australia & nz first edition 2017 06 19
Post on 16-Nov-2021
4 Views
Preview:
TRANSCRIPT
Note: If the rating of a company shown on the cover of First Edition is in bold type, a rating change has taken place
CREDIT SUISSE SECURITIES RESEARCH & ANALYTICS BEYOND INFORMATIONTM
Client-Driven Solutions, Insights, and Access
EQUITY RESEARCH CREDIT SUISSE EQUITIES (AUSTRALIA) LIMITED ABN 35 068 232 708 ACN 068 232 708 | Participating Organisation of the Australian Stock Exchange
Australia & NZ Daily Research Monday, 19 June 2017
COMPANIES & SECTORS
Aussie Transport & Infrastructure 8 Week 24 – US Inventory growth remains weak
BSL BlueScope Steel OUTPERFORM 23 Arrium preferred bidder – a minor risk?
CSL CSL OUTPERFORM 25 China – same plasma, different economics?
FXL FlexiGroup NEUTRAL 31 Certegy presents uncertainty
SGM Sims Metal Management UNDERPERFORM 37 Schnitzer Q3, strong volumes but margin flat
S32 South 32 OUTPERFORM 42 Un-chartered waters?
SXL Southern Cross Media Group OUTPERFORM 44 Upgrade on improving industry landscape
ATM The a2 Milk Company OUTPERFORM 46 .NZ Selling them as fast as it is making them
RESULT PREVIEW
MTS Metcash OUTPERFORM 51 Difficult result to predict; reports on 26 June
DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, LEGAL ENTITY DISCLOSURE AND THE STATUS OF NON-US ANALYSTS. US Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.
MARKET EVENTS
New Motor Vehicle Sales YoY (May)
19 Jun
US, Chicago Fed President Charles Evans Speaks at NYU (with Q&A)
19 Jun
NZ, Westpac Consumer Confidence (2Q)
19 Jun
NZ, Performance Services Index (May)
19 Jun
CH, May Property Prices 19 Jun
UPCOMING CONFERENCES
Global Chemicals and Agriculture Conference – London
20 Jun
China Consumer Corporate Day – Hong Kong
22 Jun
For more scheduled conferences refer to page 2
TABLES
Credit Suisse Ratings – Australia 54
Top 100 Earnings & Dividends 57
Emerging Companies Earnings & Dividends
60
Sector Aggregates 63
Weekly Market Calendar 65
Featured Research
2016 Best Piece of New ESG Research – Get Inside the Carbon Black Box, Look Down the Carbon Value Chain This piece of research was announced as the winner of the Best Piece of New ESG research at the 2016 ESG RA awards on 9 May 2017. The report presents an innovative framework for analysing the important risk of climate change in the investment decision making process. Some comments from the ESG Research Australia Awards: “Substantial thought leadership in this piece. A futurist's dream.” “Incredibly original for a topic that is often focusing on emissions alone. A pragmatic and logical thought process which leads to actionable insights.” “The most interesting and thoughtful research of the year.” (Link)
IDP Education We initiate on IEL with A$4.00 target price, UNDERPERFORM rating. Despite attractive industry fundamentals in international education and a strong recent growth track record, we view IEL as expensive given exposure to regulatory changes in Student Placement and multiple risks in Testing. (Link)
Primary Health Care Flexible GP model has diluted ROIC: We believe PRY's move to implement flexible GP contracts has resulted in reduced billings, increased operating costs and diluted the return on invested capital for the GP business (which we estimate accounts for ~25% of group EBITDA). (Link)
Australian FTA TV Sector TV sector may be on the cusp of biggest shake-up in years. TEN’s financial position is looking increasingly difficult. Step up in market share for Seven and Nine. NEC best way to play the theme. (Link)
HGG We have updated our merger model for the merger documentation. In aggregate the shift to US GAAP and JNS restatements only impacted merged earnings by -3% (at the diluted EPS level). We remain supportive of the merger and
see its strategic and financial merits (~20% accretion by FY19E). (Link)
Australia and NZ First Edition 2
Australia & NZ Market Reports Australia Index +/- %Day %Wk %Mth %YrRol
All Ordinaries 5808.2 11.5 0.2% 1.6% -0.2% 11.0% S&P/ASX 50 5728.9 10.4 0.2% 1.7% -0.6% 12.7% S&P/ASX 200 5774.0 10.8 0.2% 1.7% -0.2% 12.2% Banks 8320.8 0.0 0.0% 1.9% -2.8% 14.4% Insurance 4023.5 0.0 0.0% 1.3% 0.0% 14.3% REITs 1437.4 10.9 0.8% 4.3% 4.2% -0.7% Industrials 5868.9 -22.6 -0.4% 1.3% 3.2% 13.5% Materials 9637.9 -38.6 -0.4% -1.5% -1.1% 22.8% Cons. Discreet 2243.8 10.4 0.5% 2.6% 2.5% 9.6% Cons. Staples 9237.3 -5.4 -0.1% 1.9% -2.5% 11.8% NEW ZEALAND
NZX 50 7552.8 36.400 0.5% 1.6% 1.8% 9.6%
Currencies, Interest Rates & Gold
Index +/- %Day %Wk %Mth %YrRol
AUD/USD 0.759 0.002 0.2% 0.9% 2.2% 3.2% AUD/GBP 0.594 0.000 0.0% 0.6% 3.8% 14.6% EURAUD 1.470 0.000 0.0% -1.0% -2.0% -3.5% NZD/USD 0.722 0.002 0.2% 0.2% 4.1% 2.6% AUD/NZD 1.051 0.000 0.0% 0.7% -1.8% 0.6% TWI 0.649 0.005 0.8% 0.9% 1.6% 4.7% AU 10Y 2.424 0.088 3.8% -0.6% -2.3% 14.7% NZ 10Y 2.795 0.030 1.1% 0.4% -3.0% 13.8% US 10Y 2.172 0.036 1.7% -1.2% -2.8% 37.4% UK 10Y 1.040 0.114 12.3% 3.7% -2.1% DE 10Y 0.286 0.053 22.7% 12.2% -22.1% -1436.4% Gold Spot 1,254 -7.180 -0.6% -1.0% -0.5% -2.0%
Best Performers Worst Performers
Close % ‘000 Close % ‘000
RCG 0.83 12.2 5823 Monash IVF Group 1.67 -5.1 905 Baby Bunting Grp 1.82 12.0 490 AMA Group 0.94 -5.1 592
The a2 Milk Company 3.69 10.1 13088 Mineral Resources 10.21 -5.0 2951 Magnis Resources 0.56 9.8 1877 Liquefied 0.61 -4.7 844 CSG 0.59 9.3 598 Asaleo Care 1.47 -4.6 2051 Cardno 1.19 7.7 930 St Barbara Mining 2.83 -4.4 33791 Scottish Pacific 2.54 6.7 466 Beadell Resource 0.22 -4.4 75102 Sealink Travel 4.17 6.4 344 Aconex 4.11 -4.4 811 Ainsworth Game 2.48 6.0 1381 Gold Road 0.70 -4.1 554
Galaxy Rsrcs 1.64 5.8 11479 Servcorp 5.60 -3.9 207 Lynas Corp 0.09 5.6 27129 Reliance Worldwide 3.49 -3.9 2457 Nanosonics 2.68 5.5 2143 OceanaGold Corp 4.20 -3.9 1069
Source: ASX, Bloomberg, Reuters
Commodity Prices Spot* Forward Curve Credit Suisse Forecasts
3mth 15mth 2Q17 2017 2018
Bulks Iron Ore $/t 79.7 95.0 76.4 57.5 Coking Coal $/t 230.0 208.8 130.0 Thermal Coal $/t 61.8 80.0 77.9 68.0
Base Metals Aluminium USc/lb 84.4 84.7 86.1 83.9 83.7 75.7 Copper USc/lb 255.7 256.8 259.4 259.7 251.1 205.5 Nickel USc/lb 398.7 401.4 410.6 464.9 482.7 525.0 Zinc USc/lb 112.9 113.6 112.9 132.9 129.4 117.9 Lead USc/lb 94.0 94.9 96.2 99.8 95.7 86.2 Tin USc/lb 890.1 884.5 771.1 848.6 816.5
Precious Metals Gold US$/oz 1253.5 1300.0 1323.3 1375.0 Silver US$/oz 16.7 18.1 17.8 18.5 Platinum US$/oz 920.0 1500.0 1550.0 1750.0
Energy Oil (Brent) US$/bbl 46.2 47.5 49.9 56.0 58.4 65.0 Oil (WTI) US$/bbl 44.5 44.9 47.1 55.0 56.7 62.5
*Fiscal year averages used, Steel prices are contract prices. Spot as of 10PM AEST.
VIX (S&P 500 Options Implied Volatility)
0.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
80.00
90.00
Jan
-96
Au
g-9
6
Ap
r-97
Dec-9
7
Au
g-9
8
Ap
r-99
Dec-9
9
Au
g-0
0
Ap
r-01
Dec-0
1
Au
g-0
2
Ap
r-03
Dec-0
3
Au
g-0
4
Ap
r-05
Dec-0
5
Au
g-0
6
Ap
r-07
Dec-0
7
Au
g-0
8
Ap
r-09
Dec-0
9
Au
g-1
0
Ap
r-11
Nov-1
1
Jul-1
2
Ma
r-13
Nov-1
3
Jul-1
4
Ma
r-15
Nov-1
5
Jul-1
6
Ma
r-17
Daily VIX (S&P 500 Options Implied Volatility)
VIX Index Average -1 StDev +1 StDev
VIX – Current 1mth rol(avg) 3mth rol(avg) 6mth rol(avg) 10.90 10.92 11.70 11.69 Freight Spot 1 Wk (avg) 1 Mt (avg) 3 Mt (avg) 6 Mt (avg) 1 Yr (avg)
Baltic Dry 870.0 860 889 1083 985 906 Source: Bloomberg
Upcoming Credit Suisse Global Conferences New additions this week in bold.
Jun 2017 to Nov 2017
20-Jun 2017 Global Chemicals and Agriculture Conference – London
22 Jun 2017 China Consumer Corporate Day – Hong Kong
28-Jun 2017 Leisure & Transport Conference – London
2-3 Aug 2017 11th Annual Midsummer LathAm Conference – New York
15-16 Aug 2017 Indonesia Conference – Singapore
30-31 Aug 2017 Asia Internet C-Level Conference – Hong Kong
31 Aug-1 Sep 2017 European Telecoms Conference – London
31 Aug-1 Sep 2017 2nd Annual Kyoto Conference – Kyoto
6-8 Sept 2017 18th Annual Technology Conference – Taiwan
11-12 Sep 2017 Global Steel and Mining – London
11-13 Sep 2017 30th Annual Basic Materials Conference – New York
13-14 Sep 2017 HOLT Under Followed Opportunities – Boston / New York
13-14 Sep 2017 European Industrials Conference – London
19 Sep 2017 3rd Annual Chicago Consumer One-on-One Conference – Chicago
26-17 Sep 2017 3rd Annual Oilfield Services Bus Tour – Houston
11 Oct 2017 Global Credit Products Conference – London
12 Oct 2017 10th Annual European Prime Services Hedge Fund Leadership Conference – London
6-8 Nov 2017 26th Annual Credit Suisse Healthcare Conference – Scottsdale, Arizona
6-8 Nov 2017 8th China Investment Conference – China
7-9 Nov 2017 Boston Financials 1x1 Conference – Boston
27-30 Nov 2017 Technology, Media and Telecom Conference – Phoenix
28-30 Nov 2017 5th Annual Industrials Conference – Palm Beach, Florida
If you would like to attend any of the above conferences, please contact the Australian Corporate Access team: Cathy Kermond cathy.kermond@credit-suisse.com or your Credit Suisse sales representative
Research Production Patricia Rocis – Supervisory Analyst 61 3 9280 1678
Web Access Research Distribution client.support@credit-suisse.com Email: cms.updates@credit-suisse.com
Database Jason Swinbourne 612 8205 4591
19 June 2017
Australia and NZ First Edition 3
At a Glance
Market and key sector metrics
As at 16 June 2017 PE (1)
PE Rel vs ASX 200(1)
EPS Growth % (1)
Div Yield % (1)
2017 2018 2019 2017 2018 2019 2017 2018 2019 2017 2018 2019
S&P/ASX 200 15.94 15.10 14.76 1.00 1.00 1.00 23.91 5.58 2.30 4.47 4.58 4.72
Emerging Companies (3) 17.36 14.55 13.01 1.09 0.96 0.88 16.43 19.29 11.85 3.19 4.08 4.43
Financials (2) 14.08 13.55 12.95 0.88 0.90 0.88 12.30 3.92 4.59 5.47 5.59 5.81
Banks (2) 13.28 12.88 12.40 0.83 0.85 0.84 9.52 3.14 3.86 5.81 5.88 6.05
Diversified Financials (2) 16.44 15.67 14.75 1.03 1.04 1.00 39.09 4.92 6.22 4.69 4.91 5.23
Insurance (2) 17.82 16.28 15.00 1.12 1.08 1.02 6.81 9.50 8.50 4.22 4.57 4.97
Real Estate (2) 16.93 16.10 15.23 1.06 1.07 1.03 3.95 5.13 5.75 4.57 4.80 5.02
Materials (2) 10.65 11.44 13.86 0.67 0.76 0.94 n.m -6.85 -17.50 4.89 4.55 3.76
Metals & Mining (2) 9.64 10.55 13.32 0.60 0.70 0.90 n.m -8.64 -20.80 5.25 4.77 3.72
Energy (2) 16.85 13.15 12.29 1.06 0.87 0.83 57.57 28.15 6.97 2.20 3.24 3.81
Industrials ex Infra (2) 19.92 17.83 17.18 1.25 1.18 1.16 -1.96 11.69 3.80 3.11 3.18 3.29
Infrastructure 68.35 61.39 46.39 4.29 4.07 3.14 14.05 11.33 32.33 4.20 4.58 5.20
Consumer Discretionary (2) 21.06 19.10 17.82 1.32 1.27 1.21 2.17 10.26 7.21 4.38 4.34 4.55
Consumer Staples (2) 18.43 18.08 17.02 1.16 1.20 1.15 12.18 1.99 6.21 3.77 3.96 4.14
(1) Includes all companies covered by Credit Suisse analysts. (2) All sectors are based on S&P/ASX200.Companies on restricted list are not included in aggregates (3) Emerging companies are all companies covered by Credit Suisse analysts excluding top 100 stocks.
Source: Company data, Credit Suisse Estimates, Thomson Reuters
Australia/NZ equities executive summary
COMPANIES & SECTORS
Week 24 – US Inventory growth remains weak Aussie Transport & Infrastructure
Welcome to our weekly analysis of the Aussie transport & infrastructure space. This series of notes includes a summary of the week's events, valuation tables, events calendar, and key value driver charts for each stock.
AZJ – Aurizon Network issued A$425mn 7-year notes priced at 177 basis points over the 7-year swap rate. Industry press speculates that WICET faces a restructure after Caledon entered administration in May. WICET has until September 2018 to refinance the debt, but may seek to refinance early. Aurizon has a 4mt p.a. above rail take-or-pay contract with Caledon. SYD – Off peak movements up 3% over the last 12 months as peak movements remain flat. Sydney Airport continues to be capacity constrained at 8am on weekdays, with 96% of the 80 slots used. In May, off-peak movements were flat, with peak movements up 1.5%. ABS overseas arrivals and departures data to Australia suggests Chinese nationals make up 6.7% of total international traffic to/from Australia (up from 6.4% 12 months ago). QAN – Domestic airline load factors up 1.6ppts in April, with strong improvement across each of the route types (Triangle, East West, Resources, Domestic Leisure and regional). QAN shares are trading in line with US Airlines at 10x P/E (12-month fwd) with European airlines at 7.0x P/E. Chart of the week – BXB – US retail inventories/sales continues to fall in April. US retail inventories recorded growth of 1.6% compared to sales growth of 4.6% in April. Lower inventory growth could mean lower pallet issues for Brambles as retailers potentially extend their de-stocking phase.
Paul Butler Research Analyst 61 2 8205 4309
19 June 2017
Australia and NZ First Edition 4
Arrium preferred bidder – a minor risk? BlueScope Steel (BSL.AX)
Arrium's receiver, KordaMentha, has advised that it has chosen a Korean consortium as the preferred bidder for the Arrium group of companies. The consortium is headed by Newlake Alliance Management and JB Asset Management and is supported by the Korean steel making company, Posco. Arrium group includes ATM (Australian Tube Mills), a business that Arrium had actively but unsuccessfully sought to divest as non-core and not integrated long before receivership. ARI's price expectation deterred buyers. BlueScope, in our view, is the logical owner of the ATM business and could extract meaningful transport synergies by acquiring and relocating the capacity from Brisbane to Port Kembla, removing two unnecessary transport legs (HRC from Port Kembla to Brisbane, conversion to tube in Brisbane, transport of tube back to the main markets in Sydney and Melbourne. ATM is currently a domestic customer for up to 150ktpa of BlueScope's HRC. While this is competitively priced and is BSL's lowest margin domestic product, the alternative market is to the export market at perhaps a US$100/t lower price, or a potential $15mn–$20mn EBIT (~1.5%) impact if the Posco consortium keeps the ATM business and supplies its own Korean HRC. Arrium also has a large domestic distribution business, focused on long products. This business could, and has in the past, also distribute the product range manufactured and distributed by BlueScope. 9Posco could use this business as an import channel, competing with BlueScope, but would have to be competitive with BSL's import parity pricing. While we highlight both Posco opportunities as minor risks, we see no reason to adjust our earnings, target price or rating and recognize the equal risk of a net positive outcome if ATM was to be divested to BSL.
Share Price 11.99 (AUD)
OUTPERFORM
Target Price 13.30 (AUD)
Michael Slifirski Research Analyst 61 3 9280 1845
China – same plasma, different economics? CSL (CSL.AX)
Exploring plasma differences: Following CSL's proposed entry into the domestic China plasma fractionation sector (via Ruide) we compare/contrast key operational and financial metrics of listed peers with the CSL Behring business and assess potential readthrough for Ruide. Listed China plasma fractionators generate robust operating margins, ahead of CSL Behring, despite only clearing one core plasma product in last litres (albumin) and selling far fewer specialty (infra-marginal) products. Local margins higher due to lower COGS: Our analysis shows that this is predominantly due to significantly lower COGS per litre of plasma utilised, with other operating expenses similar in total as a percentage of revenue. Within the COGS category, we highlight that despite having substantially higher donor fees per litre of plasma collected in China, this is more than offset by lower non-donor related COGS (e.g., logistics, storage, labour, testing, supplies). For CSL, we see significant longer-term upside to current Ruide revenues of ~US$30 mn (via organic growth and new product approvals). While at face value, this should lead to material improvement in fractionation economics, in our view, the revenue uplift will require investment in both non-donor COGS (i.e., plasma collection/fractionation processes) as well as core operating cost lines (R&D, sales and marketing). As a result, our current base case assumption for Ruide (~35% EBIT margin after five years) factors in minimal operating margin expansion from current levels (~30%). Catalysts: (1) Monthly PPTA data; (2) FDA regulatory decision on Haegarda (anticipated mid-year). Valuation: CSL currently trades on 29.3x 12-month forward consensus EPS, representing a 65% premium to the ASX200 Industrials ex. Financials (two-year averages of 24.5x and 42%, respectively).
Share Price 139.00 (AUD)
OUTPERFORM
Target Price 134.00 (AUD)
Saul Hadassin Research Analyst 61 2 8205 4679
19 June 2017
Australia and NZ First Edition 5
Certegy presents uncertainty FlexiGroup (FXL.AX)
Downgrade rating to Neutral: Our prior Outperform rating ($2.12 share price, February 2016) was based on cheap valuation and a view that FXL could start to grind out growth, despite residual risks. However, roll forward to today, and despite valuation ostensibly looking compelling (again), FXL is still in a downgrade cycle (-20% FY18 consensus revisions) and we are increasingly cautious on Certegy (36% of FY16 NPAT), which could offset growth in other areas (e.g. Australian Card). While FXL looks over-sold on a short-term view and valuation may offer support, we have low conviction on earnings and still see a downside risk—we would rather wait until growth concerns are alleviated. Challenges to Certegy: We believe that having had a niche credit space largely to itself, Certegy now has growing competitors (AFY.AX, ZML.AX) with strong digital offerings and brands that are resonating with retailers and consumers alike. The no-interest-ever product remains attractive, in our view, but increased competition translates to both margin and volume pressure for FXL, at the same time as a less certain outlook for the consumer generally. This has already impacted 2H17 (contributed to lowering FY17 guidance) and poses further risk to FY18-19. Where it could be better than we think: (1) New products (Oxipay) or categories (solar battery storage) offset pressures in Certegy; (2) NZ Card growth trajectory lifts (scheme card, better sales momentum); (3) Aust. Card is better than we expect (we forecast >70% growth FY17-19); (4) improved commercial finance lifts leasing growth; and (5) other geographies (Ireland). Where it could be worse than we think: (1) Further competition in other areas (e.g. Latitude, a potential IPO candidate according to press reports); (2) impairments rise more quickly than expected; (3) contract losses/failure to renew business; (4) regulatory/consumer focus further impacts POS leasing; and (5) Card receivables conversion to interest-bearing disappoints. EPS outlook: Negative revisions to EPS estimates (-8% FY18, -14% FY19) stem mainly from forecast declines in Certegy earnings and reflect our view that FXL could struggle to generate material growth over the next 2-3 years.
Share Price 1.70 (AUD)
(from OUTPERFORM) NEUTRAL
Target Price (from 2.70) 1.85 (AUD)
Paul Buys Research Analyst 61 2 8205 4538
Schnitzer Q3, strong volumes but margin flat Sims Metal Management (SGM.AX)
Schnitzer MayQ preliminary result. Schnitzer’s scrap business (US Auto and Metals Recycling (AMR)) is expected to achieve operating income in the range of US$29 - $30mnn, or a sequentially flat operating income per ferrous ton of US$30 - $31 (equivalent to US$33-34/tonne). By contrast, SGM delivered US$8.40/t for its 1H17. Higher operating income, not margin. Schnitzer's operating income is expected to increase by approximately 12% sequentially and 10% from the prior year quarter, and would represent the best third quarter performance since fiscal 2012. Result not supportive of SGM's operating leverage thesis. SGM promote operating leverage with no increase in fixed cost as volumes rise. Schnitzer’s Q3 EBIT increase has followed its ferrous tonnage increase, showing no operating leverage, despite a materially higher ratio of non-ferrous. This appears to suggest (perhaps) an increase in buy price offsetting the otherwise expected operating leverage. Read-through for SGM earnings. If SGM’s 2H were to reflect Schnitzer’s volume profile, SGM’s 2H tonnage could be up by ~150kt on its 1H17, generating additional EBIT of ~A$13mn compared to what we forecast, if the guided operating leverage to volume was to be delivered. This hypothetical calculation would deliver FY17 EBIT of A$180mn once factoring in a contribution for guided optimise initiatives (at 50% realisation rate achieved in 2H17) and NPAT of ~$133mn. This is the scenario we have adopted in our modelling for FY17 driving our eps change. Valuation. Target price increased to $11.00/sh (from $10.50/sh) to align with our NPV. Rating remains Underperform on valuation.
Share Price 13.79 (AUD)
UNDERPERFORM
Target Price (from 10.50) 11.00 (AUD)
Michael Slifirski Research Analyst 61 3 9280 1845
19 June 2017
Australia and NZ First Edition 6
Un-chartered waters? South 32 (S32.AX)
New mining charter: South Africa’s Department of Mineral Resources has published the reviewed broad based black-economic empowerment charter for the South African mining and minerals industry. Mining companies are being asked to comply with a black-ownership threshold of 30%, up from the previous 26%, within the maximum of 12 months. The charter applies only to mining operations, as such S32’s Hillside aluminum smelter is exempt. We are far from legal experts, but if our understanding of the wording is correct (full charter doc here), the potential direct impact to S32 could be a 2.4% and 22% decrease to their effective interests in their South Africa Manganese and Energy Coal businesses respectively. Plenty of ambiguity: The Chamber of Mines, which represents ~90% of mines in South Africa, is likely to seek an injunction and the charter may be ultimately tested in the courts. As such, timing of implementation, if at all, is unclear to us. What is also not clear and most relevant for S32 is how historic transactions, which have seen it comply with previous charters, is ultimately taken into consideration. On face value, irrespective of historic adherence to the previous charter, a requirement to top up to 30% may well be required. But this is not entirely clear and the interpretation of points 2.1.2.1, 2.1.2.2 and 2.1.2.9 may be critical for S32 and specifically, their Energy Coal holding. Immaterial valuation impact: This is the third iteration of the mining charter and has reportedly been released with little consultation with the mining companies. It is relatively straight forward for us to run the scenario through our numbers (see comments below), but far more difficult to quantify the impact that comes from heightened geopolitical risk and what may be ongoing uncertainty for some time. Valuation: No change to TP or Rating. We carry $0.58/sh for the Manganese and Energy Coal businesses. If we adjusted for the potential change in effective stakes noted above, this would fall to ~$0.50/sh. The impact to FY18 and FY19 EBITDA would be 2% and 4% respectively.
Share Price 2.61 (AUD)
OUTPERFORM
Target Price 2.95 (AUD)
Sam Webb Research Analyst 61 2 8205 4535
Upgrade on improving industry landscape Southern Cross Media Group (SXL.AX)
SXL a major beneficiary of media reform: In our view SXL's current share price is not factoring in the potential upside from proposed regulatory changes: i) the abolition of licence fees could add ~8% to EPS and A$0.10 to our valuation after adjusting for new spectrum fees and a reduction in gambling ad revenue; and ii) the removal of the 75% audience reach rule, in combination with NEC's recent share price strength, could increase M&A possibilities. We note that both of these proposed changes are supported by the two major parties. TEN's issues = share upside for Nine…and by extension SXL: As Fraser
McLeish detailed in his recent note Changing channels – TV shake-up looming, TEN's deteriorating financial position (culminating in Wednesday's entry into voluntary administration) means that it is likely to cut programming spend in order to return to profitability. This creates the potential for long-term market share upside at the other networks. Any market share uplift at Nine would also drive market share improvements at SXL’s TV business. We estimate that each additional point of market share at SXL’s Nine-affiliated stations could add A$4-5m to revenue, equivalent to a ~A$2m EBITDA uplift or a ~1.5% boost to EPS. A 3% sustainable increase in SXL's regional TV market share could add A$0.05 to our valuation. Radio market back in the black in May: The metro radio market returned to positive territory in May with 5-city YoY growth of 0.5%, according to Commercial Radio Australia data. The market remains down 1.6% calendar year-to-date, however the base of comparison will ease in the second half. Upgrade to Outperform (from Neutral), A$1.35 Target Price (from A$1.30): We raise our SXL TP to A$1.35 and set it at a premium to our A$1.30 base case valuation to reflect upside from the likely removal of licence fees. We do not include any upside from a potential higher long-term TV market share. We view SXL as inexpensive on <11x FY18F P/E, falling to ~10x ex-licence fees, and move to an OUTPERFORM rating.
Share Price 1.16 (AUD)
(from NEUTRAL) OUTPERFORM
Target Price (from 1.30) 1.35 (AUD)
Lucas Goode Research Analyst 61 2 8205 4431
19 June 2017
Australia and NZ First Edition 7
Selling them as fast as it is making them The a2 Milk Company (ATM.NZ)
Earnings upgrade, again: On the back of a revised production schedule with the company’s infant formula (IF) contract manufacturer and ongoing strong demand for its product, ATM has raised its previous NZ$525mn revenue guidance to NZ$545mn compared with our NZ$534mn pre-trading update forecast for FY17F. The increased production and delivery of this IF stock by ATM to its distributors is a signal of the ongoing strong and previously unsatisfied demand in the market for its products. It is also an indication that the economic incentives on ATM’s IF remain attractive to its channel partners in the market. Coupled with changes in the phasing of the company’s marketing spend in China, we have upgraded our EBITDA forecast by 8% in FY17F and by c2% in FY18F and FY19F. The risk to our earnings forecasts in FY18F and FY19F remains to the upside driven by a combination of potential volume growth as well as higher gross margin. We maintain our OUTPERFORM rating with a revised NZ$4.10 TP. Evolving from a branded Australian liquid milk company to become a global dairy nutrition company: ATM’s A1/A2-type milk hypothesis and digestive benefit claims, coupled with its suite of patents and trademarks have provided the company with a marketing platform for premium-priced differentiated products. Our view on ATM is premised on successful rollout of the company's A2-type-based dairy products (including IF) in Australia, the UK, the US and China markets. Key to this is the successful management of channels-to-market and of regulatory changes over time. Catalysts in the next 12 months: These include ATM’s formulation registration process in China, ongoing infant formula trading conditions in China and the expansion of ATM’s footprint into the US fresh milk market. TP revised to NZ$4.10 (from NZ$3.92): This is based on our probability-weighted rolled forward sum-of-the-parts DCF adjusted for risks. On an adjusted NPAT basis (ex-UK/US losses), our TP implies FY17F and FY18F PEs of 27.0x and 22.5x, respectively. Our projected adjusted NPAT growth rates (ex-UK/US losses) are 19% and 17% in FY18F and FY19F, respectively.
Share Price 3.82 (NZD)
OUTPERFORM
Target Price (from 3.92) 4.10 (NZD)
Kar Yue Yeo Research Analyst 64 4 474 4462 This report is distributed in Australia by Credit Suisse Equities (Australia) Limited. Please see legal disclaimer and disclosure annex for further terms and information. Provided by First NZ Capital
RESULT PREVIEW
Difficult result to predict; reports on 26 June Metcash (MTS.AX)
Metcash reports on 26 June and with no company disclosure since November 2016, it is a difficult result to predict. If Metcash can limit a reduction in supermarket distribution sales to circa 5% and mitigate most of that downside with cost reduction, it is likely to meet or beat market expectations. Currently, the market appears to be pricing a circa 30% decline in supermarket distribution EBIT over the medium term. Liquor and hardware are positive stories as is the resumption of dividends in FY18. Earnings changes are due to a reduction in forecast sales for Supermarket distribution and upgrades to the outlook for Hardware and Liquor. Supermarket performance down. Pathway to stabilisation elusive. Independent retail sales are likely to have fallen circa 5% in the 2H17, based on ABS data. Acceleration in Woolworths' performance in 2017 has been as big a variable as Aldi in that outcome. We caution against interpreting the movement in market share to Woolworths as a trend; Woolworths market share improvement largely reflects catch-up after several years of under-performance. Independents continue a more active refurbishment program than in the past (which has been a successful element of the Metcash strategy). For independents, repositioning towards fresh and convenience seems the most likely route to sustainability. For Metcash, centralisation of state-based support activities is likely to have mitigated most of the sales downside in this period. Liquor and hardware are very positive stories. The independent sector continues to benefit from incumbency and regulatory barriers in liquor and another strong result is expected for Metcash. There is likely upside to current estimates from consolidation of Home Timber and Hardware and growth of the Mitre 10 brand over the medium term.
Share Price 2.18 (AUD)
OUTPERFORM
Target Price 2.54 (AUD)
Grant Saligari Research Analyst 61 3 9280 1720
Australia and NZ First Edition 8
19 June 2017
Asia Pacific/Australia Equity Research
Transportation
Aussie Transport & Infrastructure Research Analysts
Paul Butler
61 2 8205 4309
paul.butler@credit-suisse.com
Gretel Janu
61 2 8205 4028
gretel.janu@credit-suisse.com
WEEKLY ANALYSIS
Week 24 – US Inventory growth remains weak
Welcome to our weekly analysis of the Aussie transport & infrastructure space. This series of notes includes a summary of the week's events, valuation tables, events calendar, and key value driver charts for each stock.
■ AZJ – Aurizon Network issued A$425mn 7-year notes priced at 177 basis points over the 7-year swap rate. Industry press speculates that WICET faces a restructure after Caledon entered administration in May. WICET has until September 2018 to refinance the debt, but may seek to refinance early. Aurizon has a 4mt p.a. above rail take-or-pay contract with Caledon.
■ SYD – Off peak movements up 3% over the last 12 months as peak movements remain flat. Sydney Airport continues to be capacity constrained at 8am on weekdays, with 96% of the 80 slots used. In May, off-peak movements were flat, with peak movements up 1.5%.
ABS overseas arrivals and departures data to Australia suggests Chinese nationals make up 6.7% of total international traffic to/from Australia (up from 6.4% 12 months ago).
■ QAN – Domestic airline load factors up 1.6ppts in April, with strong improvement across each of the route types (Triangle, East West, Resources, Domestic Leisure and regional).
QAN shares are trading in line with US Airlines at 10x P/E (12-month fwd) with European airlines at 7.0x P/E.
■ Chart of the week – BXB – US retail inventories/sales continues to fall in April. US retail inventories recorded growth of 1.6% compared to sales growth of 4.6% in April. Lower inventory growth could mean lower pallet issues for Brambles as retailers potentially extend their de-stocking phase.
Figure 1: Chart of the week – BXB – US retail inventories/sales fall
What's on next
Tue 20-Jun SYD - May traffic
1.10
1.15
1.20
1.25
1.30
1.35
1.40
1.45
1.50
1.55
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17
US
re
tail
tra
de
inve
nto
rie
s/sa
les
Source: Thomson Reuters
19 June 2017
Australia and NZ First Edition 9
Our view
Figure 2: Credit Suisse Transport and Infrastructure summary
Stock AZJ BXB QUB QAN VAH TCL MQA SYD ASX200*
CS rating UP UP UP OP N OP N UP
CS target price 4.75 8.90 2.28 5.00 0.21 12.60 5.90 6.50
Current share price 5.41 10.21 2.68 5.32 0.19 12.43 5.88 7.35 5,678
Upside vs target -12% -13% -15% -6% 11% 1% 0% -12%
12 mth fwd PE 20.6x 19.2x 30.4x 10.2x 37.0x 62.2x 22.3x 44.3x 19.5x
12 mth fwd EV/EBITDA 9.0x 9.4x 16.8x 4.1x 5.1x 22.4x 33.3x 18.6x 10.5x
*PE and EV/EBITDA is for ASX200 Industrials (ex financials)
Source: Credit Suisse estimates
Share price performance
Figure 3: Aussie transport & infrastructure share price performance
Price performance AZJ BXB QUB QAN VAH TCL MQA SYD ASX200
1 week -0.6% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
2 weeks -4.4% -2.7% 0.8% 3.1% 8.8% -1.7% -3.8% -4.3% -1.9%
1 month -0.6% -2.3% 3.8% 9.2% 2.8% 4.2% 5.6% 1.4% -1.9%
2 months 2.3% 6.9% 4.6% 36.4% -2.6% 3.8% 12.4% 5.8% -3.6%
3 months 0.2% 12.9% 9.7% 40.4% -5.1% 11.7% 19.8% 15.2% -2.1%
6 months 10.4% -15.1% 13.4% 60.2% -15.9% 21.5% 22.0% 14.5% 2.6%
9 months 24.4% -12.3% 18.4% 63.7% -21.3% 16.4% 18.5% 14.0% 8.4%
1 year 18.4% -16.7% 22.7% 86.7% -27.5% 5.8% 17.4% 5.0% 10.3%
2 years 3.0% -6.3% 7.9% 64.7% -57.0% 24.9% 75.5% 41.9% 1.5%
3 years 10.6% 13.1% 21.3% 306.1% -57.0% 60.8% 80.4% 71.7% 5.1%
5 years 62.0% 79.3% 79.2% 360.6% -50.5% 122.3% 305.5% 147.5% 39.9%
10 years -14.2% -7.5% -91.1% 55.8% 82.8% -10.9%
52 week share price performance
Source: Credit Suisse Rav e
0.5
0.7
0.9
1.1
1.3
1.5
1.7
Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17
Sha
re p
rice
(reb
ased
)
AZJ BXB QUB QAN VAH TCL MQA SYD ASX200
19 June 2017
Australia and NZ First Edition 10
Stock estimates and valuation ratios
Figure 4: Credit Suisse estimates and valuation ratios
FY17 FY18 FY19 FY17 FY18 FY19 FY17 FY18 FY19 FY17 FY18 FY19 FY17 FY18 FY19
Business performance
Rev. growth -1.4% 0.7% 2.7% -0.1% 2.8% 4.2% 6.7% 5.3% 6.2% -1.1% 2.1% 1.2% -0.3% 4.9% 5.1%
EBITDA margin 41.7% 43.7% 45.5% 27.0% 27.7% 27.9% 17.4% 19.3% 20.8% 18.8% 18.7% 16.8% 10.2% 10.9% 10.2%
EBIT margin 24.9% 27.1% 29.4% 17.1% 17.7% 17.9% 9.6% 11.6% 13.5% 10.1% 10.1% 8.2% 3.9% 4.7% 4.1%
EPS growth -6.2% 14.2% 15.4% -6.4% 7.7% 5.5% -10.1% 26.7% 15.7% -1.7% 17.9% -9.5% -93% 59% -52%
FCF growth 38.8% 19.4% 19.3% 9.8% 9.0% -0.3% 9.3% -16.2% 15.4% -29.5% 7.3% -12.5% 130% -164% -78%
Div growth 0.0% 6.4% 4.2% 1.4% -0.5% -0.5% -1.8% 0.0% 0.0% 114.3% 6.7% 0.0% na na na
Inv. capital turns 0.4x 0.4x 0.4x 0.9x 0.9x 0.9x 0.4x 0.4x 0.4x 1.8x 1.7x 1.8x 1.5x 1.6x 1.6x
ROIC (post tax) 7.5% 8.4% 9.4% 11.5% 12.2% 12.6% 4.1% 4.7% 5.2% 14.6% 13.9% 11.7% 7.2% 7.3% 6.9%
ROE 10.4% 9.8% 11.2% 15.3% 19.3% 18.6% 4.1% 5.2% 5.9% 23.5% 24.1% 19.5% 1.7% 2.7% 1.3%
Balance sheet strength
Net debt/EBITDA* 2.3x 2.1x 1.8x 1.6x 1.4x 1.2x 3.9x 3.8x 3.7x 1.9x 1.7x 1.8x 8.6x 8.0x 8.6x
EBITDA Interest cover 7.8x 8.5x 9.7x 14.9x 16.1x 15.8x 14.9x 11.4x 10.2x 14.5x 14.9x 22.7x 3.4x 3.9x 3.6x
EBIT Interest cover 4.6x 5.3x 6.3x 9.5x 10.3x 10.1x 8.2x 6.9x 6.6x 7.8x 8.0x 11.0x 1.3x 1.7x 1.5x
Valuation
@share price 5.41 5.41 5.41 10.21 10.21 10.21 2.68 2.68 2.68 5.32 5.32 5.32 0.19 0.19 0.19
EV/IC 1.5x 1.5x 1.5x 2.3x 2.3x 2.2x 1.5x 1.4x 1.4x 7.1x 6.6x 7.4x 1.1x 1.0x 1.0x
P/B 2.0x 2.0x 2.0x 4.3x 3.9x 3.6x 1.7x 1.7x 1.6x 2.6x 2.2x 2.0x 0.8x 0.8x 0.8x
EV/EBITDA 10.2x 9.7x 9.0x 10.3x 9.7x 9.3x 19.3x 16.5x 14.5x 5.2x 5.1x 5.6x 11.8x 10.6x 10.8x
P/E 23.6x 20.7x 17.9x 21.6x 20.0x 19.0x 40.6x 32.0x 27.7x 11.3x 9.6x 10.6x 46.6x 29.3x 61.0x
FCF yield 5.1% 6.0% 7.2% 4.0% 4.3% 4.3% 4.9% 4.1% 4.7% 11% 11% 10% -26.3% 16.9% 3.8%
Div yield 4.5% 4.8% 5.0% 2.7% 2.7% 2.7% 2.0% 2.0% 2.0% 2.7% 2.9% 2.9% 0.0% 0.0% 0.0%
*QAN & VAH Net debt adjusted to include capitalised operating leases
FY17 FY18 FY19 FY17 FY18 FY19 FY17 FY18 FY19
Business performance
Rev. growth 7.3% 5.5% 5.4% 10.2% 8.9% 7.9% 10.1% 6.9% 3.2%
EBITDA margin 80.8% 81.4% 81.8% 75.9% 77.2% 78.7% 67.9% 69.1% 70.9%
EBIT margin 55.7% 56.7% 58.4% 48.2% 48.9% 51.2% 45.6% 46.1% 50.2%
EPS growth 3.8% 8.9% 8.4% nm 16.0% 55.1% -76.1% 3.0% 53.6%
FCF growth 10.4% 7.3% 5.4% 35.6% -10.1% 18.4% 6.5% -6.5% 45.7%
Div growth 9.7% 5.9% 6.9% 13.2% 10.7% 14.9% 11.1% 17.5% 38.1%
Inv. capital turns 0.2x 0.2x 0.2x 0.1x 0.1x 0.2x 0.1x 0.1x 0.1x
ROIC (post tax) 7.9% 8.4% 9.2% 5.6% 6.0% 7.2% 4.5% 5.3% 6.6%
ROE 48% nm nm 6.2% 7.7% 15.3% 3.4% 3.8% 6.1%
Balance sheet strength
Net debt/EBITDA 7.3x 7.1x 6.8x 8.5x 8.4x 8.2x 9.6x 9.2x 8.7x
EBITDA interest cover 2.7x 2.7x 2.7x 2.4x 2.4x 2.4x 4.4x 4.5x 4.8x
EBIT interest cover 1.8x 1.9x 1.9x 1.5x 1.5x 1.6x 3.0x 3.0x 3.4x
Valuation
@share price 7.35 7.35 7.35 12.43 12.43 12.43 5.88 5.88 5.88
EV/IC 2.7x 2.7x 2.8x 1.6x 1.6x 1.6x 1.0x 1.0x 1.0x
P/B 23.8x nm nm 5.8x 6.3x 7.9x 2.1x 2.2x 2.2x
EV/EBITDA 20.9x 19.7x 18.6x 31.3x 28.9x 26.9x 14.0x 13.1x 12.4x
P/E 49.4x 45.4x 41.9x 93.0x 80.2x 51.7x 58.2x 56.5x 36.7x
FCF yield 4.7% 5.0% 5.3% 5.0% 4.5% 5.3% 8.7% 8.1% 11.9%
Div yield 4.6% 4.9% 5.2% 4.0% 4.5% 5.1% 3.4% 3.9% 5.4%
*Proportional EBIT, EBITDA estimates
QAN VAH
SYD TCL* MQA*
AZJ BXB QUB
Source: Company data, Credit Suisse estimates
19 June 2017
Australia and NZ First Edition 11
Infra yields
Figure 5: Australia infrastructure spreads and yields
-2
-1
0
1
2
3
4
5
6
7
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Yie
ld &
spr
ead
(%)
TCL fwd yield spread on AU 10y MQA fwd yield spread on AU 10y SYD fwd yield spread on AU 10y AU 10Yr bond yield
Source: Datastream, Company data, Credit Suisse estimates
Airline valuation chart
Figure 6: Qantas vs US and European airlines earnings yield
-10%
0%
10%
20%
30%
40%
50%
1992 1993 1994 1995 1996 1997 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Ear
ning
s yi
eld
(12m
th fw
d)
Qantas Airways US Airlines (Delta, United, American) average Europe Airlines Average
Source: DataStream, Company data, Credit Suisse estimates
Figure 7: Qantas vs Airline peers 12mth fwd P/E
Qantas
Airways IAG Lufthansa Air France
American
Airlines
United
Airlines
Delta
Airlines JetBlue Southwest
US Hub
Carrier
Average
Europe
Average
12mth fwd PE 10.1 7.1 7.1 6.9 9.7 10.0 9.4 11.8 14.1 9.7 7.0
Source: DataStream, Company data, Credit Suisse estimates
19 June 2017
Australia and NZ First Edition 12
Credit Suisse vs. consensus
Figure 8: CS vs. Consensus revenue growth Figure 9: CS vs. Consensus EBITDA growth
-10%
-5%
0%
5%
10%
15%
20%
AZJ BXB QUB QAN VAH TCL SYD MQA
FY
17 R
even
ue g
row
th
Cons +/- 1 sd Cons High/Low Cons mean CS
-20%
-10%
0%
10%
20%
30%
40%
AZJ BXB QUB QAN VAH TCL SYD MQA
FY
17 E
BIT
DA
gro
wth
Cons +/- 1 sd Cons High/Low Cons mean CS
Source: IBES, Credit Suisse estimates Source: IBES, Credit Suisse estimates
Figure 10: CS vs. Consensus EBIT growth Figure 11: CS vs. Consensus EPS growth
-40%
-20%
0%
20%
40%
60%
80%
AZJ BXB QUB QAN VAH TCL SYD MQA
FY
17 E
BIT
gro
wth
Cons +/- 1 sd Cons High/Low Cons Mean CS
-20%
-10%
0%
10%
20%
30%
40%
AZJ BXB QUB QAN VAH TCL SYD MQA
FY
17 E
PS
gro
wth
Cons +/- 1 sd Cons High/Low Cons mean CS
Source: IBES, Credit Suisse estimates Source: IBES, Credit Suisse estimates
Figure 12: Consensus EPS changes (12mth fwd)
Consensus EPS change AZJ BXB QUB QAN VAH TCL SYD MQA
1 week -0.3% 1.6% 0.2% -1.0% -1.2% 1.8% 0.5% -0.7%
2 weeks 0.0% 1.7% 0.4% -1.0% 0.4% 2.3% 0.7% -0.3%
1 month -0.1% 2.1% 0.9% 2.1% -26.2% 0.1% 1.0% 6.4%
3 months -2.6% 0.8% 3.4% 1.8% -37.6% 2.4% 3.0% 7.8%
6 months -3.2% -7.6% -9.9% 1.6% -52.5% 7.5% 1.6% 11.9%
9 months -1.8% -5.9% -12.7% -6.1% -62.7% 9.9% 4.0% 25.9%
12 months -3.7% -5.4% -10.9% -14.0% -83.9% 8.3% 17.6% 49.7%
Source: IBES
19 June 2017
Australia and NZ First Edition 13
Upcoming events
Figure 13: Upcoming events
Date Stock/Industry data Event
Stock events
20-Jun-17 SYD May traffic
19-Jul-17 AZJ 4Q Above rail volumes
20-Jul-17 MQA 4Q traffic and revenue data
20-Jul-17 SYD June traffic
Industry data
14-Jul-17 ABS OAD data May Overseas arrivals and departures data
20-Jul-17 ABS Labour hours June labour hours data by state
Macro data
04-Jul-17 RBA RBA cash rate decision
25-Jul-17 FOMC FOMC meeting
Source: Company data
Links to our latest research
Aurizon
Intermodal exit is short-term accretive – Aurizon is running a sale process for its loss
making intermodal rail business (~A$300mn revenue). Qube and a Genesse Wyoming
and Macquarie consortium are reported to be shortlisted, final bids at end June. A sale at
A$200mn would be 5% earnings accretive for Aurizon by FY19, but even giving it away
could be ~3% accretive.
Risk of dividend decline in FY17 – Management's new guidance range of $800-$850mn
of EBIT suggests underlying business performance and/or the cost out program is weaker
than previously expected. We forecast flat dividend for FY17, but at 120% payout ratio.
There is the risk that the board sticks with 70-100% payout ratio and cuts the dividend.
Cyclone Debbie impact higher than expected – Aurizon's QLD coal could be closed for
an average of 3½ weeks. We estimate the financial impact for Aurizon at ~$100mn of
EBIT in FY17. However, $80mn of this is in the Network business, and Aurizon is likely to
recover much of this via regulated price increases in FY19.
Brambles
Beware the six missing days in 4Q FY17 – There are six less days in Brambles 4Q
FY17 than in 4Q FY16. Consensus has underlying revenue growth for 4Q FY17 at ~10%
(adjusted for trading days, FX & divestments), well above the underlying ytd growth of
~5% (CSe 5%). Brambles reaffirmed underlying EBIT guidance at flat YoY at constant
currency. Our EBIT estimate is ~3% below this.
Higher US lumber price to hit margins – US lumber prices up 14% since January on the
prospect US begins taxing Canadian softwood imports ~30%. The US sources ~30% of its
softwood requirement from Canada. We estimate a 10% increase in lumber costs could
reduce Pallets America's EBIT by ~5% (or ~2% group EBIT).
Qube
Who's going to Moorebank? – We value the 850k sqm of warehousing at Moorebank at
~A$690mn (net of ~A$980mn capex) based on a A$120/sqm lease rate, 5.75% cap rate
and fully let in ten years. We estimate the current share price (A$2.62) is discounting a
lease rate of A$150/sqm and warehousing fully let closer to five years. We view this
valuation as too stretched, and we downgrade out rating to UNDERPERFORM.
19 June 2017
Australia and NZ First Edition 14
Resources improving, but Patricks under pressure – The opening of a third Melbourne
terminal operator, VICT is likely to increase competition, hit margins and we forecast
Patricks' market share to decline to 39% by 2021. Shipping consolidation allows larger
ships and reduced frequencies and there is downside risk for Patricks.
Qantas
Shares at $7.0 if Qantas gets to FY2020 targets – Management set targets for airline
ROIC >10% through FY2020. To reach the target over the next three years it needs to
maintain higher capital efficiency. The higher domestic market share and higher exposure
to Asia (more point-to-point) may give it a structural advantage to achieve this.
Momentum turning positive – Management is bullish on the outlook for each business.
We forecast Qantas domestic 2H RASK up 2% with management's plan for 2% capacity
reduction and we forecast the International 1H RASK decline (8.9%) to moderate to -3.3%
in 2H.
Sydney Airport
Competition offset by mix shift to international – Following Sydney Airport passing up
the challenged option to build and operate WSA, we raise our target price to A$6.5 (from
A$5.5). This is due to eliminating the risk of SYD taking on the dilutive WSA project and
our change of view on the extent of the competition risks from WSA.
Monopoly going to duopoly – We estimate SYD would destroy A$1.5bn of value by
taking on the WSA project. The Government may be the toughest competitor and may
measure success by passenger volumes rather than profitability.
Transurban
35 minute time saving on 395 Express Lanes – We estimate value from the US$460mn
395 Express Lanes project in the range of A$c20-65 per share and include it in our SOTP
valuation at A$c40 per share. The I-395 is far more congested than the I-95 and there
could be potential for revenue per lane mile to be twice the level of 95 Express Lanes.
WestConnex and fresh equity for growth – We value the entire WestConnex project at
$3.0bn, with Stage 1 at $3.5bn and Stage 2 at $2.9bn, but Stage 3 (M4-M5 Link) has
negative value of $3.4bn due to high tunnel construction costs and low toll price levels.
Transurban is likely to be keen and has advantages over other bidders (better traffic
knowledge and owns South-West M5 until 2026 that is part of Stage 2).
Macquarie Atlas
Get more APRR cheap vs raising to pay for it – APRR stake is up for sale in 2H 2017.
MQA is likely to get the additional 9.7% stake in APRR at an attractive price. In our base
case scenario, buying at this level may require an equity raising of A$550mn (16% of market
cap). We raise target price to A$5.90 (from A$5.70) but downgrade rating to NEUTRAL.
D-G a steal at 28% discount to fair value – MQA bought the remaining 50% stake in
Dulles Greenway for US$445mn. With 100% ownership, MQA could create additional
value by negotiating more transparent toll regulation.
19 June 2017
Australia and NZ First Edition 15
Notes of interest from our offshore colleagues
Singapore Airlines: More needs to be done: SIA announced it has set up a dedicated
Transformation Office to conduct a wide-ranging review to address structural challenges in
the industry. The focus will be on (1) optimising the portfolio’s network with consideration
of current and upcoming fleet, (2) identifying new revenue generation opportunities, (3)
strengthening product and services positioning, and (4) reshaping the business to raise
productivity while enhancing cost efficiency. We believe a sale of its 78% stake in SIAEC
to STE could net them up to S$4.0bn in proceeds, and could provide liquidity headroom in
light of the growing capex requirements.
Shenzhen Airport: New arrival duty-free contract slightly positive: In SZAC's new
duty free contract, SZAC will take the higher amount of guaranteed rentals and shared
revenues (35% commission rate). The first annual guaranteed rental is set at Rmb45mn,
and next few years' rental growth will refer to half of SZAC's international traffic growth
(max 10% per annum). Our analysts estimate arrival duty-free will enhance SZAC's
FY17/18/19E earnings by 2%/3.6%/3.6%.
19 June 2017
Australia and NZ First Edition 16
Figure 14: AZJ key stock drivers
Met and thermal coal price Updated 16-Jun Iron Ore price Updated 16-Jun
Source: Thomson Reuters Source: Thomson Reuters
Total QLD coal export volumes growth Updated 07-Jun QLD coal export volumes growth by terminal Updated 07-Jun
Source: Queensland Ports, Port of Gladstone Source: Queensland Ports, Port of Gladstone
BMA's coal volumes - higher is +ive for AZJ Updated 26-Apr Glencore's coal volumes - higher is +ive for AZJ Updated 04-May
Source: Company data Source: Company data
Yancoal's coal volumes - higher is +ive for AZJ Updated 21-Apr
Source: Company data
40
90
140
190
240
290
340
Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17
Coa
l pric
e (U
S$/
t)
Met Coal (USD) Thermal Coal (USD)
-40%
-30%
-20%
-10%
0%
10%
20%
30%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2014 2015 2016 2017
Coa
l pro
duct
ion
grow
th (y
oy %
)
Glencore thermal coal Glencore met coal
-60%
-40%
-20%
0%
20%
Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun
QLD
coa
l ex
port
grow
th (%
)
FY16 FY17
Cy clone Debbie
30
40
50
60
70
80
90
100
May-15 Aug-15 Nov-15 Feb-16 May-16 Aug-16 Nov-16 Feb-17 May-17
Iron
Ore
63.
5% s
pot p
rice
(US
$/t)
-100%
-80%
-60%
-40%
-20%
0%
20%
40%
J F M A M J J A S O N D J F M A M
2016 2017
Coa
l ex
port
grow
th (%
)
Abbott Point Hay Point DBCT Gladstone
Cy clone Debbie
-20%
-10%
0%
10%
20%
30%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2014 2015 2016 2017
Coa
l pro
duct
ion
grow
th (y
oy %
)
BMA BHP Billiton Mitsui Coal
-20%
-10%
0%
10%
20%
30%
40%
50%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2014 2015 2016 2017
Coa
l pro
duct
ion
grow
th (y
oy %
)
19 June 2017
Australia and NZ First Edition 17
Figure 15: BXB key stock drivers
US retail trade inventories/sales Updated 15-Jun US inventory and sales growth Updated 15-Jun
Source: US Census Bureau Source: US Census Bureau
US consumer staples unit data Updated 30-May Western Europe consumer staples unit data Updated 23-May
Source: AC Nielsen Source: AC Nielsen
Lumber costs - higher costs negative for BXB Updated 15-Jun US trucking costs - lower costs +ive for BXB Updated 1-Jun
Source: Datastream Source: CASS
Major FX moves Updated 15-Jun
Source: Datastream
1.10
1.20
1.30
1.40
1.50
1.60
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17
US
reta
il tra
de
inv
ento
ries/
sale
s
-15%
-10%
-5%
0%
5%
10%
15%
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17
Inv
ento
ry a
nd s
ales
gro
wth
(y
oy) %
US Retail Inventories US Retail Sales
200
250
300
350
400
450
2010 2011 2012 2013 2014 2015 2016 2017
US
D p
er 1
000
boar
d fe
et
105
110
115
120
125
130
Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May JunCas
s tru
cklo
ad
lineh
aul
inde
x
FY12 FY13 FY14FY15 FY16 FY17
0.70
0.75
0.80
0.85
0.90
0.95
1.00
1.05
Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17
FX
(reb
ased
)
AUDUSD EURUSD GBPUSD
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
27-D
ec-1
5
24-J
an-1
6
21-F
eb-1
6
20-M
ar-1
6
17-A
pr-1
6
15-M
ay-1
6
19-J
un-1
6
17-J
ul-1
6
14-A
ug-1
6
11-S
ep-1
6
09-O
ct-1
6
06-N
ov-1
6
04-D
ec-1
6
01-J
an-1
7
29-J
an-1
7
26-F
eb-1
7
26-M
ar-1
7
23-A
pr-1
7
Wes
tern
Eur
ope
cons
umer
sta
ples
-u
nit s
ales
Total Sales Food Household care Personal care
-6%
-4%
-2%
0%
2%
4%
05-D
ec-1
5
02-J
an-1
6
30-J
an-1
6
27-F
eb-1
6
26-M
ar-1
6
23-A
pr-1
6
21-M
ay-1
6
18-J
un-1
6
16-J
ul-1
6
13-A
ug-1
6
10-S
ep-1
6
08-O
ct-1
6
05-N
ov-1
6
03-D
ec-1
6
31-D
ec-1
6
28-J
an-1
7
25-F
eb-1
7
25-M
ar-1
7
22-A
pr-1
7
20-M
ay-1
7
US
con
sum
er s
tapl
es -
unit
sale
s
Total sales Packaged food Household & personal care
19 June 2017
Australia and NZ First Edition 18
Figure 16: QUB key stock drivers
Total container volume growth Updated 07-Jun Container volume growth by ports Updated 07-Jun
Source: Ports Australia Source: Ports Australia
Iron ore price - higher price +ive for QUB Updated 15-Jun Atlas Iron Ore shipped Updated 18-Apr
Source: Thomson Reuters Source: Company data
Wheat price - weaker prices -ive for QUB Updated 15-Jun Quattro Grain shipments Updated 15-Jun
Source: Thomson Reuters Datastream Source: Quattro Grain
Zinc price - weaker prices -ive for QUB Updated 15-Jun Copper price - weaker prices -ive for QUB Updated 15-Jun
Source: Thomson Reuters Datastream Source: Thomson Reuters Datastream
-20%
-10%
0%
10%
20%
J F M A M J J A S O N D J F M A
2016 2017
Tot
al C
onta
iner
s gr
owth
(%
YoY
)
Port Botany Port of Brisbane Fremantle Ports Port of Melbourne
3
4
5
6
7
8
9
10
2010 2011 2012 2013 2014 2015 2016 2017
Whe
at p
rice
(US
$/t)
0.0
1.0
2.0
3.0
4.0
5.0
Dec
-12
Mar
-13
Jun-
13
Sep
-13
Dec
-13
Mar
-14
Jun-
14
Sep
-14
Dec
-14
Mar
-15
Jun-
15
Sep
-15
Dec
-15
Mar
-16
Jun-
16
Sep
-16
Dec
-16
Mar
-17
Ore
tonn
es s
hipp
ed (W
MT
)
0
50
100
150
200
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Iron
Ore
(Fe
63.5
%) U
S$/
t
1.5
2.0
2.5
3.0
3.5
2014 2015 2016 2017
Cop
per p
rice
(US
$/lb
)
0.60
0.70
0.80
0.90
1.00
1.10
1.20
1.30
1.40
2014 2015 2016 2017
Zin
c pr
ice
(US
$/lb
)
-12%
-8%
-4%
0%
4%
8%
12%
16%
J F M A M J J A S O N D J F M A M J J A S O N D J F M A
2015 2016 2017
Tot
al c
onta
iner
s gr
owth
ac
ross
4 p
orts
(%
YoY
)
0
50
100
150
200
M A M J J A S O N D J F M A M J
2016 2017
Vol
umes
(tho
usan
d to
nnes
)
Wheat Barley Canola Fertiliser
19 June 2017
Australia and NZ First Edition 19
Figure 17: QAN & VAH key stock drivers
AUDUSD Updated 15-Jun Brent and Jet fuel prices Updated 15-Jun
Source: Thomson Reuters Source: Thomson Reuters
Airline revenue growth vs labour hours worked Updated 15-Jun Airline revenue growth vs ASX200 Updated 15-Jun
Source: Thomson Reuters, BITRE Source: Thomson Reuters, BITRE
Domestic airlines load factor change Updated 16-Jun Domestic airline capacity growth Updated 05-Apr
Source: BITRE Source: Company data, Credit Suisse estimates, Diio-Mi
Airline peers capacity growth Updated 24-May Airline peers change in load factor Updated 24-May
Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
-12%
-9%
-6%
-3%
0%
3%
6%
9%
12%
2005 2007 2009 2011 2013 2015 2017
Labo
ur h
ours
wor
ked
grow
th
Dom
estic
airl
ines
reve
nue
grow
th
Revenue growth Labour hours worked growth
0.68
0.70
0.72
0.74
0.76
0.78
0.80
Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17
AU
DU
SD
20
40
60
80
100
120
Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17
US
D /b
bl
Brent (USD) Jet (USD)Brent (AUD) Jet (AUD)
3000
3500
4000
4500
5000
5500
6000
6500
7000
-12%
-9%
-6%
-3%
0%
3%
6%
9%
12%
2004 2006 2008 2010 2012 2014 2016
AS
X 2
00
Dom
estic
airl
ines
reve
nue
grow
th
Revenue growth ASX200
-10%
-5%
0%
5%
10%
15%
20%
3Q FY16 4Q FY16 1Q FY17 2Q FY17 3Q FY17 4Q FY17
Dom
estic
airl
ine
capa
city
gro
wth
Qantas domestic VA Domestic Jetstar Tigerair
-5%
0%
5%
10%
15%
J F M A M J J A S O N D J F M A M J J A S O N D J F M A
2015 2016 2017
Cap
acity
gro
wth
(yoy
)
Air NZ Short Haul Singapore Air Cathay Pacific (SW & Pacific)
-10
-5
0
5
10
15
J F M A M J J A S O N D J F M A M J J A S O N D J F M A
2015 2016 2017
Load
fact
or c
hang
e (p
pt)
Air NZ Short Haul Singapore Air Cathay Pacific (SW & Pacific)
-0.5
0.0
0.5
1.0
1.5
2.0
J F M A M J J A S O N D J F M A M J J A S O N D J F M A
2015 2016 2017
Load
fact
or c
hang
e (p
pt)
19 June 2017
Australia and NZ First Edition 20
Figure 18: SYD key stock drivers
Domestic pax - higher +ive for SYD Updated 19-May International pax - higher +ive for SYD Updated 19-May
Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates
SYD Slot utilisation Updated 15-Jun Growth in aircraft movements Updated 19-May
Source: AirServices Australia, Credit Suisse estimates Source: AirServices Australia, Credit Suisse estimates
Foreign arrivals to Australia growth (by nationality) Updated 13-Jun SYD China visitor arrivals (lagged 9m) vs CS ind #1 Updated 27-Apr
Source: Company data, ABS, Credit Suisse estimates Source: Company data, Credit Suisse estimates
China visitor active evaluation (CS-SYD ind #1) Updated 27-Apr China visitor commitment (CS-SYD ind #2) Updated 27-Apr
Source: Credit Suisse estimates Source: Credit Suisse estimates
0%
20%
40%
60%
80%
100%
120%
6:00
7:00
8:00
9:00
10:0
0
11:0
0
12:0
0
13:0
0
14:0
0
15:0
0
16:0
0
17:0
0
18:0
0
19:0
0
20:0
0
21:0
0
22:0
0
% o
f max
imum
(80
mov
emen
ts)
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
NZ
Chi
na
US
A
UK
Sin
gapo
re
Japa
n
Mal
aysi
a
Kor
ea
Indi
a
HK
Ger
man
y
Indo
nesi
a
Can
ada
Tai
wan
Fra
nce
Oth
er
For
eign
arr
ival
s gr
owth
(% y
oy)
0.7
1.7
2.7
3.7
4.7
5.7
-
100
200
300
400
500
Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16
CS
-S
YD
Chi
na v
isito
r in
dica
tor
#1
Chi
nese
vis
itor
arriv
als
to S
ydne
y
Chinese pax arrivals SYD (lagged 9 months)
CS - SYD China visitor indicator #1 - visitor active evaluation
0%
20%
40%
60%
80%
100%
6:00
7:00
8:00
9:00
10:0
0
11:0
0
12:0
0
13:0
0
14:0
0
15:0
0
16:0
0
17:0
0
18:0
0
19:0
0
20:0
0
21:0
0
22:0
0
% o
f max
imum
(80
mov
emen
ts)
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
NZ
Chi
na
US
A
UK
Sin
gapo
re
Japa
n
Mal
aysi
a
Kor
ea
Indi
a
HK
Ger
man
y
Indo
nesi
a
Can
ada
Tai
wan
Fra
nce
Oth
er
For
eign
arr
ival
s gr
owth
(% y
oy)
0.7
1.7
2.7
3.7
4.7
5.7
6.7
-
100
200
300
400
500
Jan-13 Aug-13 Mar-14 Oct-14 May-15 Dec-15 Jul-16 Feb-17
CS
-S
YD
Chi
na v
isito
r in
dica
tor
#1
Chi
nese
vis
itor
arriv
als
to S
ydne
y
Chinese pax arrivals SYD (lagged 9 months)
CS - SYD China visitor indicator #1 - visitor active evaluation
1,800
1,900
2,000
2,100
2,200
2,300
2,400
2,500
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Dom
estic
pas
seng
ers
2013 2014 2015 2016 2017
-5%
0%
5%
10%
J F M A M J J A S O N D J F M A M J J A S O N D J F M A M
2015 2016 2017
Gro
wth
in a
ircra
ft m
ovem
ents
(Y
oY)
Peak Off-peak
900
1,000
1,100
1,200
1,300
1,400
1,500
1,600
1,700
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Inte
rnat
iona
l pas
seng
ers
2013 2014 2015 2016 2017
0
2
4
6
8
10
12
14
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
CS
-S
YD
Chi
na in
dica
tor
#2 -
visi
tor
com
mit
2013 2014 2015 2016 2017
0.6
1.6
2.6
3.6
4.6
5.6
6.6
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
CS
-S
YD
Chi
na in
dica
tor
#1 -
visi
tor
activ
e ev
alua
tion
2013 2014 2015 2016 2017
19 June 2017
Australia and NZ First Edition 21
Figure 19: TCL key stock drivers
NSW traffic growth Updated 13-Apr NSW labour hours worked Updated 15-Jun
Source: Company data Source: ABS
VIC traffic growth Updated 13-Apr VIC labour hours worked Updated 15-Jun
Source: Company data Source: ABS
QLD traffic growth Updated 13-Apr QLD labour hours worked Updated 15-Jun
Source: Company data Source: ABS
US traffic growth Updated 13-Apr Virginia non-farm payrolls Updated 26-May
Source: Company data Source: US Bureau of Labor Statistics
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
J F M A M J J A S O N D J F M A M J J A S O N D J F M A
2015 2016 2017
Virg
inia
non
-farm
pay
rolls
gr
owth
(% y
oy)
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
J F M A M J J A S O N D J F M A M J J A S O N D J F M A M
2015 2016 2017
VIC
labo
ur h
ours
wor
ked
grow
th
(% y
oy)
-4.0%-3.0%-2.0%-1.0%0.0%1.0%2.0%3.0%4.0%5.0%6.0%
J F M A M J J A S O N D J F M A M J J A S O N D J F M A M
2015 2016 2017
QLD
labo
ur h
ours
wor
ked
grow
th
(% y
oy)
-10%
0%
10%
20%
1Q13 3Q13 1Q14 3Q14 1Q15 3Q15 1Q16 3Q16 1Q17 3Q17
Tra
ffic
grow
th (%
yoy
)
Hills M2 Lane Cove TunnelCross City Tunnel M1 Eastern DistributorM5
-2%
-1%
0%
1%
2%
3%
4%
5%
1Q13 3Q13 1Q14 3Q14 1Q15 3Q15 1Q16 3Q16 1Q17 3Q17
Tra
ffic
grow
th (%
yoy
)
CityLink
-20%
-10%
0%
10%
20%
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17
Tra
ffic
grow
th (%
yoy
)
Gateway Motorway Logan MotorwayClem7 Go Between Bridge
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
J F M A M J J A S O N D J F M A M J J A S O N D J F M A M
2015 2016 2017
NS
W la
bour
hou
rs w
orke
d gr
owth
(% y
oy)
0%
5%
10%
15%
20%
25%
30%
35%
4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17
Tra
ffic
grow
th (%
yoy
)
495 Express Lanes 95 Express Lanes
19 June 2017
Australia and NZ First Edition 22
Figure 20: MQA key stock drivers
APRR heavy vehicle economic indicators Updated 04-May APRR light vehicle economic indicators Updated 04-May
Source: Company data, Thomson Reuters Datastream Source: Company data, Thomson Reuters Datastream
APRR traffic growth Updated 19-Apr APRR heavy vehicle traffic vs. GDP growth Updated 19-Apr
Source: Company data Source: Company data, Thomson Reuters Datastream
Dulles Greenway traffic growth Updated 19-Apr Virginia non-farm payrolls growth Updated 26-May
Source: Company data Source: Bureau of Labour statistics
MQA Listed debt Updated 15-Jun Stock price vs benchmark Updated 15-Jun
Source: Company data, Bloomberg Source: Company data, Credit Suisse estimates
80
85
90
95
100
105
110
115
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Consumer confidence Disposable income LV Traffic
70
80
90
100
110
120
130
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Imports Manufacturing HV Traffic
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17
Mid
-yie
ld to
mat
urity
(%)
1000mn EUR - 5% 2017 500mn EUR - 5.125% 2018500mn EUR - 4.875% 2019 500mn EUR - FRN 2019500mn EUR - FRN 2020 500mn EUR - 2.25% 2020700mn EUR - 1.125% 2021 500mn EUR - 1.5% 2024
-10%
-5%
0%
5%
10%
1Q11 3Q11 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14 1Q15 3Q15 1Q16 3Q16 1Q17
Tra
ffic
grow
th (%
yoy
)
Dulles Greenway
-20%
-15%
-10%
-5%
0%
5%
10%
15%
2Q06 2Q07 2Q08 2Q09 2Q10 2Q11 2Q12 2Q13 2Q14 2Q15 2Q16
Tra
ffic
grow
th (%
yoy
)
LVT HVT APRR Traffic growth
-20%
-15%
-10%
-5%
0%
5%
10%
2Q06 2Q07 2Q08 2Q09 2Q10 2Q11 2Q12 2Q13 2Q14 2Q15 2Q16
Tra
ffic
grow
th (%
yoy
)
HVT GDP growth
0.80
0.90
1.00
1.10
1.20
1.30
Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun
Pric
e (r
ebas
ed)
MQA Benchmark
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
J F M A M J J A S O N D J F M A M J J A S O N D J F M A
2015 2016 2017
Virg
inia
non
-farm
pay
rolls
gro
wth
(%
yoy
)
Australia and NZ First Edition 23
19 June 2017
Asia Pacific/Australia Equity Research
Steel
BlueScope Steel
(BSL.AX / BSL AU) Rating OUTPERFORM*
Price (16-Jun,A$) 11.99
Target Price (A$) 13.30
Target price ESG risk (%) NA
Market cap (A$mn) 6,786.5
Yr avg. mthly trading (A$mn) 717.4
Projected return:
Capital gain (%) 10.9
Dividend yield (net %) 0.9
Total return (%) 11.9
Target price is for 12 months.
[V] = Stock Considered Volatile (see Disclosure Appendix)
Research Analysts
Michael Slifirski
61 3 9280 1845
michael.slifirski@credit-suisse.com
Nick Herbert, CFA
61 3 9280 1754
nick.herbert@credit-suisse.com
COMMENT
Arrium preferred bidder – a minor risk?
■ Arrium's receiver, KordaMentha, has advised that it has chosen a Korean
consortium as the preferred bidder for the Arrium group of companies.
■ The consortium is headed by Newlake Alliance Management and JB Asset
Management and is supported by the Korean steel making company, Posco.
■ Arrium group includes ATM (Australian Tube Mills), a business that Arrium
had actively but unsuccessfully sought to divest as non-core and not
integrated long before receivership. ARI's price expectation deterred buyers.
■ BlueScope, in our view, is the logical owner of the ATM business and
could extract meaningful transport synergies by acquiring and relocating the
capacity from Brisbane to Port Kembla, removing two unnecessary transport
legs (HRC from Port Kembla to Brisbane, conversion to tube in Brisbane,
transport of tube back to the main markets in Sydney and Melbourne.
■ ATM is currently a domestic customer for up to 150ktpa of BlueScope's HRC.
While this is competitively priced and is BSL's lowest margin domestic
product, the alternative market is to the export market at perhaps a US$100/t
lower price, or a potential $15mn–$20mn EBIT (~1.5%) impact if the Posco
consortium keeps the ATM business and supplies its own Korean HRC.
■ Arrium also has a large domestic distribution business, focused on long
products. This business could, and has in the past, also distribute the product
range manufactured and distributed by BlueScope. 9Posco could use this
business as an import channel, competing with BlueScope, but would have
to be competitive with BSL's import parity pricing.
■ While we highlight both Posco opportunities as minor risks, we see no
reason to adjust our earnings, target price or rating and recognize the equal
risk of a net positive outcome if ATM was to be divested to BSL.
Total return forecast in perspective
Share Price CS Target Rtn Mean
12mth Volat ility
52 Week Hi-Lo
*Target return
- 49%
- 29%
- 9%
11%
31%
51%
Source: Company data, Thomson Reuters, IBES, Credit
Suisse estimates
Performance 1M 3M 12M Absolute (%) 4.53 -8.26 90.02 Relative (%) 4.93 -7.63 78.02
Financial and valuation metrics
Year 6/16A 6/17E 6/18E 6/19E
Revenue (A$ mn) 9,183 10,495 10,377 10,393
EBITDA (A$ mn) 955 1,502 1,547 1,519
EBIT (A$ mn) 567 1,115 1,162 1,133
Net Income (Adj.) (A$ mn) 290 671 712 690
EPS (Adj.) (A$) 0.49 1.14 1.20 1.17
Change from previous EPS (%) n.a. 0.0 0.0 0.0
EPS growth (%) 113.2 129.6 5.8 (3.0)
Consensus EPS (A$) 0.50 1.15 1.15 1.10
P/E (x) 24.2 10.6 10.0 10.3
Dividends (Ac) 6.00 8.00 11.43 11.43
Dividend yield (%) 0.5 0.7 1.0 1.0
Price/Book (x) 1.5 1.4 1.2 1.1
Net debt/EBITDA (x) 0.8 0.2 (0.2) (0.6)
Source: Company data, Thomson Reuters, Credit Suisse estimates
19 June 2017
Australia and NZ First Edition 24
BlueScope Steel (BSL.AX / BSL AU) Price (16 Jun 2017): A$11.99; Rating: OUTPERFORM [V]; Target Price: A$13.3; Analyst: Michael Slifirski
Income Statement 6/16A 6/17E 6/18E 6/19E
Revenue 9,183 10,495 10,377 10,393
EBITDA 955 1,502 1,547 1,519
Depr. & Amort. (388) (387) (386) (386)
EBIT 567 1,115 1,162 1,133
Associates - - - -
Net interest exp. (90) (83) (66) (61)
Other 0 0 0 0
Profit before tax 477 1,032 1,095 1,072
Income tax (125) (281) (298) (292)
Profit after tax 352 751 797 780
Minorities (63) (80) (85) (89)
Preferred dividends - - - -
Associates & Other 0 0 0 0
Normalised NPAT 290 671 712 690
Unusual item after tax 61 (1) 0 0
Net profit (Reported) 351 670 712 690
Balance Sheet 6/16A 6/17E 6/18E 6/19E
Cash & equivalents 550 665 1,295 1,919
Inventories 1,392 1,501 1,484 1,486
Receivables 1,158 1,364 1,349 1,351
Other current assets 106 120 119 119
Current assets 3,206 3,650 4,247 4,875
Property, plant & equip. 3,834 3,828 3,849 3,858
Intangibles 1,762 1,786 1,786 1,786
Other non-current assets 346 361 361 361
Non-current assets 5,943 5,974 5,996 6,004
Total assets 9,149 9,624 10,242 10,879
Payables 1,481 1,629 1,589 1,597
Interest bearing debt 1,328 975 975 975
Other liabilities 1,355 1,411 1,403 1,395
Total liabilities 4,163 4,015 3,968 3,968
Net assets 4,985 5,609 6,275 6,911
Ordinary equity 4,497 5,041 5,621 6,169
Minority interests 488 568 653 742
Preferred capital - - - -
Total shareholder funds 4,985 5,609 6,275 6,911
Net Debt 778 310 (320) (944)
Cash Flow 6/16A 6/17E 6/18E 6/19E
EBIT 567 1,115 1,162 1,133
Net Interest (105) (71) (61) (58)
Depr & Amort 388 387 386 386
Tax Paid (50) (202) (182) (162)
Change in Working capital 209 (167) (7) 4
Other cash and non-cash items (58) (49) 7 7
Operating cash flow 952 1,013 1,303 1,308
Capex (279) (416) (407) (394)
Capex - expansionary (46) (184) (176) (163)
Capex - Maintenance (233) (232) (231) (232)
Acquisitions & Invest (1,049) 0 0 0
Asset sale proceeds 0 0 0 0
Other - - - -
Investing cash flow (1,290) (416) (407) (394)
Dividends paid (34) (40) (46) (66)
Equity raised 0 0 0 0
Net borrowings 441 (388) (134) (135)
Other financing cash in/(outflows) (39) (54) (85) (89)
Financing cash flow 368 (482) (265) (290)
Total cash flow 30 116 630 624
Adjustments 1 0 0 0
Movement in cash/equivalents 31 116 630 624
Earnings 6/16A 6/17E 6/18E 6/19E
Equiv. FPO (period avg) (mn) 586 591 592 592
EPS (CS adj.) (c) 49.5 113.6 120.2 116.6
EPS growth (%) 113.2 129.6 5.8 (3.0)
DPS (c) 6.0 8.0 11.4 11.4
Dividend Payout (%) 12.1 7.0 9.5 9.8
Free CFPS (c) 122.8 132.2 181.0 181.9
Valuation 6/16A 6/17E 6/18E 6/19E
P/E (CS) (x) 24.2 10.6 10.0 10.3
PEG (x) 0.2 0.1 1.7 (3.4)
EV/EBIT (x) 13.3 6.4 5.6 5.2
EV/EBITDA (x) 7.9 4.7 4.2 3.8
Dividend Yield (%) 0.5 0.7 1.0 1.0
FCF Yield (%) 10.2 11.0 15.1 15.2
Price to book (x) 1.5 1.4 1.2 1.1
Returns 6/16A 6/17E 6/18E 6/19E
Return on Equity (%) 6.4 13.3 12.7 11.2
Profit Margin (%) 3.2 6.4 6.9 6.6
Asset Turnover (x) 1.0 1.1 1.0 1.0
Equity Multiplier (x) 2.0 1.9 1.8 1.8
Return on Assets (%) 3.2 7.0 6.9 6.3
Return on Invested Cap. (%)
7.3 13.7 14.2 13.8
Gearing 6/16A 6/17E 6/18E 6/19E
ND/ND+E (%) 13.5 5.2 Net Cash
Net Cash Net Debt to EBITDA (x) 0.8 0.2 Net
Cash Net
Cash Int Cover (EBITDA) (x) 10.6 18.1 23.3 24.7
Int Cover (EBIT) (x) 6.3 13.5 17.5 18.5
Capex to Sales (%) 3.0 4.0 3.9 3.8
Capex to Depr (%) 71.8 107.5 105.6 102.1
MSCI IVA Rating A
Global Local Country Stock
Environment Social Governance
0
1
2
3
4
5
6
7
8
GL
C
S
G
LCS
G
LC
S
TP ESG Risk (%): 0.00 TP Risk Comment: Neutral risk. Ongoing concerns around viability of long-term domestic steel making industry is represented through a conservative profile to 'mid-cycle' earnings rather than a quantitative NPV discount factor. MSCI IVA Risk: Neutral MSCI IVA Risk Comment: MSCI upgraded its rating for BSL to 'A' (from 'BBB') in November 2016 citing BlueScope's industry leading safety performance with consistently low lost time injury rates and safety performance link to executive pay, despite the company’s strong cost cutting drive at its Australian steel plant. Tempering their view is that BlueScope lacks an emissions reduction target and has an emissions intensity at the industry average level and rising.
Share price performance
On 16-Jun-2017 the S&P ASX 200 Index closed at 5763.19 On 16-Jun-2017 the spot exchange rate was A$1.32/US$1
Source: Company Data, Credit Suisse Estimates, MSCI ESG Research
Australia and NZ First Edition 25
19 June 2017
Asia Pacific/Australia Equity Research
Biotechnology
CSL
(CSL.AX / CSL AU) Rating OUTPERFORM*
Price (16-Jun,A$) 139.00
Target Price (A$) 134.00
Target price ESG risk (%) -1.0
Market cap (A$mn) 63,083.1
Yr avg. mthly trading (A$mn) 2,292.3
Projected return:
Capital gain (%) -3.6
Dividend yield (net %) 1.6
Total return (%) -2.0
Target price is for 12 months.
Research Analysts
Saul Hadassin
61 2 8205 4679
saul.hadassin@credit-suisse.com
David Bailey
61 2 8205 4739
david.bailey@credit-suisse.com
COMPANY UPDATE
China – same plasma, different economics?
■ Exploring plasma differences: Following CSL's proposed entry into the
domestic China plasma fractionation sector (via Ruide) we compare/contrast
key operational and financial metrics of listed peers with the CSL Behring
business and assess potential readthrough for Ruide. Listed China plasma
fractionators generate robust operating margins, ahead of CSL Behring,
despite only clearing one core plasma product in last litres (albumin) and
selling far fewer specialty (infra-marginal) products.
■ Local margins higher due to lower COGS: Our analysis shows that this is
predominantly due to significantly lower COGS per litre of plasma utilised,
with other operating expenses similar in total as a percentage of revenue.
Within the COGS category, we highlight that despite having substantially
higher donor fees per litre of plasma collected in China, this is more than
offset by lower non-donor related COGS (e.g., logistics, storage, labour,
testing, supplies). For CSL, we see significant longer-term upside to current
Ruide revenues of ~US$30 mn (via organic growth and new product
approvals). While at face value, this should lead to material improvement in
fractionation economics, in our view, the revenue uplift will require
investment in both non-donor COGS (i.e., plasma collection/fractionation
processes) as well as core operating cost lines (R&D, sales and marketing).
As a result, our current base case assumption for Ruide (~35% EBIT margin
after five years) factors in minimal operating margin expansion from current
levels (~30%).
■ Catalysts: (1) Monthly PPTA data; (2) FDA regulatory decision on
Haegarda (anticipated mid-year).
■ Valuation: CSL currently trades on 29.3x 12-month forward consensus EPS,
representing a 65% premium to the ASX200 Industrials ex. Financials (two-
year averages of 24.5x and 42%, respectively).
Total return forecast in perspective
Share Price CS Target Rtn Mean
12mth Volat ility
52 Week Hi-Lo
*Target return
- 34%
- 14%
6%
26%
Source: Company data, Thomson Reuters, IBES, Credit
Suisse estimates
Performance 1M 3M 12M Absolute (%) 4.79 12.70 27.15 Relative (%) 4.99 13.14 14.95
Financial and valuation metrics
Year 6/16A 6/17E 6/18E 6/19E
Revenue (US$ mn) 5,910 6,623 7,147 7,731
EBITDA (US$ mn) 1,749 2,111 2,484 2,803
EBIT (US$ mn) 1,529 1,846 2,192 2,492
Net Income (Adj.) (US$ mn) 1,157 1,359 1,639 1,872
EPS (Adj.) (US$) 2.50 2.98 3.60 4.10
Change from previous EPS (%) n.a. 0.0 0.0 0.0
EPS growth (%) (15.6) 19.3 20.7 13.9
Consensus EPS (US$) 2.49 2.99 3.63 4.12
P/E (x) 42.2 35.4 29.3 25.8
Dividends (US$) 1.24 1.34 1.68 1.91
Dividend yield (%) 1.2 1.3 1.6 1.8
Price/Book (x) 18.8 16.3 12.4 9.7
Net debt/EBITDA (x) 1.5 1.4 1.3 1.1
Source: Company data, Thomson Reuters, Credit Suisse estimates
19 June 2017
Australia and NZ First Edition 26
CSL (CSL.AX / CSL AU) Price (16 Jun 2017): A$139.0; Rating: OUTPERFORM; Target Price: A$134; Analyst: Saul Hadassin
Income Statement 6/16A 6/17E 6/18E 6/19E
Revenue 5,910 6,623 7,147 7,731
EBITDA 1,749 2,111 2,484 2,803
Depr. & Amort. (220) (265) (292) (311)
EBIT 1,529 1,846 2,192 2,492
Associates - - - -
Net interest exp. (58) (79) (90) (92)
Other 0 0 0 0
Profit before tax 1,471 1,767 2,102 2,400
Income tax (314) (407) (462) (528)
Profit after tax 1,157 1,359 1,639 1,872
Minorities - - - -
Preferred dividends - - - -
Associates & Other 0 0 0 0
Normalised NPAT 1,157 1,359 1,639 1,872
Unusual item after tax 85 0 (10) 0
Net profit (Reported) 1,243 1,359 1,629 1,872
Balance Sheet 6/16A 6/17E 6/18E 6/19E
Cash & equivalents 557 484 636 906
Inventories 2,152 2,246 2,383 2,515
Receivables 1,107 1,177 1,295 1,395
Other current assets 2 10 10 10
Current assets 3,818 3,918 4,324 4,826
Property, plant & equip. 2,390 2,877 3,573 4,211
Intangibles 943 923 1,144 1,084
Other non-current assets 413 431 431 431
Non-current assets 3,745 4,231 5,149 5,726
Total assets 7,563 8,149 9,472 10,553
Payables 996 963 987 1,011
Interest bearing debt 3,143 3,529 3,881 3,881
Other liabilities 856 717 717 717
Total liabilities 4,996 5,210 5,585 5,609
Net assets 2,567 2,939 3,887 4,944
Ordinary equity 2,567 2,939 3,887 4,944
Minority interests 0 0 0 0
Preferred capital - - - -
Total shareholder funds 2,567 2,939 3,887 4,944
Net Debt 2,587 3,045 3,245 2,975
Cash Flow 6/16A 6/17E 6/18E 6/19E
EBIT 1,529 1,846 2,192 2,492
Net Interest (61) (82) (90) (92)
Depr & Amort 220 265 292 311
Tax Paid (326) (464) (462) (528)
Change in Working capital (454) (178) (230) (208)
Other cash and non-cash items 271 (142) (10) 0
Operating cash flow 1,179 1,245 1,691 1,975
Capex (495) (741) (858) (889)
Capex - expansionary (322) (519) (625) (638)
Capex - Maintenance (173) (222) (232) (251)
Acquisitions & Invest (245) 0 (352) 0
Asset sale proceeds 0 0 0 0
Other - - - -
Investing cash flow (810) (798) (1,210) (889)
Dividends paid (579) (601) (681) (815)
Equity raised (631) (335) 0 0
Net borrowings 847 449 352 0
Other financing cash in/(outflows) 0 0 0 0
Financing cash flow (362) (487) (329) (815)
Total cash flow 6 (40) 152 270
Adjustments (5) (32) 0 0
Movement in cash/equivalents 1 (71) 152 270
Earnings 6/16A 6/17E 6/18E 6/19E
Equiv. FPO (period avg) (mn) 463 456 456 457
EPS (CS adj.) (c) 249.9 298.0 359.8 409.7
EPS growth (%) (15.6) 19.3 20.7 13.9
DPS (c) 124.0 134.0 168.0 191.0
Dividend Payout (%) 49.6 45.0 46.7 46.6
Free CFPS (c) 217.1 224.4 320.2 377.3
Valuation 6/16A 6/17E 6/18E 6/19E
P/E (CS) (x) 42.2 35.4 29.3 25.8
PEG (x) (2.7) 1.8 1.4 1.9
EV/EBIT (x) 33.0 27.6 23.3 20.4
EV/EBITDA (x) 28.9 24.1 20.6 18.2
Dividend Yield (%) 1.2 1.3 1.6 1.8
FCF Yield (%) 2.1 2.1 3.0 3.6
Price to book (x) 18.8 16.3 12.4 9.7
Returns 6/16A 6/17E 6/18E 6/19E
Return on Equity (%) 45.1 46.2 42.2 37.9
Profit Margin (%) 19.6 20.5 22.9 24.2
Asset Turnover (x) 0.8 0.8 0.8 0.7
Equity Multiplier (x) 2.9 2.8 2.4 2.1
Return on Assets (%) 15.3 16.7 17.3 17.7
Return on Invested Cap. (%)
23.3 23.7 24.0 24.5
Gearing 6/16A 6/17E 6/18E 6/19E
ND/ND+E (%) 50.2 50.9 45.5 37.6
Net Debt to EBITDA (x) 1.5 1.4 1.3 1.1
Int Cover (EBITDA) (x) 30.3 26.7 27.5 30.4
Int Cover (EBIT) (x) 26.5 23.3 24.3 27.1
Capex to Sales (%) 8.4 11.2 12.0 11.5
Capex to Depr (%) 269.2 361.2 369.2 353.8
MSCI IVA Rating BBB
Global Local Country Stock
Environment Social Governance
0
1
2
3
4
5
6
7
8
G
L
CS
GLC
S
G
L
C
S
TP ESG Risk (%): -1.00 TP Risk Comment: Low risk. In our view CSL has a strong corporate governance framework and its impact on the environment from plasma protein fractionation is minimal (ethanol recycling at the Bern plant is an example of this). Recent product recalls (paediatric Fluvax, Australian albumin) adds only marginal risk to the stock in our view (we factor in -1% to our valuation) – these events were not due to lack of good manufacturing principles or employee error. Given the high volume of potentially high risk biological agents produced each year, CSL has an enviable track record in terms of safety outcomes. MSCI IVA Risk: Neutral MSCI IVA Risk Comment: Current 'BBB' rating. Lacks a top rating due to average safety and product quality following 2010 TGA recall of Fluvax in Australia. Whilst we do not believe these events were material to the group we maintain a NEUTRAL risk
Share price performance
On 16-Jun-2017 the S&P ASX 200 Index closed at 5774.0 On 16-Jun-2017 the spot exchange rate was A$1.32/US$1
Source: Company Data, Credit Suisse Estimates, MSCI ESG Research
19 June 2017
Australia and NZ First Edition 27
China – same plasma, different economics?
CSL Behring vs domestic operators
■ Using listed China plasma operators, China Biologics (CPBO) and Hualan Biological
Engineering Inc (002007), as representatives of the domestic China plasma industry,
we compare/contrast key operational and financial metrics with the CSL Behring
plasma business and assess potential readthrough for Ruide.
Revenues and costs per litre
■ Based on company data, we have derived revenue and COGS per litre of plasma
fractionated for the three businesses (Figure 1).
■ We note CSL has higher revenue per litre, due to the larger number of products
(particularly specialty) fractionated. Notwithstanding, a ~25% higher price point for
albumin (i.e. $/gram) in China relative to the US allows local fractionators to also
generate reasonable revenues per litre.
■ In terms of COGS, CSL Behring has roughly twice the total cost per litre of plasma
processed versus local China peers, which we explore in more detail below.
■ With regard to last litres, we note well balanced core plasma product sales for CSL
Behring (IG and albumin), while for local operators, albumin is the only product
extracted from last litres (Figure 2).
Figure 1: CSL has higher revenue and COGS/L… Figure 2: …with balanced last litres (core products).
Revenue and COGS per litre based on FY16 results Litres required for albumin and IG sales
0
50
100
150
200
250
300
350
400
450
500
CSL Behring CBPO Hualan
US
$
Revenue per litre COGS per litre
0.0
2.0
4.0
6.0
8.0
10.0
12.0
CSL Behring CBPO Hualan
Pla
sma
litre
s m
n
Albumin IG
Source for both charts: Company data, Credit Suisse estimates
COGS explored – some stark differences
■ We note several significant differences with regard to CSL Behring COGS and those of
domestic China fractionators (Figure 3, Figure 4 and Figure 5).
■ These include:
− Total COGS per litre is materially higher for CSL Behring versus local peers
(US$211 versus US$97-111).
− However, donor fees on a per litre of plasma basis for local operators are almost
twice as high as CSL Behring (US$69 versus US$37.50). We understand this is partly
due to nutrition fees paid to donors, as noted by CBPO in their 2016 annual report:
"In an effort to increase plasma collection volume and expand our donor base,
we increased the nutrition fees paid to donors consistent with the industry
19 June 2017
Australia and NZ First Edition 28
practice. We expect the nutrition fees to be paid to donors will continue to
increase as a result of improving living standards in China. Consequently, future
improvements on margins will need to be derived from increases in product
pricing, yields and manufacturing efficiency, as well as from optimizing the
product mix."
− This implies that non-donor fee COGS are materially lower for local China
participants versus CSL Behring (~US$28-42 versus US$177).
− CSL Behring plasma centres are more efficient in terms of utilisation with ~67k litres
of plasma collected per centre versus ~42k-49k for local operators.
Figure 3: Plasma collection costs and centre utilisation—CSL versus China peers
Using FY16 results CSL Behring CBPO Hualan
Plasma COGS (US$mn) 2,067.9 124.0 106.0
Litres collected (mn) 9.82 1.28 0.96
COGS/litre (US$) 211 97 111
Cost per donation (US$) 30.0 40.0 40.0
Volume per donation (litres) 0.8 0.6 0.6
Donor cost per litre (US$) 37.5 69.0 69.0
Non-donor cost per litre (US$) 176.5 28.1 41.8
Plasma centres 144 16 23
Litres per centre 67109 49438 41593
Source: Company data, Credit Suisse estimates
Figure 4: CSL Behring lower donor fees, higher non-
donor COGS…
Figure 5: …despite much higher utilisation of
plasma centre networks
Donor and non-donor COGS per litre (US$) based on 2016 results Number of plasma centres and utilisation (litres collected per centre)
0
20
40
60
80
100
120
140
160
180
200
CSL Behring CBPO Hualan
US
$
Donor cost per litre (US$) Non-donor cost per litre (US$)
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
0
20
40
60
80
100
120
140
160
CSL Behring CBPO Hualan
Plasma centres LHS Litres per centre RHS
Source for both charts: Company data, Credit Suisse estimates
■ In Figure 6, we show a breakdown of plasma collection and fractionation costs for
global players; Figure 7 shows these costs for Hualan (adapted from their 2016 annual
report). Whilst difficult to compare due to categorisation differences, one area of
discrepancy (apart from the donor fee) seems to be associated with labour costs.
■ This may be partially due to lower average wages for staff but could also represent
relative differences in numbers of engineering/biomedical staff in key functions (quality
control, quality assurance). There also appear to be differences in logistics and testing
costs. Implications for CSL (via the Ruide acquisition) are addressed below.
19 June 2017
Australia and NZ First Edition 29
Figure 6: Labour costs at least 10%... Figure 7: …but only 2.6% for Hualan
Global player plasma COGS breakdown Hualan plasma COGS breakdown – 2016 results
Donor fees16%
Logistics3%
Testing4%
Support and Fixed12%
Supplies and other variables
10%Labour
10%
Fractionation cost45%
Donor fee62%
Other direct material costs
16%
Direct Labour3%
Power Cost4%
Depreciation5%
Other10%
Source for both charts: Company data, Credit Suisse estimates
Comparing operating margins
■ Key operating margins and costs as a percentage of revenue for CSL Behring and
CBPO are shown in Figure 8, Figure 9 and Figure 10. For CSL Behring, we have
excluded recombinant clotting factor sales and COGS, and have allocated divisional
D&A across key operating cost lines in order to undertake a like-for-like assessment.
■ We note that CBPO generates a higher gross margin versus CSL (~64% and ~57%
respectively) despite clearing only one product (albumin) from last litres, and
generating lower revenue per litre. As discussed above, this is due to materially lower
non-donor fee related COGS.
Figure 8: Margins higher for local player… Figure 9: …with several opex lines lower (% sales)
Gross margin and EBIT margin for plasma businesses (2016) Costs as % of sales – D&A included in key costs lines (2016)
0%
10%
20%
30%
40%
50%
60%
70%
Gross margin EBIT margin
CSL Behring
CBPO
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
COGS S&M G&A R&D Opex
CSL Behring
CBPO
Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates
19 June 2017
Australia and NZ First Edition 30
Figure 10: CSL Behring vs CBPO
FY16 US$mn CSL Behring CBPO
Plasma product revenues US$mn 4843.4 341.2
Plasma product COGS US$mn -2,067.9 -124.0
Sales/Marketing US$ -413.3 -11.7
G&A US$ -198.5 -54.5
R&D US$ -408.8 -7.0
D&A US$ -172.9 -12.7
Total opex US$ -1,020.6 -73.2
EBIT 1755.0 143.9
Gross margin % 57.3% 63.6%
EBIT margin % 36.2% 42.2%
% of sales
COGS % 42.7% 36.4%
S&M % 8.5% 3.4%
G&A % 4.1% 16.0%
R&D % 8.4% 2.1%
D&A % 3.6% 3.7%
Opex % 21.1% 21.5%
Source: Company data, Credit Suisse estimates
Implications for CSL and Ruide
■ While we see significant longer term upside to current Ruide revenues of ~US$30mn
(consistent with CSL management guidance) from continued organic growth in albumin/IG
and via new product approvals (coagulation factors), in our view, this will require
investment in both non-donor COGS (i.e., plasma collection systems, fractionation
processes), as well as core operating cost lines (R&D, sales and marketing).
■ One area of opportunity for CSL appears to be in increasing plasma centre utilisation in
China, noting CSL Behring collects on average ~40-60% more plasma per centre;
however, as noted above, this will likely require additional capital and operating
expense investment. Hence our base case assumptions for Ruide do not factor in
significant operating margin expansion from current levels (i.e., ~30% EBIT margin).
Australia and NZ First Edition 31
19 June 2017
Asia Pacific/Australia Equity Research
Consumer Finance
FlexiGroup
(FXL.AX / FXL AU) Rating (from OUTPERFORM) NEUTRAL*
Price (16-Jun,A$) 1.70
Target Price (A$) (from 2.70) 1.85
Target price ESG risk (%) NA
Market cap (A$mn) 633.0
Yr avg. mthly trading (A$mn) 53.7
Projected return:
Capital gain (%) 8.8
Dividend yield (net %) 4.8
Total return (%) 13.6
Target price is for 12 months.
Research Analysts
Paul Buys
61 2 8205 4538
paul.buys@credit-suisse.com
DOWNGRADE RATING
Certegy presents uncertainty
■ Downgrade rating to Neutral: Our prior Outperform rating ($2.12 share
price, February 2016) was based on cheap valuation and a view that FXL
could start to grind out growth, despite residual risks. However, roll forward
to today, and despite valuation ostensibly looking compelling (again), FXL is
still in a downgrade cycle (-20% FY18 consensus revisions) and we are
increasingly cautious on Certegy (36% of FY16 NPAT), which could offset
growth in other areas (e.g. Australian Card). While FXL looks over-sold on a
short-term view and valuation may offer support, we have low conviction on
earnings and still see a downside risk—we would rather wait until growth
concerns are alleviated.
■ Challenges to Certegy: We believe that having had a niche credit space
largely to itself, Certegy now has growing competitors (AFY.AX, ZML.AX)
with strong digital offerings and brands that are resonating with retailers and
consumers alike. The no-interest-ever product remains attractive, in our
view, but increased competition translates to both margin and volume
pressure for FXL, at the same time as a less certain outlook for the
consumer generally. This has already impacted 2H17 (contributed to
lowering FY17 guidance) and poses further risk to FY18-19.
■ Where it could be better than we think: (1) New products (Oxipay) or
categories (solar battery storage) offset pressures in Certegy; (2) NZ Card
growth trajectory lifts (scheme card, better sales momentum); (3) Aust. Card
is better than we expect (we forecast >70% growth FY17-19); (4) improved
commercial finance lifts leasing growth; and (5) other geographies (Ireland).
■ Where it could be worse than we think: (1) Further competition in other
areas (e.g. Latitude, a potential IPO candidate according to press reports);
(2) impairments rise more quickly than expected; (3) contract losses/failure to
renew business; (4) regulatory/consumer focus further impacts POS leasing;
and (5) Card receivables conversion to interest-bearing disappoints.
■ EPS outlook: Negative revisions to EPS estimates (-8% FY18, -14% FY19)
stem mainly from forecast declines in Certegy earnings and reflect our view
that FXL could struggle to generate material growth over the next 2-3 years.
Total return forecast in perspective
Share Price CS Target Rtn Mean
12mth Volat ility
52 Week Hi-Lo
*Target return
- 100%
0%
100%
200%
Source: Company data, Thomson Reuters, IBES, Credit
Suisse estimates
Performance 1M 3M 12M Absolute (%) -7.86 -27.66 -5.56 Relative (%) -7.65 -27.22 -17.76
Financial and valuation metrics
Year 6/16A 6/17E 6/18E 6/19E Revenue (A$ mn) 393 440 455 480 EBITDA (A$ mn) 203 235 244 253 EBIT (A$ mn) 189 222 230 240 Net Income (Adj.) (A$ mn) 97 92 93 95 EPS (Adj.) (A$) 0.28 0.25 0.25 0.26 Change from previous EPS (%) n.a. (3.4) (8.3) (13.9) EPS growth (%) (5.1) (12.1) 1.3 2.4 P/E (x) 6.1 6.9 6.8 6.7 Dividend (A$) 0.15 0.08 0.08 0.08 Dividend yield (%) 8.5 4.7 4.8 4.9 Price/Book (x) 1.0 0.9 0.9 0.9 Net debt/equity (%) 289.7 284.5 300.2 281.4
Source: Company data, Thomson Reuters, Credit Suisse estimates
19 June 2017
Australia and NZ First Edition 32
FlexiGroup (FXL.AX / FXL AU) Price (16 Jun 2017): A$1.7; Rating: (from OUTPERFORM) NEUTRAL; Target Price: (from A$2.7) A$1.85; Analyst: Paul Buys
Income Statement 6/16A 6/17E 6/18E 6/19E
Revenue 391 439 454 479
EBITDA 203 235 244 253
Depr. & Amort. (14) (14) (14) (14)
EBIT 189 222 230 240
Associates 0 0 0 0
Net interest exp. (76) (98) (104) (110)
Other 0 0 0 0
Profit before tax 113 124 126 129
Income tax (20) (36) (37) (38)
Profit after tax 93 88 89 91
Minorities - - - -
Preferred dividends - - - -
Associates & Other 4 4 4 4
Normalised NPAT 97 92 93 95
Unusual item after tax (47) (1) 0 (1)
Net profit (Reported) 50 91 93 94
Balance Sheet 6/16A 6/17E 6/18E 6/19E
Cash & equivalents 174 153 65 71
Inventories 1 1 1 1
Receivables 1,285 1,426 1,635 1,593
Other current assets 16 14 16 14
Current assets 1,477 1,594 1,717 1,679
Property, plant & equip. 6 6 5 5
Intangibles 400 432 403 433
Other non-current assets 797 854 820 954
Non-current assets 1,203 1,292 1,228 1,392
Total assets 2,680 2,886 2,945 3,071
Payables 49 46 48 50
Interest bearing debt 1,949 2,069 2,095 2,145
Other liabilities 70 98 126 139
Total liabilities 2,067 2,213 2,269 2,334
Net assets 612 673 676 737
Ordinary equity 612 673 676 737
Minority interests 0 0 0 0
Preferred capital - - - -
Net assets 612 673 676 737
Net Debt 1,774 1,916 2,030 2,074
Cash Flow 6/16A 6/17E 6/18E 6/19E
EBIT 189 222 230 240
Net Interest (79) (105) (106) (112)
Depr & Amort 14 14 14 14
Tax Paid (44) (22) (20) (36)
Change in Working capital (396) (144) (207) 44
Other cash and non-cash items 463 210 247 2
Operating cash flow 147 175 158 151
Capex (24) (22) (16) (14)
Capex - expansionary 0 0 0 0
Capex - Maintenance (24) (22) (16) (14)
Acquisitions & Invest (187) (2) 0 0
Asset sale proceeds 0 6 0 0
Other - - - -
Investing cash flow (269) (268) (385) (278)
Dividends paid (54) (41) (29) (31)
Equity raised 143 0 0 0
Net borrowings 76 113 147 75
Other financing cash in/(outflows) 0 0 0 0
Financing cash flow 165 72 117 45
Total cash flow 43 (21) (110) (82)
Adjustments 1 0 0 0
Movement in cash/equivalents 44 (21) (110) (82)
Earnings 6/16A 6/17E 6/18E 6/19E
Equiv. FPO (period avg) (mn) 346 372 372 372
EPS (CS adj.) (c) 28.0 24.6 24.9 25.5
EPS growth (%) (5.1) (12.1) 1.3 2.4
DPS (c) 14.5 8.0 8.1 8.3
Dividend Payout (%) 51.8 32.5 32.5 32.5
Free CFPS (c) 35.6 41.1 38.1 36.8
Valuation 6/16A 6/17E 6/18E 6/19E
P/E (CS) (x) 6.1 6.9 6.8 6.7
EV/EBIT (x) 12.8 10.9 10.5 10.0
EV/EBITDA (x) 11.9 10.2 9.9 9.5
Dividend Yield (%) 8.5 4.7 4.8 4.9
FCF Yield (%) 20.9 24.2 22.4 21.6
Price to book (x) 1.0 0.9 0.9 0.9
Returns 6/16A 6/17E 6/18E 6/19E
Return on Equity (%) 15.8 13.6 13.7 12.9
Profit Margin (%) 24.8 20.9 20.4 19.8
Asset Turnover (x) 0.1 0.2 0.2 0.2
Equity Multiplier (x) 4.4 4.3 4.4 4.2
Return on Assets (%) 3.6 3.2 3.2 3.1
Return on Invested Cap. (%)
6.5 6.1 6.0 6.0
Gearing 6/16A 6/17E 6/18E 6/19E
ND/ND+E (%) 74.3 74.0 75.0 73.8
Net Debt to EBITDA (x) 8.7 8.1 8.3 8.2
Int Cover (EBITDA) (x) 2.7 2.4 2.4 2.3
Int Cover (EBIT) (x) 2.5 2.3 2.2 2.2
Capex to Sales (%) 6.2 5.0 3.5 2.9
Capex to Depr (%) 896.3 782.1 582.7 525.5
MSCI IVA Rating B
Global Local Country Stock
Environment Social Governance
0
2
4
6
8
G
L
C
S
G
LC
S
G
LC S
TP ESG Risk (%): 0.00 TP Risk Comment: For FXL, outside of the consumer services ESG risk factors we do not include any ESG impact in our base valuation. We highlight key ESG risk areas for FXL as 1) protection and management of personal information; and 2) social responsibility for providing product and services. MSCI IVA Risk: Positive MSCI IVA Risk Comment: We believe the MSCI rating is not appropriate for FXL given that it highlights access to finance and human capital management as key area of concern. FXL has doubled the number of funding providers since the GFC, has increased its facilities and completed a $270mn securitisation in June 2015. FXL remains and employer of choice in Australia.
Share price performance
On 16-Jun-2017 the S&P ASX 200 Index closed at 5774.0 On 16-Jun-2017 the spot exchange rate was A$1.32/US$1
Source: Company Data, Credit Suisse Estimates, MSCI ESG Research
19 June 2017
Australia and NZ First Edition 33
Challenges facing Certegy
■ We believe that having had a niche credit space ('no-interest-ever') largely to itself for a
number of years, Certegy now finds itself with materially increased competition. These
come in the form of Afterpay (AFY.AX) and zipMoney (ZML.AX), both of which are
young companies with strong digital offerings and growing brand awareness.
■ zipMoney is a digital retail finance and payments provider that offers point-of-sale
credit and digital payment services to the retail, education, health and travel industries.
It offers two products, ZipPay (digital wallet up to A$1,000) and ZipMoney (digital wallet
up to $20,000), and also operates a mobile budgeting application called Pocketbook.
■ Afterpay was founded in 2014 and is a retail payments platform that facilitates
commerce between retail merchants and their end-customers. Its product is targeted at
lower value transactions (current average ~$150-200, 85% of customers use debit
cards) and allows the consumer to purchase an item and pay for it in four equal value
instalments across a 6-8 week time frame.
■ AFY and ZML have enjoyed very strong growth in retailer and customer take-up, as
well as transaction volumes, with products that have been differentiated from more
traditional credit offerings through factors like digital solutions, integration with retailer
websites, reduced paperwork and increased speed of sign-up driving improved
conversion rates. Both have secured committed funding facilities from major banks.
− ZML project an annualised transaction volume run rate of A$360mn amongst its
~4,000 retail partners using the platform both online and in store. Its customer base
of ~600,000, utilising both the zipMoney and Pocketbook products, is expanding
rapidly, with ~1,200 customers being added every day. ZML has companies such
as Adairs, Kathmandu, Webjet Exclusives and Harris Farm in its portfolio.
− AFY estimate annualised underlying sales greater than A$1bn (noting higher
turnover of lower ticket value items) across its 5,000+ retailer portfolio. AFY’s recent
(31 May 2017) business update suggested its +700,000 unique end-customer base
is growing at a rate of an additional 2,500 customers per day. Noteworthy additions
to the AFY platform include Myer, Premier Investments, Big W and Officeworks.
■ We believe that the no-interest-ever product will remain attractive for consumers and
retailers alike, but that increased competition is already, and will continue to, create
both margin and volume pressure for Certegy—for the reasons that competitors have
built attractive product offerings unencumbered by legacy systems and because
retailers and consumers both have more choice.
■ This step up in competition for Certegy coincides with tougher conditions for retailers
generally, given factors like discounting and increased online shopping putting
pressure on margins, especially for more traditional bricks and mortar sites.
■ The pressures impacting Certegy have already affected 2H17 (contributing to lowering
FY17 guidance) and pose further risk to FY18-19 earnings, in our view—at this stage,
we envisage the combination of lower volumes and reduced margins could see
reductions in Certegy's earnings over the next two years.
Where FXL could perform better than we think
■ Certegy may benefit to the extent that FXL can successfully launch new products to
offset competitive pressures described above, such as Oxipay, which is planned for
market launch in 4Q17 (update expected at upcoming strategy day, 22 May 2017).
While this obviously will not help the fact that there are more choices on offer for
retailers and consumers, and FXL may suffer from the perception that it has been late
with digital product innovation, Oxipay could help drive incremental volume for Certegy.
19 June 2017
Australia and NZ First Edition 34
■ As is well known, Certegy has benefitted materially from growth in solar rooftop panel
installations in the past, and has a strong partner-vendor and customer base as a
result. To the extent that solar battery storage develops and offers additional finance
options and/or further spurs growth in rooftop solar, this could be positive for Certegy.
■ We believe the growth in the New Zealand Card business has been lower than
anticipated at the time of acquisition, which we understand FXL ascribe in part to sales
culture. It is possible that initiatives such as scheme cards (e.g. Q Master Card) and
increased marketing efforts improve sales momentum and lift the growth trajectory.
■ We already expect strong growth in Australian Card, driven by strong volume growth to
date which should translate into earnings growth as a greater proportion of the book
becomes interest-bearing. However, this growth could be stronger than our estimates –
while our FY17-19 forecast growth is >70%, the FY17 base is depressed by the
investment (~$3mn) to roll-out the Flight Centre contract.
■ FXL has been focusing on revitalising its SME leasing business, with 1H17 volumes
increasing strongly (~85%, albeit off a small base). Growth in this area, which includes
a focus on managed services offerings, could offset some of the challenges facing
POS consumer leasing.
■ FXL is due to launch a broader finance offering in Ireland in 4Q17, having operated
there for ~8 years to date (POS rental/lease). While clearly early days and carrying
inherent risks associated with a venture into an offshore market, a sensible, prudent
approach could yield earnings benefits for FXL.
Where FXL could perform worse than we think
■ We have discussed increased competition in the no-interest-ever space for Certegy,
but note the potential for similar threats in other areas, such as the Australian cards
business. According to press reports (AFR, 19 January 2017, 'Latitude eyes hefty
securitisation program then IPO') Latitude (consumer finance operation formerly part of
GE Money in Australia & New Zealand) could be a potential IPO candidate.
■ The environment for credit impairments has been fairly benign, and in recent years in
particular, funding costs have been supportive for FXL. We do not expect these factors
to become materially negative in the short-term, but there is an inherent risk that either
or both rise more quickly than expected, due to a change in factors like deteriorating
economic conditions (e.g. unemployment), FXL-specific factors (e.g. taking on riskier
business in a more competitive environment) or from reduced funder risk appetite.
■ Again, while an outcome that we do not regard as likely, material contract losses
and/or failure to renew business could negatively impact FXL. We regard the business
as reasonably well diversified across its retail customer, but in certain areas (e.g.
consumer POS leasing ad NZ leasing), customer exposure is fairly concentrated.
■ We believe FXL has become more proactive with regard to the regulatory landscape in
POS leasing, which has improved the risk profile in our view. It has also come at a cost
to profitability—such as changes to end-of-lease process that had an estimated $4mn
impact on FY17 NPAT. While FXL now appears to be aligned with current regulatory
requirements, there is a risk that further change, or the need to make amendments to
lease products to manage consumer perception, negatively impacts profitability.
■ Given the natural progression from strong volumes, which are initially interest-free, into
interest-bearing receivables in the Cards business, we expect material growth in
earnings. The risk here is that the rate of conversion to interest-bearing disappoints
(e.g. greater consumer propensity to pay down debt), or the credit risk profile increases
as FXL expands into new areas.
19 June 2017
Australia and NZ First Edition 35
Earnings revisions
■ Our FY17 estimates move in line with FXL revised FY17 guidance in May (cash NPAT
$90-93mn, from $90-97mn previously, as per the 1H17 result).
■ One of the reasons cited for lower FY17 NPAT was Certegy being behind expectations
—we believe this implies a materially weaker 2H17, which together with pressures as
described above, we expect to flow into FY18/19.
■ Lower Certegy forecasts (reduced margin and volume growth assumptions) account for
the bulk of our negative EPS revisions for FY18 (-10%) and FY19 (-17%), with the
balance due to slightly reduced forecasts on Leasing (due to a more cautious view on
consumer conditions).
■ Our forecasts on the other business (NZ Card & Leasing, Australian Card) are not
substantially changed; neither are our estimates for impairments and funding costs.
Investment view
■ Having declined materially in the past six weeks or so (~-28%), FXL could potentially
be over-sold on a short-term basis. Valuation looks very undemanding—6.8x FY18 PE,
~1.0x P/B—even on our revised EPS estimates which now assume only ~1-2% growth
for FY18-19.
■ This valuation may offer support or even some short-term upside from current levels,
and those with a value-bias may take the view that even with a flat growth outlook, the
stock is too cheap.
■ As discussed above, we identify areas where FXL may exceed our expectations, in
which case the growth outlook may be better than we anticipate.
■ However, given the challenges facing Certegy, a generally tough retail environment,
lackluster growth to date in New Zealand Cards and various areas where competition
is intensifying, overall we think there is sufficient uncertainty around the growth outlook
for the market to largely 'look through' current valuation.
■ Acknowledging potential for a short-time bounce on any sign of less negative news, we
struggle to envisage a catalyst for a meaningful re-rate, and prefer to wait on the
sidelines until we can gain more conviction around the earnings outlook.
■ The FY18 dividend yield is ~4.8%—supportive, but not overly compelling in our view
(noting major banks trading on dividend yields >5%).
■ Our rating moves from Outperform to NEUTRAL with our target price declining from
$2.70 to $1.85.
19 June 2017
Australia and NZ First Edition 36
Figure 1: FXL – historic and forecast segmental data *
FY12 FY13 FY14 FY15 1H16 2H16 FY16 1H17 2H17F FY17F FY18F FY19F
Volumes
AU Leasing 340 300 338 285 130 116 246 103 99 202 207 212
NZ Leasing 0 29 38 62 46 55 101 46 55 101 104 107
NZ Card 0 0 0 0 0 132 132 310 310 620 629 642
Certegy 434 490 507 552 281 254 535 278 251 529 527 533
AU Card 141 88 200 237 161 171 332 238 265 503 563 603
Total loan volume 915 907 1,083 1,136 618 728 1,346 975 980 1,955 2,031 2,097
Volumes, % ch
Australia Leasing 6% -12% 13% -16% -18% -9% -14% -21% -15% -18% 3% 2%
NZ leasing n/a n/a 31% 63% 70% 57% 63% 0% 0% 0% 3% 3%
NZ card n/a n/a n/a n/a n/a n/a n/a n/a 135% 370% 1% 2%
Certegy 16% 13% 3% 9% -2% -5% -3% -1% -1% -1% 0% 1%
AU Card 207% -38% 127% 19% 39% 41% 40% 48% 55% 52% 12% 7%
Total loan volume 23% -1% 19% 5% 5% 33% 18% 58% 35% 45% 3.9% 3.3%
Ave receivables
Australia Leasing 465 521 540 573 539 509 523 477 466 475 464 471
NZ Leasing 0 17 59 101 171 188 181 197 192 195 189 194
NZ card 0 0 0 0 0 0 0 636 657 644 673 696
Certegy 317 397 440 469 481 477 477 474 480 477 477 480
AU Card 22 100 197 220 252 291 271 350 424 386 537 643
Total 812 1,036 1,236 1,364 1,442 1,775 1,659 2,133 2,218 2,176 2,284 2,485
Ave receivables, % ch
Australia Leasing 18% 12% 4% 6% -8% -10% -9% -12% -8% -9.3% -2% 2%
NZ Leasing n/a n/a 238% 72.7% 147.1% 58.0% 78.3% 15.5% 2% 8% -2.8% 2.4%
NZ card n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a 4.5% 3.4%
Certegy 37% 25% 11% 7% 4% 0% 2% -1% 0.6% -0.2% 0.1% 0.6%
AU Card 313% 355% 97% 12% 18% 29% 23% 39% 45.6% 42.3% 39.0% 19.9%
Total 24.8% 27.6% 19.3% 10.3% 8.3% 28.0% 21.7% 47.9% 24.9% 31.2% 5.0% 8.8%
Impairments/ANR
Australia Leasing 2.4% 2.7% 2.7% 3.9% 3.9% 13.6% 8.6% 3.4% 3.4% 1.7% 3.5% 3.7%
NZ Leasing n/a 2.9% 1.0% 1.0% 0.9% 0.4% 0.7% 0.2% 0.2% 0.2% 0.3% 0.4%
NZ card n/a 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 2.3% 2.2% 2.2% 2.4% 2.5%
Certegy 3.2% 2.9% 3.1% 3.1% 4.0% 4.3% 4.2% 3.9% 4.0% 3.9% 4.0% 4.3%
AU Card 0.0% 1.0% 2.7% 3.0% 3.3% 3.0% 3.1% 3.4% 3.4% 3.4% 3.5% 3.7%
Total impairments/ANR 2.9% 2.6% 2.8% 3.3% 3.5% 6.1% 4.7% 2.8% 2.9% 2.5% 3.1% 3.2%
Revenue
Australia Leasing 164 153 149 162 77 74 151 50 52 102 98 100
NZ Leasing 0 14 17 22 19 19 38 21 20 40 39 40
NZ card 0 0 0 0 0 42 42 65 67 132 137 142
Certegy 82 100 108 115 58 58 117 57 55 112 106 104
AU Card 0 17 42 42 23 26 49 27 30 57 77 96
Total 246 284 317 341 177 220 396 220 223 443 457 482
Revenue, % ch
Australia Leasing 0.8% -6.7% -2.4% 8.2% -1.5% -11.0% -6.4% -34.9% -30.5% -32.8% -3.6% 2.1%
NZ Leasing n/a n/a 22.6% 30.1% 90.9% 55.2% 71.0% 8.5% 2.7% 5.5% -3.5% 2.1%
NZ card n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a 4.2% 3.4%
Certegy 35.9% 22.3% 7.5% 6.3% 3.9% -0.3% 1.7% -2.2% -5.4% -3.8% -5.5% -1.7%
AU Card n/a n/a 150% 0% 11% 19% 15% 20% 14.1% 16.9% 35.2% 24.6%
Total 10.3% 15.5% 11.4% 7.6% 7.4% 24.6% 16.3% 24.3% 1.6% 11.8% 3.3% 5.4%
Cash NPAT *
Australia Leasing 39.3 37.6 36.1 38.4 16.0 13.4 29.4 9.5 7.0 16.5 16.6 16.3
NZ Leasing 0.0 4.3 5.6 7.0 5.2 6.5 11.7 5.6 6.8 12.4 12.7 13.0
NZ card 0.0 0.0 0.0 0.0 0.0 9.3 9.3 13.3 13.4 26.7 26.7 27.1
Certegy 21.9 27.5 32.3 34.4 17.5 17.9 35.4 17.6 15.4 33.0 29.6 28.5
AU Card 0.1 2.7 11.0 12.3 6.2 7.8 14.0 5.0 5.0 10.0 14.3 17.1
Corporate debt n/d n/d n/d n/d -0.6 -2.2 -2.8 -3.5 -3.5 -7.0 -7.0 -7.0
Total 61.3 72.1 85.0 90.1 44.3 52.7 97.0 47.5 44.2 91.7 92.8 95.1
Cash NPAT, % ch
Australia Leasing 0.4% -4.3% -4.0% 6.4% -6.4% -37.1% -23.4% -40.6% -47.5% -43.8% 0.2% -1.6%
NZ leasing n/a n/a 30.2% 25.0% 62.5% 71.1% 67.1% 7.7% 5.0% 6.2% 2.5% 2.0%
NZ Card n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a 0.0% 1.5%
Certegy 59.3% 25.6% 17.5% 6.5% 5.4% 0.6% 2.9% 0.6% -14.0% -6.8% -10.3% -3.5%
AU Card n/a n/a 307% 11.8% 10.7% 16.4% 13.8% -19.4% 10.0% -28.6% 42.5% 20.2%
Total NPAT, % ch 15.8% 17.6% 18.0% 6.0% 4.2% 10.7% 7.7% 7.2% -16.2% -5.5% 1.3% 2.4%
Cash NPAT/ANR
Australia Leasing 8.5% 7.2% 6.7% 6.7% 5.9% 5.3% 5.6% 4.0% 3.0% 3.5% 3.6% 3.5%
NZ leasing n/a 24.8% 9.5% 6.9% 6.1% 6.9% 6.5% 5.7% 7.1% 6.4% 6.7% 6.7%
NZ Card 4.2% 4.1% 4.1% 4.0% 3.9%
Certegy 6.9% 6.9% 7.3% 7.3% 7.3% 7.5% 7.4% 7.4% 6.4% 6.9% 6.2% 5.9%
AU Card 0.5% 2.7% 5.6% 5.6% 4.9% 5.4% 5.2% 2.9% 2.4% 2.6% 2.7% 2.7%
Total NPAT/ANR 7.5% 7.0% 6.9% 6.6% 6.1% 5.9% 5.8% 4.5% 4.0% 4.2% 4.1% 3.8%
Source: Company data, Credit Suisse estimates, * excluding discontinued businesses from 1H17 onwards
Australia and NZ First Edition 37
19 June 2017
Asia Pacific/Australia Equity Research
Diversified Metals & Mining
Sims Metal Management
(SGM.AX / SGM AU) Rating UNDERPERFORM*
Price (16-Jun,A$) 13.79
Target Price (A$) (from 10.50) 11.00
Target price ESG risk (%) NA
Market cap (A$mn) 2,729.7
Yr avg. mthly trading (A$mn) 266.9
Projected return:
Capital gain (%) -20.2
Dividend yield (net %) 2.8
Total return (%) -17.4
Target price is for 12 months.
Research Analysts
Michael Slifirski
61 3 9280 1845
michael.slifirski@credit-suisse.com
Nick Herbert, CFA
61 3 9280 1754
nick.herbert@credit-suisse.com
INCREASE TARGET PRICE
Schnitzer Q3, strong volumes but margin flat
■ Schnitzer MayQ preliminary result. Schnitzer’s scrap business (US Auto
and Metals Recycling (AMR)) is expected to achieve operating income in the
range of US$29 - $30mnn, or a sequentially flat operating income per ferrous
ton of US$30 - $31 (equivalent to US$33-34/tonne). By contrast, SGM
delivered US$8.40/t for its 1H17.
■ Higher operating income, not margin. Schnitzer's operating income is
expected to increase by approximately 12% sequentially and 10% from the
prior year quarter, and would represent the best third quarter performance
since fiscal 2012.
■ Result not supportive of SGM's operating leverage thesis. SGM promote
operating leverage with no increase in fixed cost as volumes rise. Schnitzer’s
Q3 EBIT increase has followed its ferrous tonnage increase, showing no
operating leverage, despite a materially higher ratio of non-ferrous. This
appears to suggest (perhaps) an increase in buy price offsetting the
otherwise expected operating leverage.
■ Read-through for SGM earnings. If SGM’s 2H were to reflect Schnitzer’s
volume profile, SGM’s 2H tonnage could be up by ~150kt on its 1H17,
generating additional EBIT of ~A$13mn compared to what we forecast, if the
guided operating leverage to volume was to be delivered. This hypothetical
calculation would deliver FY17 EBIT of A$180mn once factoring in a
contribution for guided optimise initiatives (at 50% realisation rate achieved in
2H17) and NPAT of ~$133mn. This is the scenario we have adopted in our
modelling for FY17 driving our eps change.
■ Valuation. Target price increased to $11.00/sh (from $10.50/sh) to align with
our NPV. Rating remains Underperform on valuation.
Total return forecast in perspective
Share Price CS Target Rtn Mean
12mth Volat ility
52 Week Hi-Lo
*Target return
- 46%
- 26%
- 6%
14%
34%
54%
Source: Company data, Thomson Reuters, IBES, Credit
Suisse estimates
Performance 1M 3M 12M Absolute (%) 14.73 7.23 69.83 Relative (%) 15.12 7.86 57.83
Financial and valuation metrics
Year 6/16A 6/17E 6/18E 6/19E
Revenue (A$ mn) 4,661 4,975 5,018 4,965
EBITDA (A$ mn) 184 292 330 363
EBIT (A$ mn) 58 180 215 251
Net Income (Adj.) (A$ mn) 38 133 152 178
EPS (Adj.) (Ac) 18.74 67.25 76.81 90.20
Change from previous EPS (%) n.a. 14.7 1.1 10.2
EPS growth (%) (62.2) 258.8 14.2 17.4
Consensus EPS (Ac) 18.60 63.90 75.50 85.70
P/E (x) 73.6 20.5 18.0 15.3
Dividends (Ac) 22.00 38.27 38.41 45.10
Dividend yield (%) 1.6 2.8 2.8 3.3
Price/Book (x) 1.5 1.4 1.3 1.3
Net debt/EBITDA (x) (1.3) (0.9) (1.0) (1.1)
Source: Company data, Thomson Reuters, Credit Suisse estimates
19 June 2017
Australia and NZ First Edition 38
Sims Metal Management (SGM.AX / SGM AU) Price (16 Jun 2017): A$13.79; Rating: UNDERPERFORM; Target Price: (from A$10.5) A$11; Analyst: Michael Slifirski
Income Statement 6/16A 6/17E 6/18E 6/19E
Revenue 4,661 4,975 5,018 4,965
EBITDA 184 292 330 363
Depr. & Amort. (126) (112) (115) (113)
EBIT 58 180 215 251
Associates - - - -
Net interest exp. (10) (7) (4) (3)
Other 0 0 0 0
Profit before tax 48 173 211 248
Income tax (10) (40) (59) (69)
Profit after tax 38 133 152 178
Minorities - - - -
Preferred dividends - - - -
Associates & Other 0 0 0 0
Normalised NPAT 38 133 152 178
Unusual item after tax (255) 20 0 0
Net profit (Reported) (216) 153 152 178
Balance Sheet 6/16A 6/17E 6/18E 6/19E
Cash & equivalents 248 283 322 422
Inventories 398 447 452 447
Receivables 398 422 426 422
Other current assets 36 36 36 36
Current assets 1,081 1,189 1,237 1,327
Property, plant & equip. 985 1,044 1,097 1,108
Intangibles 170 170 170 170
Other non-current assets 335 335 335 335
Non-current assets 1,490 1,549 1,602 1,613
Total assets 2,571 2,738 2,839 2,941
Payables 433 468 469 460
Interest bearing debt 6 6 6 6
Other liabilities 299 299 299 299
Total liabilities 738 774 774 766
Net assets 1,833 1,964 2,064 2,175
Ordinary equity 1,833 1,964 2,064 2,175
Minority interests 0 0 0 0
Preferred capital - - - -
Total shareholder funds 1,833 1,964 2,064 2,175
Net Debt (242) (277) (316) (416)
Cash Flow 6/16A 6/17E 6/18E 6/19E
EBIT 58 180 215 251
Net Interest (8) (7) (7) (4)
Depr & Amort 126 112 115 113
Tax Paid (20) (10) (40) (59)
Change in Working capital (18) (38) (8) 1
Other cash and non-cash items (8) 38 8 (1)
Operating cash flow 131 275 282 300
Capex (109) (171) (167) (124)
Capex - expansionary (7) (54) (42) 0
Capex - Maintenance (102) (116) (126) (124)
Acquisitions & Invest 0 0 0 0
Asset sale proceeds 15 56 0 0
Other - - - -
Investing cash flow (96) (115) (167) (124)
Dividends paid (47) (63) (76) (76)
Equity raised (60) (62) 0 0
Net borrowings (5) 0 0 0
Other financing cash in/(outflows) 0 0 0 0
Financing cash flow (112) (125) (76) (76)
Total cash flow (76) 35 39 100
Adjustments 8 0 0 0
Movement in cash/equivalents (68) 35 39 100
Earnings 6/16A 6/17E 6/18E 6/19E
Equiv. FPO (period avg) (mn) 203 198 198 198
EPS (CS adj.) (c) 18.7 67.2 76.8 90.2
EPS growth (%) (62.2) 258.8 14.2 17.4
DPS (c) 22.0 38.3 38.4 45.1
Dividend Payout (%) 117.4 56.9 50.0 50.0
Free CFPS (c) 14.7 80.3 79.2 89.1
Valuation 6/16A 6/17E 6/18E 6/19E
P/E (CS) (x) 73.6 20.5 18.0 15.3
PEG (x) (1.2) 0.1 1.3 0.9
EV/EBIT (x) 42.9 13.6 11.2 9.2
EV/EBITDA (x) 13.5 8.4 7.3 6.4
Dividend Yield (%) 1.6 2.8 2.8 3.3
FCF Yield (%) 1.1 5.8 5.7 6.5
Price to book (x) 1.5 1.4 1.3 1.3
Returns 6/16A 6/17E 6/18E 6/19E
Return on Equity (%) 2.1 6.8 7.4 8.2
Profit Margin (%) 0.8 2.7 3.0 3.6
Asset Turnover (x) 1.8 1.8 1.8 1.7
Equity Multiplier (x) 1.4 1.4 1.4 1.4
Return on Assets (%) 1.5 4.9 5.3 6.1
Return on Invested Cap. (%)
2.9 8.2 8.9 10.3
Gearing 6/16A 6/17E 6/18E 6/19E
ND/ND+E (%) Net Cash
Net Cash
Net Cash
Net Cash Net Debt to EBITDA (x) Net
Cash Net
Cash Net
Cash Net
Cash Int Cover (EBITDA) (x) 19.0 40.4 77.4 126.9
Int Cover (EBIT) (x) 6.0 24.9 50.5 87.5
Capex to Sales (%) 2.3 3.4 3.3 2.5
Capex to Depr (%) 96.0 167.2 159.8 120.1
MSCI IVA Rating AAA
Global Local Country Stock
Environment Social Governance
0
2
4
6
8
GL
C
S
GLC
S
G
LC
S
TP ESG Risk (%): 0.00 TP Risk Comment: No ESG risk factored into our TP, consistent with MSCI 'AAA' rating. MSCI IVA Risk: Neutral MSCI IVA Risk Comment: As SGM is not involved in production of steel or Iron Ore, and is not anticipated too, we expect low risk of a MSCI rating downgrade
Share price performance
On 16-Jun-2017 the S&P ASX 200 Index closed at 5763.19 On 16-Jun-2017 the spot exchange rate was A$1.32/US$1
Source: Company Data, Credit Suisse Estimates, MSCI ESG Research
19 June 2017
Australia and NZ First Edition 39
The Schnitzer read-through conundrum
■ Schnitzer’s MayQ scrap result presents a conundrum, with no clear read-through for
SGM. The positive is that MayQ ferrous tonnes were up a material 12% and materially
higher margin no-ferrous tonnes were up a massive 32%. From a SGM investment
thesis this appears to be a big positive, with an implied big volume increase on a fixed
cost based and a richer margin mix with a higher proportion of high margin non-ferrous.
The logical read through is a significant step up in $/t margin. This was not however the
case for Schnitzer which reported a sequentially flat margin on its FebQ.
■ This is intuitively illogical unless it reflects the traditional challenge of the scrap
industry, that of a buy price that is difficult to control when there is increased
competition for scrap, and this buy-price pressure is now fully offsetting the operating
leverage.
■ If we want to set a positive bias for SGM to back fill earnings to part explain the share
price, we would give SGM the same volume increment as Schnitzer, but also give them
the fixed cost leverage via a higher $/t margin outcome. If we want to be negative, we
would just give then the volume benefit, but no fixed cost leverage.
■ Given SGM’s robust reinforcement of ifs volume leverage story last week, we feel it is
appropriate to give them the full leverage benefit of higher volumes on the fixed cost
based. SGM, after all, had the opportunity to refresh their message last week, but did
not. The volume leverage story was reinforced so we have to assume it remains the
case. However, we have seen this cycle before, where rising volumes are an outcome
of turf battles as scrap aggregators seeking fixed cost leverage by increasing market
share, only to deliver profitless prosperity through no margin expansion.
■ We do note that SGM revised down their cost out achievement since FY13 by $22mn
from $234m at 1H17 to now $212mn. Perhaps Schnitzer’s MayQ is also reflecting a
step increase in the controllable cost base, and this is part of the explanation for their
disappointing lack of operating leverage.
■ We remain cautious of the recent disconnect between scrap and the cost of making pig
iron. Iron ore and coking coal prices have retreated, as expected. Scrap remains
robust. US steel makers are complaining of margin pressure. Perhaps scrap has
indeed peaked and is due to correct. The relationship between scrap prices and
volumes, short term, is established. A weaker scrap price would reduce scrap volumes
and contribute negative operating leverage.
Schnitzer Q3 result continued…
■ Schnitzer’s Q3 (MayQ) ferrous sales volumes are expected to be approximately 12%
higher sequentially and 14% higher compared to the prior year quarter. SGM operate
broadly in the sale East and West coast markets, so should be experiencing the same
trading conditions, but Schnitzer has generally been able to deliver superior margin
than SGM.
■ Schnitzer’s Non-ferrous sales volumes are expected to be approximately 32% higher
both sequentially and compared to the prior year quarter. This would be a favourable
boost to SGM earnings if also achieved.
■ Average ferrous and nonferrous selling prices are expected to approximate second
quarter levels and increase approximately 20% and 12%, respectively, compared to
the prior year quarter.
■ AMR’s third quarter results are expected to include an immaterial impact from average
inventory accounting, which compares to a favorable impact of $4 million and $3 million
in the second quarter and prior year quarter, respectively.
19 June 2017
Australia and NZ First Edition 40
■ In the Steel Manufacturing Business (SMB), operating performance is expected to be
approximately break-even, which would be an improvement of approximately $2 million
sequentially and slightly below prior year operating income of $1 million. Sales volumes
are expected to increase by approximately 33% sequentially and 6% from the prior
year quarter. Average selling prices are expected to increase by approximately 5%
sequentially and 9% from the prior year quarter. During the quarter, improved seasonal
demand positively impacted sequential results, while continued pressure from low-
priced imports limited increases in selling prices in a period of rising raw material costs
which compressed SMB’s operating margins.
■ Schnitzer is breakeven at steel making, reflecting high priced scrap while Chinese steel
makers selling the same products are generating strong earnings because they are not
adversely impacted by elevated scrap prices.
Figure 1: Schnitzer ferrous volumes and EBIT/t margin. Note the 13% increase
MayQ ferrous tonnage on the prior qtr., but no change to operating margin
inferring a lack of operating leverage to higher volumes.
-40
-20
0
20
40
60
80
100
120
140
0
200
400
600
800
1000
1200
1400
1600
1800
Nov
Q 0
4F
ebQ
05
May
Q 0
5A
ugQ
05
Nov
Q 0
5F
ebQ
06
May
Q 0
6A
ugQ
06
Nov
Q 0
6F
ebQ
07
May
Q 0
7A
ugQ
07
Nov
Q 0
7F
ebQ
08M
ayQ
08
Aug
Q 0
8N
ovQ
08
Feb
Q09
May
Q 0
9A
ugQ
09
Nov
Q 0
9F
ebQ
10M
ayQ
10A
ugQ
10
Nov
Q 1
0F
ebQ
11M
ayQ
11A
ugQ
11
Nov
Q11
Feb
Q12
May
Q12
Aug
Q12
Nov
Q12
Feb
Q13
May
Q13
Aug
Q13
Nov
Q13
Feb
Q14
May
Q14
Aug
Q 1
4N
ovQ
14F
ebQ
15M
ayQ
15A
ugQ
15
Nov
Q15
Feb
Q16
May
Q16
Aug
Q 1
6N
ovQ
16F
ebQ
17M
ayQ
17
ton
nes
SCHN recycling tonnes (LHS) vs EBIT/t margin (RHS)
Processed - ferrous k tonnes EBIT/Fe tonne
Source: Company data, Credit Suisse estimates
19 June 2017
Australia and NZ First Edition 41
Valuation
Figure 2: EBITDA multiples (historic & CS forecasts)
11.00
$0.0
$10.0
$20.0
$30.0
$40.0
$50.0
$60.0
Jun 9
8
Jun 9
9
Jun 0
0
Jun 0
1
Jun 0
2
Jun 0
3
Jun 0
4
Jun
05
Jun 0
6
Jun 0
7
Jun 0
8
Jun 0
9
Jun 1
0
Jun 1
1
Jun 1
2
Jun
13
Jun 1
4
Jun 1
5
Jun 1
6
Jun 1
7
Jun 1
8
Jun 1
9
Jun 2
0
A$/shEBITDA Multiple bands (CS Estimates)
3 x 4 x 5 x 6 x 7 x 8 x 9 x 10 x Share Price TP Projection
Source: Company data, Credit Suisse estimates
■ SGM has historically traded on 5x EBITDA multiple, but is currently on a more
expensive ~8.5x FY17F and ~7.5x FY18F.
Figure 3: SGM – NPV
Operational
A$mn
(t = 1-3 yrs)
A$mn
(terminal) (2) A$mn
Risk weighting
factor A$/sh (1)
North America Metals 146 1,080 1,226 75% 4.66
ANZ Metals 70 396 467 100% 2.36
Europe Metals 65 252 318 100% 1.61
Global E-recycling 27 129 156 100% 0.79
Sub-Total 309 1,858 2,167 9.42
Non-Operational
Net Cash / (debt) 311 0 311 1.57
Sub-Total 311 0 311 1.57
Total 620 1,858 2,478 11.00
Notes & assumptions
1) Shares on issue 197.4 mn
2) Terminal grow th rate 2.0 %
Target price 11.00
NAV
Source: Company data, Credit Suisse estimates
■ We set our target price at our $11.00/sh NPV, rating remains Underperform on
valuation.
Australia and NZ First Edition 42
19 June 2017
Asia Pacific/Australia Equity Research
Diversified Metals & Mining
South 32
(S32.AX / S32 AU / S32.L) Rating OUTPERFORM*
Price (16-Jun,A$) 2.61
Target Price (A$) 2.95
Target price ESG risk (%) NA
Market cap (A$mn) 13,744.3
Yr avg. mthly trading (A$mn) 1,155.3
Projected return:
Capital gain (%) 13.0
Dividend yield (net %) 3.7
Total return (%) 16.7
Target price is for 12 months.
[V] = Stock Considered Volatile (see Disclosure Appendix)
Research Analysts
Sam Webb
61 2 8205 4535
sam.webb@credit-suisse.com
Christian Prendiville
612 8205 4012
christian.prendiville@credit-suisse.com
COMPANY UPDATE
Un-chartered waters?
■ New mining charter: South Africa’s Department of Mineral Resources has
published the reviewed broad based black-economic empowerment charter
for the South African mining and minerals industry. Mining companies are
being asked to comply with a black-ownership threshold of 30%, up from the
previous 26%, within the maximum of 12 months. The charter applies only to
mining operations, as such S32’s Hillside aluminum smelter is exempt. We
are far from legal experts, but if our understanding of the wording is correct
(full charter doc here), the potential direct impact to S32 could be a 2.4% and
22% decrease to their effective interests in their South Africa Manganese
and Energy Coal businesses respectively.
■ Plenty of ambiguity: The Chamber of Mines, which represents ~90% of
mines in South Africa, is likely to seek an injunction and the charter may be
ultimately tested in the courts. As such, timing of implementation, if at all, is
unclear to us. What is also not clear and most relevant for S32 is how historic
transactions, which have seen it comply with previous charters, is ultimately
taken into consideration. On face value, irrespective of historic adherence to
the previous charter, a requirement to top up to 30% may well be required. But
this is not entirely clear and the interpretation of points 2.1.2.1, 2.1.2.2 and
2.1.2.9 may be critical for S32 and specifically, their Energy Coal holding.
■ Immaterial valuation impact: This is the third iteration of the mining charter
and has reportedly been released with little consultation with the mining
companies. It is relatively straight forward for us to run the scenario through
our numbers (see comments below), but far more difficult to quantify the
impact that comes from heightened geopolitical risk and what may be
ongoing uncertainty for some time.
■ Valuation: No change to TP or Rating. We carry $0.58/sh for the
Manganese and Energy Coal businesses. If we adjusted for the potential
change in effective stakes noted above, this would fall to ~$0.50/sh. The
impact to FY18 and FY19 EBITDA would be 2% and 4% respectively.
Total return forecast in perspective
Share Price CS Target Rtn Mean
12mth Volat ility
52 Week Hi-Lo
*Target return
- 47%
- 22%
3%
28%
53%
78%
Source: Company data, Thomson Reuters, IBES, Credit
Suisse estimates
Performance 1M 3M 12M Absolute (%) -2.25 -6.79 65.19 Relative (%) -2.04 -6.34 52.99
Financial and valuation metrics
Year 6/16A 6/17E 6/18E 6/19E Revenue (US$ mn) 6,136 7,077 6,864 6,720 EBITDA (US$ mn) 1,131 2,502 2,218 2,115 EBIT (US$ mn) 356 1,749 1,468 1,329 Net Income (Adj.) (US$ mn) 184 1,203 961 844 EPS (Adj.) (USc) 3.45 22.39 18.31 16.91 Change from previous EPS (%) n.a. 0.0 0.0 0.0 EPS growth (%) (73.5) 548.3 (18.2) (7.6) Consensus EPS (USc) 2.60 21.80 19.20 16.90 P/E (x) 57.4 8.9 10.8 11.7 Dividends (USc) 0.00 8.99 7.26 6.66 Dividend yield (%) 0.0 4.5 3.7 3.4 Price/Book (x) 1.1 1.0 1.0 1.0 Net debt/EBITDA (x) (0.3) (0.6) (0.8) (0.8)
Source: Company data, Thomson Reuters, Credit Suisse estimates
19 June 2017
Australia and NZ First Edition 43
South 32 (S32.AX / S32 AU) Price (16 Jun 2017): A$2.61; Rating: OUTPERFORM [V]; Target Price: A$2.95; Analyst: Sam Webb
Income Statement 6/16A 6/17E 6/18E 6/19E
Revenue 6,136 7,077 6,864 6,720
EBITDA 1,131 2,502 2,218 2,115
Depr. & Amort. (775) (753) (751) (786)
EBIT 356 1,749 1,468 1,329
Associates 23 0 0 0
Net interest exp. (29) (47) (47) (47)
Other (96) (98) (100) (100)
Profit before tax 254 1,605 1,321 1,182
Income tax (93) (402) (359) (337)
Profit after tax 161 1,203 961 844
Minorities 23 -0 -0 -0
Preferred dividends - - - -
Associates & Other 0 0 0 0
Normalised NPAT 184 1,203 961 844
Unusual item after tax (1,753) 141 0 0
Net profit (Reported) (1,569) 1,344 961 844
Balance Sheet 6/16A 6/17E 6/18E 6/19E
Cash & equivalents 1,225 2,521 2,819 2,803
Inventories 747 787 768 744
Receivables 618 663 647 626
Other current assets 111 112 112 112
Current assets 2,701 4,082 4,346 4,285
Property, plant & equip. 8,651 8,283 8,084 7,830
Intangibles 288 271 271 271
Other non-current assets 1,734 1,658 1,658 1,658
Non-current assets 10,673 10,212 10,013 9,759
Total assets 13,374 14,294 14,359 14,045
Payables 676 580 566 548
Interest bearing debt 914 1,048 1,048 1,048
Other liabilities 2,346 2,392 2,392 2,392
Total liabilities 3,936 4,020 4,006 3,988
Net assets 9,425 10,274 10,353 10,057
Ordinary equity 9,426 10,274 10,353 10,057
Minority interests (1) 0 0 0
Preferred capital - - - -
Total shareholder funds 9,425 10,274 10,353 10,057
Net Debt (311) (1,473) (1,771) (1,755)
Cash Flow 6/16A 6/17E 6/18E 6/19E
EBIT 356 1,749 1,468 1,329
Net Interest (19) (17) 0 0
Depr & Amort 775 753 751 786
Tax Paid (52) (300) (359) (337)
Change in Working capital 505 (181) 21 27
Other cash and non-cash items (535) (359) (98) (127)
Operating cash flow 1,030 1,645 1,782 1,677
Capex (554) (370) (530) (510)
Capex - expansionary 0 (6) 0 0
Capex - Maintenance (554) (364) (530) (510)
Acquisitions & Invest 33 (32) (22) (22)
Asset sale proceeds 0 105 0 0
Other - - - -
Investing cash flow (342) (312) (552) (532)
Dividends paid 0 (53) (508) (337)
Equity raised 31 147 0 0
Net borrowings (127) (9) 0 0
Other financing cash in/(outflows) (3) (124) (424) (824)
Financing cash flow (99) (39) (932) (1,161)
Total cash flow 589 1,294 298 (16)
Adjustments (8) 2 0 0
Movement in cash/equivalents 581 1,296 298 (16)
Earnings 6/16A 6/17E 6/18E 6/19E
Equiv. FPO (period avg) (mn) 5,328 5,374 5,250 4,993 EPS (CS adj.) (c) 3.5 22.4 18.3 16.9 EPS growth (%) (73.5) 548.3 (18.2) (7.6) DPS (c) 0.0 9.0 7.3 6.7 Dividend Payout (%) 0.0 40.2 39.7 39.4 Free CFPS (c) 8.9 23.8 23.8 23.4
Valuation 6/16A 6/17E 6/18E 6/19E
P/E (CS) (x) 57.4 8.9 10.8 11.7 PEG (x) (0.8) 0.0 (0.6) (1.5) EV/EBIT (x) 28.4 5.1 5.9 6.5 EV/EBITDA (x) 9.0 3.6 3.9 4.1 Dividend Yield (%) 0.0 4.5 3.7 3.4 FCF Yield (%) 4.5 12.0 12.0 11.8 Price to book (x) 1.1 1.0 1.0 1.0
Returns 6/16A 6/17E 6/18E 6/19E
Return on Equity (%) 2.0 11.7 9.3 8.4 Profit Margin (%) 3.0 17.0 14.0 12.6 Asset Turnover (x) 0.5 0.5 0.5 0.5 Equity Multiplier (x) 1.4 1.4 1.4 1.4 Return on Assets (%) 1.4 8.4 6.7 6.0 Return on Invested Cap. (%)
2.5 14.9 12.4 11.4
Gearing 6/16A 6/17E 6/18E 6/19E
ND/ND+E (%) Net Cash
Net Cash
Net Cash
Net Cash Net Debt to EBITDA (x) Net
Cash Net
Cash Net
Cash Net
Cash Int Cover (EBITDA) (x) 39.0 53.7 47.0 44.8 Int Cover (EBIT) (x) 12.3 37.6 31.1 28.2 Capex to Sales (%) 9.0 5.2 7.7 7.6 Capex to Depr (%) 71.5 49.2 70.6 64.9
MSCI IVA Rating A
Global Local Country Stock
Environment Social Governance
0
1
2
3
4
5
6
7
GL
C
S
G
LCS G
LC
S
TP ESG Risk (%): 0.00 TP Risk Comment: We do not include an ESG impact in our valuation for South 32. However we note that our 10% WACC compares with 8.5% used for BHP the parent which takes into account, partly, higher risks from its South African operations. Balancing this concern, we note that S32 will inherit many of BHP's operating standards in relation to managing environmental issues, safety, engaging with local communities and host governments which we generally view to be best practice. MSCI IVA Risk: A MSCI IVA Risk Comment: Overall, South32's business profile is more highly exposed to ESG risks compared to BHPB, particularly with regard to labor unrest, safety and corruption issues. As part of the spinoff, South32 inherited BHPB's aluminium, coal, manganese, nickel and silver assets concentrated in South African, South American and Australian geographies.
Share price performance
On 16-Jun-2017 the S&P ASX 200 Index closed at 5774.0 On 16-Jun-2017 the spot exchange rate was A$1.32/US$1
Source: Company Data, Credit Suisse Estimates, MSCI ESG Research
Australia and NZ First Edition 44
19 June 2017
Asia Pacific/Australia Equity Research
Radio & TV Broadcasting
Southern Cross Media Group
(SXL.AX / SXL AU) Rating (from NEUTRAL) OUTPERFORM*
Price (16-Jun,A$) 1.16
Target Price (A$) (from 1.30) 1.35
Target price ESG risk (%) NA
Market cap (A$mn) 892.1
Yr avg. mthly trading (A$mn) 75.4
Projected return:
Capital gain (%) 16.4
Dividend yield (net %) 6.7
Total return (%) 23.0
Target price is for 12 months.
Research Analysts
Lucas Goode
61 2 8205 4431
lucas.goode@credit-suisse.com
UPGRADE RATING
Upgrade on improving industry landscape
■ SXL a major beneficiary of media reform: In our view SXL's current share
price is not factoring in the potential upside from proposed regulatory
changes: i) the abolition of licence fees could add ~8% to EPS and A$0.10 to
our valuation after adjusting for new spectrum fees and a reduction in
gambling ad revenue; and ii) the removal of the 75% audience reach rule, in
combination with NEC's recent share price strength, could increase M&A
possibilities. We note that both of these proposed changes are supported by
the two major parties.
■ TEN's issues = share upside for Nine…and by extension SXL: As Fraser
McLeish detailed in his recent note Changing channels – TV shake-up
looming, TEN's deteriorating financial position (culminating in Wednesday's
entry into voluntary administration) means that it is likely to cut programming
spend in order to return to profitability. This creates the potential for long-
term market share upside at the other networks. Any market share uplift at
Nine would also drive market share improvements at SXL’s TV business. We
estimate that each additional point of market share at SXL’s Nine-affiliated
stations could add A$4-5m to revenue, equivalent to a ~A$2m EBITDA uplift
or a ~1.5% boost to EPS. A 3% sustainable increase in SXL's regional TV
market share could add A$0.05 to our valuation.
■ Radio market back in the black in May: The metro radio market returned to
positive territory in May with 5-city YoY growth of 0.5%, according to
Commercial Radio Australia data. The market remains down 1.6% calendar
year-to-date, however the base of comparison will ease in the second half.
■ Upgrade to Outperform (from Neutral), A$1.35 Target Price (from
A$1.30): We raise our SXL TP to A$1.35 and set it at a premium to our
A$1.30 base case valuation to reflect upside from the likely removal of
licence fees. We do not include any upside from a potential higher long-term
TV market share. We view SXL as inexpensive on <11x FY18F P/E, falling to
~10x ex-licence fees, and move to an OUTPERFORM rating.
Total return forecast in perspective
Share Price CS Target Rtn Mean
12mth Volat ility
52 Week Hi-Lo
*Target return
- 36%
- 16%
4%
24%
44%
64%
Source: Company data, Thomson Reuters, IBES, Credit
Suisse estimates
Performance 1M 3M 12M Absolute (%) -11.11 -10.77 -7.94 Relative (%) -10.72 -10.14 -19.93
Financial and valuation metrics
Year 6/16A 6/17E 6/18E 6/19E Revenue (A$ mn) 642 695 666 677 EBITDA (A$ mn) 167 167 158 170 EBIT (A$ mn) 139 136 131 144 Net Income (Adj.) (A$ mn) 89 84 83 92 EPS (Adj.) (Ac) 11.63 10.95 10.80 11.99 Change from previous EPS (%) n.a. 0.0 0.0 0.0 EPS growth (%) 30.3 (5.8) (1.4) 11.1 Consensus EPS (Ac) 10.10 11.20 11.40 11.70 P/E (x) 10.0 10.6 10.7 9.7 Dividends (Ac) 6.75 7.00 7.75 8.25 Dividend yield (%) 5.8 6.0 6.7 7.1 Price/Book (x) 0.8 0.8 0.8 0.8 Net debt/EBITDA (x) 2.2 2.1 1.8 1.5
Source: Company data, Thomson Reuters, Credit Suisse estimates
19 June 2017
Australia and NZ First Edition 45
Southern Cross Media Group (SXL.AX / SXL AU) Price (16 Jun 2017): A$1.16; Rating: (from NEUTRAL) OUTPERFORM; Target Price: (from A$1.3) A$1.35; Analyst: Lucas Goode
Income Statement 6/16A 6/17E 6/18E 6/19E
Revenue 642 695 666 677
EBITDA 167 167 158 170
Depr. & Amort. (29) (30) (27) (26)
EBIT 139 136 131 144
Associates - - - -
Net interest exp. (25) (18) (13) (12)
Other 0 0 0 0
Profit before tax 114 118 118 131
Income tax (37) (34) (35) (39)
Profit after tax 77 84 83 92
Minorities -0 -0 -0 -0
Preferred dividends - - - -
Associates & Other 12 1 0 0
Normalised NPAT 89 84 83 92
Unusual item after tax 12 0 0 0
Net profit (Reported) 101 84 83 92
Balance Sheet 6/16A 6/17E 6/18E 6/19E
Cash & equivalents 95 57 5 21
Inventories 0 0 0 0
Receivables 142 152 144 147
Other current assets 0 0 0 0
Current assets 237 210 149 167
Property, plant & equip. 145 131 86 76
Intangibles 1,290 1,298 1,298 1,298
Other non-current assets 16 15 15 16
Non-current assets 1,451 1,445 1,399 1,390
Total assets 1,688 1,654 1,549 1,557
Payables 86 93 88 89
Interest bearing debt 470 410 290 270
Other liabilities 151 141 137 133
Total liabilities 708 644 515 492
Net assets 980 1,010 1,034 1,065
Ordinary equity 1,057 1,087 1,111 1,142
Minority interests 0 0 0 0
Preferred capital - - - -
Total shareholder funds 980 1,010 1,034 1,065
Net Debt 375 353 285 249
Cash Flow 6/16A 6/17E 6/18E 6/19E
EBIT 139 136 131 144
Net Interest (29) (20) (13) (12)
Depr & Amort 29 30 27 26
Tax Paid (33) (40) (35) (39)
Change in Working capital (22) (4) 3 (1)
Other cash and non-cash items 110 (2) (4) (4)
Operating cash flow 193 101 109 113
Capex (23) (28) (26) (26)
Capex - expansionary 0 0 0 0
Capex - Maintenance (23) (28) (26) (26)
Acquisitions & Invest 16 13 45 10
Asset sale proceeds 0 0 0 0
Other - - - -
Investing cash flow (7) (23) 19 (16)
Dividends paid (34) (56) (60) (62)
Equity raised 0 0 0 0
Net borrowings (200) (60) (120) (20)
Other financing cash in/(outflows) (0) (0) 0 0
Financing cash flow (234) (116) (180) (82)
Total cash flow (48) (37) (52) 16
Adjustments 0 0 0 0
Movement in cash/equivalents (48) (37) (52) 16
Earnings 6/16A 6/17E 6/18E 6/19E
Equiv. FPO (period avg) (mn) 765 770 771 771
EPS (CS adj.) (c) 11.6 10.9 10.8 12.0
EPS growth (%) 30.3 (5.8) (1.4) 11.1
DPS (c) 6.8 7.0 7.8 8.3
Dividend Payout (%) 58.1 63.9 71.8 68.8
Free CFPS (c) 22.2 9.5 10.7 11.3
Valuation 6/16A 6/17E 6/18E 6/19E
P/E (CS) (x) 10.0 10.6 10.7 9.7
PEG (x) 0.3 (1.8) (7.7) 0.9
EV/EBIT (x) 9.1 9.1 9.0 7.9
EV/EBITDA (x) 7.6 7.5 7.5 6.7
Dividend Yield (%) 5.8 6.0 6.7 7.1
FCF Yield (%) 19.2 8.2 9.2 9.7
Price to book (x) 0.8 0.8 0.8 0.8
Returns 6/16A 6/17E 6/18E 6/19E
Return on Equity (%) 8.4 7.8 7.5 8.1
Profit Margin (%) 13.8 12.1 12.5 13.6
Asset Turnover (x) 0.4 0.4 0.4 0.4
Equity Multiplier (x) 1.6 1.5 1.4 1.4
Return on Assets (%) 5.3 5.1 5.4 5.9
Return on Invested Cap. (%)
6.9 7.1 7.0 7.7
Gearing 6/16A 6/17E 6/18E 6/19E
ND/ND+E (%) 27.7 25.9 21.6 19.0
Net Debt to EBITDA (x) 2.2 2.1 1.8 1.5
Int Cover (EBITDA) (x) 6.8 9.1 12.1 13.9
Int Cover (EBIT) (x) 5.6 7.4 10.1 11.7
Capex to Sales (%) 3.6 4.1 3.9 3.8
Capex to Depr (%) 80.6 93.6 98.0 100.0
MSCI IVA Rating
Global Local Country
Environment Social Governance
0
2
4
6
8
10G
L C
GL
CG
L
C
TP ESG Risk (%): 0.00 TP Risk Comment: No major ESG risks MSCI IVA Risk: Neutral MSCI IVA Risk Comment: SXL has faced issues over high profile employees in its metro radio division which has resulted in its MSCI rating being downgraded from ‘A’ to ‘BB’. Further issues could impact future ratings or incur legal costs, however we believe that these risks are already incorporated into the current rating.
Share price performance
On 16-Jun-2017 the S&P ASX 200 Index closed at 5763.19 On 16-Jun-2017 the spot exchange rate was A$1.32/US$1
Source: Company Data, Credit Suisse Estimates, MSCI ESG Research
Australia and NZ First Edition 46
19 June 2017
Asia Pacific/New Zealand Equity Research Packaged Foods
The a2 Milk Company
(ATM.NZ / ATM NZ) Rating OUTPERFORM* Price (16-Jun,NZ$) 3.82 Target Price (NZ$) (from 3.92) 4.10 Target price ESG risk (%) Market cap (NZ$mn) 2,777.1 Yr avg. mthly trading (NZ$mn) 109.3 Projected return: Capital gain (%) 7.3 Dividend yield (net %) 0.0 Total return (%) 7.3
Target price is for 12 months.
[V] = Stock Considered Volatile (see Disclosure Appendix)
Research Analysts
Kar Yue Yeo
64 4 474 4462
karyue.yeo@fnzc.co.nz
This report is distributed in Australia by Credit
Suisse Equities (Australia) Limited. Please see legal
disclaimer and disclosure annex for further terms
and information.
Provided by First NZ Capital
INCREASE TARGET PRICE
Selling them as fast as it is making them ■ Earnings upgrade, again: On the back of a revised production schedule
with the company’s infant formula (IF) contract manufacturer and ongoing
strong demand for its product, ATM has raised its previous NZ$525mn
revenue guidance to NZ$545mn compared with our NZ$534mn pre-trading
update forecast for FY17F. The increased production and delivery of this IF
stock by ATM to its distributors is a signal of the ongoing strong and
previously unsatisfied demand in the market for its products. It is also an
indication that the economic incentives on ATM’s IF remain attractive to its
channel partners in the market. Coupled with changes in the phasing of the
company’s marketing spend in China, we have upgraded our EBITDA
forecast by 8% in FY17F and by c2% in FY18F and FY19F. The risk to our
earnings forecasts in FY18F and FY19F remains to the upside driven by a
combination of potential volume growth as well as higher gross margin. We
maintain our OUTPERFORM rating with a revised NZ$4.10 TP.
■ Evolving from a branded Australian liquid milk company to become a
global dairy nutrition company: ATM’s A1/A2-type milk hypothesis and
digestive benefit claims, coupled with its suite of patents and trademarks
have provided the company with a marketing platform for premium-priced
differentiated products. Our view on ATM is premised on successful rollout of
the company's A2-type-based dairy products (including IF) in Australia, the
UK, the US and China markets. Key to this is the successful management of
channels-to-market and of regulatory changes over time.
■ Catalysts in the next 12 months: These include ATM’s formulation
registration process in China, ongoing infant formula trading conditions in
China and the expansion of ATM’s footprint into the US fresh milk market.
■ TP revised to NZ$4.10 (from NZ$3.92): This is based on our probability-
weighted rolled forward sum-of-the-parts DCF adjusted for risks. On an
adjusted NPAT basis (ex-UK/US losses), our TP implies FY17F and FY18F
PEs of 27.0x and 22.5x, respectively. Our projected adjusted NPAT growth
rates (ex-UK/US losses) are 19% and 17% in FY18F and FY19F, respectively.
Share price performance
On 16-Jun-2017 the NEW ZEALAND EXCH NZSX 50
FREE IDX closed at 7516.35
On 16-Jun-2017 the spot exchange rate was
NZ$1.39/US$1
Performance 1M 3M 12M Absolute (%) 8.83 43.07 123.4 Relative (%) 6.87 38.08 113.6
Financial and valuation metrics
Year 6/16A 6/17E 6/18E 6/19E
Adjusted Earnings (NZ$ mn) 30 84 111 154
EPS Adjusted (NZc) 4.4 11.7 15.5 21.4
EPS Growth (%) n.m 164.4 32.2 37.9
P/E (x) 86.2 32.6 24.7 17.9
CPS (NZc) 3.2 10.5 13.4 18.7
P/CF (x) 121.1 36.2 28.5 20.5
EV/EBITDA (x) 49.6 19.8 15.1 11.0
Net DPS (NZc) 0.0 0.0 0.0 0.0
Imputation (%) 0.0 0.0 0.0 0.0
Net Yield (%) 0.0 0.0 0.0 0.0
Gross Yield (%) 0.0 0.0 0.0 0.0
Source: Company data, Thomson Reuters, Credit Suisse estimates
19 June 2017
Australia and NZ First Edition 47
Figure 1: The a2 Milk Company financial summary
Sector: Food, Beverage & Tobacco NZX Code: ATM
PROFIT & LOSS ($m) BALANCE SHEET ($m)Year to 30 Jun 2015A 2016A 2017F 2018F 2019F Year to 30 Jun 2015A 2016A 2017F 2018F 2019F
Operating Rev enue 155 353 546 696 881 Cash & Equiv alents 6.1 69.4 143 237 369
Operating Ex penses -150 -298 -412 -528 -663 Debtors & Inv entories 44.8 98.0 116 153 202
Operating EBITDA 4.8 54.6 133 168 218 Other Current Assets 9.7 15.1 15.1 15.1 15.1
Depreciation -1.2 -2.7 -3.2 -2.8 -2.7 Current Assets 60.5 182 274 406 586
Amortisation -0.8 0.0 0.0 0.0 0.0 Fix ed Assets 9.3 8.1 6.8 6.3 6.5
Operating EBIT 2.9 51.8 130 165 216 Inv estments 0.0 0.0 0.0 0.0 0.0
Other Income 0.0 0.0 0.0 0.0 0.0 Intangibles 17.2 16.3 14.1 14.1 14.1
Abnormals -1.7 0.0 -2.2 0.0 0.0 Other Non-Current Ass. 1.8 3.3 3.3 3.3 3.3
Reported EBIT 1.2 51.8 128 165 216 Total Assets 88.9 210 298 429 610
Net Interest 0.1 0.5 1.3 2.4 3.7
Pretax Profit 1.3 52.3 129 168 219 Interest Bearing Debt 0.0 0.0 0.0 0.0 0.0
Tax -3.4 -21.9 -47.0 -56.2 -65.8 Other Liabilities 30.3 77.1 83.2 103 129
Minority Interests 0.0 0.0 0.0 0.0 0.0 Total Liabilities 30.3 77.1 83.2 103 129
Equity Accounted Profit 0.0 0.0 0.0 0.0 0.0 Minorities 0.0 0.0 0.0 0.0 0.0
Reported NPAT -2.1 30.5 82.1 111 154 Conv ertible Capital 0.0 0.0 0.0 0.0 0.0
Abnormals (net of tax ) -1.7 0.0 -2.2 0.0 0.0 Ordinary Equity 58.6 133 215 327 480
Adjusted Earnings -0.4 30.5 84.3 111 154 Total Funds Emp. 88.9 210 298 429 610
RATIOS AND CAPITAL STRUCTURE CASH FLOW ($m)Year to 30 Jun 2015A 2016A 2017F 2018F 2019F Year to 30 Jun 2015A 2016A 2017F 2018F 2019F
Profitability & Growth
EBITDA/Op Rev % 3.1 15.5 24.4 24.1 24.8 Operating EBITDA 4.8 54.6 133 168 218
EBIT/Op Rev % 1.8 14.7 23.8 23.7 24.5 Other Cash Income -1.7 0.0 0.0 0.0 0.0
Effectiv e Tax Rate % 263 41.8 36.4 33.5 30.0 Interest Paid 0.1 0.5 1.3 2.4 3.7
Return On Equity % -0.7 31.8 48.4 41.1 38.1 Tax Paid -2.6 -9.7 -47.0 -56.2 -65.8
ROCE % 6.0 89.2 192 206 215 Working Capital / Other -7.3 -23.7 -11.6 -17.8 -22.0
EPS Adjusted c. -0.1 4.4 11.7 15.5 21.4 Operating Cash Flow -6.6 21.7 75.8 96.4 134
EPS Grow th % -7,483 164 32.3 37.9
Net DPS c. 0.0 0.0 0.0 0.0 0.0 Total Capex -1.0 -1.2 -1.8 -2.3 -2.9
Div idend Cov er x Acquisitions 0.0 0.0 0.0 0.0 0.0
Asset Backing & Capital Structure Div estments 0.0 0.0 0.0 0.0 0.0
Net Cash (Debt) $m 6.1 69.4 143 237 369 Div idends 0.0 0.0 0.0 0.0 0.0
NTA / Share $ 0.1 0.2 0.3 0.4 0.6 Equity Raised 0.0 44.3 0.0 0.0 0.0
Equity / Tot Assets % 66.0 63.3 72.1 76.1 78.8 Other -2.6 -0.9 0.0 0.0 0.0
Net Debt / EBITDA x -1.3 -1.3 -1.1 -1.4 -1.7 Change in Net Debt -10.2 63.9 74.0 94.1 131
Interest Cov er x -28.6 -110 -99.2 -70.3 -57.7
Shares on Issue Capex /Depn % 85.5 42.7 57.5 83.4 108
Ordinary m 655 687 719 719 719 Capex /Rev % 0.6 0.3 0.3 0.3 0.3
Fully Diluted m 655 687 719 719 719
VOLUME ASSUMPTIONS EBITDA COMPOSITION BY MARKET (NZD)Year to 30 Jun 2015A 2016A 2017F 2018F 2019F Year to 30 Jun 2015A 2016A 2017F 2018F 2019F
Sales Vol. Aus - m/L 58.7 54.66 56.43 58.24 60.1 EBITDA - Aus 29 85 154 177 196
Sales Vol. UK - m/L 0.89 3.77 6.01 12.74 31.42 EBITDA - China -3 9 30 37 49
Sales Vol. China - tn 220.5 1678.44 3571.43 5621.69 7027.12 EBITDA - UK/US -12 -20 -25 -20 1
Sales Vol. US - m/L 0.13 4.82 9.11 23.1 54.27 Corporate & Others -9 -19 -25 -26 -27
EBITDA - Total 5 55 133 168 218
Source: Company data, NZX, First NZ Capital estimates
19 June 2017
Australia and NZ First Edition 48
Key points from the ATM trading update
ATM’s second trading update in two months, in our view, signals the following:
■ An indication of unsatisfied demand for ATM’s IF product: It has been well
broadcast in the market that ATM had experienced significant IF stock shortages
relative to demand since December 2016 due to previously under-ordering of products
from its contract manufacturer. The risk for ATM during this period was that some of its
channel partners and end-customers could have permanently abandoned ATM’s IF
and shifted to other brands in the market. Judging by the sales momentum in the past
few months from ATM’s revenue upgrades, this has not occurred. The brand appears
to be gaining rather than losing momentum.
■ The overachievement continues to surprise even ATM: The ever changing
dynamics in the domestic Australia and China IF market landscape means it is difficult
to predict business outcomes with a high degree of accuracy. For ATM, the success
achieved to date has been a combination of externalities as well as good management
foresight and execution in response to changing market conditions. The company has
successfully capitalised on the emergence of the daigou and cross border e-commerce
channels, as well as mis-steps by some of its competitors in the market place. ATM
has also executed very well as far as establishing and improving the economic
incentives to maintain ongoing support from its channel partners. The fact that ATM
has had to return to the market twice in four months (and a second time in two months)
after reporting its half-year result in February indicates either management and the
board continue to maintain a conservative approach to guidance or the business
continues to beat ATM’s own internal expectations.
High level observations from our channels checks:
■ Overall volume: Overall IF volume for all brands sold by retail channels in Australia
appears to be down c5% YoY in the past twelve months. That said, on our forecasts,
ATM sales volume across all channels (Australia retail, daigou and direct export to
China/HK) is projected to rise by c80% YoY to c 18,100 tonnes in FY17F compared
with an estimated 10,000 tonnes in FY16A. We think the company’s IF volume
recorded through the retail channels has grown slightly below this overall 80% YoY
growth rate.
■ Market share: By default, ATM has been gaining share at the expense of other brands
in Australia.
■ Pricing and gross margin for channel partners: We observed that the headline
retail prices for ATM’s IF product have risen by c4% (cA$1 per can) since mid-March
across all grocery and pharmacy stores. We also note that prices on TMall and Taobao
webstores operated by ATM’s channel partners have also increased by c10% (cA$4
per can). This implies the gross margin for some channel partners has expanded.
Interestingly, we note that the higher pricing has so far occurred without negatively
impacting on demand for the product in the past few months.
Earnings revisions
■ We have raised our EBITDA forecasts for ATM by 8% in FY17F and by c 2% in FY18F
and FY19F based on the trading update for the company. This reflects a combination
of higher volume forecasts and also higher marketing costs in FY18F and beyond (see
Figure 2).
■ Our terminal year volume assumption has risen by approximately 1,000 tonnes (c3%)
from previously 31,000 tonnes to 32,000 tonnes.
19 June 2017
Australia and NZ First Edition 49
What to do with the stock?
We maintain our OUTPERFORM rating with a revised 12-month rolled forward DCF-based
risk adjusted NZ$4.10 target price (from previously NZ$3.92). This reflects higher
valuations for ANZ and China operations driven by our assumption of higher IF sales
volumes both in the short and long term but partially offset by higher sales and marketing
costs also. The risk to our assessment for ATM’s gross margin in FY18F is to the upside
as the cost for one of the primary inputs for IF now appears to have receded from the high
level observed between November 2016 and February 2017.
Our current valuation for ATM assumes that the company can achieve 32,000 tonnes of IF
sales by FY25F compared with currently 18,100 tonnes projected for FY17F.
While it is not our base case, should the company continue to take share in the current
950,000 tonnes p.a. China IF market that is projected to grow at c5%–10% p.a. (of which
half is from imports) and lift its overall IF sales to 45,000 tonnes by FY25F, it would imply a
lift in our spot DCF valuation from NZ$4.09 to NZ$5.10.
Figure 2: Earnings revision
NZ$mn FY16A FY17F FY18F FY19F
Act'l New Old Chg New Old Chg New Old Chg
ANZ 296 441 430 3% 504 490 3% 553 537 3%
China/Other Asia 38 76 76 0% 123 116 6% 155 146 6%
UK/US 18 28 28 0% 70 70 0% 173 173 0%
Others
Revenue 353 546 534 2.2% 696 675 3.2% 881 857 2.9%
ANZ 84.7 153.9 148.9 3.4% 177.2 171.3 3.4% 195.9 189.4 3.4%
Asia 9.2 29.9 25.0 19.7% 36.8 39.7 -7.3% 49.4 50.7 -2.6%
UK & US -20.5 -25.4 -25.4 0.0% -19.7 -19.7 0.0% 0.5 0.5 0.0%
Corporate -18.8 -25.4 -25.4 0.0% -26.4 -26.4 0.0% -27.4 -27.4 0.0%
EBITDA (pre-abn'l) 54.6 133.1 123.2 8.1% 168.0 165.0 1.8% 218.4 213.2 2.4%
EBIT (pre-abn'l) 51.8 129.9 120.0 8.3% 165.2 162.3 1.8% 215.7 210.6 2.4%
NPAT (pre-abn'l) 30.4 84.2 77.3 9.0% 111.4 109.3 1.9% 153.6 149.9 2.5%
Operating CF 21.7 75.8 70.1 8.2% 96.4 95.4 1.1% 134.3 131.2 2.4%
Capex -1.2 -1.8 -1.8 2.2% -2.3 -2.2 3.2% -2.9 -2.8 2.9%
Free cash flow 20.5 74.0 68.3 8.3% 94.1 93.2 1.0% 131.4 128.4 2.4%
Net debt / (cash) -69.4 -143.4 -137.7 4.1% -237.5 -230.9 2.9% -368.9 -359.3 2.7%
EPS (c) 4.4 11.4 10.4 9.3% 15.5 15.2 1.9% 21.4 20.8 2.5%
EBIT Margin 14.7% 23.8% 22.5% 1.3% 23.7% 24.0% -0.3% 24.5% 24.6% -0.1%
EBITDA Margin 15.5% 24.4% 23.1% 1.3% 24.1% 24.4% -0.3% 24.8% 24.9% -0.1%
ANZ liquid (mn litres) 54.7 56.4 56.4 0% 58.2 58.2 0% 60.1 60.1 0%
ANZ IF (tonnes) 8325 14570 14153 3% 16901 16418 3% 18591 18060 3%
UK (mn litres) 3.8 6.0 6.0 0% 12.7 12.7 0% 31.4 31.4 0%
US (mn litres) 4.8 9.1 9.1 0% 23.1 23.1 0% 54.3 54.3 0%
China IF (tonnes) 1678 3571 3571 0% 5622 5291 6% 7027 6614 6%
Total IF (tonnes) 10004 18141 17725
22522 21709
25618 24673
Total IF (NZ$mn) 214 387 375
491 470
565 540
Fresh Milk (NZ$mn) 121 135 135
180 180
289 289
Others (NZ$mn) 18 23 23
25 25
28 28
Total revenue 353 546 534
696 675
881 857
Source: Company data, FNZC estimates
19 June 2017
Australia and NZ First Edition 50
Figure 3: Revised Risk-Adjusted Sum-of-The-Parts Valuation for ATM Per share values Spot 12-mth forward Probability
weighting
Probability weighted
12-mth forward
Prob. Weighted
value (spot)
Australia value 2.73 3.08 100% 3.08 2.73
A2 UK value 0.33 0.37 20% 0.07 0.07
China value 1.08 1.22 100% 1.22 1.08
USA value ps 0.27 0.30 30% 0.09 0.08
Capitalised corp. expense -0.42 -0.47 100% -0.47 -0.42
Cash on hand 0.10 0.11 100% 0.11 0.10
DCF value per share (NZ$) 4.09 4.61 89% 4.10 3.63
Source: Company data, FNZC estimates
Figure 4: Risk-Adjusted Sum-of-The-Parts Valuation for ATM prior to revision Per share values Spot 12-mth forward Probability
weighting
Probability weighted
12-mth forward
Prob. Weighted
value (spot)
Australia value 2.69 3.03 100% 3.03 2.69
A2 UK value 0.33 0.37 20% 0.07 0.07
China value 0.96 1.08 100% 1.08 0.96
USA value ps 0.27 0.30 30% 0.09 0.08
Capitalised corp. expense -0.42 -0.47 100% -0.47 -0.42
Cash on hand 0.10 0.11 100% 0.11 0.10
DCF value per share (NZ$) 3.93 4.43 88% 3.92 3.47
Source: Company data, FNZC estimates
Australia and NZ First Edition 51
19 June 2017
Asia Pacific/Australia Equity Research
Food Retail
Metcash
(MTS.AX / MTS AU) Rating OUTPERFORM* Price (16-Jun,A$) 2.18 Target Price (A$) 2.54 Target price ESG risk (%) NA Market cap (A$mn) 2,126.9 Yr avg. mthly trading (A$mn) 168.3 Projected return: Capital gain (%) 16.5 Dividend yield (net %) 6.2 Total return (%) 22.7
Target price is for 12 months.
Research Analysts
Grant Saligari
61 3 9280 1720
grant.saligari@credit-suisse.com
Annabelle Diamond
61 3 9280 1837
annabelle.diamond@credit-suisse.com
PRE RESULTS COMMENT
Difficult result to predict; reports on 26 June
■ Metcash reports on 26 June and with no company disclosure since
November 2016, it is a difficult result to predict. If Metcash can limit a
reduction in supermarket distribution sales to circa 5% and mitigate most of
that downside with cost reduction, it is likely to meet or beat market
expectations. Currently, the market appears to be pricing a circa 30% decline
in supermarket distribution EBIT over the medium term. Liquor and hardware
are positive stories as is the resumption of dividends in FY18. Earnings
changes are due to a reduction in forecast sales for Supermarket distribution
and upgrades to the outlook for Hardware and Liquor.
■ Supermarket performance down. Pathway to stabilisation elusive.
Independent retail sales are likely to have fallen circa 5% in the 2H17, based
on ABS data. Acceleration in Woolworths' performance in 2017 has been as
big a variable as Aldi in that outcome. We caution against interpreting the
movement in market share to Woolworths as a trend; Woolworths market
share improvement largely reflects catch-up after several years of under-
performance. Independents continue a more active refurbishment program
than in the past (which has been a successful element of the Metcash
strategy). For independents, repositioning towards fresh and convenience
seems the most likely route to sustainability. For Metcash, centralisation of
state-based support activities is likely to have mitigated most of the sales
downside in this period.
■ Liquor and hardware are very positive stories. The independent sector
continues to benefit from incumbency and regulatory barriers in liquor and
another strong result is expected for Metcash. There is likely upside to
current estimates from consolidation of Home Timber and Hardware and
growth of the Mitre 10 brand over the medium term.
Total return forecast in perspective
Share Price CS Target Rtn Mean
12mth Volat ility
52 Week Hi-Lo
*Target return
- 46%
- 26%
- 6%
14%
34%
54%
Source: Company data, Thomson Reuters, IBES, Credit
Suisse estimates
Performance 1M 3M 12M Absolute (%) 5.83 -3.54 2.35 Relative (%) 6.22 -2.91 -9.65
Financial and valuation metrics
Year 4/16A 4/17E 4/18E 4/19E
Revenue (A$ mn) 13,541 13,969 14,402 14,386
EBITDA (A$ mn) 329 349 381 403
EBIT (A$ mn) 268 283 312 331
Net Income (Adj.) (A$ mn) 178 191 217 239
EPS (Adj.) (Ac) 19.19 19.91 22.19 24.52
Change from previous EPS (%) n.a. 0.6 (2.2) (1.4)
EPS growth (%) 0.3 3.7 11.5 10.5
Consensus EPS (Ac) 19.20 19.20 20.80 21.60
P/E (x) 11.4 11.0 9.8 8.9
Dividends (Ac) 0.00 0.00 13.32 14.71
Dividend yield (%) 0.0 0.0 6.1 6.7
Price/Book (x) 1.0 1.2 1.1 1.1
Net debt/EBITDA (x) 0.9 0.3 0.0 (0.1)
Source: Company data, Thomson Reuters, Credit Suisse estimates
19 June 2017
Australia and NZ First Edition 52
Metcash (MTS.AX / MTS AU) Price (16 Jun 2017): A$2.18; Rating: OUTPERFORM; Target Price: A$2.54; Analyst: Grant Saligari
Income Statement 4/16A 4/17E 4/18E 4/19E
Revenue 13,541 13,969 14,402 14,386
EBITDA 329 349 381 403
Depr. & Amort. (60) (65) (69) (72)
EBIT 268 283 312 331
Associates - - - -
Net interest exp. (27) (22) (13) (0)
Other 0 0 0 0
Profit before tax 241 261 299 331
Income tax (68) (77) (90) (99)
Profit after tax 173 184 209 231
Minorities (2) (1) -0 -0
Preferred dividends - - - -
Associates & Other 7 7 8 8
Normalised NPAT 178 191 217 239
Unusual item after tax 38 (29) (14) 0
Net profit (Reported) 217 162 203 239
Balance Sheet 4/16A 4/17E 4/18E 4/19E
Cash & equivalents 26 143 250 293
Inventories 674 746 725 724
Receivables 981 1,046 1,043 1,042
Other current assets 43 28 28 28
Current assets 1,724 1,964 2,046 2,087
Property, plant & equip. 252 259 287 318
Intangibles 1,128 1,125 1,125 1,125
Other non-current assets 244 257 264 272
Non-current assets 1,624 1,641 1,677 1,715
Total assets 3,348 3,605 3,723 3,802
Payables 1,357 1,440 1,432 1,429
Interest bearing debt 315 258 258 258
Other liabilities 307 282 262 242
Total liabilities 1,979 1,980 1,952 1,929
Net assets 1,369 1,626 1,771 1,873
Ordinary equity 2,127 1,711 1,856 1,958
Minority interests 8 8 8 8
Preferred capital - - - -
Total shareholder funds 1,369 1,626 1,771 1,873
Net Debt 289 114 7 (36)
Cash Flow 4/16A 4/17E 4/18E 4/19E
EBIT 268 283 312 331
Net Interest (22) (17) (13) (0)
Depr & Amort 60 65 69 72
Tax Paid (64) (80) (90) (99)
Change in Working capital 10 (55) 17 (1)
Other cash and non-cash items (87) 62 (34) (20)
Operating cash flow 166 258 261 282
Capex (65) (49) (97) (102)
Capex - expansionary (23) (20) (50) (50)
Capex - Maintenance (42) (29) (47) (52)
Acquisitions & Invest 42 (126) 0 0
Asset sale proceeds 242 0 0 0
Other - - - -
Investing cash flow 237 (172) (97) (102)
Dividends paid 0 0 (57) (137)
Equity raised 0 93 0 0
Net borrowings (450) (61) 0 0
Other financing cash in/(outflows) (11) (1) 0 0
Financing cash flow (460) 31 (57) (137)
Total cash flow (57) 117 107 43
Adjustments 0 0 0 0
Movement in cash/equivalents (57) 117 107 43
Earnings 4/16A 4/17E 4/18E 4/19E
Equiv. FPO (period avg) (mn) 929 958 976 976
EPS (CS adj.) (c) 19.2 19.9 22.2 24.5
EPS growth (%) 0.3 3.7 11.5 10.5
DPS (c) 0.0 0.0 13.3 14.7
Dividend Payout (%) 0.0 0.0 60.0 60.0
Free CFPS (c) 13.3 23.9 21.9 23.6
Valuation 4/16A 4/17E 4/18E 4/19E
P/E (CS) (x) 11.4 11.0 9.8 8.9
PEG (x) 40.2 3.0 0.9 0.9
EV/EBIT (x) 9.0 7.9 6.8 6.3
EV/EBITDA (x) 7.4 6.4 5.6 5.2
Dividend Yield (%) 0.0 0.0 6.1 6.7
FCF Yield (%) 6.1 10.9 10.1 10.8
Price to book (x) 1.0 1.2 1.1 1.1
Returns 4/16A 4/17E 4/18E 4/19E
Return on Equity (%) 8.4 11.1 11.7 12.2
Profit Margin (%) 1.3 1.4 1.5 1.7
Asset Turnover (x) 4.0 3.9 3.9 3.8
Equity Multiplier (x) 1.6 2.1 2.0 1.9
Return on Assets (%) 5.3 5.3 5.8 6.3
Return on Invested Cap. (%)
11.6 11.5 12.3 12.6
Gearing 4/16A 4/17E 4/18E 4/19E
ND/ND+E (%) 17.4 6.6 0.4 Net Cash Net Debt to EBITDA (x) 0.9 0.3 0.0 Net Cash Int Cover (EBITDA) (x) 12.2 15.8 29.1 899.6
Int Cover (EBIT) (x) 9.9 12.8 23.8 739.3
Capex to Sales (%) 0.5 0.4 0.7 0.7
Capex to Depr (%) 183.9 133.1 247.2 250.3
EBIT Segmentals 04/16A 04/17E 04/18E 04/19E
Food distribution 179.9 172.8 175.4 176.1
% chg (17.0) (4.0) 1.5 0.4
ALM 62.1 65.0 67.4 70.0
% chg 7.8 4.6 3.8 3.8
Hardware and automotive 32.8 48.6 71.6 87.8
% chg 9.0 48.3 47.3 22.6
Corporate (6.5) (3.1) (2.8) (2.9)
% chg (36.9) (53.0) (8.1) 1.9
Total EBIT 268.3 283.3 311.6 331.0
MSCI IVA Rating A
Global Local Country Stock
Environment Social Governance
0
1
2
3
4
5
6
7
8
G
L
C
S
G
L
C
S
G
L
C
S
TP ESG Risk (%): 0.00 TP Risk Comment: We do not explicitly incorporate ESG factors in our target price. MSCI IVA Risk: Neutral MSCI IVA Risk Comment: Metcash has an 'A' rating. MSCI believes that the company has initiatives in place to manage product quality and safety due to certification of its facilities to the HACCP food safety standard. The company lags better performing peers in managing carbon intensity and in the area of nutrition.
Source: Company Data, Credit Suisse Estimates, MSCI ESG Research
19 June 2017
Australia and NZ First Edition 53
Figure 1: Earnings changes
A$mn FY17F FY18F FY19F
New Previous Earnings
change %
New Previous Earnings
change %
New Previous Earnings
change %
Food distribution 173 175 -1% 175 186 -6% 176 195 -10%
ALM 65 65 0% 67 66 2% 70 66 6%
Hardware and automotive 49 45 9% 72 69 4% 88 77 14%
Corporate -3 -3 0% -3 -3 0% -3 -3 0%
Group EBIT 283 282 1% 312 318 -2% 331 335 -1%
Group NPAT 191 190 1% 217 222 -2% 239 242 -1%
Source: Company data, Credit Suisse estimates
Australia and NZ First Edition 54
19 June 2017
Asia Pacific/Australia
Equity Research
Credit Suisse Ratings – Australia
Research Analysts
Jason Swinbourne
+61 2 8205 4591
jason.swinbourne@credit-suisse.com
RATINGS
As of Friday, 16 June 2017
Figure 1: Credit Suisse stock ratings – distribution
OUTPERFORM, 38%
NEUTRAL, 41%
UNDERPERFORM, 21%
0% 20% 40% 60% 80% 100%
See Figure 3 for ratings on each stock covered by Credit Suisse, ranked by expected total return.
Source: Credit Suisse estimates
Stock ratings
Individual stock ratings are determined by the projected total return on a stock
relative to absolute return benchmarks.
Analysts project a 12-month target share price for each stock. The capital gain
or loss implied by the 12-month target share price, along with the analyst’s
projected prospective dividend yield, generates the analyst’s projected total
return for a given stock.
The absolute return required to achieve an Outperform rating is greater than or
equal to 7.5%, and to achieve an Underperform rating is less than or equal to
5.0%. A Neutral rating requires a projected total return within the range of -
5.0% and +15.0%. Thus, there is an overlapping range for the Neutral rating
band (see Figure 2). The overlapping rating range allows analysts to assign a
rating that puts their projected total return in the context of associated risks.
19 June 2017
Australia and NZ First Edition 55
Figure 2: Rating system parameters
ETR Range
Outperform >= 7.5%
Neutral (overlaps with Outperform and Underperform) -5% - 15.0%
Underperform =< 5.0%
Source: Credit Suisse Research, Australia
Given the dynamic nature of share prices an analyst's rating can become out of sync with
the projected total return as the share price moves. The rating must only be viewed as
valid with respect to projected total return at the time of rating or target price changes.
19 June 2017
Australia and NZ First Edition 56
Figure 3: Ranking by projected total return Code Share Price Target Price Total Return** Rating^
SYR.AX $2.59 $7.45 188% OUTPERFORM
PRU.AX $0.32 $0.85 166% OUTPERFORM
AQG.AX $2.22 $5.30 141% OUTPERFORM
ICQ.AX $0.27 $0.60 122% NEUTRAL
TEN.AX $0.16 $0.35 119% NEUTRAL
KGD.AX $0.03 $0.06 93% OUTPERFORM
AOH.AX $0.14 $0.26 86% OUTPERFORM
FAR.AX $0.08 $0.14 82% OUTPERFORM GFY.AX $0.64 $0.95 67% NEUTRAL
WSA.AX $1.93 $2.90 55% NEUTRAL
FMG.AX $4.70 $6.50 47% OUTPERFORM
MYX.AX $1.10 $1.55 42% NEUTRAL
IGO.AX $3.21 $4.30 38% OUTPERFORM
HT1.AX $2.43 $3.20 36% OUTPERFORM
WHC.AX $2.81 $3.60 35% OUTPERFORM
APO.AX $4.50 $5.85 35% NEUTRAL
SGR.AX $4.99 $6.45 32% OUTPERFORM
SWM.AX $0.67 $0.81 29% NEUTRAL
AQZ.AX $0.92 $1.15 29% OUTPERFORM STO.AX $3.03 $3.80 27% OUTPERFORM
CTX.AX $32.09 $39.70 27% OUTPERFORM
SCG.AX $4.37 $5.30 26% OUTPERFORM
AHY.AX $1.47 $1.75 26% NEUTRAL
TGR.AX $4.00 $4.85 26% OUTPERFORM RIO.AX $60.08 $72.00 26% OUTPERFORM
MTS.AX $2.15 $2.54 24% OUTPERFORM
ING.AX $3.32 $3.90 23% OUTPERFORM SDA.AX $3.77 $4.50 23% OUTPERFORM
ISU.AX $2.01 $2.40 22% OUTPERFORM
NAB.AX $29.83 $34.50 22% OUTPERFORM
PMV.AX $13.09 $15.38 22% OUTPERFORM SXL.AX $1.17 $1.35 22% OUTPERFORM
BOQ.AX $11.08 $12.75 22% NEUTRAL
ECX.AX $3.64 $4.25 21% OUTPERFORM CSR.AX $4.27 $4.90 21% NEUTRAL
BHP.AX $22.99 $26.50 20% NEUTRAL
CAJ.AX $0.26 $0.30 19% OUTPERFORM
CCL.AX $9.03 $10.30 19% OUTPERFORM
AHG.AX $3.22 $3.60 18% OUTPERFORM
NEC.AX $1.35 $1.50 18% OUTPERFORM WBC.AX $30.53 $34.00 18% NEUTRAL
VAH.AX $0.18 $0.21 17% NEUTRAL
HUO.AX $5.00 $5.80 17% OUTPERFORM BEN.AX $10.78 $11.90 17% UNDERPERFORM
S32.AX $2.61 $2.95 17% OUTPERFORM
AUB.AX $13.01 $14.70 16% OUTPERFORM
BPT.AX $0.62 $0.70 16% OUTPERFORM
ANZ.AX $28.12 $31.00 16% NEUTRAL MQG.AX $90.35 $100.00 16% NEUTRAL
ORA.AX $2.84 $3.15 15% NEUTRAL
OML.AX $4.48 $4.95 14% OUTPERFORM
PLG.AX $0.87 $0.92 14% OUTPERFORM TAH.AX $4.57 $5.00 14% OUTPERFORM
AGL.AX $25.55 $28.00 14% NEUTRAL
CBA.AX $81.86 $89.00 14% NEUTRAL AMP.AX $5.08 $5.50 14% NEUTRAL
ILU.AX $8.26 $9.40 14% NEUTRAL
AWE.AX $0.44 $0.50 14% NEUTRAL FXL.AX $1.70 $1.85 14% NEUTRAL
CYB.AX $4.68 $5.25 13% NEUTRAL SDF.AX $2.81 $3.10 13% OUTPERFORM
ORG.AX $7.17 $8.10 13% NEUTRAL
BKL.AX $91.92 $100.00 12% NEUTRAL TWR.AX $1.09 $1.15 12% NEUTRAL
IAG.AX $6.46 $6.90 11% OUTPERFORM
BSL.AX $12.10 $13.30 11% OUTPERFORM
WPP.AX $1.20 $1.25 11% OUTPERFORM
HVN.AX $3.90 $4.08 10% NEUTRAL
WES.AX $40.70 $42.95 10% NEUTRAL
MTR.AX $2.98 $3.15 10% NEUTRAL WFD.AX $8.73 $9.25 10% NEUTRAL
PGH.AX $6.10 $6.45 10% NEUTRAL
LLC.AX $16.67 $17.50 10% OUTPERFORM
MGR.AX $2.33 $2.44 9% OUTPERFORM
OSH.AX $6.78 $7.25 9% OUTPERFORM
CWN.AX $12.83 $12.50 9% NEUTRAL
NHF.AX $5.23 $5.50 9% UNDERPERFORM
SIG.AX $0.88 $0.90 8% OUTPERFORM ANN.AX $24.41 $25.80 8% NEUTRAL
AAD.AX $2.13 $2.25 8% OUTPERFORM
CAR.AX $11.54 $12.00 8% OUTPERFORM
MYO.AX $3.37 $3.50 8% NEUTRAL
IRE.AX $12.35 $12.70 7% OUTPERFORM JHX.AX $20.08 $20.85 7% OUTPERFORM
ALU.AX $9.15 $9.50 7% OUTPERFORM
MPL.AX $2.74 $2.80 7% UNDERPERFORM
NHC.AX $1.53 $1.60 7% NEUTRAL GPT.AX $5.26 $5.35 6% OUTPERFORM
APE.AX $7.82 $8.00 6% NEUTRAL
API.AX $1.86 $1.90 6% UNDERPERFORM
PRG.AX $1.87 $1.90 6% NEUTRAL
Source: ASX, CS estimates. Correct as of 9PM AET on 16 June 2017. **Projected capital gain or loss plus gross dividend yield.
Figure 3: Ranking by projected total return (continued) Code Share Price Target Price Total Return** Rating^
HSN.AX $3.55 $3.70 6% NEUTRAL
IDX.AX $1.69 $1.70 6% OUTPERFORM
CGF.AX $13.20 $13.50 5% OUTPERFORM
ABC.AX $5.66 $5.70 5% NEUTRAL
GDI.AX $1.09 $1.06 5% OUTPERFORM
ALL.AX $23.09 $23.50 4% NEUTRAL
SUN.AX $14.57 $14.50 4% NEUTRAL AOF.AX $2.16 $2.10 4% NEUTRAL
BLD.AX $7.01 $7.05 4% OUTPERFORM
TTS.AX $4.19 $4.20 4% NEUTRAL
RHC.AX $71.69 $73.00 4% NEUTRAL
NXT.AX $4.54 $4.70 4% OUTPERFORM
SXY.AX $0.29 $0.30 3% OUTPERFORM TCL.AX $12.74 $12.60 3% OUTPERFORM
PTM.AX $4.64 $4.50 3% UNDERPERFORM
OZL.AX $7.06 $7.15 3% UNDERPERFORM
CMW.AX $1.03 $0.97 3% UNDERPERFORM
SGP.AX $4.86 $4.73 3% NEUTRAL MQA.AX $5.96 $5.90 3% NEUTRAL
NUF.AX $10.02 $10.10 3% NEUTRAL
NWS.AX $18.44 $18.50 2% NEUTRAL
AST.AX $1.76 $1.70 2% NEUTRAL
RIC.AX $1.38 $1.35 2% NEUTRAL
MFG.AX $28.27 $27.50 1% OUTPERFORM
CPU.AX $14.54 $14.30 1% OUTPERFORM
BTT.AX $11.85 $11.40 1% NEUTRAL
REA.AX $65.63 $65.00 1% NEUTRAL RWH.AX $1.35 $1.30 1% NEUTRAL
OGC.AX $4.20 $4.20 1% OUTPERFORM
IPL.AX $3.46 $3.37 0% UNDERPERFORM
DOW.AX $6.05 $5.90 0% NEUTRAL AMC.AX $16.35 $15.70 0% NEUTRAL
QBE.AX $13.23 $12.60 -1% UNDERPERFORM
ALQ.AX $6.92 $6.70 -1% NEUTRAL ARB.AX $16.05 $15.45 -1% NEUTRAL
IOF.AX $4.75 $4.48 -1% NEUTRAL
RMD.AX $10.05 $9.70 -2% OUTPERFORM SBM.AX $2.83 $2.60 -2% OUTPERFORM
CSL.AX $139.00 $134.00 -2% OUTPERFORM ASX.AX $52.14 $49.00 -2% UNDERPERFORM
WOW.AX $26.25 $24.83 -2% UNDERPERFORM
HSO.AX $2.22 $2.10 -2% UNDERPERFORM GWA.AX $3.14 $2.90 -3% NEUTRAL
CQR.AX $4.42 $4.00 -3% UNDERPERFORM
FLT.AX $37.50 $34.90 -3% OUTPERFORM SHL.AX $24.11 $22.60 -3% NEUTRAL
TLS.AX $4.38 $4.00 -3% UNDERPERFORM PPT.AX $55.49 $51.00 -3% NEUTRAL
SUL.AX $8.28 $7.56 -3% NEUTRAL
VCX.AX $2.92 $2.65 -3% UNDERPERFORM
GNC.AX $10.08 $9.48 -3% NEUTRAL WEB.AX $12.63 $12.00 -3% OUTPERFORM
BWP.AX $3.20 $2.92 -3% UNDERPERFORM
AWC.AX $1.87 $1.70 -3% UNDERPERFORM EVN.AX $2.43 $2.30 -4% OUTPERFORM
TPM.AX $5.59 $5.25 -4% UNDERPERFORM
NVT.AX $4.40 $4.00 -5% UNDERPERFORM IFL.AX $9.76 $8.70 -5% NEUTRAL
MYR.AX $0.92 $0.82 -5% NEUTRAL GMG.AX $8.66 $7.92 -5% NEUTRAL
PRY.AX $3.73 $3.40 -6% UNDERPERFORM
MMS.AX $13.97 $12.50 -6% OUTPERFORM ORI.AX $20.45 $18.71 -6% NEUTRAL
QAN.AX $5.50 $5.00 -6% OUTPERFORM
TWE.AX $13.53 $12.35 -7% NEUTRAL
SYD.AX $7.36 $6.50 -7% UNDERPERFORM
AZJ.AX $5.41 $4.75 -7% UNDERPERFORM
WPL.AX $30.51 $26.80 -8% UNDERPERFORM
RRL.AX $3.55 $3.05 -8% UNDERPERFORM SEK.AX $16.69 $14.70 -9% NEUTRAL
SCP.AX $2.40 $2.04 -9% UNDERPERFORM
SKI.AX $2.84 $2.40 -10% NEUTRAL
APA.AX $9.61 $8.10 -11% UNDERPERFORM
DXS.AX $10.75 $9.10 -11% UNDERPERFORM
NST.AX $4.84 $4.15 -11% NEUTRAL
COH.AX $154.34 $133.90 -11% UNDERPERFORM
CWY.AX $1.43 $1.23 -12% NEUTRAL DLX.AX $7.16 $6.05 -12% UNDERPERFORM
NCM.AX $21.28 $18.20 -12% UNDERPERFORM
QUB.AX $2.66 $2.28 -12% UNDERPERFORM
BRG.AX $11.01 $9.30 -13% OUTPERFORM
JBH.AX $23.30 $18.68 -15% UNDERPERFORM
ACX.AX $4.11 $3.50 -15% NEUTRAL
CHC.AX $5.92 $4.71 -15% UNDERPERFORM
SGM.AX $13.47 $11.00 -15% UNDERPERFORM
SFR.AX $5.72 $4.65 -16% UNDERPERFORM IEL.AX $5.00 $4.00 -17% UNDERPERFORM
GUD.AX $13.48 $10.45 -19% NEUTRAL
CIM.AX $38.97 $28.00 -25% UNDERPERFORM
WOR.AX $11.40 $8.50 -25% NEUTRAL
WTC.AX $7.75 $4.80 -38% NEUTRAL
Source: ASX, CS estimates. Correct as of 9PM AET on 16 June 2017. **Projected capital gain or loss plus gross dividend yield.
19 J
un
e 2
017
Au
stra
lia a
nd
NZ
Firs
t Ed
ition
57
Top 100 Earnings & Dividends
Research Analyst
Jason Swinbourne
612 8205 4591
jason.swinbourne@credit-suisse.com
As at 16 June 2017 Ticker Year Rating Share 12M Mkt NPAT PE Relative PE Dividend Dividend Yield EBITDA Multiple F'kg Analyst
to Price Tgt Cap 2017 2018 2019 2017 2018 2019 2017 2018 2019 2017 2018 2019 2017 2018 2019 2017 2018 2019 2017 2018 2019 2018 Name
$ $ $m $m $m $m ¢ ¢ ¢ x x x % % % ¢ ¢ ¢ % % % x x x %
Energy
Caltex Australia CTX 31-Dec OPFM 32.09 39.70 8,369 597.7 555.9 584.9 229.0 213.0 224.1 14.0 15.1 14.3 93.1 102.1 95.8 114.5 106.5 112.1 3.6 3.3 3.5 8.0 8.2 7.7 100 Mark Samter
Origin Energy ORG 30-Jun NTRL 7.17 8.10 12,585 592.2 1,164.7 1,585.1 33.8 66.4 90.4 21.2 10.8 7.9 141.0 73.1 53.1 0.0 0.0 27.0 0.0 0.0 3.8 8.2 5.5 4.4 100 Mark Samter
Oil Search OSH 31-Dec OPFM 6.78 7.25 7,845 323.4 462.0 474.9 21.2 30.2 31.1 24.3 17.0 16.6 161.6 115.3 110.8 8.5 12.1 12.5 1.6 2.4 2.4 10.3 8.5 8.5 0 Mark Samter
Santos Ltd STO 31-Dec OPFM 3.03 3.80 4,793 419.8 504.4 493.4 20.4 24.2 23.7 11.3 9.5 9.7 74.9 64.4 65.0 0.0 9.7 9.5 0.0 4.2 4.1 4.6 4.0 3.9 100 Mark Samter
Woodside Petroleum WPL 31-Dec UPFM 30.51 26.80 19,519 980.0 1,160.8 1,097.3 116.3 137.8 130.2 19.9 16.8 17.8 132.3 113.9 119.0 93.1 110.2 104.2 4.0 4.8 4.5 8.2 7.0 6.7 100 Mark Samter
Sector Aggregate 18.2 13.9 12.8 2.4 3.2 3.9 7.8 6.4 5.9
Materials - Chemicals
Dulux Group DLX 30-Sep UPFM 7.16 6.05 2,787 141.0 138.3 142.1 35.8 34.9 35.7 20.0 20.5 20.1 132.8 138.8 134.3 26.0 26.0 26.0 3.6 3.6 3.6 13.2 12.4 12.0 100 Andrew Peros
Incitec Pivot IPL 30-Sep UPFM 3.46 3.37 5,838 353.7 360.5 346.5 20.9 21.1 20.1 16.6 16.4 17.2 110.1 111.0 115.4 10.5 10.6 10.1 3.0 3.1 2.9 8.9 8.0 7.8 87 Grant Saligari
Orica ORI 30-Sep NTRL 20.45 18.71 7,693 400.4 407.0 461.8 106.2 107.9 122.4 19.3 19.0 16.7 127.9 128.4 111.8 53.4 59.7 67.6 2.6 2.9 3.3 10.4 9.4 8.6 30 Grant Saligari
Sector Aggregate 18.3 18.2 17.4 2.9 3.1 3.2 10.2 9.2 8.7
Materials - Construction Materials
Adelaide Brighton ABC 31-Dec NTRL 5.66 5.70 3,681 202.2 207.4 207.0 31.1 31.9 31.9 18.2 17.7 17.8 120.8 120.1 118.9 23.0 23.0 23.0 4.1 4.1 4.1 10.8 10.2 10.0 100 Andrew Peros
Boral BLD 30-Jun OPFM 7.01 7.05 8,218 321.6 422.4 495.1 32.0 36.0 42.2 21.9 19.4 16.6 145.5 131.8 111.0 26.0 25.0 29.0 3.7 3.6 4.1 10.0 9.8 8.7 80 Andrew Peros
CSR CSR 31-Mar NTRL 4.27 4.90 2,154 183.8 204.7 153.9 36.3 41.2 31.0 11.8 10.4 13.8 78.1 70.2 92.3 26.0 26.0 22.0 6.1 6.1 5.2 5.6 5.2 6.1 50 Andrew Peros
James Hardie Industries plc JHX 31-Mar OPFM 20.08 20.85 6,723 248.6 278.9 332.2 56.0 62.8 74.8 27.2 24.3 20.4 180.9 164.4 136.3 38.0 42.0 53.0 2.5 2.8 3.5 16.2 15.0 12.9 0 Andrew Peros
Sector Aggregate 21.0 18.9 17.5 3.5 3.6 4.0 10.9 10.3 9.6
Materials - Containers & Packaging
Amcor AMC 30-Jun NTRL 16.35 15.70 14,380 702.8 780.9 856.2 60.1 66.8 73.2 20.7 18.6 17.0 137.3 126.0 113.5 43.0 49.0 55.0 3.5 3.9 4.4 12.6 11.5 10.7 0 Larry Gandler
Orora ORA 30-Jun NTRL 2.84 3.15 3,427 182.2 201.3 210.5 15.0 16.6 17.3 18.9 17.2 16.4 125.4 116.2 109.8 10.7 11.6 12.1 3.8 4.1 4.3 10.0 8.9 8.5 50 Larry Gandler
Materials - Metals & Mining
Alumina Limited AWC 31-Dec UPFM 1.87 1.70 4,079 266.3 261.7 236.9 9.2 9.1 8.2 15.3 15.6 17.2 101.8 105.6 115.2 7.5 8.4 8.9 5.3 5.9 6.3 15.2 15.5 17.2 100 Christian Prendiville
BHP Billiton BHP 30-Jun NTRL 22.99 26.50 87,359 8,664.4 8,586.4 6,545.7 161.6 160.1 124.0 10.8 10.9 14.1 71.8 73.9 94.2 91.0 80.6 62.4 5.2 4.6 3.6 4.5 4.5 5.6 100 Sam Webb
BlueScope Steel BSL 30-Jun OPFM 12.10 13.30 6,849 671.1 711.7 690.5 113.6 120.2 116.6 10.7 10.1 10.4 70.8 68.2 69.4 8.0 11.4 11.4 0.7 0.9 0.9 4.8 4.2 3.9 0 Michael Slifirski
Evolution Mining Limited EVN 30-Jun OPFM 2.43 2.30 4,089 272.5 381.0 427.4 16.4 22.6 25.4 14.8 10.7 9.6 98.6 72.8 64.1 3.9 4.3 4.2 1.6 1.8 1.7 6.1 4.3 3.7 0 Michael Slifirski
Fortescue Metals Group Ltd FMG 30-Jun OPFM 4.70 6.50 11,114 2,417.7 2,006.8 1,018.1 77.6 64.4 32.7 4.6 5.5 10.9 30.5 37.5 73.1 33.9 32.2 13.1 9.5 9.0 3.7 2.8 3.0 4.6 100 Sam Webb
Iluka Resources ILU 31-Dec NTRL 8.26 9.40 3,458 88.1 292.8 262.0 21.0 69.9 62.6 39.3 11.8 13.2 261.0 80.0 88.3 0.0 0.0 24.0 0.0 0.0 2.9 12.1 6.5 6.2 100 Christian Prendiville
Newcrest Mining NCM 30-Jun UPFM 21.28 18.20 12,397 479.1 761.8 840.3 62.1 98.7 108.9 26.0 16.4 14.8 172.9 110.9 99.3 15.0 40.0 50.0 0.9 2.5 3.1 9.5 7.1 6.3 0 Michael Slifirski
Northern Star Resources Ltd NST 30-Jun NTRL 4.84 4.15 2,907 196.9 306.4 349.5 32.6 50.8 57.9 14.8 9.5 8.4 98.5 64.6 55.9 8.6 15.2 16.7 1.8 3.1 3.4 6.0 3.9 3.2 0 Michael Slifirski
OZ Minerals OZL 31-Dec UPFM 7.06 7.15 2,109 128.2 8.3 14.4- 42.5 2.7 -4.8 16.6 n.m n.m 110.4 n.m n.m 12.0 12.0 12.0 1.7 1.7 1.7 3.5 7.0 8.3 100 Michael Slifirski
Rio Tinto RIO 31-Dec OPFM 60.08 72.00 73,505 9,691.0 6,730.4 4,783.9 548.1 398.0 294.6 8.3 11.5 15.5 55.3 77.7 103.6 285.4 232.9 173.5 6.3 5.1 3.8 4.0 5.6 7.1 100 Sam Webb
South 32 S32 30-Jun OPFM 2.61 2.95 10,437 1,203.1 961.2 844.3 22.4 18.3 16.9 8.9 10.8 11.7 58.8 73.3 78.4 9.0 7.3 6.7 4.5 3.7 3.4 3.6 3.9 4.1 100 Sam Webb
Sector Aggregate 9.5 10.6 13.6 5.4 4.8 3.7 4.3 4.7 5.7
Industrials - Capital Goods
CIMIC Group Limited CIM 31-Dec UPFM 38.97 28.00 12,636 670.3 656.6 657.6 212.0 216.2 219.9 18.4 18.0 17.7 122.1 122.1 118.6 127.2 129.6 133.0 3.3 3.3 3.4 9.3 9.2 8.6 0 Ian Randall
Sector Aggregate 18.4 18.0 17.7 3.3 3.3 3.4 9.3 9.2 8.6
Industrials - Commercial & Professional Services
ALS Ltd ALQ 31-Mar NTRL 6.92 6.70 3,489 112.7 146.7 172.4 22.3 29.0 34.1 31.1 23.9 20.3 206.4 161.7 135.9 13.5 17.3 20.4 2.0 2.5 2.9 15.7 13.0 11.3 50 Peter Wilson
Brambles BXB 30-Jun UPFM 10.51 8.90 12,685 453.2 627.9 662.8 37.0 39.8 42.0 21.6 20.0 19.0 143.4 135.7 127.1 29.0 29.0 29.0 2.7 2.7 2.7 10.1 9.5 8.9 0 Paul Butler
Downer EDI DOW 30-Jun NTRL 6.05 5.90 3,598 168.9 187.1 195.4 28.4 31.5 32.9 21.3 19.2 18.4 141.6 130.2 123.2 24.0 16.0 18.0 4.0 2.6 3.0 5.4 5.0 4.7 100 Peter Wilson
Seek SEK 30-Jun NTRL 16.69 14.70 5,840 194.2 219.5 256.6 55.4 62.1 71.9 30.1 26.9 23.2 200.3 182.2 155.3 44.0 47.0 50.0 2.6 2.8 3.0 16.6 14.5 12.7 100 Fraser McLeish
Sector Aggregate 23.6 21.3 19.6 2.8 2.7 2.9 10.2 9.4 8.7
Industrials - Transportation
Aurizon AZJ 30-Jun UPFM 5.41 4.75 11,100 566.3 537.0 619.8 22.9 26.2 30.2 23.6 20.7 17.9 156.8 140.0 119.9 24.6 26.2 27.3 4.5 4.8 5.0 10.1 9.5 8.7 15 Paul Butler
Macquarie Atlas MQA 31-Dec NTRL 5.96 5.90 3,415 57.0 61.9 96.0 10.2 10.6 16.2 58.2 56.5 36.7 386.4 382.5 245.9 20.0 23.5 32.5 3.4 3.9 5.4 25.8 21.7 18.7 0 Paul Butler
Qantas QAN 30-Jun OPFM 5.50 5.00 9,945 903.4 1,002.6 851.8 48.5 57.1 51.7 11.3 9.6 10.6 75.4 65.2 71.2 15.0 16.0 16.0 2.7 2.9 2.9 5.2 5.0 5.4 0 Paul Butler
Qube Holdings Limited QUB 30-Jun UPFM 2.66 2.28 4,131 92.1 120.9 139.9 6.6 8.3 9.6 40.6 32.0 27.7 269.5 216.8 185.2 5.4 5.4 5.4 2.0 2.0 2.0 20.8 18.2 16.4 0 Paul Butler
Sydney Airport SYD 31-Dec UPFM 7.36 6.50 16,559 335.0 364.7 395.5 14.9 16.2 17.6 49.4 45.4 41.9 328.4 307.6 280.2 34.0 36.0 38.5 4.6 4.9 5.2 21.3 20.2 19.3 0 Paul Butler
Transurban TCL 30-Jun OPFM 12.74 12.60 26,146 278.9 328.0 515.9 13.7 15.9 24.6 93.0 80.2 51.7 618.1 543.3 346.0 51.5 57.0 65.5 4.0 4.5 5.1 24.7 21.9 19.8 12 Paul Butler
Sector Aggregate 33.6 29.1 26.4 3.9 4.2 4.7 13.7 12.8 12.4
EPS
Source: Company data, Credit Suisse estimates, Thomson Reuters
Au
stra
lia a
nd
NZ
Firs
t Ed
ition
58
19 J
un
e 2
017
Top 100 Earnings & Dividends (continued) As at 16 June 2017 Ticker Year Rating Share 12M Mkt NPAT PE Relative PE Dividend Dividend Yield EBITDA Multiple F'kg Analyst
to Price Tgt Cap 2017 2018 2019 2017 2018 2019 2017 2018 2019 2017 2018 2019 2017 2018 2019 2017 2018 2019 2017 2018 2019 2018 Name
$ $ $m $m $m $m ¢ ¢ ¢ x x x % % % ¢ ¢ ¢ % % % x x x %
Consumer Discretionary - Consumer Durables & Apparel
Consumer Discretionary - Consumer Services
Aristocrat Leisure ALL 30-Sep NTRL 23.09 23.50 14,744 563.3 655.7 753.6 88.1 102.4 117.7 26.2 22.5 19.6 174.2 152.7 131.2 35.0 72.0 82.0 1.5 3.1 3.6 15.5 13.5 11.7 15 Larry Gandler
Crown CWN 30-Jun NTRL 12.83 12.50 9,234 387.0 400.7 446.9 53.2 56.8 64.8 24.1 22.6 19.8 160.2 153.1 132.6 143.0 143.0 142.0 11.1 11.1 11.1 10.8 11.7 12.0 70 Larry Gandler
Flight Centre FLT 30-Jun OPFM 37.50 34.90 3,789 216.0 252.5 271.0 213.3 249.3 267.6 17.6 15.0 14.0 116.8 101.9 93.8 133.5 153.3 164.7 3.6 4.1 4.4 8.9 7.6 7.0 100 Grant Saligari
Navitas Ltd NVT 30-Jun UPFM 4.40 4.00 1,577 83.3 84.5 97.9 23.1 23.5 27.2 19.0 18.8 16.2 126.3 127.1 108.4 19.2 18.7 21.8 4.4 4.3 5.0 11.1 11.0 9.7 100 Lucas Goode
Star Entertainment Group SGR 30-Jun OPFM 4.99 6.45 4,120 204.9 237.1 274.1 24.8 28.7 33.2 20.1 17.4 15.0 133.6 117.7 100.6 15.0 15.0 17.0 3.0 3.0 3.4 9.6 8.5 7.5 100 Larry Gandler
Tabcorp Holdings TAH 30-Jun OPFM 4.57 5.00 3,817 165.0 429.5 473.5 19.7 22.4 24.6 23.2 20.4 18.6 154.3 138.1 124.5 24.5 22.0 24.0 5.4 4.8 5.3 10.7 6.9 6.3 100 Larry Gandler
Tatts Group TTS 30-Jun NTRL 4.19 4.20 6,153 228.1 233.2 197.9 15.6 15.9 13.5 26.9 26.3 31.0 178.8 178.4 207.7 37.5 15.5 13.0 8.9 3.7 3.1 16.2 16.0 17.5 100 Larry Gandler
Sector Aggregate 23.6 21.1 19.2 5.4 5.2 5.3 12.3 11.0 10.2
Consumer Discretionary - Media
Fairfax Media FXJ 30-Jun RSTR 1.22 2,805 151.1 138.6 143.0 6.5 6.0 6.2 18.7 20.4 19.8 124.3 138.1 132.3 4.0 4.0 4.0 3.3 3.3 3.3 10.4 10.7 10.2 100 Fraser McLeish
REA Group REA 30-Jun NTRL 65.63 65.00 8,644 230.6 306.7 362.3 175.1 232.8 275.1 37.5 28.2 23.9 249.1 191.0 159.7 88.0 120.0 137.0 1.3 1.8 2.1 23.0 18.2 15.5 100 Fraser McLeish
Sector Aggregate 30.1 25.8 22.7 1.8 2.2 2.4 17.8 15.6 13.8
Consumer Discretionary - Retailing
Harvey Norman HVN 30-Jun NTRL 3.90 4.08 4,341 378.6 385.2 354.8 34.0 34.6 31.9 11.5 11.3 12.2 76.2 76.4 81.9 31.0 22.3 20.5 8.0 5.7 5.3 7.6 7.4 7.7 100 Grant Saligari
JB Hi-Fi JBH 30-Jun UPFM 23.30 18.68 2,666 209.2 225.4 206.0 184.5 191.4 174.9 12.6 12.2 13.3 83.9 82.5 89.1 117.2 120.3 110.0 5.0 5.2 4.7 8.7 7.7 8.1 100 Grant Saligari
Sector Aggregate 11.9 11.6 12.6 6.8 5.5 5.1 8.0 7.5 7.9
Consumer Staples - Food & Drug Retailing
Wesfarmers WES 30-Jun NTRL 40.70 42.95 46,147 3,007.2 2,811.3 2,930.9 266.1 248.1 258.7 15.3 16.4 15.7 101.6 111.1 105.3 204.2 184.3 185.0 5.0 4.5 4.5 9.0 9.5 9.1 100 Grant Saligari
Woolworths WOW 26-Jun UPFM 26.25 24.83 33,978 1,409.6 1,633.9 1,801.4 109.5 125.8 138.7 24.0 20.9 18.9 159.3 141.4 126.7 70.0 86.0 95.0 2.7 3.3 3.6 11.0 9.8 9.0 100 Grant Saligari
Sector Aggregate 18.1 18.0 16.9 4.0 4.0 4.2 9.7 9.6 9.1
Consumer Staples - Food Beverage & Tobacco
Coca-Cola Amatil CCL 31-Dec OPFM 9.03 10.30 6,895 416.9 422.9 438.1 56.1 58.0 60.1 16.1 15.6 15.0 107.0 105.4 100.5 46.0 48.0 49.0 5.1 5.3 5.4 8.6 8.4 8.1 50 Larry Gandler
Graincorp GNC 30-Sep NTRL 10.08 9.48 2,307 149.0 149.6 109.0 65.0 65.4 47.6 15.5 15.4 21.2 103.0 104.5 141.7 23.5 31.2 29.1 2.3 3.1 2.9 7.2 6.9 7.7 100 Grant Saligari
Treasury Wine TWE 30-Jun NTRL 13.53 12.35 9,987 298.2 340.4 399.9 40.0 45.6 53.6 33.8 29.7 25.3 224.7 200.9 169.0 26.0 30.0 35.0 1.9 2.2 2.6 17.7 15.8 13.7 20 Larry Gandler
Sector Aggregate 22.0 20.6 19.9 3.1 3.4 3.6 11.4 10.7 10.2
Health Care
Ansell Limited ANN 30-Jun NTRL 24.41 25.80 2,735 151.9 141.2 172.0 101.2 98.0 124.6 18.3 18.9 14.9 121.6 128.1 99.6 44.8 46.8 52.0 2.4 2.5 2.8 11.9 11.5 9.7 0 Saul Hadassin
Cochlear COH 30-Jun UPFM 154.34 133.90 8,863 224.5 266.9 313.8 387.1 457.1 533.7 39.9 33.8 28.9 264.9 228.7 193.5 273.0 323.0 377.0 1.8 2.1 2.4 26.0 21.4 18.4 100 Saul Hadassin
CSL Ltd CSL 30-Jun OPFM 139.00 134.00 47,905 1,359.3 1,639.2 1,871.7 298.0 359.8 409.7 35.4 29.3 25.8 235.3 198.7 172.4 134.0 168.0 191.0 1.3 1.6 1.8 24.1 20.6 18.2 0 Saul Hadassin
Healthscope HSO 30-Jun UPFM 2.22 2.10 3,854 182.4 181.2 189.9 10.5 10.4 10.9 21.2 21.3 20.4 140.8 144.6 136.3 7.0 6.9 7.3 3.1 3.1 3.3 12.9 12.7 12.0 100 Saul Hadassin
Primary Health Care PRY 30-Jun UPFM 3.73 3.40 1,945 91.3 101.2 117.7 17.5 19.4 22.6 21.3 19.2 16.5 141.5 130.2 110.6 10.8 12.0 14.0 2.9 3.2 3.8 8.8 8.4 7.9 100 Saul Hadassin
Ramsay Health Care RHC 30-Jun NTRL 71.69 73.00 14,487 535.6 581.1 646.2 257.8 280.3 312.4 27.8 25.6 22.9 184.7 173.3 153.6 132.0 144.0 160.0 1.8 2.0 2.2 13.1 12.3 11.4 100 Saul Hadassin
ResMed Inc. RMD 30-Jun OPFM 10.05 9.70 10,821 366.7 403.5 453.8 25.7 28.2 31.8 29.7 27.1 24.0 197.3 183.4 160.6 13.5 14.7 15.9 1.8 1.9 2.1 19.3 17.4 15.7 0 Saul Hadassin
Sonic Healthcare SHL 30-Jun NTRL 24.11 22.60 10,107 444.9 499.1 549.0 106.3 118.4 128.9 22.7 20.4 18.7 150.7 138.0 125.1 76.0 81.0 87.0 3.2 3.4 3.6 14.1 12.5 11.5 20 Saul Hadassin
Sector Aggregate 30.5 26.7 23.5 1.7 2.0 2.2 18.9 16.8 15.0
Financials - Banks
ANZ Banking Group ANZ 30-Sep NTRL 28.12 31.00 82,561 6,892.7 7,251.4 7,530.0 226.2 236.4 245.1 12.4 11.9 11.5 82.6 80.6 76.8 163.0 165.0 173.3 5.8 5.9 6.2 2.2 1.8 1.5 100 Jarrod Martin
Bendigo and Adelaide Bank BEN 30-Jun UPFM 10.78 11.90 5,146 453.2 470.7 484.1 84.4 86.2 87.8 12.8 12.5 12.3 84.9 84.7 82.1 68.0 70.0 70.0 6.3 6.5 6.5 6.2 5.9 5.7 100 James Ellis
Bank of Queensland BOQ 31-Aug NTRL 11.08 12.75 4,340 355.0 383.5 411.3 88.2 93.1 97.9 12.6 11.9 11.3 83.5 80.6 75.8 76.0 76.0 76.0 6.9 6.9 6.9 7.6 7.0 6.6 100 James Ellis
Commonwealth Bank Australia CBA 30-Jun NTRL 81.86 89.00 141,607 9,883.1 10,352.8 10,919.1 557.3 578.7 604.7 14.7 14.1 13.5 97.6 95.8 90.6 423.0 435.0 456.8 5.2 5.3 5.6 6.3 6.0 5.5 100 Jarrod Martin
Clydesdale Bank CYB 30-Sep NTRL 4.68 5.25 2,084 183.9 211.0 253.8 20.8 23.8 28.6 13.4 11.7 9.7 88.8 79.1 65.1 2.0 4.0 12.5 0.7 1.4 4.5 n.m n.m n.m 0 Jarrod Martin
National Australia Bank NAB 30-Sep OPFM 29.83 34.50 79,808 6,651.3 6,834.4 7,030.0 240.5 244.4 249.0 12.4 12.2 12.0 82.4 82.7 80.2 198.0 198.0 198.0 6.6 6.6 6.6 3.8 3.5 3.3 100 Jarrod Martin
Westpac WBC 30-Sep NTRL 30.53 34.00 102,477 8,086.1 8,312.5 8,696.6 233.7 237.9 247.8 13.1 12.8 12.3 86.8 86.9 82.4 188.0 188.0 188.0 6.2 6.2 6.2 6.9 6.6 6.3 100 Jarrod Martin
Sector Aggregate 13.3 12.9 12.4 5.8 5.9 6.1 4.3 3.8 3.4
EPS
Source: Company data, Credit Suisse estimates, Thomson Reuters
Au
stra
lia a
nd
NZ
Firs
t Ed
ition
59
19 J
un
e 2
017
Top 100 Earnings & Dividends (continued) As at 16 June 2017 Ticker Year Rating Share 12M Mkt NPAT PE Relative PE Dividend Dividend Yield EBITDA Multiple F'kg Analyst
to Price Tgt Cap 2017 2018 2019 2017 2018 2019 2017 2018 2019 2017 2018 2019 2017 2018 2019 2017 2018 2019 2017 2018 2019 2018 Name
$ $ $m $m $m $m ¢ ¢ ¢ x x x % % % ¢ ¢ ¢ % % % x x x %
Financials - Diversified Financials
AMP AMP 31-Dec NTRL 5.08 5.50 14,870 968.6 1,029.8 1,132.8 33.0 34.8 38.3 15.4 14.6 13.3 102.3 98.8 88.8 28.5 30.0 33.0 5.6 5.9 6.5 25.8 24.5 22.5 90 Andrew Adams
ASX ASX 30-Jun UPFM 52.14 49.00 10,094 430.9 435.4 450.6 222.6 224.9 232.8 23.4 23.2 22.4 155.6 157.1 149.9 200.3 202.4 209.5 3.8 3.9 4.0 12.0 11.5 11.0 100 Andrew Adams
Challenger Limited CGF 30-Jun OPFM 13.20 13.50 7,550 389.3 438.6 481.9 66.0 73.3 80.2 20.0 18.0 16.5 132.9 122.1 110.2 33.5 37.0 40.5 2.5 2.8 3.1 14.5 12.5 10.9 100 Andrew Adams
IOOF Holdings IFL 30-Jun NTRL 9.76 8.70 2,929 164.1 187.9 206.0 54.6 62.5 68.5 17.9 15.6 14.2 118.8 105.9 95.3 51.0 57.0 62.0 5.2 5.8 6.4 12.0 10.4 9.3 100 Andrew Adams
Magellan Financial Group MFG 30-Jun OPFM 28.27 27.50 4,865 224.4 262.7 297.5 130.5 152.5 172.5 21.7 18.5 16.4 144.0 125.6 109.6 94.8 110.2 123.6 3.4 3.9 4.4 16.2 13.8 12.2 100 James Cordukes
Macquarie Group MQG 31-Mar NTRL 90.35 100.00 30,751 2,217.0 2,267.3 2,332.1 644.5 653.2 668.2 14.0 13.8 13.5 93.1 93.7 90.5 470.0 475.0 490.0 5.2 5.3 5.4 7.8 7.6 7.2 45 James Ellis
Perpetual Limited PPT 30-Jun NTRL 55.49 51.00 2,584 135.6 146.9 157.3 290.5 314.0 336.4 19.1 17.7 16.5 126.9 119.7 110.4 265.0 285.0 305.0 4.8 5.1 5.5 11.4 10.5 9.7 100 James Cordukes
Sector Aggregate 16.4 15.7 14.8 4.7 4.9 5.2 11.1 10.5 9.8
Financials - Insurance
Insurance Australia Group IAG 30-Jun OPFM 6.46 6.90 15,294 827.7 907.9 1,059.3 33.1 36.4 42.4 19.5 17.7 15.2 129.7 120.1 102.1 27.0 29.0 33.5 4.2 4.5 5.2 13.3 11.5 10.0 100 Andrew Adams
Medibank Private Limited MPL 30-Jun UPFM 2.74 2.80 7,546 420.4 412.7 429.1 15.3 15.0 15.6 17.9 18.3 17.6 119.2 123.9 117.7 11.9 12.1 12.5 4.3 4.4 4.6 10.4 10.5 10.1 100 Andrew Adams
QBE Insurance Group QBE 31-Dec UPFM 13.23 12.60 13,785 839.1 941.5 975.4 60.9 69.6 73.2 16.5 14.4 13.7 109.5 97.8 91.8 52.6 60.7 63.9 4.0 4.6 4.8 15.8 14.1 13.7 30 Andrew Adams
Suncorp Group Limited SUN 30-Jun NTRL 14.57 14.50 18,835 1,093.5 1,188.6 1,271.7 83.7 90.6 96.8 17.4 16.1 15.1 115.7 108.9 100.8 68.0 71.0 77.0 4.7 4.9 5.3 16.2 15.7 15.0 100 Andrew Adams
Sector Aggregate 17.7 16.1 14.9 4.3 4.6 5.0 14.3 13.2 12.3
Financials - Real Estate
Dexus Property Group DXS 30-Jun UPFM 10.75 9.10 10,405 618.1 608.5 619.1 63.9 62.9 64.0 16.8 17.1 16.8 111.8 115.9 112.5 45.3 46.2 47.0 4.2 4.3 4.4 17.9 18.4 18.0 0 Mikhail Mohl
Goodman Group GMG 30-Jun NTRL 8.66 7.92 15,494 776.4 833.3 892.4 43.1 46.1 49.1 20.1 18.8 17.6 133.4 127.3 118.0 25.9 27.6 29.5 3.0 3.2 3.4 16.8 15.8 15.6 0 Ian Randall
GPT Group GPT 31-Dec OPFM 5.26 5.35 9,477 548.7 574.2 602.2 30.5 31.8 33.3 17.3 16.5 15.8 114.7 111.9 105.6 24.6 25.6 26.7 4.7 4.9 5.1 19.3 19.3 18.0 0 Mikhail Mohl
Investa Office Fund IOF 30-Jun NTRL 4.75 4.48 2,917 179.5 185.3 189.6 29.2 30.2 30.9 16.2 15.7 15.4 107.9 106.6 102.9 20.0 21.1 21.2 4.2 4.4 4.5 17.8 17.8 17.1 0 Ian Randall
Lend Lease LLC 30-Jun OPFM 16.67 17.50 9,726 777.5 878.3 927.5 133.5 150.7 159.1 12.5 11.1 10.5 83.0 74.9 70.1 66.7 79.9 87.5 4.0 4.8 5.3 8.9 8.1 7.2 0 Ian Randall
Mirvac Group MGR 30-Jun OPFM 2.33 2.44 8,634 533.7 561.0 576.1 14.4 15.2 15.6 16.2 15.4 15.0 107.3 104.1 100.1 10.4 11.1 11.4 4.5 4.8 4.9 16.0 15.6 15.4 0 Mikhail Mohl
Scentre Group SCG 31-Dec OPFM 4.37 5.30 23,267 1,294.6 1,370.0 1,450.1 24.4 25.8 27.3 17.9 16.9 16.0 119.1 114.8 107.1 21.7 22.5 23.3 5.0 5.1 5.3 18.3 17.8 17.2 0 Ian Randall
Stockland Group SGP 30-Jun NTRL 4.86 4.73 11,753 707.8 748.8 795.7 29.4 31.1 33.1 16.5 15.6 14.7 109.7 105.8 98.4 25.6 27.1 28.8 5.3 5.6 5.9 18.8 18.3 17.4 0 Ian Randall
Vicinity Centres VCX 30-Jun UPFM 2.92 2.65 11,559 747.1 775.2 798.9 18.9 19.6 20.2 15.5 14.9 14.5 102.8 101.0 96.8 17.6 18.2 18.7 6.0 6.2 6.4 17.1 17.0 16.7 0 Mikhail Mohl
Westfield Corporation WFD 31-Dec NTRL 8.73 9.25 13,777 704.6 738.6 836.2 33.9 35.5 40.2 19.6 18.7 16.5 129.9 126.4 110.3 25.5 25.9 27.8 3.8 3.9 4.2 25.8 22.7 20.9 0 Ian Randall
Sector Aggregate 17.1 16.2 15.3 4.5 4.7 4.9 17.2 16.4 15.6
Information Technology
carsales.com.au CAR 30-Jun OPFM 11.54 12.00 2,790 119.0 132.2 149.2 49.2 54.5 61.3 23.5 21.2 18.8 155.9 143.5 126.0 40.0 44.1 48.0 3.5 3.8 4.2 16.7 15.1 13.5 100 Fraser McLeish
Computershare CPU 30-Jun OPFM 14.54 14.30 6,032 301.5 346.0 394.8 55.2 63.3 72.3 20.0 17.4 15.3 133.0 118.1 102.2 34.0 39.0 42.0 2.3 2.7 2.8 13.4 11.5 10.2 25 Andrew Adams
Sector Aggregate 20.8 18.4 16.2 2.6 2.9 3.2 14.1 12.3 10.9
Telecommunication Services
Telstra Corporation TLS 30-Jun UPFM 4.38 4.00 52,093 3,971.3 4,103.5 3,997.6 32.9 34.8 34.5 13.3 12.6 12.7 88.4 85.2 84.8 31.0 25.0 25.0 7.1 5.7 5.7 6.2 6.1 6.1 100 Fraser McLeish
TPG Telecom TPM 31-Jul UPFM 5.59 5.25 5,169 402.0 335.9 215.1 45.7 36.3 23.3 12.2 15.4 24.0 81.2 104.2 160.8 15.5 13.4 9.1 2.8 2.4 1.6 7.3 8.4 9.3 100 Fraser McLeish
Vocus Communications VOC 30-Jun RSTR 3.62 2,256 160.3 142.2 148.2 26.2 23.0 24.0 13.8 15.7 15.1 91.9 106.6 101.1 10.0 10.0 10.8 2.8 2.8 3.0 8.9 8.9 8.2 100 Fraser McLeish
Sector Aggregate 13.2 12.9 13.3 6.5 5.3 5.3 6.4 6.3 6.4
Utilities
AGL Energy AGL 30-Jun NTRL 25.55 28.00 16,811 772.0 1,016.9 1,283.2 116.3 156.8 199.3 22.0 16.3 12.8 146.0 110.4 85.8 87.0 118.0 150.0 3.4 4.6 5.9 10.8 8.9 7.4 85 Peter Wilson
APA Group APA 30-Jun UPFM 9.61 8.10 10,708 206.9 221.4 269.3 18.6 19.9 24.2 51.7 48.4 39.8 343.8 327.7 266.1 43.5 45.7 46.8 4.5 4.8 4.9 14.1 13.7 13.1 15 Peter Wilson
AusNet Services AST 31-Mar NTRL 1.76 1.70 6,324 255.1 234.2 222.9 7.1 6.5 6.1 24.6 27.1 28.7 163.2 183.5 191.8 9.8 9.3 9.6 5.6 5.3 5.5 11.8 12.3 12.5 0 Peter Wilson
Spark Infrastructure Group SKI 31-Dec NTRL 2.84 2.40 4,777 81.6 97.5 85.3 4.8 5.8 5.1 58.6 49.0 56.0 389.2 331.8 374.7 15.3 16.0 16.6 5.4 5.6 5.9 20.9 19.2 21.0 0 Peter Wilson
Sector Aggregate 29.5 24.4 20.5 4.3 4.9 5.5 12.5 11.3 10.1
Report Average 15.1 14.8 14.9 4.6 4.6 4.6 6.7 6.3 6.1
EPS
Source: Company data, Credit Suisse estimates, Thomson Reuters
19 J
un
e 2
017
Au
stra
lia a
nd
NZ
Firs
t Ed
ition
60
Emerging Companies Earnings and Dividends
Research Analyst
Jason Swinbourne
612 8205 4591
jason.swinbourne@credit-suisse.com
As at 16 June 2017 Ticker Year Rating Share 12M Mkt NPAT PE Relative PE Dividend Dividend Yield EBITDA Multiple F'kg Analyst
to Price Tgt Cap 2017 2018 2019 2017 2018 2019 2017 2018 2019 2017 2018 2019 2017 2018 2019 2017 2018 2019 2017 2018 2019 2018 Name
$ $ $m $m $m $m ¢ ¢ ¢ x x x % % % ¢ ¢ ¢ % % % x x x %
Energy
AWE Limited AWE 30-Jun NTRL 0.44 0.50 232 15.7- 17.5 19.6 -2.9 3.2 3.6 n.m 13.6 12.2 n.m 92.3 89.2 0.0 0.0 0.0 0.0 0.0 0.0 14.8 4.9 4.1 0 Sam Webb
Beach Energy BPT 30-Jun OPFM 0.62 0.70 1,162 140.9 208.2 204.6 7.6 11.2 11.0 8.2 5.6 5.7 48.2 37.6 41.5 2.0 2.0 2.0 3.2 3.2 3.2 2.8 1.9 1.7 100 Mark Samter
FAR Limited FAR 31-Dec OPFM 0.08 0.14 421 24.1- 20.7- 6.4- -0.5 -0.4 -0.1 n.m n.m n.m n.m n.m n.m 0.0 0.0 0.0 0.0 0.0 0.0 n.m n.m n.m 0 Sam Webb
New Hope Corporation NHC 31-Jul NTRL 1.53 1.60 1,267 150.8 183.0 73.3 18.1 22.0 8.8 8.4 6.9 17.3 49.5 46.9 127.0 5.5 2.0 2.0 3.6 1.3 1.3 3.3 2.4 7.9 100 Sam Webb
Senex Energy Limited SXY 30-Jun OPFM 0.29 0.30 418 11.6- 12.4 18.7 -0.9 0.9 1.4 n.m 31.0 20.6 n.m 209.6 151.3 0.0 0.0 0.0 0.0 0.0 0.0 37.3 9.2 6.8 100 Mark Samter
Whitehaven Coal WHC 30-Jun OPFM 2.81 3.60 2,883 412.4 410.6 323.2 40.2 40.0 34.3 7.0 7.0 8.2 41.1 47.5 60.2 0.0 20.0 17.1 0.0 7.1 6.1 4.1 3.4 4.2 100 Sam Webb
WorleyParsons WOR 30-Jun NTRL 11.40 8.50 2,816 130.0 161.1 215.1 52.4 65.0 86.8 21.7 17.5 13.1 127.9 118.7 96.4 0.0 0.0 0.0 0.0 0.0 0.0 10.9 9.0 6.5 21 Mark Samter
Sector Aggregate 11.8 9.5 10.5 0.9 2.8 2.5 5.2 3.9 4.5
Materials - Chemicals
Nufarm NUF 31-Jul NTRL 10.02 10.10 2,675 127.7 164.2 185.2 47.8 61.2 68.8 21.0 16.4 14.6 123.3 110.7 106.9 14.0 18.0 21.0 1.4 1.8 2.1 8.1 7.2 6.6 0 Grant Saligari
Materials - Construction Materials
Materials - Containers & Packaging
Pact Group Holdings PGH 30-Jun NTRL 6.10 6.45 1,825 105.2 116.4 122.8 35.4 38.9 41.0 17.3 15.7 14.9 101.5 106.1 109.1 23.0 25.0 29.0 3.8 4.1 4.8 10.4 9.3 8.8 78 Larry Gandler
Materials - Metals & Mining
Altona Mining Limited AOH 30-Jun OPFM 0.14 0.26 75 4.3- 4.4- 1.7- -0.8 -0.8 -0.3 n.m n.m n.m n.m n.m n.m 0.0 0.0 0.0 0.0 0.0 0.0 n.m n.m 7.4 0 Michael Slifirski
Alacer Gold Corp. AQG 31-Dec OPFM 2.22 5.30 494 146.8 80.9 159.0 49.8 27.5 53.9 3.4 6.1 3.1 19.9 41.5 22.9 0.0 9.1 19.0 0.0 5.4 11.3 5.7 4.9 1.6 0 Michael Slifirski
Independence Group NL IGO 30-Jun OPFM 3.21 4.30 1,883 58.1 258.7 322.8 10.6 44.1 55.0 30.3 7.3 5.8 178.3 49.3 42.8 2.0 15.0 22.0 0.6 4.7 6.9 10.3 3.1 2.2 100 Michael Slifirski
Kula Gold KGD 31-Dec OPFM 0.03 0.06 11 5.1- 8.3- 25.7 -1.6 -2.5 7.9 n.m n.m 0.4 n.m n.m 2.8 0.0 0.0 0.0 0.0 0.0 0.0 n.m n.m 2.5 0 Michael Slifirski
OceanaGold Corporation OGC 31-Dec OPFM 4.20 4.20 1,962 251.9 185.0 99.3 41.2 30.3 16.3 7.7 10.5 19.6 45.5 71.3 144.0 2.0 2.0 2.0 0.6 0.6 0.6 4.0 3.7 3.5 0 Michael Slifirski
Perseus Mining PRU 30-Jun OPFM 0.32 0.85 331 20.2- 21.3 79.3 -1.9 2.0 7.3 n.m 16.3 4.4 n.m 110.6 32.3 0.0 0.0 0.0 0.0 0.0 0.0 27.0 2.9 0.5 0 Michael Slifirski
Regis Resources Limited RRL 30-Jun UPFM 3.55 3.05 1,779 122.7 182.6 207.6 24.4 36.2 41.2 14.6 9.8 8.6 85.7 66.4 63.3 15.0 21.7 24.7 4.2 6.1 7.0 6.9 4.6 3.8 100 Michael Slifirski
St Barbara Mining SBM 30-Jun OPFM 2.83 2.60 1,407 152.3 200.8 215.9 29.3 38.5 41.4 9.7 7.3 6.8 56.8 49.7 50.2 0.0 19.3 20.7 0.0 6.8 7.3 4.1 3.0 2.4 0 Michael Slifirski
Sandfire Resources NL SFR 30-Jun UPFM 5.72 4.65 903 82.6 67.9 29.3 52.4 43.1 18.6 10.9 13.3 30.7 64.2 89.8 225.7 17.9 12.9 2.5 3.1 2.3 0.4 3.4 3.8 4.5 100 Michael Slifirski
Sims Metal Management SGM 30-Jun UPFM 13.47 11.00 2,666 132.9 151.8 178.3 67.2 76.8 90.2 20.0 17.5 14.9 117.8 118.7 109.6 38.3 38.4 45.1 2.8 2.9 3.3 8.2 7.1 6.2 40 Michael Slifirski
Syrah Resources SYR 31-Dec OPFM 2.59 7.45 519 10.8- 48.6 154.0 -4.1 18.4 58.4 n.m 10.7 3.4 n.m 72.2 24.7 0.0 0.0 0.0 0.0 0.0 0.0 n.m 6.3 1.8 0 Michael Slifirski
Western Areas WSA 30-Jun NTRL 1.93 2.90 524 2.7 54.4 63.1 1.0 19.9 23.0 n.m 9.7 8.4 n.m 65.6 61.4 0.0 8.0 9.3 0.0 4.2 4.8 6.2 2.6 2.1 100 Michael Slifirski
Sector Aggregate 13.0 10.1 8.1 1.5 3.4 4.2 6.1 4.0 2.7
Materials - Paper & Forest Products
Sector Aggregate n.m n.m n.m
Industrials - Capital Goods
GWA GROUP Limited GWA 30-Jun NTRL 3.14 2.90 829 53.1 50.3 47.9 20.1 19.1 18.2 15.6 16.5 17.3 91.8 111.4 127.0 17.0 16.0 15.0 5.4 5.1 4.8 10.7 10.9 11.1 100 Andrew Peros
Sector Aggregate 15.6 16.5 17.3 5.4 5.1 4.8 10.7 10.9 11.1
EPS
Source: Company data, Credit Suisse estimates, Thomson Reuters
Au
stra
lia a
nd
NZ
Firs
t Ed
ition
61
19 J
un
e 2
017
Emerging Companies Earnings and Dividends (continued) As at 16 June 2017 Ticker Year Rating Share 12M Mkt NPAT PE Relative PE Dividend Dividend Yield EBITDA Multiple F'kg Analyst
to Price Tgt Cap 2017 2018 2019 2017 2018 2019 2017 2018 2019 2017 2018 2019 2017 2018 2019 2017 2018 2019 2017 2018 2019 2018 Name
$ $ $m $m $m $m ¢ ¢ ¢ x x x % % % ¢ ¢ ¢ % % % x x x %
Industrials - Commercial & Professional Services
Cleanaway Waste Management CWY 30-Jun NTRL 1.43 1.23 2,270 70.5 85.5 98.4 4.4 5.4 6.2 32.1 26.5 23.1 188.9 179.6 169.4 2.0 2.5 3.0 1.4 1.8 2.1 8.6 8.2 7.8 100 Matthew Nicholas
McMillan Shakespeare MMS 30-Jun OPFM 13.97 12.50 1,162 86.2 92.8 99.9 103.4 111.6 120.1 13.5 12.5 11.6 79.5 84.7 85.4 64.5 68.0 72.8 4.6 4.9 5.2 10.8 10.9 10.9 100 Paul Buys
Programmed Maintenance Services PRG 31-Mar NTRL 1.87 1.90 481 41.3 44.4 49.3 16.2 17.3 19.2 11.5 10.8 9.8 67.8 73.3 71.6 7.0 8.7 10.2 3.7 4.7 5.4 7.1 6.3 5.7 100 Matthew Nicholas
Royal Wolf Holdings RWH 30-Jun NTRL 1.35 1.30 136 8.6 8.4 10.8 8.5 8.4 10.7 15.8 16.1 12.6 93.2 108.7 92.2 5.5 5.9 7.4 4.1 4.3 5.5 6.3 6.1 5.5 100 Paul Buys
SmartGroup Corporation Ltd SIQ 31-Dec OPFM 6.90 7.45 849 57.5 65.3 70.6 46.5 52.6 56.8 14.8 13.1 12.1 87.3 88.8 89.2 28.6 32.1 34.7 4.1 4.7 5.0 10.1 8.8 8.0 100 Paul Buys
Sector Aggregate 18.5 16.6 14.9 2.9 3.4 3.8 9.0 8.5 8.0
Industrials - Transportation
Alliance Aviation Services Limited AQZ 30-Jun OPFM 0.92 1.15 112 14.3 18.4 19.8 11.7 15.2 16.3 7.8 6.1 5.7 46.1 41.0 41.5 2.0 4.0 8.2 2.2 4.3 8.9 3.7 3.1 2.7 100 Paul Buys
Virgin Australia VAH 30-Jun NTRL 0.18 0.21 1,480 31.8 50.5 24.3 0.4 0.6 0.3 46.6 29.3 61.0 274.1 198.3 447.5 0.0 0.0 0.0 0.0 0.0 0.0 11.5 10.6 11.2 0 Paul Butler
Sector Aggregate 34.6 23.1 36.1 0.2 0.3 0.6 10.0 9.0 9.2
Consumer Discretionary - Automobiles & Components
ARB Corp ARB 30-Jun NTRL 16.05 15.45 1,271 50.0 56.6 62.9 63.1 71.5 79.5 25.4 22.4 20.2 149.6 151.8 148.3 35.7 40.4 44.9 2.2 2.5 2.8 15.6 13.8 12.4 100 Paul Buys
Consumer Discretionary - Consumer Durables & Apparel
Breville Group BRG 30-Jun OPFM 11.01 9.30 1,432 54.1 56.4 59.4 41.6 43.4 45.7 26.5 25.4 24.1 155.7 171.7 176.9 30.0 32.0 34.0 2.7 2.9 3.1 15.4 14.4 13.5 65 Matthew Nicholas
G.U.D. Holdings GUD 30-Jun NTRL 13.48 10.45 1,156 53.4 60.0 63.0 61.6 69.1 72.6 21.9 19.5 18.6 128.7 132.1 136.3 45.5 51.1 53.7 3.4 3.8 4.0 14.3 12.9 12.2 100 Paul Buys
Sector Aggregate 24.2 22.4 21.3 3.0 3.3 3.5 14.9 13.7 12.9
Consumer Discretionary - Consumer Services
Ardent Leisure Group AAD 30-Jun OPFM 2.13 2.25 999 19.0 39.9 61.6 4.1 8.5 13.1 52.5 25.0 16.2 309.0 169.4 119.2 3.0 6.0 9.5 1.4 2.8 4.5 13.5 10.3 8.4 100 Matthew Nicholas
IDP Education Limited IEL 30-Jun UPFM 5.00 4.00 1,251 44.4 51.6 58.7 17.4 20.2 23.0 28.7 24.7 21.7 168.8 167.1 159.5 13.0 15.0 17.5 2.6 3.0 3.5 18.2 15.1 13.1 50 Lucas Goode
iSelect Limited ISU 30-Jun OPFM 2.01 2.40 457 18.7 22.7 26.3 8.0 10.1 11.7 25.1 20.0 17.1 147.6 135.1 125.6 4.5 6.0 7.2 2.2 3.0 3.6 12.2 10.3 9.1 100 Paul Buys
Mantra Group Limited MTR 30-Jun NTRL 2.98 3.15 886 51.3 56.8 61.2 17.3 19.1 20.6 17.2 15.6 14.5 101.4 105.5 106.3 10.0 13.0 13.5 3.4 4.4 4.5 9.3 8.4 7.8 100 Matthew Nicholas
Sector Aggregate 27.2 21.1 17.4 2.4 3.3 4.0 13.0 10.9 9.5
Consumer Discretionary - Media
APN Outdoor Group Limited APO 30-Dec NTRL 4.50 5.85 750 53.5 60.5 65.0 32.1 36.3 39.0 14.0 12.4 11.5 82.4 83.8 84.6 20.0 22.0 24.0 4.5 4.9 5.3 8.9 7.9 7.3 0 Matthew Nicholas
Here There & Everywhere HT1 31-Dec OPFM 2.43 3.20 749 60.0 64.0 69.7 19.5 20.8 22.7 12.5 11.7 10.7 73.2 79.0 78.7 9.8 10.4 13.6 4.0 4.3 5.6 7.1 6.5 6.0 100 Lucas Goode
iCar Asia Ltd ICQ 31-Dec NTRL 0.27 0.60 87 11.7- 9.2- 6.7- -4.4 -3.2 -2.3 n.m n.m n.m n.m n.m n.m 0.0 0.0 0.0 0.0 0.0 0.0 n.m n.m n.m 100 Lucas Goode
Nine Entertainment NEC 30-Jun OPFM 1.35 1.50 1,176 93.0 95.5 92.1 10.6 10.9 10.5 12.7 12.4 12.8 74.7 83.7 94.2 8.5 9.3 8.9 6.3 6.9 6.6 7.8 6.8 7.2 100 Fraser McLeish
oOh!media Limited OML 31-Dec OPFM 4.48 4.95 735 44.9 52.4 56.0 27.3 31.9 34.1 16.4 14.0 13.1 96.4 94.9 96.3 16.5 19.0 20.5 3.7 4.2 4.6 9.4 8.0 7.4 0 Matthew Nicholas
Seven West Media SWM 30-Jun NTRL 0.67 0.81 1,003 150.6 159.2 177.8 10.0 10.6 11.8 6.7 6.3 5.6 39.2 42.6 41.4 4.0 5.0 7.0 6.0 7.5 10.5 5.7 5.2 4.6 100 Fraser McLeish
Southern Cross Media Group SXL 30-Jun OPFM 1.17 1.35 900 84.3 83.2 92.4 10.9 10.8 12.0 10.7 10.8 9.8 62.9 73.3 71.6 7.0 7.8 8.3 6.0 6.6 7.1 7.5 7.5 6.8 100 Lucas Goode
Ten Network Holdings TEN 31-Aug NTRL 0.16 0.35 58 50.3- 42.7- 57.0- -12.9 -10.9 -14.6 n.m n.m n.m n.m n.m n.m 0.0 0.0 0.0 0.0 0.0 0.0 n.m n.m n.m 0 Fraser McLeish
WPP AUNZ WPP 31-Dec OPFM 1.20 1.25 1,018 86.4 94.2 101.7 10.1 11.1 11.9 11.8 10.8 10.0 69.3 73.1 73.5 7.0 8.0 9.0 5.9 6.7 7.5 7.8 7.2 6.8 100 Matthew Nicholas
Sector Aggregate 12.7 11.6 10.9 5.2 5.9 6.8 7.9 7.1 6.6
Consumer Discretionary - Retailing
Automotive Holdings Group Ltd AHG 30-Jun OPFM 3.22 3.60 1,068 89.7 96.2 102.7 27.7 29.7 31.8 11.6 10.8 10.1 68.3 73.3 74.4 20.1 20.1 21.5 6.2 6.3 6.7 9.3 8.8 8.4 100 Paul Buys
AP Eagers Limited APE 31-Dec NTRL 7.82 8.00 1,492 90.5 94.7 98.9 46.4 48.5 50.7 16.9 16.1 15.4 99.2 109.1 113.3 31.8 32.9 34.4 4.1 4.2 4.4 13.4 12.9 12.3 100 Paul Buys
Godfreys Group Limited GFY 30-Jun NTRL 0.64 0.95 26 5.8 8.8 9.8 14.1 21.7 24.1 4.5 2.9 2.6 26.5 19.8 19.4 5.0 10.8 12.0 7.9 17.0 19.0 2.8 2.0 1.6 0 Matthew Nicholas
Myer Holdings MYR 30-Jul NTRL 0.92 0.82 751 65.0 68.1 66.4 7.9 8.3 8.1 11.6 11.0 11.3 68.3 74.6 83.0 7.0 4.6 4.4 7.7 5.0 4.9 4.5 4.5 4.6 100 Grant Saligari
Premier Investments PMV 29-Jul OPFM 13.09 15.38 2,064 113.2 127.2 143.9 71.4 80.2 90.8 18.3 16.3 14.4 107.9 110.4 105.8 55.3 61.8 69.6 4.2 4.7 5.3 11.9 10.3 9.0 100 Grant Saligari
Super Retail Group SUL 2-Jul NTRL 8.28 7.56 1,633 128.7 135.5 134.3 64.7 68.1 67.5 12.8 12.2 12.3 75.3 82.2 90.1 42.0 47.3 46.9 5.1 5.7 5.7 7.0 6.7 6.5 100 Grant Saligari
Webjet WEB 30-Jun OPFM 12.63 12.00 1,243 40.4 49.1 58.8 40.1 48.8 58.5 31.5 25.9 21.6 185.1 175.2 158.5 18.0 24.0 29.0 1.4 1.9 2.3 18.2 15.3 12.4 100 Matthew Nicholas
Sector Aggregate 15.6 14.3 13.5 4.5 4.7 4.9 9.5 8.8 8.2
EPS
Source: Company data, Credit Suisse estimates, Thomson Reuters
Au
stra
lia a
nd
NZ
Firs
t Ed
ition
62
19 J
un
e 2
017
Emerging Companies Earnings and Dividends (continued) As at 16 June 2017 Ticker Year Rating Share 12M Mkt NPAT PE Relative PE Dividend Dividend Yield EBITDA Multiple F'kg Analyst
to Price Tgt Cap 2017 2018 2019 2017 2018 2019 2017 2018 2019 2017 2018 2019 2017 2018 2019 2017 2018 2019 2017 2018 2019 2018 Name
$ $ $m $m $m $m ¢ ¢ ¢ x x x % % % ¢ ¢ ¢ % % % x x x %
Consumer Staples - Food & Drug Retailing
Metcash MTS 30-Apr OPFM 2.15 2.54 2,098 190.7 216.5 239.2 19.9 22.2 24.5 10.8 9.7 8.8 63.5 65.5 64.4 0.0 13.3 14.7 0.0 6.2 6.8 6.3 5.5 5.1 100 Grant Saligari
Sector Aggregate 10.8 9.7 8.8 0.0 6.2 6.8 6.3 5.5 5.1
Consumer Staples - Food Beverage & Tobacco
Huon Aquaculture Group Limited HUO 30-Jun OPFM 5.00 5.80 437 22.2 32.4 38.7 25.5 37.1 44.4 19.6 13.5 11.3 115.5 91.3 82.7 1.5 4.5 8.5 0.3 0.9 1.7 8.0 6.4 5.4 47 Paul Buys
Inghams Group Limited ING 25-Jun OPFM 3.32 3.90 1,262 104.2 114.9 124.4 27.4 30.2 32.7 12.1 11.0 10.1 71.2 74.3 74.5 11.5 19.6 21.2 3.5 5.9 6.4 8.3 7.4 6.9 100 Paul Buys
Ridley Corporation Limited RIC 30-Jun NTRL 1.38 1.35 423 23.5 28.9 31.9 7.7 9.4 10.4 18.0 14.6 13.3 105.7 99.0 97.4 4.0 4.9 5.2 2.9 3.5 3.8 8.6 7.3 6.8 100 Paul Buys
Tassal Group Limited TGR 30-Jun OPFM 4.00 4.85 680 40.8 55.1 60.9 26.1 32.7 36.2 15.3 12.2 11.1 90.3 82.8 81.2 15.1 18.0 20.6 3.8 4.5 5.2 9.3 7.6 7.0 88 Paul Buys
Sector Aggregate 14.4 12.1 10.9 3.0 4.4 5.0 8.5 7.3 6.6
Consumer Staples - Household & Personal Products
Asaleo Care Limited AHY 31-Dec NTRL 1.47 1.75 796 65.2 67.1 66.7 12.0 12.4 12.3 12.2 11.9 11.9 71.9 80.2 87.5 10.0 10.0 10.0 6.8 6.8 6.8 7.9 7.7 7.6 30 Larry Gandler
Blackmores Ltd BKL 30-Jun NTRL 91.92 100.00 1,583 57.5 70.6 80.6 330.8 405.9 463.5 27.8 22.6 19.8 163.5 153.2 145.6 260.0 320.0 370.0 2.8 3.5 4.0 17.4 14.6 13.0 100 Larry Gandler
Sector Aggregate 19.5 17.4 16.2 4.2 4.6 5.0 12.4 11.2 10.5
Health Care
Australian Pharmaceutical Ind API 31-Aug UPFM 1.86 1.90 911 55.2 58.1 59.1 11.2 11.8 12.0 16.7 15.8 15.6 98.0 107.1 114.2 7.0 8.2 9.0 3.8 4.4 4.8 7.8 7.5 7.2 100 Saul Hadassin
Capitol Health Limited CAJ 30-Jun OPFM 0.26 0.30 207 5.6 9.0 13.1 0.9 1.1 1.6 26.8 23.0 15.8 157.9 155.6 116.1 0.0 0.0 0.0 0.0 0.0 0.0 11.4 7.8 6.7 100 Matthew Nicholas
Integral Diagnostics Limited IDX 30-Jun OPFM 1.69 1.70 243 15.5 17.6 20.4 10.7 12.2 14.1 15.8 13.9 12.0 93.0 93.8 87.9 6.5 8.4 9.9 3.8 5.0 5.9 8.5 7.3 6.5 100 Matthew Nicholas
Mayne Pharma MYX 30-Jun NTRL 1.10 1.55 1,656 114.2 123.4 142.3 7.6 8.2 9.5 14.4 13.3 11.6 84.6 90.1 84.8 0.0 0.0 0.0 0.0 0.0 0.0 8.1 6.7 5.6 0 Saul Hadassin
Sigma Pharmaceuticals SIG 31-Jan OPFM 0.88 0.90 946 66.9 63.7 62.2 6.2 5.9 5.8 14.1 14.8 15.2 82.9 100.2 111.2 5.5 5.3 5.3 6.3 6.0 6.0 8.8 9.8 9.7 100 Saul Hadassin
Sector Aggregate 15.2 14.5 13.3 2.6 2.7 2.9 8.3 7.6 6.8
Financials - Diversified Financials
BT Investment Management Limited BTT 30-Sep NTRL 11.85 11.40 3,729 172.6 224.3 263.3 55.1 71.1 83.5 21.5 16.7 14.2 126.4 112.8 104.2 47.0 59.0 69.0 4.0 5.0 5.8 16.7 12.7 10.6 33 James Cordukes
Eclipx Group ECX 30-Sep OPFM 3.64 4.25 966 66.9 72.9 78.5 25.1 27.4 29.5 14.5 13.3 12.3 85.2 89.9 90.6 15.5 16.0 17.0 4.3 4.4 4.7 24.1 23.4 23.0 100 Paul Buys
FlexiGroup Limited FXL 30-Jun NTRL 1.70 1.85 633 91.7 92.8 95.1 24.6 24.9 25.5 6.9 6.8 6.7 40.6 46.1 48.9 8.0 8.1 8.3 4.7 4.8 4.9 10.8 10.9 10.7 100 Paul Buys
IRESS IRE 31-Dec OPFM 12.35 12.70 2,111 81.2 90.4 99.4 50.4 56.1 61.7 24.5 22.0 20.0 144.2 149.0 147.0 49.0 54.6 60.0 4.0 4.4 4.9 17.4 15.7 14.4 40 Paul Buys
Platinum Asset Management PTM 30-Jun UPFM 4.64 4.50 2,722 188.0 170.8 176.5 32.0 29.1 30.1 14.5 15.9 15.4 85.2 107.9 113.2 30.0 29.0 30.0 6.5 6.3 6.5 9.9 11.1 10.7 100 James Cordukes
Sector Aggregate 16.8 15.5 14.2 4.7 5.1 5.6 14.1 13.1 11.9
Financials - Insurance
AUB Group Limited AUB 30-Jun OPFM 13.01 14.70 831 36.4 41.3 42.7 56.8 63.6 64.6 22.9 20.5 20.1 134.8 138.4 147.8 40.5 45.0 46.0 3.1 3.5 3.5 12.8 11.2 10.6 100 Andrew Adams
NIB Holdings Limited NHF 30-Jun UPFM 5.23 5.50 2,296 121.7 123.7 126.9 27.7 28.2 28.9 18.9 18.6 18.1 111.0 125.6 132.8 17.6 17.8 18.2 3.4 3.4 3.5 13.3 12.8 12.0 100 Andrew Adams
Steadfast SDF 30-Jun OPFM 2.81 3.10 2,107 89.6 98.7 114.9 11.9 13.1 15.3 23.6 21.4 18.4 138.6 144.8 135.0 6.6 7.5 9.0 2.3 2.7 3.2 19.2 17.3 14.5 100 Andrew Adams
Tower Limited TWR 30-Sep NTRL 1.09 1.15 193 2.3 22.4 22.7 1.4 13.7 13.8 82.1 8.4 8.3 482.9 56.8 60.8 0.0 10.2 10.4 0.0 8.9 9.0 6.1 4.8 4.5 0 Andrew Adams
Sector Aggregate 21.7 19.1 17.8 2.8 3.3 3.6 14.4 13.1 11.9
Financials - Real Estate
Australian Unity Office Fund AOF 30-Jun NTRL 2.16 2.10 303 23.4 24.0 24.0 16.7 17.1 17.1 13.0 12.6 12.6 76.3 85.4 92.9 14.8 15.4 15.4 6.9 7.1 7.1 15.5 15.3 15.3 0 Mikhail Mohl
BWP Trust BWP 30-Jun UPFM 3.20 2.92 2,056 111.9 115.7 120.2 17.4 17.8 18.4 18.4 18.0 17.4 108.5 121.6 127.4 17.3 17.8 18.4 5.4 5.6 5.8 18.6 18.0 17.5 0 Mikhail Mohl
Charter Hall Group CHC 30-Jun UPFM 5.92 4.71 2,757 151.0 166.1 166.3 35.8 35.9 35.9 16.5 16.5 16.5 97.1 111.6 120.9 30.0 30.9 30.9 5.1 5.2 5.2 15.3 14.5 14.5 0 Ian Randall
Cromwell Property Group CMW 30-Jun UPFM 1.03 0.97 1,806 150.2 146.3 158.4 8.5 8.3 8.9 12.0 12.4 11.5 70.7 83.9 84.5 8.3 8.5 8.7 8.1 8.3 8.4 15.6 16.2 14.6 0 Mikhail Mohl
Charter Hall Retail REIT CQR 30-Jun UPFM 4.42 4.00 1,795 124.8 130.2 136.5 30.7 31.7 32.9 14.4 13.9 13.4 84.7 94.3 98.6 28.3 29.4 30.6 6.4 6.7 6.9 16.3 15.1 14.5 0 Mikhail Mohl
GDI Property Group GDI 30-Jun OPFM 1.09 1.06 583 48.0 49.7 51.8 8.9 9.2 9.6 12.2 11.8 11.3 71.6 79.6 82.9 7.7 7.4 7.7 7.1 6.8 7.1 13.1 13.3 12.9 0 Ian Randall
Propertylink Group PLG 30-Jun OPFM 0.87 0.92 524 43.4 47.1 49.0 7.2 7.8 8.1 12.1 11.1 10.7 71.0 75.3 78.6 6.9 7.4 7.7 7.9 8.5 8.8 14.9 13.8 13.4 0 Mikhail Mohl
SCA Property Group SCP 30-Jun UPFM 2.40 2.04 1,783 106.4 112.0 116.4 14.5 15.2 15.7 16.6 15.8 15.3 97.4 106.9 112.2 13.0 13.5 14.0 5.4 5.6 5.8 19.1 18.0 17.4 0 Mikhail Mohl
Sector Aggregate 15.0 14.7 14.2 6.1 6.3 6.5 16.4 15.8 15.2
Information Technology
Aconex ACX 30-Jun NTRL 4.11 3.50 817 4.0 9.1 13.6 1.9 4.3 6.4 n.m 94.5 64.1 n.m 639.7 470.2 0.0 0.0 0.0 0.0 0.0 0.0 46.7 32.7 23.2 0 Lucas Goode
Altium ALU 30-Jun OPFM 9.15 9.50 905 29.6 35.0 43.3 22.7 26.9 33.2 30.6 25.9 20.9 180.0 175.0 153.5 21.9 26.3 32.5 2.4 2.9 3.5 24.2 20.5 16.5 0 Lucas Goode
Hansen Technologies HSN 30-Jun NTRL 3.55 3.70 646 30.7 33.2 35.5 16.7 17.8 18.9 21.3 19.9 18.8 125.2 134.9 137.7 5.5 5.4 6.0 1.5 1.5 1.7 12.9 11.3 10.1 60 Lucas Goode
MYOB Group Ltd MYO 31-Dec NTRL 3.37 3.50 2,044 104.6 113.9 118.1 17.1 18.6 19.3 19.7 18.1 17.5 116.0 122.6 128.2 12.0 13.0 13.5 3.6 3.9 4.0 12.4 11.3 10.7 100 Lucas Goode
NextDC NXT 30-Jun OPFM 4.54 4.70 1,290 13.8 7.6 28.6 4.7 2.5 9.5 95.6 n.m 47.8 562.3 n.m 351.0 0.0 0.0 0.0 0.0 0.0 0.0 28.3 24.3 15.5 0 Lucas Goode
WiseTech Global Pty Ltd WTC 30-Jun NTRL 7.75 4.80 2,254 26.9 37.5 47.3 9.3 12.9 16.3 83.6 60.0 47.6 492.0 406.2 349.5 2.0 2.5 3.5 0.3 0.3 0.5 41.3 31.0 24.9 100 Lucas Goode
Sector Aggregate 37.9 33.7 27.9 1.4 1.6 1.8 21.6 18.4 15.4
Telecommunication Services
Speedcast International SDA 31-Dec OPFM 3.77 4.50 680 45.6 63.3 74.1 19.1 26.4 30.8 15.0 10.9 9.3 88.4 73.4 68.1 10.2 14.1 16.5 2.7 3.7 4.3 8.2 6.6 5.8 0 Lucas Goode
Sector Aggregate 15.0 10.9 9.3 2.7 3.7 4.3 8.2 6.6 5.8
Utilities
Sector Aggregate n.m n.m n.m n.m n.m n.m
Report Average 16.2 14.1 13.0 3.1 4.0 4.3 9.4 7.7 6.7
EPS
Source: Company data, Credit Suisse estimates, Thomson Reuters
19 J
un
e 2
017
Au
stra
lia a
nd
NZ
Firs
t Ed
ition
63
Sector Aggregates
Research Analyst
Jason Swinbourne
612 8205 4591
jason.swinbourne@credit-suisse.com
As at 16 June 2017 PE Rel vs ASX 200(1)
EPS Growth % (1)
Div Yield % (1)
EBIT Multiple (1)
EBITDA Multiple (1)
2017 2018 2019 2017 2018 2019 2017 2018 2019 2017 2018 2019 2017 2018 2019 2017 2018 2019 2017 2018 2019 Top 200 Top 300
Energy (2) 16.9 13.2 12.3 16.9 12.9 11.3 1.1 0.9 0.8 57.6 28.1 7.0 2.2 3.2 3.8 12.3 9.7 9.2 7.4 6.0 5.6 3.97% 3.83%
Materials (2) 10.7 11.4 13.9 16.6 13.3 14.4 0.7 0.8 0.9 136 -7 -17 4.9 4.5 3.8 7.0 7.7 9.4 4.9 5.2 6.0 20.19% 19.49%
Chemicals (2) 18.6 17.9 16.9 19.6 17.7 17.0 1.2 1.2 1.1 11 4 6 2.7 2.9 3.1 13.6 12.3 11.5 9.8 8.9 8.4 1.07% 1.04%
Construction Materials (2) 21.0 18.9 17.5 20.0 18.6 17.2 1.4 1.3 1.2 0 11 8 3.5 3.6 4.0 14.9 13.8 12.9 10.9 10.3 9.6 1.29% 1.25%
Containers & Packaging (2) 20.0 17.8 16.3 18.9 17.2 16.4 1.3 1.2 1.1 4 12 9 3.6 4.1 4.5 16.0 14.2 13.1 12.0 10.7 10.0 1.37% 1.32%
Metals & Mining (2) 9.6 10.5 13.3 14.7 10.6 10.5 0.6 0.7 0.9 174 -9 -21 5.2 4.8 3.7 6.3 7.1 8.9 4.4 4.7 5.5 16.46% 15.89%
Paper & Forest Products (2) 18.6 17.9 16.9 19.6 17.7 17.0 1.2 1.2 1.1 11 4 6 2.7 2.9 3.1 13.6 12.3 11.5 9.8 8.9 8.4 1.07% 1.04%
Industrials (2) 27.6 24.7 22.8 26.9 22.3 19.5 1.8 1.7 1.5 0 12 8 3.5 3.7 4.0 19.1 17.7 16.8 11.9 11.1 10.6 6.66% 6.43%
Capital Goods (2) 18.2 17.9 17.7 17.0 17.2 17.5 1.2 1.2 1.2 19 1 1 3.4 3.4 3.5 13.1 13.2 12.8 9.4 9.3 8.7 0.76% 0.73%
Commercial Services & Supplies (2) 23.4 21.1 19.4 25.8 21.9 19.5 1.5 1.4 1.3 -9 11 9 2.8 2.7 2.9 16.1 14.5 13.2 10.1 9.3 8.7 1.87% 1.80%
Transportation (2) 33.6 29.1 26.4 45.0 38.7 32.2 2.2 2.0 1.8 1 15 10 3.9 4.2 4.7 23.1 21.2 20.5 13.7 12.8 12.4 4.03% 3.89%
Consumer Discretionary (2) 21.1 19.1 17.8 18.7 17.4 15.0 1.4 1.3 1.2 2 10 7 4.4 4.3 4.6 14.6 12.9 11.9 10.6 9.5 8.9 5.06% 4.88%
Automobiles & Components (2) 25.4 22.4 20.2 25.4 22.4 20.2 1.7 1.5 1.4 10 13 11 2.2 2.5 2.8 18.2 15.9 14.1 15.6 13.8 12.4 0.07% 0.07%
Consumer Durables & Apparel (2) 24.2 22.4 21.3 24.2 22.5 21.3 1.6 1.5 1.4 14 8 5 3.0 3.3 3.5 16.5 15.2 14.3 14.9 13.7 12.9 0.15% 0.14%
Hotels Restaurants & Leisure (2) 23.7 21.0 19.0 23.2 20.4 16.2 1.6 1.4 1.3 -1 13 11 5.2 5.1 5.3 16.2 14.3 13.0 12.2 10.9 10.1 2.56% 2.47%
Media (2) 23.0 20.7 19.1 13.4 12.4 12.2 1.5 1.4 1.3 -2 11 9 2.4 2.8 3.2 14.8 12.4 11.2 9.4 8.2 7.5 1.50% 1.45%
Retailing (2) 13.4 12.8 13.0 12.6 12.2 12.3 0.9 0.9 0.9 13 5 -2 5.7 5.1 5.0 10.6 9.8 9.8 8.4 7.9 7.8 0.78% 0.75%
Consumer Staples (2) 18.4 18.1 17.0 15.5 15.6 15.7 1.2 1.2 1.1 12 2 6 3.8 4.0 4.1 13.4 13.1 12.3 9.9 9.7 9.1 5.91% 5.70%
Food & Drug Retailing (2) 17.8 17.7 16.6 15.3 16.4 15.7 1.2 1.2 1.1 11 1 7 3.9 4.1 4.2 13.0 12.8 12.0 9.6 9.4 8.9 4.65% 4.49%
Food Beverage & Tobacco (2) 21.7 20.2 19.4 15.8 15.5 18.1 1.4 1.4 1.3 24 7 4 3.1 3.5 3.7 15.6 14.5 13.7 11.3 10.6 10.0 1.12% 1.08%
Health Care (2) 29.6 26.0 23.0 21.3 20.4 18.7 2.0 1.8 1.5 8 14 13 1.7 2.0 2.2 22.6 19.9 17.5 18.2 16.2 14.5 6.99% 6.75%
Financials (2) 14.1 13.5 13.0 15.9 15.1 13.9 0.9 0.9 0.9 12 4 5 5.5 5.6 5.8 5.7 5.0 4.4 5.2 4.6 4.1 31.95% 30.84%
Banks (2) 13.3 12.9 12.4 12.8 12.2 12.0 0.9 0.9 0.8 10 3 4 5.8 5.9 6.1 4.7 4.1 3.6 4.3 3.8 3.4 23.71% 22.89%
Diversified Financials (2) 16.4 15.7 14.8 18.5 16.3 14.8 1.1 1.1 1.0 39 5 6 4.7 4.9 5.2 13.1 12.4 11.5 11.4 10.8 10.0 4.74% 4.57%
Insurance (2) 17.8 16.3 15.0 17.9 17.7 15.2 1.2 1.1 1.0 7 10 9 4.2 4.6 5.0 15.4 14.1 13.1 14.4 13.3 12.4 3.50% 3.38%
Real Estate (2) 16.9 16.1 15.2 16.5 15.8 15.4 1.1 1.1 1.0 4 5 6 4.6 4.8 5.0 17.3 16.6 15.8 17.1 16.4 15.6 7.44% 7.18%
Information Technology (2) 23.7 21.0 18.1 27.0 23.6 19.8 1.6 1.4 1.2 1 13 16 2.4 2.7 2.9 17.6 15.4 13.3 15.4 13.5 11.7 0.91% 0.88%
Telecommunication Services (2) 13.2 12.9 13.3 13.3 15.4 15.1 0.9 0.9 0.9 0 3 -3 6.5 5.3 5.3 10.7 10.7 11.1 6.4 6.3 6.4 3.36% 3.25%
Utilities (2) 29.5 24.4 20.5 38.2 37.7 34.2 1.9 1.7 1.4 2 21 19 4.3 4.9 5.5 17.9 15.5 13.5 12.5 11.3 10.1 2.18% 2.11%
20 Leaders 13.8 13.9 14.3 15.9 15.3 15.0 0.9 0.9 0.96 37 -1 -3 5.2 5.0 4.9 6.9 6.5 6.2 5.6 5.4 5.2 na na
50 Leaders 14.5 14.3 14.6 17.9 16.5 15.5 1.0 1.0 1.0 36 1 -2 4.8 4.8 4.7 7.8 7.4 7.1 6.3 6.0 5.7 na na
ASX 100 15.1 14.8 14.9 18.9 17.2 16.4 1.0 1.0 1.0 33 2 -1 4.6 4.6 4.6 8.3 7.9 7.5 6.7 6.3 6.1 na na
MidCap 50 19.8 18.2 17.5 19.0 18.0 16.5 1.3 1.2 1.2 9 8 4 3.8 3.8 4.0 14.5 13.1 12.4 10.8 9.9 9.4 na na
S&P/ASX 200 - Industrials 17.2 16.3 15.4 18.4 17.2 16.4 1.1 1.1 1.0 8 6 6 4.5 4.6 4.9 9.0 8.1 7.3 7.7 6.9 6.3 na na
S&P/ASX 200 - Resources 10.5 11.0 13.1 14.7 10.7 10.5 0.7 0.7 0.9 152 -4 -16 4.7 4.5 3.7 6.9 7.5 8.9 4.7 4.9 5.5 na na
S&P/ASX 200 - Ind excl BIP 21.5 19.8 18.4 20.1 18.3 17.0 1.4 1.3 1.2 8.8 8.5 7.6 3.7 3.8 4.0 16.0 14.7 13.7 11.4 10.6 10.0 na na
S&P/ASX 200 15.2 14.8 14.9 18.1 16.4 15.3 1.0 1.0 1.0 32 3 -1 4.5 4.6 4.6 8.5 8.0 7.6 6.8 6.4 6.1 na na
S&P/ASX 300 - Industrials 17.3 16.3 15.4 18.2 16.9 16.2 1.1 1.1 1.0 8 6 6 4.5 4.6 4.8 9.1 8.1 7.3 7.7 7.0 6.3 na na
S&P/ASX 300 - Resources 10.5 11.0 13.1 11.0 10.7 10.5 0.7 0.7 0.9 154 -4 -16 4.6 4.4 3.7 7.0 7.5 8.8 4.7 4.9 5.4 na na
S&P/ASX 300 - Ind excl BIP 21.5 19.8 18.4 19.9 18.1 16.6 1.4 1.3 1.2 8.8 8.7 7.6 3.7 3.8 4.0 16.0 14.7 13.7 11.4 10.6 10.0 na na
S&P/ASX 300 15.2 14.8 14.8 17.4 16.3 15.1 1.0 1.0 1.0 32 3 -1 4.5 4.6 4.6 8.5 8.0 7.6 6.8 6.4 6.1 na na
Small Companies (4) 16.9 14.8 13.5 14.9 14.0 13.2 1.1 1.0 0.9 22 14 10 3.0 3.9 4.2 12.9 10.3 8.7 9.2 7.6 6.4 na na
Small Industrials 18.4 16.8 15.5 16.5 15.6 14.4 1.2 1.1 1.0 2 10 8 3.5 4.0 4.4 14.1 12.5 11.4 10.6 9.5 8.7 na na
Small Resources 12.8 10.0 8.8 7.9 10.1 8.3 0.8 0.7 0.6 163 28 14 1.1 3.3 3.6 9.7 6.1 4.5 5.9 4.1 3.1 na na
(1) Includes all companies covered by Credit Suisse analysts (3) No weighting applicable
(2) All sectors are based on S&P/ASX200.Companies on restricted list are not included in aggregates (4) Emerging companies are all companies covered by Credit Suisse excluding top 100 stocks.
Source: Company data, Credit Suisse Estimates, Thomson Reuters
Sector Weight PE (1)
Median PE (1)(3)
19 J
un
e 2
017
Au
stra
lia a
nd
NZ
Firs
t Ed
ition
64
Interest rates Economic forecasts
US Current 2017Q2 2017Q3 2017Q4 2018Q1 US 2017Q2 2017Q3 2017Q4 2018Q1 2017 2018
2yr 1.36 1.45 1.65 1.75 GDP QoQ% ann 3.1 2.3 2.4 2.3
5yr 1.77 2.00 2.15 2.30 Consumer Spending QoQ% ann 2.6 2.3 2.5 2.4
10yr 2.17 2.45 2.60 2.80 Business Investment QoQ% ann 4.2 3.7 3.1 4.6
30yr 2.78 3.10 3.20 3.35 Industrial Production QoQ% 4.6 2.0 1.7 2.5
2-10 0.81 1.00 0.95 1.05 Europe
10-30 0.62 0.65 0.60 0.55 GDP QoQ% ann 2.0 2.0 2.0 2.0
Europe Private Consumption QoQ% ann 1.8 1.6 1.6 1.7
2yr -0.64 Real Investment QoQ% ann 3.9 3.8 3.8 3.9
5yr -0.38 Industrial Production QoQ% ann 2.7 2.7 2.7 2.9
10yr 0.30 Japan
30yr 1.13 GDP QoQ% ann 1.4 -1.5 -1.1 0.8
2-10 0.94 Consumer Spending QoQ% ann 0.3 0.2 0.3 0.6
10-30 0.82 Non-Res. Investment QoQ% ann 0.0 -2.0 -3.0 1.9
Japan Industrial Production YoY% 4.7 2.5 -0.4 2.7
2yr -0.11 China
5yr -0.07 GDP YoY% 6.8 6.5
10yr 0.05 Private Consumption YoY% 7.4 7.3
30yr 0.81 Fixed Investment YoY% 6.0 5.6
2-10 0.16 CPI Inflation YoY% 2.7 2.2
10-30 0.76
Comdty Current 2017Q2 2017Q3 2017Q4 2018Q1 FX rates Current 3M 12M
Aluminium $/lb 0.83 0.84 0.82 0.85 0.77 USDJPY 111.1 107.0 107.0
Copper $/lb 2.52 2.60 2.50 2.30 2.10 EURUSD 1.12 1.15 1.15
Lead $/lb 0.93 1.00 0.90 0.90 0.86 GPBUSD 1.28 1.28 1.28
Nickel $/lb 3.92 4.65 5.00 5.00 5.25 AUDUSD 0.76 0.72 0.70
Zinc $/lb 1.11 1.33 1.32 1.27 1.18 USDCHF 0.97 0.95 0.94
USDCAD 1.33 1.30 1.36
Iron Ore Fines (CFR) $/t 79.70 95.00 70.00 55.00 60.00
Hard Coking Coal $/t 230.00 170.00 150.00 130.00
LV PCI $/t 161.00 125.00 115.00 105.00
Thermal Coal $/t 61.80 80.00 75.00 75.00 68.00
Oil (brent) $/bbl 46.92 56.00 61.00 62.00 65.00
Oil (WTI) $/bbl 44.46 55.00 60.00 60.00 62.50
US Natural Gas $/mmbtu 3.06 3.25 3.75 3.50 3.75
Uranium $/lb 35.00 35.00 35.00 45.00
Gold $/oz 1,254 1,300 1,375 1,400 1,375
Silver $/oz 16.7 18.1 17.7 18.6 18.5
Platinum $/oz 920 1,500 1,600 1,600 1,700
Palladium $/oz 870 900 925 925 950
Source: Reuters, Credit Suisse estimates
-8
-6
-4
-2
0
2
4
6
8
10 Credit Suisse Risk Appetite Index
Global Risk appetite Panic level Euphoria level
19 J
un
e 2
017
Au
stra
lia a
nd
NZ
Firs
t Ed
ition
65
Weekly Market Calendar
Research Analysts
Jason Swinbourne
612 8205 4591 jason.swinbourne@credit-suisse.com
Monday, 19 June 2017 Tuesday, 20 June 2017 Wednesday, 21 June 2017 Thursday, 22 June 2017 Friday, 23 June 2017
Credit Suisse Events LendLease market briefing, international operations (Americas, Asia, Europe)
Site Tours Amcor USA analyst tour
Economics AUSTRALIA New Motor Vehicle Sales MoM (May) (Prev 0.30%) New Motor Vehicle Sales YoY (May) (Prev 0.10%) UNITED STATES Chicago Fed President Charles Evans Speaks at NYU (with Q&A) NEW ZEALAND Westpac Consumer Confidence (2Q) (Prev 111.9) Performance Services Index (May) (Prev 52.8) CHINA China May Property Prices
Site Tours Amcor USA analyst tour
Results Sydney Airport May sales and revenue release, traffic results
Economics AUSTRALIA ANZ Roy Morgan Weekly Consumer Confidence Index (Jun-18) (Prev 112.9) House Price Index QoQ (1Q) (Mkt 2.70%, Prev 4.10%) House Price Index YoY (1Q) (Mkt 8.90%, Prev 7.70%) RBA June Rate Meeting Minutes NEW ZEALAND ANZ Consumer Confidence Index (Jun) (Prev 123.9) ANZ Consumer Confidence MoM (Jun) (Prev 1.80%) CHINA Conference Board China May Leading Economic Index
Site Tours Amcor USA analyst tour
AGM Evolution Mining (EGM) Hilton Hotel, 2/488 George Street, Sydney, 10:00am
Economics AUSTRALIA Westpac Leading Index MoM (May) (Prev -0.12%) Skilled Vacancies MoM (May) (Prev 0.10%) UNITED STATES Existing Home Sales Level SAAR (May) (CS 5.50M, Mkt 5.55M, Prev 5.57M) Existing Home Sales MoM (May) (CS -1.30%, Mkt -0.40%, Prev -2.30%)
Site Tours Amcor USA analyst tour
AGM CSR Northside Conference Centre, cnr Oxley Street and Pole Lane, Crows Nest, NSW, 11:00am
Ex Div (div¢@fkg% pay date) TIL 4.2661 0 30-Jun-17
Economics UNITED STATES Initial Jobless Claims (Week Ending June 17) (Prev 237K) Kansas City Fed Manufacturing Index (Jun) (Prev 8) NEW ZEALAND RBNZ Official Cash Rate (Jun-22) (Mkt 1.75%, Prev 1.75%) Net Migration SA (May) (Prev 5780) Credit Card Spending MoM (May) (Prev 0.90%) Credit Card Spending YoY (May) (Prev 6.40%)
Site Tours Amcor USA analyst tour
Economics UNITED STATES New Home Sales Level SAAR/MoM% (May) (CS 590K / 3.7%, Mkt 598K / 5.0%, Prev 569K / -11.4%) Cleveland Fed President Loretta Mester Speaks
ASX code changes over the past week (PNO) PharmaNet Group to (CAI) Calidus Resources (HGG) Henderson Group PLC to (JHG) Janus Henderson Group PLC
Market estimates are preliminary and subject to change. Information correct as at 15 June 2017. NZ company comment and valuation provided by First NZ Capital. Source: ASX, Bloomberg, IRESS, Reuters and Credit Suisse estimates
19 June 2017
Australia and NZ First Edition 66
Companies Mentioned (Price as of 16-Jun-2017)
Air France-KLM (AIRF.PA, €10.97) Air New Zealand (AIR.NZ, NZ$3.19) ^ American Airlines Group Inc. (AAL.OQ, $49.11) BHP Billiton (BLT.L, 1160.0p) Cathay Pacific (0293.HK, HK$12.38) China Biologic Products, Inc. (CBPO.OQ, $109.02) China Southern (1055.HK, HK$6.29) China Southern (600029.SS, Rmb8.89) Delta Air Lines, Inc. (DAL.N, $51.56) Genesee & Wyoming, Inc. (GWR.N, $66.94) Glencore (GLEN.L, 283.05p) Hualan Biological Engineering Inc. (002007.SZ, Rmb35.71) IAG (ICAG.MC, €6.698) JetBlue Airways Corporation (JBLU.OQ, $23.03) Lufthansa (LHAG.F, €18.556) POSCO (005490.KS, W272,000) Schnitzer Steel (SCHN.OQ, $18.9) South 32 (S32.L, 156.75p, OUTPERFORM[V], TP 180.0p) Southwest Airlines Co. (LUV.N, $60.11) The a2 Milk Company Limited (ATM.NZ, NZ$3.82, OUTPERFORM[V], TP NZ$4.1) ^ ^ Denotes a First NZ Capital covered company
For details of Australian companies covered by Credit Suisse refer to the Top 100 and Emerging Companies earnings & dividends sheets.
Disclosure Appendix
Important Global Disclosures
The analysts identified in this report each certify, with respect to the companies or securities that the individual analyzes, that (1) the views
expressed in this report accurately reflect his or her personal views about all of the subject companies and securities and (2) no part of his or her
compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report.
The analyst(s) responsible for preparing this research report received Compensation that is based upon various factors including Credit Suisse's total
revenues, a portion of which are generated by Credit Suisse's investment banking activities
As of December 10, 2012 Analysts’ stock rating are defined as follows: Outperform (O) : The stock’s total return is expected to outperform the relevant benchmark*over the next 12 months.
Neutral (N) : The stock’s total return is expected to be in line with the relevant benchmark* over the next 12 months.
Underperform (U) : The stock’s total return is expected to underperform the relevant benchmark* over the next 12 months.
*Relevant benchmark by region: As of 10th December 2012, Japanese ratings are based on a stock’s total return relative to the analyst's coverage uni verse which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most att ractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. As of 2nd October 2012, U.S. and Canadian as well as European ra tings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. For Latin Ame rican and non-Japan Asia stocks, ratings are based on a stock’s total return relative to the average total return of the relevant country or regional benchmark; prior to 2nd October 2012 U.S. and Canadian ratings were based on (1) a stock’s absolute total return potential to its current share price and (2) the relative attractiveness of a stock’s total return potential within an analyst’s coverage universe. For Australian and New Zealand stocks, the expected total return (ETR) calculation includes 1 2-month rolling dividend yield. An Outperform rating is assigned where an ETR is greater than or equal to 7.5%; Underperform where an ETR less than or equal to 5%. A Neutral may be assigned where the ETR is between -5% and 15%. The overlapping rating range allows analysts to assign a rating that puts ETR in the context of associated risks. Prior to 18 May 2015, ETR ranges for Outperform and Underperform ratings did not overlap with Neutral thresholds between 15% and 7.5%, wh ich was in operation from 7 July 2011.
Restricted (R) : In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications, including
an investment recommendation, during the course of Credit Suisse's engagement in an investment banking transaction and in certain other circumstances.
Volatility Indicator [V] : A stock is defined as volatile if the stock price has moved up or down by 20% or more in a month in at least 8 of the past 24
months or the analyst expects significant volatility going forward.
Analysts’ sector weightings are distinct from analysts’ stock ratings and are based on the analyst’s expectations for the fundamentals and/or
valuation of the sector* relative to the group’s historic fundamentals and/or valuation:
Overweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is favorable over the next 12 months.
Market Weight : The analyst’s expectation for the sector’s fundamentals and/or valuation is neutral over the next 12 months.
Underweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is cautious over the next 12 months.
*An analyst’s coverage sector consists of all companies covered by the analyst within the relevant sector. An analyst may cover multiple sectors.
19 June 2017
Australia and NZ First Edition 67
Credit Suisse's distribution of stock ratings (and banking clients) is:
Global Ratings Distribution
Rating Versus universe (%) Of which banking clients (%) Outperform/Buy* 44% (65% banking clients) Neutral/Hold* 40% (61% banking clients) Underperform/Sell* 14% (53% banking clients) Restricted 2% *For purposes of the NYSE and NASD ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, an d Underperform most closely correspond to Buy, Hold, and Sell, respectively; however, the meanings are not the same, as our stock ratings are determined on a relative basis. (Please refer to definitions above.) An investor's decision to buy or sell a security should be based on investment objectives, current holdin gs, and other individual factors.
Credit Suisse’s policy is to update research reports as it deems appropriate, based on developments with the subject company, the sector or the market that may have a material impact on the research views or opinions stated herein.
Credit Suisse's policy is only to publish investment research that is impartial, independent, clear, fair and not misleading. For more detail please refer to Credit Suisse's Policies for Managing Conflicts of Interest in connection with Investment Research: http://www.csfb.com/research-and-analytics/disclaimer/managing_conflicts_disclaimer.html
Credit Suisse does not provide any tax advice. Any statement herein regarding any US federal tax is not intended or written to be used, and cannot be used, by any taxpayer for the purposes of avoiding any penalties.
For other important disclosures concerning companies featured in this report, including price charts, please visit the website at https://rave.credit-suisse.com/disclosures or call +1 (877) 291-2683.
For a history of recommendations for the subject company(ies) featured in this report, disseminated within the past 12 months, please refer to https://rave.credit-suisse.com/disclosures/view/report?i=42348&v=-50txlrtp0uzijzbtahf61rjee .
Important Regional Disclosures
Singapore recipients should contact Credit Suisse AG, Singapore Branch for any matters arising from this research report.
Restrictions on certain Canadian securities are indicated by the following abbreviations: NVS--Non-Voting shares; RVS--Restricted Voting Shares; SVS--Subordinate Voting Shares.
Individuals receiving this report from a Canadian investment dealer that is not affiliated with Credit Suisse should be advised that this report may not contain regulatory disclosures the non-affiliated Canadian investment dealer would be required to make if this were its own report.
For Credit Suisse Securities (Canada), Inc.'s policies and procedures regarding the dissemination of equity research, please visit https://www.credit-suisse.com/sites/disclaimers-ib/en/canada-research-policy.html.
As of the date of this report, Credit Suisse acts as a market maker or liquidity provider in the equities securities that are the subject of this report.
Principal is not guaranteed in the case of equities because equity prices are variable.
Commission is the commission rate or the amount agreed with a customer when setting up an account or at any time after that.
Credit Suisse has entered into a strategic partnership with First NZ Capital ("FNZC"). Pursuant to this agreement, Credit Suisse makes available to
its clients certain research produced by FNZC. Credit Suisse is not responsible for the content of such research and provides such research for
informational purposes only.
To the extent this is a report authored in whole or in part by a non-U.S. analyst and is made available in the U.S., the following are important
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.
Important MSCI Disclosures
The MSCI sourced information is the exclusive property of Morgan Stanley Capital International Inc. (MSCI). Without prior written permission of
MSCI, this information and any other MSCI intellectual property may not be reproduced, re-disseminated or used to create and financial products,
including any indices. This information is provided on an "as is" basis. The user assumes the entire risk of any use made of this information. MSCI,
its affiliates and any third party involved in, or related to, computing or compiling the information hereby expressly disclaim all warranties of
originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any of this information. Without limiting any of
the foregoing, in no event shall MSCI, any of its affiliates or any third party involved in, or related to, computing or compiling the information have any
liability for any damages of any kind. MSCI, Morgan Stanley Capital International and the MSCI indexes are services marks of MSCI and its affiliates.
The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor’s. GICS is a service mark of MSCI and S&P and has been licensed for use by Credit Suisse.
For Credit Suisse disclosure information on other companies mentioned in this report, please visit the website at https://rave.credit-suisse.com/disclosures or call +1 (877) 291-2683.
EQUITIES
Mark Malouf 612 8205 4708 Head of Equities
RESEARCH Paul Buys 612 8205 4538 Head of Research
Resources
Commodities Matthew Hope 612 8205 4669
Energy (Oil & Gas) Mark Samter 612 8205 4537 David Hewitt 65 6212 3064 Sam Webb 612 8205 4535 Christian Prendiville 612 8205 4012
Diversified Resources, Coal, Iron Ore, Nickel Sam Webb 612 8205 4535 Christian Prendiville 612 8205 4012
Copper, Gold, Steel Michael Slifirski 613 9280 1845 Nick Herbert, CFA 613 9280 1754
Industrials
Food & Beverage, Packaging, Agriculture, Casinos & Gaming Larry Gandler 613 9280 1855
Media & Telecoms Fraser McLeish 612 8205 4069 Lucas Goode 612 8205 4431
Retail, Chemicals Grant Saligari 613 9280 1720 Annabelle Diamond 613 9280 1837
Health Care Saul Hadassin 612 8205 4679 David Bailey 612 8205 4739
Utilities & Infrastructure Peter Wilson 612 8205 4107
Building Materials, Developers & Contractors Andrew Peros 612 8205 4013
Transport Paul Butler 612 8205 4309 Gretel Janu 612 8205 4028
email: firstname.lastname@credit-suisse.com
Financials
Banks Jarrod Martin 612 8205 4334 James Ellis 612 8205 4531 Brendon Ferreira 612 8205 4072
Insurance & Diversified Financials Andrew Adams 612 8205 4106 James Ellis 612 8205 4531 James Cordukes 612 8205 4858 Kateryna Argyrou 612 8205 4874
Real Estate Ian Randall 612 8205 4580 Mikhail Mohl 612 8205 4413 Martin Patz 612 8205 4018
Macro
Investment Strategy Hasan Tevfik 612 8205 4284 Damien Boey 612 8205 4615 Peter Liu 612 8205 4071
ESG Sandra McCullagh 612 8205 4729 Zoe Whitton 612 8205 4613
Research Database Jason Swinbourne 612 8205 4591
Emerging Companies Research Paul Buys 612 8205 4538 Matthew Nicholas 612 8205 4210 Andrew Dodds 612 8205 4610 Specialist Sales Jonas Fitzgerald 612 8205 4326
CORPORATE ACCESS Cathy Kermond 612 8205 4488 Janice Evangelista 613 9280 1762
EQUITY CAPITAL MARKETS Ian Arnold 612 8205 4415 Head of Syndication
Credit Suisse HOLT®
Scott Chessum 613 9280 1662 Head of Australia
Peter Jabour 613 9280 1702
SALES AND TRADING
SYDNEY – Research Sales Mark Malouf 612 8205 4708 Head of Research Sales
John Fessey 612 8205 4417 Rowan Parchi 612 8205 4636 Michael van Elst 612 8205 4419 Sophie Robertson 612 8205 4249
Sales Trading Jason Cooper 612 8205 4364 Head of Sales Trading & Execution
James Hogan 612 8205 4043 Jim Bromley 612 8205 4715 David Robb 612 8205 4820
Facilitation John Manchee 612 8205 4479
Electronic & Portfolio Sales Andrew Bruce 612 8205 4474
Hedge Fund Sales & Trading Peter van Beek 852 2101 6270 Sujit Dey 612 8205 4256
Real Estate Specialist Sales Jason Cooper 612 8205 4364 Bhupen Master 612 8205 4792
MELBOURNE Research Sales
Chris Tolj 613 9280 1727 Sales Trading
John Ryan 613 9280 1644 Joe Zhang 613 9280 1691
UK/EUROPE Barnaby Hall 1 212 325 0655 Head of APAC Sales
Yvonne Voon 4420 7888 1663
USA Annie Zachara 1 212 325 9114 Head of APAC Sales
William Allen 1 212 325 9480 Amandae Baey 1 212 538 7188 Jonathan Chow 1 415 836 8686
ASIA Rowan Parchi 612 8205 4636 Head of Asian Sales
Tim Usasz 852 2101 7503
EXECUTION Paul Marosa 612 8205 4425 Head of DTR
Rohan Congues 612 8205 4728
PRIME SERVICES Jared Lewis 612 8205 4831 Head of Australia Prime Services
James Persson 612 8205 4938 Warren Goward 612 8205 4453 Nigel Watts 612 8205 4845
Research & Sales Responsibilities
This report is produced by subsidiaries and affiliates of Credit Suisse operating under its Global Markets Division. For more information on our structure, please use the following link: https://www.credit-suisse.com/who-we-are 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 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. The investments and services contained or referred to in this report may not be suitable for you and it is recommended that you consult an independent investment advisor if you are in doubt about such investments or investment services. Nothing in this report constitutes investment, legal, accounting or tax advice, or a representation that any investment or strategy is suitable or appropriate to your individual circumstances, or otherwise constitutes a personal recommendation to you. CS does not advise on the tax consequences of investments and you are advised to contact an independent tax adviser. Please note in particular that the bases and levels of taxation may change. Information and opinions presented in this report have been obtained or derived from sources believed by CS to be reliable, but CS makes no representation as to their accuracy or completeness. CS accepts no liability for loss arising from the use of the material presented in this report, except that this exclusion of liability does not apply to the extent that such liability arises under specific statutes or regulations applicable to CS. This report is not to be relied upon in substitution for the exercise of independent judgment. CS may have issued, and may in the future issue, other communications that are inconsistent with, and reach different conclusions from, the information presented in this report. Those communications reflect the different assumptions, views and analytical methods of the analysts who prepared them and CS is under no obligation to ensure that such other communications are brought to the attention of any recipient of this report. Some investments referred to in this report will be offered solely by a single entity and in the case of some investments solely by CS, or an associate of CS or CS may be the only market maker in such investments. Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is made regarding future performance. Information, opinions and estimates contained in this report reflect a judgment at its original date of publication by CS and are subject to change without notice. The price, value of and income from any of the securities or financial instruments mentioned in this report can fall as well as rise. The value of securities and financial instruments is subject to exchange rate fluctuation that may have a positive or adverse effect on the price or income of such securities or financial instruments. Investors in securities such as ADR's, the values of which are influenced by currency volatility, effectively assume this risk. Structured securities are complex instruments, typically involve a high degree of risk and are intended for sale only to sophisticated investors who are capable of understanding and assuming the risks involved. The market value of any structured security may be affected by changes in economic, financial and political factors (including, but not limited to, spot and forward interest and exchange rates), time to maturity, market conditions and volatility, and the credit quality of any issuer or reference issuer. Any investor interested in purchasing a structured product should conduct their own investigation and analysis of the product and consult with their own professional advisers as to the risks involved in making such a purchase. Some investments discussed in this report may have a high level of volatility. High volatility investments may experience sudden and large falls in their value causing losses when that investment is realised. Those losses may equal your original investment. Indeed, in the case of some investments the potential losses may exceed the amount of initial investment and, in such circumstances, you may be required to pay more money to support those losses. Income yields from investments may fluctuate and, in consequence, initial capital paid to make the investment may be used as part of that income yield. Some investments may not be readily realisable and it may be difficult to sell or realise those investments, similarly it may prove difficult for you to obtain reliable information about the value, or risks, to which such an investment is exposed. This report may provide the addresses of, or contain hyperlinks to, websites. Except to the extent to which the report refers to website material of CS, CS has not reviewed any such site and takes no responsibility for the content contained therein. Such address or hyperlink (including addresses or hyperlinks to CS's own website material) is provided solely for your convenience and information and the content of any such website does not in any way form part of this document. Accessing such website or following such link through this report or CS's website shall be at your own risk.
This report is issued and distributed in European Union (except Switzerland): by Credit Suisse Securities (Europe) Limited, One Cabot Square, London E14 4QJ, England, which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Germany: Credit Suisse Securities (Europe) Limited Niederlassung Frankfurt am Main regulated by the Bundesanstalt fuer Finanzdienstleistungsaufsicht ("BaFin"). United States and Canada: Credit Suisse Securities (USA) LLC; Switzerland: Credit Suisse AG; Brazil: Banco de Investimentos Credit Suisse (Brasil) S.A or its affiliates; Mexico: Banco Credit Suisse (México), S.A. (transactions related to the securities mentioned in this report will only be effected in compliance with applicable regulation); Japan: by Credit Suisse Securities (Japan) Limited, Financial Instruments Firm, Director-General of Kanto Local Finance Bureau ( Kinsho) No. 66, a member of Japan Securities Dealers Association, The Financial Futures Association of Japan, Japan Investment Advisers Association, Type II Financial Instruments Firms Association; Hong Kong: Credit Suisse (Hong Kong) Limited; Australia: Credit Suisse Equities (Australia) Limited; Thailand: Credit Suisse Securities (Thailand) Limited, regulated by the Office of the Securities and Exchange Commission, Thailand, having registered address at 990 Abdulrahim Place, 27th Floor, Unit 2701, Rama IV Road, Silom, Bangrak, Bangkok10500, Thailand, Tel. +66 2614 6000; Malaysia: Credit Suisse Securities (Malaysia) Sdn Bhd; Singapore: Credit Suisse AG, Singapore Branch; India: Credit Suisse Securities (India) Private Limited (CIN no.U67120MH1996PTC104392) regulated by the Securities and Exchange Board of India as Research Analyst (registration no. INH 000001030) and as Stock Broker (registration no. INB230970637; INF230970637; INB010970631; INF010970631), having registered address at 9th Floor, Ceejay House, Dr.A.B. Road, Worli, Mumbai - 18, India, T- +91-22 6777 3777; South Korea: Credit Suisse Securities (Europe) Limited, Seoul Branch; Taiwan: Credit Suisse AG Taipei Securities Branch; Indonesia: PT Credit Suisse Securities Indonesia; Philippines:Credit Suisse Securities (Philippines ) Inc., and elsewhere in the world by the relevant authorised affiliate of the above. Additional Regional Disclaimers Hong Kong: Credit Suisse (Hong Kong) Limited ("CSHK") is licensed and regulated by the Securities and Futures Commission of Hong Kong under the laws of Hong Kong, which differ from Australian laws. CSHKL does not hold an Australian financial services licence (AFSL) and is exempt from the requirement to hold an AFSL under the Corporations Act 2001 (the Act) under Class Order 03/1103 published by the ASIC in respect of financial services provided to Australian wholesale clients (within the meaning of section 761G of the Act). Research on Taiwanese securities produced by Credit Suisse AG, Taipei Securities Branch has been prepared by a registered Senior Business Person. Australia (to the extent services are offered in Australia): Credit Suisse Securities (Europe) Limited (“CSSEL”) and Credit Suisse International (“CSI”) are authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority (“FCA”) and the Prudential Regulation Authority under UK laws, which differ from Australian Laws. CSSEL and CSI do not hold an Australian Financial Services Licence (“AFSL”) and are exempt from the requirement to hold an AFSL under the Corporations Act (Cth) 2001 (“Corporations Act”) under Class Order 03/1099 published by the Australian Securities and Investments Commission (“ASIC”), in respect of the financial services provided to Australian wholesale clients (within the meaning of section 761G of the Corporations Act). This material is not for distribution to retail clients and is directed exclusively at Credit Suisse's professional clients and eligible counterparties as defined by the FCA, and wholesale clients as defined under section 761G of the Corporations Act. Credit Suisse (Hong Kong) Limited (“CSHK”) is licensed and regulated by the Securities and Futures Commission of Hong Kong under the laws of Hong Kong, which differ from Australian laws. CSHKL does not hold an AFSL and is exempt from the requirement to hold an AFSL under the Corporations Act under Class Order 03/1103 published by the ASIC in respect of financial services provided to Australian wholesale clients (within the meaning of section 761G of the Corporations Act). Credit Suisse Securities (USA) LLC (CSSU) and Credit Suisse Asset Management LLC (CSAM LLC) are licensed and regulated by the Securities Exchange Commission of the United States under the laws of the United States, which differ from Australian laws. CSSU and CSAM LLC do not hold an AFSL and is exempt from the requirement to hold an AFSL under the Corporations Act under Class Order 03/1100 published by the ASIC in respect of financial services provided to Australian wholesale clients (within the meaning of section 761G of the Corporations Act). Malaysia: Research provided to residents of Malaysia is authorised by the Head of Research for Credit Suisse Securities (Malaysia) Sdn Bhd, to whom they should direct any queries on +603 2723 2020. Singapore: This report has been prepared and issued for distribution in Singapore to institutional investors, accredited investors and expert investors (each as defined under the Financial Advisers Regulations) only, and is also distributed by Credit Suisse AG, Singapore Branch to overseas investors (as defined under the Financial Advisers Regulations). Credit Suisse AG, Singapore Branch may distribute reports produced by its foreign entities or affiliates pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Singapore recipients should contact Credit Suisse AG, Singapore Branch at +65-6212-2000 for matters arising from, or in connection with, this report. By virtue of your status as an institutional investor, accredited investor, expert investor or overseas investor, Credit Suisse AG, Singapore Branch is exempted from complying with certain compliance requirements under the Financial Advisers Act, Chapter 110 of Singapore (the “FAA”), the Financial Advisers Regulations and the relevant Notices and Guidelines issued thereunder, in respect of any financial advisory service which Credit Suisse AG, Singapore Branch may provide to you. UAE: This information is being distributed by Credit Suisse AG (DIFC Branch), duly licensed and regulated by the Dubai Financial Services Authority (“DFSA”). Related financial services or products are only made available to Professional Clients or Market Counterparties, as defined by the DFSA, and are not intended for any other persons. Credit Suisse AG (DIFC Branch) is located on Level 9 East, The Gate Building, DIFC, Dubai, United Arab Emirates. EU: This report has been produced by subsidiaries and affiliates of Credit Suisse operating under its Global Markets Division This research may not conform to Canadian disclosure requirements. In jurisdictions where CS is not already registered or licensed to trade in securities, transactions will only be effected in accordance with applicable securities legislation, which will vary from jurisdiction to jurisdiction and may require that the trade be made in accordance with applicable exemptions from registration or licensing requirements. Non-US customers wishing to effect a transaction should contact a CS entity in their local jurisdiction unless governing law permits otherwise. US customers wishing to effect a transaction should do so only by contacting a representative at Credit Suisse Securities (USA) LLC in the US. Please note that this research was originally prepared and issued by CS for distribution to their market professional and institutional investor customers. Recipients who are not market professional or institutional investor customers of CS should seek the advice of their independent financial advisor prior to taking any investment decision based on this report or for any necessary explanation of its contents. This research may relate to investments or services of a person outside of the UK or to other matters which are not authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority or in respect of which the protections of the Prudential Regulation Authority and Financial Conduct Authority for private customers and/or the UK compensation scheme may not be available, and further details as to where this may be the case are available upon request in respect of this report. CS may provide various services to US municipal entities or obligated persons ("municipalities"), including suggesting individual transactions or trades and entering into such transactions. Any services CS provides to municipalities are not viewed as "advice" within the meaning of Section 975 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. CS is providing any such services and related information solely on an arm's length basis and not as an advisor or fiduciary to the municipality. In connection with the provision of the any such services, there is no agreement, direct or indirect, between any municipality (including the officials,management, employees or agents thereof) and CS for CS to provide advice to the municipality. Municipalities should consult with their financial, accounting and legal advisors regarding any such services provided by CS. In addition, CS is not acting for direct or indirect compensation to solicit the municipality on behalf of an unaffiliated broker, dealer, municipal securities dealer, municipal advisor, or investment adviser for the purpose of obtaining or retaining an engagement by the municipality for or in connection with Municipal Financial Products, the issuance of municipal securities, or of an investment adviser to provide investment advisory services to or on behalf of the municipality. If this report is being distributed by a financial institution other than Credit Suisse AG, or its affiliates, that financial institution is solely responsible for distribution. Clients of that institution should contact that institution to effect a transaction in the securities mentioned in this report or require further information. This report does not constitute investment advice by Credit Suisse to the clients of the distributing financial institution, and neither Credit Suisse AG, its affiliates, and their respective officers, directors and employees accept any liability whatsoever for any direct or consequential loss arising from their use of this report or its content. Principal is not guaranteed. Commission is the commission rate or the amount agreed with a customer when setting up an account or at any time after that. Copyright © 2017 CREDIT SUISSE AG and/or its affiliates. All rights reserved. Investment principal on bonds can be eroded depending on sale price or market price. In addition, there are bonds on which investment principal can be eroded due to changes in redemption amounts. Care is required when investing in such instruments. When you purchase non-listed Japanese fixed income securities (Japanese government bonds, Japanese municipal bonds, Japanese government guaranteed bonds, Japanese corporate bonds) from CS as a seller, you will be requested to pay the purchase price only.
top related