Themes in Energy Efficiency - Credit Suisse | PLUS

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03 April 2014

Global

Equity Research

Themes in Energy Efficiency Connections Series

Source: Thinkstock

As part of our global energy efficiency research, this report reviews

building energy efficiency challenges and investment opportunities.

Challenges: Buildings are the largest energy consumers, with a c35% share of

global energy consumption. Without further efficiency gains, our research

indicates that energy consumption and CO² emissions by buildings could

increase more than 50% by 2050. This is led by emerging countries, where

residential floor space looks set to expand by 50bn m², or more than the current

amount for the US and Europe combined.

Opportunities: Interest in energy efficiency from property owners is rapidly

increasing owing to cost-savings and the positive impact on property values.

According to our research, refurbishing the existing building stock across

developed countries would require investment of more than $3,000bn. This

provides long-term structural growth dynamics to OEMs, property consultants,

technical installation companies and construction firms.

Stock implications: We identify c170 stocks exposed to this theme, with our

Credit Suisse HOLT® analysis indicating that they have generated above-

average through-cycle cash-flow returns. In addition, HOLT indicates the

companies have outperformed the MSCI Global Industrials and MSCI World

indices on a 1-, 3- and 5-year basis. We highlight 46 companies with significant

exposure to the theme: 20 are rated Outperform by our global equity analysts.

Credit Suisse has a Delta One basket (CSGLBENF Index) featuring companies

exposed to this theme.

The Credit Suisse Connections Series

leverages our exceptional breadth of

macro and micro research to deliver

incisive cross-sector and cross-border

thematic insights for our clients.

Thematic Research

Eugene Klerk

44 20 7883 4678

[email protected]

Richard Kersley

44 20 7888 0313

[email protected]

Ashlee Ramanathan

44 20 7883 9934

[email protected]

Stefano Natella

212 325 4217

[email protected]

Thematic Research:

This report forms part of Credit Suisse's

Global Thematic Research offering.

03 April 2014

Themes in Energy Efficiency 2

Table of contents Credit Suisse research 3 Key macro charts 4 Key stock-related charts 5 Executive summary 6

Global energy demand growth set to continue 6 Buildings drive energy consumption globally 6 The residential building efficiency market 8 The non-residential opportunity 9 Energy efficiency is a strong investment theme 10

Energy demand unlikely to slow down 12 Three key demand drivers 12 Consumption in case efficiency does not improve 15 Rising supply concerns to act as efficiency catalyst 17

Buildings and energy efficiency 18 Environmental concerns in no-change scenario 19 Building efficiency for the residential market 21 Building efficiency for non-residential buildings 31

Legislation plays a key role 34 Building-related policies 34 Component policies 38

Engagement from the private sector 39 Key products and technologies 42

Improving the building envelope 44 Reducing heating and cooling requirements 46 Improving lighting and appliances 47

Identifying investment opportunities 50 Who is exposed to building energy efficiency? 50 Building efficiency related stocks 52 Efficiency-related stocks vs. global industrials 53 Efficiency-exposed companies by subsector 55 Global stock ideas using Credit Suisse HOLT 59 Key global stock ideas from our analysts 61

Company profiles 62 Appendix: Building efficiency stocks 96 Appendix: Key technologies 102

03 April 2014


Credit Suisse research Figure 1: Contributing analysts and key teams

Thematic Research Telephone E-mail

Eugène Klerk + 44 20 7883 4678 [email protected]

Richard Kersley + 44 20 7888 0313 [email protected]

Ashlee Ramanathan + 44 20 7883 9934 [email protected]

Stefano Natella + 212 325 4217 [email protected]

North America

Capital Goods

Julian Mitchell + 212 325 6668 [email protected]

Charles Clarke + 212 538 7095 [email protected]

Jonathan Shaffer + 212 325 1259 [email protected]

Clean Technology

Patrick Jobin + 212 325 0843 [email protected]

Brandon Heiken + 212 325 6608 [email protected]

Maheep Mandloi + 212 325 2345 [email protected]

Business Services

Hamzah Mazari + 212 538 7983 [email protected]

Flavio Campos + 212 325 4411 [email protected]

Oil & Gas

Edward Westlake + 212 325 6751 [email protected]

Utilities

Dan Eggers + 212 538 8430 [email protected]

Europe

Capital Goods

Andre Kukhnin + 44 20 7888 0350 [email protected]

Jonathan Hurn + 44 20 7883 4532 [email protected]

Simon Toennessen + 44 20 7883 6893 [email protected]

Utilities

Vincent Gilles + 44 20 7888 1926 [email protected]

Michel Debs + 44 20 7883 9952 [email protected]

Oil & Gas

David Thomas + 44 20 7888 0277 [email protected]

Japan

Machinery

Shinji Kuroda + 81 3 4550 9994 [email protected]

Yunchao Zhao + 81 3 4550 9903 [email protected]

Steel

Shinya Yamada + 81 3 4550 9910 [email protected]

Glass/Ceramics/Battery

Jun Yamaguchi + 81 3 4550 9789 [email protected]

Electronic component

Akinori Kanemoto + 81 3 4550 7363 [email protected]

Construction & real estate

Masahiro Mochizuki + 81 3 4550 7389 [email protected]

Non-Japan Asia

REITs

John Richmond + 61 2 8205 4580 [email protected]

Stephen Rich + 61 2 8205 4617 [email protected]

Mikhail Mohl + 61 2 8205 4413 [email protected]

Construction & Engineering

Emma Alcock + 61 2 8205 4403 [email protected]

Electronics

Derrick Yang + 886 2 2715 6367 [email protected]

Product Management

Katio Iorio + 212 538 6386 [email protected]

Daisuke Takato + 81 3 4550 9671 [email protected] Source: Credit Suisse research

03 April 2014


Key macro charts Figure 2: Buildings consume most energy globally ('10) Figure 3: Strong building energy consumption increase in

"no-change" scenario

Buildings35%

Industry31%

Transport30%

Other4%

0

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120

2010 2050

OECD Non OECD

Source: International Energy Agency (2013), Transition to Sustainable Buildings: Strategies and Opportunities to 2050, OECD/IEA, Paris


Figure 4: The residential opportunity: energy savings of up to 95% can be achieved (Kwh/m2)

Figure 5: The non-residential opportunity: Efficiency gains far outweigh required investments (US-LEED)

0

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before1977

Today'savg.

1977 1982 1994 2001 PassivHaus

Average energyconsumption

can fall 95%

18%

30%

48%

1% 2% 2%0%

10%

20%

30%

40%

50%

60%

Certified Silver Gold

Total efficiency gains

Related cost premium

Source: PassivHaus Source: USGBC, CapitalE

Figure 6: Top-down legislation continues to push the theme: Global LEED certification (mSqft)

Figure 7: Rapidly increasing corporate interest provides more support for the investment case

0

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2006 2007 2008 2009 2010 2011 2012 2013

New Construction Existing building

0%

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60%

Starter Talk Star

2011 2012 2013

Limited policy & Implementation

Fully integrated policy &

Implementation

GRESB survey shows strong move to efficiency for property owners and

Source: USGBC Source: Global Real Estate Benchmark Survey

03 April 2014


Key stock-related charts Figure 8: We see c170 companies with exposure: c75% of stocks have a Mcap of less than $10bn

Figure 9: Building efficiency exposed companies have generated higher cash flow returns than global industrials…

Europe,

82

N.Americ

a, 57

Asia, 17

Japan,

20

-2.00

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2.00

4.00

6.00

8.00

10.00

1995 1997 1999 2001 2003 2005 2007 2009 2011 2013

Value creation: CFROI -/- discount rate

Efficiency universe Global industrials

Source: Credit Suisse research Note: Past performance should not be taken as an indication or guarantee of future performance. Source: Credit Suisse HOLT

Figure 10: …and have generated superior returns to global equities and industrials on 1, 3 and 5 years

Figure 11: Undervalued subsectors on Credit Suisse HOLT are cooling, consultancy, appliances and lighting

1.0

1.5

2.0

2.5

3.0

3.5

Feb-09 Jan-10 Dec-10 Nov-11 Oct-12 Sep-13

Universe

MSCI World

MSCI Industrials

Returns 1yr 3yr 5yr

Universe 22% 38% 199% MSCI World 16% 25% 101%

0

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18

10yr Last fiscal year Forecast Market implied CFROI

Undervalued Overvalued

Source: Credit Suisse HOLT Source: Credit Suisse HOLT, Credit Suisse research

Figure 12: Outperform-rated companies highlighted by our analysts, grouped by region and ranked by Mcap

Ctry Company Ticker Sector Exposure

HOLT

score

Mcap

($m) CS Rating

% to

CS TP

P/E '14E

(x) CFROI EG Revenue

North America

US United Technologies Corp UTX.N OEM High 5 107,077 OUTPERFORM 11% -12% 17.0 19% 10% 4%

US Emerson EMR.N OEM High 5 46,959 OUTPERFORM 14% 33% 17.1 18% 10% 3%

US Eaton Corporation ETN.N OEM High 4 35,754 OUTPERFORM 9% -18% 15.9 19% 13% 4%

US Ingersoll-Rand Plc IR.N OEM High 2 15,915 OUTPERFORM 21% -16% 17.9 20% 22% 5%

US SolarCity SCTY.OQ OEM Medium 1 5,730 OUTPERFORM 20% -90% -37% 28% 94%

US Wesco International WCC.N Technical Services High 5 3,694 OUTPERFORM 8% 68% 14.6 23% 14% 5%

US Regal Beloit RBC.N OEM Medium 5 3,280 OUTPERFORM 11% 67% 16.0 11% 6% 4%

Europe

CH ABB ABBN.VX OEM Medium 4 59,675 OUTPERFORM 14% 40% 13.8 15% 17% 4%

CH Schindler-Holding AG SCHP.VX OEM Medium 2 17,215 OUTPERFORM 15% -1% 20.6 15% 11% 6%

FR GDF Suez GSZ.PA Technical Services High 3 66,013 OUTPERFORM 3% -22% 15.1 4% -2% 3%

GB IMI Plc IMI.L OEM High 1 6,592 OUTPERFORM 12% -8% 16.8 16% 16% 3%

GB Halma HLMA.L OEM High 4 3,625 OUTPERFORM 8% -7% 19.3 25% 6% 4%

NL ARCADIS ARDS.AS Consultancy High 5 2,877 OUTPERFORM 13% 11% 14.9 18% 10% 4%

Japan

JP Nidec 6594.T OEM Medium 1 17,204 OUTPERFORM 4% -50% 24.1 8% 41% 11%

JP Sumitomo Electric Industries 5802.T OEM Medium 3 11,991 OUTPERFORM 28% 23% 12.2 2% 34% 8%

JP Rinnai 5947.T OEM High 4 4,462 OUTPERFORM -3% -19% 19.5 8% 8% 6%

JP NSG Group 5202.T OEM High 1 1,293 OUTPERFORM 15% -104% nm -1% 535% 4%

JP Toyo Tanso 5310.T OEM High 2 475 OUTPERFORM 6% 6% 21.3 -1% 1093% 40%

Non-Japan Asia

AU Charter Hall Group CHC.AX Property Owners High 5 1,279 OUTPERFORM 9% -20% 14.8 41% 8%

TW Epistar Corporation 2448.TW OEM High 1 2,263 OUTPERFORM 18% -21% 50.3 4% 927% 17%

HOLT Price

to Best

Growth 2013-15E

Source: Credit Suisse research, Thomson Reuters

03 April 2014


Executive summary We believe that the need for energy efficiency has never been higher as the world's

population looks set to increase by an additional 2bn people, urbanisation rises further and

3bn more consumers enter the middle class during the next 20 years. These factors drive

energy demand ever higher and create increasing supply frictions and environmental

challenges, making a "no-change" scenario not an option, in our view.

This report reviews energy efficiency challenges and investment opportunities related to

buildings. It adds to existing work on energy efficiency from several of Credit Suisse's

other global equity research teams, including work done by our utility team, the clean-tech

research product and research from our industrials teams in Europe and the US.

Global energy demand growth set to continue

We do not believe that a slowdown in global energy consumption is likely following a 50%

increase since 1990 and a doubling since the early 1970s. Energy intensity levels across

developed countries have steadily reduced during the past 20 years as these economies

reduced exposure to manufacturing and energy efficiency improved. However, this is more

than being offset by rapidly increasing energy consumption per capita across developing

countries. Without further efficiency gains, we believe that total energy demand from

emerging markets may increase almost fourfold by 2050. This represents almost 2.5x the

current consumption of the US and Europe combined.

Figure 13: Energy consumption/capita (MBtu) vs GDP/capita ($)

Figure 14: Total energy consumption from key emerging markets may increase c2.3x EU + US combined

100

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0

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0 10000 20000 30000 40000 50000

EU Russia Japan China

Brazil India World US (rhs)

A further increase in spending power leads to increasing energyconsumption in our view

0

100

200

300

400

500

600

2010 2020e 2030e 2040e 2050e

China India Asean Brazil Mexico

Incremental usage: 395 QBtuEU + US combined: 170 QBtu

Source: IEA, World Bank Source: World Bank, IEA, Credit Suisse research

Buildings drive energy consumption globally

Our focus on buildings is driven by the fact that they are the largest energy consumers

globally with a c35% share. In addition we note that this share has risen during the past 20

years as energy consumption from buildings has consistently increased across developed

and developing countries. To a large part this is due to increasing demand from residential

buildings, which make up 60% of energy consumption across the OECD and 85% across

developing countries.

Increasing levels of building energy efficiency are required to limit the likely strong growth

in energy consumption from buildings owing to further increases in average floor sizes per

home, and the number of households globally. We estimate that these two factors might

cause total residential floor space across emerging markets to increase by c50bn m² or

more than the current total of the US and Europe combined. This drives IEA estimates that

a "no-change" scenario results in a 50% increase in building energy consumption.

03 April 2014


Figure 15: Potential increase in building energy consumption in a "no-change" scenario (QBtu)

Figure 16: CO2 emissions in a no-change scenario

0

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120

2010 2050

OECD Non OECD

0

2

4

6

8

10

12

14

2010 2020 2030 2040 2050

GtC

O2 Fuel switching

Cooking, lightingand appliancesBuildingenvelopeSpace cooling

Other efficiency

Solar thermal

Heat pumps andco-generationElectricitydecarbonisation

2DS: 2.7 GtCO2

6DS: 11.6 GtCO2

Source: International Energy Agency (2013), Transition to Sustainable

Buildings: Strategies and Opportunities to 2050, OECD/IEA, Paris



Environmental implications in a "no-change" scenario

The likely growth of total energy demand in a "no-change" scenario undoubtedly raises

questions regarding the ability to produce and secure sufficient supply. Importantly though

it also raises substantial environmental concerns as buildings typically account for more

than 30% of a country's greenhouse gas emissions. Direct CO2 emissions from buildings

may increase by an additional 50% if efficiency does not improve further, according to the

IEA. Such a scenario would likely challenge the maximum 2 degrees temperature increase

agreed by multiple environmental platforms including for example the UN Framework on

Climate Change.

External studies show large-scale savings potential

Various studies on the topic of resource efficiency indicate that building related energy

gains represent the biggest opportunity for savings in general. The European Commission

expects annual energy costs to fall €200bn if 20% of energy usage is saved by 2020 while

for the US savings estimates related to building energy efficiency are as high as $1.9trn.

03 April 2014


The residential building efficiency market

Residential homes consume c75% of total building energy globally making them a vital

part of the quest to improve energy efficiency. Climate conditions impact the relevance of

energy consuming activities, but most important are heating (c50%), lighting (c7%) and

appliances (c25% in developed countries).

The savings opportunity for residential buildings

The potential for residential energy building savings is significant in our view owing to the

fact that typically more than 80% of homes were built before 1980, when efficiency

standards were far less in practice. Incorporating design standards such as those

supported by the PassivHaus Institut in Germany could reduce average energy

consumption per home by as much as 95%.

Figure 17: Building energy consumption by activity ('10) Figure 18: Total refurbishment investment for pre 1980 houses represents significant opportunities (€bn)

0%

20%

40%

60%

80%

100%

OECD Non OECD

Space heating Water heating

Space cooling Lighting

Cooking Appliances/ other

Higher income => more appliances

High cooking usage in GEM

Heating mostimportant forall countries

0

50

100

150

200

250

300

350

400

US

Ger

man

y

Ital

y

UK

Fran

ce

Spai

n

Po

lan

d

Ro

man

ia

Net

her

lan

ds

Be

lgiu

m

Swed

en

US: c$800bn

Source: IEA Source: Eurostat, Enerdata, Credit Suisse research

Our calculations suggest that increasing residential building efficiency gains is vital in

order to limit total building energy demand going forward. Without them we estimate that

energy consumption by residential buildings is likely to increase by 65% during the next 40

years or c1.5x current consumption for the EU and US combined. Increasing the annual

refurbishment of existing buildings to 3% from 1% currently would reduce global energy

consumption by 55% by 2050 on our estimates.

The refurbishment investment opportunity

The potential market for residential refurbishment is very significant. Upgrading the entire

pre-1980 housing stock would represent a total market opportunity of c€1.4trn for Europe

and c$800bn for the US on our estimates. In turn this would yield annual energy savings of

c€120bn in Europe and $80bn in the US.

The ability to improve residential energy consumption is dependent on property owners

making the necessary investments. Two factors that make this more likely in our view are

the steady increase in household energy costs (now c8% of income across major

European cities is spent on energy) and growing evidence that a property's value

increases as energy efficiency improves. Uncertainty over the pay-back period and the so-

called "rebound effect" on the other hand might limit the full degree of energy savings.

03 April 2014


The non-residential opportunity

The non-residential building market makes up c25% of the global building market but

consumes c40% of total energy owing to the higher penetration of electricity-consuming

products (for example HVAC, Computers and lighting). We believe that the energy

efficiency investment opportunity for non-residential buildings is significant given that:

■ Ownership is far less fragmented than in the case of residential buildings (in the US

the top 50 property managers manage c50% of the country's office space); and

■ Commercial real estate is increasingly owned by professional investors. In London, for

example, we find that 45% of office buildings are currently owned by specialist real

estate investors, up from 17% in 1975.

These investors are likely to be more receptive to investing in value and rent enhancing

products and services, in our view. We estimate that refurbishing 75% of the commercial

real estate market across Europe and the US at a cost of c$100 per square foot would

provide an investment opportunity of c€475bn in Europe and almost $500bn in the US. At

a 30% saving per refurbishment, this would imply annual energy savings of €35bn and

$38bn for Europe and the US respectively.

Figure 19: Potential efficiency gains for US LEED certification far outweighs cost of achieving this

Figure 20: Non-residential refurbishment opportunity may reach $1.1trn for Europe and US combined

18%

30%

48%

1% 2% 2%0%

10%

20%

30%

40%

50%

60%




0

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100

120

140

160

180

200

US

Ger

man

y

Fran

ce UK

Ital

y

Po

lan

d

Spai

n

NL

Swed

en

Au

stri

a

Gre

ece

US: $490bn

Source: USGBC, CapitalE Source: Eurostat, Enerdata, US DOE, Credit Suisse research

Increasing private sector involvement

Our view that the investment opportunity in energy efficiency is significant is supported by

several leading global surveys among property owners and corporates. These indicate

that 70% of companies now have an energy goal and that the key reason for this is no

longer "doing the right thing" but purely economic: companies want to reduce costs.

Property owners now also believe that the value of a building is positively correlated to the

degree of its energy efficiency. As a result we are not surprised to find that the level of

green building activity is rapidly increasing. More than 50% of construction is expected to

be green-focussed by 2015, up from c10% in 2009 and 30% in 2012 according to

McGraw-Hill.

03 April 2014


Energy efficiency is a strong investment theme

In cooperation with analysts across Credit Suisse's global equity research platform we

have identified c170 companies that have significant revenue exposure to the theme.

These companies can be grouped into consultancy firms, construction/home builders,

technical service companies, equipment manufacturers and property/real estate owners.

Superior value creation translates into long-term outperformance

We believe that the through-cycle cash flow characteristics for energy efficiency exposed

companies are attractive relative to the broader industrials universe. The structural degree

of strong cash flow returns is in our view one reason why the efficiency related group has

outperformed on a 1-, 3- and 5-year basis.

Most value found in Cooling, Consultancy, Appliances and Lighting companies

Credit Suisse HOLT indicates that cooling companies, consultancy firms, appliance

manufacturers and lighting companies are most undervalued at this stage. Insulation,

heating and construction firms on the other hand appear overvalued when comparing cash

flow based valuations to current share prices.

Figure 21: Building efficiency exposed companies have generated higher cash flow returns than global industrials

Figure 22: Undervalued subsectors on Credit Suisse HOLT are those with market-implied CFROI below the "forecast" CFROI

-2.00

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10.00

1995 1997 1999 2001 2003 2005 2007 2009 2011 2013



0

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18


Undervalued Overvalued

Global Industrials refers to Credit Suisse HOLT classified industrials.

Past performance should not be taken as an indication or guarantee

of future performance. Source: Credit Suisse HOLT

Source: Credit Suisse HOLT, Credit Suisse research

03 April 2014


Key stocks

■ Using Credit Suisse HOLT: Out of the group of c170 companies exposed to this

theme, we have used the Credit Suisse HOLT scorecard to identify those that rank in

the highest two quintiles. This produces a list of 56 companies located in 14 countries.

We refer to Figure 150 on page 60 for the details of these companies.

■ Using Credit Suisse global research analysts: We have also asked our analysts for

their preferred energy efficiency related stocks. As the theme of energy efficiency is

long term in nature (i.e. potentially beyond our 12-month rating timeframe) we have

also included Neutral-rated stocks with meaningful exposure.

The chart below highlights 46 companies with significant exposure to the theme

(please see the Company profiles section on page 62 for further details). These are

located in the US, Europe, Japan, Australia and Taiwan. For investors with a 12-month

investment horizon, we highlight in particular the 20 Outperform-rated companies

included in the table below.

Figure 23: Our analysts' key stocks with medium or high exposure to building energy efficiency


HOLT

score

Mcap

($m) CS Rating

% to

CS TP

P/E '14E


North America


US Honeywell International Inc. HON.N OEM Medium 5 72,538 NEUTRAL 12% 10% 16.7 13% 12% 5%




US Pentair Ltd. PNR.N OEM Medium 5 15,494 NEUTRAL 1% 17% 20.0 18% 25% 5%

US Cree CREE.OQ OEM High 3 6,882 NEUTRAL 6% -14% 34.0 7% 13% 25%


US SPX SPW.N OEM Medium 3 4,370 NEUTRAL 11% -53% 18.7 12% 18% 3%

US SunPower Corp. SPWR.OQ OEM Medium 2 3,924 NEUTRAL -10% -32% 26.6 6% 10% 5%



US Itron ITRI.OQ OEM High 1 1,398 NEUTRAL 7% -3% 21.4 6% 14% 2%

US Silver Spring Networks SSNI.N OEM High 1 891 NEUTRAL 15% -27% nm 16% 259% 9%

US EnerNOC ENOC.OQ OEM High 2 665 NEUTRAL 3% 46% 46.7 10% 29% 15%

US Echelon ELON.OQ OEM High 1 121 NEUTRAL 8% 38% -14% -9% 7%

Europe



CH Geberit GEBN.VX OEM Medium 5 12,242 NEUTRAL -17% -39% 23.0 24% 8% 6%

CH Sika SIK.S OEM Medium 4 8,795 NEUTRAL -25% -29% 23.0 11% 12% 9%

FI Kone Corporation KNEBV.HE OEM Medium 1 20,234 NEUTRAL 10% -36% 18.8 38% 12% 6%


FR Schneider Electric SCHN.PA OEM Medium 4 50,245 NEUTRAL -2% 23% 15.9 15% 10% 7%

FR Legrand SA LEGD.PA OEM High 3 16,499 NEUTRAL -11% -7% 20.4 16% 5% 4%


GB Melrose MRON.L OEM Medium 2 5,302 NEUTRAL -7% -21% 17.3 25% 23% 4%


GB Spirax Sarco SPX.L OEM Medium 3 3,636 NEUTRAL 5% -2% 20.6 14% 5% 3%

NL Philips PHG.AS OEM Medium 3 31,941 NEUTRAL 2% 4% 15.3 10% 12% 4%


Japan


JP Daikin Industries 6367.T OEM High 3 16,699 NEUTRAL 1% -29% 18.6 7% 15% 8%


JP Sekisui House 1928.T Construction High 5 8,535 NEUTRAL 16% 23% 10.4 5% 11% 3%

JP Asahi Glass 5201.T OEM High 1 6,738 NEUTRAL 10% 48% 21.2 0% 80% 2%

JP TOTO 5332.T OEM High 2 4,718 NEUTRAL -3% -25% 15.1 4% -18% 0%


JP GS Yuasa 6674.T OEM High 1 2,239 NEUTRAL -7% -35% 15.4 4% 28% 9%


JP Central Glass 4044.T OEM High 1 675 NEUTRAL -10% 103% 11.1 -3% 8% 2%


Non-Japan Asia

AU Commonwealth Property Office FundCPA.AX Property Owners High 5 2,707 NEUTRAL -3% 31% 14.1 7% 1%

AU Investa Office Fund IOF.AX Property Owners High 5 1,826 NEUTRAL 6% 41% 12.0 8% 3%


AU UGL Limited UGL.AX Consultancy High 2 1,080 NEUTRAL 1% -25% 11.2 11% 5% 2%


HOLT Price

to Best

Growth 2013-15E

Source: Credit Suisse estimates, Credit Suisse HOLT, Thomson Reuters

03 April 2014


Energy demand unlikely to slow down In recent decades, worries regarding the long term impact of population growth on

available resources globally started to rise since the "Club of Rome" reported their findings

in the early 1970s. Demand for the world's key resources (energy, water, land and food)

did indeed increase rapidly during the past 40 years, and we believe that the key drivers

for this remain very much in place.

Since the early 1970s global primary energy consumption has more than doubled whereas

it increased by c50% since 1990 (Figure 24). This growth has largely been driven by

developing economies as consumption from non-OECD countries has doubled since 1990

compared to an increase from OECD members of just 20%. The share of energy

consumption from developed countries has fallen to 41% in 2011 from 60% in 1973 while

Asian economies, including China, raised their share to 31% from 14% (Figure 25).

Figure 24: World energy consumption (QBtu) Figure 25: Energy consumption by region

0

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600

1990 2000 2010

Non-OECD: +100%

OECD: +20%

60%41%

8%18%

6%13%

0%

20%

40%

60%

80%

100%

120%

1973 2011

OECD China

Asia Latam

Non-OECD Europe Middle East

Africa Other

Source: IEA Source: IEA

Three key demand drivers

In a global context, we see three key drivers behind the continued increase in demand for

energy. These three drivers are population growth, urbanisation and the developing middle

class.

Population growth

To date productivity improvements, technological progress and expansion into low-cost

sources of supply has allowed the global economy to continue to grow and cope with an

increase in the world's population from less than 3 billion in 1950 to approximately 7 billion

today.

However we believe that the challenges of meeting incremental demand for water, energy,

land and basic materials going forward are likely to remain high as the world's population

is expected to increase further to approximately 9 billion by 2050 with an upper estimate of

as more than 10bn, according to McKinsey.

Most of this expected population growth is set to originate in developing economies. This

in our view makes the resource issue more challenging given incremental logistical

challenges as infrastructure across emerging countries is typically less developed.

03 April 2014


Figure 26: World population projections to 2050: Strong growth expected to continue

Figure 27: Urbanisation in emerging market regions (urban population, % of total)

500

2,500

4,500

6,500

8,500

10,500

1950 1970 1990 2010 2030 2050

World

World upper estimate

World lower estimate

LEDC

MEDC

0

10

20

30

40

50

60

70

80

90

100

1950 1970 1990 2010 2030 2050

Latin America Eastern Europe

MENA Non-Japan Asia

Sub-Saharan Africa

Source: United Nations, Credit Suisse research Source: Population Division of the Department of Economic and

Social Affairs of the UN Secretariat, Credit Suisse research

Urbanisation

Urbanisation is another factor impacting resource challenges in our view. For example

some academic studies show that every 1% increase in the urbanisation rate increases

energy consumption by an additional 0.47% (Jones, 1991). Urbanisation in low income

countries may reduce total energy use as households start to switch to more efficient

heating and cooking practices. However, this changes once countries enter the middle to

higher income levels (Figure 28) and (Figure 29).

Urbanisation also impacts carbon emission generation. For example, carbon emissions

per capita for cities in middle and higher income countries are typically c10x higher than

for cities in low developing countries with underdeveloped infrastructure (Figure 31).

Figure 28: Elasticity between economic growth and energy use and carbon emissions for households

Figure 29: Energy consumption increases with urbanisation and income levels

$ 1,500 $5,500 $20,000Low-income Middle High-income

29% 58% 76%

Urbanisation (mean)

GDP/capita(mean)

Household energytransation

Biomass Biomass/Oil Nat.gas/electr.

Urbanisation elasticityof residential energy use

Urbanisation elasticityof residential emissions

0

10

20

30

40

50

60

70

80

90

0

100

200

300

400

500

600

700

800

900

Low-income Middle-income High-income

Ura

bisa

tion

(%)

kgoe

per

cap

ita

Energy , '75 Energy, '05

Urbanisation, '75 (rhs) Urbanisation, '05 (rhs)

Source: Phetkeo Poumanyvong, Shinji Kaneko, Shobhakar Dhakal,

Impacts of urbanization on national transport and road energy use:

Evidence from low-, middle- and high-income countries, Hiroshima

University, 2012

Source: Phetkeo Poumanyvong, Shinji Kaneko, Shobhakar Dhakal,

Impacts of urbanization on national transport and road energy use:

Evidence from low-, middle- and high-income countries, Hiroshima

University, 2012

03 April 2014


Globally we believe that 70% of the world's population will live in urban areas in 2050, up

from 50% in 2009. This increase is mainly driven by developing Asian economies where

urbanisation growth is expected to remain high until 2050 (Figure 27). Proper city planning

and construction is vital in order to balance demand for and supply of key resources. In

this regard readers may be interested to also review a previous analysis from the Credit

Suisse Research Institute: Opportunities in an urbanizing world (April 2012).

Figure 30: Urbanisation vs. GDP development: economic growth tends to push urbanisation levels up

Figure 31: Environmental challenges rise as countries develop and become more urbanised

Source: World Bank, International Comparison Program database Source: Atkins Global

Developing middle class lifts resource demand

We believe that the middle class across emerging markets will continue to expand, which

in turn is set to be another key driver for resource demand in our view. The Credit Suisse

Global Wealth Report and the recently released Credit Suisse Emerging Consumer

Survey 2014 showed that roughly 60 million households across the BRIC countries alone

had entered the middle class during the past 3 years.

Notwithstanding the more immediate economic challenges faced by emerging markets, we

expect the structural long-term drivers to economic growth and the further expansion of

the middle class to remain firmly in place. Based on the results for the Credit Suisse

Emerging Consumer Survey 2014 we believe that more than 650m households look set

to enter the middle class in the countries surveyed (Figure 32). Other external studies

such as the McKinsey Global Research Institute forecast that a further 3 billion consumers

will have entered the middle class by 2030.

Figure 32: More than 650m households still to enter the middle class

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

0 - 499 500 - 999 1000 - 1499 1500 - 1999 2000 - 2499 2500+

Num

ber o

f hou

seho

lds (

'000

s)

Average household income (2013E, USD PPP Adjusted)

Brazil China India Indonesia Mexico Russia South Africa Turkey Saudi

Source: Credit Suisse Emerging Consumer Survey, World Bank Databook

https://plus.credit-suisse.com/r/Fyz9z7

03 April 2014


We believe that some of the largest emerging economies are at or close to the "sweet

spot" where acceleration in middle class discretionary spending typically accelerates. This

in turn typically leads to significant growth in energy consuming appliances and products.

Consumption in case efficiency does not improve

Energy intensity for developed regions has been declining for years owing to a shift away

from manufacturing and the adoption of energy efficiency measures. This is less the case

for emerging countries (Figure 33). In fact we note that energy consumption per capita in

countries such as China, Brazil, India and Indonesia is rising rapidly owing to population

growth, urbanisation and the developing middle class (Figure 34).

Figure 33: Energy intensity across key geographies Figure 34: Energy consumption/capita (M BTU/year)

0

5000

10000

15000

20000

25000

30000

35000

40000 Energy consumption per dollar of GDP (Btu/year), 2011

0

10

20

30

40

50

60

70

80

90

1980 1985 1990 1995 2000 2005 2010

China Brazil India Indonesia

Source: World Bank Source: World Bank

Energy consumption per capita in developing countries remains substantially below levels

seen in developed markets (Figure 35). However we believe that further economic

expansion will push energy consumption per capita in developing countries higher and

closer to levels seen in developed economies. Continued emerging market growth is

therefore likely to have a profound impact on total energy consumption if no efficiency

gains are achieved.

Figure 35: Energy consumption per capita vs GDP/capita (MBtu/capita/year)

100.0

150.0

200.0

250.0

300.0

350.0

0

50

100

150

200

250

0 5000 10000 15000 20000 25000 30000 35000 40000 45000 50000

EU Russia Japan China Brazil India World US (rhs)

Source: EIA, World Bank

03 April 2014


Assuming that emerging countries converge economically with developed markets by

2050 would suggest a possible increase in average energy consumption levels per capita

to c150 MBtu/capita by 2050 (Figure 36). This together with population expectations

implies that total energy consumption for these emerging economies may increase almost

fourfold by 2050 from 2010. To put this in context, the potential increase between 2010

and 2050 for these countries would be 2.3 times the total energy consumption of the EU

and US combined (Figure 37).

Figure 36: Potential energy consumption/capita for key emerging countries (M Btu)

Figure 37: Total energy demand for key emerging countries could increase c2.3 times the EU/US total

0

20

40

60

80

100

120

140

160

180

200

0 5000 10000 15000 20000 25000 30000 35000

Asean Brazil China India Mexico

0

100

200

300

400

500

600

2010 2020 2030 2040 2050

China India Asean Brazil Mexico

Incremental usage: 395 QBtuEU + US combined: 170 QBtu

Source: World Bank, IEA, Credit Suisse research Source: World Bank, IEA, Credit Suisse research

Our calculations are similar to those from the McKinsey Global Institute which predicts that

between 2010 and 2030 demand for energy may increase by an additional 32% or the

equivalent of the current annual consumption of the US and EU members of the OECD

combined.

Our calculations imply that without further energy efficiency gains, pressure on energy

supply conditions are likely to intensify going forward.

Figure 38: Total global energy supply requirements

340460

130

160

0

100

200

300

400

500

600

700

1990-2010 2010-2030

Primary Energy (QBTU)

Incremental supply Supply replacement (at historical rates)

+32%

Source: McKinsey Global Institute

03 April 2014


Rising supply concerns to act as efficiency catalyst

Our calculations show that energy demand globally is set to increase strongly if no

efficiency gains are achieved. While this report does not have a focus on supply-side

related issues, we do point out that the potentially strong increase in total energy demand

is likely to create supply concerns on multiple levels, which in turn provides support for the

efficiency agenda. We see at least three reasons why supply-side related concerns are

likely to increase and act as a catalyst for the efficiency agenda:

■ Firstly we note that the ability to produce the required level of resources is not a given.

Energy reserves in the case of oil and coal for example appear to be sufficient for at

least another few decades; however, accessing these resources is becoming more

problematic while the marginal cost of extracting them is increasing. In the case of oil

we note higher costs for drilling and oil-field services. The development of shale gas

may help in this regard, especially from a US perspective; however, uncertainty

remains over the impact that this may have on the global energy supply.

■ Secondly there is the issue of securing supply as many countries currently rely on

importing resources. Europe, China, India and Japan are already substantial oil and

gas importers. For example in 2012 Europe's oil and gas import bill amounted to

€400bn compared to €180bn on average for 1990-2011. A further rise in energy

demand is likely to exaggerate this problem (Figure 39). This in turn makes these

countries/regions increasingly vulnerable to price volatility and political risk as a

significant portion of current oil and gas reserves are located in countries with less

stable political regimes. This puts economic growth and social stability at risk.

Figure 39: Changing import reliance for oil and natural gas (2010-20)

Source: US Energy Information Administration, 2013 International Energy Outlook (IEO) and 2014 Annual Energy Outlook (AEO) Early Release for US projections, Credit Suisse estimates

■ Thirdly we note that increased price volatility for key resources may act as a dampener

on economic growth and stability. In this regard we note that recent price volatility for

most resources including energy has already been well above levels seen since 1900

(Figure 40).

Figure 40: Energy price volatility is at an all-time high, with the exception of energy in the 1970s (annual price volatility per decade, %)

20 22 21 13 15 7 4

5638

1440

1909 1919 1929 1939 1949 1959 1969 1979 1989 1999 2011

Energy

Source: McKinsey Global Institute - Resource Revolution, Credit Suisse estimates

03 April 2014


Buildings and energy efficiency Final energy demand can be broken down into three broad end-user categories: Buildings,

Transport and Industry (Figure 42). For the purpose of this report, we focus primarily on

the area of buildings as it makes up the biggest portion in terms of energy consumption at

c35%. We intend to focus on the other areas of energy consumers in future updates of our

resource efficiency research.

Figure 41: World energy demand set to grow further primarily driven by developing economies (Q-Btu)

Figure 42: Energy end-demand can be broken down into three categories (2010)

0

100

200

300

400

500

600

700

800

900

1990 2000 2010 2020 2030 2040

Non-OECD

OECD

Buildings35%

Industry31%

Transport30%

Other4%



The increasing role of buildings in emerging markets

Total building related energy consumption in OECD countries has increased by 1.3% pa

since 1990; however, buildings in emerging countries have shown much stronger growth

at 1.7% per annum. As a result, total building energy consumption in emerging markets is

currently c40% higher than for developed countries (Figure 43).

Figure 43: Building energy consumption increasingly dominated by developing countries (Pj)

Figure 44: Share of energy usage split by residential and commercial buildings (2010)

0

10000

20000

30000

40000

50000

60000

70000

1990 2000 2010

OECD Non-OECD

+1.3% CAGR

+1.7% CAGR

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

OECD Non OECD

Residential Commercial



03 April 2014


Environmental concerns in no-change scenario

The International Energy Agency (IEA) estimates that if nothing changes, total energy

consumption from buildings is set to increase by 50% between 2010 and 2050. Most of

this increase will be driven by the developing world (+70% over the period) as the

increasing number of households pushes demand for new housing construction. However,

even in developed countries, demand for electricity would in a "no-change" environment

still increase by c20% (Figure 45).

Figure 45: Potential increase in building energy consumption in a "no-change" scenario

Figure 46: Direct CO2 emission by buildings: Increasing since late 1990s (Gt)

0

20

40

60

80

100

120

2010 2050

OECD Non OECD

2.0

2.1

2.2

2.3

2.4

2.5

2.6

2.7

2.8

2.9

1971 1975 1980 1985 1990 1995 2000 2005 2010





The potential increase in energy consumption in case no efficiency gains are achieved has

significant environmental implications. For example we note that buildings contribute

increasingly to CO2 emissions. Direct CO2 emissions by buildings were relatively stable

during 1975 to 1995, however since then emissions have been increasing by c1%

annually which we contribute to accelerating growth across the developing world in

particular (Figure 46).

Simulation studies such as those run by the IEA show that in a "no-change" scenario, total

CO2 emissions by buildings are likely to increase by 40% between 2010 and 2050. Such a

scenario would also mean that global temperatures rise by c6 degrees Celsius. This is well

above the maximum increase of 2 degrees Celsius as agreed by for example the UN

Framework on Climate Change. Improving the energy efficiency of buildings therefore

plays an integral role in managing environmental concerns and in reducing potential

energy imbalances.

Significant energy savings are possible in the building market

Various studies on the topic of resource efficiency indicate that building related efficiency

gains represent the biggest opportunity for savings in general. This can not only be

attributed to the fact that buildings consume more energy than other end markets (industry

and transport) but also to the fact that so far only 20% of potential energy savings in

buildings has been realised. This is substantially less than gains achieved in the transport

and industrial sectors (Figure 47).

McKinsey, for example, estimates that building efficiency gains could deliver almost

$700bn in energy savings or 20% of the potential total benefits that can accrue from

increasing resource productivity and account for 30% of the total opportunity set available

for increasing energy efficiency. If fully captured, increased building efficiency would

reduce energy demand by 31QBTU or 20% more than the total global use of energy by

shipping and air transport combined.

03 April 2014


Figure 47: Buildings have the most unrealised energy efficiency potential

Figure 48: Resource efficiency potential by sector($bn): Building efficiency provides biggest opportunity

0%

20%

40%

60%

80%

100%

Industry Transport Buildings

Unrealised energy efficiency potential

Realised energy efficiency potential

106

108

115115

132134138

138143145

155167

252

266696

Power plant efficiency

Road freight shiftIrrigation techniques

Oil and coal recovery

End-use steel efficiencyLand degredation

Electric and hybrid vehicles

Transport efficiencySmallholder farm yields

Iron and steel energy…

Urban densificationMunicipal water leakage

Food waste

Large-scale farm yieldsBuilding energy efficiency

Source: McKinsey Global Institute Source: McKinsey Global Institute

The European Commission estimates that achieving the 20% energy savings target by

2020 would reduce Europe's annual energy bill by €200bn or €1,000 per household.

The impact of these energy savings on CO2 emissions and environmental issues in

general is significant. Simulation studies performed by the IEA indicate that potential CO2

savings of over 75% relative to the "no-change" scenario can be obtained by implementing

efficiency programs. These programs typically focus on two areas.

■ De-carbonisation of the supply side. More than 60% of emission reductions can be

attributed to decarbonisation of the power generating sectors (Figure 49).

■ Improving efficiency of the demand side. The potential remaining 40% of CO2

emission improvements can be generated from improving the efficiency of the demand

side. A reduction in building energy use therefore plays a very significant role in

limiting the likely increase in global average temperatures. Key areas of focus for this

include improvements in heating, cooling, lighting and the building envelope (Figure

50).

Figure 49: Total CO2 emissions in a "no-change" scenario (6DS) vs energy savings scenario (2DS)

Figure 50: Key energy saving areas for building efficiency

0

2

4

6

8

10

12

14

2010 2020 2030 2040 2050

GtC

O2 Fuel switching

Cooking, lightingand appliancesBuildingenvelopeSpace cooling

Other efficiency

Solar thermal

Heat pumps andco-generationElectricitydecarbonisation

2DS: 2.7 GtCO2

6DS: 11.6 GtCO2

0

5

10

15

20

25

30

35

40

45

50

2010 2020 2030 2040 2050

Exaj

oule

s

Energy savings from 6DS to 2DS

Lighting and spacecooling (19%)

Building envelope(14%)

Space heating(15%)

Water heating(16%)

Cooking (21%)

Other equipment(15%)





03 April 2014


Building efficiency for the residential market

Residential, single family houses are key for the energy efficiency theme as they make up

the vast majority of buildings generally. The residential housing stock in the EU and US for

example represent c75% and 80% of total floor space respectively with single family

houses accounting for c64-70% of this.

The challenge faced by governments across the developed world is to trigger households

to improve the energy efficiency of their homes. The combination of uncertainty over

payback periods, required upfront investments and recent economic weakness means that

this process has not become easier.

Figure 51: Building stock in the EU Figure 52: Building stock in the US

Residential75%

Non residential25%

Single family houses

64%

Apartment blocks36%

Residential80%

Non residential20%

Single family houses

70%

Apartment blocks30%

Source: BPIE Source: US Census, DOE

Type of residential energy usage driven by climate conditions

Residential buildings consume c75% of total building energy globally. This energy usage

can be split into heating, cooling, lighting and appliances which explains why energy

efficiency strategies for residential houses have a focus on these activities.

However the impact of climate conditions on residential energy usage patterns is

significant and has to be taken into consideration. For example the IEA estimates that

space heating accounts for 45% of houses in colder climates, whereas this represents just

13% in warmer countries. Energy usage for cooking on the other hand consumes 38% in

warmer climates compared to just 3% in colder countries (Figure 53 and Figure 54).

Figure 53: Energy usage for cold climate countries Figure 54: Energy usage for moderate/ warm countries

Space heating45%

Water heating15%

Space cooling5%

Lighting7%

Cooking3%

Appliances/ other25%

Space heating13%

Water heating30%

Space cooling3%

Lighting5%

Cooking38%

Appliances/ other11%



03 April 2014


This in turn explains why improving the efficiency of a building's boundaries, the so-called

building envelope, and efficiency of heating equipment generally makes more sense in

colder countries than it does for warmer climates. We note that energy demand can still

fluctuate substantially by season even within warmer countries as data for Delhi shows

(Figure 55).

Figure 55: Share of energy use by appliance in Delhi

Cooking1% Lighting

14%Room heater

8%

Geyser18%

Refrigerator44%

TV7%

Pumps2%

Other6%

WinterCooking1% Lighting

9%

Ceiling fans15%

Coolers9%

Refrigerator27%

TV5%

Pumps5%

Other1%

AC28%

Summer

Source: "Global Energy Assessment: Toward a Sustainable Future," GEA research team, Cambridge

University Press, 2007

Refurbishing homes in developed countries offers significant savings

Substantial potential for energy savings in residential buildings exists owing to the fact that

the average age of residential buildings across developed markets is high. In Europe and

the US, more than 80% of properties were built before 1990 whereas in the UK this ratio is

as high as 90% (Figure 56).

Energy efficiency standards were far less in practice when these properties were built

explaining why their average efficiency levels are far lower than those of more recently

constructed properties. For example, using sample data from a number of countries we

find that average heating consumption of buildings established during the past 10 years

can be 50-75% lower than for buildings that were built before 1970 (Figure 57).

An increase in average refurbishment rates of older buildings across developed countries

would have a substantial impact on heat and total energy consumption, in our view.

03 April 2014


Figure 56: Average age of residential housing stock for Europe and the US

Figure 57: Average energy consumption of single homes by construction year (kwh/m2)

0%

10%

20%

30%

40%

50%

60%

70%

Europe USA UK

Pre 1960 1961-1990 1991-

0

50

100

150

200

250

300

350

1931-1940 1951-1960 1971-1980 1991-2000 2006-

Germany Sweden Bulgaria Portugal

Italy US UK

Source: BPIE Source: BPIE

The potential energy savings from structural improvements to buildings can be substantial.

For example the PassivHaus standard for energy efficiency in buildings, introduced in

Germany in the late 1980s and promoted by the PassivHaus Institut, allows for a reduction

in a building's energy consumption by up to 95% relative to a house that was built pre-

1980 (Figure 58). Given current energy consumption levels for residential buildings across

developed markets, we see significant scope for energy efficiency gains (Figure 59) both

in terms of lower usage and CO2 emissions.

Figure 58: Energy usage by construction: kWh/m2/year Figure 59: Energy consumption per year (kWh/m2)

0

50

100

150

200

250

300

350

before1977

Today'savg.

1977 1982 1994 2001 PassivHaus

0

50

100

150

200

250

300

350

400

Mal

taP

ort

uga

lC

ypru

sSp

ain

Ital

yB

ulg

aria

Serb

iaU

SALi

thu

ania

De

nm

ark

Net

her

lan

ds

Cro

atia

Ire

lan

dG

ree

ceSl

ova

kia

Fran

ceSl

ove

nia

Au

stri

aG

erm

any

Hu

nga

rySw

ede

nC

zech

Rep

.R

om

ania

Po

lan

dU

KB

elg

ium

Fin

lan

dLa

tvia

Esto

nia

Luxe

mb

ou

rg

EU Median

PassivHaus

Source: PassivHaus Source: Entranze

Building efficiency a requirement for residential homes in developing countries

Residential building efficiency is critical across developed countries owing to their high

energy usage. However achieving high efficiency levels is also important for developing

countries given their expected growth in the total number of households.

For example the IEA expects that the number of households for the largest emerging

countries may increase by 60% or 573m until 2050. To put this into context, this is more

than 7.5x the increase for the US and EU or more than 2x the current total number of

households in the US and Europe (Figure 61).

03 April 2014


Figure 60: Average house size across emerging and developed markets (2010)

0

50

100

150

200

250

Developed: 104m2

Emerging: 58m2

Source: IEA, UN

Future energy consumption from residential houses is not just driven by the expected

increase in the number of houses but also by their size. The average home in developed

markets is almost twice as a big as in developing countries (Figure 60). As wealth

increases, we would generally expect demand for bigger living space to increase also,

which in turn increases energy requirements further.

We estimate that the growth in households and the size per home across developing

countries may increase the total residential floor space that needs heating or cooling by

50bn m2 (Figure 62). This increase is more than the current total residential floor space for

the US and EU-27 combined.

Figure 61: Emerging households set to rise by c573m up to 2050 or 7.5x the increase for the US/EU

Figure 62: Residential emerging floor space may rise by 50bn m2 or more than current US and EU combined

0

200

400

600

800

1 000

1 200

1 400

1 600

1 800

2 000

2010 2020 2030 2040 2050

EU+US Emerging

+60%: +573m

+23%: +75m

0

20

40

60

80

100

120

140

160

2010 2020 2030 2040 2050

EU+US Emerging

+80%: +42bn m2

+32%: +14bn m2

Source: IEA. Emerging = Asean, Brazil, China, India, Mexico, Russia and South Africa

Source: IEA. Emerging = Asean, Brazil, China, India, Mexico, Russia and South Africa

The need for refurbishment: mapping total residential energy consumption

In order to indicate what the impact of the expected growth in households globally might

mean for energy consumption we have run some scenarios. Using forecasts for household

formation across key regions and countries, assuming that average house sizes for

developing countries increase as income levels rise and using existing energy

consumption levels per square meter we can forecast potential total energy consumption.

03 April 2014


We can then estimate what level of annual refurbishment of existing homes is needed to

stabilise total energy consumption from residential buildings.

Based on our data we calculate that without additional efficiency gains, total energy

consumption by residential buildings globally could increase by 71% until 2050 (Figure

63). This is not only driven by emerging markets (+118%) but also by a further 17%

increase from Europe and the US over that period.

To slow down the global growth in residential energy consumption requires energy savings

and therefore investments into refurbishment. We estimate that the current c1%

refurbishment rate in Europe and the US is sufficient to keep developed market growth

flat, however, this is not sufficient for emerging markets.

To keep global residential energy consumption flat, we believe that the annual

refurbishment rate has to increase to c3% per annum. This is in line with suggestions from

the "Renovate Europe" group but we note that it would have only a material impact on a

global basis as of 2030 (Figure 66).

Figure 63: No efficiency improvements implies residential energy consumption increase of 71% on a global basis

Figure 64: 1% refurbishment annually not sufficient to limit global energy consumption

0

10

20

30

40

50

60

70

80

90

2010 2020 2030 2040 2050

EU+US GEM

+118%

+ 17%

0

10

20

30

40

50

60

70

80

2010 2020 2030 2040 2050

EU+US GEM

+84%

+ 2%

Source: IEA, World Bank, Credit Suisse estimates Source: IEA, World Bank, Credit Suisse estimates

Figure 65: A 2% refurbishment stops consumption growth in EMG but only as of 2030

Figure 66: A 3% refurbishment rate would be sufficient to lower global residential energy consumption from 2030

0

10

20

30

40

50

60

70

2010 2020 2030 2040 2050

EU+US GEM

+40% to peak in 2030 then decline in Emg.

- 20%

0

10

20

30

40

50

60

2010 2020 2030 2040 2050

EU+US GEM

-24% global decline

Source: IEA, World Bank, Credit Suisse estimates Source: IEA, World Bank, Credit Suisse estimates

03 April 2014


Our calculations for the "no-change" scenario show that further energy efficiency

improvements for residential buildings are vital in order to address potential energy supply-

demand concerns and related environmental challenges.

The potential size of the residential refurbishment market

We believe that the potential market for residential energy efficiency refurbishments is

significant; however, sizing the market opportunity is difficult owing largely to a lack of

consistent data. In Europe the total market for residential refurbishment and maintenance

has come down from €372bn in 2007 to €350bn last year. In the US, total spending on

residential refurbishment and redevelopment reached $234bn in 2007. We note that these

statistics, however, reflect more than just energy efficiency related investments.

Figure 67: Europe: Residential refurbishment and maintenance spending (€bn)

Figure 68: Number of homes by construction year: Europe has more older homes than the US (m)

250

270

290

310

330

350

370

390

1993 1997 2001 2005 2009 2013

0

10

20

30

40

50

60

< 19

45

1945

-196

9

1970

-197

9

1980

-198

9

1990

-199

9

2000

-200

8

Europe US

Source: Euroconstruct Source: US Census, Eurostat, Enerdata

Technical service companies and OEMs note that relatively low-cost investments typically

allow property owners to save at least 30% of energy costs especially in the case of older

buildings. Based on statistics for the housing stock, energy spending and current energy

prices for 27 European countries and the US we can estimate how much energy savings

can be achieved with a certain annual refurbishment rate. By using estimates for the cost

per refit we can estimate what the potential market size might be.

We believe that the 'lowest hanging fruit' in terms of efficiency gains can be achieved from

refurbishing homes that were built before 1980. Doing that for across 27 European

countries at an estimated cost of €10,000 each would suggest a total market size of

€1.4trn. For the US we estimate that this would require total investment of $813bn if we

apply the same approach. We estimate that these investments could yield total annual

energy savings of c€91bn in Europe and c$80bn in the US. These investments would be

made by property owners and therefore benefit directly the OEMs and service companies

providing the products and installation/design.

03 April 2014


Figure 69: Total investment requirement to upgrade residential housing (€bn)

0

50

100

150

200

250

300

350

400U

S

Ger

man

y

Ital

y

UK

Fran

ce

Spai

n

Po

lan

d

Ro

man

ia

Net

her

lan

ds

Be

lgiu

m

Swed

en

Cze

ch R

ep.

Au

stri

a

Hu

nga

ry

Gre

ece

De

nm

ark

Po

rtu

gal

Bu

lgar

ia

Fin

lan

d

Slo

vaki

a

Lith

uan

ia

US: €600bn

Source: Eurostat, Enerdata, Credit Suisse research

Key drivers for an increase in residential refurbishment

The ability to substantially reduce average energy usage in residential buildings is largely

dependent on acceptance by property owners to make the necessary investments. This in

our view is especially relevant for the developed world given the low redevelopment rate of

existing housing stock. Key drivers supporting the uptake of efficiency improvement are a)

the cost of energy and b) the potential value impact on a building from improving its

energy usage.

■ Rising energy costs: Retail energy prices in most of the world have been rising for a

number of years (Figure 71). As a result the share of household spending on electricity

as a percentage of total income has steadily increased and is now c9% of income in

developed Europe (Figure 70). Higher prices help reduce energy consumption and

therefore aid the energy efficiency theme, however, government legislation provides

another possible "stick" to achieve energy savings.

■ Investments create value: Improving the energy efficiency of a building not only

reduces energy consumption but also increases the value of a property. For example

in the UK the Department of Energy and Climate change estimates that improving a

building's EPC from band G to E adds 7% to its value (Figure 72). Across Europe it

appears that a similar relationship exists. The European Union released data from a

recent study showing that improving the energy rating of a home in multiple countries

by 1 band typically increases the value of that property by 3-11% (Figure 73).

03 April 2014


Figure 70: Total % of income spent on energy bills Figure 71: Price increases in the Euro area over time

0% 2% 4% 6% 8% 10% 12%

Lisbon

Copenhagen

Dublin

Rome

Amsterdam

Madrid

Berlin

London

Paris

Brussels

Electricty Gas

9

10

11

12

13

14

15

16

0.11

0.12

0.12

0.13

0.13

0.14

0.14

2005 2007 2009 2011 2013

€/G

igajo

ule

EU

R p

er

kW

h

Electricty Prices (LHS) Gas prices (RHS)

Source: HEPI by Energie-Control Austria, MEKH and VaasaETT Ltd,

Eurostat, Credit Suisse research

Source: Eurostat, Credit Suisse estimates

Figure 72: Total value uplift to a home if energy rating moves from G-rating (% house price increase)

Figure 73: Value uplift from improving EPC rating by 1 band

0%

2%

4%

6%

8%

10%

12%

14%

16%

A/B C D E F

England average London

0%

2%

4%

6%

8%

10%

12%

Source: DECC Source: European Union

The rebound effect may limit the degree of efficiency gains

Our calculations show that total energy consumption can be reduced by increasing

investments in more efficient homes, products and services. However, these calculations

assume that total demand per consumer remains stable. This may not be the case.

For example consumers might opt to raise the temperature in their homes if they feel that

heating their home is cheaper due to efficiency gains or may purchase more energy

consuming products as a result of falling product prices and improved energy consumption

levels for these products. This so-called rebound effect dampens the gains that can be

achieved from investing in energy efficiency.

To show the impact of the rebound effect, we highlight the example of appliance

penetration. Electricity-using appliance manufacturers have achieved significant efficiency

improvements during the past few decades (Figure 75). However, increased penetration of

appliances in both developed and increasingly emerging markets has more than offset this

development as Figure 74 clearly shows. Rather than reducing total electricity usage we

note that appliance efficiency improvements merely helped to lower the growth rate.

03 April 2014


Figure 74: In selected OECD countries total electricity usage for key appliances increased despite efficiency gains: a similar effect is likely for non-OECD countries

Figure 75: Average annual energy usage improvements for key energy using appliances (kWh/year)

-100%

-50%

0%

50%

100%

150%

200%

250%

Refrigeratorsand freezers

Dishwashers Clotheswashers

Clothes dryers Televisions

Total electricity consumption since 1990 (Petajoules)

Average usage/appliance (kWh/year) since 1990

Efficiency improvements by appliancemore than offset by rising penetration

0

200

400

600

800

1000

1200

1990 1993 1996 1999 2002 2005 2008

Refrigerators (-38%) Dishwashers (-45%)

Clothes washers (-38%) Clothes dryers (-21%)

Televisions (-8%)


In the case of space heating, we can also point to factors limiting the potential gains that

can be achieved solely by efficiency. For most IEA countries we find that a reduction in the

number of people per household (the occupancy effect) and an increase in dwelling size

offset a substantial part of the efficiency effect (see next page).

Finally we believe that uncertainty over pay-back periods also remains a hurdle for

property owners when deciding whether to upgrade their properties' energy efficiency. The

next page shows calculations for the UK which for investments show a short pay-back

period of less than 5 years. The more expensive investments on the other hand carry pay-

back periods that can be as high as 90 years (Figure 77).

This clearly shows that improving energy efficiency is not a straight line exercise towards

lower total energy consumption.

03 April 2014


Figure 76: Changes in heating per capita (1990-2010)

Source: IEA

Figure 77: Cost vs payback period for investments in UK residential properties

InsulationCost (£)

Annual bill

saving (£)

Average payback

(years)

Hot water cylinder insulation 50 - 70 70 - 75 0.75 - 1

Draught proofing 90 - 160 15 - 25 6 - 6.5

Loft insulation 240 - 350 165 - 240 1.5

Cavity wall insulation 340 - 580 80 - 270 2 - 4

Floor insulation 450 - 800 30 - 70 11 - 15

High performance thermal doors 700 - 1000 10 - 15 65 - 70

Double glazing 5,000 - 7,500 65 - 85 75 - 90

Internal wall insulation 5,500 - 11,000 90 - 300 37 - 62

External wall insulation 10,500 - 19,500 125 - 410 50 - 85

Heating and appliancesCost (£)

Annual bill

saving (£)

Average payback

(years)

Lighting 70 25 - 35 2 - 3

Cylinder thermostat 40 - 50 20 - 30 1.5 - 2

Heating controls (TRVs) 300 - 370 45 - 50 6.5 - 7.5

Mechanical heat recovery & ventilation 1,500 - 3,000 150 - 250 10 - 12

Gas condensing boiler 2,000 - 2,500 300 - 550 4.5 - 6.5

Fan assisted storage heaters 2,400 - 2,600 260 - 650 4 - 9

Replacement warm air units 3,500 - 4,700 190 - 450 10.5 - 18

Oil condensing boiler 4,000 - 4,600 450 - 800 6 - 9

Renewable technologiesCost (£)

Annual bill

saving (£)

Average payback

(years)

Micro wind (1kW) 2,000 - 3,000 150 - 200 10 - 15

Solar water heating 3,500 - 5,000 100 - 105 35 - 50

Solar PV (2kW) 5,000 - 7,500 200 - 250 25 - 30

Air source heat pump 5,000 - 10,000 175 - 315 29 - 32

Biomass boiler 8,000 - 9,000 475 - 815 11 - 17

Ground source heat pump 9,000 - 17,000 425 - 765 21 - 22 Source: PlanLoCal Efficiency and Green Deal

03 April 2014


Building efficiency for non-residential buildings

The non-residential building sector is diverse, ranging from retail and offices to hospitals

and schools. Their share of the total building stock across developed markets is c20-25%.

The share of energy consumption by the non-residential sector is bigger in developed

economies than in the case of developing countries (Figure 44). This in our view is due to

the larger share of the service economy across developed countries.

Figure 78: Non-residential floor space by sector in Europe Figure 79: Non-residential floor space by sector in the US

Retail27%

Offices23%School

17%

Hotel/Rest11%

Hospitals7%

Sport fac.4%

Other11%

Retail23%

Offices20%

School16%

Hotel/Rest13%

Hospitals5%

Sport fac.6%

Other17%

Source: BPIE Source: US Census

Whereas floor space is relatively evenly spread between developed markets, we note that

the energy usage by subsector differs substantially. For example in the UK the retail sector

accounts for over 30% of non-residential energy usage whereas this is c20% in France. In

the Netherlands more than 30% of energy usage is consumed by the healthcare sector

compared to less than 10% in the case of the US and Germany. Despite the level of

fragmentation, we note that two factors support a positive view on appetite for "green

investing" in non-residential real estate.

■ The ownership fragmentation within non-residential real estate appears to be low (for

example in the US the top 50 property managers manage c50% of office space).

■ In addition, commercial real estate is increasingly owned by professional sector

specialists who in our view are more likely to be receptive to investing in energy

efficiency as it raises a building's NAV and even allows for higher rents. In London for

example 45% of office buildings are currently owned by sector specialists, up from

17% in 1975 (Figure 81).

Figure 80: Non-resi building energy use by sector Figure 81: Who owns commercial real estate in London

0%

5%

10%

15%

20%

25%

30%

35% US EU UK Germany NL France

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

1975 1980 1985 1990 1995 2000 2005 2010 2011

Specialist real estate Institutions

Financial firms Traditional owners

Individuals Other

Source: BPIE Source: "Who owns the City" database

03 April 2014


Reducing energy usage across the non-residential or service sector is not just a matter of

building re-development. Through the implementation of building automation systems,

property owners can integrate heating, cooling and ventilation systems with hot water,

lighting and other loads such as elevators. Typical savings from these programs alone

range between 10-30% (Figure 82).

Refurbishment or redevelopment of existing commercial buildings can yield significant cost

savings. Figure 83 for example shows that the total cost premium to achieve higher levels

of LEED building certification in the US does not meaningfully increase, whereas the

potential energy savings certainly do.

Figure 82: Energy savings from adaptation of advanced ICT systems in buildings

Figure 83: Potential efficiency gains for US LEED certifications vs the cost of achieving these

High Advanced High Advanced

Office 7% 13% 20% 30%

School 7% 14% 12% 20%

Hospital 2% 4% 9% 14%

Hotel 5% 10% 15% 32%

Restaurant 4% 8% 23% 32%

Retail 5% 9% 27% 40%

Electrical efficiency Thermal efficiency

18%

30%

48%

1% 2% 2%0%

10%

20%

30%

40%

50%

60%




Source: Siemens, 2009 Source: USGBC, CapitalE

There are numerous examples of energy savings that can be achieved through retrofitting

of existing buildings. Measures that are typically taken to upgrade existing commercial

building include the reduction in air leakage, replacement of mechanical and electrical

equipment, the reconfiguration of HVAC systems, the implementation of better control

systems and lighting improvements. Energy savings of more than 50% can be achieved by

these measures (Figure 84).

Figure 84: Examples of savings achieved through updating non-residential buildings

Saving Area Description

30% Total energy Lighting upgrades in 80 office buildings in Toronto

40% Heating, Cooling, Ventilation Conversion of ventilation system in Texas office building

40% Heating Retrofit of existing office building in Athens.

50% Heating and cooling Optimizing ventilation systems in US restaurants

74% Cooling Duct sealing, chiller upgrade and fan controls in Florida

68% Natural gas use Converting non-condensing boilers to condensing boilers Source: Global Energy Assessment

03 April 2014


The potential size of the non-residential refurbishment market

We have estimated the total market opportunity for the non-residential building market by

assuming that 30% efficiency gains can be achieved through fairly simple investments.

Cost specifications from consultants show that this could be done at c$25-75 per square

meter.

Assuming that 75% of offices will be refurbished (reflecting the fact that companies

generally have already become active in the theme) suggests a total market opportunity in

Europe of c€240bn which would yield potential annual energy savings of c€35bn, on our

estimates.

Figure 85: European non-residential building market by subsector (mln m2)

Figure 86: Total market opportunity by country if 75% of buildings are refurbished (€bn)

0200400600800

10001200140016001800

Wh

ole

sale

& t

rad

e

Off

ice

s

Edu

cati

on

Ho

tel &

res

tau

ren

t

Pri

vate

off

ice

s

Hea

lth

Pu

blic

off

ice

s

Oth

er

0

10

20

30

40

50

60

70

80

Ger

man

y

Fran

ce UK

Ital

y

Po

lan

d

Spai

n

NL

Swed

en

Au

stri

a

Gre

ece

De

nm

ark

Source: Eurostat, Enerdata, Credit Suisse research Source: Eurostat, Enerdata, Credit Suisse research

For the US we estimate that the market opportunity might be c$244bn with an annual

energy savings potential of c$50bn.

Figure 87: US non-residential building market by subsector (bn square foot)

Figure 88: Total market opportunity in US non-residential if 75% of buildings are refurbished ($ bn)

0

2

4

6

8

10

12

14

Off

ice

Me

rcan

tile

War

eh

ou

se

Edu

cati

on

Lod

gin

g

Serv

ice

Ass

em

bly

Re

ligio

us

Hea

lth

Car

e

Vac

ant

Oth

er

Foo

d S

erv

ice

Foo

d S

ale

s

Pu

blic

Ord

er

0

5

10

15

20

25

30

35

40

45

Off

ice

Me

rcan

tile

War

eh

ou

se

Edu

cati

on

Lod

gin

g

Serv

ice

Ass

em

bly

Re

ligio

us

Hea

lth

Car

e

Vac

ant

Oth

er

Foo

d S

erv

ice

Foo

d S

ale

s

Pu

blic

Ord

er

Source: US DOE, Buildings Energy Databook 2011 Source: US DOE, Buildings Energy Databook 2011, Credit Suisse

research

03 April 2014


Legislation plays a key role Energy efficiency legislation has for years functioned as the "stick" to generating savings

from energy producers, consumers and equipment manufacturers. Legislation has also

addressed increasing concerns that without improved energy efficiency, carbon emissions

related to energy production are set to increase too much to meet global warming

requirements.

We believe that legislation has been broadly successful in pushing the energy efficiency

agenda. Reasons for this include the rising share of renewables in energy production and

efficiency improvements achieved in energy consuming products. Legislation or policies

can broadly speaking be categorised into equipment policies and whole building programs.

Building-related policies

Building codes typically require structures to meet a typical energy consumption metric,

such as an allowable amount of energy per unit of floor. It is widely accepted that building

codes are one of the most effective policy instruments to influence construction, with many

countries pursuing policy initiatives globally. However, whilst building codes succeed in

creating holistic, top-down classifications of buildings which are user-friendly, they often

fail to take account of variations, density or behaviour of occupants.

Historically government energy efficiency programs focused on new construction;

however, more recently we observe a trend to stricter targets for existing buildings. Over

time governments have tightened the standards of their building codes. From "minimum

energy efficiency saving" requirements several governments now have a "zero energy"

target (ZEB) as part of their energy efficiency policy.

For example many EU countries demand ZEB policies for all new construction from 2020,

whereas legally existing public buildings will have to be ZEB-classified by the end of 2019.

Interestingly in the US the DOE Building Technologies Platform changed its ZEB

requirement recently to a 50% cost savings in the entire building sector by 2030.

Certification plays a major role

In addition to government-initiated green building targets, there exist a number of

successful industry-supported building certification programs that aim to improve energy

efficiency.

■ In the US the Green Building Council (GBC) initiated the Leadership in Energy and

Environmental Design (LEED) certification program in 2000. Today LEED has been

certified in 130 countries.

■ In the UK the Building Research Establishment Environmental Assessment

Method (BREEAM) was initiated in 1990. BREEAM is the preferred designation for a

number of European building programs. As part of these programs, buildings often

receive performance certificates indicating the degree of energy efficiency.

The certification programs initiated by governments and industry bodies are having a

successful impact on the buildings market. The LEED certification program for example

has increased substantially on a global scale (Figure 89). In the US we find that more than

10% of office buildings are LEED certified in most metropolitan areas.

03 April 2014


Figure 89: Global LEED certification (mSqft) Figure 90: LEED certified offices as % of total

0

50

100

150

200

250

300

350

400

450

500

2006 2007 2008 2009 2010 2011 2012 2013

New Construction Existing building

0%

5%

10%

15%

20%

25%

30%

35%

Sea

ttle

Min

neap

olis

Hou

ston

San

Fra

n

Chi

cago

Den

ver

Bos

ton

LA

Atla

nta

San

Die

go

Bal

timor

e

Pho

enix

Dal

las

Was

hing

ton

Phi

lade

lphi

a

Mia

mi

NY

Source: USGBC Source: USGBC

Recently in Europe, the corporate initiative "Renovate Europe" is trying to raise awareness

to increase the annual building refurbishment rate to 3% from less than 1%. This coupled

with energy efficient renovation programs would allow for an 80% reduction in building

energy usage by 2050 (Figure 91).

Figure 91: Examples of legislation promoting building energy efficiency Country / Region Policy Overview

CaliforniaZero-net-energy

buildings

All new residential construction will be zero-net-energy by 2020, while all new commercial construction will be zero-net-energy by

2030

China 12th Five Year PlanFor new buildings, 65% energy consumption reduction compared to the 1980 building stock. For retrofits, large urban public buildings

must have secondary energy audits, as the energy intensity in these buildings is 2-3 times higher than in smaller buildings.

Denmark Plus-energy houses

By 2015, new building energy consumption must be reduced by 60% compared to current requirements. Also by 2015, new

residential buildings will be equivalent to current voluntary standards of PEH used in Germany. Danish gov't has a long term view of

making all buildings to be "plus-energy houses"

EuropeEnergy Efficiency

Directive

Headline target of reducing energy consumption by 20%.

Requires member states to ensure a refurbishment rate of 3% per year related to the total floor area of all heated and/or cooled

buildings (> 500 m2) owned and occupied by their central governments (applying the standards set by the EPBD recast).

Buildings must come with energy performance certificates

FranceEnergy positive

buildingsAll new buildings must be energy positive from end of 2020.

Global

CLASP (Collaborative

Labelling and Appliance

Standards Program)

Promoting labelling standards globally, which has led to an uptake in energy efficiency building products.

HungaryZero carbon residential

and public buildingsGranting building permits for residential and public buildings only if they are carbon neutral.

JapanTop Runner

Programme

Combination of a voluntary label scheme which encourages purchase of high-performance products, and a mandatory average

weighted minimum efficiency standards program. Aggressive targets have led to significant improvements in energy efficiency.

UK Zero carbon homesAll new houses built in the UK must be carbon neutral by 2016. Carbon performance of new homes to be improved by 25% by

2010 and 44% by 2013, as compared to 2006 building regulations.

United States

LEED (Leadership in

Energy and

Environmental Design)

Green building certification initiated by the US Green building council which has grown to having buildings certified in over 130

countries. The program specifies design criteria to earn credits for compliance that include energy efficiency considerations.

Source: Credit Suisse research

03 April 2014


Tighter legislation likely to be introduced

We expect the introduction of tighter legislation given that most countries are set to revise

their existing building codes during the next three years (Figure 92) and that efficiency

gains in several regions are running behind current targets.

Part of the reason for this relates to the fact that building codes currently focus on new

construction. There has been interest in extending the scope of building legislation to

existing buildings, particular for major retrofits. To enable this extension to the building

stock, current standards have to be tightened in our view.

Figure 92: Building codes across countries: expected revision years

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

Year

of

imp

lem

enta

tio

n

Current code Next revision

Year first code implemented

Source: IEA

Energy efficiency policy in Europe: the 2020 – 2030 agenda

Energy efficiency policy objectives remain a focus for EU policy makers given the overlap

with other EU policy initiatives such as climate change and broader energy policies. The

Energy Efficiency Directive takes a holistic approach to energy savings in the EU; the

transposition deadline for this is not until June 2014, though a review has been requested

before mid-2014 which is likely to reveal a shortfall against the target to improve energy

efficiency by 20%. As a result of this review, we expect there to be amendments to the

Directive.

In terms of the overlap between policies, the Commission’s analysis shows that a

greenhouse gas emissions reduction target of 40% would require an increased level of

energy savings of approximately 25% in 2030. It is considered that the improvements in

industry and transport must continue at their current rate but significant acceleration is

needed in the building sector that will also need to include incentives to encourage

consumers to take up innovative products and services, and appropriate financial

instruments to ensure that all energy consumers benefit from the resulting changes.

The EU energy efficiency plan has helped to inject new impetus into the EU target of

achieving 20% energy saving by 2020. Public authorities will be encouraged to take

energy efficiency into account in all their purchases, and companies will be subjected to

regular energy efficiency audits. If the 20% target could be reached by 2020, then Europe

could reduce its annual energy bill by EUR 200bn, which equates to a saving of 370million

tonnes of oil. Crucially for the residential portion of Europe, this roughly equates to EUR

1,000 saved every year per household.

03 April 2014


Energy-using products account for most of the energy consumed in households and a

third of the EU’s energy consumption. The EU’s labelling scheme has proved a success so

far in terms of raising consumer awareness of the financial benefits of owning a top-rated

energy-efficient appliance. Examples include the potential saving of EUR 4,100 (over the

product’s lifetime) for the most cost-efficient boiler when compared to the market average.

Recent changes in the EU law to include ratings going up to A+++ for goods such as

fridges have helped to provide further incentives to manufacturers to continually innovate

to enhance the energy efficiency of their products. It is hoped that over time, these

improvements will marginalise the lowest category F/G band appliances until they are

squeezed out of the market.

Energy labels will also soon be in place for buildings across the EU, with energy efficiency

certificates for each property. This should serve to increase the awareness of the owners

and occupiers of these buildings as to their energy performance. Furthermore, this has the

potential to create up to 450,000 new jobs. All new buildings are required to use nearly

zero energy by the end of 2020, and those occupied and owned by public authorities must

meet this requirement by 2018. A key advancement in this field is the development of a

common comparative framework which takes into account the different climatic conditions

in the Member States.

Legislation in emerging markets

Unlike in developed economies such as the United States or the European Union, policy

objectives in developing economies have been largely focused on channelling the rampant

growth of the past decade. However, recently we have seen a shift in the policy focus of

emerging economies with key countries such as China and India announcing stricter

controls around building efficiency as they look to consolidate past growth, and more

importantly, establish a sustainable future.

China has imposed building design standards for public buildings and for residential

buildings in three separate climate zones depending on temperatures un the summer and

winter: "cold and very cold", "hot in the summer and cold in the winter", and "hot in the

summer and warm in the winter". As part of the 12th Five-Year Plan, the standard required

a reduction in energy consumption of 65% relative to consumption in the 1980s. Both

construction companies and design institutes that did not comply with the regulations

faced fines of CNY100,000-500,000.

In India, the Indian Green Building Council has initiated the building of capacity and

services to have 20 billion sq.ft. of Green Buildings by 2025. The focus here remains on

tier-1 and tier-2 cities with one million houses across the country to be constructed in the

next four years. In addition to forward-looking plans, the IGBC have also introduced a

voluntary rating system which uses well accepted national and international standards.

Beyond domestic policies, there have also recently been cross-border commitments in this

area, such as the US and China joint statement to "commit to devote significant effort and

resources to secure concrete results by the Sixth U.S.-China Strategic and Economic

Dialogue in 2014".

However, a key outstanding issue amongst emerging economies especially in relation to

real estate is the maturity of the legal system. Uncertainty over title deeds, property rights

and ultimately the enforcement of these rules may delay building development and

refurbishment.

03 April 2014


Component policies

Key to energy savings in the building sector is the increasing penetration of highly efficient

components. Government policies in the past focused on Research and Development

sponsorship during the development phase and incentive schemes to allow a product to

establish market share. Voluntary and mandatory labelling, however, has been a long

running policy and proven to be highly successful in driving acceptance of a new, more

energy efficient product. The key labelling programs are:

European Union appliance labelling

The European Union has been promoting energy efficiency products through their "A" to

"G" program for more than 20 years. The EU directive includes A+, A++ and A+++ ratings.

US Energy Star program

In the US the "Energy Star" program is applicable to a range of building products and

energy-related products. In contrast to the European program, the Energy Star label does

not indicate the degree of efficiency but rather whether or not efficiency is higher than a

pre-set threshold. The general guideline is that a product's efficiency levels should be at

least 20% better than other similar products.

Japan's Top Runner

Japan's Top Runner program combines a voluntary label that encourages purchase of

high-performance products and a mandatory average weighted minimum efficiency

standards programme. The target for efficiency improvement is based on the Best

Available Technology (BAT) that is currently on the market.

The combination of equipment labelling, minimum efficiency requirements and (particularly

in the case of the EU and Japan) mandatory tariffs and taxes has had a positive impact on

energy usage. Data from the IEA show that appliance electricity consumption did decrease

substantially for a number of countries.

Figure 93: Electricity consumption and price changes

Source: IEA, 2010. A/c=air conditioner, CD=clothes dryers, CW=clothes washers, Cold=refrigerators and

freezers, F=freezers, Rf=refrigerators

03 April 2014


Engagement from the private sector Historically the theme of energy efficiency appeared to be largely a legislative top-down

topic. Property owners and tenants typically cited "doing the right thing" and the availability

of financial incentives as drivers for investing in energy efficiency.

We believe that legislation is likely to remain a key driver for the theme, while multiple

surveys also show that bottom-up support from property owners and tenants has

increased substantially during the past few years. This development appears increasingly

driven by economic considerations rather than by the historically more intangible reasons.

More than 70% of property owners now have a stated energy efficiency goal, according to

the Institute for Building Efficiency. This in our view supports our claim that the theme has

gained critical mass, making it relevant for equity investors.

Institute for Building Efficiency survey

The Institute for Building Efficiency, an initiative of Johnson Controls, runs an annual

building efficiency survey which draws from over 3,000 respondents from 10 countries.

The results of the most recent annual "Energy efficiency indicator survey" strongly suggest

that the theme of energy efficiency is becoming increasingly important for commercial and

institutional property owners/tenants. More than 70% of companies now have a stated

goal regarding energy efficiency.

The share of companies that perceive energy management as extremely important to their

business has doubled to 40% in 2013 from 20% in 2010.

Figure 94: % of companies with an energy efficiency goal Figure 95: % of companies for whom energy management is extremely important

0%

10%

20%

30%

40%

50%

60%

70%

80%

2011 2012 2013

Goal No goal

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

2010 2011 2012 2013

Source: Institute for Building Efficiency Source: Institute for Building Efficiency

Meanwhile, the latest survey showed that "energy cost savings" was the biggest driver for

an organisation's energy efficiency strategy in all surveyed countries (Figure 96).

The results in Figure 96 are supported by other studies such as those performed by

McGraw-Hill. Their most recent survey, based on over 800 respondents including

architects, engineers, contractors, consultants, owners, manufacturers and suppliers, also

showed that economic considerations are key in companies' focus on green investments

(Figure 97).

03 April 2014


Figure 96: How significant are the following drivers in your organisation's energy efficiency decisions?

Drivers of Efficiency US / Can UK Germany France Brazil India China Australia Singapore

Energy cost savings 1 1 1 1 1 1 1 1 1

Government & utility incentives/rebates 2 2 4 2 2 2

Increased asset value 3 5 3 3

Energy security 5 3 2 5 2 2 2

Customer attraction & retention 5 3 3 5 4

Existing government policy 3 4 3

Enhanced brand or public image 4 3 4 5 5 4 5

GHG footprint reduction 4 4

Attracting, retaining employees 4 4 Source: Institute for Building Efficiency

Green building activity set to grow

These survey results suggest that the share of "green activity" in building projects is set to

continue. By 2015 industry experts expect that more than 51% of building projects will

have a "green share" of more than 60%, up from 13% in 2009 and 28% in 2012. The

strong increase in "green building activity" is expected throughout all countries surveyed

by McGraw-Hill, again supporting the notion that energy efficiency is a global

phenomenon.

Figure 97: What are the key drivers in future green building activity?

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Client Demand Market Demand Lower OperatingCosts

Branding/PublicRelations

Right Thing to Do MarketTransformation

2008 2012

Source: McGraw-Hill Construction, 2013

Figure 98: Level of green building activity Figure 99: Percentage of firms with more than 60% of work being green

0%

10%

20%

30%

40%

50%

60%

No Green 1%-15% 16%-30% 31%-60% More than 60%

2009 2012 2015

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2012 2015

Source: McGraw-Hill Construction, 2013 Source: McGraw-Hill Construction, 2013

03 April 2014


Global Real Estate Sustainability Benchmark (GRESB)

One of the more prominent surveys among property owners is the Global Real Estate

Sustainability Benchmark (GRESB). The survey covers 543 property companies and

investors, c$1.6trn in Gross Asset Value and 49,000 assets across 46 countries.

Results from the more recent survey confirm that energy efficiency is as much a theme to

corporates as it is to real estate owners and investors. Sustainability is integrated into day-

to-day decision-making for over 80% of participants, with 55% having certified offices.

We believe that the reason for the interest in the theme is that improving the energy

efficiency of a building (both new build and retrofitting) not only lowers annual operating

costs but also increases a building's NAV. More than 50% of industry experts believe that

annual operating expenses can be reduced by more than 10% annually.

Figure 100: Expected reduction in operating costs during next 5 years

Figure 101: Expected increase in a building's value during next 5 years

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

New green building Retrofit

>70% expectsoperating cost

reduction ofmore than 5%

15-20% additionalupside from

educating on cost savings potential

0%

5%

10%

15%

20%

25%

New green building Retrofit

Source: McGraw-Hill Construction, 2013 Source: McGraw-Hill Construction, 2013

During the past three years the survey shows a strong trend towards the implementation

of energy efficiency policies and measurement procedures. This is likely to continue in our

view, which adds to the overall market opportunity for companies that provides products

and services in this field.

Figure 102: GRESB survey supports increasing importance of the theme to property owners and real estate investors

0%

10%

20%

30%

40%

50%

60%

Starter Talk Star

2011 2012 2013

Limited policy & Implementation

Fully integrated policy & Implementation

GRESB survey shows strong move to efficiency for property owners and investors

Source: GRESB

03 April 2014


Key products and technologies As mentioned before, building energy consumption is dominated by heating, cooling and

lighting (Figure 103). Therefore it comes as no surprise that lighting and HVAC (Heating,

Ventilation, Air conditioning and Cooling) are the most important efficiency programs for

corporates and owners seeking to improve building efficiency (Figure 104). We refer to the

Appendix on page 102 for a more detailed overview of the key technologies.

Figure 103: Household energy consumption by activity Figure 104: The relative importance of energy efficiency solutions to corporations/owners

10%

10%

30%

12%

30%

30%

20%

20%

13%

45%

28%

10%

40%

70%

15%

32%

5%

10%

10%

60%

0% 20% 40% 60% 80% 100%

USA

Europe

Japan

China

India

Air conditioning Lighting and appliances

Domestic hot water Space heating

Cooking

21%

24%

25%

26%

26%

35%

35%

42%

44%

Demand management

Retro commissioning

Building envelope

Smart building technology

Onsite renewable energy

Water efficiency

Behavioural programs

HVAC

Lighting improvements

High priority investments

Source: Council for Sustainable Development Source: Institute for Building Efficiency

The lifespan of building products drives supply and demand of products/services

Demand for and supply of efficiency-enhancing equipment and services is not only driven

by the level of energy consumption but also by the replacement rate (Figure 105).

Technological improvements for products and equipment with relatively short lifespans

tend to have a more immediate impact on energy savings as these products are replaced

or refurbished more frequently. These products typically also represent goods that are

purchased first when households enter the middle class and income levels rise.

Therefore further efficiency gains are not only relevant to improve energy usage in

developed markets but also to slow down the growth that might otherwise appear in

developing economies. Examples of these products are light bulbs, electronics and

appliances.

Figure 105: Average lifespan for different energy-consuming infrastructure

0 20 40 60 80 100 120

Building stock

Power stations

Other

Commercial heater and cooler

Residential heater and cooler

Residential water heater

Consumer appliances

Consumer electronics

Office equipment

Light bulbs: fluorescent

Light bulbs: incandescent

Years


03 April 2014


Products with a higher lifespan typically consume more energy, making them a key part of

the quest to lower energy usage. However, the investments required to improve efficiency

are typically also higher, which may act as a burden to households and corporates and

therefore slow down the refurbishment or redevelopment rate until replacement can no

longer be postponed. For example, buying a new, more efficient light bulb is easier done

than buying a more expensive boiler or changing single glazing to double glazing.

The relatively high average life of buildings implies a low annual rate of redevelopment.

This in turn delays the ability to fully capture the potential for energy savings. For OECD

countries, for example, the IEA estimates that more than 70% of the current building stock

will still be in place by 2050 (Figure 106). This does not diminish the potential benefits from

investments in buildings but does mean that structural improvements in buildings are more

likely via refurbishment or a so-called "Smart Technology Approach" which promotes

energy efficiency through more advanced mechanical equipment.

Figure 106: Evolution of the world's building stock

0

50

100

150

200

250

300

2010 Demolition Addition 2050 2010 Demolition Addition 2050

OECD Non-OECD

Flo

or

spa

ce

(b

illi

on

m2)

Post-2010 stock

Pre-2010 stock


From a technology perspective, we believe that most of the technologies exposed to

energy efficiency as it relates to buildings can be grouped as shown in Figure 107. These

products are largely designed to a) improve the energy consumption/loss from a building's

boundary (the "envelope"), b) reduce heating and cooling requirements, and c) improve

energy usage from lighting and general appliances.

Figure 107: Building related efficiency technologies


03 April 2014


Improving the building envelope

The building envelope or enclosure is critical in the attempt to improve its energy usage.

Building age, geographical location, occupant behaviour and orientation all determine the

degree of heating and cooling that is required. Current low efficiency levels of especially

developed housing stock suggest strong potential for improvement.

Improving the energy efficiency of a building's envelope depends on the location and age

of the building. Areas of particular importance to this are the following:

General Insulation

Insulation levels in walls, floors and ceilings of existing buildings located in developed cold

climates are often low given their age (Figure 109). As a result, heat loss in buildings

through these exteriors is high and air-tightness low.

Figure 108: Typical heat loss in buildings by exterior Figure 109: Energy loss can be significantly reduced

0%

5%

10%

15%

20%

25%

30%

35%

40%

Wal

ls

Ro

ofs

Flo

or

Win

do

ws

Do

ors

Ch

imn

ey

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

Walls Roofs

U-v

alu

e (W

/m2

K)

Uninsulated Typical building ('60s and '70s)

Germany (code) Canada (coldest zone)

Sweden (electric heat)

3 to 10

0.5 to 0.8

Source: European Commission Source: IEA

Technological improvements suggest that insulation levels can be improved substantially.

For example, Figure 110 and Figure 111 show that in Europe potential insulation

improvements for the median home can be more than 50% irrespective of the construction

period when compared to the benchmark (typically set by Scandinavian countries).

Figure 110: Wall U-values by construction (W/m2K) Figure 111: Ceiling U-values by construction (W/m2K)

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

1.80

< 1945 1945-1969 1970-1979 1980-1989 1990-1999 2000-2008

Europe Median Best: Sweden

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

< 1945 1945-1969 1970-1979 1980-1989 1990-1999 2000-2008

Europe Median Denmark/Sweden

Source: Entranze Source: Entranze

03 April 2014


The insulation market is highly developed with many providers. However, improving

insulation in existing buildings is not always easy, or cheap, given space limitations.

Windows

Windows form a key part of a building's envelope. The should let in as much light as

possible, but heat gain needs to be minimised in summer and maximised in winter. Sizing,

orientation and glazing choices are therefore key elements for improving a building's

energy use and loss.

Multiple glazing and specialised coatings are most often used to insulate windows for

particular climates. At present, a significant portion of the world's buildings use windows

with low efficiency. A stronger move to triple glazing in combination with low-e coatings

and low conductive frames would allow for a significant reduction in heat loss (Figure 112).

Using Europe as an example, we note that the savings potential from replacing windows in

existing residential homes is significant (Figure 113).

Figure 112: Energy savings through improving windows Figure 113: Window U-values by construction (W/m2K)

0

1

2

3

4

5

6

Singleglaze

clear, nonmetalframe

Doubleglazeclear,

aluminiumframe

Doubleglazeclear,woodframe

Doubleglaze low-

e, lowconductive

frame

Tripleglaze,

doublelow-e, lowconductive

frame

U-v

alu

es

(W/m

2k)

Majority of current windows Recommendations

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

< 1945 1945-1969 1970-1979 1980-1989 1990-1999 2000-2008

Europe Median Estonia

Source: European Commission Source: Entranze

Reflective sealing/cool roofs

Improving the ability of a building's exterior to reflect heat (in hot climates) or retain heat (in

cold climates) substantially reduces the need for cooling or heating energy. The global

Cool Roofs and Pavements Working Group is addressing the issue of roof reflectivity.

Statistics that support research and development of coatings and building materials

include the fact that a clean white roof typically reflects 80% of sunlight and can stay

c30C cooler than a grey roof that reflects just 20%.

Energy savings from improvements in the building envelope alone are significant. IEA

studies suggest that these can amount to 60% (Figure 116).

03 April 2014


Reducing heating and cooling requirements

Lowering a building's energy usage is not only achieved through improving the envelope

but also through increasing the efficiency of heating and cooling equipment. Some of the

key technologies that are used to achieve this include:

■ Active Solar Thermal (AST): provides space and water heating by collecting heat

from the sun and heating a fluid (typically a liquid but occasionally air). A newly

developed application for AST is solar thermal air conditioning. This approach uses

thermal collectors for air conditioning in buildings. The market for solar thermal

installations is expected to show strong growth with a c10% annual rate for residential

buildings until 2020 (Figure 114).

Figure 114: Potential strong growth in thermal solar heat

Source: Centrotec

■ Combined Heat and Power systems (CHP): mature technology, most often found in

micro turbines with an R&D focus on micro-CHP, biomass CHP and fuel cell systems.

Widespread uptake in the residential sector is limited at present due to high upfront

costs and lack of scaling.

■ Heat pumps: can be used for cooling and space and water heating. They are the

predominant technology used for space cooling and efficient. Consultancy studies on

energy-saving scenarios often conclude that the building sector needs to deploy heat

pumps more widely for space heating and hot water and high-efficiency heat pumps

for cooling.

■ Thermal storage: aims to maximise energy savings and efficiency from other

technologies. Reasons for using thermal storage systems include the ability to improve

system efficiency by avoiding partial load operation and shift demand over time to

reduce peak loads. The ability to store energy over days, weeks or months also allows

for the facilitation of a greater use of renewable energy.

Improving energy efficiency of heating and cooling equipment adds to the overall efficiency

gains that can be achieved in buildings. Energy savings from improving just a building's

heating equipment can be as high as 50% while an integrated investment in the building

envelope and heating equipment can reduce energy costs by more than 80% (Figure 116).

03 April 2014


Improving lighting and appliances

Energy consumption for lighting, appliances and equipment makes up c34% of energy use

in the OECD building sector and c16% in Non-OECD countries (Figure 115). The

developing middle class across emerging countries is likely to raise this share substantially

as penetration rates for general appliances increases with income levels.

Lighting

Lighting represents around 15% of the residential subsector but nearly 25% of the service

sector. Despite improvements achieved to date (efficiency programmes and lighting

technology), it appears that more is possible in the long term.

Figure 115: Share of energy consumption (2010). Developing countries spend less on appliances/lighting due to lower penetration. This is likely to change.

Figure 116: Potential energy savings and reduction in life cycle costs as a function of improvements to building envelope and/or heating equipment

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50% Lighting Residential appliances

Service equipment

10000

12000

14000

16000

18000

20000

22000

24000

26000

0% 20% 40% 60% 80% 100%

LCC (USD)

Energy Savings (%)

Envelopeonly

Heatingequipment

only

IntegratedApproach


Consultancy studies such as those performed by the IEA suggest that global lighting

energy usage can be further reduced by 40% through the implementation of the following:

■ Phasing out of conventional incandescent lamps and implementation of highly efficient

lamp technologies. These include compact fluorescent lamps (CFLs) and Solid-state

lighting such as light-emitting-diodes (LEDs) (Figure 117).

■ Improved usage of natural light. This can be achieved with façade systems to allow for

greater natural daylight harvesting while reducing cooling loads of buildings. In

addition, we note that building design also plays a role, especially as regards to the

orientation of a building.

■ Finally, using smart technology including sensors that automatically switch on or off

depending on space occupancy or sensors that control lighting based on the level of

daylight in a room would add to these savings. These lighting systems can be

integrated with whole-building energy management systems.

Improving energy efficiency through better lighting products and systems is relatively easy.

The IEA expects this market to continue to grow by almost 50% until 2020 (Figure 121).

03 April 2014


Figure 117: Various lighting technologies show strong efficiency gains

Source: IEA, adapted from US DOE 2012b

Appliances

Electricity consumption has been growing fast across both developed and emerging

economies during the past 40+ years. One of the key drivers behind this has been the

increase in penetration of electricity consuming appliances ranging from refrigerators,

televisions and microwaves to washing machines. The penetration development of basic

electrical appliances in China for rural and urban areas provides a good example of this

(Figure 118).

Figure 118: Chinese ownership of appliances per 100 households (urban and rural)

0

20

40

60

80

100

120

140

Washing Machine Refrigerator Color TV Airconditioner

Urban 1990 Urban 1995 Urban 2000 Urban 2005 Urban 2009

Rural 1990 Rural 1995 Rural 2000 Rural 2005 Rural 2009

Urban Rural Urban Rural Urban Rural Urban Rural

Source: National Bureau of Statistics of China, Credit Suisse research

The implication of increasing appliance penetration across the emerging world should not

be underestimated in our view. Based on IEA estimates for several key emerging

countries we calculate that the weighted average penetration of washing machines and

refrigerators may increase by more than 50% respectively (Figure 119). Household data

implies that the number of these appliances in operation by 2050 is 1.3bn higher than the

number active today (Figure 120).

03 April 2014


Figure 119: Weighted average penetration of clothes washers and refrigerators set to increase strongly across key emerging markets

Figure 120: Number of active washing machines and refrigerators may increase by more than 800m and 500m across emerging markets as penetration rises

20%

30%

40%

50%

60%

70%

80%

90%

100%

2010 2020 2030 2040 2050

Clothes washer penetration rate Refrigerator penetration

0

200

400

600

800

1,000

1,200

1,400

1,600

2010 2020 2030 2040 2050

Clothe washing machines Refrigerators

+807m

+500m

Source: IEA. Emerging = Asean, Brazil, China, India, Mexico, Russia

and South Africa

Source: IEA. Emerging = Asean, Brazil, China, India, Mexico, Russia

and South Africa

Figure 121: Lighting market growth from developing countries

Figure 122: The IEA expects the global market for smart appliances to grow very strongly

15 19 20

1214 15

10

151912

15

19

4

5

6

3

4

4

0

10

20

30

40

50

60

70

80

90

2011 2016 2020

EU

R b

illio

n

Middle East and

Africa

Latin America

Asia (excl. China)

China

North America

Europe

0

5

10

15

20

25

3020

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

US

$ b

n


03 April 2014


Identifying investment opportunities Energy efficiency impacts all aspects of a building's life cycle, ranging from the planning

phase all the way through to the redefining/redevelopment of a building (Figure 123).

Figure 123: Different companies involved in a building's life cycle

• Consultants

• Construction firms

• Technical service companies

• Equipment manufacturers

•Real estate agents

•Property company (owner)

•Asset consultants

•Technical service companies

•Equipment manufacturers

• Local authorities

• Developers

• Consultants

• Architects

• Property company (owner)

• Consultants

• Technical services companies

• Construction firms

4

Redefining

1

Planning

2

Creating

3

Operating


Who is exposed to building energy efficiency?

We group the companies exposed to the various stages of a building's life cycle into the

following categories: property consultancy firms, construction firms and homebuilders,

technical service companies, equipment manufacturers and real estate owners.

Property consultancy firms

Property consultants and architects offer services ranging from planning, design,

environmental assessment studies, project management services, and property and asset

management consultancy. Consultancy firms form an integral part of the entire life cycle of

buildings and given its increasingly complex and technical nature have become a more

important partner to property owners and developers over time.

Consultancy firms with a strong asset-build-operate capability for "green building" should

benefit from increasing demand for refitting of existing buildings (largely in developed

markets) as well as demand for new build, particularly in developing markets.

The market of property consultancy is highly fragmented, with thousands of architects,

designers and real estate service companies. Only a handful of consultancy firms have a

multi-regional approach, with even fewer having a true global footprint. These companies

tend to have global contracts for their corporate clients, providing them with a more robust

financial performance than the tail of this subsector for which barriers to entry appear low.

03 April 2014


Construction firms

New buildings (both residential and commercial) provide an opportunity for construction

firms and homebuilders. We do note, however, that most of the new build activity appears

set to take place in emerging markets.

For developed markets, it is likely that retrofitting existing buildings will be more relevant

from an energy efficiency perspective. However, this is likely to involve engineering

service companies more than general construction firms.

The financial performance of construction firms tends to be more cyclical than that of the

other subsectors on this page. New build construction activity, especially in residential

Europe, remains subdued with the UK as the exception. New non-residential construction

remains well below peak levels across Europe and the US. This does limit shorter term

potential for the group, in our view.

Engineering or technical service companies

Engineering or technical service companies are an increasingly important part of the

energy efficiency theme. They typically offer consultancy capability on mechanical,

electrical and ICT challenges and provide installation work for required improvements to

buildings generally. They typically do not manufacture the equipment and materials used.

The market for technical services is highly fragmented, with small average contract sizes.

Energy efficiency across the developed world relates more to upgrading existing buildings

rather than the construction of new green buildings. As a result, the role of engineering

service or technical installation firms in Europe and the US is probably greater than that of

construction firms.

Technical service companies typically generate a significant share of revenues from

longer-term service contracts as opposed to project or one-off related work. This suggests

that the volatility in their financial performance is lower than that of construction firms.

Dedicated technical service or engineering firms compete with service divisions from the

larger equipment manufacturers (e.g. Siemens, ABB) and utility companies (e.g. GDF

Suez and EDF) as well as the so-called hard FM divisions from larger facility management

groups.

Equipment manufacturers

The equipment manufacturers clearly provide direct exposure to energy efficiency

demand. Companies that manufacture energy-efficient building products, specialty

chemicals used for walls and roofs or electrical and mechanical products such as heat

pumps, boilers or smart metering technology should all benefit from the further increase in

green building construction. Barriers to entry for this sub group are higher than for the

others due to product-related IP which in turn should allow for higher profitability.

Property owners and investors

Real estate owners and investors benefit from the drive to improve energy efficiency as

this is seen to increase the value of a building and rents. At the same time, however, they

also face the capex requirements that are associated with this.

03 April 2014


Building efficiency related stocks

Energy efficiency runs across many firms with various degrees of significance. In order to

identify potentially interesting investment opportunities, we have collaborated with our

global research analyst platform and identified c170 companies that have significant

revenue exposure to the theme (see the Appendix on page 96 for an overview of these

companies). From a geographical perspective, c50% of this group is located in Europe

(Figure 124). This may partly be a result of the strong "green" agenda that the European

Union has had for a long time.

Style-wise, it appears that the energy efficiency theme is largely a small- and mid-cap-

driven investment thesis. Some 40% of the companies we have identified have a market

capitalisation of less than $2.5bn compared to 8% with a capitalisation of more than $25bn

(Figure 125).

Figure 124: Building energy efficiency exposed companies by region

Figure 125: Building energy efficiency exposed companies by market cap ($m)

Europe, 82

N.America,

56

Asia, 14

Japan, 20

<1bn

17%

1-2.5bn

27%

2.5-5.0bn

12%

5-10bn

21%

10-25bn

15%

>25bn

8%

Small

cap: 40%

Large

cap: 23%

Mid

cap: 33%

Source: Credit Suisse research Source: Credit Suisse research, Thomson Reuters

The size of the companies in this group tends to be inversely related to the degree of

exposure. The average market cap of highly-exposed companies is c$7bn compared to

c$18bn for companies with low exposure (Figure 126).

Figure 126: Efficiency-related companies grouped by perceived level of exposure

Number Market cap Europe N.America Asia Japan

low 25 17,959 12 7 0 6

medium 65 9,890 39 21 3 2

high 82 7,287 30 28 11 12 Source: Credit Suisse research

Figure 127: Efficiency-related group by service/product offering (Mcap in $m)

Category of companyNo. of

companies

Average

Market capEurope N.America Asia Japan

Consultancy 18 3,394 7 8 3 0

Construction 20 7,069 14 4 1 1

Technical Services 17 6,296 12 5 0 0

OEM 107 12,345 46 36 6 19

Cooling 7 23,193 2 2 1 2

Lighting 16 5,216 8 4 3 1

Insulation and energy management 47 10,667 21 15 1 10

Appliances 4 33,830 2 1 0 1

Space and water heating 13 6,507 6 4 0 3

Property Owners 10 5,455 3 3 4 0 Source: Credit Suisse research, Thomson Reuters

03 April 2014


Efficiency-related stocks vs. global industrials

We view the theme of energy efficiency as a long-term phenomenon. As a result, we deem

through-cycle, growth, value creation and profitability as key when assessing investment

opportunities. As most of the companies highlighted by our analysts are industrials, we

use the global MSCI industrial universe as our benchmark.

Value creation has been superior for our theme-related companies

From a fundamental cash flow perspective, we note that the overall group of companies

exposed to energy efficiency appears to have a much better value-creating track record

than the wider industrial sector, according to CFROI® analysis in Credit Suisse HOLT.

However, we acknowledge that there are inevitably some limitations to the data, as the

structure of the individual companies exposed to the efficiency theme may have changed

significantly over time.

■ Past 10 years: The global industrial universe did not create shareholder value in 2002

and 2008; however, HOLT indicates that companies exposed to energy efficiency did.

■ Pre-2000: Longer-term data series also seem to indicate that "efficiency exposed

companies" have created more value than the wider industrials universe.

Figure 128: Cash flow returns have been above the global industrial universe

Figure 129: Value creation by stocks exposed to the theme has been significantly higher than for the universe

4

6

8

10

12

14

16

1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

CFROI development

Building efficiency universe Global Industrials

-2.00

0.00

2.00

4.00

6.00

8.00

10.00

1995199719992001200320052007200920112013



Global Industrials refers to Credit Suisse HOLT classified industrials Past performance should not be taken as an indication or guarantee of future performance. Source: Credit Suisse HOLT, Credit Suisse research

Global Industrials refers to Credit Suisse HOLT classified industrials Past performance should not be taken as an indication or guarantee of future performance. Source: Credit Suisse HOLT, Credit Suisse research

03 April 2014


Driven by better revenue growth and asset turns

We think the stronger value creation by the building-efficiency group of stocks on HOLT

relates partly to a slightly better revenue growth profile; however, the fact that margins are

lower suggests that these companies on average are typically more asset light.

Figure 130: Efficiency exposed companies have slightly outperformed the wider industrial sector on revenue growth

Figure 131: General industrials have been able to command higher margins than efficiency exposed companies

-10

-5

0

5

10

15

20

25

30

1992 1995 1998 2001 2004 2007 2010 2013

Revenue growth


4

5

6

7

8

9

10

11

12

1994 1997 2000 2003 2006 2009 2012

EBITDA margins


Global Industrials refers to Credit Suisse HOLT classified industrials Past performance should not be taken as an indication or guarantee of future performance. Source: Credit Suisse HOLT, Credit Suisse research, Thomson Reuters

Global Industrials refers to Credit Suisse HOLT classified industrials Past performance should not be taken as an indication or guarantee of future performance. Source: Credit Suisse HOLT, Credit Suisse research, Thomson Reuters

Relative valuation does not seem to reflect superior cash flow profile

The more resilient revenue profile and better cash flow based returns for the efficiency

exposed companies on HOLT do not seem to be fully reflected in relative valuation

multiples, in our view. In fact, the premium at which the group has typically traded relative

to the global industrials sector has gradually declined to a near 20-year low.

Figure 132: Efficiency exposed companies have re-rated, but only to long-term averages on HOLT: the global sector trades close to 20-year highs

Figure 133: The premium at which efficiency exposed stocks has traded has gradually declined despite the structural demand element

10

15

20

25

30

35

1996-Jan

1998-Jan

2000-Jan

2002-Jan

2004-Jan

2006-Jan

2008-Jan

2010-Jan

2012-Jan

2014-Jan

Economic PE

Universe Global

-10%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

1996-Jan

1998-Jan

2000-Jan

2002-Jan

2004-Jan

2006-Jan

2008-Jan

2010-Jan

2012-Jan

2014-Jan

Economic PE: Universe relative to Global sector

Global Industrials refers to Credit Suisse HOLT classified industrials


of future performance. Source: CS HOLT, Thomson Reuters

Global Industrials refers to Credit Suisse HOLT classified industrials


of future performance. Source: CS HOLT, Thomson Reuters

03 April 2014


Cash flow-based valuation suggests potential upside for efficiency stocks

Based on HOLT methodology, we note that the group of energy efficiency exposed

companies has more upside potential than the global industrials universe.

What we find interesting is this: not only do the efficiency exposed companies exhibit

stronger upside potential on HOLT, but this is despite a relatively strong absolute and

relative performance (Figure 135).

Figure 134: Upside potential for efficiency exposed group on HOLT greater than for the global industrials sector

Figure 135: Share price performance of building efficiency exposed companies has been stronger vs MSCI indices

-20

-10

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10

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30

40

50

60

1996-Jan

1998-Jan

2000-Jan

2002-Jan

2004-Jan

2006-Jan

2008-Jan

2010-Jan

2012-Jan

2014-Jan

Upside Potential to HOLT Warranted Value

Universe Global Industrials

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

Aug-03 Jun-05 Apr-07 Feb-09 Dec-10 Oct-12

Universe MSCI World MSCI Industrials


of future performance. Source: Credit Suisse HOLT

Note: The "universe" in this chart refers to the stocks we have

identified as being exposed to the efficiency theme. Past performance

should not be taken as an indication or guarantee of future

performance. Source: Thomson Reuters, Credit Suisse research

Efficiency-exposed companies by subsector

When reviewing the past performance of efficiency-exposed companies on a subsector

level, we note that the more capital-light efficiency-related companies have produced

consistently better cash flow returns on HOLT. Based on CFROI analysis, consultancy and

technical service companies improved cash flow returns over time to c15% in 2012.

Construction companies, home builders and OEMs on the other hand generated relatively

stable CFROIs of c6%.

From a HOLT perspective, we can also generate a "what's priced in" analysis (Figure

137). This shows that at present consultancy firms appear undervalued while construction

firms and home builders seem to be overvalued (green dot below and above forecast

CFROI respectively). Technical service companies and OEMs appear fairly valued.

03 April 2014


Figure 136: Asset-light companies offer superior cash flow returns

Figure 137: Consultancy looks better value than construction and homebuilders

0

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1992 1995 1998 2001 2004 2007 2010

CFROI by subsector

Consultants Construction

OEM Technical Service

0

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8

10

12

14

16

18


Source: Credit Suisse HOLT Source: Credit Suisse HOLT

Top line growth by sector indicates that consultants are less affected by economic

downturns. At the same time we note that the OEMs have the ability to generate superior

margins, which we ascribe to the more proprietary nature of their products.

Figure 138: Consultants show highest through-cycle revenue growth

Figure 139: Proprietary products allow OEMs to generate above-average margins

-20

-10

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40

1992 1995 1998 2001 2004 2007 2010 2013

Revenue growth by subsector



0

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1992 1995 1998 2001 2004 2007 2010 2013

EBITDA margin by subsector




03 April 2014


Figure 140: Consultancy firms have outperformed… Figure 141: …with below average volatility

0

1

2

3

4

5

6

7

Aug-03 Jun-05 Apr-07 Feb-09 Dec-10 Oct-12

Consultancy Construction

OEM Technical Services

Universe

Consultanc

y

Constructio

n

Technical

ServicesOEM

Cooling

Lighting

energy

Insulation

Appliances

heating

Property

Owners

MSCI

World

MSCI

Industrials

0%

5%

10%

15%

20%

25%

15% 17% 19% 21% 23% 25%

CA

GR

sin

ce

200

3

Annualised monthly volatility since 2003

Source: Thomson Reuters, Credit Suisse research Source: Thomson Reuters, Credit Suisse research

Longer-term share-price returns indicate potential outperformance from the consultancy

companies; however, more recent share-price data suggest increasing leadership from

OEM sub-sectors (Figure 142). One possible explanation for this is the rapid increase in

corporate interest in the energy efficiency theme during the past few years (Figure 95)

resulting in increased demand for related products.

Furthermore, most subsectors managed to outperform global equity and industrial indices

on a 1-, 3-, 5- and 10-year basis. Risk-adjusted returns also appear superior for these

periods.

Figure 142: Average share price returns (2003-2014)

MSCI Industrials CAGR 1yr 3yr 5yr 10yr

Universe 14.8% 22.2% 37.5% 199.4% 233.2%

Consultancy 17.7% 13.8% 28.6% 160.3% 347.6%

Construction 10.1% 20.0% 38.2% 117.8% 117.8%

Technical Services 12.5% 21.4% 22.7% 113.7% 175.7%

OEM 13.9% 25.5% 42.6% 231.7% 224.1%

- Cooling 19.1% 16.0% 44.9% 156.4% 413.0%

- Lighting 14.3% 27.1% 22.0% 269.7% 277.4%

- Insulation and energy management 12.7% 29.8% 45.2% 193.7% 181.1%

- Appliances 10.5% 9.9% 27.5% 223.1% 166.7%

- space and water heating 13.5% 18.4% 40.8% 190.2% 223.9%

Property Owners 5.0% 6.8% 17.7% 116.8% 40.8%

MSCI World 6.9% 15.7% 24.7% 100.5% 59.0%

MSCI Industrials 8.7% 18.2% 23.2% 129.6% 86.3% Note: The "universe" in this chart refers to the stocks we have identified as being exposed to the efficiency theme. Past performance should not be taken as an indication or guarantee of future performance. Source: Thomson Reuters, Credit Suisse research

03 April 2014


Figure 143: Annual average share price return by subgroup

Universe

Consultancy

ConstructionTechnical Services

OEM

Property Owners

Cooling

Lighting

Insulation and energy management

Appliances

space and water heating

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0%

1yr

aver

age

shar

e p

rice

ret

urn

10yr annual average share price return

Note: The subgroups consist of stocks we have identified as being exposed to the efficiency theme. Past performance should not be taken as an indication or guarantee of future performance. Source: Thomson Reuters, Credit Suisse research

Figure 143 shows that the OEM subsectors have shown a stronger improvement in returns

during the past year than the rest of the energy efficiency exposed companies.

Based on HOLT, we note that the strong share-price returns in Space and Water Heating

now more than reflect fundamental cash flow valuation (Figure 145). Cooling and

Appliances on the other hand appear undervalued. They are also the subsector within the

OEMs that have experienced the lowest share price returns during the past 12 months,

despite improving respective CFROI levels to 20-year highs.

Figure 144: Cooling and heating CFROI above the rest: Appliances' CFROIs lower but still at 20-year highs

Figure 145: CFROI improvement from Cooling and Appliance companies not priced in yet: Heating appears most overvalued from a HOLT perspective

3

5

7

9

11

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15

1993 1996 1999 2002 2005 2008 2011

Value creation: CFROI

Appliances CoolingInsulation/Energy LightingHeating

0

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8

10

12

14

16



03 April 2014


Global stock ideas using Credit Suisse HOLT

To identify investment opportunities, we combine our HOLT scorecard analysis with stock

recommendations from our Credit Suisse equity analysts.

HOLT scorecard supports smaller asset-light stocks

The Credit Suisse HOLT scorecard suggests that 66% of the consultancy firms are ranked

in the top 2 quintiles – which is substantially better than all other groups – driven by

operational strength and valuation support (Figure 146). The other sectors show stronger

earnings momentum, but this, in our view, is merely the result of having been more

affected by the economic downturn.

Figure 146: % of companies in top 2 quintiles on HOLT scorecard

Figure 147: HOLT score by category for each group; consultants score higher on operations and valuation

0%

10%

20%

30%

40%

50%

60%

70%

80%

2.00

2.50

3.00

3.50

4.00

Score Operations Valuation Momentum

Consultancy Technical Services

OEM Property Owners

Construction


In addition we find that higher-rated energy efficiency companies on HOLT tend to be

smaller (Figure 148) than lower-rated companies. Geographical exposure within the top 2

quintiles is diverse albeit with a skew towards the US, UK and Sweden (Figure 149).

Figure 148: Higher-rated energy efficiency companies tend to be smaller (median Mcap by HOLT quintile $m)

Figure 149: Companies in top 2 quartiles can be found in all regions; most found in US, UK, Sweden and China

0

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UK

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itzerland

Germ

any

Aust

ralia

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nce

Japan

Neth

erlands

Aust

ria

Canada

Kore

a

India

Irela

nd


03 April 2014


HOLT-driven key stocks by region

To identify investment opportunities for this theme, we combine the highest ranking stocks

from our HOLT scorecard analysis with stocks from our global equity analyst team. We

recognise that the energy efficiency theme is long term in nature. Therefore, in addition to

Outperform-rated stocks we have also included Neutral-rated companies with medium to

high revenue exposure to energy efficiency. The table below provides an overview of the

companies that meet the above-mentioned criteria. These companies are grouped by

region and within each region by market capitalisation.

Figure 150: Companies with medium to high energy efficiency exposed companies with top 2 quartile ranking from HOLT (companies with Underperform rating from CS equity research have been excluded)


HOLT

score

Mcap

($m) CS Rating

% to

CS TP

P/E '14E


North America

CA Stantec STN.TO Consultancy Medium 5 2,851 NA 3% 19.0 15% 14% 11%





US Johnson Controls JCI.N OEM High 4 31,420 NA 12% 13.9 11% 16% 3%


US Whirlpool WHR.N OEM Medium 5 11,580 NA 47% 12.2 10% 16% 5%

US Mohawk Industries MHK.N OEM High 4 9,910 OUTPERFORM 22% 9% 16.5 11% 27% 11%

US Hubbell HUBb.N OEM Medium 4 6,225 NA -1% 20.7 16% 11% 6%

US Acuity Brands AYI.N OEM Medium 5 5,708 NA -4% 29.5 18% 23% 11%

US Liberty Prop Tst LPT.N Property Owners High 4 5,418 NA 42% 46.2 4% 10% 14%

US Jones Lang JLL.N Consultancy High 5 5,273 NA 63% 16.2 20% 14% 8%

US Lennox LII.N OEM Medium 4 4,449 NA -25% 20.0 16% 18% 6%

US Valmont Industries VMI.N OEM Medium 4 3,996 UNDERPERFORM 0% 56% 14.2 12% -1% 0%



US Watsco, Inc. WSO.N OEM High 5 3,002 NA 29% 22.5 15% 17% 7%

US Corp Office Prop OFC.N Property Owners High 4 2,334 NA 52% 37.2 4% -7% 3%

US Tetra Tech TTEK.OQ Consultancy Medium 4 1,922 NA -1% 16.1 16% 13% 6%

Europe




DE Infineon IFXGn.DE OEM High 4 13,454 NA 45% 20.4 6% 24% 9%

DE Osram Licht OSRn.DE OEM High 5 6,788 NA 87% 18.0 8% 14% 3%

DE Rational RAAG.DE OEM Medium 4 4,049 NA -30% 27.4 25% 11% 9%


FR MFC MFCP.PA Technical Services High 5 351 NA -16% 17.9 12% 27% 3%


GB Atkins WS ATKW.L Consultancy Medium 5 2,320 NA -14% 15.6 15% 9% 3%

GB Mitie Group MTO.L Technical Services Medium 5 1,994 NA 24% 12.8 27% 8% 4%

GB SIG SHI.L OEM High 4 1,980 NA -27% 16.4 10% 26% 5%

GB Interserve IRV.L Technical Services Medium 5 1,727 NA -11% 13.3 14% 17% 15%

GB RPS Group RPS.L Consultancy Medium 4 1,150 NA 4% 13.8 29% 7% 3%

GB Mears Grop MERG.L Technical Services Medium 4 881 NA -28% 16.1 17% 8% 5%

IE Kingspan KSP.I OEM High 4 3,243 NA -5% 22.0 9% 26% 8%

NL Aalberts Inds AALB.AS OEM Medium 4 3,854 NA 12% 16.0 10% 13% 6%


SE JM JM.ST OEM High 5 2,622 NA 1% 13.6 18% 13% 4%

SE Nibe Industrier NIBEb.ST OEM High 5 2,503 NA -11% 18.6 14% 10% 7%

SE Sweco SWECb.ST Consultancy High 5 1,375 NA -3% 16.9 20% 16% 10%

SE G & L Beijer BEIJb.ST OEM Medium 4 788 NA -13% 16.1 9% 18% 5%

SE Fagerhult FAG.ST OEM Medium 4 588 NA -22% 16.9 10% 15% 7%

Japan



JP Meisei Indu 1976.T OEM High 4 289 NA 14%

Non-Japan Asia

AU James Hardie Industries SE JHX.AX OEM High 4 5,934 NEUTRAL 5% -45% 27.1 14% 24% 14%




CN CSCEC 601668.SS Construction Medium 5 14,035 NA 22% 4.0 8% 15% 12%

CN GREE 000651.SZ OEM Medium 5 13,742 NA 174% 6.7 18% 19% 16%

CN Gold Mantis 002081.SZ Consultancy High 5 3,542 NA 112% 10.0 25% 26% 30%

CN Orient Landscape 002310.SZ Consultancy High 5 2,511 NA 95% 11.0 16% 32% 40%

IN Havells India Ltd HVEL.BO OEM Medium 4 1,901 NA -5% 20.5 8% 14% 10%

KR Lumens 038060.KQ OEM High 5 633 NA -14% 15.9 15% 17% 13%

HOLT Price

to Best

Growth 2013-15E


03 April 2014


Key global stock ideas from our analysts

We recognise that the HOLT ranking approach might be too much of a "one size fits all"

approach for some investors. As a result, we have asked our analysts to highlight energy

efficiency related companies, measured by revenue exposure, irrespective of the HOLT

default classification. We list these companies in the table below.

Figure 151: Our analysts' key stocks with medium or high exposure to building energy efficiency


HOLT

score

Mcap

($m) CS Rating

% to

CS TP

P/E '14E


North America







US Cree CREE.OQ OEM High 3 6,882 NEUTRAL 6% -14% 34.0 7% 13% 25%


US SPX SPW.N OEM Medium 3 4,370 NEUTRAL 11% -53% 18.7 12% 18% 3%

US SunPower Corp. SPWR.OQ OEM Medium 2 3,924 NEUTRAL -10% -32% 26.6 6% 10% 5%



US Itron ITRI.OQ OEM High 1 1,398 NEUTRAL 7% -3% 21.4 6% 14% 2%

US Silver Spring Networks SSNI.N OEM High 1 891 NEUTRAL 15% -27% nm 16% 259% 9%

US EnerNOC ENOC.OQ OEM High 2 665 NEUTRAL 3% 46% 46.7 10% 29% 15%

US Echelon ELON.OQ OEM High 1 121 NEUTRAL 8% 38% -14% -9% 7%

Europe





FI Kone Corporation KNEBV.HE OEM Medium 1 20,234 NEUTRAL 10% -36% 18.8 38% 12% 6%



FR Legrand SA LEGD.PA OEM High 3 16,499 NEUTRAL -11% -7% 20.4 16% 5% 4%


GB Melrose MRON.L OEM Medium 2 5,302 NEUTRAL -7% -21% 17.3 25% 23% 4%


GB Spirax Sarco SPX.L OEM Medium 3 3,636 NEUTRAL 5% -2% 20.6 14% 5% 3%

NL Philips PHG.AS OEM Medium 3 31,941 NEUTRAL 2% 4% 15.3 10% 12% 4%


Japan


JP Daikin Industries 6367.T OEM High 3 16,699 NEUTRAL 1% -29% 18.6 7% 15% 8%



JP Asahi Glass 5201.T OEM High 1 6,738 NEUTRAL 10% 48% 21.2 0% 80% 2%

JP TOTO 5332.T OEM High 2 4,718 NEUTRAL -3% -25% 15.1 4% -18% 0%


JP GS Yuasa 6674.T OEM High 1 2,239 NEUTRAL -7% -35% 15.4 4% 28% 9%


JP Central Glass 4044.T OEM High 1 675 NEUTRAL -10% 103% 11.1 -3% 8% 2%


Non-Japan Asia




AU UGL Limited UGL.AX Consultancy High 2 1,080 NEUTRAL 1% -25% 11.2 11% 5% 2%


HOLT Price

to Best

Growth 2013-15E


03 April 2014


Company profiles

03 April 2014


Europe / Switzerland

Electrical Equipment

ABB (ABBN.VX)

Medium exposure

■ Company description: ABB is a global provider of Automation and Power

products for customers ranging from industrial to utilities. The company

operates in five divisions, namely: Discrete Automation, Process Automation,

Low Voltage Products, Power Products and Power Systems. The group has

operations in more than 100 countries, with Europe accounting for 34% of

total sales in 2013.

■ Investment case: We continue to favour the combination of 1) double digit

earnings growth from margin expansion in both Power businesses and

mainly Low Voltage and de-leveraging, 2) operational leverage potential if

short-cycle recovery is stronger, 3) balance sheet optionality, and 4)

attractive valuation.

■ Exposure to energy efficiency: ABB offers its customers products such as

motors, variable speed drives, network management products, traction

converters and flexible AC transmission systems which aim to enhance

reliability and to improve energy efficiency. Its energy management solutions

help customers reduce energy bills and carbon emissions by up to 20%.

■ Valuation: ABB is trading on 9.4x FY 2015E EV/EBITA, representing a 1%

discount to the electricals average. On our estimates the company's balance

sheet is going to be ungeared next year which potentially allows $8bn M&A

firepower if management levers up to 1x net debt to EBITDA, giving it among

the highest potential for inorganic growth in the European Capital Goods

universe.

Share price performance

15

20

25

Apr-12 Aug-12 Dec-12 Apr-13 Aug-13 Dec-13

Price Price relative

The price relative chart measures performance against the SMI

PRICE which closed at 8464.75 on 27/03/14

On 27/03/14 the spot exchange rate was SFr1.22/Eu 1. -

Eu .73/US$1

Performance Over 1M 3M 12M Absolute (%) -0.1 -5.0 3.8 Relative (%) 2.0 -6.3 -3.2

Financial and valuation metrics

Year 12/13A 12/14E 12/15E 12/16E Revenue (US$ m) 41,848.0 42,503.0 44,926.5 48,002.8 EBITDA (US$ m) 5,705.00 6,495.09 7,287.46 8,165.96 Adjusted Net Income (US$ m) 3,194.34 3,799.90 4,356.78 4,959.78 CS adj. EPS (US$) 1.39 1.65 1.89 2.15 Prev. EPS (US$) — — — — ROIC (%) 14.09 17.13 19.69 21.82 P/E (adj., x) 18.20 15.29 13.33 11.71 P/E rel. (%) 110.1 98.2 94.7 88.9 EV/EBITDA 10.8 9.2 7.9 6.8

Dividend (12/14E, US$) 0.83 IC (12/14E, US$ m) 21,954.81 Dividend yield (%) 3.3 EV/IC 2.7 Net debt (12/14E, US$ m) 1,169.2 Current WACC 9.00 Net debt/equity (12/14E, %) 5.6 Free float (%) 100.00 BV/share (12/14E, US$) 8.8 Number of shares (m) 2,314.74

Source: FTI, Company data, Thomson Reuters, Credit Suisse Securities (EUROPE) LTD. Estimates.

Rating OUTPERFORM* Price (28 Mar 14, SFr) 22.36 Target price (SFr) 26.00¹ Market cap. (SFr m) 51,757.66 Enterprise value (US$ m) 59,560.1

*Stock ratings are relative to the coverage universe in each

analyst's or each team's respective sector.

¹Target price is for 12 months.

Research Analysts

Simon Toennessen

44 20 7883 6893

[email protected]

Andre Kukhnin CFA

44 20 7888 0350

[email protected]

Max Yates

44 20 7883 8501

[email protected]

Jonathan Hurn, CFA

44 20 7883 4532

[email protected]

Tiantian Li

44 20 7883 1552

[email protected]

03 April 2014


Europe / Netherlands

Business & Professional Services

ARCADIS (ARDS.AS)

High exposure

■ Company profile: Arcadis is one of the largest globally integrated

consultancy firms with a strong focus on sustainability. Revenues are

generated in four different activities: 30% of revenues are from buildings,

28% from environmental consultancy, 15% from water advisory and 27%

from infrastructure work. The geographical mix is well balanced with 35% of

EBITA from emerging markets, 48% from the US and the balance from work

done in Europe. Following acquisitions during the past few years, Arcadis is

now considered to be one of the leading asset-build consultancy firms

globally.

■ Investment case: Arcadis' risk profile is low owing to a revenue mix that is

heavily exposed to structural sustainability themes. In addition, we expect

cash flow generation to steadily increase as the company improves its

European margins following the completion of a European restructuring.

Earnings growth should reach double digits as a result, whereas gearing

should fall further from already moderate to low levels.

■ Exposure to energy efficiency: Arcadis has strong exposure to building

energy efficiency as 30% of revenues are from building-related consultancy

work. Through the acquisitions of EC Harris and Langdon and Seah a few

years ago, Arcadis has become one of the world's largest building

consultancy firms. The company provides a full life cycle offering from

planning and environmental impact studies to project management during

the construction phase, asset management consultancy during the operating

phase of a building and refurbishment with possible environmental

remediation work during the redevelopment phase.

■ Valuation: We use a combination of peer group multiple-comparison, Credit

Suisse HOLT and DCF modelling. This results in our target price of €31.6

per share. Coinciding with this building energy efficiency report, we upgrade

Arcadis to Outperform from Underperform and raise our target price from

€18.2 to €31.6 (see our note, ARCADIS - Upgrade on valuation review and

structural growth).


15

20

25



The price relative chart measures performance against the

AMSTERDAM EXCHANGE INDEX which closed at 403.19 on

27/03/14

On 27/03/14 the spot exchange rate was €1./Eu 1. -

Eu .73/US$1

Performance Over 1M 3M 12M Absolute (%) -1.3 8.1 28.3 Relative (%) -0.7 8.7 13.2


Year 12/13A 12/14E 12/15E 12/16E Revenue (Eu m) 2,515.9 2,597.8 2,738.7 2,903.2 EBITDA (Eu m) 222.90 244.74 252.19 279.44 Adjusted Net Income (Eu m) 123.37 137.06 150.31 170.43 CS adj. EPS (Eu) 1.71 1.88 2.06 2.33 Prev. EPS (Eu) — 1.93 2.08 2.28 ROIC (%) 14.86 16.96 17.04 19.52 P/E (adj., x) 15.99 14.56 13.28 11.71 P/E rel. (%) 99.6 109.2 112.6 109.2 EV/EBITDA 10.4 9.1 8.4 7.2

Dividend (12/14E, Eu) 0.69 IC (12/14E, Eu m) 853.91 Dividend yield (%) 2.5 EV/IC 2.6 Net debt (12/14E, Eu m) 179.8 Current WACC 8.30 Net debt/equity (12/14E, %) 26.7 Free float (%) 75.50 BV/share (12/14E, Eu) 9.2 Number of shares (m) 74.82


Rating (from Underperform) OUTPERFORM* Price (27 Mar 14, Eu) 27.34 Target price (Eu) (from 18.20) 31.60¹ Market cap. (Eu m) 2,046.00 Enterprise value (Eu m) 2,225.8




Research Analysts

Eugene Klerk

44 20 7883 4678

[email protected]

Andy Grobler, CFA

44 20 7883 5943

[email protected]

https://plus.credit-suisse.com/u/hl5Aek

https://plus.credit-suisse.com/u/hl5Aek

03 April 2014


Asia Pacific / Australia

Real Estate Management & Development (Real Estate (AU))

Charter Hall Group (CHC.AX / CHC AU)

High exposure

■ Company description: Charter Hall Group (CHC.ASX) is a vertically

integrated, diversified REIT that owns and manages over $10 billion of office,

retail and industrial properties. CHC is Australia’s largest third-party manager

of both office space and supermarket-anchored retail centres, and third

largest in industrial properties.

■ Investment case: CHC has delivered an EPS CAGR of 16.3% since FY11,

with normalised ROE currently at 11.6%. Outperformance has been driven

by: strong domestic FUM inflows, increasing total fund management EBITDA

by 21% in 1H14, improving funds management margins from 15.4% in FY10

to 36.1% in 1H14 through overhead reductions, fund rationalisation and

exiting offshore markets. It has been improving yields on co-investments

from 5.9% in FY09 to 7.6% in 1H14, largely through reducing non-income

producing development assets and positive debt refinancing.

■ Exposure to energy efficiency: Charter Hall is committed to improving the

environmental performance of its managed properties and minimising the

impacts of new developments. With the property sector generating 40% of

global greenhouse gases, CHC recognise the important role the sector has

in reducing carbon emissions through the provision of energy efficient

buildings. Over past years, CHC has been focused on implementing

practices within its managed properties to reduce the energy and water

consumed and the waste that is produced.

■ Valuation: Given its 8% p.a. EPS growth rate, excess co-investment

capacity and favourable market position, we believe CHC will trade towards

the higher end of its P/E range (12.8x-18.3x over the past 12 months). Our

$4.32 target price is set at a 5% premium to our $4.11 NAV and implies a

P/E of 16x, dividend yield of 5.5% and TSR of 15%.


100

120

140

160

180

2

3

4

5

6

Mar-12 Jul-12 Nov-12 Mar-13 Jul-13 Nov-13

Price (LHS) Rebased Rel (RHS)

The price relative chart measures performance against the S&P

ASX 200 Index which closed at 5366.94 on 28/03/14

On 28/03/14 the spot exchange rate was A$1.08/US$1

Performance Over 1M 3M 12M

Absolute (%) -2.5 7.4 2.3

Relative (%) -3.1 7.3 -12.9


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

Revenue (A$mn) 126.5 145.2 159.9 173.6

EBITDA (A$mn) 71.5 83.5 94.5 104.2

EBIT (A$mn) 70.3 82.6 93.6 103.3

Net income (A$mn) 71.8 82.1 95.7 104.1

EPS (CS adj.) (Ac) 23.94 25.89 27.65 30.09

EPS growth (%) 11.3 8.1 6.8 8.8

P/E (x) 16.4 15.1 14.2 13.0

Dividend (Ac) 20.25 22.13 23.95 26.12

Dividend yield (%) 5.2 5.6 6.1 6.7

Net debt/equity (%) 2.1 net cash net cash net cash

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 (28 Mar 14, A$) 3.92

Target price (A$) 4.32¹

Market cap. (A$mn) 1,363.87

Yr avg. mthly trading (A$mn) 53.91

Last month's trading (A$mn) 119.60

Projected return:

Capital gain (%) 10.1

Dividend yield (net %) 6.0

Total return (%) 16.1

52-week price range 4.6 - 3.5

* Stock ratings are relative to the relevant country benchmark.


Research Analysts

John Richmond

61 2 8205 4580

[email protected]

Stephen Rich

61 2 8205 4617

[email protected]

Mikhail Mohl

61 2 8205 4413

[email protected]

03 April 2014


Americas / United States

Clean Tech

Cree (CREE.OQ)

High exposure

■ Company description: Cree sells LED products, lighting systems and

power and RF products. CREE is the only pure-play, US-listed LED stock.

Cree's gross margins for LED chips of ~45% are well above Asia peers in

the mid 20s% because of superior performance and cost structure.

■ Investment case: Bulls contend that attractive prices for LED lighting will

drive strong growth and Cree deserves even higher premium multiples

because of the technology advantages. Bears contend that LEDs are

ultimately a commodity, suggesting that Cree's margins and multiples should

decline. The mix shift to lighting from LED products will lead to dilutive

margins. We have a Neutral rating on the stock.

■ Exposure to energy efficiency: LED lighting is the most energy efficient

option, saving about 80% of the energy used by incandescent lighting and

10-20% vs fluorescent. Traditional lighting companies have quickly

increased their mix of LED products as prices now make LED a cost-

effective option, especially for commercial, industrial and outdoor settings.

■ Valuation: Our $60 target price represents an industry premium 15x

EV/EBITDA of CY14E.


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Mar-13 Jun-13 Sep-13 Dec-13

Daily Mar 28, 2013 - Mar 27, 2014, 3/28/13 = US$54.71

Price Indexed S&P 500 INDEX

On 03/27/14 the S&P 500 INDEX closed at 1849.04

Quarterly EPS Q1 Q2 Q3 Q4 2013A 0.27 0.32 0.34 0.37 2014E 0.39 0.46 0.38 0.41 2015E 0.43 0.43 0.39 0.44


Year 06/13A 06/14E 06/15E 06/16E EPS - (Excl. ESO) (US$) 1.27 1.65 1.71 2.12 EPS (CS adj.) (US$) 1.30 1.64 1.68 2.06 Prev. EPS (CS adj.) (US$) — — — — P/E (CS adj., x) 42.2 33.6 32.7 26.7 P/E rel. (CS adj., %) 246.4 212.0 229.4 208.0 Revenue (US$ m) 1,386.0 1,651.8 2,057.7 2,684.9 EBITDA (US$ m) 336.4 393.9 423.7 495.8 Net debt (US$ m) — — — — OCFPS (US$) 2.55 3.34 2.88 3.05 P/OCF (x) 25.1 16.5 19.1 18.1

Number of shares (m) 121.67 Price/sales(x) 4.08 BV/share (Next Qtr., US$) 24.5 P/BVPS (x) 2.2 Net debt (Next Qtr., US$ m) -1,259.6 Dividend (current, US$) 1.0 Dividend yield (%) 5.5

Source: Company data, Credit Suisse estimates.

Rating NEUTRAL* Price (27 Mar 14, US$) 55.01 Target price (US$) 60.00¹ 52-week price range 75.76 - 49.20 Market cap. (US$ m) 6,693.10




Research Analysts

Brandon Heiken

212 325 6608

[email protected]

Patrick Jobin

212 325 0843

[email protected]

Maheep Mandloi

212 325 2345

[email protected]

03 April 2014


Asia Pacific / Japan

Industrial Machinery (Machinery (Japan))

Daikin Industries (6367.T / 6367 JP)

High exposure ■ Company overview: Through its acquisition of US HVAC company

Goodman, Daikin is now the world’s largest HVAC maker, with ambitions to

expand its business further by boosting global market share. It plans to

achieve this by leveraging its energy efficient and inverter technologies and

by using its highly flexible production framework.

■ Investment case: Daikin is the industry’s leading specialist maker of HVAC

systems. It is the only company in the industry capable of manufacturing

HVAC systems in-house, including refrigerants and inverters. In Japan,

Europe, China and other markets in Asia, Daikin has created markets for

energy-efficient ductless air conditioners and built extensive distribution

networks. Using its acquisition of Goodman, the company plans to expand

sales of ductless air conditioners in North America, where ducted air

conditioning is still the most common technology. Daikin is also stepping up

its global growth strategy. Here it plans to overtake US rivals by offering

more efficient ducted air conditioners based on its energy efficient and

inverter technology. We see significant potential for growth over the longer

term, supported by rising awareness of environmental issues, growing

energy efficiency needs and a shift to automated home HVAC systems.

■ Exposure to energy efficiency: Daikin’s air conditioning business provides

89% of sales and 90% of OP, while the Chinese market accounts for 19% of

sales and 41% of OP. In China, urbanization, infrastructure investment and

rising uptake of inverter models are the factors driving demand, supporting

the company’s own marketing efforts. The US market, including sales from

acquired company Goodman, accounts for 22% of total sales and 16% of

OP. In North America, seasonal energy efficiency ratio (SEER) ratings are

gradually being tightened and awareness of variable refrigerant flow (VRF)

air conditioners is rising, two trends that are positive for Daikin. Tougher

environmental standards in Asia and Europe are also translating into

increased demand for the company’s products.


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TOPIX which closed at 1186.52 on 28/03/14

On 28/03/14 the spot exchange rate was ¥102.15/US$1

Performance Over 1M 3M 12M Absolute (%) -3.5 -12.9 53.4 Relative (%) -3.8 -13.3 35.6


Year 3/13A 3/14E 3/15E 3/16E Revenue (¥ bn) 1,290.9 1,773.0 1,853.0 1,956.0 Operating profit (¥ bn) 88.6 153.0 168.0 186.0 Recurring profit (¥ bn) 94.1 152.0 167.0 185.0 Net income (¥ bn) 43.6 89.0 94.0 104.5 EPS (¥) 149.7 305.3 322.4 358.4 IBES Consensus EPS (¥) n.a. 292.9 335.6 378.6 EPS growth (%) 5.9 103.9 5.6 11.2 P/E (x) 24.6 18.5 17.5 15.8 Dividend yield (%) 1.0 0.9 1.2 1.4 EV/EBITDA(x) 13.3 11.5 9.6 8.5 P/B (x) 1.9 2.3 1.9 1.7 ROE(%) 7.8 12.4 11.0 11.0 Net debt/equity (%) 83.4 47.5 36.7 26.3

Source: Company data, Thomson Reuters, Credit Suisse estimates.

Rating NEUTRAL* Price (28 Mar 14, ¥) 5,654 Target price (¥) 6,000¹ Chg to TP (%) 6.1 Market cap. (¥ bn) 1,645.80 (US$ 16.11) Enterprise value (¥ bn) 2,030.93 Number of shares (mn) 291.09 Free float (%) 75.0




Research Analysts

Shinji Kuroda

81 3 4550 9994

[email protected]

Yunchao Zhao

81 3 4550 9903

[email protected]

03 April 2014




Eaton Corporation (ETN.N)

High exposure

■ Company description: ETN is an industrial conglomerate with leading

positions in hydraulics, electrical equipment, and superchargers and

transmission equipment for cars and commercial vehicles.

■ Investment case: ETN is one of the cheapest stocks in the EE/MI sector,

and is much more active at portfolio and balance sheet management than

most in the sector. The company has had two years of weak end-markets

(utility, datacenter and non-resi spending, and hydraulics), which now seem

to be on the verge of recovery. The track record on incremental margins

suggests we should see high operational leverage to such a recovery.

■ Catalysts: ETN has a high exposure to low voltage electrical equipment for

utilities, datacenters, plants, and residential and non-residential buildings

following its CBE acquisition, as well as strong positions in superchargers for

cars. Collectively, these account for 65% of sales.

■ Valuation: ETN trades at c13.9x 2015E P/E.


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Daily Mar 28, 2013 - Mar 27, 2014, 3/28/13 = US$61.25



Quarterly EPS Q1 Q2 Q3 Q4 2013A 0.84 1.09 1.12 1.08 2014E 0.99 1.27 1.28 1.18 2015E — — — —


Year 12/13A 12/14E 12/15E 12/16E EPS (CS adj.) (US$) 4.12 4.73 5.29 5.88 Prev. EPS (US$) — — — — P/E (x) 17.8 15.5 13.9 12.5 P/E rel. (%) 103.9 98.0 97.4 97.2 Revenue (US$ m) 22,046.0 22,687.3 23,663.5 24,676.2 EBITDA (US$ m) 3,103.0 3,484.5 3,951.4 4,290.8 OCFPS (US$) 6.51 7.27 8.27 8.98 P/OCF (x) 11.7 10.1 8.9 8.2 EV/EBITDA (current) 14.0 12.5 11.0 10.1 Net debt (US$ m) 8,634 7,969 6,600 5,041 ROIC (%) 8.34 9.15 10.34 11.34

Number of shares (m) 475.96 IC (current, US$ m) 25,497.00 BV/share (Next Qtr., US$) 35.8 EV/IC (x) 1.7 Net debt (Next Qtr., US$ m) 8,950.4 Dividend (current, US$) 1.8 Net debt/tot cap (Next Qtr., %) 52.3 Dividend yield (%) 0.52


Rating OUTPERFORM* Price (27 Mar 14, US$) 73.30 Target price (US$) 82.00¹ 52-week price range 77.67 - 55.80 Market cap. (US$ m) 34,888.02 Enterprise value (US$ m) 42,857.05




Research Analysts

Julian Mitchell

212 325 6668

[email protected]

Charles Clarke

212 538 7095

[email protected]

Jonathan Shaffer

212 325 1259

[email protected]

03 April 2014




Emerson (EMR.N)

High exposure

■ Company description: EMR is an industrial conglomerate with leading

positions in process automation, electrical equipment and residential

products.

■ Investment case: EMR has high exposure to a potential resurgence of US

downstream petrochemical spending via its leading process automation

franchise, as well as to an improvement in non-resi construction via its #1

position in scroll compressors for HVAC. Returns are consistently above the

sector average, and the valuation multiple has de-rated in recent years.

■ Exposure to energy efficiency: EMR has leading positions in electric

motors and drives, alternators for distributed power gen equipment, scroll

compressors for HVAC equipment, and UPS and precision cooling for

datacenters. Collectively these account for 40% of sales.

■ Valuation: EMR trades at c15x 2015E P/E.


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Year 09/13A 09/14E 09/15E 09/16E EPS (CS adj.) (US$) 3.55 3.80 4.23 4.68 Prev. EPS (US$) — — — — P/E (x) 18.6 17.4 15.6 14.1 P/E rel. (%) 108.8 110.2 109.9 110.2 Revenue (US$ m) 24,669.0 24,561.7 25,769.8 27,180.7 EBITDA (US$ m) 5,123.0 5,217.5 5,590.5 5,949.7 OCFPS (US$) 4.96 4.33 5.28 5.72 P/OCF (x) 13.0 15.3 12.5 11.6 EV/EBITDA (current) 9.2 9.1 8.5 8.0 Net debt (US$ m) 2,367 2,104 1,190 95 ROIC (%) 25.08 24.10 25.67 27.39







Research Analysts

Julian Mitchell

212 325 6668

[email protected]

Charles Clarke

212 538 7095

[email protected]

Jonathan Shaffer

212 325 1259

[email protected]

03 April 2014



Clean Tech

EnerNOC (ENOC)

High exposure

■ Company description: EnerNOC is a US-based energy intelligence

software provider and offers applications including demand response, which

enables commercial & industrial customers to lower power consumption

during peak times of the year so utilities can avoid building new power plants

to meet peak demand needs. The company has a strong presence in

wholesale capacity markets in the US and Australia and is expanding into

Germany, Iceland and the UK.

■ Investment case: EnerNOC has successfully become the leading third-

party demand response provider and is in the early stages of

commercialising its broader suite of energy management applications. While

we are strong believers in the EnerNOC story and management's strong

track record with execution and strategic positioning, and also agree the

stock remains undervalued on nearly any normal cash flow metric, we

believe a discounted multiple may be appropriate given continued regulatory

uncertainty in the PJM market (45% revenues) and limited visibility in

monetising energy efficiency software.

■ Exposure to energy efficiency: EnerNOC's energy intelligence software

suite monitors energy consumption in a building, offers analytical insights

into energy usage and provides actionable information to improve energy

efficiency. We estimate approximately 90% of revenue comes from demand

response programmes with utilities and grid operators, ~8% comes from

energy efficiency services, and 2% from energy efficiency software sales.

■ Valuation: We have a Neutral rating on EnerNOC. Our $23 target price is

based on 7x our 2014 adjusted EBITDA estimate of $74 million.


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Apr-13 Jul-13 Oct-13 Jan-14

Daily Apr 01, 2013 - Mar 27, 2014, 4/01/13 = US$16.93



Quarterly EPS Q1 Q2 Q3 Q4 2013A -1.12 -1.23 3.70 -0.71 2014E -1.10 -0.91 3.36 -1.01 2015E -1.24 -1.17 4.28 -1.06


Year 12/13A 12/14E 12/15E 12/16E EPS (CS adj.) (US$) 0.79 0.48 0.94 1.35 Prev. EPS (US$) — — — — P/E (x) 25.9 42.8 21.7 15.2 P/E rel. (%) 150.9 270.2 152.1 118.2 Revenue (US$ m) 383.5 442.4 506.9 571.1 EBITDA (US$ m) 55.6 57.2 77.3 92.4 OCFPS (US$) 2.71 2.62 3.16 3.79 P/OCF (x) 6.3 7.8 6.5 5.4 EV/EBITDA (current) 8.3 8.0 6.0 5.0 Net debt (US$ m) -149 -171 -240 -330 ROIC (%) 20.58 15.26 40.99 115.59

Number of shares (m) 29.84 IC (current, US$ m) 120.31 BV/share (Next Qtr., US$) 8.7 EV/IC (x) 4.5 Net debt (Next Qtr., US$ m) -138.9 Dividend (current, US$) — Net debt/tot cap (Next Qtr., %) -57.2 Dividend yield (%) —


Rating NEUTRAL* [V] Price (27 Mar 14, US$) 20.42 Target price (US$) 23.00¹ 52-week price range 22.90 - 11.84 Market cap. (US$ m) 609.41 Enterprise value (US$ m) 438.20




[V] = Stock considered volatile (see Disclosure Appendix).

Research Analysts

Patrick Jobin

212 325 0843

[email protected]

Maheep Mandloi

212 325 2345

[email protected]

03 April 2014


Asia Pacific / Taiwan

Electronic Components & Connectors

Epistar Corporation (2448.TW / 2448 TT)

High exposure

■ Company description: Epistar is one of the leading LED chip

manufacturers in the world. It has top 3 capacity globally in both GaN LED

and GaP LED. In 2013, Epistar has ~30% of its total revenues coming from

the general lighting application, 30-35% from large-size TFT backlighting, 5-

10% from small/medium size TFT application, and ~30% in four-element

red-light LED chips (GaP).

■ Investment case: For the general lighting market, we expect to see 35-40%

revenue CAGR in 2013-15 with the penetration rate rising to 37% in 2015

from 21% in 2013. For the backlighting market, though the market is

expected to be flat to slightly down in 2014, Epistar should outgrow the

market as the thinner direct-type LED TV models will require better LED

chips from suppliers like Epistar. We expect Epistar to deliver 18% YoY

growth on the top line and the gross margin to expand to 18.1% in 2014

(from 13.7% in 2013), on continuous cost reductions, better utilisation and a

more stable pricing environment.

■ Exposure to energy efficiency: Almost 100% of Epistar’s revenues are

associated with the concept of energy efficiency. On top of the well-known

general lighting application, the adoption of LED in the backlighting

application is also to replace the less efficient CCFL as the light source of

the TFT panels. For the four-element products, applications include RGB

displays, signage and auto, all of them aimed at saving energy.

■ Valuation: Our target price of NT$87 is based on 1.7x 12-month forward P/B.

Historically, Epistar shares have been trading at 0.9-2.2x P/B. Even in the

industry down cycle (Epistar recorded minus 6% OPM in 2012), shares were

still trading between 0.8-1.4. Therefore, with the operating margin expected

to improve to positive high-single digits in 2014, we believe that it deserves

to be trading at the upper half of the historical range.


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TAIWAN SE WEIGHTED INDEX which closed at 8873.15 on

01/04/14

On 01/04/14 the spot exchange rate was NT$30.41/US$1

Performance Over 1M 3M 12M Absolute (%) 3.2 28.0 35.6 — Relative (%) 3.4 24.9 27.3 —


Year 12/12A 12/13E 12/14E 12/15E Revenue (NT$ mn) 19,931.4 22,241.4 27,064.1 30,595.8 EBITDA (NT$ mn) 3,286.5 4,834.4 6,432.5 7,195.0 EBIT (NT$ mn) -1,203.4 437.8 2,087.0 2,913.5 Net profit (NT$ mn) -1,117.0 74.5 1,362.9 3,077.6 EPS (CS adj.) (NT$) -1.28 0.08 1.46 3.30 Change from previous EPS (%) n.a. 0 0 0 Consensus EPS (NT$) n.a. 0.04 1.92 3.43 EPS growth (%) n.a. n.a. 1,729.0 125.8 P/E (x) -56.7 908.2 49.7 22.0 Dividend yield (%) 1.5 0.7 0.6 1.4 EV/EBITDA (x) 20.7 14.4 10.7 9.4 P/B (x) 1.3 1.4 1.4 1.3 ROE (%) -2.3 0.2 2.8 6.2 Net debt/equity (%) 0.4 3.2 2.4 net cash


Rating OUTPERFORM Price (28 Mar 14, NT$) 72.50 Target price (NT$) 87.00¹ Upside/downside (%) 20.0 Mkt cap (NT$ mn) 67,885 (US$ 2,227) Enterprise value (NT$ mn) 69,426 Number of shares (mn) 936.34 Free float (%) 85.0 52-week price range 78.3 - 44.0




Research Analysts

Derrick Yang

886 2 2715 6367

[email protected]

Jerry Su

886 2 2715 6361

[email protected]

03 April 2014


Europe / France

Multi Utilities

GDF Suez (GSZ.PA) EUROPEAN FOCUS LIST STOCK

High exposure

■ Company description: GDF Suez is a global utility conglomerate operating

c.115GW of power generation capacity and turning over c.1200TWh of

gas/annum. The group is present in over 65 countries through five divisions:

Energy Europe; Energy International (both of those produce and sell power

and sell gas); E&P and LNG (production and trading); Infrastructures (gas

networks, etc) and Energy Services.

■ Investment case: GDF Suez’s strategy is to create value out of two opposite

trends globally. In Europe, where demand is declining structurally GDF Suez is

offsetting falling revenues and margins by restructuring historical assets and

growing services revenues and margins, thanks to the growing demand for

energy efficiency. In Emerging Markets, where electrification needs are great

and the use of gas is growing, GDF Suez is investing to tap into these trends.

The group targets c.5% annual growth in its group operating income and

c.€6bn/annum of net capex.

■ Exposure to energy efficiency: The Energy service division fields a

workforce of c.80,000 staff and delivers c.€15bn of turnover in over 30

countries. Cofely provides services in energy management, O&M and

engineering. Energy efficiency is one of the growth drivers in the Services

division. We estimate the share of energy efficiency at up to c.50% of the

c.€14.7bn divisional revenue.

■ Valuation: We rate GDF Suez Outperform as both the restructuring effort and

the profitable investment pipeline should help to grow earnings. We value the

shares at €20.5 based on a PE and DDM approach.


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CAC 40 INDEX which closed at 4401.29 on 27/03/14


Eu .73/US$1

Performance Over 1M 3M 12M Absolute (%) 12.2 15.7 31.2 Relative (%) 10.2 12.9 19.7


Year 12/12A 12/13E 12/14E 12/15E Revenue (Eu m) 97,038.0 90,469.6 93,790.7 96,547.9 EBITDA (Eu m) 17,026.00 13,383.32 12,559.32 12,516.66 Adjusted Net Income (Eu m) 3,831.00 3,478.28 3,173.19 3,340.02 CS adj. EPS (Eu) 1.59 1.44 1.32 1.38 Prev. EPS (Eu) — — — — ROIC (%) 6.14 5.56 4.61 4.30 P/E (adj., x) 12.41 13.67 14.98 14.23 P/E rel. (%) 82.9 101.5 124.8 130.0 EV/EBITDA 5.4 5.8 6.2 6.3

Dividend (12/13E, Eu) 1.50 IC (12/13E, Eu m) 92,112.72 Dividend yield (%) 7.6 EV/IC 0.85 Net debt (12/13E, Eu m) 30,683.5 Current WACC 6.06 Net debt/equity (12/13E, %) 49.9 Free float (%) 50.46 BV/share (12/13E, Eu) 21.4 Number of shares (m) 2,412.82


Rating OUTPERFORM*

Price (27 Mar 14, Eu) 19.70

Target price (Eu) 20.50¹

Market cap. (Eu m) 47,544.70

Enterprise value (Eu m) 78,228.2




Research Analysts

Michel Debs

44 20 7883 9952

[email protected]

Vincent Gilles

44 20 7888 1926

[email protected]

03 April 2014



Engineering & Construction

Geberit (GEBN.VX)

Medium exposure

■ Company description: Geberit is a leading provider of sanitary technology.

The company operates through two main product categories: Sanitary

systems (57% of group sales) and Piping systems (43%). Germany,

Switzerland and Italy are the key markets contributing c50% to total sales.

Construction is the main end market with exposure to both residential and

commercial sectors.

■ Investment Case: 1) Scope for organic growth acceleration driven by on-

going conversion of the sanitary product market to concealed cisterns and

improving construction markets in Europe. Asia and US are still untapped

markets which offer growth potential. 2) Scope for some margin

improvement in a better growth scenario. The company has enjoyed good

pricing power with annual price increases and ad hoc ones for raw materials

price spikes. 3) Cash generation. Geberit has a best in class cash

conversion profile, and we see scope for excess cash return to shareholders

over the next 12 months.

■ Exposure to Energy Efficiency: Geberit products are widely used in the

sanitary systems of residential and commercial buildings, which offers

energy-saving potential driven by technological innovation. Geberit's product

range (DeoFresh) for odour extraction is an energy-saving solution as

compared to ventilation through a window. The new AquaClean shower toilet

line introduced in April 2013 consumes 33% less energy in comparison to

older models.

■ Valuation: The stock is trading on a 2014E EV/EBITA of 18.6x and a 2015E

EV/EBITA of 17.0x, a premium of >50% to the Pan European sector which

we view as relatively expensive.


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Eu .73/US$1



Year 12/12A 12/13E 12/14E 12/15E Revenue (SFr m) 2,187.8 2,290.9 2,429.9 2,589.1 EBITDA (SFr m) 542.40 592.43 637.74 680.47 Adjusted Net Income (SFr m) 392.30 438.41 474.33 511.30 CS adj. EPS (SFr) 10.28 11.64 12.60 13.58 Prev. EPS (SFr) — — — — ROIC (%) 36.74 39.83 41.73 43.90 P/E (adj., x) 28.16 24.87 22.98 21.32 P/E rel. (%) 169.5 158.9 162.4 161.0 EV/EBITDA 19.2 17.4 15.9 14.7

Dividend (12/13E, SFr) 7.47 IC (12/13E, SFr m) 1,104.28 Dividend yield (%) 2.6 EV/IC 9.3 Net debt (12/13E, SFr m) -484.0 Current WACC 7.00 Net debt/equity (12/13E, %) -30.5 Free float (%) 87.00 BV/share (12/13E, SFr) 42.2 Number of shares (m) 37.40


Rating NEUTRAL* Price (27 Mar 14, SFr) 288.10 Target price (SFr) 240.00¹ Market cap. (SFr m) 10,774.84 Enterprise value (SFr m) 10,290.8




Research Analysts

Andre Kukhnin CFA

44 20 7888 0350

[email protected]

Patrick Laager

41 44 334 60 76

[email protected]

03 April 2014



Electrical Equipment (Electrical Equipment (Japan))

GS Yuasa (6674.T / 6674 JP)

High exposure

■ Company description: GS Yuasa is a global automotive battery and

industrial battery / power supply manufacturer. Key revenue generators are:

Overseas (automobile and motorcycle batteries) 47%, 24% from Domestic

industrial battery and power supplies, 17% from Domestic auto batteries

(lead-acid) and 9% from automotive LiBs.

■ Investment case: On 10 February, we upgraded the stock to Neutral, as we

were impressed with strong results at its subsidiary producing batteries for

hybrid vehicles. Our concerns remain though as to whether the automotive

LiB product can contribute to medium-term earnings.

■ Exposure to energy efficiency: GS Yuasa is a maker of LiBs and lead-acid

batteries, both of which are used for power storage/back-up and contribute

to energy efficiencies.

■ Valuation: Our ¥520 TP is based on an FY3/15E EPS of ¥38.5 (previously

¥37.8) and a P/E of 13.4x (13.3x). Our multiple is the average P/E for

periods since 2005 when the P/E has been below the average forward

consensus P/E (18.5x).


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Year 3/13A 3/14E 3/15E 3/16E Revenue (¥ bn) 274.5 338.0 365.0 389.0 Operating profit (¥ bn) 9.8 17.8 21.7 24.6 Recurring profit (¥ bn) 12.3 19.8 23.7 26.6 Net income (¥ bn) 5.8 12.3 15.9 17.9 EPS (¥) 14.0 29.8 38.5 43.4 IBES Consensus EPS (¥) n.a. 27.0 39.2 45.3 EPS growth (%) -50.8 113.3 29.3 12.6 P/E (x) 27.3 18.3 14.1 12.5 Dividend yield (%) 1.6 1.5 1.7 1.8 EV/EBITDA(x) 9.3 9.4 7.8 6.9 P/B (x) 1.3 1.6 1.5 1.3 ROE(%) 4.8 9.2 10.8 11.2 Net debt/equity (%) 45.0 42.6 34.7 25.0


Rating NEUTRAL* Price (28 Mar 14, ¥) 544 Target price (¥) 520¹ Chg to TP (%) -4.4 Market cap. (¥ bn) 224.57 (US$ 2.20) Enterprise value (¥ bn) 284.59 Number of shares (mn) 412.81 Free float (%) 75.0 52-week price range 642 - 372




Research Analysts

Jun Yamaguchi

81 3 4550 9789

[email protected]

03 April 2014


Europe / United Kingdom

Industrial Machinery

IMI Plc (IMI.L)

High exposure

■ Company description: IMI designs, manufactures and services bespoke

solutions that control the movement of fluids. The company’s technologies,

built around valves and actuators, enable vital processes to operate safely

and cleanly. The group's business is split across three divisions – Severe

Service (actuation and control solutions for process / power plants), Fluid

Power (motion and fluid control applications) and Indoor Climate equipment

(energy-efficient valve solutions and related services for water-based

heating and cooling systems). Primary end-markets are Process Industries

(38%), Capital equipment (33%), Environmental Control (16%), Truck (9%)

and Auto (4%). c.37% of the group's sales is from the aftermarket.

■ Investment case: (i) IMI is now a more focused process business (Severe

Service / Fluid Power = c80% of group revenue) able to deliver better

through-cycle growth; (ii) Group margins under the new structure (ex-

Merchandising / Beverage) to potentially exceed 20% this cycle and within

top quartile of the sector; (iii) Mark Selway to improve asset turns of the

business, which alongside margin improvement to drive ROIC higher; (iv)

Continued balance sheet optionality on the back of strong cash generation –

fund acquisitions or further cash returns to shareholders; (v) Potential M&A

target with large cap European and US players looking to increase their

exposure to Process.

■ Exposure to energy efficiency: IMI is the market leader with a current

market share of more than 30% in Hydronic solutions (18% of group

revenue) critical to energy consumption of the HVAC system. IMI

Thermostatic radiator valves (7% of group revenue) provide energy savings

of 28% compared to manual valves.

■ Valuation: We rate IMI Outperform. On our forecasts, IMI trades on a 12MF

EV/EBITA and P/E multiples of 12.0x and 16.7x respectively vs. its peer

group average of 12.5x / 17.4x. Our price target is 1,640p.


786

986

1186

1386




FTSE ALL SHARE INDEX which closed at 3570.9 on 27/03/14

On 27/03/14 the spot exchange rate was £.83/Eu 1. -

Eu .73/US$1

Performance Over 1M 3M 12M Absolute (%) -4.0 -4.4 13.0 Relative (%) -4.2 -4.9 -4.9


Year 12/12A 12/13E 12/14E 12/15E Revenue (£ m) 2,190.0 1,757.0 1,777.0 1,868.5 EBITDA (£ m) 414.60 364.50 376.50 401.00 Pre-tax Profit Adjusted (£ m) 372.30 310.00 331.00 357.00 CS adj. EPS (p) 83.20 70.72 86.65 95.05 Prev. EPS (p) — — — — ROIC (%) 30.89 24.98 26.33 28.63 P/E (adj., x) 17.43 20.50 16.73 15.26 P/E rel. (%) 121.1 153.4 136.4 135.2 EV/EBITDA 9.8 11.5 11.0 10.1

Dividend (12/13E, p) 35.75 IC (12/13E, £ m) 903.91 Dividend yield (%) 2.5 EV/IC 4.6 Net debt (12/13E, £ m) 245.2 Current WACC 8.63 Net debt/equity (12/13E, %) 37.2 Free float (%) 93.81 BV/share (12/13E, £) 2.0 Number of shares (m) 271.39


Rating OUTPERFORM* Price (27 Mar 14, p) 1,450.00 Target price (p) 1,640.00¹ Market cap. (£ m) 3,935.09 Enterprise value (£ m) 4,180.3




Research Analysts

Jonathan Hurn, CFA

44 20 7883 4532

[email protected]

Max Yates

44 20 7883 8501

[email protected]

Tiantian Li

44 20 7883 1552

[email protected]

03 April 2014




Ingersoll-Rand Plc (IR.N)

High exposure

■ Company description: IR has leading global positions in HVAC (brands

include Trane and Thermoking) and industrial (compressor) markets.

■ Investment case: IR is set to deliver above-average EPS growth driven by

100bps of annual operating margin expansion through cost-cutting and high

exposure to depressed end-markets (non-resi construction). Shareholder

capital returns are above-average due to consistent share buy-backs.

Portfolio change is above-average, with the spin-off of ALLE last year, and

possible future break-ups could occur.

■ Exposure to energy efficiency: IR has a strong position in non-resi, resi,

transport and refrigeration HVAC through its Trane, Thermoking and

Hussmann brands (latter is a JV). HVAC currently represent 75% of sales.

■ Valuation: We have an Outperform rating on the stock and a USD 69 TP. IR

trades at 14.0x 2015E P/E.


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61


Daily Apr 01, 2013 - Mar 27, 2014, 4/01/13 = US$43.42












Research Analysts

Julian Mitchell

212 325 6668

[email protected]

Charles Clarke

212 538 7095

[email protected]

Jonathan Shaffer

212 325 1259

[email protected]

03 April 2014



Real Estate Management & Development (Real Estate (AU))

Investa Office Fund (IOF.AX / IOF AU)

High exposure ■ Company description: The fund is the owner of investment grade office

buildings and receives rental income from a tenant register comprising

predominantly government and blue chip tenants. IOF has total assets under

management of AU$2.8 billion, with investments located in core CBD

markets throughout Australia and select offshore markets in Europe.

■ Investment case: IOF has the largest exposure to secondary grade (21%)

of the major Australian office players. However, further asset recycling and

the completion of developments such as 567 Collins St, Melbourne

(premium) should see portfolio quality improve over time. IOF delivered a

strong result, delivering FFO of $84.5mn, up 8% on pcp (8.75¢). DPS was

9.25¢, up 5.7%, reflecting a payout ratio of 67%. Solid AUS NPI growth of

4.7% reflected (1) full period income from prior period acquisitions including

positive rent reversions 66 St Georges Terrace, (2) Comp NOI growth of 3%

(above AREIT average of 2.8%), and (3) stronger tenant retention of 82% up

from 54% at June, which saw IOF achieve record leasing during the period

(118k sq m leased or under H.O.A.). Despite this higher leasing velocity,

average. incentives were low at only 14%, below market (~30%) and below

peers DXS (17% average) and MGR (19% average).

■ Exposure to energy efficiency: Investa is internationally recognised in the

development and implementation of real estate sustainability initiatives, and

for more than 10 years has worked to establish best practice sustainability

procedures in the management of its Funds and properties. With a focus on

continual improvement, Investa has been able to demonstrate sustained

improvements in building quality and subsequent investment returns of the

properties it acquires and manages, with major improvements generally

being made in the first three years under management. IOF ranked in the

top quartile in 2013 ASX 200 Climate Disclosure Leadership Index (CDLI)

and achieved global recognition as a GRESB Green Star 2013.

■ Valuation: We have a Neutral rating and A$3.39 TP on Investa Office Fund.


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Absolute (%) 0.9 3.5 4.9

Relative (%) 0.3 2.7 -13.5


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

Revenue (A$mn) 201.2 209.5 221.3 234.4

EBITDA (A$mn) 187.8 195.7 207.1 219.8

EBIT (A$mn) 190.6 197.1 207.1 219.8

Net income (A$mn) 153.5 162.2 165.0 171.3

EPS (CS adj.) (Ac) 25.00 26.41 26.87 27.90

EPS growth (%) 12.2 5.7 1.7 3.8

P/E (x) 12.8 12.2 11.9 11.5

Dividend (Ac) 17.75 19.02 19.35 20.09

Dividend yield (%) 5.5 5.9 6.0 6.3

Net debt/equity (%) 31.1 41.3 45.6 46.5


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

Rating NEUTRAL*

Price (28 Mar 14, A$) 3.21



Yr avg. mthly trading (A$mn) 132.74

Last month's trading (A$mn) 142.31

Projected return:







Research Analysts

John Richmond

61 2 8205 4580

[email protected]

Stephen Rich

61 2 8205 4617

[email protected]

Mikhail Mohl

61 2 8205 4413

[email protected]

03 April 2014



Clean Tech

Itron (ITRI)

High exposure

■ Company description: Itron is a provider of electricity, gas, and water

meters. The company offers traditional meters, advanced automated meters

with one-way communication and smart meters with two-way communication

capabilities.

■ Investment case: Itron's core business has benefitted from the first wave of

advanced and smart meter adoption by utilities in the US and other major

developed countries. However, limited growth in core markets and

commoditisation forces on the meter manufacturing part of the value chain

has pressured margins and returns. We are eager for the Itron 2.0 to emerge

– hopefully with more licensing of products to non-core countries, outsourced

manufacturing (Itron is the only firm in the space unwilling to embrace this

model) and exiting countries that are unlikely to contribute to profits.

■ Exposure to energy efficiency: All of Itron's revenue is related to meters

(both regular metrology and advanced metering system). The meters form

an important part of encouraging building energy efficiency as they enable

data collection and can encourage consumers to conserve electricity, gas

and water given awareness of consumption levels and enabling price signals.

■ Valuation: Our $38 target price for ITRI is based on 23x 2014E earnings.


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38

43

48

53


Daily Apr 01, 2013 - Mar 27, 2014, 4/01/13 = US$45.37



Quarterly EPS Q1 Q2 Q3 Q4 2013A 0.31 0.58 0.65 0.36 2014E 0.33 0.37 0.42 0.55 2015E 0.45 0.55 0.58 0.76


Year 12/13A 12/14E 12/15E 12/16E EPS (CS adj.) (US$) 1.90 1.66 2.34 2.85 Prev. EPS (US$) — — — — P/E (x) 18.1 20.6 14.7 12.0 P/E rel. (%) 105.4 130.4 103.1 93.8 Revenue (US$ m) 1,948.7 1,913.1 2,025.7 2,136.5 EBITDA (US$ m) -36.3 166.5 203.6 233.6 OCFPS (US$) 2.67 3.75 4.09 4.57 P/OCF (x) 15.5 9.2 8.4 7.5 EV/EBITDA (current) -44.2 9.6 7.9 6.9 Net debt (US$ m) 254 210 133 15 ROIC (%) -11.70 4.96 7.34 9.25

Number of shares (m) 39.32 IC (current, US$ m) 1,126.92 BV/share (Next Qtr., US$) 22.4 EV/IC (x) 1.5 Net debt (Next Qtr., US$ m) 209.0 Dividend (current, US$) — Net debt/tot cap (Next Qtr., %) 23.9 Dividend yield (%) —


Rating NEUTRAL* Price (27 Mar 14, US$) 34.34 Target price (US$) 38.00¹ 52-week price range 47.00 - 33.64 Market cap. (US$ m) 1,350.39 Enterprise value (US$ m) 1,560.12




Research Analysts

Patrick Jobin

212 325 0843

[email protected]

Maheep Mandloi

212 325 2345

[email protected]

03 April 2014


Europe / Finland


Kone Corporation (KNEBV.HE)

Medium exposure

■ Company description: Kone is one of the global leaders in the elevator and

escalator industry providing industry-leading elevators, escalators and

automatic building doors as well as solutions for modernisation and

maintenance. The group has about 250,000 customers spread across 50

countries.

■ Investment case: 1) Strongest positioning in China to capture the

maintenance market opportunity with 400 selling locations, providing

Kone with a significant advantage versus peers, especially given the new

regulation coming into force in 2014. 2) Scope for margin improvement

driven by efficiency improvements, rising density and developing China's

maintenance market. 3) Best-in-class returns and cash conversion

profile.

■ Exposure to Energy Efficiency: Kone manufactures elevators and

escalators, which contribute to energy consumption of the buildings. Design

innovation and application of smart technology can reduce energy

consumption of the building. Since 2008, Kone has reached a 70% reduction

in its energy consumptions for volume elevators in Europe, 60-75% in Asia

and 40% in the US. The company has recently launched UltraRopeTM,

which

consumes 15% lesser energy for an elevator ride of 500m height, which can

notch up to 45% for 800m.

■ Valuation: We have a Neutral rating on Kone and a €33.50 TP. With the

stock trading on EV/EBITA multiples of 13.3x in 2014E and 11.9x in 2015E,

at a c5% premium to the Pan European sector, we believe the market is

already discounting the above-mentioned growth and margin outlook.


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35




HEX25 INDEX. which closed at 2843.44 on 27/03/14


Eu .73/US$1

Performance Over 1M 3M 12M Absolute (%) 1.0 -10.1 -2.7 Relative (%) 2.3 -10.9 -10.8


Year 12/12A 12/13E 12/14E 12/15E Revenue (Eu m) 6,276.9 6,932.2 7,359.0 7,824.4 EBITDA (Eu m) 907.40 1,031.70 1,197.45 1,308.25 Adjusted Net Income (Eu m) 681.30 732.90 832.95 921.54 CS adj. EPS (Eu) 1.32 1.42 1.62 1.79 Prev. EPS (Eu) — — — — ROIC (%) 55.31 72.72 65.81 68.21 P/E (adj., x) 22.53 20.98 18.46 16.68 P/E rel. (%) 109.0 132.0 131.1 128.3 EV/EBITDA 15.0 13.2 11.4 10.3

Dividend (12/13E, Eu) 0.50 IC (12/13E, Eu m) 973.10 Dividend yield (%) 1.7 EV/IC 14.0 Net debt (12/13E, Eu m) -751.3 Current WACC 9.00 Net debt/equity (12/13E, %) -43.6 Free float (%) 75.00 BV/share (12/13E, Eu) 3.3 Number of shares (m) 482.53


Rating NEUTRAL* Price (27 Mar 14, Eu) 29.85 Target price (Eu) 33.50¹ Market cap. (Eu m) 14,403.46 Enterprise value (Eu m) 13,652.2




Research Analysts

Andre Kukhnin CFA

44 20 7888 0350

[email protected]

Max Yates

44 20 7883 8501

[email protected]

Tiantian Li

44 20 7883 1552

[email protected]

03 April 2014


Europe / France


Legrand SA (LEGD.PA)

High exposure

■ Company description: Legrand is a global specialist in electrical

installations and digital infrastructures tailored to commercial, industrial and

residential markets. The company operates in more than 70 countries with

38% of group's sales as at 2013 derived from new economies. In mature

countries, c60% of sales are in maintenance and renovation.

■ Investment case: 1) Strong pricing power (on average, increased prices

by 2% per year between 1992 and 2012); 2) Sector-leading cash

conversion (average cash conversion of 126% between 2004-2012). 3)

Limited returns volatility. 4) Low competitive risk due to high barriers to

entry from its extensive distribution network.

■ Exposure to energy efficiency: Legrand's energy efficiency portfolio

ranges from sensors to full home automation systems, lighting management

and energy management solutions for commercial building as well as

transformers, network analysers and other measuring devices for non-

residential buildings. The sale of energy efficiency solutions has increased

by 64% between 2002 and 2009. The company is also involved in promoting

energy efficiency through participation in conferences, trade shows and

adding specific eco-labels on its energy efficient products.

■ Valuation: On our 2015 estimates for EV/EBITA, Legrand is trading on a

c33% premium to the electricals average.


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Eu .73/US$1



Year 12/12A 12/13E 12/14E 12/15E Revenue (Eu m) 4,466.7 4,460.4 4,594.6 4,781.9 EBITDA (Eu m) 1,016.50 1,019.70 1,073.95 1,128.79 Adjusted Net Income (Eu m) 532.00 563.40 586.04 626.74 CS adj. EPS (Eu) 2.02 2.13 2.21 2.37 Prev. EPS (Eu) — — — — ROIC (%) 13.21 13.98 14.18 15.12 P/E (adj., x) 22.47 21.34 20.51 19.18 P/E rel. (%) 150.1 158.4 170.9 175.2 EV/EBITDA 13.1 12.9 12.1 11.2

Dividend (12/13E, Eu) 1.05 IC (12/13E, Eu m) 4,389.70 Dividend yield (%) 2.3 EV/IC 3.0 Net debt (12/13E, Eu m) 1,141.0 Current WACC 9.00 Net debt/equity (12/13E, %) 35.1 Free float (%) 85.00 BV/share (12/13E, Eu) 12.0 Number of shares (m) 265.59






Research Analysts

Simon Toennessen

44 20 7883 6893

[email protected]

Andre Kukhnin CFA

44 20 7888 0350

[email protected]

Max Yates

44 20 7883 8501

[email protected]

Jonathan Hurn, CFA

44 20 7883 4532

[email protected]

Tiantian Li

44 20 7883 1552

[email protected]

03 April 2014



Electronic Equipment & Instruments (Electric Components (Japan))

Nidec (6594.T / 6594 JP)

Medium exposure

■ Company description: Nidec is the world’s leading motor manufacturer,

and is especially competitive in brushless DC motors, known for their low

energy consumption. It is believed that motors consume more than 50% of

the power used worldwide, and Nidec is leading the push to save energy by

developing more efficient motors.

■ Investment case: Earnings from HDD spindle motors are increasingly

stable, while in automotive, home appliance, industrial equipment, and

commercial applications, there is a growing shift to brushless DC motors

from AC motors and brushed DC motors, with Nidec the company best

placed to benefit. We expect profit growth of around 20% per annum to

continue in FY3/15 onward.

■ Exposure to energy efficiency: Nidec is targeting FY3/16 sales of ¥1.2tn,

including ¥400bn for the small precision motor business, ¥300bn for the

automotive motor business, and ¥300bn for the home appliance, commercial

and industrial motors business. In small precision motors, HDD spindle

motors are the mainstay, but Nidec is also looking to grow sales of small

motors for household use.

■ Valuation: Based on our FY3/15 estimates, we derive a TP of ¥6,700 (23x

P/E). We look for the share price to rise over time, in tandem with sustained

growth in earnings. Thus, although the P/E on our FY3/15 estimates is

higher than the sector average of 15–16x, we believe this premium is

justified by the strong likelihood of earnings expansion.


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Performance Over 1M 3M 12M Absolute (%) -1.4 18.0 115.7 Relative (%) 1.1 19.3 110.4


Year 3/13A 3/14E 3/15E 3/16E Revenue (¥ bn) 709.3 876.0 987.2 1,048.3 Operating profit (¥ bn) 17.6 86.3 114.1 133.6 Pre-tax profit (¥ bn) 13.4 85.6 113.7 133.2 Net income (¥ bn) 8.0 61.7 83.5 97.7 EPS (¥) 27.3 211.0 285.5 334.1 IBES Consensus EPS (¥) n.a. 212.6 277.8 327.1 EPS growth (%) -80.4 671.8 35.3 17.0 P/E (x) 102.4 28.8 21.3 18.2 Dividend yield (%) 1.5 0.7 0.7 0.7 EV/EBITDA(x) 17.8 14.5 11.7 10.0 P/B (x) 2.0 4.0 3.6 3.1 ROE(%) 2.0 14.4 17.9 18.3 Net debt/equity (%) 28.7 23.6 13.4 net cash


Rating OUTPERFORM* Price (28 Mar 14, ¥) 6,072 Target price (¥) 6,700¹ Chg to TP (%) 10.3 Market cap. (¥ bn) 1,718.25 (US$ 16.72) Enterprise value (¥ bn) 1,822.26 Number of shares (mn) 282.98 Free float (%) 30.0 52-week price range 6,370 - 2,635




Research Analysts

Akinori Kanemoto

81 3 4550 7363

[email protected]

Yohei Ohya

81 3 4550 7366

[email protected]

03 April 2014



Glass & Ceramics (Glass & Ceramics (Japan))

NSG Group (5202.T / 5202 JP)

High exposure

■ Company description: NSG is a global flat glass manufacturing company,

with 40% of sales from architectural glass and 50% from automotive glass.

With 40% sales exposure to Europe, which has been experiencing a severe

construction market downturn, NSG is in the process of restructuring its

global operations, and is on track to deliver JPY33bn in cumulative cost

benefits through FY3/15.

■ Investment case: We continue with our Outperform rating as the larger

picture is unchanged, with 3/15 likely to see a sharp rebound in operating

profit and a turn to bottom-line profitability driven by the restructuring

undertaken so far.

■ Exposure to energy efficiency: NSG has sales exposure to insulated

windows and glass for buildings and housing. The company is pushing to

shift from pure commodity glass sales to more value-added glass products

with such properties.

■ Valuation: We base our ¥170 TP on our FY3/15 BPS forecast of ¥204 and a

P/B of 0.83x the shares’ average 12-month forward multiple since 2005.


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Year 3/13A 3/14E 3/15E 3/16E Revenue (¥ bn) 521.3 602.0 621.0 636.0 Operating profit (¥ bn) -17.3 2.1 30.4 34.0 Recurring profit (¥ bn) -29.1 -16.4 12.0 16.7 Net income (¥ bn) -32.8 -20.4 8.0 11.5 EPS (¥) -36.4 -22.6 8.9 12.7 IBES Consensus EPS (¥) n.a. -22.8 4.3 7.4 EPS growth (%) n.a. n.a. n.a. 43.8 P/E (x) -2.9 -6.5 16.5 11.5 Dividend yield (%) — — — — EV/EBITDA(x) 23.7 12.3 7.1 6.5 P/B (x) 0.66 0.75 0.72 0.68 ROE(%) -21.4 -12.7 4.5 6.1 Net debt/equity (%) 248.8 217.9 198.8 177.3


Rating OUTPERFORM* Price (28 Mar 14, ¥) 146 Target price (¥) 170¹ Chg to TP (%) 16.4 Market cap. (¥ bn) 131.74 (US$ 1.28) Enterprise value (¥ bn) 514.56 Number of shares (mn) 902.36 Free float (%) 90.0 52-week price range 154 - 90





Research Analysts

Jun Yamaguchi

81 3 4550 9789

[email protected]

03 April 2014


Europe / Netherlands

Multi-Industry-3

Philips (PHG.AS)

Medium exposure

■ Company description: Philips operates in three major business areas:

Healthcare, Consumer Lifestyle and Lighting. It is a global market leader in

several Healthcare product areas such as cardiac care, acute care and

home healthcare as well as in energy efficient lighting solutions and new

lighting applications. It is present in over 100 countries with more c(36%) as

at 2013, sales from growth geographies.

■ Investment case: We believe in a progressive, albeit slower than initially

expected margin recovery potential in Philips in FY15/16, owing to a

combination of better volume growth (mainly Healthcare) and cost savings

potential. However, in the short term we believe that ongoing sluggish

Healthcare order and revenue growth, slowing growth in Consumer Lifestyle

and strong FX headwinds (also transactional) will weigh on profits

particularly in the H1.

■ Exposure to energy efficiency: Green products represented c51% of sales

in 2013 boosted by investments in green innovation (€ 509m in 2013 or 29%

of total R&D). In 2013, 13 new green products were introduced in the

healthcare business to support energy efficiency. According to Philips, its

new EPIQ ultrasound platform and patient care & clinical informatics

solutions reduce energy consumption by 23% and 30%, respectively, in

comparison to its predecessor models. Energy efficient lighting products

accounted for c70% of sector sales. The company also promotes energy

efficiency through its green logo on products.

■ Valuation: Philips is trading on 9.2x FY15E EV/EBITA, which represents a

3% discount to peers.


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28




AMSTERDAM EXCHANGE INDEX which closed at 404.45 on

27/03/14


Eu .73/US$1

Performance Over 1M 3M 12M Absolute (%) -0.7 -5.7 9.4 Relative (%) -0.9 -6.1 -8.5



Dividend (12/14E, Eu) 0.84 IC (12/14E, Eu m) 14,178.14 Dividend yield (%) 3.3 EV/IC 1.8 Net debt (12/14E, Eu m) 3,024.2 Current WACC — Net debt/equity (12/14E, %) 27.1 Free float (%) 100.00 BV/share (12/14E, Eu) 12.5 Number of shares (m) 909.08






Research Analysts

Simon Toennessen

44 20 7883 6893

[email protected]

Andre Kukhnin CFA

44 20 7888 0350

[email protected]

Max Yates

44 20 7883 8501

[email protected]

Tiantian Li

44 20 7883 1552

[email protected]

03 April 2014



Multi-Industry-3

Regal Beloit (RBC.N)

High exposure

■ Company description: RBC is one of the leading global manufacturers of

electric motors.

■ Investment case: RBC is a pure-play cheap stock with substantial balance

sheet optionality following an equity raise in 2012, and high exposure to

depressed end markets (non-resi construction, short-cycle industrial

demand). Management is also pushing through a cost savings programme to

grow margins by 300-400bps.

■ Exposure to energy efficiency: RBC supplies medium and high efficiency

electric motors into HVAC and industrial markets. Its motors collectively

account for 80% of sales.

■ Valuation: RBC trades at 14x 2015E P/E.


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Daily Apr 01, 2013 - Mar 27, 2014, 4/01/13 = US$80.08





Year 12/13A 12/14E 12/15E 12/16E EPS (CS adj.) (US$) 4.37 4.56 4.95 — P/E (x) 16.2 15.6 14.3 — P/E rel. (%) 94.8 98.4 100.7 — Revenue (US$ m) 3,095.7 3,220.2 3,354.0 — EBITDA (US$ m) 417.5 435.4 485.1 — OCFPS (US$) 9.20 9.59 10.69 — P/OCF (x) 8.0 7.4 6.6 — EV/EBITDA (current) 8.0 7.7 6.9 — Net debt (US$ m) 153 53 -92 — ROIC (%) 9.67 9.90 11.22 —

Number of shares (m) 45.11 IC (current, US$ m) 2,209.20 BV/share (Next Qtr., US$) 46.3 EV/IC (x) 1.5 Net debt (Next Qtr., US$ m) 131.7 Dividend (current, US$) 0.86 Net debt/tot cap (Next Qtr., %) 6.3 Dividend yield (%) 0.30






Research Analysts

Julian Mitchell

212 325 6668

[email protected]

Charles Clarke

212 538 7095

[email protected]

Jonathan Shaffer

212 325 1259

[email protected]

03 April 2014



Building Products (Housing (Japan))

Rinnai (5947.T / 5947 JP)

High exposure

■ Company description: Rinnai is Japan’s leading brand for water heaters

and kitchen appliances. Its main operating geographies are Japan, Australia,

China and the US. Japan generates 75% of operating profit for the company.

■ Investment case: Home builders’ monthly orders may deteriorate, but the

market’s view of Rinnai is likely to improve, in our opinion, as it earns much

of its profit from replacement demand. We expect the company to keep

launching products delivering higher value added to address replacement

demand, which accounts for 80% of sales.

■ Exposure to energy efficiency: As water heaters and kitchen appliances

use gas, they are more energy efficient than electric appliances. The energy

efficiency of Rinnai’s water heaters, which generate 50% of sales, keeps

improving, a testament to the company’s technological strength.

■ Valuation: We have an Outperform rating on Rinnai. Our TP is based on an

FY3/15E EV/EBITDA of c9x. Rinnai’s EV/EBITDA ranged between 6.5x and

9x over 2003 and 2013.


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Year 3/13A 3/14E 3/15E 3/16E Revenue (¥ bn) 251.8 275.2 290.7 307.5 Operating profit (¥ bn) 26.4 31.5 34.3 36.7 Recurring profit (¥ bn) 29.1 33.8 36.8 39.4 Net income (¥ bn) 19.4 22.2 24.3 26.1 EPS (¥) 394.9 424.4 464.6 499.0 IBES Consensus EPS (¥) n.a. 410.4 436.3 464.5 EPS growth (%) 15.3 7.5 9.5 7.4 P/E (x) 17.1 20.7 18.9 17.6 Dividend yield (%) 0.89 0.80 0.91 0.91 EV/EBITDA(x) 8.3 9.7 8.8 8.1 P/B (x) 1.9 2.2 2.0 1.8 ROE(%) 12.0 11.7 11.1 10.9 Net debt/equity (%) net cash net cash net cash net cash


Rating OUTPERFORM* Price (28 Mar 14, ¥) 8,770 Target price (¥) 8,600¹ Chg to TP (%) -1.9 Market cap. (¥ bn) 456.11 (US$ 4.44) Enterprise value (¥ bn) 387.41 Number of shares (mn) 52.01 Free float (%) 50.0 52-week price range 8,780 - 6,360




Research Analysts

Masahiro Mochizuki

81 3 4550 7389

[email protected]

Atsuro Takemura

81 3 4550 7372

[email protected]

03 April 2014




Schindler-Holding AG (SCHP.VX)

Medium exposure

■ Company description: Schindler is a leading manufacturer of elevators,

escalators and moving walkways. The company offer products to customers

in residential and non- residential construction sectors. The group has

operations in more than 100 countries with Europe accounting for 50% of

total group sales.

■ Investment case: 1) Catching up in China. There is scope for Schindler to

continue to grow faster than the market in China, as the company is catching

up to a 'fair market share' by fully penetrating Tier 2 cities and building

presence in Tier 3/4s. 2) Product Innovation is driving strong growth

prospects. There is scope for further market share gains with Schindler

3600 in China (low-end) and Schindler 5500 globally (high-end). We also

see potential in the innovative PORT technology for the high-end & high-rise

applications – a technology which Schindler has pioneered. 3) Continuing

strong cash generation and redeployment. We expect Schindler to

continue to return capital to shareholders in 2014 (>CHF500m in 2013) and

also see scope for acquisitions such as the buy-out of the Xiji stake.

■ Exposure to Energy Efficiency: Schindler manufactures elevators and

escalators, which contribute to the energy consumption of buildings. Design

innovation and application of smart technology can reduce energy

consumption further. Schindler's 3300 product line is found to be 42% more

energy efficient than the previous models. The company has also evolved its

escalator range bringing down consumption levels by 36%.

■ Valuation: Schindler is trading at a 2014E EV/EBITA of 12.7x and 2015E

EV/EBITA of 10.6x, broadly in line with the Mechanicals sector average and

at an average discount of 8% to Kone.


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Eu .73/US$1

Performance Over 1M 3M 12M Absolute (%) -1.5 -2.2 -7.5 Relative (%) 1.7 5.8 -21.9


Year 12/13A 12/14E 12/15E 12/16E Revenue (SFr m) 8,813.0 9,165.5 9,898.8 10,492.7 EBITDA (SFr m) 1,041.00 1,101.73 1,245.29 1,363.32 Adjusted Net Income (SFr m) 676.00 705.23 790.77 875.10 CS adj. EPS (SFr) 5.85 6.34 7.20 7.97 Prev. EPS (SFr) — — — — ROIC (%) 87.53 77.87 83.32 87.75 P/E (adj., x) 21.99 20.31 17.87 16.15 P/E rel. (%) 133.0 130.4 126.9 122.5 EV/EBITDA 12.6 12.0 10.2 9.0

Dividend (12/14E, SFr) 2.30 IC (12/14E, SFr m) 908.32 Dividend yield (%) 1.8 EV/IC 14.5 Net debt (12/14E, SFr m) -1,677.9 Current WACC 9.00 Net debt/equity (12/14E, %) -64.9 Free float (%) 60.00 BV/share (12/14E, SFr) 22.8 Number of shares (m) 117.06


Rating OUTPERFORM* Price (27 Mar 14, SFr) 128.70 Target price (SFr) 150.00¹ Market cap. (SFr m) 15,044.30 Enterprise value (SFr m) 13,186.4




Research Analysts

Andre Kukhnin CFA

44 20 7888 0350

[email protected]

Patrick Laager

41 44 334 60 76

[email protected]

Tiantian Li

44 20 7883 1552

[email protected]

03 April 2014


Europe / France


Schneider Electric (SCHN.PA)

High exposure

■ Company description: Schneider Electric is a specialist in energy

management solutions offering products for optimised energy usage in

markets such as industry, energy & infrastructure, data centres, buildings

and residential. The company's end market exposure can be split up as

follows: Utilities & Infrastructure (25%), Industrial & Machines (22%), Data

centres (15%), Non-residential buildings (29%) and Residential (9%).

Schneider generates 44% of group sales from new economies as at 2013.

■ Investment case: We prefer Siemens and ABB in European Electricals as

Schneider is already priced for a pick-up in returns. We model a 12.5%

ROIC in our valuation analysis compared to a 10-year average of 10%,

which we view as fair and compares to management's new returns guidance

range of 11-15% though cycle. In addition, we see a lack of earnings

momentum excluding the inorganic impact from the Invensys acquisition.

With the stock trading at a 10% premium to the other Electricals we prefer

other names in the space.

■ Exposure to energy efficiency: Schneider promotes active energy

efficiency through energy control products, systems, services and software.

It has expanded its energy services portfolio through strong organic and

inorganic growth. The company markets its products and solutions to

customers by offering energy savings up to 30%.

■ Valuation: With the stock trading on a 2015E EV/EBITA multiple of 10.4x, a

c10% premium to electricals; we prefer ABB (trading on c10% discount to

Schneider) given better margin progress and stronger balance sheet

optionality.


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51

61






Eu .73/US$1




Dividend (12/14E, Eu) 1.99 IC (12/14E, Eu m) 24,511.49 Dividend yield (%) 3.1 EV/IC 1.7 Net debt (12/14E, Eu m) 5,059.9 Current WACC 9.00 Net debt/equity (12/14E, %) 26.0 Free float (%) 100.00 BV/share (12/14E, Eu) 33.8 Number of shares (m) 566.79






Research Analysts

Simon Toennessen

44 20 7883 6893

[email protected]

Andre Kukhnin CFA

44 20 7888 0350

[email protected]

Max Yates

44 20 7883 8501

[email protected]

Tiantian Li

44 20 7883 1552

[email protected]

03 April 2014



Clean Tech

SolarCity (SCTY.OQ)

High exposure

■ Company description: SolarCity is the largest vertically-integrated

residential solar company who is active in 14 states. The company has

~32% market share in the US distributed generation (rooftop) solar market

and primarily leases systems to customers; homeowners benefit from 10-

15% lower energy bills without any upfront investments. SolarCity has

deployed 567 MWs across 93k customers. SolarCity has also teamed up

with Tesla to provide energy storage options for residential & commercial

customers.

■ Investment case: SolarCity is at the forefront of the adoption of distributed

rooftop solar that is now economic in many markets and is displacing the

established centralized-generation utilities. Given the compelling value

proposition to customers, 2014 deployments are expected to grow 78% to

475-525 MW from 280 MW in 2013. The company's recent acquisitions

(Paramount and Zep) will help lower customer acquisition costs and cost of

installations, improving returns. We also anticipate operating leverage can

enable improved value-creation in 2H2014.

■ Exposure to energy efficiency: SolarCity's rooftop solar assets lower the

cost of energy for a residential or commercial customer, especially in sunny

areas and regions with higher energy costs. While onsite solar generation

doesn't explicitly reduce the amount of energy consumed by a building, it

does reduce the amount of energy purchased from a central utility.

Furthermore, transmission and distribution line losses (~10%) are avoided

by producing power at the same point of consumption.

■ Valuation: Our $75 target price is based on a DCF utilizing retained value of

future cash flows from projects net of operating costs and a 15% discount

rate. The company trades at ~7x our estimate of value creation in 2014.


18

38

58

78


Daily Apr 01, 2013 - Mar 27, 2014, 4/01/13 = US$19.36



Quarterly EPS Q1 Q2 Q3 Q4 2013A -0.44 -0.54 -0.47 -0.46 2014E -0.83 -0.44 -0.30 -0.63 2015E -0.42 0.03 0.07 -0.40


Year 12/13A 12/14E 12/15E 12/16E EPS (CS adj.) (US$) -1.90 -2.19 -0.65 1.17 Prev. EPS (US$) — — — — P/E (x) -31.9 -27.7 -93.1 51.9 P/E rel. (%) -186.3 -175.2 -654.3 404.3 Revenue (US$ m) 163.8 344.1 613.4 1,006.5 EBITDA (US$ m) -107.9 -103.7 78.7 333.5 OCFPS (US$) 2.19 0.35 2.81 6.69 P/OCF (x) 26.0 171.7 21.6 9.1 EV/EBITDA (current) -51.0 -53.1 70.0 16.5 Net debt (US$ m) -48 -475 -1,270 -2,723 ROIC (%) -16.03 -26.24 -4.32 1,169.70

Number of shares (m) 91.50 IC (current, US$ m) 801.01 BV/share (Next Qtr., US$) 6.2 EV/IC (x) 7.9 Net debt (Next Qtr., US$ m) -117.0 Dividend (current, US$) — Net debt/tot cap (Next Qtr., %) -14.4 Dividend yield (%) —


Rating OUTPERFORM* [V] Price (27 Mar 14, US$) 60.74 Target price (US$) 75.00¹ 52-week price range 86.14 - 18.23 Market cap. (US$ m) 5,557.93 Enterprise value (US$ m) 5,083.03





Research Analysts

Patrick Jobin

212 325 0843

[email protected]

Brandon Heiken

212 325 6608

[email protected]

Maheep Mandloi

212 325 2345

[email protected]

03 April 2014



Clean Tech

Silver Spring Networks (SSNI)

High exposure

■ Company description: Silver Spring Networks is the market leader in smart

grid networking space with a >32% market share in the US. The company

focuses on the highest growth and most value-add parts of the smart grid

market, including purpose-built IPv6 networking, software, big data analytics

and professional services. Approximately 91% of revenue comes from

advanced metering solutions and 9% from demand side management and

distribution automation offerings.

■ Investment case: We expect strong long-term revenue growth and margin

expansion, driven by a continued adoption of smart grid technologies and a

mix shift to software and recurring services. However, we expect this

transition to be less prominent in 2014 given a delay in contracting.

■ Exposure to energy efficiency: 100% of Silver Spring's revenue is related

to smart grid networking technologies that are used to increase energy

efficiency, resource conservation, and awareness on energy consumption.

■ Valuation: Our $20 target price for SSNI is derived using a 2016E price to

earnings multiple of 22x.


15

20

25

30


Daily Apr 01, 2013 - Mar 27, 2014, 4/01/13 = US$17.19



Quarterly EPS Q1 Q2 Q3 Q4 2013A -0.80 -0.10 0.19 0.00 2014E -0.20 -0.11 0.18 0.23 2015E 0.12 0.12 0.12 0.12


Year 12/13A 12/14E 12/15E 12/16E EPS - (Excl. ESO) (US$) -0.08 0.13 0.47 0.90 EPS (CS adj.) (US$) -0.08 0.13 0.47 0.90 Prev. EPS (CS adj.) (US$) — — — — P/E (CS adj., x) -210.4 128.8 36.4 18.9 P/E rel. (CS adj., %) -1,228.0 814.0 255.6 147.6 Revenue (US$ m) 344.1 364.2 411.9 486.6 EBITDA (US$ m) 3.6 20.5 47.0 89.2 Net debt (US$ m) -144 -116 -149 -188 OCFPS (US$) 0.00 -0.11 1.01 1.17 P/OCF (x) NM -152.1 17.2 14.8

Number of shares (m) 51.24 Price/sales(x) 2.41 BV/share (Next Qtr., US$) -1.6 P/BVPS (x) -7.5 Net debt (Next Qtr., US$ m) -134.4 Dividend (current, US$) — Dividend yield (%) —


Rating NEUTRAL* Price (27 Mar 14, US$) 17.02 Target price (US$) 20.00¹ 52-week price range 32.99 - 15.03 Market cap. (US$ m) 890.64





Research Analysts

Patrick Jobin

212 325 0843

[email protected]

Maheep Mandloi

212 325 2345

[email protected]

03 April 2014



Cables (Cables (Japan))

Sumitomo Electric Industries

(5802.T / 5802 JP) JAPAN FOCUS LIST STOCK

Medium exposure

■ Company description: Sumitomo Electric is a conglomerate and the

world’s No. 2 wire harness maker. It has a proprietary technology called

"redox flow" batteries, which is a large-scale storage battery used for

factories and buildings. We forecast the energy business will account for

one-third of operating profit over the next five years, double the current

levels. Sumitomo Electric is on Credit Suisse's Japan Focus List.

■ Investment case: We believe SEI is poised for a re-rating, driven by the

environment and energy segments' new businesses (e.g., batteries,

superconductors), fostering a second engine of growth to complement the

core wire harness business. SEI has been developing a large-scale storage

battery using proprietary redox flow technology, but it is only recently –

especially since the March 2011 earthquake – that storage batteries have

come into focus. This past year alone, SEI won an order from Hokkaido

Electric in July 2013 to use redox flow as back-up storage, and in August

received a government subsidy to commercialise the batteries. Demand for

SEI’s superconductive cables from data centres (e.g. cloud) and other

industrial users could also energise earnings.

■ Catalysts: We believe this energy and environment segment will account for

52% of SEI’s profits by FY2020, up from 25% currently. Recent regulation in

California requiring utilities to build energy storage systems should also help

its overseas business, which accounts for c46% of sales.

■ Valuation: We have an Outperform rating and ¥2,000 TP on the stock,

which is trading at about 10x P/E on FY3/15E earnings. This is on a par with

other auto-parts and materials companies and below its 15x historical P/E

even though SEI has stronger earnings growth, which suggests to us that

the market is undervaluing the prospects of its new businesses.


60

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100

120

600

1100

1600








Year 3/13A 3/14E 3/15E 3/16E Revenue (¥ bn) 2,159.9 2,582.0 2,790.0 2,913.0 Operating profit (¥ bn) 76.8 129.0 160.0 186.0 Recurring profit (¥ bn) 94.1 154.0 186.0 215.0 Net income (¥ bn) 38.0 80.0 109.0 128.0 EPS (¥) 47.9 100.9 137.4 161.4 IBES Consensus EPS (¥) n.a. 97.0 124.1 136.0 EPS growth (%) -35.5 110.8 36.2 17.4 P/E (x) 24.3 14.7 10.8 9.2 Dividend yield (%) 1.7 1.5 1.7 2.0 EV/EBITDA(x) 7.3 6.3 5.3 4.6 P/B (x) 0.86 0.97 0.90 0.83 ROE(%) 3.7 7.0 8.7 9.5 Net debt/equity (%) 28.7 27.0 22.6 17.6


Rating OUTPERFORM* Price (28 Mar 14, ¥) 1,478 Target price (¥) 2,000¹ Chg to TP (%) 35.3 Market cap. (¥ bn) 1,172.35 (US$ 11.41) Enterprise value (¥ bn) 1,499.79 Number of shares (mn) 793.20 Free float (%) 80.0 52-week price range 1,754 - 1,088




Research Analysts

Shinya Yamada

81 3 4550 9910

[email protected]

03 April 2014



Building Products (Housing (Japan))

TOTO (5332.T / 5332 JP)

High exposure

■ Company description: TOTO is Japan’s leading brand of sanitary ware. Its

main operating geographies are Japan, China and the US. Some 70% of OP

comes from its Japanese operations.

■ Investment case: We expect NP to peak in FY3/14 and OP to peak in

FY3/15. The market appears to have already priced in FY3/15 earnings. Our

analysis suggests the company’s management regards ¥22–24bn as a

realistic NP target.

■ Exposure to energy efficiency: We think TOTO’s toilets, its main product

line, can be regarded as energy efficient because of their water-saving

functions. The company generates 70% of OP from products that make use

of its water-saving technology.

■ Valuation: Our ¥1,400 TP is based on an FY3/15E EV/EBITDA of 9x.

TOTO’s EV/EBITDA ranged between 6x and 9x over the period 2003–11.


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130

180

0

500

1000

1500

2000








Year 3/13A 3/14E 3/15E 3/16E Revenue (¥ mn) 476,275.0 551,900.0 537,500.0 537,100.0 Operating profit (¥ mn) 23,377.0 50,700.0 43,400.0 41,700.0 Recurring profit (¥ mn) 26,078.0 52,500.0 44,200.0 42,500.0 Net income (¥ mn) 16,957.0 46,000.0 27,400.0 25,500.0 EPS (¥) 49.4 137.1 81.7 76.0 IBES Consensus EPS (¥) n.a. 118.8 84.0 84.0 EPS growth (%) 82.5 177.6 -40.4 -6.9 P/E (x) 16.9 10.3 17.3 18.6 Dividend yield (%) 1.7 1.4 1.4 1.4 EV/EBITDA(x) 7.1 7.3 8.1 8.2 P/B (x) 1.4 2.0 1.8 1.7 ROE(%) 8.7 20.7 11.1 9.6 Net debt/equity (%) 6.9 2.5 0.9 0.9


Rating NEUTRAL* Price (28 Mar 14, ¥) 1,414 Target price (¥) 1,400¹ Chg to TP (%) -0.99 Market cap. (¥ bn) 478.08 (US$ 4.65) Enterprise value (¥ bn) 483.88 Number of shares (mn) 338.10 Free float (%) 70.0 52-week price range 1,744 - 791




Research Analysts

Masahiro Mochizuki

81 3 4550 7389

[email protected]

Atsuro Takemura

81 3 4550 7372

[email protected]

03 April 2014



Glass & Ceramics (Glass & Ceramics (Japan))

Toyo Tanso (5310.T / 5310 JP)

High exposure

■ Company description: Toyo Tanso is a specialty carbon material

manufacturer, with sales for various client industries such as solar, LED and

general industrial applications.

■ Investment case: We rate it Outperform. Results for FY12/13, an irregular,

seven-month fiscal year, showed sustained growth for orders and the start of

an uptrend for sales of special carbon products for certain client industries.

■ Exposure to energy efficiency: We continue to believe the company’s

strengths are about to shine. We estimate marginal profit at better than 50%,

allowing robust earnings growth when sales are rising. Toyo Tanso is a

maker of specialty graphite products used as consumables in the production

of solar-use polycrystalline as well as LEDs.

■ Valuation: Our ¥2,500 TP uses FY12/14E BPS of ¥2,827 (¥2,795

previously) and P/B of 0.88x, the average since 2009 less one standard

deviation.


20

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0

1000

2000

3000

4000






Performance Over 1M 3M 12M Absolute (%) 4.5 13.3 -1.5 Relative (%) 7.6 21.3 -15.9


Year 12/13A 12/14E 12/15E 12/16E Revenue (¥ bn) 20.5 34.7 38.5 41.2 Operating profit (¥ bn) 1.0 3.7 4.9 6.3 Recurring profit (¥ bn) 1.3 3.5 4.7 6.1 Net income (¥ bn) -0.1 2.3 3.0 3.8 EPS (¥) -5.4 110.9 142.3 183.3 Change from previous EPS (%) n.a. 0 0 0 IBES Consensus EPS (¥) n.a. 79.6 114.5 142.3 EPS growth (%) n.a. n.a. 28.3 28.8 P/E (x) -371.3 20.5 15.9 12.4 Dividend yield (%) 0.6 1.0 1.1 1.4 EV/EBITDA(x) 12.5 6.1 5.1 3.9 P/B (x) 0.73 0.80 0.77 0.73 ROE(%) -0.2 4.0 4.9 6.1 Net debt/equity (%) net cash net cash net cash net cash


Rating OUTPERFORM* Price (28 Mar 14, ¥) 2,269 Target price (¥) 2,500¹ Chg to TP (%) 10.2 Market cap. (¥ bn) 47.05 (US$ 0.46) Enterprise value (¥ bn) 44.72 Number of shares (mn) 20.73 Free float (%) 50.0 52-week price range 2,397 - 1,457





Research Analysts

Jun Yamaguchi

81 3 4550 9789

[email protected]

03 April 2014



Engineering & Construction (Constructions & Engineering (AU))

UGL Limited (UGL.AX / UGL AU)

High exposure

■ Company description: UGL is a global diversified services company

comprising two business units—Property Services and Engineering—which

provide whole of life cycle solutions to clients across the property, power,

water, rail, resources, transport and defence sectors.

■ Investment case: We expect the potential valuation upside from DTZ to be

offset by the weak outlook for engineering and financial risks facing the

business. UGL's gearing increased vs. pcp and remains at the top end of its

targeted 25-35% range. Additionally, UGL delivered another disappointing

cash flow result which makes us cautious about UGL's ability to organically

de-lever the business in the lead-up to the demerger. UGL is still working

towards the completion of the non-core property asset sale which should go

some way to reduce gearing. However, this in isolation is not expected to be

sufficient to de-lever the business in the lead-up to the demerger.

■ Exposure to energy efficiency: UGL's property services business DTZ

(~50% group) is involved in energy efficiency. DTZ's environmental business

unit delivers a comprehensive suite of integrated environmental services

offering best practice in environmental policy, strategy, implementation and

ongoing management as a stand-alone service or as a seamless component

of its end-to-end-model.

■ Valuation: We expect UGL to trade around its current c10x 12-month

forward PE with downside risk for the engineering business offset by upside

valuation risk for the property business which may be realised via a

demerger or trade sale. Longer term, valuation upside could be realised in

the demerged DTZ business; we note the two dominant property services

companies JLL and CBG trade on an average 12-month fwd PE of ~16x.


20

70

120

6

11

16







Absolute (%) 8.4 -4.4 -31.7

Relative (%) 11.5 3.6 -46.2


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

Revenue (A$mn) 3,816.1 3,980.1 4,017.6 4,152.1

EBITDA (A$mn) 203.5 223.0 234.7 230.9

EBIT (A$mn) 131.9 143.4 154.8 164.1

Net income (A$mn) 81.8 106.6 101.5 108.2

EPS (CS adj.) (Ac) 49.15 64.09 60.68 63.90

Consensus EPS (Ac) n.a. 65.50 72.00 77.60

EPS growth (%) -49.1 30.4 -5.3 5.3

P/E (x) 14.2 10.9 11.5 10.9

Dividend (Ac) 39.00 — 21.00 42.00

Dividend yield (%) 5.6 — 3.0 6.0

P/B (x) 1.0 1.0 0.9 0.9

Net debt/equity (%) 51.4 49.0 41.9 37.4


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

Rating NEUTRAL*

Price (28 Mar 14, A$) 6.99



Yr avg. mthly trading (A$mn) 173

Last month's trading (A$mn) 277

Projected return:







Research Analysts

Emma Alcock

61 2 8205 4403

[email protected]

03 April 2014



Aerospace & Defense

United Technologies Corp (UTX.N)

High exposure

■ Company description: UTX is an industrial conglomerate with leading

global positions in aerospace and building solutions.

■ Investment case: UTX is likely to see sales and EPS growth exceed that of

most other large conglomerates, given its 60% sales exposure to depressed

markets that are bottoming (defense and non-resi construction), and new

tailwinds in its aerospace business (due to V2500 aftermarket, OE wins at

Sikorsky, the JSF, and GTF engine). UTX is more active at managing the

balance sheet and the portfolio than most large conglomerates, and the GR

and IAE deals underline a strong track record here. The company has

leading positions in global markets offering relatively high aftermarket

content and strong returns.

■ Exposure to energy efficiency: UTX is a leading global player in

commercial and military aircraft engines (Pratt & Whitney), and in

commercial and residential HVAC equipment & controls as well as transport

refrigeration (Carrier, Transicold); collectively these account for 40% of sales.

■ Valuation: UTX trades at 15x 2015E P/E.


91

101

111


Daily Apr 01, 2013 - Mar 27, 2014, 4/01/13 = US$92.92






Number of shares (m) 916.44 IC (current, US$ m) 48,952.00 BV/share (Next Qtr., US$) 35.1 EV/IC (x) 2.4 Net debt (Next Qtr., US$ m) 18,699.3 Dividend (current, US$) 2.4 Net debt/tot cap (Next Qtr., %) 55.7 Dividend yield (%) —






Research Analysts

Julian Mitchell

212 325 6668

[email protected]

Charles Clarke

212 538 7095

[email protected]

Jonathan Shaffer

212 325 1259

[email protected]

03 April 2014



Trading Companies & Distributors

Wesco International (WCC.N)

High exposure

■ Company description: Wesco is one of the largest North American

diversified electrical distributors.

■ Investment case: Wesco is a play on North American construction and

industrial markets (~70% of exposure) and share gains in a large fragmented

end market. North American industrial distribution is a $140bn + market.

■ Catalysts: Exposure to energy efficiency is medium and through distributing

energy efficient metering, pumps, lighting and other electrical fittings.


65

75

85


Daily Apr 01, 2013 - Mar 27, 2014, 4/01/13 = US$71.2





Year 12/13A 12/14E 12/15E 12/16E EPS (CS adj.) (US$) 5.05 5.72 6.55 — P/E (x) 16.2 14.3 12.5 — P/E rel. (%) 94.7 90.6 87.9 — Revenue (US$ m) 7,513.5 7,853.6 8,306.0 — EBITDA (US$ m) 512.7 554.8 610.5 — OCFPS (US$) 5.99 4.72 6.60 — P/OCF (x) 15.2 17.4 12.4 — EV/EBITDA (current) 10.0 9.2 8.4 — Net debt (US$ m) 1,364 1,143 822 — ROIC (%) 10.62 11.10 12.22 —

Number of shares (m) 44.38 IC (current, US$ m) 3,128.70 BV/share (Next Qtr., US$) 41.3 EV/IC (x) 1.6 Net debt (Next Qtr., US$ m) 1,337.7 Dividend (current, US$) — Net debt/tot cap (Next Qtr., %) 73.3 Dividend yield (%) —






Research Analysts

Hamzah Mazari, CA

212 538 7983

[email protected]

Flavio S. Campos

212 325 4411

[email protected]

James Berkley

212-325-5285

[email protected]

03 April 2014


Appendix: Building efficiency stocks Figure 152: Full universe of companies with low to high exposure to energy efficiency North America Company RIC Sub-sector Exposure M.Cap ($m) Europe Company RIC Sub-sector Exposure M.Cap ($m)

CA Brook Office BPO.TO Property Owners High 9,710 AT Strabag STRV.VI Construction Low 2,952

CA Stantec STN.TO Consultancy Medium 2,851 AT Wienerberger WBSV.VI Construction Medium 2,250

US United Technologies Corp UTX.N OEM High 107,077 AT Zumtobel ZUMV.VI OEM High 1,079

US Honeywell International Inc. HON.N OEM Medium 72,538 CH ABB ABBN.VX OEM Medium 59,675

US Emerson EMR.N OEM High 46,959 CH Schindler-Holding AG SCHP.VX OEM Medium 17,215

US Eaton Corporation ETN.N OEM High 35,754 CH Geberit GEBN.VX OEM Medium 12,242

US Johnson Controls JCI.N OEM High 31,420 CH Sika SIK.S OEM Medium 8,795

US Tyco International, Ltd TYC.N OEM Low 19,517 CH Georg Fischer FIN.S OEM Low 3,179

US Ingersoll-Rand Plc IR.N OEM High 15,915 CH Belimo Holding BEAN.S OEM Medium 1,703

US Pentair Ltd. PNR.N OEM Medium 15,494 CH Arbonia Forster AFGN.S OEM Mid 601

US Eastman Chemical EMN.N OEM High 13,031 CH Walter Meier WMN.S OEM High 565

US Fluor FLR.N Consultancy Low 12,429 CH Zehnder Group ZEH.S OEM High 428

US Whirlpool WHR.N OEM Medium 11,580 DE Siemens SIEGn.DE OEM Low 118,575

US Mohawk Industries MHK.N OEM High 9,910 DE BASF BASFn.DE OEM Low 102,084

US CBRE Group CBG.N Consultancy High 9,106 DE Infineon IFXGn.DE OEM High 13,454

US Vulcan Matls VMC.N Construction Low 8,686 DE Hochtief HOTG.F Construction High 6,298

US Jacobs Engineering JEC.N Consultancy Low 8,376 DE Osram Licht OSRn.DE OEM High 6,788

US Masco MAS.N OEM Medium 7,733 DE Bilfinger GBFG.DE Technical Services Medium 5,839

US Cree CREE.OQ OEM High 6,882 DE Rational RAAG.DE OEM Medium 4,049

US Hubbell HUBb.N OEM Medium 6,225 DE AIXTRON AIXGn.DE OEM High 1,842

US Martin Mari Mat MLM.N OEM Low 5,924 DE Centrotec CEVG.DE OEM High 457

US Acuity Brands AYI.N OEM Medium 5,708 DK Rockwool Intl ROCKb.CO OEM High 2,086

US SolarCity SCTY.OQ OEM Medium 5,730 ES Uralita URA.MC OEM High 343

US Liberty Prop Tst LPT.N Property Owners High 5,418 FI Kone Corporation KNEBV.HE OEM Medium 20,234

US Jones Lang JLL.N Consultancy High 5,273 FI YIT OYJ YTY1V.HE Construction Medium 1,355

US Owens Corning OC.N OEM Medium 5,101 FI Uponor UNR1V.HE Technical Services Low 1,334

US Lennox LII.N OEM Medium 4,449 FI Caverion CAV1V.HE Technical Services High 1,350

US SPX SPW.N OEM Medium 4,370 FI Poyry POY1V.HE Consultancy Medium 348

US Valmont Industries VMI.N OEM Medium 3,996 FR GDF Suez GSZ.PA Technical Services High 66,013

US SunPower Corp. SPWR.OQ OEM Medium 3,924 FR Schneider Electric SCHN.PA OEM Medium 50,245

US Wesco International WCC.N Technical Services High 3,694 FR Vinci SGEF.PA Construction Medium 44,845

US URS Corporation URS.N Consultancy Low 3,395 FR Saint-Gobain SGOB.PA OEM High 33,537

US Regal Beloit RBC.N OEM Medium 3,280 FR Legrand SA LEGD.PA OEM High 16,499

US Watsco, Inc. WSO.N OEM High 3,002 FR Bouygues BOUY.PA Construction Medium 13,316

US Rexnord Corporation RXN.N OEM Low 2,927 FR Capgemini CAPP.PA OEM Medium 12,136

US Armstrong World AWI.N OEM High 2,912 FR Gemalto GTO.AS OEM Medium 10,251

US Texas Industries TXI.N Construction Medium 2,565 FR Atos ATOS.PA OEM Low 8,875

US Corp Office Prop OFC.N Property Owners High 2,334 FR STMicroelectronics STM.PA OEM Medium 8,434

US Louisiana-Pacific Corp. LPX.N OEM High 2,383 FR Rexel RXL.PA Technical Services High 7,435

US Kennedy US KW.N Consultancy Medium 2,064 FR Vicat VCTP.PA Construction Medium 3,784

US Steelcase SCS.N OEM High 2,060 FR Soitec SOIT.PA OEM High 552

US Beacon Roofing BECN.OQ Construction Medium 1,904 FR MFC MFCP.PA Technical Services High 351

US Tetra Tech TTEK.OQ Consultancy Medium 1,922 GB ARM Holdings ARM.L OEM Low 23,427

US KB Home KBH.N Construction High 1,548 GB Wolseley WOS.L OEM Medium 15,108

US Itron ITRI.OQ OEM High 1,398 GB Land Securities LAND.L Property Owners Medium 13,416

US Interface TILE.OQ OEM Medium 1,368 GB British Land BLND.L Property Owners Medium 10,987

US Trex Co TREX.N OEM Medium 1,226 GB Travis Perkins TPK.L OEM Medium 7,755

US Apogee Enter APOG.OQ OEM High 958 GB Aggreko AGGK.L Technical Services Low 6,500

US Silver Spring Networks SSNI.N OEM High 891 GB IMI Plc IMI.L OEM High 6,592

US Knoll KNL.N OEM High 882 GB Taylor Wimpey Plc TW.L Construction Medium 6,369

US EnerNOC ENOC.OQ OEM High 665 GB Berkeley Group Holdings Plc BKGH.L Construction Medium 5,909

US Comfort Sys FIX.N Technical Services High 574 GB Melrose MRON.L OEM Medium 5,302

US Ameresco AMRC Technical services High 347 GB Derwent London DLN.L Property Owners High 4,650

US Echelon ELON.OQ OEM High 121 GB Halma HLMA.L OEM High 3,625

US World Energy XWES.OQ Technical services High 59 GB Spirax Sarco SPX.L OEM Medium 3,636

Japan RIC Sub-sector Exposure M.Cap ($m) GB Balfour Beatty BALF.L Construction Medium 3,440

JP Hitachi 6501.T OEM Low 36,343 GB Carillion CLLN.L Technical Services High 2,592

JP Mitsubishi Electric 6503.T OEM Low 24,804 GB Atkins WS ATKW.L Consultancy Medium 2,320

JP Mitsubishi Heavy Industries 7011.T OEM Low 19,496 GB Mitie Group MTO.L Technical Services Medium 1,994

JP Toshiba 6502.T OEM Low 17,962 GB SIG SHI.L OEM High 1,980

JP Nidec 6594.T OEM Medium 17,204 GB Interserve IRV.L Technical Services Medium 1,727

JP Daikin Industries 6367.T OEM High 16,699 GB Kier Group KIE.L Construction Low 1,522

JP Sumitomo Electric Industries 5802.T OEM Medium 11,991 GB RPS Group RPS.L Consultancy Medium 1,150

JP Asahi Kasei 3407.T OEM Low 9,420 GB Mears Grop MERG.L Technical Services Medium 881

JP Sekisui House 1928.T Construction High 8,535 GB Dialight DIAL.L OEM High 491

JP NEC 6701.T OEM Low 7,976 GB Hyder Consulting HYC.L Consultancy Medium 276

JP LIXIL Group 5938.T OEM High 7,904 IE Kingspan KSP.I OEM High 3,243

JP Asahi Glass 5201.T OEM High 6,738 NL Philips PHG.AS OEM Medium 31,941

JP TOTO 5332.T OEM High 4,718 NL Aalberts Inds AALB.AS OEM Medium 3,854

JP Rinnai 5947.T OEM High 4,462 NL ARCADIS ARDS.AS Consultancy High 2,877

JP GS Yuasa 6674.T OEM High 2,239 NL BAM Groep BAMN.AS Construction Low 1,615

JP NSG Group 5202.T OEM High 1,293 NL IMTECH NV IMUN.AS Technical Services High 1,259

JP Central Glass 4044.T OEM High 675 NL Grontmij NV GRONc.AS Consultancy High 352

JP Toyo Tanso 5310.T OEM High 475 SE Alfa Laval ALFA.ST OEM Medium 11,360

JP Meisei Indu 1976.T OEM High 289 SE Skanska AB SKAb.ST Construction Medium 9,435

JP Osaki Electric 6644.T OEM High 225 SE JM JM.ST OEM High 2,622

NJ-Asia & Australia RIC Sub-sector Exposure M.Cap ($m) SE Nibe Industrier NIBEb.ST OEM High 2,503

AU James Hardie Industries SE JHX.AX OEM High 5,934 SE Sweco SWECb.ST Consultancy High 1,375

AU Commonwealth Property Office Fund CPA.AX Property Owners High 2,707 SE NCC NCCa.ST Construction Low 963

AU Investa Office Fund IOF.AX Property Owners High 1,826 SE G & L Beijer BEIJb.ST OEM Medium 788

AU Charter Hall Group CHC.AX Property Owners High 1,279 SE Fagerhult FAG.ST OEM Medium 588

AU UGL Limited UGL.AX Consultancy High 1,080 TR Trakya Cam TRKCM.IS OEM Low 701

CN CSCEC 601668.SS Construction Medium 14,035

CN GREE 000651.SZ OEM Medium 13,742

CN Gold Mantis 002081.SZ Consultancy High 3,542

CN Orient Landscape 002310.SZ Consultancy High 2,511

CN Shui On Land 0272.HK Property Owners High 2,187

CN NVC Lighting 2222.HK OEM High 903

IN Havells India Ltd HVEL.BO OEM Medium 1,901

KR Lumens 038060.KQ OEM High 633

TW Epistar Corporation 2448.TW OEM High 2,263 Source: Credit Suisse research, Thomson Reuters

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Figure 153: Summary of energy efficiency stocks Ctry Company Ticker Sector Exposure Market

cap ($m)

Description

North America

CA Brook Office BPO.TO Property Owners High 9,710 Brookfield Office Properties Inc. (Brookfield) owns, develops and manages premier office properties in the United States, Canada, Australia and the United Kingdom. MSCI Global Green Building Index

CA Stantec STN.TO Consultancy Medium 2,851 Canadian professional consulting services company in the area of infrastructure and facilities whose services include planning, engineering, architecture, interior design, landscape architecture, surveying, project

management, environmental sciences, and project economics.

US United Technologies Corp UTX.N OEM High 107,077 US based company provides high technology products and services to the building systems and aerospace industries worldwide. The Company operates in six segments: Otis, Carrier, UTC Fire & Security, Pratt &

Whitney, Hamilton Sundstrand and Sikorsky. Products include Aircraft Engines, air conditioning equipment, HVAC equipment (Carrier brand) and building controls.

US Honeywell International Inc. HON.N OEM Medium 72,538 US-based diversified technology and manufacturing company, serving Aerospace, Automation and Control Solutions, Performance Materials and Technologies, and Transportation Systems. Company's products include

thermostats and building controls.

US Emerson EMR.N OEM High 46,959 US-based diversified technology company operating in five business segments: Process Management, Industrial Automation, Network Power, Commercial and Residential Solutions, and Climate Technologies. Products

include components for HVAC equipment, datacenter products, electric motors and drives, residential appliances.

US Eaton Corporation ETN.N OEM High 35,754 US-based diversified power management company, doing business in six segments: Electrical Americas, Electrical Rest of World, Aerospace, Hydraulics, Truck and Automotive. Company is a provider of truck and

automotive drivetrain and powertrain systems for performance, fuel economy and safety.

US Johnson Controls JCI.N OEM High 31,420 US-based company manufactures, installs and services automatic temperature regulation systems for buildings. Company is involved in the design, production, marketing and installation of integrated heating, ventilating

and air conditioning (HVAC) systems, building management systems.

US Tyco International, Ltd TYC.N OEM Low 19,517 US based global provider of diversified products ranging from electronic security and alarm monitoring to fire-fighting equipment and breathing apparatus, water purification and flow control solutions.

US Ingersoll-Rand Plc IR.N OEM High 15,915 Ireland-based diversified global company that operates in four business segments: Climate Solutions, Residential Solutions, Industrial Technologies and Security Technologies. Company's products include HVAC equipment.

Member of Renovate Europe Campaign.

US Pentair Ltd. PNR.N OEM Medium 15,494 US-based provider of water, fluid, thermal management, and equipment protection products and solutions. The company makes thermal management and water purification products for residential and commercial use

and electrical/cooling products for industrial use. 24% of company's sales is to the residential and commercial markets.

US Eastman Chemical EMN.N OEM High 13,031 US-based specialty chemicals company that produces a range of advanced materials, chemicals and fibers. Company's end-market diversity enables it to benefit from longer-term global trends such as energy efficiency.

Member of Renovate Europe Campaign.

US Fluor FLR.N Consultancy Low 12,429 US-based professional services company providing engineering, procurement, construction and maintenance, as well as project management services.

US Whirlpool WHR.N OEM Medium 11,580 Produces a range of energy efficenct appliances for laundry and kitchen

US Mohawk Industries MHK.N OEM High 9,910 US producer of floor covering products for residential and commercial applications. Constituent of the MSCI Global Green Building Index.

US CBRE Group CBG.N Consultancy High 9,106 US-based company is the worlds largest commercial real estate services player, working on various projects such as China Redesign looking at sustainable construction in China's rapidly developing market.

US Vulcan Matls VMC.N Construction Low 8,686 US based company is a producer of construction aggregates primarily crushed stone, sand, and gravel. The Company is a producer of aggregates-based construction materials including asphalt and ready-mixed concrete.

US Jacobs Engineering JEC.N Consultancy Low 8,376 US-based technical professional services firm providing four categories of services: Project Services, Process, Scientific, Systems Consulting services, Construction services, and Operations and Maintenance services

having exposure to Industrial, Infrastructure and Government end markets.

US Masco MAS.N OEM Medium 7,733 Masco, manufactures, distributes and installs home improvement and building products, including installation of insulation for the new home construction market.

US Cree CREE.OQ OEM High 6,882 US-based designer and manufacturer of semiconductor materials and devices operating in three segments: LED Products, Lighting Products and Power and RF Products. Company's products include LED lamps and

solutions.

US Hubbell HUBb.N OEM Medium 6,225 US-based company engaged in the design, manufacture and sale of electrical and electronic products for a range of non-residential and residential construction, industrial and utility applications. Company makes low and

medium voltage electrical equipment and lighting solutions.

US Martin Mari Mat MLM.N OEM Low 5,924 US-based producer of aggregates products (crushed stone, sand, and gravel) for the construction industry, including infrastructure, nonresidential, residential, railroad ballast, agricultural, and chemical grade stone used in

environmental applications.

US Acuity Brands AYI.N OEM Medium 5,708 US-based provider of lighting solutions include devices, lighting controls, power supplies, prismatic skylights, LED lamps, integrated lighting systems for indoor and outdoor applications, and other devices controlled by

software that monitors and manages light levels while optimizing energy consumption.

US SolarCity SCTY.OQ OEM Medium 5,730 Engaged in the design, installation and sale or lease of solar energy systems to residential and commercial customers. Energy efficiency products and services include home energy evaluation and energy efficiency

upgrades. The Company sells home energy efficiency evaluations to new solar energy system customers and existing customers.

US Liberty Prop Tst LPT.N Property Owners High 5,418 Recognised by ENERGY STAR for proactive energy management of property portfolio. MSCI Global Green Building Index.

US Jones Lang JLL.N Consultancy High 5,273 US-based financial and professional services firm specializing in real estate. Company has been awarded the sustained excellence award by the ENERGY Star program for numerous energy reduction programs.

US Owens Corning OC.N OEM Medium 5,101 Company's building materials segment includes Insulation and Roofing. Products include thermal batts, loose fill insulation and foam sheathing. A preferred insulating product for new home construction and remodeling.

US Lennox LII.N OEM Medium 4,449 US-based provider of climate control solutions. Company's products include HVAC equipment.

US SPX SPW.N OEM Medium 4,370 US company is a global, multi-industry manufacturer of specialized, engineered solutions operating in Flow Technology, Thermal Equipment and Services. Company's products include coal-fired power plant equipment and

medium voltage US power transformers.

US Valmont Industries VMI.N OEM Medium 3,996 A US based global producer of fabricated metal products. Company manufactures of engineered metal structures and components for the global lighting and traffic, wireless communication, roadway safety and access

systems applications. Products and services include light sensors, LED lighting and energy assessment.

Source: Thomson Reuters, Credit Suisse research

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cap ($m)

Description

North America

US SunPower Corp. SPWR.OQ OEM Medium 3,924 A vertically integrated solar products and services company. The R&C segment focuses on solar equipment sales into the residential and small commercial market through its third-party global dealer network.

US Wesco International WCC.N Technical Services High 3,694 US based distributor of products and provider of supply chain management and logistics services used primarily in industrial, construction, utility and commercial, institutional and government markets. Company gets 33%

of sales from non-residential construction end markets.

US URS Corporation URS.N Consultancy Low 3,395 One of the largest engineering, construction and technical services in the US. Company has exposure to US infrastructure and commercial construction markets.

US Regal Beloit RBC.N OEM Medium 3,280 US-based manufacturer of electric motors and controls, electric generators and controls, and mechanical motion control products. Products include components for HVAC equipment, electric motors.

US Watsco, Inc. WSO.N OEM High 3,002 US based company which is into the distribution of air conditioning, heating and refrigeration equipment and related parts and supplies (HVAC/R) in the HVAC/R distribution industry. 75% of sales is from replacement,

15% from commercial and 10% from new housing markets.

US Rexnord Corporation RXN.N OEM Low 2,927 US-based multi-platform industrial company operating in Process & Motion Control and Water Management sectors. Water Management product portfolio includes drainage products, flush valves and faucet products,

backflow prevention pressure release valves, PEX piping and engineered valves and gates for the water and wastewater treatment markets.

US Armstrong World AWI.N OEM High 2,912 US-based global producer of flooring products and ceiling systems, manufacturing sustainable and energy-saving flooring and ceiling products. Constituent of the MSCI Global Green Building Index.

US Texas Industries TXI.N Construction Medium 2,565 US based supplier of construction materials operating in three segments: cement, aggregates and consumer products.

US Corp Office Prop OFC.N Property Owners High 2,334 Corporate Office Properties Trust is an office real estate investment trust (REIT), which focuses on the customer relationships and specialized tenant requirements in the United States Government and defense

information technology, and data sectors. MSCI Global Green Building Index

US Louisiana-Pacific Corp. LPX.N OEM High 2,383 US-based manufacturer of building products, used primarily in new home construction, repair and remodeling, and manufactured housing. Constituent of the MSCI Global Green Building Index.

US Kennedy US KW.N Consultancy Medium 2,064 US-based international real estate investment and services firm providing various commercial and residential real estate services including property management, asset management, brokerage and marketing.

US Steelcase SCS.N OEM High 2,060 US company engaged in furnishing the work experience in office environments. Company's portfolio of products, services and applications are designed to unlock human promise and support social, economic and

environmental sustainability. Constituent of the MSCI Global Green Building Index.

US Beacon Roofing BECN.OQ Construction Medium 1,904 Distributor of residential and non-residential roofing materials in the US and Canada. Also distributes other complementary building materials, including siding, windows, speciality lumber products and waterproofing

systems.

US Tetra Tech TTEK.OQ Consultancy Medium 1,922 US based provider of consulting, engineering, program management, construction management and technical services focusing on natural resource management, infrastructure, energy and the environment.

US KB Home KBH.N Construction High 1,548 US-based builder of single-family residential homes, townhomes and condominiums. Constituent of the MSCI Global Green Building Index.

US Interface TILE.OQ OEM Medium 1,368 US-based company engaged in the business of design, production and sales of modular carpet, also known as carpet tile. Constituent of the MSCI Global Green Building Index.

US Trex Co TREX.N OEM Medium 1,226 US based manufacturer and distributor of wood/plastic composite products and related accessories, primarily for residential and commercial decking and railing applications. The majority of its products are manufactured in

a process that combines waste wood fibers and reclaimed polyethylene (PE material). Constituent of the MSCI Global Green Building Index.

US Apogee Enter APOG.OQ OEM High 958 US company involved in the design and development of value-added glass products, services and systems operating in four segments: Architectural Glass, Architectural Framing Systems, Architectural Services and Large-

Scale Optical Technologies. Company manufactures energy-efficient glass and windows. Constituent of the MSCI Global Green Building Index.

US Silver Spring Networks SSNI.N OEM High 891 US company involved in metering and demand management system development

US Knoll KNL.N OEM High 882 US-based designer and manufacturer of workplace furnishings, textiles and fine leathers. Constituent of the MSCI Global Green Building Index.

US EnerNOC ENOC.OQ OEM High 665 100% Exposure to energy efficiency through demand response related software

US Comfort Sys FIX.N Technical Services High 574 US based provider of heating, ventilation and air conditioning (HVAC) installation, maintenance, repairs and replacement services within the mechanical services industry. Constituent of the MSCI Global Green Building

Index.

US Ameresco AMRC Technical services High 347 Energy efficiency service company

US Echelon ELON.OQ OEM High 121 Provider of building system control equipment & smart metering technology

US World Energy XWES.OQ Technical services High 59 Provider of energy services and procurement systems

Europe

AT Strabag STRV.VI Construction Low 2,952 Austria-based construction company with activities spanning the construction industry, including Building Construction & Civil Engineering, Transportation Infrastructures, Tunneling, and construction-related services.

AT Wienerberger WBSV.VI Construction Medium 2,250 Austria-based company which produces bricks and clay roof tiles. Company's infill brick is a clay block filled with natural insulating materials and has high thermal insulating properties.

AT Zumtobel ZUMV.VI OEM High 1,079 An Austria-based company engaged in the provision of lighting solutions, luminaries, light management systems and lighting components for interior and exterior applications. Company has innovative LED and OLED

technologies.

CH ABB ABBN.VX OEM Medium 59,675 Switzerland-based company engaged in the electrical engineering industry operating into five segments: Power Products, Power Systems, Discrete Automation and Motion, Low Voltage and Process Automation.

Company is a global provider of power & automation technologies to utility and industry customers.

CH Schindler-Holding AG SCHP.VX OEM Medium 17,215 Switzerland-based holding company that specializes in the manufacture of escalators, elevators and moving walks. Manufactures elevators and escalators which contributes to the buildings energy consumption.

Company's design innovations and application of smart technology can reduce energy consumption of the building.

CH Geberit GEBN.VX OEM Medium 12,242 Switzerland-based provider of solutions for sanitary technology applications. Company makes Geberit AquaClean Sela - compact shower toilet and other energy efficient systems.

CH Sika SIK.S OEM Medium 8,795 Sika's competences are around sealing, bonding, damping and protecting. Products are used eg to seal wall structures, bind windows to their frames, install roof membranes or improve insulation to prevent heat

exchange.

CH Georg Fischer FIN.S OEM Low 3,179 Through its Piping System division Georg Fischer offers c40,000 products from energy-efficient jointing technologies to fittings, valves, measuring systems and pipes which are installed in buildings

CH Belimo Holding BEAN.S OEM Medium 1,703 The company is a global leading provider of electric flap actuators for heating, ventilation and air conditioning

CH Arbonia Forster AFGN.S OEM Mid 601 AFG is exposed through its division 'Building Envelope' which offers a wide range of windons and window frames. AFG also offers heating systems

CH Walter Meier WMN.S OEM High 565 Through ist Climate Technology segment, the company offers a wide spectrum of heating, ventilation, cooling and dehumidification systems

CH Zehnder Group ZEH.S OEM High 428 Zehnder is a key manufacturer of comfort ventilation systems and high-quality steel radiators


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Figure 155: Summary of energy efficiency stocks

Ctry Company Ticker Sector Exposure Market

cap ($m)

Description

Europe

DE Siemens SIEGn.DE OEM Low 118,575 German technology company with a global footprint operating in the fields of energy, healthcare, industry and infrastructure. Company's products include energy-efficient home appliances and cooling solutions.

DE BASF BASFn.DE OEM Low 102,084 German chemical major operating in basic chemicals, performance chemicals for paints, coatings, cosmetics and cleaning solutions, functional chemicals, agricultural solutions and solutions for oil and gas industry. Member

of Renovate Europe Campaign.

DE Infineon IFXGn.DE OEM High 13,454 Germany-based company developing semiconductors and system solutions for automotive and industrial electronics, and chip card, as well as security applications with operations in four main divisions: Automotive;

Industrial Power Control; Chip card & Security, and Power Management and Multimarket. Company is involved in development of LEDs, smart grid/metering, electromobility, battery mgmt, power saving solns.

DE Hochtief HOTG.F Construction High 6,298 Germany-based global construction group. Company provides sustainable products with high energy savings through efficient outer sking, smart lighting and ventilation.

DE Osram Licht OSRn.DE OEM High 6,788 German company engaged in development and manufacture of lamps, lighting systems, electronic control gears, as well as complete luminaries, light management systems and lighting solutions. Company is a global

player with a portfolio covering the entire value chain from components – including lamps, electronic control gear and opto semiconductors such as LED – as well as luminaires, light management systems and lighting

solutions.

DE Bilfinger GBFG.DE Technical Services Medium 5,839 Germany-based international engineering and service group operating in four segments: Industrial, Power, Building & Facility and Construction. Power segment offers maintenance, repair, efficiency enhancements and

lifetime extensions at existing plants; Building and Facility segment offers water and wastewater technology services.

DE Rational RAAG.DE OEM Medium 4,049 Germany-based global developer, producer and supplier of products for industrial and commercial kitchens worldwide. The Company's core competence is providing units for heating and cooking all types of food.

Constituent of the MSCI Global Green Building Index.

DE AIXTRON AIXGn.DE OEM High 1,842 German company is a provider of deposition equipment to the semiconductor and compound-semiconductor industry. Products include energy-saving light, development of LEDs, Gallium Nitride base power device using

Silicon to improve EE

DE Centrotec CEVG.DE OEM High 457 0

DK Rockwool Intl ROCKb.CO OEM High 2,086 Denmark-based company engaged in the manufacture and marketing of stone wool insulation to power plants, petrochemical industries and other process industries. Company's insulation products save 100x the energy

used for its manufacture. Member of Renovate Europe Campaign.

ES Uralita URA.MC OEM High 343 A Spain-based company, which is primarily engaged in the production and distribution of construction materials. The Company's businesses are structured in such divisions, as Insulation and Gypsum, Pipes and Roof Tiles.

Manufactures insulation materials like glass wool which contribute 61% of group revenues.

FI Kone Corporation KNEBV.HE OEM Medium 20,234 Finland-based engineering company that operates within the elevator and escalator business sector. Company manufactures elevators and escalators which contributes to the buildings energy consumption. Company's

design innovation and application of smart technology can reduce energy consumption of the building.

FI YIT OYJ YTY1V.HE Construction Medium 1,355 A Finland-based company engaged in the provision of services for the real estate, construction and industry sectors. The Company's activities include services, repair, renovation and modernization works required in

homes

FI Uponor UNR1V.HE Technical Services Low 1,334 Finland-based supplier of plumbing and heating systems. Customers are mainly HVAC installers and building companies.

FI Caverion CAV1V.HE Technical Services High 1,350 Finland-based company engaged in the construction industry. Company's solutions include air conditioning, apartment-specific measurement of water and heat consumption and controlled lighting.

FI Poyry POY1V.HE Consultancy Medium 348 Finland-based consulting and engineering company engaged in the provision of total solutions and design and supervision services to various sectors. Services include water, wastewater, environment and waste

management.

FR GDF Suez GSZ.PA Technical Services High 66,013 France-based natural gas and electricity supplier. Provider of services in water, sanitation and waste management.

FR Schneider Electric SCHN.PA OEM Medium 50,245 France-based company that specializes in electricity distribution, automation management and produces installation components for energy management. Company has 9% group sales exposure to residential and 29% to

non-residential construction offering companies products/solutions around energy management and efficiency improvements. energy efficient solutions for lighting, temperature management, water management.

FR Vinci SGEF.PA Construction Medium 44,845 France-based company which is involved in construction and engineering. It designs, builds, finances and manages facilities such as transport systems, public and private buildings, urban developments, and water, energy

and communication networks.

FR Saint-Gobain SGOB.PA OEM High 33,537 France-based producer, processor and distributor of construction and high-performance materials and packaging. Company's products include Insulation: Glass wool (Isover), coated glass, triple glazing. Lighting:

development of LEDs.Company is a direct benficiary of the "green" initiatives in France.

FR Legrand SA LEGD.PA OEM High 16,499 France-based specialist player in electrical and digital building infrastructures, offering vast array of products for control and command, cable management, energy distribution and data distribution, solutions that manage

lighting, heating, power, networks and building.

FR Bouygues BOUY.PA Construction Medium 13,316 France-based group that operates in two sectors: Telecommunications & Media and Construction. The construction division specializes in building and public works activities, notably in the areas of electrical engineering,

and facility maintenance.

FR Capgemini CAPP.PA OEM Medium 12,136 France-based Information Technology services company. Provides IT infrastructure for lower energy consumption in residential and commercial buildings, smart grid, smart metering.

FR Gemalto GTO.AS OEM Medium 10,251 Netherlands-based company providing digital security services in four user-oriented segments of Mobile Communication, Machine to Machine (M2M), Security and Secure Transactions. Company's products include

Cinterion modules and Machine to Machine technology for smart energy and metering.

FR Atos ATOS.PA OEM Low 8,875 France-based information technology services provider operating through four divisions: Managed Services, System Integration, Consulting & Technology Services and HTTS & Specialized businesses. Offers IT

infrastructure transformation services which include server virtualization in data centers and energy efficient buildings.

FR STMicroelectronics STM.PA OEM Medium 8,434 French independent semiconductor company that designs, develops, manufactures and markets a range of semiconductor products used in a variety of microelectronic applications, including automotive products,

computer peripherals, telecommunications systems, consumer products, industrial automation and control systems. Products and services include smart building automation, smater metering and energy conversion

switches for solar systems.

FR Rexel RXL.PA Technical Services High 7,435 France-based company engaged in the distribution of electrical parts and supplies to professionals. Company's portfolio includes energy efficient lighting and lighting retrofits.

FR Vicat VCTP.PA Construction Medium 3,784 France-based company engaged in the construction industry. It produce energy efficient construction materials such as high performance concrete.

FR Soitec SOIT.PA OEM High 552 France-based company involved in the production and marketing of silicon-on-insulator (SOI) wafers for the semiconductors industry. Products include SOI-based LED lamps that generate energy savings of 60% to

70% for lighting.

FR MFC MFCP.PA Technical Services High 351 France-based company that is primarily engaged in the construction and selling of individual houses. Company provides services for constructing Bio-climatic homes and low energy buildings


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Figure 156: Summary of energy efficiency stocks

Ctry Company Ticker Sector Exposure Market

cap ($m)

Description

Europe

GB ARM Holdings ARM.L OEM Low 23,427 US based designer of microprocessors, physical intellectual property (IP) and related technology and software, and sells development tools. Designs energy efficient microprocessor for sensors and smart control systems

used in smart grids, smart meters, home automation applications.

GB Wolseley WOS.L OEM Medium 15,108 UK-based specialist trade distributor of plumbing and heating products to professional contractors and a supplier of building materials. Company mainly distributes energy efficient heat pumps for underfloor heating.

GB Land Securities LAND.L Property Owners Medium 13,416 It owns, manages and develops offices, shops and housing in the United Kingdom. MSCI Global Green Building Index

GB British Land BLND.L Property Owners Medium 10,987 A real estate investment trust (REIT) that in 2010 set a target of reducing energy use by 20% per square metre for its commercial property portfolio. MSCI Global Green Building Index.

GB Travis Perkins TPK.L OEM Medium 7,755 Builder's merchant and home improvement retailer in the UK. Company's segments include general merchanting, contracts merchanting, plumbing and heating merchanting, and consumer. Company provides sustainable

building solutions and solutions for renewable energy projects.

GB Aggreko AGGK.L Technical Services Low 6,500 Provides power and temperate control solutions to customers who need them either very quickly, or for a short or indeterminate length of time.

GB IMI Plc IMI.L OEM High 6,592 UK-based company engaged in design, manufacture and services of bespoke solutions that control the movement of fluids. Company provides hydronic solutions to optimise indoor climate comfort and energy efficiency

of waterborne heating & cooling systems. Constituent of the MSCI Global Green Building Index.

GB Taylor Wimpey Plc TW.L Construction Medium 6,369 UK-based homebuilding company with operations in the United Kingdom and Spain. Constituent of the MSCI Global Green Building Index.

GB Berkeley Group Holdings PlcBKGH.L Construction Medium 5,909 UK company engaged in residential-led property development focusing on urban regeneration and mixed-use developments. Constituent of the MSCI Global Green Building Index.

GB Melrose MRON.L OEM Medium 5,302 UK-based company acquires manufacturing businesses and improves them. The Company operates in four divisions: Energy, Lifting, Other Industrial and Elster.

GB Derwent London DLN.L Property Owners High 4,650 Derwent London plc is a real estate investment trust (REIT) focused on the central London commercial property market. MSCI Global Green Building Index

GB Halma HLMA.L OEM High 3,625 UK-based company operates in three sectors: health and analysis, infrastructure sensors and industrial safety. Company provides building performance and energy management systems, energy consumption monitoring

system and smart metering systems.

GB Spirax Sarco SPX.L OEM Medium 3,636 UK-based industrial engineering company specialising in steam and pump technology. Provides products, services, expertise for building and maintaining steam systems with respect to health and safety, reducing energy

costs, boosting productivity, minimising maintenance, or delivering environmentally-friendly performance. These systems can be within buidlings, eg a Hospital.

GB Balfour Beatty BALF.L Construction Medium 3,440 UK-based global infrastructure company operating in four segments: Professional Services, Construction Services, Support Services and Infrastructure Investments.

GB Carillion CLLN.L Technical Services High 2,592 UK-based integrated support services company operating in four segments: support services, public private partnership projects, middle east construction services and construction services. Offers UK Green Deal

services including home energy assessment, installation, aftercare and maintenance, programme management, and business systems. Joint initiative with Birmingham City Council plans to refurbish around 60,000

homes and non-domestic buildings with new insulation and boilers.

GB Atkins WS ATKW.L Consultancy Medium 2,320 UK-based holding company engaged in engineering and design consultancy in water, environment, education, aerospace, defense and infrastructure design sectors. Company has significant international capabilities in low

carbon architectural and retro-fit; company's designers and engineers work to optimise the carbon credentials of building projects.

GB Mitie Group MTO.L Technical Services Medium 1,994 UK-based company is focused on the provision of outsourcing and energy services in support of the buildings, facilities and infrastructure of its clients. Company offers a complete range of integrated energy and carbon

management services under CarbonCare brand, including utility procurement, energy performance contracting, renewables consultancy. Significant exposures across public sector, commercial and social housing buildings

infrastrcuture.

GB SIG SHI.L OEM High 1,980 UK-based company is engaged in the supply of specialist products to construction and related markets. Products and services include insulation and energy management, exteriors and interiors. Constituent of the MSCI

Global Green Building Index.

GB Interserve IRV.L Technical Services Medium 1,727 UK-based support services and construction company. Company offers resource and waste management, energy efficiency and security, carbon reduction and regulatory compliance; onsite renewable energy generation,

behavioural change and demand reduction.

GB Kier Group KIE.L Construction Low 1,522 UK-based construction, services and property group specializing in building and civil engineering, support services, commercial property development and structured property financing and private housing.

GB RPS Group RPS.L Consultancy Medium 1,150 UK-based international consultancy providing independent advice upon the exploration and production of oil and gas and other natural resources, and the development and management of the built and natural

environment. A licensed assessor in BREEAM service areas and the Code for Sustainable Homes in the UK, company also has Energy Performance credentials.

GB Mears Grop MERG.L Technical Services Medium 881 As the UK's leading social housing maintenance & refurbishment services provider, Mears has full capabilities in design, assessment, funding and installation of energy efficiency measures including insulation and

renewables.

GB Dialight DIAL.L OEM High 491 UK-based company operates in three segments: Lighting, Signals, and Components. Company is involved in the design and manufacture of high brightness LED's and associated technologies.

GB Hyder Consulting HYC.L Consultancy Medium 276 UK-based multinational design and engineering consultancy offering infrastructure, property, and environmental solutions. Company provides solutions that optimizing the performance and longevity of existing assets.

IE Kingspan KSP.I OEM High 3,243 UK-based provider of low energy building solutions. Company is a global leader in insulated roof & wall panels as well as insulation boards. Member of Renovate Europe Campaign.

NL Philips PHG.AS OEM Medium 31,941 Netherlands-based company operates within three main business sectors, such as Healthcare, Consumer Lifestyle, and Lighting, as well as through the Innovation, Group & Services (IG&S) sector. Company has 34%

sales in lighting which provides energy-efficient solitions for lighting, including LEDs.

NL Aalberts Inds AALB.AS OEM Medium 3,854 Netherlands-based company engaged in industrial machinery and equipment sector with its business organized into two segments: Industrial Services and Flow Control. Products include light-emitting diode (LED) and

solar, programmable thermostats, intellegent temperature control, heating regulation systems, underfloor heating, wall heating.

NL ARCADIS ARDS.AS Consultancy High 2,877 Netherlands-based international engineering, consultancy and management services firm providing services in infrastructure, water, environment and building sectors. Company's business includes water planning,

wastewater and water management & consulting services and environment management focused on protection and enhance sustainability.

NL BAM Groep BAMN.AS Construction Low 1,615 Netherlands-based construction and property services company.

NL IMTECH NV IMUN.AS Technical Services High 1,259 Netherlands-based technical services provider in the fields of electrical engineering, Information and Communication Technology (ICT) and mechanical engineering with business in three segments: Electrical services, ICT

and Mechanical services. Company provides air, climate and energy solutions, cold and heat storage, clean-room technology, energy management.

NL Grontmij NV GRONc.AS Consultancy High 352 Netherlands-based company active in the construction and engineering sector. Company is involved in activities related to water, environment and renewable energy which are linked by similar types of technical

processes.

SE Alfa Laval ALFA.ST OEM Medium 11,360 Sweden-based company engaged in the development, manufacture and marketing of products and solutions for heat transfer, separation and fluid handling. The company supplies heat exchangers, separators and

equipment for safe transportation and regulation of fluids.

SE Skanska AB SKAb.ST Construction Medium 9,435 Sweden-based construction and project development company having operations in four segments: Construction, Residential Development, Commercial Property Development and Infrastructure Development. Provide a

variety of energy saving solutions such as low energy lighting, energy metering etc.

SE JM JM.ST OEM High 2,622 Sweden-based company engaged in the development of housing and residential areas, primarily in the Nordic region. Company develops low-energy houses that have extra insulation in the walls, recover heat from

ventilation and have individual hot water meters.

SE Nibe Industrier NIBEb.ST OEM High 2,503 Sweden-based company engaged in the provision of heating technology solutions. Products include groundsource/geothermal heat pumps, solar heating sytems for homes and energy efficient wood stoves.

SE Sweco SWECb.ST Consultancy High 1,375 Sweden-based company engaged in the provision of consulting services within the areas of engineering, environmental technology and architecture.

SE NCC NCCa.ST Construction Low 963 Sweden-based company active within the construction and property development industry. Its operations are divided into three business areas: industry, building and construction, and development.

SE G & L Beijer BEIJb.ST OEM Medium 788 Sweden-based company active in fields of refrigeration and cooling. Product offering includes refrigerators for commercial, domestic and industrial sectors.

SE Fagerhult FAG.ST OEM Medium 588 Lighting systems for public environments. Two main business segments: indoor lighting solutions and retail lighting solutions

TR Trakya Cam TRKCM.IS OEM Low 701 Tukey-based company engaged in the glass manufacturing industrywith exposure to energy glass and glass for home appliances. Source: Thomson Reuters, Credit Suisse research

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Description

Japan

JP Hitachi 6501.T OEM Low 36,343 Company is Japan's largest industrial electronics conglomerate with presence in Information and Telecommunication, Electricity, Social and Industrial, Electronic Device and System, Construction, High Functional

Material, Automotive, Component & Device, Digital Media & Consumer Product and Financial Services. Company has presence in elevators, escalators, A/C systems, lighting, smart meters and other aspects of energy

efficiency.JP Mitsubishi Electric 6503.T OEM Low 24,804 One of the industrial electronics conglomerate, the Japanese company is engaged in developing, manufacturing, sale and distribution of a range of electrical and electronic equipment. The company has a presence in

elevators, escalators, A/C systems, and other aspects of energy efficiency.

JP Mitsubishi Heavy Industries 7011.T OEM Low 19,496 Japanese diversified manufacturer operating in Marine Vessel & Ocean, Power Engine, Machinery & Steel Structure, Aviation & Space, General Machinery & Special Vehicle segments. Company's products include

exhaust fume treatment and waste treatment equipment.

JP Toshiba 6502.T OEM Low 17,962 One of Japan's largest manufacturers of elevators, escalators and building infrastructure. Their acquisition of Switzerland-based Landis+Gyr in 2011 also helped Toshiba gain a foothold in the smart-meter market as well.

Also has a presence in A/C systems and lighting.

JP Nidec 6594.T OEM Medium 17,204 World's largest maker of motors that go into pretty much everything that turns, the Japanese company has a strong presence in motors used in energy-efficient air conditioner inverters.

JP Daikin Industries 6367.T OEM High 16,699 Japan-based company is world's largest maker of A/C inverters and A/C units, the company has leading technology in energy efficiency. Company is engaged in the business of marine equipment and chemicals also.

JP Sumitomo Electric Industries5802.T OEM Medium 11,991 Japan-based manufacturing company operating in Automobile, Information Communications, Electronics, Cable, Equipment & Energy and Industrial Materials. SEI has a proprietary technology called "redox flow"

batteries (as we went into detail on in our Ideas Engine report on Jan. 16), which is a large-scale storage battery used for factories and buildings. We forecast the energy business will account for half of OP over the next

five years, double the current levels.

JP Asahi Kasei 3407.T OEM Low 9,420 Japanese company with a presence in Chemicals, Housing, Drug & Medical, Textiles, Electronics and Construction. Products include home insulation materials.

JP Sekisui House 1928.T Construction High 8,535 Japanese company is engaged in the design, construction and contract of prefabricated housing, the dealing, brokerage, leasing and management of real estate, as well as the provision of related services. Company's

Rethink green campaign focuses on roof sarking and ventilation. Constituent of the MSCI Global Green Building Index.

JP NEC 6701.T OEM Low 7,976 Japanese company's main business remains telecommunication equipment and IT system solutions, but has recently made inroads in energy management systems and lithium-ion storage batteries.

JP LIXIL Group 5938.T OEM High 7,904 Japan-based company operating in five segments: Metal Building Material, Plumbing Fixture, Other Building Material & Equipment, Distribution & Retail and Housing, Real Estate & Others. Company is a global leader in

window sashses, doors, toilets and other bath equipment. Leading technology in water and energy efficiency as well.

JP Asahi Glass 5201.T OEM High 6,738 Japanese manufacturer operating in three segments: Glass, Electronics and Chemical. Products include insulated windows and glass for buildings and housing.

JP TOTO 5332.T OEM High 4,718 Japanese company engaged in the manufacture and sale of restroom fixtures, bathroom fixtures, kitchen fixtures and others. Company is a global leader in toilets and other bath equipment and possesses leading

technology in water and energy efficiency.

JP Rinnai 5947.T OEM High 4,462 Japan-based company engaged in the manufacture and sale of heating appliances and components. Products include boilers and heating, mainly for kitchen and bath.

JP GS Yuasa 6674.T OEM High 2,239 Japan-based company engaged in the manufacture and sale of batteries and power supply devices. Maker of lithium ion batteries and lead-acid batteries, both used for power storage/backup.

JP NSG Group 5202.T OEM High 1,293 Japanese company mainly engaged in the manufacture and sale of glass products in Construction, Automobile, Functional and Other segments. Company is a maker of insulated windows and glass for buildings and

housing.

JP Central Glass 4044.T OEM High 675 Japanese manufacturer of glass and chemicals. Products include insulated windows and glass for buildings and housing.

JP Toyo Tanso 5310.T OEM High 475 Japan-based a company engaged in the manufacture, processing and sale of special graphite products, general carbon products, composite materials and others. Company is a maker of lithium ion batteries and lead-acid

batteries, both used for power storage/backup. Speciality graphite products made by the company are used as consumables in the production of solar-use polycrystalline as well as LEDs.

JP Meisei Indu 1976.T OEM High 289 Japanese company mainly engaged in the operation of construction business and boiler business. The construction work segment is engaged in the construction of thermal insulation works.

JP Osaki Electric 6644.T OEM High 225 Japan-based company mainly engaged in the manufacture and sale of measurement and control equipment. Company is a maker of metering devices for electricity, gas, and industrial uses.

Non Japan Asia & Australia

AU James Hardie Industries SEJHX.AX OEM High 5,934 US-based manufacturer of fiber cement products and systems for internal and external building construction applications. Constituent of the MSCI Global Green Building Index.

AU Commonwealth Property Office FundCPA.AX Property Owners High 2,707 The Fund owns and manages a diverse portfolio of office properties, located in major markets across Australia. MSCI Global Green Building Index

AU Investa Office Fund IOF.AX Property Owners High 1,826 The Fund is an owner of investment-grade office buildings and receives rental income from a tenant register consisting of predominantly Government and blue chip tenants. MSCI Global Green Building Index

AU Charter Hall Group CHC.AX Property Owners High 1,279 Charter Hall Group is engaged in three segments: Property investment, Property funds management and Development investment. MSCI Global Green Building Index

AU UGL Limited UGL.AX Consultancy High 1,080 An Australia basediversified services company. The Company consists of three complementary businesses: UGL Engineering, UGL Operations & Maintenance and DTZ Property. Company is engaged in providing

project delivery across rail, transport and technology systems, water, power, resources and defense with core capabilities in engineering, design, supply, project management and commissioning.

CN CSCEC 601668.SS Construction Medium 14,035 Specializes in building construction projects, real estate development and investment, infrastructure construction and investment, as well as design and surveying operations. Company is involved in water management &

environmental protection.

CN GREE 000651.SZ OEM Medium 13,742 Largest air conditioner enterprise that integrates R&D, manufacturing and services globally. Has the largest sales volume in the global residential air conditioner (RAC) market since 2005.

CN Gold Mantis 002081.SZ Consultancy High 3,542 China-based building decoration engineering company.

CN Orient Landscape 002310.SZ Consultancy High 2,511 Chinese company principally engaged in design of landscape and construction of landscaping projects.

CN Shui On Land 0272.HK Property Owners High 2,187 The Company and its subsidiaries are engaged in property development and provision of management services. MSCI Global Green Building Index

CN NVC Lighting 2222.HK OEM High 903 Chinese company engaged in the design, development, production, marketing and sale of a variety of lighting products. Company is a leading provider of energy-saving and other lighting products in china, with the

strongest domestic lighting brand.

IN Havells India Ltd HVEL.BO OEM Medium 1,901 India-based electrical and power distribution equipment manufacturer with products including compact fluorescent lamp (CFL) lamps.

KR Lumens 038060.KQ OEM High 633 Korea-based company mainly engaged in the manufacture of light emitting diode (LED) products. Constituent of the MSCI Global Green Building Index.

TW Epistar Corporation 2448.TW OEM High 2,263 Taiwan-based company engaged in the research, development, manufacture and distribution of light emitting diode (LED) wafers and chips. Company's products include LED lighting, LED backlighting, LED display and

LEDs for automotive applications.


03 April 2014


Appendix: Key technologies The array of products and services exposed to the theme of building energy efficiency is wide. The tables on the next two

pages summarise the key technologies exposed to this theme as well as an assessment of their potential cost savings

implications and barriers to implementation.

Figure 158: Key technological solutions aimed at improving building energy efficiency

Technology Potential savings

Cost

low,medium,

or high

Brief Description Barriers to broad implementation

Design

Integrated design & modeling

tools

L Software systems and IT that enable collaborative design Fragmented value chain – lack of collaboration;

lack of data to demonstrate viability

Favorable building siting L Orientation that favors shading and natural lighting

Natural and mixed-mode

ventilation

10% of HVAC energy use L Ventilation strategies that use outside air for cooling & ventilation, often in

combination w/HVAC; retrofitting not possible – new design only.

Complex design, climate limitations, potential fire

code concerns; no retrofits

Thermal mass and passive

solar heating

Can reduce cooling energy

by 8-18% depending on

climate

L-H Use of thermal mass (brick, concrete, stone) to moderate swings in building’s

indoor temperatures and take advantage of outdoor temperature differentials

between day and night: e.g., bring in cooler outdoor air at night to pre-cool the

building structure (night purge) – reduce cooling loads. The effectiveness of

thermal mass can be enhanced by use of solar heating to provide additional

heating during cooler months (reduce heating loads). Trombe walls – special

design.

Consumer and builder education; aesthetics;

better integration into traditional HVAC design

and construction; cost of more complex system;

specialized design

Materials

Building airtightness 10-40% of HVAC energy

use (depending on climate

and airtightness level)

L Reduce energy loss through unintentional air leakage through the building

envelope; retrofitting possible.

Lack of understanding (of cost and impact); poor

construction practices; limited code regulations

Cool roofing 6-16% of cooling energy

use (depending on climate)

L-M Coatings with high solar reflectance – reflect heat, transfer less heat to the

buildings

Residential: aesthetics – generally white

coatings; commercial: limited life cycle – degrade

properties within few years; limited code

regulations

Electrochromic windows 19-26% of cooling loads;

45-65% of lighting energy

H Adjust light transmission properties of the glazing to minimize solar heat gain and

maximize natural lighting

High first cost: incremental cost for

electrochromic windows are ~US$ 1,000/m2 of

glazing (US$ 93/ft2)

High performance windows 39% of heating and 32% of

cooling energy for HIT; 19%

of cooling energy for high

performance double-pane

low-e (Florida)

M New window technologies: 2nd gen low emmissivity (low-e) coatings; high

insulation technologies (HIT) with triple or quadruple panes, vacuum spaces and

aerogels

Low-e and double pane windows are standard;

HIT windows account for <1% in US due to cost

of US$ 30-50/m2 higher than standard; retrofitting

possible

Improved insulation 12% L Improved insulation products or practices to avoid loss of thermal insulation R-

value; thermal bridging and air leakage are major factors Lack of consumer and builder education and 3rd

party oversight; for retrofit adding sufficient

insulation and effective air sealing could be

expensive

Radiant barriers up to 10% of cooling

energy; much higher impact

when combined with

airtightnes

L Materials with high reflectivity (>0.9) and low emmissivity (< 0.1) – reflect heat

radiated by hot surfaces (e.g., keeps the heat out or in)

Lack of education: when combined with envelope

airtightness impact is significantly higher; adding

more insulation is considered more cost effective;

retrofits might be more attractive – insulation

harder to add

Phase change materials

(PCM)

can save 35% on the

energy used for air

conditioning;

H PCMs provide thermal mass to light structures, moderating temperature

fluctuations and reducing heating and cooling energy consumption. PCMs absorb

heat and slow down the temperature increase within a room, reducing peak

temperatures and delaying the peak loads. As temperatures drop, the absorbed

heat in the PCMs is released, warming the rooms and reducing the heating loads.

PCMs are generally incorporated in the building envelope as boards/panels or

other forms.

High first cost; unproven long-term performance;

new technology

Thermal energy storage

materials (TES)

10-20% of cooling energy H TES systems store a sizeable quantity of “cool” thermal energy at night to meet

cooling needs during the day. When the building requires cooling during the day,

water passes through the TES tank and circulates around the building. The

thermal storage media could be PCM materials or chilled water.

Technology commercialized, but very limited

market penetration; higher first cost and lower

efficiency for ice-based systems, space

constraints for water-based systems

Lighting

Compact Fluorescent lamps

(CFL)

Up to 80% of lighting energy L CFL lamps are smaller, consume 4 -5 times less energy to produce the same

amount of light and last approx. 10 times longer than conventional incandescent

lamps.

Higher first cost (CFLs ~ several dollars premium;

dimmable CFLs ~12 cost premium); more

common in Europe, less in US

Occupancy sensors for

lighting control

5-75% of lighting energy for

individual spaces

L Devices that automatically switch on/off lighting based on space occupancy. Payback uncertainty, commissioning challenges

and false triggering

Photosensor- based lighting

controls

Daylighting can save up to

30% in lighting energy

H Photo-sensor based devices that allow for continuous dimming (combine

daylighting with electric lighting) to adjust lighting output.

High cost, complex installation, commissioning ,

lack of evidence that technology works and

reduces energy use, limited retrofit opportunities Source: World Business Council for Sustainable Development

03 April 2014


Figure 159: Key technological solutions aimed at improving building energy efficiency

Technology Potential savings

Cost

(unsubsidize

d)

low,

medium, or

high

Brief Description Barriers to broad implementation

Air-source heat pump Up to 60% of heating

energy in moderate

climates

H Avoiding use of electric resistance heating is the primary basis for energy savings:

climates where the length of the heating season & the range of outdoor

temperatures make it possible to meet heating requirements w/little or no electric

resistance back-up.

Higher first cost versus electric resistance

heating

Condensing boilers and

furnaces

M-H Condensing boilers and furnaces achieve 90-95% efficiencies versus non-

condensing boilers at 80-85%; require stainless steel heat exchangers and

special venting.

High cost (US$ 750-1,500); lack of information

Condensing water heater 16% M-H Condensing water heaters achieve energy factor of 0.86 (residential) to 0.95

(commercial), versus conventional non-condensing water heaters.

High first cost; space required

Dedicated outdoor air systems

(DOAS)

>10% of total space

heating;

M-H DOAS condition the outdoor make-up air separately from the return air: effective

ventilation and dehumidification. Saves energy by reducing total ventilation airflow,

the energy to condition ventilation air, decoupling temperature and humidity

control.

Limited application: perception of higher cost

even though this might not be the case

Displacement ventilation (DV) 30-70% reduction in cooling

equipment energy use and

35-50% increase in

ventilation energy

consumption

H A cooling technology that uses a low-velocity air stream vs. turbulent jets. DV

reduces energy consumption relative to conventional mixing ventilation reducing

thermal envelope loads in cooling climates and increasing economizer operation in

moderate climates.

First cost premium not well understood –

perceived high; technology not well understood

Electric heat- pump water

heater (HPWH)

40-70% less than electric

resistance water heaters;

30% less than gas-fired

water heaters

H Uses vapor compression to move heat from the surrounding air to the hot-water

storage tank via a heat exchanger. Sometimes integrated with the hot-water tank.

High first cost; noise; poor reliability of early

HPWH equipment

Heat and energy recovery

ventilation (ERV)

Reduces annual cooling by -

33% while ventilation energy

increases by 25%; highly

dependent on climate

H Uses the exhaust flow to provide conditioning of the outdoor air: during cooling

season the cooler indoor air pre-cools the incoming air; during the heating season

the warmer indoor air pre-heats the incoming outdoor air.

Perception of higher cost; Perception of greater

maintenance due to moving parts

Heating-only absorption heat

pump

In heating mode can save

40% energy, when

compared to conventional

furnaces and boilers.

H Thermally activated heat pump (e.g., heat input rather than mechanical input);

simpler than the reversible counterpart; can be used for space heating, water

heating or both.

High first cost; some safety issues; limited

commercial availability

Modulating (variable

speed/capacity) compressors

20% of annual AC energy H Ability of modulating compressors to meet partial compressor loads better than

single capacity compressors, hence reduce energy consumption by reducing

loading; multiple technology approaches.

Longer simple pay-back periods (e.g., >10 years)

Radiant ceiling panels 15-20% of cooling energy,

with larger savings in warm,

dry areas

M-H «Chilled beam» systems – chilled water flows through pipes in the ceilings,

cooling the room through natural convection and radiation (passive panels, no

forced air). Each heat transfer mode accounts for ~1/2 of the cooling capacity of

passive radiant cooling panels.

Perception of higher first cost; unfamiliar with

technology; requires upfront coordination;

potential condensation problems – a DOAS is

needed to manage latent loads and avoid

condensation in many climates

Commercial combined heat

and power (CHP)

4-30% of building primary

energy consumption

M-H Integrated system that uses «waste» thermal energy produced in the power-

generation process to supplement space-heating, water heating, dehumidification.

System complexity; space requirement;

noise/vibration; uncertainties on future utility

rates; uneconomical performance in all but

highest utility rates areas

Residential combined heat

and power (micro-CHP)

Est. 55% of waste heat

could be recovered ,

displacing -50% of annual

space and water heating

primary energy

consumption

H Integrated system that uses «waste» thermal energy produced in the power-

generation process to provide heat for household space-heating, water heating,

dehumidification.

High first cost; complexity; poor economics

based on energy-cost savings

Variable-speed / ECPM 50% savings relative to

single-speed motor

H ECPMs offer variable-speed capability at no additional cost while achieving

benefits of improved efficiency and reliability.

High cost, low volume

Water-cooled condensers 20-40% reduction in cooling

energy consumption

M-H Uses water (instead of air) to transfer heat from the refrigerant. Maintenance issues; liability concerns from

biological growth, most notably legionella; cost

Electronics with low standby

power

Low but can add up ? Electronic devices can continue to provide some functionality when off, while

decreasing the power draw in the off mode.

Cost?

Enabling power management

for office equipment

Can achieve 36% reduction

in energy consumption by

all office equipment in US

? Low power sleep mode after a period of inactivity; on-mode power draw for most

devices is at least one order of magnitude greater than sleep-mode power draw -

significant energy savings potential.

Network connectivity issues, software

incompatibility, central power management, lack

of awareness

Heat pump dryer 50% less energy for drying

the clothes

H Uses a vapor-compression cycle to pump heat from the dryer’s exhaust flow to

the air entering the dryer.

First cost (payback 15 years); commercialized in

Europe, not US; concerns about reliability of new,

unfamiliar technology

Horizontal axis washing

machines

35-55% lower energy

consumption than the new,

2007 US efficiency

standard for clothes

washers

M Horizontal-axis washers use a smaller volume of heated water than vertical-axis

washers.

First cost (US$ 500?); some people in US prefer

top-loading washers for ease of loading

Non-biomass cooking, space

heating, and water heating

? Biomass-based cooking and heating generally has much lower site energy

efficiencies than conventional building equipment.

In developing countries first cost and availability of

gas and electricity

Services

Retro-commissioning 5 to 20% of building HVAC,

lighting, & large refrigeration

system energy

consumption

M Service performed in existing buildings to identify and fix potential problems so

that building systems function properly. The tests can uncover energy savings

opportunities.

First cost (typically US$ 2.50-3.50/ m2),

perceptions of expense, lack of awareness of

benefits and practical concerns

Ongoing commissioning 5-20% M Similar to retro-comissioning but carried out regularly instead of once. Lack of awareness about energy waste; uncertain

first cost

Duct sealing Sealing can reduce leakage

by about 80% and heating

and cooling energy needs

by up to 35%

L Duct leakage increases HVAC energy consumption because the heated or chilled

air that leaks into unconditioned spaces increases the run time of the heating or

cooling equipment. Aerosol duct sealant systems can be used to patch holes and

cracks in existing ducts using an adhesive-aerosol spray.

Additional costs for sealing a leaky duct system

(US$ 0.40-0.50/ft2)for a commercial building), very

little awareness of the prevalence and energy

impact of duct leakage

Clean Energy

Geothermal heat pumps 20-50% depending on

climate

M Systems that exchange heat between buildings and the ground (ground-coupled

heat pumps) or underground water (water-source heat pump).

High first cost, and some ground conditions are

unsuitable

Solar thermal heating Not known 40-80% of water

heating energy

M Liquid is heated by being pumped through a collector, usually placed on the roof,

and passed through heat exchangers that transfer the collected energy for water

or space heating.

First cost and solar hot water systems may not

be as efficient as other high efficiency options

such as indirect boiler hot water heating and high

efficiency on-demand gas water heaters

Solar photovoltaic Not known 50-80% of

electrical energy,

depending on climate

H Converts sun energy into electricity that can be used on site, or sent back into the

grid (where infrastructure exists). The 2 largest segments are grid-connected

distributed power application (62%) in developed countries and PV applications

(primarily off- grid applications) in developing countries (21%).

Cost is still high, if non-subsidized, but has

decreased by a factor of 7 over the last 20 years

and are expected to decline further with

increasing production volume

Wind turbines Not known Dependent on

site wind characteristics

H Wind turbines convert the kinetic energy in the wind into mechanical power, and a

generator converts this mechanical power into electricity. Utility-scale turbines

range in size from 100 kilowatts to several megawatts. Larger turbines are

grouped together into wind farms, which provide bulk power to the electrical grid.

Single small turbines, below 100 kilowatts, are used for homes,

telecommunications dishes, or water pumping.

Relatively new technology, not fully penetrated;

the energy balance/ payback period for wind

turbines is favorable, compared to competing

technologies

Heating, Ventilation and Air Conditioning (HVAC)

Appliances and Office equipments

Source: World Business Council for Sustainable Development

03 April 2014


Companies Mentioned (Price as of 28-Mar-2014)

ABB (ABBN.VX, SFr22.68) AIXTRON (AIXGn.DE, €11.85) ARCADIS (ARDS.AS, €27.88) ARM Holdings (ARM.L, 977.5p) Aalberts Inds (AALB.AS, €25.23) Acuity Brands (AYI.N, $130.22) Aggreko (AGGK.L, 1504.0p) Alfa Laval (ALFA.ST, Skr173.7) Apogee Enter (APOG.OQ, $32.0) Armstrong World (AWI.N, $52.52) Asahi Glass (5201.T, ¥596) Asahi Kasei (3407.T, ¥701) Atkins WS (ATKW.L, 1405.0p) Atos (ATOS.PA, €65.67) BAM Groep (BAMN.AS, €4.299) BASF (BASFn.DE, €80.41) Balfour Beatty (BALF.L, 298.9p) Beacon Roofing (BECN.OQ, $38.29) Belimo Holding (BEAN.S, SFr2420.0) Berkeley Group Holdings Plc (BKGH.L, 2609.0p) Bilfinger (GBFG.DE, €91.6) Bouygues (BOUY.PA, €30.28) British Land (BLND.L, 659.0p) Brook Office (BPO.TO, C$21.37) CBRE Group (CBG.N, $26.85) CSCEC (601668.SS, Rmb2.93) Capgemini (CAPP.PA, €55.18) Carillion (CLLN.L, 354.5p) Caverion (CAV1V.HE, €7.6) Central Glass (4044.T, ¥332) Centrotec (CEVG.DE, €18.75) Charter Hall Group (CHC.AX, A$3.92) Comfort Sys (FIX.N, $15.33) Commonwealth Property Office Fund (CPA.AX, A$1.24) Corp Office Prop (OFC.N, $26.62) Cree (CREE.OQ, $55.02) Daikin Industries (6367.T, ¥5,654) Derwent London (DLN.L, 2714.0p) Dialight (DIAL.L, 881.5p) Eastman Chemical (EMN.N, $85.6) Eaton Corporation (ETN.N, $74.23) Emerson (EMR.N, $66.76) Enel (ENEI.MI, €4.11) EnerNOC (ENOC.OQ, $21.49) Epistar Corporation (2448.TW, NT$72.5) Fagerhult (FAG.ST, Skr306.0) Fluor (FLR.N, $76.41) G & L Beijer (BEIJb.ST, Skr125.5) GDF Suez (GSZ.PA, €19.96) GREE (000651.SZ, Rmb27.6) GS Yuasa (6674.T, ¥544) Geberit (GEBN.VX, SFr288.7) Gemalto (GTO.AS, €84.4) Gold Mantis (002081.SZ, Rmb18.18) Grontmij NV (GRONc.AS, €3.649) Halma (HLMA.L, 578.5p) Havells India Ltd (HVEL.BO, Rs908.95) Hitachi (6501.T, ¥755) Hochtief (HOTG.F, €65.26) Honeywell International Inc. (HON.N, $90.89) Hubbell (HUBb.N, $117.7) Hyder Consulting (HYC.L, 428.25p) IMI Plc (IMI.L, 1453.0p) IMTECH NV (IMUN.AS, €1.973) Infineon (IFXGn.DE, €8.58) Ingersoll-Rand Plc (IR.N, $56.54) Interface (TILE.OQ, $19.59) Interserve (IRV.L, 708.5p) Investa Office Fund (IOF.AX, A$3.21) JM (JM.ST, Skr210.4) Jacobs Engineering (JEC.N, $63.12) James Hardie Industries SE (JHX.AX, A$14.23) Johnson Controls (JCI.N, $46.55) Jones Lang (JLL.N, $117.5) KABA (KABN.S, SFr422.25) KB Home (KBH.N, $17.02) Kennedy US (KW.N, $21.65) Kier Group (KIE.L, 1647.0p) Kingspan (KSP.I, €13.955) Knoll (KNL.N, $17.78) Kone Corporation (KNEBV.HE, €30.24) LII (LII.N, $90.22)

LIXIL Group (5938.T, ¥2,770) Land Securities (LAND.L, 1034.0p) Legrand SA (LEGD.PA, €45.03) Liberty Prop Tst (LPT.N, $36.55) Louisiana-Pacific Corp. (LPX.N, $16.56) Lumens (038060.KQ, W13,350) MFC (MFCP.PA, €35.92) Martin Mari Mat (MLM.N, $126.95) Masco (MAS.N, $22.04) Mears Grop (MERG.L, 511.0p) Meisei Indu (1976.T, ¥457) Melrose (MRON.L, 295.0p) Mitie Group (MTO.L, 321.3p) Mitsubishi Electric (6503.T, ¥1,140) Mitsubishi Heavy Industries (7011.T, ¥589) Mohawk Industries (MHK.N, $134.73) NCC (NCCa.ST, Skr232.3) NEC (6701.T, ¥315) NSG Group (5202.T, ¥146) NVC Lighting (2222.HK, HK$2.17) Nibe Industrier (NIBEb.ST, Skr164.5) Nidec (6594.T, ¥6,072) Orient Landscape (002310.SZ, Rmb25.49) Osaki Electric (6644.T, ¥602) Osram Licht (OSRn.DE, €45.92) Owens Corning (OC.N, $42.75) Pentair Ltd. (PNR.N, $77.66) Philips (PHG.AS, €25.86) Poyry (POY1V.HE, €4.16) RPS Group (RPS.L, 312.7p) Rational (RAAG.DE, €257.4) Regal Beloit (RBC.N, $71.3) Rexel (RXL.PA, €18.805) Rexnord Corporation (RXN.N, $28.48) Rinnai (5947.T, ¥8,770) Rockwool Intl (ROCKb.CO, Dkr1048.0) SIG (SHI.L, 200.4p) SPX (SPW.N, $96.78) STMicroelectronics (STM.PA, €6.73) Saint-Gobain (SGOB.PA, €43.65) Schindler-Holding AG (SCHP.VX, SFr129.5) Schneider Electric (SCHN.PA, €64.45) Sekisui House (1928.T, ¥1,279) Shui On Land (0272.HK, HK$2.12) Siemens (SIEGn.DE, €98.97) Sika (SIK.VX, SFr3526.0) Skanska AB (SKAb.ST, Skr150.0) Soitec (SOIT.PA, €2.25) SolarCity (SCTY.OQ, $61.38) Spirax Sarco (SPX.L, 2850.0p) Stantec (STN.TO, C$66.28) Steelcase (SCS.N, $16.3) Strabag (STRV.VI, €18.5) Sumitomo Electric Industries (5802.T, ¥1,478) SunPower Corp. (SPWR.OQ, $31.85) Sweco (SWECb.ST, Skr104.5) TOTO (5332.T, ¥1,414) Taylor Wimpey Plc (TW.L, 116.7p) Tetra Tech (TTEK.OQ, $29.19) Texas Industries (TXI.N, $88.62) Toshiba (6502.T, ¥429) Toyo Tanso (5310.T, ¥2,269) Trakya Cam (TRKCM.IS, TL2.05) Travis Perkins (TPK.L, 1876.0p) Trex Co (TREX.N, $71.13) Tyco International, Ltd (TYC.N, $41.81) UGL Limited (UGL.AX, A$6.99) URS Corporation (URS.N, $47.17) United Technologies Corp (UTX.N, $114.81) Uponor (UNR1V.HE, €13.15) Uralita (URA.MC, €1.17) Valmont Industries (VMI.N, $146.25) Vicat (VCTP.PA, €60.4) Vinci (SGEF.PA, €54.29) Vulcan Matls (VMC.N, $66.39) Watsco, Inc. (WSO.N, $98.87) Wesco International (WCC.N, $81.88) Whirlpool (WHR.N, $146.75) Wienerberger (WBSV.VI, €13.835) Wolseley (WOS.L, 3447.0p) YIT OYJ (YTY1V.HE, €7.64) Zumtobel (ZUMV.VI, €17.575)

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Disclosure Appendix

Important Global Disclosures

The analysts identified in this report each certify, with respect to the companies or securities that the individual analyzes, that (1) the views expressed in this report accurately reflect his or her personal views about all of the subject companies and securities and (2) no part of his or her compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report.

The analyst(s) responsible for preparing this research report received Compensation that is based upon various factors including Credit Suisse's total revenues, a portion of which are generated by Credit Suisse's investment banking activities

As of December 10, 2012 Analysts’ stock rating are defined as follows:

Outperform (O) : The stock’s total return is expected to outperform the relevant benchmark*over the next 12 months.

Neutral (N) : The stock’s total return is expected to be in line with the relevant benchmark* over the next 12 months.

Underperform (U) : The stock’s total return is expected to underperform the relevant benchmark* over the next 12 months.

*Relevant benchmark by region: As of 10th December 2012, Japanese ratings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attract ive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. As of 2nd October 2012, U.S. and Canadian as well as European ra tings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. For Latin Ame rican and non-Japan Asia stocks, ratings are based on a stock’s total return relative to the average total return of the relevant country or regional benchmark; 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.

Credit Suisse's distribution of stock ratings (and banking clients) is:

Global Ratings Distribution

Rating Versus universe (%) Of which banking clients (%)

Outperform/Buy* 43% (53% banking clients)

Neutral/Hold* 40% (50% banking clients)

Underperform/Sell* 14% (45% banking clients)

Restricted 2%

*For purposes of the NYSE and NASD ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, and Underperform mos t 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.

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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.

See the Companies Mentioned section for full company names

The subject company (STM.PA, VMI.N, HLMA.L, 6501.T, UTX.N, FLR.N, WHR.N, IFXGn.DE, HON.N, URS.N, RXN.N, ALFA.ST, WCC.N, BKGH.L, 5938.T, IMI.L, JEC.N, TPK.L, CPA.AX, ABBN.VX, SCHN.PA, BASFn.DE, EMR.N, 6701.T, WSO.N, SCTY.OQ, IR.N, CAPP.PA, SIEGn.DE, SGEF.PA, SPWR.OQ, TW.L, GSZ.PA, 2448.TW, 5802.T, SGOB.PA, CREE.OQ, IOF.AX, 6502.T, RBC.N, KBH.N, UGL.AX, GTO.AS, SPW.N, SIK.VX, ENEI.MI, ENOC.OQ) currently is, or was during the 12-month period preceding the date of distribution of this report, a client of Credit Suisse.

Credit Suisse provided investment banking services to the subject company (SCHP.VX, WHR.N, RXN.N, WCC.N, 5938.T, CPA.AX, ABBN.VX, BASFn.DE, 6701.T, SCTY.OQ, IR.N, SGEF.PA, SPWR.OQ, TW.L, SGOB.PA, RBC.N, KBH.N, SPW.N, SIK.VX, ENEI.MI) within the past 12 months.

Credit Suisse provided non-investment banking services to the subject company (STM.PA, VMI.N, 6501.T, WHR.N, IFXGn.DE, HON.N, BKGH.L, IMI.L, ABBN.VX, BASFn.DE, EMR.N, IR.N, CAPP.PA, SIEGn.DE, SPWR.OQ, GSZ.PA, 5802.T, IOF.AX, KBH.N, ENEI.MI) within the past 12 months

Credit Suisse has managed or co-managed a public offering of securities for the subject company (SCHP.VX, BASFn.DE, SCTY.OQ, IR.N, SPWR.OQ, KBH.N, SIK.VX, ENEI.MI) within the past 12 months.

Credit Suisse has received investment banking related compensation from the subject company (SCHP.VX, WHR.N, RXN.N, WCC.N, 5938.T, CPA.AX, ABBN.VX, BASFn.DE, 6701.T, SCTY.OQ, IR.N, SGEF.PA, SPWR.OQ, TW.L, SGOB.PA, RBC.N, KBH.N, SPW.N, SIK.VX, ENEI.MI) within the past 12 months

Credit Suisse expects to receive or intends to seek investment banking related compensation from the subject company (VMI.N, HLMA.L, 6501.T, UTX.N, FLR.N, WHR.N, IFXGn.DE, HON.N, URS.N, 6503.T, 6674.T, 5202.T, RXN.N, ALFA.ST, WCC.N, 7011.T, MAS.N, 5938.T, JEC.N, TPK.L, CPA.AX, ABBN.VX, SCHN.PA, BASFn.DE, EMR.N, 6701.T, WSO.N, SCTY.OQ, IR.N, CAPP.PA, 1928.T, SGEF.PA, SPWR.OQ, TW.L, 6367.T, GSZ.PA, BOUY.PA, 3407.T, 6594.T, 2448.TW, 5802.T, ATOS.PA, SGOB.PA, 5201.T, CREE.OQ, 6502.T, RBC.N, MHK.N, KBH.N, UGL.AX, GTO.AS, SPW.N, SIK.VX, ENEI.MI, ENOC.OQ) within the next 3 months.

Credit Suisse has received compensation for products and services other than investment banking services from the subject company (STM.PA, VMI.N, 6501.T, WHR.N, IFXGn.DE, HON.N, BKGH.L, IMI.L, ABBN.VX, BASFn.DE, EMR.N, IR.N, CAPP.PA, SIEGn.DE, SPWR.OQ, GSZ.PA, 5802.T, IOF.AX, KBH.N, ENEI.MI) within the past 12 months

As of the date of this report, Credit Suisse makes a market in the following subject companies (VMI.N, PNR.N, UTX.N, FLR.N, WHR.N, HON.N, URS.N, RXN.N, WCC.N, MAS.N, JEC.N, EMR.N, 6701.T, WSO.N, SCTY.OQ, IR.N, TYC.N, ETN.N, SPWR.OQ, CREE.OQ, 6502.T, RBC.N, MHK.N, KBH.N, SPW.N, ENOC.OQ).

As of the end of the preceding month, Credit Suisse beneficially own 1% or more of a class of common equity securities of (5202.T, ABBN.VX, SCTY.OQ, 1928.T, SIEGn.DE, TW.L, 2448.TW, ATOS.PA, ARM.L, PHG.AS, SIK.VX).

Credit Suisse has a material conflict of interest with the subject company (UTX.N) . Credit Suisse Securities (USA) LLC is acting as an advisor to Goodrich (GR) in a potential transaction with United Technologies Corp.

Credit Suisse has a material conflict of interest with the subject company (URS.N) . Credit Suisse Securities (Canada), Inc provided a Fairness Opinion and acted as financial advisor to Flint Energy Services Ltd. on the announced acquisition by URS Corporation.

Credit Suisse has a material conflict of interest with the subject company (RXN.N) . Credit Suisse served as co-managing bookrunner of Rexnord's Initial Public Offering

Credit Suisse has a material conflict of interest with the subject company (5938.T) . Credit Suisse is acting as financial advisor to TPG Capital and DLJ Merchant Banking Partners on the sale of their stake in Grohe S.A to to LIXIL Group and Development Bank of Japan.

Credit Suisse has a material conflict of interest with the subject company (6502.T) . Credit Suisse Securities (USA) LLC is acting as an advisor to Landis+Gyr on the announced acquisition by Toshiba Corporation. This acquisition remains subject to regulatory approvals and other customary closing conditions.

Credit Suisse has a material conflict of interest with the subject company (SPW.N) . Credit Suisse Securities USA LLC acted as financial advisor to SPX Corp in the sale of its Service Solutions business to Robert Bosch GmbBH.

Important Regional Disclosures

Singapore recipients should contact Credit Suisse AG, Singapore Branch for any matters arising from this research report.

The analyst(s) involved in the preparation of this report have not visited the material operations of the subject company (STM.PA, VMI.N, PNR.N, SCHP.VX, HLMA.L, 6501.T, UTX.N, AGGK.L, FLR.N, JHX.AX, CHC.AX, WOS.L, WHR.N, LEGD.PA, GEBN.VX, IFXGn.DE, HON.N, URS.N, 6503.T, 6674.T, 5332.T, 5202.T, RXN.N, ALFA.ST, YTY1V.HE, MRON.L, KNEBV.HE, ARDS.AS, WCC.N, BKGH.L, 7011.T, MAS.N, 5938.T, 4044.T, IMI.L, JEC.N, TPK.L, CPA.AX, ABBN.VX, 5310.T, SCHN.PA, BASFn.DE, EMR.N, 6701.T, WSO.N, SCTY.OQ, IR.N, CAPP.PA, TYC.N, 1928.T, SIEGn.DE, SGEF.PA, ETN.N, SPWR.OQ, TW.L, 6367.T, GSZ.PA, BOUY.PA, 3407.T, 2448.TW, 5802.T, ATOS.PA, 5947.T, SGOB.PA, ARM.L, 5201.T, PHG.AS, CREE.OQ, IOF.AX, 6502.T, RBC.N, SPX.L, UGL.AX, GTO.AS, SPW.N, SIK.VX, ENEI.MI, KABN.S, ENOC.OQ) within the past 12 months

An analyst involved in the preparation of this report has visited certain material operations of the subject company (6594.T, MHK.N, KBH.N) within the past 12 months

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The travel expenses of the analyst in connection with such visits were not paid or reimbursed by the subject company, other than de minimus local travel expenses.

Restrictions on certain Canadian securities are indicated by the following abbreviations: NVS--Non-Voting shares; RVS--Restricted Voting Shares; SVS--Subordinate Voting Shares.

Individuals receiving this report from a Canadian investment dealer that is not affiliated with Credit Suisse should be advised that this report may not contain regulatory disclosures the non-affiliated Canadian investment dealer would be required to make if this were its own report.

For Credit Suisse Securities (Canada), Inc.'s policies and procedures regarding the dissemination of equity research, please visit http://www.csfb.com/legal_terms/canada_research_policy.shtml.

Credit Suisse Securities (Europe) Limited (Credit Suisse) acts as broker to (HLMA.L, TPK.L).

The following disclosed European company/ies have estimates that comply with IFRS: (HLMA.L, WOS.L, LEGD.PA, ALFA.ST, BKGH.L, IMI.L, TPK.L, ABBN.VX, SCHN.PA, BASFn.DE, 6701.T, CAPP.PA, SIEGn.DE, TW.L, GSZ.PA, BOUY.PA, 3407.T, ATOS.PA, SGOB.PA, PHG.AS, SPX.L, SIK.VX, ENEI.MI).

Credit Suisse has acted as lead manager or syndicate member in a public offering of securities for the subject company (SCHP.VX, FLR.N, URS.N, 5938.T, ABBN.VX, BASFn.DE, SCTY.OQ, IR.N, TYC.N, SIEGn.DE, ETN.N, SPWR.OQ, TW.L, PHG.AS, RBC.N, KBH.N, SIK.VX, ENEI.MI) within the past 3 years.

As of the end of the preceding month, Credit Suisse beneficially owned the following percentages of the voting rights of the subject companies: 1.0% or more of SCHP.VX, 1.0% or more of GEBN.VX

As of the date of this report, Credit Suisse acts as a market maker or liquidity provider in the equities securities that are the subject of this report.

Principal is not guaranteed in the case of equities because equity prices are variable.

Commission is the commission rate or the amount agreed with a customer when setting up an account or at any time after that.

Taiwanese Disclosures: This research report is for reference only. Investors should carefully consider their own investment risk. Investment results are the responsibility of the individual investor. Reports may not be reprinted without permission of CS. Reports written by Taiwan based analysts on non-Taiwan listed companies are not considered recommendations to buy or sell securities under Taiwan Stock Exchange Operational Regulations Governing Securities Firms Recommending Trades in Securities to Customers.

To the extent this is a report authored in whole or in part by a non-U.S. analyst and is made available in the U.S., the following are important disclosures regarding any non-U.S. analyst contributors: The non-U.S. research analysts listed below (if any) are not registered/qualified as research analysts with FINRA. The non-U.S. research analysts listed below may not be associated persons of CSSU and therefore may not be subject to the NASD Rule 2711 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.

Credit Suisse Securities (Japan) Limited .. Shinji Kuroda ; Yunchao Zhao ; Jun Yamaguchi ; Akinori Kanemoto ; Yohei Ohya ; Masahiro Mochizuki ; Atsuro Takemura

Credit Suisse Equities (Australia) Limited ....................................................................................... John Richmond ; Stephen Rich ; Mikhail Mohl

Credit Suisse Securities (Europe) Limited................ Eugene Klerk ; Michel Debs ; Vincent Gilles ; Andre Kukhnin CFA ; Patrick Laager ; Simon Toennessen ; Max Yates ; Jonathan Hurn, CFA ; Tiantian Li ; Ashlee Ramanathan ; Richard Kersley

Credit Suisse AG, Taipei Securities Branch ........................................................................................................................ Derrick Yang ; Jerry Su

Important Credit Suisse HOLT Disclosures

With respect to the analysis in this report based on the Credit Suisse HOLT methodology, Credit Suisse certifies that (1) the views expressed in this report accurately reflect the Credit Suisse HOLT methodology and (2) no part of the Firm’s compensation was, is, or will be directly related to the specific views disclosed in this report.

The Credit Suisse HOLT methodology does not assign ratings to a security. It is an analytical tool that involves use of a set of proprietary quantitative algorithms and warranted value calculations, collectively called the Credit Suisse HOLT valuation model, that are consistently applied to all the companies included in its database. Third-party data (including consensus earnings estimates) are systematically translated into a number of default algorithms available in the Credit Suisse HOLT valuation model. The source financial statement, pricing, and earnings data provided by outside data vendors are subject to quality control and may also be adjusted to more closely measure the underlying economics of firm performance. The adjustments provide consistency when analyzing a single company across time, or analyzing multiple companies across industries or national borders. The default scenario that is produced by the Credit Suisse HOLT valuation model establishes the baseline valuation for a security, and a user then may adjust the default variables to produce alternative scenarios, any of which could occur.

Additional information about the Credit Suisse HOLT methodology is available on request.

The Credit Suisse HOLT methodology does not assign a price target to a security. The default scenario that is produced by the Credit Suisse HOLT valuation model establishes a warranted price for a security, and as the third-party data are updated, the warranted price may also change. The default variable may also be adjusted to produce alternative warranted prices, any of which could occur.

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CFROI®, HOLT, HOLTfolio, ValueSearch, AggreGator, Signal Flag and “Powered by HOLT” are trademarks or service marks or registered trademarks or registered service marks of Credit Suisse or its affiliates in the United States and other countries. HOLT is a corporate performance and valuation advisory service of Credit Suisse.

For Credit Suisse disclosure information on other companies mentioned in this report, please visit the website at https://rave.credit-suisse.com/disclosures or call +1 (877) 291-2683.

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References in this report to Credit Suisse include all of the subsidiaries and affiliates of Credit Suisse operating under its investment banking division. For more information on our structure, please use the following link: https://www.credit-suisse.com/who_we_are/en/This report may contain material that is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would subject Credit Suisse AG or its affiliates ("CS") to any registration or licensing requirement within such jurisdiction. All material presented in this report, unless specifically indicated otherwise, is under copyright to CS. None of the material, nor its content, nor any copy of it, may be altered in any way, transmitted to, copied or distributed to any other party, without the prior express written permission of CS. All trademarks, service marks and logos used in this report are trademarks or service marks or registered trademarks or service marks of CS or its affiliates. The information, tools and material presented in this report are provided to you for information purposes only and are not to be used or considered as an offer or the solicitation of an offer to sell or to buy or subscribe for securities or other financial instruments. CS may not have taken any steps to ensure that the securities referred to in this report are suitable for any particular investor. CS will not treat recipients of this report as its customers by virtue of their receiving this report. 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