SECTOR COVERAGE 24-Dec-218 Sector AIRLINE Rating Table of contents OVERWEIGHT 1. Tourism as a growth driver... 2 2. Fuel more taming... 3 3. Ancillary to enhance passenger yield... 4 4. Risk factors... 6 5. Stock coverage... 7 6. Stock picks: Vietjet Aviation JSC. (HSX: VJC)... 7 Stock Picks VJC: Overweight (VND162.8k / +33%) 218E 219F 22F PER (x) 11.7 1.5 6.8 PBR (x) 3.9 2.9 2. EV/EBITDAR (x) 4.1 3. 1.9 DY (%) 3.2 1.6 1.6 EPS (VND) 1,575 11,776 18,363 BPS (VND) 26,465 36,241 52,64 Robust international air-travel demand from North Asian market. Dynamic pricing strategy, young fleet. Ancillary revenue to compensate the downside pressure on fare price and possible load-factor. Favourable price fuel price in 219 Investment points: Tourism will boost airlines of Vietnam by 12-15%YoY in terms of air passengers in 219. The growth will be contributed mostly from international markets, especially from North Asian markets, whereas the domestic market will continue to slow down. Lower expected average fuel price is a positive signal for a recovery in airlines profit margin as well as valuation. After a hike in 9M.218 which noticeably affected airlines profit margins, the fuel price has been on a sharp downtrend since. In our estimation, the airlines could enjoy a flat (or even downtrend) in fuel price in 219. Ancillary revenue to compensate for the sharp capacity surge in 219. International expansion might be the only feasible way to adequately deploy the additional aircraft of the local airlines. Their fare price might not likely to increase in a fierce regional competition; nonetheless, dynamic pricing strategy and ancillary revenue could be the suitable way to enhance their passenger yields, especially with the LCC VJC, during their international expansion. New entrants will not significantly change the situation of the domestic market. Risks: Large swings of fuel price could cause noticeable impacts on our forecasts. The administrative process, required time and the chance of license and permit approvals can be considered as significant events that need to be taken into accounts. Any changes in custom and tourism regulations of countries in South East and North Asian regions could significantly change the future prospects of Vietnam airlines. Conclusion: The downward pressure over load-factor of airlines coming from large aircraft delivery in 219 and the fierce competition in international routes are causing some shadows on their profitability. However, the double-digit growth rate of airpassengers and a stable expected oil price and a duo-poly-alike domestic market will support the growth of Vietnam airlines, especially the low-cost carrier in 219. Therefore, we have an OVERWEIGHT outlook for this sector in 219. Stock pick: VJC Bao H. Vo (+84 28) 3914 8585 - Ext: 146 bao.vh@kisvn.vn www.kisvn.vn 24-Dec-218 Page 1
1. Tourism as a growth driver 1.1. Mature domestic market Since 217, the growth of the domestic market has slowed down significantly after a golden time from 213 to 217. According to Vietjet s management, local airlines are operating all the domestic routes, of which profitable ones are currently unexpandable as the flight frequency of these routes is mostly at their own peaks. According to CAPA expectations, the domestic market will be more into the mature phase and enjoy the organic growth of about 1% in the next 3-5 years before slowing down to the 1-digit growth rate in the longer term. Figure 1. Vietnam Air-Passenger (million passengers) Figure 2. Vietnam Air-Passenger (million passengers) 4 2 Domestics International 17.5 14.5 12.2 13.2 15. 15.3 22.5 17.7 27.9 24. 31.1 31. 34.8 38. 16 12 8 4 Total Air-Passenger (million) Growth (%) 51.9 4.5 29.5 33.1 25.3 62.1 71.4 82.1 93.6 15. 3% 25% 2% 15% 1% 5% 212 213 214 215 216 217 218E 212 213 214 215 216 217 218E 219F 22F 235F Source: IATA, CAPA, CAA, ASEANStats, VJC, HVN, KISVN Source: IATA, CAPA, CAA, ASEANStats, VJC, HVN, KISVN 1.2. Growing international demand key from tourism % Figure 3. Foreign Visitors arrived Vietnam, 211-218E 2 16 12 8 4 19% 6. 14% 6.8 Source: GSO, KISVN Foreign tourists (mil. visitors) Growth % 7.6 7.9 7.9 11% 4% 1% With the slowdown in the domestic market, the airlines of Vietnam have turned to international routes since late 217. In 218, the international expansion of these airlines, especially low-cost carrier Vietjet, has contributed a significant amount of international air-passengers which accounts for more than 5% total number of airpassengers of Vietnam. Additionally, the robust boost in international air-passengers was thank to developing inbound tourism and especially from North Asian markets such as China, Taiwan or South Korea, which contributed more than 5% total foreign visitors arriving Vietnam in 11M218. 26% 1. 3% 13. 15.6 2% 211 212 213 214 215 216 217 218E 35% 3% 25% 2% 15% 1% 5% % Figure 4. Visitors from China, S. Korea and Taiwan.39.85.44 1.11 1.95 1.78 24-Dec-218 Page 2 15. 1. 5.. From China From S. Korea From Taiwan From other countries 4.69 4.61 5.26.51 1.54 2.7 5.88.62 2.42 5.33.56 2.16 4.1 3.59 5.75.65 3.16 4.56 214 215 216 217 11M217 11M218
In Dec 218, Korean Government announced to ease their visa regulation on Vietnamese visitors. Accordingly, from 219, Vietnamese visitors to Korea who permanently resident in 3 major cities of Vietnam (Hanoi, Ho Chi Minh City and Danang) will be eligible for a 5-year multiple-entry tourist visa. This is a noticeable catalyst for Vietnam airline sector as the lift in regulatory barriers could enhance the travel demands between the two countries. In 219, we expect that tourism will keep its role as the driver for air-passenger growth of Vietnam aviation from 12-15% annually in 219 and 22. 2. Fuel more taming As the uncertainty in behaviours of oil export/production countries and group (majorly the U.S, Russia and OPEC group), the price of Brent oil had had a strong hike in 1H218 before reaching the peak of USD 86.29/barrel in Oct 218. This was a tremendous negative impact on all airlines, especially in Vietnam where airlines did not have any specific fuel hedging plan. The profit margin of airlines was negatively impacted. However, the Brent oil had only broken $8-level in a short period of time and with a sharp soar in the 4Q218 before plunging down. Year to date, the average price of Brent oil (as of 24-Dec-18) was at around USD 73/barrel. On one hand, this shows an increase of +33% compared to the average price in 217; on the other hand, it is slightly lower than our previous forecast (around USD 75/barrel). Figure 5. Oil/Jet fuel price historical fluctuation (USD per barrel) 14 12 1 8 6 4 2 Brent Jet A1 Jan/214 Jul/214 Jan/215 Jul/215 Jan/216 Jul/216 Jan/217 Jul/217 Jan/218 Jul/218 Source: Bloomberg, KISVN According to EIA, the average Brent oil price is forecasted to be around 61 USD/barrel in 219 (-17% YoY). Despite OPEC+ output cut agreement in 219, the massive production of US shale oil will effectively eat up OPEC+ agreement. Besides, concerns about the slow pace of global economic growth in 219 have led to a lower expected growth on oil demand. Hence, the outlooks of both demand supply sides are estimated to put a substantial pressure on oil price (for more additional details on oil forecasts, please looking for 219 outlooks for OIL sector of KISVN). As the expected fuel average price is lower, this can be considered as a positive signal for airlines in 219 in both expected business results and valuation when the pressure on profit margins could be eased noticeably. 24-Dec-218 Page 3
3. Ancillary to enhance passenger yield 3.1. Capacity surges in 219 Major airlines of Vietnam (Vietnam Airline and Vietjet Air) are waiting for the next huge aircraft delivery in 219. Vietnam Airline (UpCom: HVN), after the delay of A321neo in 218 due to some issues with the delivery of Whiney engines, will receive a total 2 aircraft in 219. Also in 219, a similar amount of aircraft will also be delivered to Vietjet. If the delivery is as planned, we estimate that the seat capacity of local airlines will accelerate significantly up to 21% YoY and reach 47,868 seats in 219. Figure 6. Estimated total Available Seats of VN airlines 6, 5, 21% 25% 2% 4, 3, 2, 6% 14% 15% 1% 1, 5% 217 218E 219F 22F Vietjet-VJC Vietnam Airlines - HVN Jetstar VASCO Bamboo Airways Growth % Source: Company reports, Planespotter, KISVN estimation Establishing new regional/international routes, carrying charter flights, codeshare programs with other regional airlines as well as looking for new optimistic markets are the current strategy of both HVN and VJC to adequately deploy the additional aircraft in their fleets. Nonetheless, as the expected growth rate of the number of airpassenger for 219 is around 15%, we estimate that the load factor of the airlines will likely to decrease in 219 with the sharp acceleration in fleets capacity. On the bright side, the capacity growth will be slower in 22; with the robust growth in travel demand mentioned above, the additional seat capacity could be absorbed, which will help airlines to maintain a better load factor from 22, which combining with a solid growth in air-passengers will result in a noticeable growth in earning of airlines in 22. 3.2. New players but insignificant changes Besides the main players VJC, HVN and its subsidiaries Jestar and VASCO (SkyViet), there will be two new competitors in Vietnam airline market from 219: % Bamboo Airways: a new local LCC backed by FLC group (HSX: FLC), was established in mid-217 with a chartered capital of VND 7bn. Although Bamboo Airways officially received the aviation license from Vietnam Ministry of Transportation in Nov 218, the new LCC is still waiting for the AOC Aircraft Operator Certificate and other permits regarding airport slot, selling tickets, etc. to officially launch its services and take-off on Dec 27-29, 218 as scheduled by its chairman Trinh Van Quyet. As of Dec 16, CEO of Bamboo Airways disclosed 24-Dec-218 Page 4
that their first airline, which is an Airbus A319 leased from WWTAI AIROPCO II DAC in a 48-month leasing contract, arrived at Noi Bai International Airport. This is the first of 3 aeroplanes in Bamboo Airways fleet used for their commercial flights in 219, which will focus on domestic routes from/to Quy Nhon and other tier-2 cities where FLC resorts are located such as Quang Ninh, Hai Phong, etc. The joint-venture of AirAsia (3% stakes) and Thien Minh Group (7%) the 3 rd attempt of AirAsia to jump into Vietnam. As of Dec 218, Thien Minh Group s CEO expected the JV would start operation from August 219 with the initial fleet of 5 or 6 Airbus A32 and A321 to exploit domestic routes connecting key cities including Hanoi and Ho Chi Minh City as well as regional ones from/to Ho Chi Minh City, Hanoi and Danang. In our estimation, the new entrant, indeed, will add a certain amount of available seat capacity to the market; nonetheless, we believe that the domestic market shares in 219 might not have a significant change due to: (1) Regarding Bamboo Airway case, as stated above, their initial focus will be on secondary routes, which has an unsubstantial and unstable travel demand compared to the golden ones (e.g. Hanoi, Hochiminh). Moreover, currently, both Vietjet and Vietnam Airline s subsidiaries VASCO and Jetstar are operating flights in these routes with a certain flight frequency, which is adequate to serve the current demand (according to Vietjet management). Thus, it could be difficult for the new LCC with a small fleet to compete with the current players to either gain significant market share as well as maintain their load factor and profitability. On the other hand, Bamboo Airways joins the market could raise the voice of LCC in Vietnam on regulatory matters between full-service carriers (FSCs) and LCC when currently only VJC takes this role. (2) The situation with AirAsia s unnamed JV could be slightly different as AirAsia can be considered as the largest LCC in Southeast Asia with the wide range of JV network, reputation and customer base in regional countries to support their newestablished regional routes from/to Vietnam. Nonetheless, the first barrier for its JV in Vietnam is a regulatory process. It is still questionable on the officially operating date of this JV (expected to be in Aug 219) when it still takes a noticeable amount of time for the JV to obtain the commercial aviation license as well as AOC and other permits from MoT and the Civil Aviation Authority of Vietnam (CAAV). Moreover, assuming that the JV can receive the required licences and permits on time, it still needs to find/bid for a flight slot in domestic airports. Because of the current congestion issue in major airports like Tan Son Nhat (HCMC) or Noi Bai (Hanoi), it will be a challenge for new airlines to have a significant amount of flight frequency. Hence, in this scenario, we believe that the JV could potentially cause pressure on the current airlines in the international routes, not the domestic ones. 3.3. Fiercer regional competition With the duo-poly-alike domestic market, the local players have higher pricing power to customers. However, as stated above, the potential growth from domestic routes will not be able to support the additional seat capacity of their new fleets. In the other side, this bargaining power is quite limited in the international market, which is almost the only option for these airlines to maintain their profitable load factor. Regarding Vietjet, the LCC has focused mainly its expansion to less intensive North Asian markets when the South and South East Asian ones are packed mainly by the regional players, especially the dominating LCCs like AirAsia, Indigo or Cebu, etc. 24-Dec-218 Page 5
Nonetheless, the regional peers are also looking for an opportunity to penetrate those North Asian markets for deploying additional aircraft as well. According to CAPA, the price sensitivity of the population in this region is generally high; hence, this makes it almost impossible for airlines to lifting fare significantly without paying a certain price. 3.4. Ancillary to boost passenger yield As in our previous reports, we had emphasized the role of ancillary to airlines passenger yields, especially with the LCC like Vietjet. With the international expansion, the revenue from ancillary not only grows from the higher demand for these services in longer international flights but also can be adjusted more easily through a dynamic pricing strategy. For instance, when the fuel price surged in 1H218, the unit revenue from ancillary (ancillary revenue per RPK) was hiked about 11%YoY whereas the unit fare price can only increase 2%YoY; this boost the passenger yield of VJC 5%YoY and narrow the effects from fuel. In 9M218, VJC reported a growth rate of 16.6%YoY in its ancillary revenue per pax. and the ancillary revenue accounted for 24.2% of VJC s total air transportation revenue. 4. Risk factors 4.1. Uncertain fluctuation of fuel price The fuel price could deviate from the forecast in our estimations. As the fuel expense has a key impact on airlines business results, a large swing in fuel price could result in a larger variance between our forecasts and the real business results. 4.2. Approvals/Denials for aviation permits for new entrants Although the entry of new entrants could have limited potential impacts on the domestic market, the international expansion and passenger yield of airlines could be affected by these events. However, the administrative procedure, required time and the chance of license and permit approvals can be considered as significant events that need to be taken into accounts. 4.3. Regional Tourism policy Among factors could impact the tourist flows into North and South East Asian region, especially ones from/to Vietnam, the Custom and travel liberation regulations of countries in these regions, on the one hand, will affect significantly the potential growth of airlines of Vietnam. On the other hand, these changes are related to the geopolitical strategy of each pair of countries, which are uncontrollable to companies. 24-Dec-218 Page 6
5. Stock coverage Recommendation & TP Earnings & Valuation Company Sales (VNDbn) EBIT (VNDbn) NPAT (VNDbn) EPS (VND) BPS (VND) PER (x) PBR (x) ROE (%) EV/EBITDAR VJC Recommendation BUY 216 27,499 3,195 2,496 4,68 15,775 27. 6.6 72.6 1.2.9 (HOSE: VJC) Target Price (VND) 162,8 217 42,33 5,745 5,74 9,367 23,469 13.3 4.4 66.2 6.9 2. Price (VND) 124,2 218E 56,129 7,151 5,728 1,575 26,465 11.7 3.9 46. 4.1 3.2 Market cap (VNDbn) 56,57 219F 69,652 8,5 6,378 11,776 36,241 1.5 2.9 37.6 3. 1.6 22F 94,64 12,633 9,946 18,363 52,64 6.8 2. 41.3 1.9 1.6 HVN Recommendation BUY 216 7,89 4,142 2,15 1,37 12,776 25.2 2.6 15. 4.9 1.1 (UpCOM: HVN) Target Price (VND) 49,4 217 82,951 3,475 2,659 1,417 13,681 23.2 2.4 14.6 3.8 2.5 Price (VND) 32,9 218E 96,825 4,432 2,58 1,282 14,628 25.7 2.2 12.3 3.4 2.4 Market cap (VNDbn) 4,386 219F 116,182 4,688 2,689 1,347 15,963 24.4 2.1 12. 2.2 1.5 22F 123,188 4,54 3,378 1,72 17,86 19.1 1.8 13.9 1.9 1.5 Source: Company data, KISVN. Data as of 24-Dec-18 6. Stock picks: Vietjet Aviation JSC. (HSX: VJC) (x) DY (%) 24-Dec-218 Page 7
Stock Pick Rating VJC OVERWEIGHT Beyond Vietnam border Investment points: Market price (VND) 124,2 Target price (VND) 162,8 Expected price return (%) 31% Expected dividend yield (%) 1.6% Total expected return (%) 33% VND ' 2 15 1 5 Stock performance (%) YTD 1T 3T 12T Absolute 4% -2% -18% 1% Relative 1% -2% -9% 12% Source: Bloomberg, relate to VNIndex Stock Statistics 52-week range (VND) 24-Dec-18 114.6k-186.5k Shares o/s (m) 542 Mkt cap (VND bn.) 67,268 Mkt cap ($m) 2,889 Foreign % owned 24% Est. free float (mn. shares) 288 3m avg. daily vol. (shares) 659,333 VND/USD 23,283 Index: VN-Index/HNX 911/13 Source: Bloomberg Ownership Price - Volume 12/217 3/218 6/218 9/218 Nguyen Thi Phuong Thao & affiliates ' shares 3 25 2 15 1 5 24-Dec-18 52.% GIC/Government of Singapore 4.97% Source: Bloomberg VJC is expected to enjoy a robust and higher-than-industry growth in terms of air passengers in 219, mostly from newly established international routes, especially to North Asian markets. The market share of VJC is expected to remain stable around 42% when the new entrants might not cause significant change although the domestic market is expected to continue to slow down. The sharp surge in fleets capacity of the local airlines and fiercer competition from regional LCCs like AirAsia, Cebu Airline, etc. will put significant downside pressure on fare price of VJC and load-factor. Nonetheless, VJC can compensate its passenger yield by revenue from ancillary services, when the contribution of this segment on VJC revenue can increase in longer international flights. Lower expected fuel price is a positive sign for VJC in 219 to improve their profitability in its core operation and also its valuation. We forecast in 219 VJC s core operation can reach a total net revenue of VND47,316bn (+31%YoY) and an NPAT of VND2,363bn (+11%YoY). Totally, our expected NPAT of VJC in 219 is VND6,378bn. (+11%YoY) Risks: Swing of fuel price might cause significant impacts to our forecasts on VJC s business results as this is one of the major expense. Any changes in custom and tourism regulations of countries in South East and North Asian regions could significantly change the future prospects of VJC. Any aviation incidents are considered as extreme events that unlikely to happen but would have catastrophic damages to VJC s image and its international expansion plan. Recommendation: We maintain OVERWEIGHT recommendation with VJC shares. We re-evaluate the 1Y-target price to VND162,8 using regional LCCs average multiples (EV/EBITDAR of 4.2x and PER of 12.9x). As of 9M.218, although profit margin of the air transportation segment of VJC declined mostly due to the sharp hike in fuel price, VJC still recorded a robust NPAT growth rate of its core business (exclude profits from SLB transactions) of 17%YoY, which was also stronger than our expectation. Hence, we expect the on-going growth of tourism, dynamic price strategy, young fleet and favourable fuel price could continue boosting VJC s core earnings and also recover the valuation of bikini LCC in 219. 24-Dec-218 Page 8
FINANCIALS MODEL Market Cap: VND56,57bn. Unit: VNDbn. 217 218E 219F 22F Net Revenue 42,33 56,129 69,652 94,64 Sales growth (%) 54% 33% 24% 36% Airline services 22,549 36,145 47,316 58,197 SLB 19,754 19,985 22,336 36,443 COGS 35,753 48,11 6,91 8,948 Gross margin (%) 15% 14% 14% 14% SG&A 85 967 1,61 1,6 EBITDAR 11,668 17,159 21,351 28,262 EBITDAR margin (%) 28% 31% 31% 3% EBITDA 7,142 9,753 12,577 19,32 EBITDA margin (%) 17% 17% 18% 2% Depreciation & amortization 1,398 2,62 4,77 6,4 Operating profit 5,745 7,151 8,5 12,633 EBIT margin (%) 14% 13% 12% 13% Net interest expenses 167 149 58-61 As % of avg net debt 7% 74% -3% 1% Interest cover (x) 34 48 147 (27) Other profit/loss -275-88 -1,61-1,353 FX Profit/Loss 63-4 -41 Time value of Discounted Provision cash flows -278-84 -1,2-1,353 Tax 229 394 1,3 1,395 Effective tax rate (%) 4% 6% 14% 12% Net profit 5,74 5,728 6,378 9,946 Net margin (%) 12% 1% 9% 11% Minorities Net attributable profit 5,73 5,727 6,378 9,946 Outstanding shares (mn) 451 542 542 542 EPS (bonus-adjusted, VND) 9,367 1,575 11,776 18,363 EPS growth (%) 35% -6% 11% 56% DPS (VND) 3, 4, 2, 2, Payout ratio (%) 32% 35% 17% 11% EBITDAR= Net revenue (COGs Depr n&amort n Rental Expense) SG&A expenses EBITDA = Net revenue (COGs Depr n&amort n) SG&A expenses EBIT = EBITDA Depr n&amort n Net interest expenses = interest expenses interest income Other profit/loss consists of other financial income/expenses, profit share from JVs/associates and other income/loss. Payout ratio = Dividend paid / Net attributable profit. BS & CF ITEMS (VNDbn) 217 218E 219F 22F Increase in WC -352 1,211 995 969 Capex 2,622 4,1 4,24 4,322 Other cash flow items 1,69 Free cash flow 2,511 2,95 5,133 1,919 Share issues 1,759 Dividends paid 877 1,986 1,83 1,83 Increase in net debt -3,393-919 -4,5-9,836 Net debt, end of year 661-258 -4,38-14,143 Enterprise value 56,72 55,81 51,751 41,916 Total equity 1,594 14,336 19,631 28,494 Minority interests 2 2 2 3 Shareholder s equity 1,592 14,334 19,629 28,491 BVPS (VND, bonus-adjusted) 23,469 26,465 36,241 52,64 Net debt / equity (%) 6% -2% -22% -5% Net debt / EBITDA (x).1. -.3 -.7 Total assets 31,658 31,2 32,446 31,473 Net debt = debts cash & equivalent Key ratio & Valuation 217 218E 219F 22F ROE (%) (excl minority interest) 66% 46% 38% 41% ROA (%) 16% 18% 2% 32% ROIC (%) 52% 46% 44% 67% WACC (%) 14% 15% 15% 15% PER (x) 13.3 11.7 1.5 6.8 PBR (x) 4.4 3.9 2.9 2. PSR (x) 1.3 1..8.6 EV/EBITDAR (x) 6.9 4.1 3. 1.9 EV/Sales (x) 1.3 1..7.4 Dividend yield (%) (bonus-adjusted) 2.% 3.2% 1.6% 1.6% 24-Dec-218 Page 9
Contacts: HCM City Head Office Level 3, TNR Tower 18-192 Nguyen Cong Tru St., District 1, HCM City Tel: (+84 28) 3914 8585 Fax: (+84 28) 3821 6898 Institutional Sales Ms. Uyen Lam Head of Institutional Sales (+84 28) 3914 8585 (x1444) uyen.lh@kisvn.vn 24-Dec-218 Page 1
Recommendation System OVERWEIGHT: where we believe prospective 12 months VND total return (including dividends) will be 15% or more. NEUTRAL: where we believe it will be -5% to 15%. UNDERWEIGHT: where we believe it will be -5% or less. Disclaimer This report has been issued by the KIS VN Securities Corporation (KIS) with the instructional contributions of KIS VN Securities Corporation whose employees are specified in the publication. This report is for information of its institutional and professional customers. This report is and should not be construed as an offer to sell or a solicitation of an offer to purchase or subscribe for any investment. No consideration has been given to the particular investment objectives, financial situation or particular needs of any recipient. Investors are advised make their own financial decisions based on their independent financial advisors as they believe necessary and based on their particular circumstances such as their financial situation, investment objectives and other considerations. In preparing this report, we have relied upon and assumed the accuracy and completeness of all information available from public and other sources which we believe to be reliable, but which we have not independently verified. KIS makes no express or implied guarantee, representation or warranty and accepts no responsibility or liability as to the accuracy or completeness of such information. Opinions, estimates, and projections expressed are current opinions of the authors as of the original publication date appearing on this report only and the information, including the opinions contained herein, and are subject to change without notice. KIS and its affiliates may from time to time perform investment banking or other services for, or solicit investment banking or other business from, companies mentioned herein. Further, KIS and its affiliates, and/or their officers, directors and employees involved in the preparation or issuance of this report may, from time to time, have long or short positions in, and buy or sell, the securities, or derivatives (including options) thereof, of companies mentioned herein, or related securities or derivatives in a manner that may be consistent or inconsistent with this report and opinions expressed therein. As a result, investors should be aware that KIS and its affiliates and/or their officers, directors and employees may have a conflict of interest that could affect this report. This report shall not be copied, reproduced, distributed (in whole or in part) or disclosed by recipients to any other person without the express permission of KIS in writing. 24-Dec-218 Page 11