OTC Markets Group — Staying on course

OTC Markets Group (US: OTCM)

Last close As at 20/12/2024

55.78

0.74 (1.34%)

Market capitalisation

661m

More on this equity

Research: Financials

OTC Markets Group — Staying on course

Amid market and economic uncertainty OTC Markets Group (OTCM) is taking a straightforward approach, maintaining its long-term goal of developing its transparent, cost-efficient markets while staying financially strong, serving its clients and protecting staff in the near term. Results seem likely to be affected by COVID-19 for a period, but the group is well placed to resume growth when conditions begin to normalise.

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Financials

OTC Markets Group

Staying on course

Q120 results

Financial services

28 May 2020

Price

US$29.50

Market cap

US$344m

Net cash ($m) as at end March 2020

22.7

Shares in issue

11.7m

Free float

62.5%

Code

OTCM

Primary exchange

OTCQX

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

11.2

(10.6)

(1.2)

Rel (local)

5.4

(12.3)

(8.0)

52-week high/low

US$37.95

US$23.00

Business description

OTC Markets Group operates the OTCQX, OTCQB and Pink financial markets for over 10,000 US and global securities. OTC Link LLC, a member of FINRA, operates OTC Link ATS and OTC Link ECN, both SEC-registered Alternative Trading Systems. About 85% of revenues are of a subscription-based recurring nature.

Next events

Q220

Expected August

Analysts

Andrew Mitchell

+44 (0)20 3681 2500

Martyn King

+44 (0)20 3077 5745

OTC Markets Group is a research client of Edison Investment Research Limited

Amid market and economic uncertainty OTC Markets Group (OTCM) is taking a straightforward approach, maintaining its long-term goal of developing its transparent, cost-efficient markets while staying financially strong, serving its clients and protecting staff in the near term. Results seem likely to be affected by COVID-19 for a period, but the group is well placed to resume growth when conditions begin to normalise.

Year end

Revenue ($m)

PBT
($m)

EPS*
($)

DPS**
($)

P/E
(x)

Yield
(%)

12/18

59.3

19.8

1.36

1.23

21.6

4.2

12/19

62.8

18.0

1.25

1.25

23.7

4.2

12/20e

64.7

17.8

1.20

1.25

24.6

4.2

12/21e

66.2

18.2

1.22

1.25

24.1

4.2

Note: *Fully diluted and calculated after restricted stock award allocation. **Including special dividends of 65c each year for FY18–21e.

Q120 revenue bolstered by volatility

For the first quarter COVID-19 did not have a material impact on OTCM’s overall revenue; volatility and high levels of transactions for the OTC Link business (+17% yoy) and the benefit of price increases and user growth within Market Data Licensing (+11%) offset weaker growth for Corporate Services (+2%) leaving group revenues up 8% at $16.6m. This was ahead of our expectation, but total expenses, including redistribution fees and transaction-based costs (+7%), were above our estimate leaving operating income and pre-tax profits ($4.5m) up 11% and fully diluted earnings at 32 cents (+7%). An unchanged quarterly dividend of 15 cents was announced.

Background and outlook

With most companies focused on operational matters and coping with the changes wrought by the pandemic, the environment for recruiting new corporate clients is not easy. However, OTCM itself is fortunate that about 85% of its revenues are subscription-based in character. There is a risk, particularly for the OTCQB Venture market, that there will be heightened corporate client churn but otherwise OTC Link will benefit from any further periods of volatility and Market Data Licensing subscribers may prove sticky absent a sustained economic downturn.

Valuation: Reduced estimates but still rated below peers

We have reduced our revenue estimates modestly (1% and 5% for FY20 and FY21, respectively) and assumed slightly higher costs generating a geared reduction in EPS forecasts (11% and 19%). This has pushed up our estimated prospective P/E multiples but they remain below those of global exchanges and information providers. The central value produced from our DCF model is now $29.50 per share compared with $32 previously (see page 7).

Q120 results

Exhibit 1 provides a summary of the OTCM profit and loss account for Q120 compared with Q119 and Q419. We highlight key points below with comparisons against the same period last year unless stated.

Gross revenues increased by 8% with the largest percentage increase being in OTC Link, where market volatility drove increased trading levels. The largest absolute increase was provided by Market Data Licensing, where price increases for some products and a higher number of subscribers were drivers. Corporate Services growth was tempered by a slowdown in sales in FY19 for OTCQB and in the first quarter for both premium markets.

Linked to the growth in Market Data Licensing, redistribution fees increased by 12%. Substantial revenue growth at OTC Link ECN (see Exhibit 2) was accompanied by a trebling in transaction-based expenses (rebates to subscribers providing liquidity to the ECN under the maker-taker model). Net of both these expenses revenue grew by 6%.

Operating expenses, before depreciation and amortisation, rose by 3%, benefiting to some extent from the absence of double rental costs prior to the move to the new headquarters office.

Pre-tax profit was 11% ahead while, after a slightly higher tax charge, fully diluted EPS increased by 7%.

Operationally, OTCM successfully implemented its business continuity plan in March in response to COVID-19 with 97% of staff working fully remotely. The resilience of OTCM’s infrastructure was evidenced by the achievement of 100% uptime for the OTC Link ATS core systems during market hours, extending the five-year run already established in FY19.

Exhibit 1: P&L results summary

$000

Q119

Q419

Q120

y-o-y (%)

q-o-q (%)

OTC Link

2,843

2,946

3,320

17

13

Market Data Licensing

6,071

6,214

6,745

11

9

Corporate Services

6,442

6,898

6,539

2

(5)

Gross revenues

15,356

16,058

16,604

8

3

Re-distribution fees and rebates

(626)

(625)

(701)

12

12

Net revenue

14,730

15,433

15,903

8

3

Transaction-based expenses

(140)

(214)

(438)

213

105

Revenues less transaction-based expenses

14,590

15,219

15,465

6

2

Operating expenses (exc depreciation and amortisation)

(10,289)

(10,062)

(10,568)

3

5

Depreciation and amortisation

(279)

(448)

(414)

48

(8)

Income from operations

4,022

4,709

4,483

11

(5)

Other income / net interest

37

17

16

(57)

(6)

Income before provision for income taxes

4,059

4,726

4,499

11

(5)

Taxes

(512)

(918)

(644)

26

(30)

Net income

3,547

3,808

3,855

9

1

Fully diluted EPS (c)

0.30

0.32

0.32

7

0

Operating margin (%)

27.3

30.5

28.2

Tax rate (%)

12.6

19.4

14.3

Source: OTC Markets Group, Edison Investment Research

Exhibit 2 shows a subdivisional revenue analysis based on indications given in the management discussion of the quarter’s revenue changes. Comments are included referencing the main drivers. The largest percentage gains were at OTC Link ECN (discussed above) and Virtual Investor Conferences. The latter is particularly well placed to capitalise on the current limitations on in-person meetings and provides a cost-effective means for corporates to reach an investor audience when or if the threat of COVID-19 is resolved in future. The largest specified absolute gain in revenue is for professional user licence subscriptions within Market Data Licensing.

Exhibit 2: Subdivisional revenue analysis

$000 unless stated

Q119

Q120

Change

Change %

Comments

OTC Link

OTC Link ECN

319

477

50%

Elevated market volatility and subscribers up from 42 to 61

OTC Link ATS messages

820

902

82

10%

Messaging up with trading volume

Other

1,704

1,941

14%

2,843

3,320

17%

Market Data Licensing

Professional user licence subscriptions

3,207

3,656

449

14%

Increased monthly subscription fee from 1 January plus more users

Internal, delayed and other data services

805

966

161

20%

New sales and upgrades of compliance products. Subscribers from 30 to 41.

Broker dealer enterprise licences

560

700

140

25%

Increase in licence fees from 1 January

Other

1,499

1,423

-5%

6,071

6,745

11%

Corporate Services

OTCQX

2,133

2,261

128

6%

Increased number of companies at start of 2020 versus 2019

OTCQB

3,225

3,096

(129)

-4%

Decline in number of companies on slower sales and higher standards

Virtual Investor Conferences

51

99

94%

Virtual Investor Conferences was introduced at start of 2019

Other

1,033

1,083

5%

6,442

6,539

2%

Source: OTC Markets Group, Edison Investment Research. Note: Some absolute subdivisional numbers are approximate as calculated from reported absolute changes (shown where appropriate) and percentage change.

The next table provides a summary of changes in operating expenses. As shown, the main driver here was compensation costs reflecting a combination of headcount and salary increases. As noted earlier, there was a reduction in occupancy costs as dual running costs were removed following completion of the move to the new headquarters.

Exhibit 3: Analysis of operating expenses

$000s unless stated

Q119

Q419

Q120

Absolute change y-o-y

% change y-o-y

Comments

Compensation and benefits

6,996

6,711

7,487

491

7.0

Headcount and salary increases

IT Infrastructure and information services

1,527

1,591

1,533

6

0.4

Professional and consulting fees

390

557

490

100

25.6

Linked to expansion of Virtual Investor Conferences

Marketing and advertising

251

368

242

(9)

(3.6)

Occupancy costs

846

528

557

(289)

(34.2)

Overlapping rent cost dropped out

Depreciation and amortization

279

449

414

135

48.4

Acquisition of Qaravan, investment related to new HQ and in updating two data centres

General, administration and other

279

305

259

(20)

(7.2)

Total

10,568

10,510

10,982

414

3.9

Source: OTC Markets Group, Edison Investment Research

Exhibit 4 collates operating data with related revenues. Starting with the OTC Link metrics, the dollar volume traded figures show the substantial increases for the OTCQX and Pink segments triggered by the pandemic (both over 55% sequentially). In contrast the OTCQB volume was relatively stable sequentially and down 38% y-o-y reflecting the contraction of activity in formerly hot sectors such as cannabis and bitcoin. The rise in the number of OTC Link ECN subscribers has been mentioned above and activity on this platform together with heightened trading activity contributed to overall revenue growth in OTC Link, which is also reflected in higher revenue per security quoted.

For Corporate Services the number of corporate clients in OTCQX at the end of Q120 was flat on Q119 and 6% lower sequentially, while OTCQB was down 5% y-o-y and just 1.5% sequentially. In both cases there was an impact on sales during the quarter from COVID-19 and OTCM flags this as an area that is likely to be more immediately affected depending on the evolution of the pandemic and its economic effects (see discussion in next section).

The Market Data and Licensing metrics show a modest 3% increase in the number of professional subscribers, while the number of non-professional users (a more volatile and lower revenue per head user-base) fell by 22% y-o-y. As mentioned above, increased datafile subscriptions and higher pricing were the main drivers of revenue growth here.

Exhibit 4: Operating and related revenue data

Q119

Q419

Q120

% change y-o-y

% change q-o-q

OTC Link

Dollar volume traded (millions)

OTCQX

12,416

13,836

21,572

73.7

55.9

OTCQB

7,538

4,494

4,684

(37.9)

4.2

Pink

64,344

58,950

91,427

42.1

55.1

Number of securities quoted

10,630

10,755

10,828

1.9

0.7

Number of active ATS participants

92

87

82

(10.9)

(5.7)

Number of ECN subscribers

42

53

61

45.2

15.1

New form 211 filings

97

53

61

(37.1)

15.1

Revenue per security quoted ($)

267

274

307

14.6

11.9

Corporate Services

Number of corporate clients (period end)

OTCQX

414

442

414

0.0

(6.3)

OTCQB

941

907

893

(5.1)

(1.5)

Pink

740

736

689

(6.9)

(6.4)

Total

2,095

2,085

1,996

(4.7)

(4.3)

Revenue per client ($)

3,083

3,296

3,205

3.9

(2.8)

Graduates to a national securities exchange

12

18

16

33.3

(11.1)

Market Data Licensing

Market data professional users

21,776

22,426

22,437

3.0

0.0

Market data non-professional users

14,976

12,882

11,694

(21.9)

(9.2)

Revenue per terminal (total - $)

165

176

198

19.6

12.3

Market data compliance file users

30

41

41

36.7

0.0

Source: OTC Markets Group, Edison Investment Research

On the regulatory front, the number of states granting Blue Sky recognitions1 stood at 36 and 33 for OTCQX and OTCQB, up from 34 and 31 at the end of Q119, respectively. There were no additions in Q120, but the Virginia legislature passed a bill (effective 1 July) that will provide a pathway for OTCQX to gain exempt status. Among other initiatives, OTCM has advocated wider availability of employee stock ownership plans (ESOP) and supports the ESOP Fairness bill introduced to the House and Senate in February to enable companies, such as those traded on OTCQX, to offer employee stock ownership plans. Regarding the SEC Concept release on Exchange Act Rule 15c2-11 (dealing with information requirements before quotes may be published on interdealer quotation systems such as OTC Link ATS), OTCM has submitted further comments in April aimed at improving the rule in a number of areas. If the SEC were to adopt the rule as originally proposed, then OTCM notes that there would potentially be both beneficial and negative financial consequences although these cannot be quantified.

  OTCM continues to work to extend the list of states that grant exemptions under state Blue Sky laws governing secondary trading. Blue Sky recognition is not directly linked to revenue generation but progress towards 100% coverage should be increasingly positive reputationally, helping to attract a broader range of corporate clients to OTCM’s premium markets.

Background and outlook

Before discussing the potential impacts of the pandemic on OTCM’s business we provide a brief update on the market background indicators we usually include in our notes. First, looking at a selection of equity indices (Exhibit 5), a substantial rally in markets from their recent lows has reduced the strong negative effect on most indices of the onset of the pandemic, although most are still showing negative three-month and year-to-date performances. The OTCQB Venture Index has shown marked weakness over one year reflecting both a decline in previously hot sectors and the sell-off of stocks deemed to have greater economic sensitivity. The Nasdaq Composite has shown comparative resilience reflecting a higher exposure to technology and healthcare sectors and lower weighting to financials, industrials and oil stocks when compared with the S&P 500, for example. From the perspective of existing or potential corporate clients, the combination of lower equity prices and a need to focus on operational matters within their business tends to create a more challenging environment for OTCM to recruit or retain clients. The company notes that its venture company clients may prove more vulnerable if the economic downturn becomes deeper and more prolonged than currently hoped.

Exhibit 5: Recent market index performance (total return %)

Period

S&P 500

Nasdaq Composite

OTCQX Composite

OTCQB

Venture

S&P TSX
Venture

CBOE UK Alt. (AIM issuers 100)

US$

US$

US$

US$

C$

£

3 months

-3.5

4.3

-15.4

-9.3

-1.2

-12.0

6 months

-3.8

8.6

-13.1

-17.5

1.5

-4.6

1 year

8.0

23.7

-13.8

-39.5

-11.1

-9.8

Year to date

-6.6

4.6

-12.2

-15.2

-6.7

-11.0

Source: Bloomberg. Note: Priced on 27 May 2020.

The next two charts show the number of IPOs on Nasdaq and the Canadian TSX and TSX Venture markets as an indicator of corporate activity. The level of IPOs is in any case lumpy, but the Nasdaq figure for Q120 was down 27% y-o-y while the four-month figure for TSX Venture was 52% down on the prior year period. The number of IPOs on TSX was only slightly down over the same period. Currently equity capital markets activity is concentrated on further equity issues to strengthen balance sheets allowing companies to weather the economic impact of COVID-19. When this subsides in due course and companies can eventually focus beyond immediate issues then the environment should improve for OTCM.

Exhibit 6: Nasdaq – number of IPOs

Exhibit 7: TSX and TSX Venture – number of IPOs

Source: Nasdaq

Source: TMX

Exhibit 6: Nasdaq – number of IPOs

Source: Nasdaq

Exhibit 7: TSX and TSX Venture – number of IPOs

Source: TMX

Turning to the specific background for OTCM’s three segments, new Corporate Services sales are likely to remain more difficult in the near term, a point compounded by the absence of in person meetings, which normally form an important part of the sales process. The subscription basis of fees is, nevertheless, helpful in providing stability with OTCQX fees renewable annually on a calendar year basis while OTCQB customers renew annually or semi-annually based on when they originally began their contracts. Currently around 75–100 OTCQB customer contracts come up for renewal each month. The renewal rate for April at the time of the earnings call (14 May) was 84% subject to payment extensions to end May granted to some companies (14 percentage points); this compared with an average renewal rate of about 93% for FY19. As further background, new sales in April were three for OTCQX and 13 for OTCQB. On this basis the new sales for OTCQB would have roughly balanced the non-renewals in April but this was only one month and the trend may well fluctuate significantly in the months ahead. In order to help client companies cope with current conditions, OTCM has provided temporary relief from some of its market standards until end June (in line with the SEC’s 45-day extension for some disclosures) and has also offered extended payment terms for some companies. While a longer downturn would be unhelpful, OTCM sees the potential for this to give rise to an uptick in companies delisting from exchanges. These could provide a larger pool of qualified companies for its premium markets.

Since the end of Q120 the level of trading facilitated through OTC Link ATS and on OTC Link ECN has remained above the prior year level although below earlier peaks. Changing views on the progress of the pandemic and the economic background could keep activity at a relatively high level although at some point lower volatility and or economic weakness could lead to a quieter period and encourage a further contraction in the number of broker dealer participants in OTC Link ATS.

Market Data and Licensing has benefited in the latest quarter from price increases and on a longer view from the development of new products including a range of compliance related products that have gained a wide subscription base (44) among large banks, custodians and clearing firms. Prospectively, the largely subscription-based revenue would seem likely to prove relatively sticky, but a sustained economic downturn could see consolidation and withdrawals among the market data subscribers while cost pressures could also impinge on subscribers for its existing compliance and other products. OTCM believes it has captured a large part of the potential market for its compliance products limiting the growth potential here. As a result, the group continues to develop new products to provide new growth opportunities and to offset possible consolidation among these customers as well.

Financials

There is greater than usual uncertainty attached to our estimates given the pandemic and associated economic downturn. We have adjusted numbers with the comments above in mind primarily scaling back our revenue assumption for the Corporate Services business on the basis that it has been more rapidly affected already and could potentially take longer to recover in terms of net additions to its corporate client base, subject to how quickly business confidence returns. We now look for revenue here to contract by approaching 4% this year followed by a muted recovery of less than 3% in FY21. We assume that OTC Link will continue to benefit from a higher level of activity as the market reacts to changing views of the outlook. For Market Data Licensing we look for subscriber levels to be sustained with price increases continuing to benefit year-on-year comparisons for the balance of FY20 with new products and potentially some improvement in conditions in FY21 supporting modest revenue growth in that year (+3%). The resulting changes in key numbers from our estimates are shown below (Exhibit 8). Revenue estimates are reduced by 1% and 5% for FY20 and FY21 respectively with the larger reduction for FY21 reflecting the impact of lower average corporate client numbers within Corporate Services and lower growth than previously assumed for the other two segments. At the pre-tax profit and EPS level, these changes have a geared impact which is magnified by modest increases in overall expense assumptions, including a sharper rise in our transaction-related expenses estimates; this results in 11% (FY20) and 19% (FY21). At the time of writing the risks in relation to economic forecasts appear to be weighted on the downside with concern that the structural damage to economies globally may be worse than currently allowed for in projections such as those of the IMF (see World Economic Outlook, April 2020).

Exhibit 8: Estimate revisions

 

Gross revenue ($m)

PBT ($m)

Fully diluted EPS ($)

Dividend ($)

 

Old

New

Change (%)

Old

New

Change (%)

Old

New

Change (%)

Old

New

Change (%)

2020e

65.5

64.7

-1.2

19.9

17.8

-10.7

1.34

1.20

-10.9

1.30

1.25

-3.8

2021e

69.8

66.2

-5.1

22.3

18.2

-18.5

1.51

1.22

-18.9

1.40

1.25

-10.7

Source: Edison Investment Research. Note: Dividends include estimated special dividends of 65c for FY20 and FY21.

The balance sheet remains strong with cash at the end of Q120 of $22.7m or $24.2m including restricted cash. During the first quarter there was a cash outflow of $5.6m. This reflected a roughly neutral operating cash flow and investment position, including a seasonal working capital outflow of $5m as accrued expenses were paid (Q119 outflow $3.8m) and $5.3m paid out in dividends and to purchase treasury stock.

Valuation

In Exhibit 9 we have updated our table with comparative multiples for information providers and global exchanges. Since our note in March all multiples are higher, reflecting mainly stronger share prices for the peers. OTCM’s share price is modestly higher but our earnings estimate has been reduced as shown above. Even so OTCM stands on lower multiples than both the information providers and global exchanges. In part this can be explained by reference to the group’s exposure to smaller companies through its venture market and also the relative illiquidity of its own shares. Looking further ahead, the group is financially strong and well placed to benefit once the background improves, generating greater corporate and investor confidence and creating the potential for a period of estimate upgrades.

Exhibit 9: OTCM comparative multiples

P/E ratio (x)

2020e

2021e

MSCI

46.9

41.8

Markit

24.4

21.6

Average information providers

35.7

31.7

Average global exchanges

26.1

24.9

OTCM

24.5

24.0

Source: Refinitiv, Edison Investment Research. Note: Prices as at 27 May 2020.

The reduction in our estimates has lowered the values produced from our discounted cash flow model. Our central valuation of $29.50 per share ($32 previously) assumes a discount rate of 10%, factors in our explicit forecasts for FY20 and FY21, together with an assumption of FY22–23 cash flow growth of 12% (increased to allow for a degree of bounce back), long-term growth of 4% and a terminal cash flow multiple of 16x (compared with 22.3x for FY20e).

The sensitivity of our discounted cash flow valuation to different discount rates and long-term growth assumptions is shown in Exhibit 10.

Exhibit 10: Discounted cash flow valuation sensitivity ($ per share)

Discount rate (right)

Long-term growth

8%

9%

10%

11%

12%

3%

32.5

30.3

28.2

26.4

24.7

4%

34.0

31.6

29.5

27.5

25.8

5%

35.6

33.1

30.8

28.7

26.9

6%

37.2

34.6

32.2

30.0

28.0

Source: Edison Investment Research

Exhibit 11: Financial summary

$ 000s

2016

2017

2018

2019

2020e

2021e

Year end 31 December

PROFIT & LOSS

OTC Link

10,573

10,074

11,175

11,676

12,377

12,438

Market Data Licensing

21,054

21,922

23,384

24,447

26,647

27,447

Corporate Services

19,254

22,660

24,719

26,716

25,690

26,316

Revenue

50,881

54,656

59,278

62,839

64,714

66,201

Re-distribution fees and rebates

(2,317)

(2,480)

(2,448)

(2,489)

(2,638)

(2,717)

Net revenue

48,564

52,176

56,830

60,350

62,076

63,483

Transaction-based expenses

0

0

(375)

(746)

(1,495)

(1,244)

Revenues less transaction-based expenses

48,564

52,176

56,455

59,604

60,581

62,240

Operating expenses

(30,032)

(32,511)

(35,768)

(40,230)

(41,245)

(42,489)

EBITDA

18,532

19,665

20,687

19,374

19,336

19,751

Depreciation

(1,606)

(1,361)

(1,042)

(1,492)

(1,656)

(1,673)

Operating profit

16,926

18,304

19,645

17,882

17,680

18,078

Net interest

9

47

116

103

70

75

Profit Before Tax

16,935

18,351

19,761

17,985

17,750

18,153

Tax

(6,407)

(5,792)

(3,524)

(3,043)

(3,373)

(3,449)

Profit after tax

10,528

12,559

16,237

14,942

14,378

14,704

Profit after tax and allocation to RSAs

10,252

12,241

15,840

14,588

14,024

14,350

Average Number of Shares Outstanding (m)

11.3

11.6

11.6

11.7

11.7

11.7

EPS - basic (c)

92.4

109.9

140.8

128.4

123.2

126.1

Fully diluted EPS (c)

90.4

105.8

136.3

124.7

119.7

122.5

Dividend per share (c)

116.0

116.0

123.0

125.0

125.0

125.0

EBITDA Margin (%)

38

38

36

32

31

31

Operating profit margin (%)

35

35

35

30

28

28

BALANCE SHEET

Non-current assets

 

 

 

 

 

 

Intangible assets

291

362

312

291

347

280

Property and other

3,267

3,506

4,584

25,034

23,495

23,190

Current assets

 

 

 

 

 

 

Debtors

6,262

6,450

4,942

5,157

5,720

5,720

Cash & cash investments

25,034

23,683

28,813

28,217

23,573

26,901

Other current assets

1,789

2,316

2,998

1,656

1,600

1,600

Current liabilities

 

 

 

 

 

 

Deferred revenues

(14,664)

(15,531)

(16,070)

(15,815)

(15,208)

(15,578)

Other current liabilities

(5,372)

(5,644)

(6,711)

(9,574)

(5,859)

(5,859)

Long-term liabilities

 

 

 

 

 

 

Tax, rent and other

(1,101)

(1,351)

(2,459)

(17,293)

(17,092)

(17,092)

Net assets

15,506

13,791

16,409

17,673

16,576

19,161

NAV per share ($)

1.36

1.21

1.42

1.52

1.42

1.64

CASH FLOW

Operating cash flow

21,752

21,629

24,442

23,044

17,681

22,571

Net Interest

9

47

116

103

70

75

Tax

(6,021)

(5,193)

(1,968)

(1,734)

(3,027)

(3,449)

Capex / intangible investment

(415)

(1,165)

(549)

(5,516)

(1,124)

(1,300)

Financing / investments

(1,157)

(3,407)

(2,716)

(1,933)

(3,671)

0

Dividends

(13,059)

(13,262)

(14,195)

(14,560)

(14,573)

(14,569)

Net cash flow

1,109

(1,351)

5,130

(596)

(4,644)

3,327

Opening net (debt)/cash

23,925

25,034

23,683

28,813

28,217

23,573

Closing net (debt)/cash

25,034

23,683

28,813

28,217

23,573

26,901

Cash and restricted cash

25,244

24,375

30,534

29,778

25,134

28,462

Source: OTC Markets Group accounts, Edison Investment Research


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This report has been commissioned by OTC Markets Group and prepared and issued by Edison, in consideration of a fee payable by OTC Markets Group. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

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Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2020 Edison Investment Research Limited (Edison).

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New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

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This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

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United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

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United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by OTC Markets Group and prepared and issued by Edison, in consideration of a fee payable by OTC Markets Group. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2020 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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