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Renaissance Capital

23 January 2019

Media

Solid performance for Yandex.Taxi, Uber IPO likely to be a positive catalyst

Yandex.Taxi has made impressive progress over the past two years. Its popularity continues to grow, it is far ahead of peers in terms of usage and top-line growth has been impressive post the consolidation of Uber Russia. More importantly, the business managed to significantly reduce losses over the past year, with ride-sharing turning profitable in 3Q18 (with negative c. RUB700mn EBITDA due to investments in food delivery).

The solid results suggest we were clearly too negative in the past, and we now think

Yandex.Taxi is well positioned to maintain its leadership and realise value longer term.

That said, we note that:

1.Competition is unlikely to disappear in the medium term, with Citimobil, Rutaxi and some other players continuing to invest. Even in the much more mature US market, Uber has been losing share to Lyft over the past few years (Uber’s share fell from c.85% in early-2016 to c.70% currently);

2.Given that there are, as far as we know, no other profitable online taxi businesses yet at the country level (except Gett in Israel), forecasting risk remains high, with very little visibility on what a sustainable level of long-term profitability might be. We assume a 30% long-term EBITDA margin, reflecting the forecasting risk in our WACC (13.5% for Yandex.Taxi vs 11.0% for the core business) and arrive at a $2.7bn valuation for 100%, which is materially below most other sell-side estimates.

Figure 58: Yandex.Taxi has significantly outperformed peers in terms of popularity (Android DAU, ‘000)

Yandex.Taxi		Gett		Citymobil	Rutaxi		Maxim	InDriver
1,200
1,000
800
600
400
200
0
Jul-17	Sep-17	Nov-17	Jan-18	Mar-18	May-18	Jul-18	Sep-18	Nov-18

Source: SimilarWeb

Figure 59: Yandex.Taxi revenue has been growing rapidly…								Figure 60: …and EBITDA losses have moderated
		Revenue, RUBmn			Growth, %			500				Adjusted EBITDA, RUBmn								Margin, %				100%
6,000							450%
							400%	0																50%
5,000												19%	0%
							350%	-500	54%		26%											-14%		0%
												-5%								-55%
4,000							300%	-1000							-29%									-50%
																						-53%
							250%													-72%
3,000								-1500								-108%								-100%
							200%
								-2000										-160%						-150%
2,000							150%	-2500								-173%								-200%
1,000							100%	-3000								-255%				-275%				-250%
							50%
								-3500																-300%
0							0%		1Q15	2Q15	3Q15	4Q15	1Q16	2Q16	3Q16	4Q16	1Q17	2Q17	3Q17	4Q17	1Q18	2Q18	3Q18
1Q15	3Q15	1Q16	3Q16	1Q17	3Q17	1Q18	3Q18
							Source: Company data															Source: Company data

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Figure 61: The US example shows that even in mature markets dominant players are not immune to competition, with Uber losing market share to Lyft over the past few years

				Uber		Lyft
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
1Q16	2Q16	3Q16	4Q16	1Q17	2Q17	3Q17	4Q17	1Q18	2Q18	3Q18

Source: Second Measure

Uber IPO likely in 2019, with potential valuation implying a c. $3.7-6.4bn value for Yandex.Taxi

According to press reports, Uber plans an IPO in 2019, with a potential valuation of up to $120bn. While such a significant increase vs the last private round valuation of c. $70bn seems aggressive, a valuation of somewhere between $70bn and $120bn should be possible, which is equivalent to c. 1.5-2.5x GMV (LTM), on our estimates. Applying the same GMV multiple range to Yandex.Taxi’s 2018 GMV (which we estimate at $2.5bn) implies a c. $3.7-6.4bn valuation for 100% of the company. Despite our relatively cautious view on Yandex.Taxi, we believe the run-up to Uber’s IPO is likely to be supportive for Y.Taxi’s valuation and Yandex’s share price.

Figure 62: Uber’s planned 2019 IPO could imply a c. $3.7-6.4bn valuation for Yandex.Taxi

		GMV, $bn		Valuation, $bn
120
70
47.1
					6.4
			2.5		3.7
Uber					Yandex.Taxi

Note: 4Q17-3Q18 GMV is shown for Uber, 2018E GMV is used for Y.Taxi.

Source: Press reports, Renaissance Capital estimates

Renaissance Capital

23 January 2019

Media

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Russia’s e-commerce market still highly fragmented; Beru gaining traction

Greater investment likely to accelerate market growth and consolidation

As discussed earlier, the Russian e-commerce market has been growing fast (Figure 33) but with penetration still low (c. 5%) we see significant scope for strong growth. At the same time, the market is highly fragmented (vs the more mature US or China markets where the top two players account for the bulk of sales) and likely to go through a material consolidation in the medium term. The relatively recent Yandex/Sberbank (which launched its Beru marketplace in 2H18) and Mail/Alibaba deals are likely to lead to faster consolidation, we believe, as their investments should, on the one hand, be positive for overall user adoption and market growth, and on the other increase competitive pressure on small players that do not have the same access to capital. In our view, among pure online generalist e-commerce platforms, the best positioned to secure long-term leadership are AliExpress, Beru and Ozon.

Figure 63: Russia’s e-commerce market remains highly fragmented, with the top eight players (excluding Y.Market) accounting for c. 40% of the market in 2017

Sales, RUBbn, 2017

Y.Market*
AliExpress
Wildberries
M.Video (incl. Eldorado)
Citilink
DNS
Lamoda
Ozon
Ulmart
0	20	40	60	80	100	120	140	160

Note: Y.Market’s GMV includes sales via merchants’ sites (CPC model) with Y.Market not actually processing the transactions, which is the majority of sales. Source: AKIT, Company data, Data Insight

We think the market is still quite early-stage, and current scale or product advantages do not guarantee a strong market position longer term. Nevertheless, comparing the platforms, we would make the following points:

▪There is no outright price leader. On our observation, prices do not differ significantly on Beru and Ozon, and delivery is free for high-value items on both platforms (as well as on AliExpress). That said, both Beru and Ozon are currently active in promo and we believe are, on average, cheaper than, for example, M.Video.

▪Ozon’s logistics infrastructure is its key competitive advantage. Ozon has been operating in the Russian e-commerce market for over 20 years and as a result has the most developed logistics infrastructure, operating eight fulfillment centres / warehouses with total space of c.80k m2 and over 5k pick-up points (including partners’). This allows Ozon to offer faster delivery vs competitors, an important advantage right now, in our view. However, despite being the largest among peers, its current infrastructure is relatively small and with high investment could be replicated quickly. For example, Ozon added around 40k m2 of warehousing space just during 2018 and plans to add another 120k m2 in 2019, with a five-year target of up to 1mn, according to the company.

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23 January 2019

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Renaissance Capital

23 January 2019

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▪AliExpress’ key differentiator is assortment; Beru has room to improve. In our view, AliExpress does not directly compete with Beru and Ozon due to its different focus. Given its long delivery time and relatively unattractive prices for A- brands, it is not competitive on high-ticket items, in our view. However, AliExpress accounts for a substantial share of Russia’s cross-border e-commerce market, as it offers a vast choice of cheap products from Chinese merchants, in particular in the consumer electronics, accessories and clothes categories. That said, Alibaba is now also developing its Tmall platform in Russia, which is more similar to Beru and Ozon, although it is currently early stage.

In terms of assortment, Beru has a narrower choice vs its direct peers, and does not offer, for example, large consumer appliances. We understand, however, that it is still early days for the platform.

▪Traffic and strong financial positions are Yandex’s and Mail’s clear competitive advantages. Given the relatively early stage of the market’s development, an ability to invest material amounts of dollars into product, infrastructure and marketing are likely to be more important in the medium term than the current stage of development vs peers. In this regard, Beru and AliExpress, which received (should receive upon the deal closure in case of AliExpress) significant cash injections and are backed by shareholders with strong financial positions, have clear advantages, although Ozon can continue to raise funds. Moreover, large traffic generated by Yandex’s and Mail’s other internet properties should also help, to gain traction for their e-commerce divisions. This is illustrated by Beru which has achieved material usage in less than six months post launch and Pandao which became sufficiently popular over the course of 2018 to reach a deal with Alibaba.

▪M.Video and Detsky Mir are also well positioned in their segments. We believe strong offline retailers with online platforms, such as M.Video (HOLD, TP RUB435, CP RUB402) and Detsky Mir (BUY, TP RUB117, CP RUB923) are also quite well positioned in their respective segments. Both have strong brands, generate positive free cash flow, own established supply chains and also have a large offline presence, with stores active as pick-up points, which is a very popular way to purchase online in Russia. M.Video’s online platform is currently one of the largest in the country by sales.

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Renaissance Capital

23 January 2019

Media

Figure 64: Beru is marketing heavily and rapidly gaining traction although assortment and delivery will need to improve

Beru does not have large household appliances, such as fridges or washing machines

Beru shows an information on user interest in a certain SKU, with detailed reviews of different features also available (likely taken from Y.Market)

Yandex.Station is officially sold via Beru and can be pre-ordered exclusively on this platform

Source: Beru.ru

Figure 65: Ozon’s wide assortment and logistics infrastructure are its main competitive advantages currently, in our view

Ozon recently started to offer installment sales

Daily promotion activities

A large number pick-up points in different Russian cities

Source: Ozon.ru, Renaissance Capital

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Renaissance Capital

23 January 2019

Media

Figure 66: In our view, AliExpress’ assortment makes it materially different from peers, with low-value items from

Chinese merchants accounting for the bulk of sales

Users can be redirected to Tmall which sells higherticket items with faster delivery

Promotions and deals are available on the home page

Wide assortment of lowvalue SKUs, mostly in accessories (incl. electronic), clothes and goods for everyday live

Recently viewed products

Source: Aliexpress, Renaissance Capital

Figure 67: Price and delivery comparison for iPhone XR 64GB

			Moscow				Samara
		Price,	Delivery	Cost of courier		Price,	Delivery	Cost of courier
		RUB	time	delivery, RUB		RUB	time	delivery, RUB
	Beru	62,989	2 days	Free	Beru	62,989	5 days	Free
	Ozon	61,690	1 day	Free if paid online,	Ozon	61,690	4 days	Free if paid online,
				otherwise 279				otherwise 249
	AliExpress	67,754	31-58 days	Free	AliExpress	67,753.9	31-58 days	Free
	M.Video	63,990	2 days	Free	M.Video	63,990	7 days	Free

Source: Companies’ websites, Renaissance Capital

Figure 68: Price and delivery comparison for TV LG 43LJ515V

		Moscow				Samara
	Price,	Delivery	Cost of courier		Price,	Delivery	Cost of courier
	RUB	time	delivery, RUB		RUB	time	delivery, RUB
Beru	25,989	1 days	Free	Beru	25,989	5 days	Free
Ozon	25,990	2 days	Free if paid online,	Ozon		cannot be delivered
			otherwise 500
AliExpress	25,990	6 days	Free	AliExpress	25,990	7 days	Free
M.Video	25,990	2 days	490	M.Video	25,990	1 day	390

Source: Companies’ websites, Renaissance Capital

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Renaissance Capital

23 January 2019

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Figure 69: Beru has been rapidly gaining traction on the web in Russia

Figure 70: …but its app remains unpopular (Android DAU, ‘000s)

(monthly unique website visitors in Russia, mn)…

Pandao

Yandex Market

AliExpress

Pandao

Yandex Market

AliExpress

Ozon.ru

Lamoda.ru

Beru

Ozon.ru

Lamoda.ru

Beru

70.0

4,000

60.0

3,500

50.0

3,000

40.0

2,500

2,000

30.0

1,500

20.0

1,000

10.0

500

0.0

0

Mar-17

Jun-17

Sep-17

Dec-17

Mar-18

Jun-18

Sep-18 Dec-18

Jun-17

Sep-17

Dec-17

Mar-18

Jun-18

Sep-18

Dec-18

Source: SimilarWeb

Source: SimilarWeb

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Renaissance Capital

23 January 2019

Media

Financials and valuation

Our Yandex TP is derived using a DCF methodology, with an 11% WACC (13.5% for Yandex.Taxi) and a 3% terminal growth rate. Upside risks to our forecasts include: faster- than-expected ad market dynamics and higher-than-expected search market share gains; greater-than-anticipated monetisation of the core search business; higher-than-assumed long-term earnings of Yandex.Taxi as well as lower-than-expected SG&A cost inflation; and material rouble appreciation vs the dollar. Key downside risks include: deterioration of the macro and advertising market environment in Russia; tougher competition from Google; stronger competition and lower long-term returns in the online taxi segment; higher-than-expected cost inflation and material rouble depreciation vs the dollar.

Figure 71: Yandex – income statement, RUBmn (unless otherwise stated)

	2013	2014	2015	2016	2017	2018E	2019E	2020E	2021E
Total revenue	39,502	50,767	59,792	75,925	94,054	123,350	151,497	181,346	212,040
Growth	37%	29%	18%	27%	24%	31%	23%	20%	17%
Total Yandex ad	30,963	38,737	43,704	52,888	65,149	77,527	91,870	106,569	121,489
Growth	33%	25%	13%	21%	23%	19%	19%	16%	14%
Yandex ad network websites	7,885	11,410	14,506	19,691	22,251	23,475	26,292	29,184	32,102
Growth	61%	45%	27%	36%	13%	6%	12%	11%	10%
Total advertising revenue	38,848	50,147	58,210	72,579	87,400	101,002	118,162	135,753	153,591
Growth	38%	29%	16%	25%	20%	16%	17%	15%	13%
Other revenue	260	620	1,582	3,346	6,654	22,348	33,335	45,593	58,449
Growth	126%	138%	155%	112%	99%	236%	49%	37%	28%
incl. Y.Taxi	112	327	984	2,313	4,891	17,852	27,671	38,739	50,361
Growth	0%	192%	201%	123%	111%	265%	55%	40%	30%
Other revenue ex. Y.Taxi	0	293	598	1,033	1,763	4,496	5,665	6,854	8,088
Growth	0%	0%	104%	73%	71%	155%	26%	21%	18%
Cost of revenue	(10,606)	(14,336)	(16,810)	(19,754)	(23,937)	(32,524)	(37,398)	(42,395)	(47,458)
as % of revenue	27%	28%	28%	26%	25%	26%	25%	23%	22%
Gross profit	28,896	36,431	42,982	56,171	70,117	90,826	114,099	138,951	164,582
Gross margin	73.2%	71.8%	71.9%	74.0%	74.5%	73.6%	75.3%	76.6%	77.6%
Product development	(5,827)	(8,842)	(13,421)	(15,832)	(18,761)	(22,788)	(26,746)	(30,803)	(34,923)
Growth	36%	52%	52%	18%	19%	21%	17%	15%	13%
as % of revenue	15%	17%	22%	21%	20%	18%	18%	17%	16%
Sales, general and administrative	(6,537)	(7,782)	(11,601)	(17,885)	(27,081)	(37,323)	(44,383)	(50,678)	(56,669)
Growth	33%	19%	49%	54%	51%	38%	19%	14%	12%
as % of revenue	17%	15%	19%	24%	29%	30%	29%	28%	27%
Depreciation and amortisation	(3,695)	(4,484)	(8,367)	(9,607)	(11,239)	(12,952)	(16,665)	(19,948)	(23,324)
as % of revenue	9%	9%	14%	13%	12%	11%	11%	11%	11%
Total operating costs and expenses	(26,665)	(35,444)	(50,199)	(63,078)	(81,018)	(105,587)	(125,192)	(143,824)	(162,373)
EBIT	12,837	15,323	9,593	12,847	13,036	17,763	26,305	37,522	49,666
Growth	36%	19%	-37%	34%	1%	36%	48%	43%	32%
EBIT margin	32%	30%	16%	17%	14%	14%	17%	21%	23%
EBITDA (adj. before stock-based comp)	17,367	21,052	20,969	26,121	29,075	36,882	49,787	65,630	82,532
Growth	32%	21%	0%	25%	11%	27%	35%	32%	26%
EBITDA margin	44.0%	41.5%	35.1%	34.4%	30.9%	29.9%	32.9%	36.2%	38.9%
EBITDA ex. Y.Taxi (adj.)	17,310	20,835	20,807	28,207	37,038	44,221	51,640	60,456	69,439
Margin	43.9%	41.3%	35.4%	38.3%	41.5%	41.9%	41.7%	42.4%	42.9%
EBITDA Y.Taxi	57	217	162	(2,086)	(7,963)	(7,339)	(1,853)	5,174	13,094
Margin	51%	66%	16%	-90%	-163%	-41%	-7%	13%	26%
PBT	16,713	22,475	13,596	11,107	13,582	50,098	29,450	41,753	55,119
Tax rate	19.4%	24.3%	28.8%	38.9%	36.3%	13.1%	24.6%	24.0%	24.0%
Provision for income taxes	(3,239)	(5,455)	(3,917)	(4,324)	(4,926)	(6,540)	(7,238)	(9,626)	(12,730)
Net income (adj. before stock-based comp)	12,140	13,751	12,179	14,116	15,359	26,723	29,875	39,270	48,870

Source: Company data, Renaissance Capital estimates

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Renaissance Capital

23 January 2019

Media

Figure 72: Yandex – DCF valuation, $mn (unless otherwise stated)

	2020E		2021E		2022E	2023E	2024E	2025E		2026E	2027E		2028E	2029E
Revenues	2251		2502	2701		2871	3012	3129	3236		3330		3411	3477
Growth	15%		11%	8%		6%	5%	4%	3%		3%	2%		2%
EBIT	616		693	749		795	828	855	879		901		921	938
Growth	17%		13%	8%		6%	4%	3%	3%		3%	2%		2%
Margin	27%		28%	28%		28%	28%	27%	27%		27%		27%	27%
Tax rate	20%		20%	20%		20%	20%	20%	20%		20%	20%		20%
Tax on EBIT	(123)		(139)	(150)		(159)	(166)	(171)	(176)		(180)		(184)	(188)
EBIT after tax	493		554	600		636	663	684	703		721	737		750
D&A	236		263	284		301	316	329	340		350		358	365
Changes in working capital	11		13	14		14	15	16	16		17	17		17
Share-based compensation	101		113	122		129	136	141	146		150		153	156
Capex	(346)		(370)	(392)		(412)	(432)	(454)	(476)		(500)	(525)		(552)
% revenue	15%		15%	15%		14%	14%	15%	15%		15%		15%	16%
Unleveraged free cash flow	496		572	626		669	698	715	728		737	740		738
Growth	23%		15%	9%		7%	4%	3%	2%		1%		1%	0%
Timing	1		2	3		4	5	6	7		8	9		10
Discount factor	90.1%		81.2%	73.1%		65.9%	59.3%	53.5%	48.2%		43.4%		39.1%	35.2%
NPV of cash flows	447		465	458		441	414	382	351		320	289		260
Terminal growth rate	3.0%
Free cash flow in 2029	760
Terminal multiple	12.5
Discount factor	35.2%
PV of terminal multiple	4.4
NPV of terminal value	3,345
Total NPV of cash flows	3,826
Net cash (end-2019E)	1,603
Stake in Yandex.Market	180
Market cap	8,955
Number of shares, mn	331
Core price/share, $	27.0
Y.Taxi price/share, $	5.0
TP (incl Taxi), $	32.0
												Source: Renaissance Capital estimates
Figure 73: Global internet multiples
	Price,		MktCap,			EV/EBITDA, x						P/E, x
	$		$mn		2018E		2019E	2020E		2018E		2019E		2020E
Search & portals
Mail Group	25.4		5,590		14.7x		12.4x	9.7x		30.1x		22.4x		16.5x
Yandex	30.8		9,998		13.9x		11.7x	9.4x		21.9x		21.3x		16.4x
Google	1,098.3		766,717		13.6x		11.4x	9.7x		20.2x		19.0x		16.1x
Facebook	150.0		431,816		12.2x		11.1x	9.2x		17.9x		16.5x		14.6x
Baidu	171.4		59,729		14.7x		13.7x	10.3x		17.6x		16.0x		13.2x
Tencent	43.3		412,639		22.4x		17.2x	13.5x		10.1x		9.2x		7.9x
Sina	61.7		4,411		5.0x		3.8x	2.9x		19.5x		15.6x		11.6x
Sohu	19.5		761		n.m		n.m	n.m		n.m		n.m		n.m
Average					14.0x		11.7x	9.3x		21.3x		18.2x		14.3x
E-commerce
Amazon	1,696.2		829,389		24.9x		19.5x	15.1x		60.9x		46.1x		32.7x
eBay	31.0		29,848		8.8x		8.4x	7.7x		13.1x		12.5x		11.8x
Priceline.com	1,760.3		81,552		13.0x		11.8x	10.6x		18.9x		17.2x		15.3x
Rakuten	7.7		11,037.2		0.8x		0.9x	0.9x		11.3x		19.8x		24.2x
Expedia	118.5		17,650		9.9x		8.8x	7.8x		20.1x		17.5x		14.9x
Tripadvisor	59.0		8,128		18.2x		16.3x	14.3x		33.6x		30.2x		25.8x
Netflix	339.1		147,876		74.4x		47.8x	32.7x		101.0x		69.9x		44.2x
Mercadolibre Inc	350.7		15,851		n.m		174.1x	64.7x		n.m		590.7x		135.2x
ASOS	39.0		3,269		16.1x		14.4x	10.9x		37.9x		41.5x		29.1x
Ctrip	32.4		17,665		34.4x		28.0x	20.9x		25.6x		24.4x		17.5x
Groupon	3.8		2,163		5.2x		4.8x	4.3x		17.3x		14.1x		11.9x
REA Group	55.5		7,308		20.1x		18.1x	16.0x		32.1x		28.3x		24.5x
Average					20.5x		29.4x	17.2x		33.8x		76.0x		32.3x

Note: Forecasts based on Bloomberg consensus, except Yandex and Mail Group (covered by RenCap) and Tencent (based on existing RenCap forecasts as part of our forecasts for Naspers). Current intraday prices at 21 January 2019.

Source: Bloomberg, Renaissance Capital estimates

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Disclosures appendix

Renaissance Capital

23 January 2019

Media

Analysts certification

This research report has been prepared by the research analyst(s), whose name(s) appear(s) on the front page of this document, to provide background information about the issuer or issuers (collectively, the “Issuer”) and the securities and markets that are the subject matter of this report. Each research analyst hereby certifies that with respect to the Issuer and such securities and markets, this document has been produced independently of the Issuer and all the views expressed in this document accurately reflect his or her personal views about the Issuer and any and all of such securities and markets. Each research analyst and/or persons connected with any research analyst may have interacted with sales and trading personnel, or similar, for the purpose of gathering, synthesizing and interpreting market information. If the date of this report is not current, the views and contents may not reflect the research analysts’ current thinking.

Each research analyst also certifies that no part of his or her compensation was, or will be, directly or indirectly related to the specific ratings, forecasts, estimates, opinions or views in this research report. Research analysts’ compensation is determined based upon activities and services intended to benefit the investor clients of Renaissance Securities (Cyprus) Limited and any of its affiliates (“Renaissance Capital”). Like all of Renaissance Capital’s employees, research analysts receive compensation that is impacted by overall Renaissance Capital profitability, which includes revenues from other business units within Renaissance Capital.

Important issuer disclosures

Important issuer disclosures outline currently known conflicts of interest that may unknowingly bias or affect the objectivity of the analyst(s) with respect to an issuer that is the subject matter of this report. Disclosure(s) apply to Renaissance Securities (Cyprus) Limited or any of its direct or indirect subsidiaries or affiliates (which are individually or collectively referred to as “Renaissance Capital”) with respect to any issuer or the issuer’s securities.

A complete set of disclosure statements associated with the issuers discussed in this Report is available using the ‘Stock Finder’ or ‘Bond Finder’ for individual issuers on the Renaissance Capital Research Portal at: http://research.rencap.com/eng/default.asp

Mail Group

RIC: MAILRq.L

Renaissance Capital is either a market maker or on a continuous basis has sold to/bought from customers on a principal basis the securities or related securities of the issuer at prices defined by Renaissance Capital.

Yandex NV

RIC YNDX.OQ

Renaissance Capital is either a market maker or on a continuous basis has sold to/bought from customers on a principal basis the securities or related securities of the issuer at prices defined by Renaissance Capital.

Investment ratings

Investment ratings may be determined by the following standard ranges: Buy (expected total return of 15% or more); Hold (expected total return of 0-15%); and Sell (expected negative total return). Standard ranges do not always apply to emerging markets securities and ratings may be assigned on the basis of the research analyst’s knowledge of the securities.

Investment ratings are a function of the research analyst’s expectation of total return on equity (forecast price appreciation and dividend yield within the next 12 months, unless stated otherwise in the report). Investment ratings are determined at the time of initiation of coverage of an issuer of equity securities or a change in target price of any of the issuer’s equity securities. At other times, the expected total returns may fall outside of the range used at the time of setting a rating because of price movement and/or volatility. Such interim deviations will be permitted but will be subject to review by Renaissance Capital’s Research Management.

Where the relevant issuer has a significant material event with further information pending or to be announced, it may be necessary to temporarily place the investment rating Under Review. This does not revise the previously published rating, but indicates that the analyst is actively reviewing the investment rating or waiting for sufficient information to re-evaluate the analyst’s expectation of total return on equity.

Where coverage of the relevant issuer is due to be maintained by a new analyst, on a temporary basis the relevant issuer will be rated as Coverage in Transition. Previously published investment ratings should not be relied upon as they may not reflect the new analysts’ current expectations of total return. While rated as Coverage in Transition, Renaissance Capital may not always be able to keep you informed of events or provide background information relating to the issuer.

If issuing of research is restricted due to legal, regulatory or contractual obligations publishing investment ratings will be Restricted. Previously published investment ratings should not be relied upon as they may no longer reflect the analysts’ current expectations of total return. While restricted, the analyst may not always be able to keep you informed of events or provide background information relating to the issuer.

Where Renaissance Capital has neither reviewed nor revised its investment ratings on the relevant issuer for a period of 180 calendar days, coverage shall be discontinued.

Where Renaissance Capital has not provided coverage of an issuer for a period of 365 calendar days, coverage shall be discontinued.

Where Renaissance Capital has not expressed a commitment to provide continuous coverage and/or an expectation of total return, to keep you informed, analysts may prepare reports covering significant events or background information without an investment rating (Not Covered).

Your decision to buy or sell a security should be based upon your personal investment objectives and should be made only after evaluating the security’s expected performance and risk.

Renaissance Capital reserves the right to update or amend its investment ratings in any way and at any time it determines.

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