Please refer to page 13 for important disclosures and analyst certification, or on our website www.macquarie.com/research/disclosures . HONG KONG 2883 HK Neutral Price (at 07:59, 22 Jul 2016 GMT) HK$6.13 Valuation HK$ 3.70-9.10 - Residual Income (Bear-Bull) 12-month target HK$ 5.60 12-month TSR % -7.7 Volatility Index High GICS sector Energy Market cap HK$m 27,554 Market cap US$m 3,553 30-day avg turnover US$m 8.8 Number shares on issue m 4,495 Investment fundamentals Year end 31 Dec 2015A 2016E 2017E 2018E Revenue m 23,417 17,663 18,837 20,043 EBITDA m 5,845 -4680 3,608 4,451 EBITDA growth % -52.1 nmf nmf 23.4 Adjusted profit m 2,098 -2143 -1091 -193 EPS adj Rmb 0.44 -0.45 -0.23 -0.04 EPS adj growth % -72.2 nmf 49.1 82.3 PER adj x 12.0 nmf nmf nmf Total div yield % 1.3 0.9 0.9 0.9 ROA % 1.8 -10.6 -0.9 0.3 ROE % 4.5 -5.6 -3.7 -0.7 EV/EBITDA x 8.0 -10.5 12.9 10.5 Net debt/equity % 48.5 101.3 110.9 108.6 P/BV x 0.5 0.8 0.9 0.9 Source: FactSet, Macquarie Research, July 2016 (all figures in Rmb unless noted, TP in HKD) Macquarie versus Consensus MacQ Cons. % diff Target Price (HK$) 5.6 5.7 -2% Upside/(downside) -9% -6% -2 pp Target 2017 EV-EBITDA 15.3x 9.9x 55% 2017E EBITDA (Rmb, bn) 3.6 5.6 -36% 2017E EPS (Rmb) -0.23 0.14 nmf 2017E DPS (Rmb) 0.05 0.05 -5% 2016-18E Dividend Yield 0.9% 1.1% -20 bps 2016-18E FCF Yield 0.5% 1.2% -72 bps 2016-18E ND/E 107% 67% 40 pp Source: FactSet, Macquarie Research, July 2016 (all figures in Rmb unless noted, TP in HKD Analyst(s) Aditya Suresh, CFA +852 3922 1265 [email protected]25 July 2016 Macquarie Capital Limited China Oilfield Services Fundamentally challenged On the sidelines... despite a bullish oil price view At Macquarie we think spot oil prices need to structurally rise by 60% to US$75 per barrel long term. COSL’s share price has historically been highly correlated to oil prices and the company is less vulnerable to balance sheet stress. However we opt to remain on the sidelines as the significant earnings downside risk for COSL–regardless of what the oil price does–dominates our thinking. See companion Global sector note ‘Defensive oil optionality’. Global offshore rig markets materially oversupplied and rig rates will remain under pressure While COSL was relatively insulated to global rig-rate dynamics in the past, it is now facing increasing pressure from CNOOC to lower rates. With current market rates for jack-ups and semi-subs 35%-55% below what COSL earns (fig 10-11), we see ongoing downside risk. Further about 65% of COSL’s fleet needs to be re-marketed in 2H16/2017. With significant excess capacity in global offshore rig markets (fig 12-13), we expect the current muted day-rate environment to persist in 2017/18 with risks skewed to the downside, even in a rising oil price environment. Material consensus downgrades ahead COSL’s domestic revenue has traditionally been highly correlated to sister company CNOOC’s capex (R 2 93% 2002-15). CNOOC has earmarked its China capex to fall 16% in 2016, while COSL’s key overseas client Statoil has already cancelled two key contracts. We model COSL’s revenue to fall 25% y/y in 2016. This then translates to a more meaningful c.60% decline in clean EBITDA and a loss at the EBIT line. Even assuming a rising CNOOC capex profile, our 2016- 18E base-bear clean EBITDA forecast for COSL is 40-60% below consensus. The Bull Case—CNOOC capex could rise materially CNOOC’s proven reserve life of 8 years is low versus global peers. In a bull case scenario CNOOC targets maintaining its reserve life at current levels and if we assume US$25/boe finding & development cost then the implied annual capex for CNOOC would be 65% above 2016 levels (math outline in fig 5), and in turn equate to 40% upside to COSL’s revenue and our valuation. We would be buyers of COSL if we had visibility on this outcome. COSL Bull-Bear Risk Reward Outlook Source: Macquarie Research, July 2016 3.7 5.6 9.1 0.0 2.5 5.0 7.5 10.0 HK$/sh Current share price
15
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Please refer to page 13 for important disclosures and analyst certification, or on our website
www.macquarie.com/research/disclosures.
HONG KONG
2883 HK Neutral
Price (at 07:59, 22 Jul 2016 GMT) HK$6.13
Valuation HK$ 3.70-9.10 - Residual Income (Bear-Bull)
12-month target HK$ 5.60
12-month TSR % -7.7
Volatility Index High
GICS sector Energy
Market cap HK$m 27,554
Market cap US$m 3,553
30-day avg turnover US$m 8.8
Number shares on issue m 4,495
Investment fundamentals Year end 31 Dec 2015A 2016E 2017E 2018E
Revenue m 23,417 17,663 18,837 20,043 EBITDA m 5,845 -4680 3,608 4,451
EBITDA growth % -52.1 nmf nmf 23.4 Adjusted profit m 2,098 -2143 -1091 -193 EPS adj Rmb 0.44 -0.45 -0.23 -0.04 EPS adj growth % -72.2 nmf 49.1 82.3 PER adj x 12.0 nmf nmf nmf Total div yield % 1.3 0.9 0.9 0.9 ROA % 1.8 -10.6 -0.9 0.3 ROE % 4.5 -5.6 -3.7 -0.7 EV/EBITDA x 8.0 -10.5 12.9 10.5 Net debt/equity % 48.5 101.3 110.9 108.6 P/BV x 0.5 0.8 0.9 0.9
China Oilfield Services Fundamentally challenged On the sidelines... despite a bullish oil price view
At Macquarie we think spot oil prices need to structurally rise by 60% to US$75
per barrel long term. COSL’s share price has historically been highly correlated
to oil prices and the company is less vulnerable to balance sheet stress.
However we opt to remain on the sidelines as the significant earnings downside
risk for COSL–regardless of what the oil price does–dominates our thinking. See
companion Global sector note ‘Defensive oil optionality’.
Global offshore rig markets materially oversupplied and rig rates will remain under pressure
While COSL was relatively insulated to global rig-rate dynamics in the past, it is
now facing increasing pressure from CNOOC to lower rates. With current market
rates for jack-ups and semi-subs 35%-55% below what COSL earns (fig 10-11),
we see ongoing downside risk. Further about 65% of COSL’s fleet needs to be
re-marketed in 2H16/2017. With significant excess capacity in global offshore rig
markets (fig 12-13), we expect the current muted day-rate environment to persist
in 2017/18 with risks skewed to the downside, even in a rising oil price
environment.
Material consensus downgrades ahead
COSL’s domestic revenue has traditionally been highly correlated to sister
company CNOOC’s capex (R2 93% 2002-15). CNOOC has earmarked its China
capex to fall 16% in 2016, while COSL’s key overseas client Statoil has already
cancelled two key contracts. We model COSL’s revenue to fall 25% y/y in 2016.
This then translates to a more meaningful c.60% decline in clean EBITDA and a
loss at the EBIT line. Even assuming a rising CNOOC capex profile, our 2016-
18E base-bear clean EBITDA forecast for COSL is 40-60% below consensus.
The Bull Case—CNOOC capex could rise materially
CNOOC’s proven reserve life of 8 years is low versus global peers. In a bull case
scenario CNOOC targets maintaining its reserve life at current levels and if we
assume US$25/boe finding & development cost then the implied annual capex
for CNOOC would be 65% above 2016 levels (math outline in fig 5), and in turn
equate to 40% upside to COSL’s revenue and our valuation. We would be
buyers of COSL if we had visibility on this outcome.
COSL Bull-Bear Risk Reward Outlook
Source: Macquarie Research, July 2016
3.75.6
9.1
0.0
2.5
5.0
7.5
10.0 HK$/sh
Current share price
Macquarie Research China Oilfield Services
25 July 2016 2
Bull-Bear Outlook
Fig 1 COSL Bull-Bear Outlook: Significant downside risk to dayrates and utilization... unless CNOOC significantly expands capex to maintain its proven reserve life
Source: Macquarie Research, July 2016
Base Case HK$5.60, 8% TSR downside
Our HK$5.60 one-year price target for COSL is based on a residual income valuation at a
8.2% discount rate, and implies 12x 2018E EV-EBITDA. Key base case assumptions include:
Brent oil price assumption 2016/17/18/long-term: US$44/61/68/74 per barrel.
In our view global jack-up and semi-sub day-rates will likely remain under pressure for the
next few years even if oil rebounds, due to the oversupplied nature of offshore rig markets.
We model COSL’s jack-up dayrates to decline 30% y/y in 2016 to US$65K/day (global
average today c.US$50K/day) and semi-sub rates to fall a more significant 50% to
US$150K/day (global average today c.US$120K/day). With offshore rig markets set to
remain oversupplied over the next few years, we assume no rate recovery for 2017/18.
We assume 2016/17/18E CNOOC China capex of Rmb32/35/38 billion.
We expect the traditionally strong relationship between CNOOC’s China capex and
COSL’s China revenue (R2 93% since 2002) to be maintained—in our modelling this
shows up via an improving jack-up fleet utilization rate outlook. However the outlook for
COSL’s semi-subs working overseas (mainly Statoil) will likely remain challenged. The net
result is that we expect 2016 revenue to fall 25% y/y and only recover a modest 7% pa in
2017/18. Our 2016-18e revenue forecast is 7% below consensus.
Our 2016-18E clean EBITDA forecasts are a more material 40% below consensus, due to
lower assumed drilling margins, in line with the trend in global offshore drilling margins.
At the net income line, our modelling implies COSL reports its first annual loss in 2016 and
turns profitable again only in 2018E.
We have factored COSL’s Rmb7.1 billion impairment announced on 24-July. Albeit our
residual income valuation for COSL is largely un-impacted by impairments.
Bull Case HK$9.10, 45% upside
If CNOOC materially expands capex to address its relative low proven reserve life and
COSL’s drilling margins normalize, then we note 45% upside in our bull case valuation.
$30/bbl forever? HK$3.70 Bear Case, 40% downside
COSL’s fundamental earnings headwinds would be exacerbated in a falling oil price
environment and the shares will underperform all three of its Chinese SOE oilco sisters.
3.75.6
9.1
0.0
2.5
5.0
7.5
10.0 HK$/sh
Current share price
HK$5.60 one-year
price target; Neutral
Recommendation
Bull case rests on a
material pick up in
CNOOC capex
Macquarie Research China Oilfield Services
25 July 2016 3
The Bull Case—default proof oil gearing 1. Oil is rising and so will COSL
Perhaps. At Macquarie we think the current Brent forward curve is US$15 per barrel too low.
COSL’s share price has historically experienced a strong technical correlation with oil prices.
COSL shares are already down c.75% from the start of 2014, underperforming its large cap
Chinese oilco sisters (CNOOC, PetroChina, Sinopec) by an average 50%. In a rising oil price
environment COSL shares could therefore outperform as all the negatives are likely already
in the price. While we see merit in this view, we are less convinced in today’s environment—
see the pushback section on page 5-6.
Fig 2 Brent Crude Price: Macquarie c.$15 per barrel above the forward curve
Fig 3 COSL has a strong technical correlation with oil price
Source: Macquarie Research, July 2016 Source: Datastream, Macquarie Research, July 2016
2. CNOOC capex could materially rise
Agree. CNOOC’s proven reserve life (1P reserves/production) at end-2015 was 8.4 years,
low by global standards (fig 4). CNOOC’s finding & development (F&D) cost has increased an
average 9% pa over the past decade to US$34.0/boe in 2015; 10-year average US$25.8/boe.
In a scenario CNOOC targets maintaining its reserve life at current levels and assuming
US$25/boe F&D (close to the 10Y average) then as we show in fig 5 below the upside to
consensus CNOOC capex is a material 65%. In turn this would imply about 40% upside to
consensus revenue, assuming: (a) CNOOC spends half of its capex budget in China, and (b)
COSL maintains its c.40% market share of CNOOC China capex.
Fig 4 Proven Reserve Life (Reserves/Production): CNOOC’s 1P life is low relative to peers
Fig 5 COSL bull case... potential significant uplift in CNOOC capex due to a relatively low reserve life
Source: Company data, Macquarie Research, July 2016 Source: Company data, Macquarie Research, July 2016
$40
$45
$50
$55
$60
$65
$70
$75
3Q16E 1Q17E 3Q17E 1Q18E 3Q18E
Brent Forecast versus Consensus and Forward curve
Brent forecast
Consensus
Forward Curve
0
25
50
75
100
125
150
0
5
10
15
20
25
30
US$/bblHK$/sh COSL vs. Brent Oil Price
COSL share price Brent Oil Price - rhs
0 5 10 15 20
Rosneft
Exxon
PetroChina
BP
Total
Occidental
Conoco
Chevron
Repsol
Petrobras
ENI
Shell
CNOOC
Statoil
Sinopec
years1P Oil & Gas Reserve Life CNOOC Proven Reserves, 2015 (mn boe) 4,023
2016-18 Total Production (mn boe) -1,457
2016-18 Reserve Addition Needed (mn boe) 1,642
CNOOC Proven Reserves, 2018 (mn boe) 4,208
2018E Production (mn boe) 495
Reserve Life R/P Target, 2018 (years) 8.5
F&D cost US$/boe 25.0
2016-18E Total CNOOC capex (US$, billion) 41.0
....2016 Capex Guidance (US$, billion) 9.1
...2017-18E CNOOC capex (US$, billion) 31.9
2017-18E Avg. CNOOC capex (Rmb, billion) 107.0
% Upside vs. Consensus 65%
COSL shares are
geared to oil prices
CNOOC capex to
rise... and COSL to
benefit
Macquarie Research China Oilfield Services
25 July 2016 4
3. Multiples could expand... regardless of fundamentals
Perhaps. Post GFC, COSL’s one-year forward EV-EBITDA multiple has ranged between
7.5x (2014 peak EBITDA) and 15x (2010 oil price recovery towards $100 and expectations of
EBITDA growth). Today COSL trades on 12.9x/10.5x 2017/18E EV-EBITDA. If there was a
clear path to an earnings recovery for COSL we would have been willing to target a 15x
multiple due to our rising oil price expectation. As things stand however, in our view COSL’s
fundamentals are set to deteriorate and we note that COSL would be trading on a lofty
20x/18x 2017/18E EV-EBITDA under our bear assumptions. We are therefore reluctant to
stray away from our residual income valuation which implies limited upside from here.
China Oilfield Services 2883 HK 7,010 N 11.3 6.1 5.6 -8% 0.6% 12.9 x 10.5 x nmf 0.9 x 53% -4% -1%
OFFSHORE DRILLERS 0.2% 9.3 x 10.5 x 21.4 x 0.3 x 35% -1% 8%Helmerich & Payne HP US 7,193 UP 114.1 66.58 40.00 -40% 4.2% 18.2 x 12.7 x na 1.8 x net cash -3% 0%
Transocean RIG US 4,415 NR 173.7 12.09 NR NR 0.0% 10.0 x 10.9 x na 0.3 x 29% -2% 2%
Diamond Offshore Drilling DO US 3,336 NR 53.8 24.32 NR NR 0.0% 7.1 x 8.3 x 25.7 x 0.8 x 34% 3% 13%
Ensco International ESV US 2,959 NR 90.0 9.82 NR NR 0.4% 6.6 x 10.2 x 17.9 x 0.4 x 41% 2% 10%
Nabors NBR US 2,687 NR 78.5 9.53 NR NR 2.5% 8.9 x 6.2 x 1.5 x 0.8 x 44% -9% 6%
Rowan Companies RDC US 2,189 NR 57.4 17.45 NR NR 0.0% 6.2 x 10.0 x nmf 0.4 x 32% 1% 13%
Noble Corp. NE US 1,992 NR 89.5 8.19 NR NR 2.6% 10.0 x 10.9 x na 0.3 x 35% -3% 9%
Seadrill SDRL US 1,607 NR 44.3 3.16 NR NR 0.0% 9.7 x 11.8 x 21.4 x 0.2 x 49% 1% 3%
Atwood Oceanics ATW US 789 N 48.6 12.17 9.00 -26% 2.3% 9.6 x 13.6 x 1.5 x 0.2 x 35% -2% -1%
ASIA OFFSHORE MARINE 1.3% 8.9 x 8.0 x 10.1 x 0.6 x 53% 3% 12%Sapura Kencana SAKP MK 2,112 NR 8.7 1.42 NR NR 1.9% 11.3 x 11.2 x 16.3 x 0.7 x 57% 3% 13%
Bumi Armada BAB MK 1,092 OP 5.4 0.75 1.06 +41% 1.3% 8.9 x 7.7 x 10.1 x 0.6 x 47% 6% 16%
Ezion EZI SP 590 OP 3.8 0.39 0.65 +69% 0.0% 7.2 x 5.9 x 4.9 x 0.4 x 53% 8% 12%
UMW O&G UMWOG MK 488 UP 0.3 0.91 0.55 -40% 0.0% 28.6 x 21.9 x na 0.7 x 47% -4% 4%
Aban Offshore ABAN IN 194 NR 7.0 223.35 nmf NR 1.6% 8.2 x 8.0 x na 0.2 x 69% 2% nmf
OFFSHORE SUPPORT VESSELS, LIFTBOATS 7.0% 8.0 x 6.0 x 45.7 x 0.3 x 37% -4% 4%Seacor CKH US 965 NR 7.2 55.74 NR NR na 6.0 x 6.0 x 89.2 x 0.5 x 23% na 12%
Bourbon SA GBB FP 889 NR 0.7 10.58 NR NR 9.5% 8.0 x 4.2 x na 0.7 x 47% -5% 5%
Hornbeck HOS US 303 NR 9.0 8.38 NR NR 0.0% 14.5 x 10.5 x na 0.2 x 36% -4% -6%
Tidewater TDW US 221 NR 11.2 4.70 NR NR 12.4% 14.9 x 14.3 x na 0.1 x 37% -7% 3%
Gulf Marine GMS LN 154 NR 16.9 33.50 NR NR 4.5% 3.0 x 3.1 x 2.3 x 0.3 x 48% 16% na
CHINA ONSHORE OILFIELD SERVICES 0.1% 11.1 x 9.0 x 27.0 x 0.8 x 36% 4% -2%Sinopec OFS 1033 HK 7,830 NR 1.2 1.48 3.42 +131% 0.0% 15.3 x 12.2 x nmf 0.8 x 33% 0% 3%
Jereh 002353 CH 2,746 N 69.4 19.15 17.00 -11% 0.2% 25.9 x 19.5 x 48.5 x 2.2 x net cash 5% -2%
Hilong 1623 HK 186 OP 0.4 0.85 2.00 +135% 2.2% 4.7 x 3.9 x 5.6 x 0.4 x 36% 7% -5%
Anton 3337 HK 226 OP 0.5 0.79 1.30 +65% 0.0% 6.8 x 5.8 x na 0.8 x 50% 3% -2%
RIG BUILDERS, SHIPYARDS 2.5% 11.7 x 9.4 x 11.6 x 0.8 x 39% 8% 12%Mitsubishi HI 7011 JP 14,764 N 69.3 465.80 430.00 -8% 2.5% 5.1 x 4.6 x 11.6 x 0.8 x 27% 8% 4%
Keppel Corp KEP SP 7,458 NR 21.2 5.58 nmf NR 4.6% 11.7 x 11.3 x 8.8 x 0.8 x 34% 9% 7%
Hyundai Heavy Industries 009540 KS 7,091 OP 21.3 106,500 130,000 +22% 0.9% 8.2 x 7.3 x 10.0 x 0.5 x 39% 5% 15%
Sembcorp Marine SMM SP 2,354 NR 5.1 1.53 nmf NR 2.7% 12.8 x 12.6 x 14.9 x 1.2 x 51% 8% 12%
Samsung Heavy Industries 010140 KS 2,144 UP 15.1 10,600 5,000 -53% 2.2% 12.4 x 9.4 x 21.0 x 0.5 x 40% 3% 19%
EV/EBITDA
(consensus)
Macquarie Research China Oilfield Services
25 July 2016 11
Fig 23 COSL Financial Summary
Source: Company data, Macquarie Research, July 2016
Shareholder Equity 46,829 30,179 28,850 28,418 Equity Value (HK$/sh) 5.6
HK$5.60One-Year Price Target:
Macquarie Research China Oilfield Services
25 July 2016 12
Macquarie Quant View
The quant model currently holds a strong negative view on China Oilfield
Services. The strongest style exposure is Valuations, indicating this stock
is under-priced in the market relative to its peers. The weakest style
exposure is Earnings Momentum, indicating this stock has received
earnings downgrades and is not well liked by sell side analysts.
Displays where the
company’s ranked based on
the fundamental consensus
Price Target and
Macquarie’s Quantitative
Alpha model.
Two rankings: Local market
(Hong Kong) and Global
sector (Energy)
347/550 Global rank in
Energy
% of BUY recommendations 27% (4/15)
Number of Price Target downgrades 0
Number of Price Target upgrades 5
Macquarie Alpha Model ranking Factors driving the Alpha Model
A list of comparable companies and their Macquarie Alpha model score
(higher is better).
For the comparable firms this chart shows the key underlying styles and their contribution
to the current overall Alpha score.
Macquarie Earnings Sentiment Indicator Drivers of Stock Return
The Macquarie Sentiment Indicator is an enhanced earnings revisions
signal that favours analysts who have more timely and higher conviction
revisions. Current score shown below.
Breakdown of 1 year total return (local currency) into returns from dividends, changes
in forward earnings estimates and the resulting change in earnings multiple.
What drove this Company in the last 5 years How it looks on the Alpha model
Which factor score has had the greatest correlation with the company’s
returns over the last 5 years.
A more granular view of the underlying style scores that drive the alpha (higher is
better) and the percentile rank relative to the sector and market.
Source (all charts): FactSet, Thomson Reuters, and Macquarie Research. For more details on the Macquarie Alpha model or for more customised analysis and
screens, please contact the Macquarie Global Quantitative/Custom Products Group ([email protected])
Fu
nd
am
en
tals
Quant
Local market rank Global sector rank
Attractive
-2.1
-1.4
-1.3
-1.3
-1.1
-0.8
-0.5
-3.0 -2.0 -1.0 0.0 1.0 2.0 3.0
Ensco International
Nabors Industries
Diamond Offshore Drilling…
Transocean
China Oilfield Services
Seadrill
Helmerich & Payne
-100% -80% -60% -40% -20% 0% 20% 40% 60% 80% 100%
Ensco International
Nabors Industries
Diamond Offshore Drilling…
Transocean
China Oilfield Services
Seadrill
Helmerich & Payne
Valuations Growth Profitability Earnings
Momentum
Price
Momentum
Quality
-0.9
0.3
0.5
0.2
-1.2
-0.1
-0.2
-3.0 -2.0 -1.0 0.0 1.0 2.0 3.0
Ensco International
Nabors Industries
Diamond Offshore Drilling…
Transocean
China Oilfield Services
Seadrill
Helmerich & Payne
-100% -50% 0% 50% 100%
Ensco International
Nabors Industries
Diamond Offshore Drilling…
Transocean
China Oilfield Services
Seadrill
Helmerich & Payne
Dividend Return Multiple Return Earnings Outlook 1Yr Total Return
-33%
-28%
-27%
-25%
22%
24%
50%
58%
-60% -40% -20% 0% 20% 40% 60%
⇐ Negatives Positives ⇒
Turnover (USD) 250 Day
Turnover(USD) 125 Day
ROIC 12m Fwd
Turnover (USD) 20 Day
Price to Earnings FY1
EV/EBITDA FY0
Net Buybacks to Mkt Cap
Sales to EV FY0
0 1
Technicals & TradingRisk
LiquidityCapital & Funding
QualityPrice Momentum
Earnings MomentumProfitability
Growth
ValuationAlpha Model Score
0.57-0.78
-1.62 0.08
NaN-0.65
-0.85NaN-0.50
-0.19-1.07
0 1
Normalized
Score
0 50 100
Percentile relative
to sector(/550)
0 50 100
Percentile relative
to market(/717)
Macquarie Research China Oilfield Services
25 July 2016 13
Important disclosures:
Recommendation definitions
Macquarie - Australia/New Zealand Outperform – return >3% in excess of benchmark return Neutral – return within 3% of benchmark return Underperform – return >3% below benchmark return Benchmark return is determined by long term nominal GDP growth plus 12 month forward market dividend yield
Macquarie – South Africa Outperform – expected return >+10% Neutral – expected return from -10% to +10% Underperform – expected return <-10%
Macquarie - Canada Outperform – return >5% in excess of benchmark return Neutral – return within 5% of benchmark return Underperform – return >5% below benchmark return
Macquarie - USA Outperform (Buy) – return >5% in excess of Russell 3000 index return
Neutral (Hold) – return within 5% of Russell 3000 index return Underperform (Sell)– return >5% below Russell 3000 index return
Volatility index definition*
This is calculated from the volatility of historical price movements. Very high–highest risk – Stock should be expected to move up or down 60–100% in a year – investors should be aware this stock is highly speculative. High – stock should be expected to move up or down at least 40–60% in a year – investors should be aware this stock could be speculative. Medium – stock should be expected to move up or down at least 30–40% in a year. Low–medium – stock should be expected to move up or down at least 25–30% in a year. Low – stock should be expected to move up or down at least 15–25% in a year. * Applicable to Asia/Australian/NZ/Canada stocks only
Recommendations – 12 months Note: Quant recommendations may differ from
Fundamental Analyst recommendations
Financial definitions
All "Adjusted" data items have had the following adjustments made: Added back: goodwill amortisation, provision for catastrophe reserves, IFRS derivatives & hedging, IFRS impairments & IFRS interest expense Excluded: non recurring items, asset revals, property revals, appraisal value uplift, preference dividends & minority interests EPS = adjusted net profit / efpowa* ROA = adjusted ebit / average total assets ROA Banks/Insurance = adjusted net profit /average total assets ROE = adjusted net profit / average shareholders funds Gross cashflow = adjusted net profit + depreciation *equivalent fully paid ordinary weighted average number of shares All Reported numbers for Australian/NZ listed stocks are modelled under IFRS (International Financial Reporting Standards).
Recommendation proportions – For quarter ending 30 June 2016
AU/NZ Asia RSA USA CA EUR Outperform 45.17% 56.00% 36.36% 43.16% 63.39% 45.91% (for global coverage by Macquarie, 6.27% of stocks followed are investment banking clients)
Neutral 36.21% 28.59% 40.26% 50.38% 29.46% 36.96% (for global coverage by Macquarie, 6.33% of stocks followed are investment banking clients)
Underperform 18.62% 15.41% 23.38% 6.46% 7.14% 17.12% (for global coverage by Macquarie, 5.38% of stocks followed are investment banking clients)
2883 HK vs HSI, & rec history
(all figures in HKD currency unless noted)
Note: Recommendation timeline – if not a continuous line, then there was no Macquarie coverage at the time or there was an embargo period.
Source: FactSet, Macquarie Research, July 2016
12-month target price methodology
2883 HK: HK$5.60 based on a Residual Income methodology
Company-specific disclosures: 2883 HK: Macquarie Capital Limited makes a market in the securities of China Oilfield Services Ltd. Important disclosure information regarding the subject companies covered in this report is available at www.macquarie.com/research/disclosures.
Date Stock Code (BBG code) Recommendation Target Price 07-Mar-2016 2883 HK Underperform HK$5.50 15-Dec-2015 2883 HK Neutral HK$6.60 28-Aug-2015 2883 HK Outperform HK$11.00 01-Apr-2015 2883 HK Underperform HK$8.50 11-Dec-2014 2883 HK Underperform HK$11.00 31-Oct-2014 2883 HK Underperform HK$13.50 27-Aug-2014 2883 HK Outperform HK$26.00 08-Jan-2014 2883 HK Underperform HK$18.00 29-Oct-2013 2883 HK Neutral HK$19.50 20-Aug-2013 2883 HK Neutral HK$18.00
Target price risk disclosures: 2883 HK: Any inability to compete successfully in their markets may harm the business. This could be a result of many factors which may include geographic mix and introduction of improved products or service offerings by competitors. The results of operations may be materially affected by global economic conditions generally, including conditions in financial markets. The company is exposed to market risks, such as changes in interest rates, foreign exchange rates and input prices. From time to time, the company will enter into transactions, including transactions in derivative instruments, to manage certain of these exposures.
Analyst certification: We hereby certify that all of the views expressed in this report accurately reflect our personal views about the subject company or companies and its or their securities. We also certify that no part of our compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report. The Analysts responsible for preparing this report receive compensation from Macquarie that is based upon various factors including Macquarie Group Ltd total revenues, a portion of which are generated by Macquarie Group’s Investment Banking activities. General disclaimers: Macquarie Securities (Australia) Ltd; Macquarie Capital (Europe) Ltd; Macquarie Capital Markets Canada Ltd; Macquarie Capital Markets North America Ltd; Macquarie Capital (USA) Inc; Macquarie Capital Limited and Macquarie Capital Limited, Taiwan Securities Branch; Macquarie Capital Securities
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Asia Sales Regional Heads of Sales
Miki Edelman (Global) (1 212) 231 6121
Jeff Evans (Boston) (1 617) 598 2508
Jeffrey Shiu (China, Hong Kong) (852) 3922 2061
Sandeep Bhatia (India) (9122) 6720 4101
Thomas Renz (Geneva) (41 22) 818 7712
Riaz Hyder (Indonesia) (6221) 2598 8486
Nick Cant (Japan) (65) 6601 0210
John Jay Lee (Korea) (822) 3705 9988
Nik Hadi (Malaysia) (603) 2059 8888
Eric Roles (New York) (1 212) 231 2559
Gino C Rojas (Philippines) (632) 857 0861
Regional Heads of Sales cont’d
Paul Colaco (San Francisco) (1 415) 762 5003
Amelia Mehta (Singapore) (65) 6601 0211
Angus Kent (Thailand) (662) 694 7601
Ben Musgrave (UK/Europe) (44 20) 3037 4882
Christina Lee (UK/Europe) (44 20) 3037 4873
Sales Trading
Adam Zaki (Asia) (852) 3922 2002
Stanley Dunda (Indonesia) (6221) 515 1555
Sales Trading cont’d
Suhaida Samsudin (Malaysia) (603) 2059 8888
Michael Santos (Philippines) (632) 857 0813
Chris Reale (New York) (1 212) 231 2555
Marc Rosa (New York) (1 212) 231 2555
Justin Morrison (Singapore) (65) 6601 0288
Daniel Clarke (Taiwan) (8862) 2734 7580
Brendan Rake (Thailand) (662) 694 7707
Mike Keen (UK/Europe) (44 20) 3037 4905
This publication was disseminated on 25 July 2016 at 08:03 UTC.