today at a glance - zacks investment research
TRANSCRIPT
January 28, 2015PrimeTime US
Today At A Glance
Company Ticker Rating PT chg Curr. Q (e) chg Curr. Y (e) chg Next Y (e) chgEst.
Type
A.O. Smith AOS B $62.00 to $71.00 $0.60 to $0.56 - - EPS
Abiomed ABMD B $45.00 to $56.00 $0.07 to $0.18 $0.15 to $0.53 $0.39 to $0.73 EPS
ACADIA Pharm. ACAD B $42.00 to $50.00 - - -
Affiliated Managers Group AMG B $230.00 to $235.00 $2.92 to $2.96 $13.77 to $13.80 $14.97 to $15.05 EPS
AK Steel Holding Corp. AKS H $6.25 to $4.75 - $0.90 to $0.50 $0.80 to $0.72 EPS
Apple Inc. AAPL H $120.00 to $124.00 $2.15 to $2.31 $8.52 to $9.15 $8.89 to $9.31 EPS
Caterpillar CAT H $85.00 to $75.00 $1.60 to $1.40 $6.25 to $4.75 $6.60 to $5.00 EPS
Charles River Laboratories CRL B $80.00 to $83.00 $0.74 to $0.73 $3.39 to $3.38 $3.75 to $3.67 EPS
Citizens Financial Group CFG H $25.00 to $26.00 $0.28 to $0.31 $1.40 to $1.50 $1.85 to $1.95 EPS
Electronic Arts Inc. EA H $38.00 to $47.00 - $2.07 to $2.35 - EPS Non-GAAP
GS Engineering &Construction
006360 KS H KRW31,000 toKRW25,000
- - -
ICON plc ICLR B $66.00 to $68.50 - - -
LG Innotek 011070 KS B KRW140,000to KRW130,000
- - -
Lockheed Martin LMT H $175.00 to $190.00 $2.65 to $2.45 $11.30 to $11.20 - EPS
Malaysia Airports MAHB MK S MYR5.80 to MYR5.20 - - -
Mercury Systems MRCY H $11.20 to $14.00 - $0.30 to $0.38 - EPS
Nucor Corp. NUE B $66.00 to $61.00 - $3.95 to $3.05 $4.60 to $4.25 EPS
Oshkosh Corp. OSK B $45.00 to $54.00 $1.00 to $0.75 $3.55 to $3.90 $3.90 to $4.25 EPS
Oz Minerals OZL AU P AUD6.94 to AUD6.49 - - -
Packaging Corp of America PKG B $89.00 to $88.00 $1.20 to $1.08 $5.29 to $4.98 $5.93 to $5.84 EPS
PRA Health Sciences PRAH B $27.00 to $31.00 $0.27 to $0.29 $1.31 to $1.39 $1.62 to $1.69 EPS Non-GAAP
Regis Resources RRL AU P AUD2.20 to AUD2.48 - - -
Sandfire Resources NL SFR AU N AUD5.21 to AUD4.99 - - -
Stryker Corp. SYK H $85.00 to $94.00 $1.20 to $1.10 $5.23 to $5.02 $5.68 to $5.50 EPS
VMware VMW B $128.00 to $104.00 $0.87 to $0.83 $4.03 to $4.00 - EPS
Western Digital WDC B $129.00 to $128.00 $2.14 to $1.95 $8.61 to $8.30 - EPS
Yahoo! YHOO B $53.00 to $61.00 - $0.88 to $0.75 - EPS
Zions Bancorp. ZION H $29.00 to $28.00 $0.38 to $0.30 $1.55 to $1.40 $1.90 to $1.95 EPS
Accuray ARAY B - - ($0.45) to ($0.49) $0.06 to $0.03 EPS
Amgen AMGN B - $2.03 to $1.95 $9.53 to $9.48 $10.15 to $10.08 EPS
AT&T T B - - $2.60 to $2.57 $2.62 to $2.64 EPS
Bristol-Myers Squibb BMY H - - $1.70 to $1.66 $2.02 to $2.07 EPS
Charles Schwab Corporation SCHW B - - $1.15 to $1.13 $1.73 to $1.69 EPS
E*Trade Financial Corp. ETFC H - $0.29 to $0.25 $1.19 to $1.09 $1.49 to $1.40 EPS
EZCORP, Inc. EZPW H - - - -
PAREXEL Int'l PRXL H - - $2.63 to $2.64 - EPS
Parker Hannifin PH B - - $8.20 to $8.30 - EPS
Quintiles Inc. Q H - - - $2.98 to $3.00 EPS
Surgical Care Affiliates SCAI H - - - -
TD Ameritrade Holding Corp.AMTD H - - $1.61 to $1.58 $2.11 to $2.09 EPS
West Pharmaceutical WST H - $0.48 to $0.46 $1.81 to $1.80 $2.04 to $1.90 EPS
Amdocs, Ltd. DOX H - - - -
AT&T T B - - - -
Chugai 4519 JP H - - - -
Cytec CYT H - - - -
Jefferies does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that Jefferies may have a conflictof interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.Please see analyst certifications and important disclosure information on pages 25 to 27 of this report.
DMG Mori Seiki 6141 JP B - - - -
FILA Korea 081660 KS B - - - -
IGB Real Estate InvestmentTrust
IGBREIT MK B - - - -
Intel INTC B - - - -
Kalbe Farma KLBF IJ B - - - -
Komatsu 6301 JP H - - - -
LG H&H 051900 KS B - - - -
Lion Biotech LBIO B - - - -
Madison Square Garden MSG H - - - -
Maruti Suzuki India MSIL IN B - - - -
Nippon Building Fund 8951 JP H - - - -
PolyOne Corporation POL B - - - -
Quality Houses PCL QH TB B - - - -
SeAH Besteel 001430 KS B - - - -
Sumitomo Mitsui FinancialGrp
8316 JP B - - - -
Total System Svcs. TSS H - - - -
United States Steel X H - - - -
Focus Calls
ACADIA Pharmaceuticals Inc. (NASDAQ: ACAD, $31.70 , BUY) ▶▶
Raising Nuplazid Sales Estimates in Parkinson’s Disease Psychosis
Thomas Wei(212) 284-2326
Key Takeaway
Based on a refreshed and slightly different analysis of the literature on Parkinson’s disease psychosis (PDP) epidemiology, we are raisingour sales estimates for Nuplazid in PDP alone from $1.9b to $2.6b. We believe Nuplazid’s efficacy and safety profile, along with theenablement of marketing in this disease, could lead to a strong launch and expanded market opportunity, and we are raising our pricetarget from $42 to $50.
Rating Price target Curr. Q (e) Current year (e) Next year (e) Est. type Region
BUY ▲$42.00 to $50.00 ($0.26) ($0.92) $0.29 EPS Americas
Pharmaceutical Svcs.▶▶
FX Will Take a Toll on Revenue, EBIT Impact Mixed; Top Ideas for 2015
David Windley, CFA, CPA(615) 963-8313
Key Takeaway
FX moves since 3Q earnings create revenue headwinds across the CROs for both 4Q14 and '15. EBIT impact varies by company and in mostcases is muted by "natural hedges". Investors know the issue, though perhaps not the magnitude. That said, FX-driven shortfalls shouldbe taken in context. The more pertinent factors affecting '15 will be biotech funding, pharma M&A, and CRO market share consolidation.PRAH, ICLR and CRL remain our favorites.
Brokers, Asset Mgrs & Exchanges▶▶
Discount Broker 2015 Outlook....Still Waiting
Daniel T. Fannon(415) 229-1523
Key Takeaway
Looking ahead to 2H15 for the discount brokers, we are updating our forecast for the Fed's initial rate hike from 3Q15 to 4Q15.Implications on earnings are relatively minimal for this fiscal year's estimates (-$0.02 to -$0.04) as trends around customer engagement(trading, margin balances, etc) remain relatively strong. SCHW remains our favorite idea given its asset gathering momentum andleverage to higher interest rates.
page 2 of 27
Please see important disclosure information on pages 25 - 27 of this report.
PrimeTime US
January 28, 2015
Intel Corporation (NASDAQ: INTC, $34.19 , BUY) ▶▶
INTC-MSFT Decoupling - Reiterate Buy
Mark Lipacis(415) 229-1438
Key Takeaway
We think MSFT's weak outlook led INTC to underperform the SPX by 320 bps yesterday. We show that INTC and MSFT shipments havedecoupled as x86-based PCs like Chrome and MAC have taken share from Windows, and Intel has penetrated Android tablets. We thinkthis decoupling is not well understood by the Street, and view Intel's recent weakness as a particular buying opportunity.
Rating Price target Curr. Q (e) Current year (e) Next year (e) Est. type Region
BUY $50.00 $0.48 $2.75 $3.14 EPS Americas
Madison Square Garden (NASDAQ: MSG, $75.22 , HOLD) ▶▶
Compelling Asset Story - But No Slam Dunk at Current Levels
John Janedis, CFA(212) 284-2187
Key Takeaway
We are initiating coverage of MSG with a Hold rating and an $85 PT. As the owner of the Knicks, Rangers, the Garden, and two RSNs, MSGis in a unique position to capitalize on the rising value of sports content. Given the proposed spin, upside will be a function of furthernarrowing of the public/ private market discount, which may be difficult to achieve absent an asset sale.
Rating Price target Curr. Q (e) Current year (e) Next year (e) Est. type Region
HOLD $85.00 $0.75 $1.72 $2.14 EPS Americas
Lion Biotech (OOTC: LBIO, $8.80 , BUY) ▶▶
Initiate at Buy: TILs May Offer Differentiated Approach In Solid Tumors
Biren Amin(212) 284-8162
Key Takeaway
LBIO appears poised to be the leading player in tumor-infiltrating lymphocytes (TILs), and is one of the exciting developments in immuno-oncology. LBIO has significant potential based on clinical data with LN-144 observing highly robust and durable responses in refractorymetastatic melanoma, supporting a highly favorable outlook for the pivotal PIII trial beginning ~YE'15. We initiate with a Buy and a$12 PT.
Rating Price target Curr. Q (e) Current year (e) Next year (e) Est. type Region
BUY $12.00 ($0.09) ($0.39) ($0.97) EPS Americas
Internet▶▶
4Q14 Internet & Interactive Entertainment Preview
Jefferies US Internet [email protected]
Key Takeaway
Heading into the 4Q print, we see continuation of the secular shift from offline to online and positive trends in online ad budgets. In theeCommerce space, we saw mixed results but we think AMZN stole Christmas again despite continuing pressure on discretionary spenddue to tepid wage growth. In 4Q, FX was an even bigger headwind than in 3Q. On the margin, we favor online ad names over eCommercenames.
page 3 of 27
Please see important disclosure information on pages 25 - 27 of this report.
PrimeTime US
January 28, 2015
Yahoo!, Inc. (NASDAQ: YHOO, $47.99 , BUY) ▶▶
Tax-Free Spin-Off Announced! Raise PT to $61 and Reiterate Buy
Jefferies US Internet [email protected]
Key Takeaway
Management announced a plan for the remaining BABA shares to be spun-off in a tax-free transaction. We believe a tax-efficienttransaction provides ~30% upside from here, excluding any gains in Alibaba, so we're reiterating our Buy.
Rating Price target Curr. Q (e) Current year (e) Next year (e) Est. type Region
BUY ▲$53.00 to $61.00 $0.15 $0.88 ▼ $0.75 $0.74 EPS Americas
VMware, Inc. (NYSE: VMW, $80.61 , BUY) ▶▶
Strong 4Q; 2015 Guide Reduced as Expected, Though Cash Flow MuchLower
DiFucci & Zelnick(212) 284-2196
Key Takeaway
VMW reported strong 4Q results and guided below consensus as expected due primarily to FX effects, but also a move to more subscriptionrevenue. 2015 cash flow guidance was lower than expected due to one-time items. While our VMW thesis remains largely intact, we can’tignore reduced cash flow forecasts, which affects our DCF. We remain overweight VMW, but are lowering our PT to $104 (30% upside)from $128.
Rating Price target Curr. Q (e) Current year (e) Next year (e) Est. type Region
BUY ▼$128.00 to $104.00 $0.87 ▼ $0.83 $4.03 ▼ $4.00 $4.71 EPS Americas
All Research
Australia (Evans & Partners) - E&P: Metals & Mining
Oz Minerals (ASX: OZL AU, AUD3.44 , Positive) ▶▶
4QCY14 QUARTERLY: LET THE CASH BUILD COMMENCE
Cathy Moises+61 3 9631 9842
Key Takeaway
WHAT SURPRISED?Production: Oz Minerals delivered a strong final quarter, consolidating on an excellent year. Full year copper production of 92,615t exceeded the top end ofcompany guidance of 85-90kt copper. Full year gold production of 148,192 ounces also exceeded guidance of 130-140k ounces.
Costs: Full year C1 costs of US$0.91/lb, were also better than guidance of US$1.10-1.20/lb which were largely driven by the higher other metal credits(combination of stronger gold production and higher prices).
Outlook: Management has guided analysts to the production run rate for Prominent Hill in the December 2014 quarter as the best assumption for 2015production, prior to a full guidance update scheduled for April 2015.· OZL has not yet provided guidance around LOM strip ratio which we view as a key driver for mine profitability – it was originally forecast to decline rapidly.· The cost environment has become more favourable with the lower oil price and falling labour market but is partially offset by greater haulage distances.· OZL is taking a strategic review following the commencement of new Managing Director, Andrew Cole. As part of this review, a decision has been made torelocate head office from Melbourne to Adelaide.
Rating Price target Curr. Q (e) Current year (e) Next year (e) Est. type Region
Positive ▼AUD6.94 to AUD6.49 - - - Asia
page 4 of 27
Please see important disclosure information on pages 25 - 27 of this report.
PrimeTime US
January 28, 2015
Australia (Evans & Partners) - E&P: Metals & Mining
Regis Resources (ASX: RRL AU, AUD2.00 , Positive) ▶▶
2QFY15 QUARTERLY: Recovery WELL underway
Cathy Moises+61 3 9631 9842
Key Takeaway
WHAT SURPRISED?Regis reported continued strong production from Garden Well and Rosemont, and remains well on track to achieve guidance. Production fell at Moolart Well,but that was off a particularly high (grade related) quarterly in September, where no blending of low grade stockpiles occurred.
Production for the quarter was 80.1k ounces, in line with EAP forecasts given a previous production update earlier in January.
Costs tracked lower at Garden Well due to the impact of cost saving initiatives. Unit costs were flat at Moolart Well, but were negatively impacted by the lowerhead grade on a per ounce basis.
Guidance for FY15 re-affirmed: Production between 305-355k ounces and C1 costs between A$835-915/oz. Run rate for YTD sees performance at thetop end of guidance, with costs tracking below guidance.
Debt halves. Regis reported strong operational cash build of $43.5m for the quarter, which enabled a $20m repayment on its corporate debt.
Rating Price target Curr. Q (e) Current year (e) Next year (e) Est. type Region
Positive ▲AUD2.20 to AUD2.48 - - - Asia
Australia (Evans & Partners) - E&P: Metals & Mining
Sandfire Resources NL (ASX: SFR AU, AUD4.09 , Neutral) ▶▶
2QFY15 QUARTERLY: EMERGING FROM THE DEPTHS
Cathy Moises+61 3 9631 9842
Key Takeaway
WHAT SURPRISED?Production: 15,350t copper and 9,058oz gold which was a modest performance given the increased water flows into the Conductor 4/5 decline, which werepreviously flagged. In 1H15, this equates to 31,413t copper, ahead of guidance for 30,000t copper.
Costs: C1 US$1.18/lb, in line with FY15 guidance for US$1.15-1.25/lb.
Outlook: For 2H15, SFR provided production guidance of 34-37kt copper and C1 cost guidance of US$1.05-1.15/lb. FY16 guidance to be provided at 4QFY15quarterly (July 2015).
Capital position: planned capital expenditure of $13m relating to the new Pebble Crusher, SAG Mill Classification Screen and Column Flotation Cell. Cashbalance was strong as it remained relatively flat after capex, capital repayment ($20m) and dividend ($15.6m). We expect cash build to continue in 3QFY15as capital-intensive projects complete.
Exploration: acquired 100% of Sipa’s Thaduna Copper Project for $2m newly issued scrip and 1% royalty. Settlement expected to occur in January 2015.
Rating Price target Curr. Q (e) Current year (e) Next year (e) Est. type Region
Neutral ▼AUD5.21 to AUD4.99 - - - Asia
Consumer - Retailing/Food & Drug Chains
Retailing/Food & Drug Chains▶▶
Hurdle for Generic Nexium Removed; Possible 2015 Tailwind forPharmacies
Mark Wiltamuth(212) 708-2628
Key Takeaway
This morning, the FDA announced that it believes Ranbaxy has forfeited its 180-day exclusivity period for a generic form of Nexium whilegranting approval for the same drug to Teva. We view this as removing a major hurdle to generic Nexium's launch and moving the peakprofitability period to C4Q15. Given the market is expecting peak profitability from this drug in 2016, the earlier timing of this periodis a modest positive for drug retailers.
page 5 of 27
Please see important disclosure information on pages 25 - 27 of this report.
PrimeTime US
January 28, 2015
Equity Strategy - India
India▶▶
Frequent Factors: Project Revivals Increasing, Rural Wage GrowthDeclining
Piyush Nahar+91 22 4224 6113
Key Takeaway
Our Activity Index growth has stabilized at levels implying GDP growth of c6%. December saw mixed trends among indicators. Whileindustry indicators were weak led partly by monthly volatility, consumer indicators saw strong growth led by autos. The key positivethough were the forward looking indicators especially project revivals and steel consumption, which saw strong improvement and ruralwage growth, which has slowed sharply.
Financials - Banks
Sumitomo Mitsui Financial Group (TSE: 8316 JP, ¥4,171 , BUY) ▶▶
Visiting Hours: Candid Camera
Makarim Salman, FIA+813 5251 6157
Key Takeaway
A very candid meeting, given investor frustrations with the stock. The biggest disconnect here seems to be that the company (and thesell-side, given where target prices are) view themselves as an international financial conglomerate. Investors on the other hand focuson the domestic banking business and returns. At the current valuation (0.71x PBR) and absolute share price, we retain our Buy and lookto May's shareholder return announcement as a key catalyst.
Rating Price target Curr. Q (e) Current year (e) Next year (e) Est. type Region
BUY ¥7,000 - - - EPS Asia
Financials - Banks
Citizens Financial Group, Inc. (NYSE: CFG, $24.09 , HOLD) ▶▶
Core Fundamentals Solid; Lower Credit Costs Help Estimates
Ken Usdin(212) 284-2444
Key Takeaway
Core fees were solid, expense control was on-point, and net interest income and credit costs outperformed expectations. The '15 guide forprovision ($350mm-$400mm) was much lower than expectations, driving our EPS estimates higher. This was further helped by a slightlyhigher net interest income pull-through, but partially offset by a weaker outlook for fees. We increase our '15 EPS est. to $1.50 (from$1.40) and our '16 EPS est. to $1.95 (from $1.85).
Rating Price target Curr. Q (e) Current year (e) Next year (e) Est. type Region
HOLD ▲$25.00 to $26.00 $0.28 ▲ $0.31 $1.40 ▲ $1.50 $1.85 ▲ $1.95 EPS Americas
Financials - Brokers, Asset Mgrs & Exchanges
Affiliated Managers Group (NYSE: AMG, $204.85 , BUY) ▶▶
4Q14 Follow Up: Flow Trends Improving; Optimistic Outlook
Daniel T. Fannon(415) 229-1523
Key Takeaway
Despite retail net outflows in 4Q14, trends appear to be improving in early Jan to go along with continued positive momentum inthe institutional business. In terms of outlook, mgmt. remained bullish on deal opportunities (focus on non-US equity and alternativeopportunities) while buybacks increasingly become a common use of capital.
Rating Price target Curr. Q (e) Current year (e) Next year (e) Est. type Region
BUY ▲$230.00 to $235.00 $2.92 ▲ $2.96 $13.77 ▲ $13.80 $14.97 ▲ $15.05 EPS Americas
page 6 of 27
Please see important disclosure information on pages 25 - 27 of this report.
PrimeTime US
January 28, 2015
Financials - Brokers, Asset Mgrs & Exchanges
Charles Schwab Corporation (NYSE: SCHW, $26.81 , BUY) ▶▶
Discount Broker 2015 Outlook....Still Waiting
Daniel T. Fannon(415) 229-1523
Key Takeaway
Looking ahead to 2H15 for the discount brokers, we are updating our forecast for the Fed's initial rate hike from 3Q15 to 4Q15.Implications on earnings are relatively minimal for this fiscal year's estimates (-$0.02 to -$0.04) as trends around customer engagement(trading, margin balances, etc) remain relatively strong. SCHW remains our favorite idea given its asset gathering momentum andleverage to higher interest rates.
Rating Price target Curr. Q (e) Current year (e) Next year (e) Est. type Region
BUY $35.00 $0.25 $1.15 ▼ $1.13 $1.73 ▼ $1.69 EPS Americas
E*Trade Financial Corporation (NASDAQ: ETFC, $23.86 , HOLD) ▶▶
Discount Broker 2015 Outlook....Still Waiting
Daniel T. Fannon(415) 229-1523
Key Takeaway
Looking ahead to 2H15 for the discount brokers, we are updating our forecast for the Fed's initial rate hike from 3Q15 to 4Q15.Implications on earnings are relatively minimal for this fiscal year's estimates (-$0.02 to -$0.04) as trends around customer engagement(trading, margin balances, etc) remain relatively strong. SCHW remains our favorite idea given its asset gathering momentum andleverage to higher interest rates.
Rating Price target Curr. Q (e) Current year (e) Next year (e) Est. type Region
HOLD $23.00 $0.29 ▼ $0.25 $1.19 ▼ $1.09 $1.49 ▼ $1.40 EPS Americas
TD Ameritrade Holding Corporation (NYSE: AMTD, $33.28 , HOLD)▶▶
Discount Broker 2015 Outlook....Still Waiting
Daniel T. Fannon(415) 229-1523
Key Takeaway
Looking ahead to 2H15 for the discount brokers, we are updating our forecast for the Fed's initial rate hike from 3Q15 to 4Q15.Implications on earnings are relatively minimal for this fiscal year's estimates (-$0.02 to -$0.04) as trends around customer engagement(trading, margin balances, etc) remain relatively strong. SCHW remains our favorite idea given its asset gathering momentum andleverage to higher interest rates.
Rating Price target Curr. Q (e) Current year (e) Next year (e) Est. type Region
HOLD $34.00 $0.38 $1.61 ▼ $1.58 $2.11 ▼ $2.09 EPS Americas
page 7 of 27
Please see important disclosure information on pages 25 - 27 of this report.
PrimeTime US
January 28, 2015
Financials - Commercial Finance
EZCORP, Inc. (NASDAQ: EZPW, $11.62 , HOLD) ▶▶
EZPW F1Q15; Some Positives but Domestic Conditions RemainChallenging
John Hecht415-229-1569
Key Takeaway
EZPW reported core F1Q15 GAAP EPS of $0.26 versus our $0.36 forecast (and consensus of $0.35). In general, strong performance outof Mexico offset a challenging domestic environment, while a renewed focused on expense controls also supported the bottom line. Welook to ongoing improvements in the US pawn segment and consistent focus on corporate expenses, both of which would make us morefavorable on the name.
Rating Price target Curr. Q (e) Current year (e) Next year (e) Est. type Region
HOLD $11.00 - - - EPS Americas
Financials - Regional Banks
Zions Bancorp. (NASDAQ: ZION, $25.12 , HOLD) ▶▶
Energy Provisions Weigh on '15, Underlying Core OK
Ken Usdin(212) 284-2444
Key Takeaway
As anticipated, ZION added to its reserve for potential energy-related issues, but the biggest change to guidance is the expectation forno further reserve releases. Core loan growth was ok, NIM increased as expected, and fees and costs were reasonable. We lower our 2015EPS to $1.40 from $1.55 but 2016 goes to $1.95 from $1.90 on better NIM. At 0.95x tangible book, risk/reward in ZION is compelling,but concerns over energy could remain a weight.
Rating Price target Curr. Q (e) Current year (e) Next year (e) Est. type Region
HOLD ▼$29.00 to $28.00 $0.38 ▼ $0.30 $1.55 ▼ $1.40 $1.90 ▲ $1.95 EPS Americas
Financials - REITs
Nippon Building Fund Inc. (TSE: 8951 JP, ¥600,000 , HOLD) ▶▶
Small Acquisition at 5% Cap Rate
Chang Han Joo, CFA+813 5251 6155
Key Takeaway
Nippon Building Fund (NBF), after market close today, announced that it plans to acquire KANDASUDACHO i-Mark Building for ¥5.96bn(US$5m) at an estimated cap rate of c.5% through debt financing. This should be earnings accretive but given the asset is so small (lessthan 1% of total assets), we see limited impact on the company's earnings. We maintain our Hold rating and target price. Our preferredexposure is logistic JREITs.
Rating Price target Curr. Q (e) Current year (e) Next year (e) Est. type Region
HOLD ¥600,000 - - - EPS Asia
page 8 of 27
Please see important disclosure information on pages 25 - 27 of this report.
PrimeTime US
January 28, 2015
Healthcare - Biotechnology
Amgen, Inc. (NASDAQ: AMGN, $158.89 , BUY) ▶▶
4Q Revenue/EPS Beat; Potential 3 New Product Launches, Not in Our '15Est's
Eun K. Yang, Ph.D.(212) 284-2264
Key Takeaway
Reported ~6% higher EPS on ~3% higher product sales & lower tax rate (more than offsetting higher OpEx). Reiterated previous FY15EPS/revenue guidance of +5-8%/+6-10% y/y, reflecting new product launches (Corlanor, Repatha, T-VEC; none in our '15 estimates) &impact from Zarxio (biosimilar filgrastim) launch. With its limited ex-U.S. exposure (~25% of revenue), AMGN expects ~1% revenue/$0.05 EPS impact for 2015 if FX rates remain constant.
Rating Price target Curr. Q (e) Current year (e) Next year (e) Est. type Region
BUY $182.00 $2.03 ▼ $1.95 $9.53 ▼ $9.48 $10.15 ▼ $10.08 EPS Americas
Healthcare - Biotechnology
Biotechnology▶▶
Biotech Short Interest by Market Caps
Eun K. Yang, Ph.D.(212) 284-2264
Key Takeaway
As of January 15, 2015, weighted average short interest levels increased +0.1% for large-cap (market cap >$10B) biotech stocks, increased+0.8% for mid-caps ($2B-$10B), increased +0.1% for smid-caps ($500M-$2B), decreased -0.5% for small-caps ($250M-$500M), anddecreased -1.1% for micro-caps (<$250M). (Chart 1.)
Healthcare - Biotechnology
ACADIA Pharmaceuticals Inc. (NASDAQ: ACAD, $31.70 , BUY) ▶▶
Raising Nuplazid Sales Estimates in Parkinson’s Disease Psychosis
Thomas Wei(212) 284-2326
Key Takeaway
Based on a refreshed and slightly different analysis of the literature on Parkinson’s disease psychosis (PDP) epidemiology, we are raisingour sales estimates for Nuplazid in PDP alone from $1.9b to $2.6b. We believe Nuplazid’s efficacy and safety profile, along with theenablement of marketing in this disease, could lead to a strong launch and expanded market opportunity, and we are raising our pricetarget from $42 to $50.
Rating Price target Curr. Q (e) Current year (e) Next year (e) Est. type Region
BUY ▲$42.00 to $50.00 ($0.26) ($0.92) $0.29 EPS Americas
Healthcare - Biotechnology
Lion Biotech (OOTC: LBIO, $8.80 , BUY) ▶▶
Initiate at Buy: TILs May Offer Differentiated Approach In Solid Tumors
Biren Amin(212) 284-8162
Key Takeaway
LBIO appears poised to be the leading player in tumor-infiltrating lymphocytes (TILs), and is one of the exciting developments in immuno-oncology. LBIO has significant potential based on clinical data with LN-144 observing highly robust and durable responses in refractorymetastatic melanoma, supporting a highly favorable outlook for the pivotal PIII trial beginning ~YE'15. We initiate with a Buy and a$12 PT.
Rating Price target Curr. Q (e) Current year (e) Next year (e) Est. type Region
BUY $12.00 ($0.09) ($0.39) ($0.97) EPS Americas
page 9 of 27
Please see important disclosure information on pages 25 - 27 of this report.
PrimeTime US
January 28, 2015
Healthcare - Healthcare Services
Healthcare Services▶▶
Weekly Check-Up: News Flow Has Been Good For Providers; CTRXCatches A Breeze
Brian Tanquilut(615) 963-8338
Key Takeaway
This week has been good so far for H/C providers as we heard about Indiana's Medicaid expansion decision, HHS's announcement of itstimeline for implementing quality/value-based Medicare payments (which we view as positive for scaled providers), and the continued,elevated prevalence of the flu. Our theses on top picks CTRX (contract wins, M&A, retail partnership) and HCA (S&P500 inclusion) areplaying out and we remain bullish on both names.
Healthcare - Healthcare Services
Surgical Care Affiliates, Inc. (NASDAQ: SCAI, $32.30 , HOLD) ▶▶
Thesis Review: Solid Story & Mgmt But Growth Recalibration Keeps Us AtHold
Brian Tanquilut(615) 963-8338
Key Takeaway
We continue to have a positive view on SCA's fundamentals and are fans of mgmt.'s hospital partnership strategy. However, the recenttightening of mgmt.'s LT earnings growth outlook range -- which we believe was driven by a recalibration in same-store growthexpectations -- has prompted us to adjust our earnings estimates down and keeps us on the sidelines on the name for now based onvaluation.
Rating Price target Curr. Q (e) Current year (e) Next year (e) Est. type Region
HOLD $32.00 - - - Americas
Healthcare - Medical Supplies & Devices
Stryker Corporation (NYSE: SYK, $92.33 , HOLD) ▶▶
4Q: No Major Surprises; In Pursuit of M&A Opportunities
Raj Denhoy(212) 336-7070
Key Takeaway
Organic growth in 4Q was 5.5% and Stryker looks to remain in the mid-single digits and at the upper end of large cap medtech. How thecompany leverages a strong balance sheet to bolster the growth profile and drive shareholder value remains a key question to the SYKstory -- the appetite for deals is clearly high. Growth prospects appear appropriately reflected in the shares’ valuation, keeping us at Hold.
Rating Price target Curr. Q (e) Current year (e) Next year (e) Est. type Region
HOLD ▲$85.00 to $94.00 $1.20 ▼ $1.10 $5.23 ▼ $5.02 $5.68 ▼ $5.50 EPS Americas
Healthcare - Medical Supplies & Devices
Accuray Incorporated (NASDAQ: ARAY, $6.94 , BUY) ▶▶
F2Q as Advertised as Gross Orders Improve
Raj Denhoy(212) 336-7070
Key Takeaway
ARAY put up an inline F2Q versus preliminary guidance. The Q showed a noticeable sequential improvement in gross orders from uptake ofTomoHDA in single and dual vault sites. Elsewhere, age-outs will decline into the back half while CKM6+MLC beta testing will be completedby March. F15 guidance reiterated despite potential back-half boost in orders and revenue flow. Reiterate Buy with improving orderbackdrop and discounted valuation.
Rating Price target Curr. Q (e) Current year (e) Next year (e) Est. type Region
BUY $11.00 ($0.05) ($0.45) ▼ ($0.49) $0.06 ▼ $0.03 EPS Americas
page 10 of 27
Please see important disclosure information on pages 25 - 27 of this report.
PrimeTime US
January 28, 2015
Healthcare - Medical Supplies & Devices
Abiomed (NASDAQ: ABMD, $38.63 , BUY) ▶▶
Abiomed Breaks Through: F3Q Beats by $10mn
Raj Denhoy(212) 336-7070
Key Takeaway
ABMD posted what could prove to be its breakout quarter. Revenues of $62mn handily exceeded our $52mn forecast. The performancelooks sustainable as the company is calling for 20% growth in FY16. The new level of growth justifies a higher multiple; we use 7x toarrive at our new $56 target.
Rating Price target Curr. Q (e) Current year (e) Next year (e) Est. type Region
BUY ▲$45.00 to $56.00 $0.07 ▲ $0.18 $0.15 ▲ $0.53 $0.39 ▲ $0.73 EPS Americas
Healthcare - Pharmaceuticals
Chugai (TSE: 4519 JP, ¥3,165 , HOLD) ▶▶
Delivered Solid 2014 Results; Guidance Looks Soft
Naomi Kumagai+813 5251 6156
Key Takeaway
Chugai announced 2014 annual results at 4:30pm Tokyo time today. The results beat the guidance helped by steady growth of mainstay& new products, and an increase in exports of Actemra to Roche (ROG VX, Buy). 2015 guidance looks soft and is lower than our estimates/consensus.
Rating Price target Curr. Q (e) Current year (e) Next year (e) Est. type Region
HOLD ¥3,000 - - - EPS Asia
Healthcare - Pharmaceutical Svcs.
Charles River Laboratories, Inc. (NYSE: CRL, $70.17 , BUY) ▶▶
FX Will Take a Toll on Revenue, EBIT Impact Mixed; Top Ideas for 2015
David Windley, CFA, CPA(615) 963-8313
Key Takeaway
FX moves since 3Q earnings create revenue headwinds across the CROs for both 4Q14 and '15. EBIT impact varies by company and in mostcases is muted by "natural hedges". Investors know the issue, though perhaps not the magnitude. That said, FX-driven shortfalls shouldbe taken in context. The more pertinent factors affecting '15 will be biotech funding, pharma M&A, and CRO market share consolidation.PRAH, ICLR and CRL remain our favorites.
Rating Price target Curr. Q (e) Current year (e) Next year (e) Est. type Region
BUY ▲$80.00 to $83.00 $0.74 ▼ $0.73 $3.39 ▼ $3.38 $3.75 ▼ $3.67 EPS Americas
ICON plc (NASDAQ: ICLR, $57.82 , BUY) ▶▶
FX Will Take a Toll on Revenue, EBIT Impact Mixed; Top Ideas for 2015
David Windley, CFA, CPA(615) 963-8313
Key Takeaway
FX moves since 3Q earnings create revenue headwinds across the CROs for both 4Q14 and '15. EBIT impact varies by company and in mostcases is muted by "natural hedges". Investors know the issue, though perhaps not the magnitude. That said, FX-driven shortfalls shouldbe taken in context. The more pertinent factors affecting '15 will be biotech funding, pharma M&A, and CRO market share consolidation.PRAH, ICLR and CRL remain our favorites.
Rating Price target Curr. Q (e) Current year (e) Next year (e) Est. type Region
BUY ▲$66.00 to $68.50 $0.75 $2.76 $3.26 EPS Americas
page 11 of 27
Please see important disclosure information on pages 25 - 27 of this report.
PrimeTime US
January 28, 2015
PAREXEL International Corporation (NASDAQ: PRXL, $63.34 ,HOLD) ▶▶
FX Will Take a Toll on Revenue, EBIT Impact Mixed; Top Ideas for 2015
David Windley, CFA, CPA(615) 963-8313
Key Takeaway
FX moves since 3Q earnings create revenue headwinds across the CROs for both 4Q14 and '15. EBIT impact varies by company and in mostcases is muted by "natural hedges". Investors know the issue, though perhaps not the magnitude. That said, FX-driven shortfalls shouldbe taken in context. The more pertinent factors affecting '15 will be biotech funding, pharma M&A, and CRO market share consolidation.PRAH, ICLR and CRL remain our favorites.
Rating Price target Curr. Q (e) Current year (e) Next year (e) Est. type Region
HOLD $57.00 $0.59 $2.63 ▲ $2.64 $3.11 EPS Americas
PRA Health Sciences (NASDAQ: PRAH, $27.20 , BUY) ▶▶
FX Will Take a Toll on Revenue, EBIT Impact Mixed; Top Ideas for 2015
David Windley, CFA, CPA(615) 963-8313
Key Takeaway
FX moves since 3Q earnings create revenue headwinds across the CROs for both 4Q14 and '15. EBIT impact varies by company and in mostcases is muted by "natural hedges". Investors know the issue, though perhaps not the magnitude. That said, FX-driven shortfalls shouldbe taken in context. The more pertinent factors affecting '15 will be biotech funding, pharma M&A, and CRO market share consolidation.PRAH, ICLR and CRL remain our favorites.
Rating Price target Curr. Q (e) Current year (e) Next year (e) Est. type Region
BUY ▲$27.00 to $31.00 $0.27 ▲ $0.29 $1.31 ▲ $1.39 $1.62 ▲ $1.69 EPS Non-GAAP
Americas
Quintiles Inc. (NYSE: Q, $61.90 , HOLD) ▶▶
FX Will Take a Toll on Revenue, EBIT Impact Mixed; Top Ideas for 2015
David Windley, CFA, CPA(615) 963-8313
Key Takeaway
FX moves since 3Q earnings create revenue headwinds across the CROs for both 4Q14 and '15. EBIT impact varies by company and in mostcases is muted by "natural hedges". Investors know the issue, though perhaps not the magnitude. That said, FX-driven shortfalls shouldbe taken in context. The more pertinent factors affecting '15 will be biotech funding, pharma M&A, and CRO market share consolidation.PRAH, ICLR and CRL remain our favorites.
Rating Price target Curr. Q (e) Current year (e) Next year (e) Est. type Region
HOLD $59.50 $0.68 $2.66 $2.98 ▲ $3.00 EPS Americas
West Pharmaceutical Services, Inc. (NYSE: WST, $50.76 , HOLD) ▶▶
FX Will Take a Toll on Revenue, EBIT Impact Mixed; Top Ideas for 2015
David Windley, CFA, CPA(615) 963-8313
Key Takeaway
FX moves since 3Q earnings create revenue headwinds across the CROs for both 4Q14 and '15. EBIT impact varies by company and in mostcases is muted by "natural hedges". Investors know the issue, though perhaps not the magnitude. That said, FX-driven shortfalls shouldbe taken in context. The more pertinent factors affecting '15 will be biotech funding, pharma M&A, and CRO market share consolidation.PRAH, ICLR and CRL remain our favorites.
Rating Price target Curr. Q (e) Current year (e) Next year (e) Est. type Region
HOLD $48.00 $0.48 ▼ $0.46 $1.81 ▼ $1.80 $2.04 ▼ $1.90 EPS Americas
page 12 of 27
Please see important disclosure information on pages 25 - 27 of this report.
PrimeTime US
January 28, 2015
Indonesia (Indo Premier) - Indo Premier: Consumer
Kalbe Farma (IDX: KLBF IJ, IDR1,855.00 , Buy) ▶▶
Optimistic outlook for 2015
Julianto Wongso(62) 21 5793 1168
Key Takeaway
■ Management is more optimistic for 2015■ Lower input costs should boost margins■ However, FY14 results are likely below expectations■ Retain BUY recommendation at TP Rp1,970
Rating Price target Curr. Q (e) Current year (e) Next year (e) Est. type Region
Buy IDR1,970.00 - - - Asia
Industrials - Aerospace & Defense Electronics
Mercury Systems (NASDAQ: MRCY, $14.48 , HOLD) ▶▶
FQ2 Earnings - Beat and Raise Reflected in Share Price
Howard A. Rubel(212) 284-2126
Key Takeaway
MRCY reported a GAAP EPS from cont. ops of $0.09 for FQ2:15 vs. our forecast/consensus of $0.04. This compares to management'sguidance range of $0.01 to $0.05. Management increased the mid-point of the June FY15 EPS guidance range by 25% to $0.33-$0.39from $0.26-$0.32. Our FY15 EPS estimate is $0.38 from $0.30. We continue to rate MRCY HOLD.
Rating Price target Curr. Q (e) Current year (e) Next year (e) Est. type Region
HOLD ▲$11.20 to $14.00 $0.12 $0.30 ▲ $0.38 $0.40 EPS Americas
Industrials - Aerospace & Defense Electronics
Lockheed Martin Corp. (NYSE: LMT, $190.55 , HOLD) ▶▶
Grinding Down Risk
Howard A. Rubel(212) 284-2126
Key Takeaway
LMT's 2014 EPS of $11.21 and the 2015 guidance of $10.80 to $11.20 reflects prudent performance & a deliberate first cut at the yearahead. We trim our 2015 EPS to $11.20 from $11.30 due to a lower pension discount rate, but assume the company can overcome somerisks. Our EPS ests. for 2016 and 2017 remain unchanged at $12.70 and $13.75.
Rating Price target Curr. Q (e) Current year (e) Next year (e) Est. type Region
HOLD ▲$175.00 to $190.00 $2.65 ▼ $2.45 $11.30 ▼ $11.20 $12.70 EPS Americas
Industrials - Autos & Auto Parts
Maruti Suzuki India Limited (BSE BO: MSIL IN, INR3,687.90 , BUY) ▶▶
Margin Expansion Aided by Favorable Currency & Commodity
Govindarajan Chellappa+91 22 4224 6111
Key Takeaway
MSIL reported better than forecasted margins aided by soft commodity prices and favorable currency. While overall demand is still muted,Maruti has further improved its market share on the back of shift in demand to petrol vehicles and successful launches in Q3. We expectMSIL to benefit the most from better demand and pricing environment with little new competition in its core areas and its imminententry into white spaces in its portfolio. Maintain Buy.
Rating Price target Curr. Q (e) Current year (e) Next year (e) Est. type Region
BUY INR4,276.00 - INR176.00 INR212.50 EPS Asia
page 13 of 27
Please see important disclosure information on pages 25 - 27 of this report.
PrimeTime US
January 28, 2015
Industrials - Capital Goods
Komatsu (TSE: 6301 JP, ¥2,587 , HOLD) ▶▶
3Q Results: Slightly Weaker Than Anticipated
Yukihiro Kumagai+813 5251 6184
Key Takeaway
Reported 3Q FY3/15 results were slightly weaker than expected. 3Q OP was ¥56.2bn (-1% YoY), 8% below Jefferies ¥60.9bn estimate.Overall revenues were solid at ¥494.1bn (+6% YoY). While forex remained a tailwind for profits, volume declines, fixed cost increase andother factors including unprofitable mining equipment orders impacted incremental profits negatively in 3Q. Full year guidance leftunchanged. Maintain Hold.
Rating Price target Curr. Q (e) Current year (e) Next year (e) Est. type Region
HOLD ¥2,750 - - - EPS Asia
Industrials - Capital Goods
DMG Mori Seiki (TSE: 6141 JP, ¥1,679 , BUY) ▶▶
Moderate Impact on Debt Financing from Potential TOB Price Hike
Yukihiro Kumagai+813 5251 6184
Key Takeaway
We simulated DMG Mori Seiki's capability to repay debt assuming the TOB is successfully completed. DMG Mori Seiki will clearly havehigher gearing to their balance sheet, and the stock market is now concerned about AG's share price, which has gone above the TOBprice already. We came to the conclusion that DMG Mori Seiki's financial cost burden should remain moderate given Japanese favorableinterest rate conditions even if the TOB price is raised.
Rating Price target Curr. Q (e) Current year (e) Next year (e) Est. type Region
BUY ¥1,800 - ¥91.78 ¥101.72 EPS Asia
Industrials - Chemicals
Cytec Industries Inc. (NYSE: CYT, $44.00 , HOLD) ▶▶
Q4 Beats by $0.05. Outlook in Line with Consensus.
Laurence Alexander, CFA(212) 284-2553
Key Takeaway
Excluding $1.05 in pension and other special items, Q4 adjusted EPS of $0.66 was $0.05 above consensus and $0.01 above our estimate.Cytec set a 2015 EPS range of $3.10-$3.30, +5%-11% YoY, compared to consensus of $3.22 led by growth in In-Process, Additive Tech andAerospace and slightly offset by Industrial Materials.
Rating Price target Curr. Q (e) Current year (e) Next year (e) Est. type Region
HOLD $49.00 - - - EPS Americas
Industrials - Chemicals
PolyOne Corporation (NYSE: POL, $36.05 , BUY) ▶▶
Q4 Beats by $0.02. Mix Shift Continues
Laurence Alexander, CFA(212) 284-2553
Key Takeaway
Q4 EPS of $0.36 was $0.02 above consensus and $0.03 above our estimate, as favorable mix offset weak European conditions andFX headwinds. Segment results were in line with our forecast, with strength in GCAI and GSEM offset by weakness in PP&S. Taxesand sharecount were both $0.01 tailwinds. In Q4, the company repurchased ~1.9% of shares outstanding. The outlook ("double-digitgrowth") leaves room for headwinds to consensus.
Rating Price target Curr. Q (e) Current year (e) Next year (e) Est. type Region
BUY $47.00 - - - EPS Americas
page 14 of 27
Please see important disclosure information on pages 25 - 27 of this report.
PrimeTime US
January 28, 2015
Industrials - Diversified Industrials
A.O. Smith Corporation (NYSE: AOS, $59.73 , BUY) ▶▶
Slower 1H15, but then a Wind at its Back
R. Scott Graham(212) 336-7465
Key Takeaway
4Q14 adj EPS increased 23% and were above expectations. 2015 guide was increased owing to favorable resi conditions and continuedmomentum in China. 1H15 earnings will be slowed by a NA WH industry change, but we then see earnings taking flight again, withgrowth accelerating to 20% in 2H15 and upper-teens in '16. We have rolled out our '16 EPS and PTs.
Rating Price target Curr. Q (e) Current year (e) Next year (e) Est. type Region
BUY ▲$62.00 to $71.00 $0.60 ▼ $0.56 $2.72 $3.18 EPS Americas
Industrials - Industrials
Industrials▶▶
Highlights from HVAC Show: A Way to Avoid Oil & Gas Markets
Stephen Volkmann, CFA(212) 284-2031
Key Takeaway
We attended the AHRI Expo in Chicago this week. This is the primary trade show of the HVAC market, and >2,000 companies exhibitedtheir products, including HVAC OEMs, component manufacturers and distributors. We met with multiple industry participants.
Industrials - Machinery
Caterpillar (NYSE: CAT, $79.85 , HOLD) ▶▶
4Q14 Model Update
Stephen Volkmann, CFA(212) 284-2031
Key Takeaway
CAT reported 4Q EPS of $1.35, which excluded ~$0.12 of restructuring, well below consensus of $1.55. Revenues were in line while EBITmargin of 8.4% was 50bps below our estimate. 2015 preliminary guidance of revenue flat to slightly up y/y was lowered to "~$50B",10% below consensus, and EPS guidance of $4.75 is well below consensus of $6.68. We continue our Hold rating and lower our PT to$75 from $85.
Rating Price target Curr. Q (e) Current year (e) Next year (e) Est. type Region
HOLD ▼$85.00 to $75.00 $1.60 ▼ $1.40 $6.25 ▼ $4.75 $6.60 ▼ $5.00 EPS Americas
Industrials - Machinery
Oshkosh Corporation (NYSE: OSK, $44.57 , BUY) ▶▶
F1Q15 Model Update
Stephen Volkmann, CFA(212) 284-2031
Key Takeaway
OSK reported F1Q15 EPS of $0.41 ex items, well above consensus of $0.24. OSK beat our estimate by ~$0.15 due to higher margins inDefense (+2.4% vs. JEF -3.9%) and Fire & Emergency (+0.9% vs. JEF -2.0%). FY15 EPS guidance of $4.00-$4.25 ex. items was unchanged,which at the midpoint is above consensus of $3.97.
Rating Price target Curr. Q (e) Current year (e) Next year (e) Est. type Region
BUY ▲$45.00 to $54.00 $1.00 ▼ $0.75 $3.55 ▲ $3.90 $3.90 ▲ $4.25 EPS Americas
page 15 of 27
Please see important disclosure information on pages 25 - 27 of this report.
PrimeTime US
January 28, 2015
Industrials - Machinery
Parker Hannifin (NYSE: PH, $121.35 , BUY) ▶▶
F2Q15 Model Update
Stephen Volkmann, CFA(212) 284-2031
Key Takeaway
PH reported F2Q15 adjusted EPS of $1.84 (Street: $1.55) on revenues of $3.2 bln. Sales were in line with our forecast and margins were20bps better, but the beat came mostly from a lower tax rate ($0.17). FY2015 EPS guidance was increased to $7.90-$8.30 (ex $0.20restructuring); while revenue growth was lowered to -1 to +1% (prior: 0%-3%) mainly on an fx headwind.
Rating Price target Curr. Q (e) Current year (e) Next year (e) Est. type Region
BUY $145.00 $2.10 $8.20 ▲ $8.30 $9.75 EPS Americas
Industrials - Materials (Steel)
United States Steel (NYSE: X, $21.27 , HOLD) ▶▶
X Results Beat Big in 4Q14; Guidance Provided for FY15
Luke Folta, CFA(212) 284-2044
Key Takeaway
X's 4Q14 EPS of $1.83, beat Street est. of $0.85 on strong results in NAFR and Tubular segments. Surprisingly, it also provided FY2015guidance (EBITDA $1.1-1.4B), which, while short of our/Street $1.46/$1.56B est., we believe is above mkt. expectations heading intothe print. We are skeptical of steel producers' ability to accurately predict results a year forward though look forward to learn about itsunderlying assumptions on tomorrow's 8:30AM call.
Rating Price target Curr. Q (e) Current year (e) Next year (e) Est. type Region
HOLD $31.00 - - - EPS Americas
Industrials - Materials (Steel)
AK Steel Holding Corp. (NYSE: AKS, $4.25 , HOLD) ▶▶
4Q Beats; Improved '15 Expected; Reducing EPS on Lower Pricing;Maintain HOLD
Luke Folta, CFA(212) 284-2044
Key Takeaway
AKS reported adj. 4Q14 EPS of $0.14, which beat (+$0.07) ours/Street estimates. With flat rolled steel prices in free-fall thus far in 1Q15and materially below our prior forecast, we’ve made reductions to our est./PT for AKS. Among the highest levered to weakening flatrolled price trends with an above average (albeit improving) cost structure within the group, we expect AKS to continue to underperformpeers and maintain our HOLD rating.
Rating Price target Curr. Q (e) Current year (e) Next year (e) Est. type Region
HOLD ▼$6.25 to $4.75 $0.17 $0.90 ▼ $0.50 $0.80 ▼ $0.72 EPS Americas
page 16 of 27
Please see important disclosure information on pages 25 - 27 of this report.
PrimeTime US
January 28, 2015
Industrials - Materials (Steel)
Nucor Corp. (NYSE: NUE, $44.33 , BUY) ▶▶
Reduce Est. on Lower Steel Prices, Non-Resi to Drive Growth in '15;Maint. Buy
Luke Folta, CFA(212) 284-2044
Key Takeaway
While our est. fall amidst a weaker near term outlook for steel prices, we continue to see NUE among the best positioned producers inthe group with above avg. exposure to recovering non-resi construction mkts. and margin pressure from lower steel prices likely to bemitigated by significantly lower scrap costs in 2015. On our lowered earnings forecast, we reduce our target price to $61 (-$5), thoughmaintain our Buy rating.
Rating Price target Curr. Q (e) Current year (e) Next year (e) Est. type Region
BUY ▼$66.00 to $61.00 $0.45 $3.95 ▼ $3.05 $4.60 ▼ $4.25 EPS Americas
Industrials - Paper & Packaging
Packaging Corp of America (NYSE: PKG, $76.33 , BUY) ▶▶
4Q14 Recap: Noise in 1H, But Demand Remains Strong
Philip Ng, CFA(212) 336-7369
Key Takeaway
While there's some noise in the 1H and we are re-basing our estimates, underlying fundamentals are strong with box shipments up 5%in January. PKG continues to execute at a high level with the D-3 ramp and integration of Boise.
Rating Price target Curr. Q (e) Current year (e) Next year (e) Est. type Region
BUY ▼$89.00 to $88.00 $1.20 ▼ $1.08 $5.29 ▼ $4.98 $5.93 ▼ $5.84 EPS Americas
Malaysia (KAF) - KAF: REITs
IGB Real Estate Investment Trust (KUL: IGBREIT MK, MYR1.31 , Buy)▶▶
4Q14 - Good finish
Alia Azwa Hashim(603)2168-8541
Key Takeaway
IGB REIT’s 4Q14 numbers were driven mainly by higher rental income from positive rental reversions in The Gardens Mall, where 70% of net lettable area(NLA) was up for renewal last year. Despite the lack of a clear pipeline of acquisitions, we believe IGB REIT will continue to focus on growing organically inover the near to medium term.
Rating Price target Curr. Q (e) Current year (e) Next year (e) Est. type Region
Buy MYR1.41 - - - Asia
Malaysia (KAF) - KAF: Transport
Malaysia Airports (KUL: MAHB MK, MYR7.18 , Sell) ▶▶
Announces rights price
Pengiran Aizuddin+603 2168 8095
Key Takeaway
Following the acquisition of ISG earlier this month, MAHB has fixed the rights issue price at RM4.78 per share. The new shares issuance results in significantEPS dilution on our earnings forecasts. Maintain Sell with a new ex rights TP of RM5.20. Valuations remain expensive with minimal yield support.
Rating Price target Curr. Q (e) Current year (e) Next year (e) Est. type Region
Sell ▼MYR5.80 to MYR5.20 - - - Asia
page 17 of 27
Please see important disclosure information on pages 25 - 27 of this report.
PrimeTime US
January 28, 2015
Media - Media & Entertainment
Madison Square Garden (NASDAQ: MSG, $75.22 , HOLD) ▶▶
Compelling Asset Story - But No Slam Dunk at Current Levels
John Janedis, CFA(212) 284-2187
Key Takeaway
We are initiating coverage of MSG with a Hold rating and an $85 PT. As the owner of the Knicks, Rangers, the Garden, and two RSNs, MSGis in a unique position to capitalize on the rising value of sports content. Given the proposed spin, upside will be a function of furthernarrowing of the public/ private market discount, which may be difficult to achieve absent an asset sale.
Rating Price target Curr. Q (e) Current year (e) Next year (e) Est. type Region
HOLD $85.00 $0.75 $1.72 $2.14 EPS Americas
Property - China Property
China Property▶▶
Accessibility to Funding and New Land
Venant Chiang+852 3743 8013
Key Takeaway
Market noise remains mixed as overall sentiment continues to be negatively biased. We see risk and opportunity. Sales outlook should bepositive on loosened credit, but weaker developers will become marginalized in terms of expansion and seeking funds. Outperformancewill be delivered by strong players who can refine their capital structure and add NAV. Buy especially on weakness for COLI, CR Land,Vanke, Longfor and Sunac.
Property - Japan Property
Japan Property▶▶
Major Developers to Dominate Condo Markets
Chang Han Joo, CFA+813 5251 6155
Key Takeaway
Despite some headwinds, we believe the dominance of major developers will continue in the condo markets. Our most preferred exposurein the developer space is Mitsui Fudosan (8801 JP, BUY, TP: ¥4,200) for its diversified business model and well capitalised balance sheet.It was the No. 1 condo seller in 2013 and we believe it will maintain its competitiveness with improving margins.
S. Korea (Mirae) - Mirae: Construction
GS Engineering & Construction Corp (KSE: 006360 KS, KRW22,750 ,Hold) ▶▶
Too early for earnings normalization
Kwangsoo Lee+82 2 3774 1457
Key Takeaway
GS E&C reported 4Q14 consolidated revenue of KRW2.7tn (20.1%, QoQ), operating profit of KRW34bn (44.6%, QoQ), and pre-tax profits of 24bn (103.5%,QoQ), in line with our estimates. We believe the continuous improvement in its earnings in 2014, backed by solid profitability of the housing business in 4Q14,should reduce earnings uncertainty. Despite the fact that 4Q14 earnings were in line with our estimates, we maintain our HOLD rating on GS E&C, due to thepossibility of: 1) an increase in the COGS/revenue ratio of low-margined overseas projects; and 2) the reflection of one-off costs from the housing business in2015. Despite the company’s shift to profitability in 2014, we think a full-fledged recovery has yet to begin, as this will require structural normalization.
Rating Price target Curr. Q (e) Current year (e) Next year (e) Est. type Region
Hold ▼KRW31,000 to KRW25,000 - - - Asia
page 18 of 27
Please see important disclosure information on pages 25 - 27 of this report.
PrimeTime US
January 28, 2015
S. Korea (Mirae) - Mirae: Consumer
FILA Korea Ltd (KSE: 081660 KS, KRW113,500 , Buy) ▶▶
Entering transitional period
Ted Kim+82 3774 3911
Key Takeaway
We expect Fila Korea (FK)’s 2015 earnings to remain flat YoY, due to likely stagnant domestic sales and slower sales growth from its US subsidiary. However,we think the company is still highly likely to see improved enterprise value through the IPO of Acushnet. We expect Acushnet to go public in 2016, despite arecent media report speculating about a possible IPO within 2015.
Rating Price target Curr. Q (e) Current year (e) Next year (e) Est. type Region
Buy KRW130,000 - - - Asia
S. Korea (Mirae) - Mirae: IT Hardware
LG Innotek Co Ltd (KSE: 011070 KS, KRW107,000 , Buy) ▶▶
Apple’s iPhone sales to remain solid in 2015
Jinho Cho+82 2 3774 3831
Key Takeaway
LG Innotek reported 4Q14 sales of KRW1.8tn and operating profit of KRW58bn, falling short of our and consensus estimates (KRW66.6bn and KRW64.9bn,respectively) by 10%. The weaker-than-expected operating profit is due to a decrease in LED business sales. 4Q14 net profit came in at -KRW5.7bn, significantlybelow the consensus of KRW31.9bn, owing to an increase in deferred tax. Meanwhile, Apple recorded 4Q14 shipments of iPhone and iPad of 74.5m units(+90% QoQ, +46% YoY) and 21.4m units (+74% QoQ, -18% YoY), respectively.
Rating Price target Curr. Q (e) Current year (e) Next year (e) Est. type Region
Buy ▼KRW140,000 toKRW130,000
- - - Asia
S. Korea (Mirae) - Mirae: Retail
LG Household & Health Care Ltd (KSE: 051900 KS, KRW626,000 ,Buy) ▶▶
Solid 4Q14 earnings
Yumi Park+82 2 3774 6818
Key Takeaway
LG Household & Health Care (LG H&H) released 4Q14 results after market close on 27 January. LG H&H’s 4Q14 operating profit exceeded our and Bloombergconsensus estimates by 7.2% and 7.1%, respectively. We expect such strong earnings to continue into 2015, backed by an increase in Chinese tourists and anearnings turnaround in the beverage division. Maintain BUY.
Rating Price target Curr. Q (e) Current year (e) Next year (e) Est. type Region
Buy KRW750,000 - - - Asia
page 19 of 27
Please see important disclosure information on pages 25 - 27 of this report.
PrimeTime US
January 28, 2015
S. Korea (Mirae) - Mirae: Steel & Metals
SeAH Besteel Corp. (KSE: 001430 KS, KRW30,300 , Buy) ▶▶
Earnings beat expectations
Jaekwang Rhee+82 3774 6022
Key Takeaway
SeAH Besteel’s 4Q14 results beat market consensus by 21.7% and our estimate by 7.6%, backed by improved roll margin on the drop in steel scrap prices (thekey raw material). The share price has been weak since early December 2014 amid concerns over the financial burden of acquiring POSCO Specialty Steel.However, as we expect the concerns to ease following the finalization of the acquisition contract (slated for end-February), we recommend buying the sharesat the current price level. The shares are currently trading at FY15E P/E of 8.5x.
Rating Price target Curr. Q (e) Current year (e) Next year (e) Est. type Region
Buy KRW48,000 - - - Asia
Taiwan (Fubon) - Fubon: Semiconductors
Powertech Technology Inc (TSEC: 6239 TT, TWD52.80 , Neutral) ▶▶ Carlos Peng+8862 66066687
Key Takeaway
Rating Price target Curr. Q (e) Current year (e) Next year (e) Est. type Region
Neutral ▲TWD52.00 to TWD57.00 - - - Asia
Taiwan (Fubon) - Fubon: Travel & LeisureTaiwan (Fubon) - TechnologyTechnology - Computer Services & IT Consulting
Total System Services, Inc. (NYSE: TSS, $34.22 , HOLD) ▶▶
A Mixed Bag
Jason Kupferberg(646) 805 5412
Key Takeaway
TSS reported 4Q results with revs/adjusted EPS modestly ahead of JEFe/Street. While overall initial F15 guidance was largely in-line, webelieve segment specific commentary provides ammunition for both bulls (N. America growth in mid-teens), and bears (flat const. currint'l growth, modest merchant growth, and falling Netspend margins). Amid mixed fundamentals, we believe the new share repurchaseauthorization will likely provide support for shares.
Rating Price target Curr. Q (e) Current year (e) Next year (e) Est. type Region
HOLD $33.00 - - - EPS Americas
Technology - Computer Services & IT Consulting
Amdocs, Ltd. (NYSE: DOX, $47.54 , HOLD) ▶▶
Aside from FX, A Solid Print
Jason Kupferberg(646) 805 5412
Key Takeaway
F1Q revs were modestly below JEFe/Street, largely due to FX. However, pro forma EPS, ex benefit from lower than JEFe taxes/interestexpense, was in-line, helped by decent margin performance. F15 reported revs guidance was lowered by 1% y/y, due to FX, but pro-formaEPS guidance was maintained. We like DOX's execution but believe stronger revs growth would be required for multiple to expand fromcurrent levels (14.2x C15 P/E). Maintain Hold.
Rating Price target Curr. Q (e) Current year (e) Next year (e) Est. type Region
HOLD $46.00 - - - EPS Americas
page 20 of 27
Please see important disclosure information on pages 25 - 27 of this report.
PrimeTime US
January 28, 2015
Technology - Interactive Entertainment
Electronic Arts Inc. (NASDAQ: EA, $48.41 , HOLD) ▶▶
Dragon Age: Inquisition Drives a Big Beat for EA
Jefferies US InteractiveEntertainment Team
Key Takeaway
Results were solid; quality games + opex discipline drove record cash flow in C2014. We remain somewhat cautious on the March releaseBattlefield Hardline. We are more constructive on December release Star Wars Battlefront, which is the key focus for F'16, in our opinion.High margin digital revenue (led by Ultimate Team) exceeded 50% of total (TTM) for the first time ever, a positive milestone given digitalrevenue is inherently more profitable.
Rating Price target Curr. Q (e) Current year (e) Next year (e) Est. type Region
HOLD ▲$38.00 to $47.00 $0.23 $2.07 ▲ $2.35 - EPS Non-GAAP
Americas
Technology - Internet
Internet▶▶
4Q14 Internet & Interactive Entertainment Preview
Jefferies US Internet [email protected]
Key Takeaway
Heading into the 4Q print, we see continuation of the secular shift from offline to online and positive trends in online ad budgets. In theeCommerce space, we saw mixed results but we think AMZN stole Christmas again despite continuing pressure on discretionary spenddue to tepid wage growth. In 4Q, FX was an even bigger headwind than in 3Q. On the margin, we favor online ad names over eCommercenames.
Technology - Internet
Yahoo!, Inc. (NASDAQ: YHOO, $47.99 , BUY) ▶▶
Tax-Free Spin-Off Announced! Raise PT to $61 and Reiterate Buy
Jefferies US Internet [email protected]
Key Takeaway
Management announced a plan for the remaining BABA shares to be spun-off in a tax-free transaction. We believe a tax-efficienttransaction provides ~30% upside from here, excluding any gains in Alibaba, so we're reiterating our Buy.
Rating Price target Curr. Q (e) Current year (e) Next year (e) Est. type Region
BUY ▲$53.00 to $61.00 $0.15 $0.88 ▼ $0.75 $0.74 EPS Americas
Technology - IT Hardware
Apple Inc. (NASDAQ: AAPL, $109.14 , HOLD) ▶▶
Monster iPhone Quarter - Maintain Hold
Sundeep Bajikar(415) 229-1552
Key Takeaway
FQ1 EPS were 9% higher than our estimate, which was 9% above the Street's. We remain Hold-rated on AAPL as we are concerned Apple isat risk of losing its "cool" factor this year to Samsung's high-end phones featuring flexible displays, more advanced 14nm semiconductorcomponents, and attractive designs. We continue to think Apple needs to raise its game in Cloud Services to mitigate iOS hardware risk.
Rating Price target Curr. Q (e) Current year (e) Next year (e) Est. type Region
HOLD ▲$120.00 to $124.00 $2.15 ▲ $2.31 $8.52 ▲ $9.15 $8.89 ▲ $9.31 EPS Americas
page 21 of 27
Please see important disclosure information on pages 25 - 27 of this report.
PrimeTime US
January 28, 2015
Technology - IT Hardware
Western Digital (NASDAQ: WDC, $97.63 , BUY) ▶▶
Solid FQ2; What Pricing Pressure? Reiterate Buy
James Kisner, CFA(713) 308-4509
Key Takeaway
Western Digital reported solid Q2 results; gross margins and ASPs were better-than-expected. Guidance was below Street butunsurprising. Importantly, WDC is not seeing the pricing pressure cited by STX. WDC remains our Top Pick in IT Hardware. Reiterate Buy.
Rating Price target Curr. Q (e) Current year (e) Next year (e) Est. type Region
BUY ▼$129.00 to $128.00 $2.14 ▼ $1.95 $8.61 ▼ $8.30 $9.78 EPS Americas
Technology - Semiconductors
Intel Corporation (NASDAQ: INTC, $34.19 , BUY) ▶▶
INTC-MSFT Decoupling - Reiterate Buy
Mark Lipacis(415) 229-1438
Key Takeaway
We think MSFT's weak outlook led INTC to underperform the SPX by 320 bps yesterday. We show that INTC and MSFT shipments havedecoupled as x86-based PCs like Chrome and MAC have taken share from Windows, and Intel has penetrated Android tablets. We thinkthis decoupling is not well understood by the Street, and view Intel's recent weakness as a particular buying opportunity.
Rating Price target Curr. Q (e) Current year (e) Next year (e) Est. type Region
BUY $50.00 $0.48 $2.75 $3.14 EPS Americas
Technology - Software
VMware, Inc. (NYSE: VMW, $80.61 , BUY) ▶▶
Strong 4Q; 2015 Guide Reduced as Expected, Though Cash Flow MuchLower
DiFucci & Zelnick(212) 284-2196
Key Takeaway
VMW reported strong 4Q results and guided below consensus as expected due primarily to FX effects, but also a move to more subscriptionrevenue. 2015 cash flow guidance was lower than expected due to one-time items. While our VMW thesis remains largely intact, we can’tignore reduced cash flow forecasts, which affects our DCF. We remain overweight VMW, but are lowering our PT to $104 (30% upside)from $128.
Rating Price target Curr. Q (e) Current year (e) Next year (e) Est. type Region
BUY ▼$128.00 to $104.00 $0.87 ▼ $0.83 $4.03 ▼ $4.00 $4.71 EPS Americas
Telecommunications - Telecom Services
AT&T Inc. (NYSE: T, $32.81 , BUY) ▶▶
Margin Guidance Soothes, Phone-Only ARPU Declines Accelerate
Mike McCormack, CFA(212) 284-2516
Key Takeaway
AT&T posted mixed results, with Wireless profitability below already tempered expectations, while Wireline delivered an unexpectedpositive surprise. ARPU trends are worth monitoring, though Next sales should provide a catalyst for overall topline growth, whileelevated churn should dip in a seemingly less competitive start to the year. Guidance is likely to provide comfort, and the outlook postthe DTV/Nextel Mexico deal closures appear additive.
Rating Price target Curr. Q (e) Current year (e) Next year (e) Est. type Region
BUY $39.00 $0.65 $2.60 ▼ $2.57 $2.62 ▲ $2.64 EPS Americas
page 22 of 27
Please see important disclosure information on pages 25 - 27 of this report.
PrimeTime US
January 28, 2015
Telecommunications - Telecom Services
AT&T Inc. (NYSE: T, $33.18 , BUY) ▶▶
Wireless Challenges Evident
Mike McCormack, CFA(212) 284-2516
Key Takeaway
Though EPS of $0.55 was inline with our expectations, results were disappointing, particularly in the Wireless segment. Net additions werestronger than expected, contributing to weaker margins, though phone-only ARPU and churn fell short. However, Wireline (incl. partialqtr of CT) proved better than expected on both revenue and EBITDA, despite weaker sub metrics. Guidance appears inline, includingimproving wireless margins, which could surprise positively.
Rating Price target Curr. Q (e) Current year (e) Next year (e) Est. type Region
BUY $39.00 - - - EPS Americas
Thailand (Asia Plus) - Asia Plus: Property
Quality Houses PCL (SET: QH TB, THB3.96 , Buy) ▶▶
Transportation, Location, Location
Perth Kunakool, CFA(662) 680 1281
Key Takeaway
Yesterday QH held its 2015 Business Plan meeting and introduced its new CEO, former transport minister, Dr. Chadchart Sittipunt. This year, the company’smajor focus will be on brand alignment and improving the quality of its products and after-sales service. Management has set lofty targets for this year, withrevenue and presales expected to grow 20-25%. However, we are more conservative and maintain our forecasts of 13.5% revenue growth and 20% earningsgrowth.
Rating Price target Curr. Q (e) Current year (e) Next year (e) Est. type Region
Buy THB5.00 - - - Asia
Jefferies Events For further details please call your Jefferies contact
ConferencesTitle Dates Location
Jefferies 4th Annual ASIA EXPERT Summit 2/4/2015 - 2/5/2015 Central
Jefferies 2015 Boston CIO Summit, February 23 - Boston 2/23/2015 Boston
Jefferies 2015 Dental Summit 2/26/2015 Chicago
Jefferies 2015 Building and Construction Summit 3/11/2015 Boston
Jefferies 2015 3D Printing Summit 3/26/2015 New York
Jefferies 2015 Electronic Payments Summit 4/7/2015 New York
Jefferies 2015 Hoare Govett UK Companies Summit 5/12/2015 London
Company MarketingTitle Dates Location
Paychex Inc (PAYX) 1/28/2015 New York
Premier Foods PLC (PFD LN) 1/28/2015 - 2/27/2015 Edinburgh, London
RNTSMedia pe (RNTS LX) 1/28/2015 London
Hays PLC (HAS LN) 1/29/2015 Frankfurt
Nabtesco Corp (6268 JP) - Group Conference Call 1/30/2015 Tokyo
FashionAndYou 2/2/2015 London
Far East Consortium International Ltd/HK (35 HK) 2/2/2015 London
National Fuel Gas Co (NFG) 2/2/2015 - 2/3/2015 Chicago, Kansas City
ProNAi Therapeutics (Private) 2/3/2015 - 2/19/2015 Baltimore, Boston, New York, San Francisco
Artisan Partners Asset Management Inc (APAM) 2/4/2015 - 2/5/2015 London
Xenon Pharmaceuticals Inc (XENE) 2/4/2015 - 2/12/2015 Boston, San Francisco
page 23 of 27
Please see important disclosure information on pages 25 - 27 of this report.
PrimeTime US
January 28, 2015
Novozymes A/S (NZMB GR) 2/6/2015 Boston
Novo Nordisk A/S (NOVOB DC) 2/9/2015 Denver
Fubon Financial Holding Co Ltd (2881 TT) 2/9/2015 - 2/13/2015 Boston, Chicago, Des Moines, Kansas City,New York, San Francisco
Hyundai Motor Co 2/9/2015 - 2/13/2015 Hong Kong, Singapore
TimkenSteel Corp (TMST) 2/9/2015 - 2/12/2015 Baltimore, Boston, New York, Princeton
Luminex Corp (LMNX) 2/10/2015 Boston
United Technologies Corp (UTX) - Boston Bruins vs Dallas Stars 2/10/2015 - 2/11/2015 Boston
Analyst MarketingTitle Dates Location
Randal "Randy" Konik 1/29/2015 Mid-Atlantic
Peter Welford 1/29/2015 Milan
Christopher "Chris" Sighinolfi 1/29/2015 - 1/30/2015 Atlanta, Orlando, Tampa
Stephen "Steve" Volkmann 2/2/2015 - 2/3/2015 Chicago
Anthony Codling, Sam Cullen 2/2/2015 - 2/5/2015 Chicago, Des Moines, New York
Howard Rubel 2/2/2015 - 2/3/2015 Denver, Kansas City
Laurence Alexander 2/2/2015 Toronto
David Steinberg 2/2/2015 Boston
Baron Nie - China Insurance 2/2/2015 - 2/6/2015 Boston, Chicago, Kansas City, New York, SanFrancisco
Zhi Aik Yeo 2/2/2015 - 2/8/2015 Abu Dhabi, Amsterdam, Copenhagen,Edinburgh, London, Rotterdam, Stockholm,
Vienna
Hyunwoo Doh, Jinho Cho, Mirae (Jefferies Korea co-branded alliance partner) 2/2/2015 - 2/6/2015 Hong Kong, Singapore
Lavina Quadros 2/2/2015 - 2/5/2015 Hong Kong, Singapore
Chang Han Joo 2/2/2015 - 2/6/2015 Copenhagen, Edinburgh, London, Paris,Stockholm
Sean Darby 2/2/2015 - 2/6/2015 Copenhagen, Edinburgh, London, Paris,Silkeborg
George Notter 2/2/2015 - 2/4/2015 Austin, Dallas, Houston, San Antonio
Ken Usdin 2/3/2015 Connecticut
Mark Wiltamuth 2/3/2015 Boston
Surinder Thind 2/3/2015 - 2/6/2015 London
James Vane-Tempest 2/3/2015 Edinburgh
Omar Fall 2/3/2015 Edinburgh
Peter Ward 2/4/2015 - 2/5/2015 Chicago, Minneapolis
Sundeep Bajikar 2/5/2015 Denver
Milan Radia 2/5/2015 Frankfurt
Yukihiro Kumagai - Japan Machinery 2/9/2015 - 2/13/2015 Los Angeles, Mid-Atlantic, New York, SanFrancisco, Santa Barbara, Toronto, West Coast,
Wilmington
Jason Kupferberg & Ramsey El-Assal 2/9/2015 Boston
James Grzinic 2/9/2015 - 2/12/2015 Atlanta, Austin, Boston, Houston, Miami, NewYork
David Steinberg 2/9/2015 - 2/10/2015 Austin, Dallas, Houston
Marcin Spiewak 2/9/2015 - 2/13/2015 Copenhagen, Edinburgh, Geneva, London,Paris, Stockholm
Laban Yu 2/9/2015 - 2/10/2015 Singapore
Govindarajan Chellappa - India Strategy & Auto/Consumers 2/9/2015 - 2/13/2015 Boston, Chicago, Des Moines, Midwest, NewYork, Princeton, West Coast
Ken Usdin 2/9/2015 - 2/12/2015 Frankfurt, Geneva, London, Zurich
Ward McCarthy 2/9/2015 Hong Kong
Mark Wiltamuth 2/9/2015 - 2/11/2015 Austin, Dallas, Houston, San Antonio
John DiFucci, Brad Zelnick 2/10/2015 Baltimore
Sundeep Bajikar 2/10/2015 - 2/11/2015 Southeast
page 24 of 27
Please see important disclosure information on pages 25 - 27 of this report.
PrimeTime US
January 28, 2015
Important DisclosuresAs is the case with all Jefferies employees, the analyst(s) responsible for the coverage of the financial instruments discussed in this report receivescompensation based in part on the overall performance of the firm, including investment banking income. We seek to update our research asappropriate, but various regulations may prevent us from doing so. Aside from certain industry reports published on a periodic basis, the largemajority of reports are published at irregular intervals as appropriate in the analyst's judgement.
Company Specific DisclosuresDan Fannon owns an equity position in Charles Schwab.Jefferies Group LLC is advising Bristol Myers Squibb on its business combination with Reckitt Benckiser Group Plc regarding Latin American licensesJefferies is acting as Financial Advisor to Monoprice Inc in connection with their sale to Bloucora Inc.Rebecca Forest holds a long, equity position in DVAX.Timothy O'Shea owns a long equity position of Google Inc. Common Stock. Sachin Khattar owns a long equity position in Google, Inc.Thomas Wei owns shares of A.P. Pharma common stock.Thomas Wei holds a long, equity poisition in Heron Therapeutics Inc.Rafi Hassan owns shares of Nividia Corporation common stock.
Meanings of Jefferies RatingsBuy - Describes stocks that we expect to provide a total return (price appreciation plus yield) of 15% or more within a 12-month period.Hold - Describes stocks that we expect to provide a total return (price appreciation plus yield) of plus 15% or minus 10% within a 12-month period.Underperform - Describes stocks that we expect to provide a total negative return (price appreciation plus yield) of 10% or more within a 12-monthperiod.The expected total return (price appreciation plus yield) for Buy rated stocks with an average stock price consistently below $10 is 20% or more withina 12-month period as these companies are typically more volatile than the overall stock market. For Hold rated stocks with an average stock priceconsistently below $10, the expected total return (price appreciation plus yield) is plus or minus 20% within a 12-month period. For Underperformrated stocks with an average stock price consistently below $10, the expected total return (price appreciation plus yield) is minus 20% within a 12-month period.NR - The investment rating and price target have been temporarily suspended. Such suspensions are in compliance with applicable regulations and/or Jefferies policies.CS - Coverage Suspended. Jefferies has suspended coverage of this company.NC - Not covered. Jefferies does not cover this company.Restricted - Describes issuers where, in conjunction with Jefferies engagement in certain transactions, company policy or applicable securitiesregulations prohibit certain types of communications, including investment recommendations.Monitor - Describes stocks whose company fundamentals and financials are being monitored, and for which no financial projections or opinions onthe investment merits of the company are provided.
Valuation MethodologyJefferies' methodology for assigning ratings may include the following: market capitalization, maturity, growth/value, volatility and expected totalreturn over the next 12 months. The price targets are based on several methodologies, which may include, but are not restricted to, analyses of marketrisk, growth rate, revenue stream, discounted cash flow (DCF), EBITDA, EPS, cash flow (CF), free cash flow (FCF), EV/EBITDA, P/E, PE/growth, P/CF,P/FCF, premium (discount)/average group EV/EBITDA, premium (discount)/average group P/E, sum of the parts, net asset value, dividend returns,and return on equity (ROE) over the next 12 months.
Jefferies Franchise PicksJefferies Franchise Picks include stock selections from among the best stock ideas from our equity analysts over a 12 month period. Stock selectionis based on fundamental analysis and may take into account other factors such as analyst conviction, differentiated analysis, a favorable risk/rewardratio and investment themes that Jefferies analysts are recommending. Jefferies Franchise Picks will include only Buy rated stocks and the numbercan vary depending on analyst recommendations for inclusion. Stocks will be added as new opportunities arise and removed when the reason forinclusion changes, the stock has met its desired return, if it is no longer rated Buy and/or if it triggers a stop loss. Stocks having 120 day volatility inthe bottom quartile of S&P stocks will continue to have a 15% stop loss, and the remainder will have a 20% stop. Franchise Picks are not intendedto represent a recommended portfolio of stocks and is not sector based, but we may note where we believe a Pick falls within an investment stylesuch as growth or value.
Risk which may impede the achievement of our Price TargetThis report was prepared for general circulation and does not provide investment recommendations specific to individual investors. As such, thefinancial instruments discussed in this report may not be suitable for all investors and investors must make their own investment decisions basedupon their specific investment objectives and financial situation utilizing their own financial advisors as they deem necessary. Past performance ofthe financial instruments recommended in this report should not be taken as an indication or guarantee of future results. The price, value of, andincome from, any of the financial instruments mentioned in this report can rise as well as fall and may be affected by changes in economic, financialand political factors. If a financial instrument is denominated in a currency other than the investor's home currency, a change in exchange rates may
page 25 of 27
Please see important disclosure information on pages 25 - 27 of this report.
PrimeTime US
January 28, 2015
adversely affect the price of, value of, or income derived from the financial instrument described in this report. In addition, investors in securities suchas ADRs, whose values are affected by the currency of the underlying security, effectively assume currency risk.
Distribution of RatingsIB Serv./Past 12
Mos.Rating Count Percent Count Percent
BUY 1055 51.89% 285 27.01%HOLD 823 40.48% 146 17.74%UNDERPERFORM 155 7.62% 7 4.52%
Other Important Disclosures
Jefferies Equity Research refers to research reports produced by analysts employed by one of the following Jefferies Group LLC (“Jefferies”) groupcompanies:
United States: Jefferies LLC which is an SEC registered firm and a member of FINRA.
United Kingdom: Jefferies International Limited, which is authorized and regulated by the Financial Conduct Authority; registered in England andWales No. 1978621; registered office: Vintners Place, 68 Upper Thames Street, London EC4V 3BJ; telephone +44 (0)20 7029 8000; facsimile +44(0)20 7029 8010.
Hong Kong: Jefferies Hong Kong Limited, which is licensed by the Securities and Futures Commission of Hong Kong with CE number ATS546;located at Suite 2201, 22nd Floor, Cheung Kong Center, 2 Queen’s Road Central, Hong Kong.
Singapore: Jefferies Singapore Limited, which is licensed by the Monetary Authority of Singapore; located at 80 Raffles Place #15-20, UOB Plaza2, Singapore 048624, telephone: +65 6551 3950.
Japan: Jefferies (Japan) Limited, Tokyo Branch, which is a securities company registered by the Financial Services Agency of Japan and is a memberof the Japan Securities Dealers Association; located at Hibiya Marine Bldg, 3F, 1-5-1 Yuraku-cho, Chiyoda-ku, Tokyo 100-0006; telephone +813 52516100; facsimile +813 5251 6101.
India: Jefferies India Private Limited (CIN - U74140MH2007PTC200509), which is licensed by the Securities and Exchange Board of India as a MerchantBanker (INM000011443) and a Stock Broker with Bombay Stock Exchange Limited (INB011491033) and National Stock Exchange of India Limited(INB231491037) in the Capital Market Segment; located at 42/43, 2 North Avenue, Maker Maxity, Bandra-Kurla Complex, Bandra (East) Mumbai 400051, India; Tel +91 22 4356 6000.
This material has been prepared by Jefferies employing appropriate expertise, and in the belief that it is fair and not misleading. The information setforth herein was obtained from sources believed to be reliable, but has not been independently verified by Jefferies. Therefore, except for any obligationunder applicable rules we do not guarantee its accuracy. Additional and supporting information is available upon request. Unless prohibited by theprovisions of Regulation S of the U.S. Securities Act of 1933, this material is distributed in the United States ("US"), by Jefferies LLC, a US-registeredbroker-dealer, which accepts responsibility for its contents in accordance with the provisions of Rule 15a-6, under the US Securities Exchange Act of1934. Transactions by or on behalf of any US person may only be effected through Jefferies LLC. In the United Kingdom and European EconomicArea this report is issued and/or approved for distribution by Jefferies International Limited and is intended for use only by persons who have, or havebeen assessed as having, suitable professional experience and expertise, or by persons to whom it can be otherwise lawfully distributed. JefferiesInternational Limited has adopted a conflicts management policy in connection with the preparation and publication of research, the details of whichare available upon request in writing to the Compliance Officer. Jefferies International Limited may allow its analysts to undertake private consultancywork. Jefferies International Limited’s conflicts management policy sets out the arrangements Jefferies International Limited employs to manage anypotential conflicts of interest that may arise as a result of such consultancy work. For Canadian investors, this material is intended for use only byprofessional or institutional investors. None of the investments or investment services mentioned or described herein is available to other personsor to anyone in Canada who is not a "Designated Institution" as defined by the Securities Act (Ontario). In Singapore, Jefferies Singapore Limited isregulated by the Monetary Authority of Singapore. For investors in the Republic of Singapore, this material is provided by Jefferies Singapore Limitedpursuant to Regulation 32C of the Financial Advisers Regulations. The material contained in this document is intended solely for accredited, expert orinstitutional investors, as defined under the Securities and Futures Act (Cap. 289 of Singapore). If there are any matters arising from, or in connectionwith this material, please contact Jefferies Singapore Limited, located at 80 Raffles Place #15-20, UOB Plaza 2, Singapore 048624, telephone: +656551 3950. In Japan this material is issued and distributed by Jefferies (Japan) Limited to institutional investors only. In Hong Kong, this report isissued and approved by Jefferies Hong Kong Limited and is intended for use only by professional investors as defined in the Hong Kong Securities andFutures Ordinance and its subsidiary legislation. In the Republic of China (Taiwan), this report should not be distributed. The research in relation tothis report is conducted outside the PRC. This report does not constitute an offer to sell or the solicitation of an offer to buy any securities in the PRC.PRC investors shall have the relevant qualifications to invest in such securities and shall be responsible for obtaining all relevant approvals, licenses,verifications and/or registrations from the relevant governmental authorities themselves. In India this report is made available by Jefferies India PrivateLimited. In Australia this information is issued solely by Jefferies International Limited and is directed solely at wholesale clients within the meaning ofthe Corporations Act 2001 of Australia (the "Act") in connection with their consideration of any investment or investment service that is the subject ofthis document. Any offer or issue that is the subject of this document does not require, and this document is not, a disclosure document or productdisclosure statement within the meaning of the Act. Jefferies International Limited is authorised and regulated by the Financial Conduct Authorityunder the laws of the United Kingdom, which differ from Australian laws. Jefferies International Limited has obtained relief under Australian Securitiesand Investments Commission Class Order 03/1099, which conditionally exempts it from holding an Australian financial services licence under the
page 26 of 27
Please see important disclosure information on pages 25 - 27 of this report.
PrimeTime US
January 28, 2015
Act in respect of the provision of certain financial services to wholesale clients. Recipients of this document in any other jurisdictions should informthemselves about and observe any applicable legal requirements in relation to the receipt of this document.
This report is not an offer or solicitation of an offer to buy or sell any security or derivative instrument, or to make any investment. Any opinionor estimate constitutes the preparer's best judgment as of the date of preparation, and is subject to change without notice. Jefferies assumes noobligation to maintain or update this report based on subsequent information and events. Jefferies, its associates or affiliates, and its respective officers,directors, and employees may have long or short positions in, or may buy or sell any of the securities, derivative instruments or other investmentsmentioned or described herein, either as agent or as principal for their own account. Upon request Jefferies may provide specialized research productsor services to certain customers focusing on the prospects for individual covered stocks as compared to other covered stocks over varying timehorizons or under differing market conditions. While the views expressed in these situations may not always be directionally consistent with the long-term views expressed in the analyst's published research, the analyst has a reasonable basis and any inconsistencies can be reasonably explained.This material does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needsof individual clients. Clients should consider whether any advice or recommendation in this report is suitable for their particular circumstances and,if appropriate, seek professional advice, including tax advice. The price and value of the investments referred to herein and the income from themmay fluctuate. Past performance is not a guide to future performance, future returns are not guaranteed, and a loss of original capital may occur.Fluctuations in exchange rates could have adverse effects on the value or price of, or income derived from, certain investments. This report has beenprepared independently of any issuer of securities mentioned herein and not in connection with any proposed offering of securities or as agent of anyissuer of securities. None of Jefferies, any of its affiliates or its research analysts has any authority whatsoever to make any representations or warrantyon behalf of the issuer(s). Jefferies policy prohibits research personnel from disclosing a recommendation, investment rating, or investment thesisfor review by an issuer prior to the publication of a research report containing such rating, recommendation or investment thesis. Any comments orstatements made herein are those of the author(s) and may differ from the views of Jefferies.
This report may contain information obtained from third parties, including ratings from credit ratings agencies such as Standard & Poor’s.Reproduction and distribution of third party content in any form is prohibited except with the prior written permission of the related third party.Third party content providers do not guarantee the accuracy, completeness, timeliness or availability of any information, including ratings, and arenot responsible for any errors or omissions (negligent or otherwise), regardless of the cause, or for the results obtained from the use of such content.Third party content providers give no express or implied warranties, including, but not limited to, any warranties of merchantability or fitness for aparticular purpose or use. Third party content providers shall not be liable for any direct, indirect, incidental, exemplary, compensatory, punitive,special or consequential damages, costs, expenses, legal fees, or losses (including lost income or profits and opportunity costs) in connection withany use of their content, including ratings. Credit ratings are statements of opinions and are not statements of fact or recommendations to purchase,hold or sell securities. They do not address the suitability of securities or the suitability of securities for investment purposes, and should not be reliedon as investment advice.
Jefferies research reports are disseminated and available primarily electronically, and, in some cases, in printed form. Electronic research issimultaneously available to all clients. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent ofJefferies. Neither Jefferies nor any officer nor employee of Jefferies accepts any liability whatsoever for any direct, indirect or consequential damagesor losses arising from any use of this report or its contents.
For Important Disclosure information, please visit our website at https://javatar.bluematrix.com/sellside/Disclosures.action or call 1.888.JEFFERIES
© 2015 Jefferies Group LLC
page 27 of 27
Please see important disclosure information on pages 25 - 27 of this report.
PrimeTime US
January 28, 2015