

4.7

4.3

5.3

Normalised Operating Margin (%)

 

 

35.2

32.5

34.4

34.8

 

 

 

 

 

 

 

Average Diluted Shares Outstanding (m)

 

 

218.4

217.9

220.3

222.4

Basic EPS (p)

 

 

2.66

2.55

2.85

3.04

EPS - normalised fully diluted (p)

 

 

2.65

2.54

2.84

3.03

Dividend per share - proposed (p)

 

 

1.65

1.65

1.65

1.65

 

 

 

 

 

 

 

BALANCE SHEET

 

 

 

 

 

 

Fixed Assets

 

 

3,273

423

332

241

Intangible Assets

 

 

504

299

155

11

Tangible Assets

 

 

129

81

134

187

Investments

 

 

2,567

0

0

0

Deferred tax assets

 

 

73

43

43

43

Current Assets

 

 

37,053

40,541

43,477

46,819

Debtors

 

 

6,324

5,695

6,069

6,462

Cash

 

 

12,010

21,720

24,282

27,231

Money market instruments

 

 

18,100

13,020

13,020

13,020

Other

 

 

619

106

106

106

Current Liabilities

 

 

(4,522)

(3,256)

(3,428)

(3,591)

Creditors

 

 

(2,949)

(2,372)

(2,528)

(2,691)

Other

 

 

(1,573)

(884)

(900)

(900)

Net Assets

 

 

35,804

37,708

40,381

43,468

Minority interests

 

 

3,876

4,019

4,019

4,019

Net assets attributable to ordinary shareholders

 

31,928

33,689

36,362

39,449

No of shares at year end

 

 

217.5

217.2

221.4

221.4

NAV per share p

14.7

15.5

16.4

17.8

CASH FLOW

 

 

 

 

 

 

Operating Cash Flow

 

 

6,472

5,791

6,234

6,686

Capex

 

 

(128)

(29)

(130)

(130)

Cash flow from investing activities

 

 

0

(39)

(100)

(100)

Dividends

 

 

(3,266)

(3,750)

(3,583)

(3,653)

Other financing activities

 

 

(2,571)

7,737

142

146

Other

 

 

0

0

0

0

Net Cash Flow

 

 

507

9,710

2,562

2,949

Opening cash/(net debt)

 

 

11,503

12,010

21,720

24,282

Other

 

 

0

0

0

0

Closing net (debt)/cash

 

 

12,010

21,720

24,282

27,231

Closing net debt/(cash) inc money market instruments

30,110

34,740

37,302

40,251

 

 

 

 

 

 

 

Closing ($bn)

 

 

55.4*

52.9

58.2

57.0

Source: Record accounts, Edison Investment Research. Note: *2015 AUME on previous disclosure basis.

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 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 Record 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, 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 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 Record 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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Medigene — Becoming an increasingly prominent player

Medigene is well funded (FY16 cash €52.6m) to advance both its DC vaccine programmes and TCR programme. We expect a number of important milestones in 2017; specifically, we expect newsflow from its most advanced technology (DC vaccines) in Phase I/II studies for AML (complete enrolment) and the start of its first company-initiated T-cell receptor (TCR) clinical study. We have increased our rNPV-based valuation to €293m (vs €233m), to reflect the increase in the TCR programme probability to 13% (vs 5%), rolling the model forward and using FY16 cash.

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