Note: If the rating of a company shown on the cover of First Edition is in bold type, a rating change has taken place CREDIT SUISSE SECURITIES RESEARCH & ANALYTICS BEYOND INFORMATION TM Client-Driven Solutions, Insights, and Access EQUITY RESEARCH CREDIT SUISSE EQUITIES (AUSTRALIA) LIMITED ABN 35 068 232 708 ACN 068 232 708 | Participating Organisation of the Australian Stock Exchange Australia & NZ Daily Research Monday, 19 June 2017 COMPANIES & SECTORS Aussie Transport & Infrastructure 8 Week 24 – US Inventory growth remains weak BSL BlueScope Steel OUTPERFORM 23 Arrium preferred bidder – a minor risk? CSL CSL OUTPERFORM 25 China – same plasma, different economics? FXL FlexiGroup NEUTRAL 31 Certegy presents uncertainty SGM Sims Metal Management UNDERPERFORM 37 Schnitzer Q3, strong volumes but margin flat S32 South 32 OUTPERFORM 42 Un-chartered waters? SXL Southern Cross Media Group OUTPERFORM 44 Upgrade on improving industry landscape ATM The a2 Milk Company OUTPERFORM 46 .NZ Selling them as fast as it is making them RESULT PREVIEW MTS Metcash OUTPERFORM 51 Difficult result to predict; reports on 26 June DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, LEGAL ENTITY DISCLOSURE AND THE STATUS OF NON-US ANALYSTS. US Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. MARKET EVENTS New Motor Vehicle Sales YoY (May) 19 Jun US, Chicago Fed President Charles Evans Speaks at NYU (with Q&A) 19 Jun NZ, Westpac Consumer Confidence (2Q) 19 Jun NZ, Performance Services Index (May) 19 Jun CH, May Property Prices 19 Jun UPCOMING CONFERENCES Global Chemicals and Agriculture Conference – London 20 Jun China Consumer Corporate Day – Hong Kong 22 Jun For more scheduled conferences refer to page 2 TABLES Credit Suisse Ratings – Australia 54 Top 100 Earnings & Dividends 57 Emerging Companies Earnings & Dividends 60 Sector Aggregates 63 Weekly Market Calendar 65 Featured Research 2016 Best Piece of New ESG Research – Get Inside the Carbon Black Box, Look Down the Carbon Value Chain This piece of research was announced as the winner of the Best Piece of New ESG research at the 2016 ESG RA awards on 9 May 2017. The report presents an innovative framework for analysing the important risk of climate change in the investment decision making process. Some comments from the ESG Research Australia Awards: “Substantial thought leadership in this piece. A futurist's dream.” “Incredibly original for a topic that is often focusing on emissions alone. A pragmatic and logical thought process which leads to actionable insights.” “The most interesting and thoughtful research of the year.” (Link) IDP Education We initiate on IEL with A$4.00 target price, UNDERPERFORM rating. Despite attractive industry fundamentals in international education and a strong recent growth track record, we view IEL as expensive given exposure to regulatory changes in Student Placement and multiple risks in Testing. (Link) Primary Health Care Flexible GP model has diluted ROIC: We believe PRY's move to implement flexible GP contracts has resulted in reduced billings, increased operating costs and diluted the return on invested capital for the GP business (which we estimate accounts for ~25% of group EBITDA). (Link) Australian FTA TV Sector TV sector may be on the cusp of biggest shake-up in years. TEN’s financial position is looking increasingly difficult. Step up in market share for Seven and Nine. NEC best way to play the theme. (Link) HGG We have updated our merger model for the merger documentation. In aggregate the shift to US GAAP and JNS restatements only impacted merged earnings by -3% (at the diluted EPS level). We remain supportive of the merger and see its strategic and financial merits (~20% accretion by FY19E). (Link)
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Note: If the rating of a company shown on the cover of First Edition is in bold type, a rating change has taken place
CREDIT SUISSE SECURITIES RESEARCH & ANALYTICS BEYOND INFORMATIONTM
Client-Driven Solutions, Insights, and Access
EQUITY RESEARCH CREDIT SUISSE EQUITIES (AUSTRALIA) LIMITED ABN 35 068 232 708 ACN 068 232 708 | Participating Organisation of the Australian Stock Exchange
Australia & NZ Daily Research Monday, 19 June 2017
COMPANIES & SECTORS
Aussie Transport & Infrastructure 8 Week 24 – US Inventory growth remains weak
BSL BlueScope Steel OUTPERFORM 23 Arrium preferred bidder – a minor risk?
CSL CSL OUTPERFORM 25 China – same plasma, different economics?
SGM Sims Metal Management UNDERPERFORM 37 Schnitzer Q3, strong volumes but margin flat
S32 South 32 OUTPERFORM 42 Un-chartered waters?
SXL Southern Cross Media Group OUTPERFORM 44 Upgrade on improving industry landscape
ATM The a2 Milk Company OUTPERFORM 46 .NZ Selling them as fast as it is making them
RESULT PREVIEW
MTS Metcash OUTPERFORM 51 Difficult result to predict; reports on 26 June
DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, LEGAL ENTITY DISCLOSURE AND THE STATUS OF NON-US ANALYSTS. US Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.
MARKET EVENTS
New Motor Vehicle Sales YoY (May)
19 Jun
US, Chicago Fed President Charles Evans Speaks at NYU (with Q&A)
19 Jun
NZ, Westpac Consumer Confidence (2Q)
19 Jun
NZ, Performance Services Index (May)
19 Jun
CH, May Property Prices 19 Jun
UPCOMING CONFERENCES
Global Chemicals and Agriculture Conference – London
20 Jun
China Consumer Corporate Day – Hong Kong
22 Jun
For more scheduled conferences refer to page 2
TABLES
Credit Suisse Ratings – Australia 54
Top 100 Earnings & Dividends 57
Emerging Companies Earnings & Dividends
60
Sector Aggregates 63
Weekly Market Calendar 65
Featured Research
2016 Best Piece of New ESG Research – Get Inside the Carbon Black Box, Look Down the Carbon Value Chain This piece of research was announced as the winner of the Best Piece of New ESG research at the 2016 ESG RA awards on 9 May 2017. The report presents an innovative framework for analysing the important risk of climate change in the investment decision making process. Some comments from the ESG Research Australia Awards: “Substantial thought leadership in this piece. A futurist's dream.” “Incredibly original for a topic that is often focusing on emissions alone. A pragmatic and logical thought process which leads to actionable insights.” “The most interesting and thoughtful research of the year.” (Link)
IDP Education We initiate on IEL with A$4.00 target price, UNDERPERFORM rating. Despite attractive industry fundamentals in international education and a strong recent growth track record, we view IEL as expensive given exposure to regulatory changes in Student Placement and multiple risks in Testing. (Link)
Primary Health Care Flexible GP model has diluted ROIC: We believe PRY's move to implement flexible GP contracts has resulted in reduced billings, increased operating costs and diluted the return on invested capital for the GP business (which we estimate accounts for ~25% of group EBITDA). (Link)
Australian FTA TV Sector TV sector may be on the cusp of biggest shake-up in years. TEN’s financial position is looking increasingly difficult. Step up in market share for Seven and Nine. NEC best way to play the theme. (Link)
HGG We have updated our merger model for the merger documentation. In aggregate the shift to US GAAP and JNS restatements only impacted merged earnings by -3% (at the diluted EPS level). We remain supportive of the merger and
see its strategic and financial merits (~20% accretion by FY19E). (Link)
6-8 Nov 2017 8th China Investment Conference – China
7-9 Nov 2017 Boston Financials 1x1 Conference – Boston
27-30 Nov 2017 Technology, Media and Telecom Conference – Phoenix
28-30 Nov 2017 5th Annual Industrials Conference – Palm Beach, Florida
If you would like to attend any of the above conferences, please contact the Australian Corporate Access team: Cathy Kermond [email protected] or your Credit Suisse sales representative
Research Production Patricia Rocis – Supervisory Analyst 61 3 9280 1678
(1) Includes all companies covered by Credit Suisse analysts. (2) All sectors are based on S&P/ASX200.Companies on restricted list are not included in aggregates (3) Emerging companies are all companies covered by Credit Suisse analysts excluding top 100 stocks.
Source: Company data, Credit Suisse Estimates, Thomson Reuters
Australia/NZ equities executive summary
COMPANIES & SECTORS
Week 24 – US Inventory growth remains weak Aussie Transport & Infrastructure
Welcome to our weekly analysis of the Aussie transport & infrastructure space. This series of notes includes a summary of the week's events, valuation tables, events calendar, and key value driver charts for each stock.
AZJ – Aurizon Network issued A$425mn 7-year notes priced at 177 basis points over the 7-year swap rate. Industry press speculates that WICET faces a restructure after Caledon entered administration in May. WICET has until September 2018 to refinance the debt, but may seek to refinance early. Aurizon has a 4mt p.a. above rail take-or-pay contract with Caledon. SYD – Off peak movements up 3% over the last 12 months as peak movements remain flat. Sydney Airport continues to be capacity constrained at 8am on weekdays, with 96% of the 80 slots used. In May, off-peak movements were flat, with peak movements up 1.5%. ABS overseas arrivals and departures data to Australia suggests Chinese nationals make up 6.7% of total international traffic to/from Australia (up from 6.4% 12 months ago). QAN – Domestic airline load factors up 1.6ppts in April, with strong improvement across each of the route types (Triangle, East West, Resources, Domestic Leisure and regional). QAN shares are trading in line with US Airlines at 10x P/E (12-month fwd) with European airlines at 7.0x P/E. Chart of the week – BXB – US retail inventories/sales continues to fall in April. US retail inventories recorded growth of 1.6% compared to sales growth of 4.6% in April. Lower inventory growth could mean lower pallet issues for Brambles as retailers potentially extend their de-stocking phase.
Arrium preferred bidder – a minor risk? BlueScope Steel (BSL.AX)
Arrium's receiver, KordaMentha, has advised that it has chosen a Korean consortium as the preferred bidder for the Arrium group of companies. The consortium is headed by Newlake Alliance Management and JB Asset Management and is supported by the Korean steel making company, Posco. Arrium group includes ATM (Australian Tube Mills), a business that Arrium had actively but unsuccessfully sought to divest as non-core and not integrated long before receivership. ARI's price expectation deterred buyers. BlueScope, in our view, is the logical owner of the ATM business and could extract meaningful transport synergies by acquiring and relocating the capacity from Brisbane to Port Kembla, removing two unnecessary transport legs (HRC from Port Kembla to Brisbane, conversion to tube in Brisbane, transport of tube back to the main markets in Sydney and Melbourne. ATM is currently a domestic customer for up to 150ktpa of BlueScope's HRC. While this is competitively priced and is BSL's lowest margin domestic product, the alternative market is to the export market at perhaps a US$100/t lower price, or a potential $15mn–$20mn EBIT (~1.5%) impact if the Posco consortium keeps the ATM business and supplies its own Korean HRC. Arrium also has a large domestic distribution business, focused on long products. This business could, and has in the past, also distribute the product range manufactured and distributed by BlueScope. 9Posco could use this business as an import channel, competing with BlueScope, but would have to be competitive with BSL's import parity pricing. While we highlight both Posco opportunities as minor risks, we see no reason to adjust our earnings, target price or rating and recognize the equal risk of a net positive outcome if ATM was to be divested to BSL.
Share Price 11.99 (AUD)
OUTPERFORM
Target Price 13.30 (AUD)
Michael Slifirski Research Analyst 61 3 9280 1845
China – same plasma, different economics? CSL (CSL.AX)
Exploring plasma differences: Following CSL's proposed entry into the domestic China plasma fractionation sector (via Ruide) we compare/contrast key operational and financial metrics of listed peers with the CSL Behring business and assess potential readthrough for Ruide. Listed China plasma fractionators generate robust operating margins, ahead of CSL Behring, despite only clearing one core plasma product in last litres (albumin) and selling far fewer specialty (infra-marginal) products. Local margins higher due to lower COGS: Our analysis shows that this is predominantly due to significantly lower COGS per litre of plasma utilised, with other operating expenses similar in total as a percentage of revenue. Within the COGS category, we highlight that despite having substantially higher donor fees per litre of plasma collected in China, this is more than offset by lower non-donor related COGS (e.g., logistics, storage, labour, testing, supplies). For CSL, we see significant longer-term upside to current Ruide revenues of ~US$30 mn (via organic growth and new product approvals). While at face value, this should lead to material improvement in fractionation economics, in our view, the revenue uplift will require investment in both non-donor COGS (i.e., plasma collection/fractionation processes) as well as core operating cost lines (R&D, sales and marketing). As a result, our current base case assumption for Ruide (~35% EBIT margin after five years) factors in minimal operating margin expansion from current levels (~30%). Catalysts: (1) Monthly PPTA data; (2) FDA regulatory decision on Haegarda (anticipated mid-year). Valuation: CSL currently trades on 29.3x 12-month forward consensus EPS, representing a 65% premium to the ASX200 Industrials ex. Financials (two-year averages of 24.5x and 42%, respectively).
Downgrade rating to Neutral: Our prior Outperform rating ($2.12 share price, February 2016) was based on cheap valuation and a view that FXL could start to grind out growth, despite residual risks. However, roll forward to today, and despite valuation ostensibly looking compelling (again), FXL is still in a downgrade cycle (-20% FY18 consensus revisions) and we are increasingly cautious on Certegy (36% of FY16 NPAT), which could offset growth in other areas (e.g. Australian Card). While FXL looks over-sold on a short-term view and valuation may offer support, we have low conviction on earnings and still see a downside risk—we would rather wait until growth concerns are alleviated. Challenges to Certegy: We believe that having had a niche credit space largely to itself, Certegy now has growing competitors (AFY.AX, ZML.AX) with strong digital offerings and brands that are resonating with retailers and consumers alike. The no-interest-ever product remains attractive, in our view, but increased competition translates to both margin and volume pressure for FXL, at the same time as a less certain outlook for the consumer generally. This has already impacted 2H17 (contributed to lowering FY17 guidance) and poses further risk to FY18-19. Where it could be better than we think: (1) New products (Oxipay) or categories (solar battery storage) offset pressures in Certegy; (2) NZ Card growth trajectory lifts (scheme card, better sales momentum); (3) Aust. Card is better than we expect (we forecast >70% growth FY17-19); (4) improved commercial finance lifts leasing growth; and (5) other geographies (Ireland). Where it could be worse than we think: (1) Further competition in other areas (e.g. Latitude, a potential IPO candidate according to press reports); (2) impairments rise more quickly than expected; (3) contract losses/failure to renew business; (4) regulatory/consumer focus further impacts POS leasing; and (5) Card receivables conversion to interest-bearing disappoints. EPS outlook: Negative revisions to EPS estimates (-8% FY18, -14% FY19) stem mainly from forecast declines in Certegy earnings and reflect our view that FXL could struggle to generate material growth over the next 2-3 years.
Share Price 1.70 (AUD)
(from OUTPERFORM) NEUTRAL
Target Price (from 2.70) 1.85 (AUD)
Paul Buys Research Analyst 61 2 8205 4538
Schnitzer Q3, strong volumes but margin flat Sims Metal Management (SGM.AX)
Schnitzer MayQ preliminary result. Schnitzer’s scrap business (US Auto and Metals Recycling (AMR)) is expected to achieve operating income in the range of US$29 - $30mnn, or a sequentially flat operating income per ferrous ton of US$30 - $31 (equivalent to US$33-34/tonne). By contrast, SGM delivered US$8.40/t for its 1H17. Higher operating income, not margin. Schnitzer's operating income is expected to increase by approximately 12% sequentially and 10% from the prior year quarter, and would represent the best third quarter performance since fiscal 2012. Result not supportive of SGM's operating leverage thesis. SGM promote operating leverage with no increase in fixed cost as volumes rise. Schnitzer’s Q3 EBIT increase has followed its ferrous tonnage increase, showing no operating leverage, despite a materially higher ratio of non-ferrous. This appears to suggest (perhaps) an increase in buy price offsetting the otherwise expected operating leverage. Read-through for SGM earnings. If SGM’s 2H were to reflect Schnitzer’s volume profile, SGM’s 2H tonnage could be up by ~150kt on its 1H17, generating additional EBIT of ~A$13mn compared to what we forecast, if the guided operating leverage to volume was to be delivered. This hypothetical calculation would deliver FY17 EBIT of A$180mn once factoring in a contribution for guided optimise initiatives (at 50% realisation rate achieved in 2H17) and NPAT of ~$133mn. This is the scenario we have adopted in our modelling for FY17 driving our eps change. Valuation. Target price increased to $11.00/sh (from $10.50/sh) to align with our NPV. Rating remains Underperform on valuation.
New mining charter: South Africa’s Department of Mineral Resources has published the reviewed broad based black-economic empowerment charter for the South African mining and minerals industry. Mining companies are being asked to comply with a black-ownership threshold of 30%, up from the previous 26%, within the maximum of 12 months. The charter applies only to mining operations, as such S32’s Hillside aluminum smelter is exempt. We are far from legal experts, but if our understanding of the wording is correct (full charter doc here), the potential direct impact to S32 could be a 2.4% and 22% decrease to their effective interests in their South Africa Manganese and Energy Coal businesses respectively. Plenty of ambiguity: The Chamber of Mines, which represents ~90% of mines in South Africa, is likely to seek an injunction and the charter may be ultimately tested in the courts. As such, timing of implementation, if at all, is unclear to us. What is also not clear and most relevant for S32 is how historic transactions, which have seen it comply with previous charters, is ultimately taken into consideration. On face value, irrespective of historic adherence to the previous charter, a requirement to top up to 30% may well be required. But this is not entirely clear and the interpretation of points 2.1.2.1, 2.1.2.2 and 2.1.2.9 may be critical for S32 and specifically, their Energy Coal holding. Immaterial valuation impact: This is the third iteration of the mining charter and has reportedly been released with little consultation with the mining companies. It is relatively straight forward for us to run the scenario through our numbers (see comments below), but far more difficult to quantify the impact that comes from heightened geopolitical risk and what may be ongoing uncertainty for some time. Valuation: No change to TP or Rating. We carry $0.58/sh for the Manganese and Energy Coal businesses. If we adjusted for the potential change in effective stakes noted above, this would fall to ~$0.50/sh. The impact to FY18 and FY19 EBITDA would be 2% and 4% respectively.
Share Price 2.61 (AUD)
OUTPERFORM
Target Price 2.95 (AUD)
Sam Webb Research Analyst 61 2 8205 4535
Upgrade on improving industry landscape Southern Cross Media Group (SXL.AX)
SXL a major beneficiary of media reform: In our view SXL's current share price is not factoring in the potential upside from proposed regulatory changes: i) the abolition of licence fees could add ~8% to EPS and A$0.10 to our valuation after adjusting for new spectrum fees and a reduction in gambling ad revenue; and ii) the removal of the 75% audience reach rule, in combination with NEC's recent share price strength, could increase M&A possibilities. We note that both of these proposed changes are supported by the two major parties. TEN's issues = share upside for Nine…and by extension SXL: As Fraser
McLeish detailed in his recent note Changing channels – TV shake-up looming, TEN's deteriorating financial position (culminating in Wednesday's entry into voluntary administration) means that it is likely to cut programming spend in order to return to profitability. This creates the potential for long-term market share upside at the other networks. Any market share uplift at Nine would also drive market share improvements at SXL’s TV business. We estimate that each additional point of market share at SXL’s Nine-affiliated stations could add A$4-5m to revenue, equivalent to a ~A$2m EBITDA uplift or a ~1.5% boost to EPS. A 3% sustainable increase in SXL's regional TV market share could add A$0.05 to our valuation. Radio market back in the black in May: The metro radio market returned to positive territory in May with 5-city YoY growth of 0.5%, according to Commercial Radio Australia data. The market remains down 1.6% calendar year-to-date, however the base of comparison will ease in the second half. Upgrade to Outperform (from Neutral), A$1.35 Target Price (from A$1.30): We raise our SXL TP to A$1.35 and set it at a premium to our A$1.30 base case valuation to reflect upside from the likely removal of licence fees. We do not include any upside from a potential higher long-term TV market share. We view SXL as inexpensive on <11x FY18F P/E, falling to ~10x ex-licence fees, and move to an OUTPERFORM rating.
Selling them as fast as it is making them The a2 Milk Company (ATM.NZ)
Earnings upgrade, again: On the back of a revised production schedule with the company’s infant formula (IF) contract manufacturer and ongoing strong demand for its product, ATM has raised its previous NZ$525mn revenue guidance to NZ$545mn compared with our NZ$534mn pre-trading update forecast for FY17F. The increased production and delivery of this IF stock by ATM to its distributors is a signal of the ongoing strong and previously unsatisfied demand in the market for its products. It is also an indication that the economic incentives on ATM’s IF remain attractive to its channel partners in the market. Coupled with changes in the phasing of the company’s marketing spend in China, we have upgraded our EBITDA forecast by 8% in FY17F and by c2% in FY18F and FY19F. The risk to our earnings forecasts in FY18F and FY19F remains to the upside driven by a combination of potential volume growth as well as higher gross margin. We maintain our OUTPERFORM rating with a revised NZ$4.10 TP. Evolving from a branded Australian liquid milk company to become a global dairy nutrition company: ATM’s A1/A2-type milk hypothesis and digestive benefit claims, coupled with its suite of patents and trademarks have provided the company with a marketing platform for premium-priced differentiated products. Our view on ATM is premised on successful rollout of the company's A2-type-based dairy products (including IF) in Australia, the UK, the US and China markets. Key to this is the successful management of channels-to-market and of regulatory changes over time. Catalysts in the next 12 months: These include ATM’s formulation registration process in China, ongoing infant formula trading conditions in China and the expansion of ATM’s footprint into the US fresh milk market. TP revised to NZ$4.10 (from NZ$3.92): This is based on our probability-weighted rolled forward sum-of-the-parts DCF adjusted for risks. On an adjusted NPAT basis (ex-UK/US losses), our TP implies FY17F and FY18F PEs of 27.0x and 22.5x, respectively. Our projected adjusted NPAT growth rates (ex-UK/US losses) are 19% and 17% in FY18F and FY19F, respectively.
Share Price 3.82 (NZD)
OUTPERFORM
Target Price (from 3.92) 4.10 (NZD)
Kar Yue Yeo Research Analyst 64 4 474 4462 This report is distributed in Australia by Credit Suisse Equities (Australia) Limited. Please see legal disclaimer and disclosure annex for further terms and information. Provided by First NZ Capital
RESULT PREVIEW
Difficult result to predict; reports on 26 June Metcash (MTS.AX)
Metcash reports on 26 June and with no company disclosure since November 2016, it is a difficult result to predict. If Metcash can limit a reduction in supermarket distribution sales to circa 5% and mitigate most of that downside with cost reduction, it is likely to meet or beat market expectations. Currently, the market appears to be pricing a circa 30% decline in supermarket distribution EBIT over the medium term. Liquor and hardware are positive stories as is the resumption of dividends in FY18. Earnings changes are due to a reduction in forecast sales for Supermarket distribution and upgrades to the outlook for Hardware and Liquor. Supermarket performance down. Pathway to stabilisation elusive. Independent retail sales are likely to have fallen circa 5% in the 2H17, based on ABS data. Acceleration in Woolworths' performance in 2017 has been as big a variable as Aldi in that outcome. We caution against interpreting the movement in market share to Woolworths as a trend; Woolworths market share improvement largely reflects catch-up after several years of under-performance. Independents continue a more active refurbishment program than in the past (which has been a successful element of the Metcash strategy). For independents, repositioning towards fresh and convenience seems the most likely route to sustainability. For Metcash, centralisation of state-based support activities is likely to have mitigated most of the sales downside in this period. Liquor and hardware are very positive stories. The independent sector continues to benefit from incumbency and regulatory barriers in liquor and another strong result is expected for Metcash. There is likely upside to current estimates from consolidation of Home Timber and Hardware and growth of the Mitre 10 brand over the medium term.
Welcome to our weekly analysis of the Aussie transport & infrastructure space. This series of notes includes a summary of the week's events, valuation tables, events calendar, and key value driver charts for each stock.
■ AZJ – Aurizon Network issued A$425mn 7-year notes priced at 177 basis points over the 7-year swap rate. Industry press speculates that WICET faces a restructure after Caledon entered administration in May. WICET has until September 2018 to refinance the debt, but may seek to refinance early. Aurizon has a 4mt p.a. above rail take-or-pay contract with Caledon.
■ SYD – Off peak movements up 3% over the last 12 months as peak movements remain flat. Sydney Airport continues to be capacity constrained at 8am on weekdays, with 96% of the 80 slots used. In May, off-peak movements were flat, with peak movements up 1.5%.
ABS overseas arrivals and departures data to Australia suggests Chinese nationals make up 6.7% of total international traffic to/from Australia (up from 6.4% 12 months ago).
■ QAN – Domestic airline load factors up 1.6ppts in April, with strong improvement across each of the route types (Triangle, East West, Resources, Domestic Leisure and regional).
QAN shares are trading in line with US Airlines at 10x P/E (12-month fwd) with European airlines at 7.0x P/E.
■ Chart of the week – BXB – US retail inventories/sales continues to fall in April. US retail inventories recorded growth of 1.6% compared to sales growth of 4.6% in April. Lower inventory growth could mean lower pallet issues for Brambles as retailers potentially extend their de-stocking phase.
Figure 1: Chart of the week – BXB – US retail inventories/sales fall
Source: Company data, Thomson Reuters, Credit Suisse estimates
19 June 2017
Australia and NZ First Edition 24
BlueScope Steel (BSL.AX / BSL AU) Price (16 Jun 2017): A$11.99; Rating: OUTPERFORM [V]; Target Price: A$13.3; Analyst: Michael Slifirski
Income Statement 6/16A 6/17E 6/18E 6/19E
Revenue 9,183 10,495 10,377 10,393
EBITDA 955 1,502 1,547 1,519
Depr. & Amort. (388) (387) (386) (386)
EBIT 567 1,115 1,162 1,133
Associates - - - -
Net interest exp. (90) (83) (66) (61)
Other 0 0 0 0
Profit before tax 477 1,032 1,095 1,072
Income tax (125) (281) (298) (292)
Profit after tax 352 751 797 780
Minorities (63) (80) (85) (89)
Preferred dividends - - - -
Associates & Other 0 0 0 0
Normalised NPAT 290 671 712 690
Unusual item after tax 61 (1) 0 0
Net profit (Reported) 351 670 712 690
Balance Sheet 6/16A 6/17E 6/18E 6/19E
Cash & equivalents 550 665 1,295 1,919
Inventories 1,392 1,501 1,484 1,486
Receivables 1,158 1,364 1,349 1,351
Other current assets 106 120 119 119
Current assets 3,206 3,650 4,247 4,875
Property, plant & equip. 3,834 3,828 3,849 3,858
Intangibles 1,762 1,786 1,786 1,786
Other non-current assets 346 361 361 361
Non-current assets 5,943 5,974 5,996 6,004
Total assets 9,149 9,624 10,242 10,879
Payables 1,481 1,629 1,589 1,597
Interest bearing debt 1,328 975 975 975
Other liabilities 1,355 1,411 1,403 1,395
Total liabilities 4,163 4,015 3,968 3,968
Net assets 4,985 5,609 6,275 6,911
Ordinary equity 4,497 5,041 5,621 6,169
Minority interests 488 568 653 742
Preferred capital - - - -
Total shareholder funds 4,985 5,609 6,275 6,911
Net Debt 778 310 (320) (944)
Cash Flow 6/16A 6/17E 6/18E 6/19E
EBIT 567 1,115 1,162 1,133
Net Interest (105) (71) (61) (58)
Depr & Amort 388 387 386 386
Tax Paid (50) (202) (182) (162)
Change in Working capital 209 (167) (7) 4
Other cash and non-cash items (58) (49) 7 7
Operating cash flow 952 1,013 1,303 1,308
Capex (279) (416) (407) (394)
Capex - expansionary (46) (184) (176) (163)
Capex - Maintenance (233) (232) (231) (232)
Acquisitions & Invest (1,049) 0 0 0
Asset sale proceeds 0 0 0 0
Other - - - -
Investing cash flow (1,290) (416) (407) (394)
Dividends paid (34) (40) (46) (66)
Equity raised 0 0 0 0
Net borrowings 441 (388) (134) (135)
Other financing cash in/(outflows) (39) (54) (85) (89)
Financing cash flow 368 (482) (265) (290)
Total cash flow 30 116 630 624
Adjustments 1 0 0 0
Movement in cash/equivalents 31 116 630 624
Earnings 6/16A 6/17E 6/18E 6/19E
Equiv. FPO (period avg) (mn) 586 591 592 592
EPS (CS adj.) (c) 49.5 113.6 120.2 116.6
EPS growth (%) 113.2 129.6 5.8 (3.0)
DPS (c) 6.0 8.0 11.4 11.4
Dividend Payout (%) 12.1 7.0 9.5 9.8
Free CFPS (c) 122.8 132.2 181.0 181.9
Valuation 6/16A 6/17E 6/18E 6/19E
P/E (CS) (x) 24.2 10.6 10.0 10.3
PEG (x) 0.2 0.1 1.7 (3.4)
EV/EBIT (x) 13.3 6.4 5.6 5.2
EV/EBITDA (x) 7.9 4.7 4.2 3.8
Dividend Yield (%) 0.5 0.7 1.0 1.0
FCF Yield (%) 10.2 11.0 15.1 15.2
Price to book (x) 1.5 1.4 1.2 1.1
Returns 6/16A 6/17E 6/18E 6/19E
Return on Equity (%) 6.4 13.3 12.7 11.2
Profit Margin (%) 3.2 6.4 6.9 6.6
Asset Turnover (x) 1.0 1.1 1.0 1.0
Equity Multiplier (x) 2.0 1.9 1.8 1.8
Return on Assets (%) 3.2 7.0 6.9 6.3
Return on Invested Cap. (%)
7.3 13.7 14.2 13.8
Gearing 6/16A 6/17E 6/18E 6/19E
ND/ND+E (%) 13.5 5.2 Net Cash
Net Cash Net Debt to EBITDA (x) 0.8 0.2 Net
Cash Net
Cash Int Cover (EBITDA) (x) 10.6 18.1 23.3 24.7
Int Cover (EBIT) (x) 6.3 13.5 17.5 18.5
Capex to Sales (%) 3.0 4.0 3.9 3.8
Capex to Depr (%) 71.8 107.5 105.6 102.1
MSCI IVA Rating A
Global Local Country Stock
Environment Social Governance
0
1
2
3
4
5
6
7
8
GL
C
S
G
LCS
G
LC
S
TP ESG Risk (%): 0.00 TP Risk Comment: Neutral risk. Ongoing concerns around viability of long-term domestic steel making industry is represented through a conservative profile to 'mid-cycle' earnings rather than a quantitative NPV discount factor. MSCI IVA Risk: Neutral MSCI IVA Risk Comment: MSCI upgraded its rating for BSL to 'A' (from 'BBB') in November 2016 citing BlueScope's industry leading safety performance with consistently low lost time injury rates and safety performance link to executive pay, despite the company’s strong cost cutting drive at its Australian steel plant. Tempering their view is that BlueScope lacks an emissions reduction target and has an emissions intensity at the industry average level and rising.
Share price performance
On 16-Jun-2017 the S&P ASX 200 Index closed at 5763.19 On 16-Jun-2017 the spot exchange rate was A$1.32/US$1
Source: Company Data, Credit Suisse Estimates, MSCI ESG Research
TP ESG Risk (%): -1.00 TP Risk Comment: Low risk. In our view CSL has a strong corporate governance framework and its impact on the environment from plasma protein fractionation is minimal (ethanol recycling at the Bern plant is an example of this). Recent product recalls (paediatric Fluvax, Australian albumin) adds only marginal risk to the stock in our view (we factor in -1% to our valuation) – these events were not due to lack of good manufacturing principles or employee error. Given the high volume of potentially high risk biological agents produced each year, CSL has an enviable track record in terms of safety outcomes. MSCI IVA Risk: Neutral MSCI IVA Risk Comment: Current 'BBB' rating. Lacks a top rating due to average safety and product quality following 2010 TGA recall of Fluvax in Australia. Whilst we do not believe these events were material to the group we maintain a NEUTRAL risk
Share price performance
On 16-Jun-2017 the S&P ASX 200 Index closed at 5774.0 On 16-Jun-2017 the spot exchange rate was A$1.32/US$1
Source: Company Data, Credit Suisse Estimates, MSCI ESG Research
19 June 2017
Australia and NZ First Edition 27
China – same plasma, different economics?
CSL Behring vs domestic operators
■ Using listed China plasma operators, China Biologics (CPBO) and Hualan Biological
Engineering Inc (002007), as representatives of the domestic China plasma industry,
we compare/contrast key operational and financial metrics with the CSL Behring
plasma business and assess potential readthrough for Ruide.
Revenues and costs per litre
■ Based on company data, we have derived revenue and COGS per litre of plasma
fractionated for the three businesses (Figure 1).
■ We note CSL has higher revenue per litre, due to the larger number of products
(particularly specialty) fractionated. Notwithstanding, a ~25% higher price point for
albumin (i.e. $/gram) in China relative to the US allows local fractionators to also
generate reasonable revenues per litre.
■ In terms of COGS, CSL Behring has roughly twice the total cost per litre of plasma
processed versus local China peers, which we explore in more detail below.
■ With regard to last litres, we note well balanced core plasma product sales for CSL
Behring (IG and albumin), while for local operators, albumin is the only product
extracted from last litres (Figure 2).
Figure 1: CSL has higher revenue and COGS/L… Figure 2: …with balanced last litres (core products).
Revenue and COGS per litre based on FY16 results Litres required for albumin and IG sales
0
50
100
150
200
250
300
350
400
450
500
CSL Behring CBPO Hualan
US
$
Revenue per litre COGS per litre
0.0
2.0
4.0
6.0
8.0
10.0
12.0
CSL Behring CBPO Hualan
Pla
sma
litre
s m
n
Albumin IG
Source for both charts: Company data, Credit Suisse estimates
COGS explored – some stark differences
■ We note several significant differences with regard to CSL Behring COGS and those of
domestic China fractionators (Figure 3, Figure 4 and Figure 5).
■ These include:
− Total COGS per litre is materially higher for CSL Behring versus local peers
(US$211 versus US$97-111).
− However, donor fees on a per litre of plasma basis for local operators are almost
twice as high as CSL Behring (US$69 versus US$37.50). We understand this is partly
due to nutrition fees paid to donors, as noted by CBPO in their 2016 annual report:
"In an effort to increase plasma collection volume and expand our donor base,
we increased the nutrition fees paid to donors consistent with the industry
19 June 2017
Australia and NZ First Edition 28
practice. We expect the nutrition fees to be paid to donors will continue to
increase as a result of improving living standards in China. Consequently, future
improvements on margins will need to be derived from increases in product
pricing, yields and manufacturing efficiency, as well as from optimizing the
product mix."
− This implies that non-donor fee COGS are materially lower for local China
participants versus CSL Behring (~US$28-42 versus US$177).
− CSL Behring plasma centres are more efficient in terms of utilisation with ~67k litres
of plasma collected per centre versus ~42k-49k for local operators.
Figure 3: Plasma collection costs and centre utilisation—CSL versus China peers
TP ESG Risk (%): 0.00 TP Risk Comment: For FXL, outside of the consumer services ESG risk factors we do not include any ESG impact in our base valuation. We highlight key ESG risk areas for FXL as 1) protection and management of personal information; and 2) social responsibility for providing product and services. MSCI IVA Risk: Positive MSCI IVA Risk Comment: We believe the MSCI rating is not appropriate for FXL given that it highlights access to finance and human capital management as key area of concern. FXL has doubled the number of funding providers since the GFC, has increased its facilities and completed a $270mn securitisation in June 2015. FXL remains and employer of choice in Australia.
Share price performance
On 16-Jun-2017 the S&P ASX 200 Index closed at 5774.0 On 16-Jun-2017 the spot exchange rate was A$1.32/US$1
Source: Company Data, Credit Suisse Estimates, MSCI ESG Research
19 June 2017
Australia and NZ First Edition 33
Challenges facing Certegy
■ We believe that having had a niche credit space ('no-interest-ever') largely to itself for a
number of years, Certegy now finds itself with materially increased competition. These
come in the form of Afterpay (AFY.AX) and zipMoney (ZML.AX), both of which are
young companies with strong digital offerings and growing brand awareness.
■ zipMoney is a digital retail finance and payments provider that offers point-of-sale
credit and digital payment services to the retail, education, health and travel industries.
It offers two products, ZipPay (digital wallet up to A$1,000) and ZipMoney (digital wallet
up to $20,000), and also operates a mobile budgeting application called Pocketbook.
■ Afterpay was founded in 2014 and is a retail payments platform that facilitates
commerce between retail merchants and their end-customers. Its product is targeted at
lower value transactions (current average ~$150-200, 85% of customers use debit
cards) and allows the consumer to purchase an item and pay for it in four equal value
instalments across a 6-8 week time frame.
■ AFY and ZML have enjoyed very strong growth in retailer and customer take-up, as
well as transaction volumes, with products that have been differentiated from more
traditional credit offerings through factors like digital solutions, integration with retailer
websites, reduced paperwork and increased speed of sign-up driving improved
conversion rates. Both have secured committed funding facilities from major banks.
− ZML project an annualised transaction volume run rate of A$360mn amongst its
~4,000 retail partners using the platform both online and in store. Its customer base
of ~600,000, utilising both the zipMoney and Pocketbook products, is expanding
rapidly, with ~1,200 customers being added every day. ZML has companies such
as Adairs, Kathmandu, Webjet Exclusives and Harris Farm in its portfolio.
Source: Company data, Thomson Reuters, Credit Suisse estimates
19 June 2017
Australia and NZ First Edition 38
Sims Metal Management (SGM.AX / SGM AU) Price (16 Jun 2017): A$13.79; Rating: UNDERPERFORM; Target Price: (from A$10.5) A$11; Analyst: Michael Slifirski
Income Statement 6/16A 6/17E 6/18E 6/19E
Revenue 4,661 4,975 5,018 4,965
EBITDA 184 292 330 363
Depr. & Amort. (126) (112) (115) (113)
EBIT 58 180 215 251
Associates - - - -
Net interest exp. (10) (7) (4) (3)
Other 0 0 0 0
Profit before tax 48 173 211 248
Income tax (10) (40) (59) (69)
Profit after tax 38 133 152 178
Minorities - - - -
Preferred dividends - - - -
Associates & Other 0 0 0 0
Normalised NPAT 38 133 152 178
Unusual item after tax (255) 20 0 0
Net profit (Reported) (216) 153 152 178
Balance Sheet 6/16A 6/17E 6/18E 6/19E
Cash & equivalents 248 283 322 422
Inventories 398 447 452 447
Receivables 398 422 426 422
Other current assets 36 36 36 36
Current assets 1,081 1,189 1,237 1,327
Property, plant & equip. 985 1,044 1,097 1,108
Intangibles 170 170 170 170
Other non-current assets 335 335 335 335
Non-current assets 1,490 1,549 1,602 1,613
Total assets 2,571 2,738 2,839 2,941
Payables 433 468 469 460
Interest bearing debt 6 6 6 6
Other liabilities 299 299 299 299
Total liabilities 738 774 774 766
Net assets 1,833 1,964 2,064 2,175
Ordinary equity 1,833 1,964 2,064 2,175
Minority interests 0 0 0 0
Preferred capital - - - -
Total shareholder funds 1,833 1,964 2,064 2,175
Net Debt (242) (277) (316) (416)
Cash Flow 6/16A 6/17E 6/18E 6/19E
EBIT 58 180 215 251
Net Interest (8) (7) (7) (4)
Depr & Amort 126 112 115 113
Tax Paid (20) (10) (40) (59)
Change in Working capital (18) (38) (8) 1
Other cash and non-cash items (8) 38 8 (1)
Operating cash flow 131 275 282 300
Capex (109) (171) (167) (124)
Capex - expansionary (7) (54) (42) 0
Capex - Maintenance (102) (116) (126) (124)
Acquisitions & Invest 0 0 0 0
Asset sale proceeds 15 56 0 0
Other - - - -
Investing cash flow (96) (115) (167) (124)
Dividends paid (47) (63) (76) (76)
Equity raised (60) (62) 0 0
Net borrowings (5) 0 0 0
Other financing cash in/(outflows) 0 0 0 0
Financing cash flow (112) (125) (76) (76)
Total cash flow (76) 35 39 100
Adjustments 8 0 0 0
Movement in cash/equivalents (68) 35 39 100
Earnings 6/16A 6/17E 6/18E 6/19E
Equiv. FPO (period avg) (mn) 203 198 198 198
EPS (CS adj.) (c) 18.7 67.2 76.8 90.2
EPS growth (%) (62.2) 258.8 14.2 17.4
DPS (c) 22.0 38.3 38.4 45.1
Dividend Payout (%) 117.4 56.9 50.0 50.0
Free CFPS (c) 14.7 80.3 79.2 89.1
Valuation 6/16A 6/17E 6/18E 6/19E
P/E (CS) (x) 73.6 20.5 18.0 15.3
PEG (x) (1.2) 0.1 1.3 0.9
EV/EBIT (x) 42.9 13.6 11.2 9.2
EV/EBITDA (x) 13.5 8.4 7.3 6.4
Dividend Yield (%) 1.6 2.8 2.8 3.3
FCF Yield (%) 1.1 5.8 5.7 6.5
Price to book (x) 1.5 1.4 1.3 1.3
Returns 6/16A 6/17E 6/18E 6/19E
Return on Equity (%) 2.1 6.8 7.4 8.2
Profit Margin (%) 0.8 2.7 3.0 3.6
Asset Turnover (x) 1.8 1.8 1.8 1.7
Equity Multiplier (x) 1.4 1.4 1.4 1.4
Return on Assets (%) 1.5 4.9 5.3 6.1
Return on Invested Cap. (%)
2.9 8.2 8.9 10.3
Gearing 6/16A 6/17E 6/18E 6/19E
ND/ND+E (%) Net Cash
Net Cash
Net Cash
Net Cash Net Debt to EBITDA (x) Net
Cash Net
Cash Net
Cash Net
Cash Int Cover (EBITDA) (x) 19.0 40.4 77.4 126.9
Int Cover (EBIT) (x) 6.0 24.9 50.5 87.5
Capex to Sales (%) 2.3 3.4 3.3 2.5
Capex to Depr (%) 96.0 167.2 159.8 120.1
MSCI IVA Rating AAA
Global Local Country Stock
Environment Social Governance
0
2
4
6
8
GL
C
S
GLC
S
G
LC
S
TP ESG Risk (%): 0.00 TP Risk Comment: No ESG risk factored into our TP, consistent with MSCI 'AAA' rating. MSCI IVA Risk: Neutral MSCI IVA Risk Comment: As SGM is not involved in production of steel or Iron Ore, and is not anticipated too, we expect low risk of a MSCI rating downgrade
Share price performance
On 16-Jun-2017 the S&P ASX 200 Index closed at 5763.19 On 16-Jun-2017 the spot exchange rate was A$1.32/US$1
Source: Company Data, Credit Suisse Estimates, MSCI ESG Research
19 June 2017
Australia and NZ First Edition 39
The Schnitzer read-through conundrum
■ Schnitzer’s MayQ scrap result presents a conundrum, with no clear read-through for
SGM. The positive is that MayQ ferrous tonnes were up a material 12% and materially
higher margin no-ferrous tonnes were up a massive 32%. From a SGM investment
thesis this appears to be a big positive, with an implied big volume increase on a fixed
cost based and a richer margin mix with a higher proportion of high margin non-ferrous.
The logical read through is a significant step up in $/t margin. This was not however the
case for Schnitzer which reported a sequentially flat margin on its FebQ.
■ This is intuitively illogical unless it reflects the traditional challenge of the scrap
industry, that of a buy price that is difficult to control when there is increased
competition for scrap, and this buy-price pressure is now fully offsetting the operating
leverage.
■ If we want to set a positive bias for SGM to back fill earnings to part explain the share
price, we would give SGM the same volume increment as Schnitzer, but also give them
the fixed cost leverage via a higher $/t margin outcome. If we want to be negative, we
would just give then the volume benefit, but no fixed cost leverage.
■ Given SGM’s robust reinforcement of ifs volume leverage story last week, we feel it is
appropriate to give them the full leverage benefit of higher volumes on the fixed cost
based. SGM, after all, had the opportunity to refresh their message last week, but did
not. The volume leverage story was reinforced so we have to assume it remains the
case. However, we have seen this cycle before, where rising volumes are an outcome
of turf battles as scrap aggregators seeking fixed cost leverage by increasing market
share, only to deliver profitless prosperity through no margin expansion.
■ We do note that SGM revised down their cost out achievement since FY13 by $22mn
from $234m at 1H17 to now $212mn. Perhaps Schnitzer’s MayQ is also reflecting a
step increase in the controllable cost base, and this is part of the explanation for their
disappointing lack of operating leverage.
■ We remain cautious of the recent disconnect between scrap and the cost of making pig
iron. Iron ore and coking coal prices have retreated, as expected. Scrap remains
robust. US steel makers are complaining of margin pressure. Perhaps scrap has
indeed peaked and is due to correct. The relationship between scrap prices and
volumes, short term, is established. A weaker scrap price would reduce scrap volumes
and contribute negative operating leverage.
Schnitzer Q3 result continued…
■ Schnitzer’s Q3 (MayQ) ferrous sales volumes are expected to be approximately 12%
higher sequentially and 14% higher compared to the prior year quarter. SGM operate
broadly in the sale East and West coast markets, so should be experiencing the same
trading conditions, but Schnitzer has generally been able to deliver superior margin
than SGM.
■ Schnitzer’s Non-ferrous sales volumes are expected to be approximately 32% higher
both sequentially and compared to the prior year quarter. This would be a favourable
boost to SGM earnings if also achieved.
■ Average ferrous and nonferrous selling prices are expected to approximate second
quarter levels and increase approximately 20% and 12%, respectively, compared to
the prior year quarter.
■ AMR’s third quarter results are expected to include an immaterial impact from average
inventory accounting, which compares to a favorable impact of $4 million and $3 million
in the second quarter and prior year quarter, respectively.
19 June 2017
Australia and NZ First Edition 40
■ In the Steel Manufacturing Business (SMB), operating performance is expected to be
approximately break-even, which would be an improvement of approximately $2 million
sequentially and slightly below prior year operating income of $1 million. Sales volumes
are expected to increase by approximately 33% sequentially and 6% from the prior
year quarter. Average selling prices are expected to increase by approximately 5%
sequentially and 9% from the prior year quarter. During the quarter, improved seasonal
demand positively impacted sequential results, while continued pressure from low-
priced imports limited increases in selling prices in a period of rising raw material costs
which compressed SMB’s operating margins.
■ Schnitzer is breakeven at steel making, reflecting high priced scrap while Chinese steel
makers selling the same products are generating strong earnings because they are not
adversely impacted by elevated scrap prices.
Figure 1: Schnitzer ferrous volumes and EBIT/t margin. Note the 13% increase
MayQ ferrous tonnage on the prior qtr., but no change to operating margin
inferring a lack of operating leverage to higher volumes.
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ton
nes
SCHN recycling tonnes (LHS) vs EBIT/t margin (RHS)
Cash Int Cover (EBITDA) (x) 39.0 53.7 47.0 44.8 Int Cover (EBIT) (x) 12.3 37.6 31.1 28.2 Capex to Sales (%) 9.0 5.2 7.7 7.6 Capex to Depr (%) 71.5 49.2 70.6 64.9
MSCI IVA Rating A
Global Local Country Stock
Environment Social Governance
0
1
2
3
4
5
6
7
GL
C
S
G
LCS G
LC
S
TP ESG Risk (%): 0.00 TP Risk Comment: We do not include an ESG impact in our valuation for South 32. However we note that our 10% WACC compares with 8.5% used for BHP the parent which takes into account, partly, higher risks from its South African operations. Balancing this concern, we note that S32 will inherit many of BHP's operating standards in relation to managing environmental issues, safety, engaging with local communities and host governments which we generally view to be best practice. MSCI IVA Risk: A MSCI IVA Risk Comment: Overall, South32's business profile is more highly exposed to ESG risks compared to BHPB, particularly with regard to labor unrest, safety and corruption issues. As part of the spinoff, South32 inherited BHPB's aluminium, coal, manganese, nickel and silver assets concentrated in South African, South American and Australian geographies.
Share price performance
On 16-Jun-2017 the S&P ASX 200 Index closed at 5774.0 On 16-Jun-2017 the spot exchange rate was A$1.32/US$1
Source: Company Data, Credit Suisse Estimates, MSCI ESG Research
Southern Cross Media Group (SXL.AX / SXL AU) Price (16 Jun 2017): A$1.16; Rating: (from NEUTRAL) OUTPERFORM; Target Price: (from A$1.3) A$1.35; Analyst: Lucas Goode
Income Statement 6/16A 6/17E 6/18E 6/19E
Revenue 642 695 666 677
EBITDA 167 167 158 170
Depr. & Amort. (29) (30) (27) (26)
EBIT 139 136 131 144
Associates - - - -
Net interest exp. (25) (18) (13) (12)
Other 0 0 0 0
Profit before tax 114 118 118 131
Income tax (37) (34) (35) (39)
Profit after tax 77 84 83 92
Minorities -0 -0 -0 -0
Preferred dividends - - - -
Associates & Other 12 1 0 0
Normalised NPAT 89 84 83 92
Unusual item after tax 12 0 0 0
Net profit (Reported) 101 84 83 92
Balance Sheet 6/16A 6/17E 6/18E 6/19E
Cash & equivalents 95 57 5 21
Inventories 0 0 0 0
Receivables 142 152 144 147
Other current assets 0 0 0 0
Current assets 237 210 149 167
Property, plant & equip. 145 131 86 76
Intangibles 1,290 1,298 1,298 1,298
Other non-current assets 16 15 15 16
Non-current assets 1,451 1,445 1,399 1,390
Total assets 1,688 1,654 1,549 1,557
Payables 86 93 88 89
Interest bearing debt 470 410 290 270
Other liabilities 151 141 137 133
Total liabilities 708 644 515 492
Net assets 980 1,010 1,034 1,065
Ordinary equity 1,057 1,087 1,111 1,142
Minority interests 0 0 0 0
Preferred capital - - - -
Total shareholder funds 980 1,010 1,034 1,065
Net Debt 375 353 285 249
Cash Flow 6/16A 6/17E 6/18E 6/19E
EBIT 139 136 131 144
Net Interest (29) (20) (13) (12)
Depr & Amort 29 30 27 26
Tax Paid (33) (40) (35) (39)
Change in Working capital (22) (4) 3 (1)
Other cash and non-cash items 110 (2) (4) (4)
Operating cash flow 193 101 109 113
Capex (23) (28) (26) (26)
Capex - expansionary 0 0 0 0
Capex - Maintenance (23) (28) (26) (26)
Acquisitions & Invest 16 13 45 10
Asset sale proceeds 0 0 0 0
Other - - - -
Investing cash flow (7) (23) 19 (16)
Dividends paid (34) (56) (60) (62)
Equity raised 0 0 0 0
Net borrowings (200) (60) (120) (20)
Other financing cash in/(outflows) (0) (0) 0 0
Financing cash flow (234) (116) (180) (82)
Total cash flow (48) (37) (52) 16
Adjustments 0 0 0 0
Movement in cash/equivalents (48) (37) (52) 16
Earnings 6/16A 6/17E 6/18E 6/19E
Equiv. FPO (period avg) (mn) 765 770 771 771
EPS (CS adj.) (c) 11.6 10.9 10.8 12.0
EPS growth (%) 30.3 (5.8) (1.4) 11.1
DPS (c) 6.8 7.0 7.8 8.3
Dividend Payout (%) 58.1 63.9 71.8 68.8
Free CFPS (c) 22.2 9.5 10.7 11.3
Valuation 6/16A 6/17E 6/18E 6/19E
P/E (CS) (x) 10.0 10.6 10.7 9.7
PEG (x) 0.3 (1.8) (7.7) 0.9
EV/EBIT (x) 9.1 9.1 9.0 7.9
EV/EBITDA (x) 7.6 7.5 7.5 6.7
Dividend Yield (%) 5.8 6.0 6.7 7.1
FCF Yield (%) 19.2 8.2 9.2 9.7
Price to book (x) 0.8 0.8 0.8 0.8
Returns 6/16A 6/17E 6/18E 6/19E
Return on Equity (%) 8.4 7.8 7.5 8.1
Profit Margin (%) 13.8 12.1 12.5 13.6
Asset Turnover (x) 0.4 0.4 0.4 0.4
Equity Multiplier (x) 1.6 1.5 1.4 1.4
Return on Assets (%) 5.3 5.1 5.4 5.9
Return on Invested Cap. (%)
6.9 7.1 7.0 7.7
Gearing 6/16A 6/17E 6/18E 6/19E
ND/ND+E (%) 27.7 25.9 21.6 19.0
Net Debt to EBITDA (x) 2.2 2.1 1.8 1.5
Int Cover (EBITDA) (x) 6.8 9.1 12.1 13.9
Int Cover (EBIT) (x) 5.6 7.4 10.1 11.7
Capex to Sales (%) 3.6 4.1 3.9 3.8
Capex to Depr (%) 80.6 93.6 98.0 100.0
MSCI IVA Rating
Global Local Country
Environment Social Governance
0
2
4
6
8
10G
L C
GL
CG
L
C
TP ESG Risk (%): 0.00 TP Risk Comment: No major ESG risks MSCI IVA Risk: Neutral MSCI IVA Risk Comment: SXL has faced issues over high profile employees in its metro radio division which has resulted in its MSCI rating being downgraded from ‘A’ to ‘BB’. Further issues could impact future ratings or incur legal costs, however we believe that these risks are already incorporated into the current rating.
Share price performance
On 16-Jun-2017 the S&P ASX 200 Index closed at 5763.19 On 16-Jun-2017 the spot exchange rate was A$1.32/US$1
Source: Company Data, Credit Suisse Estimates, MSCI ESG Research
Australia and NZ First Edition 46
19 June 2017
Asia Pacific/New Zealand Equity Research Packaged Foods
The a2 Milk Company
(ATM.NZ / ATM NZ) Rating OUTPERFORM* Price (16-Jun,NZ$) 3.82 Target Price (NZ$) (from 3.92) 4.10 Target price ESG risk (%) Market cap (NZ$mn) 2,777.1 Yr avg. mthly trading (NZ$mn) 109.3 Projected return: Capital gain (%) 7.3 Dividend yield (net %) 0.0 Total return (%) 7.3
Target price is for 12 months.
[V] = Stock Considered Volatile (see Disclosure Appendix)
Source: Company data, Thomson Reuters, Credit Suisse estimates
19 June 2017
Australia and NZ First Edition 52
Metcash (MTS.AX / MTS AU) Price (16 Jun 2017): A$2.18; Rating: OUTPERFORM; Target Price: A$2.54; Analyst: Grant Saligari
Income Statement 4/16A 4/17E 4/18E 4/19E
Revenue 13,541 13,969 14,402 14,386
EBITDA 329 349 381 403
Depr. & Amort. (60) (65) (69) (72)
EBIT 268 283 312 331
Associates - - - -
Net interest exp. (27) (22) (13) (0)
Other 0 0 0 0
Profit before tax 241 261 299 331
Income tax (68) (77) (90) (99)
Profit after tax 173 184 209 231
Minorities (2) (1) -0 -0
Preferred dividends - - - -
Associates & Other 7 7 8 8
Normalised NPAT 178 191 217 239
Unusual item after tax 38 (29) (14) 0
Net profit (Reported) 217 162 203 239
Balance Sheet 4/16A 4/17E 4/18E 4/19E
Cash & equivalents 26 143 250 293
Inventories 674 746 725 724
Receivables 981 1,046 1,043 1,042
Other current assets 43 28 28 28
Current assets 1,724 1,964 2,046 2,087
Property, plant & equip. 252 259 287 318
Intangibles 1,128 1,125 1,125 1,125
Other non-current assets 244 257 264 272
Non-current assets 1,624 1,641 1,677 1,715
Total assets 3,348 3,605 3,723 3,802
Payables 1,357 1,440 1,432 1,429
Interest bearing debt 315 258 258 258
Other liabilities 307 282 262 242
Total liabilities 1,979 1,980 1,952 1,929
Net assets 1,369 1,626 1,771 1,873
Ordinary equity 2,127 1,711 1,856 1,958
Minority interests 8 8 8 8
Preferred capital - - - -
Total shareholder funds 1,369 1,626 1,771 1,873
Net Debt 289 114 7 (36)
Cash Flow 4/16A 4/17E 4/18E 4/19E
EBIT 268 283 312 331
Net Interest (22) (17) (13) (0)
Depr & Amort 60 65 69 72
Tax Paid (64) (80) (90) (99)
Change in Working capital 10 (55) 17 (1)
Other cash and non-cash items (87) 62 (34) (20)
Operating cash flow 166 258 261 282
Capex (65) (49) (97) (102)
Capex - expansionary (23) (20) (50) (50)
Capex - Maintenance (42) (29) (47) (52)
Acquisitions & Invest 42 (126) 0 0
Asset sale proceeds 242 0 0 0
Other - - - -
Investing cash flow 237 (172) (97) (102)
Dividends paid 0 0 (57) (137)
Equity raised 0 93 0 0
Net borrowings (450) (61) 0 0
Other financing cash in/(outflows) (11) (1) 0 0
Financing cash flow (460) 31 (57) (137)
Total cash flow (57) 117 107 43
Adjustments 0 0 0 0
Movement in cash/equivalents (57) 117 107 43
Earnings 4/16A 4/17E 4/18E 4/19E
Equiv. FPO (period avg) (mn) 929 958 976 976
EPS (CS adj.) (c) 19.2 19.9 22.2 24.5
EPS growth (%) 0.3 3.7 11.5 10.5
DPS (c) 0.0 0.0 13.3 14.7
Dividend Payout (%) 0.0 0.0 60.0 60.0
Free CFPS (c) 13.3 23.9 21.9 23.6
Valuation 4/16A 4/17E 4/18E 4/19E
P/E (CS) (x) 11.4 11.0 9.8 8.9
PEG (x) 40.2 3.0 0.9 0.9
EV/EBIT (x) 9.0 7.9 6.8 6.3
EV/EBITDA (x) 7.4 6.4 5.6 5.2
Dividend Yield (%) 0.0 0.0 6.1 6.7
FCF Yield (%) 6.1 10.9 10.1 10.8
Price to book (x) 1.0 1.2 1.1 1.1
Returns 4/16A 4/17E 4/18E 4/19E
Return on Equity (%) 8.4 11.1 11.7 12.2
Profit Margin (%) 1.3 1.4 1.5 1.7
Asset Turnover (x) 4.0 3.9 3.9 3.8
Equity Multiplier (x) 1.6 2.1 2.0 1.9
Return on Assets (%) 5.3 5.3 5.8 6.3
Return on Invested Cap. (%)
11.6 11.5 12.3 12.6
Gearing 4/16A 4/17E 4/18E 4/19E
ND/ND+E (%) 17.4 6.6 0.4 Net Cash Net Debt to EBITDA (x) 0.9 0.3 0.0 Net Cash Int Cover (EBITDA) (x) 12.2 15.8 29.1 899.6
Int Cover (EBIT) (x) 9.9 12.8 23.8 739.3
Capex to Sales (%) 0.5 0.4 0.7 0.7
Capex to Depr (%) 183.9 133.1 247.2 250.3
EBIT Segmentals 04/16A 04/17E 04/18E 04/19E
Food distribution 179.9 172.8 175.4 176.1
% chg (17.0) (4.0) 1.5 0.4
ALM 62.1 65.0 67.4 70.0
% chg 7.8 4.6 3.8 3.8
Hardware and automotive 32.8 48.6 71.6 87.8
% chg 9.0 48.3 47.3 22.6
Corporate (6.5) (3.1) (2.8) (2.9)
% chg (36.9) (53.0) (8.1) 1.9
Total EBIT 268.3 283.3 311.6 331.0
MSCI IVA Rating A
Global Local Country Stock
Environment Social Governance
0
1
2
3
4
5
6
7
8
G
L
C
S
G
L
C
S
G
L
C
S
TP ESG Risk (%): 0.00 TP Risk Comment: We do not explicitly incorporate ESG factors in our target price. MSCI IVA Risk: Neutral MSCI IVA Risk Comment: Metcash has an 'A' rating. MSCI believes that the company has initiatives in place to manage product quality and safety due to certification of its facilities to the HACCP food safety standard. The company lags better performing peers in managing carbon intensity and in the area of nutrition.
Source: Company Data, Credit Suisse Estimates, MSCI ESG Research
Source: Company data, Credit Suisse estimates, Thomson Reuters
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Top 100 Earnings & Dividends (continued) As at 16 June 2017 Ticker Year Rating Share 12M Mkt NPAT PE Relative PE Dividend Dividend Yield EBITDA Multiple F'kg Analyst
to Price Tgt Cap 2017 2018 2019 2017 2018 2019 2017 2018 2019 2017 2018 2019 2017 2018 2019 2017 2018 2019 2017 2018 2019 2018 Name
$ $ $m $m $m $m ¢ ¢ ¢ x x x % % % ¢ ¢ ¢ % % % x x x %
Source: Company data, Credit Suisse estimates, Thomson Reuters
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Top 100 Earnings & Dividends (continued) As at 16 June 2017 Ticker Year Rating Share 12M Mkt NPAT PE Relative PE Dividend Dividend Yield EBITDA Multiple F'kg Analyst
to Price Tgt Cap 2017 2018 2019 2017 2018 2019 2017 2018 2019 2017 2018 2019 2017 2018 2019 2017 2018 2019 2017 2018 2019 2018 Name
$ $ $m $m $m $m ¢ ¢ ¢ x x x % % % ¢ ¢ ¢ % % % x x x %
Source: Company data, Credit Suisse estimates, Thomson Reuters
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Emerging Companies Earnings and Dividends (continued) As at 16 June 2017 Ticker Year Rating Share 12M Mkt NPAT PE Relative PE Dividend Dividend Yield EBITDA Multiple F'kg Analyst
to Price Tgt Cap 2017 2018 2019 2017 2018 2019 2017 2018 2019 2017 2018 2019 2017 2018 2019 2017 2018 2019 2017 2018 2019 2018 Name
$ $ $m $m $m $m ¢ ¢ ¢ x x x % % % ¢ ¢ ¢ % % % x x x %
Source: Company data, Credit Suisse estimates, Thomson Reuters
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Emerging Companies Earnings and Dividends (continued) As at 16 June 2017 Ticker Year Rating Share 12M Mkt NPAT PE Relative PE Dividend Dividend Yield EBITDA Multiple F'kg Analyst
to Price Tgt Cap 2017 2018 2019 2017 2018 2019 2017 2018 2019 2017 2018 2019 2017 2018 2019 2017 2018 2019 2017 2018 2019 2018 Name
$ $ $m $m $m $m ¢ ¢ ¢ x x x % % % ¢ ¢ ¢ % % % x x x %
Small Companies (4) 16.9 14.8 13.5 14.9 14.0 13.2 1.1 1.0 0.9 22 14 10 3.0 3.9 4.2 12.9 10.3 8.7 9.2 7.6 6.4 na na
Small Industrials 18.4 16.8 15.5 16.5 15.6 14.4 1.2 1.1 1.0 2 10 8 3.5 4.0 4.4 14.1 12.5 11.4 10.6 9.5 8.7 na na
Small Resources 12.8 10.0 8.8 7.9 10.1 8.3 0.8 0.7 0.6 163 28 14 1.1 3.3 3.6 9.7 6.1 4.5 5.9 4.1 3.1 na na
(1) Includes all companies covered by Credit Suisse analysts (3) No weighting applicable
(2) All sectors are based on S&P/ASX200.Companies on restricted list are not included in aggregates (4) Emerging companies are all companies covered by Credit Suisse excluding top 100 stocks.
Source: Company data, Credit Suisse Estimates, Thomson Reuters
Sector Weight PE (1)
Median PE (1)(3)
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Interest rates Economic forecasts
US Current 2017Q2 2017Q3 2017Q4 2018Q1 US 2017Q2 2017Q3 2017Q4 2018Q1 2017 2018
2yr 1.36 1.45 1.65 1.75 GDP QoQ% ann 3.1 2.3 2.4 2.3
Economics AUSTRALIA New Motor Vehicle Sales MoM (May) (Prev 0.30%) New Motor Vehicle Sales YoY (May) (Prev 0.10%) UNITED STATES Chicago Fed President Charles Evans Speaks at NYU (with Q&A) NEW ZEALAND Westpac Consumer Confidence (2Q) (Prev 111.9) Performance Services Index (May) (Prev 52.8) CHINA China May Property Prices
Site Tours Amcor USA analyst tour
Results Sydney Airport May sales and revenue release, traffic results
Economics AUSTRALIA ANZ Roy Morgan Weekly Consumer Confidence Index (Jun-18) (Prev 112.9) House Price Index QoQ (1Q) (Mkt 2.70%, Prev 4.10%) House Price Index YoY (1Q) (Mkt 8.90%, Prev 7.70%) RBA June Rate Meeting Minutes NEW ZEALAND ANZ Consumer Confidence Index (Jun) (Prev 123.9) ANZ Consumer Confidence MoM (Jun) (Prev 1.80%) CHINA Conference Board China May Leading Economic Index
Economics AUSTRALIA Westpac Leading Index MoM (May) (Prev -0.12%) Skilled Vacancies MoM (May) (Prev 0.10%) UNITED STATES Existing Home Sales Level SAAR (May) (CS 5.50M, Mkt 5.55M, Prev 5.57M) Existing Home Sales MoM (May) (CS -1.30%, Mkt -0.40%, Prev -2.30%)
Site Tours Amcor USA analyst tour
AGM CSR Northside Conference Centre, cnr Oxley Street and Pole Lane, Crows Nest, NSW, 11:00am
Ex Div (div¢@fkg% pay date) TIL 4.2661 0 30-Jun-17
Economics UNITED STATES Initial Jobless Claims (Week Ending June 17) (Prev 237K) Kansas City Fed Manufacturing Index (Jun) (Prev 8) NEW ZEALAND RBNZ Official Cash Rate (Jun-22) (Mkt 1.75%, Prev 1.75%) Net Migration SA (May) (Prev 5780) Credit Card Spending MoM (May) (Prev 0.90%) Credit Card Spending YoY (May) (Prev 6.40%)
Site Tours Amcor USA analyst tour
Economics UNITED STATES New Home Sales Level SAAR/MoM% (May) (CS 590K / 3.7%, Mkt 598K / 5.0%, Prev 569K / -11.4%) Cleveland Fed President Loretta Mester Speaks
ASX code changes over the past week (PNO) PharmaNet Group to (CAI) Calidus Resources (HGG) Henderson Group PLC to (JHG) Janus Henderson Group PLC
Market estimates are preliminary and subject to change. Information correct as at 15 June 2017. NZ company comment and valuation provided by First NZ Capital. Source: ASX, Bloomberg, IRESS, Reuters and Credit Suisse estimates
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Companies Mentioned (Price as of 16-Jun-2017)
Air France-KLM (AIRF.PA, €10.97) Air New Zealand (AIR.NZ, NZ$3.19) ^ American Airlines Group Inc. (AAL.OQ, $49.11) BHP Billiton (BLT.L, 1160.0p) Cathay Pacific (0293.HK, HK$12.38) China Biologic Products, Inc. (CBPO.OQ, $109.02) China Southern (1055.HK, HK$6.29) China Southern (600029.SS, Rmb8.89) Delta Air Lines, Inc. (DAL.N, $51.56) Genesee & Wyoming, Inc. (GWR.N, $66.94) Glencore (GLEN.L, 283.05p) Hualan Biological Engineering Inc. (002007.SZ, Rmb35.71) IAG (ICAG.MC, €6.698) JetBlue Airways Corporation (JBLU.OQ, $23.03) Lufthansa (LHAG.F, €18.556) POSCO (005490.KS, W272,000) Schnitzer Steel (SCHN.OQ, $18.9) South 32 (S32.L, 156.75p, OUTPERFORM[V], TP 180.0p) Southwest Airlines Co. (LUV.N, $60.11) The a2 Milk Company Limited (ATM.NZ, NZ$3.82, OUTPERFORM[V], TP NZ$4.1) ^ ^ Denotes a First NZ Capital covered company
For details of Australian companies covered by Credit Suisse refer to the Top 100 and Emerging Companies earnings & dividends sheets.
Disclosure Appendix
Important Global Disclosures
The analysts identified in this report each certify, with respect to the companies or securities that the individual analyzes, that (1) the views
expressed in this report accurately reflect his or her personal views about all of the subject companies and securities and (2) no part of his or her
compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report.
The analyst(s) responsible for preparing this research report received Compensation that is based upon various factors including Credit Suisse's total
revenues, a portion of which are generated by Credit Suisse's investment banking activities
As of December 10, 2012 Analysts’ stock rating are defined as follows: Outperform (O) : The stock’s total return is expected to outperform the relevant benchmark*over the next 12 months.
Neutral (N) : The stock’s total return is expected to be in line with the relevant benchmark* over the next 12 months.
Underperform (U) : The stock’s total return is expected to underperform the relevant benchmark* over the next 12 months.
*Relevant benchmark by region: As of 10th December 2012, Japanese ratings are based on a stock’s total return relative to the analyst's coverage uni verse which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most att ractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. As of 2nd October 2012, U.S. and Canadian as well as European ra tings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. For Latin Ame rican and non-Japan Asia stocks, ratings are based on a stock’s total return relative to the average total return of the relevant country or regional benchmark; prior to 2nd October 2012 U.S. and Canadian ratings were based on (1) a stock’s absolute total return potential to its current share price and (2) the relative attractiveness of a stock’s total return potential within an analyst’s coverage universe. For Australian and New Zealand stocks, the expected total return (ETR) calculation includes 1 2-month rolling dividend yield. An Outperform rating is assigned where an ETR is greater than or equal to 7.5%; Underperform where an ETR less than or equal to 5%. A Neutral may be assigned where the ETR is between -5% and 15%. The overlapping rating range allows analysts to assign a rating that puts ETR in the context of associated risks. Prior to 18 May 2015, ETR ranges for Outperform and Underperform ratings did not overlap with Neutral thresholds between 15% and 7.5%, wh ich was in operation from 7 July 2011.
Restricted (R) : In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications, including
an investment recommendation, during the course of Credit Suisse's engagement in an investment banking transaction and in certain other circumstances.
Volatility Indicator [V] : A stock is defined as volatile if the stock price has moved up or down by 20% or more in a month in at least 8 of the past 24
months or the analyst expects significant volatility going forward.
Analysts’ sector weightings are distinct from analysts’ stock ratings and are based on the analyst’s expectations for the fundamentals and/or
valuation of the sector* relative to the group’s historic fundamentals and/or valuation:
Overweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is favorable over the next 12 months.
Market Weight : The analyst’s expectation for the sector’s fundamentals and/or valuation is neutral over the next 12 months.
Underweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is cautious over the next 12 months.
*An analyst’s coverage sector consists of all companies covered by the analyst within the relevant sector. An analyst may cover multiple sectors.
19 June 2017
Australia and NZ First Edition 67
Credit Suisse's distribution of stock ratings (and banking clients) is:
Global Ratings Distribution
Rating Versus universe (%) Of which banking clients (%) Outperform/Buy* 44% (65% banking clients) Neutral/Hold* 40% (61% banking clients) Underperform/Sell* 14% (53% banking clients) Restricted 2% *For purposes of the NYSE and NASD ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, an d Underperform most closely correspond to Buy, Hold, and Sell, respectively; however, the meanings are not the same, as our stock ratings are determined on a relative basis. (Please refer to definitions above.) An investor's decision to buy or sell a security should be based on investment objectives, current holdin gs, and other individual factors.
Credit Suisse’s policy is to update research reports as it deems appropriate, based on developments with the subject company, the sector or the market that may have a material impact on the research views or opinions stated herein.
Credit Suisse's policy is only to publish investment research that is impartial, independent, clear, fair and not misleading. For more detail please refer to Credit Suisse's Policies for Managing Conflicts of Interest in connection with Investment Research: http://www.csfb.com/research-and-analytics/disclaimer/managing_conflicts_disclaimer.html
Credit Suisse does not provide any tax advice. Any statement herein regarding any US federal tax is not intended or written to be used, and cannot be used, by any taxpayer for the purposes of avoiding any penalties.
For other important disclosures concerning companies featured in this report, including price charts, please visit the website at https://rave.credit-suisse.com/disclosures or call +1 (877) 291-2683.
For a history of recommendations for the subject company(ies) featured in this report, disseminated within the past 12 months, please refer to https://rave.credit-suisse.com/disclosures/view/report?i=42348&v=-50txlrtp0uzijzbtahf61rjee .
Important Regional Disclosures
Singapore recipients should contact Credit Suisse AG, Singapore Branch for any matters arising from this research report.
Restrictions on certain Canadian securities are indicated by the following abbreviations: NVS--Non-Voting shares; RVS--Restricted Voting Shares; SVS--Subordinate Voting Shares.
Individuals receiving this report from a Canadian investment dealer that is not affiliated with Credit Suisse should be advised that this report may not contain regulatory disclosures the non-affiliated Canadian investment dealer would be required to make if this were its own report.
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As of the date of this report, Credit Suisse acts as a market maker or liquidity provider in the equities securities that are the subject of this report.
Principal is not guaranteed in the case of equities because equity prices are variable.
Commission is the commission rate or the amount agreed with a customer when setting up an account or at any time after that.
Credit Suisse has entered into a strategic partnership with First NZ Capital ("FNZC"). Pursuant to this agreement, Credit Suisse makes available to
its clients certain research produced by FNZC. Credit Suisse is not responsible for the content of such research and provides such research for
informational purposes only.
To the extent this is a report authored in whole or in part by a non-U.S. analyst and is made available in the U.S., the following are important
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NASD Rule 2711 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a
research analyst account.
Important MSCI Disclosures
The MSCI sourced information is the exclusive property of Morgan Stanley Capital International Inc. (MSCI). Without prior written permission of
MSCI, this information and any other MSCI intellectual property may not be reproduced, re-disseminated or used to create and financial products,
including any indices. This information is provided on an "as is" basis. The user assumes the entire risk of any use made of this information. MSCI,
its affiliates and any third party involved in, or related to, computing or compiling the information hereby expressly disclaim all warranties of
originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any of this information. Without limiting any of
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The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor’s. GICS is a service mark of MSCI and S&P and has been licensed for use by Credit Suisse.
For Credit Suisse disclosure information on other companies mentioned in this report, please visit the website at https://rave.credit-suisse.com/disclosures or call +1 (877) 291-2683.
Emerging Companies Research Paul Buys 612 8205 4538 Matthew Nicholas 612 8205 4210 Andrew Dodds 612 8205 4610 Specialist Sales Jonas Fitzgerald 612 8205 4326
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