Share — Poised for delivery

Share — Poised for delivery

Share plc’s FY16 result was modestly ahead of our expectation and it is making progress in its work to enhance its customer proposition and servicing through significant investment in IT. The results of this should become more evident in the current year and help continue the growth in assets under administration (AUA), potentially helped by further acquisitions of books of accounts and corporate partnerships. As a platform with relatively stable costs once the IT renewal has been completed, increasing scale should feed through to geared profit improvement. Our central valuation of 29p is maintained.

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Written by

Share

Poised for delivery

FY16 results

Financial services

15 March 2017

Price

27.10p

Market cap

£39m

Net cash (£m) at 31 December 2016

11.4

Shares in issue

143.7m

Free float

31%

Code

SHRE

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(0.9)

(0.9)

(2.7)

Rel (local)

(2.9)

(7.0)

(17.3)

52-week high/low

29p

27p

Business description

Share plc’s main subsidiary is The Share Centre, which is a self-select retail stockbroker that also offers share services for corporates and employees. It has a relatively high proportion of income from fees.

Next events

Q1 trading update

April 2017

AGM

June 2017

Analysts

Andrew Mitchell

+44 (0)20 3681 2500

Julian Roberts

+44 (0)20 3077 5748

Share is a research client of Edison Investment Research Limited

Share plc’s FY16 result was modestly ahead of our expectation and it is making progress in its work to enhance its customer proposition and servicing through significant investment in IT. The results of this should become more evident in the current year and help continue the growth in assets under administration (AUA), potentially helped by further acquisitions of books of accounts and corporate partnerships. As a platform with relatively stable costs once the IT renewal has been completed, increasing scale should feed through to geared profit improvement. Our central valuation of 29p is maintained.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

12/15

14.1

0.6

0.40

0.74

68.0

2.7

12/16

14.6

0.0

0.00

0.25

N/A

0.9

12/17e

16.5

0.3

0.12

0.30

215.2

1.1

12/18e

17.5

0.7

0.36

0.50

73.3

1.8

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

FY16 results

AUA increased by 32% to £3.7bn in 2016, reflecting both market strength (the FTSE All Share Index was up 12%), transfers in, organic growth and the benefit of book acquisitions and partnerships. Revenue was up by 4% but this includes interest income where lower rates depressed the contribution further, and fee and commission income alone were up 8%. Reported pre-tax profit was £1m (vs £0.9m in FY15), including a £2.1m profit on the sale of London Stock Exchange shares. There was a marginal normalised profit after tax (vs £0.6m) reflecting investment costs. Following the adoption of a new dividend policy based on earnings and cash generation a dividend of 0.25p was declared (vs 0.74p in FY15), slightly ahead of our estimate.

Outlook: More positive trends

Following a particularly poor market background for retail investment activity in H215 and the H116 uncertainty ahead of the Brexit referendum, activity levels have picked up, an improvement that has been sustained into the current year. This year should also benefit from full inclusion of accounts acquired during 2016 and the initiation of services for Computershare, together with the services to be provided to an as yet unnamed wealth manager. IT investment should also see more tangible benefits with the launch of a new version of the Share app, which will include dealing and other functionality, as well as improvements to the website to ease customer use. We now forecast an underlying profit rather than loss for 2017, while tempering our expectation for 2018 to allow more fully for the costs of investments.

Valuation: Unchanged

Our DCF assumptions take into account near-term depressed profits and a return to significant profitability over the medium term as operational gearing comes into play. Our central valuation of 29p is unchanged (see page 7).

Customer-focused retail stockbroker

The Share Centre, Share’s main business, was launched in 1991 to provide execution-only stockbroking services to individual investors. In addition to share dealing accounts, The Share Centre also offers accounts for ISAs, SIPPs and investment clubs. It has c 250,000 customer accounts and £3.7bn of AUA. Customers are signed up individually and through corporate partnerships such as those with Henderson for investment trust ISA accounts, Barclays (certificated and investment club dealing services), Computershare (certificated and corporate sponsored nominee dealing) and Invesco Perpetual (ISA accounts). Revenue is generated from three sources: account fees, trading commissions and interest income, split 46.4%, 48.2% and 5.4% respectively for 2016. Share’s account fee structure is differentiated from many peers by being fixed per account rather than based on the value of AUA. Transaction commissions are either charged at 1% with a minimum of £7.50 or, for those who deal frequently or in large sizes, on a flat £7.50 per bargain basis with a £20 quarterly fee (a 30% discount is offered to holders of 500 or more shares in Share plc). This means that the accounts frequently rank favourably in comparisons of providers (depending on portfolio size and frequency of trading).

FY16 results

Share’s FY16 results were ahead of our estimates with revenues 2% above our forecast, while a small underlying net profit rather than a loss was recorded. Progress is being made in the programme of IT investment aimed at improving the customer proposition and servicing, enabling Share to scale the business and respond to market changes in a timely manner. See Exhibit 1 for details of the profit and loss for the full-year and half-year periods. The main points are highlighted below:

AUA increased by 32% to £3.7bn, reflecting market strength (FTSE All Share +12%) and net flows. Segregated customer deposits stood at £296m compared with £176m at end 2015.

The three in-house fund of funds, while still small, now manage £70m compared with £50m and are seen as providing an easy entry point for investors into the world of equity investing.

The level of dealing activity spiked after the Brexit vote and remained at a higher level, allowing full-year total revenues to increase by 4% after a reduction in the first half. Interest income was pressured further by lower rates, and fee and commission revenue alone increased by 8%.

Overall costs (nearly £16m) were up 6.8%, including an increase in staff costs of 8% partly reflecting an increase in staff numbers from 169 to 185 as IT capabilities and in-house marketing have been strengthened. Amortisation cost increased sharply (still only £0.1m), reflecting capitalised investment in systems development.

Reported pre-tax profit was £1.0m versus £0.9m, including a one-off gain of £2.1m on the partial sale of shares in the London Stock Exchange. There was a small underlying profit in 2016 compared with a profit of £0.58m (excludes one-off items, among which is the FSCS levy of £0.272m versus £0.478m).

Underlying, basic, diluted EPS was 0.0p compared with 0.4p for 2015. Reported earnings per share were 0.5p (unchanged).

A dividend per share of 0.25p was announced compared with 0.74p reflecting the new policy adopted during the year under which payments will be based on earnings and cash generated.

The balance sheet remains strong with year-end net cash of £11.4m (£11.7m FY15).

Exhibit 1: Results summary: H216 and FY16

Year-end 31 December

H115

H215

H116

H216

H216 vs H215 %

2015

2016

2016 vs 2105 %

£000 except where stated

Account fees

3,199

3,201

3,271

3,513

9.7

6,400

6,784

6.0

Dealing Commissions

3,426

2,974

3,443

3,597

20.9

6,400

7,040

10.0

Interest and other income

743

507

510

276

(45.6)

1,250

786

(37.1)

Revenue

7,368

6,682

7,224

7,386

10.5

14,050

14,610

4.0

Total costs

(7,451)

(7,493)

(7,892)

(8,064)

7.6

(14,944)

(15,956)

6.8

Operating profit

(83)

(811)

(668)

(678)

(16.4)

(894)

(1,346)

50.6

Investment revenues

223

53

230

18

(66.0)

276

248

(10.1)

Other losses and gains

2

1,477

628

1,491

0.9

1,479

2,119

43.3

Pre-tax profit

142

719

190

831

15.6

861

1,021

18.6

Normalised pre tax

608

(24)

110

(156)

584

(46)

Tax

(33)

(163)

(56)

(228)

(196)

(284)

Post-tax profit

109

556

134

603

8.5

665

737

10.8

Normalised EPS (p)

0.40

0.00

Dividend (p)

0.74

0.25

(73.0)

Source: Share plc, Edison Investment Research

As noted above, AUA rose strongly, accelerating the longer-term trend illustrated in Exhibit 2, helped by market strength, transfers-in from other providers and the benefit of additions through partnership or acquisition such as those agreed with Barclays and Hendersons.

Exhibit 2: Share plc AUA

Exhibit 3: Share plc revenue analysis over time

Source: Share plc

Source: Share plc

Exhibit 2: Share plc AUA

Source: Share plc

Exhibit 3: Share plc revenue analysis over time

Source: Share plc

Exhibit 3 shows an analysis of Share’s revenue over a similar timescale with a key feature being the way in which overall revenue has been broadly maintained in the face of two changes: the first being the adoption in 2013 of a flat fee structure that did not attempt to replace trail commission or to continue a model based on a percentage of assets; and the second, the dramatic contraction in interest income on customer cash balances reflecting central bank measures to guard against deflation. Interest income in 2016 accounted for 5.4% of revenue compared with 14.0% in 2013.

Share notes that last year its level of interest fell sharply while that of its peers increased (Exhibit 4). The company believes that some of its peers may use relatively higher risk counterparties to earn higher returns while those that are part of a bank may benefit from better rates. Share’s dealing and fee revenue growth outperformed a ComPeer-collected peer group over the period. (The peer group excludes Hargreaves Lansdown, which does not submit monthly information to ComPeer.) The relative performance of commission income benefited from a new partnership and acquisitions (see below), while fee income was bolstered by strong new account acquisition and a good year for the administration of EIS and Business Property Relief schemes (180 funds, 24 investment managers).

Reflecting these trends there has been a disparity between Share’s market share progression with and without interest income (Exhibit 5). For 2016, excluding interest income, Share’s revenue market share excluding interest reached a record level of 9.85% compared with 9.39% for 2015. Including interest income, the market share was lower at 7.64% versus 7.79%.

Exhibit 4: Share plc revenue analysis over time

Exhibit 5: Share plc market share progress

Source: Share plc, ComPeer

Source: Share plc, ComPeer

Exhibit 4: Share plc revenue analysis over time

Source: Share plc, ComPeer

Exhibit 5: Share plc market share progress

Source: Share plc, ComPeer

Work on Share’s digital transformation was a feature of 2016 and remains in progress during the current year with more visible delivery set to become evident. Last year, the company launched its first mobile and tablet app for Apple and Android devices and, critically, is due to add dealing and other functionality later this year. The website is to be enhanced to improve customer usability while work on a new back-office system will be helped by the project that has already been completed to move the database on to new technology.

The central place of IT for Share reflects its concentration on its core retail broking business and strategy of putting customers first. Chairman Gavin Oldham comments that from inception the concentration in the business has been on servicing the customer accounts, not on securing transaction volumes alone. This was in order to establish long-term customer relationships and hence a sustainable business. This is also evident in the flat fee structure, which is in line with the nature of the costs in the business. Prospectively, this could mean that Share is well positioned from a competitive position as year-end statements highlight more clearly the level of fees investors are paying at other providers.

In 2015, Share signed a partnership agreement with Barclays Stockbrokers for certificated dealings and an acquisition of investment trust ISA accounts from Henderson. In 2016, in a further transaction with Barclays it acquired accounts for investment clubs, corporates and charities. Heads of terms were agreed with Computershare for the provision on a white label basis of certificated dealing and corporate nominee dealing services. Computershare provides registry services to more than 900 corporates in the UK, Ireland and Channel Islands and has 22 corporate nominee clients including Aviva, E.on, Rio Tinto, Standard Chartered and Vodafone. This service is due to be launched shortly and, ahead of this, a deceased estate service was launched in the second half of 2016. Share also announced the acquisition of a book of up to 8,700 (over £200m) ISA accounts from Invesco Perpetual (due to complete in April 2017) and that it is in advanced discussions with a leading wealth manager with development work to provide a streamlined administration service for part of the business already underway.

As part of its focus on the core retail broking business, Share decided to transfer the Authorised Corporate Director activity to another party (Treasury Capital Ltd). This is due to complete on 24 March. The business had cash of £0.774m at the year end and we assume that this will effectively stay with Share, although no terms have been disclosed.

Background and outlook

Exhibits 6 and 7 provide a reminder of the UK equity market background in recent years highlighting fluctuations in the FTSE All-Share Index but strong overall progress despite an uncertain economic and political background. The Volatility Index (sometimes termed a ‘fear gauge’) has shown a decline since the Brexit vote, creating a calmer background that has encouraged a higher level of retail transactions.

Exhibit 6: FTSE All-Share Index (total return)

Exhibit 7: FTSE100 Implied Volatility Index

Source: Thomson Datastream

Source: Thomson Datastream

Exhibit 6: FTSE All-Share Index (total return)

Source: Thomson Datastream

Exhibit 7: FTSE100 Implied Volatility Index

Source: Thomson Datastream

This is shown in Exhibits 8 and 9 with a noticeable pick-up in the level of transactions, even discounting the spike at the time of the Brexit referendum.

Exhibit 8: Retail trading volume (bargains)

Exhibit 9: Retail trading volume (change vs prior year)

Source: ComPeer, London Stock Exchange

Source: ComPeer, London Stock Exchange

Exhibit 8: Retail trading volume (bargains)

Source: ComPeer, London Stock Exchange

Exhibit 9: Retail trading volume (change vs prior year)

Source: ComPeer, London Stock Exchange

Prospectively, global geopolitical uncertainty remains in place and in the UK and Europe there could be fluctuating sentiment towards news from Brexit negotiations. Having said this the UK economy has remained resilient compared with many expectations during 2015 and forecasts have generally been revised upwards. European growth expectations have also strengthened, albeit concerns remain over aspects of the eurozone.

For Share, a key determinant of future performance will be delivery of its digital transformation as this should provide an improved customer experience (Share continues to score well on Trustpilot ratings) and facilitate a scaling of the business through customer transfers in, further partnerships and acquisition of books of accounts. Eventually a move towards the normalisation of interest rates could also be beneficial for revenue. Assuming the current level of customer cash at c £300m, a 25bp improvement in rates received could add £0.75m to revenues that would drop straight through to pre-tax profit.


Financials

We have increased our revenue estimate for the current year (see Exhibit 10) to reflect the strong second half of 2016 and start to the current year, while cautiously leaving our 2018 estimate unchanged. As a result, our underlying profit forecast for 2017 has moved from loss to profit, although in revising our 2018 estimate we have allowed for higher costs resulting from continuation of investment through the current year tempering our profit estimate. Looking further ahead we would expect success in attracting new customers and further acquisitions of books of accounts or partnerships to generate operational leverage given the investment now being undertaken to refresh the technology base.

While the dividend payout was reduced from 0.74p to 0.25p for 2016, we expect the move back into greater profitability to be accompanied by a more rapid increase in dividend than previously expected.

Exhibit 10: Estimate revisions

Revenue (£m)

PBT (£m)

EPS (p)

Dividend (p)

Old

New

% chg

Old

New

% chg

Old

New

% chg

Old

New

% chg

2016

14.4

14.6

2%

-0.9

0.0

N/A

-0.49

0.00

N/A

0.20

0.25

25%

2017e

15.7

16.5

5%

-0.2

0.3

N/A

-0.06

0.12

N/A

0.20

0.30

50%

2018e

17.4

17.5

0%

1.1

0.7

-42%

0.68

0.36

-47%

0.30

0.50

67%

Source: Edison Investment Research. Note: For 2016 new column = actual

Looking at Share’s cash flow for 2016, the main features were investment in intangibles of nearly £1.2m, reflecting work capitalised on system development. This was more than offset by the sale of shares in the London Stock Exchange, which meant that sales of available for sale investments totalled nearly £2.4m. Combined with a small operating cash inflow resulting from a working capital inflow and the dividend outflow of c £1m, the level of cash was only down modestly from £11.7m in FY15 to £11.4m.

From a regulatory perspective, Share still has a healthy margin above its target level of regulatory capital. Its resources stood at 2.6x the regulatory requirement; this compares with 3.6x for the prior year, partly reflecting a rise in the capital requirement from £5.1m in 2016 to £5.6m, but more importantly the deduction of the increased level of intangibles noted above together with the non-inclusion of the profit on the London Stock Exchange share sale in regulatory capital prior to audit. Prospectively, inclusion of this profit should act to offset the net increase of c £1m we expect in intangibles on the balance sheet in 2017.

Valuation

We have updated our comparative table, which includes selected measures for Share, Alliance Trust Savings (unquoted subsidiary of Alliance Trust) and Hargreaves Lansdown. As before, this underlines the scale of Hargreaves Lansdown with AUA of £70bn in total compared with Alliance Trust Savings at £13bn and Share on £3.7bn. The agreed purchase of TD Direct Investing by Interactive Investor will give that combination AUA of c £18bn. Given the potential benefits of scale, we would expect further consolidation on a medium- to longer-term view crystallising value for seller and buyer depending on the terms and how the industry pricing model evolves.

There is a wide variation in valuation multiples. Perhaps unsurprisingly, Hargreaves Lansdown, as market leader by a large margin with an established record of strong growth and profitability, is the most highly valued across each of the measures. Share is more expensive than Alliance Trust Savings in terms of adjusted value to AUA, but this can be explained by the higher revenue yield earned by Share, while in terms of adjusted value to revenue Share is valued below the other two companies. Increased scale through acquisition or organic growth would be likely to benefit profitability and hence valuation on these metrics.

Exhibit 11: Peer comparison

£m unless stated

Share

Alliance Trust Savings

Hargreaves Lansdown

Market capital

38.9

6,215.6

Surplus capital (assumes cover of twice the regulatory requirement)

5.4

55.2

Adjusted value

33.6

54.0

6,160.4

Revenue

14.6

13.7

369.8

AUA

3,700

13,000

70,000

Market capital/revenue (x)

2.7

N/A

16.8

Market capital/AUA (%)

1.1

N/A

8.9

Adjusted value/revenue (x)

2.3

3.9

16.7

Adjusted value/AUA (%)

0.9

0.4

8.8

Source: Edison, companies’ disclosure. Note: valuation of Alliance Trust Savings from H116 results, revenue 2015 and AUA at end September 2016. Hargreaves Lansdown AUA and revenue (annualised) from H117.

To give an absolute indication of value we have also updated our DCF model using the same central assumptions but rolling our forecasts forward a year. Among the assumptions are two years of strong cash flow growth of 60% in 2020 and 2021 (following a return to reported profits of c £0.5m in 2019) and seven years of growth at 5%. We also assume a terminal multiple of 10x and a discount rate of 10%. Exhibit 12 sets out the sensitivity of the value output to changes in the discount rate and 2020-21 growth assumption. Our central valuation of 29p is unchanged.

Exhibit 12: Discounted cash flow valuation sensitivity (pence per share)

Discount rate

2020 and 2021 growth

8%

9%

10%

11%

12%

0%

20

20

19

18

18

30%

26

25

23

23

22

60%

32

31

29

28

26

80%

38

36

34

32

30

Source: Edison Investment Research


Exhibit 13: Financial summary

£000 except where stated

2014

2015

2016

2017e

2018e

Year end 31 December

PROFIT & LOSS

Account fees

6,610

6,400

6,784

8,480

9,074

Dealing Commissions

6,610

6,400

7,040

7,533

7,909

Interest and other income

1,800

1,250

786

474

510

Revenue

 

15,042

14,050

14,610

16,486

17,493

Cost of Sales (excl amortisation and depreciation)

(14,579)

(14,812)

(15,727)

(16,622)

(17,284)

EBITDA

 

463

(762)

(1,117)

(135)

209

Depreciation

 

(104)

(111)

(121)

(131)

(150)

Amortisation

(11)

(21)

(108)

(390)

(400)

Operating profit (pre-exceptional)

 

348

(894)

(1,346)

(656)

(341)

Other

60

1,479

2,119

0

0

Investment revenues

308

276

248

201

198

Profit Before Tax (FRS 3)

 

716

861

1,021

(455)

(142)

Profit Before Tax (norm)

 

1,615

584

(46)

329

658

Tax

(109)

(196)

(284)

0

0

Profit After Tax (FRS 3)

 

607

665

737

(455)

(142)

Profit After Tax (norm)

 

1,416

555

4

172

506

Average Number of Shares Outstanding (m) - excl treasury

143.5

139.2

139.3

140.0

140.0

EPS - normalised (p)

 

0.99

0.40

0.00

0.12

0.36

EPS - FRS3 (p)

 

0.42

0.48

0.53

(0.33)

(0.10)

Dividend per share (p)

0.62

0.74

0.25

0.30

0.50

EBITDA Margin (%)

3.1%

(5.4%)

(7.6%)

(0.8%)

1.2%

Normalised operating margin (%)

8.3%

2.2%

(2.0%)

0.8%

2.6%

BALANCE SHEET

Fixed Assets (mainly Investments)

 

9,405

8,083

8,341

9,420

9,485

Current Assets

 

21,316

19,716

23,883

23,376

23,850

Total Assets

 

30,721

27,799

32,224

32,796

33,335

Current Liabilities

 

(8,450)

(7,681)

(13,384)

(14,159)

(14,659)

Long term Liabilities

(1,594)

(1,418)

(1,096)

(1,096)

(1,096)

Net Assets

 

20,677

18,700

17,744

17,541

17,580

CASH FLOW

Operating Cash Flow

 

348

(894)

(1,346)

(656)

(341)

Net cash from investing activities

(434)

1,990

483

(1,399)

(417)

Net cash from (used in) financing

(736)

(878)

(1,019)

(350)

(420)

Net Cash Flow

 

(971)

(992)

(242)

(2,108)

(384)

Opening net (debt)/cash

 

13,626

12,655

11,663

11,421

9,313

Closing net (debt)/cash

 

12,655

11,663

11,421

9,313

8,929

Source: Company accounts, Edison Investment Research

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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

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

Sunesis Pharmaceuticals — Getting closer to EU approval

The company’s application for EU approval for vosaroxin approval in AML continues to progress. The company will go before the Oncology Division of the Scientific Advisory Group (SAG-O) in April with a Committee for Medicinal Products for Human Use (CHMP) decision likely by mid-year. We continue to expect a launch in H217. Also, the company plans to initiate a Phase Ib/II study of SNS-062, their BTK inhibitor, in patients with various advanced B-cell malignancies in H117.

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