Commissioned Research 22 February SyntheticMR. Solid finish to 2017 and entering an eventful 2018

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1 Commissioned Research 22 February 2018 Healthcare, Sweden Key data Price*: SEK354 Country: Sweden Bloomberg: SYNT SS Reuters: SYNT.ST Free float 66% Market cap (SEKm) 1,430 Net debt (current Y/E) (SEKm) -34 No. of shares (m) 4.0 Next event: Q1: 25 Apr SyntheticMR Solid finish to 2017 and entering an eventful 2018 A strong Q4 for SyntheticMR increased our confidence in our long-term growth projections for the company s software. We see a high likelihood that the software will be used on the major magnetic resonance (MR) manufacturer cameras. In 2018, we see several important milestones such as the launch of Siemens digital ecosystem and GE offering the software to radiologists in the reading room. * Price as at close on 21 February 2018 CEO CFO Company description Stefan Tell Fredrik Jeppsson SyntheticMR provides software for MRI (magnetic resonance imaging) visualisation and analysis, and has agreements with some of the largest global OEMs for marketing and selling its product. SyntheticMR was founded in 2007 by Dr. Marcel Warntjes and was owned by life science group Accelerator AB until 2013, when it was listed on AktieTorget. Ownership structure Staffan Persson 34.4% Marcel Warntjes 9.3% Artisan Partners 6.6% Johan Sedihn 5.8% Swedbank Robur Fonder 5.2% Source: Holdings.se 21 February 2018 Estimate changes 2018E 2019E 2020E Sales 1.8% 3.3% 3.3% EBITDA 1.6% 2.3% 1.8% EBIT (adj.) 1.2% 2.6% 2.2% EPS (adj.) 1.6% 2.8% 2.4% Source: Danske Bank Equity Research estimates Strong revenue growth. Sales grew 45% versus a strong Q4 16, proving that although we have seen good growth in previous quarters of 2017, the seasonality with a strong finish to the year was higher than we expected. The key driver for growth was GE and SyntheticMR s products sold under the Magic brand. Building a platform for growth in An agreement has been reached with GE on terms to offer the reading room functionality to clients. This allows for more than one reading room licence to be sold per MR camera. Guidance is that sales for this functionality are expected to commence in H2 18. Also, the Siemens digital ecosystem is set to be launched in April 2018, allowing for a subscription-based growth from new Siemens customers. Estimate revisions. We have made minor changes to our estimates to reflect that we expect reading room sales to GE to be one-time rather than subscription based, making the growth profile slightly more front-end loaded. Valuation. We have increased our valuation range to SEK (from SEK ) per share. The increased take rate from GE has lifted our conviction in our long-term sales projections, hence we have cut the WACC by 50bp to 9.0%. Key financials Year-end Dec (SEK) E 2019E 2020E Revenues (m) Revenues growth n.m. 87.6% 65.4% 55.1% 48.0% EBITDA (m) EBIT adj. (m) EBIT growth n.m. n.m. n.m. 66.4% 64.4% Pre-tax profit (m) EPS adj Price performance Analyst(s) Oscar Stjerngren Carolina Elvind This material should be viewed as marketing material and does not constitute independent research Important disclosures and certifications are contained from page 14 of this report DPS Dividend yield FCF yield (inc. recurring capex) 0.2% 0.7% 1.2% 1.9% 3.7% EBIT margin (adj.) 16.6% 31.2% 47.3% 50.7% 56.4% Net debt/ebitda (x) ROIC 19.9% 43.1% 90.0% 114.6% 149.0% EV/sales (x) EV/EBITDA (adj.) (x) EV/EBIT (adj.) (x) n.m P/E (adj.) (x) n.m. n.m P/BV (x) Source: Company data, Danske Bank Equity Research estimates Jan 17Feb 17Mar 17Apr 17May 17 Jun 17Jul 17Aug 17Sep 17Oct 17Nov 17Dec 17Jan 18Feb 18 Source: FactSet SyntheticMR STOXX 600/Health Care (Rebased) Commissioned Research marketing material sponsored by SyntheticMR 1

2 Contents FDA approval for NEURO... 3 Reading room agreement with GE Healthcare... 3 Siemens digital ecosystem... 3 Estimates revisions... 3 Forecasts & Scenarios... 4 Valuation... 5 Executive summary...6 MR market structure and top-line growth drivers... 7 Risks... 8 Company summary Commissioned Research marketing material sponsored by SyntheticMR 2

3 FDA approval for NEURO In January 2018, SyntheticMR s software SyMRI NEURO was 510(k) cleared by the FDA for marketing and selling on the US market. The clearance is initially tied to GE Healthcare scanners since the GE Healthcare sequence is the only one cleared on the US market. The next step is therefore for Siemens and Philips to get their sequences FDA cleared, and then for SyntheticMR to add these to their FDA clearance for NEURO to fully be able to sell on the US market. We believe this approval is more important for the Siemens and Philips sales, since through these names the software is marketed under SyMRI. Through GE Healthcare, the software is marketed as MAGiC, i.e. GE s own branding, and GE has not yet released a MAGiC version including the NEURO functions. However, it is possible for GE customers to purchase NEURO directly from SyntheticMR. Reading room agreement with GE Healthcare The terms for GE to sell the reading room functionality are negotiated, and guidance is that sales are expected to start in the later part of This means that the reading room part of IMAGE, i.e. to be able to adjust pictures in retrospect, in the reading room, functionality will be sold as a product in the same way MAGiC is now. (The functionality will not include Neuro for now.) We did include this kind of sales in our estimates, but we have made a few adjustments. Siemens digital ecosystem Siemens launches its digital ecosystem at the end of April, and by then SyntheticMR s software will be available for download in its app store. This will make SyntheticMR s software available for download to a large number of customers at the same time. Note that this is only on markets where SyntheticMR has the regulatory clearance to sell its software through Siemens, the largest being Europe at the moment. We believe the clearance needed to sell through Siemens and Philips on the US market will be in place soon. Estimates revisions We make some minor revisions to our estimates. In our old estimates, we had included sales from GE Reading room, but make adjustments according to the new information. Prior to this, we modelled reading room sales as subscription sales, but now we model one-time sales but with higher pricing compared to the subscription. For 2018, we take down our attach rate for Philips slightly, by 0.5pp, because of the comments in the report regarding Philips sales going a bit slow. We also take up our cost estimates a few percent for all years in the forecast period. Estimate revisions New estimates Old estimates Estimate revisions SEKm 2018E 2019E 2020E 2018E 2019E 2020E 2018E 2019E 2020E Sales % 3.3% 3.3% Opex (incl D&A) % 3.9% 4.9% EBITDA % 2.4% 1.9% EBIT % 2.7% 2.2% Net profit % 2.5% 2.3% Source: Danske Bank Equity Research Commissioned Research marketing material sponsored by SyntheticMR 3

4 Forecasts and scenarios Scenario analysis and assumptions (SEKm) Base case 2018E 2019E 2020E 2021E 2022E Revenues GE Healthcare Philips Siemens OPEX EBIT EBIT margin 47% 51% 56% 60% 55% Attach rate GE MAGiC 25% 28% 32% 35% 38% GE Reading room 5% 9% 13% 16% 20% Philips 3% 4% 5% 7% 8% Siemens 2% 5% 8% 10% 13% Total users GE MAGiC 774 1,285 1,891 2,602 3,429 GE Reading room ,252 % of users use reading room software 11% 19% 26% 31% 36% Philips Siemens Bull case Revenues GE Healthcare Philips Siemens OPEX EBIT EBIT margin 61% 66% 71% 74% 71% Attach rate GE MAGiC 33% 39% 45% 51% 57% GE Reading room 7% 15% 24% 32% 40% Philips 4% 6% 8% 10% 12% Siemens 3% 7% 11% 15% 20% Total users GE MAGiC 916 1,626 2,495 3,540 4,781 GE Reading room ,497 2,367 % of users use reading room software 14% 24% 34% 42% 50% Philips Siemens ,330 Bear case Revenues GE Healthcare Philips Siemens OPEX EBIT EBIT margin 28% 25% 26% 26% 12% Attach rate GE MAGiC 20% 20% 20% 20% 20% GE Reading room 3% 5% 7% 8% 10% Philips 2% 3% 3% 4% 4% Siemens 1% 2% 4% 5% 6% Total users GE MAGiC 689 1,051 1,436 1,845 2,280 GE Reading room % of users use reading room software 8% 14% 19% 24% 29% Philips Siemens Source: Danske Bank Equity Research Commissioned Research marketing material sponsored by SyntheticMR 4

5 Market assumptions Market assumptions 2018E 2019E 2020E 2021E 2022E Replacement cycle, years Market growth 6.6% 6.6% 6.6% 6.6% 6.6% MR systems sold 4,545 4,845 5,165 5,506 5,870 GE market share 22% 22% 22% 22% 22% Philips market share 17% 17% 17% 17% 17% Siemens market share 26% 26% 26% 26% 26% Est. mid-life upgrades 3,186 3,377 3,580 3,795 4,023 Total sales opportunities 7,732 8,223 8,745 9,301 9,892 Sales opportunities (constant market shares) GE 1,701 1,809 1,924 2,046 2,176 Philips 1,314 1,398 1,487 1,581 1,682 Siemens 2,010 2,138 2,274 2,418 2,572 Source: Company data, Danske Bank Equity Research estimates Valuation Following the Q4 report, we believe some confidence is added regarding sales growth, since the reading room agreement with GE is negotiated. In general, everything seems to be going as planned, and this was a strong report. We therefore lower our risk premia and therefore our WACC by 0.5pp to 9%, which together with slightly higher earnings estimates, motivates higher current values of the share price in our different valuation methods; our new valuation range is SEK , compared with our prior range of SEK We see a value range of SEK per share, which we derive using three different valuation methods. Two of these are based on our base case scenario, and the other is a kind of project valuation. We value SyntheticMR on a peer multiple basis, 25x EBIT 2020E, which we discount to the present day, yielding a value of SEK421. We have also developed two DCF valuations. The first looks at the company as a project based solely on discounting the cash flows generated from SyntheticMR s current products and eventual add-ons (yielding a value of SEK413). The second more traditional DCF values SyntheticMR as a business that will become larger and make investments over time, yielding a potential value of SEK486. Valuation SEK Per share Upside potential* Multiple valuation % DCF valuation % Project valuation % *Upside from share price as at close on 21 February 2018 of SEK354 Source: Danske Bank Equity Research. Commissioned Research marketing material sponsored by SyntheticMR 5

6 Executive summary SyntheticMR provides a unique, software based, feature for MRI scanners that enables the computerised interpretation and analysis of the images, as opposed to the predominant existing approach in which images are subjectively interpreted, generally without quantitative support. The software is brand agnostic and the key drivers for hospitals to opt for this extra specification on a MR scanner are productivity and the increased possibility of analysing the results of the scan after it is performed. In terms of increased productivity, the average time for a scan can be reduced from minutes to six minutes. In terms of increased productivity, the average time for a scan can be reduced from minutes to six minutes, which makes the payback on the investment very attractive, at less than one year, and possibly half that if the machine is used in an efficient way. On top of the obvious financial benefits of shorter scan time, discomfort such as claustrophobia, and uncomfortable, long scans for children, can be avoided. The second benefit of the software is that by measuring changes in, for example, the myelin levels in the brain it offers the possibility to analyse and track the progress of certain diseases such as MS. Finally, a key aspect of SyntheticMR s software is that as the pictures are synthesised, the radiologists can, in the reading room where they examine and evaluate MR images, simulate new scans on the back of the pre-defined picture sequence and using SyntheticMR s algorithms. In simple terms, simulations can be made using the software that would require a rescan without it. No. months pay back, adjusted for 25% brain examinations of total examinations MRI system utilisation (% of business hours) Time difference, minutes % % % % Source: Danske Bank Equity Research estimates SyMRI also offers the possibility of deeper analysis based on quantitative data obtained at the MRI scan. The company was founded in 2007 in order to commercialise the image processing software developed by the founder of the company, Dr Marcel Warntjes. A number of clinical evaluation projects involving the company s technology have been performed both within and outside Sweden. There are several independent studies supporting SyntheticMR s business case, the most recent being the American Journal of Neuroradiology s discussion of SyntheticMR products with Lawrence Tanenbaum. The conclusion is that SyntheticMR could become the future standard for MRIs. Commissioned Research marketing material sponsored by SyntheticMR 6

7 MRI systems sales MR market structure and top-line growth drivers SyntheticMR s product is sold through cooperation agreements with three of the largest OEMs: GE Healthcare, Philips and Siemens. The global MR market has an estimated value of USD6.6bn as of 2017, and is growing c.6.6% per year (source: company data). Every year around 4,000-5,000 MR systems are sold globally. SyntheticMR s product is sold through cooperation agreements with three of the largest OEMs, GE Healthcare, Philips and Siemens. This enables access to a very large market, 65% of the global MR market, and offers potential for significant sales growth, despite SyntheticMR being a small company, and thus very high sales growth going forward. Sales opportunities MRI sales and mid-life upgrades 7,000 6,000 5,000 4,000 3,000 2,000 1, E 2018E 2019E 2020E 2021E GE Healthcare systems Siemens systems Philips systems Mid-life upgrades Source: Company data, Danske Bank Equity Research estimates To be able to use SyntheticMR s software, a sequence has to be installed on the MRI scanner, which these three OEMs have developed as an option on their MRI scanners. To create a compatible base of MRI scanners, for which additional software can be sold, it is very important to reach a high penetration rate when these OEMs sell MRI cameras. Volume is therefore the key aspect to future success. SyntheticMR estimated sales by source OEM SEKm and attach rates SyntheticMR estimated sales by source OEM SEKm % 30% 20% 10% E 2018E 2019E 2020E 2021E Siemens Healthineers Philips GE Healthcare 0% E 2018E 2019E 2020E 2021E GE Healthcare Philips Siemens Healthineers Source: Danske Bank Equity Research estimates Source: Danske Bank Equity Research estimates Commissioned Research marketing material sponsored by SyntheticMR 7

8 The limited need to add operational expenses and investments results in very strong cash flow generation and high margins. Today, a large majority of sales come through GE Healthcare, we believe, due to the current licence agreement structure. The key reason for success with GE is that SyntheticMR s products are marketed as extra equipment for GE s MR scanners. SyntheticMR s software is sold under the brand name MAGiC. We believe Philips and Siemens will sell significantly more than during 2017, through their co-marketing agreements with SyntheticMR, and there is especially large potential in sales through the Siemens ecosystem, a sort of app store for software related to their products, to be launched in All in all, the lion s share of revenues is likely to stem from GE within the forecast period, assuming that the other OEM agreements are not upgraded to resemble the GE agreement. We believe revenues could exceed SEK200m in All this, and the limited need to add operational expenses and investments, results in very strong cash flow generation and high margins. Risks When estimating SyntheticMR s sales potential, we assess the potential take rates of its product. The key risk as we see it is a slower than expected adoption of the company s products - how many will adopt this new technology, and how fast will it happen? We are convinced of the strength of the company s product, but see the main risk in timing, i.e. that the projected growth will take longer than anticipated. Other risks are competitive pressure from existing players and new potential entrants. We argue, however, that SyntheticMR s product is superior to any existing competitors, which hence offer limited threat to pricing and volumes. If similar software were to be launched by a competitor, SyntheticMR s headstart is significant, given the lead times for regulatory approval, testing etc. in a very conservative industry. Commissioned Research marketing material sponsored by SyntheticMR 8

9 SWOT analysis Strengths Superior product within a niche area, with potential to revolutionise MRI. Agreements with large OEMs enable access to a global market. Opportunities Co-marketing agreement with Siemens enables access to the market quickly through a digital ecosystem. Weaknesses Small company which may have a problem reaching out to the market. The co-marketing agreements may not be enough for SyntheticMR to reach high penetration. Threats Future technology. Retrospective sales of reading room software. Future agreements with OEMs, or extended contracts with signed OEMs. Source: Danske Bank Equity Research Commissioned Research marketing material sponsored by SyntheticMR 9

10 Quarterly and yearly estimates SEKm Q1 17 Q2 17 Q3 17 Q4 17E 2017E Q1 18E Q2 18E Q3 18E Q4 18E 2018E 2019E 2020E Sales Sales growth 240% 58% 110% 45% 72% 20% 97% 83% 73% 65% 55% 48% EBITDA EBIT EBIT-margin 38% 1% 29% 41% 31% 44% 38% 46% 54% 47% 51% 56% PTP Net profit Source: Company data, Danske Bank Equity Research estimates Commissioned Research marketing material sponsored by SyntheticMR 10

11 Apr-16 Jun-16 Aug-16 Oct-16 Dec-16 Feb-17 Apr-17 Jun-17 Aug-17 Oct-17 Dec-17 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec E 2018E 2019E 2020E E 2018E 2019E 2020E Company summary Sales breakdown, geographical areas Sales breakdown, divisions Sweden 6% n.a. Other 94% Company information SyntheticMR Storgatan 11, LINKÖPING Sweden Main shareholders Name Votes (%) Capital (%) Staffan Persson 34.4% 34.4% Marcel Warntjes 9.3% 9.3% Artisan Partners 6.6% 6.6% Johan Sedihn 5.8% 5.8% Swedbank Robur 4.4% 4.4% Net sales and EBITDA margin (SEKm) EBIT and EBIT-margin (SEKm) Net sales EBITDA-margin (RHS) % EBIT EBIT- margin (RHS) 60% 40% 20% 0% P/E NTM EV/Sales NTM 200.0x 150.0x 100.0x 50.0x SYNT PE 30.0x 20.0x 10.0x SYNT EV/SALES 0.0x 0.0x Source: FactSet, Company data, Danske Bank Equity Research estimates Commissioned Research marketing material sponsored by SyntheticMR 11

12 Summary tables INCOME STATEMENT Year end Dec, SEKm E 2019E 2020E Net sales Cost of sales and operating costs EBITDA EBITDA, adj Depreciation EBITA Amortisation EBIT incl. EO, bef. ass EBIT, adj Financial items, net Pre-tax profit Taxes Net profit, rep Net profit, adj CASH FLOW SEKm E 2019E 2020E EBITDA Change in working capital Net interest paid Taxes paid Other operating cash items Cash flow from operations Capex Dividends to minorities Free cash flow Disposals/(acquisitions) Free cash flow to equity Dividend paid Share buybacks New issue common stock Incr./(decr.) in debt Minorities and other financing CF Cash flow from financing Disc. ops and other Incr./(decr.) in cash BALANCE SHEET SEKm E 2019E 2020E Cash and cash equivalents Inventory Trade receivables Other current assets Goodwill Other intangible assets Fixed tangible assets Associated companies Other non-current assets Total assets Shareholders' equity Of which minority interests Current liabilities Interest-bearing debt Pension liabilities Other non-current liabilities Total liabilities Total liabilities and equity Net debt Working capital Source: Company data, Danske Bank Equity Research estimates Commissioned Research marketing material sponsored by SyntheticMR 12

13 Summary tables PER SHARE DATA E 2019E 2020E No. of shares, fully diluted (y.e.) (m) No. of shares, fully diluted (avg.) (m) EPS (SEK) EPS adj. (SEK) DPS (SEK) CFFO/share (SEK) Book value/share (SEK) MARGINS AND GROWTH E 2019E 2020E EBITDA margin n.m. n.m. n.m % 30.4% 39.3% 52.5% 54.4% 59.1% EBITA margin n.m. n.m. n.m % 30.3% 39.3% 52.5% 54.4% 59.1% EBIT margin n.m. n.m. n.m. n.m. 16.6% 31.2% 47.3% 50.7% 56.4% EBIT adj. margin n.m. n.m. n.m. n.m. 16.6% 31.2% 47.3% 50.7% 56.4% Sales growth 100.0% 40.0% n.m. n.m. 87.6% 65.4% 55.1% 48.0% EBITDA growth -4.0% -46.4% 13.7% n.m. n.m. n.m. 60.8% 60.7% EBITA growth -3.9% -45.8% 13.8% n.m. n.m. n.m. 60.8% 60.7% EPS adj. growth -29.2% n.m. n.m. n.m. n.m. 66.4% 64.4% PROFITABILITY E 2019E 2020E ROIC (after tax, incl. GW, adj.) % -89.1% % 1.3% 19.9% 43.1% 90.0% 114.6% 149.0% ROIC (after tax, excl. GW, adj.) % -89.1% % 1.3% 19.9% 43.1% 90.0% 114.6% 149.0% ROE (adj.) % -45.4% -38.3% 0.4% 10.6% 29.8% 50.5% 50.2% 49.6% ROIC (adj.) - WACC % -98.2% % -7.8% 10.9% 34.1% 80.9% 105.5% 139.9% MARKET VALUE E 2019E 2020E Share price (SEK) No. shares reduced by buybacks (m) Mkt cap used in EV (m) ,125 1,430 1,430 1,430 Net debt, year-end (m) MV of min/ass and other (m) Enterprise value (m) ,108 1,396 1,369 1,317 VALUATION E 2019E 2020E EV/sales (x) n.m. n.m EV/EBITDA (x) n.m. n.m. n.m EV/EBITA (x) n.m. n.m. n.m EV/EBIT (x) n.m. n.m. n.m. n.m P/E (reported) (x) n.m. n.m. n.m. n.m. n.m P/E (adj.) (x) n.m. n.m. n.m. n.m. n.m P/BV (x) EV/invested capital (x) Dividend yield Total yield (incl. buybacks) FCFE-yield -4.37% -2.44% -1.89% 0.23% 0.68% 1.17% 1.90% 3.67% FINANCIAL RATIOS E 2019E 2020E Net debt/ebitda (x) Net debt/equity (x), year-end Dividend payout ratio 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Interest coverage (x) n.m. n.m. n.m Cash conversion (FCF/net profit) n.m. n.m. n.m. n.m. 48.5% 91.7% 76.9% 75.2% 88.1% Capex/sales 310.9% 238.9% 137.0% 47.7% 17.4% 8.4% 6.4% 5.0% 4.0% NWC/sales -37.3% 11.7% -43.8% 2.7% 7.7% 13.4% 15.4% 18.4% 16.4% QUARTERLY P&L Q1 17 Q2 17 Q3 17 Q4 17 Q1 18E Q2 18E Q3 18E Q4 18E Sales (m) EBITDA (m) EBIT before non-recurring items (m) Net profit (adj.) (m) EPS (adj.) (SEK) EBITDA margin 45.9% 13.4% 38.1% 46.5% 50.8% 44.5% 52.1% 57.8% EBIT margin (adj.) 38.1% 0.6% 28.7% 41.0% 44.2% 37.7% 46.6% 54.3% Source: Company data, Danske Bank Equity Research estimates Commissioned Research marketing material sponsored by SyntheticMR 13

14 Disclosures This commissioned research report has been prepared by Equity Research, a division of Danske Bank A/S ( Danske Bank ). The authors of this research report are Oscar Stjerngren and Carolina Elvind. This commissioned research report should be considered marketing material, as it has been requested and paid for by SyntheticMR and has therefore not been prepared in accordance with the legal requirements designed to promote the independence of investment research. However, the report is still subject to prohibition on dealing ahead of the dissemination of the report. Analyst certification Each research analyst responsible for the content of this commissioned research report certifies that the views expressed in the research report accurately reflect the research analyst s personal view about the financial instruments and issuers covered by the research report. Regulation Danske Bank is authorised and subject to regulation by the Danish Financial Supervisory Authority and is subject to the rules and regulation of the relevant regulators in all other jurisdictions where it conducts business. Danske Bank is subject to limited regulation by the Financial Conduct Authority and the Prudential Regulation Authority (UK). Details on the extent of the regulation by the Financial Conduct Authority and the Prudential Regulation Authority are available from Danske Bank on request. The commissioned research reports of Danske Bank are prepared in accordance with the recommendations of the Danish Securities Dealers Association. Conflicts of interest Danske Bank has established procedures to prevent conflicts of interest and to ensure the provision of high-quality research based on research objectivity and independence from outside influences. These procedures are documented in Danske Bank s research policies. Employees within Danske Bank s Research Departments have been instructed that any request that might impair the objectivity of research and independence from outside influence of research shall be referred to Research Management and the Compliance Department. Danske Bank s Research Departments are organised independently from and do not report to other business areas within Danske Bank. Research analysts are remunerated in part based on the overall profitability of Danske Bank, which includes investment banking revenues, but do not receive bonuses or other remuneration linked to specific corporate finance or debt capital transactions. Danske Bank, its affiliates, subsidiaries and staff may perform services for or solicit business from SyntheticMR and may hold long or short positions in, or otherwise be interested in, the financial instruments mentioned in this research report. The Equity and Corporate Bonds analysts of Danske Bank and undertakings with which the Equity and Corporate Bonds analysts have close links are, however, not permitted to invest in financial instruments that are covered by the relevant Equity or Corporate Bonds analyst or the research sector to which the analyst is linked. Danske Bank, its affiliates and subsidiaries are engaged in commercial banking, securities underwriting, dealing, trading, brokerage, investment management, investment banking, custody and other financial services activities, may be a lender to SyntheticMR and have whatever rights as are available to a creditor under applicable law and the applicable loan and credit agreements. At any time, Danske Bank, its affiliates and subsidiaries may have credit or other information regarding SyntheticMR that is not available to or may not be used by the personnel responsible for the preparation of this report, which might affect the analysis and opinions expressed in this research report. On 22 February 2018, Danske Bank, its affiliates and subsidiaries, in the aggregate, beneficially own 1% or more of a class of shares issued by SyntheticMR. Danske Bank is a market maker and a liquidity provider and may hold positions in the financial instruments of the issuer(s) mentioned in this research report. As an investment bank, Danske Bank, its affiliates and subsidiaries provide a variety of financial services, including investment banking services. It is possible that Danske Bank and/or its affiliates and/or its subsidiaries might seek to become engaged to provide such services to SyntheticMR in the next three months. Parts of this research report have been disclosed to SyntheticMR for factual check. Financial models and/or methodology used in this research report Investment views and opinions in this research report are formed on the basis of a combined selection of discounted cash flow analysis, industry knowledge, peer group analysis and company-specific and market technical elements (events affecting both the financial and operational profile of the company). Forecasting of company sales and earnings is based on segmented bottom-up models using subjective views of relevant future market developments. In addition, the expected macroeconomic environment is taken into account. The output is aggregated into models for group profit and loss, balance sheets and cash flow estimates all taking into account the recent development in historical research reports. More information about the valuation and/or methodology and the underlying assumptions is accessible via Risk warning Major risks connected with investment views or opinions in this research report, including a sensitivity analysis of relevant assumptions, are stated throughout the text. Expected updates This research product will be updated on a semi-annual basis as a minimum. Completion and first dissemination The completion date and time in this research report mean the date and time when the author hands over the final version of the research report to Danske Bank s editing function for legal review and editing. The date and time of first dissemination mean the date and estimated time of the first dissemination of this research report. The estimated time may deviate up to 15 minutes from the effective dissemination time due to technical limitations. See the back page of this research report for the date and time of first dissemination. Recommendation structure This report does not include an investment recommendation and this section is therefore not relevant for this publication. Commissioned Research marketing material sponsored by SyntheticMR 14

15 Validity time period This communication as well as previous communications referred to below are valid until the earlier of (a) dissemination of a superseding communication by the author, or (b) significant changes in circumstances following its dissemination, including events relating to the market or the issuer, which can influence the price of the issuer or financial instrument. Investment recommendations disseminated in the preceding 12-month period Not relevant for this publication as no recommendations are connected to the report. General disclaimer This commissioned research has been prepared by Equity Research (a division of Danske Bank A/S). It is provided for informational purposes only. It does not constitute or form part of, and shall under no circumstances be considered as, an offer to sell or a solicitation of an offer to purchase or sell any relevant financial instruments (i.e. financial instruments mentioned herein or other financial instruments of any issuer mentioned herein and/or options, warrants, rights or other interests with respect to any such financial instruments) ( Relevant Financial Instruments ). The research report has been prepared independently of outside influence and solely on the basis of publicly available information that Danske Bank considers to be reliable. While reasonable care has been taken to ensure that its contents are not untrue or misleading, no representation is made as to its accuracy or completeness and Danske Bank, its affiliates and subsidiaries accept no liability whatsoever for any direct or consequential loss, including without limitation any loss of profits, arising from reliance on this research report. The opinions expressed herein are the opinions of the research analysts responsible for the research report and reflect their judgement as of the date hereof. These opinions are subject to change and Danske Bank does not undertake to notify any recipient of this research report of any such change nor of any other changes related to the information provided in the research report. This research report is not intended for, and may not be redistributed to, retail customers in the United Kingdom and may under no circumstances be distributed in the United States. This research report is protected by copyright and is intended solely for the designated addressee. It may not be reproduced or distributed, in whole or in part, by any recipient for any purpose without Danske Bank s prior written consent. Report completed: 22 February 2018 at 08:09 CET Report disseminated: 22 February 2018 at 08:30 CET Commissioned Research marketing material sponsored by SyntheticMR 15