- migme Limited
Transcription
- migme Limited
MIG GME LIM MITED Resea arch Note PRIM MED TO LE EVERAGE OFF ITS PLATFOR RM GROWT TH Investment Highllights 18 November 22015 migme Limited d (MIG) has been rapidly in ncreasing its s Monthly Acttive Us ser (MAU) an nd verified arttist base for its digital med dia and socia al ne etworking pla atform targete ed at the Sou uth East Asia market. MIG is cu urrent focuse ed on increas sing its MAU base b and sub bsequently co onverting tho ose users to Monthly M Activ ve Paying Us ers (MAPU) via v op ptimisation of its platform m, increased content c and fu further artist interactions fa acilitating use er micro-trans sactions. The e MIG platform m is an n amalgamatiion of service es offered by other social networks an nd ha as been custo omised to foc cus on, and cater c to, the S South East As sian market, particu ular India, Ind donesia and the t Philippine es. We believ ve the pportunity in this market is i substantial, given rapid d internet op pe enetration fac cilitating the rise of a large total addres ssable marke et of c4 450m people.. MIG is in a promising p position to leve erage off this MAPUs large target ma arket and thu us increase its s MAUs and M We remain hig ghly positive on the MIG s story and significantly. W maintain our S Speculative Buy B rating with a target priice of $1.90/s sh. Arrtists/Celebrity Engageme ent correlated d to MAUs: W We see potential large upside in MIG attracting g addition artis sts (more than n 490 as at 30 eptember 2015) and, more importantly, household nam me celebrities from Se the respective target countrie es. This may cause a transittion of followers MIG platform frrom other social media platfforms such as s (users) to the M Fa acebook and T Twitter, where e certain artists s and celebritiies have a larg ge fan base but little interaction or o monetisatio on. 12mth Rating A$ A$ % 0.93 1.90 105.7 RIC: R MIG.AX Shares S o/s Free F Float Market M Cap. Net N Debt (Cashh) Net N Debt/Equityy 3m 3 Av. D. T’oveer 52wk 5 High/Low w 2yr 2 adj. beta m % A$m A A$m A % A$m A A$ BBG: MIG M AU 273.3 80.0 252.8 (10.1) na 0.15 1..30/0.37 1.66 Valuation: V Methodology M Value V per sharee Growing user b base but und dervalued com mpared to intternational pe eers: MIG has experienced 30% qu uarter-on-quarrter user grow wth, with curren nt us ser numbers sstanding at ove er 24m as at 30 3 Septemberr 2015. We expect us ser numbers to o continue the e healthy grow wth trend. Glob bal peers are cu urrently valued d at US$37.74 4 per user, whiile MIG tradess at US$8.05 per p us ser. This show ws the extent to o which MIG is potentially u undervalued by the market; howeve er a portion of the discount may m be explaiined by the cu urrent w revenue per user of c.$0..50 derived fro om MIG’s platfform. low Valuation V acro oss all metric cs highlights significant u pside: Using the DC CF method we e have derived d a 12 month target price off $1.90/sh. Ou ur va aluation is high hly sensitive to o MAPU conversion and AR RPU, highlightting further upside frrom optimisatiion of these metrics. m Using a sales multip ple of 10 0x, we derive vvalue for MIG of $2.57/sh frrom 2017 onw ward. Additiona ally us sing the media an global peerr value per use er of US$37.74 4, would sugg gest a va alue of $4.73/ssh. All these valuation metrics suggest M IG is trading at a a su ubstantial disccount and shou uld re-rate upw ward. Jon Scholtz Phone: P ( +61) 8 922 25 2836 [email protected] Disclosure: D Seecurities Limited d acted as Jointt Lead Manager M to the S Share Placemen nt that raised $7 7.0m at $0.67/sh $ for Migm me Limited in April A 2015. It also acted as a Lead Manageer to the Share Placement P that raised r $10.1m $ at $1.00/s /sh for Migme Limited in Septem mber 2015. 2 It was paid d fees for these services 12 Month h Share Price e Performanc ce Performance P % Absolute A Rel. R S&P/ASX 3300 RESEAR RCH NOTE – PAT TERSONS SECU URITIES LIMITED DCF 1.90 A$ Analyst: A Email: E SPE EC BUY Price P Target T Price 12m Total Retuurn 1mtth -6.0 0 -4.7 7 3mth -24.8 -20.3 12mth 176.5 187.4 1 All inform mation and advice e is confidential and a for the private information of tthe person to who om it is provided and is provided w without any respo onsibility or liabilitty on any account whatsoever on th he part of this firm or any member or employee thereoof. 18 November 2015 Migme Limited COMPANY OVERVIEW migme Limited (MIG) is a digital media and social networking platform based in Singapore, with offices in Taiwan, Indonesia, Hong Kong, Malaysia and, most recently, in India. MIG is strongly focussed on the emerging markets in the Asia Pacific region, and will specifically target Indonesia and India. The migme platform is the Company’s flagship asset which provides chat, entertainment, microblogging and gaming on a freemium model that consists of free core components and paid premium value-add extensions. Figure 1: MIG Offices and targeted markets Source: migme Limited The MIG platform allows users an aspirational online presence that is detached from their real life self, which is in contrast to ones presence on Facebook. The idea is that, in markets such as Indonesia and India with significant structural and social inequalities, users can create their own identity. The MIG business model is an amalgamation of services offered currently in China (by Tencent, YY and Weibo etc) and western social networks (Facebook, Twitter etc), but customised and packaged to service the Asia Pacific market. The freemium model is a proven concept with consumers in the region, with MIG’s key differentiating factor being local artists and celebrities who create and share content that, in turn, drives users to the platform and increases participation and potential monetisation MIG has made 3 strategic acquisitions which are bolt-ons to the main MIG platform; 1) alivenotdead – a media and artist community that has a large footprint in Asian media 2) LoveByte – an App targeted at couples to capture, track and share special moments/occasions. Key synergies are in MIG’s ability to integrate the avatar creator and virtual gift creator/provider into its core platform. And 3) Sold.sg – an eCommerce pay to bid platform which provides a path for MIG to monetise physical good (and premium virtual goods) via a Business to Consumers basis and potentially Consumer to Consumer (similar to Alibaba’s flagship Taoboa platform). INTERNET PENETRATION & TOTAL ADDRESSABLE MARKET India currently ranks 3rd in the number of smartphone users and is expected to move ahead of the USA in th number by 2018. Indonesia, while currently ranked 7 with 38.3m smartphone users, is expected to see the uptake of smartphones increase rapidly and propel the country to the 4th largest user globally. We note that, due to the adoption of cheaper smartphones, the number of handsets in emerging nations could potentially outstrip the current estimate RESEARCH NOTE – PATERSONS SECURITIES LIMITED 2 All information and advice is confidential and for the private information of the person to whom it is provided and is provided without any responsibility or liability on any account whatsoever on the part of this firm or any member or employee thereof. 18 November 2015 Migme Limited Figure 2: Internet Penetration (2000- 2020) Source: migme Limited Internet and smartphone penetration is expected to substantially increase in emerging markets with the development and deployment of low cost (below $200 per unit) smartphones is the Asia Pacific markets. MIG’s initial focus is on the South East Asia market where internet penetration is currently 15% but is expected to experience double-digit growth rates over the next few years and forecast to hit 65% by 2020. Rapid Internet penetration would make South East Asia the largest base of internet users with a forecast 1.5bn people connected by 2020.The current addressable market is in excess of 1bn people in emerging markets, whilst the current target market is c300m internet users in India, Indonesia and the Philippines, expected to grow to c443m by the end of 2018. Figure 3: MIG Addressable Market (2018 forecast) Source: migme Limited RESEARCH NOTE – PATERSONS SECURITIES LIMITED 3 All information and advice is confidential and for the private information of the person to whom it is provided and is provided without any responsibility or liability on any account whatsoever on the part of this firm or any member or employee thereof. 18 November 2015 Migme Limited ARTISTS AND USER BASE MIG has grown its user base by c30% quarter on quarter from June 2014 to September 2015, where user numbers increased from 5.0m to 24.0m. The increase in MAUs is due to the revamped platform, increased advertising and an increase in the number of artists and celebrities on the App. The latter is a key aspect in acquiring and monetising users, as associated artists use the platform to attract and engage with fans. Figure 4: MIG Verified Artists and MAU’s Artists (LHS) MAU's (RHS) 500.00 25.0 400.00 20.0 300.00 15.0 200.00 10.0 100.00 5.0 0.00 ‐ Sep‐14 Dec‐14 Mar‐15 Jun‐15 Sep‐15 Source: migme Limited, Patersons Securities Limited MIG, being a media social media network, requires the virtual presence and interactions of various local celebrities/artists to drive consumer engagement. Only a year ago, MIG had just over 30 verified artists and has since grown its talent pool to over 490 verified artists. Artists and celebrities create and share content (in conjunction with a dedicated in house MIG team) on the platform to attract and engage with users. Users, in turn, are encouraged to give artists virtual gifts (hugs, flowers, stickers etc), with most items costing between 1 and 10 US cents. MIG and the artists share in the revenue generated from the purchase of virtual gifts. The idea of a revenue share is a particularly powerful attraction to artists in South East Asia, as piracy erodes a substantial portion of their potential incomes. This incentivises the artists to be active on the platform which, in turn, leads to increased user interactions and increased monetisation which generates artist’s income; and so the cycle continues and grows. As Figure 4 highlights, verified artist growth and user growth are highly correlated and we believe the verified artists on the platform is a key driver in user acquisition. We see potential large upside in MIG attracting additional artists and, more importantly, household name celebrities from the respective target countries which may cause a transition of followers (users) to the MIG platform from other social media platforms. This could occur due to the largely arm’s length and impersonal nature of social media platforms such as Facebook and Twitter, where certain artists and celebrities have a large fan base but little interaction or monetisation. RESEARCH NOTE – PATERSONS SECURITIES LIMITED 4 All information and advice is confidential and for the private information of the person to whom it is provided and is provided without any responsibility or liability on any account whatsoever on the part of this firm or any member or employee thereof. 18 November 2015 Migme Limited PEER COMPARISON MIG is based on a freemium business model. Freemium means the core components of the service offering is free, in this case the chat, gaming and microblogging features, but the premium components are charged for. The premium goods and services include virtual goods; premium avatar play and value add options within the platforms and games. Facebook is the only other social media platform to offer a full suite of products and services to its users, however the impact of the Facebook platform is largely in the developed Western markets. This highlights the quality of the MIG platform and its ability to potentially corner the large emerging South East Asia market. Figure 5: MIG Peer offering comparison Source: migme Limited The virtual goods range in price with no cap, although the majority of goods cost between 1 and 10 US cents. Credit on the MIG platform is pre-paid either through traditional channels, such as bank accounts and credit cards, or through services such as DOKU. The DOKU service seems more appropriate for emerging Asian economies and allows users to top up credit via an ATM or via vouchers from local stores. Monetisation has been subdued in prior quarters as only 0.3% of active users used or purchased premium goods. We expect this number to increase as the payment system is further rolled out, artist interactions increase and additional premium goods are made available RESEARCH NOTE – PATERSONS SECURITIES LIMITED 5 All information and advice is confidential and for the private information of the person to whom it is provided and is provided without any responsibility or liability on any account whatsoever on the part of this firm or any member or employee thereof. 18 November 2015 Migme Limited Figure 6: Social Network Users and Market Cap Figure 7: US$ per user Users Market Cap (US$m) Facebook Inc* 2845 301,350.0 Tencent** US$/user 105.92 2102 184,350.0 87.70 LinkedIn 400 33,365.0 83.41 120.00 Twitter 307 18,500.0 60.26 100.00 Line*** 212 8,000.0 37.74 Momo 82 2,510.0 30.61 YY 127 3,200.0 25.20 Weibo 212 3,680.0 17.36 Migme 24 193.2 8.05 US$/user 80.00 60.00 40.00 20.00 0.00 Median 37.74 Implied Valuation US$ 905.66 Implied Valuation A$ 1,293.80 A$/sh 4.73 Implied Valuation per share Source: Bloomberg, Patersons Securities Limited * Facebook, Instagram, WhatsApp (Facebook Inc) ** WeChat, QQ, QZone (Tencent) *** Estimated Market Cap When comparing the market cap per user ratio of MIG’s peer group, we note that Facebook (including Whatsapp and Instagram) and Tencent (Including QQ, Wechat and Qzone) attract the highest dollar amount per user at US$105.9 and US$87.70 respectively. MIG is well below its peers at US$8.05 per user. Using the median US$ per user (ex MIG) value of US$37.74, we can derive an implied value for MIG of US$905.66m or A$1.3bn (A$4.73/sh), which is well above the current market valuation of MIG. RESEARCH NOTE – PATERSONS SECURITIES LIMITED 6 All information and advice is confidential and for the private information of the person to whom it is provided and is provided without any responsibility or liability on any account whatsoever on the part of this firm or any member or employee thereof. 18 November 2015 Migme Limited VALUATION Assumptions Monthly Active Users (MAU): MIG has seen 30% growth in user numbers quarter-on-quarter (QoQ). We assume user numbers will increase by 26% for the last remaining quarter of CY15, 15% QoQ in CY16, 15% for CY17 and 3% from CY18 onward. Thus we expect 30m users by end CY15, 53m users by CY16 and then stabilising at >60m users by CY17. As most of the early adopters of MIG have been in Indonesia and Nepal, our MAU assumptions may prove conservative if it were to see wide adoption in the Indian market. Monthly Paying Users (MAPU): MIG’s conversion of MAUs to paying users has been subdued, largely due to the lack of payment options given the low level of bank account holders in key markets. MIG has addressed this issue by introducing a range of new payment providers on its platform including DOKU and Dompetku in Indonesia, to significantly broaden the payment system facilities for monetisation. Historically, paying users have been low at c0.3%, while peers have reported conversion rates of 2.5% (tian.ge) to as high as 13% (YY). We assume MIG can increase its paying user penetration by 0.3% QoQ till end FY16 and 0.7% p.a. from FY17 onward (capped at 6%) as it refines its payments systems, increases user/artist interactions and has an increased amount of premium goods and services on offer. Average Revenue Per User (ARPU): Average spend per user, including mobile plan, in the Asia Pacific region is the lowest globally at $71 per user a year vs $500 in USA and $230 in China. This is understandable, given the low level of bank accounts and credit cards (payment options) and the subdued level of internet penetration. However ARPU growth ex mobile plan is the fastest in both Africa and Asia Pacific due to consumers finding alternative payment methods and being exposed to an increased number of freemium services. MIG’s current ARPU is erratic but growing, as we have back calculated a range of $0.27 to $0.70 per annum over the last 6 quarters, with the most recent quarter (September) being $0.70 annualised. We have forecast ARPU to start at $0.50 annualised (assumes MAPU of 0.11m and revenue per MAPU of $8.60 per month) and progressively increase to $2.50 annualised by the end of 2019 (assumes MAPU of 2.1m and revenue per MAPU of $6.90 per month) as premium services and user interactions increase. Revenue Share: MIG’s main driver of monetisation is leveraging off content created by its enlisted artists and celebrities. These local celebrities create and share content in liaison with a dedicated MIG team, such as images, stories and competitions which drive user interactions. Users are encouraged to send artists virtual goods (as discussed in monetisation) and revenue is split between MIG and the celebrity. MIG intended to establish a leader board with the top % of celebrities receiving 50% revenue share, while less productive artists have a lower revenue share and the lowest % of celebrities receiving no revenue. This staggered payment system is used to motivate celebrities and artists to post and interact with users. We have assumed a group revenue share of 40%. Costs base: Besides revenue share and marketing, MIG’s cost base is mainly fixed. 55% of costs are salaries and benefits to employees which we have escalated by around 10% per annum. While this is high, we believe it is prudent given the growing nature of the business and user numbers/artists. We have inflated others costs at 3% per annum. This leads to a negative EBITDA in CY15, before increasing to an EBITDA margin of 5% in CY16, rising to a sustained level of 45% by CY20 in our base case. Discount Rate: Given the variability of our assumptions and forecasting risk, we have used a Weighted Average Cost of Capital (WACC) of 15.1% by applying a risk free rate of 4%, equity risk premium of 6.5% and beta of 1.7 times, on an all-equity basis RESEARCH NOTE – PATERSONS SECURITIES LIMITED 7 All information and advice is confidential and for the private information of the person to whom it is provided and is provided without any responsibility or liability on any account whatsoever on the part of this firm or any member or employee thereof. 18 November 2015 Migme Limited Valuation Using the discounted cash flow method at a 15.1% WACC and terminal growth rate of 3.0%, we value MIG at $520.0m or $1.90/sh, which is a 105% premium to the current share price. We have also outlined our forecast Sales multiples, using 10.0x Sales as the industry standard, which suggest strong valuation upside in FY17 ($2.57/sh) and beyond Figure 8: MIG Valuation Valuation $m $/sh 504.8 1.85 Unpaid Capital 5.1 0.02 Net cash/(debt) 10.1 0.04 520.0 1.90 2016F 2017F 46.2 68.3 Present value of free cash flows DCF valuation WACC 15.1% Terminal growth 3.0% Sales ($m) Sales multiple 10.0x 10.0x Net Debt (Cash) ($m) (8.5) (18.2) Implied Valuation ($m) 470.6 701.6 Capitalised earnings per share $1.72 $2.57 Source: Patersons Securities Limited Our valuation is based on strong growth in MAUs, particularly in 2016, and an increase in the monetisation via the conversion of MAUs to paying users (MAPU). We have assumed 30m MAUs by end 2015, 50m MAUs end 2016 and then plateauing at >60 MAUs post 2017. This accounts for only 13.5% of the total addressable market and thus highlights the upside in further user acquisition and increased market share in South East Asia. Conversion to MAPU is currently low at a c0.3% conversion of MAUs. The industry monetisation standard is substantially higher at 6% to 10%. We have forecast MAPU to increase by 0.3% Quarter on Quarter till end 2016 and then 0.7% annually from 2017 onward, capped at the lower end of the monetisation range of 6%. Again, MIG has potential significant upside from an increase in MAPU conversion. Due to the growth in both MAU and MAPU conversion, we have assumed MAPUs of 0.6m in 2016, 1.2m in 2017 and 1.6m in 2018. We have forecast ARPU of $0.50 for 2015, increasing to $2.50 per annum from 2019 onward. Figure 9: MIG Forecast MAU’s Figure 10: MIG Forecast Paying users and ARPU MAUs (LHS) MAU Growth (RHS) MAPU (LHS) ARPU (RHS) 70.00 120% 3.00 3.0 60.00 100% 2.50 2.5 80% 2.00 2.0 60% 1.50 1.5 40% 1.00 1.0 20% 0.50 0.5 0% 0.00 50.00 40.00 30.00 20.00 10.00 0.00 FY14a H1FY15a FY15e FY16e FY17e FY18e FY19e ‐ FY14a H1FY15a FY15e FY16e FY17e FY18e FY19e Source: Patersons Securities Limited RESEARCH NOTE – PATERSONS SECURITIES LIMITED 8 All information and advice is confidential and for the private information of the person to whom it is provided and is provided without any responsibility or liability on any account whatsoever on the part of this firm or any member or employee thereof. 18 November 2015 Migme Limited Figure 11 below highlights our headline forecasts which show a large increase in revenue in 2016 and 2017, which is based on the increase in the MAU base and MAPU. Both gross margins and EBITDA margins increase healthily due to the relatively fixed nature of the cost base (ex revenue share), which we do not expect to increase at the same pace as revenue growth. Figure 11: MIG Revenue and Cost FY14a H1FY15a FY15e FY16e FY17e FY18e Revenue $m 1.95 3.03 11.87 46.21 68.34 111.21 Cost of sales $m 1.36 1.36 4.20 10.37 10.75 12.18 Revenue Share $m 0.00 2.43 4.75 18.48 27.34 44.48 Gross Profit $m 0.59 -0.76 2.92 17.35 30.26 54.55 30.4% -24.9% 24.6% 37.6% 44.3% 49.0% Gross Margin Employee Expense $m 6.24 4.96 9.92 10.92 12.01 13.21 Operating Expense $m 3.16 1.93 3.81 3.92 4.04 4.16 EBITDA $m -8.81 -7.64 -10.81 2.51 14.21 37.17 -452% -252% -91% 5% 21% 33% EBITDA Margin Source: Patersons Securities Limited Sensitivities We note that our valuation is highly sensitive to the assumptions stated. Below we have shown the sensitivity to each variable, ceteris paribus, and highlight the extreme valuation sensitivity to movements in MAPU and ARPU assumptions. MAU: a 1 % increase in MAU growth translates to a 7.9% change in our valuation MAPU: a 1% increase in paying user conversion translates to a 13.9% change in our valuation. ARPU: a $1 increase in ARPU translates to a 19.8% change in our valuation. Revenue share: a 1% change in revenue share translates to a 2.4% change in our valuation. Discount Rate: a 1% change in WACC translates to a 12.3% change in our valuation RESEARCH NOTE – PATERSONS SECURITIES LIMITED 9 All information and advice is confidential and for the private information of the person to whom it is provided and is provided without any responsibility or liability on any account whatsoever on the part of this firm or any member or employee thereof. 18 November 2015 Migme Limited CORPORATE As at 30 September 2015, MIG had $10.8m of cash on hand. On 11 September 2015, MIG placed 10,110,000 shares at $1.00 to raise $10.11m. Given a cash burn of c$3.0m per quarter, we expect MIG to have around $7.1m in cash as at 31 December 2015. We have forecast MIG to achieve cash flow break even sometime during the second half of CY16, unless MIG can monetise content sooner or at a greater rate, and/or control costs. We envisage the need to return to market for further funding in 6 to 9 months. MIG has 18.0m options outstanding at various exercise prices ($0.20 to $0.70) with the first tranche of these options expiring on 31 July 2017. We note that all the options are currently in-the-money and thus represent unpaid capital of $5.1m RISKS & CATALYSTS Risks Technology: MIG may be adversely affected by rapid macro changes in technology that renders its platform obsolete. MIG is also exposed to issues specific to its platform, such as security and downtime issues. However we feel the technological risk is rather manageable as MIG seems to have a capable team to support its platform and should be able to adjust to changes. Competition: Competition from an increased presence by other social networks such as Facebook or Tencent could negatively affect MIG’s footprint in emerging Asian markets. However, we feel that MIG’s first mover advantage and platform specifically customised for the market, has gone some way to address this concern. Monetisation: MIG may not be able to reach monetisation figures achieved in China, Japan or South Korea due to the low level of bank accounts and credit cards in its targeted emerging markets. MIG has taken steps to address this by partnering with DOKU, a payment service that may be more appropriate for the market and should increase monetisation. Catalysts User Growth: Current user quarter on quarter growth is 30%. MIG may be able to increase its user growth through further artist interaction, pre-installs on android devices and an increase in marketing in key markets. Geographic Expansion: Penetration in India is key to MIG’s growth, we understand that MIG already has a presence in the country but quicker adoption may allow MIG to focus expansion on additional markets such as Africa. Artist/Celebrity Adoption: If the revenue share model proved to be successful for the current verified artists, we believe additional artists will be drawn to the platform in a hope to attract additional users and monetise their social interactions. The adoption of new artists may also increase the number of users and engagement of users on the platform. Acquisitions: The MIG platform allows the Company to acquire and integrate complimentary businesses. We see additional gaming and ecommerce acquisitions as the logical step in increasing monetisation. Third party developers: MIG has opened its API to allow third party developers to create Apps and games on the MIG platform, user growth could make this an extremely attractive marketplace for developers in a similar manner Facebook API’s allowed Zynga to leverage (Farmville, poker etc). RESEARCH NOTE – PATERSONS SECURITIES LIMITED 10 All information and advice is confidential and for the private information of the person to whom it is provided and is provided without any responsibility or liability on any account whatsoever on the part of this firm or any member or employee thereof. 18 Novem mber 2015 Migme Limited RESEAR RCH NOTE – PAT TERSONS SECU URITIES LIMITED 11 All inform mation and advice e is confidential and a for the private information of tthe person to who om it is provided and is provided w without any respo onsibility or liabilitty on any account whatsoever on th he part of this firm or any member or employee thereoof. 18 Novem mber 2015 Migme Limited Re ecommend dation Histtory Date Type Target PriceSh hare PriceRecom mmendation Re eturn 27 May 15 Research Note 1.87 0.82 SB 29 May 15 H off the Press Hot s 1.87 0.85 SB 3..7% 10 Jun 15 H off the Press Hot s 1.87 1.05 SB 23 3.5% 1..9% 31 Jul 15 H off the Press Hot s 1.87 1.07 SB 02 Sep 15 H off the Press Hot s 1.87 1.14 SB 6..5% 15 Oct 15 H off the Press Hot s 1.98 0.98 SB -14 4.0% Research Note 1.90 0.93 SB -5 5.1% 18 Nov 15 ce Current Share Pric 0.93 Sto ock recommen ndations: Invesstment ratings are a function of Patersons expe ectation of total return (forecastt price apprecia ation plus dividend yie eld) within the ne ext 12 months. The investmentt ratings are Buyy (expected tota al return of 10% % or more), Holdd (-10% to +10% % total return) an nd Se ell (> 10% negattive total return)). In addition we e have a Specul ative Buy rating g covering highe er risk stocks thaat may not be of o investment gra ade due to low markett capitalisation, high debt levels s, or significant risks in the business model. Inv vestment ratinggs are determine ed at the time off age, or a change e in target price e. At other timess the expected total return may fall outside of thhese ranges be ecause of price inittiation of covera mo ovements and/o or volatility. Such h interim deviations from speciffied ranges will be permitted bu ut will become ssubject to review w by Research Ma anagement. This Document is not n to be passed on to any third d party without our prior written n consent. RESEAR RCH NOTE – PAT TERSONS SECU URITIES LIMITED 12 All inform mation and advice e is confidential and a for the private information of tthe person to who om it is provided and is provided w without any respo onsibility or liabilitty on any account whatsoever on th he part of this firm or any member or employee thereoof. 18 November 2015 Migme Limited RESEARCH NOTE – PATERSONS SECURITIES LIMITED 13 All information and advice is confidential and for the private information of the person to whom it is provided and is provided without any responsibility or liability on any account whatsoever on the part of this firm or any member or employee thereof.