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, 17 February 2014

COMPANIES & SECTORS

AHE Automotive Holdings Group NEUTRAL 13 Auto solid, cold storage needs to warm up

FBU Fletcher Building NEUTRAL 19 .NZ Earnings recovery - not if but when

HNZ Heartland New Zealand NEUTRAL 31 .NZ Diversifying its book and earnings

JHX James Hardie Industries SE OUTPERFORM 35 Positive volume and price momentum

MHI Michael Hill International OUTPERFORM 39 .NZ 1H14 result – steady as she goes

NCM Newcrest Mining UNDERPERFORM 44 1H FY14 result spot on. Debt up on working

capital and FX

PRU Perseus Mining UNDERPERFORM 61 Low key 1H14 result, but a loss

RIO Rio Tinto OUTPERFORM 66 Strong result, conservative guidance

SGM Sims Metal Management UNDERPERFORM 77 Australia drives a better 1H; challenging outlook

keeps management cautious

TPI Transpacific Industries Group NEUTRAL 96 Shifting gears...

VHP Vital Healthcare Property Trust NEUTRAL 99 .NZ Strong result - driven by one-off impacts

WDC Westfield OUTPERFORM 106 Light at the end of the tunnel

RESULT PREVIEW

Australian Utilities Sector 118 1H14 results: Margin outlook and weather

PNA PanAust OUTPERFORM 133 CY13 result preview: Key numbers known;

reports on 20 Feb

POT Port of Tauranga UNDERPERFORM 135 .NZ 1H14 result preview; reports on 20 Feb

STU Steel & Tube Holdings UNDERPERFORM 137 .NZ 1H14 result preview; reports on 20 Feb

STRATEGY & ECONOMICS

Australian ESG/SRI - AGM series 139 GNC: 50% of the LTI opportunity converted to

STI plan for FY14

NZ House Prices 151 REINZ House Prices (Jan) – Further easing in

the rate of house price growth

DISCLOSURE APPENDIX CONTAINS ANALYST CERTIFICATIONS AND THE STATUS OF NON-US ANALYSTS. FOR OTHER IMPORTANT DISCLOSURES, visit www.credit-suisse.com/ researchdisclosures or call +1 (877) 291-2683. U.S. 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

Results, Australand 17 Feb

Results, Ansell 17 Feb

Results, APN News & Media 17 Feb

Results, Aurizon 17 Feb

UPCOMING CONFERENCES

2014 HOLT Conference 2014 – London

25 Feb

2014 5th Annual DC Defense Conference – Washington

25 Feb

For more scheduled conferences refer to page 2

TABLES

Credit Suisse Ratings – Australia 154

Top 100 Earnings & Dividends 157

Small Caps Earnings & Dividends 160

Sector Aggregates 163

Weekly Market Calendar 164

Reporting Season Calendar 167

First NZ Capital Results Preview 172

March 24-28, Hong Kong

Australia and NZ First Edition 2

Australia & NZ Market Reports

Australia Index +/- %Day %Wk %Mth %YrRol

All Ordinaries 5366.9 48.2 0.9% 3.5% 2.1% 6.1% S&P/ASX 50 5522.8 44.8 0.8% 3.6% 2.1% 7.5% S&P/ASX 200 5356.3 48.2 0.9% 3.7% 2.1% 6.3% Financials 5834.9 44.2 0.8% 4.3% 1.1% 11.3% REITs 1016.3 6.7 0.7% 3.0% 1.2% 0.3% Industrials 3937.0 32.8 0.8% 3.2% 2.1% 0.9% Materials 10458.0 102.0 1.0% 4.4% 6.4% -6.9% Cons. Discreet 1806.8 20.1 1.1% 2.9% 0.5% 19.7%

NEW ZEALAND

NZX 50 4888.4 14.872 0.3% 1.0% -0.5% 15.3%

Currencies, Interest Rates & Gold

Index +/- %Day %Wk %Mth %YrRol

AUD/USD 0.899 0.001 0.1% 0.4% 0.8% -13.2% AUD/GBP 0.539 0.000 0.0% -1.2% -1.0% -19.4% EURAUD 1.523 0.000 0.0% 0.1% -0.2% 18.1% NZD/USD 0.834 0.000 0.0% 0.6% 0.0% -2.0% AUD/NZD 1.076 0.000 0.0% -0.3% 0.7% -11.6% TWI 0.687 -0.010 -1.4% -0.6% 0.0% -11.7% Aust 90Day 2.450 0.000 0.0% 0.0% 0.0% Aust 10Y 4.166 -0.078 -1.8% -0.1% -2.1% 15.7% NZ 90Day 3.220 NZ 10Y 4.620 -0.010 -0.2% 0.7% -1.9% 17.6% Gold Spot 1,302 11.660 0.9% 2.8% 4.9% -20.3%

Best Performers Worst Performers

Close % ‘000 Close % ‘000

Indophil Resourc 0.21 10.5 3152 Bathurst Resources 0.16 1033 Saracen Mineral 0.41 9.3 8248 Elemental 0.26 -5.5 68 Cudeco 1.66 7.8 859 iSelect Limited 1.22 -4.3 53 Alkane Resources 0.43 7.5 385 G.U.D. Holdings 5.96 -3.7 220 St Barbara 0.38 7.0 5814 Webjet 3.06 -3.2 364 Kingsgate Consol 1.39 6.9 2292 Astro JP 3.95 -3.2 124 PanAust 1.97 6.8 10393 OrotonGroup 3.91 -3.0 89 Sims Metal Mgmt 10.70 6.8 2079 Energy Wrld Corp 0.35 -2.8 1001 Sirius Resources 2.40 5.7 2816 Imdex 0.55 -2.7 268 Resolute Mining 0.66 5.6 4967 Neon Energy 0.04 -2.6 6937 Mount Gibson Iron 1.18 5.4 4929 Select Harvests 6.17 -2.4 240 Evolution Mining 0.83 5.1 4754 Ridly 0.81 -2.4 198

Source: ASX, Bloomberg, Reuters

Commodity Prices Spot* Forward Curve Credit Suisse Forecasts 3mth 15mth 1Q14 2014 2015

Bulks Iron Ore $/t 122.0 125.0 111.3 Coking Coal $/t 143.0 153.3 Thermal Coal $/t 76.8 85.0 85.0 Base Metals Aluminium USc/lb 77.1 78.4 83.5 77.1 82.2 Copper USc/lb 324.0 322.5 319.6 317.5 300.5 Nickel USc/lb 639.1 640.7 643.4 635.0 629.4 Zinc USc/lb 91.8 91.8 92.6 90.7 95.3 Lead USc/lb 95.4 96.1 96.6 99.8 103.2 Tin USc/lb 1025.2 1023.8 1043.3 1071.6

Precious Metals Gold US$/oz 1302.3 1160.0 1082.5 Silver US$/oz 20.5 18.7 18.2 Platinum US$/oz 1411.8 1380.0 1430.0

Energy Oil (Brent) US$/bbl 108.5 108.2 103.0 107.0 101.8 Oil (WTI) US$/bbl 100.4 99.3 90.2 94.0 91.8

*Fiscal year averages used, Steel prices are contract prices. Spot as of 10PM AEST.

VIX (S&P 500 Options Implied Volatility)

0.00

10.00

20.00

30.00

40.00

50.00

60.00

70.00

80.00

90.00

Jan

-96

Au

g-9

6

Ap

r-97

Dec-9

7

Au

g-9

8

Ap

r-99

Dec-9

9

Au

g-0

0

Ap

r-01

Dec-0

1

Au

g-0

2

Ap

r-03

Dec-0

3

Au

g-0

4

Ap

r-05

Dec-0

5

Au

g-0

6

Ap

r-07

Dec-0

7

Au

g-0

8

Ap

r-09

Dec-0

9

Au

g-1

0

Ap

r-11

Nov-1

1

Jul-1

2

Dec-1

2

Jun

-13

Dec-1

3

Daily VIX (S&P 500 Options Implied Volatility)

VIX Index Average -1 StDev +1 StDev

VIX – Current 1mth rol(avg) 3mth rol(avg) 6mth rol(avg) 14.14 15.84 14.30 14.51 Freight Spot 1 wk (avg) 1 mth (avg) 3 mth (avg) 6 mth (avg) 1 yr (avg)

Baltic Dry 1085.0 1091 1202 1635 1647 1280

Source: Bloomberg

Upcoming Credit Suisse Global Conferences New additions this week in bold.

February 2014 to November 2014

Feb-Mar 2014 Q1 Media Seminar – London

25 Feb 2014 HOLT Conference 2014 – London

25 Feb 2014 5th Annual DC Defense Conference – Washington

4-5 Mar 2014 Global Healthcare Conference – London

5 Mar 2014 Geneva Autos Show 2014 – Geneva

10-12 Mar 2014 Global Services Conference – Scottsdale, Arizona

11-12 Mar 2014 European Banks Conference 2014 – London

13 Mar 2014 Global Flagship event – London

13 Mar 2014 9th Annual European Cable and Telecoms Conf – London

13-16 Mar 2014 DCM Winter Conference 2014 – Silvaplana-Surlej

19-21 Mar 2014 Prime Services 2014 Hedge Fund Leadership Conf. – Florida

24 - 28 Mar 2014 Asian Investment Conference – Hong Kong

25 Mar 2014 Asian Hedge Fund Forum 2014 – Hong Kong

26-28 Mar 2014 Global Trading Forum 2014 – Miami

8 May 2014 Stockholm Consumer IR Day – Stockholm

14-15 May 2014 Chemicals & Ag Conference – London

May-Jun 2014 Q2 Media Seminar – London

3-4 Jun 2014 Energy Conference – London

5 Jun 2014 European Gaming Companies Conference – London

11 Jun 2014 Global Small & Midcap Conference – London

12 Jun 2014 European Buildings Conference – London

Jun 2014 Swiss Midcap Healthcare Conference – Zurich

Aug-Sep 2014 Q3 Media Seminar – London

10-12 Sep 2014 Asian Technology Conference – Taiwan

15-16 Sep European Telecoms 1:1 Conference – London

17-18 Sep Pan European Capital Goods Conference – London

24-25 Sep Global Steel & Mining Conference – London

3-4 Oct Paris Auto Conference – Paris

Oct-Nov Q4 Media Seminar – London

1 Nov Global Consumer IR Day – London

Nov Swiss Midcap Conference – Zurich

If you would like to attend any of the above conferences, please contact the Australian Corporate Access team: Cathy Kermond cathy.kermond@credit-suisse.com or your Credit Suisse sales representative

Research Production

Adam Indikt – Supervisory Analyst 61 3 9280 1659 Patricia Rocis – Supervisory Analyst 61 3 9280 1678

Web Access Research Distribution client.support@credit-suisse.com Email: cms.updates@credit-suisse.com

Database Jason Swinbourne 612 8205 4591

Bottom Liners

17 February 2014

Australia and NZ First Edition 3

At a Glance Australia/NZ equities executive summary

COMPANIES & SECTORS

Auto solid, cold storage needs to warm up Automotive Holdings Group (AHE.AX)

Auto momentum continues, but TCS a drag and we still see risks around the disruption occurring within the industry: We believe the strong growth within the Automotive division from the annualisation of acquisitions, the continued growth of existing dealerships and scale benefits are likely to continue. However, Transport and Cold Storage (TCS) continues to be a drag on the group and while management expects an improved 2H result (on 2H13) it should still result in a decline on a full year basis (we forecast ~13% EBITDA decline in FY14). This combination means that short- to medium-term growth will likely be below the levels achieved recently. Further, we see additional risk from: (1) strong dollar weakening; (2) potential increases in unemployment; (3) the end of local manufacturing (disrupting the brands to which AHE is heavily exposed); and (4) broader economic uncertainly in AHE's two largest states (WA & Qld). While AHE is not trading at demanding levels (12.4x FY14 PE, ~20% discount to XSI), we believe that earnings risk is elevated and we retain our NEUTRAL rating. Key takeaways: (1) strong performance in the Automotive division continues with margin expansion across EBITDA, EBIT and PBT; (2) organic top line growth in automotive appears to be slowing and we believe the primary driver is discounting (due to excess inventory); (3) but the top line weakness in automotive is not flowing through to earnings as AHE continues to drive F&I, generate increased efficiency and we believe achieve greater manufacturer incentives; (4) TCS continues to be impacted by weak industry volumes and is carrying incremental costs—guidance for 2H14 to be above 2H13; (5) in the Other Logistics division, the mining downturn continues to impact COVS, but the other businesses performed well. Target price $3.90 (from $4.00): We derive our $3.90 target price for AHE by using an equally blended DCF and PE-relative based valuation.

Share Price 3.65 (AUD)

NEUTRAL

Target Price (from 4.00) 3.90 (AUD)

Chris Smith Research Analyst 61 2 8205 4210 This report is distributed in Australia by Credit Suisse Equities (Australia) Limited. Please see legal disclaimer and disclosure annex for further terms and information.

Prepared by Credit Suisse Emerging Companies (Australia) Pty Limited, a joint venture entered into between Credit Suisse and First NZ Capital.

17 February 2014

Australia and NZ First Edition 4

Earnings recovery - not if but when Fletcher Building (FBU.NZ)

Flagging upside risk to our forecasts: Our analysis of the historical relationship between FBU NZ and Australia earnings relative to the activity indicators we monitor (including currency impact on demand and product pricing dynamics) suggest upside risks to our 2H FY14and FY15 forecasts. The feedback we received from our recent FNZC sector conference also framed a more positive picture than we had expected. Accordingly, we have upgraded our FBU7 recommendation from Underperform to NEUTRAL with a revised NZ$10.25 target price (previously NZ$9.00). Balancing a positive three-year view vs. 12- month upside current level: FBU provides a good proxy for 1) the current and ongoing recovery in the NZ building market, 2) a pick-up in the Australian building sector, 3) a projected recovery in the US non-residential sector in 2014 and 2015 and 4) the potential upside in terms of cost savings from FBunite programme. We balance this positive three-year view against the magnitude of upside in the next 12 months relative to our DCF valuation, FBU’s peers and NZ equity market valuation. Residential building approvals in the coming months and 1H FY14 results: Our expectation is for a more positive trading outlook commentary since its AGM guidance four months ago. Our expectations are for EBIT of NZ$304mn (+12% vs pcp adjusted EBIT of NZ$272mn, reported of NZ$262mn) and NPAT of NZ$173mn (+19% vs pcp reported NPAT of NZ$146mn). Target price raised to NZ$10.25 (previously NZ$9.00): This is based on the midpoint of our valuation range between NZ$9.65 (12-forward DCF approach) and NZ$10.80 (with reference to NZ equity market and regional sector multiples).

Share Price 9.48 (NZD)

(from Underperform) NEUTRAL

Target Price (from 9.00) 10.25 (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

Diversifying its book and earnings Heartland New Zealand (HNZ.NZ)

Event: HNZ announced the proposed acquisition of Home Equity Release (HER) mortgage businesses in NZ and Australia for $87mn (settlement 1 April 2014) to be funded by a ($58.7mn) capital raise to the vendor ($38.7mn), a $20mn placement and existing cash. Underlying NPAT contribution in the first full 12 months is expected to be $8mn-$9mn (implies initial acquisition P/E of 9.7x to 10.9x) but integration costs of $2mn (post tax) will weigh on HNZ’s FY14 (three months) and FY15 earnings contribution. Inclusive of the HER business, HNZ expects FY15 NPAT to be between $42mn and $44mn. At first glance the acquisition looks broadly neutral as it is priced on a similar P/E to what HNZ was trading prior to the announcement. However, we believe it is a strong strategic acquisition for HNZ that diversifies its earnings base (new market segment but also into Australia) and presents growth potential and a positive earnings story to HNZ over the next few years. We have preliminarily adjusted our forecasts to reflect the HER acquisition and guidance that HNZ’s existing business is trading slightly below our expectations in the near term. We will look for a full update when HNZ reports its 1H14 result on 25 February 2013. Investment case: HNZ should continue to re-rate as it improves its ROE and continues to grow and develop its business. HNZ remains on undemanding multiples. Catalysts: HNZ will release its 1H14 result on 25 February 2014. Valuation: We have upgraded our target price from $0.90 to $0.96 to reflect a heavier weight on higher FY15E earnings in our valuation approach (but retain a forward P/E of 11x) and an increase in the asset multiples used to set our target price to reflect the growth potential from the HER businesses.

Share Price 0.91 (NZD)

NEUTRAL

Target Price (from 0.90) 0.96 (NZD)

Greg Main Research Analyst 64 4 474 4061 Disclaimer: First NZ Capital is acting as underwriter to Heartland in its NZ$5m share purchase plan to shareholders

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

17 February 2014

Australia and NZ First Edition 5

Positive volume and price momentum James Hardie Industries SE (JHX.AX)

Louisiana Pacific (LP.US) reports 4Q: Louisiana Pacific, a key competitor of JHX in the US siding & trim market, reported its 4Q (Dec) 2013 result. The stock was up 5.5% on the back of this result. The read-through typically serves are a useful (albeit not precise) proxy for US fibre cement volume and price trends. The LP 4Q result (SmartSide division): A positive mix shift led prices up (+4%) and strong volume (+20%) was underpinned by growth in the R&R segment (single family and DIY also improving). This is despite weather disruptions (Polar Vortex) in the latter part of the qtr which continued into January 2014. Pleasingly, a number of distributors reported that January 2014 (weather impaired) activity was still better than the pcp. Pent-up demand is material and this should accelerate when the weather breaks. Read-though: JHX's US fibre cement volumes exhibiting a strong relationship to LP’s SmartSide volume with a 0.7 correlation through the cycle. Strong price growth (led by +ve mix shift) is also indicative of a change in consumer and homebuilder sentiment towards more higher priced and quality products. This plays right into the hands of JHX and was the key driver of JHX’s 4% price rise at the previous 2Q result. For JHX, we are increasingly confident that trend momentum will grow into FY14-15. Other points of interest: (1) US new home construction activity to

increase 20% in CY2014; (2) still significant pent-up demand; (3) first-time homebuyer is unlikely to participate until there is more job growth and an increased availability to financing; and (4) builders optimistic about 2014 activity, but concerned about labour shortages. Catalyst: JHX reports 3Q FY14 on 28 February 2014.

Share Price 13.19 (AUD)

OUTPERFORM

Target Price 13.50 (AUD)

Andrew Peros Research Analyst 61 2 8205 4013

1H14 result – steady as she goes Michael Hill International (MHI.NZ)

PBT, at A$28.5mn, compared with the pcp at A$27.0mn, up 5.1%, and was reasonably consistent with our estimate at A$28.7mn. MHI reported 1H14 reported earnings at A$16.2mn, down 26.3% compared with the pcp, and less than 30% compared with our 1H14 estimates. However, the result was impacted by a tax provision which has now been provided for in relation to the tax dispute with the Australian Taxation Office (ATO). We estimate the amount in the vicinity of A$7mn (based on our 1H14 tax estimate relative to the reported amount). Sales figures, and the composition thereof, had already been disclosed at the time of the 2H14 sales release, with the depreciation of the AUD relative to its respective regional currencies providing a meaningful tailwind with regards headline AUD revenues. EBIT margins held up reasonably well in the context of a challenging environment, but the inclusion of the high margin PCP was supportive of earnings. We expect MHI’s performance to be steady for a time. Key catalysts for performance include an improvement in the Australian economy (not expected any time soon), seeing the NZ management team get some meaningful traction (expected over next 12 months), with continued growth in the North American business considered a plus (but not a key valuation driver). We would also like to see the excess inventory issue resolved sooner rather than later. We retain our NZ$1.67 target price. We continue to believe that the business model is intact for MHI, but acknowledge that the stock may languish at around current levels until such a time as the issues addressed above (either macro or business specific) improve and/or are resolved.

Share Price 1.38 (NZD)

OUTPERFORM

Target Price 1.67 (NZD)

Sarndra Urlich Research Analyst +64 4 496 5363 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

17 February 2014

Australia and NZ First Edition 6

1H FY14 result spot on. Debt up on working capital and FX Newcrest Mining (NCM.AX)

Underlying NPAT $207mn (CS $206mn). Reported NPAT $40mn reflects previously advised $120mn tax expense and $47mn impairment of West Africa exploration assets. FY13 reported $5.8bn loss post $6.2bn write down. $228mn operating cash flow impacted by $200mn working capital movement and $70mn tax payment for prior R&D claims. 2H expected to see a ~$100m working capital release for a $370mn turnaround. No dividend. Operating cash flow less than the $421mn capex (Cadia East development), resulting in debt draw. 2H cash flow increase should exceed capex increase. No write down of Telfer despite reserves restated from 11.6moz to 6.3moz. Current mine plan consumes less than half the written down reserves. Group Reserves restated to 78moz from 87.7moz comprising: 3moz depletion, -5moz Telfer leaving 6.3Moz, -2.5moz at Lihir. Resource restated to 150moz from 161.2Moz. Reserve and RSC price assumptions unchanged. Net debt $4.5bn versus June 30 $4.14bn. $164mn attributable FX on USD denominated debt. Available liquidity A$1,250mn (FY13 A$958mn) in cash and undrawn facilities before additional liquidity of US$200mn in January. No change to FY14 production guidance or strategy. Each asset managed to be cash flow neutral or positive in FY14 at A$1,450/oz. TP unchanged at $8.20/share. Rating remains underperform.

Share Price 11.05 (AUD)

UNDERPERFORM

Target Price 8.20 (AUD)

Michael Slifirski Research Analyst 61 3 9280 1845

Low key 1H14 result, but a loss Perseus Mining (PRU.AX)

$4mn 1H14 loss, better than we forecast ($14mn loss) but largely explained by an $8.3mn FX gain we hadn’t accounted for. $16mn cash available and no debt, but this provides little comfort in the context of the 1H operating cash consumption of $1.8mn before investing cash consumption of $17.8mn. 1H cash consumption was minimised by drawing part of the mill feed from stockpile to avoid investing significant capital in pre-stripping to access higher grade ore. Liquidity outlook will depend on operation stability and gold price, with improved ore grades expected as mining progresses, lifting cash generation. Progress with Ghanaian government discussion has confirmed that at least a portion of the VAT refund will be achieved with 60mn Ghanaian cedi (~$23mn USD) agreed to be able to be used to offset future royalties/taxes, a benefit to cash flow. This is ~half of the VAT rebate that PRU believe they are entitled to but have not yet received. A cash component is expected in the final settlement and administration changes are hoped to stop the VAT receivable from increasing in future. Cost reduction initiatives implemented during the 1H reduced all-in site costs and are expected to have an increased full period benefit in the 2H. Management continue to project an all-in site cash cost of US$937/oz for 230koz/yr over 10 years to 2024. Valuation: A lot has to go right for Perseus to prosper. Our target price (unchanged) is undermined by punitive gold price assumptions, suggesting and unattractive risk-reward equation. Rating moves to Underperform given the recent share price strength.

Share Price 0.50 (AUD)

(from Outperform) UNDERPERFORM

Target Price 0.50 (AUD)

Michael Slifirski Research Analyst 61 3 9280 1845

17 February 2014

Australia and NZ First Edition 7

Strong result, conservative guidance Rio Tinto (RIO.AX)

Headline numbers, all positive: Underlying earnings beat - $10.2bn v CS $10.2bn and consensus $9.7bn, driven by savings in coal and aluminium. Cost cutting beat with $2.3bn of cost reductions, 15% ahead of the 2013 target. Dividend beat at 192cps or 15% increase, in-line with CS but well ahead of consensus expectation of 181cps (8%). Net debt much lower, $18.1bn v CS $18.3bn and consensus $21bn. Capex came in at $12.9bn in 2013 and RIO confirmed guidance for 2014 at <$11bn and 2015 of ~$8bn. Multiple impairment charges and one-offs for net earnings at $3.7bn: The interesting ones were a $696m charge to the Kitimat ali smelter on a capex overrun and restructuring costs of $367m (4000 staff reductions). Iron ore production guidance for 2014 is 295mt (global, 100% basis). This is below consensus at 305mt and CS at 311mt. Despite rainfall, we view the guidance as conservative - we expect that Rio will do a little better than guidance and assume 300mt production with 5mt of inventory sales. Other guidance also soft, with 570kt mined and 260kt refined copper below consensus at 615kt and 280kt. Guidance for 1.5mt TiO2 in FY14 is well below capacity at 1.8mt. Earnings and valuation, EPS down <1% as the 10mt lower iron ore production (~$400m NPAT) and 2% higher tax rate ($300m) are offset by cost savings in the coal and ali divisions. Our DCF increases to A$83.5/sh from A$78.5/sh on model roll forward ($2/sh), lower pension liabilities ($2/sh) and lower coal/ali costs ($1/sh). We raise our target price to A$80/sh (from A$75/sh) and £42/sh (from £40/sh) and retain our OUTPERFORM rating.

Share Price 67.83 (AUD)

OUTPERFORM

Target Price (from 75.00) 80.00 (AUD)

Paul McTaggart Research Analyst 61 2 8205 4698

Australia drives a better 1H; challenging outlook keeps management cautious

Sims Metal Management (SGM.AX)

Statutory 1H NPAT $9.3mn (CS $9mn). A$42.1mn underlying NPAT exceeded expectation. $113mn EBITDA exceeded our $86mn, driven by a very strong Australian result and the benefit of AUD depreciation on other regions. Australia underpinned by materially improving domestic scrap sector structure as competitors withdraw from the market. US now facing headwinds. SRS deteriorated further. No guidance. No interim dividend. Sales volumes increased by 3.3% to 6.1Mt in 1HY14 (5.927Mt pcp) in HY13, but down 6.2% from the strong 2H13 6.526Mt. Underlying EBITDA was A$128.5mn up 37.9% on pcp, again due to materially improved performance from recycling operations in Australia. At constant currency, underlying controllable costs were A$24.8mn lower in HY14 compared to HY13. Net debt as at 31 December 2013 was A$121.2mn, a decrease of A$32.6mn on FY13 $154mn. Operating cash flow $37.8mn plus $30.1mn cash from asset sales. Capex of $29.2mn is less than half the FY14 forecast $80mn and FY13 $149mn. 2H14 outlook described as challenging with export markets (Turkey) impacting demand for SGM's exports. New strategy to be delivered to the market by new MD Galdino Claro before the end of the half. No change to target price or rating.

Share Price 10.70 (AUD)

UNDERPERFORM

Target Price 10.00 (AUD)

Michael Slifirski Research Analyst 61 3 9280 1845

17 February 2014

Australia and NZ First Edition 8

Shifting gears... Transpacific Industries Group (TPI.AX)

TPI reported solid 1H14 underlying NPAT of $41.7mn, up 16.5% on pcp, driven by a $20mn improvement in Net Interest expense and lower D&A. Waste Management EBITDA of $189.3mn was down 0.5% on pcp and 1.5% ahead of CS forecast. Underlying operational outperformance of Cleanaway and NZ was offset by a weaker Industrial result. We have upgraded FY14 NPAT by 35% on upgraded NZD, inclusion of two months of commercial vehicles trading, lower D&A and revised interest guidance. Our FY15E NPAT is upgraded 15.6% and 6.3% in FY16. Brad Clibborn assumes coverage of TPI following a change in analyst responsibilities. NEUTRAL rating as TPI shifts gears: After a number of years of focus on restructuring and debt reduction, we now see TPI at a turning point. The management team has breathing room to focus on continuing operational efficiency gains and a new CEO to lead the business forward. Further, TPI will soon find itself with sufficient capital flexibility to explore strategic and growth options in Australia (assuming a successful sale of NZ in the next six months). With TPI trading on 18.7x FY15E P/E we believe the market has already priced in successful execution on the guided $50mn of first round cost-out (FY13–FY15) and de-risking of the balance sheet (ND/EBITDA now <2x). However, we believe TPI likely has further medium-term margin upside from operating efficiencies (route optimisation and further overhead reduction). In order to move positive on TPI from these levels we need to see a successful sale of NZ, greater clarity on next phase operating efficiencies and more from new CEO Robert Boucher on the strategic and growth opportunities for TPI in Australia. Catalysts: Update on sale of NZ business expected late FY14 or early FY15. Our target price increases to $1.27 from $1.00. We apply a DCF-based valuation to derive our target price employing a 9.9% WACC.

Share Price 1.16 (AUD)

NEUTRAL

Target Price (from 1.00) 1.27 (AUD)

Bradley Clibborn Research Analyst 61 2 8205 4465 This report is distributed in Australia by Credit Suisse Equities (Australia) Limited. Please see legal disclaimer and disclosure annex for further terms and information. Prepared by Credit Suisse Emerging Companies (Australia) Pty Limited, a joint venture entered into between Credit Suisse and First NZ Capital.

17 February 2014

Australia and NZ First Edition 9

Strong result – driven by one-off impacts Vital Healthcare Property Trust (VHP.NZ)

VHP's reported 1H14 distributable profit rose 48% on pcp and 44% on forecast as one-off items below the line contributed strongly to the result. Rental income was 2% up on pcp and in line with our forecast. Current tax was a credit of NZ$1.6mn which created a positive variance of NZ$4.7mn to our forecast which assumed a normalised tax charge in the period. Portfolio-structured rent review mechanism proving its worth. With minimal real rental growth being seen in the sector, VHP is likely to have one of the strongest rental growth prospects over the next 12 months (excluding currency impacts) from the majority structured review mechanism. In FY14, 81% of the total rent is subject to a review and with around half completed in the first half, VHP reported a 2.4% average rental increase. Portfolio metrics improved further. As announced in late 2013, management had been successful in the early negotiations of a new 30-year lease to Mercy Ascot Hospital in Auckland which made up circa 10% of the portfolio rent roll. This lease combined with several long-term extensions at some of their Australian assets saw the WALT extend from 11.8 years at year end to 14.9 years. Occupancy remained above 99% and the expiry profile appears to be very manageable through to FY17. With one of the two material lease expiries within the portfolio no longer of concern and gearing levels comfortably in the mid-30%, we have less concerns around the stock. The focus will now be on how management deals with the confirmed tenant departure at their Allamanda asset. We forecast VHP to have one of the higher rental growth and earnings profiles in the sector. Whilst our 12-month target price reduces 4cps to $1.35, the significant pull-back in the share price over the second half of 2013 means we upgrade our rating to NEUTRAL (from Underperform).

Share Price 1.29 (NZD)

(from Underperform) NEUTRAL

Target Price (from 1.39) 1.35 (NZD)

Stephen Reid Research Analyst +64 9 302 5543 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

Light at the end of the tunnel Westfield (WDC.AX)

Reality check: After running to $10.78 immediately after proposing the creation of Scentre Group, WDC has subsequently sold off 2.4% to $10.27 (vs Global REIT's 2.6% and Domestic Equities' +1.6%). Results have been de-risked with 2013 FFO guidance of 66.5c re-iterated in Dec. FY14 growth guidance was also struck, at 3.2% (68.6c). While dilutive sales pose some risk to growth, WDC would no doubt be ready to re-deploy capital into buying back their stock as it currently trades on an 11.3% discount to NAV. We lift our Target Price to $11.45 and upgrade rating to OUTPERFORM. Investment case: Westfield appears to have been dragged down by three key factors: 1) concerns re US pricing / comps, 2) concerns re growth outlook, and 3) liquidity drains on the A-REIT sector. Our CY14 NAV framework suggests the market is pricing WDC's "business" at $1.3bn or 5.2x FY14 EBIT - this excludes any value for the likely margin on the $1.5bn of balance sheet development currently underway. The headwind: We expect US non-core disposals to culminate shortly with six assets sold for $1.2bn, driving dilution in the order of 2.9% annualised (2.3% of FY14 FFO). Press speculation now suggests there may also be ~$1bn of UK asset sales – potentially ~1.8% dilutive (annualised). Yet, we stress, FY14 weakness could pull forward the long awaited growth by 2015. US cap rates offset FX: Our earnings (FY14 +0.8%) upgrades are driven purely by updated FX assumptions and share counts. The valuation uplift has been partially offset by applying 5bps higher cap rates to US NOI. Our valuation applies a blended average cap rate of 5.75% and an 11.1x multiple on active EBIT (& dev't value add) vs 10x on unallocated expenses.

Share Price 10.27 (AUD)

(from Neutral) OUTPERFORM

Target Price (from 11.27) 11.45 (AUD)

Stephen Rich Research Analyst 61 2 8205 4617

17 February 2014

Australia and NZ First Edition 10

RESULT PREVIEW

1H14 results: Margin outlook and weather Australian Utilities Sector

FY13 was bad for Integrated Utilities; FY14 starting off badly: We believe 1H14 will be a low for the Integrated Utilities as margins are impacted from discounting, churn, lower volumes and higher wholesale prices. While we expect a poor 1H14 for Integrated Utilities, the key to the results will likely be outlook and guidance statements for 2H14, as our proprietary survey indicates that discounting may already be at its nadir. In addition, we will be looking for commentary as to how the utilities managed the January heat wave in the South Eastern states. Marginally prefer ORG over AGK: We marginally prefer ORG to AGK coming into the 1H14 result. We do not expect ORG to provide formal guidance for FY14, instead providing outlook commentary, showing expectations of further discount tapering and a smaller relative impact from the January heat wave in SE Australia. For AGK, we will not be surprised if FY14 guidance will be tightened to the lower end of the $560mn to around $610mn, with the added possibility that any loss from Forge's issues at the Diamantina power station could be taken below the line. Few surprises expected for the Regulated Utilities: With guidance provided for each of regulated utilities (distribution or NPAT), we expect few surprises for the coming reporting season. For us, the key areas of focus will be any update on tax issues relating to SKI and commentary in relation to further growth opportunities in Western Australia following on from recent projects announced by DUE (potentially of benefit to both DUE and APA).

Sandra McCullagh Research Analyst 61 2 8205 4729

CY13 result preview: Key numbers known; reports on 20 Feb

PanAust (PNA.AX)

EBITDA of US$271mn is known, so uncertainty around unknown depreciation, corporate allocation, hedge accounting and tax drives a $10mn risk band around NPAT forecasting. We view our $81mn estimate as conservative with risk of being exceeded by lower depreciation and lower tax. 2H depreciation should be higher than 1H, reflecting operation of the Phu Kham enhanced recovery circuit. This is reflected in our higher 2H depreciation forecast. Consensus range of $81mn to $105mn could reflect variation in above assumptions or inclusion/exclusion of minorities. 31 Dec cash US$130.3mn and US$162mn debt already advised with the DecQ result in January. CY14 guidance provided: Phu Kham Cu 65-70kt, cash costs US$1.50-1.60/lb Cu; Ban Houayxai US$650-$700/oz. Consolidated gold forecast 160-165koz. CY14F EBITDA US$200– $225mn. No changes to these numbers expected. We hope for additional guidance on the capex profile, corporate overhead allocation and project expenditure. TP and rating unchanged.

Share Price 1.97 (AUD)

OUTPERFORM

Target Price 2.00 (AUD)

Michael Slifirski Research Analyst 61 3 9280 1845

17 February 2014

Australia and NZ First Edition 11

1H14 result preview; reports on 20 Feb Port of Tauranga (POT.NZ)

FNZC assumptions We anticipate POT's 1H14 NPAT at NZ$40.4mn. Management expects NPAT for FY14 in the range of NZ$77-81mn, which is consistent with our forecast of NZ$79.7mn. We assume EBITDA of NZ$67.5mn in 1H14 and NZ$122.8mn for FY14F. What to look for We are not anticipating any surprises in POT’s 1H14 result. Organic and inorganic growth in revenues is expected to be largely offset by a backflow of container volume to the Port of Auckland. A progress update on the expansion of existing facilities. Share price implications We expect a relatively muted response on the back of a flat underlying NPAT result when compared to the pcp. At current levels, valuation remains a hurdle. In order for us to upgrade our target price and rating for POT, we would require a positive surprise both in terms of the offset between increasing log volumes and the level of reduction in container volumes, and progress on the expansion in existing port facilities.

Share Price 13.95 (NZD)

UNDERPERFORM

Target Price 13.80 (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

1H14 result preview; reports on 20 Feb Steel & Tube Holdings (STU.NZ)

FNZC Assumptions Our expectation is for 1H14 NPAT of NZ$7.5mn, translating into NZ$17.3mn for FY14. We anticipate 1H14 EBIT of NZ$11.0mn, translating into NZ$25.1mn for FY14. What to look for We look for evidence of STU’s ability to capitalise on the NZ building and construction sector recovery translating into higher steel demand. Increased activity in both residential and non-residential building consents in Auckland and Christchurch are the key drivers here. Importantly, increased demand should translate into an improvement in margins. Share price implications To be more bullish on the stock, we would require improvement in margins and an anticipation that these improvements can be sustained going forward through the remainder of FY14F.

Share Price 3.00 (NZD)

UNDERPERFORM

Target Price 3.10 (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

STRATEGY & ECONOMICS

GNC: 50% of the LTI opportunity converted to STI plan for FY14

Australian ESG/SRI - AGM series

We have reviewed the Grain Corp (GNC.AX) Remuneration Report for the Annual General Meeting on 25

th February 2014.

The CEO earns a base salary of $1.15mn, up 21.5% on FY12. Market capitalisation increased from $1.2bn to $1.8bn during the 2012 remuneration review period, which was cited as the reason for the base salary increase. Market cap is currently ~$1.78bn, therefore benchmarking may still be relevant. FY13 LTI will be cash-based, rather than rights, but will be subject to same hurdles and vesting period. 50% of the FY14 LTI opportunity has been converted to the STI plan due to share price volatility following the failed take-over attempt. This results in an additional $0.60mn in STI opportunity in lieu of the LTI plan for the CEO. CEO termination benefit composition unclear: The former CEO departed on 13 January 2014 and collected $0.939mn in termination benefits, including contractual pro-rata STI for ~3 months. The Board has discretion on payout of STI but we are unable to determine if any of the converted LTI for FY14 was paid out as part of termination.

Sandra McCullagh Research Analyst 61 2 8205 4729

17 February 2014

Australia and NZ First Edition 12

REINZ House Prices (Jan) – Further easing in the rate of house price growth

NZ House Prices

The REINZ house price index (stratified) rose by 7.7% YoY in January 2014, down from the 9.2% YoY increase recorded over the previous month. The national stratified house price index continued to ease back from its November 2013 peak of NZ$437,700, recording a price of NZ$423,150 over January. While the rise in national house prices continued to be underpinned by robust increases in both the Auckland and Canterbury regions, there were further signs of a softening in the rate of growth in annual house price inflation. In particular, annual house price inflation turned modestly negative in the Wellington region (down 1.1%), while that past three months has seen declines in the annual pace of growth in both Auckland and Christchurch house prices. In addition to the softening in the rate of growth in national house prices, REINZ estimates that the number of house sales declined by 1.1% MoM in January. While it still remains a little early to be definitive regarding the impact of the recently introduced high LVR mortgage restrictions, the RBNZ is likely to take comfort from these data showing further signs of a softening in the rate of growth in house prices. Moreover, despite the current elevated level of consumer confidence and continued rise in migrant inflows, the heightened prospect of the RBNZ raising interest rate settings in March 2014 is also increasingly likely to be a factor dampening housing market activity.

Chris Green Research Analyst 64 9 302 5509

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

Australia and NZ First Edition 13

17 February 2014

Asia Pacific/Australia

Equity Research

Small Cap Companies

Automotive Holdings Group

(AHE.AX / AHE AU) RESULTS

Auto solid, cold storage needs to warm up ■ Auto momentum continues, but TCS a drag and we still see risks

around the disruption occurring within the industry: We believe the

strong growth within the Automotive division from the annualisation of

acquisitions, the continued growth of existing dealerships and scale benefits

are likely to continue. However, Transport and Cold Storage (TCS)

continues to be a drag on the group and while management expects an

improved 2H result (on 2H13) it should still result in a decline on a full year

basis (we forecast ~13% EBITDA decline in FY14). This combination means

that short- to medium-term growth will likely be below the levels achieved

recently. Further, we see additional risk from: (1) strong dollar weakening;

(2) potential increases in unemployment; (3) the end of local manufacturing

(disrupting the brands to which AHE is heavily exposed); and (4) broader

economic uncertainly in AHE's two largest states (WA & Qld). While AHE is

not trading at demanding levels (12.4x FY14 PE, ~20% discount to XSI), we

believe that earnings risk is elevated and we retain our NEUTRAL rating.

■ Key takeaways: (1) strong performance in the Automotive division

continues with margin expansion across EBITDA, EBIT and PBT; (2) organic

top line growth in automotive appears to be slowing and we believe the

primary driver is discounting (due to excess inventory); (3) but the top line

weakness in automotive is not flowing through to earnings as AHE continues

to drive F&I, generate increased efficiency and we believe achieve greater

manufacturer incentives; (4) TCS continues to be impacted by weak industry

volumes and is carrying incremental costs—guidance for 2H14 to be above

2H13; (5) in the Other Logistics division, the mining downturn continues to

impact COVS, but the other businesses performed well.

■ Target price $3.90 (from $4.00): We derive our $3.90 target price for AHE

by using an equally blended DCF and PE-relative based valuation.

Total return forecast in perspective

Mean^CSEC tgt^

Sh Prc

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

12mth Volatility* 52wk Hi-Lo IBES Consensustarget return^

Performance over 1M 3M 12M

Absolute (%) -1.9 -2.7 -7.6

Relative (%) -4.0 -1.8 -13.9

Financial and valuation metrics

Year 06/13A 06/14E 06/15E 06/16E

Revenue (A$mn) 4,271.7 4,549.3 4,687.7 4,830.3

EBITDA (A$mn) 165.3 171.6 181.0 188.5

EBIT (A$mn) 136.9 143.7 151.9 158.3

Net income (A$mn) 72.7 76.9 81.4 86.3

EPS (CS adj.) (Ac) 27.88 29.48 31.23 33.09

Change from previous EPS (%) n.a. -1.6 -2.2 -0.9

Consensus EPS (Ac) n.a. 30.30 33.00 35.10

EPS growth (%) 13.3 5.7 5.9 6.0

P/E (x) 13.1 12.4 11.7 11.0

Dividend (Ac) 20.00 21.07 22.23 23.56

Dividend yield (%) 5.5 5.8 6.1 6.5

P/B (x) 2.0 1.9 1.8 1.7

Net debt/equity (%) 138.0 139.6 132.1 123.6

Relative performance versus S&P ASX 200. See Reference Appendix for a description of the chart. Source: CSEC estimates, * Consensus, mean range from Thomson Reuters.

Source: Company data, ASX, CSEC estimates, * Adj. for goodwill, notional interest and unusual items. Relative P/E against

ASX/S&P200 based on pre GW in AUD. Company PE calculation is based on displayed EPS Currency

Rating NEUTRAL*

Price (14 Feb 14, A$) 3.65

Target price (A$) (from 4.00) 3.90¹

Market cap. (A$mn) 951.12

Yr avg. mthly trading (A$mn) 44

Last month's trading (A$mn) 33

Projected return:

Capital gain (%) 6.8

Dividend yield (net %) 6.0

Total return (%) 12.8

52-week price range 4.3 - 3.1

* Stock ratings are relative to the relevant country

benchmark.

¹Target price is for 12 months.

Research Analysts

Chris Smith

61 2 8205 4210

chris.smith@cs-emc.com.au

Paul Buys

61 2 8205 4538

paul.buys@cs-emc.com.au

Bradley Clibborn

61 2 8205 4465

bradley.clibborn@cs-emc.com.au

Sarah Mann

61 2 8205 4610

sarah.mann@cs-emc.com.au

This report is distributed in Australia by Credit

Suisse Equities (Australia) Limited. Please see legal disclaimer and

disclosure annex for further terms and information.

Prepared by Credit Suisse Emerging Companies (Australia) Pty Limited,

a joint venture entered into between Credit Suisse and First NZ Capital.

17 February 2014

Australia and NZ First Edition 14

Figure 1: Financial summary

Automotive Holdings Group Ltd (AHE) Year ending 30 Jun In AUDmn, unless otherwise stated2012 2013 2014 2015 2016 2012 2013 2014 2015 2016

Share Price: A$3.65 Earnings 06/12A 06/13A 06/14E 06/15E 06/16ERating c_EPS_SHARESEquiv. FPO (period avg.) mn 260.7 260.8 260.7 260.7 260.7

Target Price A$ 3.90 c_EPS*100EPS (Normalised) c 24.6 27.9 29.5 31.2 33.1

vs Share price % 6.85 EPS_GROWTH*100EPS Growth % 13.3 5.7 5.9 6.0

DCF A$ 4.12 c_EBITDA_MARGIN*100EBITDA Margin % 3.9 3.9 3.8 3.9 3.9

c_DPS*100DPS c 18.0 20.0 21.1 22.2 23.6

c_PAYOUT*100Payout % 73.1 71.7 71.5 71.2 71.2

FRANKING*100Franking % 100.0 100.0 100.0 100.0 100.0

c_FCF_PS*100Free CFPS c 17.2 9.9 17.7 28.0 31.9

Profit & Loss 06/12A 06/13A 06/14E 06/15E 06/16E c_TAX_RATE*100Effective tax rate % 30.4 29.5 30.0 30.0 30.0

Sales revenue 3,914.7 4,271.7 4,549.3 4,687.7 4,830.3 ValuationEBITDA 153.5 165.3 171.6 181.0 188.5 c_PE P/E x 14.8 13.1 12.4 11.7 11.0

Depr. & Amort. (26.5) (28.4) (27.8) (29.1) (30.1) c_EBIT_MULTIPLE_CURREV/EBIT x 12.0 11.8 11.6 10.9 10.5

EBIT 127.0 136.9 143.7 151.9 158.3 c_EBITDA_MULTIPLE_CUEV/EBITDA x 9.9 9.8 9.7 9.2 8.8

Associates 0.0 0.0 0.0 0.0 0.0 c_DIV_YIELD*100Dividend Yield % 4.9 5.5 5.8 6.1 6.5

Net interest Exp. (30.7) (29.4) (27.6) (29.7) (28.9) c_FCF_YIELD*100FCF Yield % 4.7 2.7 4.8 7.7 8.8

Other 0.0 0.0 0.0 0.0 0.0 c_PB Price to Book x 2.1 2.0 1.9 1.8 1.7

Profit before tax 96.3 107.6 116.2 122.2 129.4 ReturnsIncome tax (29.2) (31.7) (34.8) (36.6) (38.8) c_ROE*100Return on Equity % 14.1 15.2 15.4 15.5 15.7

Profit after tax 67.1 75.9 81.3 85.5 90.6 c_I_NPAT/c_I_SALES*100Profit Margin % 1.6 1.7 1.7 1.7 1.8

Minorities 0.0 0.0 0.0 0.0 0.0 c_I_SALES/c_B_TOT_ASSAsset Turnover x 2.8 2.7 2.7 2.7 2.7

Preferred dividends 0.0 0.0 0.0 0.0 0.0 c_ASSETS/c_EQ_COMMONEquity Multiplier x 3.1 3.3 3.4 3.3 3.3

Associates & Other (2.9) (3.1) (4.5) (4.1) (4.4) c_ROA*100Return on Assets % 4.6 4.6 4.6 4.7 4.8

Normalised NPAT 64.2 72.7 76.9 81.4 86.3 c_ROIC*100Return on Invested Cap. % 8.6 8.3 8.2 8.5 8.7

Unusual item after tax (13.5) (6.0) (0.8) 0.0 0.0 GearingReported NPAT 50.6 66.8 76.0 81.4 86.3 c_GEARING*100Net Debt to Net debt + Equity % 55.6 58.0 58.3 56.9 55.3

c_NET_DEBT/c_I_EBITDANet Debt to EBITDA x 3.7 4.1 4.1 3.9 3.7

Balance Sheet 06/12A 06/13A 06/14E 06/15E 06/16E c_I_EBITDA/ c_I_NET_INTERESTInt Cover (EBITDA/Net Int.) x 5.0 5.6 6.2 6.1 6.5

Cash & equivalents 81.4 97.4 107.0 123.2 147.2 c_I_EBIT/ c_I_NET_INTERESTInt Cover (EBIT/Net Int.) x 4.1 4.7 5.2 5.1 5.5

Inventories 584.2 691.0 735.5 757.3 780.0 (c_C_CAPEX/c_I_SALES)*-100Capex to Sales % 1.1 1.6 1.3 0.8 0.7

Receivables 248.8 300.3 293.8 302.8 312.0 (c_C_CAPEX/c_I_DEPR)*-100Capex to Depreciation % 224.7 323.6 303.2 171.5 145.4

Other current assets 82.9 18.3 21.5 21.5 21.5

Current assets 997.2 1,107.0 1,157.8 1,204.8 1,260.6 MSCI IVA (ESG) Rating BBProperty, plant & equip. 137.3 186.4 224.5 239.5 249.5 TP ESG Risk (%): 0

Intangibles 211.8 249.0 259.0 250.8 242.7

Other non-current assets 52.1 38.5 44.1 44.1 44.1

Non-current assets 401.2 474.0 527.6 534.4 536.3

Total assets 1,398.4 1,581.0 1,685.4 1,739.2 1,796.9

Payables 195.1 251.3 269.8 277.7 286.1

Interest bearing debt 654.0 768.8 818.3 834.7 851.7

Other liabilities 91.5 74.4 87.6 88.3 89.3 MSCI IVA Risk: Positive

Total liabilities 940.5 1,094.5 1,175.7 1,200.7 1,227.1

Net assets 457.9 486.5 509.7 538.5 569.8

Ordinary equity 454.1 477.6 499.1 523.8 550.7

Minority interests 3.8 8.9 10.6 14.7 19.1

Preferred capital 0.0 0.0 0.0 0.0 0.0

Total shareholder funds 457.9 486.5 509.7 538.5 569.8

Net debt 572.6 671.4 711.3 711.4 704.5 Source: MSCI ESG Research

Cashflow 06/12A 06/13A 06/14E 06/15E 06/16E Share Price Performance

EBIT 127.0 136.9 143.7 151.9 158.3

Net interest -31.1 -29.4 -30.7 -29.7 -28.9

Depr & Amort 26.5 28.4 27.8 29.1 30.1

Tax paid -28.3 -32.1 -28.6 -36.0 -37.7

Working capital 0.0 0.0 19.9 -6.4 -6.6

Other -7.2 -11.1 -26.3 0.0 0.0

Operating cashflow 86.9 92.7 105.9 108.9 115.3

Capex -42.1 -67.0 -59.7 -36.0 -32.0

Capex - expansionary 0.0 0.0 0.0 0.0 0.0

Capex - maintenance -42.1 -67.0 -59.7 -36.0 -32.0

Acquisitions & Invest -60.3 -45.7 -10.6 0.0 0.0

Asset sale proceeds -2.3 64.7 0.3 0.0 0.0

Other 0.0 -4.6 0.2 0.0 0.0

Investing cashflow -104.7 -52.5 -69.8 -36.0 -32.0

Dividends paid -46.5 -52.1 -56.2 -56.7 -59.4

Equity raised 0.5 0.0 0.0 0.0 0.0

Net borrowings 15.2 28.0 29.6 0.0 0.0

Other 0.0 0.0 0.0 0.0 0.0 1 Month 3 Month 12 Month

Financing cashflow -30.8 -24.1 -26.5 -56.7 -59.4 Absolute -2.7% -7.6%

Total cashflow -48.6 16.1 9.5 16.2 23.9 Relative -1.4% -0.3% -10.3%

Adjustments 0.0 0.0 0.0 0.0 0.0

Net change in cash -48.6 16.1 9.5 16.2 23.9 Source: Reuters 52 week trading range: 3.13-4.33

MSCI IVA Risk Comment: We believe the MSCI rating for AHE is not

appropriate since it highlights labour-related work stoppages and customer

dissatisfaction as key ESG risks. AHE has a strong focus on training and

motivating staff sales through training and development programs for

Dealer Principals and salesmen. Furthermore AHE have demonstrated a

dedication to building customer relationships. This was highlighted through

their development program dedicated to Customer Service and Retention

which provides significant training to customer-facing staff.

14/02/2014 19:28

Automotive Holdings Group Limited (AHE) is a diversified automotive retailing and logistics

group with operations in every Australian and New Zealand. AHE has three segments:

automotive retail, other logistics and property.

CSEC View

TP Risk Comment: For AHE, outside of the retail ESG risk factors we do

not include any ESG impact in our base valuation. We highlight AHE's

dedication to training and motivating its sales staff through established

leadership and training programs as a positive ESG factor. We highlight a

potential corporate governance issue with two long standing board

members sitting on the board for over 10 years and so can no longer be

considered independent as a key ESG risk.

NEUTRAL

3.00

3.20

3.40

3.60

3.80

4.00

4.20

4.40

4/02/2013 4/04/2013 4/06/2013 4/08/2013 4/10/2013 4/12/2013 4/02/2014

AHE.AX XSI

2.3

3.3

4.3

5.3

6.3

7.3

8.3

9.3

10.3

Environment Social Governance

Stock Local Sector

Country Global Sector

Source: Company data, CSEC estimates

17 February 2014

Australia and NZ First Edition 15

Key takeaways

■ Solid 1H14 result: AHE delivered a solid 1H14 result with underlying NPAT up 2.0%

to $39.3mn, behind CSEC $42mn estimate. The Automotive Retail division grew

strongly through both organic and acquisitive initiatives, delivering revenue growth of

8% and PBT growth of 20%. Transport and Cold Storage was again impacted by the

continued investment in facilities, as well as lower freight volumes in the half with PBT

decreasing 28.9%. Other Logistics continued to be mixed (EBITDA +5.6%, PBT –1%),

with COVS impacted by lower demand from the mining sector, but KTM, AMCAP and

GTB/VSE performing well.

AHE declared an interim dividend of 8.5cps (1H13 8.0cps).

Automotive Retailing

■ Automotive Retailing – softening growth supported by acquisitions: Revenue

increased 8% to $1,916mn, EBITDA increased 11.5% to $64mn and EBITDA, EBIT

and PBT margins all increased. Continued scale benefits, as well as increased

efficiency and the annualisation of acquisitions increased the operating EBITDA

margin to 3.3% (from 3.2% in 1H13, FY13 3.4%).

■ Reversion risk of industry growth drivers: After a long period of near ‘perfect storm’

conditions, we believe the industry will find it increasingly challenging to replicate

historical growth levels. Put simply, we believe that while industry demand drivers

remain supportive at the moment, there is increased risk around their reversion

(increased unemployment, falling vehicle affordability, lower consumer confidence)

and that growth in vehicle sales is likely to moderate towards the longer-term trend of

~3% (over the past ten years).

Figure 2: Automotive Retailing

A$mn, unless stated FY09 FY10 FY11 FY12 1H13 2H13 FY13 1H14 2H14F FY14F FY15F

Revenue 2691.2 2857.7 2923.8 3207.5 1774.7 1766.7 3541.4 1916.1 1887.8 3803.9 3916.1

…growth (%) -11.1% 6.2% 2.3% 9.7% 15.4% 5.8% 10.4% 8.0% 6.9% 7.4% 2.9%

EBITDA (operating) 54.9 88.8 93.3 106.3 57.4 61.4 118.8 64.0 64.8 128.8 132.7

…growth (%) -43% 62% 5% 14% 15% 9% 12% 12% 6% 8% 3%

…margin (%) 2.0% 3.1% 3.2% 3.3% 3.2% 3.5% 3.4% 3.3% 3.4% 3.4% 3.4%

EBIT (operating) 44.7 78.3 81.8 92.9 50.4 54.2 104.6 56.4 57.3 113.6 116.8

…growth (%) -48% 75% 4% 14% 16% 9% 13% 12% 6% 9% 3%

…margin (%) 1.7% 2.7% 2.8% 2.9% 2.8% 3.1% 3.0% 2.9% 3.0% 3.0% 3.0%

PBT (operating) 23.6 62.9 62.0 71.6 38.7 43.7 82.3 46.4 47.3 93.8 95.4

…growth (%) -64% 166% -1% 15% 16% 14% 15% 20% 8% 14% 2%

…margin (%) 0.9% 2.2% 2.1% 2.2% 2.2% 2.5% 2.3% 2.4% 2.5% 2.5% 2.4%

Non-operating adjustments 18.6 0.0 -7.4 -10.4 -1.9 -0.4 -2.3 -1.2 0.0 -1.2 0.0

PBT (reported) 42.2 62.9 54.6 61.2 36.8 43.3 80.1 45.2 47.3 92.6 95.4

…growth (%) -28.2% 48.9% -13.2% 12.1% 11.7% 53.3% 30.9% 22.9% 9.4% 15.6% 3.0%

…margin (%) 1.6% 2.2% 1.9% 1.9% 2.1% 2.4% 2.3% 2.4% 2.5% 2.4% 2.4%

Source: Company data, CSEC estimates

■ Excess inventory seems to be impacting the top line growth in Automotive

Retailing, but finance and insurance (F&I) and manufacturer incentives appear

to be supporting margins: Backing out our estimated revenue from recent

acquisitions in the Automotive Retailing division we believe that the growth in the

underlying dealerships was at low single digit levels in 1H14. We believe this

compares to mid-single digit underlying growth that AHE has delivered over recent

history. We attribute this decline in headline revenue to the increased discounting of

new vehicles following the FBT disruption that led to increased inventory levels across

the industry. We believe this is likely to remain a headwind in 2H14. Positively and

ahead of our expectations, AHE continues to be able to utilise its scale, drive

17 February 2014

Australia and NZ First Edition 16

efficiency, increase the penetration of the high margin F&I and we believe

negotiate/receive beneficial incentives from the car manufacturers as they use AHE's

scale to clear excess inventory.

AHE remains well positioned to continue to benefit from acquisitions and supportive

industry drivers (low interest rates, low unemployment and record vehicle affordability).

However, in addition to the risk around the reversion of the positive demand drivers

experienced over the past two years we believe excess inventory volumes within the

industry are creating headlines for top line growth (ex acquisitions). Backing out the

annualisation of recent acquisitions from the 1H14 result we believe the top line

generated low single-digit growth. Positively, this weakness does not seem to be

flowing through to earnings as we believe AHE continues to drive F&I, efficiency

improvements and achieve preferential manufacturer incentives.

■ Reversion risk of the positive industry growth drivers: After a long period of highly

supportive conditions, we believe the industry will find it increasingly challenging to

replicate historical growth levels. We believe that while the industry demand drivers

are currently supportive, there is increased risk around their reversion (increased

unemployment, falling vehicle affordability, lower consumer confidence) and that

growth in vehicle sales is likely to moderate towards the longer-term trend of ~3%.

Transport and Cold Storage

■ Transport and Cold Storage – continued investment and weak volumes: Revenue

was weak (-0.7% to $210mn) from a combination of: (1) softer volumes across the

industry (lower peak demand and lower frozen and freshfood volumes); and (2) the

seasonal impact from the 2013 floods in NSW and Queensland that have reduced

supply in 1H14. EBITDA fell 23.4% to $15.4mn, but included $2mn of "one-off" costs

from the investment in new facilities in WA and SA. The EBITDA margin declined to

7.3% on a reported basis and 8.3% on an underlying basis, from 9.5% in 1H13.

The Transport and Cold Storage result was materially below our expectations at both

the revenue (CSECf $218.8mn) and EBITDA level ($20.8mn), with an underlying

EBITDA margin of 8.3% below our forecast for it to be broadly flat on 1H13.

Management expects 2H14 performance in Rand to improve on the pcp (2H13

$11.8mn). We have tempered our margin expectations for the division in the near

term, but we continue to believe that as AHE internalises the Toll pallets and utilisation

within the pallet storage business returns towards normalised levels that margins will

trend towards at least the historically generated levels (+9% EBITDA).

Figure 3: Transport and cold storage

A$mn, unless stated FY09 FY10 FY11 FY12 1H13 2H13 FY13 1H14 2H14F FY14F FY15F

Revenue 155.3 167.1 201.6 325.2 211.5 178.6 390.0 210.0 181.0 391.0 404.6

…growth (%) 7.6% 20.6% 61.3% 25.4% 14.1% 19.9% -0.7% 1.4% 0.3% 3.5%

EBITDA (operating) 13.3 15.0 19.8 29.8 20.1 11.8 31.9 15.4 12.1 27.5 32.1

…growth (%) 13% 32% 51% 5% 11% 7% -23% 3% -14% 17%

…margin (%) 8.6% 9.0% 9.8% 9.2% 9.5% 6.6% 8.2% 7.3% 6.7% 7.0% 7.9%

EBIT (operating) 10.1 10.4 13.8 19.1 14.2 6.0 20.2 10.5 7.4 17.9 22.0

…growth (%) 3% 33% 39% 6% 4% 6% -26% 23% -11% 23%

…margin (%) 6.5% 6.2% 6.8% 5.9% 6.7% 3.3% 5.2% 5.0% 4.1% 4.6% 5.4%

PBT (operating) 8.6 8.4 11.4 14.6 12.2 4.0 16.1 8.7 5.5 14.2 18.0

…growth (%) -2% 36% 28% 11% 9% 11% -29% 39% -12% 27%

…margin (%) 5.5% 5.0% 5.7% 4.5% 5.8% 2.2% 4.1% 4.1% 3.0% 3.6% 4.5%

Non-operating adjustments 0.0 0.0 0.0 -1.8 -1.1 -1.1 -2.3 -0.1 0.0 -0.1 0.0

PBT (reported) 8.6 8.4 11.4 12.8 11.0 2.8 13.9 8.6 5.5 14.1 18.0

…growth (%) -2.0% 36.2% 12.0% 14.5% -9.7% 8.6% -22.6% 94.2% 1.3% 28.2%

…margin (%) 5.5% 5.0% 5.7% 3.9% 5.2% 1.6% 3.6% 4.1% 3.0% 3.6% 4.5%

Source: Company data, CSEC estimates

17 February 2014

Australia and NZ First Edition 17

Other Logistics

■ Other Logistics – still mixed: Continuing business (excluding Zupps from pcp)

revenue increased 3.6% to $189.9, EBITDA was up solidly (+5.6%) to $9.8mn, with

the EBITDA margin expanding to 5.2% (from 5.1%). Due to higher D&A ($1.5mn vs

$1.1mn) and lower interest income ($0.3mn vs $0.5mn), PBT decreased 1% to

$8.6mn. The result was mixed with the mining downturn impacting COVS, but KTM

delivered record unit sales that more than offset the weaker AUD, and AMCAP and

GTB/VSE both performed well.

Figure 4: Other logistics

Other Logistics FY09 FY10 FY11 FY12 1H13 2H13 FY13 1H14 2H14F FY14F FY15F

Revenue 226.6 215.1 210.4 386.9 183.2 162.4 345.6 189.9 166.5 356.4 366.5

…growth (%) -41.2% -5.1% -2.2% 83.9% -10.1% -11.3% -10.7% 3.6% 2.5% 3.1% 2.8%

EBITDA (operating) 14.3 12.2 9.2 16.5 9.3 7.2 16.6 9.8 8.2 18.1 18.6

…growth (%) -46% -15% -25% 79% 17% -15% 1% 6% 14% 9% 3%

…margin (%) 6.3% 5.7% 4.4% 4.3% 5.1% 4.4% 4.8% 5.2% 4.9% 5.1% 5.1%

EBIT (operating) 12.8 10.4 7.5 14.3 8.2 5.8 14.1 8.3 6.7 15.1 15.5

…growth (%) -43% -18% -28% 90% 18% -20% -2% 1% 15% 7% 3%

…margin (%) 5.6% 4.8% 3.6% 3.7% 4.5% 3.6% 4.1% 4.4% 4.0% 4.2% 4.2%

PBT (operating) 10.7 8.2 6.5 14.9 8.7 6.3 15.0 8.6 7.0 15.6 16.1

…growth (%) -13% -23% -21% 130% 22% -19% 1% -1% 12% 4% 3%

…margin (%) 4.7% 3.8% 3.1% 3.8% 4.8% 3.9% 4.3% 4.5% 4.2% 4.4% 4.4%

Non-operating adjustments 0.0 0.0 -14.4 -3.0 -2.7 -5.1 -7.7 -0.1 0.0 -0.1 0.0

PBT (reported) 10.7 8.2 -7.9 11.9 6.0 1.2 7.3 8.5 7.0 15.6 16.1

…growth (%) -12.8% -23.3% -196.9% -249.6% 9.6% -81.0% -39.0% 41.4% 478.5% 114.5% 3.4%

…margin (%) 4.7% 3.8% -3.8% 3.1% 3.3% 0.7% 2.1% 4.5% 4.2% 4.4% 4.4%

Source: Company data, CSEC estimates

Earnings changes, investment case and target price

■ Earnings changes: We have made minor revisions to our forecasts over the forecast

period (-3% to -4%). We continue to forecast solid growth in the Automotive Retailing

division from a combination of internal initiatives and the annualisation of acquisitions.

We believe that excess inventory is likely to continue to temper the top line (driven by

discounting) and see annualisation of acquisitions as being the primary driver of

growth. We forecast a recovery in industry volumes in Transport and Cold Storage and

assume margin uplift from the internationalisation of Toll pallet storage business and

increased utilisation. In Other Logistics we forecast continued solid growth for KTM,

AMCAP, and GTB/VSE. We have reduced our forecasts for COVS and assume it

continues to be negatively impacted by the mining downturn.

Investment case: We continue to believe that the strong growth drivers present over

the last two years (low unemployment, low interest rates, manufacturer incentives and

record levels of vehicle affordability) remain supportive. However, we believe there is

both increased uncertainty in the short term from: (1) the impact on new vehicle pricing

from the excess inventory within the system; (2) the potential for positive growth drivers

to revert; and (3) the brand disruption from the announced closure of the Australian

manufacturers. We see AHE as likely to continue to supplement its organic growth

through acquisitions, but see the reversion of growth drivers and broader industry

disruption as heightening earnings risk in the short term. NEUTRAL rating retained.

■ Target price: We derive our $3.90 target price for AHE by using a blended valuation

methodology, applying equal weights to our DCF and P/E-relative based valuations. At

our target price AHE would be trading at 12.8x 12-month forward earnings and a

~10% discount to the XSI.

17 February 2014

Australia and NZ First Edition 18

Our P/E relative valuation assumes that AHE trades at a 15% discount to the XSI on a

12-month forward basis. The key assumptions for our DCF are a WACC of 11.1%,

beta of 1.1x, risk free rate of 5.3% and terminal growth rate of 3.0%.

Figure 5: AHE P/E absolute Figure 6: AHE P/E relative to XSI

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

14.0x

16.0x

18.0x

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AHE.AX Mean +SD -SD

0%

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AHE EV/EBIT relative (to XSI) Mean +SD -SD

Source: IBES consensus data Source: IBES consensus data

Figure 7: AHE EV/EBITDA absolute Figure 8: AHE EV/EBITDA relative to the XSI

0.0x

2.0x

4.0x

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0%

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AHE EV/EBITDA relative (to XSI) Mean +SD -SD

Source: IBES consensus data Source: IBES consensus data

Australia and NZ First Edition 19

17 February 2014

Asia Pacific/New Zealand

Equity Research

Construction & Engineering (Industrials)

■

Fletcher Building (FBU.NZ / FBU NZ) UPGRADE RATING

Earnings recovery - not if but when

■ Flagging upside risk to our forecasts: Our analysis of the historical

relationship between FBU NZ and Australia earnings relative to the activity

indicators we monitor (including currency impact on demand and product

pricing dynamics) suggest upside risks to our 2H FY14and FY15 forecasts.

The feedback we received from our recent FNZC sector conference also

framed a more positive picture than we had expected. Accordingly, we have

upgraded our FBU7 recommendation from Underperform to NEUTRAL with a

revised NZ$10.25 target price (previously NZ$9.00).

■ Balancing a positive three-year view vs. 12- month upside current

level: FBU provides a good proxy for 1) the current and ongoing recovery in

the NZ building market, 2) a pick-up in the Australian building sector, 3) a

projected recovery in the US non-residential sector in 2014 and 2015 and 4)

the potential upside in terms of cost savings from FBunite programme. We

balance this positive three-year view against the magnitude of upside in the

next 12 months relative to our DCF valuation, FBU’s peers and NZ equity

market valuation.

■ Residential building approvals in the coming months and 1H FY14 results:

Our expectation is for a more positive trading outlook commentary since its

AGM guidance four months ago. Our expectations are for EBIT of NZ$304mn

(+12% vs pcp adjusted EBIT of NZ$272mn, reported of NZ$262mn) and NPAT

of NZ$173mn (+19% vs pcp reported NPAT of NZ$146mn).

■ Target price raised to NZ$10.25 (previously NZ$9.00): This is based on

the midpoint of our valuation range between NZ$9.65 (12-forward DCF

approach) and NZ$10.80 (with reference to NZ equity market and regional

sector multiples).

Share price performance

80.0

87.5

95.0

102.5

110.0

8.00

8.50

9.00

9.50

10.00

Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14

Fletcher Building Limited LHS Relative to NZX50 (RHS)

The price relative chart measures performance against the

NZX50 index which closed at 4873.5 on 13 Feb 14 .

The spot exchange rate was NZ$1.199/US$1 on 14 Feb 14.

Performance over 1M 3M 12M

Absolute(%) 5.8 -2.6 8.7

Rel-NZX50(%) 5.7 -1.5 -6.3

Year to 30 Jun 2012A 2013A 2014F 2015F 2016F

Adjusted Earnings NZ$m 314 337 368 431 514

EPS Adjusted NZc. 46.2 49.2 53.8 62.9 75.0

EPS Grow th % -16.0 6.5 9.3 17.0 19.2

P/E x 20.5 19.3 17.6 15.1 12.6

CPS NZc. 79.9 81.3 85.6 95.0 108

P/CF x 11.9 11.7 11.1 10.0 8.8

EV/EBITDA x 10.9 10.6 9.8 8.7 7.7

Net DPS NZc. 34.0 34.0 35.0 39.0 44.0

Imputation % 50.0 50.0 50.0 50.0 50.0

Net Yield % 3.6 3.6 3.7 4.1 4.6

Gross Yield % 4.3 4.3 4.4 4.9 5.5

Financial and valuation metrics

Source: Company data, NZX, First NZ Capital estimates

Rating (from Underperform) NEUTRAL* Price (14 Feb 2014, NZ$) 9.48 Target price (NZ$) (from 9.00) 10.25¹ Market cap. (NZ$mn) 6,520.86 Projected return: 0 Capital gain (%) 8.1 Dividend yield (net %) 4.0 Total return (%) 12.1 52-week price range (NZ$) 8.03-9.99

* Stock ratings are relative to the relevant country

benchmark.

¹Target price is for 12 months.

Research Analysts

Kar Yue Yeo

+64 4 474 4462

karyue.yeo@fnzc.co.nz

Andrew Peros

61 2 8205 4013

andrew.peros@credit-suisse.com

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

17 February 2014

Australia and NZ First Edition 20

Figure 1: Fletcher Building financial summary

Sector: Capital Goods NZX Code: FBU

PROFIT & LOSS ($m) BALANCE SHEET ($m)Year to 30 Jun 2012A 2013A 2014F 2015F 2016F Year to 30 Jun 2012A 2013A 2014F 2015F 2016F

Operating Rev enue 8,871 8,521 8,634 9,137 9,922 Cash & Equiv alents 168 123 123 123 123

Operating Ex penses -8,091 -7,718 -7,779 -8,182 -8,844 Debtors & Inv entories 2,894 2,699 2,694 2,851 3,095

Operating EBITDA 781 803 855 955 1,078 Other Current Assets 28.0 30.0 30.0 30.0 30.0

Depreciation -229 -220 -218 -220 -224 Current Assets 3,090 2,852 2,847 3,004 3,248

Amortisation 0.0 0.0 0.0 0.0 0.0 Fix ed Assets 2,348 2,261 2,323 2,378 2,406

Operating EBIT 552 583 637 735 853 Inv estments 224 251 251 251 251

Other Income 0.0 0.0 0.0 0.0 0.0 Intangibles 1,762 1,729 1,729 1,729 1,729

Abnormals -149 -10.0 0.0 0.0 0.0 Other Non-Current Ass. 0.0 0.0 0.0 0.0 0.0

Reported EBIT 403 573 637 735 853 Total Assets 7,424 7,093 7,150 7,361 7,635

Net Interest -152 -147 -138 -133 -129

Pretax Profit 251 426 499 602 725 Interest Bearing Debt 2,207 2,019 1,919 1,874 1,795

Tax -57.4 -85.3 -116 -155 -189 Other Liabilities 1,614 1,520 1,533 1,609 1,727

Minority Interests -8.0 -11.0 -14.9 -16.6 -22.0 Total Liabilities 3,821 3,539 3,452 3,483 3,522

Equity Accounted Profit 0.0 0.0 0.0 0.0 0.0 Minorities 32.0 35.0 49.9 66.5 88.5

Reported NPAT 185 330 368 431 514 Conv ertible Capital 0.0 0.0 0.0 0.0 0.0

Abnormals (net of tax ) -128 -7.3 0.0 0.0 0.0 Ordinary Equity 3,571 3,519 3,648 3,812 4,024

Adjusted Earnings 314 337 368 431 514 Total Funds Emp. 7,424 7,093 7,150 7,361 7,635

RATIOS AND CAPITAL STRUCTURE CASH FLOW ($m)Year to 30 Jun 2012A 2013A 2014F 2015F 2016F Year to 30 Jun 2012A 2013A 2014F 2015F 2016F

Profitability & Growth

EBITDA/Op Rev % 8.8 9.4 9.9 10.5 10.9 Operating EBITDA 781 803 855 955 1,078

EBIT/Op Rev % 6.2 6.8 7.4 8.0 8.6 Other Cash Income 0.0 0.0 0.0 0.0 0.0

Effectiv e Tax Rate % 22.9 20.0 23.2 25.7 26.1 Interest Paid -152 -149 -138 -133 -129

Return On Equity % 8.7 9.5 10.3 11.6 13.1 Tax Paid -79.0 -60.0 -116 -155 -189

ROCE % 9.8 10.5 11.6 13.2 15.0 Working Capital / Other -102 -27.2 18.5 -81.3 -127

EPS Adjusted c. 46.2 49.2 53.8 62.9 75.0 Operating Cash Flow 448 567 619 586 634

EPS Grow th % -16.0 6.5 9.3 17.0 19.2

Net DPS c. 34.0 34.0 35.0 39.0 44.0 Total Capex -344 -233 -280 -274 -253

Div idend Cov er x 1.4 1.4 1.5 1.6 1.7 Acquisitions -48.0 -13.0 0.0 0.0 0.0

Asset Backing & Capital Structure Div estments 0.0 91.0 0.0 0.0 0.0

Net Cash (Debt) $m -2,039 -1,896 -1,796 -1,751 -1,672 Div idends -201 -208 -240 -267 -301

NTA / Share $ 2.7 2.6 2.8 3.0 3.4 Equity Raised 0.0 0.0 0.0 0.0 0.0

Equity / Tot Assets % 48.5 50.1 51.7 52.7 53.9 Other 0.0 0.0 0.0 0.0 0.0

Net Debt / EBITDA x 2.6 2.4 2.1 1.8 1.6 Change in Net Debt -145 204 99.9 44.9 79.1

Interest Cov er x 3.6 4.0 4.6 5.5 6.6

Shares on Issue Capex /Depn % 150 106 129 125 113

Ordinary m 679 685 685 685 685 Capex /Rev % 3.9 2.7 3.2 3.0 2.6

Fully Diluted m 679 685 685 685 685

KEY DRIVERS DIVISIONAL EBIT ($m)Year to 30 Jun 2012A 2013A 2014F 2015F 2016F Year to 30 Jun 2012A 2013A 2014F 2015F 2016F

NZD:AUD 0.78 0.80 0.87 0.88 0.87 Construction 49.8 90.9 103 131 131

NZD:USD 0.81 0.82 0.78 0.76 0.75 Infrastructure 209 222 243 273 316

Res Consents (NZ) 15000 18800 20000 21000 23000 Building Products 105 126 136 149 169

Infrastructure ($m, real) 3530.11 3759.57 3928.75 4105.54 4208.18 Distribution 65.0 49.7 63.1 78.5 107

Non-res WPP ($m, real) 2947.69 3050.86 3203.4 3539.76 3805.24 Laminates & Panels 139 126 132 145 171

Resid. Comms. (000s, AUS)157.3 170.6 165 167.78 167.48

Source: Company data, NZX, First NZ Capital estimates

17 February 2014

Australia and NZ First Edition 21

Summary ■ Overall FNZC sector conference feedback frames a more positive picture of the

sector than we had expected – NZ housing work volume continues its recovery with

some signs of activity spreading beyond Auckland and Christchurch. NZ non-

residential market volume recovery is also underway. The NZ infrastructure market has

bottomed and on-site work volume should begin to turn up in late 2014 or early 2015.

There are expectations that the total rebuild cost in Canterbury will exceed Treasury’s

last estimate of NZ$40bn. Those operators with Australian exposure suggested a

strong recovery in NSW housing work volume and infrastructure work (ex-mining) is

projected to bottom in 2014 and should begin its recovery in 2015.

■ Lead activity indicators in NZ – Both new houses and apartments building consents

issued have continued to lift driven by Christchurch, Auckland and to a less degree the

other regions in NZ. Recovery in NZ net migration has been a factor and will likely to

continue to support higher housing formation rate. NZ stratified median house price

peaked at 10% YoY in October 2013 and has moderated to c7.7% YoY in January

2014. We note the increase in NZ new residential building consents issued YoY growth

rate has lifted from 23% in 1H 2013 to 27% in 2H 2013. The consent data in 2013

suggests NZ non-residential sector is recovering albeit less consistent than in housing.

■ Lead activity indicators in Australia – The recovery in approvals for apartments has

been the major driver of Australian total building approval levels rising by 23% YoY in

2H 2013 from 8% YoY in 1H 2013. That said, detached house building approvals have

also recorded significant improvement rising by 13% YoY in 2H 2013 from 7% YoY in

1H 2013. This recent acceleration in value of residential work approved promises

considerable pent-up growth in the next 12 months. Similarly, the recent value of non-

residential work approved also points to growth in the next 12 months.

■ Earnings revision risks: The current activity indicators we monitor (including currency

impact on demand and product pricing dynamics) point to upside risks to our 2H

FY14F forecast and likely FY15F. These analyses are outlined in Figure 4, Figure 7,

Figure 8, Figure 9). We await FBU’s pending result on 20 February to finalise changes

in our FBU’s earnings.

■ What to do with the stock? Based on our recent findings, we are upgrading FBU from

Underperform to NEUTRAL to signal a further business recovery in the sector and as

positive earnings revision risks to our FBU forecasts. We have also revised our target

price from NZ$9.00 to NZ$10.25. This is based on our valuation range of between

NZ$9.65 (12-forward DCF approach) and NZ$10.80 (using NZ FY16F core market P/E

and regional sector multiples, specifically Boral’s current FY16F P/E, for relativity).

17 February 2014

Australia and NZ First Edition 22

Key points from FNZC sector conference

Overall feedback painted a constructive view of the NZ sector – Positive outlook

expressed by presenters on the NZ sector – good volume recovery in residential, stable to

recovering volume of work in non-residential and prospects for a recovery in infrastructure.

Treasury’s Christchurch re-build cost estimate of NZ$40bn may be light – Feedback

from the presenters at our forum suggest this will likely be exceeded, though none of our

presenters ventured to offer an estimate. It would not surprise us the next estimate

reaches NZ$45bn-NZ$50bn. From the feedback we received, we concluded that 2014, by

and large, will be a planning and consenting phase for city centre redevelopment with one

or possibly two major anchor projects to commence in mid-to-late 2014.

Divergence in competition and price across difference regions observed – 1) The

average per tonne NZD steel price has declined from a peak of NZ$2,300 in late 2012 to

currently NZ$1,800 due in part to higher NZDUSD. This has also caused some

inconsistent price behaviour among the distributors. Overall dollar margin per tonne has

lifted in the industry. 2) Product price divergence is occurring due to regional differences in

demand dynamics for certain building products and construction material. 3) A lid remains

on construction margin due to keen competition in the sector with new overseas entrants.

NZ residential – This segment is likely to remain strong across Christchurch, as well as

Auckland with shortening of development and environmental consenting process for those

that qualifies under Special Housing Accord. Auckland City Council aims to lift its seven-

year residential pipeline of visible/likely projects from currently 20,000 dwellings to

100,000. This is equivalent to 14,000 new dwellings pa vs currently 5,000 consents new

dwellings consented in Auckland.

NZ non-residential – This segment is beginning to experience a significant volume lift in

recent weeks (e.g. steel) in Auckland and certain regional markets. There has also been a

strong lift in request-for-pricing activity among NZ steel fabricators. This suggests potential

lift in the pipeline of work.

NZ Infrastructure – Workflow is projected to climb in NZ across Auckland and

Christchurch as well as in irrigation schemes and roads of national significance. As an

example, the infrastructure spend in Auckland is currently at NZ$1.8bn pa and is projected

to peak at NZ$2.5bn in 2018. Auckland Infrastructure spend is forecast to deliver NZ$16bn

capex over the next seven years (an average of NZ$2.3bn pa).

Figure 2: FBU FY13a EBIT composition by geography Figure 3: In NZ, residential sector provides the best proxy

for FBU’s NZ-sourced earnings

NZ, 50%

Australia, 36%

US, 7%

Asia, 7%Europe, -1%

Others, 1%

NZ- Res, 25%

NZ-Non-Res, 13%

NZ-Other, 13%

Australia, 36%

US, 7%

Asia, 7%EU, -1%Others, 1%

Source: Company data, FNZC estimates

Source: Company data, FNZC estimates

17 February 2014

Australia and NZ First Edition 23

Figure 4: Ongoing recovery in NZ housing points to

upside risks in our forecasts for FBU NZ operation

Figure 5: Contribution from FBU’s EQR contract

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

0

50

100

150

200

250

300

1H

05a

2H

05a

1H

06a

2H

06a

1H

07a

2H

07a

1H

08a

2H

08a

1H

09a

2H

09a

1H

10a

2H

10a

1H

11a

2H

11a

1H

12a

2H

12a

1H

13a

2H

13a

1H

14F

2H

14F

NZ

six

mo

nth

ly n

ew

re

sid

en

tia

l bu

ildin

g

co

nse

nts

issu

ed

FB

U h

alf-y

ea

r N

Z E

BIT

(N

Z$

mn

)

NZ EBIT (ex-EQR) NZ New Res consents advanced by six months

Excludes gain on sale of quarry

0

2

4

6

8

10

12

14

16

18

1H

05a

2H

05a

1H

06a

2H

06a

1H

07a

2H

07a

1H

08a

2H

08a

1H

09a

2H

09a

1H

10a

2H

10a

1H

11a

2H

11a

1H

12a

2H

12a

1H

13a

2H

13a

1H

14F

2H

14F

1H

15F

2H

15F

EB

IT c

on

trib

utio

n fro

m E

QR

co

nstr

act

(NZ

$m

n)

Source: Company data, Stats NZ, FNZC estimates

Source: Company data, FNZC estimates

Figure 6: In Australia, residential sector remains the most

important contributor to earnings

Figure 7: The sharp turn in Australia 2H 2013 total

building approvals suggest upside risk for FBU 2H FY14F

earnings

NZ, 50%

Aust-Res, 20%

Aust-Non-Res, 11%

Aust-Others, 5%

US, 7%

Asia, 7%Europe, -1%Others, 1%

0

20000

40000

60000

80000

100000

120000

0

20

40

60

80

100

120

140

1H

06a

2H

06a

1H

07a

2H

07a

1H

08a

2H

08a

1H

09a

2H

09a

1H

10a

2H

10a

1H

11a

2H

11a

1H

12a

2H

12a

1H

13a

2H

13a

1H

14F

2H

14F A

ustr

alia

six

mo

nth

ly b

uild

ing

ap

pro

va

ls

FB

U h

alf-y

ea

r A

ustr

alia

EB

IT (

A$

mn

)

Australia EBIT (ex-insulation subsidy, A$mn)

Aust building approvals (advanced by six months)

Acquisitions & Rocla's rail contract (non-building)

Source: Company data, FNZC estimates

Source: ABS, company data, FNZC estimates

Figure 8: Even excluding apartments, the upturn in

Australia 2H 2013 detached houses building approvals

also points to upside risk in FBU 2H FY14F earnings

Figure 9: AUDUSD weakness should provide tailwind for

domestic demand and pricing power in FY15F

0

10000

20000

30000

40000

50000

60000

70000

0

20

40

60

80

100

120

140

1H

06a

2H

06a

1H

07a

2H

07a

1H

08a

2H

08a

1H

09a

2H

09a

1H

10a

2H

10a

1H

11a

2H

11a

1H

12a

2H

12a

1H

13a

2H

13a

1H

14F

2H

14F A

ustr

alia

six

mo

nth

ly b

uild

ing

ap

pro

va

ls

FB

U h

alf-y

ea

r A

ustr

alia

EB

IT (

A$

mn

)

Australia EBIT (ex-insulation subsidy, A$mn)

Aust building approvals (houses, advanced six months)

Acquisitions & Rocla's rail contract (non-building)

Source: ABS, company data, FNZC estimates

Source: Bloomberg, company data, FNZC estimates

17 February 2014

Australia and NZ First Edition 24

Figure 10: Trajectory for FBU North America earnings Figure 11: Trajectory for FBU Asia earnings

80

90

100

110

120

130

140

150

160

170

180

-5

0

5

10

15

20

251

H0

6a

2H

06a

1H

07a

2H

07a

1H

08a

2H

08a

1H

09a

2H

09a

1H

10a

2H

10a

1H

11a

2H

11a

1H

12a

2H

12a

1H

13a

2H

13a

1H

14F

2H

14F

FB

U h

alf y

ea

r N

ort

h A

m r

eve

nu

e (

US

$m

n)

FB

U h

alf-y

ea

r N

ort

h A

m E

BIT

(U

S$

mn

)

North America EBIT (US$mn) US revenue (US$mn)

0

20

40

60

80

100

120

0

2

4

6

8

10

12

14

16

18

20

1H

06a

2H

06a

1H

07a

2H

07a

1H

08a

2H

08a

1H

09a

2H

09a

1H

10a

2H

10a

1H

11a

2H

11a

1H

12a

2H

12a

1H

13a

2H

13a

1H

14F

2H

14F

FB

U h

alf y

ea

r A

sia

re

ve

nu

e (

US

$m

n)

FB

U h

alf-y

ea

r A

sia

EB

IT (

US

$m

n)

Asia EBIT (US$mn) Asia revenue (US$mn)

Source: Company data, FNZC estimates

Source: Company data, FNZC estimates

Figure 12: Trajectory for FBU other earnings

80

90

100

110

120

130

140

150

160

-8

-6

-4

-2

0

2

4

6

8

10

12

1H

06a

2H

06a

1H

07a

2H

07a

1H

08a

2H

08a

1H

09a

2H

09a

1H

10a

2H

10a

1H

11a

2H

11a

1H

12a

2H

12a

1H

13a

2H

13a

1H

14F

2H

14F

FB

U h

alf y

ea

r E

U r

eve

nu

e (

US

$m

n)

FB

U h

alf-y

ea

r E

U E

BIT

(U

S$

mn

)

EU EBIT (US$mn) EU revenue (US$mn)

Source: Company data, FNZC estimates

17 February 2014

Australia and NZ First Edition 25

NZ activity indicators

Figure 13: NZ home sales vs monthly total new residential

consents issued

Figure 14: NZ home sales vs monthly new residential (ex-

aptmts) consents issued

700

1,000

1,300

1,600

1,900

2,200

2,500

2,800

3,100

3,400

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

11,000

12,000

Jan

-95

Jan

-96

Jan

-97

Jan

-98

Jan

-99

Jan

-00

Jan

-01

Jan

-02

Jan

-03

Jan

-04

Jan

-05

Jan

-06

Jan

-07

Jan

-08

Jan

-09

Jan

-10

Jan

-11

Jan

-12

Jan

-13

Jan

-14

Mo

nth

ly c

on

se

nts

issu

ed

in

cl-

ap

mt

Mo

nth

ly h

ou

se

sa

les

Monthly House Sales Volume s.a. (LHS)

Monthly Consents Issued incl apmts. s.a. (RHS)

House sales is advanced 4 months in this chart

New residential approvals

continue its recovery in NZ

700

1,000

1,300

1,600

1,900

2,200

2,500

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

11,000

12,000

Jan

-95

Jan

-96

Jan

-97

Jan

-98

Jan

-99

Jan

-00

Jan

-01

Jan

-02

Jan

-03

Jan

-04

Jan

-05

Jan

-06

Jan

-07

Jan

-08

Jan

-09

Jan

-10

Jan

-11

Jan

-12

Jan

-13

Jan

-14

Mo

nth

ly c

on

se

nts

issu

ed

ex-a

pm

t

Mo

nth

ly h

ou

se

sa

les

Monthly House Sales Volume s.a. (LHS)

Monthly Consents Issued ex aptmt. s.a. (RHS)

House sales is advanced 4 months in this chart

New residential approvals continue its recovery in NZ

Source: Stats NZ, REINZ, FNZC estimates

Source: Stats NZ, REINZ, FNZC estimates

Figure 15: Auckland home sales volume appears to have

reached an intermediate peak

Figure 16: Canterbury new residential building consents

issued (ex-apmts) remain at elevated levels

0

100

200

300

400

500

600

700

800

900

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

Jan

-95

Jan

-96

Jan

-97

Jan

-98

Jan

-99

Jan

-00

Jan

-01

Jan

-02

Jan

-03

Jan

-04

Jan

-05

Jan

-06

Jan

-07

Jan

-08

Jan

-09

Jan-1

0

Jan

-11

Jan

-12

Jan

-13

Jan

-14

Mo

nth

ly c

on

se

nts

issu

ed

ex-a

pm

t

Mo

nth

ly h

ou

se

sa

les (

Au

ckla

nd

)

Auckland house sales s.a.

Consents Issued ex aptmt. Auckland s.a.

House sales is advanced by 4 months in this chart

0

100

200

300

400

500

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

Jan

-95

Jan

-96

Jan

-97

Jan

-98

Jan

-99

Jan

-00

Jan

-01

Jan

-02

Jan

-03

Jan

-04

Jan

-05

Jan

-06

Jan

-07

Jan

-08

Jan

-09

Jan

-10

Jan

-11

Jan

-12

Jan

-13

Jan

-14

Mo

nth

ly c

on

se

nts

issu

ed

ex-a

pm

t

Mo

nth

ly h

ou

se

sa

les

(Can

terb

ury

/Westla

nd)

House Sales Volume (Canterbury) s.a.

Consents Issued ex aptmt. Canterbury s.a.

House sales is advanced by 4 months in this chart

Source: Stats NZ, REINZ, FNZC estimates

Source: Stats NZ, REINZ, FNZC estimates

Figure 17: In other NZ regions, the recovery in new

residential building consents remains modest

Figure 18: The strength of in-house price growth reflects

ongoing strong Auckland housing demand

0

300

600

900

1,200

1,500

1,800

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

Jan

-95

Jan

-96

Jan

-97

Jan

-98

Jan

-99

Jan

-00

Jan

-01

Jan

-02

Jan

-03

Jan

-04

Jan

-05

Jan

-06

Jan

-07

Jan

-08

Jan

-09

Jan

-10

Jan

-11

Jan

-12

Jan

-13

Jan

-14

Mo

nth

ly c

on

se

nts

issu

ed

ex-a

pm

t

Mo

nth

ly h

ou

se

sa

les (

ex-A

uckla

nd

-C

an

terb

ury

/Westla

nd)

House Sales Volume (ex- Auckland & Canterbury) s.a.

Consents Issued ex aptmt. Ex Auckland & Canterbury s.a.

House sales is advanced by 4 months in this chart

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

Jan

-11

Ap

r-11

Jul-

11

Oct-

11

Jan

-12

Ap

r-12

Jul-

12

Oct-

12

Jan

-13

Ap

r-13

Jul-

13

Oct-

13

Jan

-14

Ap

r-14

Jul-

14

Oct-

14Y

oY

Sta

rte

fie

d m

ed

ian

ho

use

pri

ce

ch

na

ge

(%

)

Auckland Christchurch Wellington

Other North Island Other South Island

Auckland

Other regions

Christchurch

Source: Stats NZ, REINZ, FNZC estimates

Source: REINZ

17 February 2014

Australia and NZ First Edition 26

Figure 19: Housing loan approvals suggest RBNZ’s

lending limits have had some impact on demand

Figure 20: The value of NZ non-residential building

consents has slowed to +2.8% YoY in 2H 2013 vs +9.3%

YoY in 1H 2013

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

1 5 9 13 17 21 25 29 33 37 41 45 49 53

Nu

mb

er

of

mo

rta

ge a

pp

rova

ls

Calendar week-ending

2012 2013 2014

0

100

200

300

400

500

600

Ap

r-9

0

Ap

r-9

1

Ap

r-9

2

Ap

r-9

3

Ap

r-9

4

Ap

r-9

5

Apr-

96

Ap

r-9

7

Ap

r-9

8

Ap

r-9

9

Ap

r-0

0

Ap

r-0

1

Ap

r-0

2

Apr-

03

Ap

r-0

4

Ap

r-0

5

Ap

r-0

6

Ap

r-0

7

Ap

r-0

8

Ap

r-0

9

Apr-

10

Ap

r-1

1

Ap

r-1

2

Ap

r-1

3

Ap

r-1

4To

tal n

on-r

esid

en

tia

l b

uild

ing a

pp

rova

l (N

Z$

mn

)

Total monthly non-residential buildings

Total monthly non-residential building approval (3 monthly average)

Source: RBNZ

Source: Stats NZ

Figure 21: 2013 data suggest NZ non-residential sector is

recovering albeit less consistent than in housing

0

50

100

150

200

250

300

350

400

450

500

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Mo

nth

;y N

on

-re

sid

en

tial b

uild

ing

co

nse

nts

(N

Z$

mn

)

2011 2012 2013

Source: Stats NZ

17 February 2014

Australia and NZ First Edition 27

Australia activity indicator

Figure 22: Recent weakness in Australia consumer

sentiment may stifle further building approval recovery

Figure 23: Same could be said of the recovery observed

for detached homes

20

40

60

80

100

120

140

2000

4000

6000

8000

10000

12000

14000

16000

18000

Ma

r-8

4

Oct-

85

Ma

y-8

7

Dec-8

8

Jul-

90

Fe

b-9

2

Se

p-9

3

Ap

r-95

Nov-9

6

Jun

-98

Jan

-00

Au

g-0

1

Ma

r-0

3

Oct-

04

Ma

y-0

6

Dec-0

7

Jul-

09

Fe

b-1

1

Se

p-1

2

Ap

r-14

Co

nsu

me

r se

ntim

en

t

Mo

nth

ly t

ota

l b

uild

ing

ap

pro

va

ls

Monthly Total Building Approvals (s.a.) Westpac Consumer Sentiment Survey

Consumer sentiment is advanced 5 months in this chart

20

40

60

80

100

120

140

0

2000

4000

6000

8000

10000

12000

14000

Ma

r-8

4

Oct-

85

Ma

y-8

7

De

c-8

8

Jul-

90

Fe

b-9

2

Se

p-9

3

Ap

r-95

No

v-9

6

Jun

-98

Jan

-00

Au

g-0

1

Ma

r-0

3

Oct-

04

Ma

y-0

6

De

c-0

7

Jul-

09

Fe

b-1

1

Se

p-1

2

Ap

r-14

Co

nsu

me

r se

ntim

en

t

Mo

nth

ly p

riva

te s

ecto

r h

ou

se

s a

pp

rova

ls

Monthly Private Housing Approvals (s.a.)

Westpac Consumer Sentiment Survey

Consumer sentiment is advanced 5 months in this chart

Source: ABS, Westpac

Source: ABS, Westpac

Figure 24: Recent levelling of housing finance data points

to an intermediate peak in building approvals

Figure 25: Australia monthly total building approval, YoY

basis

4000

5000

6000

7000

8000

9000

10000

11000

12000

8000

10000

12000

14000

16000

18000

20000

22000

24000

Jan

-90

Jan

-91

Jan

-92

Jan

-93

Jan

-94

Jan

-95

Jan

-96

Jan

-97

Jan

-98

Jan

-99

Jan

-00

Jan

-01

Jan

-02

Jan

-03

Jan

-04

Jan

-05

Jan

-06

Jan

-07

Jan

-08

Jan

-09

Jan

-10

Jan

-11

Jan

-12

Jan

-13

Jan

-14

Fin

an

ce

Ap

pro

va

ls fo

r C

on

str

uctio

n &

Ne

w

Pu

rch

ase

Mo

nth

ly B

uild

ing

Ap

pro

va

ls

Monthly Building Approvals (s.a.)

Finance Approval for Construction & New Purchase (s.a.)

Finance approvals series is advanced 4 months in this chart

Avg. mortgage approvals

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun

Au

str

alia

mo

nth

ly b

uild

ing

ap

pro

va

ls (

tota

l,

s.a

.)

2011-12 2012-13 2013-14

Source: ABS, FNZC estimates

Source: ABS

17 February 2014

Australia and NZ First Edition 28

Figure 26: Australia monthly detached house building

approval – YoY basis

Figure 27: Recent value of residential work approved

promises pent-up growth in the next 12 months

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun

Austr

alia

mon

thly

bu

ildin

g a

ppro

vals

(fo

r h

ou

se

s, s.a

.)

2011-12 2012-13 2013-14

0.0

50.0

100.0

150.0

200.0

250.0

300.0

350.0

400.0

Jun

-86

Jun

-88

Jun

-90

Jun

-92

Jun-9

4

Jun

-96

Jun

-98

Jun

-00

Jun

-02

Jun

-04

Jun

-06

Jun

-08

Jun

-10

Jun-1

2

Jun

-14Q

trly

re

sid

en

tia

l bu

ildin

g v

olu

me

in

de

x

(Ju

n 1

98

6=

10

0)

Qtrly residential building approval (s.a., constant price)

Qtrly value of residential building work done (constant price, s.a.)

Source: ABS

Source: ABS, FNZC estimates

Figure 28: Australia monthly non-residential building

approval continues to recover – YoY basis

Figure 29: Recent value of non-residential work approved

points to growth in the next 12 months

0.0

1.0

2.0

3.0

4.0

5.0

6.0

Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun

Va

lue

of n

on

-re

sid

en

tial b

uild

ing

a

pp

rova

ls (

s.a

., A

$b

n)

2011-12 2012-13 2013-14

0.0

50.0

100.0

150.0

200.0

250.0

300.0

350.0

Jun

-86

Jun

-88

Jun

-90

Jun

-92

Jun

-94

Jun

-96

Jun

-98

Jun

-00

Jun

-02

Jun

-04

Jun

-06

Jun

-08

Jun

-10

Jun

-12

Jun

-14

Qtr

ly n

on

-re

sid

en

tial b

uild

ing

vo

lum

e

ind

ex (

Ju

n 1

98

6=

10

0)

Qtrly non-residential building approval (s.a., constant price)

Qtrly value of non-residential building work done (constant price, s.a.)

Source: ABS, FNZC estimates

Source: ABS, FNZC estimates

17 February 2014

Australia and NZ First Edition 29

Expectations for 1H FY14F

Figure 30: Our current 1H and 2H YoY EBIT growth estimates for FBU vs lead activity

indicators suggest upside revision risks to our forecasts

1H14F 1H13A % change 2H14F 2H13A % change

Construction 630 613 3% 612 580 6%

Infrastructure Products 1030 1052 -2% 1057 1043 1%

Building Products 700 701 0% 631 649 -3%

Distribution 1100 1133 -3% 1086 1008 8%

Laminates & Panels 900 881 2% 888 857 4%

Corporate

0

0 0

Total Revenue 4360 4380 0% 4274 4137 3%

EBIT pre-abnormal

Construction 47 37 27% 56 50 13%

Infrastructure Products 119 102 17% 124 120 3%

Building Products 67 60 12% 69 66 4%

Distribution 29 26 12% 34 24 42%

Laminates & Panels 62 57 9% 70 69 1%

Corporate -20 -10 100% -20 -22 -9%

Total 304 272 12% 333 307 8%

0

Net interest 70 75 -7% 68 72 -6%

PBT 234 197 19% 265 235 13%

Tax 55 39

61 49

less minorties 6 5

9 6

NPAT pre-abnormal 173 153 13% 195 180 8%

Abnormal 0 -7

0 0

Gain on property sales 0 0

0 0

Reported NPAT 173 146 19% 195 180

EBIT margin

Construction 7.5% 6.0% 1.4% 9.2% 8.6% 0.6%

Infrastructure Products 11.6% 9.7% 1.9% 11.7% 11.5% 0.2%

Building Products 9.6% 8.6% 1.0% 10.9% 10.2% 0.7%

Distribution 2.6% 2.3% 0.3% 3.1% 2.4% 0.8%

Laminates & Panels 6.9% 6.5% 0.4% 7.9% 8.1% -0.2%

Group (ex-abnormal) 7.0% 6.2% 0.8% 7.8% 7.4% 0.4%

EBIT margin ex-Steel

Tax rate 24% 20%

23.0% 21%

Operating cash flow 288 204 41% 331 355 -7%

Free cash flow (pre-acqn) 148 110 35% 192 241 -21%

Average Issued shares (mn) 688 685

688 685

Net debt (incl pension liab) 1814.0 1995.0

-16.7 1860.0

EPS 25.2 22.3 13% 28.4 26.3 8%

DPS 17.0 17.0 0% 18.0 17.0 6%

Source: Company data, FNZC estimates

Valuation comparisons

There are virtually no genuinely comparable building material companies in the region for

FBU because of differences in products, market structure and geographic composition of

revenue and earnings. That said, Boral (BLD) probably comes closest to as a multi-

building and construction materials and geographically diversified company.

Using BLD’s current FY16F multiple as benchmark, this would value FBU at NZ$10.50ps.

If we assumed NZ core equity market P/E of 15.0x for FBU, this would imply a valuation of

NZ$10.80.

In adopting the NZ$10.25 midpoint of our NZ$9.65 (12-month DCF) to NZ$10.80ps (P/E

multiple base) valuation range, we took into account that FBU has historically traded an

average 0.85x P/E relative (to NZ core equity market multiple) and less of a discount to the

market in a cyclical upturn phase.

17 February 2014

Australia and NZ First Edition 30

Figure 31: Multiples for Australia and NZ building and construction material companies

Company Name FY14 PE FY15 PE FY16 PE

FY14 EV /

EBIT

FY15 EV /

EBIT

FY16 EV /

EBIT

EPS

CAGR 14-

16F

EBIT

CAGR 14-

16F

FY14 Div

Yield

Fletcher Building 17.4 14.9 12.5 13.1 11.3 9.8 11.7% 10.2% 3.7%

CSR 23.0 16.8 12.3 14.9 11.2 8.2 23.2% 22.0% 3.6%

Adelaide Brighton 17.4 16.9 16.3 14.8 14.6 14.7 2.2% 0.2% 4.4%

Boral 24.4 19.1 14.6 21.5 20.1 15.8 18.8% 10.9% 3.1%

James Hardie

Industries SE 27.8 21.8 18.3 20.2 15.1 12.4 15.0% 17.7% 4.4%

NZ core market 17.6 15.4 15.0 13.7 12.6 12.7 na na 4.0%

FBU @ NZ$10.00 18.7x 16.0x 13.9x

FBU @ NZ$10.50 19.6x 16.8x 14.6x

FBU @ NZ$10.80 20.2x 17.2x 15.0x

Source: Credit Suisse, FNZC estimates

Australia and NZ First Edition 31

17 February 2014

Asia Pacific/New Zealand

Equity Research

Diversified Financial Services (Financials)

Heartland New Zealand

(HNZ.NZ) INCREASE TARGET PRICE

Diversifying its book and earnings

■ Event: HNZ announced the proposed acquisition of Home Equity

Release (HER) mortgage businesses in NZ and Australia for $87mn

(settlement 1 April 2014) to be funded by a ($58.7mn) capital raise to the

vendor ($38.7mn), a $20mn placement and existing cash. Underlying NPAT

contribution in the first full 12 months is expected to be $8mn-$9mn (implies

initial acquisition P/E of 9.7x to 10.9x) but integration costs of $2mn (post

tax) will weigh on HNZ’s FY14 (three months) and FY15 earnings

contribution. Inclusive of the HER business, HNZ expects FY15 NPAT to be

between $42mn and $44mn. At first glance the acquisition looks broadly

neutral as it is priced on a similar P/E to what HNZ was trading prior to the

announcement. However, we believe it is a strong strategic acquisition for

HNZ that diversifies its earnings base (new market segment but also into

Australia) and presents growth potential and a positive earnings story to

HNZ over the next few years. We have preliminarily adjusted our forecasts

to reflect the HER acquisition and guidance that HNZ’s existing business is

trading slightly below our expectations in the near term. We will look for a full

update when HNZ reports its 1H14 result on 25 February 2013.

■ Investment case: HNZ should continue to re-rate as it improves its ROE

and continues to grow and develop its business. HNZ remains on

undemanding multiples.

■ Catalysts: HNZ will release its 1H14 result on 25 February 2014.

■ Valuation: We have upgraded our target price from $0.90 to $0.96 to reflect

a heavier weight on higher FY15E earnings in our valuation approach (but

retain a forward P/E of 11x) and an increase in the asset multiples used to

set our target price to reflect the growth potential from the HER businesses.

Share price performance

90.0

97.5

105.0

112.5

120.0

0.00

0.25

0.50

0.75

1.00

Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14

Heartland New Zealand Limited LHS Relative to NZX50 (RHS)

The price relative chart measures performance against the

NZX50 index which closed at 4873.5 on 13 Feb 14

The spot exchange rate was NZ$1.199/US$1 on 14 Feb 14

Performance Over 1M 3M 12M

Absolute (%) 4.7 3.5 30.7

Rel-NZX50(%) 4.5 4.6 15.7

Year to 30 Jun 2012A 2013A 2014F 2015F 2016F

Adjusted Earnings NZ$m 40.3 6.9 35.2 42.0 46.2

EPS Adjusted NZc. 10.4 1.8 8.6 9.1 9.9

EPS Grow th % 341 -82.8 384 5.1 8.7

P/E x 8.8 51.1 10.6 10.0 9.2

CPS NZc. 10.6 2.0 8.8 9.2 10.0

P/CF x 8.6 46.4 10.3 9.9 9.1

EV/EBITDA x 104 198 50.1 47.7 44.7

Net DPS NZc. 0.0 3.5 6.0 6.5 7.0

Imputation % 100 100 100 100 100

Net Yield % 0.0 3.8 6.6 7.1 7.7

Gross Yield % 0.0 5.3 9.2 9.9 10.7

Financial and valuation metrics

Source: Company data, NZX, First NZ Capital estimates

Rating NEUTRAL* Price (14 Feb 2014, NZ$) 0.91 Target price (NZ$) (from 0.90) 0.96¹ Market cap. (NZ$mn) 357.22 Projected return: 0 Capital gain (%) -1.1 Dividend yield (net %) 6.9 Total return (%) 5.8 52-week price range (NZ$) 0.71-0.92

* Stock ratings are relative to the relevant country

benchmark.

¹Target price is for 12 months.

Research Analysts

Greg Main CFA

64 4 474 4061

greg.main@fnzc.co.nz

Disclaimer:

First NZ Capital is acting as underwriter to

Heartland in its NZ$5m share purchase plan to

shareholders

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

17 February 2014

Australia and NZ First Edition 32

Figure 1: Heartland New Zealand financial summary

Sector: Diversified Financials NZX Code: HNZ

PROFIT & LOSS ($m) BALANCE SHEET ($m)Year to 30 Jun 2012A 2013A 2014F 2015F 2016F Year to 30 Jun 2012A 2013A 2014F 2015F 2016F

Operating Rev enue 92.9 107 121 136 138 Cash & Equiv alents 89.7 174 150 150 150

Operating Ex penses -73.3 -96.0 -70.1 -75.4 -71.1 Debtors & Inv entories 2,113 2,043 2,770 2,861 2,980

Operating EBITDA 19.6 10.9 51.1 60.6 66.6 Other Current Assets 21.4 10.1 10.1 10.1 10.1

Depreciation -0.8 -0.7 -0.8 -0.8 -0.8 Current Assets 2,224 2,227 2,930 3,021 3,140

Amortisation -1.1 -1.2 -1.4 -1.4 -1.4 Fix ed Assets 10.1 10.3 10.3 10.3 10.3

Operating EBIT 17.8 8.9 48.9 58.4 64.4 Inv estments 83.0 228 187 178 172

Other Income 0.0 0.0 0.0 0.0 0.0 Intangibles 23.0 23.0 23.0 23.0 23.0

Abnormals 9.6 0.0 0.0 0.0 0.0 Other Non-Current Ass. 8.1 16.4 16.4 16.4 16.4

Reported EBIT 27.4 8.9 48.9 58.4 64.4 Total Assets 2,348 2,505 3,166 3,248 3,361

Net Interest 0.0 0.0 0.0 0.0 0.0

Pretax Profit 27.4 8.9 48.9 58.4 64.4 Interest Bearing Debt 1,939 2,098 2,679 2,745 2,838

Tax 3.3 -2.5 -14.2 -17.0 -18.7 Other Liabilities 33.8 36.5 36.5 36.5 36.5

Minority Interests 0.0 0.0 0.0 0.0 0.0 Total Liabilities 1,973 2,134 2,716 2,781 2,875

Equity Accounted Profit 0.0 0.5 0.5 0.5 0.5 Minorities 0.0 0.0 0.0 0.0 0.0

Reported NPAT 30.7 6.9 35.2 42.0 46.2 Conv ertible Capital 0.0 0.0 0.0 0.0 0.0

Abnormals (net of tax ) -9.6 0.0 0.0 0.0 0.0 Ordinary Equity 375 371 450 467 486

Adjusted Earnings 40.3 6.9 35.2 42.0 46.2 Total Funds Emp. 2,348 2,505 3,166 3,248 3,361

RATIOS AND CAPITAL STRUCTURE CASH FLOW ($m)Year to 30 Jun 2012A 2013A 2014F 2015F 2016F Year to 30 Jun 2012A 2013A 2014F 2015F 2016F

Profitability & Growth

EBITDA/Op Rev % 21.1 10.2 42.2 44.6 48.4 Operating EBITDA 19.6 10.9 51.1 60.6 66.6

EBIT/Op Rev % 19.2 8.3 40.3 43.0 46.8 Other Cash Income 0.0 0.0 0.0 0.0 0.0

Effectiv e Tax Rate % -12.0 28.1 29.0 29.0 29.0 Interest Paid 0.0 0.0 0.0 0.0 0.0

Return On Equity % 12.0 1.9 8.6 9.2 9.7 Tax Paid 0.0 0.0 -22.4 -25.2 -26.9

ROCE % 0.9 0.4 1.9 2.0 2.1 Working Capital / Other -18.7 59.6 -711 -71.4 -103

EPS Adjusted c. 10.4 1.8 8.6 9.1 9.9 Operating Cash Flow 0.9 70.5 -683 -35.9 -63.0

EPS Grow th % 341 -82.8 384 5.1 8.7

Net DPS c. 0.0 3.5 6.0 6.5 7.0 Total Capex -3.2 -2.3 -2.2 -2.2 -2.2

Div idend Cov er x 0.5 1.4 1.4 1.4 Acquisitions -32.3 -131 -87.0 0.0 0.0

Asset Backing & Capital Structure Div estments 0.8 3.2 0.0 0.0 0.0

Net Cash (Debt) $m -1,850 -1,923 -2,529 -2,595 -2,688 Div idends 0.0 -13.6 -27.7 -30.3 -33.0

NTA / Share $ 0.9 0.9 0.9 1.0 1.1 Equity Raised 55.0 0.0 65.1 5.3 5.8

Equity / Tot Assets % 16.0 14.8 14.2 14.4 14.5 Other 0.0 0.0 0.0 0.0 0.0

Net Debt / EBITDA x 94.2 177 49.5 42.8 40.4 Change in Net Debt 21.2 -73.6 -734 -63.1 -92.5

Interest Cov er x

Shares on Issue Capex /Depn % 420 318 278 278 278

Ordinary m 389 389 461 466 472 Capex /Rev % 3.4 2.1 1.8 1.6 1.6

Fully Diluted m 389 389 461 466 429

KEY ASSUMPTIONSYear to 30 Jun 2012A 2013A 2014F 2015F 2016F

Profitability Ratios:

Net Interest Spread (%) 3.29 1.12 0.64 0.48 0.46

Op cost to income ratio (%) 70.6 65.8 53.1 52.0 49.1

Bad Debt Charge:

BD chrg % of av g fin rec (%) 0.45 1.09 0.28 0.24 0.19

Provisioning:

Collectiv e prov ision % 0.38 0.77 0.46 0.32 0.23

Specific prov ision % 0.92 1.68 0.92 0.48 0.21

Total prov ision % 1.30 2.45 1.37 0.80 0.44

Credit Growth

Sy stem Credit Grow th % 1.3 3.5 4.0 4.1 4.5

Finance Receiv ables Grow th %-2.3 -2.1 34.7 2.7 3.8

Residential12%

Consumer30%

Leases2%

Rural29%

Business23%

Non-Core Property

Book

4%

Loan Book Split

Source: Company data, NZX, First NZ Capital estimates

17 February 2014

Australia and NZ First Edition 33

Diversifying the earnings base

HNZ has entered into a Sale and Purchase Agreement with Seniors Money International

Limited for the acquisition of its NZ and Australian Home Equity Release (HER) mortgage

businesses. Consideration is $87mn and settlement is 1 April 2014. Underlying NPAT

contribution in the first full 12 months is expected to be $8mn-$9mn (implies initial

acquisition P/E of 9.7x to 10.9x) but integration costs of $2mn (post tax) will weigh on the

earnings contribution in HNZ’s FY14 (3 months) and FY15 financial years. Inclusive of the

HER business HNZ expects FY15 NPAT to be between $42mn and $44mn.

HNZ is funding the acquisition via:

■ $20mn capital raising via a $15mn institutional placement and $5mn share purchase

plan.

■ $38.7mn placemen to the Vendor at $0.90 per share (43mn shares representing circa

14% of post deal shares on issue). All shares issued to the Vendor are subject to a

minimum 12-month lock-up. Presumably this implies some overhang post the escrow

period.

■ The balance ($28.3mn) is being funded via cash reserves.

From a valuation perspective, at first glance the acquisition looks broadly neutral as it is

being priced on a similar P/E to what HNZ was trading at prior to the announcement.

However, we see it as being a strong strategic acquisition for HNZ that diversifies its

earnings base (new market segment but also into Australia) and presents some attractive

underlying growth potential that should see the HER business help provide a positive

earnings story to HNZ over the next few years.

Figure 2: Pro forma HNZ balance sheet expansion

Source: Company data, FNZC estimates

One slightly disappointing aspect of the announcement, but not a total surprise, is that

HNZ expects its existing business (i.e., excluding the HER acquisitions) to only increase

NPAT by circa 5% in FY15 over FY14. Our previous forecasts were for NPAT to increase

from $34.8mn to $39.2mn (+12.6%). HNZ will release its 1H14 result on 25 February 2014

and said it expects 1H14 NPAT to be circa $16.5mn (our forecast $17.5mn). HNZ has

retained its guidance for FY14 NPAT of $34mn to $37mn but it obviously now includes one

quarter's contribution from the HER businesses, albeit there will be some integration and

other upfront costs likely.

We suspect part of the issue has been the impact the LVR restrictions have had with the

main trading banks looking to replace lost earnings in other areas and this has impacted

HNZ. In addition, credit growth has probably tracked a bit weaker than we had expected

17 February 2014

Australia and NZ First Edition 34

and it could also relate to the timing of expected cost efficiencies. We will get more details

at the result. However, we have preliminarily adjusted our forecasts to reflect the lower

core business forecasts and for the acquisition of the HER businesses. We have

maintained our DPS forecast at 6cps for FY14 and have set a DPS of 6.5cps for FY15

(previous 6.8cps). Although we still have to discuss with HNZ how the acquisition will

impact its prudential capital requirements, we expect HNZ to still be relatively well

capitalised implying some potential further bolt-on acquisitions going forward.

We have elected to increase our target price from $0.90ps to $0.96. The increased target

price reflects greater weight on FY15 EPS forecast since our last note (even though we

have lowered our FY15 EPS forecast) and we have increased the asset based multiples

we use to set our target price to reflect the greater growth prospects of the MER business.

We note that based on FY15E P/E outlook, HNZ continues to trade at a discount to its

Australian peers (average 12.6x vs 10.0x for HNZ) and at a higher dividend yield.

Figure 3: Preliminary revised forecasts

NZ$mn FY14F FY15F

Was Now %Ch Was Now %Ch

Net Interest Income 108.6 109.9 1.1% 116.0 125.4 8.1%

Net Operating Income 119.2 121.1 1.6% 125.8 136.0 8.1%

Operating expenses 60.6 62.2 2.7% 60.7 68.5 12.9%

Impaired asset expense 8.4 7.9

8.7 6.9

Operating profit before taxation 48.8 49.4 1.2% 55.0 58.9 7.2%

Taxation (14.0) (14.2) 1.2% (15.8) (16.9) 7.2%

Net profit after taxation 34.8 35.2 1.2% 39.2 42.0 7.1%

Less Abnormals 0.0 0.0 N/A 0.0 0.0 N/A

Adjusted NPAT 34.8 35.2 1.2% 39.2 42.0 7.1%

EPS (cents) 8.9 8.6 -3.7% 10.1 9.1 -10.1%

EPS adj. (cents) 8.9 8.6 -3.7% 10.1 9.1 -10.1%

DPS (cents) 6.0 6.0 -0.5% 6.8 6.5 -4.2%

Source: Company data, FNZC estimates

Highlights of the businesses to be acquired

Sentinel is the number one HER provider in NZ with approximately 80% market share.

AFS is the largest non-bank HER loan provider in Australia, with approximately 20%

market share.

Commonwealth Bank of Australia (CBA) has agreed to continue to provide committed

facilities to HNZ to fund the Sentinel and AFS portfolios for a term of five and a half years,

on similar terms to those currently in place.

Figure 4: Key metrics of businesses acquired

NZ Australia

Sentinel AFS

Established 2003 2004

Approximate market share 80% 20%

Portfolio size NZ$340m A$380m

Number of loans 4,048 4,245

Average loan - current NZ$84.2k A$89.8k

Average loan at origination NZ$39.5k A$45.1k

Average property value NZ$324.7k A$344.3k

Weighted average age 77.8 years 76.2 years

Weighted average current LVR 32.7% 31.8%

Weighted average original LVR 15.6% 17.1%

Source: Company data, FNZC estimates

Australia and NZ First Edition 35

17 February 2014

Asia Pacific/Australia

Equity Research

Building Materials & Construction (Building Materials (AU))

James Hardie Industries SE

(JHX.AX / JHX AU) COMPANY UPDATE

Positive volume and price momentum

■ Louisiana Pacific (LP.US) reports 4Q: Louisiana Pacific, a key competitor

of JHX in the US siding & trim market, reported its 4Q (Dec) 2013 result. The

stock was up 5.5% on the back of this result. The read-through typically

serves are a useful (albeit not precise) proxy for US fibre cement volume

and price trends.

■ The LP 4Q result (SmartSide division): A positive mix shift led prices up

(+4%) and strong volume (+20%) was underpinned by growth in the R&R

segment (single family and DIY also improving). This is despite weather

disruptions (Polar Vortex) in the latter part of the qtr which continued into

January 2014. Pleasingly, a number of distributors reported that January

2014 (weather impaired) activity was still better than the pcp. Pent-up

demand is material and this should accelerate when the weather breaks.

■ Read-though: JHX's US fibre cement volumes exhibiting a strong

relationship to LP’s SmartSide volume with a 0.7 correlation through the

cycle. Strong price growth (led by +ve mix shift) is also indicative of a

change in consumer and homebuilder sentiment towards more higher priced

and quality products. This plays right into the hands of JHX and was the key

driver of JHX’s 4% price rise at the previous 2Q result. For JHX, we are

increasingly confident that trend momentum will grow into FY14-15.

■ Other points of interest: (1) US new home construction activity to increase

20% in CY2014; (2) still significant pent-up demand; (3) first-time homebuyer

is unlikely to participate until there is more job growth and an increased

availability to financing; and (4) builders optimistic about 2014 activity, but

concerned about labour shortages.

■ Catalyst: JHX reports 3Q FY14 on 28 February 2014.

Total return forecast in perspective

Mean^CSEC tgt^

Sh Prc

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

12mth Volatility* 52wk Hi-Lo IBES Consensustarget return^

Performance over 1M 3M 12M

Absolute (%) 1.1 8.4 39.9

Relative (%) -0.1 10.1 34.6

Financial and valuation metrics

Year 03/13A 03/14E 03/15E 03/16E

Revenue (US$mn) 1,321.3 1,480.5 1,716.4 1,987.2

EBITDA (US$mn) 242.2 324.4 417.1 498.3

EBIT (US$mn) 181.0 257.9 344.7 420.0

Net income (US$mn) 140.8 193.2 246.0 293.4

EPS (CS adj.) (USc) 32.06 43.59 55.51 66.22

Change from previous EPS (%) n.a. — — —

Consensus EPS (USc) n.a. 41.30 53.10 66.40

EPS growth (%) -0.4 36.0 27.3 19.3

P/E (x) 37.0 27.2 21.4 17.9

Dividend (USc) 18.00 53.00 61.00 68.00

Dividend yield (%) 1.5 4.5 5.1 5.7

P/B (x) 287.0 -223.7 -109.9 -94.3

Net debt/equity (%) net cash net cash net cash net cash

Relative performance versus S&P ASX 200.See Reference

Appendix for a description of the chart. Source: Credit Suisse

estimates, * Consensus, mean range from Thomson Reuters

Source: Company data, ASX, Credit Suisse estimates, * Adj. for goodwill, notional interest and unusual items. Relative P/E

against ASX/S&P200 based on pre GW in AUD. Company PE calculation is based on displayed EPS Currency

Rating OUTPERFORM*

Price (13 Feb 14, A$) 13.19

Target price (A$) 13.50¹

Market cap. (A$mn) 5,850.30

Yr avg. mthly trading (A$mn) 307

Last month's trading (A$mn) 352

Projected return:

Capital gain (%) 2.4

Dividend yield (net %) 5.1

Total return (%) 7.4

52-week price range 13.8 - 8.9

* Stock ratings are relative to the relevant country

benchmark.

¹Target price is for 12 months.

Research Analysts

Andrew Peros

61 2 8205 4013

andrew.peros@credit-suisse.com

17 February 2014

Australia and NZ First Edition 36

Figure 1: Financial Summary

James Hardie Industries SE (JHX) Year ending 31 Mar In USDmn, unless otherwise stated2012 2013 2014 2015 2016 2012 2013 2014 2015 2016

Share Price: A$13.19 Earnings 03/12A 03/13A 03/14E 03/15E 03/16ERating OUTPERFORM c_EPS_SHARESEquiv. FPO (period avg.) mn 436.2 439.2 443.1 443.1 443.1

Target Price A$ 13.50 c_EPS*100EPS (Normalised) c 32.2 32.1 43.6 55.5 66.2

vs Share price % 2.35 EPS_GROWTH*100EPS Growth % -0.4 36.0 27.3 19.3

DCF A$ 14.22 c_EBITDA_MARGIN*100EBITDA Margin % 20.5 18.3 21.9 24.3 25.1

c_DPS*100DPS c 42.0 18.0 53.0 61.0 68.0

c_PAYOUT*100Payout % 130.5 56.1 121.6 109.9 102.7

FRANKING*100Franking % 0.0 0.0 0.0 0.0 0.0

c_FCF_PS*100Free CFPS c 80.6 11.0 29.4 30.7 59.9

Profit & Loss 03/12A 03/13A 03/14E 03/15E 03/16E c_TAX_RATE*100Effective tax rate % 22.4 23.2 24.6 25.5 25.4

Sales revenue 1,237.5 1,321.3 1,480.5 1,716.4 1,987.2 ValuationEBITDA 253.6 242.2 324.4 417.1 498.3 c_PEP/E x 36.8 37.0 27.2 21.4 17.9

Depr. & Amort. (65.2) (61.2) (66.5) (72.4) (78.3) c_EBIT_MULTIPLE_CURREV/EBIT x 26.5 28.2 20.6 16.1 13.4

EBIT 188.4 181.0 257.9 344.7 420.0 c_EBITDA_MULTIPLE_CUEV/EBITDA x 19.7 21.1 16.4 13.3 11.3

Associates 0.0 0.0 0.0 0.0 0.0 c_DIV_YIELD*100Dividend Yield % 3.5 1.5 4.5 4.6 5.2

Net interest Exp. (7.4) 2.4 (1.6) (14.5) (26.5) c_FCF_YIELD*100FCF Yield % 6.8 0.9 2.5 2.6 5.1

Other 0.0 0.0 0.0 0.0 0.0 c_PBPrice to Book x 41.1 287.0 -223.7 -109.9 -94.3

Profit before tax 181.0 183.4 256.2 330.2 393.5 ReturnsIncome tax (40.6) (42.6) (63.1) (84.2) (100.0) c_ROE*100Return on Equity % 111.1 773.6 -822.4 -514.4 -527.0

Profit after tax 140.4 140.8 193.2 246.0 293.4 c_I_NPAT/c_I_SALES*100Profit Margin % 11.3 10.7 13.0 14.3 14.8

Minorities (0.0) (0.0) (0.0) (0.0) (0.0) c_I_SALES/c_B_TOT_ASSAsset Turnover x 0.5 0.6 0.6 0.7 0.8

Preferred dividends 0.0 0.0 0.0 0.0 0.0 c_ASSETS/c_EQ_COMMONEquity Multiplier x 18.3 115.8 -98.7 -52.2 -46.3

Associates & Other (0.0) 0.0 0.0 0.0 0.0 c_ROA*100Return on Assets % 6.1 6.7 8.3 9.9 11.4

Normalised NPAT 140.4 140.8 193.2 246.0 293.4 c_ROIC*100Return on Invested Cap. % -105.1 -102.6 719.3 107.5 96.6

Unusual item after tax 463.9 (95.3) 0.0 0.0 0.0 GearingReported NPAT 604.3 45.5 193.2 246.0 293.4 c_GEARING*100Net Debt to Net debt + Equity % Net Cash Net Cash 186.9 120.0 117.2

c_NET_DEBT/c_I_EBITDANet Debt to EBITDA x Net Cash Net Cash 0.2 0.7 0.8

Balance Sheet 03/12A 03/13A 03/14E 03/15E 03/16E c_I_EBITDA/ c_I_NET_INTERESTInt Cover (EBITDA/Net Int.) x 34.3 -100.9 200.9 28.7 18.8

Cash & equivalents 265.4 153.7 153.7 153.7 153.7 c_I_EBIT/ c_I_NET_INTERESTInt Cover (EBIT/Net Int.) x 25.5 -75.4 159.7 23.7 15.8

Inventories 189.0 172.1 220.1 292.9 327.1 (c_C_CAPEX/c_I_SALES)*-100Capex to Sales % 2.9 4.6 10.1 8.6 5.4

Receivables 343.1 272.3 350.0 381.2 397.4 (c_C_CAPEX/c_I_DEPR)*-100Capex to Depreciation % 54.9 99.8 225.8 204.5 136.8

Other current assets 78.1 92.9 92.9 92.9 92.9

Current assets 875.6 691.0 816.7 920.7 971.0 MSCI IVA (ESG) Rating BBProperty, plant & equip. 665.5 658.9 742.6 818.3 847.1 TP ESG Risk (%): -18

Intangibles 0.0 0.0 0.0 0.0 0.0

Other non-current assets 768.9 757.7 757.7 757.7 757.7

Non-current assets 1,434.4 1,416.6 1,500.3 1,576.0 1,604.8

Total assets 2,310.0 2,107.6 2,317.0 2,496.7 2,575.8

Payables 92.6 98.1 153.0 176.3 225.4

Interest bearing debt 0.0 0.0 204.2 440.3 533.7

Other liabilities 2,091.0 1,991.3 1,983.2 1,927.9 1,872.4 MSCI IVA Risk: Neutral

Total liabilities 2,183.6 2,089.4 2,340.5 2,544.5 2,631.5

Net assets 126.4 18.2 -23.5 -47.8 -55.7

Ordinary equity 126.4 18.2 -23.5 -47.8 -55.7

Minority interests 0.0 0.0 0.0 0.0 0.0

Preferred capital 0.0 0.0 0.0 0.0 0.0

Total shareholder funds 126.4 18.2 -23.5 -47.8 -55.7

Net debt -265.4 -153.7 50.5 286.6 380.0 Source: MSCI IVA Rating

Cashflow 03/12A 03/13A 03/14E 03/15E 03/16E Share Price Performance

EBIT 188.4 181.0 257.9 344.7 420.0

Net interest -11.2 -0.1 -1.6 -14.5 -26.5

Depr & Amort 65.2 61.2 66.5 72.4 78.3

Tax paid 267.2 -83.3 -53.3 -78.9 -96.1

Working capital 0.0 -34.0 -68.6 -78.5 1.0

Other -122.4 -15.5 -20.0 -62.9 -61.7

Operating cashflow 387.2 109.3 180.9 182.3 315.1

Capex -35.8 -61.1 -150.2 -148.1 -107.1

Capex - expansionary 0.0 0.0 -99.5 -102.0 -57.5

Capex - maintenance -35.8 -61.1 -50.7 -46.1 -49.6

Acquisitions & Invest 0.0 0.0 0.0 0.0 0.0

Asset sale proceeds 0.0 1.4 0.0 0.0 0.0

Other -14.1 0.0 0.0 0.0 0.0

Investing cashflow -49.9 -59.7 -150.2 -148.1 -107.1

Dividends paid -17.4 -188.5 -234.8 -270.3 -301.3

Equity raised -8.0 26.3 0.0 0.0 0.0

Net borrowings -59.0 0.0 204.2 236.1 93.4

Other 0.0 3.5 0.0 0.0 0.0 1 Month 3 Month 12 Month

Financing cashflow -84.4 -158.7 -30.6 -34.2 -207.9 Absolute 1.1% 8.4% 39.9%

Total cashflow 252.9 -109.1 0.0 0.0 0.0 Relative -0.1% 10.1% 34.6%

Adjustments -6.1 -2.6 0.0 0.0 0.0

Net change in cash 246.8 -111.7 0.0 0.0 0.0 Source: Reuters 52 week trading range: 8.90-13.80

MSCI IVA Risk Comment: JHX has appropriately provided for the

asbestos liability on its B/S and cash payments (35% op CF) are

made into the asbestos fund. A reduction in the projected future

number of asbestos claims to be reported for a number of disease

types implies the liability is appropriately provided for.

James Hardie Industries SE (JHX). is an international building materials company focused on

fibre cement products. JHX is the dominant manufacturer of fibre cement in the US, Australia,

New Zealand and the Philippines.

Credit Suisse View

TP Risk Comment: Our JHX val'v is reduced by A$1.42/share

(18.0%) due to the asbestos liability. Our valuation captures a

nominal impact from carbon (>1%) effective 1 July 2012. MSCI

ascribes a 33% weighting to carbon which we believe is

overstated.

4.00

6.00

8.00

10.00

12.00

14.00

16.00

Feb 13 Apr 13 Jun 13 Aug 13 Oct 13 Dec 13 Feb 14

JHX.AX XJO

1.8

2.8

3.8

4.8

5.8

6.8

Environment Social Governance

Stock Local Sector

Country Global Sector

Source: Company data, Credit Suisse estimates

17 February 2014

Australia and NZ First Edition 37

The following information has been extracted from LP presentation slides and the

post 4Q result conference call.

LP.US 4Q 2013 read-through

■ For the quarter, SmartSide average sale price (most relevant division for JHX) was up

4%, and volume increased a meaningful 20%. This was driven by continued

penetration in several key focus markets, including repair & remodel along with new

housing markets.

■ Prices in the SmartSide siding product line primarily increased due to changes in

product mix.

■ Of lesser importance, CanExel divisional volume declined 9%, but these are very

lumpy given distributors stocking methods. CanExel prices were flat for the quarter.

End-market comments

■ Repair and remodel (R&R) was a strong growth segment, while new single-family

construction and retail (DIY) saw solid volume improvements.

■ Housing is forecast to increase 20% in 2014.

■ The single-family segment is still focused on more affluent buyers, as evidenced by

the average square footage being the highest ever.

■ A sustained recovery requires the first homebuyer to participate in activity.

■ Despite weather challenges in many parts of the country in January, many of LP’s

channel partners had a better January this year than they did in January of last year,

and they all say there's pent-up demand that will accelerate activity when the weather

does break.

■ Builders are optimistic about 2014, with the number of exhibitors at the International

Builders Show was up about 20%. Attendance was probably 30% to 35% higher than

last year.

Other points of interest

Comments/feedback from the Policy Advisory Board of the Harvard Joint Center for

Housing Studies.

■ The general mood on the market was upbeat, and lots of comments on pent-up

demand.

■ Consensus estimates from this group were also in that 1.1 million start range for 2014.

■ There's still a strong belief that the first-time homebuyer is unlikely to participate, until

there is more job growth and an increased availability to financing.

■ There was a general feeling that the price increases experienced across the country in

2013 will moderate, in all but the best markets.

■ Builders continue to be concerned about labor shortages, both skilled and unskilled

workers, and most participants were calling for immigration reform as a means to ease

some of this tension.

■ There does not appear to be much confidence that Congress will pass any reform on

the government-sponsored entities (Freddie Mac and Fannie Mae) that back

mortgages.

17 February 2014

Australia and NZ First Edition 38

Focus charts

Figure 2: JHX volume vs LP volume (YoY chg%)

-45%

-30%

-15%

0%

15%

30%

45%

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

James Hardie (Fibre Cement) Louisiana Pacific (SmartSide)

Volume YoY

Source: Company data, Credit Suisse estimates

Figure 3: JHX price vs LP price (YoY chg%)

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

James Hardie (Fibre Cement) Louisiana Pacific (SmartSide)

Price YoY

Source: Company data, Credit Suisse estimates

Australia and NZ First Edition 39

17 February 2014

Asia Pacific/New Zealand

Equity Research

Specialty Retail (Consumer Discretionary)

■

■

Michael Hill International

(MHI.NZ / MHI NZ) RESULTS

1H14 result – steady as she goes ■ PBT, at A$28.5mn, compared with the pcp at A$27.0mn, up 5.1%, and

was reasonably consistent with our estimate at A$28.7mn. MHI reported

1H14 reported earnings at A$16.2mn, down 26.3% compared with the pcp,

and less than 30% compared with our 1H14 estimates. However, the result

was impacted by a tax provision which has now been provided for in relation

to the tax dispute with the Australian Taxation Office (ATO). We estimate the

amount in the vicinity of A$7mn (based on our 1H14 tax estimate relative to

the reported amount).

■ Sales figures, and the composition thereof, had already been disclosed

at the time of the 2H14 sales release, with the depreciation of the AUD

relative to its respective regional currencies providing a meaningful

tailwind with regards headline AUD revenues. EBIT margins held up

reasonably well in the context of a challenging environment, but the

inclusion of the high margin PCP was supportive of earnings.

■ We expect MHI’s performance to be steady for a time. Key catalysts for

performance include an improvement in the Australian economy (not

expected any time soon), seeing the NZ management team get some

meaningful traction (expected over next 12 months), with continued growth

in the North American business considered a plus (but not a key valuation

driver). We would also like to see the excess inventory issue resolved

sooner rather than later.

■ We retain our NZ$1.67 target price. We continue to believe that the

business model is intact for MHI, but acknowledge that the stock may

languish at around current levels until such a time as the issues

addressed above (either macro or business specific) improve and/or

are resolved.

Share price performance

90.0

105.0

120.0

135.0

150.0

1.00

1.25

1.50

1.75

2.00

Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14

Michael Hill International Limited LHS Relative to NZX50 (RHS)

The price relative chart measures performance against the

NZX50 index which closed at 4873.5 on 13 Feb 14

The spot exchange rate was NZ$1.202/US$1 on 13 Feb 14

Performance over 1M 3M 12M

Absolute (%) -2.8 -11.4 21.1

Rel-NZX50(%) -2.9 -10.3 6.2

Year to 30 Jun 2012A 2013A 2014F 2015F 2016F

Adjusted Earnings NZ$m 36.5 39.7 39.6 45.3 41.6

EPS Adjusted NZc. 9.5 10.4 10.4 11.8 10.9

EPS Grow th % 5.9 8.8 -0.3 14.3 -8.2

P/E x 14.7 13.5 13.5 11.8 12.9

CPS NZc. 12.8 13.8 14.3 16.3 15.7

P/CF x 11.0 10.2 9.8 8.6 8.9

EV/EBITDA x 9.7 8.9 8.8 7.6 7.0

Net DPS NZc. 5.5 6.5 6.5 7.5 6.8

Imputation % 0.0 0.0 0.0 0.0 0.0

Net Yield % 3.9 4.6 4.7 5.3 4.9

Gross Yield % 3.9 4.6 4.7 5.3 4.9

Financial and valuation metrics

Source: Company data, NZX, First NZ Capital estimates

Rating OUTPERFORM* Price (14 Feb 2014, NZ$) 1.38 Target price (NZ$) 1.67¹ Market cap. (NZ$mn) 536.26 Projected return: 0 Capital gain (%) 19.3 Dividend yield (net %) 5.1 Total return (%) 24.4 52-week price range (NZ$) 1.22-1.60

* Stock ratings are relative to the relevant country

benchmark.

¹Target price is for 12 months.

Research Analysts

Sarndra Urlich

64 4 496 5363

sarndra.urlich@fnzc.co.nz

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

17 February 2014

Australia and NZ First Edition 40

Figure 1: Michael Hill International financial summary

Sector: Retailing NZX Code: MHIPROFIT & LOSS ($m) BALANCE SHEET ($m)

Year to 30 Jun 2012A 2013A 2014F 2015F 2016F Year to 30 Jun 2012A 2013A 2014F 2015F 2016F

Operating Rev enue 513 550 539 580 618 Cash & Equiv alents 12.1 12.5 12.5 12.5 12.5

Operating Ex penses -455 -487 -476 -509 -541 Debtors & Inv entories 199 202 195 209 222

Operating EBITDA 58.2 62.9 62.7 71.2 77.1 Other Current Assets 0.0 0.0 0.0 0.0 0.0

Depreciation -12.3 -13.0 -15.3 -17.0 -18.5 Current Assets 211 215 207 222 235

Amortisation 0.0 0.0 0.0 0.0 0.0 Fix ed Assets 47.1 60.1 74.4 83.2 89.6

Operating EBIT 45.9 49.8 47.4 54.2 58.5 Inv estments 0.0 0.0 0.0 0.0 0.0

Other Income 0.0 0.0 0.0 0.0 0.0 Intangibles 0.0 0.0 0.0 0.0 0.0

Abnormals 0.0 0.0 0.0 0.0 0.0 Other Non-Current Ass. 65.6 73.2 73.2 73.2 73.2

Reported EBIT 45.9 49.8 47.4 54.2 58.5 Total Assets 324 348 355 378 398

Net Interest -3.9 -3.1 -2.0 -1.0 -0.8

Pretax Profit 42.0 46.7 45.3 53.2 57.7 Interest Bearing Debt 33.1 33.4 19.2 18.6 17.4

Tax -5.5 -7.0 -5.7 -7.9 -16.2 Other Liabilities 96.2 108 114 121 127

Minority Interests 0.0 0.0 0.0 0.0 0.0 Total Liabilities 129 141 133 140 144

Equity Accounted Profit 0.0 0.0 0.0 0.0 0.0 Minorities 0.0 0.0 0.0 0.0 0.0

Reported NPAT 36.5 39.7 39.6 45.3 41.6 Conv ertible Capital 0.0 0.0 0.0 0.0 0.0

Abnormals (net of tax ) 0.0 0.0 0.0 0.0 0.0 Ordinary Equity 194 207 222 238 254

Adjusted Earnings 36.5 39.7 39.6 45.3 41.6 Total Funds Emp. 324 348 355 378 398

RATIOS AND CAPITAL STRUCTURE CASH FLOW ($m)

Year to 30 Jun 2012A 2013A 2014F 2015F 2016F Year to 30 Jun 2012A 2013A 2014F 2015F 2016F

Profitability & Growth

EBITDA/Op Rev % 11.3 11.4 11.6 12.3 12.5 Operating EBITDA 58.2 62.9 62.7 71.2 77.1

EBIT/Op Rev % 8.9 9.1 8.8 9.3 9.5 Other Cash Income 0.5 9.8 6.5 5.2 4.1

Effectiv e Tax Rate % 13.2 15.0 12.6 14.8 28.0 Interest Paid -3.9 -2.7 -2.0 -1.0 -0.8

Return On Equity % 19.6 19.8 18.5 19.7 16.9 Tax Paid -1.4 -11.9 -5.7 -7.9 -16.2

ROCE % 21.3 22.5 20.8 22.9 23.3 Working Capital / Other -1.3 -5.7 5.8 -10.9 -10.0

EPS Adjusted c. 9.5 10.4 10.4 11.8 10.9 Operating Cash Flow 52.2 52.5 67.2 56.6 54.2

EPS Grow th % 5.9 8.8 -0.3 14.3 -8.2

Net DPS c. 5.5 6.5 6.5 7.5 6.8 Total Capex -17.9 -28.6 -28.0 -27.5 -26.9

Div idend Cov er x 1.7 1.6 1.6 1.6 1.6 Acquisitions 0.0 0.0 0.0 0.0 0.0

Asset Backing & Capital Structure Div estments 0.0 0.0 0.0 0.0 0.0

Net Cash (Debt) $m -21.0 -20.9 -6.7 -6.1 -5.0 Div idends -19.1 -23.0 -25.0 -28.6 -26.2

NTA / Share $ 0.5 0.5 0.6 0.6 0.7 Equity Raised 0.0 0.0 0.0 0.0 0.0

Equity / Tot Assets % 60.1 59.4 62.4 63.0 63.8 Other 0.0 -2.9 0.0 0.0 0.0

Net Debt / EBITDA x 0.4 0.3 0.1 0.1 0.1 Change in Net Debt 15.1 -2.0 14.2 0.6 1.2

Interest Cov er x 11.9 16.1 23.2 57.0 71.4

Shares on Issue Capex /Depn % 145 219 184 162 145

Ordinary m 383 383 383 383 383 Capex /Rev % 3.5 5.2 5.2 4.7 4.4

Fully Diluted m 383 383 383 383 383

KEY ASSUMPTIONS

Year to 30 Jun 2012A 2013A 2014F 2015F 2016F

Sales by Region

Australia 333.17 361.24 340.5 361.45 378.98

NZ 109.11 111.36 106.16 110.91 115.26

Canada 55.12 64.14 80.74 96.38 112.32

US 12 12.47 10.97 11.08 11.19

Other 2.09 0.41 0.41 0.41 0.41

EBIT by Region

Australia 47.51 52.74 49.71 52.77 55.33

NZ 21.55 22.13 21.34 22.29 23.17

Canada 0.71 1.36 1.71 2.04 2.37

US -3.32 -2.87 -1.1 -1.11 0

Unallocated Ex penses -8.26 -10.48 -9.01 -4.82 -3.81

Australia61%

NZ19%

Canada17%

US3%

Stores by Region FY13A

Source: Company data, NZX, First NZ Capital estimates

17 February 2014

Australia and NZ First Edition 41

1H14 result – tax and inventories a bit of a dampener

Summary

MHI reported 1H14 reported earnings at A$16.2mn, down 26.3% compared with the pcp,

and less than 30% compared with our 1H14 estimates.

However, the result was impacted by a tax provision which has now been provided for in

relation to the tax dispute with the ATO. We estimate the amount in the vicinity of A$7mn

(based on our 1H14 tax estimate relative to the reported amount).

PBT, at A$28.5mn, compared with the pcp at A$27.0mn, up 5.1%, and was reasonably

consistent with our estimate at A$28.7mn.

Although the GP margin at 64.6% exceeded our estimate by 100bp (and the pcp by 71bp),

we underestimated SG&A costs by A$2.8mn, and the pcp by A$14.9mn. This is clearly

telling regarding a lack of operating leverage during the key Xmas/holiday season.

Sales figures, and the composition thereof, had already been disclosed at the time of the

2H14 sales release, with the depreciation of the AUD relative to its respective regional

currencies providing a meaningful tailwind with regards to headline AUD revenues.

Figure 2: 1H14 earnings summary (A$mn)

1H14a 1H13a Change 1H14e 1H14a/1H14e

Trading revenue 262.4 242.7 8.1% 262.4 0%

PCP 8.3 4.0 108.7% 8.3 0%

Other revenue 0.3 0.1 113.3% 0.2 71%

Total operating revenue 271.1 246.8 9.8% 270.8 0%

COGS -95.9 -89.1 7.7% -98.6 -3%

GP 175.2 157.7 11.1% 172.3 2%

Employee benefits -69.0 -60.2 14.6% -67.6 2%

Occupancy costs -23.0 -20.3 13.2% -22.5 2%

Selling & marketing -29.8 -28.4 5.0% -29.2 2%

Other expenses -17.2 -15.2 13.4% -16.9 2%

S,G&A -139.0 -124.1 12.0% -136.2 2%

EBITDA 36.1 33.7 7.4% 36.0 0%

D&A -6.2 -5.0 23.0% -6.0 3%

EBIT 29.9 28.6 4.6% 30.0 0%

Interest -1.5 -1.5 -4.0% -1.3 12%

PBT 28.5 27.1 5.1% 28.7 -1%

Tax -12.2 -5.1 141.7% -5.5 124%

NPAT 16.2 22.0 -26.3% 23.2 -30%

Margins/ratios 1H14a 1H13a ∆ bp 1H14e

COGS 35.4% 36.1% -71.0 36.4%

GP 64.6% 63.9% +71.0 63.6%

Employee benefits 25.4% 22.2% +324.3 25.0%

Occupancy costs 8.5% 7.5% +99.2 8.3%

Selling & marketing 11.0% 10.5% +52.9 10.8%

Other expenses 6.4% 5.6% +74.9 6.2%

S,G&A/revenues 51.3% 50.3% +101.2 50.3%

EBITDA 13.3% 13.6% -30.2 13.3%

EBIT 11.0% 11.6% -54.8 11.1%

PCP revenue brought to income 8.3 4.0 109% 8.3

PCP revenue collected 17.6 14.3 23% 17.6

Metrics 1H14a 1H13a

1H14e

eps cps 4.2 5.8

6.1

dps cps 2.5 2.5

2.2

payout ratio 58.9% 43.4%

36.2%

Total stores #'s 279 263 +16

Source: MHI

17 February 2014

Australia and NZ First Edition 42

Divisional breakdown

Figures 3 through 6 summarise the divisional results from MHI’s respective geographies.

Figure 3: Segment result Australian operations

Australia 1H14a 1H13a chg

Sales $Amn 171.7 162.7 5.5%

Sales $NZmn 192.3 206.4 -6.8%

Segment result $Amn 29.0 28.0 3.6%

Segment result $NZmn 32.5 35.4 -8.3%

Margin 16.9% 17.1% -25.7

NZD/AUD 0.89 0.79 13.3%

Stores 166 160 +6

Sales/store $Amn 1.03 1.02 1.7%

sss 1.4% 3.8%

Ratio total sales 63% 66% -2.6%

Source: MHI

Figure 4: Segment result NZ operations

New Zealand 1H14a 1H13a chg

Sales $Amn 54.3 49.8 9.1%

Sales $NZmn 60.8 63.1 -3.7%

Segment result $Amn 11.1 10.2 8.3%

Segment result $NZmn 12.4 13.0 -4.4%

Margin 20.4% 20.5% -0.5%

stores 53 52 +1

sales/stores (cc) 1.15 1.21 -5.5%

sss -4.1% 3.0%

Ratio total sales 20.0% 20.2% -0.1%

Source: MHI

Figure 5: Segment result Canadian operations

Canada 1H14a 1H13a chg

Sales $Amn 39.4 28.5 38.0%

Sales $CADmn 37.9 29.5 28.5%

Segment result $Amn 2.98 1.49 100.4%

Segment result $CADmn 2.86 1.53 86.7%

Margin 7.6% 5.3% 228.2

AUD/CAD 1.04 0.97 7.4%

Stores 52 42 +10

Sales/store $CADmn 0.73 0.70 3.8%

sss 7.9% 3.8%

Ratio total sales 14.5% 11.6% 3.0%

Source: MHI

Figure 6: Segment result US operations

USD 1H14a 1H13a chg

Sales $Amn 5.5 5.3 3.8%

Sales $USmn 5.0 5.5 -8.4%

Segment result $Amn -0.6 -1.2 -51.2%

Segment result $USmn -0.5 -1.3 -57.0%

Margin -10.9% -23.1% -53.0%

AUD/USD 1.09 0.96 13.4%

Stores 8 9 -1

Sales/store $USmn 0.6 0.6 3.0%

Ratio total sales 2.0% 2.1% -0.1%

Source: MHI

17 February 2014

Australia and NZ First Edition 43

What’s the story

Key themes from MHI’s respective geographies are as follows:

■ Australia: Australia saw lower SSS growth than the pcp, although these were at least

in [small] positive territory. This was largely reflective of a sluggish retail landscape, a

scenario that we do not see changing in the near term. Margins held up reasonably

well, but the disproportionately high PCP margins supported this. Australia now

comprises 63% total sales, down from 66%.

■ New Zealand: As discussed at the time of the 1H14 sales result, a combination of

sluggish underlying trends and disruptive changes to its management team had a

disproportionate negative impact on sales (down 4.1%, compared with +3.0% at the

pcp). Margins held steady compared with those in 1H13, again supported by the PCP

contribution.

■ Canada: Canada was the shining light of this result, with SSS growth at +7.9%, and

margins up from 5.3% to 7.6%. MHI attributed this, in part, to economies of scale

associated with a critical mass of stores at 52 (up from 42 at 1H13).

■ US: Sales remain small in the context of MHI’s portfolio, although reassuringly 1H14

saw a lessening of losses compared to the pcp.

Asset backing, capital structure, and ratios

Figure 7 profiles MHI’s OCF, gearing and cover ratios. The key point to note is the

deterioration in OCF compared to the pcp. This is a function of significant inventory being

deployed in North America as part of MHI’s new bridal range strategy. MHI is targeting a

correction of the excess inventory during 2H14 as it can be utilised across the group (i.e.,

merchandise is not obsolete).

Figure 7: Asset backing, capital structure and ratios (A$mn)

1H14a 1H13a Change $

OCF -2.3 22.2 -24.4

Capex 11.3 10.9 0.4

NIBD 46.1 16.4 29.8

Gearing 19.1% 9.9%

Interest cover (x) 20.6 18.9

Fixed charge cover (x) 1.8 1.8

Stock turn (x) 1.3 1.5

Source: MHI

PCP data

PCP data is summarised in Figure 8.

Figure 8: PCP data (A$mn)

PCP data 1H14a 1H13a

Revenue collected 17.6 14.2

Revenue brought to income 8.3 4.0

Deferred revenue carried forward to balance sheet 49.4 35.2

Source: MHI

Australia and NZ First Edition 44

17 February 2014

Asia Pacific/Australia

Equity Research

Precious Metals (Gold (AU))

Newcrest Mining

(NCM.AX / NCM AU) RESULTS

1H FY14 result spot on. Debt up on working

capital and FX

■ Underlying NPAT $207mn (CS $206mn). Reported NPAT $40mn reflects

previously advised $120mn tax expense and $47mn impairment of West

Africa exploration assets. FY13 reported $5.8bn loss post $6.2bn write

down.

■ $228mn operating cash flow impacted by $200mn working capital movement

and $70mn tax payment for prior R&D claims. 2H expected to see a ~$100m

working capital release for a $370mn turnaround. No dividend.

■ Operating cash flow less than the $421mn capex (Cadia East development),

resulting in debt draw. 2H cash flow increase should exceed capex increase.

■ No write down of Telfer despite reserves restated from 11.6moz to 6.3moz.

Current mine plan consumes less than half the written down reserves.

■ Group Reserves restated to 78moz from 87.7moz comprising: 3moz

depletion, -5moz Telfer leaving 6.3Moz, -2.5moz at Lihir. Resource restated

to 150moz from 161.2Moz. Reserve and RSC price assumptions

unchanged.

■ Net debt $4.5bn versus June 30 $4.14bn. $164mn attributable FX on USD

denominated debt. Available liquidity A$1,250mn (FY13 A$958mn) in cash

and undrawn facilities before additional liquidity of US$200mn in January.

■ No change to FY14 production guidance or strategy. Each asset managed to

be cash flow neutral or positive in FY14 at A$1,450/oz.

■ TP unchanged at $8.20/share. Rating remains underperform.

Total return forecast in perspective

Mean^

CS tgt^

Sh Prc

-40%

10%

60%

110%

12mth Volatility* 52wk Hi-Lo IBES Consensustarget return^

Performance over 1M 3M 12M

Absolute (%) 29.5 15.1 -52.7

Relative (%) 27.4 15.9 -59.0

Financial and valuation metrics

Year 06/13A 06/14E 06/15E 06/16E

Revenue (A$mn) 3,775.0 3,825.4 4,223.1 4,229.5

EBITDA (A$mn) 1,367.0 1,234.5 1,627.6 1,738.5

EBIT (A$mn) 756.0 657.9 1,032.4 1,119.5

Net income (A$mn) 451.0 295.8 530.6 605.7

EPS (CS adj.) (Ac) 58.89 38.63 69.27 79.07

Change from previous EPS (%) n.a. 1.5 -1.8 -1.6

Consensus EPS (Ac) n.a. 39.00 55.90 74.50

EPS growth (%) -58.4 -34.4 79.3 14.2

P/E (x) 18.8 28.6 16.0 14.0

Dividend (Ac) 12.00 — — 20.00

Dividend yield (%) 1.1 — — 1.8

P/B (x) 0.85 0.80 0.76 0.72

Net debt/equity (%) 41.1 37.9 31.2 24.7

Relative performance versus S&P ASX 200.See Reference

Appendix for a description of the chart. Source: Credit Suisse

estimates, * Consensus, mean range from Thomson Reuters

Source: Company data, ASX, Credit Suisse estimates, * Adj. for goodwill, notional interest and unusual items. Relative P/E

against ASX/S&P200 based on pre GW in AUD. Company PE calculation is based on displayed EPS Currency

Rating UNDERPERFORM* [V]

Price (14 Feb 14, A$) 11.05

Target price (A$) 8.20¹

Market cap. (A$mn) 8,469.95

Yr avg. mthly trading (A$mn) 1,515

Last month's trading (A$mn) 1,330

Projected return:

Capital gain (%) -25.8

Dividend yield (net %) —

Total return (%) -25.8

52-week price range 23.4 - 7.0

* Stock ratings are relative to the relevant country

benchmark.

¹Target price is for 12 months.

[V] = Stock considered volatile (see Disclosure Appendix).

Research Analysts

Michael Slifirski

61 3 9280 1845

michael.slifirski@credit-suisse.com

Sam Webb

61 3 9280 1716

sam.webb@credit-suisse.com

17 February 2014

Australia and NZ First Edition 45

Figure 1: NCM Financial Summary

Newcrest Mining (NCM) Year ending 30 Jun In AUDmn, unless otherwise stated2012 2013 2014 2015 2016 2012 2013 2014 2015 2016

Share Price: A$11.05 Earnings 06/12A 06/13A 06/14E 06/15E 06/16ERating UNDERPERFORM c_EPS_SHARESEquiv. FPO (period avg.) mn 765.9 765.8 765.8 766.0 766.0

Target Price A$ 8.20 c_EPS*100EPS (Normalised) c 141.5 58.9 38.1 70.5 80.4

vs Share price % -25.79 EPS_GROWTH*100EPS Growth % -58.4 -34.4 79.3 14.2

DCF A$ 8.08 c_EBITDA_MARGIN*100EBITDA Margin % 48.7 36.2 32.3 38.5 41.1

c_DPS*100DPS c 35.0 12.0 0.0 0.0 20.0

c_PAYOUT*100Payout % 24.7 20.4 0.0 0.0 25.3

FRANKING*100Franking % 15.0 0.0 0.0 0.0 0.0

c_FCF_PS*100Free CFPS c 52.4 10.9 36.1 135.7 145.8

Profit & Loss 06/12A 06/13A 06/14E 06/15E 06/16E c_TAX_RATE*100Effective tax rate % 26.2 25.5 31.0 29.8 29.8

Sales revenue 4,416.0 3,775.0 3,825.4 4,223.1 4,229.5 ValuationEBITDA 2,151.0 1,367.0 1,234.5 1,627.6 1,738.5 c_PEP/E x 7.8 18.8 28.6 16.0 14.0

Depr. & Amort. (561.0) (611.0) (576.6) (595.2) (619.0) c_EBIT_MULTIPLE_CURREV/EBIT x 6.7 16.7 19.1 11.6 10.2

EBIT 1,590.0 756.0 657.9 1,032.4 1,119.5 c_EBITDA_MULTIPLE_CUEV/EBITDA x 4.9 9.2 10.2 7.4 6.6

Associates 0.0 0.0 0.0 0.0 0.0 c_DIV_YIELD*100Dividend Yield % 3.2 1.1 0.0 0.0 1.8

Net interest Exp. (41.0) (109.0) (199.7) (239.7) (222.4) c_FCF_YIELD*100FCF Yield % 4.7 1.0 3.3 12.3 13.2

Other 0.0 0.0 0.0 0.0 0.0 c_PBPrice to Book x 0.6 0.9 0.8 0.8 0.7

Profit before tax 1,549.0 647.0 458.2 792.7 897.0 ReturnsIncome tax (406.1) (165.0) (142.0) (236.3) (267.6) c_ROE*100Return on Equity % 7.2 4.5 2.8 4.7 5.2

Profit after tax 1,142.9 482.0 316.2 556.4 629.4 c_I_NPAT/c_I_SALES*100Profit Margin % 24.5 11.9 7.7 12.6 14.3

Minorities (58.9) (31.0) (20.4) (25.8) (23.7) c_I_SALES/c_B_TOT_ASSAsset Turnover x 0.2 0.2 0.2 0.2 0.2

Preferred dividends 0.0 0.0 0.0 0.0 0.0 c_ASSETS/c_EQ_COMMONEquity Multiplier x 1.4 1.7 1.7 1.7 1.6

Associates & Other 0.0 (0.0) 0.0 0.0 0.0 c_ROA*100Return on Assets % 5.3 2.6 1.7 2.9 3.2

Normalised NPAT 1,084.0 451.0 295.8 530.6 605.7 c_ROIC*100Return on Invested Cap. % 6.8 4.0 3.0 4.9 5.3

Unusual item after tax 33.0 (6,229.0) (191.1) (8.2) (1.6) GearingReported NPAT 1,117.1 (5,778.0) 104.7 522.4 604.1 c_GEARING*100Net Debt to Net debt + Equity % 12.5 29.1 27.5 23.8 19.8

c_NET_DEBT/c_I_EBITDANet Debt to EBITDA x 1.0 3.0 3.3 2.2 1.7

Balance Sheet 06/12A 06/13A 06/14E 06/15E 06/16E c_I_EBITDA/ c_I_NET_INTERESTInt Cover (EBITDA/Net Int.) x 52.5 12.5 6.2 6.8 7.8

Cash & equivalents 242.0 69.0 231.7 659.9 1,142.7 c_I_EBIT/ c_I_NET_INTERESTInt Cover (EBIT/Net Int.) x 38.8 6.9 3.3 4.3 5.0

Inventories 748.0 946.0 723.7 656.3 678.6 (c_C_CAPEX/c_I_SALES)*-100Capex to Sales % 57.9 51.5 21.5 18.2 15.6

Receivables 251.0 178.0 217.1 397.0 410.4 (c_C_CAPEX/c_I_DEPR)*-100Capex to Depreciation % 511.9 357.5 160.1 148.3 121.7

Other current assets 223.0 232.0 194.1 199.0 207.1

Current assets 1,464.0 1,425.0 1,366.7 1,912.1 2,438.8 MSCI IVA (ESG) Rating BBProperty, plant & equip. 4,364.0 5,544.0 5,943.5 6,194.3 6,312.1 TP ESG Risk (%): 0

Intangibles 3,852.0 550.0 546.1 536.9 528.6

Other non-current assets 10,829.0 9,666.0 9,897.2 9,911.1 9,902.5

Non-current assets 19,045.0 15,760.0 16,386.8 16,642.3 16,743.2

Total assets 20,509.0 17,185.0 17,753.5 18,554.5 19,182.0

Payables 482.0 620.0 361.9 587.5 607.4

Interest bearing debt 2,408.0 4,211.0 4,324.6 4,202.6 4,085.0

Other liabilities 2,525.0 2,269.0 2,264.0 2,405.1 2,577.5 MSCI IVA Risk: Neutral

Total liabilities 5,415.0 7,100.0 6,950.5 7,195.2 7,269.9

Net assets 15,094.0 10,085.0 10,803.0 11,359.3 11,912.1

Ordinary equity 14,975.0 9,945.0 10,643.5 11,174.1 11,703.1

Minority interests 119.0 140.0 159.4 185.2 209.0

Preferred capital 0.0 0.0 0.0 0.0 0.0

Total shareholder funds 15,094.0 10,085.0 10,803.0 11,359.3 11,912.1

Net debt 2,166.0 4,142.0 4,092.9 3,542.7 2,942.3 Source: MSCI IVA Rating

Cashflow 06/12A 06/13A 06/14E 06/15E 06/16E Share Price Performance

EBIT 1,590.0 756.0 657.9 1,032.4 1,119.5

Net interest -31.0 -97.0 -190.9 -244.6 -230.6

Depr & Amort 561.0 611.0 576.6 595.2 619.0

Tax paid -219.0 -162.0 -151.9 -95.2 -95.2

Working capital 183.0 13.0 -75.0 113.2 -15.8

Other -358.0 -414.0 -153.1 -26.6 55.0

Operating cashflow 1,726.0 707.0 663.6 1,374.4 1,451.8

Capex -2,556.0 -1,946.0 -822.0 -770.2 -660.8

Capex - expansionary -1,231.7 -1,322.6 -435.1 -435.2 -325.4

Capex - maintenance -1,324.3 -623.4 -387.0 -335.0 -335.0

Acquisitions & Invest -158.0 -152.0 -72.3 -54.0 -114.0

Asset sale proceeds 0.0 0.0 0.0 0.0 0.0

Other -41.0 -26.0 0.0 0.0 0.0

Investing cashflow -2,755.0 -2,124.0 -894.3 -824.2 -774.8

Dividends paid -405.0 -256.0 0.0 0.0 -76.6

Equity raised 0.0 0.0 0.0 0.0 0.0

Net borrowings 1,543.0 1,379.0 399.4 -122.1 -117.6

Other -48.0 113.0 -7.0 0.0 0.0 1 Month 3 Month 12 Month

Financing cashflow 1,090.0 1,236.0 392.4 -122.1 -194.2 Absolute 29.5% 15.1% -52.7%

Total cashflow 61.0 -181.0 161.7 428.2 482.8 Relative 27.4% 15.9% -59.0%

Adjustments -4.0 8.0 1.0 0.0 0.0

Net change in cash 57.0 -173.0 162.7 428.2 482.8 Source: Reuters 52 week trading range: 6.99-23.10

MSCI IVA Risk Comment: Given performance and rating

provided, feel change in rating in near-term may be unlikely.

14/02/2014 19:36

Newcrest Mining Limited (NCM) is engaged in the exploration, mine development, operations

and the sale of gold and gold/copper concentrate. NCM has exploration and production

operations in Australia, Indonesia, Cote d’Ivoire, Papua New Guinea and Fiji.

Credit Suisse View

TP Risk Comment: No additional ESG downside risk

incorporated into our Target Price outside of already assumed

cost pressure from labour in our modelled assumptions.

0.00

5.00

10.00

15.00

20.00

25.00

30.00

4/02/2013 4/04/2013 4/06/2013 4/08/2013 4/10/2013 4/12/2013 4/02/2014

NCM.AX XJO

1.8

2.8

3.8

4.8

5.8

6.8

Environment Social Governance

Stock Local Sector Country Global Sector

Source: Company data, Credit Suisse estimates

17 February 2014

Australia and NZ First Edition 46

No great surprise in 1H14 result

After a very satisfactory DecQ and 1H operating performance, Newcrest has delivered an

in-line profit result, but a higher debt outcome.

While optically disappointing, the one off unfavourable $200mn working capital increase

and $70mn cash tax payment for prior periods, accounts entirely for the need for the debt

draw for the half. The magnitude of the net debt increase exceeds debt draw, due to FX

re-statement. Gearing is less impacted due to $8bmn of Newcrest's assets being offshore

and USD denominated.

Management indicated the working capital will be more balanced over the year, with an

expectation of a $100mn release in 2H14. The net impact relative to the 1H is potentially a

$370mn turn around. This more than exceeds the expected higher capital expenditure in

2H14 so should deliver a lower year end net debt outcome, subject to metal prices and

production outcome being delivered on plan.

Reserve and resource restatement was significantly more benign than we had expected,

leading to a reduced impairment compared to what might have been if adjustments were

more significant. We had expected Telfer's reserves to be written down to match the

articulated 4-5 year production plan, or to ~3moz from prior 11.6moz. The 4.6moz

adjustment to 6.3moz (reduction of open pit reserves) leaves more than twice the planned

production, suggesting room for a future adjustment or for an extension to the current plan.

It could also be a deferral of the decision to a future period to assist with the optics of

gearing, avoiding a ~$700mn write down of the asset.

The small adjustment to Lihir's reserves of 2.5moz to a still robust 29moz reflects an

increase in the cut-off grade from 0.75g/t to 1g/t which will lead to a reduced stockpile

build and lower grade material tipped as waste. This makes sense, with a recoverable

value of US$32/oz at U$$1,250/oz compared to a future recovery and processing cost of

perhaps $40/t at current operating cost. Clearly management expect costs to decline

further during the stockpile recovery phase, probably from a material reduction in the

admin overhead when mining ceases.

Management sounded materially more relaxed on the call than on prior recent calls,

suggesting a greater level of comfort with the business. This also appeared to be

expressed through comments around the balance sheet, suggesting a "progressive

reduction in gearing over time subject to market and operating conditions". This resonates

with our analysis that indicates that free cash generating increases materially after next

year when the $400mn annual capital investment in Cadia East falls to $100mn and cash

generation from Cadia East rises.

■ Operational NPAT of $207mn, (CS $206mn, 2H13A $131mn, 1H13A $320mn), spot

on our expectations.

■ Statutory profit $40mn after $120mn R&D tax hit and $47mn exploration impairment.

■ Net debt up as expected to $4.5bn, from A$4.143bn (1H $3,106mn), $164mn

attributable FX on USD denominated debt. Available liquidity A$1,250mn (FY13

A$958mn) in cash and undrawn facilities before additional liquidity of US$200mn in

January. This is a good outcome given:

o One off $70mn tax cost

o One off $200mn working capital hit

o Constrained cash generation during ramp up

o Elevated capex while Cadia East development and Lihir remediation capital is

spend.

17 February 2014

Australia and NZ First Edition 47

■ However, we note that the 2H will see higher capital expenditure but more than offset

by higher expected operating cash flow.

■ We also note that 1H net debt could have been worse if projected growth and

sustaining capital had been evenly spread across the year, not skewed to the 2H.

■ Cost cutting evident in reductions in:

o Corporate overheads falling to $40mn (annualised below guidance) from FY13

$132mn (2H $66mn, 1H $66mn). Guidance was that 2H12 should be annualised

for FY13. FY14 guided to be lower at $85-$95m reflecting cost saving initiatives,

office closures and redundancies. FY13 corporate overheads include underlying

$102mn, $22mn depreciation and $8mn equity payments.

o Exploration expenditure and expenses falling to $36mn and $12mn respectively.

■ Weak operating cash flow of $228mnn from (2H13 $482mn, 1H13 $225mn) down on

FY12 $1.726bn and FY11 $1.729bn, reflecting subdued production from the Cadia

Valley and Lihir operations, undermined by weaker metal prices, reduced by increased

capitalised stripping and adverse working capital movements and the tax payment.

Adjusting for working capital and tax, operating cash flow was a robust $498mn.

■ Tax paid $78mn including the adverse $70mn R&D claim reversal (2H $44mn,

1HFY13 $118mn, FY12 $219mn, $107mn in FY11). No longer protected by Australian

tax losses but with on-going R&D deductions reducing the tax rate, but full tax paid in

Indonesia from Gosowong. No Australian tax forecast to be paid this year.

■ Abating capital re-investment of $457mn (FY13 $1,946mn, 2H13 $824mn, 1H 13

$1,122mn including exploration).

■ No dividend as per expectation.

■ The heavy capital investment phase has another year to run at Cadia East in FY15 to

complete panel cave #2. The Lihir remediation, included in sustaining capital, is

completed this year.

Operations profit review

Lihir Island – no visibility of FY15 strategy but expect less stockpile?

The 8Mt of stockpiled ore carries a $55mn accounting charge in addition to a $2/t cost of

handling. This is included in the $675-$735mn cash cost.

17 February 2014

Australia and NZ First Edition 48

Figure 2: Lihir FY14

Milling Stockpile recovery: 80% Mine:

11.5Mtpa 8Mt @ 2.3g/t 3.5Mt @ 2.9g/t

592koz contained 326koz contained

90% recovery

Float 8Mt @ 2.3g/t

8Mtpa 90% recovery 88% recovery

40% mass pull

88% recovery

Autoclave 3.2Mt @ 5.18g/t 3.5Mt @ 2.9g/t

10Mtpa capacity but 6.7Mt utilised 88% recovery 88% recovery

recover 469koz recover 287koz

CIL 756koz

Source: Company data, Credit Suisse estimates

■ $192mn EBITDA (FY13 $540mn EBITDA), 24.4% of group total but on 57.9% group

net operating assets.

■ No additional asset write-down with only trivial adjustment to end of mine life reserves

now excluded from future stockpiles by a higher cut-off grade assumption.

■ FY13 A$3,492mn, US$3,240mn write down of US$3,643mn goodwill based on a

5.25% favourable discount rate (5.5%) but unfavourable reduction in gold multiple

from 1.4 to 1.0x.

■ 1H14 $121mn capex of FY14F $290mn - $320mn (comprising A$140mn-$155mn

stripping Minifie and $150-$165mn in sustaining capital inclusive of the old plant

refurbishment capital). Project capital declines to only $2-5mn.

■ Still no clarity around Kapit/Kapit North East until studies are completed and the cost

and scope of the sea wall are defined. This project will be deferred as long as possible

– possibly by >10 years.

■ 5 year outlook for production and capital not provided but does not include Kapit but

does include additional flotation capital.

■ Site costs up on MOPU plant ramp up and increased mining activity to $391mn in

1H14 (JunQ13 $217mn, MarQ13 $166mn, DecQ12 $144mn, SepQ12 $124mn).

■ 1H depreciation of $263/oz above guided ~$200/oz (FY13 A$206/oz, JunQ $215/oz).

■ 1H14 all in sustaining cost of $1,201/oz on 398,669oz or $479mn at the bottom end of

the FY14F all in sustaining cost of production of A$965-$1,060mn to produce 700-

800koz, an implied cash cost range of $1,206 - $1,514/oz.

■ 1H sustaining capital $37mn.

■ 1H project capex of $6mn excludes the old plant remediation capital carried within

sustaining capex.

17 February 2014

Australia and NZ First Edition 49

Cadia – ramping up as expected – small change to guidance as stockpiles cut

Cadia guidance was marginally reduced with the DecQ with the elimination of low grade

stockpiled tonnes from the production plan. These appeared to remain cash flow positive

to us and this has been confirmed by them remaining in reserves. Initially an implied 8-

10Mt of capacity was available for the treatment of very low grade stockpiles. 1H

stockpiles treated totalled 3.429Mt before cessation of this ore source.

Management has been clear that stockpiles will only be processed where they are cash

flow positive. The Cadia mills will no longer be fully utilised in FY14.

■ $341mn EBITDA, 43.3% of group total or 27.5% group net operating assets.

■ Cadia East on schedule. Commercial production was from 1 January 2013 resulting in

previously capitalised interest now being expensed.

■ Cadia East capex forecast unchanged at $349-$380mn of total site capital of $405-

$445mn, down on FY13 $525mn and A$1,108mn capital spent in FY12.

■ Very confident on ramp up profile with progress ahead of schedule but with cessation

of low grade stockpile treatment, 2H production expected to be a little below 1H

305.5moz of a FY14 guidance figure of 480-530koz.

■ 5 year targeted production of 800koz. No change to plan.

■ On-going development capex of $100mn/yr after $1.3bn of cave development capital

over the next 5 years plus 11 additional $100mn crushers required over balance of

mine life.

■ 1H14 sustaining capital $21.7mn of FY14F site sustaining capital of $50-60mn/yr.

■ 1H14 depreciation of $309/oz, flat on $313/oz in FY13, materially up on FY12 $240/oz

reflecting higher Cadia East capital base and lower FY13F production from low grade

stockpiles.

■ Trivial exploration budget of $1-2mn.

■ 1H14 AISC of $90mn of FY14F all in sustaining cost of production guidance of A$265-

$300mn (after by-product credits) to produce 480-530koz, an implied cash cost range

of $500 - $625/oz.

■ 1H sustaining capital $21mn.

■ Site project capital of $340-$380mn is the only group capital not included in all in

sustaining capital. 1H14 Capex of $141mn is at the low end of capex guidance,

suggesting an elevated 2H.

Bonikro

■ $8mn EBITDA, 1% of group total on 3.2% group net operating assets.

■ Additional $47mn exploration write off on top of the FY13 $480mn write-down

including all of the US$188mn goodwill.

■ Targeted mill expansion from current 2Mtpa to 3.5Mtpa to increase production from

current 100koz/yr to ~225koz/yr at a cash cost of ~US$600-650/oz remains deferred

indefinitely from prior FY16 targeted for expanded production rate, following a year of

ramp up.

■ $120mn capex in FY13 declines to $25-30mn in FY14 including $15-20m stripping (in

all in sustaining costs). 1H capex zero.

■ 1H sustaining capital $2mn.

17 February 2014

Australia and NZ First Edition 50

■ 1H AISC of $63mn at the high end of FY14F for All in sustaining cost of A$105-125mn

to produce 80-95koz suggest a cost range of A$1,147/oz to $1,563/oz.

Telfer – stripping largely complete

■ $135mn EBITDA, 17.1% of group total but on 5.4% group net operating assets.

■ No additional write down of Telfer, despite reserves written down for 11.6moz to

6.3moz after adjustment for depletion. FY13 saw $1,175mn write down reflect a loss of

shareholder funds on a project that failed to deliver on feasibility projections. This book

value reflects real dollars invested in the project that are not expected to be recovered.

■ Production guidance of 400-450koz in FY14 from 525.5koz in FY13.

■ Mine life potentially limited to 4-5 years unless further significant deployment of capital.

Capital is required to produce more than half the written down reserve.

■ Underground production sustainable for 5 years after which a contribution from the

emerging VSC or West Dome Deep is require. Drilling is progressing but the capital

hurdle makes such an investment unlikely.

■ FY14 Capital expenditure of $80-90mn includes $20-25mn for the last of stage 4

stripping included in all in sustaining cost. Zero 1H project capital.

■ 1H sustaining capital $26mn.

■ 1H14 AISC of $291mn at the bottom end of FY14F All in sustaining cost of A$590-

660mn after by-product credits to produce 400-450koz - suggest a cost range of

A$1,311 - 1,475/oz.

■ No guidance granularity on production make up. We have guessed contributions of

underground, open pit and stockpiles.

Gosowong – past its best years

■ $105mn EBITDA, 13.3% of group total but on only 3.6% group net operating assets.

■ Weak FY14 guidance of only 260-320koz but with a stronger 2H on grade expectation.

1H 149koz already above mid-point of guidance and a stronger 2H still forecast.

■ Depreciation rising to 1H14 $335/oz reflecting capex on access to new shoots and

plant debottlenecking.

■ 1H14 $91.77mn site costs, in line with historic run rate (JunQ $51.66mn, MarQ

$46.5mn, DecQ $43.64mn up on lower SepQ $39.6mn, JunQ $42.5mn, MarQ $40mn).

■ FY13 site cost $181.3mn (forecast was $175-$185mn), above FY12 $166mn. JunQ

annualised is 10% above FY13 total.

■ 1HFY14 AISC $151.7mn at the top end of FY14 all in sustaining cost guidance of

$265-290mn to produce 260-320koz, an implied all in cash cost of $828/oz -

$1,115/oz.

■ 1H sustaining capital $37mn.

■ $1mn project capital in 1H14.

17 February 2014

Australia and NZ First Edition 51

Hidden Valley – an amazing turn around

■ $7mn (POSITIVE!) EBITDA, 0.9% of group total, on 2.4% group net operating assets.

■ No additional write down of the FY13 US$380mn write down which confirmed the

deep operational challenges compared with feasibility expectations.

■ Appalling performance continued with a delay to completion of the conveyor head end

crusher. This meant lower production and higher costs until the conveyor can be fully

utilised.

■ Management indicate in June 2013 that their cash subsidy tolerance is~$10mn before

considering care and maintenance. The operation reported a materially better DecQ

AISC of $1,343/oz, being cash flow positive for the Q but cash consuming for the half

with an AISC of $1,627/oz.

■ 1H production of 49.7koz, comfortably in production guidance forecast of 80-105koz

(up 10% on FY13) but remains constrained.

■ The sites issues are not confined to the ore haulage challenges. Grades and

recoveries as also fallen short of feasibility expectations.

■ Depreciation of $323/oz remains high due to constrained production and remedial

capital.

■ Future expansion no longer in plans.

■ 1H14 site costs improved to $82.3mn from JunQ $50.6mn (MarQ $46.7mn, DecQ

$44.1mn, SepQ $40.5mn, JunQ $42.5mn, MarQ $37mn). Costs up on lower

production.

■ FY13 site costs of $182mn exceeded forecast of $155-$165mn. Costs remained

elevated by: poor conveyor performance requiring supplementation by expensive

trucking; poor road conditions, high tyre wear, mining interrupted by rain and fog and

the remoteness of the site.

■ 1H14 AISC of $79.4mn, at the bottom end of FY14F all in sustaining cost of A$160-

$180mn to produce 80-105koz, an implied all in cash cost of $1,523 – $2,250/oz

suggesting very little change of achieving a cash flow neutral outcome relative to

assumed A$1,450/oz. However, this cost guidance includes treatment of stockpiled

ore with a P&L cost in the cash cost guidance. The reduction in guidance granularity

makes it impossible to guess between cash and non-cash in the guidance.

■ 1H sustaining capital $7mn.

17 February 2014

Australia and NZ First Edition 52

Figure 3: Operational EBITDA

0

100

200

300

400

500

600

700

8001Q

09

2Q09

3Q09

4Q09

1Q10

2Q10

3Q10

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A$m

n

EBITDA contribution - operations

Cracow ( 70%) Gosowong ( 82.5%) Hidden Valley ( 50%) Telfer ( 100%)Cadia ( 100%) Ridgeway ( 100%) Lihir Island (100%) Mt Rawdon (100%)Bonikro (90%) Wafi Golpu (35%) Namosi (69.94%)

Source: Company data, Credit Suisse estimates

17 February 2014

Australia and NZ First Edition 53

1H14 result detail Profit and loss – as expected

■ 1H14 underlying profit of $207mn (CS $206mn). Statutory profit of $40mn after

$120mn R&D tax smack and $47mn Bonikro exploration impairment.

■ FY13 underlying profit of $451mn (1H $320mn) in line with CS $434mn forecasts.

FY13 statutory loss of $5,778mn as per $6,229mn write down guidance.

■ Favourable tax rate not maintained (FY13 26%, 1H 23%). However, $120mn R&D tax

claim restatement taken in 1H14 with a $70mn cash tax payment.

■ Revenue was 84.7% (FY13 83%, 1H13 85.5%) gold and silver (FY12 86%, 1H 85%),

confirming Newcrest’s position as predominantly a gold company, although there now

appears to be little differentiation between gold and copper companies.

■ Profit reported was clear of any hedge influence.

■ $788mn (FY13 $1,611mn, 1H $843mn) operating EBITDA dominated by:

o Lihir (24.4%) or $192mn (FY13 33.5% at $540mn, 1H $285mn, 34%, FY12

$594mn),

o Cadia Valley (43.3%) or $341mn (FY13 30.5 or $492mn, 1H $198mn, 23%, FY12

$551mn),

o Gosowong (13.3%) or $105mn (FY13 17.3%, $278mn, 1H $166mn, 20%, FY12

$504mn).

o Telfer (17.1%) or $135mn (FY13 16.2%, $261mn, 1H $160mn, 19%, FY12

$409mn).

■ Bonikro and Hidden Valley contribution $8mn (1%) and $7mn (0.9%) respectively.

■ $12mn exploration expensed of $36mn expenditure. FY14 exploration budget of $80-

90mn from FY14 $152mn. In 2HFY13 42% or $64mn of exploration expenditure of

$84mn expensed. (1H13 43% or $33mn of exploration expenditure of $84mn

expensed). FY12 50% or $80mn of exploration expenditure of $158mn expensed.

1H12 50% or $33mn of exploration expenditure of $66mn expensed.

■ Earnings period reflects sub-normal production and cost from Cadia, Hidden Valley

and Lihir.

■ 1H14 corporate overheads $40mn, excluding $14mn corporate depreciation and $4mn

equity based settlements. Corporate overheads reduced significantly to a FY14F of

$85-$90mn from FY13 A$102mn/$132mn (1H $66mn, FY12 $140mn, 1H $66mn, from

FY11 $93mn , FY10 $78mn. FY13 of $132mn Corporate includes $22mn corporate

depreciation and $8mn equity settled share payments.

■ Corporate overheads for the period totalled $40/oz down from FY13 $62/oz (FY12

$61/oz, 1H $57/oz, FY10 $51/oz, 1H10 $44.6/oz, FY09 $42.8/oz).

■ Depreciation $314mn (FY13 $589mn, 1H13 $259mn, FY12 $542mn, 1H $267mn,

FY11 $501mn, FY09 $262mn and FY08 $274mn) reflecting the increasing capital

intensity as new mines replace lower capital intensity old mines and the high capital

intensity of the Lihir assets.

■ Depreciation down to $260/oz from FY13 $290/oz (1H13 $259/oz, 1H $259/oz. FY12

$236/oz, 1H $220/oz) produced, up on FY11 $204/oz from FY10 $175/oz.

17 February 2014

Australia and NZ First Edition 54

Figure 4: EBITDA Margin

39%

32%34%

43%41%

51% 50% 49%

41%

32%

36% 36%

0%

10%

20%

30%

40%

50%

60%

2005 2006 2007 2008 2009 2010 2011 2012 1H'13 2H'13 2013 1H'14

(%)

EBITDA Margin

Source: Company data, Credit Suisse estimates

Figure 5: EBIT Margin

26%

19%21%

31% 31%

40%

38%36%

26%

14%

20% 20%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

2005 2006 2007 2008 2009 2010 2011 2012 1H'13 2H'13 2013 1H'14

(%)

EBIT Margin

Source: Company data, Credit Suisse estimates

Cash flow statement – weak cash generation

requires debt draw to fully fund growth and

unforeseen tax payment

■ Operating cash flow of only $228mn (FY13 $707mn, 1H 13 $225mn, FY12 $1,726mn,

1H $1,009mn, FY11 $1,729mn, 1H $922mn).

■ Tax payments of $102mn (FY13 $162mn, 1H13 $118mn, FY12 $219mn, FY11

$107mn, FY10 $74.1mn). Tax payments include the $70mn tax paid for reassessed

R&D claims for past periods.

17 February 2014

Australia and NZ First Edition 55

■ Investing capex down very materially to $457mn dominated by Cadia East panel cave

#2 development.

o Cadia East $141mn

o Lihir $6mn

o Wafi Golpu $14mn

■ FY13 $2,098mn (1H13 $1,038mn, FY12 $2,556mn, 1H $1,329mn).

■ Sustaining capital subset of investing capital of $136mn. Low 1H14 sustaining capital

suggests a significant rise in 2H sustaining capital to reach guidance of $355-$410mn.

o Telfer $26mn

o Cadia Valley $21mn

o Lihir $37mn

o Gosowong $37mn

o Bonikro $2mn

o Hidden Valley $7mn

■ Production stripping consumed $120mn (FY13 $346mn)

o Telfer $24mn

o Lihir $78mn

o Bonikro 9$9mn

o Hidden Valley $9mn

■ Exploration expenditure of $36mn (FY13 $152mn, 1H13 $84mn, FY13 budget $150-

$160mn, FY12 $158mn, 2H12 $92mn, 1H $66mn, FY11 $126mn reflects only 4

months of LGL ownership, FY10 $101.1mn).

■ Zero cash dividends paid versus FY13 $256mn (1H $150mn).

■ Cash short fall funded by $287mn debt draw. FY13 debt draw $1,803mn (1H13

$837mn, FY12 $1,543mn, 1H $744mn debt draw).

Balance sheet – CY15 re-financing dictating

operating strategy?

Focus continues to be largely on Newcrest's balance sheet given June 30 elevated

gearing of 29.1% increased to 30.5% and a gold price that remains below Newcrest's

planning price for a cash neutral outcome (just).

Management have indicated that despite the $70mn tax payment and 1H $200mn working

capital consumption, the year is still expected to be cash neutral and this can be achieved

at a lower gold price than the previously stated A$1,450/oz. Management stress that

costs, production and capex will continue to be actively managed for no worse than a cash

neutral outcome. There is ample evidence that this is occurring:

■ Marginal Cadia East stockpile production has been cut;

■ $68mn sustaining capital in the DecQ and $136mn in the half is well below full year

guidance of $355-$410mn, suggesting a significant 2H sustaining capital expenditure

that perhaps also has production implications;

■ AISC guidance range of $2,450-$2,730mn has been re-guided toward the bottom of

the range, a $140mn saving compared to mid-range; and

17 February 2014

Australia and NZ First Edition 56

■ Production guidance has been guided to the top end of guidance, 150koz above the

mid-point.

It is clear that further changes in operating plans and corporate overheads could be

implemented and are expected (by the market) to be implemented by Sandeep, if not

sooner. These could include:

■ Additional cuts to corporate overheads – we could suggest a few high cost individuals

not critical to near term sustainability

■ Additional cuts to exploration

■ Increased treatment of Lihir stockpiles and reduced mining activity on cut back 9

■ Elimination of other low grade stockpiles that are currently cash positive

■ Cessation of Telfer open pit production and halving of mill capacity

We do not see significant opportunities for reducing growth capital. Growth capital is

dominated by Cadia panel cave 2 development which has a significant positive benefit to

future cash generation.

Separate announcements of the increase of US$450mn (October 17) and US$200mn (Jan

14) in bilateral loan facilities despite the challenging environment, adds significant head

room and demonstrates that lenders appear to have greater confidence in Newcrest’s

balance sheet outlook than the equity market. The equity market was concerned about

Newcrest’s ability to extend existing facilities maturing in Sep 15 and Sep 17 yet NCM has

done better, increasing available facilities.

Management have confirmed that there are no ratings triggers or gearing covenants in any

of Newcrest's debt facilities. All debt costs are fixed or have fixed points relative to libor so

any rating change impacts only the cost of future debt, not existing facilities. Most of

Newcrest’s debt is long term other than $1.2bn which is due in September 2015 and

September 2017. As evidenced by today's new facility, we expect that this debt will be

renegotiated as it has been in the past, albeit at a potentially higher cost reflecting both

higher prevailing rates and the balance sheet deterioration.

A new MD however is a troubling sign for those not inclined to a capital raising, with

perhaps the beginning of his tenure (or that of the Chairman) an opportunity to address the

$4.2bn debt balance. We are always cautious of management changes, as all too often

they have signalled material changes to operations, balance sheet and/or investor

sentiment. We don't propose this is necessarily one of these occasions, but highlight the

risk nonetheless. A new MD and new Chairman who is also new to the board can readily

distance themselves from previous statements made on balance sheet management.

■ Cash balance of $121mn (FY13 $69mn, 1H $97mn, FY12 $242mn, H $265mn) but

debt up to $4,211mn (1H $3,203mn, FY12 $2,408mn,1H $1,601mn).

■ Net debt of $4,517mn (FY13 $4,142mn) but impacted by unfavourable FX restatement

of USD debt ($164mn) plus incremental debt draw ($287mn).

■ Undrawn US$1,210mn facilities available (FY13 US$825mn of US$2.5bn US bilateral

facilities, FY12 US$780mn, 1H US$1,730mn) available with a holding cost/facility fee

estimated to be ~0.75%.

■ All debt is US dollar denominated.

■ Gearing now 30.5% with AUD debt up and assets also up, despite the West African $47mn

impairments. FY13 29.1% (1H 16.9%) up on FY12 12.5%.

■ Gearing target is below 15% and long term target is 10%.

17 February 2014

Australia and NZ First Edition 57

■ Under our more punitive gold and copper price assumptions than prevailing spot,

NCM continues to consume cash (FCF – operating cash flow less capex) in FY14.

This is consistent with 7 June guidance of being FCF neutral given the fall in the gold

price subsequent to this date.

Investment phase end in sight

With the heavy capital reinvestment phase (Lihir expansion and refurbishment, Telfer cut

back and Cadia East development) now largely complete (or deferred), Newcrest moves

naturally to a phase of reduced capital expenditure with no major capital projects other

than completion of:

■ The 5Mtpa Lihir flotation expansion ($300mn) is now complete and in commissioning

phase with commissioning costs in the operating budget

■ The old plant refurbishment ($200mn) with ~$50mn in FY14 within the sustaining

capital forecast of $150-$165mn and $40mn assumed in FY15

■ Cadia East lift 2 development, $340-$380mn in FY14

Discussion on all management calls since the MarQ has made it abundantly clear that any

new capital committed to any Newcrest projects would only be on the basis of sound

returns. This hinted broadly at significant revisions to the August 2012, 5 year plan to be

updated in August 2013. We expected little change from Cadia other than potential

exclusion of some stockpiled ore, but saw potential for further revision of the Lihir plan

compared to the prior plan.

We remain concerned about the sustainability of Telfer in its current form but do see the

potential for extensions beyond our currently assumed 5 year life, but perhaps with the mill

capacity halved using only one of the two parallel mill trains. West Dome Deeps drilling,

while early stage, is to date unconvincing in both grade and width of intersection,

particularly the material capital required to access a potential future resource.

Management has re-affirmed that FY14 total capex will be ~$895mn - $1025mn, down

from ~$2bn in FY13, with Cadia East the only development capital project.

17 February 2014

Australia and NZ First Edition 58

Figure 6: Production forecast and actual

FY11

Actual

FY12

Original

Guidance

FY12A FY13

Guidance

FY13 #1

revised

Guidance

FY13 #2

revised

Guidance

FY13A FY14

Guidance

Gold Production koz koz koz koz koz koz koz koz koz

Cadia Valley 515 550 – 580 473,195 400 - 500 450 - 470 no change 447 480 530

Lihir 791 815 – 850 604,336 700 - 900 726 - 746 620 - 680 649 700 800

Telfer 621 575 – 610 540,115 500 - 600 549 - 559 no change 526 400 450

Gosowong 463 455 – 465 439,384 375 - 425 351-361 300 - 325 313 260 320

Hidden Valley 100 115 – 135 88,801 100 - 120 88-98 80 - 90 85 80 105

Bonikro 50 95 – 105 92,102 100 - 110 104 - 114 no change 90 80 95

Cracow 71 70 – 75 divested divested divested divested divested divested divested

Mt Rawdon 90 100 – 105 divested divested divested divested divested divested divested

Total Gold Production 2,702 2,775 –

2,925

2,286 2,300 -

2,500

2,268 -

2,378

2,000 -

2124

2109.784 2000 2300

Copper Production kt kt kt kt kt kt kt kt kt

Cadia Valley 44 45 – 50 45 53 - 58 53 - 58 54 - 58 54 60

Telfer 32 30 – 35 31 22 - 27 22 - 27 23 - 27 26 20

Total Copper Production 76 75 - 85 76.015 75 - 85 75 - 85 76 - 85 80 75 85

Silver Production 1,921 koz 2,500 –

2,750 koz

1,997.25 2,380 -

2,630

2,380 -

2,630

2,380 -

2,631

1,932 1,200 1,500

Source: Company data, Credit Suisse estimates

17 February 2014

Australia and NZ First Edition 59

Earnings changes Figure 7: Earnings changes

FY15

Old 1H14 2H14 New % change Old New % change Old New % change

Total Revenue A$mn 3,869 2,016 1,809 3,825 -1% 4,223 4,223 0% 4,229 4,229 0%

Cracow EBIT A$mn - - - - - - - - - - -

Gosowong EBIT A$mn 131 57 68 125 -5% 169 152 -10% 155 134 -14%

Hidden Valley EBIT A$mn 21- 10- 10- 20- 3% 22- 22- 0% 21- 21- 0%

Telfer EBIT A$mn 105 99 7 106 1% 74 70 -5% 55 49 -11%

Cadia EBIT A$mn 145 86 60 146 1% 488 488 0% 811 811 0%

Ridgeway EBIT A$mn 259 146 114 260 0% 193 193 0% - - -

Wafi - Golpu Revenue - - - - - - - - - - -

Lihir Island EBIT A$mn 188 109 83 192 2% 283 283 0% 281 281 0%

Mt Rawdon EBIT A$mn - - - - - - - - - - -

Bonikro EBIT A$mn 18- 10- 7- 18- 2% 11- 11- 0% 3 3 0%

Other EBIT A$mn 11- 18- 5- 23- -104% 10- 9- 9% 9- 8- 9%

Corporate A$mn 89- 44- 44- 88- 1% 95- 95- 0% 95- 95- 0%

Exploration A$mn 25- 12- 12- 24- 5% 16- 16- 0% 34- 34- 0%

EBITDA A$mn 1,223 731 504 1,235 1% 1,628 1,628 0% 1,738 1,738 0%

Depreciation & Amortisation A$mn 559- 327- 250- 577- -3% 575- 595- -4% 593- 619- -4%

EBIT A$mn 664 404 254 658 -1% 1,053 1,032 -2% 1,146 1,119 -2%

Net Interest A$mn 219- 88- 112- 200- 9% 242- 240- 1% 230- 222- 3%

NPBT A$mn 445 316 142 458 3% 811 793 -2% 916 897 -2%

Taxation A$mn 132- 100- 42- 142- -7% 242- 236- 2% 273- 268- 2%

Minorities A$mn 22- 9- 11- 20- 6% 29- 26- 11% 27- 24- 13%

NPAT (operating) A$mn 291 207 89 296 1% 540 531 -2% 615 606 -2%

EPS (operating) A¢ 38 27 12 39 1% 71 69 -2% 80 79 -2%

FY16FY14

Source: Company data, Credit Suisse estimates

Our earnings forecasts continue to be driven by a spot scenario using US$1,230/oz gold,

US$3.30/lb Cu and 0.90 AUDUSD. This is reviewed typically on a quarterly basis.

17 February 2014

Australia and NZ First Edition 60

Figure 8: Key data summary - NCM Market Data P&L (A$mn) FY12 A FY13 E FY14 E FY15 E FY16 E

Ticker NCM.AX Total revenues 4416 3775 3825 4223 4229

Share price 16-Jul-13 A$ 11.05 Total operating expenses -2265 -2408 -2591 -2596 -2491

Target price A$ 8.20 EBITDA 2151 1367 1235 1628 1738

Rating UNDERPERFORM Depreciation and amortisation -561 -611 -577 -595 -619

Return to target price % -26% EBIT 1590 756 658 1032 1119

Market cap mn 8,470 Finance cost -41 -109 -200 -240 -222

Shares on issue mn 767 Profit before tax 1549 647 458 793 897

Year end 30-Jun Tax -406 -165 -142 -236 -268

Outside equity interest -59 -31 -20 -26 -24

Company Background Underlying NPAT 1084 451 296 531 606

Net significant items (post tax) 33 -6229 -191 -8 -2

Reported NPAT 1117 -5778 105 522 604

Valuation Data A$m A$/sh Balance Sheet (A$mn) FY12 A FY13 A FY14 E FY15 E FY16 E

Bonikro 56 0.07 Cash 242 69 232 660 1143

Cadia 6281 8.20 Receviables 251 178 217 397 410

Gosowong 552 0.72 Inventories 748 946 724 656 679

Hidden Valley 0 0.00 Other current assets 223 232 194 199 207

Lihir Island 2081 2.72 Current Assets 1464 1425 1367 1912 2439

Namosi 0 0.00 Plant & Equipments 4364 5544 5944 6194 6312

Ridgeway 289 0.38 Intangibles 3852 550 546 537 529

Telfer 94 0.12 Other non current assets 0 0 0 0 0

Wafi-Golpu 636 0.83 Total Assets 20509 17185 17753 18554 19182

O'Callaghans 50 0.07 Payables 482 620 362 588 607

Evolution stake 194 0.25 Borrowings 2408 4211 4325 4203 4085

Lihir end of life capitalised rsvs 1,100 1.44 Other liabilities 2525 2269 2264 2405 2577

Net Debt Dec 31, 2013 -4,517 -5.90 Total Liabilities 5415 7100 6950 7195 7270

Corporate -629 -0.82 Net Assets 15094 10085 10803 11359 11912

Total 6,187 8.08 Net Tangible Assets 11242 9535 10257 10822 11383

P/NPV 1.37x

Cash Flow (A$mn) FY12 A FY13 A FY14 E FY15 E FY16 E

Assumptions FY12 A FY13 A FY14 E FY15 E FY16 E

Operating Cash Flow 1726 707 664 1374 1452

Copper (Cu) US$/lb 3.70 3.42 3.27 3.30 3.30 Maintenance Capex -1324 -623 -387 -335 -335

Gold (Au) US$/oz 1,673 1,609 1,269 1,230 1,230 Free Cash Flow 402 84 277 1039 1117

Silver (Ag) US$/oz 34.2 30.3 20.8 20.0 20.0 Expansion Capex -1232 -1323 -435 -435 -325

AUDUSD x 1.03 1.02 0.91 0.90 0.90 Exporation Expenditure -158 -152 -72 -54 -114

Other investing cash flow -41 -26 0 0 0

Production Profile FY12 A FY13 A FY14 E FY15 E FY16 E Investing Cash Flow -2755 -2124 -894 -824 -775

Financing Cash Flow 1090 1236 392 -122 -194

Reserves - P&P (contained gold) Net change in cash -1263 -804 -225 93 148

Bonikro koz 1014 1301 1442 1348 1258

Cadia koz 24251 23980 26520 25933 25063 Ratios FY12 A FY13 A FY14 E FY15 E FY16 E

Gosowong koz 1340 950 772 454 135

Hidden Valley koz 3408 3470 3276 3056 2836 Per share ratios

Lihir Island koz 30731 32004 28587 28227 27880 Dividends per share cps 35.0 12.0 0.0 0.0 20.0

Ridgeway koz 2332 2004 1723 1472 1472 Underlying EPS - Basic cps 141.7 58.9 38.6 69.3 79.1

Telfer koz 11373 11236 6085 5513 4962 Underlying EPS - Diluted cps 141.5 58.9 38.6 69.3 79.1

Resources - M&I (contained gold) Reported EPS - Basic cps 146.0 -754.5 13.7 68.2 78.9

Bonikro koz 1795 1867 1942 1849 1759 Reported EPS - Diluted cps 145.8 -754.5 13.7 68.2 78.9

Cadia koz 35575 37965 37913 37326 36457 NAV per share ps 19.7 13.2 14.1 14.8 15.6

Gosowong koz 1626 1327 1006 688 369 NTA per share ps 14.7 12.5 13.4 14.1 14.9

Hidden Valley koz 5433 6023 5256 5036 4817

Lihir Island koz 51881 53990 51172 50282 49380 Price ratios

Ridgeway koz 2793 2664 2295 2044 2044 Payout Ratio % 25% 20% 0% 0% 25%

Telfer koz 18877 17947 12831 12260 11709 Dividend yield % 3.2% 1.1% 0.0% 0.0% 1.8%

Production - (attributable gold) P/BV x 0.6 x 0.8 x 0.8 x 0.7 x 0.7 x

Bonikro koz 92 90 82 88 86 P/NTA x 0.8 x 0.9 x 0.8 x 0.8 x 0.7 x

Cadia koz 250 185 231 527 778

Gosowong koz 439 313 297 302 302 Profitability ratios

Hidden Valley koz 89 85 99 95 95 EBITDA margin % 49% 36% 32% 39% 41%

Lihir Island koz 604 649 757 858 869 EBIT margin % 36% 20% 17% 24% 26%

Ridgeway koz 223 262 299 203 0 NPAT margin % 25% 12% 8% 13% 14%

Telfer koz 540 526 504 419 403 Tax rate % 26% 26% 31% 30% 30%

Total koz 2,238 2,110 2,270 2,492 2,533 EBITDA growth (pcp) % 5% -36% -10% 32% 7%

Total Cash Cost (incl. royalties) EBIT growth (pcp) % 3% -52% -13% 57% 8%

Bonikro US$/oz 925 1,005 1,044 937 964 NPAT growth (pcp) % 23% -617% -102% 399% 16%

Cadia US$/oz 482 386 405 127 21 EPS Growth % -4% -58% -34% 79% 14%

Gosowong US$/oz 417 635 640 534 549

Hidden Valley US$/oz 1,294 1,643 1,174 1,188 1,167 Gearing ratios

Lihir Island US$/oz 575 700 843 747 754 Net Debt (cash) A$m 2166 4142 4093 3543 2942

Ridgeway US$/oz 393 455 177 149 0 Net Debt / Equity % 14% 41% 38% 31% 25%

Telfer US$/oz 806 1,045 931 970 1,001 Net Debt / (Equity+Net Debt) % 13% 29% 27% 24% 20%

Group Cash Cost US$/oz 634 768 725 602 566

Source: Company Data, Rave, Bloomberg

Newcrest Mining Limited (NCM) is engaged in the exploration, mine development, operations and the sale of gold

and gold/copper concentrate. NCM has exploration and production operations in Australia, Indonesia, Cote

d’Ivoire, Papua New Guinea and Fiji.

Source: Company data, Credit Suisse estimates

Australia and NZ First Edition 61

17 February 2014

Asia Pacific/Australia

Equity Research

Diversified Metals & Mining (Gold (AU))

Perseus Mining

(PRU.AX / PRU AU) DOWNGRADE RATING

Low key 1H14 result, but a loss

■ $4mn 1H14 loss, better than we forecast ($14mn loss) but largely explained

by an $8.3mn FX gain we hadn’t accounted for.

■ $16mn cash available and no debt, but this provides little comfort in the

context of the 1H operating cash consumption of $1.8mn before investing

cash consumption of $17.8mn. 1H cash consumption was minimised by

drawing part of the mill feed from stockpile to avoid investing significant

capital in pre-stripping to access higher grade ore.

■ Liquidity outlook will depend on operation stability and gold price, with

improved ore grades expected as mining progresses, lifting cash generation.

Progress with Ghanaian government discussion has confirmed that at least

a portion of the VAT refund will be achieved with 60mn Ghanaian cedi

(~$23mn USD) agreed to be able to be used to offset future royalties/taxes,

a benefit to cash flow. This is ~half of the VAT rebate that PRU believe they

are entitled to but have not yet received. A cash component is expected in

the final settlement and administration changes are hoped to stop the VAT

receivable from increasing in future.

■ Cost reduction initiatives implemented during the 1H reduced all-in site costs

and are expected to have an increased full period benefit in the 2H.

Management continue to project an all-in site cash cost of US$937/oz for

230koz/yr over 10 years to 2024.

■ Valuation: A lot has to go right for Perseus to prosper. Our target price

(unchanged) is undermined by punitive gold price assumptions, suggesting

and unattractive risk-reward equation. Rating moves to Underperform given

the recent share price strength.

Total return forecast in perspective

Mean^CSEC tgt^

Sh Prc

-80%

-30%

20%

70%

120%

170%

220%

270%

320%

12mth Volatility* 52wk Hi-Lo IBES Consensustarget return^

Performance over 1M 3M 12M

Absolute (%) 38.4 29.5 -71.9

Relative (%) 36.2 30.3 -78.2

Financial and valuation metrics

Year 06/13A 06/14E 06/15E 06/16E

Revenue (A$mn) 293.6 279.9 320.7 342.6

EBITDA (A$mn) 86.8 41.7 52.8 48.9

EBIT (A$mn) 66.5 4.5 16.2 7.2

Net income (A$mn) 38.4 2.2 9.8 2.4

EPS (CS adj.) (Ac) 8.38 0.48 2.15 0.52

Change from previous EPS (%) n.a. n.m n.m -3.5

Consensus EPS (Ac) n.a. -0.90 4.70 3.90

EPS growth (%) -20.8 -94.3 348.6 -75.6

P/E (x) 6.0 105.6 23.5 96.6

Dividend (Ac) — — — —

Dividend yield (%) — — — —

P/B (x) 0.49 0.48 0.47 0.47

Net debt/equity (%) net cash net cash net cash net cash

Relative performance versus S&P ASX 200. See Reference Appendix for a description of the chart. Source: Credit Suisse estimates, * Consensus, mean range from Thomson Reuters.

Source: Company data, ASX, Credit Suisse estimates, * Adj. for goodwill, notional interest and unusual items. Relative P/E

against ASX/S&P200 based on pre GW in AUD. Company PE calculation is based on displayed EPS Currency

Rating (from Outperform) UNDERPERFORM* [V]

Price (14 Feb 14, A$) 0.50

Target price (A$) 0.50¹

Market cap. (A$mn) 231.27

Yr avg. mthly trading (A$mn) 75

Last month's trading (A$mn) 73

Projected return:

Capital gain (%) -0.99

Dividend yield (net %) —

Total return (%) -0.99

52-week price range 1.92 - 0.22

* Stock ratings are relative to the relevant country

benchmark.

¹Target price is for 12 months.

[V] = Stock considered volatile (see Disclosure Appendix).

Research Analysts

Michael Slifirski

61 3 9280 1845

michael.slifirski@credit-suisse.com

Sam Webb

61 3 9280 1716

sam.webb@credit-suisse.com

17 February 2014

Australia and NZ First Edition 62

Figure 1: PRU Financial Summary

Perseus Mining (PRU) Year ending 30 Jun In AUDmn, unless otherwise stated2012 2013 2014 2015 2016 2012 2013 2014 2015 2016

Share Price: A$0.51 Earnings 06/12A 06/13A 06/14E 06/15E 06/16ERating UNDERPERFORM c_EPS_SHARESEquiv. FPO (period avg.) mn 448.3 458.0 458.0 458.0 458.0

Target Price A$ 0.50 c_EPS*100EPS (Normalised) c 10.6 8.4 0.5 2.1 0.5

vs Share price % -0.99 EPS_GROWTH*100EPS Growth % -20.8 -94.3 348.6 -75.6

DCF A$ 0.62 c_EBITDA_MARGIN*100EBITDA Margin % 46.6 29.6 14.9 16.5 14.3

c_DPS*100DPS c 0.0 0.0 0.0 0.0 0.0

c_PAYOUT*100Payout % 0.0 0.0 0.0 0.0 0.0

FRANKING*100Franking % 0.0 0.0 0.0 0.0 0.0

c_FCF_PS*100Free CFPS c 8.9 5.6 0.3 5.5 2.2

Profit & Loss 06/12A 06/13A 06/14E 06/15E 06/16E c_TAX_RATE*100Effective tax rate % 12.7 32.7 21.5 35.0 50.3

Sales revenue 155.3 293.6 279.9 320.7 342.6 ValuationEBITDA 72.3 86.8 41.7 52.8 48.9 c_PEP/E x 4.8 6.0 105.6 23.5 96.6

Depr. & Amort. (10.2) (20.2) (37.1) (36.6) (41.7) c_EBIT_MULTIPLE_CURREV/EBIT x 3.0 2.9 45.9 11.7 26.1

EBIT 62.2 66.5 4.5 16.2 7.2 c_EBITDA_MULTIPLE_CUEV/EBITDA x 2.6 2.3 5.0 3.6 3.9

Associates 0.0 0.0 0.0 0.0 0.0 c_DIV_YIELD*100Dividend Yield % 0.0 0.0 0.0 0.0 0.0

Net interest Exp. (1.1) (2.9) (0.7) 0.5 0.8 c_FCF_YIELD*100FCF Yield % 17.7 11.1 0.7 11.0 4.4

Other 0.0 0.0 0.0 0.0 0.0 c_PBPrice to Book x 0.6 0.5 0.5 0.5 0.5

Profit before tax 61.1 63.6 3.8 16.7 8.0 ReturnsIncome tax (7.8) (20.8) (0.8) (5.8) (4.0) c_ROE*100Return on Equity % 13.2 8.1 0.5 2.0 0.5

Profit after tax 53.3 42.8 3.0 10.8 4.0 c_I_NPAT/c_I_SALES*100Profit Margin % 30.5 13.1 0.8 3.1 0.7

Minorities (5.3) (3.1) (0.8) (1.0) (1.6) c_I_SALES/c_B_TOT_ASSAsset Turnover x 0.3 0.5 0.5 0.5 0.6

Preferred dividends 0.0 0.0 0.0 0.0 0.0 c_ASSETS/c_EQ_COMMONEquity Multiplier x 1.5 1.2 1.2 1.3 1.3

Associates & Other (0.6) (1.4) 0.0 0.0 0.0 c_ROA*100Return on Assets % 9.0 6.5 0.4 1.6 0.4

Normalised NPAT 47.4 38.4 2.2 9.8 2.4 c_ROIC*100Return on Invested Cap. % 17.3 10.0 0.8 2.3 0.8

Unusual item after tax (0.3) 0.1 0.0 0.0 0.0 GearingReported NPAT 47.2 38.4 2.2 9.8 2.4 c_GEARING*100Net Debt to Net debt + Equity % Net Cash Net Cash Net Cash Net Cash Net Cash

c_NET_DEBT/c_I_EBITDANet Debt to EBITDA x Net Cash Net Cash Net Cash Net Cash Net Cash

Balance Sheet 06/12A 06/13A 06/14E 06/15E 06/16E c_I_EBITDA/ c_I_NET_INTERESTInt Cover (EBITDA/Net Int.) x 66.8 29.5 59.1 -109.7 -63.3

Cash & equivalents 105.5 35.5 22.7 42.3 42.5 c_I_EBIT/ c_I_NET_INTERESTInt Cover (EBIT/Net Int.) x 57.4 22.6 6.5 -33.7 -9.4

Inventories 37.3 30.7 17.2 16.4 23.0 (c_C_CAPEX/c_I_SALES)*-100Capex to Sales % 82.2 13.1 7.7 5.6 5.5

Receivables 10.5 8.2 11.5 11.5 19.7 (c_C_CAPEX/c_I_DEPR)*-100Capex to Depreciation % 1,256.0 189.8 58.1 48.8 45.5

Other current assets 5.6 12.9 11.6 10.0 10.1

Current assets 159.0 87.3 63.0 80.2 95.3 MSCI IVA (ESG) Rating Property, plant & equip. 287.8 367.4 391.2 372.5 349.8 TP ESG Risk (%): 0

Intangibles 0.0 0.0 0.0 0.0 0.0

Other non-current assets 82.2 135.0 141.6 165.0 175.0

Non-current assets 370.0 502.4 532.8 537.5 524.8

Total assets 529.0 589.6 595.8 617.7 620.1

Payables 31.7 53.1 45.9 52.4 49.2

Interest bearing debt 60.3 0.0 0.0 0.0 0.0

Other liabilities 77.1 55.2 56.9 61.4 62.9 MSCI IVA Risk: Positive

Total liabilities 169.1 108.3 102.7 113.8 112.1

Net assets 359.9 481.3 493.1 503.9 507.9

Ordinary equity 360.5 472.3 483.0 492.9 495.3

Minority interests -0.6 9.1 10.1 11.1 12.7

Preferred capital 0.0 0.0 0.0 0.0 0.0

Total shareholder funds 359.9 481.3 493.1 503.9 507.9

Net debt -45.2 -35.5 -22.7 -42.3 -42.5 Source: MSCI IVA Rating

Cashflow 06/12A 06/13A 06/14E 06/15E 06/16E Share Price Performance

EBIT 62.2 66.5 4.5 16.2 7.2

Net interest -0.8 -2.8 -0.2 0.4 0.7

Depr & Amort 10.2 20.2 37.1 36.6 41.7

Tax paid 0.0 0.0 0.0 -1.3 -9.9

Working capital -35.8 30.3 3.0 7.4 -18.0

Other 7.3 -67.6 -25.5 -15.9 7.4

Operating cashflow 43.1 46.7 18.9 43.2 29.1

Capex -127.7 -38.4 -21.5 -17.8 -19.0

Capex - expansionary -124.6 -17.4 -4.2 0.0 0.0

Capex - maintenance -3.1 -21.1 -17.3 -17.8 -19.0

Acquisitions & Invest -29.4 -13.4 -10.2 -5.8 -10.0

Asset sale proceeds 0.0 0.0 0.1 0.0 0.0

Other 54.0 -6.9 -0.2 0.0 0.0

Investing cashflow -103.1 -58.7 -31.8 -23.6 -29.0

Dividends paid 0.0 0.0 0.0 0.0 0.0

Equity raised 89.1 0.0 0.0 0.0 0.0

Net borrowings -21.2 -60.6 0.0 0.0 0.0

Other 0.6 0.0 0.0 0.0 0.0 1 Month 3 Month 12 Month

Financing cashflow 68.5 -60.6 0.0 0.0 0.0 Absolute 38.4% 29.5% -71.9%

Total cashflow 8.4 -72.6 -12.9 19.6 0.1 Relative 36.2% 30.3% -78.2%

Adjustments 0.6 2.6 0.1 0.0 0.0

Net change in cash 9.0 -70.0 -12.8 19.6 0.1 Source: Reuters 52 week trading range: 0.22-1.92

MSCI IVA Risk Comment: Recent downgrrade to 'B' rating reflects

poor biodiversity and land use, health & safety scores. Given the

project is in early stages, as production ramps up at Edikan in

Ghana, we expect an increased focus by management on

addressing these issues in future.

11/02/2014 17:52

Perseus Mining Limited (PRU) focuses on exploration and operating gold deposits in West

Africa. PRU’s sole operating asset, the Edikan Gold Mine in Ghana, reached commercial

production on 1 January, 2012.

Credit Suisse View

TP Risk Comment: No incorporation of ESG concerns outside

sector-wide cost inflation (current and forecast) in our current

Target Price. Forecasts include conservative cost assumptions to

somewhat account for perceived (actual or otherwise) geopolitical

risk of West African operators.

0.00

0.50

1.00

1.50

2.00

2.50

4/02/2013 4/04/2013 4/06/2013 4/08/2013 4/10/2013 4/12/2013 4/02/2014

PRU.AX XJO

1.8

2.8

3.8

4.8

5.8

6.8

Environment Social Governance

Stock Local Sector Country Global Sector

Source: Company data, Credit Suisse estimates

17 February 2014

Australia and NZ First Edition 63

View

PRU has delivered an earnings loss, as expected, but less than we had forecast. The

main difference between our projected loss and the smaller loss delivered was an FX

benefit that we are unable to forecast.

PRU's 1H struggled with higher costs and downgraded production (FY14 unchanged).

Both line items should improve in the second half, delivering a higher 2H EBITDA to offset

depreciation, but we've said this before. It is clear that underlying losses (the first since

FY11) need to be rectified but a sticky cost base remains. In fact 1H14 USD cash costs

were actually flat on 2H FY13 (~US$115mn).

Management continue to be frustrated by the challenge of removing costs from the

operation and achieving operational reliability and stability. Certainly operational

performance appears to have improved and now cost achievement should be less of a

challenge. Removing costs when fighting to maintain production has been a challenge. It

is difficult to forecast the pace at which costs abate.

Given the existing cost base, it is difficult to have a compelling positive view on PRU under

our punitive gold price assumptions. CS official house forecasts are indicating gold to fall

under US$1,000/oz in the DecQ this year. Under this scenario, Edikan in unviable. We

(Australian Gold research team) don't entertain the same belief for the trajectory of the

gold price, but the breakeven status of the operation is no doubt a concern and

compresses our cash flow generation modelling.

One of the challenges is that the ounces just aren't coming out of the operation that was

once projected.

■ 8.1Mtpa processing rate, now 7.5Mtpa (although 8Mtpa is still believed achievable)

■ 90%-92% recoveries, now (DecQ) 84.4% and best quarter only 87.7% (SepQ12)

■ Head grade for years 1-3 previously expected to be >1.2g/t, now (DecQ) 1g/t

The operation has failed to deliver the grade or recovery projected and Ghanaian

operating costs and labour productivity have not met expectation. This has been

exacerbated by the unforeseen cash flow impost of the un-rebated (to date) VAT.

Result commentary

■ 1H14 underlying NLAT $4.024mn, a better outcome than our forecast for a loss of

$14mn. This was the first half delivering an underlying earnings loss since 2H FY11.

■ Adjusted result was largely in line with our estimates

o FX gain of $8.3mn (not modelled but recognised as a variable risk to our number).

■ Forecasting of FX gains remains difficult. No detailed guidance is provided despite this

being our largest missed forecast item across many reporting periods.

■ A$ cash available cash $16.016mn. In addition, $10.634mn supports environmental

performance guarantees.

■ 8,984oz of bullion (A$13mnm) on account at the refinery but not yet in reflected in

cash.

17 February 2014

Australia and NZ First Edition 64

■ DecQ gold production of 48.36koz, up on the SepQ 45.83koz and met DecH guidance

of 91-101koz. Production forecast for 2H FY14 unchanged at 99-109koz at an all-in

site cost of US$1,050-1,250/oz for an unchanged full year forecast of 190-210koz at

US$1,000-1,250oz. This excludes any VAT charge that may or may not be rebated,

off site exploration and corporate overheads ($18mn/yr).

■ Australian dollar cash (and bullion) balance up $0.9mn on SepQ to $28.2mn, but

helped by period end currency being 4c more favourable versus SepQ end. US$ cash

and bullion actually fell slightly quarter on quarter.

■ Group cash flow generation remains constrained by elevated costs. However, good

progress has been made on unit costs: Mining declined to $3.71 ($4.16/t), and

processing to $10.77/t ($11.61/t). G&A at $1.62/month ($1.63) is below the $2/month

plan.

■ SepQ result flipped the 1H v 2H production guidance, so the 2H should deliver

stronger production numbers and this should drive dollar per ounce cash costs down.

Group FY14 all-in site cash cost guidance of US$1,050-$1,250/oz unchanged, but

revised up US$50/oz at SepQ result versus previous guidance.

■ 44,617oz gold sold less than 48,360oz production. Average price achieved of

US$1,318/oz exceeded spot $1,271/oz, benefiting from hedging.

■ Gold hedging covers 124,000oz at an average price of US$1,463/oz, in the money by

US$31.6mn.

VAT progress

VAT rebate discussions with the Ghanaian government are reported as making progress

on the ~US$39mn receivable.

The Government is to issue US$25.4mn of Treasury credit notes and are discussing a

cash component in the final settlement mix. In addition, discussions progressing aimed at

ensuring that the VAT receivable does not increase in future. VAT has been charged on

the mining contract at a rate of $8-10mn/q and is not reflected in the quoted c1 cash cost.

We note that the VAT receivable increased in the DecQ from a closing balance at the end

of the SepQ of from SepQ GHC 86.4mn (US$39.2mn) to a marginal increase at the end of

the DecQ of GHC 93mn (US$39.4mn).

The proposed Treasury Credit Notes are to apply to any liability that is due and payable to

the government, i.e. royalties as well as taxes. This instrument is expected to have a cash

flow impact of US$5-6M per quarter, when implemented. Over and above this instrument,

a final cash settlement is being negotiated for the GHC30M outstanding.

PRU now expect to recover the full amount of the VAT and do not expect to see the VAT

receivable build in future, permanently improving cash flow.

PRU's operating costs are expressed ex-VAT so have not been included other than as an

unfavourable movement in working capital (to date). This should reverse. The VAT

receivable had been growing at GHC10mm/q.

17 February 2014

Australia and NZ First Edition 65

1H14 by numbers

■ 1H14 NPAT a loss of $4.024mn.

o FY13 NPAT (attributable) $38.37mn (1H13 $28.2mn) reported NPAT

(attributable).

■ $5.164mn exploration expenditure.

■ Net operating cash flow consumption of $1.782mn (1H13 $31.8mn, FY14 $46.7mn).

■ Total cash consumption $19.593mn.

■ No debt.

■ $16mn available cash.

■ $13mn bullion awaiting sale.

■ $31.6mn positive marked to market hedge book.

■ $39.4mn VAT receivable.

Earnings changes

Figure 2: Earnings changes

Old 1H14 2H14 New % chg. Old New % chg. Old New % chg.

Edikan revenue A$mn 275 133 143 277 0% 305 305 0% 328 328 0%

Tengrela revenue A$mn - - - - - - - - - - -

Other revenue (includes hedging gain/loss) A$mn 1- 2 1 3 563% 16 16 0% 14 14 0%

Total Revenue A$mn 275 135 145 280 2% 321 321 0% 343 343 0%

Edikan EBITDA A$mn 41 10 32 42 3% 55 55 0% 53 53 0%

Tengrela EBITDA A$mn - - - - - - - - - - -

Other EBITDA A$mn 1- 28 1 29 4155% 16 16 0% 14 14 0%

Corporate & other expenses/ income A$mn 18- 21- 9- 30- -66% 18- 18- 0% 18- 18- 0%

Exploration A$mn - - - - - - - - - - -

EBITDA A$mn 22 17 25 42 87% 53 53 0% 49 49 0%

Depreciation & Amortisation A$mn 30- 21- 16- 37- -22% 37- 37- 0% 42- 42- 0%

EBIT A$mn 8- 4- 8 5 157% 16 16 0% 7 7 0%

Net Interest A$mn 1 1- 0 1- -228% 1 0 -11% 1 1 -12%

NPBT A$mn 7- 5- 8 4 151% 17 17 0% 8 8 -1%

Taxation A$mn - 1 1- 1- - 3- 6- -80% 4- 4- 0%

Minorities A$mn 1- 0 1- 1- -12% 1- 1- 0% 2- 2- 0%

Share of net profit from associate A$mn - - - - - - - - - - -

NPAT (operating) A$mn 8- 4- 6 2 127% 12 10 -21% 2 2 -4%

EPS (operating) A$/sh 0.02- 0.01- 0.01 0.00 127% 0.03 0.02 -21% 0.01 0.01 -4%

FY15 FY16FY14

Source: Company data, Credit Suisse estimates

Australia and NZ First Edition 66

17 February 2014

Asia Pacific/Australia

Equity Research

Diversified Metals & Mining (Diversified Resources (AU))

Rio Tinto (RIO.AX / RIO AU) INCREASE TARGET PRICE

Strong result, conservative guidance

■ Headline numbers, all positive: Underlying earnings beat - $10.2bn v CS

$10.2bn and consensus $9.7bn, driven by savings in coal and aluminium.

Cost cutting beat with $2.3bn of cost reductions, 15% ahead of the 2013

target. Dividend beat at 192cps or 15% increase, in-line with CS but well

ahead of consensus expectation of 181cps (8%). Net debt much lower,

$18.1bn v CS $18.3bn and consensus $21bn. Capex came in at $12.9bn in

2013 and RIO confirmed guidance for 2014 at <$11bn and 2015 of ~$8bn.

■ Multiple impairment charges and one-offs for net earnings at $3.7bn:

The interesting ones were a $696m charge to the Kitimat ali smelter on a

capex overrun and restructuring costs of $367m (4000 staff reductions).

■ Iron ore production guidance for 2014 is 295mt (global, 100% basis).

This is below consensus at 305mt and CS at 311mt. Despite rainfall, we

view the guidance as conservative - we expect that Rio will do a little better

than guidance and assume 300mt production with 5mt of inventory sales.

Other guidance also soft, with 570kt mined and 260kt refined copper below

consensus at 615kt and 280kt. Guidance for 1.5mt TiO2 in FY14 is well

below capacity at 1.8mt.

■ Earnings and valuation, EPS down <1% as the 10mt lower iron ore

production (~$400m NPAT) and 2% higher tax rate ($300m) are offset by cost

savings in the coal and ali divisions. Our DCF increases to A$83.5/sh from

A$78.5/sh on model roll forward ($2/sh), lower pension liabilities ($2/sh) and

lower coal/ali costs ($1/sh). We raise our target price to A$80/sh (from

A$75/sh) and £42/sh (from £40/sh) and retain our OUTPERFORM rating.

Total return forecast in perspective

Mean^CS tgt^

Sh Prc

-30%

-20%

-10%

0%

10%

20%

30%

40%

12mth Volatility* 52wk Hi-Lo IBES Consensustarget return^

Performance over 1M 3M 12M

Absolute (%) 7.1 3.5 -3.7

Relative (%) 5.2 5.3 -9.8

Financial and valuation metrics

Year 12/12A 12/13E 12/14E 12/15E

Revenue (US$mn) 50,942.0 51,171.0 49,689.3 51,489.5

EBITDA (US$mn) 19,125.0 21,509.0 21,439.0 21,720.8

EBIT (US$mn) 14,684.0 15,457.0 15,724.7 15,894.2

Net income (US$mn) 9,269.0 10,217.0 11,054.3 11,529.0

EPS (CS adj.) (USc) 501.27 553.12 598.40 624.10

Change from previous EPS (%) n.a. 0.35 -0.12 -0.81

Consensus EPS (USc) n.a. 521.70 579.30 615.30

EPS growth (%) -37.6 10.3 8.2 4.3

P/E (x) 12.1 11.0 10.1 9.7

Dividend (USc) 167.00 192.05 211.26 232.38

Dividend yield (%) 2.8 3.2 3.5 3.8

P/B (x) 2.4 2.4 2.1 1.8

Net debt/equity (%) 34.1 34.3 20.3 9.2

Relative performance versus S&P ASX 200. See Reference

Appendix for a description of the chart. Source: Credit Suisse

estimates, * Consensus, mean range from Thomson Reuters.

Source: Company data, ASX, Credit Suisse estimates, * Adj. for goodwill, notional interest and unusual items. Relative P/E

against ASX/S&P200 based on pre GW in AUD. Company PE calculation is based on displayed EPS Currency

Rating OUTPERFORM*

Price (13 Feb 14, A$) 67.83

Target price (A$) (from 75.00) 80.00¹

Market cap. (A$mn) 121,448.48

Yr avg. mthly trading (A$mn) 3,217

Last month's trading (A$mn) 3,101

Projected return:

Capital gain (%) 17.9

Dividend yield (net %) 3.5

Total return (%) 21.5

52-week price range 72.1 - 50.2

* Stock ratings are relative to the relevant country

benchmark.

¹Target price is for 12 months.

Research Analysts

Paul McTaggart

61 2 8205 4698

paul.mctaggart@credit-suisse.com

James Gurry

44 20 7883 7083

james.gurry@credit-suisse.com

Martin Kronborg

61 2 8205 4369

martin.kronborg@credit-suisse.com

Justin Teo

61 2 8205 4426

justin.teo@credit-suisse.com

17 February 2014

Australia and NZ First Edition 67

Rio Tinto delivers – debt down, dividends up

Rio delivered a strong FY13 result in Sam Walsh's first full year as CEO and in-line with

his agenda to restore value and show a much stronger commitment to shareholder value.

■ UNDERLYING EARNINGS - at US$10.2bn, in line with CS at $10.2bn and 5% ahead

of consensus $9.7bn, driven by exceeding cost targets and improved aluminium result.

■ DIVIDEND - 192cps or 15% increase, in-line with CS at 192cps but well ahead (8%) of

consensus expectation of 181cps. Pay-out ratio now 35% (but still low!).

■ NET DEBT - better than expected at $18.1bn (ND:ND+E of 25%) v CS $18.3bn and

consensus at $21bn. Cash flow from operations was up 22% to $20.1bn. Capex was

$12.9bn. Targeting sustainable net debt levels in mid-teen billions.

■ COST CUTTING - beat targets with $2.3bn of cost reductions, 15% ahead of the 2013

target (we thought a 10% beat was possible). 2014 target remains unchanged at $3bn

but after exceeding targets in 2013, we think RIO can again surprise. Headcount

reduced by 4,000 across the group.

■ EFFECTIVE TAX RATE – on underlying earnings (and excluding equity accounted

units) was a high 35% given utilisation of MRRT deferred tax asset. Guidance for

2014 is 30-35%, we assume 32%.

■ ONE OFFS:

o Impairments $3.4bn (Oyu Tolgoi $1.6bn, Kitimat ali smelter $696m, Gove alumina

refinery $555m) and non-cash FX losses $2.9bn.

o Restructuring costs of $367m were taken.

o FX losses on debt and derivatives mark-to-market of $2.7bn.

o Gains: disposal of assets netted $847m including $596m from Constellium and

$396m from Northparkes.

■ NET EARNINGS - $3.7bn after taking into account the one off -items.

Figure 1: Rio FY13 reconciliation of underlying and reported earnings

Source: Company data, Credit Suisse estimates

17 February 2014

Australia and NZ First Edition 68

Key divisions:

■ Iron ore: net earnings IN-LINE at $9.9bn v consensus at $9.9bn. Disappointingly,

iron ore production guidance for 2014 is 295mt (global, 100% basis) with the

Pilbara 290 ramp up to be complete before the end of 1H14. On the call, management

noted that guidance was conservative and there had been rain in the Pilbara lately.

Rio has 14mt of excess iron ore inventory in Australia which will be drawn down

progressively over the next 3 years. This guidance will be lower than many expected,

with consensus of 305mt (CS had been forecasting 311mt). We have revised our

forecasts down to 300mt, in the belief that RIO in being extremely conservative.

■ Copper: AHEAD at $821bn net earnings v CS $813m and consensus at $735m.

Guidance of 570kt mined and 260kt refined copper is below consensus at 615kt and

280kt (though ahead of CS).

■ Aluminium: AHEAD net earnings at $557m v expectations (CS and consensus) of

breakeven. This is partially offset by a charge of $281m in "other" which includes Gove

expenses – this was not included in the divisional Alu breakdown.

■ Energy: IN-LINE with net earnings at $33m v consensus at a loss $35m.

■ Minerals: IN-LINE at $350m net earnings. Guidance for 1.5mt TiO2 in FY14 is well

below capacity at 1.8mt.

■ Offset by slightly higher intersegment transactions, interest costs and "other" for an in-

line result with CS.

Rio is positive on global growth and flow-on impact for China exports. Despite talk of

liquidity and solvency issues in China, Rio has not seen any impact on letters of credit or

iron ore orders.

Capex inline and guidance confirmed – came in at $12.9bn in 2013, reconfirm guidance

for 2014 at <$11bn and 2015 of ~$8bn. Group sustaining capex reduced by $1.9bn to

~$4.5bn.

Post balance net date debt moved lower – net declined further in January with inflows

of $1.2bn from TRQ minority shareholders rights issue participation. The Clermont coal

sale ($1bn) should complete in 1H 2014. Pension provisions reduced from $6.2bn to

$3.6bn.

Oyu Tolgoi Mongolia Update – recently production has been impacted by post-

commissioning issues including failure of rake blades in tailings thickeners. The

associated repair works will see only one line in the mill operating for 6-8 weeks. Despite

this issue 2014 production guidance remains unchanged at 150-175kt copper in

concentrate and 700-750k oz gold in concentrate. An option to restart the underground

development by March when lender commitments are due to expire has been proposed.

However this will be delayed if the outstanding shareholder issues and permits are not

resolved.

Cash flow boosted by lower exploration/evaluation, tax payments – the former

reduced to $948m and reduced by $1bn against a targeted reduction of $750m. Rio stated

that exploration/evaluations spend will remain around this level. Tax payments in 2013

were $2.1bn lower than in 2012. Rio says that increased tax outflows in Australia are

expected in 2014 following a transition to monthly tax payments and that Rio will pay 14

months of Australian tax in 2014 (a timing impact – last quarter in 2013 plus 11 months in

2014).

Cost cutting – group unit cash costs reduced by 10% versus 2012 with Kennecott costs

down by $1,500/t, primary aluminium (North America) costs down by $300/t and Rio Tinto

Coal down by $30/t. Aluminium and Energy cost saves were, respectively, $574m and

$646m in 2013. A low AUD also had a $1bn net impact on earnings.

17 February 2014

Australia and NZ First Edition 69

Figure 2: Rio P&L vs CS vs Consensus

Rio P&L (US$mn) 1H13 2H13 FY13

Jun-13 Dec-13 Dec-13

Summary - Actuals vs CS vs Consensus Actuals Actuals Actuals CS Var Consensus Var

Revenue 24,511 26,660 51,171 50,044 2%

Operating expenses 14,912 14,750 29,662 29,309 1%

EBITDA Underlying 9,599 11,910 21,509 20,735 4% 20,763 4%

Depreciation of assets -3,512 -2,540 -6,052 -6,342 -5%

EBIT 6,087 9,370 15,457 14,393 7%

Net interest -344 -81 -425 -739 -43% -503

Other -353 -272 -625 -353 77%

Profit before tax 5,390 9,017 14,407 13,300 8%

Tax -1,526 -776 -2,302 -4,057 -43%

Share of net profits of associates (after tax) 330 368 698 903 -23%

Net profit after tax (pre OEI) 4,194 8,609 12,803 10,146 26%

Minorities (OEI) 35 -2,621 -2,586 35 -7489%

Underlying NPAT (post OEI) 4,229 5,988 10,217 10,181 0%

Significant items -2,509 -4,043 -6,552 -2,509 161%

Reported NPAT 1,720 1,945 3,665 7,672 -52%

Underlying EPS (USc/sh) 229 324 553 551 0%

DPS (USc/sh) 84 109 192 192 0% 181 6%

Underlying Earnings

Iron Ore 4,273 5,585 9,858 9,994 -1% 9,861 0%

Aluminium 123 434 557 5 nm -2

Copper 348 473 821 866 -5% 735 12%

Energy -52 85 33 -289 nm -35

Minerals (and Diamonds) 192 158 350 348 1% 412 -15%

Total Divisional 4,884 6,735 11,619 10,924 6% 10,970 6%

Margins

Revenue / Opex (x) 1.64x 1.81x 1.73x 1.71x 1%

EBITDA margin (%) 39% 45% 42% 41% 1%

EBIT margin (%) 25% 35% 30% 29% 5%

NPAT margin (%) - underlying 17% 22% 20% 20% -2% Source: Company data, Credit Suisse estimates, Vuma Consensus

Iron Ore

■ Iron ore earnings of $9.86bn was in line with consensus and marginally below CS at

$10bn.

■ EBITDA of $17.4bn was ahead of consensus and CS at $17bn, despite revenue of

$26bn being largely in line at $26bn. A beat on costs.

■ Rio saw cost savings of $351m ($240m post-tax), which compares to the target

savings of $400m by end 2014. A weaker currency also contributed while higher

royalty and MRRT payments were a partial offset.

■ The key point of contention is the 295mt global production guidance for FY14. This is

significantly below consensus and CS at app. 305/311mt. With "330mt Pilbara

production in 2015" guidance still maintained, would require ~55mt growth YoY in

2015. We expect that RIO will do a little better than its guidance and assume 300mt

production with 5mt of inventory sales.

17 February 2014

Australia and NZ First Edition 70

■ We are uncertainty on how the 330mt guidance for 2015 will be reached and have

pulled back our estimates to 325mt.

Figure 3: Iron ore summary

Iron Ore 1H11 2H11 1H12 2H12 1H13 2H13 1H14F 2H14F

Units Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14

Production Rio share ('000 tonnes)

Total Australia mt 87 97 91 100 96 104 104 118

Other (IOC, Simandou) mt 3 4 4 5 4 5 6 7

Total iron ore (Rio share) mt 91 101 94 105 100 109 110 125

Total Australia iron ore (100% basis) mt 110 122 114 125 120 131 133 147

Summary financials - Iron Ore

Iron Ore - Fines CFR China (62%) US$/t $177 $159 $141 $115 $137 $134 $120 $103

Australian revenue US$mn 12,425 14,430 11,273 10,912 10,807 12,929 11,627 11,168

Total Revenue US$mn 13,494 15,832 12,194 11,963 11,797 14,197 13,171 12,699

Costs US$mn 3,853 4,552 4,203 4,271 4,162 4,461 4,600 5,103

EBITDA US$mn 9,641 11,280 7,991 7,692 7,635 9,736 8,571 7,596

D&A US$mn 562 607 697 791 757 884 1,001 1,086

EBIT US$mn 9,079 10,673 7,294 6,901 6,878 8,852 7,570 6,510

Total Underlying Earnings US$mn 6,095 7,185 4,755 4,487 4,273 5,542 5,151 4,449

Total CAPEX US$mn 2,068 2,636 3,037 4,829 3,519 3,568 2,585 2,932

…growth US$mn 201 1,252 2,220 2,375 2,694 2,790 1,785 2,034

…maintenance US$mn 1,867 1,384 817 2,454 825 778 800 897

Operating assets US$mn 14,207 13,115 18,251 21,619 22,309 21,870 23,443 25,289

ROE % 47% 53% 30% 23% 19% 25% 23% 18%

Per tonne analysis

Realised price per tonne (Australia) US$/t 142 149 124 109 113 124 112 95

Realised price per tonne (Total) US$/t 149 157 129 114 118 130 120 102

Costs per tonne US$/t 42 45 45 41 42 41 42 41

EBITDA per tonne US$/t 106 112 85 74 76 89 78 61

D+A US$/t 6 6 7 8 8 8 9 9

EBIT per tonne US$/t 100 106 77 66 69 81 69 52

Interest, tax and other US$/t 34 36 29 25 28 32 24 18

Operating earnings per tonne US$/t 66 70 49 41 41 49 45 34

Capex per tonne US$/t 23 26 32 46 35 33 24 24

Sustaining capex per tonne US$/t 21 14 9 23 8 7 7 7

Margins

Realised price / costs per tonne x 3.50x 3.48x 2.90x 2.80x 2.83x 3.18x 2.86x 2.49x

EBITDA margin % 71% 71% 66% 64% 65% 69% 65% 60%

EBIT margin % 67% 67% 60% 58% 58% 62% 57% 51%

NPAT margin - underlying % 45% 45% 39% 38% 36% 39% 39% 35% Source: Company data, Credit Suisse estimates

Aluminium

■ Big positive surprise with underlying earnings of $557m against consensus

expectations of break even. This is up $54m in 2013, despite 9% lower LME prices.

■ Higher physical premia and cost reductions have turned the business around into

profitability (though undoubtedly, some of the $367m restructuring charges not

included in underlying earnings were taking in the ali. division).

■ Impairment charge of $696m on Kitimat is a negative. The cause is a capex overrun,

although the exact amount has not yet been determined. The project was on the go-

slow, overruns are not unusual in those situations.

17 February 2014

Australia and NZ First Edition 71

■ FY14 Guidance of 41mt bauxite (42mt consensus), 8.1mt alumina (9.2mt) and 3.4mt

aluminium (3.6mt) was below expectations and CS. On-going streamlining and cost-

outs has probably meant lower production. This is not a major concern as the

business is profitable again.

■ Primary Metal North America costs reduced by $300/t.

Copper

■ Earnings of $821m marginally ahead of consensus at $734m.

■ Rio still has 254mlb copper sales that have been provisionally priced at $3.33/lb. At

current prices of $3.22/lb that would equates to a negative $32m impact.

■ An option to restart the underground development at OT, subject to certain conditions

being met, has been proposed. However, outstanding issues, such as project finance,

still need to be resolved.

■ Recovery work at Kennecott is expected to last until end 2015. An impairment charge

of $283m was taken to write off deferred stripping assets and damaged equipment,

which compares to the initial $340m charge taken (a reversal in 2H14?).

■ Guidance of 570kt mined and 260kt refined copper is below consensus expectations

at 615kt and 280kt (though ahead of CS). Rio notes that there will be planned smelter

maintenance at Kennecott Utah in the year ahead.

17 February 2014

Australia and NZ First Edition 72

Figure 4: Copper summary Copper 1H11 2H11 1H12 2H12 1H13 2H13 1H14F 2H14F

Units Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14

Production (Rio share) ('000 tonnes)

Copper - mine production 000 t 274 246 253 296 297 335 284 286

Copper - refined production 000 t 185 149 123 156 151 149 129 129

Molybdenum (Bingham Canyon) 000 t 8 6 6 4 3 3 10 10

Silver mined 000 oz 2,578 2,345 1,812 1,846 2,006 2,758 2,764 2,784

Silver - refined (Kennecott) 000 oz 1,771 1,418 1,284 1,167 1,129 1,028 1,893 1,893

Gold mined 000 oz 316 324 154 141 130 212 174 174

Gold refined 000 oz 204 175 155 124 104 88 210 210

Prices

Copper US$/lb 4.25 3.80 3.67 3.56 3.44 3.21 3.12 2.89

Copper price US$/t 9,367 8,375 8,092 7,845 7,577 7,072 6,873 6,373

Gold US$/oz 1,448 1,694 1,652 1,686 1,525 1,308 1,140 1,025

Summary financials

Gross revenue US$mn 4,148 3,407 3,170 3,350 3,121 2,795 2,977 2,557

Costs US$mn 1,948 2,213 2,343 2,441 2,225 1,941 1,726 1,658

EBITDA US$mn 2,200 1,194 827 909 896 854 1,251 899

D+A US$mn 265 252 269 333 464 498 344 375

EBIT US$mn 1,935 942 558 576 432 356 907 524

Net earnings US$mn 1,392 847 556 780 348 473 593 299

CAPEX - total US$mn 719 1,312 1,360 2,706 1,580 1,233 1,075 927

Operating assets US$mn 5,153 6,001 6,898 13,812 12,873 12,070 15,897 16,422

ROE % 31% 15% 9% 8% 3% 4% 4% 2%

Per tonne analysis (per tonne of mined Copper)

Realised price per tonne US$/t 15,163 13,835 12,535 11,323 10,526 8,341 10,471 8,933

Costs per tonne US$/t 7,121 8,986 9,265 8,251 7,504 5,792 6,071 5,793

EBITDA per tonne US$/t 8,042 4,848 3,270 3,072 3,022 2,548 4,401 3,140

D+A US$/t 969 1,023 1,064 1,126 1,565 1,486 1,212 1,311

EBIT per tonne US$/t 7,073 3,825 2,206 1,947 1,457 1,062 3,189 1,829

Net earnings per tonne US$/t 5,088 3,439 2,198 2,636 1,174 1,412 2,088 1,044

Capex per tonne US$/t 2,630 5,328 5,378 9,146 5,329 3,679 3,780 3,238

Margins

Realised price / costs per tonne x 2.13x 1.54x 1.35x 1.37x 1.40x 1.44x 1.72x 1.54x

EBITDA margin % 53% 35% 26% 27% 29% 31% 42% 35%

EBIT margin % 47% 28% 18% 17% 14% 13% 30% 20%

NPAT margin - underlying % 34% 25% 18% 23% 11% 17% 20% 12% Source: Company data, Credit Suisse estimates

Energy

■ Earnings of $33m compared to consensus expecting a loss of $35m. Rio reported a

$258m gain on divestment of exploration projects.

■ Cost savings of $646m pre-tax were achieved, $442m post tax. Rio Tinto Coal

Australia costs were down an impressive $30/t.

■ ERA and Rossing still struggling following issues following leach tank failures. Still

awaiting approvals for recommencing operations at ERA while at Rossing some

operations were restarted in January 2014, to be gradually restored over 1Q14.

■ Guidance of 8.5mt semi-soft coking coal, 3mt HCC and 16.5mt thermal is a little below

expectations on all counts.

17 February 2014

Australia and NZ First Edition 73

Figure 5: Energy summary

Energy 1H11 2H11 1H12 2H12 1H13 2H13 1H14F 2H14F

Units Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14

Production (Rio share)

Total hard coking 000 t 3,403 5,412 3,704 4,339 3,552 4,663 4,430 4,430

Total thermal 000 t 8,780 9,011 8,914 11,736 11,032 11,945 8,276 8,500

Uranium 000 lbs 2,468 4,590 3,796 5,964 4,701 3,293 3,082 3,768

Prices

Coking Coal-high grade US$/t 278 300 223 198 169 149 147 160

Semi-soft coking US$/t 264 285 201 157 137 125 125 136

Steaming Coal US$/t 110 119 114 115 105 95 92 88

Uranium price US$/lb 60 53 52 46 42 36 38 45

Summary financials - Energy

Gross revenue US$mn 3,156 4,165 2,860 2,916 2,592 2,862 2,529 2,192

Costs US$mn 2,367 2,722 2,088 2,427 2,190 2,358 1,852 1,913

EBITDA US$mn 789 1,443 772 489 402 504 677 279

Underlying earnings US$mn 375 699 307 11 -52 85 308 -11

Capex US$mn 531 796 934 971 510 222 226 176

Coal - (excludes uranium divisions within Energy)

Gross revenue US$mn 2,686 3,510 2,533 2,475 2,313 2,493 2,381 1,972

Costs US$mn 1,828 2,050 2,028 2,014 1,980 2,031 1,659 1,666

EBITDA US$mn 858 1,460 505 461 333 462 721 306

Underlying earnings US$mn 433 807 196 114 -2 126 346 15

Capex US$mn 444 572 787 849 410 169 203 153

Operating assets US$mn 3,703 7,356 8,062 6,186 6,221 4,653 4,653 4,583

ROE % 13% 15% 3% 2% 0% 2% 7% 0%

Coal - Per tonne analysis

Realised price per tonne US$/t 220 243 201 154 159 150 187 153

Costs per tonne US$/t 150 142 161 125 136 122 131 129

EBITDA per tonne US$/t 70 101 40 29 23 28 57 24

Underlying earnings per tonne US$/t 36 56 16 7 0 8 27 1

Capex per tonne US$/t 36 40 62 53 28 10 16 12

Coal - Margins

Realised price / costs per tonne x 1.47x 1.71x 1.25x 1.23x 1.17x 1.23x 1.43x 1.18x

EBITDA margin % 32% 42% 20% 19% 14% 19% 30% 16%

NPAT margin - underlying % 16% 23% 8% 5% 0% 5% 15% 1% Source: Company data, Credit Suisse estimates

Diamonds and minerals

■ Earnings came in at $350m, slightly below consensus at $412m but in line with CS.

■ Not much news, Rio noted that pigment producers are believed to have absorbed a

large amount of inventories in 2013 but that an overhang remains on the feed stocks

side. Rio remains committed to the minerals sands business and Walsh says he is still

happy to have bought BHP's share of RBM.

■ Guidance of 1.5mt TiO2 - Rio operations will continue to operate well below capacity

of 1.8mt and expectations of 1.7mt.

17 February 2014

Australia and NZ First Edition 74

Earnings and valuation

EPS down <1% as the 10mt lower iron ore production (~$400m NPAT) and 2% higher tax

rate ($300m) are offset by cost savings in the coal and ali divisions.

Figure 6: Earnings changes Earnings FY13F FY14F FY15F

revisions Old New Ch % Old New Ch % Old New Ch %

Sales revenue ($mn) 50,044 51,171 2.3% 50,224 49,689 -1.1% 50,635 51,489 1.7%

EBITDA ($mn) 20,735 21,509 3.7% 21,490 21,439 -0.2% 21,761 21,721 -0.2%

EBIT ($mn) 14,393 15,457 7.4% 15,267 15,725 3.0% 15,583 15,894 2.0%

Underlying NPAT ($mn) 10,181 10,217 0.4% 11,068 11,054 -0.1% 11,623 11,529 -0.8%

Reported NPAT ($mn) 7,672 3,665 -52.2% 11,313 11,299 -0.1% 11,623 11,529 -0.8%

EPS Pre-GW (¢) 551 553 0.4% 599 598 -0.1% 629 624 -0.8%

DPS (¢) 192 192 0.0% 211 211 0.0% 232 232 0.0%

Operating cashflow 14,642 15,078 3.0% 17,223 18,442 7.1% 18,321 18,122 -1.1%

Capex total -13,245 -13,001 -1.8% -10,360 -10,734 3.6% -7,546 -7,444 -1.3% Source: Credit Suisse estimates

Our DCF increases to A$83.5/sh from A$78.5/sh on model roll forward ($2/sh), lower

pension liabilities ($2/sh) and lower coal/ali costs ($1/sh). We raise our target price to

A$80/sh (from A$75/sh) and £42/sh (from £40/sh) and retain our OUTPERFORM rating.

Figure 7: Rio DCF based SoTP valuation

NPV USD $/share AUD $A/share GBP/share %

Rio Tinto Alcan 8,024 4.3 9,499 5.1 2.6 5.2%

Pacific Aluminium 2,549 1.4 3,000 1.6 0.8 1.7%

Total Aluminium 10,573 5.7 12,498 6.8 3.4 6.9%

Hamersley Iron 95,005 51.4 111,456 60.3 31.0 62.0%

Robe River 9,571 5.2 11,207 6.1 3.1 6.2%

Iron Ore Company of Canada 2,624 1.4 3,067 1.7 0.9 1.7%

Simandou 1,128 0.6 1,333 0.7 0.4 0.7%

Iron ore 108,327 58.6 127,063 68.8 35.3 70.7%

Kennecott Utah Copper 5,919 3.2 6,959 3.8 1.9 3.9%

Escondida 7,019 3.8 8,250 4.5 2.3 4.6%

Grasberg joint venture 3,400 1.8 4,012 2.2 1.1 2.2%

Northparkes (sold) 0 0.0 0 0.0 0.0 0.0%

Oyu Tolgoi 1,269 0.7 1,492 0.8 0.4 0.8%

Resolution 1,000 0.5 1,176 0.6 0.3 0.7%

Northern Dynasty (shareholding) 68 0.0 77 0.0 0.0 0.0%

Turquise Hill other assets 1,000 0.5 1,000 0.5 0.3 0.7%

Copper 19,676 10.7 22,967 12.4 6.4 12.8%

Rio Tinto Iron & Titanium 5,018 2.7 5,897 3.2 1.6 3.3%

Rio Tinto Minerals 1,261 0.7 1,476 0.8 0.4 0.8%

Diamonds 1,055 0.6 1,245 0.7 0.3 0.7%

Minerals (and Diamonds) 7,334 4.0 8,618 4.7 2.4 4.8%

Rio Tinto Coal Australia 5,978 3.2 7,008 3.8 1.9 3.9%

Mozambique 390 0.2 457 0.2 0.1 0.3%

Rössing 408 0.2 483 0.3 0.1 0.3%

Energy Resources of Australia 531 0.3 531 0.3 0.2 0.3%

Energy 7,307 4.0 8,479 4.6 2.4 4.8%

Total operations 153,217 82.9 179,625 97.2 49.9 100%

Net debt 17,625 9.5 20,735 11.2 5.7

Unfunded pension 3,600 1.9 4,235 2.3 1.2

Net debt and other 21,225 11.5 24,971 13.5 6.9

Net valuation 131,992 71.5 154,654 83.7 43.0 Source: Credit Suisse estimates

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Australia and NZ First Edition 75

Rio financial summary

Figure 8: RIO financial summary Market data RIO (Total) plc Ltd NPV USD $/sh A$/sh GB/sh

Ticker $US RIO.L RIO.AX Aluminium 10,573 5.7 6.8 3.4

Share prices (local) (GB£ / A$) 35.1 67.8 Iron ore 108,327 58.6 68.8 35.3

Share price $US equivalent 58.9 58.3 60.6 Copper 19,676 10.7 12.4 6.4

plc / Ltd Premium/(discount) -4% 4% Mineral/Diamond 7,334 4.0 4.7 2.4

Market cap (US$'mn) 108,721 82,312 26,409 Energy 7,307 4.0 4.6 2.4

Market cap (%) 100% 76% 24% Total operations 153,217 82.9 97.2 49.9

Market cap (local) (GB£ / A$) (million) 49,544 29,560 Net debt & other 21,225 11.5 13.5 6.9

Shares on issue (mn) 1,847 1,412 436 Net valuation 131,992 71.5 83.7 43.0

Shares (%) 100% 76% 24% Shares on issue 1,847 FX 0.89 1.66

Enterprise value (EV) ($US'mn) 129,946

F'cast->

Commodity assumptions FY12 FY13F FY14F FY15F FY16F FY17F FY18F FY19F FY20F

Iron Ore - Fines CFR China (62%) 128 135 111 95 95 95 95 95 95

Iron Ore - Lump CFR China (64%) 135 146 131 107 103 103 103 103 103

Iron ore Pellets (US$/t) 182 174 163 139 135 136 136 137 138

Freight cost Aust-China (US$/t) 8.8 8.1 10.0 10.0 10.0 10.0 10.0 10.0 10.0

Hard Coking Coal (US$/t) FOB Queensland 210.0 158.5 153.3 167.5 175.0 175.0 175.0 175.0 175.1

Semi soft coking coal (US$/t) FOB Queensland 178.7 130.8 130.2 142.8 149.2 149.2 148.4 147.3 146.1

PCI coal (US$/t) FOB Queensland 153.1 125.4 123.0 132.0 138.0 138.0 137.3 136.3 135.2

Thermal coal (US$/t) FOB Newcastle 114.5 100.0 89.8 91.8 98.0 100.0 100.1 100.3 100.4

Aluminium (US$/lb) 0.92 0.86 0.82 0.91 0.95 1.00 1.01 1.03 1.04

Alumina (US$/t) 319.0 329.8 330.0 340.0 350.0 380.0 385.6 394.5 403.4

Alumina (contract linkage) (US$/t) 317.7 314.0 290.4 312.0 336.0 348.0 355.8 361.8 367.8

Copper (US$/lb) 3.62 3.32 3.01 3.06 3.29 3.52 3.47 3.41 3.34

Uranium (US$/lb) 48.8 38.5 41.8 55.3 60.0 70.0 69.9 69.7 69.5

Gold (US$/oz) 1,669 1,416 1,083 990 1,000 1,000 1,041 1,106 1,171

Zircon bulk from Australia FOB 2,173 1,151 1,108 1,250 1,400 1,600 1,599 1,597 1,596

TiO2 basket price 1,783 748 776 1,038 958 859 857 855 852

TCRC: Copper, USc/lb, contract 19.2 19.2 19.2 19.2 19.2 19.2 19.2 19.2 19.2

AUD:USD 1.04 0.97 0.89 0.86 0.85 0.85 0.85 0.85 0.85

Production schedule (attributable) FY12 FY13F FY14F FY15F FY16F FY17F FY18F FY19F FY20F

Alumina ('000 tonnes) 10,041 9,309 8,090 7,840 7,840 7,840 7,840 7,840 3,920.00

Aluminium ('000 tonnes) 3,220 3,553 3,434 3,448 3,521 3,522 3,522 3,522 1,761.15

Bauxite ('000 tonnes) 39,363 43,204 41,000 41,200 41,200 41,200 41,200 41,200 20,600.00

Coal - Coking ('000 tonnes) 8,043 8,215 8,860 9,670 10,558 11,286 11,286 11,286 5,643.00

Coal - Semi soft ('000 tonnes) 3,286 3,858 3,028 3,484 3,712 3,969 3,969 3,969 1,984.49

Coal - Thermal ('000 tonnes) 20,378 22,977 16,775 17,687 18,183 18,871 21,005 22,205 11,702.42

Copper - mined ('000 tonnes) 549 632 570 670 654 645 689 755 403.36

Copper - refined ('000 tonnes) 279 300 258 281 289 295 295 295 147.60

Iron ore ('000 tonnes) 198,870 208,966 234,245 280,206 290,706 299,106 307,294 314,846 161,199.36

Pilbara capacity guidance (100%), end year 240,000 261,510 293,000 335,000 345,000 355,000 360,000 360,000 360,000

Pilbara production 100% 239,381 250,584 279,000 330,000 342,500 352,500 360,000 360,000 180,000

Global iron ore production at 100% 253,460 265,951 300,500 353,000 365,500 375,500 388,000 408,000 214,000.00

Titanium dioxide feedstock ('000 tonnes) 1,595 1,622 1,500 1,650 1,850 1,900 1,900 1,900 950.00

Uranium ('000 lbs) 9,760 7,994 6,850 8,042 6,813 6,813 6,813 6,813 3,406.51

Gold - mined ('000 ozs) 296 342 349 516 474 420 427 434 216.14

Gold - refined ('000 ozs) 279 192 420 453 453 453 453 453 226.30

Revenue, mt Fe - IO equivalent 465 488 479 528 543 553 565 571 576

...Growth - IO equivalent 8% 5% -2% 10% 3% 2% 2% 1% 1%

Expenses per tonne of IO equivalent 68 61 59 56 56 56 55 54 55

P&L ($US'mn) FY12 FY13F FY14F FY15F FY16F FY17F FY18F FY19F FY20F

Revenue 50,942 51,171 49,689 51,489 52,947 54,424 55,350 56,084 57,583

Expenses 31,817 29,662 28,250 29,769 30,231 30,873 31,270 31,096 31,570

EBITDA 19,125 21,509 21,439 21,721 22,716 23,550 24,080 24,988 26,013

Depreciation & amortisation 4,441 6,052 5,714 5,827 5,955 5,903 5,938 6,055 6,223

EBIT 14,684 15,457 15,725 15,894 16,761 17,647 18,142 18,933 19,790

Net interest + other 2,682 1,050 549 387 194 -79 -375 -772 -1,208

Profit before tax 12,002 14,407 15,175 15,507 16,567 17,726 18,516 19,704 20,998

Associates after tax 1,056 698 938 1,010 1,049 974 993 1,086 1,041

Tax -3,788 -2,302 -4,856 -4,652 -4,970 -5,318 -5,555 -5,911 -6,299

OEI -1 -2,586 -203 -336 -332 -325 -382 -410 -497

Underlying NPAT 9,269 10,217 11,054 11,529 12,314 13,058 13,573 14,469 15,243

Net significant items (post tax) -12,297 -6,552 245 - - - - - -

Reported NPAT -3,028 3,665 11,299 11,529 12,314 13,058 13,573 14,469 15,243

EPS - basic (underlying) (US cents) 501 553 598 624 667 707 735 783 825

DPS (US cents) 167 192 211 232 256 281 309 340 374

Payout ratio 33% 35% 35% 37% 38% 40% 42% 43% 45%

Dividend growth (%) 15% 15% 10% 10% 10% 10% 10% 10% 10%

Business unit earnings (post tax pre interest) FY12 FY13F FY14F FY15F FY16F FY17F FY18F FY19F FY20F

Iron Ore 9,242 9,858 9,600 8,729 8,878 9,199 9,610 10,103 10,594

Aluminium 3 557 621 846 953 1,172 1,186 1,293 1,399

Copper 1,092 821 892 1,060 1,224 1,224 1,339 1,453 1,591

Energy 283 33 297 213 450 610 610 613 617

Minerals (and Diamonds) 119 350 298 919 931 825 827 826 826

Other (interest, exploration, other ops) -1,470 -1,402 -654 -239 -122 27 2 181 215

Underlying NPAT 9,269 10,217 11,054 11,529 12,314 13,058 13,573 14,469 15,243 Source: Company data, Credit Suisse estimates

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Australia and NZ First Edition 76

Figure 9: Rio financial summary (continued) Cashflows ($US'mn) FY12 FY13F FY14F FY15F FY16F FY17F FY18F FY19F FY20F

Operating cashflows 9,430 15,078 18,442 18,122 19,290 19,855 20,636 21,706 22,763

Capex - sustaining -3,000 -3,000 -3,300 -3,630 -3,775 -3,926 -4,083 -4,247 -4,416

FCF- pre growth capex 6,430 12,078 15,142 14,492 15,515 15,929 16,552 17,460 18,347

Capex - growth -14,615 -10,001 -7,434 -3,814 -3,860 -3,749 -1,015 -42 -

Free cash flow after all capex -8,185 2,077 7,709 10,678 11,654 12,180 15,538 17,418 18,347

Total capex spend -17,615 -13,001 -10,734 -7,444 -7,635 -7,675 -5,098 -4,288 -4,416

Exploration and other -628 2,055 600 -400 -400 -400 -600 -600 -600

Share buy-back -1,471 - - - - - - - -

Dividend payments -3,038 -3,322 -3,779 -4,080 -4,488 -4,937 -5,430 -5,973 -6,571

Other cashflows 10,833 2,388 1,200 -0 -0 0 - -0 -

Net increase in cash -2,489 3,198 5,730 6,198 6,767 6,843 9,507 10,844 11,176

Cash at end of period 7,272 10,209 15,939 22,136 28,903 35,746 45,253 56,098 67,274

Net debt 19,233 17,625 11,902 5,705 -1,062 -7,905 -17,412 -28,257 -39,433 #N/A #N/A #N/A #N/A

Balance Sheet ($US'm) FY12 FY13F FY14F FY15F FY16F FY17F FY18F FY19F FY20F

Cash 7,135 10,216 15,939 22,136 28,903 35,746 45,253 56,098 67,274

Receivables 5,341 4,667 4,667 4,667 4,667 4,667 4,667 4,667 4,667

Inventories 6,375 5,737 5,737 5,737 5,737 5,737 5,737 5,737 5,737

Plant & equipment 76,985 70,827 74,853 76,471 78,152 79,924 79,084 77,316 75,510

Deferred tax assets 3,476 3,555 3,555 3,555 3,555 3,555 3,555 3,555 3,555

Other assets & intangibles 19,125 16,023 16,023 16,023 16,023 16,023 16,023 16,023 16,023

Assets 118,437 111,025 120,774 128,589 137,037 145,652 154,319 163,396 172,766

Payables 9,420 8,400 8,400 8,400 8,400 8,400 8,400 8,400 8,400

Provisions 17,394 14,081 14,081 14,081 14,081 14,081 14,081 14,081 14,081

Tax liabilities 823 1,126 2,197 2,227 2,516 2,686 2,828 2,999 3,200

Borrowings 26,904 28,551 28,551 28,551 28,551 28,551 28,551 28,551 28,551

Other liabilities 6,156 5,365 5,365 5,365 5,365 5,365 5,365 5,365 5,365

Liabilities 60,697 57,523 58,594 58,624 58,913 59,083 59,225 59,396 59,597

Net Assets 57,740 53,502 62,180 69,965 78,123 86,570 95,094 104,000 113,169

Valuation metrics (31-DecYE) FY12 FY13F FY14F FY15F FY16F FY17F FY18F FY19F FY20F

Underlying EPS - diluted (US cents) 501 553 598 624 667 707 735 783 825

EPS growth (underlying - diluted) -38% 10% 8% 4% 7% 6% 4% 7% 5%

Cash EPS 76 526 921 940 989 1,026 1,056 1,111 1,162

PE - plc 11.6x 10.5x 9.7x 9.3x 8.7x 8.2x 7.9x 7.4x 7.1x

PE - Ltd 12.1x 11.0x 10.1x 9.7x 9.1x 8.6x 8.2x 7.7x 7.3x

PE - ltd (CS FX Forward Curve) 14.0x 11.9x 10.0x 9.3x 8.6x 8.2x 7.8x 7.4x 7.0x

Share price / cash EPS - plc 76.3x 11.1x 6.3x 6.2x 5.9x 5.7x 5.5x 5.2x 5.0x

Share price / cash EPS - Ltd 79.3x 11.5x 6.6x 6.5x 6.1x 5.9x 5.7x 5.5x 5.2x

Div Yield Plc 2.9% 3.3% 3.6% 4.0% 4.4% 4.8% 5.3% 5.8% 6.4%

Div Yield Ltd 2.8% 3.2% 3.5% 3.8% 4.2% 4.6% 5.1% 5.6% 6.2%

EV / EBITDA (fixed) 7.4x 6.4x 6.4x 6.3x 6.1x 5.8x 5.7x 5.5x 5.3x

EV / EBITDA (floating) 7.3x 6.2x 6.0x 5.6x 5.1x 4.6x 4.1x 3.5x 3.0x

FCF / share, USD, all capex -4.43 1.12 4.17 5.78 6.31 6.59 8.41 9.43 9.93

FCF yield all capex Plc -7.6% 1.9% 7.2% 9.9% 10.8% 11.3% 14.4% 16.2% 17.0%

FCF yield all capex Ltd -7.3% 1.9% 6.9% 9.5% 10.4% 10.9% 13.9% 15.6% 16.4%

Price / cash earnings Ltd 79.3x 11.5x 6.6x 6.5x 6.1x 5.9x 5.7x 5.5x 5.2x

Price / cash earnings Plc 76.3x 11.1x 6.3x 6.2x 5.9x 5.7x 5.5x 5.2x 5.0x

Price / Book Plc 2.3x 2.4x 2.0x 1.8x 1.6x 1.4x 1.3x 1.2x 1.1x

Cash PE - ltd (CS FX Forward Curve) 92.0x 12.5x 6.5x 6.2x 5.8x 5.6x 5.5x 5.2x 5.0x

ROE 18.7% 27.7% 22.4% 20.3% 19.0% 17.9% 16.8% 16.2% 15.6%

ROIC 13.1% 18.3% 14.4% 14.7% 15.2% 15.7% 16.3% 17.5% 18.8%

Gearing and debt metrics FY12 FY13F FY14F FY15F FY16F FY17F FY18F FY19F FY20F

Net Debt (net cash) 19,233 17,625 11,902 5,705 -1,062 -7,905 -17,412 -28,257 -39,433

Net Debt / (Net Debt + Equity) (%) 26% 26% 17% 8% 0% -9% -21% -36% -52%

Net Debt / Equity (%) 34% 34% 20% 9% 0% -8% -18% -26% -34%

Interest cover (x) (EBIT) 83.0x 36.4x 28.6x 41.0x 86.4x -223.4x -48.4x -24.5x -16.4x

Margins FY12 FY13F FY14F FY15F FY16F FY17F FY18F FY19F FY20F

EBITDA margin 38% 42% 43% 42% 43% 43% 44% 45% 45%

EBIT margin 29% 30% 32% 31% 32% 32% 33% 34% 34%

NPAT margin 18% 20% 22% 22% 23% 24% 25% 26% 26%

Income tax rate 32% 16% 32% 30% 30% 30% 30% 30% 30%

Valuation metrics FY12 FY13F FY14F FY15F FY16F FY17F FY18F FY19F FY20F

PER weighted average 11.7x 10.6x 9.8x 9.4x 8.8x 8.3x 8.0x 7.5x 7.1x

NPAT growth (%) -152% -221% 208% 2% 7% 6% 4% 7% 5%

EV (floating) (US$mn) 128,490 127,056 121,333 115,136 108,369 101,526 92,019 81,174 69,998

NTA per share (US$) 26.0 25.3 30.0 34.2 38.6 43.2 47.8 52.6 57.6

ROTE (%) 30% 34% 33% 29% 27% 25% 23% 22% 21%

P / NTA (x) 2.3x 2.4x 2.0x 1.8x 1.6x 1.4x 1.3x 1.2x 1.1x

FCF/sh -sustaining CAPEX (US$) 3.48 6.54 8.20 7.84 8.40 8.62 8.96 9.45 9.93

FCF/sh - total CAPEX -4.43 1.12 4.17 5.78 6.31 6.59 8.41 9.43 9.93 Source: Company data, Credit Suisse estimates

Australia and NZ First Edition 77

17 February 2014

Asia Pacific/Australia

Equity Research

Diversified Metals & Mining (Steel (AU))

Sims Metal Management

(SGM.AX / SGM AU) RESULTS

Australia drives a better 1H; challenging

outlook keeps management cautious

■ Statutory 1H NPAT $9.3mn (CS $9mn). A$42.1mn underlying NPAT

exceeded expectation. $113mn EBITDA exceeded our $86mn, driven by a

very strong Australian result and the benefit of AUD depreciation on other

regions. Australia underpinned by materially improving domestic scrap

sector structure as competitors withdraw from the market. US now facing

headwinds. SRS deteriorated further. No guidance. No interim dividend.

■ Sales volumes increased by 3.3% to 6.1Mt in 1HY14 (5.927Mt pcp) in

HY13, but down 6.2% from the strong 2H13 6.526Mt.

■ Underlying EBITDA was A$128.5mn up 37.9% on pcp, again due to

materially improved performance from recycling operations in Australia.

■ At constant currency, underlying controllable costs were A$24.8mn lower in

HY14 compared to HY13.

■ Net debt as at 31 December 2013 was A$121.2mn, a decrease of

A$32.6mn on FY13 $154mn. Operating cash flow $37.8mn plus $30.1mn

cash from asset sales. Capex of $29.2mn is less than half the FY14

forecast $80mn and FY13 $149mn.

■ 2H14 outlook described as challenging with export markets (Turkey)

impacting demand for SGM's exports.

■ New strategy to be delivered to the market by new MD Galdino Claro before

the end of the half. No change to target price or rating.

Total return forecast in perspective

Mean^

CS tgt^Sh Prc

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

12mth Volatility* 52wk Hi-Lo IBES Consensustarget return^

Performance over 1M 3M 12M

Absolute (%) 3.2 2.4 -2.4

Relative (%) 1.1 3.2 -8.7

Financial and valuation metrics

Year 06/13A 06/14E 06/15E 06/16E

Revenue (A$mn) 7,245.6 7,199.5 7,321.5 7,832.0

EBITDA (A$mn) 191.4 240.6 318.8 379.9

EBIT (A$mn) 67.9 118.7 192.3 251.1

Net income (A$mn) 17.1 73.3 126.3 168.7

EPS (CS adj.) (Ac) 8.37 35.89 61.76 82.50

Change from previous EPS (%) n.a. 71.1 -0.7 0.2

Consensus EPS (Ac) n.a. 49.10 80.90 103.50

EPS growth (%) -76.7 328.9 72.1 33.6

P/E (x) 127.9 29.8 17.3 13.0

Dividend (Ac) — — 30.88 41.25

Dividend yield (%) — — 2.9 3.9

P/B (x) 1.1 1.2 1.2 1.1

Net debt/equity (%) 8.0 10.9 5.2 1.3

Relative performance versus S&P ASX 200.See Reference

Appendix for a description of the chart. Source: Credit Suisse

estimates, * Consensus, mean range from Thomson Reuters

Source: Company data, ASX, Credit Suisse estimates, * Adj. for goodwill, notional interest and unusual items. Relative P/E

against ASX/S&P200 based on pre GW in AUD. Company PE calculation is based on displayed EPS Currency

Rating UNDERPERFORM*

Price (14 Feb 14, A$) 10.70

Target price (A$) 10.00¹

Market cap. (A$mn) 2,187.50

Yr avg. mthly trading (A$mn) 215

Last month's trading (A$mn) 151

Projected return:

Capital gain (%) -6.5

Dividend yield (net %) 1.8

Total return (%) -4.7

52-week price range 11.2 - 8.3

* Stock ratings are relative to the relevant country

benchmark.

¹Target price is for 12 months.

Research Analysts

Michael Slifirski

61 3 9280 1845

michael.slifirski@credit-suisse.com

Sam Webb

61 3 9280 1716

sam.webb@credit-suisse.com

17 February 2014

Australia and NZ First Edition 78

Figure 1: SGM Financial Summary

Sims Metal Management (SGM) Year ending 30 Jun In AUDmn, unless otherwise stated2012 2013 2014 2015 2016 2012 2013 2014 2015 2016

Share Price: A$10.70 Earnings 06/12A 06/13A 06/14E 06/15E 06/16ERating UNDERPERFORM c_EPS_SHARESEquiv. FPO (period avg.) mn 205.8 204.4 204.4 204.4 204.4

Target Price A$ 10.00 c_EPS*100EPS (Normalised) c 36.0 8.4 35.9 61.8 82.5

vs Share price % -6.54 EPS_GROWTH*100EPS Growth % -76.7 328.9 72.1 33.6

DCF A$ 10.04 c_EBITDA_MARGIN*100EBITDA Margin % 2.8 2.6 3.3 4.4 4.9

c_DPS*100DPS c 20.0 0.0 0.0 30.9 41.2

c_PAYOUT*100Payout % 55.6 0.0 0.0 50.0 50.0

FRANKING*100Franking % 0.0 0.0 0.0 40.0 40.0

c_FCF_PS*100Free CFPS c 77.6 77.4 15.8 71.8 90.6

Profit & Loss 06/12A 06/13A 06/14E 06/15E 06/16E c_TAX_RATE*100Effective tax rate % 27.5 66.0 29.6 30.0 30.0

Sales revenue 9,123.2 7,245.6 7,199.5 7,321.5 7,832.0 ValuationEBITDA 253.2 191.4 240.6 318.8 379.9 c_PEP/E x 29.8 127.9 29.8 17.3 13.0

Depr. & Amort. (129.9) (123.5) (121.8) (126.5) (128.8) c_EBIT_MULTIPLE_CURREV/EBIT x 20.1 34.5 20.1 11.9 8.8

EBIT 123.3 67.9 118.7 192.3 251.1 c_EBITDA_MULTIPLE_CUEV/EBITDA x 9.8 12.2 9.9 7.2 5.8

Associates 0.0 0.0 0.0 0.0 0.0 c_DIV_YIELD*100Dividend Yield % 1.9 0.0 0.0 2.9 3.9

Net interest Exp. (21.2) (17.6) (14.6) (11.9) (10.2) c_FCF_YIELD*100FCF Yield % 7.3 7.2 1.5 6.7 8.5

Other 0.0 0.0 0.0 0.0 0.0 c_PBPrice to Book x 0.9 1.1 1.2 1.2 1.1

Profit before tax 102.1 50.3 104.1 180.4 240.9 ReturnsIncome tax (28.1) (33.2) (30.8) (54.1) (72.3) c_ROE*100Return on Equity % 3.1 0.9 4.1 6.6 8.4

Profit after tax 74.0 17.1 73.3 126.3 168.7 c_I_NPAT/c_I_SALES*100Profit Margin % 0.8 0.2 1.0 1.7 2.2

Minorities 0.0 0.0 0.0 0.0 0.0 c_I_SALES/c_B_TOT_ASSAsset Turnover x 2.5 2.5 2.6 2.6 2.6

Preferred dividends 0.0 0.0 0.0 0.0 0.0 c_ASSETS/c_EQ_COMMONEquity Multiplier x 1.5 1.5 1.5 1.5 1.5

Associates & Other (0.0) (0.0) 0.0 0.0 0.0 c_ROA*100Return on Assets % 2.0 0.6 2.7 4.4 5.6

Normalised NPAT 74.0 17.1 73.3 126.3 168.7 c_ROIC*100Return on Invested Cap. % 3.3 1.1 4.2 6.7 8.7

Unusual item after tax (696.5) (483.2) (32.8) 0.0 0.0 GearingReported NPAT (622.5) (466.1) 40.5 126.3 168.7 c_GEARING*100Net Debt to Net debt + Equity % 10.9 7.4 9.8 4.9 1.3

c_NET_DEBT/c_I_EBITDANet Debt to EBITDA x 1.2 0.8 0.8 0.3 0.1

Balance Sheet 06/12A 06/13A 06/14E 06/15E 06/16E c_I_EBITDA/ c_I_NET_INTERESTInt Cover (EBITDA/Net Int.) x 11.9 10.9 16.5 26.8 37.2

Cash & equivalents 51.4 46.9 5.9 102.6 174.6 c_I_EBIT/ c_I_NET_INTERESTInt Cover (EBIT/Net Int.) x 5.8 3.9 8.1 16.2 24.6

Inventories 890.0 574.9 431.3 439.3 469.9 (c_C_CAPEX/c_I_SALES)*-100Capex to Sales % 1.8 2.1 1.3 1.7 1.6

Receivables 513.4 455.4 503.2 512.5 548.2 (c_C_CAPEX/c_I_DEPR)*-100Capex to Depreciation % 156.3 147.4 88.4 119.9 119.9

Other current assets 29.4 82.2 82.2 82.2 82.2

Current assets 1,484.2 1,159.4 1,022.5 1,136.6 1,275.0 MSCI IVA (ESG) Rating AAAProperty, plant & equip. 977.1 992.2 960.4 960.4 960.4 TP ESG Risk (%): 0

Intangibles 634.0 263.9 263.9 263.9 263.9

Other non-current assets 524.7 501.3 501.3 501.3 501.3

Non-current assets 2,135.8 1,757.4 1,725.6 1,725.6 1,725.6

Total assets 3,620.0 2,916.8 2,748.1 2,862.2 3,000.6

Payables 672.1 585.2 556.7 560.2 596.2

Interest bearing debt 343.6 200.7 200.7 200.7 200.7

Other liabilities 209.9 202.1 202.1 202.1 202.1 MSCI IVA Risk: Neutral

Total liabilities 1,225.6 988.0 959.5 963.0 999.0

Net assets 2,394.4 1,928.8 1,788.6 1,899.2 2,001.6

Ordinary equity 2,394.4 1,928.8 1,788.6 1,899.2 2,001.6

Minority interests 0.0 0.0 0.0 0.0 0.0

Preferred capital 0.0 0.0 0.0 0.0 0.0

Total shareholder funds 2,394.4 1,928.8 1,788.6 1,899.2 2,001.6

Net debt 292.2 153.8 194.8 98.1 26.1 Source: MSCI IVA Rating

Cashflow 06/12A 06/13A 06/14E 06/15E 06/16E Share Price Performance

EBIT 123.3 67.9 118.7 192.3 251.1

Net interest -20.0 -16.7 -16.7 -14.7 -11.9

Depr & Amort 129.9 123.5 121.8 126.5 128.8

Tax paid -64.8 -9.4 -27.5 -30.8 -54.1

Working capital 106.6 286.2 67.4 -13.8 -30.4

Other 14.6 -154.2 -141.5 13.8 30.4

Operating cashflow 289.6 297.3 122.3 273.3 313.9

Capex -161.1 -149.0 -90.0 -126.5 -128.8

Capex - expansionary -31.2 -10.0 0.0 0.0 0.0

Capex - maintenance -129.9 -139.1 -90.0 -126.5 -128.8

Acquisitions & Invest -75.6 28.9 -50.0 -50.0 -50.0

Asset sale proceeds 0.0 0.0 0.0 0.0 0.0

Other -105.9 1.3 2.4 0.0 0.0

Investing cashflow -342.6 -118.8 -137.6 -176.5 -178.8

Dividends paid -69.3 -20.4 0.0 0.0 -63.1

Equity raised -37.0 -8.8 0.0 0.0 0.0

Net borrowings 40.9 -157.3 -28.6 0.0 0.0

Other 0.0 0.0 0.0 0.0 0.0 1 Month 3 Month 12 Month

Financing cashflow -65.4 -186.5 -28.6 0.0 -63.1 Absolute 3.2% 2.4% -2.4%

Total cashflow -118.4 -8.0 -43.9 96.8 72.0 Relative 1.1% 3.2% -8.7%

Adjustments 4.3 3.5 2.9 0.0 0.0

Net change in cash -114.1 -4.5 -41.0 96.8 72.0 Source: Reuters 52 week trading range: 8.26-11.24

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

11/02/2014 17:52

Sims Metal Management Limited is a metals recycling company. Its core businesses include

ferrous recycling; non-ferrous recycling; and recycling solutions.

Credit Suisse View

TP Risk Comment: No ESG risk factored into our TP, consistent

with MSCI 'AAA' rating.

0.00

2.00

4.00

6.00

8.00

10.00

12.00

4/02/2013 4/04/2013 4/06/2013 4/08/2013 4/10/2013 4/12/2013 4/02/2014

SGM.AX XJO

1.8

2.8

3.8

4.8

5.8

6.8

Environment Social Governance

Stock Local Sector Country Global Sector

Source: Company data, Credit Suisse estimates

17 February 2014

Australia and NZ First Edition 79

Stronger 1H than we expected, but 2H appears

challenged as tailwind becomes a headwind

Undoubtedly a better result than we had envisaged driven by a strong result from Australia

but helped by accounting definitions more than true underlying recovery in performance, in

our view. Underlying earnings of $42.1mn, up on pcp $9.4mn. $9.3mn statutory/reported

earnings result was in line with our forecasts.

Much of the gap between the 'underlying' figure and the reported figure could be debated,

6 of the 11 'significant items' occurring in 1H13 and the major difference, a deferred tax

asset write-off of $17.6mn, impossible for us to estimate. That said, the headline figure

was pleasing, even if driven only by Australia on 1.015Mt and unlikely to be replicated by

the larger volume, 4.364Mt US business.

The outlook, however, is somewhat more subdued and ultimately the 2H may indeed

prove more difficult from:

■ Turkey market disruptions seen aggressively since January;

■ Export destined tonnage now competing with US domestic markets for a buyer;

■ Continued low levels of scrap generation in the US and now reduction in competition;

■ No turnaround visible in the SRS business (new management placed in 1 July 2013),

indeed a further deterioration;

■ Excess processing capacity (ongoing structural issue) in the US market;

■ Severe winters in the US and Europe impacting 2H scrap flows;

■ Collapsing half to date prices globally for scrap.

In line with our preview, SGM’s 1H results exceeded our forecast, driven, as we had

forewarned, by a stronger Australasia result than we were modelling.

We recognised two risks to our Australian forecast – that of the materially improved

domestic structure following significant capacity idling and competition abatement and the

benefit of the rapidly rising scrap price in November and December, and of course the

declining AUD.

Only one prong of this three-pronged boost remains in the current half, that of the

improved and seemingly sustainable industry structure in Australia. FX may have

stabilised and it is difficult to see a significant rise in the ferrous scrap price during the

current half. The June half will see downward pressure from improved US scrap flows as

the northern hemisphere winter abates and is unlikely to see the 1H leg-up from a rising

iron ore price. Iron ore prices appear stable and well supported, but unlikely to rise

materially in the half, therefore holding scrap at parity.

SGM’s US operations also saw the benefit of strong November and December price

momentum, almost certainly assisting margins during that period. The US still struggles

with chronic over-capacity and a vastly inferior market structure to Australia. We do not

see this overcapacity/low utilisation/overbidding for scrap abating any time soon. SGM's

management is unable to quantify the magnitude of the capacity challenge, other than to

say that it varies by region. This much we already assumed. However, incremental

positive signs of volume growth are emerging, but seemingly of a trivial magnitude

compared to the extent of the overcapacity.

US margins appear likely to be static for some time, with any improvement delivered by

SGM’s ability to cut its cost base more aggressively than its unlisted, and generally more

nimble, smaller peers. We do see the potential for SGM to become relatively more nimble,

17 February 2014

Australia and NZ First Edition 80

with significantly deeper cuts possible than can be executed by the already hand-to-mouth

buy-price setting peer group.

While management suggests that margin improvement was delivered by internal action

(cost cutting and efficiency), not market, we suspect that the strongly rising price in

November and December nevertheless contributed significantly. Certainly SGM’s peers

suggest that their weak November quarters would have been materially worse had it not

been for a strong November.

New MD Galdino Claro suggests that there is a layer of business improvement identified to

be extracted through further internal improvements, suggesting improved cost efficiency

has and will continue to improve peer relative position. He believes that the business will

migrate from volume-focused to margin-focused, with more emphasis on cost control and

margin extraction. His focus is the entire supply chain seeking to improve cost of in bound,

conversion and shipping costs, to maximise profit on every tonne.

No guidance has been provided for the 2H, not even directionally. However, it is

abundantly clear that the market is currently deeply challenged and does not have the 1H

external support factors. Indeed the 1H tailwinds that boosted earnings have reversed to

2H headwinds with scrap falling materially and export markets currently in disarray now

impacting US domestic scrap market as “refugee scrap” previously destined for the Turkey

market seeks an already supplied interim market destination.

In our view, the strong 1H Australasian result may struggle to be replicated in the 2H, and

the US market will need to see a material improvement from its current dislocation. At this

point, a weaker US scrap outlook is probable.

While not wishing to deflect or diminish the stronger-than-expected 1H result, we were

quite disappointed by the further deterioration in the SRS business. We had expected the

half to be a period of stabilistion, with remedial actions lifting margins. Disappointingly, the

SRS business deteriorated further and significant further restructuring of the business has

been identified as necessary.

Despite SGM’s return to profitability, strong balance sheet and likely working capital

release likely as scrap collapses, the board is still not confident to resume dividends. This

says clearly that it is not confident that profitability has been sustainably restored and that

further restructuring work and market activity is required to restore this confidence.

Management proudly presents its delivery of $110mn annualised controllable cost

reduction since 2H FY12 exceeding target $100mn. However, this has been almost

entirely eroded by currency impact in AUD terms. This same FX movement has of course

assisted translation of reported EBIT which has not improved proportionally.

Australia clearly the stand out, but we question its sustainability

Strong result from Australia delivering 71% of group underlying operating EBIT, despite

higher costs (on higher volumes) but reflective of exiting competition in the market.

■ Stronger sales volumes of 0.975Mt, up 8.5% pcp and 12.7% HoH.

■ Strongest intake volumes of 1.015Mt, up 18.2% pcp and 12.9% HoH. Highest intake

volumes for at least five years.

■ Some risk to medium-term outlook as manufacturing continues to reduce suggesting

less prompt scrap availability.

■ Stronger sales revenues of $596.9mn up 4.1% versus pcp and 17% HoH.

■ Margins the key driver to the improved EBITDA on the back of improved intake and

market consolidation.

17 February 2014

Australia and NZ First Edition 81

■ New WA shredder to be operational in 2H FY15, to replace two smaller existing

shredders – a decision possible post ARI's exit from the WA market (a failed Smorgon

strategy).

While no doubt a pleasing result, 1H result, we note, was largely Australia driven. We

remain cautious on the outlook given the margin pressure we continue to see where cost

outs are largely consumed by buy price pressure. Fundamentally, margins have not

returned at the pace of volumes, despite aggressive cost cutting, improved non-ferrous

contributions and yard and shredder optimisation. This continues to influence our long-

term view.

We recognise that when volumes are ultimately restored, fixed cost coverage should

improve, reducing unit operating cost but, to date, material achievements with reducing

operating costs have not flowed to materially improving earnings. We are cautious on not

calling a turnaround when comparing numbers to what was a very weak FY13, and what

remains a very poor result on the asset deployed.

Ferrous scrap prices retreating

The past two weeks have seen the return of some scrap demand from Turkey with several

mills reported as resuming deep-sea cargoes for February-March shipment from American

and Baltic suppliers, after an exceptionally quiet January.

Pricing is ~$370/mt CFR Turkish ports for heavy melting scrap (80:20 blend), a $31/t lower

price than at the start of 2014.

Turkey is the world's largest export market for scrap, but has declined year or year with

CY13 scrap imports declining to 19.4Mt, down 13.4% YoY. Turkey’s scrap imports account

for > 20% of total global scrap trade and approximately equivalent to the US total scrap

exports. The US is the largest global exporter.

Turkey can import scrap from the US, EU, the UK or Russia or it can buy semi-finished

steel (billets, blooms and slabs) from Russia. Importing semi's has been cheaper and has

reduced need for scrap.

Turkey produced 35Mt of steel in CY13, 70% of which was in electric arc furnaces fed

largely by imported scrap. This compares to EAF's production globally being well below

40% of total steel production. The collapse of the Turkish Lira against the US$ has

favoured Eurozone exports slightly in recently relative to US exports, with UK exports

being the most expensive.

The Middle East and North Africa account for 54% of Turkish finished steel exports.

Instability in Turkey’s largest export market is not helpful to its steel producers and impacts

its scrap requirements.

Turkish scrap imports softened in December, increasing US domestic scrap market

liquidity and capping year-end domestic scrap price increases. Simplistically, this suggests

scrap prices must decline to a point where export pricing becomes attractive again,

obviously exacerbated by the Lira. Semi-finished steel exports from Russia to Turkey are

additionally impacted Turkey's by demand for scrap imports.

US East Coast scrap traders, sell mainly to Europe and the Middle East, so are more

impacted by weaker Turkish demand than West Coast scrapyards, which sell mainly to

Asia. For SGM, its East Coast operations have historically been less competitive and more

profitable than its intensely competitive West Coast operations.

SGM's East Coast peer, Schnitzer Steel Industries Inc. reported that exports accounted for

67% of overall sales in its latest quarter, down from 71%, a year earlier.

Steel Dynamics Inc scrap subsidiary, OmniSource, suggests that reduced scrap buying

from Turkey will offset US cold weather scrap supply issues and lead to declining US

ferrous scrap prices in February, and potentially the rest of the first quarter.

17 February 2014

Australia and NZ First Edition 82

Most recently, the differential between scrap and billet has narrowed to ~$122/t,

suggesting that there is less economic advantage for a Turkish EAF to purchase and re-

roll billet (and other semis) over importing scrap and converting it to billet.

Figure 2: Global scrap prices – falling

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HMS 1/2 80:20 / East Asia import CFR $/t HMS 1/2 / N.America domestic Del. Mill $/l.ton

HMS 1/2 80:20 / Turkish port import CFR $/t HMS Europe export FOB

Shred Scrp US Midwest Source: SBB, Credit Suisse

Margins up, but still historically weak

It has long been our thesis that historical ferrous margins of >US$30/t will not return to

scrap markets given the structural and dynamic changes the industry has undergone over

the past 3-4 years. This thesis continues to hold, but even the extent of the continued

margin compression has surprised us in its severity. With each half of reporting, we

become even more confident in our view. Our $15/t 'mid-cycle' margin assumption may

indeed be too optimistic.

Figure 3: Margins still under pressure

1H06

2H061H07

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Ferrous Processing margins

Source: Company data, Credit Suisse estimates

17 February 2014

Australia and NZ First Edition 83

P&L

■ 1H14 underlying NPAT $42mn (2H13 underlying NPAT $7mn, 1H13 $10mn).

■ Interest cost of $126mn (2H13 $12.9mn, 1H13 $12mn) on closing debt of $184.1mn

(2H13 $200mn, 1H13 $364mn).

■ Fourth straight half where no dividend has been paid. Last dividend was 2H FY12

(10cps unfranked, a payout of 66% of ¢15.1 EPS). We continue to forecast ~50%

payout ratio which we continue to use to forecast future dividend payouts. Despite no

change to guidance policy of 45–55%, we remain unsure when dividends will re-

commence. We assume FY15.

■ We note the Board's reluctance to restore dividends is consistent with our cautious

view of SGM's recovery trajectory. While ferrous volumes are improving, they are not

delivering the improved margins that should be expected.

■ Underlying EBIT again heavily weighted to Australia as expected:

o Australia $47.6mn (2H13 $42.2mn, 1H13 $19.5mn)

o Europe $11.1mn (2H13 UK impacted $31.5mn loss, 1H13 at $12.3mn)

o North America $6.8mn (2H13 $34.8mn, 1H13 small $1.9mn).

■ Depreciation and amortisation flat at $60.9mn (2H13 $61.3mn, 1H13 $62.2mn).

■ Effective tax rate 29.2%, or $17.4mn. 2H13 $20.7mn tax on $27.8mn PBT (74%),

1H13 $12.5mn on $22.5mn PBT (56%). We continue to model a flat 30% rate.

■ Corporate overheads, as stated, total $61.1mn.

Figure 4: EBIT

(100)

-

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600

1H06 2H06 1H07 2H07 1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12 1H13 2H13 1H14

A$m

n

Group EBIT contributions

Australia, NZ & Asia North America Europe Group

Source: Company data, Credit Suisse estimates

17 February 2014

Australia and NZ First Edition 84

Balance sheet remains strong

■ Period end net debt improved again to $121.2mn. 30 June 2013 net debt $153.8mn,

31 December 2012 net debt $292.8mn. Strength of balance sheet continues.

■ Gearing 5.7% (7.4% June 30, 2013). Maintaining low gearing remains a focus.

■ Inventory up in AUD at $651.2mn but broadly flat after 2H13 restatement to $574.9mn.

■ No material write-downs outside a $17.6mn write-off of deferred tax asset balance.

■ Goodwill $174.5mn (2H13 $166.5mn, 2H12 $507.4mn, 2H11 $988.7mn, 2H10

$1,151.7mn!).

■ Unfortunately a smaller than usual release of financials means no disclosure on the

split of goodwill between geographies.

■ We note the possibility of a 2H14 working capital released on the strong reversal of

scrap prices, particularly if this is sustained over the half.

Figure 5: Gearing

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A$m

n

Net cash / (debt)

Cash & Equivalents Debt Net cash / (debt)

Source: Company data, Credit Suisse estimates

17 February 2014

Australia and NZ First Edition 85

Cash flow

■ Operating cash flow of $37.8mn, down on 2H13 $220.9mn and on pcp 1H13 $76.4mn.

SGM typically have far higher operating cash flows in each 2H.

■ No dividends paid since 1H13.

■ Net borrowings ~$28mn. Gross debt has been gradually reducing since 2H FY12.

Figure 6: Cash flow summary

(600)

(400)

(200)

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1H06 2H06 1H07 2H07 1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12 1H13 2H13 1H14

A$m

n

Cash Flow Summary

Operating Cashflows Investing Cashflows Financing Cashflows Net cash

Source: Company data, Credit Suisse estimates

17 February 2014

Australia and NZ First Edition 86

Operational review Australia (and NZ consolidated) – the shining light

■ 1H FY14 statutory EBIT $48.3mn (2H13 $4mn, 1H13 EBIT $15mn).

■ 1H13 EBIT margin of $49.5/t (2H13 $4.5, 1H13 $16.6t, $70/t in 2H12 and $44/t in 1H12).

■ Scrap sales of 0.975Mt (2H13 0.865Mt, 1H13 0.899Mt, 2H12 0.88Mt, 1H12 0.0.89Mt).

■ Intake volumes 1.015Mt (2H13 0.899Mt, 1H13 0.859Mt).

■ Australia remains (by far) the best business in the portfolio

■ Employees now being added.

■ $8mn additional costs explained by greater intake volumes vs sales.

Figure 7: Australasia financial summary

Australia, NZ & Asia 2H11 2011 1H12 2H12 2012 1H13 2H13 2013 1H14 hoh (%) pcp (%)

Sales Revenue A$mn 690 1,369 639 589 1,228 574 510 1,083 597 17% 4%

EBITDA (statutory) A$mn 73 109 54 77 131 28 17 45 63 262% 128%

EBITA (statutory) A$mn 62 87 42 65 106 15 4 20 49 1009% 219%

EBIT (pre-amortisation of

intangibles, statutory)

A$mn 62 87 38 64 102 15 4 19 48 1138% 224%

Assets $ 633 633 650 733 733 709 671 671 695 4% -2%

Employees 942 942 960 1,006 1,006 968 984 984 1,013 3% 5%

Sales tonnes $/t 884 1,774 855 917 1,772 899 865 1,764 975 13% 8%

EBITDA/t $/t 82.6 61.3 62.8 83.8 73.6 30.6 20.0 25.4 64.2 221% 110%

EBITA/t % 70.2 49.2 48.9 70.4 60.0 17.0 5.1 11.2 50.1 884% 194%

EBIT/t % 70.0 49.0 44.2 70.0 57.6 16.6 4.5 10.7 49.5 999% 199%

EBITDA / Sales A$ 10.6% 7.9% 8.4% 13.0% 10.6% 4.8% 3.4% 4.1% 10.5% 209% 119%

EBITDA / Assets % 23.1% 17.2% 16.5% 21.0% 17.8% 7.8% 5.2% 6.7% 18.0% 250% 132%

EBITDA / Employee % 154,989 115,393 111,875 152,684 129,722 56,818 35,163 45,528 123,593 251% 118%

EBIT / Sales A$/t 9.0% 6.4% 5.9% 10.9% 8.3% 2.6% 0.8% 1.7% 8.1% 957% 212%

Source: Company data, Credit Suisse estimates

Figure 8: Australia – EBIT, revenue and margin

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Australia, NZ & Asia

Sales Revenue EBIT EBIT / Sales

Source: Company data, Credit Suisse estimates

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Figure 9: Assets Figure 10: Regional EBIT contributions

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Australia, NZ & Asia North America Europe Group

Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates

Figure 11: EBITDA by region Figure 12: EBITDA return on assets

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1H07 2H07 1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12 1H13 2H13 1H14

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A$m

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EBITDA return on assets

North America Australia, NZ & Asia Europe

Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates

17 February 2014

Australia and NZ First Edition 88

North America – still struggling

■ 1H14 statutory EBIT -$1mn loss (2H13 $4.8mn and impairment impacted 1H13

$320.1mn loss).

■ $36mn of margin enhancement ($7mn volume, $24mn cost out and $5mn FX) was not

delivered to margins, with a weaker SRS contribution blamed.

■ EBIT/t again very weak, just under breakeven and only $1.6/t on underlying EBIT.

■ Volumes (sales and intake) weaker than 2H13, but up marginally on pcp. 4.364Mt

intake and 4.342Mt sales volumes.

■ Margin restoration remains elusive.

■ $44mn articulated cost reductions but no material improvement or flow through to

earnings.

■ New England expansion completed.

■ ~200 less employees than at June 30.

■ $7.8mn difference between statutory and "underlying" earnings

Figure 13: North America financial summary

North America 2H11 2011 1H12 2H12 2012 1H13 2H13 2013 1H14 hoh (%) pcp (%)

Sales Revenue A$mn 3,418 5,993 3,044 2,983 6,027 2,043 2,491 4,535 2,182 -12% 7%

EBITDA (statutory) A$mn 132 197 25 2 27 -1 46 46 33 -28% -5650%

EBITA (statutory) A$mn 105 141 -2 -24 -26 -26 23 -3 8 -65% -132%

EBIT (pre-amortisation of intangibles, statutory)

A$mn 96 118 3 -6 -3 2 5 -315 -1 -121% -100%

Assets 2,656 2,656 2,157 2,066 2,066 1,670 1,660 1,660 1,650 -1% -1%

Employees Mt 3,503 3,503 3,804 3,692 3,692 3,744 3,618 3,618 3,417 -6% -9%

Sales tonnes $/t 6,024 10,964 5,488 5,592 11,080 4,233 5,144 9,377 4,342 -16% 3%

EBITDA/t $/t 21.9 18.0 4.5 0.4 2.4 -0.1 9.0 4.9 7.7 -14% -5511%

EBITA/t % 17.4 12.8 -0.3 -4.3 -2.3 -6.1 4.5 -0.3 1.9 -58% -131%

EBIT/t % 15.9 10.8 0.5 -1.0 -0.3 0.5 0.9 -33.6 -0.2 -125% -100%

EBITDA / Sales A$/t 3.9% 3.3% 0.8% 0.1% 0.4% 0.0% 1.9% 1.0% 1.5% -18% -5297%

EBITDA / Assets % 10.0% 7.4% 2.3% 0.2% 1.3% -0.1% 5.6% 2.7% 4.0% -27% -5716%

EBITDA / Employee % 75,478 56,352 12,881 1,246 7,259 -267 25,484 12,576 19,491 -24% -6181%

EBIT / Sales A$/t 2.8% 2.0% 0.1% -0.2% 0.0% 0.1% 0.2% -7.0% 0.0% -124% -100%

Source: Company data, Credit Suisse estimates

17 February 2014

Australia and NZ First Edition 89

Figure 14: US reporting segment

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North America

Sales Revenue EBIT EBIT / Sales

Source: Company data, Credit Suisse estimates

Europe

■ 1H14 statutory EBIT $3.3mn (2H13 EBIT -$144.7mn loss, 1H13 EBIT -$5.9mn, both

impacted by UK write downs).

■ EBIT/t $4.1/t, or $13.8/t on underlying EBIT ($11.1mn).

■ $19mn cost reductions and $2mn volume growth more than consumed, with a $1.2mn

lower underlying EBIT (pcp) on roughly the same tonnage. Like North America, cost

outs are still failing to fall to the bottom line, but again attributable to SRS

performance,

■ Scrap sales of 0.795Mt (2H 0.843Mt, 1H12 0.852Mt, 2H11 803kt, 1H 682kt, flat on

2H10 686kt but down on 1H10 714kt).

■ ~100 employees removed HoH.

Figure 15: European financial summary

Europe 2H11 2011 1H12 2H12 2012 1H13 2H13 2013 1H14 hoh (%) pcp (%)

Sales Revenue A$mn 789 1,485 901 880 1,781 812 764 1,575 814 7% 0%

EBITDA (statutory) A$mn 77 126 22 8 30 8 -125 -118 16 -112% 101%

EBITA (statutory) A$mn 64 102 9 -5 4 -5 -140 -145 4 -103% -170%

EBIT (pre-amortisation of intangibles, statutory)

A$mn 63 100 -92.3 -8.4 -100.7 -5.9 -144.7 -150.6 3.3 -102% -156%

Assets 891 891 726 710 710 699 585 585 649 11% -7%

Employees 1,727 1,727 1,846 1,900 1,900 1,845 1,718 1,718 1,616 -6% -12%

Sales tonnes $/t 766 1,466 808 843 1,651 795 850 1,645 807 -5% 2%

EBITDA/t $/t 100.7 86.2 27.2 9.6 18.2 9.7 -147.3 -71.4 19.2 -113% 98%

EBITA/t % 84.1 69.8 11.3 -5.9 2.5 -6.3 -164.7 -88.1 4.3 -103% -169%

EBIT/t % 82.6 68.3 -114.2 -10.0 -61.0 -7.4 -170.2 -91.6 4.1 -102% -155%

EBITDA / Sales A$/t 3.9% 3.3% 0.8% 0.1% 0.4% 0.0% 1.9% 1.0% 1.5% -18% -5297%

EBITDA / Assets % 10.0% 7.4% 2.3% 0.2% 1.3% -0.1% 5.6% 2.7% 4.0% -27% -5716%

EBITDA / Employee % 75,478 56,352 12,881 1,246 7,257 -321 25,484 12,576 19,491 -24% -6181%

EBIT / Sales A$/t 8.0% 6.7% -10.2% -1.0% -5.7% -0.7% -18.9% -9.6% 0.4% -102% -156%

Source: Company data, Credit Suisse estimates

17 February 2014

Australia and NZ First Edition 90

Figure 16: Europe revenue and earnings

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Sales Revenue EBIT EBIT / Sales

Source: Company data, Credit Suisse estimates

Figure 17: Raw material expenses Figure 18: Freight expenses

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Freight expenses Freight expenses US$/tonne

Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates

Figure 19: Employee benefits expense Figure 20: Depreciation and amortisation expense

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Depreciation and amoritisation expense

Depreciation and amoritisation expense US$/tonne

Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates

17 February 2014

Australia and NZ First Edition 91

Figure 21: Repairs and maintenance expense Figure 22: ‘Other’ expenses

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Other expenses from ordinary activities Other expenses from ordinary activities US$/t

Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates

17 February 2014

Australia and NZ First Edition 92

Business segments Ferrous shredded and processed including NFSR

Figure 23: Ferrous processing margins

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Ferrous Processing margins

EBIT/t US$/t EBIT/t A$/t EBIT margin %

Source: Company data, Credit Suisse estimates

Ferrous shredded and processed including NFSR

■ Ferrous sales volumes down to 4.327Mt vs pcp 4.398Mt. and 4.602Mt in prior half

■ Ferrous EBITDA $71.8mn (2H13 $31.5mn, 1H13 $12.9mn, 2H12 $4.5mn).

■ Australian operations remain robust and high margin, however Nov/Dec scrap price

rises likely helped margin expansion.

■ Margins remain materially below those achieved in 1H09 when EBIT/t was $51.42/t,

but achieved on a more favourable FX translation.

Ferrous brokerage – materially weaker margins

■ 1H14 brokerage tonnage 1.519Mt, down HoH (1.577Mt) but up on very weak 1H13

1.263Mt. Sales tonnage has averaged 1.68Mt since FY08 (inclusive).

■ 1H14 EBITA $4.7mn (2H13 $4.9mn, 1H13 $8.8mn).

■ 1H14 EBITA/t $3.1/t (flat on 2H13 $3.1/t, 1H13 $7/t)

■ Ferrous brokerage is normally a $5/t to $10/t business and has averaged a margin on

$6.7/t since FY08 (inclusive).

■ The business is a low-margin, consistent business, with very little capital deployed.

17 February 2014

Australia and NZ First Edition 93

Figure 24: Ferrous brokerage margins

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/t)

Ferrous Brokerage margins

EBIT/t US$/t EBIT/t A$/t EBIT margin %

Source: Company data, Credit Suisse estimates

Non-ferrous trading and brokerage

■ Flat 1H14 tonnage of 275kt (2H13 274kt, 1H13 282kt) and in line with average

volumes since 2008.

■ 1H14 EBITA $24.8mn, (2H13 $23.8mn, 1H13 $18.3mn, 2H12 $42.9mn, 1H12

$29.5mn).

■ 1H14 EBITA/t $89/t (2H13 $84/t, 1H13 EBIT/t $69/t, 2H12 $144/t, 1H12 $102/t).

Manufacturing, distribution and JVs

■ 1H14 $20.1mn (2H13 $33.9mn loss, 1H13 $5.2mn).

■ This segment now is dominated by JVs,

■ The JVs are dominated by the SA recycling JV which generate the majority of JV

contribution. Thie $20.1m result is very material.

■ This material turn around was not discussed by management, but was a significant

trend change consolidated in the weaker North American result.

17 February 2014

Australia and NZ First Edition 94

Figure 25: Non-ferrous margins

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

(200)

(150)

(100)

(50)

-

50

100

150

200

250

300

350

4001H

04

2H04

1H05

2H05

1H06

2H06

1H07

2H07

1H08

2H08

1H09

2H09

1H10

2H10

1H12

2H12

1H13

2H13

1H14

EB

IT m

argi

n (%

)

EB

IT m

argi

n ($

/t)

Non-Ferrous margins

EBIT/t US$/t EBIT/t A$/t EBIT margin

Source: Company data, Credit Suisse estimates

Earnings changes

Figure 26: Earnings changes

Old 1H14 2H14 New % chg Old New % chg Old New % chg

Revenues

Ferrous Trading & NFSR A$mn 3,572 1,871 1,791 3,662 3% 3,790 3,662 -3% 3,898 3,766 -3%

Ferrous Brokerage A$mn 1,099 589 578 1,168 6% 1,103 1,109 1% 1,240 1,240 0%

Non-Ferrous A$mn 1,421 663 732 1,394 -2% 1,644 1,589 -3% 1,840 1,858 1%

Manufacturing / JVs A$mn 60 30 30 60 0% 66 66 0% 72 72 0%

Recycling Solutions A$mn 1,000 440 456 896 -10% 1,000 896 -10% 1,000 896 -10%

Total Revenue A$mn 7,152 3,613 3,587 7,200 1% 7,602 7,322 -4% 8,050 7,832 -3%

EBIT

Ferrous Trading & NFSR A$mn 85 72 58 130 54% 144 139 -3% 174 168 -3%

Ferrous Brokerage A$mn 16 5 6 10 -38% 19 19 1% 23 23 0%

Non-Ferrous A$mn 59 25 28 53 -10% 74 71 -3% 83 84 1%

Manufacturing / JVs A$mn 20 20 20 40 100% 20 20 0% 21 21 0%

Recycling Solutions A$mn 50 2 10 12 -75% 80 80 0% 81 81 0%

Operational EBIT A$mn 230 124 122 245 7% 336 329 -2% 382 377 -1%

Non operational EBIT A$mn 157- 72- 71- 142- 9% 144- 137- 5% 133- 126- 5%

Total EBIT A$mn 73 68 51 119 62% 192 192 0% 249 251 1%

EBITDA A$mn 203 129 112 241 18% 327 319 -3% 387 380 -2%

Depreciation A$mn 108- 51- 51- 102- 5% 112- 106- 5% 114- 107- 6%

GW Amoritsation A$mn 23- 10- 10- 20- 11% 24- 21- 11% 24- 21- 11%

EBIT A$mn 73 68 51 119 62% 192 192 0% 249 251 1%

Net Interest A$mn 12- 8- 6- 15- -22% 11- 12- -12% 9- 10- -13%

NPBT A$mn 61 60 45 104 70% 182 180 -1% 240 241 0%

Taxation A$mn 18- 17- 13- 31- -68% 54- 54- 1% 72- 72- 0%

NPAT (operating) A$mn 43 42 31 73 71% 127 126 -1% 168 169 0%

EPS (operating) Acps 21 21 15.3 36 71% 62 62 -1% 82 82 0%

FY15 FY16FY14

Source: Company data, Credit Suisse estimates

17 February 2014

Australia and NZ First Edition 95

Valuation

Figure 27: DCF based sum-of-the-parts

Operational

A$mn

(t = 1-3 yrs)

A$mn

(terminal) (2)A$mn A$/sh (1)

Ferrous Trading & Ferrous Other 224 1,160 1,384 6.77

Ferrous Brokerage 29 171 200 0.98

Non-Ferrous 112 634 746 3.65

Manufacturing/JVs/Sims Steel 39 143 181 0.89

Recycling Solutions 103 552 656 3.21Growth Capex (3)

-32 -146 -178 -0.87

Sub-Total 475 2,514 2,989 14.62

Non-Operational

Net Cash / (debt) -121 0 -121 -0.59

Corporate -175 -640 -814 -3.98

Sub-Total -296 -640 -936 -4.58

Total 179 1,875 2,054 10.04

Notes & assumptions

1) Shares on issue 204.4 mn

2) Terminal growth rate 2.0 %

3) Excluding sustaining capex which is incl in operational DCFs

Target price 10.00

NAV

Source: Company data, Credit Suisse estimates

Australia and NZ First Edition 96

17 February 2014

Asia Pacific/Australia

Equity Research

Diversified Commercial Services

Transpacific Industries Group

(TPI.AX / TPI AU) ASSUMING COVERAGE

Shifting gears... ■ TPI reported solid 1H14 underlying NPAT of $41.7mn, up 16.5% on pcp,

driven by a $20mn improvement in Net Interest expense and lower D&A.

Waste Management EBITDA of $189.3mn was down 0.5% on pcp and 1.5%

ahead of CS forecast. Underlying operational outperformance of Cleanaway

and NZ was offset by a weaker Industrial result. We have upgraded FY14

NPAT by 35% on upgraded NZD, inclusion of two months of commercial

vehicles trading, lower D&A and revised interest guidance. Our FY15E

NPAT is upgraded 15.6% and 6.3% in FY16. Brad Clibborn assumes

coverage of TPI following a change in analyst responsibilities.

■ NEUTRAL rating as TPI shifts gears: After a number of years of focus on

restructuring and debt reduction, we now see TPI at a turning point. The

management team has breathing room to focus on continuing operational

efficiency gains and a new CEO to lead the business forward. Further, TPI

will soon find itself with sufficient capital flexibility to explore strategic and

growth options in Australia (assuming a successful sale of NZ in the next six

months). With TPI trading on 18.7x FY15E P/E we believe the market has

already priced in successful execution on the guided $50mn of first round

cost-out (FY13–FY15) and de-risking of the balance sheet (ND/EBITDA now

<2x). However, we believe TPI likely has further medium-term margin upside

from operating efficiencies (route optimisation and further overhead

reduction). In order to move positive on TPI from these levels we need to

see a successful sale of NZ, greater clarity on next phase operating

efficiencies and more from new CEO Robert Boucher on the strategic and

growth opportunities for TPI in Australia.

■ Catalysts: Update on sale of NZ business expected late FY14 or early

FY15.

■ Our target price increases to $1.27 from $1.00. We apply a DCF-based

valuation to derive our target price employing a 9.9% WACC.

Total return forecast in perspective

Mean^

CSEC tgt^

Sh Prc

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

12mth Volatility* 52wk Hi-Lo IBES Consensustarget return^

Performance over 1M 3M 12M

Absolute (%) 3.1 0.4 40.4

Relative (%) 1.0 1.3 34.0

Financial and valuation metrics

Year 06/13A 06/14E 06/15E 06/16E

Revenue (A$mn) 2,282.7 1,919.7 1,892.1 1,931.3

EBITDA (A$mn) 406.7 382.7 399.6 412.8

EBIT (A$mn) 221.0 204.4 214.2 228.0

Net income (A$mn) 67.9 84.0 98.1 111.7

EPS (CS adj.) (Ac) 4.30 5.32 6.22 7.08

Change from previous EPS (%) n.a. 35.4 15.7 6.4

Consensus EPS (Ac) n.a. 4.70 6.30 7.60

EPS growth (%) 0.3 23.7 16.9 13.9

P/E (x) 27.1 21.9 18.7 16.5

Dividend (Ac) — — 1.55 3.54

Dividend yield (%) — — 1.3 3.0

P/B (x) 1.1 0.9 0.9 0.8

Net debt/equity (%) 48.7 31.8 26.9 23.1

Relative performance versus S&P ASX 200.See Reference

Appendix for a description of the chart. Source: CSEC

estimates, * Consensus, mean range from Thomson Reuters

Source: Company data, ASX, CSEC estimates, * Adj. for goodwill, notional interest and unusual items. Relative P/E against

ASX/S&P200 based on pre GW in AUD. Company PE calculation is based on displayed EPS Currency

Rating NEUTRAL*

Price (14 Feb 14, A$) 1.16

Target price (A$) (from 1.00) 1.27¹

Market cap. (A$mn) 1,839.29

Yr avg. mthly trading (A$mn) 74

Last month's trading (A$mn) 77

Projected return:

Capital gain (%) 9.0

Dividend yield (net %) 0.84

Total return (%) 9.8

52-week price range 1.18 - 0.73

* Stock ratings are relative to the relevant country

benchmark.

¹Target price is for 12 months.

Research Analysts

Bradley Clibborn

61 2 8205 4465

bradley.clibborn@cs-emc.com.au

Paul Buys

61 2 8205 4538

paul.buys@cs-emc.com.au

Chris Smith

61 2 8205 4210

chris.smith@cs-emc.com.au

Sarah Mann

61 2 8205 4610

sarah.mann@cs-emc.com.au

This report is distributed in Australia by Credit

Suisse Equities (Australia) Limited. Please see legal disclaimer and disclosure annex for further terms

and information.

Prepared by Credit Suisse Emerging Companies

(Australia) Pty Limited, a joint venture entered into between

Credit Suisse and First NZ Capital.

17 February 2014

Australia and NZ First Edition 97

Figure 1: Financial summary

Transpacific Industries Group (TPI) Year ending 30 Jun In AUDmn, unless otherwise stated2012 2013 2014 2015 2016 2012 2013 2014 2015 2016

Share Price: A$1.17 Earnings 06/12A 06/13A 06/14E 06/15E 06/16ERating c_EPS_SHARESEquiv. FPO (period avg.) mn 1,352.3 1,578.8 1,578.6 1,578.6 1,578.6

Target Price A$ 1.27 c_EPS*100EPS (Normalised) c 4.3 4.3 5.3 6.2 7.1

vs Share price % 9.01 EPS_GROWTH*100EPS Growth % 0.3 23.7 16.9 13.9

c_EBITDA_MARGIN*100EBITDA Margin % 19.3 17.8 19.9 21.1 21.4

c_DPS*100DPS c 0.0 0.0 0.0 1.6 3.5

c_PAYOUT*100Payout % 0.0 0.0 0.0 25.0 50.0

FRANKING*100Franking % 100.0 100.0 100.0 100.0 100.0

c_FCF_PS*100Free CFPS c 6.6 5.5 3.1 6.4 7.2

Profit & Loss 06/12A 06/13A 06/14E 06/15E 06/16E c_TAX_RATE*100Effective tax rate % 26.7 25.8 27.9 27.8 28.2

Sales revenue 2,267.2 2,282.7 1,919.7 1,892.1 1,931.3 ValuationEBITDA 437.3 406.7 382.7 399.6 412.8 c_PE P/E x 27.2 27.1 21.9 18.7 16.5

Depr. & Amort. (188.0) (185.7) (178.3) (185.4) (184.8) c_EBIT_MULTIPLE_CURREV/EBIT x 11.6 12.7 12.5 11.5 10.5

EBIT 249.3 221.0 204.4 214.2 228.0 c_EBITDA_MULTIPLE_CUEV/EBITDA x 6.6 6.9 6.7 6.2 5.8

Associates 2.9 5.5 9.0 9.0 9.0 c_DIV_YIELD*100Dividend Yield % 0.0 0.0 0.0 1.3 3.0

Net interest Exp. (168.8) (133.4) (95.6) (85.6) (79.5) c_FCF_YIELD*100FCF Yield % 5.7 4.7 2.7 5.5 6.2

Other 0.0 0.0 0.0 0.0 0.0 c_PB Price to Book x 1.0 1.1 0.9 0.9 0.8

Profit before tax 83.4 93.1 117.9 137.6 157.5 ReturnsIncome tax (22.3) (24.0) (32.9) (38.3) (44.4) c_ROE*100Return on Equity % 3.1 3.9 4.2 4.7 5.2

Profit after tax 61.1 69.1 85.0 99.3 113.1 c_I_NPAT/c_I_SALES*100Profit Margin % 2.6 3.0 4.4 5.2 5.8

Minorities (3.1) (1.2) (1.0) (1.2) (1.3) c_I_SALES/c_B_TOT_ASSAsset Turnover x 0.6 0.6 0.5 0.5 0.5

Preferred dividends 0.0 0.0 0.0 0.0 0.0 c_ASSETS/c_EQ_COMMONEquity Multiplier x 2.0 2.1 1.8 1.7 1.6

Associates & Other 0.0 0.0 0.0 0.0 0.0 c_ROA*100Return on Assets % 1.5 1.9 2.4 2.8 3.1

Normalised NPAT 58.0 67.9 84.0 98.1 111.7 c_ROIC*100Return on Invested Cap. % 5.7 5.5 4.9 5.2 5.5

Unusual item after tax (45.5) (286.6) 114.0 (2.9) (2.9) GearingReported NPAT 12.5 (218.7) 197.9 95.2 108.8 c_GEARING*100Net Debt to Net debt + Equity % 32.8 32.7 24.1 21.2 18.8

c_NET_DEBT/c_I_EBITDANet Debt to EBITDA x 2.4 2.4 1.9 1.6 1.4

Balance Sheet 06/12A 06/13A 06/14E 06/15E 06/16E c_I_EBITDA/ c_I_NET_INTERESTInt Cover (EBITDA/Net Int.) x 2.6 3.0 4.0 4.7 5.2

Cash & equivalents 77.9 76.2 72.6 82.1 75.6 c_I_EBIT/ c_I_NET_INTERESTInt Cover (EBIT/Net Int.) x 1.5 1.7 2.1 2.5 2.9

Inventories 175.2 165.2 20.2 20.5 20.9 (c_C_CAPEX/c_I_SALES)*-100Capex to Sales % 7.9 8.6 9.4 9.5 9.1

Receivables 305.6 282.6 291.0 292.0 297.7 (c_C_CAPEX/c_I_DEPR)*-100Capex to Depreciation % 105.0 107.9 103.1 99.1 97.4

Other current assets 18.7 28.0 22.7 22.7 22.7

Current assets 577.4 552.0 406.4 417.3 416.9 MSCI IVA (ESG) Rating BProperty, plant & equip. 1,035.7 1,084.4 1,095.3 1,093.6 1,088.9 TP ESG Risk (%): 0

Intangibles 2,047.2 1,862.8 1,909.3 1,901.6 1,893.9

Other non-current assets 99.3 137.2 131.7 140.7 149.7

Non-current assets 3,182.2 3,084.4 3,136.2 3,135.8 3,132.4

Total assets 3,759.6 3,636.4 3,542.6 3,553.2 3,549.3

Payables 290.7 264.9 186.2 189.5 192.6

Interest bearing debt 1,128.5 1,053.7 795.6 715.6 635.6

Other liabilities 189.1 310.5 289.9 292.8 295.7 MSCI IVA Risk: Neutral

Total liabilities 1,608.3 1,629.1 1,271.7 1,197.9 1,123.9

Net assets 2,151.3 2,007.3 2,270.9 2,355.3 2,425.4

Ordinary equity 1,896.1 1,750.9 2,013.5 2,096.7 2,165.5

Minority interests 5.4 6.6 7.6 8.8 10.1

Preferred capital 249.8 249.8 249.8 249.8 249.8

Total shareholder funds 2,151.3 2,007.3 2,270.9 2,355.3 2,425.4

Net debt 1,050.6 977.5 723.0 633.5 560.0 Source: MSCI ESG Research

Cashflow 06/12A 06/13A 06/14E 06/15E 06/16E Share Price Performance

EBIT 249.3 221.0 204.4 214.2 228.0

Net interest -135.2 -103.0 -83.1 -85.6 -79.5

Depr & Amort 188.0 185.7 178.3 185.4 184.8

Tax paid 8.1 -5.5 -20.8 -34.4 -40.4

Working capital 12.2 0.0 -1.1 1.9 -3.0

Other -52.4 -15.8 -48.6 0.0 0.0

Operating cashflow 270.0 282.4 229.1 281.5 290.0

Capex -180.1 -196.3 -180.0 -180.0 -176.4

Capex - expansionary 0.0 0.0 0.0 0.0 0.0

Capex - maintenance -180.1 -196.3 -180.0 -180.0 -176.4

Acquisitions & Invest 14.3 28.2 9.1 0.0 0.0

Asset sale proceeds 0.0 0.0 235.3 0.0 0.0

Other 16.6 4.1 5.1 0.0 0.0

Investing cashflow -149.2 -164.0 69.5 -180.0 -176.4

Dividends paid 0.0 0.0 0.0 -12.0 -40.1

Equity raised 260.7 1.2 0.0 0.0 0.0

Net borrowings -348.1 28.2 -283.1 -80.0 -80.0

Other -44.5 -150.3 -20.8 0.0 0.0 1 Month 3 Month 12 Month

Financing cashflow -131.9 -120.9 -303.9 -92.0 -120.1 Absolute 3.1% 0.4% 40.4%

Total cashflow -11.1 -2.5 -5.3 9.5 -6.5 Relative 1.0% 1.3% 34.0%

Adjustments 0.3 0.8 1.7 0.0 0.0

Net change in cash -10.8 -1.7 -3.6 9.5 -6.5 Source: Reuters 52 week trading range: 0.73-1.18

MSCI IVA Risk Comment: We belive the MSCI rating is

appropriate given TPI's recent environmental performance in

relation to specific occurences and management of its carbon

footprint.

14/02/2014 18:08

Transpacific Industries Group Ltd is an Australia-based company. It operates in three core

segments across the waste collection and management areas: Cleanaway, Transpacific

Industrials and New Zealand.

Credit Suisse View

TP Risk Comment: For TPI, outside of the corporate services

ESG risk factors we do not include any ESG impact in our base

valuation. We highlight the key ESG risk areas for TPI as 1) the

Tullamarine site remediation and cap; and 2) environmental

concerns surrounding site remediation, waste management and

the capture/sequestration of greenhouse gases from its waste

facilities.

NEUTRAL

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

4/02/2013 4/04/2013 4/06/2013 4/08/2013 4/10/2013 4/12/2013 4/02/2014

TPI.AX XJO

2.7

3.7

4.7

5.7

6.7

7.7

Environment Social Governance

Stock Local Sector

Country Global Sector

Source: Company data, CSEC estimates

17 February 2014

Australia and NZ First Edition 98

Figure 2: Earnings Changes

Consolidated P&L (A$mn) FY14F FY15F FY16F

Old New % chg Old New % chg Old New % chg

Cleanaway 826.0 928.6 12.4% 851.9 959.7 12.7% 881.7 995.5 12.9%

Industrials 504.9 496.3 -1.7% 519.8 501.4 -3.6% 538.0 505.3 -6.1%

New Zealand 333.2 412.0 23.7% 342.7 431.1 25.8% 353.0 430.5 21.9%

CVM 23.6 82.8 250.1% 24.4 - -100.0% 25.0 - -100.0%

Other operating income - - - - - -

Total sales revenue 1,687.7 1,919.7 13.7% 1,738.8 1,892.1 8.8% 1,797.6 1,931.3 7.4%

Non operating revenues 8.7 12.9 47.5% 8.7 12.9 47.5% 8.7 12.9 47.5%

Total revenues 1,696.4 1,932.6 13.9% 1,747.5 1,905.0 9.0% 1,806.4 1,944.2 7.6%

Operating expenses 1,327.4 1,549.9 16.8% 1,357.8 1,505.4 10.9% 1,395.1 1,531.4 9.8%

Cleanaway 196.9 196.9 0.0% 205.7 208.2 1.2% 216.7 220.4 1.7%

Industrials 94.0 90.8 -3.4% 100.4 96.2 -4.2% 106.4 97.2 -8.6%

New Zealand 86.1 97.2 12.9% 88.5 103.5 16.9% 92.3 103.7 12.3%

CVM -2.3 5.8 -348.8% 0.9 - -100.0% 1.9 - -100.0%

Commercial vehicles -5.6 -8.0 42.0% -5.8 -8.2 42.0% -6.0 -8.5 42.0%

EBITDA 369.1 382.7 3.7% 389.7 399.6 2.5% 411.3 412.8 0.4%

TPI EBITDA (incl. associate) 377.5 391.7 3.8% 398.1 408.6 2.6% 419.7 421.8 0.5%

Depreciation of assets -183.3 -174.6 -4.8% -185.2 -181.7 -1.9% -186.1 -181.1 -2.7%

Amortisation other -3.7 -3.7 0.0% -3.7 -3.7 0.0% -3.7 -3.7 0.0%

EBIT 182.0 204.4 12.3% 200.8 214.2 6.7% 221.5 228.0 3.0%

TPI EBIT (incl. associate) 190.4 213.4 12.1% 209.2 223.2 6.7% 229.9 237.0 3.1%

Interest charges (Bank, USPP, conv notes, leases)-91.3 -82.0 -10.2% -78.4 -71.8 -8.4% -70.4 -65.8 -6.6%

Interest on Step up prefs -16.2 -16.0 -1.2% -16.2 -16.0 -1.2% -16.2 -16.0 -1.2%

Interest received 1.8 2.4 31.9% 1.2 2.2 74.5% 0.6 2.3 266.3%

Share of net profits of associates 8.4 9.0 7.1% 8.4 9.0 7.1% 8.4 9.0 7.1%

Profit before tax 84.7 117.9 39.1% 115.9 137.6 18.8% 143.9 157.5 9.5%

Tax -21.7 -32.9 51.3% -29.7 -38.3 29.1% -37.2 -44.4 19.5%

OEI -1.0 -1.0 4.2% -1.3 -1.2 -11.0% -1.6 -1.3 -18.1%

Normalised NPAT 62.0 84.0 35.4% 84.9 98.1 15.6% 105.1 111.7 6.3%

Significant items (net of tax) 59.1 114.0 92.9% -6.1 -2.9 -51.6% -6.0 -2.9 -51.7%

Reported NPAT 121.1 197.9 63.5% 78.8 95.2 20.8% 99.0 108.8 9.9%

Normalised EPS (cps) 3.9 5.3 35.4% 5.4 6.2 15.6% 6.7 7.1 6.3%

DPS (cps) - - nm 1.3 1.6 15.7% 3.3 3.5 6.4%

Tax rate % 26% 28% 26% 28% 26% 28% Source: Company data, CSEC estimates

Australia and NZ First Edition 99

17 February 2014

Asia Pacific/New Zealand

Equity Research

Real Estate Investment Trusts (REITs) (Financials)

■

■

Vital Healthcare Property Trust

(VHP.NZ / VHP NZ) UPGRADE RATING

Strong result – driven by one-off impacts ■ VHP's reported 1H14 distributable profit rose 48% on pcp and 44% on

forecast as one-off items below the line contributed strongly to the result.

Rental income was 2% up on pcp and in line with our forecast. Current tax

was a credit of NZ$1.6mn which created a positive variance of NZ$4.7mn to

our forecast which assumed a normalised tax charge in the period.

■ Portfolio-structured rent review mechanism proving its worth. With

minimal real rental growth being seen in the sector, VHP is likely to have

one of the strongest rental growth prospects over the next 12 months

(excluding currency impacts) from the majority structured review

mechanism. In FY14, 81% of the total rent is subject to a review and with

around half completed in the first half, VHP reported a 2.4% average rental

increase.

■ Portfolio metrics improved further. As announced in late 2013,

management had been successful in the early negotiations of a new 30-year

lease to Mercy Ascot Hospital in Auckland which made up circa 10% of the

portfolio rent roll. This lease combined with several long-term extensions at

some of their Australian assets saw the WALT extend from 11.8 years at

year end to 14.9 years. Occupancy remained above 99% and the expiry

profile appears to be very manageable through to FY17.

■ With one of the two material lease expiries within the portfolio no longer of

concern and gearing levels comfortably in the mid-30%, we have less

concerns around the stock. The focus will now be on how management

deals with the confirmed tenant departure at their Allamanda asset. We

forecast VHP to have one of the higher rental growth and earnings profiles in

the sector. Whilst our 12-month target price reduces 4cps to $1.35, the

significant pull-back in the share price over the second half of 2013 means

we upgrade our rating to NEUTRAL (from Underperform).

Share price performance

90.0

95.0

100.0

105.0

110.0

1.00

1.25

1.50

1.75

2.00

Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14

Vital Healthcare Property Trust LHS Relative to NZX50 (RHS)

The price relative chart measures performance against the

NZX50 index which closed at 4873.5 on 13 Feb 14

The spot exchange rate was NZ$1.199/US$1 on 14 Feb 14

Performance over 1M 3M 12M

Absolute(%) -0.4 -0.4 7.3

Rel-NZX50(%) -0.6 0.7 -7.7

Rel-NZPTY(%) -0.8 -0.3 5.7

Year to 30 Jun 2012A 2013A 2014F 2015F 2016F

Adjusted Earnings NZ$m 22.7 27.9 32.4 29.3 30.0

EPS Adjusted NZc. 7.8 9.3 9.7 8.6 8.7

EPS Grow th % 6.4 19.3 4.6 -11.9 1.9

P/E x 16.6 13.9 13.3 15.1 14.8

CPS NZc. 7.8 9.3 9.7 8.6 8.7

P/CF x 16.6 13.9 13.3 15.1 14.8

EV/EBITDA x 15.9 13.6 13.5 12.7 12.4

Net DPS NZc. 7.7 7.9 7.9 8.1 8.3

Imputation % 19.0 46.0 47.0 48.0 48.0

Net Yield % 6.0 6.1 6.1 6.3 6.4

Gross Yield % 8.9 9.1 9.2 9.4 9.6

Financial and valuation metrics

Source: Company data, NZX, First NZ Capital estimates

Rating (from Underperform) NEUTRAL* Price (14 Feb 2014, NZ$) 1.29 Target price (NZ$) (from 1.39) 1.35¹ Market cap. (NZ$mn) 436.98 Projected return: 0 Capital gain (%) 4.7 Dividend yield (net %) 6.2 Total return (%) 10.9 52-week price range (NZ$) 1.23-1.44

* Stock ratings are relative to the relevant country

benchmark.

¹Target price is for 12 months.

Research Analysts

Stephen Reid

+64 9 302 5543

stephen.reid@fnzc.co.nz

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

17 February 2014

Australia and NZ First Edition 100

Figure 1: Vital Healthcare Property Trust—Financial summary

PROFIT & LOSS ($m) BALANCE SHEET ($m)Year to 30 Jun 2012A 2013A 2014F 2015F 2016F Year to 30 Jun 2012A 2013A 2014F 2015F 2016F

Operating Rev enue 48.0 57.9 58.5 61.0 63.4 Cash & Equiv alents 1.3 1.4 1.4 1.4 1.4

Operating Ex penses -7.1 -7.2 -7.3 -7.4 -7.6 Debtors & Inv entories 0.0 0.0 0.0 0.0 0.0

Operating EBITDA 40.9 50.6 51.1 53.7 55.8 Other Current Assets 3.2 7.5 7.5 7.5 7.5

Depreciation 0.0 0.0 0.0 0.0 0.0 Current Assets 4.5 8.8 8.8 8.8 8.8

Amortisation 0.0 0.0 0.0 0.0 0.0 Fix ed Assets 575 619 640 660 664

Operating EBIT 40.9 50.6 51.1 53.7 55.8 Inv estments 0.0 0.0 0.0 0.0 0.0

Other Income 0.0 0.0 0.0 0.0 0.0 Intangibles 0.0 0.0 0.0 0.0 0.0

Abnormals 0.0 0.0 0.0 0.0 0.0 Other Non-Current Ass. 0.8 1.9 1.9 1.9 1.9

Reported EBIT 40.9 50.6 51.1 53.7 55.8 Total Assets 581 629 651 670 675

Net Interest -16.1 -17.4 -17.1 -17.9 -19.0

Pretax Profit 24.8 33.3 34.1 35.8 36.8 Interest Bearing Debt 244 266 239 254 254

Tax -2.1 -5.4 -1.7 -6.5 -6.8 Other Liabilities 48.9 54.4 54.4 54.4 54.4

Minority Interests 0.0 0.0 0.0 0.0 0.0 Total Liabilities 293 320 294 309 308

Equity Accounted Profit 0.0 0.0 0.0 0.0 0.0 Minorities 0.0 0.0 0.0 0.0 0.0

Reported NPAT 22.7 27.9 32.4 29.3 30.0 Conv ertible Capital 0.0 0.0 0.0 0.0 0.0

Abnormals (net of tax ) 0.0 0.0 0.0 0.0 0.0 Ordinary Equity 287 309 357 362 367

Adjusted Earnings 22.7 27.9 32.4 29.3 30.0 Total Funds Emp. 581 629 651 670 675

RATIOS AND CAPITAL STRUCTURE CASH FLOW ($m)Year to 30 Jun 2012A 2013A 2014F 2015F 2016F Year to 30 Jun 2012A 2013A 2014F 2015F 2016F

Profitability & Growth

EBITDA/Op Rev % 85.2 87.5 87.5 87.9 88.0 Operating EBITDA 40.9 50.6 51.1 53.7 55.8

EBIT/Op Rev % 85.2 87.5 87.5 87.9 88.0 Other Cash Income 0.0 0.0 0.0 0.0 0.0

Effectiv e Tax Rate % 8.5 16.3 4.9 18.3 18.4 Interest Paid -17.2 -17.6 -17.1 -17.9 -19.0

Return On Equity % 7.7 9.3 9.7 8.1 8.2 Tax Paid -0.6 -2.1 -1.7 -6.5 -6.8

ROCE % 8.1 9.2 8.8 8.9 9.0 Working Capital / Other 0.5 1.2 0.0 0.0 0.0

EPS Adjusted c. 7.8 9.3 9.7 8.6 8.7 Operating Cash Flow 23.7 32.1 32.4 29.3 30.0

EPS Grow th % 6.4 19.3 4.6 -11.9 1.9

Net DPS c. 7.7 7.9 7.9 8.1 8.3 Total Capex -36.4 -41.7 -21.3 -19.7 -4.3

Div idend Cov er x 1.0 1.2 1.2 1.1 1.1 Acquisitions -34.1 -40.4 0.0 0.0 0.0

Asset Backing & Capital Structure Div estments 14.4 12.8 0.0 0.0 0.0

Net Cash (Debt) $m -243 -265 -238 -253 -252 Div idends -19.0 -17.5 -23.4 -24.5 -25.1

NTA / Share $ 1.0 1.0 1.0 1.1 1.1 Equity Raised 0.0 0.0 39.2 0.0 0.0

Equity / Tot Assets % 49.5 49.1 54.9 54.0 54.4 Other 2.3 0.0 0.0 0.0 0.0

Net Debt / EBITDA x 5.9 5.2 4.7 4.7 4.5 Change in Net Debt -49.1 -54.7 26.9 -15.0 0.6

Interest Cov er x 2.5 2.9 3.0 3.0 2.9

Shares on Issue Capex /Depn %

Ordinary m 293 307 341 343 346 Capex /Rev % 75.9 72.1 36.4 32.3 6.8

Fully Diluted m 293 307 341 343 346

Auckland21%

Other2%Hawkes Bay

2%

Australia75%

GEOGRAPHIC SPLIT BY VALUE

0.50

0.70

0.90

1.10

1.30

1.50

1.70

Sep

-99

Sep

-00

Sep

-01

Sep

-02

Sep

-03

Sep

-04

Sep

-05

Sep

-06

Sep

-07

Sep

-08

Sep

-09

Sep

-10

Sep

-11

Sep

-12

Sep

-13

MOVING PRICE TO NTA

Source: Company data, NZX, First NZ Capital estimates

17 February 2014

Australia and NZ First Edition 101

The result

On 14 February 2014, Vital Healthcare Property Trust (VHP) reported their results for the

six months to 31 December 2013.

Figure 2: VHP financials for the six months ended 31 December 2013 (NZ$mn)

1H14A 1H13A % Chg FNZC % Chg vs f/c

Net rental revenue 28.9 28.3 2% 29.1 -1%

Administration expenses (including management fee - base) (2.6) (2.9) -8% (2.4) 9%

Other indirect expenses (0.5) (0.6) -12% (1.0) -47%

EBIT 25.7 24.9 3% 25.7 0%

Net interest expense (7.8) (8.4) -7% (8.3) -6%

Operating profit before taxation 18.0 16.5 8% 17.4 3%

Taxation expense 1.6 (2.6) -161% (3.1) -152%

Operating profit (FNZC) 19.5 13.9 40% 14.3 36%

Tax expense/(benefit) from foreign exchange gains/(losses) 1.1 -

Distributable profit (VHP) 20.6 13.9 48% 14.3 44%

Less distributable profit adjustments (1.1) -

Unrealised loss on foreign exchange (6.4) -

Receipts under transaction hedging foreign exchange contracts 1.1 0.1

Fair value gain/(Loss) on foreign exchange derivatives 0.3 0.1

Fair value gain/(Losses) on interest rate derivatives 3.1 1.0

Deferred tax (0.9) (0.5)

Profit/(Loss) after income tax 16.6 14.6

Movement in foreign currency translation reserve (27.7) (3.1)

Realised foreign exchange loss on hedges 18.2 3.9

Unrealised foreign exchange loss on hedges (6.3) 1.7

Fair value gain on net investment hedges 18.2 (3.2)

Income tax expense relating to other comprehensive income - current (5.1) (1.1)

Income tax expense relating to other comprehensive income - deferred (3.3) 0.4

Comprehensive income (loss) after tax 10.6 13.2

EPU operating profit before current taxation (NZc) 5.5 5.6 -2.2% 5.2 4.7%

EPU operating profit FNZC (NZc) 5.9 4.7 26.4% 4.3 38.3%

EPU distributable profit VHP (NZc) 6.3 4.7 n/a

DPU Gross (NZc) 4.1 4.3 -5.4% 4.9 -15.7%

DPU Net (NZc) 4.0 3.9 2.6% 3.9 0.1%

FNZC payout % 66% 82% 92%

VHP payout % 63% 82% n/a

Imputation % 8% 26% 48%

NTA/Unit $1.05 $0.99

NIBD/Total assets 34% 44%

Source: Company data, FNZC estimates

The 1H14 result was significantly ahead of forecast although it was driven by one-off items

relating to taxation and foreign exchange. Net rental revenue rose 2% on the prior period

although the Trust reported gross rental up 3.8% which was offset by the stronger NZ

dollar over the period. We had forecast a NZ$3.1mn tax expense in 1H14 (reflecting an

effective tax rate of 18%) but the result was a NZ$1.6mn credit due to a combination of an

unrealised forex loss tax deduction and also a write-back of current tax paid under

FIF rules.

In Figure 3 below, we try and analyse the underlying business performance by stripping

out the one-off impacts in 1H14 which shows a 10.6% increase in FNZC gross

distributable profit. VHP operates foreign exchange contracts (FEC) whereby they hedge

the forecast quarterly remittances from their Australian operation that are used to pay their

quarterly distributions (in NZD). VHP currently brings this gain/loss through distributable

profit as part of its ‘normal business’. As this is likely to fluctuate year to year we show this

separately below for comparison purposes. In 1H14 this produced a circa NZ$1.0mn gain.

17 February 2014

Australia and NZ First Edition 102

Figure 3: Distributable profit analysis

$NZ’000

Reported gross distributable profit 1H12 13,891

Rental increase 593

Reduction in overhead costs 293

Reduction in net finance costs 592

Operating performance

1,478

FNZC gross distributable profit 1H13 15,369

10.6%

Receipts under forex contracts

1,017

One-off taxation variance

4,202

Reported gross distributable profit 1H13

20,588

Source: Company data, FNZC estimates

VHP’s gearing was 33.9% and its weighted average interest rate was 6.58% at period end.

Net tangible assets were $1.05 per unit at 31 December 2013, up 4 cents from $1.01 per

unit at 30 June 2013. VHP benefits from the natural hedge of 75% of its assets in AUD

and 100% of its debt in AUD although in times of rising NZD the unhedged portion will

result in a reducing NTA as the portfolio value reduces greater than the debt value. The

rights issue completed above NTA was the main driver of the increased NTA as the

portfolio value actually reduced by around NZ$20mn when translated into NZD.

17 February 2014

Australia and NZ First Edition 103

Portfolio metrics

Figure 4: WALT (years) Figure 5: Occupancy (%)

8.0

9.0

10.0

11.0

12.0

13.0

14.0

15.0

2009 2010 2011 2012 2013

Full-Year Half-Year

97.0%

97.5%

98.0%

98.5%

99.0%

99.5%

100.0%

2009 2010 2011 2012 2013

Full-Year Half-Year

Source: Company data

Source: Company data

■ The already high WALT has jumped to 14.9 years on the back of securing of a new

30-year lease late last year with Mercy Ascot Hospital in Auckland (circa 10% of rent

roll) and four 10-year lease extensions in Australia.

■ Occupancy remains above 99%.

Figure 6: Lease expiry profile

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Lease Expiry Profile 30-Jun-13 Lease Expiry Profile 31-Dec-13

Source: Company data

■ The completion of the new lease to Mercy Ascot Hospital has seen the 2019 lease

expiries reduce significantly to circa 5% (from 13%). The 2018 expiries are still

dominated by the Allamanda Hospital expiry in November 2017 which currently makes

up 12.5% of the total rent roll.

17 February 2014

Australia and NZ First Edition 104

Forecasts

We have made some changes to our forecasts incorporating the following:

■ Committed redevelopment works in Australia.

■ Minor changes to rental track on the back of current rent review run-rate.

■ Normalisation of current tax to 18% in 2H14.

Figure 7: Forecasts ($NZmn)

FY14 FY15 FY16

Was Now Chg. Was Now Chg. Was Now Chg.

($m) ($m) (%) ($m) ($m) (%) ($m) ($m) (%)

Net Rental Revenue 59.1 58.5 -1% 60.6 61.0 1% 61.8 63.4 3%

Base Management Fee (5.1) (5.1)

(5.1) (5.2)

(5.2) (5.3)

Other Indirect Expenses (2.2) (2.2)

(2.2) (2.2)

(2.2) (2.3)

EBIT 51.8 51.1 -1% 53.3 53.6 1% 54.4 55.8 3%

Net Interest Expense (16.6) (17.2)

(15.8) (17.9)

(16.4) (19.0)

Income Tax Expense (6.5) (1.6)

(7.2) (6.5)

(7.3) (6.7)

Operating Profit 28.7 32.3 13% 30.3 29.2 -4% 30.7 29.7 -2%

EPU (cents) 8.6 9.7 13% 8.9 8.6 -4% 8.9 8.7 -2%

Net DPU (cents) 7.9 7.9 0% 8.4 8.1 -4% 8.5 8.3 -2%

Payout ratio 92% 82%

95% 95%

95% 95%

Source: Company data, FNZC estimates

The reduction in EPS forecast in FY15 and FY16 is almost solely attributable to higher

interest costs through a combination of increased gearing through the various

redevelopment works and forecast increases in interest costs.

We have lowered our forecast pay-out ratio to 95% resulting in a 2-4% reduction in DPS in

FY15 and FY16. Guidance for cash DPU in FY14 was reaffirmed at 7.9cps and we expect

a pay-out ratio of around 82% due to the one-off tax adjustments. .

Allamanda lease expiry

The tenant Healthescope has now confirmed that it will be relocating services to a new

private hospital on the Gold Coast. This lease expires in November 2017 and makes up

12.5% of the total portfolio rent roll.

At this stage we have not assumed a lower rent or any capex for potential conversion

given the expiry is some 3.5 years away and management are not in a position to detail

any alternatives. However, if we make a broad assumption of a year’s rent-free and

NZ$10mn of redevelopment capex on expiry our DCF would drop by 4cps or 3%.

17 February 2014

Australia and NZ First Edition 105

Valuation and investment view

VHP continues to maintain it’s near full occupancy and long WALT (now extended out to

14.9 years). With around 80% of their portfolio leases being under a structured or fixed

review mechanism we expect VHP will produce one of the strongest rental growths in the

sector over the next 12 months, excluding any negative foreign exchange outcomes.

Management continues to organically grow the rental streams through careful brownfield

redevelopments forecast to yield around 10% on completion.

With a forecast FY14 cash distribution of 7.9cps Vital is trading on a 6.1% cash yield,

above the sector average, but still some 23% above NTA. We see little downside risk to

this distribution amount through a combination of positive earnings momentum and an

unstressed pay-out ratio. We have a lower risk view on the stock with gearing now under

control and the Mercy Ascot lease extended. The biggest risk remains the lease expiry

and departure of the tenant at their Allamanda property. Although still 3.5 years away, it

will need to be carefully managed given this one lease makes up circa 12.5% of the total

rent roll.

Our 12-month target price has reduced by 4cps (or 3%) to $1.35 mainly on the back of

slightly slower forecast earnings growth. With the significant pull-back in the share price

over the second half of 2013, we upgrade our rating to NEUTRAL (from

Underperform).

Australia and NZ First Edition 106

17 February 2014

Asia Pacific/Australia

Equity Research

REITs (Real Estate (AU))

Westfield

(WDC.AX / WDC AU) UPGRADE RATING

Light at the end of the tunnel

■ Reality check: After running to $10.78 immediately after proposing the

creation of Scentre Group, WDC has subsequently sold off 2.4% to $10.27

(vs Global REIT's 2.6% and Domestic Equities' +1.6%). Results have been

de-risked with 2013 FFO guidance of 66.5c re-iterated in Dec. FY14 growth

guidance was also struck, at 3.2% (68.6c). While dilutive sales pose some

risk to growth, WDC would no doubt be ready to re-deploy capital into

buying back their stock as it currently trades on an 11.3% discount to NAV.

We lift our Target Price to $11.45 and upgrade rating to OUTPERFORM.

■ Investment case: Westfield appears to have been dragged down by three

key factors: 1) concerns re US pricing / comps, 2) concerns re growth

outlook, and 3) liquidity drains on the A-REIT sector. Our CY14 NAV

framework suggests the market is pricing WDC's "business" at $1.3bn or

5.2x FY14 EBIT - this excludes any value for the likely margin on the $1.5bn

of balance sheet development currently underway.

■ The headwind: We expect US non-core disposals to culminate shortly with

six assets sold for $1.2bn, driving dilution in the order of 2.9% annualised

(2.3% of FY14 FFO). Press speculation now suggests there may also be

~$1bn of UK asset sales – potentially ~1.8% dilutive (annualised). Yet, we

stress, FY14 weakness could pull forward the long awaited growth by 2015.

■ US cap rates offset FX: Our earnings (FY14 +0.8%) upgrades are driven

purely by updated FX assumptions and share counts. The valuation uplift

has been partially offset by applying 5bps higher cap rates to US NOI. Our

valuation applies a blended average cap rate of 5.75% and an 11.1x multiple

on active EBIT (& dev't value add) vs 10x on unallocated expenses.

Total return forecast in perspective

Mean^CS tgt^

Sh Prc

-20%

-10%

0%

10%

20%

30%

40%

12mth Volatility* 52wk Hi-Lo IBES Consensustarget return^

Performance over 1M 3M 12M

Absolute (%) 1.6 -5.9 -6.7

Relative (%) -0.5 -5.0 -13.1

Financial and valuation metrics

Year 12/12A 12/13E 12/14E 12/15E

Revenue (A$mn) 2,254.6 2,242.4 2,321.1 2,439.8

EBITDA (A$mn) 2,142.4 2,132.7 2,209.8 2,322.0

EBIT (A$mn) 2,142.4 2,132.7 2,209.8 2,322.0

Net income (A$mn) 1,437.0 — — —

EPS (CS adj.) (Ac) 65.01 66.53 68.60 70.54

Change from previous EPS (%) n.a. 0.02 0.83 0.42

EPS growth (%) 0.3 2.3 3.1 2.8

P/E (x) 15.8 15.4 15.0 14.6

Dividend (Ac) 49.50 51.00 52.22 55.02

Dividend yield (%) 4.8 5.0 5.1 5.4

Net debt/equity (%) 63.9 64.0 70.0 77.2

Relative performance versus S&P ASX 200.See Reference

Appendix for a description of the chart. Source: Credit Suisse

estimates, * Consensus, mean range from Thomson Reuters

Source: Company data, ASX, Credit Suisse estimates, * Adj. for goodwill, notional interest and unusual items. Relative P/E

against ASX/S&P200 based on pre GW in AUD. Company PE calculation is based on displayed EPS Currency

Rating (from Neutral) OUTPERFORM*

Price (14 Feb 14, A$) 10.27

Target price (A$) (from 11.27) 11.45¹

Market cap. (A$mn) 21,705.66

Yr avg. mthly trading (A$mn) 1,487.60

Last month's trading (A$mn) 1,295.81

Projected return:

Capital gain (%) 11.5

Dividend yield (net %) 5.1

Total return (%) 16.6

52-week price range 12.3 - 9.7

* Stock ratings are relative to the relevant country

benchmark.

¹Target price is for 12 months.

Research Analysts

Stephen Rich

61 2 8205 4617

stephen.rich@credit-suisse.com

John Richmond

61 2 8205 4580

john.richmond@credit-suisse.com

Mikhail Mohl

61 2 8205 4413

mikhail.mohl@credit-suisse.com

Specialist sales: Bhupen Master

61 2 8205 4792

bhupen.master@credit-suisse.com

17 February 2014

Australia and NZ First Edition 107

Figure 1: Westfield Group financial summary

Westfield ######## ######## ######## ######## ########

In AUDmn unless otherwise stated Year ending 31 Dec Share Price: A$10.2712-month target price: A$#ERR: Label not found: 'ESTIM_PP'

2011 2012 2013 2014 2015 2011 2012 2013 2014 2015

Profit & Loss 2011A 2012A 2013F 2014F 2015F Financial Summary 2011A 2012A 2013F 2014F 2015F

Net property income 1,947 1,941 1,929 1,997 2,107 Core Earnings 1,492.4 1,473.7 1,438.8 1,424.1 1,464.4

Investment Income Core Earnings Growth -1.3% -2.4% -1.0% 2.8%

Management EBIT 108 123 129 140 145 EPS (CS underlying) 64.8 65.0 66.5 68.6 70.5

Development EBIT 43 87 102 113 111 EPS growth 0.3% 2.3% 3.1% 2.8%

Other Active EBIT P/E 15.85 15.80 15.44 14.97 14.56

Trading Profits (/loss) Dividends (cents per share) 48.4 49.5 51.0 52.2 55.0

Other income 5 24 13 - - Dividend Yield 4.7% 4.8% 5.0% 5.1% 5.4%

Unallocated expenses -37 -33 -41 -40 -41 AFFO (cents per share) 73.4 68.0 62.0 63.7 65.4

EBITDA 2,064 2,142 2,133 2,210 2,322 P/AFFO 14.0 15.1 16.6 16.1 15.7

Depreciation & Amortisation EV/EBITDA 14.3 14.9 14.7 14.6 14.6

EBIT 2,064 2,142 2,133 2,210 2,322

Net Interest 445 552 589 676 745 Profitability Ratios

PBT 1,619 1,591 1,544 1,534 1,577 Development ROC 13.5% 13.5% 13.5% 13.5% 13.5%

Tax -110 -95 -95 -99 -101 ROE (%) 8.77% 9.35% 7.87% 7.59% 7.62%

Minorities -17 -22 -11 -11 -11 Payout Ratio (Dist / Op Earnings) 75% 76% 77% 76% 78%

NPAT (post minorities) 1,492 1,474 1,439 1,424 1,464 Offshore Assets 44% 45% 59% 59% 59%

Balance Sheet 2011A 2012A 2013F 2014F 2015F Financial Ratios 2011A 2012A 2013F 2014F 2015F

Cash & equivalents 191 1,099 991 1,049 1,008 Balance Sheet Ratios

Receivables 1,535 244 481 481 481 Interest cover 4.0 3.4 3.6 3.3 3.1

Derivatives 188 146 134 134 134 Debt/EBITDA 8.0 5.8 5.9 6.4 6.8

Other current assets 167 204 626 626 626 Net Debt / Investment Properties 44.1% 39.4% 59.9% 63.0% 69.2%

Current assets 2,080 1,692 2,233 2,290 2,249 Total Liabilities/ Total Assets 53.8% 53.7% 52.1% 53.3% 54.6%

Investment Properties 23,108 17,956 19,524 20,852 21,457 Share Items

Investments 9,990 12,947 14,844 15,457 16,995 EFPOWA 2,303.1 2,267.0 2,162.6 2,076.0 2,076.0

Intangible assets - - - - - Units on Issue 2,303.1 2,238.6 2,121.4 2,076.0 2,076.0

Other non-current assets 1,675 1,460 1,556 1,578 1,613 Target Price ESG Risk Due to ESG 0.0%

Non-current assets 34,778 32,382 35,942 37,906 40,084 MSCI IVA Risk Neutral

Total assets 36,858 34,074 38,175 40,196 42,333 MSCI IVA Comment

Derivatives 495 451 242 242 242

Interest bearing debt 13,886 11,178 12,683 14,193 15,858

Other liabilities 5,457 6,681 6,974 6,988 7,007

Total liabilities 19,837 18,310 19,899 21,423 23,107

Net assets 17,021 15,764 18,275 18,773 19,225

Ordinary equity 17,021 15,764 18,275 18,773 19,225

Minorities / prefered capital 273 435 225 225 225 Share Price Performance 52 week range: $9.70 - $12.34

Net Tangible Assets per share 7.4 7.0 8.6 9.0 9.3

Cashflow 2011A 2012A 2013F 2014F 2015F

Net Property Income 1,947 1,941 1,929 1,997 2,107

Other operating cashflow -140 -431 -803 2 -868

Operating cashflow 1,807 1,510 1,126 1,999 1,240

Disposals (/acquisitions) of property

Specific Capex -797 -974 -786 -1,428 -1,452

Maintenance Capex -6 -62 -73 -75 -81

Net investment in JV's & associates

Other Investing Cashflows -269 3,950 2,474 - -

Investing cashflow -1,073 2,914 1,614 -1,503 -1,533

Proceeds from Equity Issuance -7 -776 -1,644 - -

Dividend Re-investment Plan

Dividends paid -1,284 -1,125 -1,103 -1,067 -1,123

Net borrowings 1,091 -1,660 -105 1,413 1,375

Other -525 44 8 - -

Financing cashflow -726 -3,516 -2,845 346 252

Net cashflow 8 907 -105 842 -41

We agree with MSCI's rating as a number of WDC

retail property owning peers have started to

demonstrate more proactive efforts to achieve green

certifications across their portfolios, and while

Westfield continues to adopt green certifications at a

slow rate and demonstrates little evidence of

improvement in portfolio-wide energy and water

efficiency

9.5

10.0

10.5

11.0

11.5

12.0

12.5

13.0

Feb

-13

Mar

-13

Apr

-13

May

-13

Jun-

13

Jul-1

3

Aug

-13

Sep

-13

Oct

-13

Nov

-13

Dec

-13

Jan-

14

Feb

-14

WDC.AX S&P/ASX 200 S&P/ASX 200 Property

Source: Company data, Credit Suisse estimates

17 February 2014

Australia and NZ First Edition 108

Investment thesis Since popping to $10.78 on announcement of the Scentre Group proposal, Westfield has

fallen 2.4% (vs the broader markets' +1.6%, A-REITs' +0.9% and Global REITs' 2.6%) on

a dividend adjusted basis. Implied value would appear to have emerged when we consider

the following metrics:

■ NAV: Using our NAV framework, market pricing reflects: a 6.14% forward NOI yield

(vs 5.9% book) and a 10.4x multiple (vs CSe 11.1x) on active earnings and value

creation (i.e., including estimated value uplift on balance sheet devt).

■ Dividend: Yield of 5.1% is not compelling relative to a historical average of 7%,

however, the 2013 pay-out ratio of 77% is considerably lower than the 92% average.

■ Multiples: WDC's 15.0x FFO multiple reflects a PE Rel of 1.04 is in line with the

historical average, but with history of trading 15% expensive when growth emerges,

However, market concerns seem focused on three key factors:

■ Deal transparency: We estimate a 21x pre-eliminations EBIT multiple if we assume

WRT consideration is truly worth NTA, despite historically trading at a 14.8% discount,

■ US pricing / comps: Post proposal, WDC has de-rated by 11% relative to US peers

on a price to FFO multiple basis, more than compensating for lower short-term growth,

■ Liquidity drains on the A-REIT sector: $1.9bn of 4Q13 REIT capital raised, and…

… lack of confidence in growth!!!

Market data shows second-year growth expectations (12 to 24mth forward) has averaged

4.9% since the merger, in-line with management comments of ~5% trend EPS growth.

However, Westfield's growth since the merger of 2004 has consistently underwhelmed.

Compound Annual Growth on post GFC re-capitalised FY11 earnings stands at just 3.5%

pa to 2013 (Figure 2) and is expected to grow just 3.2% into 2014.

Figure 2: WDC growth historically underwhelming Figure 3: When hopes breach 5.5% PErel +1 s.d.

-40%

-30%

-20%

-10%

0%

10%

20%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

EPS DPS Forecast Growth into Forward 'Year 2'

Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates

The risk creates the opportunity

We note the risks to FY14 FFO associated with dilutive disposals including:

■ US: 2.3% dilution from selling six assets with a book value of US$1.2bn

■ UK: 1.4% dilution from selling stakes in Merry Hill and Derby.

However, depressing FY14 earnings may see FY15 growth more achievable. 3-4% EPS

dilution could be offset by a potentially greater re-rate. With comfort in 5.5% growth, could

WDC trade back to 1 standard deviation expensive? That’s where our TP stands.

Concerns remain, but value

has emerged – Upgrade to

OUTPERFORM

Lower yield with lower

payout -> even more need

to generate growth!

Dilution as a "growth

slingshot?"

Our $11.45 target price is

NAV driven. Yet, we note, it

reflects 16.69x 2014 FFO –

1.16x PE Rel, or <1 sd

above the historical average

17 February 2014

Australia and NZ First Edition 109

The disposals The potential for dilutive asset sales are the primary drag on confidence. While US sales

have been well flagged since April 2011, we now read of the potential for UK sales also.

United States

Westfield December 2013 Group Restructure presentation highlighted that six US assets

with a total book value of US$1.2bn and average productivity of US$325 psft were

considered non-core.

Figure 4: Credit Suisse depiction of potential suspects highlights ~7% yield

Asset Market 31 Dec, 2013

Book Value

2012 Specialty

Sales (US$ psft)

Estimated Yield

31 Dec, 12

Meriden Connecticut 136 313 7.01%

Vancouver Washington 141 331 6.05%

Hawthorn Illinois/Indiana 183 300 7.00%

Fox Valley Illinois/Indiana 209 314 7.24%

Connecticut Post Connecticut 237 343 7.00%

Wheaton Maryland 272 352 7.26%

1,177 328 6.99%

Source: Company data, Credit Suisse estimates

US dilutive sales impact

Unsure of relative denominations of debt, if we were to assume this portfolio were sold at a

5% discount to book, settling on 1 April, paying down debt at a group average interest

expense of 4%, the FFO hit would be 2.3% (growing to 2.9% annualised).

Superficial analysis could overstate the dilution

As highlighted in September's note, "Are We There Yet?" there are a few factors that can

reduce dilution:

■ Property Level (/Mortgage) Debt: If assets are sold with property level debt that can

be assumed by the buyer, this will reduce the group's average cost of debt,

■ Co-investment: Retaining some stake in the disposal assets appears to be prudent

from a tax perspective. If the stake is held in a highly levered, floating debt structure,

WDC's dividend income can partially offset the dilution.

Full analysis is reproduced in Appendix 1.

United Kingdom

In addition to US sales, the AFR has recently reported that Westfield is also negotiating to

sell interests in its UK assets Derby and Merry Hill.

■ Derby: Shifted from 100% consolidated to 66.7% Equity Accounted at June. At 31

December 2012, the 100% stake was valued at £394.3m, on a yield of 6.5%. Westfield

holds a 50% direct interest and 16.7% through its one-third stake in the UK Shopping

Centre Fund – the income from which would also reduce on disposal.

■ Merry Hill: At 31 December 2012, the 33.3% stake was valued at £254.9m, on a yield

of 5.7%. Westfield holds a 25% direct interest and 8.3% through its one-third stake in

the UK Shopping Centre Fund – the income from which would also reduce on

disposal.

If sold at book, the combined receipts would reach ~£518m or ~A$950m.

US sales: 2.3% dilutive to

2014 FFO – pre-structuring

~$1bn of UK disposals to

improve portfolio quality

17 February 2014

Australia and NZ First Edition 110

Reuters reported that UK Retail REIT Intu was in talks with Westfield regarding Derby and

that the deal would also include an equity interest, and the management of Merry Hill.

Recall: Intu is part of the vehicle formerly known as Liberty International, in which

Westfield previously took a stake. The same group also bought Westfield’s 75% stake in

Broadmarsh shopping centre in Nottingham in November 2011.

UK dilutive sales impact

If we were to assume this portfolio were sold at a 5% discount to book, settling on 1 April,

paying down debt at the group average 4% interest expense, the FFO hit would be 1.4%.

(growing to 1.8% annualised). This reflects both the negative spread on rent vs interest

expense and foregone management income, which we assume at ~ 45bps of FUM.

An interesting note: Shadow developments

When compiling the list of potential disposals we note that Plaza Camino Real is footnoted

as being under development. This has not been flagged explicitly at results but we do note

$470m of "other projects" at the September Quarter update. This item has been a notable

inclusion post the Global Financial Crisis as depicted in Figure 5 below.

Figure 5: Small project programme / Other projects re-accelerating

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

0

100

200

300

400

500

600

Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13

Total Project $m Yield

Source: Company data, Credit Suisse estimates

We provide some detail on the Carlsbad Development from the San Diego Business

Journal below to highlight the scope of some of these projects that never make the explicit

pipeline.

Plaza Camino Real, Carlsbad, San Diego, California.

■ Scale: Expected to top $100m,

■ San Diego track record: Fifth makeover in the past five years, on a portfolio of just

seven malls! Last year saw the completion of both a $180m renovation at Westfield

UTC and ~$55m spend at North County, Escondido

■ Timing: Expected to be completed by fall 2014.

■ Lifestyle Focused: Including a new 40k sqft 24-hour fitness and a new 12-screen,

high-tech movie theatre developed by Regal Entertainment Group.

■ Longer-term: Plan to make ~$1bn in improvements to the site at University Towne

Centre, with more retail and residential elements in the works.

UK sales: 1.4% dilutive to

2014 FFO

Context: $250m @ 7.5%

generates ~2.3% of US NOI

17 February 2014

Australia and NZ First Edition 111

Base case FFO adjustments At this point we have yet to include either: non-core disposals or Scentre Group spin-off.

We have, however, adjusted our base case earnings forecasts for two key factors:

■ Buyback: WDC bought back 91.5m shares with an average timing of 4 October at an

average price of $11.01, and

■ Foreign Exchange: The AUDUSD finished the period at 89.2, with a 2H13 average of

~92.1.

Figure 6: Buyback activity aggressive while on Figure 7: Australian dollar weaker

0%

10%

20%

30%

40%

50%

60%

70%

80%

10.60

10.70

10.80

10.90

11.00

11.10

11.20

11.30

11.40

Avg Price Mkt Share

0.78

0.8

0.82

0.84

0.86

0.88

0.9

0.92

0.94

Spot FY14 FY15 FY16

AUDUSD @ 16 Sept AUDUSD Today

Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates

Forward looking / impact

Currency

The spot AUDUSD has fallen 3.4% since our last model update for FX, from 93.2 to 90.

More importantly our house FY14 AUD/USD forecast has shifted 1.2%, as have future

years.

All else being equal, the currency moves drive a:

■ 1.6% upgrade to our WDC NAV, and

■ 1.3% upgrade to FY14 earnings

We note: when Westfield provided a forecast for 2014 FFO in early December, they used

a cross rate of 0.91. This would be 1.3% dilutive to our FY14 estimate.

Share count

We had assumed 45m shares would be bought back this half at an average price of

$11.05 (at an average date of 31 October) and a further 45m in the half to June 2014 at

$11.30.

Applying the 2H13 actual figures (as above) and removing 1H14 buyback activity drives

minimal FY14 accretion (~0.2%).

FFO falls ~1c if we apply

WDC's 0.91 AUDUSD

17 February 2014

Australia and NZ First Edition 112

Valuation

Two key factors impacting Westfield’s valuation right now include:

■ Perceived US valuation: Concerns re: 1) a multiple de-rate due to lower growth and

2) unwillingness of offshore investors to ascribe much of a multiple to active earnings,

not helped by…

■ Transparency: Significant confusion / frustration around the pricing of the Scentre

Group proposal.

Multiple confusion

Westfield Retail Trust holders have been vocal in their disapproval of the merger ratios

applied in the creation of Scentre Group.

While it would appear tough for both parties to the merger to feel hard done by (?!?), the

lack of transparency has clearly frustrated both groups of investors.

The Economics

We believe Scentre Group's Proforma FFO forecasts (Figure 8) understate the economics

of the earnings streams in play. With only 25% of real estate externally owned on Day 1,

75% of earnings will be eliminated / not charged.

In a world awash with capital seeking real estate investments and given the quality of the

portfolio, we would expect Scentre group to increase external holdings rapidly. Further, the

earnings stream being sold, was generating earnings from 62.5% external ownership.

Figure 8: Eliminations reduce Scentre Group earnings Figure 9: Considering pre-eliminations FFO

Proforma ($m) CY14WDC (Aus/NZ)

and WRTAdj Proforma

Property NOI

WRT 836 836

WDC 942 55 997

Total NOI 1,779 55 1,834

Property Management Income 103 (55) 48

Project Income 92 (15) 77

Overheads (107) 9 (98)

EBIT 1,867 (6) 1,860

Interest (557) 11 (546)

Tax (98) 19 (78)

Minorities (96) (96)

FFO 1,116 25 1,140

Securities on issue (post) 5,311

FFO per security (cents) 21.5

Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates

In Figure 10 below we consider one scenario under which Westfield Group's comments re

a 16.6x multiple hold (i.e., the inverse of a property cap rate), based on pre-eliminations

earnings.

After all, Property Management Fees are charged to the tenant and the equivalent of

"internally generated project earnings" is simply development upside – a capital

release.

17 February 2014

Australia and NZ First Edition 113

Figure 10: One way to backsolve to Westfield Group's 16.6x multiple

Theoretical Income Analysis Assumptions Earnings Multiple Comments

Assets 37,900

Net Property Income 6.2% 2,347

Gross Property Income 1.35 3,168

Property Management Revenue 5.0% 158

A) Property Management Income 100% 158 16.15x Inverse of 6 cap

Development pa 48 2.1%

Spend pa 790

B) Project 'Earnings' 13.5% 107 17.18x Solved for

C) Overheads -0.26% -98 9.00x Scalability

Earnings / Valuation 167 3,507 A + B + C

Blended average pre cost multiple 265 16.6x Just A & B

Source: Company data, Credit Suisse estimates

We see this as a stretch from three perspectives and consider some sensitivities:

1) 100% scalability of property management income: We allocate 80% of

property management revenue to our EBIT line, and eliminate the associated

costs from the "unallocated overhead" line.

2) Project "Earnings" multiple: We believe a 13x EBIT multiple would be more

palatable given the lack of transparency that comes with limited external

ownership and visibility on the future pipeline and trajectory, and

3) Overheads: Proforma $98m seems reasonable with reference to the Westfield

Group's 1H13 overheads of $95m, and reflects just 26bps of Assets Under

Management, However, we are reluctant to reward scalability by ascribing the

relatively low ~9x multiple we would typically ascribe to a Real Estate business's

unallocated overheads without more transparency on the composition of trajectory

of costs. We lift the multiple to 10x.

Figure 11 below highlights the implications for the valuation of the business.

Figure 11: Three adjustment sensitivities see valuation fall 21%

Theoretical Income Analysis Assumptions Earnings Multiple Comments

Assets 37,900

Net Property Income 6.2% 2,347

Gross Property Income 1.35 3,168

Property Management Revenue 5.0% 158

A) Property Management Income 80% 127 16.15x Inverse of 6 cap

Development pa 48 2.1%

Spend pa 790

B) Project 'Earnings' 13.5% 107 13.0x Solved for

C) Overheads -0.17% -66 10.00x Scalability

Earnings / Valuation 167 2,769 A + B + C

Blended average pre-cost multiple 233 14.7x Just A & B

Source: Company data, Credit Suisse estimates

The sensitivity valuation implies:

■ A valuation of $2.77bn (vs $3.5bn)

■ A pre-cost EBIT multiple of 14.7x (from 16.6x), and

■ An EBIT multiple of 16.6x (from 21x)

We stress this is not an attempt at a conclusive valuation but an estimate of three

key adjustments we believe should be made.

17 February 2014

Australia and NZ First Edition 114

Considerations for valuation

We are increasingly warming to Westfield’s argument re property management fees

warranting a comparable multiple to rental income.

Further, with Simon Property Group set to receive property management income from

SpinCo, we note WDC will have a vocal and respected partner likely to be lobbying the

investment community to value this stream “fairly”.

However, we would note that the “Management” EBIT line in Figure 11 also includes funds

management fees. We believe it would be wise for Scentre Group management to provide

significantly greater transparency re: the composition, margins and growth trajectory of

various earnings streams to facilitate a more robust valuation analysis. This would benefit

the market pricing of both entities.

US REIT comparison

For the year to June 2013 US Regional Mall REIT's traded on an average 18.6x forward

FFO multiple. However they have subsequently de-rated substantially in line with most

yield asset classes globally, to now trade at 16.3x on average (Figure 12).

Figure 12: US regional mall REITs' FFO multiple de-rating Figure 13: Shifting growth picture? But once bitten…

17.2 16.7 16.7

16.4

14.7

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

13.5

14.0

14.5

15.0

15.5

16.0

16.5

17.0

17.5

TCO.N MAC.N GGP.N SPG.N WDC.AX

2014 FFO Multiple 2yr FFO CAGR (to '16) FFO G (1Yr)

Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates

While WDC's forecast 2014 FFO growth of 3.2% is underwhelming with a shift in focus to

2014 multiples, we should consider growth into 2015.

Our FFO growth forecasts remain depressed into 2015 (+2.8%), but a two year forward

CAGR of 4.7% becomes interesting – standing close the peer group's 5%.

Further, if WDC were to announce dilutive transactions early this year and/or re-

structure the debt book (for a full year impact in 2015), growth into FY15 could pop.

WDC has traded to a 13% multiple discount to US peers – vs 2% on Proposal of the

Scentre Group - as the market fixates on WDC's lacklustre 2015 growth.

Figure 14: Westfield Group's EPS and DPS track record Figure 15: Achieved vs forecast "Year 2" growth

0

20

40

60

80

100

120

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

EPS Growth DPS Growth

-40%

-30%

-20%

-10%

0%

10%

20%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

EPS DPS Forecast Growth into Forward 'Year 2'

Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates

For now we leave our

domestic multiples

unchanged.

Punished for historical

disappointment?

17 February 2014

Australia and NZ First Edition 115

Net asset valuation Our Net Asset Valuation is largely unchanged, up 1.6% to $11.45.

Key Changes include:

■ Rolling Valuation to December 14 from June 14,

■ Updating Foreign Exchange assumptions (+1.6%),

■ Increasing US cap rates by 5bps to reflect potential disposals.

Figure 16: Westfield Group NAV

Westfield Group NAV Local Income AUD Income Cap Rate Gross value

Assets (Local $) ($Am) (% / x) (A$m)

Australia 817 817 5.70% 14,330

New Zealand 107 98 7.50% 1,311

UK 131 242 5.60% 4,313

US 666 751 5.65% 13,303

Income Producing Assets 5.76% 33,257

Other Hard Assets 3,513

Tangible Assets 36,770

Active Earnings Streams 253 10.7 2,701

Development Pipeline 85 12.5 1,060

Other Net Assets - excl tax items 958

Gross Enterprise Value 41,490

Liabilities

Debt by denomination

AUD&NZD -3,702 -3,702 -3,702

USD -7,012 -7,908 -7,908

UK&EUR -2,045 -3,758 -3,758

Debt -15,368

Corporate Overheads -40 10 -400

OEI's, PLN's and Converts -1,953

Equity Value 23,769

Number of Shares 2,076

Value per share 11.45

Source: Company data, Credit Suisse estimates

What will the spin-off do?

The true focus for US comparison should be the post spin off Westfield Corporation.

While there has been no medium term EPS growth guidance provided key points to note

for the new vehicle (at Dec presentation FX rates) include:

■ ROE lifts from 11.6% to ~12%

■ The book Equity Base reduces by $6.9bn to $10.5bn,

■ Gearing falls from 35.5% to 33.6%

We expect Westfield Group to Report Full Year Results in late February. This should

provide a better basis for forecasting, valuation and analysis of the new entity. As will the

Independent Experts Reports to be released with the Explanatory Memorandum in April.

See Appendix 2 for indicative timetable.

Superficial indications in

advance of April's

Explanatory Memorandum

17 February 2014

Australia and NZ First Edition 116

Appendix 1: US dilution softeners Figure 17: CSe 6.8% passing yield on June 13 valuations – assuming no NOI growth

Assets 31 Dec Valuation Yield Income Productivity

Mid-West Belden Village 211 6.41% 14 441

Franklin Park 318 6.89% 22 412

Great Northern 145 6.80% 10 353

Southlake 280 6.22% 17 410

West Coast Capital 187 6.66% 12 355

Parkway 294 6.36% 19 337

West Covina 328 5.62% 18 366

31-Dec-12 1763 6.37% 112 383

30-Jun-13 1643 6.83% 112

Source: Company data, Credit Suisse estimates

Joint venture yield

As highlighted in Figure 18, by gearing up the disposal assets at ~55%, Westfield should

be able to generate a ~9.1% yield out of its ~US$73.1m investment – decreasing dilution.

Figure 18: WDC juiced up return from remaining 10% stake

Assets 1% 1,623.6

Debt 55% 893.0

WDC Equity 10% 73.1

Net Property Income Yield 6.83% 112.1

Mgmt Fee to Starwood 0.45% -7.3

Cost of Debt 4.25% -38.0

JV Profit 66.8

WDC Return 10% 6.7

WDC Yield 9.1%

Source: Company data, Credit Suisse estimates

Westfield Group impact

Figure 19 below highlights how you could estimate 4.5cps dilution from this transaction.

However, as highlighted by our comments, this is far from the impact we’ve modelled.

Figure 19: Reconciling the guided impact

WDC Impact Assumption Impact Comment

Headline (US$m) 1640

WDC Sales (US$m) 1% 1623.6

Yield (US$m) 6.83% -111.0 As per Figure 2 above

Investment (US$m) 10% 73.1

Investment Yield (US$m) 9.1% 6.7

Debt Reduction 1,550.5

Int Exp Reduction 1.0% 15.5 Low relative to CSe

Net Impact (US$m) -88.8

Net Impact (A$m) 0.920 -96.5 93.3 at time of writing…

Per Share (m / cps) 2,162 -4.5 At spot vs CSe 2014 Average: 2,124m

Part Period 13% -0.6 Assumes 15 Nov settlement

Source: Company data, Credit Suisse estimates

Further, we also understand there was ~US$175m of debt against these assets which we

assume was paying ~4.5%.

If we also consider floating cost of debt closer to 1.5%, the blended cost of debt paid-off

would be closer to 1.85% and dilution on this deal, closer to 3.8cps.

Starwood Disposal Portfolio

– September, 2013

We estimate FY dilution of

~3.8c

17 February 2014

Australia and NZ First Edition 117

Appendix 2: Timetable Figure 20: Indicative timetable provided on proposal announcement – 4 December 2013

February 2014 WRT and WDC full-year 2013 results announcement

WRT and WDC distribution paid for H2 2013

April 2014 First court hearing

Explanatory Memorandum and meeting documents sent to WDC and WRT securityholders

May 2014 WRT and WDC AGM and securityholder meetings to approval proposal

Second court hearing

June 2014 WRT and WDC 1H 2014 distribution

Full implementation and commencement of separate listings

Source: Company data, Credit Suisse estimates

Australia and NZ First Edition 118

17 February 2014

Asia Pacific/Australia

Equity Research

Utilities

Australian Utilities Sector PRE RESULTS COMMENT

1H14 results: Margin outlook and weather

■ FY13 was bad for Integrated Utilities; FY14 starting off badly: We

believe 1H14 will be a low for the Integrated Utilities as margins are

impacted from discounting, churn, lower volumes and higher wholesale

prices. While we expect a poor 1H14 for Integrated Utilities, the key to the

results will likely be outlook and guidance statements for 2H14, as our

proprietary survey indicates that discounting may already be at its nadir. In

addition, we will be looking for commentary as to how the utilities managed

the January heat wave in the South Eastern states.

■ Marginally prefer ORG over AGK: We marginally prefer ORG to AGK

coming into the 1H14 result. We do not expect ORG to provide formal

guidance for FY14, instead providing outlook commentary, showing

expectations of further discount tapering and a smaller relative impact from

the January heat wave in SE Australia. For AGK, we will not be surprised if

FY14 guidance will be tightened to the lower end of the $560mn to around

$610mn, with the added possibility that any loss from Forge's issues at the

Diamantina power station could be taken below the line.

■ Few surprises expected for the Regulated Utilities: With guidance

provided for each of regulated utilities (distribution or NPAT), we expect few

surprises for the coming reporting season. For us, the key areas of focus will

be any update on tax issues relating to SKI and commentary in relation to

further growth opportunities in Western Australia following on from recent

projects announced by DUE (potentially of benefit to both DUE and APA).

Figure 1: Discount tapering extends beyond NSW into 2H14

10%

12%

6%

11%

7%

13%

7%

10%9%

16%

7%

12%

8%

16%

7%

12%

8%

15%

7%

12%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

NSW VIC QLD SA

June July September October January

Source: Company data, Credit Suisse estimates

Research Analysts

Sandra McCullagh

61 2 8205 4729

sandra.mccullagh@credit-suisse.com

David Bailey

61 2 8205 4739

david.bailey@credit-suisse.com

Nicholas Markiewicz

61 2 8205 4107

nicholas.markiewicz@credit-suisse.com

17 February 2014

Australia and NZ First Edition 119

Utilities reporting season When are they reporting?

Figure 2: Dial-in details for utilities reporting season

Company Date and Time Australian no. International no. Password / ID

AGK 26 February 2014

10:30am (AEST) 1800 801 825 +61 2 8524 5042 AGL

APA 19 February 2014

11:00am (AEST) 1800 558 698 +612 9007 3187 730151

DUE 21 February 2014

11:00am (AEST) 1800 801 825 +612 8254 5042 1620160

ENV 20 February 2014

1:00pm (AEST) 1800 123 296 +61 2 8038 5221 3560 9827

ORG 20 February 2014

10:00am (AEST) 1800 064 350 +61 3 8605 4954 N/A

SKI 24 February 2014

10:30am (AEST) 1800 558 698 +61 2 9007 3187 729 092

ENE 25 February 2014 NA NA NA

Source: Company data, Credit Suisse estimates

17 February 2014

Australia and NZ First Edition 120

Forecasts and consensus

■ Energy developments is the only Integrated Utility to provide 1H14 guidance, at

$82mn to $86mn EBITDA.

■ ORG and AGK offer no 1H guidance with impacts of discounting still unknown:

Both AGK and ORG have not offered 1H14 guidance, with only AGK offering FY14

guidance of $560mn–$610mn NPAT.

■ Few surprises expected from the regulated utilities: DUE, APA and SKI have

provided 1H14 distribution guidance for the reporting period, with ENV providing NPAT

guidance for 1H14 of ~$85mn (CS: $87mn). With both APA and ENV upgrading full-

year guidance in mid-December and DUE re-iterating in mid-January, we see limited

scope for updates/variation to be provided during this reporting season.

Figure 3: February 2014 reporting season – Credit Suisse estimates, company guidance

Company Period EBITDA EBIT NPAT EPS DPS Company guidance

$mn $mn $mn cps cps

Origin Energy 1H14 1,204.0 821.4 408.3 37.0 25.0 No guidance.

AGL 1H14 700.5 537.6 305.2 54.9 31.0 No 1H14 guidance. FY14 NPAT guidance remains $560mn to $610mn.

Energy Developments 1H14 82.9 48.1 24.1 14.9 9.7 EBITDA guidance of $82mn - $86mn.

Duet 1H14 411.2 277.8 52.8 4.5 8.5 1H14 distribution 8.5cps; FY14 distribution guidance of 17cps.

APA Group 1H14 380.1 312.3 115.9 13.9 17.5 1H14 distribution 17.5cps; FY14 EBITDA guidance of $730-740mn, net

interest cost $315-325mn.

Envestra 1H14 223.8 192.8 87.0 4.8 3.2 1H14 NPAT guidance of ~$85mn; FY14 NPAT guidance of ~$145mn.

Spark Infrastructure FY13 317.8 317.8 161.5 12.2 11.0 FY13 distribution guidance of 11cps; 3-5% growth for 2014-2015.

Source: Company data, Credit Suisse estimates

■ Credit Suisse forecasts imply seasonality in line with historic averages.

Figure 4: Historic 1H EBITDA seasonality, Credit Suisse 1H14 estimates

EBITDA ($mn) Seasonality

1H11 FY11 1H12 FY12 1H13 FY13 1H14F FY14F 1H11 1H12 1H13 1H14F

Origin Energy 818 1782 1157 2257 1055 2181 1204 2343 46% 51% 48% 51%

AGL 416 805 439 904 650 1336 701 1397 52% 49% 49% 50%

Energy Developments 64 119 62 132 84 175 83 176 53% 47% 48% 47%

Duet 371 755 379 736 405 799 411 804 49% 51% 51% 51%

APA Group 254 490 289 535 324 667 380 734 52% 54% 49% 52%

Envestra 165 297 174 334 198 360 224 409 55% 52% 55% 55%

Source: Company data, Credit Suisse estimates

■ For Integrates Utilities, minor variation exists between Credit Suisse forecasts

and consensus estimates. Among regulated utilities, variance exists for DUE (albeit

noting a very wide consensus range; likely a mix of proportionate and statutory) while

for SKI, we have included a non-cash tax item relating to SAPN.

Figure 5: Summary of consensus, Credit Suisse estimates

EBITDA ($mn) NPAT ($mn) DPS (cps)

Consensus CS % Var Consensus CS % Var Consensus CS % Var

Origin Energy FY14 2,278.0 2,343.3 2.9% 772.2 791.2 2.5% 50.0 50.0 0.0%

AGL FY14 1,358.0 1,397.5 2.9% 597.7 603.7 1.0% 65.0 65.0 0.0%

Energy Developments FY14 181.5 175.9 -3.1% 55.9 55.8 -0.2% 19.6 22.5 14.8%

Duet FY14 816.3 803.6 -1.6% 115.9 85.9 -25.9% 17.0 17.0 0.0%

APA Group FY14 736.3 733.8 -0.3% 198.8 201.4 1.3% 36.4 36.0 -1.1%

Envestra FY14 391.0 409.4 4.7% 145.3 145.2 -0.1% 6.4 6.4 0.0%

Spark Infrastructure FY13 329.3 317.8 -3.5% 199.0 161.5 -18.8% 11.0 11.0 0.0%

Source: Bloomberg, Credit Suisse estimates

17 February 2014

Australia and NZ First Edition 121

Industry wide trends and themes

■ What is the near-term outlook for discounting conditions? Management point to

evidence that discounting conditions may be abating, particularly with the cessation of

door knocking campaigns. We have seen some evidence of this in our proprietary

discounting survey data for NSW (Figure 6), with deepest average discounts falling to

8% from 10% in June 2013. In Victoria, discounting has abated for the first time in

January 2014 to 15% but still above the 12% levels of June 2013. South Australia, at

an average of 12%, is still above the 11% average deepest discounts of June 2013,

and similarly Queensland's discount level of 7% is still above the 6% of June 2013.

Figure 6: Average deepest discounting remains elevated – though improving

10%

12%

6%

11%

7%

13%

7%

10%9%

16%

7%

12%

8%

16%

7%

12%

8%

15%

7%

12%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

NSW VIC QLD SA

June July September October January

Source: Company data, Credit Suisse estimates

■ How are discounts impacting margins? With discounts appearing to ease, 1H14

could very well be the low point for retail margins. For FY14 we have assumed retail

margins are largely flat on FY13 with a recovery thereafter. We expect that much of

the 1H14 result will lie in ORG's guidance and any forward looking commentary from

management.

Figure 7: EBITDA margin at the deepest discount by State

6.7% 6.4%

18.5%

6.6%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

South Australia New SouthWales

Victoria Queensland

Source: Company data, Credit Suisse estimates

17 February 2014

Australia and NZ First Edition 122

Issues / key questions AGL Energy (AGK, NEUTRAL, TP $15.80)

■ Margins: AGK has the benefit of reporting almost a week after ORG and thus can see

their results, guidance and shape its own messages. CLP's subsidiary,

EnergyAustralia, will report a day after AGK on 27/02/14. We expect 1H14 net Retail

EBIT margins of 6.8% (down from 7.2% in FY13 but up on 5.4% in 1H13). Price

discounting, higher wholesale prices and weak demand are all expected to impact on

1H14 margins.

■ South Eastern Australia heat wave impact: We understand AGK experienced

issues with both Loy Yang (one unit) and with Torrens Island generators during the

heat wave in South Eastern Australia. We expect AGK will likely have some protection

from weather derivatives from the high temperatures but the loss of some upside from

Loy Yang and Torrens Island is no doubt disappointing. The upsurge in demand may

however mitigate the impact from the temporary generation loss.

■ Customer growth: We expect to see muted customer growth as door knocking was

wound back in the half. This is supported by the recent normalisation of electricity

retail churn data.

■ AGK gas sales: We will be looking for information on sales of the announced 40PJa

gas book for FY15–17 that AGK identified at the FY13 result. We believe a small

portion of this gas (~10PJ) may have been sold to IPL.

■ AGK gas contract renewal: AGK has gas contracts expiring after the end 2016, with

the need to replace up to 130PJa of gas. Given the constrained domgas market and

announcements in the past six months by both ORG and ORI on domgas purchases,

we are keen to understand when AGK expects to announce replacement gas

contracts. Without certainty on gas supply past mid-2017, AGK risks further gas

customer losses amongst its commercial and industrial customers.

■ Forge impact: We understand that AGK may suffer some impact of $5mn–$10mn

from the collapse of Forge (FGE) who was constructing the Diamantina Power station.

This could also result in a delay of a few months on the delivery of the power station.

The power station is due to be fully operational in 1H 2014.

■ Guidance: AGK has guided to FY14 NPAT range of $560mn–$610mn. If the company

has suffered downside from the weather conditions, we can expect that guidance may

be firmed towards the lower end of guidance. However, AGK may wait until June to

firm up the guidance range.

Origin Energy (ORG, NEUTRAL, TP $15.30)

■ Margins: We expect to see energy EBIT margins (all products) marginally up at 9.0%

for 1H14 from 8.6% at FY13 and 8.4% at 1H13. We expect a small increase in

blended margins, driven primarily by a flat retail business and marginally more positive

upstream.

■ South Eastern Australia heat wave impact: With Origin short generation in South

Eastern states, we will be looking for commentary as to how the business fared during

the most recent heat wave, which would impact on 2H14 results.

■ Customer losses expected to be reversed: With ORG now focussed on retaining

customers, we expect a net add of up 19,000 customers, predominantly gas

customers. ORG added 7,000 net customers in 2H13, turning around a net loss of

23,000 customers in 1H13.

17 February 2014

Australia and NZ First Edition 123

■ Guidance: All eyes will be on whether ORG provides any FY14 guidance for NPAT

and EBITDA. Having provided no FY14 guidance at the FY13 result, or at the AGM,

we do not expect ORG to provide guidance now. Consensus has FY14 growth only

1.6% above FY13.

Energy Developments (ENE, OUTPERFORM, TP $6.44):

■ Tight guidance range: Management has already delivered a 1H14 EBITDA guidance

range of $82mn to $86mn and FY14 EBITDA to $175mn to $185mn.

■ Earnings composition a key focus: Given the tight guidance range, the earnings

composition and quality will be a key focus. Given historical operating issues, we will

believe management needs to demonstrate tight cost control at Remote Energy sites.

■ Free cash-flow should start to ramp up: With the McArthur River expansion already

funded, and in the absence of any growth opportunities announced in FY14, we believe

we should start to see the emergence of an impressive free cash flow yield in 1H14.

■ More about outlook and growth opportunities: With over 400MW of growth

opportunities previously identified as well a tight guidance range, we believe the 1H14

result will be as much about outlook commentary as the result itself. We expect

management to talk positively to prospective growth opportunities, though actual

announcements on the expansion of the RE and WCMG businesses will likely be

more forthcoming in the coming months as opposed to the result itself.

APA Group (APA, UNDERPERFORM, TP $6.05)

■ Net impact from changing face of East Coast gas market: We look for further

commentary on organic growth opportunities, on both the East and West Coast. We

have previously written on the potential for demand destruction in line with our

expectations for higher East Coast gas prices and contract expiry on the Moomba–

Sydney pipeline. Since FY13 results, we have seen ORG, Lumo, and EnergyAustralia

sign contracts for gas transportation from Victoria into NSW with APA, and ORI sign

contracts for gas from Victoria into NSW, bypassing APA's pipelines. We will be

looking for commentary from APA on the net margin impact of these changes.

■ Commentary on the increased ENV bid: While the increased offer was in line with

our expectations for a deal to be acceptable to ENV, we continue to see limited

strategic rationale for the bid given limited synergy benefits and depressed returns

within the regulated space.

■ We expect few surprises from the result: With FY14 guidance upgraded in mid-

December, we expect few surprises from an operational perspective. Our FY14

forecasts sit in line with company guidance (EBITDA $730mn–$740mn, net interest

costs of $315mn–$325mn) and consensus estimates.

DUET Group (DUE, OUTPERFORM, TP $2.30)

■ DDG growth opportunities: Following on from the recently announced expansion

projects in WA (Wheatstone, Solomon Hub), look for any further commentary in

relation to near-term opportunities in Western Australia. With current projects

generating equity IRRs of 13%+, additional opportunities with similar return profiles

would provide further incremental earnings accretion.

■ DBP Standard Shipping Contracts renewal: A key catalyst for DUE is the tariff

outlook for the DBP. In 2016, the Standard Shipping Contracts (70% of capacity)

revert from a contracted to a regulated tariff. In our view, risk free rates will determine

the extent of the downside of such a move (risk free rates are slightly above those set

for the current regulatory period). However, renegotiation for a continuation of the

current contracted rate would alleviate the risk. Look for any commentary as to the

potential timing and progress for re-contracting.

17 February 2014

Australia and NZ First Edition 124

■ DRP cap: Funds raised from the recent $30mn SPP are expected to be allocated

towards capex for UED and Multinet. Look for any commentary in relation to DRP

caps on a forward looking basis (recently capped at 20%).

Spark Infrastructure (SKI, OUTPERFORM, TP $1.78)

■ Focus continues to be on tax: For us the key issue in this result season is likely to

be what happens with tax. While incremental detail has been released to the market,

we could expect a more comprehensive overview/update to be provided. We will be

looking for a timeline for any potential future decisions as well as any update of the

potential magnitude of an adverse decision. On a "worst case" outcome, we estimate

that tax loss carry forwards would be depleted with both entities moving to a cash-tax

paying position. However, we see management as having the capacity to maintain the

current distribution profile, with the parent entity as having sufficient capacity to

provide additional funds through either undrawn debt facilities or a DRP.

■ Expect a relatively straight forward result: Outside of tax, we expect SKI to report

fairly reliable numbers (limited dispersion at the EBITDA level). We are looking for

proportionate EBITDA of $775mn or $699mn excluding customer contributions.

■ Distribution guidance: FY13 distribution guidance is for 11cps. We forecast 11.5cps

in FY14, an increase of 4.5% and at the upper end of management's 3%–5% guided

range to 2015.

Envestra (ENV, NEUTRAL, TP $1.22)

■ Guidance well flagged: ENV provided updated guidance for both the half and full

year in mid-December 2013 (NPAT of $85mn and $145mn, respectively); our 1H14

forecasts sits marginally ahead at $87mn.

■ Capital management: Look for any change to FY14 FFO/interest, FFO/debt targets

(2.7x and 10%, respectively) as well as any commentary relating to a take-over clause

and any potential requirements for debt financing.

17 F

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ruary

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4

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lia a

nd

NZ

Firs

t Ed

ition

125

Figure 8: Financial summary

Source: Company data, Credit Suisse estimates

17 February 2014

Australia and NZ First Edition 126

Figure 9: ORG financial summary

Origin Energy (ORG) Year ending 30 Jun In AUDmn, unless otherwise stated2012 2013 2014 2015 2016 2012 2013 2014 2015 2016

Share Price: A$14.76 Earnings 06/12A 06/13A 06/14E 06/15E 06/16ERating c_EPS_SHARESEquiv. FPO (period avg.) mn 1,084.1 1,098.3 1,100.0 1,104.4 1,108.6

Target Price A$ 15.30 c_EPS*100EPS (Normalised) c 82.4 69.2 71.9 91.0 104.6

vs Share price % 3.66 EPS_GROWTH*100EPS Growth % -16.0 3.9 26.6 14.9

DCF A$ 16.57 c_EBITDA_MARGIN*100EBITDA Margin % 17.4 14.9 15.1 17.5 20.9

c_DPS*100DPS c 50.0 50.0 50.0 50.0 50.0

c_PAYOUT*100Payout % 60.7 72.3 69.5 54.9 47.8

FRANKING*100Franking % 100.0 50.0 50.0 50.0 50.0

c_FCF_PS*100Free CFPS c 116.4 85.5 104.6 112.4 92.8

Profit & Loss 06/12A 06/13A 06/14E 06/15E 06/16E c_TAX_RATE*100Effective tax rate % 30.1 28.7 28.7 28.7 28.7

Sales revenue 12,935.0 14,619.0 15,545.0 15,519.3 16,182.4 ValuationEBITDA 2,257.0 2,181.0 2,343.3 2,719.5 3,383.8 c_PE P/E x 17.9 21.3 20.5 16.2 14.1

Depr. & Amort. (659.0) (743.0) (757.7) (863.5) (1,110.6) c_EBIT_MULTIPLE_CURREV/EBIT x 13.6 16.0 16.0 14.2 11.4

EBIT 1,598.0 1,438.0 1,585.6 1,855.9 2,273.3 c_EBITDA_MULTIPLE_CUEV/EBITDA x 9.6 10.6 10.8 9.7 7.6

Associates 0.0 0.0 0.0 0.0 0.0 c_DIV_YIELD*100Dividend Yield % 3.4 3.4 3.4 3.4 3.4

Net interest Exp. (217.0) (255.0) (314.9) (280.0) (507.5) c_FCF_YIELD*100FCF Yield % 7.9 5.8 7.1 7.6 6.3

Other 0.0 0.0 0.0 0.0 0.0 c_PB Price to Book x 1.2 1.2 1.2 1.2 1.1

Profit before tax 1,381.0 1,183.0 1,270.8 1,575.9 1,765.8 ReturnsIncome tax (415.0) (339.0) (364.1) (451.6) (506.0) c_ROE*100Return on Equity % 6.8 5.7 5.8 7.2 8.0

Profit after tax 966.0 844.0 906.6 1,124.3 1,259.8 c_I_NPAT/c_I_SALES*100Profit Margin % 6.9 5.2 5.1 6.5 7.2

Minorities (73.0) (84.0) (115.4) (119.1) (100.0) c_I_SALES/c_B_TOT_ASSAsset Turnover x 0.5 0.5 0.5 0.5 0.5

Preferred dividends 0.0 0.0 0.0 0.0 0.0 c_ASSETS/c_EQ_COMMONEquity Multiplier x 2.1 2.2 2.4 2.4 2.3

Associates & Other 0.0 0.0 0.0 (0.0) 0.0 c_ROA*100Return on Assets % 3.2 2.6 2.4 3.0 3.4

Normalised NPAT 893.0 760.0 791.2 1,005.2 1,159.8 c_ROIC*100Return on Invested Cap. % 5.6 4.7 4.6 5.2 6.3

Unusual item after tax 87.0 (382.0) (166.0) (277.1) (157.3) GearingReported NPAT 980.0 378.0 625.1 728.1 1,002.5 c_GEARING*100Net Debt to Net debt + Equity % 27.6 31.5 37.3 39.3 37.5

c_NET_DEBT/c_I_EBITDANet Debt to EBITDA x 2.4 3.1 3.9 3.7 2.8

Balance Sheet 06/12A 06/13A 06/14E 06/15E 06/16E c_I_EBITDA/ c_I_NET_INTERESTInt Cover (EBITDA/Net Int.) x 10.4 8.6 7.4 9.7 6.7

Cash & equivalents 357.0 307.0 183.0 195.4 139.7 c_I_EBIT/ c_I_NET_INTERESTInt Cover (EBIT/Net Int.) x 7.4 5.6 5.0 6.6 4.5

Inventories 259.0 231.0 245.6 245.2 255.7 (c_C_CAPEX/c_I_SALES)*-100Capex to Sales % 11.6 7.1 4.4 3.3 1.6

Receivables 2,306.0 2,705.0 2,876.3 2,871.6 2,994.3 (c_C_CAPEX/c_I_DEPR)*-100Capex to Depreciation % 228.1 140.1 89.6 58.7 23.9

Other current assets 1,017.0 718.0 718.0 718.0 718.0

Current assets 3,939.0 3,961.0 4,023.0 4,030.2 4,107.7 MSCI IVA (ESG) Rating AProperty, plant & equip. 11,733.0 12,161.0 12,175.1 11,974.9 11,496.9 TP ESG Risk (%): -1.6

Intangibles 5,966.0 6,113.0 6,113.0 6,113.0 6,113.0

Other non-current assets 6,343.0 7,351.0 10,096.8 11,611.5 11,963.3

Non-current assets 24,042.0 25,625.0 28,384.8 29,699.4 29,573.2

Total assets 27,981.0 29,586.0 32,407.8 33,729.5 33,680.9

Payables 2,063.0 2,120.0 2,248.5 2,211.3 2,287.1

Interest bearing debt 5,879.0 7,116.0 9,266.0 10,266.0 9,766.0

Other liabilities 5,581.0 5,556.0 5,628.8 5,719.1 5,576.6 MSCI IVA Risk: Negative

Total liabilities 13,523.0 14,792.0 17,143.3 18,196.4 17,629.6

Net assets 14,458.0 14,794.0 15,264.5 15,533.1 16,051.2

Ordinary equity 13,094.0 13,283.0 13,713.9 13,947.0 14,452.6

Minority interests 1,364.0 1,511.0 1,550.6 1,586.1 1,598.6

Preferred capital 0.0 0.0 0.0 0.0 0.0

Total shareholder funds 14,458.0 14,794.0 15,264.5 15,533.1 16,051.2

Net debt 5,522.0 6,809.0 9,083.0 10,070.6 9,626.3 Source: MSCI ESG Research

Cashflow 06/12A 06/13A 06/14E 06/15E 06/16E Share Price Performance

EBIT 1,598.0 1,438.0 1,585.6 1,855.9 2,273.3

Net interest -366.0 -436.0 -582.6 -703.3 -762.9

Depr & Amort 659.0 743.0 757.7 863.5 1,110.6

Tax paid -39.0 -275.0 -224.6 -250.0 -442.8

Working capital -334.0 -213.0 -57.5 -32.1 -57.4

Other -62.0 -51.0 -53.8 -236.3 -826.9

Operating cashflow 1,456.0 1,206.0 1,424.8 1,497.8 1,293.8

Capex -1,503.0 -1,041.0 -678.7 -506.8 -265.1

Capex - expansionary -1,309.0 -774.0 -405.0 -250.0 0.0

Capex - maintenance -194.0 -267.0 -273.7 -256.8 -265.1

Acquisitions & Invest 0.0 0.0 0.0 0.0 0.0

Asset sale proceeds 75.0 0.0 0.0 0.0 0.0

Other -1,235.0 -486.0 -2,450.0 -1,400.0 0.0

Investing cashflow -2,663.0 -1,527.0 -3,128.7 -1,906.8 -265.1

Dividends paid -377.0 -459.0 -549.2 -550.0 -552.2

Equity raised 155.0 9.0 54.9 55.0 55.2

Net borrowings 1,093.0 754.0 2,150.0 1,000.0 -500.0

Other -34.0 -44.0 -75.8 -83.7 -87.5 1 Month 3 Month 12 Month

Financing cashflow 837.0 260.0 1,579.9 421.3 -1,084.4 Absolute 9.3% 1.6% 21.8%

Total cashflow -370.0 -61.0 -124.0 12.3 -55.7 Relative 8.1% 3.3% 16.4%

Adjustments 3.0 11.0 0.0 0.0 0.0

Net change in cash -367.0 -50.0 -124.0 12.3 -55.7 Source: Reuters 52 week trading range: 11.33-14.86

MSCI IVA Risk Comment: ORG could suffer a rating downgrade

on increased risk from increased scrutiny over fugitive gas

emissions from its upstream coal seam gas operations.

14/02/2014 11:42

Origin Energy is engaged in the operation of energy businesses, including exploration and

production of oil and gas; electricity generation, and wholesale and retail sale of electricity and

gas.

Credit Suisse View

TP Risk Comment: We have included the impact of lowering the

carbon price to $12/t in our target price due to expectec changes

in carbon tax legislation.

NEUTRAL

0.30

2.30

4.30

6.30

8.30

10.30

12.30

14.30

16.30

4/02/2013 4/04/2013 4/06/2013 4/08/2013 4/10/2013 4/12/2013 4/02/2014

ORG.AX XJO

2.7

3.7

4.7

5.7

6.7

7.7

Environment Social Governance

Stock Local Sector

Country Global Sector

Source: Company data, Credit Suisse estimates

17 February 2014

Australia and NZ First Edition 127

Figure 10: AGK financial summary

AGL Energy (AGK) Year ending 30 Jun In AUDmn, unless otherwise stated2012 2013 2014 2015 2016 2012 2013 2014 2015 2016

Share Price: A$15.71 Earnings 06/12A 06/13A 06/14E 06/15E 06/16ERating c_EPS_SHARESEquiv. FPO (period avg.) mn 482.3 550.5 558.3 566.5 574.9

Target Price A$ 15.80 c_EPS*100EPS (Normalised) c 99.9 108.7 108.1 124.3 135.4

vs Share price % 0.57 EPS_GROWTH*100EPS Growth % 8.8 -0.5 15.0 8.9

c_EBITDA_MARGIN*100EBITDA Margin % 12.1 13.8 13.7 14.9 15.6

c_DPS*100DPS c 61.0 63.0 65.0 66.6 68.3

c_PAYOUT*100Payout % 61.0 58.0 60.1 53.6 50.4

FRANKING*100Franking % 100.0 100.0 100.0 100.0 100.0

c_FCF_PS*100Free CFPS c 76.0 76.1 131.0 164.5 180.6

Profit & Loss 06/12A 06/13A 06/14E 06/15E 06/16E c_TAX_RATE*100Effective tax rate % 29.0 29.1 29.1 29.1 29.1

Sales revenue 7,455.6 9,715.7 10,177.2 10,386.7 10,650.5 ValuationEBITDA 904.3 1,336.4 1,397.5 1,552.5 1,663.9 c_PE P/E x 15.7 14.5 14.5 12.6 11.6

Depr. & Amort. (173.9) (287.1) (331.6) (344.3) (357.7) c_EBIT_MULTIPLE_CURREV/EBIT x 15.4 11.1 10.7 9.1 7.9

EBIT 730.4 1,049.3 1,065.8 1,208.2 1,306.2 c_EBITDA_MULTIPLE_CUEV/EBITDA x 12.5 8.7 8.2 7.1 6.2

Associates 0.0 0.0 0.0 0.0 0.0 c_DIV_YIELD*100Dividend Yield % 3.9 4.0 4.1 4.2 4.3

Net interest Exp. (51.2) (205.5) (214.4) (215.0) (208.5) c_FCF_YIELD*100FCF Yield % 4.8 4.8 8.3 10.5 11.5

Other 0.0 0.0 0.0 0.0 0.0 c_PB Price to Book x 1.2 1.2 1.1 1.1 1.0

Profit before tax 679.2 843.8 851.4 993.2 1,097.7 ReturnsIncome tax (197.2) (245.5) (247.7) (289.0) (319.4) c_ROE*100Return on Equity % 6.8 8.2 7.8 8.6 8.9

Profit after tax 482.0 598.3 603.7 704.2 778.4 c_I_NPAT/c_I_SALES*100Profit Margin % 6.5 6.2 5.9 6.8 7.3

Minorities 0.0 0.0 0.0 0.0 0.0 c_I_SALES/c_B_TOT_ASSAsset Turnover x 0.5 0.7 0.7 0.7 0.7

Preferred dividends 0.0 0.0 0.0 0.0 0.0 c_ASSETS/c_EQ_COMMONEquity Multiplier x 2.1 1.8 1.8 1.8 1.7

Associates & Other 0.0 0.0 0.0 0.0 0.0 c_ROA*100Return on Assets % 3.3 4.5 4.3 4.8 5.1

Normalised NPAT 482.0 598.3 603.7 704.2 778.4 c_ROIC*100Return on Invested Cap. % 5.4 7.3 7.3 8.2 9.0

Unusual item after tax (367.1) (209.6) (46.0) 0.0 0.0 GearingReported NPAT 114.9 388.7 557.7 704.2 778.4 c_GEARING*100Net Debt to Net debt + Equity % 25.9 27.8 25.7 21.7 15.1

c_NET_DEBT/c_I_EBITDANet Debt to EBITDA x 2.8 2.1 1.9 1.5 0.9

Balance Sheet 06/12A 06/13A 06/14E 06/15E 06/16E c_I_EBITDA/ c_I_NET_INTERESTInt Cover (EBITDA/Net Int.) x 17.7 6.5 6.5 7.2 8.0

Cash & equivalents 1,812.9 281.0 490.6 888.7 1,610.1 c_I_EBIT/ c_I_NET_INTERESTInt Cover (EBIT/Net Int.) x 14.3 5.1 5.0 5.6 6.3

Inventories 185.4 133.0 157.7 160.9 165.0 (c_C_CAPEX/c_I_SALES)*-100Capex to Sales % 10.2 5.9 5.3 5.0 3.0

Receivables 1,531.4 1,844.0 1,931.6 1,971.4 2,021.4 (c_C_CAPEX/c_I_DEPR)*-100Capex to Depreciation % 437.3 198.7 163.8 151.6 89.6

Other current assets 602.2 578.0 578.0 578.0 578.0

Current assets 4,131.9 2,836.0 3,157.8 3,599.0 4,374.5 MSCI IVA (ESG) Rating BBBProperty, plant & equip. 6,323.5 6,175.7 6,480.8 6,628.0 6,538.9 TP ESG Risk (%): -1

Intangibles 3,172.0 3,149.4 3,149.4 3,149.4 3,149.4

Other non-current assets 1,111.0 1,204.7 1,204.7 1,204.7 1,204.7

Non-current assets 10,606.5 10,529.8 10,834.9 10,982.1 10,893.0

Total assets 14,738.4 13,365.8 13,992.7 14,581.0 15,267.6

Payables 1,158.4 1,444.0 1,513.0 1,522.6 1,549.0

Interest bearing debt 4,312.0 3,109.0 3,164.0 3,164.0 3,164.0

Other liabilities 2,135.1 1,473.8 1,593.4 1,698.6 1,820.4 MSCI IVA Risk: Neutral

Total liabilities 7,605.5 6,026.8 6,270.4 6,385.3 6,533.5

Net assets 7,132.9 7,339.0 7,722.3 8,195.8 8,734.1

Ordinary equity 7,132.9 7,339.0 7,722.3 8,195.8 8,734.1

Minority interests 0.0 0.0 0.0 0.0 0.0

Preferred capital 0.0 0.0 0.0 0.0 0.0

Total shareholder funds 7,132.9 7,339.0 7,722.3 8,195.8 8,734.1

Net debt 2,499.1 2,828.0 2,673.4 2,275.3 1,553.9 Source: MSCI ESG Research

Cashflow 06/12A 06/13A 06/14E 06/15E 06/16E Share Price Performance

EBIT 730.4 1,049.3 1,065.8 1,208.2 1,306.2

Net interest -98.0 -214.2 -186.5 -185.7 -177.8

Depr & Amort 173.9 287.1 331.6 344.3 357.7

Tax paid -180.8 -71.1 -128.1 -183.7 -197.6

Working capital -185.7 -473.8 -43.2 -33.4 -27.7

Other 26.7 24.5 0.0 0.0 0.0

Operating cashflow 466.5 601.8 1,039.6 1,149.6 1,260.8

Capex -760.4 -570.4 -543.0 -521.8 -320.6

Capex - expansionary -660.5 -387.4 -234.5 -304.2 -98.3

Capex - maintenance -99.9 -183.0 -308.5 -217.6 -222.3

Acquisitions & Invest 143.2 4.2 -103.0 0.0 0.0

Asset sale proceeds 217.5 -33.1 0.0 0.0 0.0

Other -131.6 49.8 -18.5 1.1 21.3

Investing cashflow -531.3 -549.5 -664.6 -520.7 -299.4

Dividends paid -185.8 -213.9 -346.8 -362.9 -377.4

Equity raised 879.4 -6.1 126.3 132.1 137.4

Net borrowings 431.0 -1,258.9 55.0 0.0 0.0

Other 0.0 -105.2 0.0 0.0 0.0 1 Month 3 Month 12 Month

Financing cashflow 1,124.6 -1,584.1 -165.5 -230.7 -240.0 Absolute 4.7% 3.5% 4.2%

Total cashflow 1,059.8 -1,531.8 209.5 398.1 721.4 Relative 3.5% 5.2% -1.1%

Adjustments 0.0 0.0 0.0 0.0 0.0

Net change in cash 1,059.8 -1,531.8 209.5 398.1 721.4 Source: Reuters 52 week trading range: 13.89-16.60

MSCI IVA Risk Comment: As expected, MSCI has downgraded its

IVA rating for AGK from A to BBB due to LYA emissions. We now

agree with MSCI's IVA rating and have a Neutral rating outlook.

14/02/2014 11:42

AGL Energy is an Australian based integrated energy retailer. It owns generation (coal, gas,

hydro and renewables) and a large electricity and gas retail customer base across Eastern

Australian. It has a small portfolio of coal seam gas assets.

Credit Suisse View

TP Risk Comment: We have included the impact of lowering the

carbon price to $12/t in our target price due to expectec changes

in carbon tax legislation.

NEUTRAL

0.30

2.30

4.30

6.30

8.30

10.30

12.30

14.30

16.30

18.30

4/02/2013 4/04/2013 4/06/2013 4/08/2013 4/10/2013 4/12/2013 4/02/2014

AGK.AX XJO

2.7

3.7

4.7

5.7

6.7

7.7

Environment Social Governance

Stock Local Sector

Country Global Sector

Source: Company data, Credit Suisse estimates

17 February 2014

Australia and NZ First Edition 128

Figure 11: APA financial summary

APA Group (APA) Year ending 30 Jun In AUDmn, unless otherwise stated2012 2013 2014 2015 2016 2012 2013 2014 2015 2016

Share Price: A$6.21 Earnings 06/12A 06/13A 06/14E 06/15E 06/16ERating c_EPS_SHARESEquiv. FPO (period avg.) mn 639.7 772.3 835.8 835.8 835.8

Target Price A$ 6.05 c_EPS*100EPS (Normalised) c 21.9 23.1 24.1 28.8 32.3

vs Share price % -2.58 EPS_GROWTH*100EPS Growth % 5.5 4.1 19.4 12.1

DCF A$ 6.12 c_EBITDA_MARGIN*100EBITDA Margin % 50.8 52.9 55.3 56.7 57.4

c_DPS*100DPS c 35.0 35.5 36.0 36.9 37.8

c_PAYOUT*100Payout % 159.6 153.4 149.4 128.2 117.2

FRANKING*100Franking % 0.0 0.0 0.0 0.0 0.0

c_FCF_PS*100Free CFPS c 48.6 52.8 43.4 55.6 57.1

Profit & Loss 06/12A 06/13A 06/14E 06/15E 06/16E c_TAX_RATE*100Effective tax rate % 26.4 25.7 27.0 27.0 27.0

Sales revenue 1,054.3 1,260.6 1,327.8 1,426.2 1,483.4 ValuationEBITDA 535.5 667.1 733.8 808.5 852.0 c_PE P/E x 28.3 26.8 25.8 21.6 19.2

Depr. & Amort. (110.4) (130.5) (137.2) (142.8) (143.9) c_EBIT_MULTIPLE_CURREV/EBIT x 18.4 17.8 16.6 14.9 13.8

EBIT 425.1 536.7 596.6 665.7 708.0 c_EBITDA_MULTIPLE_CUEV/EBITDA x 14.6 14.3 13.5 12.3 11.5

Associates 0.0 0.0 0.0 0.0 0.0 c_DIV_YIELD*100Dividend Yield % 5.6 5.7 5.8 5.9 6.1

Net interest Exp. (234.3) (299.7) (320.8) (336.2) (338.6) c_FCF_YIELD*100FCF Yield % 7.8 8.5 7.0 9.0 9.2

Other 0.0 0.0 0.0 0.0 0.0 c_PB Price to Book x 3.3 2.7 2.8 2.9 3.0

Profit before tax 190.8 237.0 275.8 329.5 369.4 ReturnsIncome tax (50.4) (61.0) (74.5) (89.0) (99.7) c_ROE*100Return on Equity % 11.4 9.3 11.0 13.6 15.7

Profit after tax 140.4 176.0 201.4 240.5 269.7 c_I_NPAT/c_I_SALES*100Profit Margin % 13.3 14.2 15.2 16.9 18.2

Minorities (0.1) 2.8 0.0 0.0 0.1 c_I_SALES/c_B_TOT_ASSAsset Turnover x 0.2 0.2 0.2 0.2 0.2

Preferred dividends 0.0 0.0 0.0 0.0 0.0 c_ASSETS/c_EQ_COMMONEquity Multiplier x 4.5 4.0 4.4 4.6 4.8

Associates & Other 0.0 0.0 0.0 0.0 0.0 c_ROA*100Return on Assets % 2.6 2.3 2.5 3.0 3.3

Normalised NPAT 140.3 178.8 201.4 240.6 269.7 c_ROIC*100Return on Invested Cap. % 7.4 5.8 6.1 6.8 7.5

Unusual item after tax (9.7) 120.0 0.0 0.0 0.0 GearingReported NPAT 130.6 298.8 201.4 240.6 269.7 c_GEARING*100Net Debt to Net debt + Equity % 62.0 63.4 66.1 66.8 66.5

c_NET_DEBT/c_I_EBITDANet Debt to EBITDA x 4.9 6.5 6.4 5.9 5.4

Balance Sheet 06/12A 06/13A 06/14E 06/15E 06/16E c_I_EBITDA/ c_I_NET_INTERESTInt Cover (EBITDA/Net Int.) x 2.3 2.2 2.3 2.4 2.5

Cash & equivalents 329.9 81.0 44.9 77.5 250.9 c_I_EBIT/ c_I_NET_INTERESTInt Cover (EBIT/Net Int.) x 1.8 1.8 1.9 2.0 2.1

Inventories 11.5 12.7 12.7 12.7 12.7 (c_C_CAPEX/c_I_SALES)*-100Capex to Sales % 23.6 31.5 35.0 15.8 3.1

Receivables 238.5 164.6 153.3 164.5 171.1 (c_C_CAPEX/c_I_DEPR)*-100Capex to Depreciation % 238.5 318.5 353.4 164.4 33.0

Other current assets 4.6 22.1 22.1 22.1 22.1

Current assets 584.5 280.4 233.0 276.9 456.8 MSCI IVA (ESG) Rating AProperty, plant & equip. 3,472.2 5,280.4 5,613.7 5,702.1 5,609.5 TP ESG Risk (%): -0.16

Intangibles 595.5 1,327.5 1,321.8 1,316.2 1,310.5

Other non-current assets 843.8 810.6 808.3 805.1 801.8

Non-current assets 4,911.5 7,418.5 7,743.9 7,823.4 7,721.8

Total assets 5,496.1 7,698.9 7,976.9 8,100.2 8,178.6

Payables 175.0 190.1 139.3 155.2 158.6

Interest bearing debt 2,965.3 4,440.5 4,765.9 4,833.6 4,856.4

Other liabilities 741.7 556.0 645.5 749.5 844.2 MSCI IVA Risk: Neutral

Total liabilities 3,882.0 5,186.6 5,550.8 5,738.2 5,859.2

Net assets 1,614.0 2,512.3 2,426.1 2,362.0 2,319.4

Ordinary equity 1,227.1 1,913.6 1,827.5 1,763.4 1,720.8

Minority interests 386.9 598.7 598.7 598.6 598.6

Preferred capital 0.0 0.0 0.0 0.0 0.0

Total shareholder funds 1,614.0 2,512.3 2,426.1 2,362.0 2,319.4

Net debt 2,635.3 4,359.6 4,721.0 4,756.1 4,605.5 Source: MSCI ESG Research

Cashflow 06/12A 06/13A 06/14E 06/15E 06/16E Share Price Performance

EBIT 425.1 536.7 596.6 665.7 708.0

Net interest -218.2 -270.6 -305.8 -321.2 -323.6

Depr & Amort 110.4 130.5 137.2 142.8 143.9

Tax paid 0.0 -0.1 0.0 0.0 -19.9

Working capital -53.9 87.8 -39.4 4.6 -3.2

Other 72.1 -51.5 2.3 3.2 3.3

Operating cashflow 335.6 432.6 390.9 495.1 508.5

Capex -249.1 -397.5 -464.9 -225.5 -45.7

Capex - expansionary -224.7 -372.8 -436.2 -195.1 -14.1

Capex - maintenance -24.4 -24.7 -28.6 -30.4 -31.5

Acquisitions & Invest -17.4 -323.6 0.0 0.0 0.0

Asset sale proceeds 476.0 412.0 0.0 0.0 0.0

Other -29.0 -66.6 0.0 0.0 0.0

Investing cashflow 180.6 -375.6 -464.9 -225.5 -45.7

Dividends paid -208.5 -269.9 -287.5 -304.7 -312.3

Equity raised 44.5 74.4 0.0 0.0 0.0

Net borrowings -103.8 -49.8 325.4 67.6 22.8

Other -13.8 -60.8 0.0 0.0 0.0 1 Month 3 Month 12 Month

Financing cashflow -281.6 -306.0 37.9 -237.0 -289.4 Absolute 2.6% 2.5% 8.6%

Total cashflow 234.6 -249.0 -36.1 32.6 173.4 Relative 1.4% 4.2% 3.2%

Adjustments 0.0 0.0 0.0 0.0 0.0

Net change in cash 234.6 -249.0 -36.1 32.6 173.4 Source: Reuters 52 week trading range: 5.73-6.95

MSCI IVA Risk Comment: We have a Neutral outlook given APA's

solid performance on ESG matters.

14/02/2014 15:00

APA Group consists of Australian Pipeline Trust (APT) and APT Investment Trust (APTIT).

APA is principally engaged in the ownership and operation of energy infrastructure, including

gas and transmission and distribution businesses.

Credit Suisse View

TP Risk Comment: We value the fall in the debt margin post the

next regulatory decisions based on community concerns with

rising energy prices. This affects primarily the Gasnet assets

UNDERPERFORM

5.20

5.70

6.20

6.70

7.20

4/02/2013 4/04/2013 4/06/2013 4/08/2013 4/10/2013 4/12/2013 4/02/2014

APA.AX XJO

2.7

3.7

4.7

5.7

6.7

7.7

8.7

Environment Social Governance

Stock Local Sector

Country Global Sector

Source: Company data, Credit Suisse estimates

17 February 2014

Australia and NZ First Edition 129

Figure 12: DUE financial summary

DUET Group (DUE) Year ending 30 Jun In AUDmn, unless otherwise stated2012 2013 2014 2015 2016 2012 2013 2014 2015 2016

Share Price: A$2.10 Earnings 06/12A 06/13A 06/14E 06/15E 06/16ERating c_EPS_SHARESEquiv. FPO (period avg.) mn 1,070.5 1,143.9 1,246.9 1,295.9 1,295.9

Target Price A$ 2.30 c_EPS*100EPS (Normalised) c 5.8 5.9 6.9 9.8 12.5

vs Share price % 9.79 EPS_GROWTH*100EPS Growth % 2.1 15.9 42.9 26.7

c_EBITDA_MARGIN*100EBITDA Margin % 61.2 63.5 63.5 64.9 65.9

c_DPS*100DPS c 16.0 16.5 17.0 17.5 18.0

c_PAYOUT*100Payout % 274.8 277.7 246.8 177.9 144.6

FRANKING*100Franking % 0.0 0.0 0.0 0.0 0.0

c_FCF_PS*100Free CFPS c 71.3 60.9 65.4 68.5 73.3

Profit & Loss 06/12A 06/13A 06/14E 06/15E 06/16E c_TAX_RATE*100Effective tax rate % 3.8 27.0 0.0 0.0 0.0

Sales revenue 1,201.9 1,257.9 1,265.5 1,355.8 1,430.1 ValuationEBITDA 735.8 799.4 803.6 880.0 942.3 c_PE P/E x 36.0 35.3 30.4 21.3 16.8

Depr. & Amort. (233.9) (253.9) (264.8) (272.1) (278.2) c_EBIT_MULTIPLE_CURREV/EBIT x 15.1 14.6 14.7 13.4 12.3

EBIT 501.9 545.5 538.8 607.9 664.1 c_EBITDA_MULTIPLE_CUEV/EBITDA x 10.3 10.0 9.9 9.2 8.7

Associates 6.8 0.0 0.0 0.0 0.0 c_DIV_YIELD*100Dividend Yield % 7.6 7.9 8.1 8.4 8.6

Net interest Exp. (447.6) (433.5) (450.2) (465.1) (477.2) c_FCF_YIELD*100FCF Yield % 34.0 29.1 31.2 32.7 35.0

Other 0.0 0.0 0.0 0.0 0.0 c_PB Price to Book x 1.7 1.8 1.9 2.0 2.1

Profit before tax 61.1 112.0 88.5 142.8 187.0 ReturnsIncome tax (2.3) (30.3) (0.0) (0.0) (0.0) c_ROE*100Return on Equity % 4.5 5.1 5.9 9.3 12.5

Profit after tax 58.8 81.7 88.5 142.8 187.0 c_I_NPAT/c_I_SALES*100Profit Margin % 5.2 5.4 6.8 9.4 11.3

Minorities 3.6 (13.8) (2.7) (15.3) (25.3) c_I_SALES/c_B_TOT_ASSAsset Turnover x 0.1 0.1 0.1 0.2 0.2

Preferred dividends 0.0 0.0 0.0 0.0 0.0 c_ASSETS/c_EQ_COMMONEquity Multiplier x 5.9 6.4 5.8 6.2 6.6

Associates & Other (0.0) 0.0 0.0 0.0 0.0 c_ROA*100Return on Assets % 0.8 0.8 1.0 1.5 1.9

Normalised NPAT 62.3 68.0 85.9 127.5 161.6 c_ROIC*100Return on Invested Cap. % 7.5 5.9 7.8 8.8 9.6

Unusual item after tax (14.8) (62.1) 0.0 0.0 0.0 GearingReported NPAT 47.5 5.9 85.9 127.5 161.6 c_GEARING*100Net Debt to Net debt + Equity % 75.7 77.6 76.2 78.2 79.5

c_NET_DEBT/c_I_EBITDANet Debt to EBITDA x 6.6 6.6 6.5 6.2 5.8

Balance Sheet 06/12A 06/13A 06/14E 06/15E 06/16E c_I_EBITDA/ c_I_NET_INTERESTInt Cover (EBITDA/Net Int.) x 1.6 1.8 1.8 1.9 2.0

Cash & equivalents 243.6 402.2 358.8 259.0 277.1 c_I_EBIT/ c_I_NET_INTERESTInt Cover (EBIT/Net Int.) x 1.1 1.3 1.2 1.3 1.4

Inventories 19.6 22.1 22.1 22.1 22.1 (c_C_CAPEX/c_I_SALES)*-100Capex to Sales % 0.0 0.0 0.0 0.0 0.0

Receivables 68.0 79.7 79.7 79.7 79.7 (c_C_CAPEX/c_I_DEPR)*-100Capex to Depreciation % 0.0 0.0 0.0 0.0 0.0

Other current assets 79.5 108.5 108.5 108.5 108.5

Current assets 410.8 612.5 569.1 469.4 487.4 MSCI IVA (ESG) Rating BBProperty, plant & equip. 5,473.2 5,613.7 5,701.5 5,762.1 5,725.3 TP ESG Risk (%): -2.6

Intangibles 2,094.3 2,087.4 2,087.4 2,087.4 2,087.4

Other non-current assets 140.4 191.7 191.7 191.7 191.7

Non-current assets 7,707.9 7,892.9 7,980.7 8,041.3 8,004.5

Total assets 8,118.7 8,505.4 8,549.8 8,510.7 8,491.9

Payables 285.1 235.4 235.4 235.4 235.4

Interest bearing debt 5,125.1 5,671.9 5,598.2 5,687.0 5,763.8

Other liabilities 1,139.7 1,076.1 1,076.1 1,076.1 1,076.1 MSCI IVA Risk: Positive

Total liabilities 6,550.0 6,983.4 6,909.7 6,998.5 7,075.3

Net assets 1,568.7 1,522.0 1,640.1 1,512.2 1,416.6

Ordinary equity 1,376.9 1,332.5 1,464.8 1,365.4 1,293.4

Minority interests 191.8 189.5 175.3 146.8 123.2

Preferred capital 0.0 0.0 0.0 0.0 0.0

Total shareholder funds 1,568.7 1,522.0 1,640.1 1,512.2 1,416.6

Net debt 4,881.5 5,269.7 5,239.5 5,428.0 5,486.7 Source: MSCI ESG Research

Cashflow 06/12A 06/13A 06/14E 06/15E 06/16E Share Price Performance

EBIT 501.9 545.5 538.8 607.9 664.1

Net interest 19.6 7.2 11.5 7.4 7.3

Depr & Amort 233.9 253.9 264.8 272.1 278.2

Tax paid -50.3 -38.7 0.0 0.0 0.0

Working capital 352.3 -63.9 0.0 0.0 0.0

Other -293.9 -7.5 0.0 0.0 0.0

Operating cashflow 763.4 696.5 815.1 887.3 949.5

Capex 0.0 0.0 0.0 0.0 0.0

Capex - expansionary

Capex - maintenance

Acquisitions & Invest

Asset sale proceeds 0.1 0.0 0.0 0.0 0.0

Other -41.0 -391.4 -352.6 -332.6 -241.4

Investing cashflow -40.9 -391.4 -352.6 -332.6 -241.4

Dividends paid -145.7 -147.2 -211.9 -226.9 -233.7

Equity raised 266.4 0.0 258.3 0.0 0.0

Net borrowings

Other -1,145.6 0.7 -552.3 -427.6 -456.5 1 Month 3 Month 12 Month

Financing cashflow -1,024.9 -146.4 -505.9 -654.4 -690.1 Absolute 1.7% -3.0% -1.6%

Total cashflow -302.4 158.7 -43.4 -99.7 18.0 Relative 0.5% -1.3% -7.0%

Adjustments 2.5 -0.1 0.0 0.0 0.0

Net change in cash -299.9 158.6 -43.4 -99.7 18.0 Source: Reuters 52 week trading range: 1.99-2.52

MSCI IVA Risk Comment: DUE has recently been downgraded

from BBB to BB, with a lack of disclosure on environmental issues

such as biodiversity and land use, and Social issues such as

Employee benefits and programs. We believe as DUE moves to

internalise management and acts more as an integrated company

rather than as a manager of asset companies, disclosure will

improve.

14/02/2014 11:43

DUET Group is an investor in energy infrastructure assets. DUE's portfolio comprises three

assets DBP (80%), UED (66%) and MGH (100%). DBP is a gas transmission pipeline in

Western Australia, with primarily contracted revenues.

Credit Suisse View

TP Risk Comment: We value the fall in the debt margin post the

next regulatory decisions based on community concerns with

rising energy prices

OUTPERFORM

0.30

0.80

1.30

1.80

2.30

2.80

4/02/2013 4/04/2013 4/06/2013 4/08/2013 4/10/2013 4/12/2013 4/02/2014

DUE.AX XJO

2.7

3.7

4.7

5.7

6.7

7.7

Environment Social Governance

Stock Local Sector

Country Global Sector

Source: Company data, Credit Suisse estimates

17 February 2014

Australia and NZ First Edition 130

Figure 13: SKI financial summary

Spark Infrastructure Group (SKI) Year ending 31 Dec In AUDmn, unless otherwise stated2011 2012 2013 2014 2015 2011 2012 2013 2014 2015

Share Price: A$1.72 Earnings 12/11A 12/12A 12/13E 12/14E 12/15ERating c_EPS_SHARESEquiv. FPO (period avg.) mn 1,326.7 1,326.7 1,326.7 1,326.7 1,326.7

Target Price A$ 1.78 c_EPS*100EPS (Normalised) c 12.6 13.1 13.4 15.9 16.1

vs Share price % 3.41 EPS_GROWTH*100EPS Growth % 4.1 2.1 18.7 1.6

c_EBITDA_MARGIN*100EBITDA Margin % 96.4 96.4 96.6 96.9 96.8

c_DPS*100DPS c 10.0 10.5 11.0 11.5 12.0

c_PAYOUT*100Payout % 79.5 80.1 82.2 72.4 74.4

FRANKING*100Franking % 0.0 0.0 0.0 0.0 0.0

c_FCF_PS*100Free CFPS c 14.2 13.4 14.2 16.1 16.8

Profit & Loss 12/11A 12/12A 12/13E 12/14E 12/15E c_TAX_RATE*100Effective tax rate % 5.0 5.1 20.0 20.0 20.0

Sales revenue 287.7 298.0 328.9 368.0 369.2 ValuationEBITDA 277.3 287.1 317.8 356.6 357.5 c_PE P/E x 13.7 13.1 12.9 10.8 10.7

Depr. & Amort. (0.0) (0.0) (0.0) (0.0) (0.0) c_EBIT_MULTIPLE_CURREV/EBIT x 8.4 8.0 7.1 6.1 6.0

EBIT 277.3 287.1 317.8 356.6 357.5 c_EBITDA_MULTIPLE_CUEV/EBITDA x 8.4 8.0 7.1 6.1 6.0

Associates 0.0 0.0 0.0 0.0 0.0 c_DIV_YIELD*100Dividend Yield % 5.8 6.1 6.4 6.7 7.0

Net interest Exp. (101.7) (103.9) (95.9) (93.2) (89.9) c_FCF_YIELD*100FCF Yield % 8.3 7.8 8.3 9.4 9.8

Other 0.0 0.0 0.0 0.0 0.0 c_PB Price to Book x 1.7 1.5 1.5 1.3 1.2

Profit before tax 175.7 183.3 221.9 263.4 267.6 ReturnsIncome tax (8.7) (9.4) (44.4) (52.7) (53.5) c_ROE*100Return on Equity % 12.5 11.8 11.4 12.3 11.5

Profit after tax 166.9 173.9 177.5 210.7 214.0 c_I_NPAT/c_I_SALES*100Profit Margin % 58.0 58.3 54.0 57.3 58.0

Minorities (0.0) (0.0) (0.0) (0.0) (0.0) c_I_SALES/c_B_TOT_ASSAsset Turnover x 0.1 0.1 0.1 0.1 0.1

Preferred dividends 0.0 0.0 0.0 0.0 0.0 c_ASSETS/c_EQ_COMMONEquity Multiplier x 1.7 1.7 1.7 1.7 1.6

Associates & Other 0.0 0.0 0.0 0.0 0.0 c_ROA*100Return on Assets % 7.2 7.1 6.8 7.4 7.1

Normalised NPAT 166.9 173.9 177.5 210.7 214.0 c_ROIC*100Return on Invested Cap. % 19.0 18.3 16.6 17.6 16.8

Unusual item after tax (84.4) 0.0 (16.0) 0.0 0.0 GearingReported NPAT 82.6 173.9 161.5 210.7 214.0 c_GEARING*100Net Debt to Net debt + Equity % 3.6 0.9 Net Cash Net Cash Net Cash

c_NET_DEBT/c_I_EBITDANet Debt to EBITDA x 0.2 0.0 Net Cash Net Cash Net Cash

Balance Sheet 12/11A 12/12A 12/13E 12/14E 12/15E c_I_EBITDA/ c_I_NET_INTERESTInt Cover (EBITDA/Net Int.) x 2.7 2.8 3.3 3.8 4.0

Cash & equivalents 32.9 42.0 104.3 165.2 228.5 c_I_EBIT/ c_I_NET_INTERESTInt Cover (EBIT/Net Int.) x 2.7 2.8 3.3 3.8 4.0

Inventories 0.0 0.0 0.0 0.0 0.0 (c_C_CAPEX/c_I_SALES)*-100Capex to Sales % 0.0 0.0 0.0 0.0 0.0

Receivables 11.2 11.4 11.4 11.4 11.4 (c_C_CAPEX/c_I_DEPR)*-100Capex to Depreciation %

Other current assets 0.6 0.6 0.6 0.6 0.6

Current assets 44.8 54.0 116.4 177.3 240.6 MSCI IVA (ESG) Rating AProperty, plant & equip. 0.0 0.0 0.0 0.0 0.0 TP ESG Risk (%): -6.12

Intangibles 0.0 0.0 0.0 0.0 0.0

Other non-current assets 2,271.4 2,384.7 2,511.8 2,655.2 2,793.8

Non-current assets 2,271.4 2,384.7 2,511.8 2,655.2 2,793.8

Total assets 2,316.1 2,438.6 2,628.2 2,832.4 3,034.4

Payables 50.8 49.0 49.0 49.0 49.0

Interest bearing debt 82.9 55.7 75.7 75.7 75.7

Other liabilities 848.6 857.0 943.0 995.7 1,049.2 MSCI IVA Risk: Neutral

Total liabilities 982.3 961.7 1,067.6 1,120.3 1,173.8

Net assets 1,333.8 1,477.0 1,560.5 1,712.1 1,860.6

Ordinary equity 1,333.8 1,473.5 1,557.0 1,708.6 1,857.1

Minority interests 0.0 0.0 0.0 0.0 0.0

Preferred capital 0.0 0.0 0.0 0.0 0.0

Total shareholder funds 1,333.8 1,473.5 1,557.0 1,708.6 1,857.1

Net debt 50.0 13.7 -28.7 -89.6 -152.9 Source: MSCI ESG Research

Cashflow 12/11A 12/12A 12/13E 12/14E 12/15E Share Price Performance

EBIT 277.3 287.1 317.8 356.6 357.5

Net interest -7.1 -9.0 -2.3 0.3 3.6

Depr & Amort 0.0 0.0 319.2 387.2 477.2

Tax paid -11.2 0.0 0.0 0.0 0.0

Working capital -30.8 -2.0 51.4 74.3 80.2

Other -39.4 -97.7 -497.7 -604.9 -696.1

Operating cashflow 189.0 178.4 188.3 213.5 222.5

Capex 0.0 0.0 0.0 0.0 0.0

Capex - expansionary 0.0 0.0 0.0 0.0 0.0

Capex - maintenance 0.0 0.0 0.0 0.0 0.0

Acquisitions & Invest 0.0 0.0 0.0 0.0 0.0

Asset sale proceeds 0.0 0.0 0.0 0.0 0.0

Other -51.8 0.0 0.0 0.0 0.0

Investing cashflow -51.8 0.0 0.0 0.0 0.0

Dividends paid -153.5 -139.3 -145.9 -152.6 -159.2

Equity raised 0.0 0.0 0.0 0.0 0.0

Net borrowings -40.0 -30.0 20.0 0.0 0.0

Other 0.0 0.0 0.0 0.0 0.0 1 Month 3 Month 12 Month

Financing cashflow -193.5 -169.3 -125.9 -152.6 -159.2 Absolute 4.6% 4.9% 4.9%

Total cashflow -56.4 9.1 62.4 60.9 63.3 Relative 3.4% 6.6% -0.5%

Adjustments 0.0 0.0 0.0 0.0 0.0

Net change in cash -56.4 9.1 62.4 60.9 63.3 Source: Reuters 52 week trading range: 1.55-1.85

MSCI IVA Risk Comment: No current concerns

14/02/2014 11:45

Spark Infrastructure is an Australia-based company. It is engaged in the investment in

electricity distribution businesses in Victoria and South Australia. It operates under two

segements: CHEDHA Holdings and ETSA Utilities.

Credit Suisse View

TP Risk Comment: We value the fall in the debt margin post the

next regulatory decision based on community concerns with rising

energy prices

OUTPERFORM

0.30

0.50

0.70

0.90

1.10

1.30

1.50

1.70

1.90

2.10

4/02/2013 4/04/2013 4/06/2013 4/08/2013 4/10/2013 4/12/2013 4/02/2014

SKI.AX XJO

2.7

3.7

4.7

5.7

6.7

7.7

Environment Social Governance

Stock Local Sector

Country Global Sector

Source: Company data, Credit Suisse estimates

17 February 2014

Australia and NZ First Edition 131

Figure 14: ENV financial summary

Envestra (ENV) Year ending 30 Jun In AUDmn, unless otherwise stated2012 2013 2014 2015 2016 2012 2013 2014 2015 2016

Share Price: A$1.18 Earnings 06/12A 06/13A 06/14E 06/15E 06/16ERating c_EPS_SHARESEquiv. FPO (period avg.) mn 1,524.0 1,629.1 1,796.8 1,796.8 1,796.8

Target Price A$ 1.22 c_EPS*100EPS (Normalised) c 4.9 6.6 8.1 8.2 8.3

vs Share price % 3.13 EPS_GROWTH*100EPS Growth % 35.2 22.1 1.1 2.2

DCF A$ 1.13 c_EBITDA_MARGIN*100EBITDA Margin % 71.3 71.0 72.9 73.0 72.5

c_DPS*100DPS c 5.8 5.9 6.4 6.6 7.0

c_PAYOUT*100Payout % 118.5 89.2 79.2 81.3 83.6

FRANKING*100Franking % 0.0 0.0 0.0 0.0 0.0

c_FCF_PS*100Free CFPS c 10.2 13.1 13.7 14.5 14.9

Profit & Loss 06/12A 06/13A 06/14E 06/15E 06/16E c_TAX_RATE*100Effective tax rate % 29.9 29.9 30.0 30.0 30.0

Sales revenue 468.6 507.5 561.6 578.9 600.0 ValuationEBITDA 334.1 360.3 409.4 422.8 434.9 c_PE P/E x 24.1 17.9 14.6 14.5 14.2

Depr. & Amort. (56.5) (58.6) (63.4) (68.6) (72.1) c_EBIT_MULTIPLE_CURREV/EBIT x 15.3 13.7 12.3 12.1 12.1

EBIT 277.6 301.7 346.0 354.2 362.8 c_EBITDA_MULTIPLE_CUEV/EBITDA x 12.7 11.5 10.4 10.2 10.1

Associates 0.0 0.0 0.0 0.0 0.0 c_DIV_YIELD*100Dividend Yield % 4.9 5.0 5.4 5.6 5.9

Net interest Exp. (171.2) (147.9) (138.6) (144.6) (148.5) c_FCF_YIELD*100FCF Yield % 8.6 11.1 11.6 12.3 12.6

Other 0.0 0.0 0.0 0.0 0.0 c_PB Price to Book x 3.2 2.5 2.4 2.3 2.3

Profit before tax 106.4 153.8 207.4 209.7 214.3 ReturnsIncome tax (31.8) (46.0) (62.2) (62.9) (64.3) c_ROE*100Return on Equity % 12.7 12.8 16.4 16.1 15.9

Profit after tax 74.6 107.8 145.2 146.8 150.0 c_I_NPAT/c_I_SALES*100Profit Margin % 15.9 21.2 25.9 25.4 25.0

Minorities (0.0) (0.0) (0.0) (0.0) (0.0) c_I_SALES/c_B_TOT_ASSAsset Turnover x 0.2 0.2 0.2 0.2 0.2

Preferred dividends 0.0 0.0 0.0 0.0 0.0 c_ASSETS/c_EQ_COMMONEquity Multiplier x 5.2 3.8 3.9 3.9 4.0

Associates & Other 0.0 0.0 0.0 0.0 0.0 c_ROA*100Return on Assets % 2.4 3.3 4.2 4.1 4.0

Normalised NPAT 74.6 107.8 145.2 146.8 150.0 c_ROIC*100Return on Invested Cap. % 7.2 7.4 8.0 8.0 8.0

Unusual item after tax (0.7) 0.0 0.0 0.0 0.0 GearingReported NPAT 73.9 107.8 145.2 146.8 150.0 c_GEARING*100Net Debt to Net debt + Equity % 78.4 70.6 70.7 70.5 70.5

c_NET_DEBT/c_I_EBITDANet Debt to EBITDA x 6.4 5.6 5.2 5.2 5.2

Balance Sheet 06/12A 06/13A 06/14E 06/15E 06/16E c_I_EBITDA/ c_I_NET_INTERESTInt Cover (EBITDA/Net Int.) x 2.0 2.4 3.0 2.9 2.9

Cash & equivalents 1.0 1.0 4.0 1.6 4.8 c_I_EBIT/ c_I_NET_INTERESTInt Cover (EBIT/Net Int.) x 1.6 2.0 2.5 2.5 2.4

Inventories 0.0 0.0 0.0 0.0 0.0 (c_C_CAPEX/c_I_SALES)*-100Capex to Sales % 37.6 42.8 47.5 36.2 39.2

Receivables 72.9 82.7 91.8 94.6 98.6 (c_C_CAPEX/c_I_DEPR)*-100Capex to Depreciation % 311.7 371.0 420.9 305.2 326.2

Other current assets 5.0 2.5 2.6 2.6 2.7

Current assets 78.9 86.2 98.3 98.9 106.1 MSCI IVA (ESG) Rating BBBProperty, plant & equip. 2,341.7 2,497.0 2,700.4 2,841.2 3,004.4 TP ESG Risk (%): -3.94

Intangibles 606.0 606.0 606.0 606.0 606.0

Other non-current assets 32.0 47.7 47.7 47.7 47.7

Non-current assets 2,979.7 3,150.7 3,354.1 3,494.9 3,658.1

Total assets 3,058.6 3,236.9 3,452.4 3,593.8 3,764.2

Payables 49.4 47.2 47.3 48.5 51.4

Interest bearing debt 2,124.9 2,022.5 2,134.6 2,181.5 2,257.1

Other liabilities 297.9 325.4 387.6 450.5 514.8 MSCI IVA Risk: Positive

Total liabilities 2,472.2 2,395.1 2,569.6 2,680.6 2,823.3

Net assets 586.4 841.8 882.9 913.2 940.9

Ordinary equity 586.4 841.8 882.9 913.2 940.9

Minority interests 0.0 0.0 0.0 0.0 0.0

Preferred capital 0.0 0.0 0.0 0.0 0.0

Total shareholder funds 586.4 841.8 882.9 913.2 940.9

Net debt 2,123.9 2,021.5 2,130.6 2,179.9 2,252.3 Source: MSCI ESG Research

Cashflow 06/12A 06/13A 06/14E 06/15E 06/16E Share Price Performance

EBIT 277.6 301.7 346.0 354.2 362.8

Net interest -142.8 -143.8 -133.6 -139.6 -143.5

Depr & Amort 56.5 58.6 2,621.0 2,702.3 2,821.9

Tax paid 0.0 0.0 0.0 0.0 0.0

Working capital 5.1 -12.0 -9.0 -1.7 -1.2

Other -24.6 29.3 -2,557.7 -2,633.7 -2,749.8

Operating cashflow 171.8 233.8 266.8 281.5 290.2

Capex -176.1 -217.4 -266.8 -209.4 -235.3

Capex - expansionary -159.9 -196.6 -245.8 -188.1 -212.1

Capex - maintenance -16.2 -20.8 -21.1 -21.3 -23.2

Acquisitions & Invest 0.0 0.0 0.0 0.0 0.0

Asset sale proceeds 0.1 0.9 0.0 0.0 0.0

Other -0.6 -8.9 0.0 0.0 0.0

Investing cashflow -176.6 -225.4 -266.8 -209.4 -235.3

Dividends paid -87.5 -93.7 -104.1 -116.4 -122.3

Equity raised 69.6 219.0 0.0 0.0 0.0

Net borrowings 19.4 -129.3 107.1 41.9 70.6

Other -3.0 -4.4 0.0 0.0 0.0 1 Month 3 Month 12 Month

Financing cashflow -1.5 -8.4 3.0 -74.6 -51.7 Absolute 2.8% 9.4% 18.2%

Total cashflow -6.3 0.0 3.0 -2.4 3.2 Relative 1.6% 11.2% 12.8%

Adjustments 0.0 0.0 0.0 0.0 0.0

Net change in cash -6.3 0.0 3.0 -2.4 3.2 Source: Reuters 52 week trading range: 0.93-1.18

MSCI IVA Risk Comment: We note that ENV was recently

downgraded on issues on carbon and envirnmental management.

We expect that with clearer disclosure on network replacment

programs and the carbon reduction impact of this that there is

upside risk to the MSCI IVA rating.

14/02/2014 11:45

ENV owns and invests in gas transportation infrastructure across the Australian market.

Headquartered in South Australia, ENV's primarily assets are gas distribution networks in

Queensland, Victoria and South Australia.

Credit Suisse View

TP Risk Comment: We value the fall in the debt margin post the

next regulatory decisions based on community concerns with

rising energy prices

NEUTRAL

0.30

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0.70

0.80

0.90

1.00

1.10

1.20

1.30

4/02/2013 4/04/2013 4/06/2013 4/08/2013 4/10/2013 4/12/2013 4/02/2014

ENV.AX XJO

2.7

3.7

4.7

5.7

6.7

7.7

Environment Social Governance

Stock Local Sector

Country Global Sector

Source: Company data, Credit Suisse estimates

17 February 2014

Australia and NZ First Edition 132

Figure 15: ENE financial summary

Energy Developments Limited (ENE) Year ending 30 Jun In AUDmn, unless otherwise stated2012 2013 2014 2015 2016 2012 2013 2014 2015 2016

Share Price: A$6.00 Earnings 06/12A 06/13A 06/14E 06/15E 06/16ERating c_EPS_SHARESEquiv. FPO (period avg.) mn 168.2 163.2 161.2 161.2 161.2

Target Price A$ 6.44 c_EPS*100EPS (Normalised) c 5.5 33.7 34.5 37.0 31.7

vs Share price % 7.28 EPS_GROWTH*100EPS Growth % 512.9 2.4 7.2 -14.4

c_EBITDA_MARGIN*100EBITDA Margin % 41.3 43.5 41.8 40.6 42.1

c_DPS*100DPS c 0.0 22.0 22.4 24.0 20.6

c_PAYOUT*100Payout % 0.0 65.3 65.0 65.0 65.0

FRANKING*100Franking % 0.0 0.0 0.0 0.0 0.0

c_FCF_PS*100Free CFPS c 41.9 21.9 65.3 63.3 52.3

Profit & Loss 06/12A 06/13A 06/14E 06/15E 06/16E c_TAX_RATE*100Effective tax rate % 121.9 17.2 30.1 30.3 30.3

Sales revenue 319.4 400.9 420.5 442.9 392.5 ValuationEBITDA 132.0 174.6 175.9 179.7 165.3 c_PE P/E x 109.1 17.8 17.4 16.2 18.9

Depr. & Amort. (59.6) (69.4) (69.7) (70.1) (70.4) c_EBIT_MULTIPLE_CURREV/EBIT x 19.4 13.2 12.6 11.6 12.9

EBIT 72.4 105.2 106.2 109.6 95.0 c_EBITDA_MULTIPLE_CUEV/EBITDA x 10.6 8.0 7.6 7.1 7.4

Associates 0.0 0.0 0.0 0.0 0.0 c_DIV_YIELD*100Dividend Yield % 0.0 3.7 3.7 4.0 3.4

Net interest Exp. (38.0) (41.8) (31.7) (29.4) (27.6) c_FCF_YIELD*100FCF Yield % 7.0 3.6 10.9 10.6 8.7

Other (26.2) 0.0 0.0 0.0 0.0 c_PB Price to Book x 3.8 3.1 3.0 2.8 2.7

Profit before tax 8.2 63.4 74.4 80.2 67.4 ReturnsIncome tax (2.1) (10.9) (22.4) (24.3) (20.5) c_ROE*100Return on Equity % 3.5 17.3 17.1 17.2 14.0

Profit after tax 6.1 52.5 52.0 55.8 46.9 c_I_NPAT/c_I_SALES*100Profit Margin % 2.9 13.7 13.2 13.5 13.0

Minorities 0.0 0.0 0.0 0.0 0.0 c_I_SALES/c_B_TOT_ASSAsset Turnover x 0.4 0.4 0.4 0.5 0.4

Preferred dividends 0.0 0.0 0.0 0.0 0.0 c_ASSETS/c_EQ_COMMONEquity Multiplier x 3.2 3.0 2.9 2.8 2.7

Associates & Other 3.2 2.4 3.6 3.8 4.1 c_ROA*100Return on Assets % 1.1 5.9 5.9 6.2 5.2

Normalised NPAT 9.2 55.0 55.6 59.6 51.1 c_ROIC*100Return on Invested Cap. % 7.6 11.7 10.6 11.7 10.6

Unusual item after tax (7.9) 0.0 0.0 0.0 0.0 GearingReported NPAT 1.4 55.0 55.6 59.6 51.1 c_GEARING*100Net Debt to Net debt + Equity % 62.2 57.3 53.3 47.1 41.4

c_NET_DEBT/c_I_EBITDANet Debt to EBITDA x 3.3 2.4 2.1 1.7 1.6

Balance Sheet 06/12A 06/13A 06/14E 06/15E 06/16E c_I_EBITDA/ c_I_NET_INTERESTInt Cover (EBITDA/Net Int.) x 3.5 4.2 5.5 6.1 6.0

Cash & equivalents 42.8 42.3 96.1 159.5 210.5 c_I_EBIT/ c_I_NET_INTERESTInt Cover (EBIT/Net Int.) x 1.9 2.5 3.3 3.7 3.4

Inventories 15.4 13.5 13.5 13.7 14.0 (c_C_CAPEX/c_I_SALES)*-100Capex to Sales % 0.0 23.2 7.9 6.5 7.7

Receivables 46.9 51.1 47.4 50.1 47.3 (c_C_CAPEX/c_I_DEPR)*-100Capex to Depreciation % 0.0 134.2 47.6 41.2 42.9

Other current assets 11.5 32.3 32.3 32.3 32.3

Current assets 116.6 139.2 189.3 255.6 304.1 MSCI IVA (ESG) Rating Property, plant & equip. 643.7 698.0 661.5 619.7 578.5 TP ESG Risk (%): -19.55

Intangibles 52.6 50.3 50.3 50.3 50.3

Other non-current assets 44.3 48.0 45.4 43.6 42.4

Non-current assets 740.6 796.3 757.1 713.6 671.1

Total assets 857.2 935.5 946.5 969.2 975.2

Payables 29.1 58.6 64.0 67.9 58.1

Interest bearing debt 480.6 468.0 468.0 468.0 468.0

Other liabilities 80.9 91.8 89.2 87.1 85.1 MSCI IVA Risk:

Total liabilities 590.6 618.4 621.2 623.1 611.2

Net assets 266.6 317.1 325.3 346.1 364.0

Ordinary equity 266.6 317.1 325.3 346.1 364.0

Minority interests 0.0 0.0 0.0 0.0 0.0

Preferred capital 0.0 0.0 0.0 0.0 0.0

Total shareholder funds 266.6 317.1 325.3 346.1 364.0

Net debt 437.9 425.7 371.9 308.6 257.5 Source: MSCI ESG Research

Cashflow 06/12A 06/13A 06/14E 06/15E 06/16E Share Price Performance

EBIT 72.4 105.2 106.2 109.6 95.0

Net interest -36.5 -36.4 -31.7 -29.4 -27.6

Depr & Amort -59.6 -69.4 -69.7 -70.1 -70.4

Tax paid 0.0 0.0 -22.4 -24.3 -20.5

Working capital 0.0 0.0 9.1 1.3 -7.0

Other 94.2 129.3 143.0 143.9 144.8

Operating cashflow 70.5 128.8 134.4 131.0 114.4

Capex 0.0 -93.1 -33.2 -28.9 -30.2

Capex - expansionary -4.0 0.0 0.0

Capex - maintenance -29.2 -28.9 -30.2

Acquisitions & Invest

Asset sale proceeds 0.0 0.0 0.0 0.0 0.0

Other -185.4 4.2 0.0 0.0 0.0

Investing cashflow -185.4 -88.9 -33.2 -28.9 -30.2

Dividends paid 0.0 0.0 -36.2 -38.8 -33.2

Equity raised 26.1 -17.0 -11.3 0.0 0.0

Net borrowings 93.3 -25.1 0.0 0.0 0.0

Other -32.3 -1.0 0.0 0.0 0.0 1 Month 3 Month 12 Month

Financing cashflow 87.0 -43.1 -47.5 -38.8 -33.2 Absolute 0.0% 5.3% 82.4%

Total cashflow -27.9 -3.2 53.8 63.3 51.0 Relative -1.2% 7.0% 77.0%

Adjustments 0.0 0.0 0.0 0.0 0.0

Net change in cash -27.9 -3.2 53.8 63.3 51.0 Source: Reuters 52 week trading range: 3.03-6.45

MSCI IVA Risk Comment:

14/02/2014 11:46

Energy Developments owns a portfolio of remote power generation supplying electricity to

remote mines and town, as well and a portfolio of clean energy generation, including

generation from landfill gas and coal mine waste gas.

Credit Suisse View

TP Risk Comment: Our ESG impact is the value of $24 carbon

into perpetuity, which represents $1.56 further upside not currently

captured in our valuation. The high ESG sensitivity reflects the

material contribution from Green Revenue to group earnings.

OUTPERFORM

0.30

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2.30

3.30

4.30

5.30

6.30

7.30

4/02/2013 4/04/2013 4/06/2013 4/08/2013 4/10/2013 4/12/2013 4/02/2014

ENE.AX XJO

2.7

3.7

4.7

5.7

6.7

7.7

Environment Social Governance

Stock Local Sector

Country Global Sector

Source: Company data, Credit Suisse estimates

Australia and NZ First Edition 133

17 February 2014

Asia Pacific/Australia

Equity Research

Diversified Metals & Mining (Copper (AU))

PanAust

(PNA.AX / PNADA AU) PRE RESULTS COMMENT

CY13 result preview: Key numbers known;

reports on 20 Feb

Date: Thursday, 20 February Time: Pre-market

Period: Final Earnings Risk: Low

Credit Suisse estimates Briefing and dial-in details

NPAT: US$80.8mn (consensus $70mn-105mn) 11am (ADST)

Dial in: 1800 558 698 (Aust). +612

9007 3187 (Int.). ID: 729144.

EPS: 13.56cps

DPS: 4cps

■ EBITDA of US$271mn is known, so uncertainty around unknown depreciation,

corporate allocation, hedge accounting and tax drives a $10mn risk band around

NPAT forecasting. We view our $81mn estimate as conservative with risk of

being exceeded by lower depreciation and lower tax. 2H depreciation should be

higher than 1H, reflecting operation of the Phu Kham enhanced recovery circuit.

This is reflected in our higher 2H depreciation forecast.

■ Consensus range of $81mn to $105mn could reflect variation in above

assumptions or inclusion/exclusion of minorities.

■ 31 Dec cash US$130.3mn and US$162mn debt already advised with the

DecQ result in January.

■ CY14 guidance provided: Phu Kham Cu 65-70kt, cash costs US$1.50-1.60/lb

Cu; Ban Houayxai US$650-$700/oz. Consolidated gold forecast 160-165koz.

CY14F EBITDA US$200– $225mn. No changes to these numbers expected.

■ We hope for additional guidance on the capex profile, corporate overhead

allocation and project expenditure.

■ TP and rating unchanged.

Total return forecast in perspective

Mean^CS tgt^ Sh Prc

-50%

-30%

-10%

10%

30%

50%

70%

90%

12mth Volatility* 52wk Hi-Lo IBES Consensustarget return^

Performance over 1M 3M 12M

Absolute (%) 6.5 11.6 -38.6

Relative (%) 4.4 12.5 -45.0

Financial and valuation metrics

Year 12/12A 12/13E 12/14E 12/15E

Revenue (US$mn) 705.3 733.4 635.3 648.4

EBITDA (US$mn) 319.3 271.0 171.7 178.5

EBIT (US$mn) 230.8 150.2 70.3 70.4

Net income (US$mn) 142.3 80.8 31.0 23.1

EPS (CS adj.) (USc) 23.91 13.56 5.19 3.88

Change from previous EPS (%) n.a. — — —

Consensus EPS (USc) n.a. 14.80 8.80 11.60

EPS growth (%) 3.0 -43.3 -61.7 -25.3

P/E (x) 7.4 13.1 34.1 45.7

Dividend (USc) 7.00 7.00 7.00 7.00

Dividend yield (%) 4.0 4.0 4.0 4.0

P/B (x) 1.1 1.1 1.1 1.1

Net debt/equity (%) 3.9 9.8 18.0 62.8

Relative performance versus S&P ASX 200.See Reference

Appendix for a description of the chart. Source: Credit Suisse

estimates, * Consensus, mean range from Thomson Reuters

Source: Company data, ASX, Credit Suisse estimates, * Adj. for goodwill, notional interest and unusual items. Relative P/E

against ASX/S&P200 based on pre GW in AUD. Company PE calculation is based on displayed EPS Currency

Rating OUTPERFORM* [V]

Price (14 Feb 14, A$) 1.97

Target price (A$) 2.00¹

Market cap. (A$mn) 1,222.83

Yr avg. mthly trading (A$mn) 165

Last month's trading (A$mn) 176

Projected return:

Capital gain (%) 1.5

Dividend yield (net %) 4.0

Total return (%) 5.5

52-week price range 3.2 - 1.4

* Stock ratings are relative to the relevant country

benchmark.

¹Target price is for 12 months.

[V] = Stock considered volatile (see Disclosure Appendix).

Research Analysts

Michael Slifirski

61 3 9280 1845

michael.slifirski@credit-suisse.com

Sam Webb

61 3 9280 1716

sam.webb@credit-suisse.com

17 February 2014

Australia and NZ First Edition 134

Figure 1: PNA Financial Summary

PanAust (PNA) Year ending 31 Dec In USDmn, unless otherwise stated2011 2012 2013 2014 2015 2011 2012 2013 2014 2015

Share Price: A$1.97 Earnings 12/11A 12/12A 12/13E 12/14E 12/15ERating OUTPERFORM c_EPS_SHARESEquiv. FPO (period avg.) mn 593.0 594.9 596.2 597.1 597.1

Target Price A$ 2.00 c_EPS*100EPS (Normalised) c 23.2 23.9 13.6 5.2 3.9

vs Share price % 1.52 EPS_GROWTH*100EPS Growth % 3.0 -43.3 -61.7 -25.3

DCF US$ 1.94 c_EBITDA_MARGIN*100EBITDA Margin % 47.6 45.3 37.0 27.0 27.5

c_DPS*100DPS c 0.0 7.0 7.0 7.0 7.0

c_PAYOUT*100Payout % 0.0 29.3 51.6 135.0 180.6

FRANKING*100Franking % 0.0 0.0 0.0 0.0 0.0

c_FCF_PS*100Free CFPS c 30.3 21.6 9.0 24.1 19.1

Profit & Loss 12/11A 12/12A 12/13E 12/14E 12/15E c_TAX_RATE*100Effective tax rate % 27.3 25.3 27.2 25.0 25.0

Sales revenue 596.6 705.3 733.4 635.3 648.4 ValuationEBITDA 284.2 319.3 271.0 171.7 178.5 c_PEP/E x 7.6 7.4 13.1 34.1 45.7

Depr. & Amort. (59.5) (88.4) (120.8) (101.4) (108.1) c_EBIT_MULTIPLE_CURREV/EBIT x 4.7 4.9 8.0 18.4 25.0

EBIT 224.7 230.8 150.2 70.3 70.4 c_EBITDA_MULTIPLE_CUEV/EBITDA x 3.7 3.6 4.4 7.5 9.9

Associates 0.0 0.0 0.0 0.0 0.0 c_DIV_YIELD*100Dividend Yield % 0.0 4.0 4.0 4.0 4.0

Net interest Exp. (12.4) (16.6) (21.1) (17.9) (28.7) c_FCF_YIELD*100FCF Yield % 17.1 12.2 5.1 13.6 10.8

Other (3.0) (1.9) (1.0) (1.2) 0.0 c_PBPrice to Book x 1.3 1.1 1.1 1.1 1.1

Profit before tax 209.3 212.4 128.1 51.2 41.7 ReturnsIncome tax (57.3) (53.7) (34.9) (12.8) (10.4) c_ROE*100Return on Equity % 17.7 15.5 8.5 3.3 2.5

Profit after tax 152.1 158.7 93.2 38.4 31.3 c_I_NPAT/c_I_SALES*100Profit Margin % 23.1 20.2 11.0 4.9 3.6

Minorities (14.4) (16.4) (12.4) (7.5) (8.1) c_I_SALES/c_B_TOT_ASSAsset Turnover x 0.5 0.5 0.5 0.4 0.3

Preferred dividends 0.0 0.0 0.0 0.0 0.0 c_ASSETS/c_EQ_COMMONEquity Multiplier x 1.5 1.5 1.6 1.6 2.1

Associates & Other 0.0 0.0 0.0 0.0 0.0 c_ROA*100Return on Assets % 11.5 10.1 5.4 2.1 1.2

Normalised NPAT 137.7 142.3 80.8 31.0 23.1 c_ROIC*100Return on Invested Cap. % 19.3 16.2 9.3 4.2 3.1

Unusual item after tax (5.5) 0.0 0.0 0.0 0.0 GearingReported NPAT 132.1 142.3 80.8 31.0 23.1 c_GEARING*100Net Debt to Net debt + Equity % Net Cash 3.7 8.9 15.2 38.6

c_NET_DEBT/c_I_EBITDANet Debt to EBITDA x Net Cash 0.1 0.4 1.1 3.7

Balance Sheet 12/11A 12/12A 12/13E 12/14E 12/15E c_I_EBITDA/ c_I_NET_INTERESTInt Cover (EBITDA/Net Int.) x 22.9 19.2 12.8 9.6 6.2

Cash & equivalents 155.5 125.0 129.4 42.4 22.3 c_I_EBIT/ c_I_NET_INTERESTInt Cover (EBIT/Net Int.) x 18.1 13.9 7.1 3.9 2.5

Inventories 56.3 111.9 173.6 131.3 144.3 (c_C_CAPEX/c_I_SALES)*-100Capex to Sales % 38.9 28.9 13.2 27.5 76.9

Receivables 15.7 20.1 22.0 16.6 18.3 (c_C_CAPEX/c_I_DEPR)*-100Capex to Depreciation % 390.0 230.5 82.2 172.2 461.4

Other current assets 4.2 0.5 8.3 22.1 22.1

Current assets 231.7 257.5 333.3 212.4 206.9 MSCI IVA (ESG) Rating AAProperty, plant & equip. 525.3 903.9 877.1 975.3 1,416.1 TP ESG Risk (%): 0

Intangibles 14.0 14.0 14.0 14.0 14.0

Other non-current assets 421.9 228.4 269.0 280.3 289.3

Non-current assets 961.1 1,146.3 1,160.1 1,269.6 1,719.3

Total assets 1,192.9 1,403.8 1,493.4 1,482.0 1,926.2

Payables 84.5 88.0 91.8 83.5 85.1

Interest bearing debt 107.0 164.7 233.8 233.8 683.8

Other liabilities 107.4 127.0 101.1 101.1 104.2 MSCI IVA Risk: Neutral

Total liabilities 298.9 379.7 426.6 418.4 873.0

Net assets 894.0 1,024.1 1,066.8 1,063.6 1,053.2

Ordinary equity 777.7 915.5 949.6 938.9 920.4

Minority interests 116.3 108.6 117.2 124.6 132.8

Preferred capital 0.0 0.0 0.0 0.0 0.0

Total shareholder funds 894.0 1,024.1 1,066.8 1,063.6 1,053.2

Net debt -48.5 39.7 104.4 191.3 661.5 Source: MSCI IVA Rating

Cashflow 12/11A 12/12A 12/13E 12/14E 12/15E Share Price Performance

EBIT 224.7 230.8 150.2 70.3 70.4

Net interest -17.1 -18.0 -18.6 -17.9 -28.7

Depr & Amort 59.5 88.4 120.8 101.4 108.1

Tax paid -36.5 -53.9 -52.1 -26.5 -7.3

Working capital 38.1 -56.6 -59.8 39.5 -13.1

Other -29.6 7.6 -16.0 2.6 3.0

Operating cashflow 239.1 198.4 124.5 169.3 132.3

Capex -232.2 -203.8 -96.5 -174.6 -498.8

Capex - expansionary -173.0 -134.1 -25.9 -149.4 -480.8

Capex - maintenance -59.2 -69.6 -70.6 -25.2 -18.0

Acquisitions & Invest -69.1 -67.9 -47.9 -40.0 -62.0

Asset sale proceeds 0.0 0.0 0.0 0.0 0.0

Other -0.7 -8.3 -5.1 0.0 0.0

Investing cashflow -302.0 -279.9 -149.5 -214.6 -560.8

Dividends paid 0.0 -16.9 -39.4 -41.7 -41.7

Equity raised 1.4 3.7 2.3 0.0 0.0

Net borrowings 43.3 56.5 59.6 0.0 450.0

Other -10.5 7.2 8.7 0.0 0.0 1 Month 3 Month 12 Month

Financing cashflow 34.2 50.5 31.3 -41.7 408.3 Absolute 6.5% 11.6% -38.6%

Total cashflow -28.6 -31.0 6.3 -87.0 -20.2 Relative 4.4% 12.5% -45.0%

Adjustments -0.6 0.5 -1.9 0.0 0.0

Net change in cash -29.2 -30.5 4.4 -87.0 -20.2 Source: Reuters 52 week trading range: 1.45-3.20

MSCI IVA Risk Comment: Rating upgraded to 'AA' (from 'A') on

17 Dec 13. The recent upgrade was pleasing however main

operations in Laos/Thailand continue to place perceived

geopolitical risk on PNA.

11/02/2014 17:52

PanAust Limited (PanAust) is a copper and gold producer in Laos, Southeast Asia, and has a

portfolio of organic growth projects. PanAust’s portfolio of development and exploration assets

are located primarily in Laos and Chile.

Credit Suisse View

TP Risk Comment: Despite low carbon tax exposure and

operations in Laos/Thailand, we do not attribute any ESG risk to

our share price.

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4/02/2013 4/04/2013 4/06/2013 4/08/2013 4/10/2013 4/12/2013 4/02/2014

PNA.AX XJO

1.8

2.8

3.8

4.8

5.8

6.8

Environment Social Governance

Stock Local Sector Country Global Sector

Source: Company data, Credit Suisse estimates

Australia and NZ First Edition 135

17 February 2014

Asia Pacific/New Zealand

Equity Research

Transportation Infrastructure (Industrials)

Port of Tauranga (POT.NZ / POT NZ) PRE RESULTS COMMENT

1H14 result preview; reports on 20 Feb

Date: 20/02/14 Time: 10:30am

Period: 1H14 Earnings Risk: n/a

FNZC estimates Briefing and dial-in details

NPAT: $40.4mn Time: 1.00pm

Dial: 0800 450 585

Confirmation code: 1391003

EPS: 30.1¢

DPS: 20.0¢

FNZC assumptions

■ We anticipate POT's 1H14 NPAT at NZ$40.4mn. Management expects

NPAT for FY14 in the range of NZ$77-81mn, which is consistent with our

forecast of NZ$79.7mn.

■ We assume EBITDA of NZ$67.5mn in 1H14 and NZ$122.8mn for FY14F.

What to look for

■ We are not anticipating any surprises in POT’s 1H14 result. Organic and

inorganic growth in revenues is expected to be largely offset by a backflow

of container volume to the Port of Auckland.

■ A progress update on the expansion of existing facilities.

Share price implications

■ We expect a relatively muted response on the back of a flat underlying NPAT

result when compared to the pcp. At current levels, valuation remains a hurdle.

■ In order for us to upgrade our target price and rating for POT, we would

require a positive surprise both in terms of the offset between increasing log

volumes and the level of reduction in container volumes, and progress on

the expansion in existing port facilities.

Share price performance

80.0

87.5

95.0

102.5

110.0

13.00

13.75

14.50

15.25

16.00

Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14

Port of Tauranga Limited (ns) LHS Relative to NZX50 (RHS)

The price relative chart measures performance against the

NZX50 index which closed at 4873.5 on 13 Feb 14.

The spot exchange rate was NZ$1.199/US$1 on 14 Feb 14.

Performance over 1M 3M 12M

Absolute(%) -4.7 3.8 4.5

Rel-NZX50(%) -4.9 4.9 -10.4

Year to 30 Jun 2012A 2013A 2014F 2015F 2016F

Adjusted Earnings NZ$m 73.9 77.3 79.7 84.5 89.2

EPS Adjusted NZc. 55.1 57.6 59.4 63.0 66.5

EPS Grow th % 27.6 4.4 3.2 6.1 5.5

P/E x 25.4 24.3 23.5 22.2 21.0

CPS NZc. 65.8 69.3 72.3 78.4 84.2

P/CF x 21.3 20.2 19.3 17.8 16.6

EV/EBITDA x 16.0 15.2 14.8 13.9 12.9

Net DPS NZc. 39.0 46.0 46.0 46.0 48.0

Imputation % 100 100 100 100 100

Net Yield % 2.8 3.3 3.3 3.3 3.4

Gross Yield % 3.9 4.6 4.6 4.6 4.8

Financial and valuation metrics

Source: Company data, NZX, First NZ Capital estimates

Rating UNDERPERFORM* Price (14 Feb 2014, NZ$) 13.95 Target price (NZ$) 13.80¹ Market cap. (NZ$mn) 1,874.95 Projected return: 0 Capital gain (%) -1.3 Dividend yield (net %) 3.3 Total return (%) 2.0 52-week price range (NZ$) 13.15-15.70

* Stock ratings are relative to the relevant country

benchmark.

¹Target price is for 12 months.

Research Analysts

Kar Yue Yeo

+64 4 474 4462

karyue.yeo@fnzc.co.nz

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

17 February 2014

Australia and NZ First Edition 136

Figure 1: Port of Tauranga—Financial summary

Sector: Transportation NZX Code: POT

PROFIT & LOSS ($m) BALANCE SHEET ($m)Year to 30 Jun 2012A 2013A 2014F 2015F 2016F Year to 30 Jun 2012A 2013A 2014F 2015F 2016F

Operating Rev enue 226 244 262 281 302 Cash & Equiv alents 9.2 37.2 37.2 37.2 37.2

Operating Ex penses -113 -121 -129 -136 -145 Debtors & Inv entories 33.8 34.0 36.3 38.6 41.2

Operating EBITDA 113 123 133 145 157 Other Current Assets 1.1 0.0 0.0 -0.2 -0.2

Depreciation -14.2 -15.8 -17.3 -20.6 -23.7 Current Assets 44.0 71.3 73.5 75.7 78.3

Amortisation -2.7 -2.8 -2.8 -2.8 -2.8 Fix ed Assets 889 947 1,045 1,076 1,080

Operating EBIT 96.4 105 113 122 131 Inv estments 78.6 46.5 68.8 70.3 71.8

Other Income 2.9 2.1 0.8 0.3 0.0 Intangibles 16.9 42.6 41.5 40.4 39.3

Abnormals -0.3 33.7 0.0 0.0 0.0 Other Non-Current Ass. 5.3 5.3 5.3 5.3 5.3

Reported EBIT 99.0 140 114 122 131 Total Assets 1,034 1,113 1,234 1,268 1,275

Net Interest -13.8 -13.4 -15.1 -18.8 -21.5

Pretax Profit 85.2 127 98.4 103 109 Interest Bearing Debt 196 226 329 336 316

Tax -23.8 -25.1 -27.7 -29.0 -30.7 Other Liabilities 104 92.6 93.1 95.6 98.3

Minority Interests 0.0 0.0 0.0 0.0 0.0 Total Liabilities 300 319 422 432 414

Equity Accounted Profit 12.3 10.4 8.9 10.2 10.7 Minorities 0.0 0.0 0.0 0.0 0.0

Reported NPAT 73.7 112 79.7 84.5 89.2 Conv ertible Capital 0.0 0.0 0.0 0.0 0.0

Abnormals (net of tax ) -0.3 34.9 0.0 0.0 0.0 Ordinary Equity 734 794 812 836 861

Adjusted Earnings 73.9 77.3 79.7 84.5 89.2 Total Funds Emp. 1,034 1,113 1,234 1,268 1,275

RATIOS AND CAPITAL STRUCTURE CASH FLOW ($m)Year to 30 Jun 2012A 2013A 2014F 2015F 2016F Year to 30 Jun 2012A 2013A 2014F 2015F 2016F

Profitability & Growth

EBITDA/Op Rev % 50.1 50.4 50.6 51.7 52.0 Operating EBITDA 113 123 133 145 157

EBIT/Op Rev % 42.6 42.8 43.0 43.4 43.3 Other Cash Income 0.0 0.0 0.0 0.0 0.0

Effectiv e Tax Rate % 27.9 19.8 28.1 28.1 28.1 Interest Paid -12.3 -16.9 -14.3 -18.6 -21.5

Return On Equity % 10.3 10.1 9.9 10.3 10.5 Tax Paid -24.0 -26.9 -27.7 -29.0 -30.7

ROCE % 12.3 12.3 11.7 11.8 12.4 Working Capital / Other -2.5 4.2 -1.8 0.1 0.1

EPS Adjusted c. 55.1 57.6 59.4 63.0 66.5 Operating Cash Flow 74.5 83.4 89.0 97.8 105

EPS Grow th % 27.6 4.4 3.2 6.1 5.5

Net DPS c. 39.0 46.0 46.0 46.0 48.0 Total Capex -39.1 -97.3 -117 -53.0 -29.6

Div idend Cov er x 1.4 1.3 1.3 1.4 1.4 Acquisitions -4.0 -2.0 -21.6 0.0 0.0

Asset Backing & Capital Structure Div estments 1.0 70.5 0.0 0.0 0.0

Net Cash (Debt) $m -187 -189 -292 -299 -278 Div idends -44.3 -63.0 -61.7 -60.7 -63.7

NTA / Share $ 5.3 5.6 5.7 5.9 6.1 Equity Raised 0.0 0.0 0.0 0.0 0.0

Equity / Tot Assets % 71.0 71.3 65.8 65.9 67.6 Other 3.9 4.3 0.0 0.0 0.0

Net Debt / EBITDA x 1.6 1.5 2.2 2.1 1.8 Change in Net Debt -8.1 -4.1 -111 -15.9 11.8

Interest Cov er x 7.0 7.8 7.5 6.5 6.1

Shares on Issue Capex /Depn % 275 616 679 257 125

Ordinary m 134 134 134 134 134 Capex /Rev % 17.3 39.9 44.7 18.9 9.8

Fully Diluted m 134 134 134 134 134

CARGO VOLUMES (000 tonnes) REVENUE BREAKDOWNYear to 30 Jun 2012A 2013A 2014F 2015F 2016F Year to 30 Jun 2012A 2013A 2014F 2015F 2016F

Logs 4,919 5,601 6,161 6,408 6,664 Revenue

Other Forest Products 2,404 2,229 2,274 2,365 2,459 Port Serv ice Rev enue 184.7 191.0 206.9 219.4 232.4

Primary Ex ports 2,520 2,849 2,906 3,051 3,204 Quality Marshalling 0 9.96 9.96 12.95 19.42

Other Ex ports 1,898 1,937 1,956 2,074 2,177 Property Lease Rentals 18.8 19.9 21.3 23.7 24.2

Total Exports 12,262 13,056 13,746 14,355 14,971 Tapper Transport 22.7 23.2 24.1 25.1 26.1

Oil Products 1,230 1,242 1,267 1,292 1,318 Total 226.2 244.01 262.27 281.13 302.02

Fertiliser Bases 520 382 390 397 405

Coal 31.0 63.0 50.0 50.0 50.0

Other Imports 4,409 4,322 4,402 4,545 4,684

Total Imports 6,190 6,009 6,109 6,284 6,457

Total Volume 18,452 19,065 19,854 20,639 21,428

Containers (000 teus) 796 848 831 881 917

Source: Company data, NZX, First NZ Capital estimates

Australia and NZ First Edition 137

17 February 2014

Asia Pacific/New Zealand

Equity Research

Construction & Engineering (Industrials)

Steel & Tube Holdings (STU.NZ / STU NZ) PRE RESULTS COMMENT

1H14 result preview; reports on 20 Feb

Date: 20/02/14 Time: 9:00am

Period: 1H14 Earnings Risk: n/a

FNZC estimates Briefing and dial-in details

NPAT: $7.5mn n/a

EPS: 8.5¢

DPS: 6.5¢

FNZC Assumptions

■ Our expectation is for 1H14 NPAT of NZ$7.5mn, translating into NZ$17.3mn

for FY14.

■ We anticipate 1H14 EBIT of NZ$11.0mn, translating into NZ$25.1mn for

FY14.

What to look for

■ We look for evidence of STU’s ability to capitalise on the NZ building and

construction sector recovery translating into higher steel demand. Increased

activity in both residential and non-residential building consents in Auckland

and Christchurch are the key drivers here. Importantly, increased demand

should translate into an improvement in margins.

Share price implications

■ To be more bullish on the stock, we would require improvement in margins

and an anticipation that these improvements can be sustained going forward

through the remainder of FY14F.

Share price performance

80.0

90.0

100.0

110.0

120.0

2.00

2.50

3.00

3.50

4.00

Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14

Steel & Tube Holdings Limited LHS Relative to NZX50 (RHS)

The price relative chart measures performance against the

NZX50 index which closed at 4873.5 on 13 Feb 14.

The spot exchange rate was NZ$1.199/US$1 on 14 Feb 14.

Performance over 1M 3M 12M

Absolute(%) 0.3 -1.6 27.2

Rel-NZX50(%) 0.2 -0.5 12.3

Year to 30 Jun 2012A 2013A 2014F 2015F 2016F

Adjusted Earnings NZ$m 13.1 14.6 17.3 21.6 25.3

EPS Adjusted NZc. 14.9 16.6 19.6 24.4 28.6

EPS Grow th % -24.1 11.6 18.3 24.5 17.1

P/E x 20.6 18.4 15.6 12.5 10.7

CPS NZc. 21.9 22.7 24.8 29.6 33.8

P/CF x 14.0 13.5 12.3 10.3 9.1

EV/EBITDA x 11.8 11.2 10.0 8.3 7.2

Net DPS NZc. 12.0 15.0 15.5 19.0 24.0

Imputation % 100 100 100 100 100

Net Yield % 3.9 4.9 5.1 6.2 7.8

Gross Yield % 5.4 6.8 7.0 8.6 10.9

Financial and valuation metrics

Source: Company data, NZX, First NZ Capital estimates

Rating UNDERPERFORM* Price (14 Feb 2014, NZ$) 3.00 Target price (NZ$) 3.10¹ Market cap. (NZ$mn) 265.33 Projected return: 0 Capital gain (%) 3.3 Dividend yield (net %) 5.9 Total return (%) 9.2 52-week price range (NZ$) 2.32-3.20

* Stock ratings are relative to the relevant country

benchmark.

¹Target price is for 12 months.

Research Analysts

Kar Yue Yeo

+64 4 474 4462

karyue.yeo@fnzc.co.nz

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

17 February 2014

Australia and NZ First Edition 138

Figure 1: Steel & Tube Holdings financial summary

Sector: Capital Goods NZX Code: STU

PROFIT & LOSS ($m) BALANCE SHEET ($m)Year to 30 Jun 2012A 2013A 2014F 2015F 2016F Year to 30 Jun 2012A 2013A 2014F 2015F 2016F

Operating Rev enue 405 393 421 465 489 Cash & Equiv alents 3.7 3.5 3.5 3.5 3.5

Operating Ex penses -379 -366 -392 -429 -447 Debtors & Inv entories 157 150 160 172 178

Operating EBITDA 26.1 27.0 29.7 35.8 41.1 Other Current Assets 0.6 0.7 0.7 0.7 0.7

Depreciation -6.2 -5.4 -4.6 -4.6 -4.6 Current Assets 161 154 164 176 182

Amortisation 0.0 0.0 0.0 0.0 0.0 Fix ed Assets 48.2 46.5 46.5 46.5 46.5

Operating EBIT 19.9 21.6 25.1 31.2 36.6 Inv estments 0.0 0.0 0.0 0.0 0.0

Other Income 0.0 0.0 0.0 0.0 0.0 Intangibles 20.9 21.5 21.5 21.5 21.5

Abnormals 0.0 0.9 0.0 0.0 0.0 Other Non-Current Ass. 0.0 0.0 0.0 0.0 0.0

Reported EBIT 19.9 22.6 25.1 31.2 36.6 Total Assets 230 222 232 244 250

Net Interest -1.7 -1.4 -1.1 -1.3 -1.5

Pretax Profit 18.3 21.2 24.0 29.9 35.1 Interest Bearing Debt 40.5 27.3 29.5 30.3 26.2

Tax -5.1 -5.6 -6.7 -8.4 -9.8 Other Liabilities 37.2 37.9 40.4 44.4 46.5

Minority Interests 0.0 0.0 0.0 0.0 0.0 Total Liabilities 77.7 65.2 70.0 74.7 72.7

Equity Accounted Profit 0.0 0.0 0.0 0.0 0.0 Minorities 0.0 0.0 0.0 0.0 0.0

Reported NPAT 13.1 15.6 17.3 21.6 25.3 Conv ertible Capital 0.0 0.0 0.0 0.0 0.0

Abnormals (net of tax ) 0.0 0.9 0.0 0.0 0.0 Ordinary Equity 153 157 162 169 177

Adjusted Earnings 13.1 14.6 17.3 21.6 25.3 Total Funds Emp. 230 222 232 244 250

RATIOS AND CAPITAL STRUCTURE CASH FLOW ($m)Year to 30 Jun 2012A 2013A 2014F 2015F 2016F Year to 30 Jun 2012A 2013A 2014F 2015F 2016F

Profitability & Growth

EBITDA/Op Rev % 6.4 6.9 7.0 7.7 8.4 Operating EBITDA 26.1 27.0 29.7 35.8 41.1

EBIT/Op Rev % 4.9 5.5 6.0 6.7 7.5 Other Cash Income 0.0 0.9 0.0 0.0 0.0

Effectiv e Tax Rate % 28.1 26.5 28.0 28.0 28.0 Interest Paid -1.7 -1.2 -1.1 -1.3 -1.5

Return On Equity % 8.6 9.4 10.8 13.0 14.6 Tax Paid -4.9 -5.3 -6.7 -8.4 -9.8

ROCE % 10.5 11.7 13.6 16.3 18.5 Working Capital / Other -1.0 7.2 -7.0 -7.9 -4.1

EPS Adjusted c. 14.9 16.6 19.6 24.4 28.6 Operating Cash Flow 18.5 28.6 14.9 18.3 25.8

EPS Grow th % -24.1 11.6 18.3 24.5 17.1

Net DPS c. 12.0 15.0 15.5 19.0 24.0 Total Capex -4.3 -2.8 -4.6 -4.6 -4.6

Div idend Cov er x 1.2 1.1 1.3 1.3 1.2 Acquisitions 0.0 0.0 0.0 0.0 0.0

Asset Backing & Capital Structure Div estments 0.0 0.0 0.0 0.0 0.0

Net Cash (Debt) $m -36.8 -23.8 -26.0 -26.8 -22.7 Div idends -12.8 -11.4 -12.6 -14.5 -17.1

NTA / Share $ 1.5 1.5 1.6 1.7 1.8 Equity Raised 0.0 0.0 0.0 0.0 0.0

Equity / Tot Assets % 66.3 70.7 69.8 69.3 70.9 Other 0.0 0.0 0.0 0.0 0.0

Net Debt / EBITDA x 1.4 0.9 0.9 0.7 0.6 Change in Net Debt 1.5 14.4 -2.3 -0.8 4.1

Interest Cov er x 11.9 15.8 23.5 24.2 24.7

Shares on Issue Capex /Depn % 69.6 51.8 100 100 100

Ordinary m 88.2 88.2 88.2 88.2 88.2 Capex /Rev % 1.1 0.7 1.1 1.0 0.9

Fully Diluted m 88.2 88.2 88.2 88.2 88.2

Distribution47%

Piping Sy stems

3%

Hurricane10%

Fasteners13%

Reinf orcing11%

Roof ing16%

EST REVENUE BREAKDOWN

Distribution28%

Piping Systems

5%

Hurricane10%

Fasteners14%

Reinforcing18%

Roofing25%

EST EBITDA BREAKDOWN

Source: Company data, NZX, First NZ Capital estimates

Australia and NZ First Edition 139

17 February 2014

Asia Pacific/Australia

Equity Research

Macro

Australian ESG/SRI - AGM series

SOCIALLY RESPONSIBLE INVESTING

GNC: 50% of the LTI opportunity converted to

STI plan for FY14

■ We have reviewed the Grain Corp (GNC.AX) Remuneration Report for

the Annual General Meeting on 25th

February 2014.

■ The CEO earns a base salary of $1.15mn, up 21.5% on FY12.

■ Market capitalisation increased from $1.2bn to $1.8bn during the 2012

remuneration review period, which was cited as the reason for the base

salary increase. Market cap is currently ~$1.78bn, therefore benchmarking

may still be relevant.

■ FY13 LTI will be cash-based, rather than rights, but will be subject to same

hurdles and vesting period.

■ 50% of the FY14 LTI opportunity has been converted to the STI plan

due to share price volatility following the failed take-over attempt. This

results in an additional $0.60mn in STI opportunity in lieu of the LTI plan for

the CEO.

■ CEO termination benefit composition unclear: The former CEO departed

on 13 January 2014 and collected $0.939mn in termination benefits,

including contractual pro-rata STI for ~3 months. The Board has discretion

on payout of STI but we are unable to determine if any of the converted LTI

for FY14 was paid out as part of termination.

Figure 1: Summary of remuneration issues

GNC.AX AGM: 25 Feb

Long-term incentives

FY13 LTI: Converted to a cash performance award rather than performance rights but subject to same hurdles and vesting. FY14 LTI: Converted to a cash STI award at 50% of maximum LTI award, subject to STI hurdles and vesting (including one- and two-year deferral).

Short-term incentives

CEO termination: Board exercised discretion for pro-rata STI payment for part of FY14, but not clear if this included pro-rata of converted STI.

Fixed pay Remuneration benchmarking based on market capitalization increase in 2012 resulted in a 21.5% increase in base pay and a 39.8% increase in maximum pay from FY12.

Remuneration vote

Strong support for Remuneration Report (1% against vote in FY12 and FY11).

Source: Company data, Credit Suisse estimates

Research Analysts

Sandra McCullagh

61 2 8205 4729

sandra.mccullagh@credit-suisse.com

Chris Parks

61 2 8205 4400

chris.parks@credit-suisse.com

17 February 2014

Australia and NZ First Edition 140

Summary ■ We have reviewed the Grain Corp (GNC.AX) Remuneration Report for the Annual

General Meeting on 25 February 2014.

Figure 2: Summary of remuneration issues

GNC.AX AGM: 25 Feb

Long term incentives

FY13 LTI: Converted to a cash performance award rather than performance rights but subject to same hurdles and vesting. FY14 LTI: Converted to a cash STI award at 50% of maximum LTI award, subject to STI hurdles and vesting (including one- and two-year deferral).

Short term incentives

CEO termination: Board exercised discretion for pro-rata STI payment for part of FY14, but not clear if this included pro-rata of converted STI.

Fixed pay Remuneration benchmarking based on market capitalisation increase in 2012 resulted in a 21.5% increase in base pay and a 39.8% increase in maximum pay from FY12.

Remuneration vote

Strong support for Remuneration Report (1% against vote in FY12 and FY11).

Source: Company data, Credit Suisse estimates

■ The CEO earns a base salary of $1.15mn (21.5% increase from FY12).

■ The CEO can earn up to $4.8mn, with STI contributing up to 200% of base salary (up

from 150% in FY12). We assume the LTI can comprise up to 100% of base salary

(does not specify maximum, 100% is target). We estimate the total maximum salary

has increased by 39.8% compared to FY12.

■ Market capitalisation increased from $1.2bn to $1.8bn during remuneration

review period in 2012 conducted by EY, which was cited as the reason for the base

salary increase. Market capitalisation is currently ~$1.78bn, therefore benchmarking

may still be relevant.

■ The CEO earned an STI of $0.732mn, which was 64% of the base and target, and

32% of the maximum STI available.

■ Disclosure could improve for STI: Specific hurdles for calculating STI are generally

not disclosed. Two notable exceptions are safety (LTIFR reduction of 32%) and

employee engagement (engagement survey result of 62.5%), both of which were

missed.

■ FY13 LTI award granted in cash equivalents not performance rights due to

volatility during the takeover attempt. LTI opportunity remains 100% of base salary with

the same timing, vesting and performance conditions.

■ 50% of the LTI opportunity has been converted to the STI plan for FY14 due to

share price volatility following the failed take-over attempt. This results in an additional

$0.60mn in STI opportunity in lieu of LTI plan for the CEO.

■ CEO termination benefit composition unclear: The former CEO departed on 13

January 2014 and collected $0.939mn in termination benefits, including contractual

pro-rata STI for ~3 months. The Board has discretion on payout of STI but we are

unable to determine if any of the converted LTI for FY14 was paid out as part of the

termination.

■ No incentive structure for acting CEO. The Chairman has stepped in as the acting

CEO while continuing in the role of Chairman of the Board and being remunerated

separately for both roles (Chairman:$0.33mn, CEO:$0.60mn), though is not taking part

in LTI and STI plans. We note the board has set performance criteria for the interim

CEO.

17 February 2014

Australia and NZ First Edition 141

Remuneration report Salary structure

Figure 3: Comparison of FY12 and FY13 pay structures for CEO

Item FY12 FY13

Base pay $0.99mn $1.15mn (21.5% increase)

Short-term incentive 150% of base salary possible 200% of base salary possible

Long-term incentive 100% of base salary 100% of base salary

Mix (Base: STI: LTI) Base 29%: STI 43%: LTI 29% Base 25%: STI 50%: LTI 25%

Maximum possible salary $3.46mn $4.80mn (39.8% increase)

Remuneration advisor EY EY

Auditor PWC PWC

Source: Company data, Credit Suisse estimates

■ The CEO earns a base salary of $1.15mn (21.5% increase from FY12).

■ The CEO can earn up to $4.8mn, with STI contributing up to 200% of base salary (up

from 150% in FY12). We assume the LTI can comprise up to 100% of base salary

(does not specify maximum, 100% is target). We estimate the total maximum salary

has increased by 39.8% compared to FY12.

■ Market capitalisation increase from $1.2bn to $1.8bn during the remuneration

review period in 2012 conducted by EY cited as reason for the base salary increase.

Market capitalisation is currently ~$1.78bn, therefore benchmarking may still be

relevant.

■ CEO termination benefit composition unclear: The former CEO departed on 13

January 2014 and collected $0.939mn in termination benefits, including contractual

pro-rata STI for ~3 months. The Board has discretion on payout of STI but we are

unable to determine if any of the converted LTI for FY14 (refer to the FY14

Performance section) was paid out as part of the termination.

■ No incentive structure for acting CEO. The Chairman has stepped in as the acting

CEO while continuing in the role of Chairman of the Board and being remunerated

separately for both roles (Chairman:$0.33mn, CEO:$0.60mn), though is not taking part

in LTI and STI plans. We note the board has set performance criteria for the interim

CEO.

17 February 2014

Australia and NZ First Edition 142

Short-term incentives

Figure 4: FY13 short-term performance incentives for CEO

Item FY13 Comment

CEO achieved $0.732mn 50% is deferred, with 25% vesting after one year;

25% vesting after two years

Performance hurdles

Financial; NOPAT Safety; Injury rates

Customer; Improve supply chain People; Engagement and talent

Strategic; Asset optimisation and efficiency Regulation & External; Investor and regulatory

relationships

Disclosure on hurdles Some hurdles are disclosed in arrears

% of maximum awarded 32%

Exclusions None

Disclosure on performance Discussion on each area provided though generally not

quantitative. Employee engagement and safety performances

below target

Source: Company data, Credit Suisse estimates

■ The CEO earned an STI of $0.732mn, which was 64% of the base, and 32% of the

maximum STI available.

■ Deferral of 50%: 50% of the STI is deferred; 25% of the STI earned is vested after one

year, and 25% after two years.

■ Disclosure could improve: Specific measurable hurdles for calculating STI are

generally not disclosed. Two notable exceptions are safety (LTIFR reduction of 32%)

and employee engagement (engagement survey result of 62.5%), both of which were

missed.

17 February 2014

Australia and NZ First Edition 143

Long-term incentives

Figure 5: FY13 long-term incentives for CEO

Item FY13 Comment

Number of performance

rights/cash $1.15mn

Deferred cash grants under the same terms and

conditions of the performances rights were granted

due to share price volatility

How calculated cash

Basis of calculation 100% of base salary

Performance hurdle 1 Relative TSR - 50% Comparative group comprises of 50 companies

immediately above and below GNC by market cap

Vesting for performance hurdle 1

50th percentile: 0% vesting

75th percentile:100% vesting (straight line basis)

Rewards second quartile performance

Performance hurdle 2

ROE - 50%

Targets are not disclosed until results available

Vesting for performance hurdle 2

At minimum target: 50% At maximum target: 100%

(straight line) Full vesting possible within target range

Testing period Three years

Retesting No

Hedging allowed? No

Source: Company data, Credit Suisse estimates

■ FY13 LTI award granted in cash equivalents not performance rights due to

volatility during the takeover attempt. LTI opportunity remains 100% of base salary with

the same timing, vesting and performance conditions.

■ Use of VWAP to calculate awards, which is positive: GNC calculates rights based

awards on 20-day VWAP and does not apply discounts reflecting the probability of

vesting which we view as a better indicator of "remuneration at risk", rather than

compensating for that risk. Due to the use of cash-based awards in FY13 and FY14,

this does not apply but is worthy of mention.

17 February 2014

Australia and NZ First Edition 144

Voting on remuneration report

■ Strong vote for the Remuneration Report at 2012 and 2011 AGMs: The Against

vote in FY13 was 1% (1% in FY12).

Figure 6: Comparison of FY11 and FY12 AGM Remuneration Reports voting

FY12 FY13

For resolution 99% 99%

Against resolution 1% 1%

Source: Company data

17 February 2014

Australia and NZ First Edition 145

FY14 performance rights Figure7: Comparison of FY13 and FY14 LTI share performance grants

Item FY13 FY14 Comment

Number of performance rights/cash

$1.15mn $600,000 for CEO FY14 grant may return back to FY12

conditions for the CEO

How calculated cash 50% of the value of the LTI opportunity

converted into the STI plan

Basis of calculation

100% of base salary 50% of LTI opportunity (LTI opportunity

is 100% of base salary)

Performance hurdle 1

Relative TSR – 50% Uses the short-term incentive targets:

(see STI)

Vesting for performance hurdle 1

50

th percentile:0% vesting

75th percentile:100% vesting (straight line basis)

Performance hurdle 2

ROE – 50%

Vesting for performance hurdle 2

At minimum target:50% At maximum target:100%

(straight line)

Testing period Three years

Retesting No

Source: Company data, Credit Suisse estimates

■ No resolution at AGM to award FY14 performance shares.

■ 50% of the LTI opportunity has been converted to the STI plan for FY14 due to

share price volatility following the failed take-over attempt. This results in an additional

$0.60mn in STI opportunity in lieu of the LTI plan for the CEO.

■ It is not clear if the CEO termination package, which included pro-rata STI,

contained any of the converted LTI. The former CEO departed on 13 January 2014

and collected $0.939mn. We are unable to reconcile this figure based on the

information provided and determine the proportion of STI, converted LTI or other

components paid upon departure.

■ We forecast declining ROE in FY14 of 6.7% (FY13:9.9%). As a result we expect

lower ROE hurdles for GNC as maximum and minimum targets have generally been

in-line with consensus (Figure 8). We note our ROE historics differ from those of GNC.

Figure 8: GNC.AX ROE

ROE

GNC.AX FY11A FY12A FY13A FY14F FY15F FY16F

ROE 12.5% 13.3% 9.9% 6.7% 7.8% 9.9%

Reference to grant year FY11 FY12 FY13 FY14 Source: Company data, Credit Suisse estimates

17 February 2014

Australia and NZ First Edition 146

ESG metrics MSCI ESG

■ MSCI ESG rates GNC BB. Our analyst has a Neutral outlook on that rating.

Target Price Impacts from ESG

■ Our analyst has included no downside risk for ESG issues in the Target Price for

GNC.

Figure 9: MSCI and CS Analyst Views

MSCI IVA (ESG) Rating BB

TP ESG Risk (%): 0

MSCI IVA Risk: Neutral

MSCI IVA Risk Comment: Graincorp was recently upgraded to

a 'BB' rating from 'B' following the initiation of programs to

improve energy consumption efficiency. We retain a Neutral

outlook for GNC's MSCI rating on the grounds that its most

significant ESG detriments are now being addressed. GNC's

rating is being dragged by relatively weak carbon emission

and water stress programs however these are offset by a

strong presence of operations in developed economies

reducing its exposure to poor labour standard risks.

Credit Suisse View

Our analysis has found no downside material ESG risk

1.4

2.4

3.4

4.4

5.4

6.4

7.4

8.4

9.4

10.4

Environment Social Governance

Stock Local Sector

Country Global Sector

Source: Company data, Credit Suisse estimates

17 February 2014

Australia and NZ First Edition 147

Australian ESG/SRI – AGM series

■ We plan to publish the Remuneration reports for the upcoming AGM season for mainly

ASX100 companies (excluding REITS). We have published for the following

companies:

■ Australian ESG/SRI – ALL: Discounted fair value results in 94% higher LTI grant

for FY13 – 7 February

■ Australian ESG/SRI – AGK: clawback positive but hurdle too low – 2 October

■ Australian ESG/SRI – AMC: LTI hurdle below current performance – 9 October

■ Australian ESG/SRI – ANN: EPS growth hurdle appears 'in the money' – 2

October

■ Australian ESG/SRI – ANZ: 157% higher LTI grant – 10 December

■ Australian ESG/SRI – APA: Greater disclosure needed for ASX50 company; no

remuneration vote – 1 October

■ Australian ESG/SRI – ARI: FY13, FY14 LTI EPS hurdles look achievable– 6

November

■ Australian ESG/SRI – ARP: Minimalist Remuneration Report – 12 September

■ Australian ESG/SRI – ASX: LTI EPS hurdle well above consensus – 5 September

■ Australian ESG/SRI – AZJ: FY13 LTI targets appear achievable, FY14 some

challenges – 28 October

■ Australian ESG/SRI – BEN: LTI can vest on lower cash earnings – 11 October

■ Australian ESG/SRI – BHP: relativity with Board adjustments – 21 October

■ Australian ESG/SRI – BLD: 40% more LTI awards for FY14 – 15 October

■ Australian ESG/SRI – BOQ: Use of cash NPAT in STI – 11 November

■ Australian ESG/SRI – BSL: maximum STI in FY13 – 4 November

■ Australian ESG/SRI – BXB – High quality remuneration structure, though STI

disclosure could be improved – 9 October

■ Australian ESG/SRI – CBA: Fair value results in 67% more LTI – 22 October

■ Australian ESG/SRI – COH: recalibration of CEO's remuneration mix – 1 October

■ Australian ESG/SRI – CPU: 110% average STI over four years; LTI does not meet

EPS hurdle – 5 November

■ Australian ESG/SRI – CSL: EPS hurdle in the money – 24 September

■ Australian ESG/SRI – CRZ: low base salary, double digit LTI growth – 10 October

■ Australian ESG/SRI –CWN: Refreshing in design – 11 October

■ Australian ESG/SRI –DJS, MYR: Similarities, different outcomes – 12 November

■ Australian ESG/SRI –DOW: LTI EPS hurdles difficult to achieve – 22 October

■ Australian ESG/SRI –DUE: First look at Remuneration – 6 November

■ Australian ESG/SRI –FLT: one of a kind – 17 October

17 February 2014

Australia and NZ First Edition 148

■ Australian ESG/SRI –FMG: ROE LTI hurdle appears achievable – 29 October

■ Australian ESG/SRI –FXJ: new incentive plan – 23 October

■ Australian ESG/SRI –HVN: modest salary and incentives – 11 November

■ Australian ESG/SRI – IAG: LTI ROE hurdle could be higher – 11 September

■ Australian ESG/SRI – IPL: FY13 LTI EPS hurdle 'out of the money' – 11 December

■ Australian ESG/SRI: NAB: LTI award 145% higher than under VWAP – 10

December

■ Australian ESG/SRI: NCM: ROCE hurdle out of the money – 9 October

■ Australian ESG/SRI – ORG: Board slashes approved FY13 LTI grant – 2 October

■ Australian ESG/SRI – ORI: EPS LTI hurdle tough – 20 Jan

■ Australian ESG/SRI – PPT: LTI EPS hurdle appears achievable – 14 October

■ Australian ESG/SRI – RHC: FY14 LTI grant at 378% of base salary – 4 November

■ Australian ESG/SRI – REA: Estimate 25% LTI EPS growth but hurdles not

disclosed – 4 November

■ Australian ESG/SRI – SEK: Tailored to company needs – 14 November

■ Australian ESG/SRI – SGM: Board discretion on STI, LTI grant valued at 450% of

base – 4 November

■ Australian ESG/SRI – SHL: LTI hurdle of CAGR in ROIC appears difficult – 11

November

■ Australian ESG/SRI – SUN adjustments to underlying profits need disclosure – 3

October

■ Australian ESG/SRI – TAH: Prefer VWAP for calculating executive incentives –

15 October

■ Australian ESG/SRI – TLS: Hurdle lowered for FCF ROI on NBN payment timing

– 23 September

■ Australian ESG/SRI – TOL: FY14 LTI now ROC focussed – 2 October

■ Australian ESG/SRI – TTS: Lower CEO pay, no performance based LTI – 17

October

■ Australian ESG/SRI – TWE: Board shows discipline – 2 October

■ Australian ESG/SRI – UGL: No LTI expected for the CEO – 14 October

■ Australian ESG/SRI – WBC: 'Fair value' results in 92% higher LTI – 4 December

■ Australian ESG/SRI – WES: LTI all about relativity – 9 October

■ Australian ESG/SRI – WHC: reworked remuneration for the new CEO – 17

October

■ Australian ESG/SRI – WOR: currency a key to LTI EPS hurdle – 9 September

17 February 2014

Australia and NZ First Edition 149

Recent Australian ESG research:

■ Australian ESG/SRI – MSCI ESG rating changes – WPL makes AAA; healthcare

stocks down two notches – 13 August

■ Australian ESG/SRI – TWE: Executive remuneration may contribute to share

price overhang – 16 July

■ Australian ESG/SRI - LEI appoints new independent directors – an analysis of

LEI's latest Board composition – 21 Jun 2013.

■ Australian ESG/SRI - Too late to stop; Too late to start: winners and losers

from CSG – our views on the ESG issues associated with current and prospective

CSG projects – 10 Apr 2013.

■ Australian ESG/SRI - An update on safety – 28 Feb 2013.

■ Australian ESG/SRI - Water handling increases LNG capex – 25 Feb 2013.

■ Australian ESG/SRI - Impact of NSW policy on AGK CSG carrying value – 25

Feb 2013.

■ Australian ESG/SRI - MSCI SPN upgrade changes Utilities outlook – our views

on ESG issues in the Utilities sector in Australia – 13 Feb 2013.

■ Australian ESG/SRI - ESG issues to watch in 2013 – our key ESG issues for

2013 – 31 Jan 2013.

■ Australian ESG/SRI - Banks down, REITS up, RIO down to BB – an update on

key ESG stock calls, MSCI IVA rating changes and ESG Target Price impact changes

– 21 January 2013.

■ Australian ESG/SRI - ESG in the Media Sector – our views on ESG issues in the

Media sector in Australia – 27 November.

■ ESG changes in stocks calls and analyst views – an update on key ESG stock

calls, MSCI IVA rating changes and ESG Target Price impact changes – 24 October

2012.

■ “ESG overlay on key stock calls”- our view on the analysts’ outlook for MSCI IVA

ratings on 27 September 2012.

■ “$21.4bn in ESG concerns on Australian stocks” - our first view of the impact on

analysts’ Target Prices - 2 July 2012.

Recent Global ESG Research

■ Credit Suisse ESG Spotlight – weekly update from the global ESG team –29

January 2014

■ Credit Suisse ESG Spotlight – weekly update from the global ESG team – 23

January 2014

■ Credit Suisse ESG Spotlight – weekly update from the global ESG team – 15

January 2014

17 February 2014

Australia and NZ First Edition 150

MSCI Disclaimer

Australia and NZ First Edition 151

17 February 2014

Asia Pacific/New Zealand

Equity Research

Economics

■

NZ House Prices ECONOMICS

REINZ House Prices (Jan) – Further easing in

the rate of house price growth

■ The REINZ house price index (stratified) rose by 7.7% YoY in January

2014, down from the 9.2% YoY increase recorded over the previous

month. The national stratified house price index continued to ease back

from its November 2013 peak of NZ$437,700, recording a price of

NZ$423,150 over January.

■ While the rise in national house prices continued to be underpinned by robust

increases in both the Auckland and Canterbury regions, there were further

signs of a softening in the rate of growth in annual house price inflation.

In particular, annual house price inflation turned modestly negative in the

Wellington region (down 1.1%), while that past three months has seen declines

in the annual pace of growth in both Auckland and Christchurch house prices.

■ In addition to the softening in the rate of growth in national house prices, REINZ

estimates that the number of house sales declined by 1.1% MoM in January.

■ While it still remains a little early to be definitive regarding the impact

of the recently introduced high LVR mortgage restrictions, the RBNZ is

likely to take comfort from these data showing further signs of a

softening in the rate of growth in house prices. Moreover, despite the

current elevated level of consumer confidence and continued rise in migrant

inflows, the heightened prospect of the RBNZ raising interest rate settings in

March 2014 is also increasingly likely to be a factor dampening housing

market activity.

Figure 1: REINZ House Prices – January

YoY %

-10

-5

0

5

10

15

20

25

Jan-95 Jan-98 Jan-01 Jan-04 Jan-07 Jan-10 Jan-13

YoY% 3mth/YoY% Average

Source: REINZ, First NZ Capital

Research Analysts

Chris Green

64 9 302 5509

chris.green@fnzc.co.nz

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

17 February 2014

Australia and NZ First Edition 152

NZ House Prices Figure 2: House price inflation continues to be dominated

by the Auckland and Canterbury regions YoY %

Figure 3: Further signs of some pricing pressures easing

in the robust Auckland region YoY% - 3-month average

7.7

14.0

-1.1

10.0

2.9

5.2

-5

0

5

10

15

NZ AKL WNG CCH Other NI Other SI

-10

0

10

20

30

Jan-93 Jan-97 Jan-01 Jan-05 Jan-09 Jan-13

Total NZ Auckland Region Canterbury Region

Source: REINZ, First NZ Capital

Source: REINZ, First NZ Capital

Figure 4: National house prices in stratified terms moved

back from recent historic highs NZ$ - Stratified house prices

Figure 5: The ratio of Auckland to national house prices

stabilises after reaching a historic peak Ratio of regional house prices to national average

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14

NZ Auckland Wellington

Christchurch Other NI Other SI

0.6

0.8

1.0

1.2

1.4

1.6

Jan-92 Jan-96 Jan-00 Jan-04 Jan-08 Jan-12

Auckland Wellington Christchurch

Other NI Other SI

Source: REINZ, First NZ Capital

Source: REINZ, First NZ Capital

Figure 6: Further signs of a softening in house sales

Number (12M moving avg.) - lhs, YoY % (3M average) - rhs

Figure 7: REINZ house price inflation table

YoY %

-10

-5

0

5

10

15

20

25

4,000

5,000

6,000

7,000

8,000

9,000

10,000

11,000

Jan-95 Jan-99 Jan-03 Jan-07 Jan-11

House Sales - lhs House Prices - rhs

Long-term

YoY % Nov-13 Dec-13 Jan-14 Average

NZ 9.6 9.2 7.7 6.5

Auckland 14.9 14.4 14.0 7.7

Wellington 6.2 2.0 -1.1 6.1

Christchurch 12.2 7.2 10.0 6.3

Other North Island 3.8 8.4 2.9 5.9

Other South Island 5.2 6.7 5.2 6.3

Source: REINZ, First NZ Capital

Source: REINZ, First NZ Capital

17 February 2014

Australia and NZ First Edition 153

NZ House Prices Figure 8: Annual house sales ease back slightly below

their long-term “average” levels Number

Figure 9: Number of days to sell shows a seasonal

increase over January Monthly sales - lhs, Days to sell (inverted) - rhs

50,000

70,000

90,000

110,000

130,000

Jan-90 Jan-95 Jan-00 Jan-05 Jan-10

Annual Sales Annual Average

20

30

40

50

60

702,000

4,000

6,000

8,000

10,000

12,000

Jan-95 Jan-98 Jan-01 Jan-04 Jan-07 Jan-10 Jan-13

Number of sales - lhs Number of days to sell - rhs

Source: REINZ, First NZ Capital

Source: REINZ, First NZ Capital

Figure 10: Sharp rise in residential dwelling consents

over December contrasts with flattening sales growth Number (12-month moving average) - lhs, Number (s.a.) - rhs

Figure 11: Rising net migration inflows continue to

support housing market activity Annual total – lhs, YoY % - rhs

800

1,000

1,200

1,400

1,600

1,800

2,000

2,200

2,400

2,600

4,000

5,000

6,000

7,000

8,000

9,000

10,000

11,000

Jan-95 Jan-99 Jan-03 Jan-07 Jan-11

House Sales - lhs Consents ex apart. - rhs

-10

-5

0

5

10

15

20

25

-20,000

-10,000

0

10,000

20,000

30,000

40,000

50,000

Jan-93 Jan-97 Jan-01 Jan-05 Jan-09 Jan-13

Net Migration - lhs House Prices - rhs

Source: Statistics NZ, REINZ, First NZ Capital

Source: Statistics NZ, REINZ, First NZ Capital

Figure 12: Auckland (nominal) house prices now around

23% above their previous peak levels NZ$

Figure 13: RBNZ projects annual house price inflation

peaking around the current 10% level NZ$ - lhs, YoY % - rhs

$350,000

$450,000

$550,000

$650,000

$750,000

Jan-05 Jan-07 Jan-09 Jan-11 Jan-13

Auckland House Price

Auckland house prices now23% above previous peak

-10

-5

0

5

10

15

20

$250,000

$300,000

$350,000

$400,000

$450,000

Jan-05 Jan-07 Jan-09 Jan-11 Jan-13

House Prices (NZ$) - lhs House Prices (YoY %) - rhs

Source: REINZ, First NZ Capital

Source: REINZ, First NZ Capital

Australia and NZ First Edition 154

17 February 2014

Asia Pacific/Australia

Equity Research

Credit Suisse Ratings – Australia

Research Analysts

Adam Indikt

61 3 9280 1659

adam.indikt@credit-suisse.com

RATINGS

As of Friday, 14 February 2014

Figure 1: Credit Suisse stock ratings – distribution

UNDERPERFORM 22%

NEUTRAL 44%

OUTPERFORM 34%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

See Figure 3 for ratings on each stock covered by Credit Suisse, ranked by expected total return.

Source: Credit Suisse estimates

Stock ratings

Individual stock ratings are determined by the projected total return on a stock

relative to absolute return benchmarks.

Analysts project a 12-month target share price for each stock. The capital gain

or loss implied by the 12-month target share price, along with the analyst’s

projected prospective dividend yield, generates the analyst’s projected total

return for a given stock.

The absolute return required to achieve an Outperform rating is greater than or

equal to 15%, and to achieve an Underperform rating is less than 7.5%. A

Neutral rating requires a projected total return within this range.

17 February 2014

Australia and NZ First Edition 155

Figure 2: Stock ratings definitions Stock rating Projected total return

Outperform ≥ 15 % Neutral 7.5% to < 15% Underperform < 7.5% Source: Credit Suisse

Credit Suisse applies a volatility cushion of 2.5% to the 7.5% and 15% total return

benchmarks so as to minimise rating changes caused by short-lived stock price

movements. Accordingly, a stock must trade for more than four consecutive trading days

above 10% or below 12.5% total return before an automatic rating change to Neutral from

either Underperform or Outperform, respectively, is considered appropriate.

Given the dynamic nature of share prices and as expectations regarding earnings

performance are adjusted for new information, it is possible these ratings could change

with some frequency.

17 February 2014

Australia and NZ First Edition 156

Figure 3: Ranking by projected total return Code Share Price Target Price Total Return** Rating^

KGD.AX

$0.10 $0.35 250% OUTPERFORM BSE.AX

$0.44 $0.90 107% OUTPERFORM AQZ.AX

$1.23 $2.15 82% OUTPERFORM * MDL.AX

$2.20 $4.00 82% OUTPERFORM SYR.AX

$2.75 $4.90 78% OUTPERFORM WHC.AX

$1.57 $2.75 76% OUTPERFORM MCS.AX

$1.10 $1.75 64% OUTPERFORM * NWT.AX

$0.47 $0.74 58% OUTPERFORM * TIG.AX $0.16 $0.25 56% OUTPERFORM ISU.AX $1.22 $1.90 56% OUTPERFORM * TSE.AX $0.82 $1.20 46% OUTPERFORM * AOH.AX

$0.18 $0.26 44% OUTPERFORM MSB.AX

$5.77 $7.95 38% OUTPERFORM GRY.AX

$0.19 $0.25 35% OUTPERFORM FMG.AX

$5.70 $7.50 35% OUTPERFORM MRM.AX

$2.94 $3.80 34% OUTPERFORM * BND.AX

$0.15 $0.20 33% NEUTRAL JBH.AX $18.27 $23.06 31% OUTPERFORM TGA.AX

$2.02 $2.53 31% NEUTRAL * TRS.AX

$10.91 $13.50 29% NEUTRAL FLT.AX $46.67 $58.00 28% OUTPERFORM FXL.AX $4.07 $5.00 27% OUTPERFORM * ERA.AX

$1.19 $1.50 27% OUTPERFORM PMV.AX

$7.91 $9.50 27% OUTPERFORM ORL.AX

$3.91 $4.65 25% OUTPERFORM SWM.AX

$2.18 $2.60 25% OUTPERFORM SAI.AX $3.83 $4.57 24% OUTPERFORM * PAN.AX

$0.24 $0.29 23% NEUTRAL QBE.AX

$11.43 $13.65 23% OUTPERFORM PRG.AX

$2.71 $3.15 23% NEUTRAL * CTX.AX

$19.93 $23.80 22% OUTPERFORM WRT.AX

$3.06 $3.51 21% OUTPERFORM AGO.AX

$1.10 $1.30 21% OUTPERFORM SFH.AX

$0.84 $1.00 21% OUTPERFORM RIO.AX $67.90 $80.00 21% OUTPERFORM BKN.AX

$4.51 $5.15 21% OUTPERFORM * GDI.AX $0.89 $1.01 20% OUTPERFORM SKE.AX

$3.07 $3.50 20% OUTPERFORM * ANZ.AX

$31.34 $35.80 20% OUTPERFORM TWR.AX

$1.49 $1.66 20% NEUTRAL UXC.AX

$1.06 $1.20 20% OUTPERFORM * MQG.AX

$55.36 $63.00 19% OUTPERFORM NAB.AX

$34.12 $38.00 18% OUTPERFORM PRT.AX

$1.00 $1.10 18% NEUTRAL OSH.AX

$8.32 $9.70 17% OUTPERFORM DUE.AX

$2.11 $2.30 17% OUTPERFORM MYR.AX

$2.49 $2.70 17% NEUTRAL CQR.AX

$3.66 $3.99 17% NEUTRAL PGH.AX

$3.45 $3.85 16% OUTPERFORM API.AX $0.58 $0.64 16% OUTPERFORM UGL.AX

$7.08 $7.75 16% NEUTRAL PRY.AX

$4.65 $5.15 16% NEUTRAL AHE.AX

$3.65 $4.00 16% NEUTRAL * AMP.AX

$4.52 $4.96 15% NEUTRAL TLS.AX $5.20 $5.70 15% OUTPERFORM GPT.AX

$3.66 $4.00 15% OUTPERFORM DXS.AX

$1.07 $1.16 15% OUTPERFORM LLC.AX $11.33 $12.54 15% OUTPERFORM SXY.AX

$0.74 $0.85 15% OUTPERFORM WDC.AX

$10.27 $11.27 15% NEUTRAL CGF.AX

$6.30 $7.00 15% OUTPERFORM IAG.AX $5.47 $6.00 15% NEUTRAL SLM.AX

$2.05 $2.20 15% NEUTRAL * SGP.AX

$3.90 $4.23 15% NEUTRAL WOR.AX

$15.69 $17.10 14% NEUTRAL NHC.AX

$3.39 $3.70 14% NEUTRAL IIN.AX $7.38 $8.10 14% OUTPERFORM * IOF.AX $3.10 $3.33 13% NEUTRAL MMS.AX

$11.34 $12.25 13% UNDERPERFORM * WTF.AX

$2.73 $2.90 13% UNDERPERFORM * RWH.AX

$3.25 $3.55 13% OUTPERFORM * MGR.AX

$1.74 $1.87 13% OUTPERFORM IVC.AX $10.61 $11.60 13% NEUTRAL * NUF.AX

$4.14 $4.55 13% NEUTRAL RMD.AX

$5.09 $5.60 13% NEUTRAL EHL.AX $0.26 $0.28 12% NEUTRAL * CSL.AX $67.69 $74.55 12% OUTPERFORM CFX.AX

$1.95 $2.04 12% NEUTRAL WOW.AX

$35.50 $38.25 12% OUTPERFORM SGN.AX

$1.47 $1.55 12% NEUTRAL AMX.AX

$0.17 $0.19 12% NEUTRAL AIO.AX $5.72 $6.20 12% OUTPERFORM BLD.AX $5.48 $5.90 11% NEUTRAL ANN.AX

$19.29 $21.00 11% NEUTRAL SUL.AX $10.76 $11.50 11% NEUTRAL DOW.AX

$4.90 $5.20 11% NEUTRAL ENE.AX

$6.00 $6.44 11% OUTPERFORM WEB.AX

$3.06 $3.25 11% NEUTRAL * AMM.AX

$2.02 $2.17 11% NEUTRAL * SIP.AX $0.64 $0.66 11% NEUTRAL BOQ.AX

$11.89 $12.50 11% NEUTRAL HVN.AX

$3.17 $3.40 11% NEUTRAL ARP.AX

$10.70 $11.50 10% UNDERPERFORM * ILU.AX $9.24 $10.00 10% NEUTRAL ALQ.AX

$8.31 $8.75 10% UNDERPERFORM GNC.AX

$7.85 $8.36 10% UNDERPERFORM PPT.AX $48.34 $51.00 10% NEUTRAL VAH.AX

$0.35 $0.38 10% NEUTRAL TPI.AX $1.17 $1.27 10% NEUTRAL *

Source: ASX, Credit Suisse estimates, CSEC estimates. Correct as of 9PM AET on 14 February 2014. * Please note these companies are covered by Credit Suisse Emerging Companies (CSEC), a joint venture between Credit Suisse and First NZ Capital. **Projected capital gain or loss plus gross dividend yield.

Figure3: Ranking by projected total return (continued) Code Share Price Target Price Total Return** Rating^

SKI.AX $1.73 $1.78 10% OUTPERFORM BEN.AX

$11.72 $12.20 10% NEUTRAL MTS.AX

$2.99 $3.10 10% UNDERPERFORM TTS.AX $3.04 $3.16 10% NEUTRAL SMX.AX

$4.20 $4.40 10% NEUTRAL * BXB.AX

$8.79 $9.29 9% NEUTRAL FDC.AX

$2.37 $2.43 9% NEUTRAL QUB.AX

$2.07 $2.20 9% NEUTRAL AMC.AX

$10.72 $11.20 9% NEUTRAL ORA.AX

$1.35 $1.40 8% OUTPERFORM PBG.AX

$0.75 $0.75 8% NEUTRAL CPU.AX

$11.93 $12.60 8% NEUTRAL ENV.AX

$1.19 $1.22 8% NEUTRAL WBC.AX

$32.75 $33.50 8% UNDERPERFORM WES.AX

$43.84 $45.00 7% NEUTRAL SEK.AX

$13.19 $13.78 7% NEUTRAL GMG.AX

$4.81 $4.95 7% NEUTRAL NWS.AX

$19.20 $20.25 7% NEUTRAL DMP.AX

$19.51 $20.50 7% NEUTRAL * IPL.AX $3.02 $3.10 7% OUTPERFORM HGG.AX

$4.34 $4.45 7% NEUTRAL ORG.AX

$14.80 $15.30 7% NEUTRAL NVT.AX

$7.09 $7.35 7% OUTPERFORM * DJS.AX $3.10 $3.14 7% NEUTRAL NEC.AX

$2.23 $2.30 6% OUTPERFORM SPN.AX

$1.28 $1.27 6% NEUTRAL IRE.AX $9.41 $9.60 6% NEUTRAL * TAH.AX

$3.60 $3.65 6% NEUTRAL IFL.AX $9.34 $9.35 6% NEUTRAL PNA.AX

$1.97 $2.00 5% OUTPERFORM SUN.AX

$12.54 $12.36 5% UNDERPERFORM CBA.AX

$75.99 $76.00 5% UNDERPERFORM BRG.AX

$8.07 $8.20 5% NEUTRAL * EGP.AX

$2.45 $2.50 5% OUTPERFORM JHX.AX $13.50 $13.50 5% OUTPERFORM BHP.AX

$37.71 $38.00 5% NEUTRAL TME.AX

$3.70 $3.70 5% UNDERPERFORM APE.AX

$5.01 $5.00 4% NEUTRAL * GUD.AX

$5.96 $5.77 4% NEUTRAL * NWH.AX

$1.36 $1.30 4% NEUTRAL * APA.AX

$6.20 $6.05 3% UNDERPERFORM AGK.AX

$15.92 $15.80 3% NEUTRAL FAN.AX

$1.99 $2.00 3% UNDERPERFORM CAB.AX

$4.12 $4.00 3% UNDERPERFORM * ALZ.AX $3.91 $3.81 3% NEUTRAL CHC.AX

$3.89 $3.78 3% NEUTRAL QAN.AX

$1.22 $1.21 3% NEUTRAL BPT.AX $1.54 $1.55 3% NEUTRAL SHL.AX $16.85 $16.50 2% NEUTRAL TOL.AX $5.67 $5.49 2% NEUTRAL AWC.AX

$1.30 $1.30 2% OUTPERFORM CPA.AX

$1.26 $1.21 2% NEUTRAL OZL.AX $3.93 $3.80 2% UNDERPERFORM REA.AX

$47.62 $47.50 1% NEUTRAL CCL.AX

$11.79 $11.30 1% UNDERPERFORM ASX.AX

$36.80 $35.20 1% UNDERPERFORM MYX.AX

$0.87 $0.86 0% NEUTRAL ORI.AX $24.19 $23.10 0% NEUTRAL RRL.AX

$3.09 $2.90 0% NEUTRAL PRU.AX

$0.51 $0.50 -1% UNDERPERFORM CSR.AX

$3.06 $2.90 -1% OUTPERFORM AUB.AX

$10.95 $10.41 -1% UNDERPERFORM LEI.AX $16.34 $15.20 -2% UNDERPERFORM STO.AX

$14.06 $13.40 -2% UNDERPERFORM RHC.AX

$43.53 $41.50 -3% NEUTRAL WPL.AX

$38.36 $35.00 -3% UNDERPERFORM BSL.AX $5.93 $5.70 -3% OUTPERFORM COH.AX

$55.47 $51.10 -3% UNDERPERFORM CRZ.AX

$10.61 $9.80 -4% NEUTRAL SGM.AX

$10.70 $10.00 -5% UNDERPERFORM ALL.AX $4.94 $4.50 -5% UNDERPERFORM YAL.AX $0.70 $0.65 -5% UNDERPERFORM AQA.AX

$2.75 $2.60 -5% OUTPERFORM TPM.AX

$5.41 $5.00 -6% NEUTRAL * CWN.AX

$17.40 $15.90 -6% UNDERPERFORM SXL.AX $1.63 $1.40 -8% UNDERPERFORM SFR.AX

$6.55 $5.75 -9% UNDERPERFORM BLY.AX $0.44 $0.40 -9% UNDERPERFORM * MGX.AX

$1.18 $1.05 -9% UNDERPERFORM ARI.AX $1.71 $1.43 -10% UNDERPERFORM IGO.AX $4.25 $3.70 -10% OUTPERFORM SDF.AX

$1.58 $1.36 -11% UNDERPERFORM PTM.AX

$7.09 $6.00 -11% UNDERPERFORM ABC.AX

$4.06 $3.40 -12% UNDERPERFORM TWE.AX

$3.75 $3.15 -12% UNDERPERFORM TEN.AX

$0.34 $0.29 -13% NEUTRAL GFF.AX

$0.61 $0.50 -13% UNDERPERFORM VOC.AX

$3.29 $2.82 -14% OUTPERFORM * WSA.AX

$3.19 $2.75 -14% NEUTRAL BTT.AX $6.30 $5.15 -14% NEUTRAL FWD.AX

$2.97 $2.40 -14% NEUTRAL * OKN.AX

$1.63 $1.25 -17% NEUTRAL * OGC.AX

$2.49 $2.00 -20% UNDERPERFORM AQG.AX

$2.82 $2.25 -20% UNDERPERFORM EVN.AX

$0.83 $0.64 -21% UNDERPERFORM NCM.AX

$11.05 $8.20 -26% UNDERPERFORM FXJ.AX $0.72 $0.50 -28% UNDERPERFORM APN.AX

$0.45 $0.30 -31% UNDERPERFORM GBG.AX

$0.10 $0.06 -41% UNDERPERFORM

Source: ASX, Credit Suisse estimates CSEC estimates. Correct as of 9PM AET on 14 February 2014. * Please note these companies are covered by Credit Suisse Emerging Companies (CSEC), a joint venture between Credit Suisse and First NZ Capital. **Projected capital gain or loss plus gross dividend yield.

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Top 100 Earnings & Dividends Research Analyst

Jason Swinbourne

612 8205 4591

jason.swinbourne@credit-suisse.com

As at 14 February 2014 Year Rating Share 12M Mkt NPAT PE Relative PE Dividend Dividend Yield EBITDA Multiple F'kg

to Price Tgt Cap 2013 2014F 2015F 2013 2014F 2015F 2013 2014F 2015F 2013 2014F 2015F 2013 2014F 2015F 2013 2014F 2015F 2013 2014F 2015F 2014F

$ $ $m $m $m $m ¢ ¢ ¢ x x x % % % ¢ ¢ ¢ % % % x x x %

Energy

Aurora Oil & Gas 31-Dec RSTR 4.13 1,666 124.5 288.7 266.8 27.2 63.0 58.3 13.7 5.9 6.4 81.6 41.3 47.5 0.0 0.0 0.0 0.0 0.0 0.0 6.5 3.4 3.0 0

Beach Energy 30-Jun NTRL 1.54 1.55 1,962 140.8 264.2 235.9 10.5 19.5 17.2 14.7 7.9 8.9 87.7 55.4 66.5 2.8 2.8 2.8 1.8 1.8 1.8 5.3 3.4 3.9 100

Caltex Australia 31-Dec OPFM 19.93 23.80 5,381 320.3 433.6 475.5 118.6 160.6 176.1 16.8 12.4 11.3 100.4 87.1 84.4 40.0 48.2 105.7 2.0 2.4 5.3 8.7 6.9 6.5 100

Origin Energy 30-Jun NTRL 14.80 15.30 16,298 760.0 791.2 1,005.2 69.2 71.9 91.0 21.4 20.6 16.3 127.8 144.5 121.3 50.0 50.0 50.0 3.4 3.4 3.4 10.6 10.8 9.7 50

Oil Search 31-Dec OPFM 8.32 9.70 10,047 209.0 328.0 907.5 15.6 24.3 67.0 48.1 30.7 11.2 287.2 215.6 83.2 4.0 4.0 26.8 0.5 0.5 3.6 30.7 17.6 7.4 0

Santos Ltd 31-Dec UPFM 14.06 13.40 13,642 558.7 558.3 1,002.3 57.8 57.2 101.7 24.3 24.6 13.8 145.2 172.5 103.2 30.0 30.0 50.8 2.1 2.1 3.6 9.9 9.5 6.6 100

WorleyParsons 30-Jun NTRL 15.69 17.10 3,820 322.1 261.9 276.6 130.8 106.2 112.2 12.0 14.8 14.0 71.7 103.7 104.3 92.5 84.0 78.0 5.9 5.4 5.0 7.5 8.6 8.4 75

Woodside Petroleum 31-Dec UPFM 38.36 35.00 28,410 1,717.9 2,068.9 2,257.9 208.5 251.1 274.0 16.5 13.7 12.6 98.8 96.4 93.9 250.4 200.9 219.2 7.3 5.8 6.4 8.2 6.6 6.1 100

Sector Aggregate 20.3 16.2 12.4 4.0 3.7 4.7 10.0 7.9 6.6

Materials - Chemicals

Incitec Pivot Ltd. 30-Sep OPFM 3.02 3.10 4,968 298.4 350.9 477.7 18.3 21.5 29.3 16.5 14.0 10.3 98.5 98.4 76.8 9.2 11.9 16.1 3.0 3.9 5.3 9.8 8.0 6.2 50

Orica 30-Sep NTRL 24.19 23.10 8,956 601.6 626.7 693.6 165.2 171.8 189.6 14.6 14.1 12.8 87.5 98.8 95.2 94.0 98.0 107.0 3.9 4.1 4.4 9.1 9.1 8.0 50

Sector Aggregate 15.3 14.1 11.8 3.6 4.0 4.7 9.4 8.7 7.3

Materials - Construction Materials

Adelaide Brighton 31-Dec UPFM 4.06 3.40 2,592 148.6 153.0 158.4 23.1 23.8 24.6 17.6 17.1 16.5 105.0 119.8 123.0 17.5 18.0 18.0 4.3 4.4 4.4 10.9 10.6 10.4 100

Boral 30-Jun NTRL 5.48 5.90 4,267 104.4 174.0 224.0 13.5 22.5 28.8 40.6 24.3 19.0 242.4 170.6 141.9 11.0 17.0 23.0 2.0 3.1 4.2 11.6 9.4 9.2 80

James Hardie Industries SE 31-Mar OPFM 13.50 13.50 5,382 140.8 193.2 246.0 32.1 43.6 55.5 37.9 27.8 21.9 226.1 195.4 163.1 18.0 53.0 61.0 1.5 4.4 5.0 21.6 16.7 13.6 0

Sector Aggregate 32.9 24.2 19.9 2.1 3.9 4.6 15.2 12.4 11.3

Materials - Containers & Packaging

Amcor 30-Jun NTRL 10.72 11.20 12,936 689.5 722.8 806.1 56.3 59.0 65.8 19.0 18.2 16.3 113.8 127.5 121.5 40.0 41.3 46.7 3.7 3.9 4.4 10.5 9.9 9.3 0

Orora 30-Jun OPFM 1.35 1.40 1,629 - 98.5 112.7 8.2 9.3 n.m 16.5 14.5 116.2 107.8 5.8 6.5 4.3 4.8 n.m 8.0 7.3 0

Materials - Metals & Mining

Arrium 30-Jun UPFM 1.71 1.43 2,321 168.3 362.7 246.9 12.5 26.7 18.2 13.6 6.4 9.4 81.4 44.8 69.9 5.0 12.0 9.1 2.9 7.0 5.3 7.5 4.2 5.0 0

Alumina Limited 31-Dec OPFM 1.30 1.30 3,267 17.0 40.2 170.6 0.6 1.4 6.1 n.m 81.3 19.2 n.m 570.9 142.9 0.0 1.0 7.0 0.0 0.9 6.0 n.m n.m n.m 100

BHP Billiton 30-Jun NTRL 37.71 38.00 174,644 11,223.0 13,643.8 12,445.5 210.2 254.3 231.9 16.1 13.3 14.6 96.4 93.6 109.0 116.0 127.0 140.0 3.4 3.7 4.1 7.2 6.3 6.6 100

BlueScope Steel 30-Jun OPFM 5.93 5.70 3,313 29.7 67.8 160.1 5.2 12.1 28.7 n.m 48.8 20.7 680.0 342.7 154.3 0.0 0.0 8.8 0.0 0.0 1.5 8.3 6.6 4.9 100

Fortescue Metals Group Ltd 30-Jun OPFM 5.70 7.50 15,954 1,706.4 3,279.9 2,841.9 54.8 105.3 91.3 9.4 4.9 5.6 55.9 34.1 41.9 10.0 10.0 21.0 2.0 2.0 4.1 8.0 3.5 3.5 100

Iluka Resources 31-Dec NTRL 9.24 10.00 3,869 59.0 96.0 337.7 14.1 22.9 80.7 65.5 40.3 11.5 391.5 282.9 85.5 10.0 19.0 30.0 1.1 2.1 3.2 15.2 12.4 6.1 100

Newcrest Mining 30-Jun UPFM 11.05 8.20 8,470 451.0 295.8 530.6 58.9 38.6 69.3 18.8 28.6 16.0 112.1 200.8 119.0 12.0 0.0 0.0 1.1 0.0 0.0 9.2 10.2 7.4 0

OZ Minerals 31-Dec UPFM 3.93 3.80 1,193 62.5- 24.5- 82.2- -20.6 -8.1 -27.1 n.m n.m n.m n.m n.m n.m 20.0 20.0 20.0 5.1 5.1 5.1 7.2 6.3 6.4 0

Rio Tinto 31-Dec OPFM 67.90 80.00 108,845 10,217.0 11,054.3 11,529.0 553.1 598.4 624.1 11.0 10.2 9.8 65.9 71.6 73.0 192.1 211.3 232.4 3.1 3.5 3.8 5.9 5.7 5.3 100

Regis Resources Limited 30-Jun NTRL 3.09 2.90 1,539 145.7 112.7 179.6 30.1 22.5 35.9 10.3 13.7 8.6 61.3 96.3 64.2 15.0 11.3 21.5 4.9 3.6 7.0 6.0 7.3 4.6 0

Sims Metal Management 30-Jun UPFM 10.70 10.00 2,187 17.1 42.9 127.1 8.4 21.0 62.2 n.m 51.0 17.2 764.0 358.1 128.3 0.0 10.5 31.1 0.0 1.0 2.9 12.2 11.4 6.8 40

Sector Aggregate 15.5 11.6 11.4 2.8 3.4 4.0 7.6 6.0 5.7

Industrials - Capital Goods

Leighton Holdings 31-Dec UPFM 16.34 15.20 5,510 521.5 502.1 503.8 154.7 149.0 149.5 10.6 11.0 10.9 63.1 77.0 81.6 99.0 89.4 89.7 6.1 5.5 5.5 3.3 3.2 3.1 55

UGL Limited 30-Jun NTRL 7.08 7.75 1,179 81.8 117.7 119.5 49.1 70.8 71.4 14.4 10.0 9.9 86.1 70.2 73.9 39.0 46.0 47.0 5.5 6.5 6.6 8.6 6.7 6.4 100

Sector Aggregate 11.1 10.8 10.7 6.0 5.7 5.7 3.7 3.5 3.4

Industrials - Commercial & Professional Services

ALS Limited 31-Mar UPFM 8.31 8.75 3,276 237.9 191.5 226.2 69.4 53.4 61.3 12.0 15.6 13.6 71.5 109.3 101.2 48.0 36.6 42.9 5.8 4.4 5.2 9.1 11.0 9.1 50

Brambles Limited 30-Jun NTRL 8.79 9.29 12,341 585.1 629.5 698.3 37.7 40.5 45.0 21.0 19.5 17.6 125.3 136.9 131.1 27.0 30.0 32.0 3.5 3.4 3.6 10.5 9.8 9.1 25

Downer EDI 30-Jun NTRL 4.90 5.20 2,130 215.4 214.9 224.6 50.1 49.1 50.4 9.8 10.0 9.7 58.4 70.0 72.5 21.0 25.0 25.0 4.3 5.1 5.1 3.5 3.4 2.9 100

Seek 30-Jun NTRL 13.19 13.78 4,474 141.0 164.4 202.9 41.5 48.4 59.7 31.8 27.2 22.1 189.9 191.3 164.7 22.0 33.9 41.8 1.7 2.6 3.2 19.9 15.6 13.2 100

Sector Aggregate 19.6 18.4 16.1 3.3 3.5 3.9 10.1 9.1 8.0

Industrials - Transportation

Asciano Group 30-Jun OPFM 5.72 6.20 5,579 358.4 360.7 415.6 36.7 37.0 42.6 15.6 15.5 13.4 93.0 108.6 100.2 11.1 14.8 21.3 1.9 2.6 3.7 8.7 8.2 7.4 100

Aurizon 30-Jun RSTR 5.10 10,900 487.4 519.0 643.3 21.6 24.3 30.1 23.6 21.0 16.9 141.1 147.4 126.4 16.0 17.0 21.1 3.1 3.3 4.1 10.6 10.0 8.5 20

Qantas Airways 30-Jun NTRL 1.22 1.21 2,669 133.4 382.3- 197.1- 6.0 -17.0 -8.8 20.4 n.m n.m 122.0 n.m n.m 0.0 1.5 5.5 0.0 1.2 4.5 3.2 5.2 4.4 100

Toll Holdings 30-Jun NTRL 5.67 5.49 4,066 288.0 285.7 307.2 40.2 40.1 42.8 14.1 14.1 13.2 84.3 99.3 98.7 26.0 29.5 32.0 4.6 5.2 5.6 7.6 7.2 6.8 100

Sector Aggregate 18.7 29.3 19.8 2.7 3.2 4.3 7.7 8.1 7.2

* Please note these companies are covered by Credit Suisse Emerging Companies (CSEC), a joint venture between Credit Suisse and First NZ Capital.

EPS

Source: Company data, Credit Suisse estimates, CSEC estimates

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Top 100 Earnings & Dividends (continued) As at 14 February 2014 Year Rating Share 12M Mkt NPAT PE Relative PE Dividend Dividend Yield EBITDA Multiple F'kg

to Price Tgt Cap 2013 2014F 2015F 2013 2014F 2015F 2013 2014F 2015F 2013 2014F 2015F 2013 2014F 2015F 2013 2014F 2015F 2013 2014F 2015F 2014F

$ $ $m $m $m $m ¢ ¢ ¢ x x x % % % ¢ ¢ ¢ % % % x x x %

Consumer Discretionary - Consumer Durables & Apparel

Consumer Discretionary - Consumer Services

Aristocrat Leisure 30-Sep UPFM 4.94 4.50 2,724 107.2 130.5 144.5 19.4 23.6 26.1 25.5 21.0 18.9 152.3 147.3 141.2 14.5 16.5 20.0 2.9 3.3 4.0 15.6 12.4 11.0 0

Crown 30-Jun UPFM 17.40 15.90 12,674 472.8 614.2 663.3 64.9 84.3 91.1 26.8 20.6 19.1 160.1 144.9 142.5 37.0 37.0 37.0 2.1 2.1 2.1 18.8 18.1 18.3 60

Echo Entertainment 30-Jun OPFM 2.45 2.50 2,023 123.3 126.4 133.6 14.9 15.3 16.1 16.4 16.0 15.2 98.2 112.5 113.5 6.0 6.0 8.0 2.4 2.4 3.3 7.0 6.7 6.4 100

Flight Centre 30-Jun OPFM 46.67 58.00 4,692 240.8 272.3 307.3 239.0 270.2 305.0 19.5 17.3 15.3 116.7 121.3 114.2 137.0 160.5 190.5 2.9 3.4 4.1 9.0 7.3 6.2 100

Navitas Ltd * 30-Jun OPFM 7.09 7.35 2,662 74.6 82.6 108.1 19.9 22.0 28.8 35.7 32.2 24.6 213.2 226.3 183.7 19.5 19.5 23.0 2.8 2.7 3.2 21.2 18.8 14.9 90

Tabcorp Holdings 30-Jun NTRL 3.60 3.65 2,715 139.1 144.7 162.0 18.8 19.2 21.4 19.1 18.8 16.8 114.1 131.8 125.7 19.0 15.3 17.1 5.3 4.3 4.8 8.3 8.0 7.5 100

Tatts Group 30-Jun NTRL 3.04 3.16 4,308 227.4 243.0 250.2 16.4 17.2 17.4 18.5 17.7 17.4 110.5 124.2 130.0 15.5 17.0 17.0 5.1 5.6 5.6 11.8 10.6 10.4 100

Sector Aggregate 22.8 19.7 18.0 3.1 3.1 3.4 12.8 11.6 10.7

Consumer Discretionary - Media

Sector Aggregate n.m n.m n.m n.m n.m n.m

Consumer Discretionary - Retailing

David Jones 26-Jul NTRL 3.10 3.14 1,665 101.6 92.1 107.5 19.1 17.2 20.1 16.2 18.0 15.4 96.8 126.3 115.0 17.0 15.1 17.4 5.5 4.9 5.6 8.5 8.9 7.9 100

Harvey Norman 30-Jun NTRL 3.17 3.40 3,368 183.4 216.8 243.1 17.3 20.4 22.9 18.4 15.5 13.9 109.7 109.0 103.3 9.0 10.1 11.3 2.8 3.2 3.6 11.5 8.9 8.0 100

Myer Holdings 27-Jul NTRL 2.49 2.70 1,458 127.2 125.1 149.5 21.6 21.4 25.6 11.5 11.6 9.7 68.9 81.8 72.5 18.0 18.2 22.4 7.2 7.3 9.0 5.9 6.1 5.3 100

Sector Aggregate 15.7 14.9 13.0 4.5 4.6 5.3 8.8 8.0 7.2

Consumer Staples - Food & Drug Retailing

Metcash 30-Apr UPFM 2.99 3.10 2,656 268.1 254.1 215.5 31.1 28.9 24.5 9.6 10.4 12.2 57.5 72.8 91.2 28.0 20.8 17.1 9.4 7.0 5.7 6.8 7.4 8.0 100

Wesfarmers 30-Jun NTRL 43.84 45.00 50,121 2,261.0 2,340.9 2,686.6 195.6 204.8 239.7 22.4 21.4 18.3 133.9 150.3 136.4 180.0 195.4 223.0 4.1 4.5 5.1 11.6 11.4 10.3 100

Woolworths 30-Jun OPFM 35.50 38.25 44,539 2,355.7 2,524.7 2,703.9 189.5 200.4 213.3 18.7 17.7 16.6 111.9 124.3 124.2 133.0 139.7 149.0 3.7 3.9 4.2 10.4 10.0 9.3 100

Sector Aggregate 19.9 19.0 17.3 4.1 4.3 4.7 10.8 10.6 9.8

Consumer Staples - Food Beverage & Tobacco

Coca-Cola Amatil 31-Dec UPFM 11.79 11.30 9,003 508.8 515.5 522.9 66.7 67.4 68.3 17.7 17.5 17.3 105.6 122.8 128.7 59.5 61.0 58.0 5.0 5.2 4.9 10.2 10.0 9.8 70

Graincorp 30-Sep UPFM 7.85 8.36 1,797 174.5 121.1 146.7 76.2 52.2 64.1 10.3 15.0 12.2 61.5 105.6 91.4 40.0 27.6 33.6 5.1 3.5 4.3 6.2 6.8 6.2 100

Treasury Wine 30-Jun UPFM 3.75 3.15 2,427 136.8 162.4 196.4 20.7 25.0 30.2 18.2 15.0 12.4 108.4 105.4 92.6 13.0 12.0 15.0 3.5 3.2 4.0 9.3 10.2 8.2 0

Sector Aggregate 16.2 16.6 15.3 4.8 4.6 4.7 9.2 9.5 8.8

Health Care

Ansell Limited 30-Jun NTRL 19.29 21.00 2,649 139.2 161.9 194.4 106.0 111.9 125.6 16.4 15.5 13.8 97.7 108.8 103.0 38.0 40.7 46.5 2.2 2.3 2.7 14.5 12.6 10.1 0

Cochlear 30-Jun UPFM 55.47 51.10 3,165 132.6 108.0 150.5 232.4 189.2 261.7 23.9 29.3 21.2 142.6 205.9 158.1 252.0 254.0 254.0 4.5 4.6 4.6 16.1 19.6 14.2 0

CSL Ltd 30-Jun OPFM 67.69 74.55 29,457 1,216.3 1,342.3 1,425.6 243.1 276.6 296.8 25.0 22.0 20.5 149.5 154.4 153.0 102.0 113.1 125.3 1.7 1.9 2.1 18.0 15.9 14.8 0

Primary Health Care 30-Jun NTRL 4.65 5.15 2,348 150.1 167.8 188.6 29.9 33.3 37.1 15.6 14.0 12.5 93.0 98.2 93.4 17.5 22.0 24.0 3.8 4.7 5.2 8.8 8.4 7.9 100

Ramsay Health Care 30-Jun NTRL 43.53 41.50 8,797 275.4 323.1 373.0 148.0 170.3 195.4 29.4 25.6 22.3 175.7 179.5 166.2 70.5 82.7 94.9 1.6 1.9 2.2 15.6 13.8 12.2 100

ResMed Inc. 30-Jun NTRL 5.09 5.60 6,478 307.2 364.3 403.7 21.0 25.1 27.7 21.8 18.3 16.5 130.4 128.2 123.2 7.6 10.5 12.5 1.7 2.3 2.7 13.6 11.6 10.5 0

Sonic Healthcare 30-Jun NTRL 16.85 16.50 6,753 335.0 403.8 441.1 84.3 100.4 108.5 20.0 16.8 15.5 119.5 117.8 115.9 62.0 72.9 78.8 3.7 4.3 4.7 13.1 11.0 10.0 45

Sector Aggregate 25.5 20.7 18.4 2.0 2.4 2.7 16.9 13.9 12.3

Financials - Banks

ANZ Banking Group 30-Sep OPFM 31.34 35.80 86,000 6,446.0 7,036.2 7,450.6 229.6 247.8 261.9 13.6 12.6 12.0 81.5 88.8 89.2 164.0 176.0 187.0 5.2 5.6 6.0 4.8 4.1 3.6 100

Bendigo and Adelaide Bank 30-Jun NTRL 11.72 12.20 4,805 348.0 378.3 397.4 78.4 84.3 87.7 15.0 13.9 13.4 89.3 97.6 99.7 61.0 64.0 67.0 5.2 5.5 5.7 8.2 7.5 7.1 100

Bank of Queensland 31-Aug NTRL 11.89 12.50 3,835 248.2 291.3 328.1 75.8 86.5 95.7 15.7 13.7 12.4 93.8 96.5 92.7 58.0 66.0 73.0 4.9 5.6 6.1 9.7 8.6 7.7 100

Commonwealth Bank Australia 30-Jun UPFM 75.99 76.00 122,490 7,720.0 8,458.1 8,535.6 468.5 511.3 511.2 16.2 14.9 14.9 96.9 104.3 110.9 364.0 393.0 397.0 4.8 5.2 5.2 9.0 7.3 7.1 100

National Australia Bank 30-Sep OPFM 34.12 38.00 80,231 5,958.0 6,569.2 6,910.8 251.6 275.3 289.1 13.6 12.4 11.8 81.0 87.0 88.0 190.0 209.0 220.0 5.6 6.1 6.4 4.9 4.3 3.9 100

Westpac 30-Sep UPFM 32.75 33.50 101,821 7,097.0 7,307.1 7,538.8 223.0 228.2 234.9 14.7 14.4 13.9 87.7 100.8 104.0 174.0 182.0 190.0 5.3 5.6 5.8 8.2 7.9 7.6 100

Sector Aggregate 14.6 13.7 13.2 5.2 5.6 5.8 6.5 5.7 5.2

* Please note these companies are covered by Credit Suisse Emerging Companies (CSEC), a joint venture between Credit Suisse and First NZ Capital.

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Source: Company data, Credit Suisse estimates, CSEC estimates

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Top 100 Earnings & Dividends (continued) As at 14 February 2014 Year Rating Share 12M Mkt NPAT PE Relative PE Dividend Dividend Yield EBITDA Multiple F'kg

to Price Tgt Cap 2013 2014F 2015F 2013 2014F 2015F 2013 2014F 2015F 2013 2014F 2015F 2013 2014F 2015F 2013 2014F 2015F 2013 2014F 2015F 2014F

$ $ $m $m $m $m ¢ ¢ ¢ x x x % % % ¢ ¢ ¢ % % % x x x %

Financials - Diversified Financials

ASX 30-Jun UPFM 36.80 35.20 7,124 348.2 380.4 407.8 195.5 196.9 210.7 18.8 18.7 17.5 112.4 131.2 130.3 170.2 177.0 189.7 4.6 4.8 5.2 8.3 8.2 7.6 100

Challenger Limited 30-Jun OPFM 6.30 7.00 3,344 308.5 327.8 310.5 58.6 64.0 62.1 10.7 9.8 10.1 64.2 69.1 75.7 20.0 23.0 23.0 3.2 3.7 3.7 8.7 7.6 6.9 23

Henderson Group PLC 31-Dec NTRL 4.34 4.45 1,556 161.9 172.5 192.6 14.6 15.5 17.3 16.1 15.1 13.5 96.1 106.0 100.9 8.5 9.8 11.0 3.6 4.2 4.7 7.4 6.3 5.3 0

Macquarie Group 31-Mar OPFM 55.36 63.00 17,774 851.0 1,262.3 1,267.4 246.1 363.4 381.4 22.5 15.2 14.5 134.4 107.0 108.3 200.0 269.5 302.0 3.6 4.9 5.5 9.4 6.9 7.0 40

Perpetual Limited 30-Jun NTRL 48.34 51.00 2,249 75.9 110.9 141.0 185.1 254.0 305.3 26.1 19.0 15.8 156.0 133.6 118.1 130.0 200.0 250.0 2.7 4.1 5.2 17.6 12.8 10.0 100

Sector Aggregate 19.4 15.2 14.4 3.7 4.6 5.1 9.2 7.4 7.0

Financials - Insurance

AMP 31-Dec NTRL 4.52 4.96 13,369 646.6 827.3 969.5 25.1 31.6 34.5 18.0 14.3 13.1 107.6 100.5 97.9 24.0 25.5 28.0 5.3 5.6 6.2 25.0 20.4 18.6 65

Insurance Australia Group 30-Jun NTRL 5.47 6.00 12,809 1,063.0 1,038.9 869.0 48.7 44.6 35.3 11.2 12.3 15.5 67.0 86.1 115.7 36.0 29.0 27.0 6.6 5.3 4.9 8.5 8.4 9.5 100

QBE Insurance Group 31-Dec OPFM 11.43 13.65 12,830 249.6- 970.9 1,194.9 -19.0 73.1 89.5 n.m 14.1 11.5 n.m 98.7 85.7 34.0 41.0 50.0 3.2 3.6 4.2 22.0 11.7 9.8 70

Suncorp Group Limited 30-Jun UPFM 12.54 12.36 16,134 502.6 1,163.6 1,361.7 41.1 91.0 106.6 30.5 13.8 11.8 182.5 96.7 87.8 75.0 78.0 90.0 6.0 6.2 7.2 26.6 12.6 10.9 100

Sector Aggregate 26.1 13.6 12.6 5.2 5.2 5.7 17.4 12.1 11.2

Financials - Real Estate

CFS Retail Property Trust 30-Jun NTRL 1.95 2.04 5,885 384.6 386.7 401.7 13.6 13.7 14.2 14.3 14.3 13.7 85.7 100.1 102.4 13.6 13.7 14.2 7.0 7.0 7.3 16.9 16.2 15.5 0

Commonwealth Property Office Fund 30-Jun NTRL 1.26 1.21 2,945 204.3 206.9 207.5 8.7 8.8 8.8 14.4 14.2 14.2 86.1 99.9 105.9 6.6 6.7 6.9 5.2 5.3 5.5 15.8 15.3 15.4 0

Dexus Property Group 30-Jun OPFM 1.07 1.16 5,107 365.4 384.5 398.3 7.7 8.3 8.6 13.8 12.9 12.4 82.2 90.2 92.3 6.0 6.2 6.4 5.6 5.9 6.0 15.2 14.9 14.3 0

Federation Centres 30-Jun NTRL 2.37 2.43 3,384 224.4 237.1 249.5 15.8 16.6 17.5 15.0 14.3 13.6 89.6 100.2 101.1 13.8 14.6 15.4 5.8 6.2 6.5 14.0 14.9 15.1 0

Goodman Group 30-Jun NTRL 4.81 4.95 8,267 544.1 603.5 635.4 32.4 35.0 36.7 14.8 13.7 13.1 88.6 96.4 97.8 19.5 20.8 22.1 4.1 4.3 4.6 16.1 15.2 14.6 0

GPT Group 31-Dec OPFM 3.66 4.00 6,203 446.8 442.0 454.7 25.7 26.5 27.4 14.2 13.8 13.3 85.1 96.8 99.6 20.4 21.2 21.9 5.6 5.8 6.0 14.4 14.5 14.0 0

Investa Office Fund 30-Jun NTRL 3.10 3.33 1,904 137.5 139.8 145.0 22.4 22.8 23.6 13.8 13.6 13.1 82.7 95.6 97.9 17.7 18.5 19.0 5.7 6.0 6.1 14.7 15.0 14.9 0

Lend Lease 30-Jun OPFM 11.33 12.54 6,534 553.0 545.8 597.4 96.3 94.5 102.9 11.8 12.0 11.0 70.3 84.1 82.1 42.0 45.4 51.5 3.7 4.0 4.5 9.4 8.7 8.1 0

Mirvac Group 30-Jun OPFM 1.74 1.87 6,377 377.6 437.4 447.6 10.9 12.0 12.2 15.9 14.6 14.2 95.1 102.2 106.1 8.8 9.0 9.2 5.1 5.2 5.3 19.1 15.5 15.5 0

Stockland 30-Jun NTRL 3.90 4.23 8,992 494.8 550.0 596.5 22.4 23.8 25.6 17.4 16.4 15.2 104.2 114.9 113.5 24.0 24.0 24.0 6.2 6.2 6.2 22.3 20.4 18.7 0

Westfield 31-Dec NTRL 10.27 11.27 21,706 1,448.1 1,420.8 1,459.3 66.5 68.0 70.2 15.4 15.1 14.6 92.2 106.0 109.1 51.0 52.1 54.8 5.0 5.1 5.3 15.3 15.9 15.8 0

Westfield Retail Trust 31-Dec OPFM 3.06 3.51 9,116 605.3 619.7 641.2 20.0 20.7 21.5 15.3 14.8 14.3 91.6 103.6 106.4 19.9 20.7 21.4 6.5 6.8 7.0 15.5 15.4 15.0 0

Sector Aggregate 14.9 14.3 13.7 5.4 5.5 5.7 15.3 14.9 14.5

Information Technology

Computershare 30-Jun NTRL 11.93 12.60 5,965 304.8 335.0 376.4 54.8 60.2 67.7 19.6 17.8 15.8 116.8 125.0 118.2 28.0 28.0 31.0 2.7 2.4 2.5 14.2 12.9 11.0 20

Telecommunication Services

Telstra Corporation 30-Jun OPFM 5.20 5.70 64,704 3,866.0 4,094.0 4,265.2 31.1 32.9 34.3 16.7 15.8 15.2 100.0 110.9 113.2 28.0 29.0 30.0 5.4 5.6 5.8 7.2 7.0 6.9 100

Utilities

AGL Energy 30-Jun NTRL 15.92 15.80 8,889 598.3 603.7 704.2 108.7 108.1 124.3 14.6 14.7 12.8 87.5 103.3 95.5 63.0 65.0 66.6 4.0 4.1 4.2 8.8 8.3 7.2 100

APA Group 30-Jun UPFM 6.20 6.05 5,182 178.8 201.4 240.6 23.1 24.1 28.8 26.8 25.7 21.5 160.0 180.6 160.7 35.5 36.0 36.9 5.7 5.8 6.0 14.3 13.5 12.3 0

DUET Group 30-Jun OPFM 2.11 2.30 2,714 68.0 85.9 127.5 5.9 6.9 9.8 35.5 30.6 21.4 212.2 215.1 160.0 16.5 17.0 17.5 7.8 8.1 8.3 10.0 9.9 9.3 0

Spark Infrastructure Group 31-Dec OPFM 1.73 1.78 2,289 177.5 210.7 214.0 13.4 15.9 16.1 12.9 10.9 10.7 77.0 76.3 79.8 11.0 11.5 12.0 6.4 6.7 7.0 7.1 6.2 6.0 0

SP AusNet 31-Mar NTRL 1.28 1.27 4,318 279.1 295.4 333.5 8.5 8.7 9.5 14.9 14.7 13.4 89.2 103.4 99.8 8.2 8.4 8.5 6.4 6.6 6.7 9.3 9.2 8.9 33

Sector Aggregate 17.4 16.7 14.6 5.5 5.6 5.8 9.6 9.1 8.3

Report Average 16.7 14.2 13.4 4.1 4.4 4.9 8.4 7.2 6.7

* Please note these companies are covered by Credit Suisse Emerging Companies (CSEC), a joint venture between Credit Suisse and First NZ Capital.

EPS

Source: Company data, Credit Suisse estimates, CSEC estimates

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Small Caps Earnings & Dividends

Research Analyst

Jason Swinbourne

612 8205 4591

jason.swinbourne@credit-suisse.com

As at 14 February 2014 Year Rating Share 12M Mkt NPAT PE Relative PE Dividend Dividend Yield EBITDA Multiple F'kg

to Price Tgt Cap 2013 2014F 2015F 2013 2014F 2015F 2013 2014F 2015F 2013 2014F 2015F 2013 2014F 2015F 2013 2014F 2015F 2013 2014F 2015F 2014F

$ $ $m $m $m $m ¢ ¢ ¢ x x x % % % ¢ ¢ ¢ % % % x x x %

Energy

Aquila Resources 30-Jun OPFM 2.75 2.60 1,132 173.4- 15.1- 19.3- -42.1 -3.7 -4.7 n.m n.m n.m n.m n.m n.m 0.0 0.0 0.0 0.0 0.0 0.0 n.m n.m n.m 100

Bandanna Energy Limited 30-Jun NTRL 0.15 0.20 79 7.6- 13.3- 14.4- -1.4 -2.5 -2.7 n.m n.m n.m n.m n.m n.m 0.0 0.0 0.0 0.0 0.0 0.0 n.m 3.4 n.m 0

Cockatoo Coal 30-Jun RSTR 0.04 181 21.8- 19.1- 13.7 -1.3 -1.1 0.8 n.m n.m 5.3 n.m n.m 31.6 0.0 0.0 0.0 0.0 0.0 0.0 58.3 21.2 4.4 100

Energy Resources of Australia 31-Dec OPFM 1.19 1.50 614 142.4- 135.8- 142.5- -27.5 -26.2 -27.5 n.m n.m n.m n.m n.m n.m 0.0 0.0 0.0 0.0 0.0 0.0 2.2 4.0 n.m 100

New Hope Corporation 31-Jul NTRL 3.39 3.70 2,817 124.4 113.7 134.1 15.0 13.7 16.1 22.6 24.8 21.0 95.3 120.4 125.3 16.0 13.7 16.1 4.7 4.0 4.8 9.7 12.4 11.4 100

Senex Energy Limited 30-Jun OPFM 0.74 0.85 847 61.0 64.7 79.0 5.3 5.6 6.9 13.9 13.2 10.8 58.5 64.1 64.4 0.0 0.0 0.0 0.0 0.0 0.0 9.2 8.6 6.8 100

Whitehaven Coal 30-Jun OPFM 1.57 2.75 1,610 60.7- 16.3- 57.8 -6.2 -1.6 5.6 n.m n.m 27.9 n.m n.m 166.2 0.0 0.0 2.5 0.0 0.0 1.6 199.5 23.4 9.8 100

Yancoal Australia 31-Dec UPFM 0.70 0.65 691 6.1 24.0- 150.0 0.6 -2.4 15.1 n.m n.m 4.6 473.3 n.m 27.5 0.0 0.3 3.8 0.0 0.5 5.4 23.3 8.4 5.6 100

Sector Aggregate n.m n.m 28.6 1.7 1.5 2.5 24.0 13.3 15.6

Materials - Chemicals

Nufarm 31-Jul NTRL 4.14 4.55 1,092 69.2 78.4 98.9 26.4 29.8 37.4 15.7 13.9 11.1 66.1 67.7 66.0 8.0 8.9 13.1 1.9 2.2 3.2 6.6 6.2 5.3 31

Materials - Construction Materials

CSR 31-Mar OPFM 3.06 2.90 1,548 32.7 67.0 91.7 6.5 13.2 18.1 47.4 23.1 16.9 199.2 112.3 100.8 5.1 11.0 13.0 1.7 3.6 4.2 10.3 8.2 7.0 0

Materials - Containers & Packaging

Pact Group Holdings 30-Jun OPFM 3.45 3.85 1,015 131.1 81.9 88.8 44.6 27.8 30.2 7.7 12.4 11.4 32.6 60.3 68.2 0.0 9.5 20.2 0.0 2.8 5.9 8.6 8.1 7.5 65

Materials - Metals & Mining

Atlas Iron 30-Jun OPFM 1.10 1.30 1,002 13.7 117.8 67.9 1.5 11.1 6.4 72.4 9.9 17.2 304.4 47.9 102.8 3.0 3.0 3.0 2.7 2.7 2.7 7.1 2.5 4.0 0

Ampella Mining Limited 31-Dec NTRL 0.17 0.19 42 19.6- 18.8- 19.8- -7.9 -7.6 -8.0 n.m n.m n.m n.m n.m n.m 0.0 0.0 0.0 0.0 0.0 0.0 n.m n.m n.m 0

Altona Mining Limited 30-Jun OPFM 0.18 0.26 96 12.6 13.8 11.6 2.4 2.6 2.2 7.6 7.0 8.3 32.1 34.1 49.8 0.0 0.0 0.0 0.0 0.0 0.0 8.3 3.8 5.4 0

Alacer Gold Corp. 31-Dec UPFM 2.82 2.25 736 110.3 52.3 0.9 38.2 18.1 0.3 6.6 14.0 n.m 27.9 68.2 n.m 0.0 0.0 0.0 0.0 0.0 0.0 2.0 3.1 9.9 0

Base Resources Ltd 30-Jun OPFM 0.44 0.90 244 5.7- 20.9- 88.3 -1.0 -3.7 15.7 n.m n.m 2.8 n.m n.m 16.5 0.0 0.0 0.0 0.0 0.0 0.0 n.m n.m 2.4 100

Evolution Mining Limited 30-Jun UPFM 0.83 0.64 588 44.4 47.4 38.6 6.3 6.7 5.4 13.2 12.4 15.2 55.6 60.3 91.0 1.0 1.7 1.6 1.2 2.0 1.9 3.3 3.2 3.5 0

Gindalbie Metals Ltd 30-Jun UPFM 0.10 0.06 148 138.9- 5.5- 19.9- -10.3 -0.4 -1.3 n.m n.m n.m n.m n.m n.m 0.0 0.0 0.3 0.0 0.0 2.9 n.m n.m n.m 0

Gryphon Minerals Limited 30-Jun OPFM 0.19 0.25 74 4.1- 3.0- 7.5- -1.1 -0.8 -1.9 n.m n.m n.m n.m n.m n.m 0.0 0.0 0.0 0.0 0.0 0.0 n.m n.m n.m 0

Independence Group NL 30-Jun OPFM 4.25 3.70 992 18.3 52.6 74.8 7.8 22.6 32.1 54.6 18.8 13.3 229.6 91.5 79.1 2.0 9.0 12.8 0.5 2.1 3.0 19.4 8.0 5.7 100

Kula Gold 31-Dec OPFM 0.10 0.35 13 2.1- 5.5- 32.2 -0.8 -1.3 7.8 n.m n.m 1.3 n.m n.m 7.6 0.0 0.0 0.0 0.0 0.0 0.0 15.3 n.m 0.9 0

Mineral Deposits Ltd. 31-Dec OPFM 2.20 4.00 205 1.6 2.0 70.9 1.7 2.0 68.5 n.m n.m 2.9 490.7 493.0 17.2 0.0 0.0 0.0 0.0 0.0 0.0 n.m n.m n.m 100

Mount Gibson Iron 30-Jun UPFM 1.18 1.05 1,287 92.9 247.6 99.6 8.5 22.7 9.1 13.8 5.2 12.9 58.2 25.3 77.1 4.0 2.0 2.0 3.4 1.7 1.7 6.0 2.7 4.1 100

OceanaGold Corporation 31-Dec UPFM 2.49 2.00 672 76.4 77.1 66.7 25.7 25.7 22.2 8.7 8.7 10.1 36.6 42.4 60.1 0.0 0.0 0.0 0.0 0.0 0.0 3.4 3.3 2.9 0

Panoramic Resources 30-Jun NTRL 0.24 0.29 76 26.1- 16.3- 3.4- -10.3 -5.3 -1.0 n.m n.m n.m n.m n.m n.m 1.0 0.0 0.0 4.3 0.0 0.0 4.0 1.3 0.4 100

PanAust 31-Dec OPFM 1.97 2.00 1,099 80.8 31.0 23.1 13.6 5.2 3.9 13.1 34.1 45.7 55.0 166.0 272.7 7.0 7.0 7.0 4.0 4.0 4.0 4.4 7.5 9.9 0

Perseus Mining 30-Jun UPFM 0.51 0.50 231 38.4 2.2 9.8 8.4 0.5 2.1 6.0 n.m 23.5 25.4 513.3 140.5 0.0 0.0 0.0 0.0 0.0 0.0 2.3 5.0 3.6 0

Sandfire Resources NL 30-Jun UPFM 6.55 5.75 1,019 88.0 103.5 116.4 57.4 65.4 73.1 11.4 10.0 9.0 48.0 48.7 53.5 0.0 0.0 36.6 0.0 0.0 5.6 4.6 4.2 3.6 0

Syrah Resources 30-Jun OPFM 2.75 4.90 447 4.8- 5.3- 8.1- -3.5 -3.6 -5.5 n.m n.m n.m n.m n.m n.m 0.0 0.0 0.0 0.0 0.0 0.0 n.m n.m n.m 0

Tigers Realm Coal 31-Dec OPFM 0.16 0.25 84 17.4- 6.1- 29.8- -3.2 -0.8 -3.3 n.m n.m n.m n.m n.m n.m 0.0 0.0 0.0 0.0 0.0 0.0 n.m n.m n.m 0

Western Areas 30-Jun NTRL 3.19 2.75 628 5.6 8.1 0.4 2.8 4.1 0.2 n.m 77.4 n.m 472.6 376.2 n.m 2.0 0.0 0.0 0.6 0.0 0.0 6.2 7.0 7.7 100

Sector Aggregate 27.8 14.6 16.2 1.4 1.3 2.0 5.6 4.4 4.8

Materials - Paper & Forest Products

Sector Aggregate n.m n.m n.m

Industrials - Capital Goods

Bradken Limited * 30-Jun OPFM 4.51 5.15 763 96.2 63.8 79.5 56.2 36.9 45.1 8.0 12.2 10.0 33.8 59.4 59.7 38.0 28.7 31.0 8.4 6.4 6.9 5.6 6.3 5.6 100

Boart Longyear Group * 31-Dec UPFM 0.44 0.40 182 125.7- 76.4- 48.0- -27.6 -16.8 -10.6 n.m n.m n.m n.m n.m n.m 0.0 0.0 0.0 0.0 0.0 0.0 6.9 6.7 5.9 35

Emeco Holdings * 30-Jun NTRL 0.26 0.28 153 23.8 14.8- 6.2 4.1 -2.4 1.0 6.3 n.m 25.0 26.5 n.m 149.0 2.5 0.0 1.0 9.8 0.0 3.9 3.2 4.9 3.3 100

NRW Holdings Limited * 30-Jun NTRL 1.36 1.30 379 74.1 59.0 61.6 26.5 21.1 22.1 5.1 6.4 6.2 21.6 31.3 36.7 13.0 10.9 11.1 9.6 8.0 8.2 2.8 2.8 2.4 100

Sector Aggregate 24.3 77.5 17.1 7.7 5.3 6.0 4.3 4.7 4.0

* Please note these companies are covered by Credit Suisse Emerging Companies (CSEC), a joint venture between Credit Suisse and First NZ Capital.

EPS

Source: Company data, Credit Suisse estimates, CSEC estimates

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Small Caps Earnings & Dividends (continued) As at 14 February 2014 Year Rating Share 12M Mkt NPAT PE Relative PE Dividend Dividend Yield EBITDA Multiple F'kg

to Price Tgt Cap 2013 2014F 2015F 2013 2014F 2015F 2013 2014F 2015F 2013 2014F 2015F 2013 2014F 2015F 2013 2014F 2015F 2013 2014F 2015F 2014F

$ $ $m $m $m $m ¢ ¢ ¢ x x x % % % ¢ ¢ ¢ % % % x x x %

Industrials - Commercial & Professional Services

Cabcharge Australia * 30-Jun UPFM 4.12 4.00 496 66.5 66.9 55.1 55.2 55.6 45.8 7.5 7.4 9.0 31.4 36.0 53.7 30.0 28.9 23.7 7.3 7.0 5.7 7.6 7.3 8.5 100

McMillan Shakespeare * 30-Jun UPFM 11.34 12.25 845 63.1 59.6 79.3 82.9 77.9 103.7 13.7 14.6 10.9 57.6 70.8 65.3 52.0 49.1 65.0 4.6 4.3 5.7 5.9 5.5 4.4 100

Programmed Maintenance Services * 31-Mar NTRL 2.71 3.15 320 34.6 34.9 39.7 28.6 28.7 32.6 9.5 9.5 8.3 39.9 46.0 49.6 15.0 17.0 17.5 5.5 6.3 6.4 5.8 5.3 4.7 100

Royal Wolf Holdings * 30-Jun OPFM 3.25 3.55 326 19.1 20.7 23.8 19.0 20.6 23.7 17.1 15.7 13.7 72.0 76.6 81.8 9.5 11.1 12.8 2.9 3.4 3.9 10.0 9.2 8.4 0

SAI Global * 30-Jun OPFM 3.83 4.57 807 43.2 43.3 51.4 20.9 20.7 24.6 18.4 18.5 15.6 77.3 90.0 93.1 15.0 14.5 17.2 3.9 3.8 4.5 9.8 9.2 8.3 100

Skilled Group Limited * 30-Jun OPFM 3.07 3.50 718 58.4 58.1 66.9 24.2 24.3 27.9 12.7 12.6 11.0 53.4 61.5 65.7 16.0 17.4 19.0 5.2 5.7 6.2 8.5 8.4 7.2 100

Salmat * 30-Jun NTRL 2.05 2.20 328 17.5 14.9 21.8 11.0 9.4 13.6 18.6 21.9 15.0 78.3 106.6 89.8 24.0 15.0 15.0 11.7 7.3 7.3 6.6 8.7 6.7 100

Transpacific Industries Group * 30-Jun NTRL 1.17 1.27 1,839 67.9 84.0 98.1 4.3 5.3 6.2 27.1 21.9 18.7 114.0 106.5 111.9 0.0 0.0 1.6 0.0 0.0 1.3 6.9 6.7 6.2 100

Transfield Services Ltd * 30-Jun OPFM 0.82 1.20 420 45.5 55.8 68.9 8.9 10.9 13.4 9.2 7.5 6.1 38.9 36.6 36.4 5.0 0.0 0.0 6.1 0.0 0.0 6.5 5.4 4.7 40

Sector Aggregate 14.8 14.0 12.2 3.9 3.2 3.9 7.2 6.9 6.2

Industrials - Transportation

Alliance Aviation Services Limited * 30-Jun OPFM 1.23 2.15 130 21.7 22.8 25.3 21.7 21.5 23.9 5.7 5.7 5.1 23.8 27.8 30.7 10.4 8.6 9.6 8.5 7.0 7.8 3.7 3.4 3.1 100

McAleese Group * 30-Jun OPFM 1.10 1.75 326 58.7 44.2 43.1 20.4 15.4 15.0 5.4 7.2 7.3 22.6 34.8 43.7 0.0 4.3 6.8 0.0 3.9 6.1 4.3 4.3 4.2 100

Mermaid Marine Australia * 30-Jun OPFM 2.94 3.80 684 60.3 60.1 66.6 26.5 25.7 28.3 11.1 11.4 10.4 46.7 55.6 62.0 13.5 13.3 14.3 4.6 4.5 4.9 6.4 5.7 5.2 100

Qube Logistics 30-Jun NTRL 2.07 2.20 1,928 86.3 84.9 96.4 9.4 9.2 10.5 22.1 22.5 19.8 93.0 109.2 118.1 5.2 5.0 5.4 2.5 2.4 2.6 13.2 11.6 10.4 100

Virgin Australia 30-Jun NTRL 0.35 0.38 1,213 58.4- 119.7- 60.7- -2.4 -4.9 -2.5 n.m n.m n.m n.m n.m n.m 0.0 0.0 0.0 0.0 0.0 0.0 12.5 10.7 8.9 100

Sector Aggregate 28.9 n.m 29.4 2.1 2.3 2.7 9.3 8.4 7.5

Consumer Discretionary - Automobiles & Components

ARB Corp * 30-Jun UPFM 10.70 11.50 776 42.4 42.6 50.1 58.4 58.8 69.1 18.3 18.2 15.5 77.0 88.5 92.5 28.0 28.7 33.6 2.6 2.7 3.1 11.6 11.2 9.4 100

Consumer Discretionary - Consumer Durables & Apparel

Fleetwood Corporation * 30-Jun NTRL 2.97 2.40 180 16.6 13.3 19.6 27.6 22.3 32.7 10.7 13.3 9.1 45.2 64.9 54.3 30.0 6.9 19.6 10.1 2.3 6.6 5.2 5.7 4.5 100

G.U.D. Holdings * 30-Jun NTRL 5.96 5.77 425 36.8 28.2 35.6 51.5 39.3 49.6 11.6 15.1 12.0 48.7 73.7 71.8 72.0 36.0 44.6 12.1 6.0 7.5 6.9 8.6 7.2 100

Sector Aggregate 11.3 14.6 11.0 11.5 4.9 7.2 6.3 7.5 6.1

Consumer Discretionary - Consumer Services

Domino's Pizza * 30-Jun NTRL 19.51 20.50 1,676 30.4 43.7 54.7 43.0 52.0 63.1 45.4 37.5 30.9 191.1 182.3 184.4 30.9 36.9 44.6 1.6 1.9 2.3 31.0 19.5 16.1 100

iSelect Limited * 30-Jun OPFM 1.22 1.90 318 14.4 21.0 25.3 7.1 7.8 9.4 17.2 15.6 12.9 72.5 75.8 77.2 0.0 0.0 0.0 0.0 0.0 0.0 8.8 7.5 6.3 100

Invocare Group * 31-Dec NTRL 10.61 11.60 1,167 45.5 50.7 55.5 41.6 46.3 50.7 25.5 22.9 20.9 107.3 111.4 124.8 35.8 37.2 40.8 3.4 3.5 3.8 14.3 13.3 12.4 100

Sector Aggregate 31.3 27.2 23.5 2.1 2.3 2.6 18.4 14.6 12.7

Consumer Discretionary - Media

APN News & Media 30-Dec UPFM 0.45 0.30 294 49.4 50.3 55.6 7.5 7.6 8.4 6.0 5.9 5.3 25.0 28.5 31.8 0.0 0.0 5.0 0.0 0.0 11.2 4.6 3.8 3.3 33

Fairfax Media 30-Jun UPFM 0.72 0.50 1,693 128.0 111.2 106.6 5.4 4.7 4.5 13.2 15.2 15.9 55.7 74.1 94.8 2.0 2.0 2.0 2.8 2.8 2.8 4.9 6.4 6.6 100

Nine Entertainment 30-Jun OPFM 2.23 2.30 2,097 136.7 150.7 160.2 14.5 16.0 17.0 15.3 13.9 13.1 64.5 67.7 78.1 0.0 4.1 9.4 0.0 1.8 4.2 9.1 8.4 7.8 100

Prime Media Group 30-Jun NTRL 1.00 1.10 364 35.4 32.3 34.5 9.7 8.8 9.4 10.3 11.3 10.6 43.3 54.9 63.1 7.3 6.6 7.1 7.3 6.6 7.1 7.4 7.3 6.9 30

REA Group 30-Jun NTRL 47.62 47.50 6,272 109.7 145.1 177.0 83.3 110.1 134.4 57.2 43.2 35.4 240.5 210.2 211.5 41.5 56.0 67.5 0.9 1.2 1.4 36.8 26.9 22.1 100

STW Communications Group 31-Dec NTRL 1.47 1.55 592 49.5 52.6 55.5 12.3 13.1 13.8 11.9 11.2 10.6 50.0 54.3 63.2 8.6 8.8 9.3 5.9 6.0 6.3 8.7 7.9 7.3 100

Seven West Media Ltd 30-Jun OPFM 2.18 2.60 2,178 225.2 256.8 273.8 19.8 22.7 24.2 11.0 9.6 9.0 46.4 46.7 53.7 12.0 12.0 12.1 5.5 5.5 5.6 7.4 6.7 6.2 100

Southern Cross Media Group 30-Jun UPFM 1.63 1.40 1,146 90.8 103.4 108.5 12.9 14.7 15.4 12.6 11.1 10.6 53.1 53.8 63.0 9.0 10.0 10.0 5.5 6.2 6.2 8.3 8.0 7.6 100

Ten Network Holdings 31-Aug NTRL 0.34 0.29 894 5.0- 5.4- 51.8 -0.2 -0.2 2.0 n.m n.m 17.0 n.m n.m 101.4 0.0 0.0 1.3 0.0 0.0 3.8 22.0 26.5 7.6 0

Sector Aggregate 19.6 17.9 15.6 2.2 2.6 3.5 11.1 10.7 9.4

Consumer Discretionary - Retailing

Automotive Holdings Group Ltd * 30-Jun NTRL 3.65 4.00 951 72.7 78.1 83.2 27.9 30.0 31.9 13.1 12.2 11.4 55.1 59.2 68.2 20.0 21.0 22.4 5.5 5.8 6.1 9.8 9.3 8.8 100

AP Eagers Limited * 31-Dec NTRL 5.01 5.00 885 62.6 61.9 63.8 34.9 34.1 35.2 14.3 14.7 14.2 60.3 71.4 84.9 21.1 20.7 21.4 4.2 4.1 4.3 11.6 11.3 11.0 100

Breville Group * 30-Jun NTRL 8.07 8.20 1,050 49.7 49.6 55.8 38.2 38.1 42.9 21.1 21.2 18.8 88.8 103.0 112.3 26.0 26.5 29.8 3.2 3.3 3.7 12.8 12.7 11.3 83

Fantastic Holdings 30-Jun UPFM 1.99 2.00 205 13.5 5.4 10.2 13.1 5.3 10.0 15.1 37.8 19.9 63.5 183.7 118.9 15.0 3.2 6.2 7.6 1.6 3.1 8.3 13.2 8.9 100

JB Hi-Fi 30-Jun OPFM 18.27 23.06 1,832 116.4 131.9 149.5 117.0 129.3 147.1 15.6 14.1 12.4 65.7 68.7 74.1 72.0 81.0 97.7 3.9 4.4 5.3 9.0 8.2 7.1 100

OrotonGroup 27-Jul OPFM 3.91 4.65 160 23.4 9.6 12.4 57.3 23.5 30.3 6.8 16.6 12.9 28.7 80.9 76.9 50.0 22.0 26.0 12.8 5.6 6.6 3.2 8.5 6.6 100

Pacific Brands 30-Jun NTRL 0.75 0.75 680 73.8 69.8 68.2 8.1 7.6 7.4 9.2 9.8 10.1 38.8 47.7 60.3 5.0 5.3 5.9 6.7 7.2 7.9 6.1 6.3 6.3 100

Premier Investments Ltd 27-Jul OPFM 7.91 9.50 1,229 69.3 86.4 95.5 44.1 55.0 60.8 17.9 14.4 13.0 75.5 69.9 77.6 38.0 47.8 53.0 4.8 6.0 6.7 9.7 8.5 7.5 100

Specialty Fashion Group 30-Jun OPFM 0.84 1.00 161 13.0 10.0 17.7 6.7 5.2 9.2 12.5 16.2 9.1 52.7 78.6 54.5 2.0 2.0 2.0 2.4 2.4 2.4 3.0 3.5 2.3 100

Super Retail Group 30-Jun NTRL 10.76 11.50 2,117 114.1 117.6 142.4 57.7 59.4 72.0 18.7 18.1 15.0 78.5 88.0 89.2 38.0 41.7 50.5 3.5 3.9 4.7 16.5 16.4 14.4 100

Thorn Group * 31-Mar NTRL 2.02 2.53 302 28.0 29.3 32.1 19.1 19.7 21.4 10.6 10.2 9.4 44.5 49.8 56.2 10.5 11.0 11.3 5.2 5.5 5.6 7.1 6.9 6.6 100

Trade Me Group Ltd 30-Jun UPFM 3.70 3.70 1,582 78.6 85.9 96.5 19.8 21.7 24.3 20.1 18.4 16.4 84.6 89.5 97.8 15.8 17.3 19.5 4.0 4.3 4.9 13.8 12.5 11.1 0

The Reject Shop 30-Jun NTRL 10.91 13.50 314 17.4 17.5 23.3 64.0 65.5 87.2 17.1 16.6 12.5 71.8 81.0 74.7 37.0 50.5 67.2 3.4 4.6 6.2 7.8 7.9 6.2 100

Webjet * 30-Jun NTRL 3.06 3.25 243 12.0 16.0 18.9 15.8 19.2 21.8 19.4 15.9 14.1 81.7 77.5 83.9 13.0 13.5 15.2 4.2 4.4 5.0 9.9 8.9 7.1 100

Wotif.com Holdings * 30-Jun UPFM 2.73 2.90 578 53.3 45.7 47.6 25.0 21.5 22.2 10.9 12.7 12.3 45.9 61.9 73.3 23.0 18.5 19.1 8.4 6.8 7.0 5.8 6.0 5.6 100

Sector Aggregate 15.6 15.2 13.6 4.5 4.7 5.3 9.7 9.6 8.5

* Please note these companies are covered by Credit Suisse Emerging Companies (CSEC), a joint venture between Credit Suisse and First NZ Capital.

EPS

Source: Company data, Credit Suisse estimates, CSEC estimates

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Small Caps Earnings & Dividends (continued) As at 14 February 2014 Year Rating Share 12M Mkt NPAT PE Relative PE Dividend Dividend Yield EBITDA Multiple F'kg

to Price Tgt Cap 2013 2014F 2015F 2013 2014F 2015F 2013 2014F 2015F 2013 2014F 2015F 2013 2014F 2015F 2013 2014F 2015F 2013 2014F 2015F 2014F

$ $ $m $m $m $m ¢ ¢ ¢ x x x % % % ¢ ¢ ¢ % % % x x x %

Consumer Staples - Food Beverage & Tobacco

Goodman Fielder 30-Jun UPFM 0.61 0.50 1,193 66.2 63.2 86.1 3.4 3.2 4.4 18.1 19.0 14.0 76.4 92.5 83.3 3.0 2.4 3.0 4.9 3.9 4.9 6.9 7.2 6.3 10

Health Care

Australian Pharmaceutical Ind 31-Aug OPFM 0.58 0.64 281 24.3 26.2 27.0 5.0 5.4 5.5 11.6 10.7 10.4 48.6 52.0 62.0 3.3 3.3 3.3 5.7 5.7 5.7 5.2 5.3 4.4 100

Mesoblast 30-Jun OPFM 5.77 7.95 1,853 61.7- 81.7- 93.6- -20.3 -25.0 -28.1 n.m n.m n.m n.m n.m n.m 0.0 0.0 0.0 0.0 0.0 0.0 n.m n.m n.m 0

Mayne Pharma 30-Jun NTRL 0.87 0.86 490 6.2 18.4 26.7 1.4 3.1 4.5 60.7 27.9 19.3 255.5 135.7 114.9 0.0 0.0 1.4 0.0 0.0 1.6 29.4 13.1 9.2 10

Sigma Pharmaceuticals 31-Jan NTRL 0.64 0.66 715 53.6 49.8 51.0 4.5 4.3 4.6 14.0 14.9 13.8 59.0 72.3 82.7 4.0 4.5 4.5 6.3 7.1 7.1 8.1 8.7 8.5 100

Sector Aggregate n.m n.m n.m 1.8 2.0 2.2 44.7 49.6 35.9

Financials - Diversified Financials

BT Investment Management 30-Sep NTRL 6.30 5.15 1,781 61.9 88.3 103.4 20.9 29.4 34.5 30.1 21.4 18.3 126.8 104.1 109.1 18.0 26.0 30.0 2.9 4.1 4.8 20.9 14.6 12.4 100

FlexiGroup Limited * 30-Jun OPFM 4.07 5.00 1,238 72.1 86.0 95.5 24.9 28.2 31.2 16.4 14.4 13.1 68.8 70.1 78.0 14.5 17.0 18.0 3.6 4.2 4.4 12.2 12.0 11.0 100

IOOF Holdings 30-Jun NTRL 9.34 9.35 2,168 108.8 126.3 140.2 46.9 54.4 60.4 19.9 17.2 15.5 83.9 83.5 92.3 42.0 49.0 54.0 4.5 5.2 5.8 14.6 12.4 11.1 100

Platinum Asset Management 30-Jun UPFM 7.09 6.00 4,103 129.1 176.7 197.0 22.6 30.1 33.6 31.4 23.5 21.1 132.1 114.4 126.0 22.0 29.0 33.0 3.1 4.1 4.7 22.2 16.0 14.3 100

Sector Aggregate 24.8 19.8 17.6 3.4 4.4 4.9 17.8 14.1 12.6

Financials - Insurance

Austbrokers 30-Jun UPFM 10.95 10.41 653 28.9 32.6 35.6 50.2 55.5 60.6 21.8 19.7 18.1 91.8 95.9 107.9 35.5 39.0 42.0 3.2 3.6 3.8 16.1 13.6 12.2 100

Steadfast 30-Jun UPFM 1.58 1.36 789 35.8 38.5 40.8 7.1 7.7 8.1 22.1 20.5 19.4 92.9 99.9 115.6 0.0 4.6 5.0 0.0 2.9 3.1 21.8 21.3 20.3 100

Tower Limited 30-Sep NTRL 1.49 1.66 286 34.4 28.0 29.4 16.6 13.5 14.2 9.7 11.9 11.3 40.7 57.8 67.5 11.0 12.8 13.5 6.8 8.0 8.4 n.m 0.9 0.8 0Sector Aggregate 19.0 18.4 17.3 2.2 3.9 4.1 35.4 6.7 6.3

Financials - Real Estate

Australand 31-Dec NTRL 3.91 3.81 2,261 146.7 156.1 168.0 25.4 27.0 29.1 15.4 14.5 13.5 64.8 70.4 80.3 21.5 21.6 23.2 5.5 5.5 5.9 13.8 13.3 12.6 0

Charter Hall Group 30-Jun NTRL 3.89 3.78 1,203 71.8 74.8 81.2 23.9 24.5 26.0 16.2 15.9 15.0 68.4 77.3 89.4 20.3 22.0 23.4 5.2 5.7 6.0 17.0 15.7 14.7 0

Charter Hall Retail REIT 30-Jun NTRL 3.66 3.99 1,328 96.4 104.4 107.1 29.8 30.5 30.7 12.3 12.0 11.9 51.7 58.4 71.2 26.8 27.5 27.9 7.3 7.5 7.6 14.8 13.9 13.4 0

GDI Property Group 30-Jun OPFM 0.89 1.01 505 - 21.6 45.1 3.8 8.0 n.m 23.4 11.2 113.8 66.8 3.5 7.5 3.9 8.4 n.m 25.9 12.6 0

Sector Aggregate 14.6 14.6 13.1 5.9 5.9 6.6 14.8 14.6 13.2

Information Technology

IRESS * 31-Dec NTRL 9.41 9.60 1,492 55.0 76.6 91.6 38.9 47.8 56.4 24.2 19.7 16.7 101.7 95.8 99.5 32.5 39.2 46.3 3.5 4.2 4.9 18.3 13.4 11.4 90

Oakton * 30-Jun NTRL 1.63 1.25 147 9.2 10.1 11.9 10.0 11.2 13.1 16.4 14.6 12.4 68.9 71.0 74.2 9.5 9.6 10.5 5.8 5.9 6.4 9.6 9.2 7.9 100

SMS Management & Technology * 30-Jun NTRL 4.20 4.40 294 21.1 16.0 20.8 30.1 22.5 29.3 14.0 18.6 14.3 58.7 90.6 85.6 25.5 18.0 21.1 6.1 4.3 5.0 8.7 11.5 8.9 100

UXC Limited * 30-Jun OPFM 1.06 1.20 338 20.5 22.0 27.4 6.5 6.9 8.5 16.2 15.2 12.4 68.2 74.1 74.1 5.8 5.7 6.4 5.5 5.4 6.1 8.5 8.3 6.8 100

Sector Aggregate 20.2 18.4 15.2 4.2 4.5 5.2 13.4 11.7 9.8

Telecommunication Services

Amcom Telecommunications * 30-Jun NTRL 2.02 2.17 494 20.8 23.7 29.6 8.4 9.7 12.1 24.1 20.8 16.7 101.5 101.4 99.7 5.5 6.3 7.9 2.7 3.1 3.9 12.6 10.8 8.9 100

iiNet * 30-Jun OPFM 7.38 8.10 1,190 56.1 67.0 82.2 34.6 41.6 51.0 21.3 17.8 14.5 89.7 86.3 86.4 19.0 23.7 30.6 2.6 3.2 4.1 8.3 7.5 6.5 100

NewSat Limited * 30-Jun OPFM 0.47 0.74 276 1.8 0.2- 5.2 0.5 0.0 0.7 97.0 n.m 63.4 408.1 n.m 378.2 0.0 0.0 0.0 0.0 0.0 0.0 57.9 n.m 94.0 100

TPG Telecom * 31-Jul NTRL 5.41 5.00 4,295 139.2 161.2 220.0 17.5 20.3 27.7 30.9 26.6 19.5 129.8 129.5 116.5 7.5 9.3 12.8 1.4 1.7 2.4 15.2 14.2 10.2 100

Vocus Communications * 30-Jun OPFM 3.29 2.82 266 8.2 10.9 16.1 10.6 13.5 19.6 31.1 24.4 16.8 131.0 118.5 100.3 1.0 1.5 2.2 0.3 0.4 0.7 15.0 11.2 8.2 0

Sector Aggregate 28.7 24.8 18.5 1.6 2.0 2.6 13.4 12.3 9.4

Utilities

Energy Developments Limited 30-Jun OPFM 6.00 6.44 965 55.0 55.6 59.6 33.7 34.5 37.0 17.8 17.4 16.2 74.9 84.5 96.8 22.0 22.4 24.0 3.7 3.7 4.0 8.0 7.6 7.1 0

Envestra 30-Jun NTRL 1.19 1.22 2,138 107.8 145.2 146.8 6.6 8.1 8.2 18.0 14.7 14.6 75.7 71.6 87.0 5.9 6.4 6.6 5.0 5.4 5.6 11.5 10.4 10.2 0

Sector Aggregate 17.9 15.5 15.0 4.6 4.9 5.1 10.1 9.3 9.0

Report Average 23.8 20.6 16.8 3.0 3.2 3.9 10.5 9.2 8.5

* Please note these companies are covered by Credit Suisse Emerging Companies (CSEC), a joint venture between Credit Suisse and First NZ Capital.

EPS

Source: Company data, Credit Suisse estimates, CSEC estimates

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Sector Aggregates

Research Analyst

Jason Swinbourne

612 8205 4591

jason.swinbourne@credit-suisse.com

As at 14 February 2014 PE Rel vs ASX 200(1)

EPS Growth % (1)

Div Yield % (1)

EBIT Multiple (1)

EBITDA Multiple (1)

2013 2014 2015 2013 2014 2015 2013 2014 2015 2013 2014 2015 2013 2014 2015 2013 2014 2015 2013 2014 2015 Top 200 Top 300

Energy (2) 22.0 16.7 12.7 14.8 13.2 11.3 1.3 1.1 0.9 -15.7 31.6 31.9 3.8 3.5 4.6 16.2 11.9 9.3 10.4 8.2 6.7 5.28% 5.17%

Materials (2) 15.9 12.0 11.8 17.6 15.3 14.8 0.9 0.8 0.8 -20 32 2 2.8 3.4 4.1 11.0 8.6 8.4 7.8 6.2 5.9 24.29% 23.78%

Chemicals (2) 15.3 14.0 11.7 15.7 14.0 11.1 0.9 0.9 0.8 -19 9 20 3.5 3.9 4.6 12.1 11.4 9.3 9.1 8.4 7.1 0.89% 0.87%

Construction Materials (2) 34.0 24.1 19.5 42.0 23.7 18.0 2.0 1.6 1.4 -13 41 23 2.1 3.8 4.5 25.2 18.4 15.6 14.4 11.7 10.6 0.85% 0.83%

Containers & Packaging (2) 19.0 18.0 16.1 19.0 17.4 15.4 1.1 1.2 1.1 9 5 12 3.7 3.9 4.4 16.8 13.2 12.2 10.5 9.6 9.0 0.86% 0.84%

Metals & Mining (2) 15.5 11.6 11.5 14.1 13.6 14.3 0.9 0.8 0.8 -21 34 0 2.8 3.4 4.0 10.6 8.2 8.1 7.5 5.9 5.7 21.70% 21.23%

Paper & Forest Products (2) 15.3 14.0 11.7 15.7 14.0 11.1 0.9 0.9 0.8 -19 9 20 3.5 3.9 4.6 12.1 11.4 9.3 9.1 8.4 7.1 0.89% 0.87%

Industrials (2) 17.6 20.1 16.3 13.7 12.6 10.9 1.0 1.3 1.2 12 -13 23 3.4 3.6 4.2 13.3 13.3 11.4 7.5 7.3 6.5 3.76% 3.68%

Capital Goods (2) 10.1 10.6 10.3 9.3 10.5 10.0 0.6 0.7 0.7 -4 -4 3 6.4 5.8 5.9 7.5 7.3 6.8 3.8 3.6 3.4 0.46% 0.45%

Commercial Services & Supplies (2) 18.6 17.4 15.3 13.2 15.1 12.3 1.1 1.2 1.1 5 7 14 3.3 3.4 3.8 14.3 13.2 11.5 9.4 8.6 7.6 1.70% 1.66%

Transportation (2) 20.7 35.3 21.6 15.6 14.1 13.2 1.2 2.3 1.5 35 -41 63 2.6 3.1 4.0 15.6 17.7 14.1 8.0 8.3 7.3 1.60% 1.56%

Consumer Discretionary (2) 21.9 20.4 18.0 17.9 16.6 15.3 1.3 1.4 1.3 -12 7 14 2.8 3.1 3.6 16.4 15.4 13.4 11.6 10.7 9.5 4.48% 4.39%

Automobiles & Components (2) >100 >100 >100 >100 >100 >100

Consumer Durables & Apparel (2) 11.6 15.1 12.0 11.6 15.1 12.0 0.7 1.0 0.9 -18 -24 26 12.1 6.0 7.5 8.7 11.4 9.1 6.9 8.6 7.2 0.03% 0.02%

Hotels Restaurants & Leisure (2) 23.5 20.3 18.5 25.5 20.6 18.9 1.4 1.4 1.3 -14 16 10 3.0 3.1 3.4 18.0 15.6 14.2 13.3 11.8 10.9 2.05% 2.00%

Media (2) 26.4 27.6 22.6 12.6 11.2 15.9 1.5 1.8 1.6 -20 -4 22 1.3 2.1 2.6 18.9 19.8 15.9 11.1 10.5 9.1 1.42% 1.39%

Retailing (2) 16.0 15.1 13.4 16.6 15.0 12.8 0.9 1.0 1.0 1 6 13 4.4 4.7 5.4 12.2 11.4 10.0 9.7 9.1 8.1 0.99% 0.97%

Consumer Staples (2) 19.4 18.7 17.0 18.1 17.5 14.0 1.1 1.2 1.2 3 3 10 4.2 4.3 4.7 13.5 13.4 12.3 10.5 10.4 9.6 6.60% 6.46%

Food & Drug Retailing (2) 19.9 19.0 17.3 18.7 17.7 16.6 1.1 1.3 1.2 6 5 10 4.1 4.3 4.7 13.8 13.5 12.4 10.8 10.6 9.8 5.75% 5.63%

Food Beverage & Tobacco (2) 16.3 16.8 15.2 17.9 16.3 13.2 0.9 1.1 1.1 -10 -3 11 4.8 4.5 4.7 12.0 12.8 11.6 9.0 9.2 8.5 0.85% 0.83%

Health Care (2) 26.6 21.8 19.3 20.0 16.8 15.5 1.5 1.5 1.4 18 22 13 2.0 2.4 2.7 21.1 17.2 15.1 17.6 14.6 12.8 3.93% 3.85%

Financials (2) 15.6 13.9 13.3 15.3 14.3 13.5 0.9 0.9 1.0 5 13 4 5.1 5.5 5.7 8.6 7.3 6.7 7.9 6.8 6.3 34.73% 33.99%

Banks (2) 14.6 13.7 13.2 14.8 13.8 12.9 0.8 0.9 0.9 8 7 3 5.2 5.6 5.8 7.0 6.1 5.6 6.5 5.7 5.2 23.59% 23.08%

Diversified Financials (2) 20.1 15.8 14.9 19.4 16.2 15.0 1.2 1.1 1.1 12 27 6 3.7 4.6 5.1 11.8 9.3 8.8 10.1 8.1 7.6 2.42% 2.36%

Insurance (2) 26.1 13.6 12.6 14.6 13.9 12.4 1.5 0.9 0.9 -26 93 8 5.2 5.2 5.7 26.7 12.9 12.1 17.4 12.1 11.2 3.34% 3.27%

Real Estate (2) 14.8 14.3 13.7 14.8 14.3 13.6 0.9 1.0 1.0 3 4 4 5.4 5.6 5.8 15.5 15.1 14.6 15.3 14.9 14.4 5.39% 5.27%

Information Technology (2) 23.6 19.7 16.9 23.2 19.2 16.1 1.4 1.3 1.2 7 20 16 2.7 2.8 3.2 18.3 14.9 12.5 17.0 14.0 11.8 0.65% 0.63%

Telecommunication Services (2) 17.3 16.2 15.4 21.3 17.8 15.2 1.0 1.1 1.1 10 6 6 5.1 5.3 5.5 12.2 11.4 11.1 7.5 7.2 7.1 4.15% 4.06%

Utilities (2) 17.5 16.5 14.6 16.5 14.7 14.0 1.0 1.1 1.0 8 6 13 5.4 5.6 5.8 12.4 11.7 10.6 9.7 9.2 8.4 1.51% 1.48%

20 Leaders 16.5 13.9 13.4 18.0 14.9 14.5 1.0 0.9 0.95 -7 18 4 4.2 4.6 5.0 9.7 8.2 7.7 7.8 6.7 6.3 na na

50 Leaders 16.5 14.1 13.3 17.1 14.8 14.0 1.0 0.9 1.0 -5 17 6 4.1 4.5 4.9 10.3 8.6 8.0 8.2 7.0 6.5 na na

ASX 100 17.2 14.9 13.9 17.1 15.1 13.9 1.0 1.0 1.0 -3 15 7 4.2 4.6 5.0 10.5 8.9 8.2 8.6 7.4 6.8 na na

MidCap 50 19.0 16.3 14.7 16.6 15.5 13.6 1.1 1.1 1.1 4 17 11 3.6 4.0 4.6 14.2 11.8 10.5 10.0 8.7 7.8 na na

S&P/ASX 200 - Industrials 17.1 15.5 14.4 16.4 15.1 14.2 1.0 1.0 1.0 4 10 7 4.5 4.8 5.2 10.2 9.0 8.2 8.6 7.7 7.1 na na

S&P/ASX 200 - Resources 18.3 13.5 12.5 14.7 13.4 13.2 1.1 0.9 0.9 -27 36 7 3.0 3.3 4.1 12.5 9.4 8.8 8.5 6.6 6.2 na na

S&P/ASX 200 - Ind excl BIP 19.5 18.4 16.3 18.2 16.5 14.6 1.1 1.2 1.2 3.9 6.1 12.7 3.7 4.0 4.4 14.1 13.1 11.8 10.1 9.5 8.7 na na

S&P/ASX 200 17.3 15.0 14.0 16.2 14.9 13.9 17.3 15.0 14.0 -4 15 7 4.2 4.5 4.9 10.7 9.0 8.3 8.6 7.4 6.9 na na

S&P/ASX 300 - Industrials 19.7 18.4 16.4 16.9 15.5 14.2 1.1 1.2 1.2 1 7 12 3.7 4.0 4.4 15.2 14.1 12.8 10.3 9.7 8.9 na na

S&P/ASX 300 - Resources 18.5 13.5 12.6 13.9 12.8 11.8 1.1 0.9 0.9 -27 37 8 3.0 3.3 4.1 12.7 9.5 8.9 8.5 6.6 6.2 na na

S&P/ASX 300 - Ind excl BIP 19.7 18.4 16.4 16.9 15.5 14.2 1.1 1.2 1.2 0.7 7.0 12.4 3.7 4.0 4.4 15.2 14.1 12.8 10.3 9.7 8.9 na na

S&P/ASX 300 17.4 15.1 14.0 15.9 14.8 13.8 1.0 1.0 1.0 -4 15 7 4.2 4.5 4.9 10.7 9.1 8.4 8.6 7.4 6.9 na na

Small Companies (4) 21.7 18.4 15.9 14.0 14.4 13.2 1.3 1.2 1.1 24- 18 16 3.3 3.4 4.0 14.9 13.0 11.7 9.4 8.6 7.9 na na

Small Industrials 19.2 17.8 15.7 15.4 14.7 13.5 1.1 1.2 1.1 -4 8 13 3.9 4.1 4.6 17.0 15.7 14.0 11.8 10.8 9.8 na na

Small Resources 77.7 19.7 19.7 9.4 9.9 12.9 4.5 1.3 1.4 -76 294 0 1.1 1.2 1.9 35.4 13.2 16.4 7.0 5.4 5.8 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) Small companies are all companies covered by Credit Suisse analysts excluding top 100 stocks.

Sector Weight PE (1)

Median PE (1)(3)

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61 3 9280 1659 adam.indikt@credit-suisse.com

Market estimates are preliminary and subject to change. Information correct as at 13 February 2014. NZ company comment and valuation provided by First NZ Capital. Source: ASX, Bloomberg, IRESS, Reuters and Credit Suisse estimates, CSEC estimates

Monday, 17 February 2014 Tuesday, 18 February 2014 Wednesday, 19 February 2014 Thursday, 20 February 2014 Friday, 21 February 2014

Results (estimates) Australand 1H14F NPAT $146.7mn, DPS 10.9cps Ansell 1H14F NPAT $64.3mn, DPS 17.4cps APN News & Media 1H14F NPAT $46.0mn, DPS 0.0 Aurizon 1H14F Bendigo and Adelaide Bank 1H14F NPAT $192.0mn, DPS 32.0cps *Fleetwood Corp 1H14F NPAT $5.0mn, DPS 0.0cps UGL 1H14F NPAT 46.3mn, DPS 22.0cps Western Areas 1H14F NPAT $6.3mn, DPS 0.0cps

Ex Div (div¢@fkg% pay date) BKN (0.0543) 15 0 21-Mar-14 CBA (8.4906)183 100 3-Apr-14 COO 0.5 0 5-Mar-14 GXL (0.049) 5.5 100 14-Mar-14 RKN 4.75 90 6-Mar-14 SCC 5 100 27-Feb-14

Results (estimates) Asciano Group 1H14F DPS 3.0cps Amcor 1H14F NPAT $5,233.1mn, DPS 18.5cps *Amcom Telecommunications 1H14F NPAT $11.3mn, DPS 2.3cps Arrium 1H14F NPAT $0.0mn, DPS 6.0cps BHP Billiton 1H14F NPAT US$7,072.3mn, DPS 62.0cps Coca-Cola Amatil 1H14F NPAT $499.6mn, DPS 35.5cps CFS Retail Property Trust 1H14F NPAT $191.9mn, DPS 6.8cps Challenger Limited 1H14F NPAT $200.9mn, DPS 10.0cps Commonwealth Property Office Fund 1H14F NPAT $105.7mn, DPS 3.4cps Mount Gibson Iron 1H14F NPAT $141.6mn, DPS 0.0cps *McMillan Shakespeare 1H14F NPAT $22.1mn, DPS 17.9cps *Oakton 1H14F NPAT $4.6mn, DPS 4.5cps Orora 1H14F NPAT $1,551.6mn, DPS 3.0cps Pacific Brands 1H14 *SAI Global 1H14 Sonic Healthcare 1H14F NPAT $172.2mn, DPS 27.9cps Ex Div (div¢@fkg% pay date) BLD (0.2962) 7 100 24-Mar-14 CPU (0.4467) 14 20 18-Mar-14 DMP (0.1124) 17.7 100 11-Mar-14 ETSMSF 13.3 0 27-Mar-14 ITD 0.5 100 3-Mar-14 MCR (0.0081) 2 100 21-Mar-14

Results (estimates) APA Group 1H14F NPAT $0.0mn, DPS 17.3cps APN News & Media 1H14 *ARB Corp 1H14F NPAT $19.5mn, DPS 12.0cps Brambles Limited 1H14F DPS 14.1cps Fortescue Metals Group 1H14F NPAT US$1,646.6mn, DPS 5.0cps Seek 1H14 *SMS Management & Technology 1H14F NPAT $6.8mn, DPS 7.0cps Suncorp Group Limited 1H14F NPAT $560.3mn, DPS 33.0cps Toll Holdings 1H14F DPS 15.0cps TradeMe 1H14 Wesfarmers FY13F NPAT $1,364.4mn, DPS 84.7cps Woodside Petroleum 1H14F NPAT US$1,763.9mn, DPS 104.4cps AGM Aristocrat Leisure 10 Macquarie Street, Sydney, 10:00

Results (estimates) Adelaide Brighton 1H14F DPS 8.0cps *Alliance Aviation Services 1H14 AMP 1H14F NPAT $646.6mn, DPS 12.5cps *Breville Group 1H14F NPAT $49.7mn, DPS 12.0cps *Emeco Holdings FY13F NPAT -$12.3mn, DPS 0.0cps Envestra FY13F NPAT $87.0mn, DPS 3.2cps Fairfax Media 1H14 Federation Centres 1H14F NPAT $115.8mn, DPS 7.1cps *iiNet 1H14F NPAT $31.7mn, DPS 9.0cps Investa Office Fund 1H14F NPAT $69.3mn, DPS 9.3cps Leighton Holdings 1H14F NPAT $556.4mn, DPS 54.0cps Mirvac Group 1H14F NPAT $210.0mn, DPS 4.3cps Myer 1H14 Origin Energy 1H14F PanAust 1H14F NPAT $80.8mn, DPS 4.0cps Platinum Asset Management 1H14F NPAT $88.5mn, DPS 11.0cps Super Retail Group 1H14F NPAT $60.7mn, DPS 18.5cps Tatts Group 1H14F NPAT $114.3mn, DPS 0.0cps Treasury Wine 1H14F DPS 6.0cps

Ex Div (div¢@fkg% pay date) ETSGEL 10.36 0 9-May-14 KOV 26 100 12-Mar-14

Results (estimates) Crown 1H14F DUET Group 1H14F Evolution Mining Limited 1H14F NPAT $28.6mn, DPS 0.9cps Insurance Australia Group 1H14F NPAT $570.4mn, DPS 16.0cps Iluka Resources FY13F NPAT $18.0mn, DPS 5.0cps Qube Logistics 1H14 Sandfire Resources NL 1H14F NPAT $31.7mn Santos Ltd 1H14F NPAT $469.5mn

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Market estimates are preliminary and subject to change. Information correct as at 13 February 2014. NZ company comment and valuation provided by First NZ Capital. Source: ASX, Bloomberg, IRESS, Reuters and Credit Suisse estimates, CSEC estimates

Monday, 17 February 2014 Tuesday, 18 February 2014 Wednesday, 19 February 2014 Thursday, 20 February 2014 Friday, 21 February 2014 Economics AUSTRALIA New Motor Vehicle Sales MoM (Jan) (Prev 1.70%) New Motor Vehicle Sales YoY (Jan) (Prev 0.10%) NEW ZEALAND Performance Services Index (Jan) (Prev 57.5) Retail Sales Ex Inflation QoQ (4Q) (Mkt 1.90%, Prev 0.30%)

Economics UNITED STATES Revisions of the Consumer Price Index Empire Manufacturing (Feb) (Mkt 9.7, Prev 12.5) Net Long-term TIC Flows (Dec) (Prev -$29.3bn) NAHB Housing Market Index (Feb) (Mkt 56, Prev 56)

Economics AUSTRALIA Conf. Board Leading Index MoM (Dec) (Prev 0.20%) Skilled Vacancies MoM (Jan) (Prev -0.60%) Bloomberg Feb Australia Economic Survey Wage Cost Index QoQ (4Q) (Prev 0.50%) Wage Cost Index YoY (4Q) (Prev 2.70%) CHINA MNI February Business Indicator UNITED STATES PPI (Jan)- Will reflect a significant redefinition (Prev 0.4%) - Core PPI (Prev 0.3%) Housing Starts (Jan) (CS 945K, Mkt 950K, Prev 999K) - Building Permits (Mkt 975K, Prev 991K) Atlanta Fed’s Lockhart speaks on the economic outlook at Mercer University (Non-Voter) St. Louis Fed’s Bullard speaks on the US economy and monetary policy (Non-Voter) FOMC Minutes from the January 28-29 meeting San Francisco Fed’s Williams speaks in NY on the outlook and monetary policy (Non-Voter)

Economics AUSTRALIA RBA FX Trans. Mkt (Jan) (Prev 884M) RBA FX Transactions Government (Jan) (Prev -906M) RBA FX Transactions Other (Jan) (Prev 31M) CHINA HSBC/Markit Flash Mfg PMI (Feb) (Mkt 49.6, Prev 49.5) Bloomberg Feb. China Economic Survey UNITED STATES Initial Jobless Claims (wk ended Feb 15) (CS 340K, Mkt 330K, Prev 339K) CPI (Jan) MoM (YoY) (CS 0.1%(1.5%), Mkt 0.1%(1.6%), Prev 0.3%(1.5%)) -.Core CPI (CS 0.2%(1.6%), Mkt 0.1%(1.6%), Prev 0.1%(1.7%)) CPI NSA Index (CS 233.770, Prev 233.049) Markit US PMI (Feb-Prelim) (Mkt 53.7, Prev 53.7 (Jan-Fin)) Philadelphia Fed (Feb) (Mkt 10.0, Prev 9.4) Leading Indicators (Jan) (Mkt 0.4%, Prev 0.1%) UST 2-Year Floating Rate Note Announcement (Reopening) UST 2, 5 & 7-Year Note Announcements UST 30-Year TIPS Auction NEW ZEALAND ANZ Job Advertisements MoM (Jan) (Prev -0.70%) PPI Input QoQ (4Q) (Prev 2.20%) PPI Output QoQ (4Q) (Prev 2.40%) ANZ Consumer Confidence Index (Feb) (Prev 135.8) ANZ Consumer Confidence MoM (Feb) (Prev 4.90%)

Economics UNITED STATES Revisions of Existing Home Sales Existing Home Sales (Jan) (CS 4.70mn, Mkt 4.70mn, Prev 4.87mn) St. Louis Fed’s Bullard speaks to the St. Louis Forum (Non-Voter) NEW ZEALAND Food Prices MoM Jan, (Prev -0.10%) Non Resident Bond Holdings Jan, (Prev 65.10%)

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Companies that have reported over the past week ANZ Banking Group1H14 NPAT $3,405mn, EPS $1.27, DPS 80cps Macquarie Group 1H14 NPAT $501mn, EPS $1.50, DPS $1.00 Boral 1H14 NPAT -$27mn, EPS 11.6cps, DPS 7.0cps carsales.com.au 1H14 NPAT $44mn, EPS 18.5cps, DPS 14.7cps Commonwealth Bank of Australia 1H14 co def NPAT $4,268mn, EPS $2.64, DPS $1.83 Computershare 1H14 norm. NPAT US$164mn, EPS 26.9cps, DPS 14.0cps CSL 1H14 rep. NPAT $645.7mn, EPS 133cps, DPS 53cps Dexus Property Group 1H14 NPAT $189.8mn, EPS 4.08cps, DPS 3.07cps *Domino's Pizza 1H14 NPAT $20.2mn, EPS 25cps, DPS 17.7cps Goodman Fielder 1H14 pre sig. NPAT $14.6mn, EPS -3.3cps, DPS 1.0cps OZ Minerals CY13 NPAT -$62.5mn, EPS -20.60cps, DPS (final) 10.0cps Newcrest Mining 1H14 underlying NPAT $207mn Sims Metal Management 1H14 underlying NPAT $42.1mn Perseus Mining 1H14 NPAT -$4.024mn, EPS -0.84cps Rating Changes over the past week *iiNet from Neutral to OUTPERFORM Goodman Fielder from Neutral to UNDERPERFORM OZ Minerals from Neutral to UNDERPERFORM *Skilled Group from Neutral to UNDERPERFORM

ASX code change over the past week (WAG) WAG to (EPA) Ephraim Resources

Companies that have reported over the past week Primary Healthcare 1H14 reported NPAT $75.5mn, EPS 0.15cps, DPS 9.0cps *Skilled Group 1H14 NPAT $26.0mn, EPS 9.00cps, DPS 7.5cps ASX 1H14 underlying NPAT $189.6mn, DPS 88.2cps Goodman Group 1H14 NPAT $306.8mn, EPS 17.2cps, DPS 13.50cps Stockland 1H14 NPAT $267.0mn, EPS 11.6cps, DPS 12cps STW Communications FY13 NPAT $49.5mn, EPS 12.3cps, DPS 8.6cps Telstra 1H14 NPAT $1,93bn, EPS 15.5cps, DPS 14.5cps *Webjet 1H14 NPAT $9.17mn, EPS 11.55cps, DPS 6.25cps Bradken 1H14 NPAT $38.1mn, EPS 22.5cps, DPS 15cps Cochlear 1H14 NPAT $21mn, EPS 37cps, DPS 127cps Rio Tinto FY13 underlying NPAT $10.2bn, DPS 192cps GPT Group FY13 NPAT $471.8mn, EPS 25.7cps, DPS (final) 10.3cps *Automotive 1H14 NPAT $37.9mn, EPS 15.1cps Charter Hall Retail REIT 1H14 stat NPAT $20.6mn, DPU 13.65cpu *TransPacific Industries 1H14 NPAT $158.6mn, EPS 10cps

Market estimates are preliminary and subject to change. Information correct as at 13 February 2014. NZ company comment and valuation provided by First NZ Capital. Source: ASX, Bloomberg, IRESS, Reuters and Credit Suisse estimates, CSEC estimates

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Credit Suisse’s Reporting Season Calendar Research Analyst

Adam Indikt 61 3 9280 1659

adam.indikt@credit-suisse.com

Price 12M NPAT pre-unusual** Reported NPAT** DPS (c)

Code Company Currency (A$) Tgt. Rtg Date Report Curr PCP Chg % Curr PCP Chg % Curr PCP Chg % Credit Suisse analyst comment

ALZ Australand A$ 3.9 3.8 N 17-Feb Final 146.7 142.0 3.3 146.7 142.0 3.3 10.9 11.0 -0.5

ANN Ansell Limited US$ 19.3 21.0 N 17-Feb Interim 64.3 57.1 12.6 64.3 57.1 12.6 17.4 16.0 8.9

AZJ Aurizon A$ 5.1 R 17-Feb Interim 0.0 0.0 0.0 0.0 450.0 410.0 9.8 Expect 1Q14 above rail volumes and qualitative outlook commentary, though nothing formal. Outlook commentary likely to be relatively positive given the reasonable organic volume growth in the space.

BEN Bendigo and Adelaide Bank

A$ 11.7 12.2 N 17-Feb Interim 192.0 169.7 13.1 192.0 169.7 13.1 32.0 30.0 6.7 We would look for: Some relief emerging for net interest margins (TD spread pressures easing, the re-pricing of parts of the Community Bank portfolio); Accelerating operating costs; Rural Bank asset quality; Update on medium term issues, such as the progress of the Great Southern litigation and the Basel advanced accreditation program.

FWD Fleetwood Corporation*

A$ 3.0 2.4 N 17-Feb Interim 5.0 8.9 -43.5 5.0 5.2 -4.3 0.0 30.0 -100.0

UGL UGL Limited A$ 7.1 7.8 N 17-Feb Interim 51.1 51.0 0.2 46.3 26.0 77.8 22.0 34.0 -35.3 We expect UGL to report 1H14 underlying NPAT of $51mn and to reiterate FY14 guidance of $120-130mn underlying NPAT. We expect a solid result for the property business to be overshadowed by weakness in the engineering division.

WSA Western Areas A$ 3.2 2.8 N 17-Feb Interim 6.3 6.5 -2.9 6.3 2.1 196.5 0.0 2.0 -100.0 Reporting date is an estimate.

AIO Asciano Group A$ 5.7 6.2 O 18-Feb Interim 0.0 0.0 0.0 0.0 3.0 3.0 0.0 Quarterly volumes will be released at AGM. We have a good read-through from Port and Coal stats so don't expect any material surprises. Data is showing a recovery in port volumes and continued underlying growth of 5-6% of coal. Expect outlook commentary though no formal guidance likely. Management may reiterate progress towards 10-15% EPS growth targets and WACC goals.

AMC Amcor A$ 10.7 11.2 N 18-Feb Interim 5,233.1 322.0 1,525.2 5,233.1 238.3 2,096.0 18.5 19.0 -2.6

AMM Amcom Telecommunications*

A$ 2.0 2.2 N 18-Feb Interim 11.3 10.0 13.9 11.3 10.0 13.9 2.3 2.0 14.6 FY14 earnings guidance for "double digit NPAT growth" expected to be maintained. Any momentum from sales here forward will be a driver for FY15 earnings. Could see announcement of first wins on CISCO HCS product. Potentially positive catalyst

ARI Arrium A$ 1.7 1.4 U 18-Feb Interim 0.0 0.0 0.0 0.0 6.0 2.0 200.0 1H FY14 quantitative guidance may be provided. We will also focus on domestic demand commentary and Iron Ore segment likely continued strong performance. First AGM for new MD Andrew Roberts.

BHP BHP Billiton US$ 37.7 38.0 N 18-Feb Interim 6,912.3 4,433.0 55.9 7,072.3 2,988.0 136.7 62.0 57.0 8.7

CCL Coca-Cola Amatil A$ 11.8 11.3 U 18-Feb Final 508.8 558.4 -8.9 499.6 459.9 8.6 35.5 -17.0 308.8

CFX CFS Retail Property Trust

A$ 2.0 2.0 N 18-Feb Interim 191.9 0.0 191.9 0.0 6.8 0.0 Australia dial in 1800 801 825. International dial in 61 2 8524 5042. Conference ID 3227176

CGF Challenger Limited A$ 6.3 7.0 O 18-Feb Interim 164.5 148.7 10.6 200.9 222.0 -9.5 10.0 9.5 5.3

CPA Commonwealth Property Office Fund

A$ 1.3 1.2 N 18-Feb Interim 105.7 103.3 2.3 105.7 103.3 2.3 3.4 3.2 4.7 Australia dial in 1800 801 825. International dial in 61 2 8524 5042. Conference ID 8287329.

MGX Mount Gibson Iron A$ 1.2 1.1 U 18-Feb Interim 141.6 37.1 281.7 141.6 37.1 281.7 0.0 2.0 -100.0 Reporting date is an estimate

MMS McMillan Shakespeare*

A$ 11.3 12.3 U 18-Feb Interim 23.0 29.7 -22.7 23.0 29.7 -22.7 18.4 24.0 -23.5

OKN Oakton* A$ 1.6 1.3 N 18-Feb Interim 4.6 4.5 1.6 4.6 4.5 1.6 4.5 4.8 -4.6

* Please note these companies are covered by Credit Suisse Emerging Companies (CSEC), a joint venture between Credit Suisse and First NZ Capital.

** In A$mn, unless otherwise stated. Final DPS is 2H dividend. O = Outperform, N = Neutral, U = Underperform, R = Restricted. Source: Company data, Credit Suisse estimates, CSEC estimates

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Currency Price 12M NPAT pre-unusual** Reported NPAT** DPS (c)

Code Company (A$) Tgt. Rtg Date Report Curr PCP Chg % Curr PCP Chg % Curr PCP Chg % Credit Suisse analyst comment

ORA Orora A$ 1.4 1.4 O 18-Feb Interim 1,551.6 0.0 1,551.6 0.0 3.0 0.0 November trading update, AMC/Orora indicated trading was favorable: Earnings higher than last year across Australasia and Packaging Distribution. Full year earnings expected to be significantly higher, cost savings will be skewed toward 2H14.

PBG Pacific Brands A$ 0.7 0.8 N 18-Feb Interim 34.4 38.9 -11.5 42.1 38.9 8.3 2.3 2.5 -9.8 PBG indicated at its AGM in October that its 1H14 EBIT and NPAT pre SI would be 'materially down' on pcp.

SHL Sonic Healthcare A$ 16.9 16.5 N 18-Feb Interim 172.2 150.6 14.3 172.2 150.6 14.3 27.9 25.0 11.5

SWM Seven West Media Ltd

A$ 2.2 2.6 O 18-Feb Interim 165.3 142.3 16.2 165.3 -109.3 251.1 6.0 6.0 0.0 SWM could surprise on the upside with stronger TV revenues towards the end of the period and potentially a better result on cost-out. Cautiously optimistic near-to-medium term trading outlook likely.

APA APA Group A$ 6.2 6.1 U 19-Feb Interim 0.0 0.0 0.0 0.0 17.5 17.0 2.9

APN APN News & Media A$ 0.4 0.3 U 19-Feb Final 49.4 54.4 -9.1 46.0 -455.8 110.1 0.0 0.0 APN may surprise on the upside with strong radio results and a strengthening NZ economy and exchange rate.

ARP ARB Corp* A$ 10.7 11.5 U 19-Feb Interim 19.5 20.9 -6.6 19.5 20.9 -6.6 12.0 12.5 -4.0

BXB Brambles Limited US$ 8.8 9.3 N 19-Feb Interim 0.0 0.0 0.0 0.0 13.6 13.9 -1.9 1Q14 sales and outlook commentary expected ahead of the AGM. Potential for BXB's mgmt to narrow guidance within the stated band. Given the recent negative read-through into the US retail sales from Wal-Mart, there is a chance that guidance could be narrowed to the lower end of the range. CS is currently at the top end.

FMG Fortescue Metals Group Ltd

US$ 5.7 7.5 O 19-Feb Interim 1,594.5 367.4 334.0 1,646.6 478.0 244.5 5.0 0.0

SEK Seek A$ 13.2 13.8 N 19-Feb Interim 72.9 67.5 8.0 72.9 67.5 8.0 12.9 10.0 29.0 Expect an update to the guidance given at the AGM. Currency will provide tailwind while core domestic employment business appears to be bottoming out - commentary and outlook likely to be key to share price reaction.

SMX SMS Management & Technology*

A$ 4.2 4.4 N 19-Feb Interim 6.8 12.7 -46.3 6.8 12.9 -47.1 7.0 13.5 -48.0

SUN Suncorp Group A$ 12.5 12.4 U 19-Feb Interim 560.3 574.0 -2.4 560.3 574.0 -2.4 33.0 25.0 32.0

SXL Southern Cross Media Group

A$ 1.6 1.4 U 19-Feb Interim 54.3 47.6 14.1 54.3 45.1 20.4 5.0 4.5 11.1 SXL is likely to report a mixed result, with radio ad spend more subdued towards the end of the period and SXL continuing to lose market share, offset by a potentially stronger result from regional TV.

TME Trade Me Group Ltd NZ$ 3.7 3.7 U 19-Feb Interim 40.9 37.4 9.4 40.9 37.4 9.4 8.3 7.5 10.1 TME indicated at its FY13 result that the rate of growth across the business would slow in FY14. The market is forecasting 9% EBITDA growth versus FY guidance for less than 12%.

TOL Toll Holdings A$ 5.7 5.5 N 19-Feb Interim 0.0 0.0 0.0 0.0 15.0 12.5 20.0 Qualitative and informal outlook commentary likely. Expect the tone of outlook to be reserved, in line with commentary at FY14 result.

TRS The Reject Shop A$ 10.9 13.5 N 19-Feb Interim 16.7 18.0 -7.1 16.7 20.0 -16.4 22.7 24.0 -5.6 TRS issued a trading update on 24 January that was 30% below market expectations and indicated 1H14 NPAT would be ~7% below pcp.

WES Wesfarmers A$ 43.8 45.0 N 19-Feb Interim 1,297.9 1,285.0 1.0 1,364.4 1,285.0 6.2 84.7 77.0 9.9

WPL Woodside Petroleum US$ 38.4 35.0 U 19-Feb Final 1,717.9 2,086.5 -17.7 1,763.9 2,983.0 -40.9 104.4 0.0 FY13 results and final dividend announcement.

ABC Adelaide Brighton A$ 4.1 3.4 U 20-Feb Interim 0.0 0.0 0.0 0.0 8.0 7.5 6.7

AMP AMP A$ 4.5 5.0 N 20-Feb Final 646.6 703.6 -8.1 646.6 703.6 -8.1 12.5 12.5 0.0

BRG Breville Group* A$ 8.1 8.2 N 20-Feb Final 49.7 46.0 8.2 49.7 46.0 8.2 12.0 11.5 4.3

EHL Emeco Holdings* A$ 0.3 0.3 N 20-Feb Interim -12.3 25.1 -148.8 -12.3 22.5 -154.4 0.0 2.5 -100.0

ENV Envestra A$ 1.2 1.2 N 20-Feb Interim 87.0 59.1 47.1 87.0 59.1 47.1 3.2 3.0 6.7

FDC Federation Centres A$ 2.4 2.4 N 20-Feb Interim 115.8 106.2 9.0 115.8 106.2 9.0 7.1 6.6 8.2

FXJ Fairfax Media A$ 0.7 0.5 U 20-Feb Interim 68.9 83.0 -17.1 68.9 386.3 -82.2 1.0 1.0 0.0 FXJ is likely to report a deceleration in the rate of decline in profit, primarily driven by cost-out. We are forecasting a $79mn cost reduction in 1H14 out of the $100-120mn cost-out flagged for FY. The revenue run-rate decline is also expected to decelerate.

IIN iiNet* A$ 7.4 8.1 O 20-Feb Interim 31.7 26.3 20.5 31.7 31.9 -0.9 9.0 8.0 12.5 Expect a strong subscriber net adds result (best for several years). Also expect to see the cost discipline from 2H13 continued with further cost out from synergies and reduction in employee costs. IIN does not provide guidance. CS is above consensus in FY14 by 3%

IOF Investa Office Fund A$ 3.1 3.3 N 20-Feb Interim 69.3 69.3 0.0 69.3 69.3 0.0 9.3 0.0

LEI Leighton Holdings A$ 16.3 15.2 U 20-Feb Final 521.5 442.5 17.9 556.4 444.7 25.1 54.0 60.0 -9.9

* Please note these companies are covered by Credit Suisse Emerging Companies (CSEC), a joint venture between Credit Suisse and First NZ Capital.

** In A$mn, unless otherwise stated. Final DPS is 2H dividend. O = Outperform, N = Neutral, U = Underperform, R = Restricted. Source: Company data, Credit Suisse estimates, CSEC estimates

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Currency Price 12M NPAT pre-unusual** Reported NPAT** DPS (c)

Code Company (A$) Tgt. Rtg Date Report Curr PCP Chg % Curr PCP Chg % Curr PCP Chg % Credit Suisse analyst comment

MGR Mirvac Group A$ 1.7 1.9 O 20-Feb Interim 210.0 194.2 8.1 210.0 194.2 8.1 4.3 4.2 2.7 Australia dial in 1800 801 825. International dial in 612 8524 5042. Conference ID 2526682.

ORG Origin Energy A$ 14.8 15.3 N 20-Feb Interim 0.0 0.0 0.0 0.0 0.0 0.0

PNA PanAust US$ 2.0 2.0 O 20-Feb Final 80.8 142.3 -43.2 80.8 142.3 -43.2 4.0 4.0 0.0 Reporting date is an estimate

PTM Platinum Asset Management

A$ 7.1 6.0 U 20-Feb Interim 88.5 62.4 41.8 88.5 62.4 41.8 11.0 8.0 37.5

SUL Super Retail Group A$ 10.8 11.5 N 20-Feb Interim 60.7 60.6 0.1 60.7 60.6 0.1 18.5 17.0 9.0

TTS Tatts Group A$ 3.0 3.2 N 20-Feb Interim 114.3 109.7 4.2 114.3 129.3 -11.6 0.0 0.0

TWE Treasury Wine A$ 3.8 3.2 U 20-Feb Interim 0.0 0.0 6.0 6.0 0.0

CWN Crown A$ 17.4 15.9 U 21-Feb Interim 0.0 0.0 0.0 0.0 0.0 0.0

DUE DUET Group A$ 2.1 2.3 O 21-Feb Interim 0.0 0.0 0.0 0.0 0.0 0.0

EVN Evolution Mining A$ 0.8 0.6 U 21-Feb Interim 28.6 40.7 -29.7 28.6 40.7 -29.7 0.9 0.0 No material updates are expected.

FAN Fantastic Holdings A$ 2.0 2.0 U 21-Feb Interim 4.1 7.7 -47.1 4.1 7.7 -47.1 2.4 7.5 -68.4 FAN issued a trading update on 3 December that was ~50% below market expectations and indicated 1H14 NPAT would be 35-61% below pcp.

IAG Insurance Australia Group

A$ 5.5 6.0 N 21-Feb Interim 570.4 643.0 -11.3 570.4 461.0 23.7 16.0 11.0 45.5

ILU Iluka Resources A$ 9.2 10.0 N 21-Feb Final 59.0 363.2 -83.7 18.0 363.2 -95.0 5.0 10.0 -50.0 Dividend announcement.

SFR Sandfire Resources NL A$ 6.6 5.8 U 21-Feb Interim 31.7 79.1 -59.9 31.7 79.1 -59.9 0.0 0.0 No material updates are expected.

STO Santos Ltd A$ 14.1 13.4 U 21-Feb Final 558.7 606.0 -7.8 469.5 519.0 -9.5 0.0 0.0

AGO Atlas Iron A$ 1.1 1.3 O 24-Feb Interim 69.5 1.0 6,839.9 69.5 -256.0 127.2 0.0 0.0 Estimated date.

AQA Aquila Resources A$ 2.8 2.6 O 24-Feb Interim -7.8 -112.0 93.1 -7.8 408.9 -101.9 0.0 0.0 reporting date is an estimate

BLY Boart Longyear Group*

US$ 0.4 0.4 U 24-Feb Final -125.7 114.0 -210.3 -410.4 68.2 -702.1 0.1 1.0 -94.5 Update given in December following clarification on Canadian tax issues. However, by mid-Feb should have an idea of conversation with Northern Hemisphere customers for 2014 budgets. Guidance unlikely to be provided. We expect conditions to remains challenging given weak gold price. Focus needs to be on reducing costs and releasing working capital to manage the balance sheet.

BPT Beach Energy A$ 1.5 1.6 N 24-Feb Interim 161.3 62.2 159.2 161.3 45.1 257.8 0.8 0.8 0.0

BSL BlueScope Steel A$ 5.9 5.7 O 24-Feb Interim 0.0 0.0 0.0 0.0 0.0 0.0 Quantitative guidance change unlikely. Our focus will be on qualitative

commentary around domestic conditions and demand.

CTX Caltex Australia A$ 19.9 23.8 O 24-Feb Final 320.3 458.0 -30.1 344.5 56.8 506.7 17.0 23.0 -26.1 FY13 results, dividend announced

IGO Independence Group NL

A$ 4.3 3.7 O 24-Feb Interim 21.3 16.5 29.1 21.3 16.5 29.1 3.7 1.0 265.4 Estimated reporting week.

MCS McAleese Group* A$ 1.1 1.8 O 24-Feb Interim 23.4 28.6 -17.9 15.5 27.6 -43.7 0.0 0.0 Maiden result for McAleese. Focus will be on pro forma trading results for the first 6 months to Dec-13. Stat results likely to be messy given Nov-13 listing. No surprise expected given recent prospectus forecasts given in Nov-13

MDL Mineral Deposits Ltd. US$ 2.2 4.0 O 24-Feb Final 1.6 20.1 -91.9 -11.6 16.3 -171.7 0.0 0.0 Reporting date is an estimate

PAN Panoramic Resources

A$ 0.2 0.3 N 24-Feb Interim -9.1 -13.0 29.6 -9.1 -13.0 29.6 0.0 1.0 -100.0 Reporting date is an estimate

RRL Regis Resources Limited

A$ 3.1 2.9 N 24-Feb Interim 61.0 66.1 -7.6 61.0 66.1 -7.6 0.0 0.0 No material update expected.

SKI Spark Infrastructure Group

A$ 1.7 1.8 O 24-Feb Final 177.5 173.9 2.1 177.5 173.9 2.1 5.5 5.3 4.7

SXY Senex Energy A$ 0.7 0.9 O 24-Feb Interim 27.3 23.4 17.1 27.3 23.4 17.1 0.0 0.0 Reporting date is an estimate

TIG Tigers Realm Coal A$ 0.2 0.3 O 24-Feb Final -17.4 -18.8 7.2 -17.4 -18.8 7.2 0.0 0.0 Reporting date is an estimate

YAL Yancoal Australia A$ 0.7 0.7 U 24-Feb Final 6.1 30.5 -79.9 -721.8 403.1 -279.0 0.0 0.0 reporting date is an estimate

CAB Cabcharge Australia* A$ 4.1 4.0 U 25-Feb Interim 34.1 33.3 2.2 34.1 33.3 2.2 17.6 18.0 -2.0

CHC Charter Hall Group A$ 3.9 3.8 N 25-Feb Interim 37.1 33.4 11.4 37.1 33.4 11.4 11.0 9.8 12.2

ENE Energy Developments A$ 6.0 6.4 O 25-Feb Interim 24.0 29.5 -18.5 24.0 29.5 -18.5 9.7 0.0

FLT Flight Centre A$ 46.7 58.0 O 25-Feb Interim 105.8 91.8 15.3 105.8 91.8 15.3 52.5 46.0 14.1

IFL IOOF Holdings A$ 9.3 9.4 N 25-Feb Interim 61.8 50.9 21.2 49.2 33.2 48.1 24.0 19.5 23.1

MRM Mermaid Marine Australia*

A$ 2.9 3.8 O 25-Feb Final 60.3 51.0 18.1 60.3 51.0 18.1 7.0 6.0 16.7

* Please note these companies are covered by Credit Suisse Emerging Companies (CSEC), a joint venture between Credit Suisse and First NZ Capital.

** In A$mn, unless otherwise stated. Final DPS is 2H dividend. O = Outperform, N = Neutral, U = Underperform, R = Restricted. Source: Company data, Credit Suisse estimates, CSEC estimates

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Currency Price 12M NPAT pre-unusual** Reported NPAT** DPS (c)

Code Company (A$) Tgt. Rtg Date Report Curr PCP Chg % Curr PCP Chg % Curr PCP Chg % Credit Suisse analyst comment

OSH Oil Search US$ 8.3 9.7 O 25-Feb Final 209.0 154.5 35.3 209.3 175.8 19.0 2.0 2.0 0.0

QBE QBE Insurance Grp US$ 11.4 13.7 O 25-Feb Final -249.6 761.0 -132.8 -249.6 761.0 -132.8 13.0 10.4 25.1

RHC Ramsay Health Care A$ 43.5 41.5 N 25-Feb Interim 159.1 140.0 13.7 149.2 130.1 14.7 33.1 29.0 14.0

SFH Specialty Fashion Group

A$ 0.8 1.0 O 25-Feb Interim 12.6 18.0 -29.7 12.6 18.0 -29.7 2.0 2.0 0.0 SFH is likely to report a material decline in 1H profit in line with broader retail downgrades. The Rivers acquisition is unlikely to be positively contributing. We are 30% below market.

SLM Salmat* A$ 2.1 2.2 N 25-Feb Interim 7.4 9.8 -24.5 6.8 41.5 -83.6 7.5 25.0 -70.0

AGK AGL Energy A$ 15.9 15.8 N 26-Feb Interim 0.0 0.0 0.0 0.0 31.0 30.0 3.3

HGG Henderson Grp PLC £ 4.3 4.5 N 26-Feb Final 161.9 126.8 27.7 118.9 99.7 19.2 6.3 5.1 25.1

IRE IRESS* A$ 9.4 9.6 N 26-Feb Final 55.0 54.4 1.1 55.0 54.4 1.1 19.0 24.5 -22.4

LLC Lend Lease A$ 11.3 12.5 O 26-Feb Interim 253.7 302.3 -16.1 253.7 302.3 -16.1 0.0 0.0 Australia dial in 1800 354 715. Conference ID 15797117.

MYX Mayne Pharma A$ 0.9 0.9 N 26-Feb Interim 9.5 1.6 489.4 8.8 -2.5 446.4 0.0 0.0

PGH Pact Group Holdings A$ 3.5 3.9 O 26-Feb Interim 0.0 0.0 0.0 0.0 0.0 0.0

PRT Prime Media Group A$ 1.0 1.1 N 26-Feb Interim 16.4 19.4 -15.2 16.4 4.6 255.6 3.4 4.0 -15.0 PRT provided an update at its AGM in November that was 10% below market expectations and indicated FY14 core NPAT would be ~8% below pcp.

WHC Whitehaven Coal A$ 1.6 2.8 O 26-Feb Interim -19.0 -27.6 31.1 -19.0 -47.1 59.6 0.0 0.0

WOR Worley Parsons A$ 15.7 17.1 N 26-Feb Interim 92.2 155.1 -40.6 92.2 155.1 -40.6 42.0 41.5 1.2 We expect WOR to report 1H14 underlying NPAT of $92mn, at the bottom end of 1H14 guidance ($90-110mn). We also expect WOR to reiterate FY14 guidance of $260-300mn.

WTF Wotif.com Holdings* A$ 2.7 2.9 U 26-Feb Interim 22.2 27.5 -19.4 22.2 27.5 -19.4 8.3 11.5 -27.6 AGM: We are not expecting quantified guidance, but we believe that qualitative outlook commentary is a strong possibility. We are looking for updated commentary surrounding the strategies announced at the strategic review in May. Specifically, we would be looking for more detail on the marketing plans for Asia and for a further explanation of the strategy.

GBG Gindalbie Metals Ltd A$ 0.1 0.1 U 27-Feb Interim -7.6 -18.8 59.6 -7.6 -18.8 59.6 0.0 0.0

ISU iSelect Limited* A$ 1.2 1.9 O 27-Feb Interim 5.0 0.2 2,359.5 5.0 0.2 2,359.5 0.0 0.0

NEC Nine Entertainment A$ 2.2 2.3 O 27-Feb Interim 0.0 0.0 0.0 0.0 0.0 0.0 Although NEC did not release any prospectus forecasts for the first half we expect upgrades post-1H14 result to full year numbers due to improved ad market conditions and strong performance of Nine Network over summer.

NWH NRW Holdings Limited*

A$ 1.4 1.3 N 27-Feb Interim 25.7 48.6 -47.0 25.7 48.6 -47.0 4.3 8.0 -45.8 Update expected on revenue guidance of $1 - $1.2bn. Now have Roy Hill contract awarded, hence should give mgmt more visibility. Roy Hill should be mostly mobilized and changes to RIO work schedule should also be understood.

PPT Perpetual Limited A$ 48.3 51.0 N 27-Feb Interim 46.9 35.7 31.2 40.8 28.0 45.6 110.0 50.0 120.0

QAN Qantas Airways A$ 1.2 1.2 N 27-Feb Interim 0.0 0.0 0.0 0.0 0.0 0.0 No formal guidance, but qualitative outlook commentary likely to be offered. Alan Joyce will likely reiterate the airline is still on track for profitability in International by FY15

TSE Transfield Services Ltd*

A$ 0.8 1.2 O 27-Feb Interim 0.0 0.0 0.0 0.0 0.0 5.0 -100.0 Expect re-iteration of guidance for $65 - $70mn NPAT consistent with December update. key focus will be on balance sheet where ND expected to peak at ~$680mn. Also expect to see TIMEC (North America) turn to positive profit contribution (major milestone). This will be the first result showing the margin improvement from major cost out initiatives. So all eyes will be on margin trends.

UXC UXC Limited* A$ 1.1 1.2 O 27-Feb Interim 6.4 7.5 -15.5 6.4 8.4 -24.1 1.5 1.8 -13.1

VOC Vocus Communications*

A$ 3.3 2.8 O 27-Feb Interim 5.1 3.9 31.2 5.1 4.2 21.1 0.7 0.4 72.9 Focus will be on: (1) growth in fibre customers and fibre revenue; (2) capex and FY14 capex guidance; (3) continuing to win market share in Internet? and (4) cost control. We expect a very strong result.

WDC Westfield A$ 10.3 11.3 N 27-Feb Final 1,448.1 1,473.7 -1.7 1,448.1 1,473.7 -1.7 25.5 24.8 3.0

WRT Westfield Retail Trust A$ 3.1 3.5 O 27-Feb Final 605.3 572.6 5.7 605.3 572.6 5.7 9.9 9.5 4.5

AOH Altona Mining Limited A$ 0.2 0.3 O 28-Feb Interim 8.5 14.2 -39.7 8.5 14.2 -39.7 0.0 0.0

AUT Aurora Oil & Gas US$ 4.1 R 28-Feb Final 124.5 55.2 125.7 124.5 55.2 125.7 0.0 0.0 Conference call.

BSE Base Resources Ltd A$ 0.4 0.9 O 28-Feb Interim -30.0 -2.0 -1,371.4 -30.0 -2.0 -1,371.4 0.0 0.0 Reporting date is an estimate

HVN Harvey Norman A$ 3.2 3.4 N 28-Feb Interim 119.5 113.4 5.4 119.5 81.9 45.9 5.1 4.5 12.5

NWT NewSat Limited* A$ 0.5 0.7 O 28-Feb Interim 0.1 1.3 -90.6 0.1 1.3 -90.6 0.0 0.0 Result not particularly meaningful. Key focus needs to be on delivery of sales contract for Jabiru1 satellite launching mid-2015.

* Please note these companies are covered by Credit Suisse Emerging Companies (CSEC), a joint venture between Credit Suisse and First NZ Capital.

** In A$mn, unless otherwise stated. Final DPS is 2H dividend. O = Outperform, N = Neutral, U = Underperform, R = Restricted. Source: Company data, Credit Suisse estimates, CSEC estimates

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Currency Price 12M NPAT pre-unusual** Reported NPAT** DPS (c)

Code Company (A$) Tgt. Rtg Date Report Curr PCP Chg % Curr PCP Chg % Curr PCP Chg % Credit Suisse analyst comment

VAH Virgin Australia A$ 0.3 0.4 N 28-Feb Interim 0.0 0.0 0.0 0.0 0.0 0.0 Tentative date

WOW Woolworths A$ 35.5 38.3 O 28-Feb Interim 1,344.2 1,247.2 7.8 1,344.2 1,154.8 16.4 64.5 62.0 4.1

GRY Gryphon Minerals Limited

A$ 0.2 0.3 O 3-Mar Interim -1.5 -1.1 -31.3 -1.5 -1.1 -31.3 0.0 0.0

ORL OrotonGroup A$ 3.9 4.7 O 11-Mar Interim 5.8 16.4 -64.5 5.8 16.4 -64.5 10.0 22.0 -54.5 ORL provided a trading update in Feb 2014 that was below expectations. 1H14 EBIT from continuing businesses is expected to be $8mn, representing a 24% decline from continuing businesses on pcp. FY14 guidance was revised down to the 'lower end' of $13-15mn EBIT.

ORL OrotonGroup A$ 3.9 4.7 O 11-Mar Interim 5.8 16.4 -64.5 5.8 16.4 -64.5 10.0 22.0 -54.5 ORL provided a trading update in Feb 2014 that was below expectations. 1H14 EBIT from continuing businesses is expected to be $8mn, representing a 24% decline from continuing businesses on pcp. FY14 guidance was revised down to the 'lower end' of $13-15mn EBIT.

PMV Premier Investments Ltd

A$ 7.9 9.5 O 19-Mar Interim 52.3 46.5 12.6 52.3 46.5 12.6 23.6 19.0 24.2

MYR Myer Holdings A$ 2.5 2.7 N 20-Mar Interim 77.0 87.9 -12.5 77.0 87.9 -12.5 10.0 10.0 0.0

TPM TPG Telecom* A$ 5.4 5.0 N 24-Mar Interim 75.3 71.3 5.6 75.3 78.3 -3.8 4.6 3.5 30.1 Guidance expected to be re-iterated for $290 - $300mn EBITDA (excluding AAPT acquisition). Key focus will be on progress with FTTb project

TEN Ten Network Holdings

A$ 0.3 0.3 N 10-Apr Interim 6.6 6.8 -3.2 6.6 -243.3 102.7 0.0 0.0 Weak result expected. Investor focus likely to be centred on programming strategy for 2014, in particular areas of investment.

BOQ Bank of Queensland A$ 11.9 12.5 N 11-Apr Interim 140.5 119.9 17.2 140.5 119.9 17.2 32.0 28.0 14.3

MSB Mesoblast A$ 5.8 8.0 O TBA Interim -36.5 -27.8 -31.4 -36.5 -27.8 -31.4 0.0 0.0

* Please note these companies are covered by Credit Suisse Emerging Companies (CSEC), a joint venture between Credit Suisse and First NZ Capital.

** In A$mn, unless otherwise stated. Final DPS is 2H dividend. O = Outperform, N = Neutral, U = Underperform, R = Restricted. Source: Company data, Credit Suisse estimates, CSEC estimates

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First NZ Capital Results Preview Research Analyst

Robert Bode 64 9 302 5555

robert.bode@fnzc.co.nz

Price Tgt Est NPAT rptd (NZ$m) EPS adjusted (NZ¢) DPS (NZ¢)

Code Company (NZ$) (NZ$) Rtg Date Report Curr PCP Chg Curr PCP Chg Curr PCP FNZC Analyst Comment

PFI Property for Industry 1.27 1.35 U 17-Feb FY 22.6 13.7 65% 7.2 6.2 15% 7.0 6.6 PFI will report for the first time post the DPF merger although comparatives will be of little use due to the merger occurring on 1 July 2013. PFI has already announced a small positive revaluation over its portfolio of 2.4%. We expect further muted comments on the outlook for rental growth and are looking for guidance that confirms the talked about benefits of the DPF merger. Gearing remains close to the board imposed limit of 40%.

CEN Contact Energy 5.18 5.75 O 18-Feb 1H 79.7 88.0 -9% 10.9 12.6 -13% 11.0 11.0 1H14 earnings expected to be slightly below pcp. We forecast stronger 2H14F due to Te Mihi EBITDAF uplift and reduced fuel costs. Our FY14F NPAT forecast currently lies 3% above pcp, but will be sensitive to initial level of Te Mihi depreciation.

PCT Precinct Properties 1.025 1.08 N 18-Feb 1H 30.9 26.2 18% 2.9 2.6 12% 2.7 2.6 1H14 should see the start of rental and earnings momentum, particularly out of their Auckland prime office portfolio where vacancy is effectively nil and tenant demand is firm. This reporting period will also show the benefits of their debt fuelled acquisitions over the last 18 or so months consolidating their Auckland downtown precinct with a large expected jump in headline NPAT although less on a per share basis.

TME Trade Me 4.00 4.23 U 19-Feb 1H 40.9 37.4 9% 10.3 9.4 9% 17.3 15.8 We expect TME to maintain its FY14 guidance for revenue and EBITDA growth to be lower than FY13 (i.e., lower than 15% revenue growth and 12% EBITDA growth). Market forecasting 9% EBITDA growth.

EBO EBOS Group 9.72 11.25 O 19-Feb 1H 48.7 15.0 320% 33.0 29.0 14% 19.5 17.5 EBO 1H14 is not comparable on a pcp basis, given the acquisition of Symbion in June 2013. Points of interest will include the impact of the AUD (PFI 1H14 guidance issued at 0.82), and any comments around market dynamics in Australia (particularly around PBS policy and guidelines).

MEL Meridian Energy 1.025 1.70 O 19-Feb 1H 62.7 173.4 -64% 2.5 3.5 -29% 4.2 0 Large fall in 1H14 NPAT, due mainly to introduction of lower NZAS sale price from July 2013, and some reduction in Retail FPVV average sale price. Our 2H14 earnings forecast remains consistent with MEL meeting PFI forecasts for FY14. Any cost saving in underlying business would be upside.

STU Steel & Tube 3.00 3.10 U 20-Feb 1H 7.5 7.3 3% 8.5 7.5 13% 6.5 6.5 The rebuild in Canterbury as well as housing and investment recovery in Auckland should deliver growth for STU. The extent to which this captured by STU will be subject to price discipline in the market.

POT Port of Tauranga 13.95 13.80 U 20-Feb 1H 40.4 39.2 3% 30.1 29.2 3% 20.0 20.0 A projected decline in POT’s container volume handled is likely to be more than offset by log volume in 1H, driven by ongoing strong demand for logs from Asia. We expect POT to maintain its NZ$77mn-NZ$81mn NPAT guidance range.

FBU Fletcher Building 9.48 9.00 U 20-Feb 1H 173.0 146.0 19% 25.2 22.3 13% 17.0 17.0 NZ earnings should continue to respond to the pick-up in Auckland housing and ongoing repair and rebuild in Canterbury. Australia performance will likely have remained flat but outlook statement should be more encouraging in light of recovery displayed by lead activity indicators in the sector. We expect FBU to maintain it NZ$610mn-NZ$650mn EBIT guidance range.

AIA Auckland Intl Airport 3.58 3.45 N 20-Feb 1H 86.3 76.1 13% 6.5 5.8 13% 0.0 5.75 Revenue is forecast to lift +7.8% to $239.4mn following a 4.3% increase in international pax and a 3.8% lift in aircraft tonnes landed. EBITDA (excl. associates) is forecast to increase 7.9% to $178.0mn. Due to the announcement of a $454mn capital return AIA will not pay an interim dividend.

NPX Nuplex 3.36 3.73 N 20-Feb 1H 27.0 24.5 10% 13.6 12.4 10% 10.0 10.0 We assume $3.3m restructuring charges in 1H14. Look for European and Asian trading conditions commentary. Impact of strong NZ dollar may weigh on company outlook.

TEL Telecom 2.46 2.50 N 21-Feb 1H 172.0 156.0 10% 9.4 8.4 12% 8.0 8.0 Can TEL surprise on the cost out benefits it has received and outline a plan for further reductions greater than the market anticipates? Operationally, we expect mobile to be the star performer. Look for an update on content strategy and capital structure post AAPT sale.

*Ratings: O = Outperform, U = Underperform, N = Neutral, R = Restricted

Source: Company data, FNZC estimates

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Price Tgt Est NPAT rptd (NZ$m) EPS adjusted (NZ¢) DPS (NZ¢)

Code Company (NZ$) (NZ$) Rtg Date Report Curr PCP Chg Curr PCP Chg Curr PCP FNZC Analyst Comment

NZX NZX 1.24 1.26 U 21-Feb FY 14.0 9.9 41% 5.9 4.8 23% 5.6 5.1 A strong 2013 market will flow through to results. Key question remains around the rebasing of operating costs to meet service levels and if the momentum in other areas can offset a weaker capital raising environment.

VCT Vector 2.32 2.55 U 21-Feb 1H 85.9 116.7 -26% 8.6 11.7 -27% 6.8 7.3 Look for impact of regulated price reset for gas transmission and distribution and claw back for electricity. Key issue remains what return VCT can earn on its network at the 2015 electricity rest given interest rate risk and potential for the Comcom to change its WACC methodology.

CNU Chorus 1.445 1.56 N 24-Feb 1H 80.5 83.6 -4% 20.7 21.7 -5% 0.0 10.0 Key driver is CFH discussions near term but we don’t expect much of an update on this at the result. Operationally probably too early to be talking major cost cutting until CNU know if they can renegotiate CFH contract or not.

FRE Freightways 4.55 4.50 N 24- Feb 1H 21.4 21.0 2% 13.4 12.9 4% 10.0 9.0 Express parcel volume is projected to be c2% YoY driven by a recovery in the NZ economy but earnings growth will likely be contained to mid-single digit due to ongoing shift in volume growth toward the higher unit cost to serve B2C market. We expect FRE to maintain c6% NPAT growth in FY14F before adjusting for recent document destruction and information management businesses

SKT Sky Television 5.78 5.70 U 24-Feb 1H 74.1 68.2 9% 19.1 17.5 9% 13.5 12.0 Another solid result expected. The key focus is subscriber growth and mix following the DSO and whether there have been some expenses associated with a high level of promotional activity and the lower price of Igloo boxes in the period. This will help contextualise the FY14 earnings guidance SKT gave at its ASM in October.

GPG Guinness Peat Group 0.66 0.59 N 25-Feb FY Besides pensions for GPG key focus will be on the impact of weaker Brazil and emerging markets and slower growth in China on Coats’ performance. Our 2H13 revenue for Industrials may be too optimistic.

PGW PGG Wrightson 0.42 0.52 O 25-Feb 1H 9.3 4.8 93% 1.2 1.1 12% 2.2 2.2 Our expectations are for merchandising to deliver NZ$20.4mn EBITDA (+14% YoY) driven by relatively broad-based recovery. Outlook remains encouraging based on current farmgate prices and returns.

HNZ Heartland New Zealand 0.91 0.90 N 25-Feb 1H 17.5 10.7 64% 4.5 2.8 61% 2.5 2.0 Key question is whether the LVR restrictions have flowed through to competition in rural thus impacting HNZ. Look for update on whether there are any acquisition opportunities.

SUM Summerset 3.28 3.55 O 25-Feb FY 24.9 14.8 68% 11.7 7.0 67% 3.5 2.5 Confident around estimates for strong growth in FY13; however, growth rate should ebb in FY14 as SUM cycles a tougher comp and as overheads ramp-up before build rate matches.

ATM A2 Corporation 0.96 0.73 U 26-Feb 1H 1.6 1.2 33% 25.0 9.0 278% 0.0 0.0 We await an update on progress in A2’s most recent initiatives in China with infant formula and the UK where the company has recently taken full ownership of its previous fresh milk JV with Muller-Wiseman. We also anticipate news on further ventures into new markets – most likely the US.

MRP Mighty River Power 1.975 2.30 N 26-Feb 1H 100.9 75.5 34% 7.2 9.5 -24% 5.5 4.8 We forecast 3% uplift vs pcp for 1H14 EBITDAF. Due to large one-off Overseas JV net uplift in pcp 1H14 NPAT expected to be lower. Our current 1H14 forecast is consistent with MRP hitting EBITDAF $500m FY14 guidance.

AIR Air New Zealand 1.695 1.66 N 27 Feb 1H 130 100 30% 11.8 9.0 30% 4.5 3.0 Passenger revenue is forecast to increase 0.4% to $1,937mn with short-haul revenue growth of 1.6% offset by a 1.8% decline in long-haul. We expect lower hedged jet fuel price, a stronger NZ$ and ongoing fuel efficiency improvements to drive lower fuel costs which will in turn deliver around 20% growth in1H14 EBIT that AIR guided to in December.

NZR New Zealand Refining 1.97 2.78 O 27-Feb FY 29.3 32.6 -10% 10.5 11.7 -10% 6.0 7.0 A very weak end to FY13 for margins means downside revisions are likely to our/consensus numbers. Meanwhile, FY14 appears to have started poorly for margins.

HBY Hellaby Holdings 3.15 3.90 O 27-Feb 1H 9.3 6.2 50% 9.9 6.6 50% 7.5 5.0 Despite the changed composition of the investment portfolio, with the acquisition of Contract Resources, we are forecasting a 1H / 2H split consistent with that of last year (that being 1/3 and 2/3 respectively). This is due the contract nature of the oil and gas business.

*Ratings: O = Outperform, U = Underperform, N = Neutral, R = Restricted

Source: Company data, FNZC estimates

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Companies Mentioned (Price as of 14 Feb 2014)

Adelaide Brighton (ABC.AU, AU$4.06, UNDERPERFORM, TP AU$3.40) BHP Billiton (BLT.L, 1871.0p) Boral (BLD.AU, AU$5.48, NEUTRAL, TP AU$5.90) CLP Holdings Limited (0002.HK, HK$59.45) Commonwealth Bank Australia (CBA.AU, AU$75.99, UNDERPERFORM, TP AU$76.00) CSR (CSR.AU, AU$3.06, OUTPERFORM, TP AU$2.90) *Fletcher Building (FBU.NZ, NZ$9.48, NEUTRAL, TP NZ$10.25) *Heartland New Zealand (HNZ.NZ, NZ$0.91, NEUTRAL, TP NZ$0.96) James Hardie Industries SE (JHX.AU, AU$13.50, OUTPERFORM, TP AU$13.50) Louisiana-Pacific Corp. (LPX.N, $18.07) *Michael Hill International (MHI.NZ, NZ$1.38, OUTPERFORM, TP NZ$1.67) *Port of Tauranga (POT.NZ, NZ$13.95, UNDERPERFORM, TP NZ$13.80) Rio Tinto (RIO.L, 3497.5p, OUTPERFORM, TP 4200.0p) Simon Property Group, Inc. (SPG.N, $158.73) Singapore Telecom (SGT.AX, A$3.59, NEUTRAL, TP S$3.9) Singapore Telecom (STEL.SI, S$3.58, NEUTRAL, TP S$3.9) *Steel & Tube Holdings (STU.NZ, NZ$3.00, UNDERPERFORM, TP NZ$3.10) *Vital Healthcare Property Trust (VHP.NZ, NZ$1.29, NEUTRAL, TP NZ$1.35)

*Denotes a First NZ Capital covered company. For details of Australian companies covered by Credit Suisse refer to the Top 100 and Small Caps earnings & dividends sheets.

CSEC 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 CSEC’s revenues, a portion of which is generated by Credit Suisse and CSEC’s investment banking activities. CSEC Analysts involved in the preparation of this report may be co-located with Credit Suisse analysts.

The analyst(s) responsible for preparing this research report received compensation that is based upon various factors including CSEC's total revenues, a portion of which are generated by CSEC's investment banking activities.

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.

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 universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractiv e, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. As of 2nd October 2012, U.S. and Canadian as well as European ratings 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 releva nt 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; Australia, New Zealand are, and 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, 12 -month rolling yield is incorporated in the absolute total return calculation and a 15% and a 7.5% threshold replace the 10-15% level in the Outperform and Underperform stock rating definitions, respectively. The 15% and 7.5% thresholds replace the +10-15% and -10-15% levels in the Neutral stock rating definition, respectively. Prior to 10th December 2012, Japanese ra tings were based on a stock’s total return relative to the average total return of the relevant country or regional benchmark.

Restricted (R) : In certain circumstances, CSEC policy and/or applicable law and regulations preclude certain types of communications, including an investment recommendation, during the course of CSEC's engagement in an investment banking transaction and in certain other circumstances.

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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.

CSEC's distribution of stock ratings (and banking clients) is:

Global Ratings Distribution

Rating Versus universe (%) Of which banking clients (%)

Outperform/Buy* 39% (0% banking clients)

Neutral/Hold* 48% (0% banking clients)

Underperform/Sell* 13% (0% banking clients)

Restricted 0%

*For purposes of the NYSE and NASD ratings distribution disclosure requirements, our stock rating s of Outperform, Neutral, and 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 holdings, and other individual factors.

CSEC’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.

CSEC's policy is only to publish investment research that is impartial, independent, clear, fair and not misleading. For more detail on CSEC's Policies for Managing Conflicts of Interest in connection with Investment Research please contact (+612) 8205 4381.

CSEC 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.

Credit Suisse Disclosure Appendix

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 ana lyst'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. 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 represen ting the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. For Latin American 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; Australia, New Zealand are, and 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, 12 -month rolling yield is incorporated in the absolute total return calculation and a 15% and a 7.5% threshold replace the 10-15% level in the Outperform and Underperform stock rating definitions, respectively. The 15% and 7.5% thresholds replace the +10-15% and -10-15% levels in the Neutral stock rating definition, respectively. Prior to 10th December 2012, Japanese ratings were based on a stock’s total return relative to the average total return of the relevant country or regional benchmark.

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.

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Credit Suisse's distribution of stock ratings (and banking clients) is:

Global Ratings Distribution

Rating Versus universe (%) Of which banking clients (%)

Outperform/Buy* 43% (54% banking clients)

Neutral/Hold* 40% (49% banking clients)

Underperform/Sell* 15% (44% 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.

Please refer to the firm's disclosure website at https://rave.credit-suisse.com/disclosures for the definitions of abbreviations typically used in the target price method and risk sections.

Important Regional Disclosures

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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 Emerging Companies (Australia) Pty Limited ("CSEC") is the research report provider in relation to this report. Credit Suisse has disclosed its conflicts of interest also in this report as Credit Suisse is a material shareholder in CSEC; the distributor of this research; and has re-branded this document. Despite the foregoing, Credit Suisse is not liable or responsible for the content of this research report and provides it as distributor for informational purposes only

Credit Suisse Emerging Companies (Australia) Pty Limited ("CSEC") is an incorporated joint venture entered into between Credit Suisse and First NZ Capital. Pursuant to this arrangement, Credit Suisse makes available to its clients certain research produced by CSEC. CSEC is not an affiliate or related body corporate of Credit Suisse. Credit Suisse is not liable or responsible for the content of such research and provides such research as its distributor for informational purposes only

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Investment principal on bonds can be eroded depending on sale price or market price. In addition, there are bonds on which investment principal can be eroded due to changes in redemption amounts. Care is required when investing in such instruments.

When you purchase non-listed Japanese fixed income securities (Japanese government bonds, Japanese municipal bonds, Japanese government guaranteed bonds, Japanese corporate bonds) from CS as a seller, you will be requested to pay the purchase price only.