WILLIAM DEMANT HOLDING 2017e to be front-end loaded SELL TP: DKK125

Transcription

1 EQUITY RESEARCH Research report prepared by DNB Markets, a division of DNB Bank ASA Health Care Update WILLIAM DEMANT HOLDING 2017e to be front-end loaded William Demant is due to publish its Q1 trading update before the market opens on 9 May. We expect continued strong momentum driven by the Oticon Opn launch, including additional price points. We expect the full-year guidance to be maintained and see 2017 as very frontend loaded. We also expect Sonova s acquisition of AudioNova to hurt volumes. We reiterate our SELL recommendation and DKK125 target price. Good market growth and potential market share gain in Q1. We expect William Demant to communicate that it has performed above the market in Q1 driven by the Oticon Opn launch including additional price points. We estimate this will lead to a positive ASP contribution in H1 and positive comments in the upcoming Q1 trading update. For the market, we expect the company to communicate 5 6% unit growth, and 2 3% positive value growth due to a lower ASP in Q1 from mix. This marks a continuation of the strong trend in H from both William Demant and the market. Retail as a growth driver coming to an end. We expect positive comments around the retail business including the benefit from an increased share of wallet in Audika but also a negative impact on volumes from Sonova s acquisition of AudioNova. We will also focus on comments around the performance of US retail, which has struggled in the past quarters with negative growth, a trend we do not see changing in Q1. We expect limited news related to Diagnostic Instruments and Hearing Implants guidance to be kept unchanged. We expect William Demant to keep its 2017 guidance for operating profit of DKK2.2bn 2.5bn with the company expecting market unit growth of 4 6%, but with more moderate growth of 1 3% for the market in value terms. We highlight that the 2017e for operating profit is before restructuring costs of cdkk200m. The company further expects the acquisitions made in 2016 and FX (based on current spot rates) to contribute c1% each to revenue in SELL recommendation and DKK125 target price reiterated. We are still concerned about the competitive situation and see continued pressure on ASPs and margins. We believe the Oticon Opn hearing aid uptake is more than reflected in consensus, the share price, and risk of multiples contraction. Year-end Dec e 2018e 2019e Revenue (DKKm) 8,959 9,346 10,665 12,002 12,719 13,432 14,210 EBITDA adj (DKKm) 2,028 2,055 2,203 2,534 2,774 2,882 3,024 EBIT adj (DKKm) 1,736 1,761 1,878 2,130 2,356 2,457 2,593 PTP (DKKm) 1,664 1,691 1,809 1,841 2,053 2,264 2,500 EPS rep (DKK) EPS adj (DKK) DPS (DKK) Revenue growth (%) EBITDA growth adj (%) EPS growth adj (%) EBITDA margin adj (%) EV/Sales adj (x) EV/EBITDA adj (x) EV/EBIT adj (x) P/E adj (x) P/Book (x) ROE (%) Dividend yield (%) FCFF yield (%) SELL TP: DKK125 WDH versus OMXC20 (12m) Apr Jun Aug Oct Dec Feb Apr William Demant OMXC20 (Rebased) Source: Factset SUMMARY Recommendation (prev.) SELL (SELL) Share price (DKK) 154 Target price (previous) (DKK) 125 (125) Upside/downside potential (%) -19 Tickers WDH DC, WDH.DC CAPITAL STRUCTURE No. of shares (m) No. of shares fully dil. (m) Market cap. (DKKm) 41,057 NIBD adj end-2017e (DKKm) -4,097 Enterprise value adj (DKKm) 36,960 Net debt/ebitda adj (x) SHARE PRICE PERFORMANCE Abs. 1/3/12m (%) 6/24/14 Rel. 1/3/12m (%) 2/19/16 High/Low 12m (DKK) 154/113 Source: Company, DNB Markets (estimates) NEXT EVENT Q1 trading update 09/05/2017 ESTIMATE CHANGES (DKK) Year-end Dec 2017e 2018e 2019e EPS (old) EPS (new) Change (%) Sales (old) 12,719 13,432 14,210 Sales (new) 12,719 13,432 14,210 Change (%) Source: DNB Markets, Company consensus ANALYSTS Rune Majlund Dahl rune.dahl@dnb.no +44 (0) Jesper Ingildsen jesper.ingildsen@dnb.no +44 (0) Please see the last two pages for important information. This research report was not produced in the US. Analysts employed by non-us affiliates are not registered/ qualified research analysts with FINRA in the United States.

2 2016 Hearing aids Diagnostic instruments Hearing Implants 2017e Hearing aids Diagnostic instruments Hearing Implants 2018e DNB Markets the company Investment case overview Share price performance, DNB Markets target price, bear- and bull-case scenarios 174 DKK170 (11%) 164 DKK Target price methodology Our target price is based on a DCFmodelled fair value. We use a WACC of 8.5% and 3% terminal growth in our base-case scenario. William Demant is trading at a 12- month forward P/E of 21.7x (key peer group average 20.0x). 124 DKK125 (-19%) 114 DKK110 (-28%) 104 Apr 2016 Aug 2016 Dec 2016 Apr 2017 Aug 2017 Dec 2017 Apr 2018 Historical Share Price Performance Price Target (Apr 18) Current Share Price Source: FactSet, DNB Markets Source: DNB Markets Downside risks to our investment case Missing a product lifecycle or launching a product that falls short of customers expectations or competitors products. Lower ASP following greater price competition and new healthcare reforms cutting costs. Shorter product lifecycle from strong competition for market share gains and not expanding the market would increase R&D costs. Being unable to deliver on margin and top-line growth expectations. DNB Markets investment case and how we differ from consensus Growth in William Demant is driven primarily by retail acquisitions, which are EBIT margin dilutive. We see a risk of greater price pressure if all competitors go for market share gains (as planned). We see longer-term opportunities from the Oticon Opn and Oticon Medical launches, but believe they are strongly reflected in the share prices. We believe it will achieve its 2017 EBIT guidance of DKK2.2bn 2.5bn before restructuring costs. Upside risks to our investment case Higher than expected Oticon Nera2 and Ria2 sales in the mid-/low-priced segments, as well as the new premium product Opn, could drive higher growth. William Demant having a full-scale competitive platform based on the dual chip (2.4GHz and 100MHz) technology. Higher sales from independent shops and higher than expected market unit sales growth would benefit the company as one of the larger names with a strong distribution network. Source: DNB Markets Source: DNB Markets Source: DNB Markets Revenue bridge e (DKKm) 14,000 13, , ,500 12, ,500 11,000 12,002 12,719 13,432 Source: DNB Markets (forecasts), company (historical data) 2

3 2017 guidance We expect William Demant to keep its 2017 guidance for operating profit of DKK2.2bn 2.5bn before restructuring costs of cdkk200m. For the hearing aid market, we expect the company to maintain its unit growth guidance of 4 6%. In value terms, this would translate into 1 3% growth, as the company expects a low, single-digit percentage ASP decline owing to pricing pressure stemming from intensified competition as key competitors introduce new technology platforms to the market space. The company expects the acquisitions made in 2016 and FX (based on current spot rates) to contribute c1% each to revenue in Figure 1: Half-year forecasts (DKKm) H H H H H H H1 2017e H2 2017e Revenue 4,539 4,807 5,043 5,622 5,810 6,192 6,259 6,460 Cost of sales -1,219-1,314-1,300-1,470-1,461-1,511-1,527-1,614 Gross profit 3,320 3,493 3,743 4,152 4,349 4,681 4,732 4,845 Depreciation EBIT reported ,102 1,070 1,086 Net financial items Pre-tax profit ,044 1,016 1,037 Taxes Net profit Growth and margins (%) Revenue, HOH growth 0% 6% 5% 11% 3% 7% 1% 3% Revenue, YOY growth 3% 6% 11% 17% 15% 10% 8% 4% Gross margin 73.1% 72.7% 74.2% 73.9% 74.9% 75.6% 75.6% 75.0% Depreciation/revenue 3% 3% 3% 3% 3% 4% 3% 3% EBIT margin 18.4 % 19.3 % 17.4 % 17.8 % 14.5 % 17.8 % 17.1 % 16.8 % Net profit margin 13.8% 14.6% 13.2% 13.7% 10.9% 13.4% 12.9% 12.7% 3

4 DNB versus Bloomberg consensus Figure 2: DNB forecasts versus pre-q1 Bloomberg consensus 2017e e e % Diff. 1 % Diff. 1 % Diff. DNB vs. 1 DNB vs. 1 DNB vs. (DKKm) DNB Cons. Cons. 1 DNB Cons. Cons. 1 DNB Cons. Cons. Revenue 12,719 12, % 13,432 13, % 14,210 14, % Reported growth 6.0% 6.8% 5.6% 5.3% 5.8% 5.5% Gross profit 9,578 9, % 10,141 10, % 10,771 10, % Gross margin 75.3% 75.2% 75.5% 75.5% 75.8% 75.7% EBIT reported 2,156 2, % 2,357 2, % 2,593 2, % EBIT margin 17.0% 16.8% 17.6% 17.9% 18.3% 18.6% EBT 2,053 2, % 2,264 2, % 2,500 2, % Net profit 1,626 1, % 1,791 1, % 1,978 2, % Source: Bloomberg consensus (estimates), DNB Markets (estimates) 4

5 May-16 May-16 Jun-16 Jul-16 Jul-16 Aug-16 Sep-16 Sep-16 Oct-16 Nov-16 Nov-16 Dec-16 Jan-17 Jan-17 Feb-17 Mar-17 Apr-17 Apr-17 03/05/16 24/05/16 14/06/16 05/07/16 26/07/16 16/08/16 06/09/16 27/09/16 18/10/16 08/11/16 29/11/16 20/12/16 10/01/17 31/01/17 21/02/17 14/03/17 04/04/17 25/04/17 May-14 Oct-14 Mar-15 Aug-15 Jan-16 Jun-16 Nov-16 Apr-17 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 DNB Markets the company Valuation We value William Demant using a DCF with a WACC of 8.5% and terminal growth of 3% in our base-case scenario. Our assumptions suggest a DCF-based fair value of DKK125. Figure 3: DCF valuation WACC 8.5% Growth 2026e --> 3.0% DCF base-case growth scenario (DKKm) 28,229 Net debt 2017e (DKKm) 4,036 Value per share (DKK) share of value 2017e 2027e 55% - share of DCF from terminal period 45% Source: DNB Markets Figure 4: Share prices in the sector (past three years) Figure 5: Share prices in the sector (past 12 months) William Demant Holding A/S GN Store Nord A/S William Demant Holding A/S GN Store Nord A/S Sonova Holding AG Sonova Holding AG Source: DNB Markets, Bloomberg Source: DNB Markets, Bloomberg William Demant shares are trading at a 12-month forward P/E of 21.7x, compared to Sonova s 21.3x and GN s 18.7x. The 12-month forward P/E for William Demant has averaged c19.0x over the past three years and 19.8x over the past 12 months. William Demant is trading at a 14.0% premium to its 3-year historical average 12-month forward P/E, while Sonova and GN are trading at premiums of 1.0% and 0.7%, respectively. Figure 6: 12-month forward P/E Figure 7: 12-month forward EV/EBITDA 25x 24x 23x 22x 21x 20x 19x 18x 17x 16x 15x 14x 17x 16x 15x 14x 13x 12x 11x 10x William Demant Holding A/S Sonova Holding AG GN Group William Demant Holding A/S Sonova Holding AG GN Group Source: DNB Markets, Bloomberg Source: DNB Markets, Bloomberg 5

6 Forecast changes P&L New Old Change (DKKm) 2017e 2018e 2019e 2017e 2018e 2019e 2017e 2018e 2019e Revenues 12,719 13,432 14,210 12,719 13,432 14, Cost of sales -3,142-3,291-3,439-3,142-3,291-3, Gross profit 9,578 10,141 10,771 9,578 10,141 10, Operating expenses -7,422-7,784-8,178-7,396-7,784-8, EBITDA 2,574 2,782 3,024 2,599 2,782 3, EBITDA adj 2,774 2,882 3,024 2,799 2,882 3, EBITDA margin (%) Depreciation EBITA 2,166 2,368 2,604 2,191 2,368 2, Amortisation EBIT 2,156 2,357 2,593 2,181 2,357 2, EBIT adj 2,356 2,457 2,593 2,381 2,457 2, Net interest Net financial items PBT 2,053 2,264 2,500 2,078 2,264 2, Taxes Minorities Net profit 1,626 1,791 1,978 1,646 1,791 1, Adjustments to net profit Net profit adj 1,786 1,871 1,978 1,806 1,871 1, Per share data (DKK) EPS EPS adj DPS Other key metrics (%) Revenue growth EBIT adj growth EPS adj growth Avg. number of shares (m) Capex OpFCF 2,094 2,191 2,324 2,119 2,191 2, Working capital 2,317 2,479 2,665 2,317 2,479 2, NIBD adj -4,097-4,062-4,160-4,077-4,042-4, Source: DNB Markets Forecast changes By segment and assumptions New Old Change (DKKm) 2017e 2018e 2019e 2017e 2018e 2019e 2017e 2018e 2019e Revenues Hearing Aids 11,146 11,759 12,406 11,146 11,759 12, Diagnostic Instruments 1,143 1,201 1,261 1,143 1,201 1, Hearing Implants (from 2014 a Source: DNB Markets 6

7 Annual P&L (DKKm) e 2018e 2019e Revenues 6,892 8,041 8,555 8,959 9,346 10,665 12,002 12,719 13,432 14,210 Cost of sales -1,934-2,264-2,428-2,441-2,533-2,770-2,972-3,142-3,291-3,439 Gross profit 4,959 5,777 6,127 6,518 6,813 7,895 9,030 9,578 10,141 10,771 Operating expenses -3,529-4,068-4,474-4,782-5,052-6,017-7,088-7,422-7,784-8,178 EBITDA 1,654 1,942 1,920 2,028 2,055 2,203 2,346 2,574 2,782 3,024 Depreciation EBITA 1,430 1,709 1,653 1,736 1,761 1,878 1,942 2,166 2,368 2,604 Amortisation EBIT 1,430 1,709 1,653 1,736 1,761 1,878 1,942 2,156 2,357 2,593 Net interest Net financial items PBT 1,314 1,606 1,521 1,664 1,691 1,809 1,841 2,053 2,264 2,500 Taxes Effective tax rate (%) Minorities Net profit 988 1,199 1,151 1,286 1,327 1,439 1,464 1,626 1,791 1,978 Adjustments to net profit Net profit adj 988 1,199 1,151 1,286 1,327 1,439 1,614 1,786 1,871 1,978 Dividend paid Avg. number of shares Per share data (DKK) EPS EPS adj DPS Growth and margins (%) Revenue growth EPS adj growth Gross margin EBITDA margin EBITDA adj margin Depreciation/revenues EBIT margin EBIT adj margin PBT margin Net profit margin

8 Adjustments to annual P&L (DKKm) e 2018e 2019e EBITDA 1,654 1,942 1,920 2,028 2,055 2,203 2,346 2,574 2,782 3,024 Other EBITDA adjustments EBITDA adj 1,654 1,942 1,920 2,028 2,055 2,203 2,534 2,774 2,882 3,024 EBITA 1,430 1,709 1,653 1,736 1,761 1,878 1,942 2,166 2,368 2,604 EBITA adj 1,430 1,709 1,653 1,736 1,761 1,878 2,130 2,366 2,468 2,604 EBIT 1,430 1,709 1,653 1,736 1,761 1,878 1,942 2,156 2,357 2,593 EBIT adj 1,430 1,709 1,653 1,736 1,761 1,878 2,130 2,356 2,457 2,593 Net profit 988 1,199 1,151 1,286 1,327 1,439 1,464 1,626 1,791 1,978 Net profit adj 988 1,199 1,151 1,286 1,327 1,439 1,614 1,786 1,871 1,978 Per share data (DKK) EPS Recommended adjustment EPS adj Cash flow (DKKm) e 2018e 2019e Net profit 988 1,199 1,151 1,286 1,327 1,439 1,464 1,626 1,791 1,978 Depreciation and amortisation Other non-cash adjustments Cash flow from operations (CFO) 826 1,381 1,272 1,282 1,495 1,592 1,679 1,626 1,791 1,978 Capital expenditure Acquisitions/Investments , , Divestments Cash flow from investing (CFI) -1, ,172-1, , Free cash flow (FCF) ,101 1,277 Net change in debt ,022-1, Dividends paid Share issue (repurchase) 1, ,050-1,100-1,200-1,300 Other ,769 3, Cash flow from financing (CFF) ,140 1, ,000-1,098-1,258 Total cash flow (CFO+CFI+CFF) FCFF calculation Free cash flow ,101 1,277 Less: net interest Less: tax shields/other Less: acquisitions , , Less: divestments Free cash flow to the firm , ,101 1,277 Growth (%) CFO CFI FCF CFF FCFF

9 Balance sheet (DKKm) e 2018e 2019e Assets 6,786 7,646 8,777 10,318 11,219 14,390 15,548 16,253 16,977 17,696 Inventories 993 1,082 1,014 1,142 1,203 1,324 1,300 1,378 1,455 1,539 Trade receivables 1,609 1,711 1,754 1,862 1,994 2,203 2,440 2,586 2,731 2,889 Other receivables 1,414 1,415 2, Cash and cash equivalents , Current assets 3,061 3,362 3,452 3,762 4,049 4,808 5,129 5,430 5,807 6,107 Property, plant and equipment 1,111 1,276 1,372 1,488 1,557 1,768 1,742 2,004 2,270 2,540 Goodwill 1,661 1,976 2,568 3,545 3,831 5,660 6,276 6,276 6,276 6,426 Other intangible assets Investments in associates Defferred tax assets Non-current financial assets Non-current assets 3,725 4,284 5,325 6,556 7,170 9,582 10,419 10,823 11,170 11,590 Total assets 6,786 7,646 8,777 10,318 11,219 14,390 15,548 16,253 16,977 17,696 Equity and liabilities 6,786 7,646 8,777 10,318 11,219 14,390 15,548 16,253 16,977 17,696 Minority interests Total equity 2,443 3,304 4,059 5,056 5,584 6,500 6,966 7,492 8,083 8,761 Trade payables Other payables and accruals 1,336 1,487 1,545 1,472 1,612 1,934 2,139 2,209 2,301 2,391 Short-term debt 1,454 1,301 2,637 3,112 3,503 3,050 3,547 3,647 3,749 3,791 Total current liabilities 2,868 2,833 4,236 4,649 5,183 5,129 5,834 6,013 6,216 6,358 Long-term debt 1,045 1, ,080 1,960 1,960 1,960 1,960 Deferred tax liabilities Pension liabilities Other non-current liabilities Total non-current liabilities 1,475 1, ,761 2,748 2,748 2,678 2,578 Total liabilities 4,343 4,342 4,718 5,262 5,636 7,890 8,582 8,761 8,894 8,936 Total equity and liabilities 6,786 7,646 8,777 10,318 11,219 14,390 15,548 16,253 16,977 17,696 Key metrics Net interest bearing debt -1,869-1,548-1,807-2,284-2,405-3,703-4,036-4,098-4,064-4,161 9

10 Valuation ratios (DKKm) e 2018e 2019e Enterprise value Share price (DKK) Number of shares (m) Market capitalisation 24,040 27,815 27,582 29,839 26,060 35,123 31,830 38,648 36,600 34,381 Net interest bearing debt -1,869-1,548-1,807-2,284-2,405-3,703-4,036-4,098-4,064-4,161 Adjustments to NIBD Net interest bearing debt adj -1,869-1,548-1,807-2,284-2,405-3,701-4,034-4,097-4,062-4,160 EV 22,171 26,267 25,775 27,555 23,655 31,420 27,794 34,549 32,536 30,220 EV adj 22,171 26,267 25,775 27,555 23,655 31,422 27,795 34,551 32,537 30,221 Valuation EPS EPS adj DPS P/E P/E adj P/B Average ROE 52.8% 41.7% 31.3% 28.2% 24.9% 23.8% 21.7% 22.5% 23.0% 23.5% Dividend yield 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% EV/SALES EV/SALES adj EV/EBITDA EV/EBITDA adj EV/EBIT EV/EBIT adj EV/NOPLAT EV/OpFCF (taxed)

11 Key accounting ratios e 2018e 2019e Profitability (%) ROA Return on invested capital (%) Net PPE/revenues Working capital/revenues Cash flow ratios (%) FCF/revenues FCF/market capitalisation CFO/revenues CFO/market capitalisation CFO/capex CFO/current liabilities Cash conversion ratio Capex/revenues Capex/depreciation OpFCF margin Total payout ratio Leverage and solvency (x) Net debt/ebitda Total debt/total capital (BV) LTD / (LTD + equity (MV)) Cash conversion cycle Inventory turnover days Receivables turnover days Credit period Cash conversion cycle

12 Important Information Company: William Demant Holding Coverage by Analyst: Rune Majlund Dahl Date: 25/04/2017 This report has been prepared by DNB Markets, a division of DNB Bank ASA. DNB Bank ASA is a part of the DNB Group. This report is based on information obtained from public sources that DNB Markets believes to be reliable but which DNB Markets has not independently verified, and DNB Markets makes no guarantee, representation or warranty as to its accuracy or completeness. This report does not, and does not attempt to, contain everything material which there is to be said about the Company. Any opinions expressed herein reflect DNB Markets judgement at the time the report was prepared and are subject to change without notice. The report is planned updated minimum every quarter. Recommendation structure and risk classification DNB Markets recommendations are based on absolute performance: Buy Hold Sell - indicates an expected return greater than 10% within 12 months - indicates an expected return between 0 and 10% within 12 months - indicates an expected negative return within 12 months The return-requirement bands above may be applied with some degree of flexibility depending on the liquidity and volatility characteristics of the individual share. High risk Medium risk Low risk - Volatility over 40 percent. - Volatility from 25 percent to 40 percent. - Volatility under 25 percent. Current 6 months volatility rates this security as LOW risk. Investing in any security is subject to substantial risk. Return on investment may vary greatly. Careful consideration for possible financial distress should be accounted for before investing in any security. Price targets are based on a combination of several valuation methods such as discounted cash flow, pricing based on earnings multiples, multiple on book value, net asset value and peer comparison. Substantial material sources for coverage of this company include historical financial figures and communication with the company, and relevant third party information. Recommendations and historical target prices below may not compile all recommendations by DNB Markets, for further information please contact DNB Markets. Price, Rating, and Price Target History William Demant Holding (WDH DC) as of S : S : S : Source: Factset Estimates (Prices) / DNB (ratings and target price) Conflict of interest DNB Markets/DNB Group may receive compensation for investment banking services or other products/services from William Demant Holding. Share positions in the company: Analyst* Employees** DNB*** Update Number of shares /04/2017 *The analyst or any close associates. **Share positions does not include administration and section FX/Treasury. ***Share positions as part of DNB Group. Holdings as part of DNB Markets investment services activity are not included. Recommendation distribution and corporate clients for the last 12 months Buy Hold Sell No rec Total Number % of total 45% 29% 22% 4% DNB Markets client 17% 5% 2% 3% 56 12

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The research analyst(s) named on this report are foreign research analysts as defined by FINRA Rule The only affiliate contributing to this research report is DNB Bank through its DNB Markets division ( DNB Markets/DNB Bank ); the foreign research analysts employed by DNB Markets/DNB Bank are named on the first page; the foreign research analysts are not registered/qualified as research analysts with FINRA; foreign research analysts are not associated persons of DNB Markets, Inc. and therefore are not subject to the restrictions set forth in FINRA Rules 2241 and 2242 regarding restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account. 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Any U.S. recipient of this report seeking to obtain additional information or to effect any transaction in any security discussed herein or any related instrument or investment should contact DNB Markets, Inc., 200 Park Avenue, New York,NY , telephone number In Canada The Report has been distributed in reliance on the International Dealer Exemption pursuant to NI subsection 8.18(2) and subsection 8.18(4)(b). Please be advised that: 1. DNB Bank ASA (DNB Markets) and DNB Markets, Inc. are not registered as a dealer in the local jurisdiction to make the trade. We provide our services in Canada as an exempt international dealer. 2. The jurisdiction of DNB Bank ASA (DNB Markets) and DNB Markets, Inc.'s head office is Norway. 3. There may be difficulty enforcing legal rights against DNB Bank ASA (DNB Markets) and DNB Markets, Inc. because all or substantially all of their assets may be situated outside of Canada. 4. The name and address of the agent for service of process for DNB Bank ASA (DNB Markets) and DNB Markets, Inc. in the local jurisdiction is: Alberta: Blake, Cassels & Graydon LLP, 855-2nd Street S.W., Suite 3500, Bankers Hall East Tower, Calgary, AB T2P 4J8. British Columbia: Blakes Vancouver Services Inc., 595 Burrard Street, P.O. Box 49314, Suite 2600, Three Bentall Centre, Vancouver, BC V7X 1L3. Manitoba: Aikins, MacAulay & Thorvaldson LLP, 30th Floor, Commodity Exchange Tower, 360 Main Street, Winnipeg, MB R3C 4G1. New Brunswick: Stewart McKelvey, Suite 1000, Brunswick House, 44 Chipman Hill, PO Box 7289, Station A, Saint John, NB E2L 2A9. Newfoundland and Labrador: Stewart McKelvey, Suite 1100, Cabot Place, 100 New Gower Street, P.O. Box 5038, St. John's, NL A1C 5V3. Nova Scotia: Stewart McKelvey, Purdy's Wharf Tower One, 1959 Upper Water Street, Suite 900, P.O. Box 997, Halifax, NS B3J 2X2. Northwest Territories: Gerald Stang, Suite 201, Street, Yellowknife, NT X1A 1P8. Nunavut: Field LLP, P.O. Box 1779, Building 1088C, Iqaluit, NU X0A 0H0. Ontario: Blakes Extra-Provincial Services Inc., Suite 4000, 199 Bay Street, Toronto, ON M5L 1A9. Prince Edward Island: Stewart McKelvey, 65 Grafton Street, Charlottetown, PE C1A 1K8. Québec: Services Blakes Québec Inc., 600 de Maisonneuve Boulevard Ouest, Suite 2200, Tour KPMG, Montréal, QC H3A 3J2. Saskatchewan: MacPherson, Leslie & Tyerman LLP, 1500 Continental Bank Building, 1874 Scarth Street, Regina, SK S4P 4E9. Yukon: Grant Macdonald, Macdonald & Company, Suite 200, Financial Plaza, 204 Lambert Street, Whitehorse, YK Y1A 3T2. In Brazil The analyst or any close associates do not hold nor do they have any direct/indirect involvement in the acquisition, sale, or intermediation of the securities discussed herein. Any financial interests, not disclosed above, that the analyst or any close associates holds in the issuer discussed in the report is limited to investment funds that do not mainly invest in the issuer or industry discussed in the report and the management of which these persons cannot influence. 13