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    Divis laboratories q1_fy11_08_28_2010 Divis laboratories q1_fy11_08_28_2010 Document Transcript

    • For Private Circulation only FIRST GLOBAL www.firstglobal.in India Research Sector: Pharmaceuticals What Happened Last Quarter Divi’s Laboratories Ltd. (DIVI.IN/DIVI.BO) Moderate Outperform (CMP: Rs.744.8, Mkt Cap: Rs.97.3 bn (US $2.1 bn), Aug 27, '10) Relevant Index: CNX Nifty Index: 5,408.7 (Aug 27, ’10) All set to step back on the growth trajectory in FY11… Current valuation leaves sufficient room for multiple expansion, considering industry best EBIDTA margin of 40%+… Last report’s recommendation: Moderate Outperform (MP: Rs.749.1, Jun 04, 2010) Relevant Index: CNX Nifty index: 5,135.5 (Jun 04, 2010) Relative Performance since last rating change: CNX Nifty Index: up 10.4%. DIVI: up 20.5% August 28, 2010 TO ACCESS FIRST GLOBAL RESEARCH ON BLOOMBERG, TYPE FGSL <GO> Research Contact: Associate Director, Research: Hitesh Kuvelkar Mob. +91 9833 732633 Email: hitesh.kuvelkar@fglobal.com Sales Offices: India Sales: Tel. No: +91-22-400 12 440 Email: indiasales@fglobal.com fgasiasales@bloomberg.net UK, US & Europe: Tel.: + 44-203-189 0057 Email: uk@fglobal.com Research Note issued by First Global Securities Ltd., India First Global (UK) Ltd. is a member of London Stock Exchange and is regulated by Financial Services Authority (FSA), UK First Global Stockbroking is a member of Bombay Stock Exchange & National Stock Exchange, India IMPORTANT DISCLOSURES CAN BE FOUND AT THE END OF THIS REPORT
    • FIRST GLOBAL www.firstglobal.in India Research Price and Rating History Chart Ratings Key B = Buy BD = Buy at Declines OP = Outperform Positive Ratings S-OP = Sector MO-OP = Moderate M-OP = Market Outperform Outperform Outperform Neutral Ratings H = Hold MP = Market Perform SP = Sector Perform S = Sell SS = Sell into Strength UP = Underperform Negative Ratings A = Avoid MO-UP = Moderate Underperform S-UP = Sector Underperform ST: Short Term MT: Medium Term LT: Long Term Divi’s Laboratories Ltd. (DIVI.IN/DIVI.BO) 1-Jan-2004 =100 (LHS) 970 280 30-Oct-07 6-Jun-08 27-Aug-10 870 OP OP MO-OP 30-Jul-08 4-Jun-10 28-Jan-08 MO-OP 770 230 OP OP 1-Feb-10 15-Dec-09 MO-OP 670 8-Jun-09 ST-MP OP 180 4-Apr-08 2-Jul-09 570 (INR) 22-Jun-07 OP OP OP 5-Nov-09 470 130 4-Aug-09ST-MP 30-Jan-09 ST-MP 370 OP 270 80 170 30 70 1-Jan- 17- 22- 4-Feb- 15- 27- 13- 24-Jul- 4-Dec- 20- 31- 11- 29- 10- 27- 17-Jul- 1-Dec- 20- 26- 04 May- Sep-04 05 Jun-05 Oct-05 Mar- 06 06 Apr- Aug- Jan-08 May- Oct-08 Feb-09 09 09 Apr- Aug- 04 06 07 07 08 10 10 Relative to NIFTY (LHS) FG Reco DIVISLAB Share Price (RHS) Represents an Upgrade Represents a Downgrade Represents Reiteration of Existing Rating Details of First Global’s Rating System given at the end of the report 1
    • FIRST GLOBAL www.firstglobal.in India Research Financial Snapshot (Standalone) Key Financials (YE Mar 31st) (Rs. mn) FY07 FY08 FY09 FY10 FY11E FY12E Total Revenue 7,356 10,391 11,952 9,376 11,902 14,091 Revenue Grwoth (Y-oY) 88.9% 41.3% 15.0% -21.6% 26.9% 18.4% EBIDTA 2,460 4,169 4,904 4,119 5,332 6,385 EBIDTA Growth (Y-o-Y) 110.8% 69.5% 17.6% -16.0% 29.5% 19.8% Net Profit 1,918 3,536 4,245 3,442 4,373 5,267 Net Profit Growth (Y-o-Y) 172.1% 84.4% 20.1% -18.9% 27.0% 20.4% Net Profit Excl. extra-ordinaries 1,917 3,536 4,240 3,408 4,373 5,267 Net Profit Growth Excl. extra-ordinaries (Y-o-Y) 172.5% 84.4% 19.9% -19.6% 28.3% 20.4% Shareholders Equity 5,420 8,740 12,618 15,421 18,202 21,333 Number of Diluted shares(mn) 65 65 65 131 132 132 Key Operating Ratios (YE Mar 31st) FY07 FY08 FY09 FY10 FY11E FY12E Diluted EPS Excl. extra-ordinaries (Rs.) 14.68 27.07 32.47 26.10 33.09 39.86 Diluted EPS Excl. extra-ordinaries Growth (Y-o-Y) 172.5% 84.4% 19.9% -19.6% 26.8% 20.4% CEPS Excl. extra-ordinaries (Rs.) 16.4 29.8 36.1 30.0 37.0 44.9 EBIDTA (%) 33.9% 40.4% 41.2% 44.3% 45.1% 45.6% NPM (%) 26.4% 34.2% 35.6% 36.7% 37.0% 37.6% Tax/PBT (%) 15.4% 8.1% 7.4% 11.4% 13.6% 11.9% RoE (%) 43.4% 49.9% 39.7% 24.3% 26.0% 26.6% RoCE (%) 31.9% 41.3% 35.7% 22.3% 24.2% 25.1% Book Value per share (Rs.) 41.5 66.9 96.6 118.1 137.7 161.4 Debt/Equity (x) 0.28 0.10 0.04 0.02 0.02 0.01 Dividend Payout Ratio (%) 7% 7% 9% 23% 18% 15% Free Cash Flow Analysis (YE Mar 31st) (Rs. mn) FY07 FY08 FY09 FY10 FY11E FY12E Operating Cash Flows 1,438 2,716 2,472 3,359 5,075 4,782 Capex 1,467 1,762 970 557 2,000 500 Investments - Strategic 2 0 0 0 0 0 Total Free Cash Flows (156) 1,415 1,708 3,344 3,107 4,314 Valuation Ratios (YE Mar 31st) FY07 FY08 FY09 FY10 FY11E FY12E P/E (x) 22.5 18.7 P/BV (x) 5.4 4.6 P/CEPS (x) 20.1 16.6 EV/EBIDTA (x) 18.2 14.8 Net cash/Mkt cap 1.6% 4.0% Market Cap./ Sales (x) 8.3 7.0 Dividend Yield(%) 0.8% 0.8% 2
    • FIRST GLOBAL www.firstglobal.in India Research Market Cap. and Enterprise Value Data as on August 27, 2010 Current Market Price (Rs.) 745 No. of Basic Shares (mn) 131 Rs bn US$ bn Market Cap 97.3 2.08 Total Debt* 0.3 0.01 Cash & Cash Equivalents* 0.1 0.00 Enterprise Value 97.5 2.08 * Debt & Cash & Cash Equivalents as of FY 10 ,INR Exchange Rate 46.86 DuPont Model (YE Mar 31st) FY07 FY08 FY09 FY10 FY11E FY12E EBIDTA/Sales (%) 34% 40% 41% 44% 45% 46% Sales/Operating Assets (x) 1.2 1.2 1.1 0.8 1.0 1.1 EBIDTA/Operating Assets (%) 39.7% 50.1% 46.0% 34.7% 43.2% 48.1% Operating Assets/ Net Assets(x) 1.0 1.0 0.9 0.8 0.7 0.6 Net Earnings/ EBIDTA (%) 78% 85% 86% 83% 82% 82% Net Assets/ Equity (x) 1.4 1.2 1.1 1.1 1.1 1.0 Return on Equity (%) 43.4% 49.9% 39.7% 24.3% 26.0% 26.6% Common Sized Profit & Loss Account (YE Mar 31st) FY07 FY08 FY09 FY10 FY11E FY12E Total Revenues 100% 100% 100% 100% 100% 100% Net Raw Material Consumed 44.7% 39.8% 37.3% 31.8% 36.5% 36.0% Power & Fuel 3.4% 3.7% 4.2% 4.9% 0.0% 0.0% Manufacturing Expenses 3.0% 2.5% 2.4% 2.9% 2.7% 2.6% Personnel 4.2% 4.9% 5.2% 7.4% 7.0% 7.0% Advertisement and sales promotion Exp. 6.9% 5.6% 5.8% 7.1% 7.0% 7.0% Miscelleaneous Exp 4.0% 3.1% 3.9% 1.6% 1.7% 1.8% EBITDA 33.9% 40.4% 41.2% 44.3% 45.1% 45.6% Depreciation and Amortization 3.1% 3.5% 4.0% 5.5% 4.4% 4.7% Interest 1.5% 1.0% 0.6% 0.3% 0.2% 0.1% Net Profit 26.4% 34.2% 35.7% 37.0% 37.0% 37.6% Net Profit Excl. extra-ordinaries 26.4% 34.2% 35.6% 36.7% 37.0% 37.6% * A stock split took place in FY08 in the ratio 1:5 taking the face value per share from the earlier Rs.10/share to Rs.2/share. The previous year EPS figures have been adjusted for the same # A bonus issue of 1:1 was exercised in Q1FY10 and hence the share capital and EPS figures of previous years have been adjusted for the same 3
    • FIRST GLOBAL www.firstglobal.in India Research What Happened Last Quarter… Divi’s Laboratories Ltd. (DIVI.IN/DIVI.BO) appear to have a delivered a robust performance in Q1 FY11 on the face of it, with the topline up 25% Y-o-Y, the EBIDTA margin expanding by 170 basis points Y-o-Y to 39% and the net profit increasing 46% Y-o-Y. However, much of this strong growth in the quarter came on the back of a low base effect. The company’s net earnings at Rs.863 mn in Q1 FY11 came in lower than the expectation of Rs.900 mn-1.0 bn. A sequential comparison of the numbers for Q1 FY11 reveals that the company’s performance was not that impressive and the topline and bottomline actually declined sequentially by 15% and 34% respectively. The company’s performance in Q1 FY11 was impacted by adjustments related to inventory de-stocking issues (associated with a few of its global clients) that was witnessed in the 9-months ending FY10. However, most of the issues were resolved in Q4 FY10 and the company is now gradually coming back on track, with management stating that it was only an aberration. Management confirmed that there is a gradual pick up in customers and remains confident of the company stepping back on the growth trajectory in the coming quarters. Divi’s now expects a quarterly topline run rate of Rs.3 bn+, going forward. This was against revenues of Rs.2.6 bn recorded in Q1FY11. For now, we are maintaining our estimates for FY11 and continue to expect an EPS of Rs.33.1, marking a healthy growth of 27%. At 22x our FY11E earnings, the stock At 22x our FY11E earnings, the stock trades at a trades at a moderate premium to the industry moderate premium to the industry forward P/E forward P/E average of 21x, and believe that average of 21x, and believe that the stock deserves to trade at higher multiples, considering the the stock deserves to trade at higher multiples, company’s EBIDTA margin of 40%+, which considering the company’s EBIDTA margin remains the best in the Indian Pharma space … of 40%+, which remains the best in the Indian Pharma space. Moreover, in spite of the …in spite of the ongoing pressure, the company ongoing pressure, the company has has maintained a tight control on its working capital, reduced its debt and improved its cash maintained a tight control on its working position. In view of the company’s strong topline capital, reduced its debt and improved its cash and bottomline growth prospects for FY11, we position. In view of the company’s strong reiterate our rating of ‘Moderate Outperform’ topline and bottomline growth prospects for view on Divi’s Laboratories FY11, we reiterate our rating of ‘Moderate Outperform’ view on Divi’s Laboratories. 4
    • FIRST GLOBAL www.firstglobal.in India Research Comparative Valuations - Indian Pharma peers Y-o-Y EPS P/E P/S P/BV EV/EBITDA EV/Sales RoE RoCE EBITDA Growth (%) Company (Rs.) (x) (x) (x) (x) (x) (%) (%) (%) EPS Revenues FY10E FY11E FY10E FY11E FY10E FY11E FY10E FY11E FY10E FY11E FY10E FY11E FY11E FY11E FY11E (FY11E/FY10E) Sun Pharma 65.2 73.5 23.6 20.9 7.9 6.7 4.6 4.3 22.8 19.1 7.8 6.6 21% 20% 34% 13% 18% Glenmark 12.3 17.4 22.1 15.5 2.7 2.2 3.1 2.6 13.2 9.8 3.4 2.6 18% 13% 26% 42% 24% Ranbaxy* 7.8 24.5 55.2 18.8 2.5 2.2 4.6 4.0 30.5 11.0 2.9 2.5 22% 13% 22% 194% 15% Dr.Reddy’s 55.4 64.9 21.7 18.5 2.8 2.5 4.6 3.8 13.1 11.0 2.9 2.5 23% 17% 22% 17% 12% Cipla 12.6 14.5 25.3 22.0 4.6 4.2 4.4 3.8 19.1 16.4 4.6 4.2 18% 16% 26% 15% 10% Biocon@ 14.8 17.9 19.5 16.1 2.4 2.0 3.3 2.8 12.6 10.0 2.4 2.0 18% 15% 21% 21% 18% Lupin 76.7 94.9 23.4 18.9 3.4 2.8 9.2 7.6 19.5 15.7 3.5 2.9 43% 28% 19% 24% 20% Divi’s 26.1 33.1 28.5 22.5 10.4 8.3 6.3 5.4 23.6 18.2 10.5 8.2 26% 24% 45% 27% 27% Orchid Pharma -14.5 12.6 NA 15.5 0.7 0.8 0.5 0.5 NA 4.4 1.2 0.9 3% 4% 20% NM -5% Jubilant Org 26.2 29.9 12.5 11.0 1.3 1.2 3.3 2.9 10.5 9.0 2.2 1.9 28% 11% 21% 14% 11% Average 28.3 20.2 4.6 3.9 4.8 4.0 22.0 16.1 4.7 4.0 23% 17% 25% 43% 21% *For Ranbaxy, the financial year is December ending, as against March ending for other companies. Hence, for Ranbaxy, FY10E=CY09 and FY11E=CY10 * The earnings are excluded for extra ordinaries and forex related losses or gain NM – Not Meaningful 5
    • FIRST GLOBAL www.firstglobal.in India Research Quarterly Result Analysis YE March FY11 FY10 Y-o-Y FY10 Q-o-Q FY 10 FY 09 Y-o-Y (Rs. mn) Q1 Q1 % Q4 % 12M 12M % Total Revenue 2,653 2,122 25.0% 3,121 -15.0% 9,467 12,035 -21.3% Less: Total Expenditure Net Raw Material consumed 1,015 819 23.9% 991 2.5% 2,960 4,436 -33.3% Manufacturing Expenses 212 171 24.1% 185 14.7% 717 787 -8.9% Other Expenses 223 165 34.9% 251 -11.1% 813 1,160 -29.9% Personnel 174 179 -2.8% 177 -1.9% 685 619 10.6% Total Expenditure 1,625 1,335 21.7% 1,604 1.3% 5,174 7,002 -26.1% EBIDTA 1,028 787 30.6% 1,518 -32.2% 4,292 5,033 -14.7% Less: Depreciation 131 129 1.9% 123 6.8% 515 478 7.6% EBIT 897 659 36.2% 1,395 -35.7% 3,778 4,555 -17.1% Less: Interest 6 8 -33.7% -28 -119.4% 28 72 -61.8% Profit Before Extraordinary items and Tax 892 650 37.1% 1,423 -37.3% 3,750 4,483 -16.3% Other Income 49 29 71.9% 35 38.4% 133 101 32.1% Less: Extraordinary Expense (net) 0 0 -540 0 0 Profit Before Tax 941 679 38.6% 1,999 -52.9% 3,883 4,583 -15.3% Less: Total Tax 78 89 -12.7% 158 -50.8% 441 339 30.2% Profit After Tax 863 590 46.4% 1,841 -53.1% 3,442 4,245 -18.9% Proforma Net Profit 863 590 46.4% 1,300 -33.6% 3,442 4,245 -18.9% Shares Outstanding (mn) 132 130 132 131 130 0.3% Reported Diluted EPS (Rs.) 6.52 4.55 43.3% 14.09 -53.7% 26.35 32.46 -18.8% Proforma Diluted EPS (Rs.) 6.53 4.55 43.6% 9.84 -33.6% 26.32 32.54 -19.1% Margin RM/Net Sales 38.3% 38.6% 31.7% 31.3% 36.9% Purchase of Finished Goods 8.0% 8.1% 5.9% 7.6% 6.5% Other Expenses./Net Sales 8.4% 7.8% 8.0% 8.6% 9.6% Personnel/Net Sales 6.5% 8.4% 5.7% 7.2% 5.1% EBIDTA Margin 38.8% 37.1% 48.6% 45.3% 41.8% Proforma NPM 32.5% 27.8% 41.7% 36.4% 35.3% Effective Tax Rate 8.3% 13.1% 7.9% 11.4% 7.4% - In Q1 FY11, the company’s total revenue at Rs.2.65 bn was up 25% Y-o-Y, due to a low base effect, but down 15% sequentially. For the 9-months ending FY09, Divi’s witnessed a slowdown in orders, as clients reduced their inventory level. According to the company, the impact of de-stocking by global innovators has played out and it expects business to be step back on track, going forward. - Revenue from the carotenoid segment came in at Rs.180 mn in the quarter, up from Rs.130 mn recorded in Q4 FY10. Divi’s expects the segment to record revenue of Rs.750 mn in Q2 FY11, as against Rs.340 mn reported for the full year FY10. - The EBITDA margin declined significantly to 39% on a sequential basis, due to a change in the company’s product mix, with a higher proportion of sales from generic APIs. 6
    • FIRST GLOBAL www.firstglobal.in India Research - In FY10, Divi’s added seven products to its portfolio, two in generic APIs and five in custom synthesis. - Divi’s spent Rs.540 mn on capital expenditure in FY10 and expects to spend Rs.2.5 bn towards the new SEZ for creating additional capacities, as its existing capacities are likely to near full utilization by the end of FY11. The SEZ is expected to be complete by the end of FY11. - The tax rate for the quarter was lower due to EoU and SEZ benefits. - Loans, which stood at Rs.328 mn in FY10, declined further to Rs.290 mn in Q1 FY11. Scope exists for upward revision to our FY11 estimates The overall strength of Divi’s was evident in its ability to maintain an EBIDTA margin of 45%+ in FY10, in spite of the global economic downturn and de-stocking pressure faced from its key clients in the 9-months ending FY10. Since FY08, Divi’s has managed to post an EBIDTA margin of 40%+. And now, with these global pressures easing out and with the business getting back on track , we believe that Divi’s would be able to maintain a 40%+ EBIDTA margin going forward… Quote: “Once the global economic situation normalizes in FY11 and orders begin to pick up from Q4 FY10 onwards, we believe that there will be significant scope for further EBIDTA margin expansion. However, on a pretty conservative basis, we still estimate an EBIDTA margin of just 45% for FY11, as compared to a margin of 44% recorded in FY10 , marking an improvement of 80 basis points Y-o-Y, which, we believe, the company will be able to surpass comfortably. Hence, there exists scope for a significant upside to our FY11E estimates.” Unquote: (First Global’s, “Divi’s Laboratories Ltd.: Well positioned to step back on the growth trajectory in FY11; upgrade to Moderate Outperform”, dated February 2, 2010). Just as we had expected, the company’s EBIDTA margin for FY10 stood at a healthy 44%, which we expect to improve further to 45% in FY11. However, the EBIDTA margin for Q1 FY11 came in at 39%, as the company’s topline witnessed a delayed effect of the inventory destocking issues faced in the 9-months ending FY10. Nevertheless, we expect the company’s overall business to step back on track in the coming quarters and hence, continue to expect a topline and bottomline growth of 27% each for FY11. This was against a negative topline and bottomline growth recorded in FY10.We are also maintaining our earlier EBIDTA margin estimate of 45% for FY11. 7
    • FIRST GLOBAL www.firstglobal.in India Research IMPORTANT DISCLOSURES Price Target Price targets (if any) are derived from a subjective and/or quantitative analysis of financial and nonfinancial data of the concerned company using a combination of P/E, P/Sales, earnings growth, and its stock price history. The risks that may impede achievement of the price target/investment thesis are – Upsides on the clinical research front/pipeline setbacks Faster than expected uptake of both the CCS and API business Ability to bring in strong sales from carotenoids and peptides Litigation setbacks 8
    • FIRST GLOBAL www.firstglobal.in India Research First Global’s Rating System Our rating system consists of three categories of ratings: Positive, Neutral and Negative. Within each of these categories, the rating may be absolute or relative. When assigning an absolute rating, the price target, if any, and the time period for the achievement of this price target, are given in the report. Similarly when assigning a relative rating, it will be with respect to certain market/sector index and for a certain period of time, both of which are specified in the report. Rating in this report is relative to: CNX Nifty Index Positive Ratings (i) Buy (B) – This rating means that we expect the stock price to move up and achieve our specified price target, if any, over the specified time period. (ii) Buy at Declines (BD) – This rating means that we expect the stock to provide a better (lower) entry price and then move up and achieve our specified price target, if any, over the specified time period. (iii) Outperform (OP) – This is a relative rating, which means that we expect the stock price to outperform the specified market/sector index over the specified time period. Neutral Ratings (i) Hold (H) – This rating means that we expect no substantial move in the stock price over the specified time period. (ii) Marketperform (MP) – This is a relative rating, which means that we expect the stock price to perform in line with the performance of the specified market/sector index over the specified time period. Negative Ratings (i) Sell (S) – This rating means that we expect the stock price to go down and achieve our specified price target, if any, over the specified time period. (ii) Sell into Strength (SS) – This rating means that we expect the stock to provide a better (higher) exit price in the short term, by going up. Thereafter, we expect it to move down and achieve our specified price target, if any, over the specified time period. (iii) Underperform (UP) – This is a relative rating, which means that we expect the stock price to underperform the specified market/sector index over the specified time period. (iv) Avoid (A) – This rating means that the valuation concerns and/or the risks and uncertainties related to the stock are such that we do not recommend considering the stock for investment purposes. 9
    • FIRST GLOBAL www.firstglobal.in India Research FG Markets, Inc. 90 John Street, Suite 703, New York, NY 10038 Dealing Desk (US): Tel. No.: +1-212-227 6611 Email: us@fglobal.com FIRST GLOBAL FIRST GLOBAL (UK) Ltd. Nirmal, 6th Floor, Nariman Point, 13, Regent Street, London SW1Y 4LR, Mumbai - 400 021, India. United Kingdom Dealing Desk (India): Dealing Desk (UK & Europe): Tel. No.: +91-22-400 12 400 Tel. No.: +44-203-189 0057 Email: fgasiasales@bloomberg.net Email: uk@fglobal.com The information and opinions in this report were prepared by First Global Securities Ltd. Information contained herein is based on data obtained from recognized statistical services, issuer reports or communications, or other sources, believed to be reliable. However, such information has not been verified by us, and we do not make any representations as to its accuracy or completeness. Any statements nonfactual in nature constitute only current opinions, which are subject to change. First Global does not undertake to advise you of changes in its opinion or information. First Global and others associated with it may make markets or specialize in, have positions in and effect transactions in securities of companies mentioned and may also perform or seek to perform investment banking services for those companies. Whilst all reasonable care has been taken to ensure the facts stated and the opinions given are fair, neither First Global (UK) Limited nor FG Markets, Inc. nor any of their affiliates shall be in any way responsible for its contents, nor do they accept any liability for any loss or damage (including without limitation loss of profit) which may arise directly or indirectly from use of or reliance on such information. First Global (or one of its affiliates or subsidiaries) or their officers, directors, analysts, employees, agents, independent contractors, or consultants may have positions in securities or commodities referred to herein and may, as principal or agent, buy and sell such securities or commodities. An employee, analyst, officer, agent, independent contractor, a director, or a consultant of First Global, its affiliates, or its subsidiaries may serve as a director for companies mentioned in this report. First Global and its affiliates may, to the extent permitted under applicable law, have acted upon or used the information prior to or immediately following its publication, provided that we could not reasonably expect any such action to have a material effect on the price. This memorandum is based on information available to the public. No representation is made that it is accurate or complete. This memorandum is not an offer to buy or sell or a solicitation of an offer to buy or sell the securities mentioned. The investments discussed or recommended in this report may not be suitable for all investors. Investors must make their own investment decisions based on their specific investment objectives and financial position and using such independent advisors as they believe necessary. Where an investment is denominated in a currency other than the investor's currency, changes in rates of exchange may have an adverse effect on the value, price of, or income derived from the investment. There may be instances when fundamental, technical, and quantitative opinions may not be in concert. Past performance is not necessarily a guide to future performance. Income from investments may fluctuate. The price or value of the investments to which this report relates, either directly or indirectly, may fall or rise against the interest of investors. There are risks inherent in international investments, which may make such investments unsuitable for certain clients. These include, for example, economic, political, currency exchange rate fluctuations, and limited availability of information on international securities. The value of investments and the income from them may vary and you may realize less than the sum invested. Part of the capital invested may be used to pay that income. In the case of higher volatility investments, these may be subject to sudden and large falls in value and you may realize a large loss equal to the amount invested. Some investments are not readily realizable and investors may have difficulty in selling or realizing the investment or obtaining reliable information on the value or risks associated with the investment. Where a security is denominated in a currency other than sterling (for UK investors) or dollar (for US investors), changes in exchange rates may have an adverse effect on the value of the security and the income thereon. The tax treatment of some of the investments mentioned above may change with future legislation. The investment or investment service may not be suitable for all recipients of this publication and any doubts regarding this should be addressed to your broker. While First Global has prepared this report, First Global (UK) Ltd. and FG Markets, Inc. is distributing the report in the UK & US and accept responsibility for its contents. Any person receiving this report and wishing to effect transactions in any security discussed herein should do so only with a representative of First Global (UK) Ltd. or FG Markets, Inc. First Global (UK) Limited is regulated by FSA and is a Member firm of the London Stock Exchange. 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