Please refer to page 17 for important disclosures and analyst certification, or on our website www.macquarie.com/research/disclosures . AUSTRALIA TPM AU Outperform Price (at 08:19, 16 Sep 2015 GMT) A$9.70 Valuation A$ 9.53 - DCF (WACC 8.3%, beta 1.2, ERP 5.0%, RFR 3.8%, TGR 3.0%) 12-month target A$ 10.40 12-month TSR % +8.9 Volatility Index Medium GICS sector Telecommunication Services Market cap A$m 7,925 30-day avg turnover A$m 14.4 Number shares on issue m 817.0 Investment fundamentals Year end 31 Jul 2014A 2015E 2016E 2017E Revenue m 969.2 1,245.3 2,076.8 2,247.3 EBIT m 256.9 331.2 537.9 627.1 Reported profit m 171.7 222.8 278.5 388.3 Adjusted profit m 191.6 244.8 331.6 392.8 Gross cashflow m 271.9 364.2 520.0 585.1 CFPS ¢ 34.3 45.9 63.8 71.6 CFPS growth % 26.3 33.9 39.1 12.3 PGCFPS x 28.3 21.1 15.2 13.5 PGCFPS rel x 3.60 2.47 1.89 1.86 EPS adj ¢ 24.1 30.8 40.7 48.1 EPS adj growth % 35.5 27.7 31.9 18.2 PER adj x 40.2 31.5 23.8 20.2 PER rel x 2.85 2.11 1.68 1.60 Total DPS ¢ 9.3 11.8 16.3 19.2 Total div yield % 1.0 1.2 1.7 2.0 Franking % 100 100 100 100 ROA % 20.5 20.9 20.5 17.4 ROE % 24.8 27.0 27.9 25.9 EV/EBITDA x 21.9 16.6 11.1 9.9 Net debt/equity % 38.8 29.1 113.6 80.5 P/BV x 9.3 7.9 5.7 4.8 TPM AU vs ASX 100, & rec history 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, September 2015 (all figures in AUD unless noted) 17 September 2015 Macquarie Securities (Australia) Limited TPG Telecom Bigger is better Event Following a period of research restrictions, we resume coverage of TPG Telecom with an Outperform recommendation and $10.40/sh target price. Impact Well positioned infrastructure player: TPG has extensive fixed line infrastructure assets serving customers in both the Consumer and Corporate/Wholesale markets. This provides TPG with a strong growth platform and allows it to drive operational leverage from new customers. Coupled with its ongoing focus on operational cost efficiencies and scale gained from the iiNet acquisition, we believe TPG is positioned to hold a sustainable cost advantage and price differentiated product in an increasingly competitive fixed line environment as the NBN rolls out. Significant synergies from iiNet transaction: We forecast $70m in synergies over 3 yrs from a combination of network and general operating expenses. Further cost savings could be achieved from cuts to the iiNet brand and customer service offering, however we only see this as making sense if broadband products become commoditised in an NBN world, in which case iiNet’s differentiated market position would no longer be justified. Scope for upside from ACCC Fixed Line pricing review: Incremental to this, TPG is well positioned should the ACCC lower regulated access pricing for copper services, as flagged in its recent draft paper. Assuming a 9.6% cut to pricing, consistent with the draft paper, we would see ~5.1% upside to our FY16E EPS (10 months’ impact) and 3.4% to FY17E EPS assuming 25% and 50% pass-through to customers respectively in those periods. Resuming coverage with an Outperform and target price of $10.40/sh: Our target price of $10.40/sh is based on our DCF analysis and implies an adjusted FY16 PER of 25x. While this does imply a premium to telco and ASX100 peers on an earnings capitalisation approach, we see this as reflecting TPG’s strong growth prospects and cash conversion, further upside potential to earnings and valuation from the ACCC pricing review, scope for synergies to exceed the $70m we have forecast, and potential for future M&A. Downside risks predominantly relate to increased competition, greater than expected margin contraction as the NBN rolls out, and iiNet integration risks. Earnings and target price revision Underlying EPS changes are: FY15 +0.2%; FY16 +15.4%; FY17 +23.9% which incorporates the acquisition of iiNet and general modelling adjustments. Also, we have moved the amortisation of acquired customer bases to be an adjusting item. We expect the iiNet acquisition will create a significant amortisation entry that will distort future earnings and multiples if incorporated. Including the removal of customer bases and brand name amortisation from adj earnings, EPS changes are: FY15 +10.1%; FY16 +19.5%; FY17 +25.4%. Price catalyst 12-month price target: A$10.40 based on a DCF methodology. Catalyst: FY15 result (22 September). Fixed line FAD (end of September). Action and recommendation We resume coverage with an Outperform recommendation and $10.40/sh target price.
18
Embed
TPG Telecom - Macquarie · We resume coverage on TPG Telecom with an Outperform recommendation and a $10.40/sh target price. TPG is a cost-efficient and scaled fixed line telecoms
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
Please refer to page 17 for important disclosures and analyst certification, or on our website
PER adj x 40.2 31.5 23.8 20.2 PER rel x 2.85 2.11 1.68 1.60 Total DPS ¢ 9.3 11.8 16.3 19.2 Total div yield % 1.0 1.2 1.7 2.0 Franking % 100 100 100 100
Source: Company data, Macquarie Research, September 2015
Assessing the iiNet opportunity
Strategic rationale
TPG’s acquisition of iiNet entrenches it as a clear number two player in the Consumer broadband
segment with a 26% subscriber market share. Increased scale will bring both operational and
network cost efficiencies. Arguably, as we enter an NBN world and fixed line products are
increasingly commoditised, the acquisition will allow TPG to maintain a sustainable cost
advantage over its competitors. This in turn provides flexibility to offer competitively priced
products, while also protecting margin.
From a geographic perspective, the acquisition provides TPG with a stronger presence in the
Perth and Adelaide markets, as well as enhancing its East coast market share.
The acquisition does appear to settle the fixed line competitive dynamic in Australia, with the
ACCC unlikely to permit further consolidation between the five scale players that remain.
Looking at the broader telecommunications space in Australia, the acquisition of iiNet places TPG
as the third most profitable telco – behind Telstra and Optus, and on a pro-forma basis slightly
ahead of Vodafone.
Macquarie Wealth Management TPG Telecom
17 September 2015 4
Fig 2 Broadband subscriber market share
Fig 3 EBITDA by operator
Source: Company data, Macquarie Research, September 2015
FY16 EBITDA estimates unless otherwise stated. *Telstra Domestic EBITDA only (ex PSAA payments). **12m to June 2015 as Macq does not forecast Vodafone earnings. ***Vocus pro-forma FY15 EBITDA (includes Amcom contribution). Source: Company data, Macquarie Research, September 2015
In addition to its Consumer offering, TPG also has an extensive Corporate division that will be
boosted, albeit to a lesser extent than Consumer, by this acquisition. iiNet had grown its business
revenues to $204m or 20% of total revenues in FY14.
Finally, TPG has also acquired iiNet’s mobile customer base. Combined, the Group would now
have around 500k MVNO subscribers on the Optus network. At this scale, it makes TPG the 5th
largest mobile player in Australia (behind Telstra, Optus, Vodafone and amaysim) with a ~1.5%
subscriber share.
Financial implications
We have upgraded our underlying FY16 and FY17 EPS forecasts (excluding customer base and
brand name amortisation) by 15.4% and 23.9% respectively. This reflects the direct impact of the
mostly cash-funded acquisition as well as the achievement of $70m in synergies by FY18.
TPG has significant scale within the industry, although its profitability is still dwarfed by that of
Telstra and Optus. We see capex peaking in coming years at $217m, which incorporates IRU
payments committed by both TPG and iiNet, with underlying capex requirements of the business
at ~$110m.
Longer-term, we see compression in Consumer Broadband profit margins as the NBN rolls out
and margins come under pressure across the industry. Longer-term growth prospects for TPG’s
corporate fibre and wholesale businesses look robust as it leverages extensive network assets
and a largely fixed cost base to deliver aggressively priced products.
Assessing synergy potential at ~$70m within 3-years
TPG has not quantified the potential synergies from the iiNet acquisition. We have estimated the
level of opex synergies to be ~$70m coming from a combination of network savings, scale
efficiencies and reduced duplication. We expect TPG can realise the bulk of these synergies
within 3 years, although some savings will take longer due to complexity (IT/systems integration)
or due to contractual obligations (network savings).
This does assume some savings in customer service related costs at iiNet (iiNet currently has call
centres in Cape Town, Perth, Sydney and Auckland), but assumes that customer service for iiNet
continues to be operated separately to the core TPG customer service platform over the medium
term, and that the iiNet brand is maintained, as stated by TPG management.
Telstra45.3%
TPG26.0%
Optus15.4%
M27.4%
Others5.9%
9,685
2,760
742 709244 100 28
0
2,000
4,000
6,000
8,000
10,000
TLS* Optus TPM Voda** MTU VOC*** NXT
A$m
Macquarie Wealth Management TPG Telecom
17 September 2015 5
Fig 4 Macq estimates of IIN synergies (cumulative)
Fig 5 Breakdown of iiNet costs (FY15)
Source: Company data, Macquarie Research, September 2015
Source: Company data, Macquarie Research, September 2015
At a more granular level, the iiNet scheme documents highlight potential savings across the
TPG subscribers in FY16 are based on an average of FY15 and FY16 estimates. iiNet subscribers in FY16 are based on closing numbers of FY15 and assume no change during FY16. Source: Macquarie Research, September 2015
Ultimately, the NBN rollout will reduce the number of regulated copper access lines significantly
over the coming years as these access products are removed in favour of the NBN products. This
dynamic means that the benefit to TPG is diluted over time as the NBN rollout gathers pace.
A key component of any analysis is the assumption of pass-through of any savings to retail
customers. The numbers above highlight the gross opex savings and hence assumes there is no
pass through. In the short term, we would see this as a likely outcome, but note that ongoing
competitive dynamics in the fixed line markets point to ongoing pressure on ARPUs, some of
which might be accelerated by this competition.
Macquarie Wealth Management TPG Telecom
17 September 2015 10
Strong cash flow to reduce debt burden in coming years
TPG is a highly cash generative business. Like many of its peers, it releases working capital as it
grows, leading to cash conversion rates in excess of 100%.
Fig 11 TPM cash conversion has typically exceeded 100% due to favourable working capital dynamics
Note: *TPM and MTU have been adjusted to exclude customer base amortisation. **NXT multiples have been excluded from FY16 calculations as they are outliers. Prices at 15 September 2015. ^M2, NextDC covered by Michael Higgins; Speedcast covered by Andrew Wackett. Source: Factset, Macquarie Research, September 2015
Similarly, looking at TPG from a PER view against ASX100 industrial peer companies, it looks fully
priced. However, given the factors above we believe the stock can sustain a premium should it
continue to deliver strong growth prospects, and given a number of stock-specific factors (iiNet
synergy potential, ACCC decision) could deliver higher than expected growth.
Fig 18 ASX100 (ex Banks, Resources): PER (FY1) vs EPS CAGR (FY1-3)
Note: Sample also excludes SKI as PER (FY1) was an outlier. TPG data excludes PPA amortisation. Data at market close on 15 September 2015. Source: Macquarie Research, September 2015
TPG
(10%)
0%
10%
20%
30%
40%
0x 10x 20x 30x 40x 50x 60x 70x 80x
EPS CAGR (FY1-3)
PER (FY1)
Macquarie Wealth Management TPG Telecom
17 September 2015 13
Fig 19 Zooming in - Subset of ASX100 (ex Banks, Resources): PER (FY1) vs EPS CAGR (FY1-3)
Note: Sample also excludes SKI as PER (FY1) was an outlier. TPG data excludes PPA amortisation. Data at market close on 15 September 2015. Source: Macquarie Research, September 2015
TPG Corporate history
TPG was founded in 1986 as a computer retailer. Almost 30 years on, it has a market
capitalisation of over $7.5bn and is the second largest fixed line telecoms operator in Australia.
Fig 20 TPG Telecom corporate history
Date Event Price paid (Multiple)
Notes
1986 TPG founded as Total Peripherals Group by David Teoh
n/a Founded as a computer retailer and later transitioned to internet and telephone services.
April 2007 TPG acquired 70.25% stake in Chariot Limited (ISP)
$4.5m Acquired Adelaide-based ISP.
April 2008 TPG completes reverse takeover of SP Telemedia
$230m (4.7x FY08 EV/EBITDA and 8.5x FY08 PER)
Combined TPG's 200k subscribers with SP's 500k subscribers (included key corporate and government customers). Created one of Australia's largest DSLAM networks (TPG added 238). Also combined TPG's and SP's backhaul. SP had over 320 network access points and data collection centres in 66 call collection areas, as well as advanced IP carrier backbone.
August 2008 Acquired remaining 29.75% of Chariot Limited (ISP)
$2.7m Took full ownership of Chariot.
December 2009 SP Telemedia renamed TPG Telecom Limited
n/a Followed reverse takeover
March 2010
Acquisition of PIPE Networks (Domestic and International transmission)
$373m (10.1x FY10 EBITDA)
Acquired a large fibre network through Sydney, Melbourne and Brisbane, access to 500+ buildings, 200+ Telstra exchanges and 75+ major data centres, a diversified customer base, international capacity and submarine cable (PPC-1).
August 2011 Acquisition of IntraPower (Trusted Cloud Platform)
$13m (39x FY10 PER)
Provides secure "IT-as-a-service" and enabled on-demand network access to a shared pool of computing resources, accessible from any location.
February 2014 Acquisition of AAPT (Corporate/Wholesale)
$450m (6.4x EV/EBITDA pre synergies)
Incorporated AAPT's intercapital fibre network into TPG's CBD, metro and international network assets. AAPT added 11,000km of fibre across six states/territories, fibre access to over 50% of NBN POIs and 1,500 commercial buildings, 15 data centres and coverage to over 950k metro businesses.
August 2015 Acquisition of iiNet (Consumer Broadband and Fixed Voice)
$1.9bn (~10x CY14 EV/EBITDA)
Increased fixed broadband share from 12% to 26%. Increased scale, geographical diversification (iiNet brought West coast customers) and expanded corporate division (iiNet brought large SME base)
Source: Macquarie Research, September 2015
REAGNC
MFG
CSL
JHX
TWE
BXB
REC COH
RMD
HSO
RHC
SEK
TPG
CAR
MPL
AIO
WFD
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
18x 20x 22x 24x 26x 28x
EPS CAGR (FY1-3)
PER (FY1)
Macquarie Wealth Management TPG Telecom
17 September 2015 14
Fig 21 Available NBN plans (download/upload speed of 12/1 mbps)
Fig 22 Available NBN plans (download/upload speed of 25/5 mbps)
Note: Available 24 month NBN plans (bundled with home phone line) as at 16 Sep 2015. Most plans include unlimited local and national calls (except for Dodo plans, which are PAYG). Some phone inclusions vary across operators. Any one-off or set up fees have been amortised over 24 months and are included in the monthly cost. Source: Company data, Macquarie Research, September 2015
Note: Available 24 month NBN plans (bundled with home phone line) as at 16 Sep 2015. Most plans include unlimited local and national calls (except for Dodo plans, which are PAYG). Some phone inclusions vary across operators. Any one-off or set up fees have been amortised over 24 months and are included in the monthly cost. Source: Company data, Macquarie Research, September 2015
Fig 23 Available NBN plans (download/upload speed of 100/40 mbps)
Note: Available 24 month NBN plans (bundled with home phone line) as at 16 Sep 2015. Most plans include unlimited local and national calls (except for Dodo plans, which are PAYG). Some phone inclusions vary across operators. Any one-off or set up fees have been amortised over 24 months and are included in the monthly cost. Source: Company data, Macquarie Research, September 2015
$30
$40
$50
$60
$70
$80
$90
$100
0 200 400 600 800 1,000 1,200
Monthly cost
TPG iiNet Dodo
Unltd
Monthly data (GB)
$40
$60
$80
$100
$120
$140
$160
0 500 1,000 1,500 2,000 2,500
Monthly cost
Optus TPG iiNet Dodo Telstra
Unltd
Monthly data (GB)
$60
$80
$100
$120
$140
0 500 1,000 1,500 2,000 2,500
Monthly cost
Optus TPG iiNet Dodo
Unltd
Monthly data (GB)
Macquarie Wealth Management TPG Telecom
17 September 2015 15
Source: Company data, Macquarie Research, September 2015
TPG Telecom (TPM) $9.70Interim 1H15 2H15e 1H16e 2H16e Full year FY14 FY15e FY16e FY17e
EV $m 7,984.9 Shaereholder Equity $m 832.4 980.4 1,392.6 1,637.1
Macquarie Wealth Management TPG Telecom
17 September 2015 16
Macquarie Quant View
The quant model currently holds a strong positive view on TPG Telecom.
The strongest style exposure is Price Momentum, indicating this stock has
had strong medium to long term returns which often persist into the future.
The weakest style exposure is Valuations, indicating this stock is over-
priced in the market relative to its peers.
Displays where the
company’s ranked based on
the fundamental consensus
Price Target and
Macquarie’s Quantitative
Alpha model.
Two rankings: Local market
(Australia & NZ) and Global
sector (Telecommunication
Services)
17/170 Global rank in
Telecommunication Services
% of BUY recommendations 33% (3/9)
Number of Price Target downgrades 1
Number of Price Target upgrades 4
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])
Dividend Return Multiple Return Earnings Outlook 1Yr Total Return
-30%
-29%
-24%
-24%
23%
24%
29%
33%
-40% -20% 0% 20% 40%
⇐ Negatives Positives ⇒
SAL Growth 5yr Historic
Capex Growth
Change in PPE FY0
Asset Growth
Dividend Cover
PE Growth FY1
Net Buybacks to Mkt Cap
Profit Margin Last Actual…
0 1
Technicals & TradingRisk
LiquidityCapital & Funding
QualityPrice Momentum
Earnings MomentumProfitability
Growth
ValuationAlpha Model Score
-0.65-0.04
-1.29-0.06
0.18 1.22
0.07 0.58 0.16
-0.28 1.19
0 1
Normalized
Score
0 50 100
Percentile relative
to sector(/170)
0 50 100
Percentile relative
to market(/411)
Macquarie Wealth Management TPG Telecom
17 September 2015 17
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 First South - 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 2015
AU/NZ Asia RSA USA CA EUR
Outperform 46.23% 58.36% 47.27% 44.20% 60.65% 43.01% (for US coverage by MCUSA, 9.68% of stocks followed are investment banking clients)
Neutral 37.67% 25.65% 29.09% 49.29% 34.19% 40.93% (for US coverage by MCUSA, 5.53% of stocks followed are investment banking clients)
Underperform 16.10% 15.99% 23.64% 6.52% 5.16% 16.06% (for US coverage by MCUSA, 1.38% of stocks followed are investment banking clients)
TPM AU vs ASX 100, & rec history
(all figures in AUD 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, September 2015
12-month target price methodology
TPM AU: A$10.40 based on a DCF methodology
Company-specific disclosures: TPM AU: MACQUARIE CAPITAL (AUSTRALIA) LIMITED or one of its affiliates has provided TPG Telecom Ltd with investment advisory services in the past 12 months, for which it received compensation. Important disclosure information regarding the subject companies covered in this report is available at www.macquarie.com/disclosures.
Date Stock Code (BBG code) Recommendation Target Price 23-Sep-2014 TPM AU Outperform A$7.60 26-Mar-2014 TPM AU Outperform A$7.00 18-Sep-2013 TPM AU Neutral A$4.00 19-Mar-2013 TPM AU Outperform A$2.70 18-Sep-2012 TPM AU Outperform A$2.15
Target price risk disclosures: TPM AU: 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: The views expressed in this research reflect the personal views of the analyst(s) about the subject securities or issuers and no part of the compensation of the analyst(s) was, is, or will be directly or indirectly related to the inclusion of specific recommendations or views in this research. The analyst principally responsible for the preparation of this research receives compensation based on overall revenues of Macquarie Group Ltd (ABN 94 122 169 279, AFSL No. 318062) (“MGL”) and its related entities (the “Macquarie Group”) and has taken reasonable care to achieve and maintain independence and objectivity in making any recommendations. General disclosure: This research has been issued by Macquarie Securities (Australia) Limited (ABN 58 002 832 126, AFSL No. 238947) a Participant of the Australian Securities Exchange (ASX) and Chi-X Australia Pty Limited. This research is distributed in Australia by Macquarie Equities Limited
Macquarie Wealth Management TPG Telecom
17 September 2015 18
(ABN 41 002 574 923, AFSL No. 237504) ("MEL"), a Participant of the ASX, and in New Zealand by Macquarie Equities New Zealand Limited (“MENZ”) an NZX Firm. Macquarie Private Wealth’s services in New Zealand are provided by MENZ. Macquarie Bank Limited (ABN 46 008 583 542, AFSL No. 237502) (“MBL”) is a company incorporated in Australia and authorised under the Banking Act 1959 (Australia) to conduct banking business in Australia. None of MBL, MGL or MENZ is registered as a bank in New Zealand by the Reserve Bank of New Zealand under the Reserve Bank of New Zealand Act 1989. Any MGL subsidiary noted in this research, apart from MBL, is not an authorised deposit-taking institution for the purposes of the Banking Act 1959 (Australia) and that subsidiary’s obligations do not represent deposits or other liabilities of MBL. MBL does not guarantee or otherwise provide assurance in respect of the obligations of that subsidiary, unless noted otherwise. This research is general advice and does not take account of your objectives, financial situation or needs. Before acting on this general advice, you should consider the appropriateness of the advice having regard to your situation. We recommend you obtain financial, legal and taxation advice before making any financial investment decision. This research has been prepared for the use of the clients of the Macquarie Group and must not be copied, either in whole or in part, or distributed to any other person. If you are not the intended recipient, you must not use or disclose this research in any way. If you received it in error, please tell us immediately by return e-mail and delete the document. We do not guarantee the integrity of any e-mails or attached files and are not responsible for any changes made to them by any other person. Nothing in this research shall be construed as a solicitation to buy or sell any security or product, or to engage in or refrain from engaging in any transaction. This research is based on information obtained from sources believed to be reliable, but the Macquarie Group does not make any representation or warranty that it is accurate, complete or up to date. We accept no obligation to correct or update the information or opinions in it. Opinions expressed are subject to change without notice. The Macquarie Group accepts no liability whatsoever for any direct, indirect, consequential or other loss arising from any use of this research and/or further communication in relation to this research. The Macquarie Group produces a variety of research products, recommendations contained in one type of research product may differ from recommendations contained in other types of research. The Macquarie Group has established and implemented a conflicts policy at group level, which may be revised and updated from time to time, pursuant to regulatory requirements; which sets out how we must seek to identify and manage all material conflicts of interest. The Macquarie Group, its officers and employees may have conflicting roles in the financial products referred to in this research and, as such, may effect transactions which are not consistent with the recommendations (if any) in this research. The Macquarie Group may receive fees, brokerage or commissions for acting in those capacities and the reader should assume that this is the case. The Macquarie Group‘s employees or officers may provide oral or written opinions to its clients which are contrary to the opinions expressed in this research. Important disclosure information regarding the subject companies covered in this report is available at www.macquarie.com/disclosures.