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Equity Lighthouse Analysis

What is Lighthouse (LH)?

Lighthouse is a fundamental analysis project of the IEAF aimed at the secondary equity market, and with the backing of BME (Bolsas y Mercados Españoles).

What makes Lighthouse unique?

Coverage with conditions: LH limits its coverage to listed Spanish stocks not covered by the Sell Side. Once a stock starts to be analysed by the Sell Side, LH discontinues its coverage. We consider a stock is being covered by the Sell Side when it is followed on a regular basis. This involves the publication of a yearly update report, of a report on all quarterly results, of reports arising from significant events or events with a significant impact on the stock, and the keeping of updated financial projections with the publication of reports when there is a change in these.

  • “No P/L”: LH’s goal is not to build a P/L so its research is not intended to be sold but rather to provide a service to the market.
  • No advice: LH does not aim to advise investors, but rather to increase the market's knowledge of certain stocks about whose fundamentals it has little or no information. As a result, the stocks will become more liquid and trade closer to their fundamental values.
  • Other objectives: LH has two other aims: monitoring and following the level of coverage of the Spanish equity market and proposing measures that help to improve market coverage.

What are LH’s guiding principles?

  • No competition: A basic principle of LH is not to compete with the Sell Side. Its aim is to provide a service to the market: the coverage of those stocks that the Sell Side does not cover spontaneously. For this reason, when a stock is no longer an orphan LH will discontinue its coverage.
  • Quality :LH is associated with a prestigious entity within the world of analysis (IEAF) and a logical objective is that its product is of optimum technical quality. Its analysis is not intended to be superficial but in-depth and appreciated by the market.
  • Independence: LH aims to offer the market fully independent analysis without conflicts of interest.
  • Stability: LH was created to provide a permanent and long-term solution for all orphan stocks on the Spanish market.
  • Just analysis: LH is not a vehicle for selling other investment banking products. The IEAF doesn’t have any and the project does not have this aim in mind. There are no execution, M&A, financing or other services. LH is strictly and solely a project for the analysis of orphan stocks.
  • Maximum distribution: The project aims to guarantee coverage of orphan stocks but also investor access to this research. The IEAF, through its website, will distribute the research and provide universal access to the product (all investors in all markets). LH’s product will also be freely accessible on the BME website and on the main global market information platforms (Bloomberg, Capital IQ, Factset and Thomson Reuters).
  • Transparency with the market: LH aims for full transparency with the market.
  • Good governance: LH is controlled by the Comisión de Servicios de Análisis (Analysis Services Committee) which reports to the Board of the IEAF. The Committee’s main mandate is to control the stocks to be covered by LH, ensuring that the stocks covered are orphan stocks and that LH never competes with the market. The Committee will also propose discontinuing coverage of a stock when it considers that this no longer has orphan status. The Committee will ensure compliance with LH's Code of Conduct.

Features of LH’s fundamental analysis

  • With financial projections: The methodology followed by LH is one of classic fundamental analysis, based therefore on in-depth knowledge of the businesses analysed and good modelling with financial projections. This is not quantitative or technical analysis.
  • No recommendation or valuation: For LH the value of research (especially for “small caps”) lies in the financial projections and not in the valuation or the recommendation. LH does not issue recommendations (it doesn’t say “buy” or “sell”), and neither does it value or publish target prices. This represents a significant difference with respect to the traditional Sell Side product.
  • Technical quality: The goal of LH’s product is to be useful to the market. To achieve this all the focus is on the technical quality of the research being op.

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