syft draft 7 dh · 136.6 47.7 135.6 14.9 7.8 5.0 ev/ebitda net(dps(c imputation net(yield...

EASTBOURNE ADVISORY LIMITED 1 Eastbourne Advisory Limited does not warrant the accuracy of any information or forecasts in this report. Recommendations may not be appropriate and investors must consider their own circumstances and seek independent advice.

Analyst: Andrew Mortimer

Email: [email protected]

Mobile: +64-‐(0)27-‐457 5730

Date: 7 December 2016

SYFT TECHNOLOGIES

Waking up and smelling the roses

Ticker: N/A

Price ($):0.060 Market Cap ($m):$65.0

n SYFT technology analyses in real time and for multiple compounds gaseous compositions to detect wanted gases, dangerous gases, unwanted contaminants and illicit compounds for a very wide range of industries.

n The company’s shares currently “trade” on the grey market but the company is looking at moving to a more visible market to enhance liquidity, currently the company has 650 shareholders. The last share trade was at 6cps valuing the company’s equity at $65m.

n The key advantages over competitor technology is that it is real time and can detect multiple compounds simultaneously and compounds not detectable by other instruments and at very small trace levels offering superior performance against traditional technology and opens up a range of entirely new markets.

n CEO Doug Hastie has grand ambitions for the company and is on record saying he “expects it to be a billion dollar company in a relatively short period of time” (by revenue). Over the past three years he has been instrumental in the company’s turnaround to profit.

n Currently SYFT is not well known globally but this is changing and awareness is growing through the acquisition of a number of blue chip clients including Samsung, LG, Palmolive, SC Johnson, Lear Corporation and Baker Hughes amongst others.

n SYFT expect to see a rapid increase in growth in revenues and profitability in the medium term. While the growth track will not be straight line, the company expects to be selling 500 -‐ 1000 instruments (~$125m-‐$250m revenue) per annum within the next 5 years.

n As SYFT’s star rises it will be presented with a huge opportunity in what is a multi billion industry estimated at between US$4-‐US$14 billion depending on how the market is segmented and in a market growing strongly organically.

n Our Base Case scenario yields a 11.5c valuation but is very unstable given an uncertain growth track but our base case forecasts are considerable lower than the Company’s ambitions for $1bn revenues on improved margins.

Investment Fundamentals

Financial'and'Valuation'Metrics'$000Year'to'31'MarchAdjusted(EarningsEPS(AdjustedEPS(GrowthP/E

Financial'and'Valuation'Metrics'$0002015A 2016A 2017F 2018F 2019F 2020F476 1,362 479 4,352 8,312 13,0020.0 0.1 0.0 0.4 0.8 1.2NA NA C65% 808% 91% 56%

136.6 47.7 135.6 14.9 7.8 5.0EV/EBITDANet(DPS(cImputationNet(YieldGross(YieldSource:(Company(data,(estimates

118.0 44.6 121.1 14.5 7.4 4.30.0 0.0 0.0 0.0 0.0 0.0NA NA 0.0 0.0 0.0 0.0NA NA 0.0 0.0 0.0 0.0NA NA 0.0 0.0 0.0 0.0

EASTBOURNE ADVISORY RESEARCH 7 December 2016


Executive Summary SYFT proprietary instruments deliver a combination of unique gas analysis attributes including high selectivity (The property of affecting some things and not others), very low limits of detection, high speed, ease of use, and very low total cost of ownership for a wide variety of end markets. They can also measure compounds that are very difficult to analyze with other techniques, such as reduced sulfur compounds, aldehydes, volatile fatty acids, amines, chloroamines, and siloxanes, in addition to the more routine analytes such as hydrocarbons and halogenated hydrocarbons.

In essence, SYFT technology analyses in retail time and for multiple compounds gaseous compositions to detect wanted gases, dangerous gases, unwanted contaminants, and illicit compounds for a very wide range of industries. The key advantages over competitor technology is that it is real time and can detect multiple compounds simultaneously and compounds not detectable by other instruments and at very small trace levels.

Benefits of SIFT-‐MS Include; n Instantaneous, quantitative analysis of air and headspace (where the gases are

captive) with very high sensitivity and selectivity. n Simultaneous analysis of chemically diverse VOCs (volatile organic compounds e.g.

aldehydes, amines and organosulfurs). n Direct analysis of high humidity samples. n Simplicity of operation. n Simple integration with existing infrastructure.

n Low maintenance and long-‐term stability.

CEO Doug Hastie has grand ambitions for the company and is on record saying he “expects it to be a billion dollar company in a relatively short period of time” (by revenue). The company believes it can achieve that ambition with its present product suite but plans to add more products which have synergies with its, sales, marketing and distribution operating model.

Due to the high cost per instrument and attractive Gross Margins, SYFT does not need to sell a large number of units before it becomes very profitable. SYFT expect to see a rapid increase in growth in revenues and profitability in the medium term. While the growth track will be hard to predict and is unlikely to be straight line, from 16 instruments sold FY16, the company expects to be selling 500 -‐ 1000 instruments (~$125m-‐$250m revenue) per annum within the next 5 years.

The nature of selling scientific instruments means the customers tend to be very conservative; creating a barrier to entry SYFT needed to clear before becoming generally accepted as a reliable, capable and quality option; meaning converting sales can take some time.

Currently SYFT is not well known globally but this is changing and awareness is growing through the acquisition of a number of blue chip clients including Samsung, LG, Palmolive, SE Johnson, Lear Corporation and Baker Hughes along with a number of very well respected research organisations amongst others. Samsung is currently the largest repeat customer having already bought 30 machines with the expectation for sales of potentially 100’s more adding significant credibility as a product champion.



Sales leads are generated in a number of ways. At present most come from SYFT’s distributors but more recently (over the last 6 months) SYFT have put greater emphasis on marketing and several leads are now coming direct. SYFT also sell a significant number of instruments through word of mouth illustrating the respect it is beginning to command in the marketplace. Repeat business is increasing and almost all customers to date have bought multiple instruments.

As SYFT’s star rises it will be presented with a huge opportunity in what is a multi billion industry estimated at between US$4-‐US$14 billion depending on how the market is segmented and is overall, growing strongly.

New markets are opening up all the time and the size of the addressable market for SYFT instruments is likely to grow significantly. SYFTs challenge may well be focusing on the number of opportunities than can be adequately resourced in the short term.

We believe that were SYFT Technology licenced to, or sold to a recognised and trusted brand in the sector (of which there are many), market access would be considerably lubricated and volumes sold could be multiples higher. At the right time, a partnership with one of the larger players in the market could in our view see a significant increase in market share and the creation of tremendous value for shareholders.

SYFT could well be the target of corporate activity in the future but we expect SYFT will build more brand value and sell higher volumes before shareholders should consider parting with their holdings.

This report has been written assuming a 6.0c Last Share Price and Current Offer Price.

For information about buying or selling Shares in the Company click on the following link.

https://www.sharemart.co.nz/Secure/Syft-‐Technologies-‐Limited

About The Company Founded on technology out of the Canterbury University and established in 2002, Syft initially pursued medical testing applications. However it was unsuccessful in developing a commercial product and in 2012 changed its strategy to a much wider variety of applications.

Market applications targeted now include testing the air in shipping containers (safety and food contamination), testing for trace elements in industrial "clean rooms" (where contaminants can degrade products manufactured e.g. semi-‐conductors), indoor and outdoor emissions analysis (e.g. smoke-‐stacks), testing for the "new car smell” and analysis for the oil exploration industry amongst many others.

SYFT instruments differentiate from its competitor’s products by their ability to deliver real time results. The firm's focus is now as much on improving its sales and marketing performance as improving the technology. This decision is being vindicated by the large increase in sales volumes expected in the current year. Currently most sales are made by distributors with one or two each year sold direct although four were sold direct FY16. Since 2002, the company has sold around 130 instruments.

Since development adaptations to the technology have included improved limits of detection, a 45% reduction in build cost, Dual Polarity Ion Source (Negative Ions), New Inlet options, Swab Desorber for detecting semi-‐volatiles, new software and new methods for different applications. All these improvements have been made since 2012.



The company currently has 40 staff having hired 20 new staff over the last year and is planning to hire around another 20 in the current year, principally in sales and development functions. Staff includes a wide range of nationalities and are highly engaged evidenced by their willingness to support the company through its hardest days and are very passionate about the innovative product the company has developed.

In FY15 the directors implemented an employee share option scheme recognizing its people are its greatest asset and that it needs to retain and incentivize key staff. One of the key attributes of the company has been their loyalty to the company and the products they have developed.

Catalysts for Share Price Performance n Acquisition of new, and repeat sales to Blue Chip multinational company’s creating

further sales momentum. n Increased liquidity and awareness following migration to a more visible share-‐

trading platform. n The potential for corporate activity medium term. Core Strategy The board and management have aspirations for SYFT to be a very large profitable business. This first step is to develop the business for SIFT-‐MS instruments through sales, marketing and further development. Once this business is established and business processes are optimised the Company can add other measurement techniques and operate them through its business platform. The ultimate destination is to step further up the value chain and not just provide measurement solutions but total solutions to the underlying problems. This includes medical diagnostics through breath testing, improved air quality and better food quality.

The SIFT System For those with a scientific bent, SIFT-‐MS is a tool for high-‐throughput and real-‐time gas analysis applications. SYFT’s SIFT-‐MS instrumentation is industry proven, providing non-‐technical operators with laboratory-‐grade chemical analysis presented in a format that they can understand and act on quickly. The ionization process SYFT has developed is unique and requires no workup of gas/treatment and can measure compounds simultaneously and in real time.

Selected ion flow tube mass spectrometry (SIFT-‐MS) is a form of direct mass spectrometry that analyzes trace amounts of volatile organic compounds (VOCs) and inorganic gases in air. Real-‐time, quantitative analysis is achieved by applying precisely controlled soft chemical ionization and eliminating sample preparation, pre-‐concentration and chromatography. Those wanting further information on the technology should click-‐on the following links.

https://www.youtube.com/watch?v=yIswYTmNoC8

http://SYFT.com/wp-‐content/uploads/2015/10/SYFT-‐Technology-‐Overview-‐BCR-‐003-‐02.1-‐A4.pdf

SYFT has more recently widened the number of compounds it can detect by adding technology able to detect negative ions. This technology was developed for Stack Analysis for Samsung (i.e. measuring and analyzing what comes out of the factory smokestack).



Samsung indicate they may have demand for 300 instruments for this application and is currently in trial. If the trial proves successful for Samsung it is quite likely for SYFT instruments to be rolled out for this application around the world and across a wide range of industries.

SYFT have also found that negative ions are also very useful for monitoring VIAQ (car interiors), semi-‐conductors and for Environmental Monitoring and believe it will open many more markets as it enhances selectivity (can measure a complex matrix) and gives an ability to measure compounds that other instruments can’t.

Benefits of SIFT-‐MS include: n Instantaneous, quantitative analysis of air and headspace with very high sensitivity

and selectivity. n Simultaneous analysis of chemically diverse VOCs (e.g. aldehydes, amines and

organo-‐sulfurs). n Direct analysis of high humidity samples. n Simplicity of operation. n Simple integration with existing infrastructure. n Low maintenance. n The creation of value for the customer. Syft Combines the Best of the other Technologies

Applications Product Quality The unintentional presence of volatile and/or semi-‐volatile organic compounds (Vocs and SVocs) can significantly impact the quality of certain products, including semiconductors, food products, and pharmaceuticals. These quality issues can result in product losses, shortened product life, and brand damage.

SIFT MS can quantify Vocs and SVocs in real time, at the required concentrations, so that issues are detected on-‐line in real time and can be dealt with immediately. This offers the customer economic benefits through reduced product losses in the factory, and adds an additional layer of protection from the distribution of faulty product.



Shipping Containers Shipping containers are used to transport a huge variety of goods, including chemicals, industrial equipment, household items and food products. This introduces a significant and unquantified risk to companies that pack containers with sensitive consumer products, such as foodstuffs, pharmaceuticals, and personal care products.

SYFT technologies provide unique solutions that allow companies to reduce the risk of using containers that are contaminated with tainting compounds, such as tribromoanisole (tBA-‐ that causes unpleasant earthy, musty and moldy aromas) and dichlorophenol (DcP-‐ that is used primarily as an intermediate in the preparation of herbicides).

Also frontline workers in the shipping and border security industries face constant danger from exposure to undocumented or incorrectly packaged toxic compounds, such as fumigants and toxic industrial chemicals (TICs) and in some cases, fatal exposures have occurred. Using SYFT ensures regulatory requirements for minimizing worker exposure to fumigants are met and worker health and safety is enhanced. Compared to conventional analysis, time per analysis and cost per analysis are significantly reduced.

Applications include: n Enhanced container surveys at the depot to identify and remove tainted

containers from the supply chain. n Quality control of incoming empty containers at the pack point or distribution

centre. n Quality assurance of incoming product at unloading point. n Human Safety.

Food Flavours and aromas are primarily derived from volatile organic compounds (VOCs). These compounds are chemically diverse, and they can have a profound effect on the human perception (both favorable or unfavorable) over an extremely broad concentration range. For example, over 1000 VOCs have been identified in the headspace of coffee, with a much smaller number characterized as key aroma compounds.

Raw materials for the food processing industry usually show seasonal and other quality variations. When coupled with changes in the performance of processing equipment, product quality may vary. Since aromas are derived from Vocs and are a key component of consumer perception of the product, best results are obtained by monitoring the product during processing.

Selective analysis of the individual compounds within a complex food matrix is a difficult challenge for any analytical technique. SYFT provides an superior solution through the application of eight rapidly switchable reagent ions. The varied ionization chemistry of these reagents enables the rapid, sensitive, and highly selective measurement of a wide range of chemically diverse flavor and aroma compounds.

Sift-‐MS instruments are excellent process-‐line monitors for sensitive detection and quantitation of both oxidation and Maillard reaction products (food products which brown) that indicate the degree of processing and the product quality.



Benefits of applying SIFT-‐MS on the food processing line include;

n rapid quality assurance of incoming raw materials to eliminate losses caused by their use.

n optimization of formation of favorable aroma compounds that aid consumer acceptance and mask unfavorable oxidation aromas formed during ageing.

n reduction of product losses due to formation of unfavorable aromas (such as rancidity).

Customers in this sector have included Kraft Heinz and Fonterra.

Vehicle Suppliers and Manufacturers The health impacts of the “new car smell” have led several countries to impose limits on the concentrations of volatile organic compounds (VOCs) emitted from newly manufactured vehicles.

Vehicle interior air quality (VIAQ) testing is a challenging application due to the diversity of the target compounds (aldehydes and VOCs). Testing all vehicles is desirable due to the batch-‐to-‐batch variability of target VOCs, however, this is not practical with conventional High Performance Liquid Chromatography (HPLC) and Gas Chromatography–Mass Spectrometry (GC/MS) techniques due to the time and expense of each analysis.

SYFT can analyze all of the VOCs required by the Chinese, Japanese, and Korean standards to well below the current limits. Analysis is simple, requiring no sample preparation, so each car can be analysed by front-‐line staff. Due to fast analysis times, all cars coming off a production line can be analyzed, and any deviations or changes in production can be detected in real-‐time and dealt with immediately.

The rapid analysis also provides a means to economically test VOC and aldehyde levels in components supplied to the OEM. Analysis can be carried out by the supplier, or by the OEM on receipt. Any product that fails testing can be rejected, preventing costly tear-‐out later.

Customers in this sector have included Lear Corporation and Guilford Performance Textiles. Lear Corporation is a Fortune 500 company, engaged in the business of manufacturing and distribution of automotive seating and electrical distribution systems for OEM’s, has sales of around US$22bn p.a. and employs ~113,000 people globally. Guilford, a subsidiary of Lear Corporation, is the global textile solution of choice for many leading OEMs around the world.

Ambient Air Quality Volatile organic compounds (VOCs) are significant air pollutants. Air quality agencies and policy makers recognize the public health issues associated with unmonitored and un-‐quantified VOC pollution, but lack satisfactory methods for rapidly measuring chemically diverse VOCs at the required detection limits. Comprehensive ambient air analysis typically utilizes a collection of instruments for detecting various inorganic gases (such as greenhouse gases and ozone) and VOCs, resulting in monitoring sites that are expensive to establish and maintain.

SYFT provides rapid, high-‐sensitivity analysis of VOCs and inorganic gases at ambient levels with no sample preparation required. SYFT’s Dual-‐polarity ion source provides eight independent, rapidly switchable reagent ions for sample interrogation.



The different ionization mechanisms provided by these reagent ions significantly enhance selectivity for all VOC analyses and enables the analysis of a wide range of inorganic and permanent gases.

Customers in this sector have included amongst others, Samsung, the University of York, The University of California and CSIRO.

Semiconductors Fabrication of semiconductors, photovoltaics (the conversion of light into electricity using semiconducting materials) and LCD/LED panels utilizes extremely high-‐precision manufacturing equipment in an ultraclean environment. The presence of volatile and/or semi volatile organic compounds (VOCs and SVOCs) can significantly impact on the quality of semiconductor products. These quality issues result in product losses, shortened product life, and potentially brand damage. Volatile or semi volatile contaminants in air degrade semiconductor performance, increase the frequency of expensive maintenance, and shorten the operational service of fabrication equipment.

SYFT provides rapid, ultra-‐trace analysis of air for the compounds that have an impact on production quality, reducing product loss and equipment failure.

Customers in this sector have included Samsung and SMIC.

Border Security With the continual growth of global trade and travel, the demand for accurate, reliable, rapid, and selective security screening technologies is ever increasing. Border security agencies must screen for a large range of threats including explosives, narcotics, toxic chemicals, illicit tobacco and chemical warfare agents (CWAs).

SYFT’s solution for the detection of these compounds relies on the measurement of characteristic VOCs. SYFT’s unique Dual-‐polarity ion source provides eight rapidly switchable reagent ions with which to interrogate the sample giving a fast and sensitive analysis and largely eliminating the possibility of false-‐positive results.

SYFT have sold over 30 instruments to Canadian, Australian and Dutch customs for the Health and Safety of Customers Officers entering containers. SYFT have developed strong customer relations with these customers and are looking to address the much larger market for the detection of narcotics, explosives, and tobacco. While initial dialogue has been positive, until now the company has not had sufficient resource to develop this market.

Breath Research Volatile organic compounds (VOCs) and certain inorganic gases (such as nitric oxide) occur at trace concentrations on human breath due to a range of metabolic processes. Measurement of the concentration profiles of these compounds allows the identification of markers of ill health by comparing profiles from the unwell with those from the “healthy normal” population. Diabetes and kidney disease are two conditions that have been linked to breath VOC markers using SIFT-‐MS.

Rapid instrumental detection of volatile biomarkers has proved challenging due to the complexity and high humidity of the matrix and the low concentrations of the target compounds. SIFT-‐MS is the only technology to successfully address all of these challenges. Researchers access breath-‐by-‐breath analysis that’s both practical and accurate. Breath profiles for a broad range of compounds are captured and displayed as they occur. More patients can be screened, and results are instant.



Customers in this sector have included the Canterbury DHB, the Cleveland Clinic, Stanford University, the University of West England and the University of South Australia amongst others. The Cleveland Clinic is recognized as one of the top medical centres in the USA and the world.

Mud Logging High-‐penetration-‐rate drilling technologies present a challenge to current mud-‐gas analysis techniques as they are either too slow (gas chromatography), or do not quantify a complete range of compounds (photometric and electrochemical techniques).

SYFT’s instrument (Mudlogger) analyses a wide range of inorganics and hydrocarbons at a very fast rate. Compounds analysed include saturated, unsaturated, cyclic and aromatic hydrocarbons; inorganics including H2S, and other reduced sulfur compounds. The typical analysis time of 10 seconds, allow multiple data points to be averaged for each foot of depth. Fast gas chromatography (GC) analyses by comparison are typically limited to C1 to C5 analysis with 90 seconds per analysis cycle.

While it is early days for this application, customers in this sector include Baker Hughes. Baker Hughes is one of the world's largest oil field services companies with ~33,000 employees. It operates in over 90 countries, providing the oil and gas industry with products and services for oil drilling, formation, evaluation, completion, production and reservoir consulting. Discussions are currently underway with other companies in the sector.

Competition SYFT’s technology is new so while it has considerable advantages over Chromatography techniques in terms of speed, being real-‐time and able to analyse more compounds simultaneously the biggest issues it faces is lack of awareness and acceptance of what is new and disruptive technology. SYFT have little credible competition when competing head to head for many applications. In contested situations, SYFT normally come up against traditional technology like GC-‐MS, LC/MS and HPLC.

These are manufactured by companies such as Agilent, Thermo, Bruker, Shimadzu and others (see appendix 2 for a more comprehensive list). In describing the price proposition of SYFT versus its “competition”, this depends on the technique and the add-‐ons but for some colour, prices range from US$120,000 for GC-‐MS to US$400,000 for HPLC with SYFT sitting somewhere near the middle of this range.

The scientific instrument market is very conservative and slow to change and there are large barriers to entry in terms of development costs, which are large. At present, SYFT believe there is no one in the market with technology that is close to being as good as its own, however, as the company’s success continues it does expect emulators.

The Principles of Gas Chromatography (GC/MS), The Main Competition Gas Chromatography is a technique, which separates a gas mixture to determine the presence and concentration of gases and impurities in a sample. Applied correctly, GC can measure down to ppb levels, making it well suited for use in high purity processes. In GC, gas mixture components are separated by circulating a gas sample, using an inert carrier gas, into a flow-‐through circular tube known as a column. The different gas constituents are separated due to their interaction with the column material, which cause the different molecules in the sample to elute at different times. These specific retention times are detected by a sensor at the column exit, as the individual molecular properties of each gas cause it to travel through and exit at a different time.



The comparison of retention times allows users to qualitatively identify gas types by the order in which they elute from the column. If conditions are constant, a particular gas will elute (to wash out or extract) with the same retention time, allowing specific gas types to be deduced from the area of the peak. In addition, the relative volume of each gas concentration can also be measured by the detector as each gas elutes from the column.

The conditions by which GC operates for a given application are invariably different and require individual optimization. The majority of GC analyzers are therefore preset at the factory, with application specific valve timings, flow and temperature settings and peak detection parameters.

SIFT (Selected Ion Flow Tube) is the differentiator from GC as it separates in real time through Ion Chemistry whereas Chromatography separate flow through the column. GC (and all chromatography solutions) require the sample to be conditioned first, whereas SIFT-‐MS does a direct measurement saving considerable time (days) and ensure exactly what is there to be measured.

Another decider over GC is speed. While there are real time techniques that are fast, they don’t have the sensitivity and selectivity of SIFT-‐MS (many of the real time techniques are only effective if the sample is close to pure). While GC-‐MS has high selectivity and sensitivity, it is considerably slower than SIFT-‐MS. Fundamentally GC separate different compounds by speed down a column whereas SIFT-‐MS separates through ion-‐chemistry all at the same time. SIFT-‐MS is easy to operate and generally has lower operating costs than its alternatives.

About the IP It is the SIFT i.e. Selected Ion Flow Tube that is the key differentiator from traditional technologies which separate compounds in Real Time though Ion Chemistry whereas Chromatography separate flow through the column which is a slower process.

The company has some patents around the flow tube but are not relying on these to provide protection. The Company’s strongest protection is in its expertise, specifically in the Chemistry, Software and Electronics aspects of the technology, which would be very hard to replicate. Further the company has a culture which is passionate, loyal and innovative which when combined with hard nosed commercialism is likely to see next generation instruments with added features and potentially lower cost in the market on a regular basis.

About the Market New international manufacturing (cGMP) and distribution (cGDP) certification for pharmaceutical manufacturers, growing food safety concerns, increased importance of tests in drug approvals, outsourcing to Asia and new product launches are major factors driving gas analytic markets. In addition, the market has witnessed various technological advancements to meet the needs of biotechnology and biopharmaceutical companies; food and beverage, chemical, semiconductor industries; and environmental testing. Increasing financial assistance from governments in the form of grants, funds, investments and subsidies are also driving growth, especially in the emerging markets.

Market research reports for the chromatography instrumentation sector forecast steady growth for the industry. According to these reports, the market is expected to grow at a robust CAGR of 5.7% from 2013 to 2018 and at this rate; the market would be worth more than US$10.0 Billion by the end of 2018.



In the consumables segment, columns are expected to dominate the industry with a CAGR of over 6% and reach US$2.6 Billion by the end of 2018.

The largest market is North America followed by Europe with the two continents combined accounting for 70% of the market. While it is expected that North America and Europe will continue to command the largest share over the next five years, the market in Asia will expand and increase at a faster rate.

The drivers behind this expansion are due to the expansion of local companies in Asia and Western Pharma outsourcing its research and manufacturing operations to Asia, (particularly China and India).

By industry Environmental Testing is currently the largest component of demand followed by Agriculture and Food, Academia and Oil and Gas but a large percentage (estimated at 33%) is for unclassified uses, highlighting the very wide number of applications for the technologies. SYFTs instrument is disruptive having features alternative technologies do not which can potentially open up new markets in addition to the traditional chromatography markets.

SYFT’s current addressable markets include analytical instruments, process instruments and hand held instruments. The following table shows the estimated size of the analytical instrument market 2009-‐2014 and expected growth rates.

Within the Analytical Instrument market, SYFT compete in Mass Spectrometry and the Separations and Spectroscopy markets to a lesser extent.

Markets are now opening for SYFT that previously didn’t exist where instruments are now selling for new applications where there had never been an instrument available to meet the need.

Sales&By&Region&% Sales&By&Industry&%

Source;(MarketsAndMarkets Source;(Global(Assessment(Report



SYFT believe the current market size available is US$4 billion with a potential market of US$14 billion with instrument improvements. Even these figures are considered conservative as they don’t consider process instruments, handheld instruments as well as new markets that will develop.

The key point is potential markets are very large and while SYFT can reach its aspirational revenue target of US$1 billion with its present instrument range, the strategy is to add more instruments/products to its development, sales, marketing and distribution business model.

Sales leads are generated in a number of ways. At present most come from SYFT’s distributors but more recently (over the last 6 months), SYFT have put greater emphasis on marketing and several leads are now coming direct providing extra margin. Over 2-‐3 years SYFT believe >50% could be by way of Direct Sale. SYFT also sell a significant number of instruments through word of mouth illustrating the respect it commands in the marketplace. Repeat business is increasing and almost all customers have bought multiple instruments.

Margins and Costs The company prices in USD, Euro and GBP but 70% of revenue are transacted in USD. There can be some flexibility around pricing given attractive margins. At present 90% of an exchange rate gain or loss impacts the bottom line with most costs localised. However this could be mitigated by investing in development costs offshore and is something that may be considered in the future.

Gross Margins have increased from 39% FY13 to 60% FY16, this improvement can be attributed to higher average selling prices and a better exchange rate prevailing but also due to lower production costs (reduced by 45%). SYFT have an objective to increase margins further over time through adding higher margin accessories to its range, selling more consulting services (considered a large opportunity), selling direct to customers and through reducing the cost of build (likely to come with next generation instruments and scale).

Factors impacting average Gross Margins include the foreign currency sales price, the FX rate, whether the instrument is sold through a distributor or sold direct to a customer, what accessories are sold to the customer, more recently whether the Negative Ion Source System is optioned and the cost of labour and materials to build. While the cost to build is relatively static, the other factors referred to can vary although the sales price has begun to steady as the company has become better established.

Sales made direct to an end customer the sale are made at list price. Sales through a distributor are made at 70% of the list price. While currently most sales are though a distributor channel, this is likely to change over time as the company builds out its own distribution in certain geographies, which will drive higher margins.

Any further opex investment would be likely to be made in sales, marketing and development. The business does not require any investment for manufacturing in terms of plant or machinery but might have working capital requirements that could be bank funded.

Over the last 3 years the company has made significant investment in sales, marketing and development and a 3-‐year revenue CAGR of 21% has been associated with an Opex CAGR of 7%.



There is typically one year lag between sales and marketing expenditure and revenue and the decision to lift this spend to $2.0m FY16 (34%) has been vindicated by the current years lift in sales volumes.

Research and Development for the FY16 year was around $1.5m or 25% of sales. The company must continue to be innovative and lead the pack if it is to maintain its competitive advantage. These costs will in the medium term continue to increase both in dollar and percentage terms but should longer term decline to 15%-‐20% of sales.

An Employee Share Equity Scheme to Incentivise Employees The company implemented an Employee Share Option Scheme in 2014. This was followed with a second scheme in 2015. In total there are 6.87m securities outstanding all with an exercise price of 3c of which 3.61m have vested. While they are in the money at the current share price they are not materially dilutive due to the large number of ordinary shares already outstanding.

Assembly/Manufacturing The company assembles the machines at its shared office and manufacturing facility at 3 Craft Place in Christchurch. While around 90% of components are sourced in New Zealand, that only represents around 50% by value with high cost parts like Vacuum Pumps, Quadrapoles and Detectors sourced from Europe. The company currently has capacity to assemble around 80 machines per annum in NZ with the constraint for instrument assembly being labour This capacity will increase as it develops the next generation instruments, outsources more of production, and hires and train more people. Production capacity is very unlikely to be a constraint in the future.

While the company did have some quality issues in the early generation of the product and more recently 3 years ago following a large increase in sales volumes, since then it has had a real focus on quality and is not now seen as an issue. When the company did have quality issues, it dealt with them proactively and customers affected have continued to buy from SYFT. Warranties are usually extended for 1 year only.

Order to delivery lead times can vary and has been as long as 3 months, currently order lead times are around 1 month.

A reasonable Capital Position but could do with more to fund growth At 30 September 2016, the company had cash of $1.8m, and generated positive operating cash flows of $1.8m for the 6 month period on the back of a $0.8m reduction in Working Capital. While the company has enough capital to grow at the current rate, any acceleration might ideally be met with a further tranche of equity.

Recent News and outlook At its AGM, SYFT directors gained approval to institute a minimum holding of 40,000 shares, followed by a plan to share consolidation of 20:1 and said it had plans to move to a more visible share trading platform, whether this the “unlisted” platform or a NZX platform remains to be seen. The company also said that there were no immediate plans to raise more capital.

2013 2014 2015 2016 CAGR

Revenue0($000) 3,362 4,980 5,283 6,011 21%

Expenses0($000) 2,360 3,022 2,489 2,855 7%

Ratio0Revenue/Operating0expenses 1.42 1.65 2.12 2.11

Profit0($000) H1,679 H339 476 1,362

Source:(Company (



The Last Few Years Results FY16 keeping up the momentum For the year the company delivered a $1.4m profit strongly up from the prior periods $0.5m and said it had received “a large number of orders” for delivery FY17 and with the resources in place “can really turn up the volume on growth”. Over the period a futher 20 staff were added to the pay-‐roll and said it expected to add considerably more. The Gross Margin for the year was 60% and compared with the prior periods 54% with the improvement in margin driven by better pricing and a more favourable exchange rate. Compared to revenue growth of 14%, expenses increased 15% mainly due to higher staff numbers in sales and development.

The cash position at year end was ~$0.2m, operating cashflow was a $0.7m outflow and outflows from investing activities $0.3m. Operating cashflow included a Calaghan Grant of $0.3m.

R&D for the period was $1.5m or around 25% of revenues (pcp $1m or 19%).. As in prior years, the company was not required to pay tax due to accumulated losses.

The company said it had made a number of improvements in its processes including Production Inventory and Accounting which enabled the company to enhance the speed at which it could operate.

The company also launched its “dual polarity ion source” with a successful installation at Samsung which is “unique to SYFT and vastly increases the number of applications for SYFTs Products and further set SYFT apart from other analytical platforms”. New markets available from this enhanced technology include Stack Testing, Green House Gas analysis, Gas Purity Analysis, Fuel Cell’s and Food and Flavour application.improving Soft

Futher progress was noted as having being made on VIAO (Vehicle Interiors Air Quality) Semiconductor and Environmental applications resulting in a number of new orders.

FY15, a maiden full year profit A maiden full year profit was the highlight for the year. On revenues of $5.6m (pcp $5.0m), the company delivered NPAT of $0.5m (pcp -‐$0.3m). A Gross Margin of $3.0m and Gross Margin percent of 54%, compared with the pcp’s $2.0m and 40%. Over the period the company employed one half its total number of year end employees.

The cash position at year end was ~$1.6m ($1.3m net of Trade Finance facilities), operating cashflow was a -‐$0.6m outflow and outflows from investing activities $0.03m. Operating cashflow included a Calaghan Grant of $0.2m.

R&D for the period was $1m or around 19% of revenues (pcp $0.8m or 16%) mainly invested in improving Software, new inlets, improving reliability and reducing instrument cost.

FY14 Record Volumes and a Technical Profit Selling 17 instruments over the period was a record year and prior to a one-‐off clean-‐up of inventory, the company would have reported a profit. Of the instruments sold 75% were to new customers. In May 2013, the company was recapitalised to the amount of $3.5m via a rights issue to repay debt and outstanding creditors and allow the company to move forward.

Revenue for the period was up 48% with instruments sales more than doubling (FY13 8 instruments were sold). Revenues growth did not match volume growth due to a reduced sales price to increase penetration and from a reduction in direct sales.



Overheads were 22% lower ($0.7m) over the prior comparable period which actually masked the true story as a number of costs were shifted from COGS to overhead meaning on a like for like expenses were very significantly contained.

Cost reductions included Staff Costs, Finance Costs and Professional Service Fees amongst others whilst Sales and Development Costs were higher to position the company for further growth. It was noted over 2 years the company had reduced cost of production by 40% through redesign, better negotiation with suppliers and lower direct labour costs per instrument.

A higher focus on quality as volume increased and errors in the inventory system saw the company write down inventory by ~$0.4m. Additional recruitment to fix and improve the business meant FY15 labour costs would be higher.

For the period on operating revenue of $4.8m (total revenue $5.0m) the company reported a loss of $0.3m. Excluding inventory adjustments and a couple of technical accounting issues, the company would have been modestly profitable for the period.

Forecasts point to very strong growth medium term Where previously the company had very little visibility of the sales pipeline, it is now developing better leading indicators of sales and is reasonably confident over sales expectations for the next couple of years. With an aspirational goal of $1 billion revenues, within 5 years the company expects to be selling 500-‐1000 units per annum or at current pricing, generating $125m-‐$250m in revenues.

In addition the company expects the services component of revenue to increase as a proportion of total revenue. From what is mainly support services currently, the company has a strategy to build out training and consulting and believes total services revenue could be greater than 40% of total revenues (currently 28%) within 3 years time.

We have assumed the sale of 28 units in the current year and understand around half that volume was sold in the 1st half of FY17. FY18 we assume the sale of 45 units or a 61% growth in volumes. We think the next two years will be critical for the company in building its presence, credibility and brand allowing volumes to accelerate further thereafter (i.e. the “tipping point”). Our 5 year forecast volumes for comparison with Managements expectation (250-‐500 units) is for sales of 173 (FY22) units and our terminal year volumes (FY26) 664. Back-‐working managements target for $1 billion of revenue and assuming 28% was derived from services provided would imply sales of ~2,800 units. Our terminal year forecast revenues are US$149m or just 4% of the current addressable market.

While the Company thinks Gross Margins will grow further as it introduces next generation instruments and makes more sales through its own distribution channels, we have been more cautious and assumed stable margins excepting those influenced by forecast movements in the exchange rate.

In line with FNZC estimates, we use a long-‐run NZD: USD assumption of $0.62.

Likewise our attachment rate for services revenues has been held at the FY16A actual rate of 28% of operating revenues. The company believes this has plenty of upside and could be more than 40% in the medium term (as reported in the FY17 interim report). However we have included these factors into a Bull Case scenario where all the stars line up, something that rarely happens in our experience.



Sales and Development Costs are forecast at a ratio based on the subsequent year expected sales (i.e. Revenues are lagged by 1 year relative to the investment in S&D). This sees S&D investment increase year on year at ~18% or from $2m FY16 to $17.4m in FY26. In the 2nd half of the current year we forecast a large step-‐up in S&D costs as the Company beefs up its Sales Force and looks to roll out next generation technology next year. While we forecast these costs to continue to increase, we forecast them to decline as a percentage of sales thereafter. This investment may be higher depending on the strategy the company takes, however we would expect this to be accompanied by higher margin (reduced costs of production) and/or higher sales volumes provided an offset to forecast cash-‐flows.

Other Operating Expenses (excluding Depreciation and Amortisation) are forecast to increase by a ratio based on the current year expected sales. This sees Opex increase year on year at ~6% from $0.7m FY16 to $1.7m in FY26.

Total expenses are expected to increase at a CAGR of 18% over the forecast period or from $2.8m FY16 to $19.1m FY26.

We have not forecast any dividends being paid over the forecast period as we expect the company will take further value accreting opportunities as they present.

Forecasts

Syft%Income%Statement%($000)Year%to%31%MarchSYFT%RevenuesServices%RevenueRental%IncomeTotal%Operating%RevenueTotal%COGSTotal%Gross%MarginNon%operating%incomeOperating%Expenses%Total%EBITDADepreciationAmortisationEBITFinance%Costs%(Revenues)PBTTaxReported%NPATNon%recurring%itemsUnderlying%NPAT

% %2015A 2016A 2017F 2018F 2019F 2020F3,803 4,323 6,468 10,911 16,186 22,6611,480 1,688 2,515 4,243 6,295 8,813

6 50 50 50 50 505,289 6,061 9,033 15,204 22,531 31,5232,659 2,417 3,828 6,202 8,805 12,3072,630 3,644 5,205 9,002 13,726 19,216319 541 326 326 326 326

2,404 2,756 5,012 4,968 5,863 6,911545 1,429 519 4,360 8,189 12,63177 85 85 85 85 858 14 14 14 14 14

460 1,330 420 4,261 8,090 12,532L16 L32 L59 L92 L222 L470476 1,362 479 4,352 8,312 13,0020 0 0 0 0 0

476 1,362 479 4,352 8,312 13,0020 0 0 0 0 0

476 1,362 479 4,352 8,312 13,002EPS%cUnderlying%EPS%cDividend%per%share%cPayout%RatioNet%Debt/EBITDA%(X)EBITDA%Margin%(%)Gross%Margin%%Revenue%Growth

0.0 0.1 0.0 0.4 0.8 1.20.0 0.1 0.0 0.4 0.8 1.20.0 0.0 0.0 0.0 0.0 0.0

0.00 0.0 0% 0% 0% 0%L2.31 L1.5 L3.4 L0.99 L1.28 L1.6510% 24% 6% 29% 36% 40%50% 60% 58% 59% 61% 61%5% 14% 50% 69% 48% 40%

Source:(Company(data,(estimatesSource:(Company(data,(estimates



SYFT%Cashflow%StatementCash%Flow%AnalysisEBITDANet$Working$CapitalOperating%CashflowNet$InterestTax$PaidOtherFree%CashflowMaintenance$CapexExpansion$CapexIntangiblesDivestmentsInvestmentsInvesting%CashflowDistributable%CashflowGross$DividendsMinority$interests/$OtherEquity$Issues/RedemptionsChange%in%Net%DebtOpening%CashChangeClosing$CashSource:(Company(data,(estimates

2015A 2016A 2017F 2018F 2019F 2020F

545 1,429 519 4,360 8,189 12,631E108 E228 E860 E1,810 E2,149 E2,589437 1,201 L341 2,550 6,040 10,04216 32 59 92 222 4705 0 0 0 0 0

99 0 0 0 0 0557 1,233 L281 2,641 6,262 10,513E35 E290 E85 E85 E85 E850 0 0 0 0 00 E34 E20 E20 E20 E200 0 0 0 0 00 0 0 0 0 0

L35 L324 L105 L105 L105 L105522 909 L386 2,536 6,157 10,4080 0 0 0 0 00 0 0 0 0 00 0 0 0 0 0

522 909 L386 2,536 6,157 10,408737 1,259 2,168 1,782 4,318 10,475522 909 E386 2,536 6,157 10,408

1,259 2,168 1,782 4,318 10,475 20,883Source:(Company(data,(estimates

WDT$Balance$SheetYear$to$31$MarchCashReceivablesInventoriesOther2CurrentPlant2and2EquipmentIntangiblesDeferred2TaxTotal$AssetsPayablesOtherTerm2LiabilitiesTotal$LiabilitiesNet2Equity

2015A 2016A 2017F 2018F 2019F 2020F1,58022222222 2,48922222222 2,10322222222 4,63922222222 10,796222222 21,2042222221,26022222222 1,43222222222 2,14322222222 3,61522222222 5,36322222222 7,443222222221,02122222222 1,20422222222 1,69922222222 2,81922222222 4,15022222222 5,78222222222

292222222222222 292222222222222 292222222222222 292222222222222 292222222222222 29222222222222211322222222222 31822222222222 31822222222222 31822222222222 31822222222222 31822222222222122222222222222 322222222222222 382222222222222 442222222222222 502222222222222 562222222222222M222222222222 M222222222222 M222222222222 M222222222222 M222222222222 M222222222222

4,015$$$$$$$$ 5,505$$$$$$$$ 6,330$$$$$$$$ 11,465$$$$$$ 20,705$$$$$$ 34,832$$$$$$71322222222222 84122222222222 1,18722222222 1,96922222222 2,89822222222 4,02222222222M222222222222 M222222222222 M222222222222 M222222222222 M222222222222 M22222222222232122222222222 32122222222222 32122222222222 32122222222222 32122222222222 32122222222222

1,034$$$$$$$$ 1,162$$$$$$$$ 1,508$$$$$$$$ 2,290$$$$$$$$ 3,219$$$$$$$$ 4,343$$$$$$$$2,98122222222 4,34322222222 4,82222222222 9,17522222222 17,487222222 30,489222222

Book$Value$Per$Share 0.00 0.00 0.00 0.01 0.02 0.03



Forecasts in Pictures

Valuation Unsurprisingly valuation is strongly dependent on volume growth and margin, attachment rates for services and to a lesser extent exchange rates.

Forecast)Revenue)Track)($000) Forecast)Gross)Margin)Track)(%)2020F 2021F 2022F 2023F 2024F 2025F

12,631 19,069 28,342 41,634 60,608 87,60940% 43% 46% 48% 50% 52%

2020F 2021F 2022F 2023F 2024F 2025F31,523 44,113 61,738 86,413 120,958 169,32119,216 26,903 37,664 52,730 73,822 103,35112,532 18,970 28,243 41,535 60,509 87,510

2020F 2021F 2022F 2023F 2024F 2025F12,307 17,210 24,073 33,683 47,136 65,9706,911 8,160 9,648 11,422 13,540 16,068

Source:(EAL(Estimates Source:(EAL(Estimates

Number)of)Instruments)Sold EBITDA)and)EBITDA)Margins

Source:(Company;(Eastbourne(Advisory(Estimates Source:(Company;(Eastbourne(Advisory(Estimates

Stacked)Profitability)$000 COGS)and)OPEX)$000

.

Source:(marketsandmarketsSource;(MarketsAndMarkets

Global.Energy.Efficient.Motors.Low.HP.By.Geography.US$bn.(Refridge)

Source:(Company;(Eastbourne(Advisory(Estimates Source:(Company;(Eastbourne(Advisory(Estimates

0.

50000.

100000.

150000.

200000.

2013A.

2014A.

2015A.

2016A.

2017F.

2018F.

2019F.

2020F.

2021F.

2022F.

2023F.

2024F.

2025F.

Global)Revenues)$000)

SyO.Global.Revenues.($000).

CAGR.xx%.

0.

100.

200.

300.

400.

500.

2013A.

2014A.

2015A.

2016A.

2017F.

2018F.

2019F.

2020F.

2021F.

2022F.

2023F.

2024F.

2025F.

Number)of)Machines)Sold)Per)Year)

Number.of.Machines.Sold.

30%.

35%.

40%.

45%.

50%.

55%.

60%.

65%.

2013A.

2014A.

2015A.

2016A.

2017F.

2018F.

2019F.

2020F.

2021F.

2022F.

2023F.

2024F.

2025F.

)Gross)Margin)%)

SyO.Gross.Margin.%.

V60%.

V40%.

V20%.

0%.

20%.

40%.

60%.

V5,000.

15,000.

35,000.

55,000.

75,000.

95,000.2013A.

2014A.

2015A.

2016A.

2017F.

2018F.

2019F.

2020F.

2021F.

2022F.

2023F.

2024F.

2025F.

EBITDA)$000)and)EBITDA)Margins)

EBITDA.Margin.$000. EBITDA.Margin.%.

0.50,000.100,000.150,000.200,000.250,000.300,000.350,000.400,000.

2013A.

2014A.

2015A.

2016A.

2017F.

2018F.

2019F.

2020F.

2021F.

2022F.

2023F.

2024F.

2025F.

Profitability)$000)

EBIT. Gross.Margin. Revenue.

0.10,000.20,000.30,000.40,000.50,000.60,000.70,000.80,000.90,000.

2013A.

2014A.

2015A.

2016A.

2017F.

2018F.

2019F.

2020F.

2021F.

2022F.

2023F.

2024F.

2025F.

Profitability)$000)

COGS.. OPEX..

Sensitivities( Syft(Gross(Margin

0.12 52.50% 55.00% 57.50% 60.00% 62.50% 65.00% 67.50%Syft(Growth((Volume) 10.0% 0.03 0.03 0.03 0.03 0.03 0.04 0.04

20.0% 0.04 0.04 0.05 0.05 0.05 0.05 0.0630.0% 0.06 0.07 0.07 0.08 0.08 0.08 0.0940.0% 0.10 0.10 0.11 0.12 0.12 0.13 0.1350.0% 0.15 0.16 0.17 0.18 0.19 0.20 0.2060.0% 0.23 0.25 0.26 0.27 0.28 0.30 0.3170.0% 0.35 0.37 0.39 0.41 0.43 0.45 0.46

Source:(estimates

Sensitivities( Syft(Volumes((Growth)

( 0.12 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00%Services(as(a(%(of(Sales 13.0% 0.02 0.03 0.05 0.08 0.13 0.20 0.30

18.0% 0.03 0.04 0.06 0.09 0.14 0.22 0.3323.0% 0.03 0.04 0.07 0.10 0.16 0.24 0.3728.0% 0.03 0.05 0.08 0.12 0.18 0.27 0.4133.0% 0.04 0.06 0.08 0.13 0.20 0.30 0.4538.0% 0.04 0.06 0.09 0.15 0.22 0.33 0.5043.0% 0.05 0.07 0.11 0.16 0.25 0.38 0.56

Source:(estimates



Our Base Case DCF Valuation is 11.5c, which assumes 40% volume growth off a very low base and stable growth margins.

Our forecast for Profit Before Tax FY17 is $0.4m after heavily loading the back end of FY17 with additional S&D investment (more people, new product development and increased marketing) and therefore see FY17 as an anomaly. Applying the New Zealand median FY18 P/E multiple of 18.3X (calendarised to March) would yield an equity value of $79.6m implying at the current price, an investor is less than nothing for the growth optionality thereafter (we acknowledge our forecasts have significant risk inherent both to the upside and downside).

The following table shows implied multiples at both the current share price and at valuation. At the current share price appears relatively cheap FY18 and also very reasonably priced at valuation in the year following based on our forecasts.

Comparable Company Multiples (see Appendix 2) While many of the companies contained in the appendix are much larger and more mature than SYFT, they do demonstrate the scale and profitability of the industry.

Key Risks The market is large enough and SYFT have shown it has a successful formula and there does not appear to be any competitive technology in market likely to supersede SYFT technology (based on high barriers to entry) presenting SYFT with two 2 options;

1. Take the conservative option and grow within its current resources; 2. Spend a greater amount of Sales and Marketing and Development and grow

significantly faster. While the company have shown through success to date that it has the right formula, the lumpy nature of instrument sales makes cash reserves an important safety factor if it follows the second option and would potentially require further capital.

Valuation)metricsAt Share Price 2016A 2017F 2018F 2019F 2020F EV/EBITDA 44.0 121.1 14.4 7.7 5.0EV/EBITA 47.3 149.6 14.8 7.8 5.0P/E 47.7 135.6 14.9 7.8 5.0At Base Case Scenario EV/EBITDA 86.0 236.7 28.2 15.0 9.7EV/EBITA 92.4 292.5 28.8 15.2 9.8P/E 91.8 260.9 28.7 15.0 9.6Source: EAL estimates



SWOT%AnalysisStrengths WeaknessesStrong'culture'of'innovation Relatively'small'scale'relative'to'competitorsLeading'edge'products'in'market Sales'currently'lumpyProduct'volume'and'revenue'growth'currently'very'strong Not'well'capitalised'to'fund'high'growthStrong''management'and'work'place'culture Breadth'of'product'portfolioHigh'margin'business'with'little'near'term'risk'of'erosion Considerable'currency'risk'with'most'product'sold'offshoreGood'relationships'with'large'bluechip'clients 'Reasonable'barriers'to'entry'(cost'of'development'and'"smarts") 'Opportunities ThreatsNew'Markets'available'unable'to'be'fulfilled'by'competitors Limited'formalised'IPOnly'have'small'market'share'in'very''large'markets Fragmented'market'with'well'resourced'competitorsSome'opportunity'to'improve'margins Competitors'likely'to'try'to'emulate'technologyOpportunities'to'develop'adjacent'products 'Further'strengthen'relationships'with'Blue'Chip'customers 'New'channel'development'opportunities'(selling'direct)'''

Source:(Company,(Eastbourne(Advisory(Limited



Appendix 1-‐ Key People and Major Shareholders

Directors The Hon. Ruth Richardson Ruth was instrumental for a number major reforms of the New Zealand economy as Minister of Finance from 1990 to 1993. Since the Ruth established her own consultancy helping many countries implement reform initiatives. Ruth is also Chairman of Jade Software Corporation, The Merino Company Limited and a Director of Synlait Milk Limited and the Bank of China (NZ) Limited.

Michael Bushell Michael and his family are foundation Shareholders. Michael has worked in Corporate and Commercial banking and finance for 37 years the last 12 as a partner in a private finance company specialising in working capital Pacific Invoice Finance that supported SYFT until 31 March 2013. Michael was part of an independent advisory to SYFT set up in April 2011.

Richard Coleman Richard is a partner at Koau Capital Partners Limited who specialise in sourcing, structuring, funding and managing assets within the Maori commercial sector. Prior to Koau, Richard spent 15 years within the Ngai Tahu commercial group in a variety of roles including Group Investment Manager of Ngai Tahu Holdings (the parent to its property, seafood, tourism and private equity arms) and latterly Chief Executive of Ngai Tahu Seafood.

CEO Douglas Hastie Doug graduated from Auckland University with an engineering degree and followed that up with an MBA from Yale and two years traded equities for Goldman Sachs in New York. Once back in New Zealand, Doug established Temple Consultancy Group and Chanui, a branded tea and coffee company. Doug has a particular strength in sales and believes many New Zealand Companies while very innovative, are weaker at commercialising technology. Doug joined SYFT in 2012 and bought innovation and the pragmatism required to transform SYFT into a profitable high growth business.

Significant)ShareholdersShareholder Number)(m) %)of)shares)on)issueDouglas(Hastie 191.3 14.8%ACC 181.2 14.0%Douglas(Ziffel(and(Smoot((NY)(Limited 145.2 11.2%Whale(Watch(Kaikoura 130.0 10.1%Stephen(John(Collins 66.6 5.2%Opihi(Investments 37.6 2.9%Source:(Companies(Office



Appendix 2 -‐Key Competitor Multiples and Forecast Growth

Companies in the sector include; n Thermo Fisher Scientific, Inc. (TMO:NYSE.) n Agilent Technologies (A:NYSE.) n PerkinElmer, Inc. (PKI:NYSE.) n Shimadzu Corporation (7701:TOK) n Waters Corporation (WAT:NYSE), n JASCO, Inc. (Private:Japan) n GL Sciences, Inc. (7705: TOK) n Phenomenex, Inc. (Private:U.S.) n Servomex (owned by Spectris SXS:LSE) n Siemens (SIE:ETR) n ABB (ABB:STO) n Emerson (EMR:NYSE) n Michell (Private:UK) n Orthodyne (Private) n Honeywell gas detection (HON:NYSE) n Pfeiffer (PFV:ETR) n Teledyne (TDY:NYSE) n Draeger (DRW3:ETR)

Company NameThermo FisherAgilentPerkinElmerShimadzuWatersGL SciencesSpectrisSiemensABBEmersonHoneywell International Inc.Pfeiffer VacuumTeledyne TechDraegerwerk

Market CapDomicile (Local $mn)US 59,969 US 14,828 US 5,675 JP 446,235 US 11,304 JP 8,104 UK 2,451 DE 87,508 CH 45,092 US 32,428 US 84,786 DE 806 US 3,692 DE 1,093

Calendarised P/E31-Dec-16 31-Dec-17

23.4x 20.6x18.5x 16.7x19.9x 18.5x21.4x 19.6x

17.1x 15.7x14.4x 13.3x16.4x 15.0x20.8x 20.8x16.8x 15.7x17.6x 15.3x20.6x 19.4x15.6x 11.7x18.5x 16.9x18.1x 16.2x

Calendarised P/E Calendarised EV / EBIT31-Dec-16 31-Dec-17

17.1x 15.4x15.1x 13.7x

17.7x 17.1x

13.6x 12.4x13.2x 12.2x11.7x 10.7x14.5x 14.3x12.1x 11.5x11.5x 10.1x

11.5x 8.7x13.8x 12.6x13.4x 12.3x

Calendarised EV / EBIT31-Dec-16 31-Dec-17

15.3x 13.9x14.0x 12.6x9.3x 8.5x

15.6x 15.1x

12.0x 11.0x10.9x 10.3x9.0x 8.4x

11.8x 11.6x10.7x 10.2x8.9x 8.2x

6.3x 5.3x11.2x 10.5x10.9x 10.3x

Calendarised EV / EBITDA

Company NameThermo FisherAgilentPerkinElmerShimadzuWatersGL SciencesSpectrisSiemensABBEmersonHoneywell International Inc.Pfeiffer VacuumTeledyne TechDraegerwerk

Source;(Bloomberg

Market CapDomicile (Local $mn)US 59,969 US 14,828 US 5,675 JP 446,235 US 11,304 JP 8,104 UK 2,451 DE 87,508 CH 45,092 US 32,428 US 84,786 DE 806 US 3,692 DE 1,093

Sales Growth (%) Sales CAGR (%)31-Dec-16 31-Dec-17 3 Yrs to Dec-17

3.2% 4.7% -12.2%2.4% 4.1% 2.5%0.2% 2.3% 3.2%5.7% 5.3% 4.6%

8.9% 6.9% 5.7%6.3% 7.3% 6.0%

-2.7% 0.6% -4.5%-10.7% -2.7% -15.2%

2.3% 2.9% 0.2%2.4% 6.4% 6.6%

-6.8% 3.1% -2.7%-1.5% 2.3% 2.6%0.8% 3.6% -0.3%2.3% 3.6% 2.5%

Sales Growth (%) EBITDA Growth (%)31-Dec-16 31-Dec-17

9.5% 11.0%5.5% 7.9%5.1% 6.4%8.8% 6.8%

6.3% 8.8%11.8% 9.0%

3.7% 4.4%-10.4% -0.8%

5.3% 6.0%0.6% 9.1%

-5.4% 8.1%33.0% 18.9%

6.2% 8.0%5.4% 8.0%

EBITDA Growth (%)



Limitations and Disclaimer

Eastbourne Advisory Limited is registered on the New Zealand Financial Service Providers Register (FSP number 466826) and is registered to provide wholesale and/or generic financial adviser services only.

DISCLAIMER Copyright 2015 Eastbourne Advisory Limited (EAL). All rights reserved. This report has been commissioned by SYFT Technologies Limited and prepared and issued by EAL for publication. 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. Opinions contained in this report represent those of EAL at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide is not intended to be, and 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 EAL’s solicitation to effect, or attempt to effect, any transaction in a security. 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. This document is provided 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 notsubject to any prohibition on dealing ahead of the dissemination of investment research EAL has a restrictive policy relating to personal dealing.

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§ • EBIT

1

loss for Q1 of $381k impacted by non-cash amortisation charges and

syft draft 7 dh · 136.6 47.7 135.6 14.9 7.8 5.0 ev/ebitda net(dps(c imputation net(yield...

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