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DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, 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.

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27 May 2015

Global

Equity Research

Investment Strategy

Global Equity Strategy STRATEGY

Oil: excess speculation

■ We note that speculative positions in oil are excessive and appear to

have peaked. Ordinarily, this leads to a fall in the oil price. Additionally, if the

oil price rose significantly from here it would threaten Saudi Arabia's market

share strategy (which it implemented at an $80p/b oil price) especially with

shale capex being switched back on at $65p/b. Since 1860, bear markets in

oil have lasted 11 to 28 years, not 7 years. The recent strength in the dollar

points to a weaker oil price, tactically. Credit Suisse's house view is that oil

prices will weaken in the near-term, before rising to $71p/b in Q4.

■ We are underweight IOCs: P/B relatives are back to their norm (though

book value is, if anything, more impaired than normal); adjusting for scrip,

the dividend yield relative to the market is back to its norm. Above all, on an

oil price of $76p/b, the FCF yield of the global IOC sector is forecast by our

analysts to be just 3.4% in 2016. Recently, capex cuts appear to have

slowed. Sell-side net buy recommendations have risen sharply to levels from

which, 75% of the time, the sector has subsequently underperformed over

the following 3 and 6 months.

■ We would look to buy some of those areas that have suffered from the

recent rise in oil price. We add money to Airlines: 10% off the oil price

ordinarily leads to c5% outperformance; P/E relative is at the low end of its

range at a 43% discount to the market; earnings revisions are still better

than the market (in spite of the rise in the oil price) suggesting that capex to

sales being below its norm is still resulting in capital discipline (our airlines

margin proxy, calculated as the gap between airlines CPI and fuel CPI, is

abnormally supportive). Buy IAG, easyJet and Ryanair.

■ We re-iterate our recent upgrade of UK retailing to overweight, if oil

peaks near term. The sector is abnormally cheap versus its peers and its

historical norm and the outlook for real disposable income growth is very

good. Earnings revisions are positive. Buy Kingfisher, Poundland, B&M.

We would look to buy some of the energy-consuming areas, particularly

those that have underperformed since the trough in the oil price and have

pricing power. The following stocks are cheap on Credit Suisse HOLT®,

have positive earnings revisions and are Outperform-rated by our analysts:

Ryanair, easyJet, Akzo Nobel. We would buy India and Korea: these are

two of the biggest oil importers, and when India has been this oversold it has

outperformed historically. We would be cautious on Russia-exposed

European stocks which tend to track the oil price (e.g., Oriflame Cosmetics,

Adidas, Teliasonera).

Research Analysts

Andrew Garthwaite

44 20 7883 6477

[email protected]

Marina Pronina

44 20 7883 6476

[email protected]

Robert Griffiths

44 20 7883 8885

[email protected]

Yiagos Alexopoulos

44 20 7888 7536

[email protected]

Nicolas Wylenzek

44 20 7883 6480

[email protected]

27 May 2015

Global Equity Strategy 2

Table of contents Oil: excess speculation 3

Integrated Oil: an underweight 5 Who are the potential beneficiaries if oil falls? 8 Airlines: add to weightings 8 UK retailing: re-iterate overweight 10 Oil importing GEMs 12 Energy consuming stocks 15 Cautious of Russian exposure 15

Appendix 18 Long-term oil price 18 Sell-side net buy recommendation backtest 18 UK retail sales volume 19 Russia vs the oil price 19 US IOCs 20 US airlines 21 US retailing 22 Sector weightings 24

27 May 2015


Oil: excess speculation A number of factors make us a little nervous on the near-term outlook for the oil price:

■ Speculative positions are extended: Net long positions in oil have risen to all-time

highs. Historically, once very elevated speculative positions start to roll over, the oil

price has fallen significantly (with the oil price falling by between 12% and 60% on the

last 4 occasions that speculative positions rolled over from very high levels). In recent

days, just such a peak in speculative positions seems to have been seen.

Figure 1: Speculative positions in oil are extended Figure 2: In recent years, the oil price has fallen by

around 30% following peaks in net long positions

40

50

60

70

80

90

100

110

120

130

140

0

50,000

100,000

150,000

200,000

250,000

300,000

2011 2012 2013 2013 2014 2015

ICE Brent managed money net long contracts

Brent in USD/bbl, rhs

Date of peakOil price at

peak

Subsequent oil

price drop

Duration (in

months)

29/03/2012 125 -28% 2.8

12/02/2013 119 -18% 2.1

29/08/2013 117 -12% 2.3

20/06/2014 116 -60% 6.9

Average -29% 3.5

Oil price performance after peaks in net long positions

Source: The BLOOMBERG PROFESSIONAL™ service, Credit

Suisse research


Suisse research

■ Saudi Arabia's market share battle isn't over yet. Saudi Arabia introduced its

market share strategy when the oil price was at $80p/b, and this change of strategy

was subsequently backed up by near record production. In other words, Saudi Arabia

wished to avoid the repetition of its 1980 to 1985 experience when it acted as swing

producer to non-OPEC production, which resulted in a nearly 75% fall in its output.

Consensus expects the oil price to rise close to $80pb by the end of 2016. However,

the last time Saudi Arabia introduced a 'market share' strategy, it took 5 years for the

oil price to return to the level it was at when the 'market share' strategy was

introduced. We would also note, in this context, that the oil price is now performing

significantly better than it did the last time Saudi Arabia introduced a market share

strategy (in November 1985).

We believe that if the oil price were to rise significantly from here, then Saudi Arabia

would start to lose its market share. Indeed, at $65p/b, EOG Resources has stated

that it would resume double-digit production growth, as reported in the FT, 5 May

2015. Against that backdrop, the IEA has stated that it is 'premature' to conclude that

OPEC 'has won the battle for market share' (see the FT, 13 May).

■ The oil price is now modestly overbought. The oil price has moved from being

oversold to overbought.

27 May 2015


Figure 3: Oil is no longer oversold

Figure 4: The current oil price cycle vs Nov 1985, the last

time when Saudi Arabia opted for a strategy of market

share. It took 5yrs for the oil price to reach previous highs

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

1984 1989 1994 1999 2004 2009 2015

Brent Crude, deviation from 6mma

Average (+/- 1 SD)

0 30 60 90 120 150 180 210 240 270 300 330 360

20

30

40

50

60

70

80

90

100

110Oil price 365 working days after peak

25 Nov 1985

25 Aug 2014

Source: Thomson Reuters, Credit Suisse research Source: Thomson Reuters, Credit Suisse research

We also worry about four other factors impacting negatively on the oil price:

■ An optimistic consensus: There is very tight and clear consensus that the oil price

will rebound towards $75-$80p/b by the end of next year. The Bloomberg consensus

is $75 for year-end 2016, the 3-year forward price is $73.6p/b and the tone of

commentary from CEOs and oil traders in the media has turned notably more

optimistic;

■ Bear markets have tended to last significantly longer: Historically, oil bear markets

have lasted 11 to 28 years (see Appendix);

■ Lower subsidies and environmental legislation will impact on demand: Our oil

team highlights that oil demand growth in the OECD is currently 1.2% Y/Y, a three-

year high. We are concerned, however, that the rebound in demand is more limited

than would normally be the case with half of demand growth in the past 10 years

having come from oil exporters; oil subsidies in a number of emerging markets have

been reduced significantly (in India and Indonesia, in particular); and tougher

environmental considerations are likely to weigh on demand (CO2 emissions

standards, the requirement for MPG for US cars to be 52.5 by 2025, nearly double

today's level).

■ The oil trade has been correlated to the dollar (with Figure 6 illustrating the

relationship between Brent and the dollar trade weighted index). On the basis of this

relationship, the move higher in the dollar over the past week is consistent with the oil

price falling back to below $60.

27 May 2015


Figure 5: Consensus expects the oil price to rise steadily

above $77 next year

Figure 6: The dollar TWI and the oil price have been

closely related in recent years

63

6972 72

77

40

50

60

70

80

90

100

110

Q3 15 Q4 15 Q1 16 Q2 16 Q3 16

Median forecast (with high/low band)CS forecastBrent forward

Bloomberg consensus forecasts for Brent

40

50

60

70

80

90

100

110

12082

87

92

97

102

107

Jan 13 Jul 13 Jan 14 Jul 14 Jan 15

US TWI, inverted, lhs

Oil brent, rhs


Suisse estimates

Source: Thomson Reuters, Credit Suisse research

In Oil Sense: Taking Stock, 7 May 2015, our energy analyst Jan Stuart suggested oil

markets are due a correction. The team forecast that Brent crude will fall in the near term,

but ultimately end the year at $71.00 (for Brent). We agree.

Integrated Oil: an underweight

We believe investors should be underweight IOCs. Valuations are average, at best: the

IOCs now have a dividend yield relative to the market which, adjusted for scrip (25% of

total dividends), is back to its average. The P/B relative of the sector is also back to its

norm (and book value, we believe, is more impaired than normal because much of their

asset life depends on high cost oil whose book value is now questionable in a lower cost

oil regime). We show the same charts for the US sector in the appendix.

Figure 7: DY relative to the market of the IOCs are back to

average after scrip

Figure 8: With P/B relative also back to average

70%

90%

110%

130%

150%

170%

190%

210%

230%

1995 1999 2003 2007 2011 2015

Europe IOCs DY rel market

Average (+/- 1sd)

Assuming a 25% aggregatescript

40%

60%

80%

100%

120%

140%

160%

1995 1999 2003 2007 2011 2015

Europe IOCs ex BP P/B rel market

Average


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27 May 2015


Furthermore, IOCs offer the lowest 2016 consensus free cash flow yield of all sectors. In

fact, on our analysts numbers and assuming spot energy prices as well as their base case

(76 USD Brent in 2016), none of the European oil majors are able to cover their dividends

on free cash flow (in contrast to some of the major miners).

Figure 9: None of the oil majors cover their dividend with

free cash flow on our analysts' 2016 forecasts…

Figure 10: … the same is the case on our team's base

case assumptions

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

Gle

n

RIO

BH

P

RD

S

AA

L

TO

TA

L

BP

(pr

e-M

acon

do)

BP

(po

stM

acon

do)

FCF yield

DY (including scrip)

2016 estimate assuming spot oil (67 USD Brent) /commodity prices

0%

1%

2%

3%

4%

5%

6%

7%

RD

S

Exx

onM

obil

Tot

al

BP

(pr

e-M

acon

do)

BP

(po

stM

acon

do)

Che

vron

FCF yield Dividend yield (incl. scrip)

2016 estimate assuming CS base case (76 USD Brent)

Source: CS mining / oil & gas equity research team, Credit Suisse

estimates

Source: CS oil & gas research team, Credit Suisse estimates

We believe that the market should not reward dividends being paid out of debt or

disposals (for example, GSK's dividend yield is high at 5.1% because investors see only

75% of the dividend being covered by free cash flow). The debate is whether capex gets

cut significantly further than the analysts forecast. That partly depends on the oil price, but

we would note that US companies seemed to have stopped cutting capex and that the

flexible part of opex (S,G and A) is close to normal levels relative to capex.

Figure 11: S,G & A is 30% of capex for the oil sector Figure 12: 2015 Capex estimates for major IOC have fallen

significantly, though not recently

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

SG&A/CAPEX (%)

55

65

75

85

95

105

115

Jan-14 Mar-14 Jun-14 Sep-14 Nov-14 Feb-15 May-15

Exxon Mobil Chevron

Conocophillips Occidental

2015 Capex estimates, YTD, Jan 2014 = 100


27 May 2015


The IOCs sector moved from being heavily oversold to being 1 standard deviation

overbought (though has now fallen back to only slightly above neutral levels).

Figure 13: Price momentum for the Pan European sector relative to the sector is neutral

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

2000 2003 2006 2009 2012 2015

Pan European energy, deviation from 6mma rel mkt Average (+/- 1 SD)


In addition, sell-side recommendations have now turned much more positive on the sector.

The last time net buy recommendations were at this level, the oil sector subsequently

underperformed the market on 75% of occasions over the following 3 and 6 months (see

Appendix).

Figure 14: Sell-side analysts have turned much more

positive on the sector

Figure 15: The sector's earnings momentum tend to

follow the oil price

2.1

2.3

2.5

2.7

2.9

3.1-15%

-10%

-5%

0%

5%

10%

1996 1999 2002 2005 2008 2011 2015

Europe IOCs on analyst recommendations rel to market (+=Buy; -=Sell)Analyst recommendations (1=Buy; 5=Sell)

-50

-40

-30

-20

-10

0

10

20

30

-80

-60

-40

-20

0

20

40

60

80

2007 2008 2009 2010 2011 2012 2013 2014 2015

Brent, 6m % chg

Pan European energy 12m forwardEPS, 6m %chg, rhs


Historically, this sector has been a serial value destroyer (the CFROI® per unit of the oil

price has fallen 75% since 2002).

On the positive side, the main supports for the sector are the high nominal yield (at 4.7%

on a trailing basis), the credit rating (AA), and earnings revisions (which unsurprisingly

tend to follow the oil price, as illustrated in Figure 15).

27 May 2015


Who are the potential beneficiaries if oil falls?

It might be worth considering some of the trades that might benefit from a fall in the oil

price.

Airlines: add to weightings

The airline team point out that IAG should retain most of the windfall gain from a lower oil

price given BA's attractive position at a full Heathrow, with budget airlines easyJet and

Ryanair occupying the middle ground, while Air France KLM and Lufthansa will likely see

benefits largely competed away over time. (See European Airlines: Pricing power trumps

falling fuel, 16 January).

Figure 16: 12-month forward P/E relative is low Figure 17: European airlines tend to outperform when the

oil price falls, and vice versa: 10% on the oil price tends

to mean 5% off airlines

20%

70%

120%

170%

220%

270%

320%

370%

2002 2004 2006 2008 2010 2012 2015

European Airlines 12m fwd P/E relEuropean Market

-80%

-60%

-40%

-20%

0%

20%

40%

60%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

European airlines relative 3m % chg

Oil price 3m % chg (rhs inverted)


In our view, airlines are a play on three separate themes:

■ Reasonable capital discipline. Despite the fall in the oil price and the investment

plans of the Middle Eastern state-backed operators, there is in general still reasonable

capital discipline, as illustrated by: (i) below average capex to sales; (ii) the very high

margin (our margin proxy is airline CPI less airline fuel costs) and (iii) the fact that

earnings revisions are positive despite the recent rise in the oil price. Our team

expects short haul capacity to rise by c4% this year, close to the increase in demand,

and expects transatlantic capital discipline to remain high. Underlying this greater

capital discipline has been the fact that the sector has seen state

involvement/ownership decline significantly over the past 10 years.

■ Second, a rise in corporate spend (according to our airlines analyst, Neil Glynn, this

accounts for 40% for the flag carriers overall revenues – with IAG the most exposed).

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27 May 2015


Figure 18: Despite the move higher in the oil price,

earnings revisions for the sector remain slightly stronger

than the market

Figure 19: Capex to sales has moved higher, but remains

below its long run average

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

1996 1999 2002 2005 2008 2011 2015

European Airlines 3m breadth Rel market

4

6

8

10

12

14

Q2 1995 Q4 1997 Q2 2000 Q4 2002 Q2 2005 Q4 2007 Q2 2010 Q4 2012 Q2 2015

European airlines capex / sales (%)


■ Third, the sector is a play on a likely rise in euro-area tourism, which increased 3.9%

yoy in 2014 (with the budget airlines having 100% of their revenues and legacy

carriers having 40-50% of their revenues coming from European travel). The fall in the

euro against both sterling and the US dollar YTD is likely to provide further support to

this trend. Moreover, the CEO of major retailers (such as M&S and Next) have

highlighted that the windfall gains of a lower oil price are being spent on big ticket

technology items and holidays.

Figure 20: Airlines margin proxy (calculated as the gap

between airlines CPI and fuel CPI) is highly supportive,

though less than it has been

Figure 21: European airlines sector looks neutral on our

price momentum monitor

-40

-30

-20

-10

0

10

20

30

40

2010 2011 2012 2013 2014 2015

Gap between air transport CPI and Liquid fuelCPI (Margin proxy)

% chg Y/Y (bps)

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015

European Airlines %dev from 6mma, rel to European Market

Average (+/- 1SD)


27 May 2015


Below, we show a screen of airlines rated Outperform by Credit Suisse equity research

analysts. Our team particularly like IAG owing to the capacity constraints at Heathrow, and

the budget airlines whose cost base (labour costs to sales) is nearly half that of the legacy

flag carriers.

Figure 22: Stocks rated Outperform in European airlines sector by Credit Suisse analysts

Name Absrel to

Industry

rel to mkt %

above/below

average

Abs

rel to mkt %

above/below

average

FCY DY

Price, %

change to

best

3m EPS 3m Sales Credit Suisse

rating

Intl.Cons.Airl.Gp.(Cdi) 9.9 45% -41% 4.4 91% 30.8 2.1 22.0 19.5 4.0 2.2 Outperform

Ryanair Holdings 15.1 94% -23% 4.7 19% 3.7 1.0 13.7 8.9 2.5 2.0 Outperform

Easyjet 12.2 76% -21% 3.1 48% 2.2 3.5 12.2 1.8 -2.3 2.1 Outperform

-----P/E (12m fwd) ------ 2015e Momentum, %------ P/B ------- HOLT2015e, %Consensus

recommendation

(1=Buy; 5=Sell)

Source: MSCI, IBES, Thomson Reuters, Credit Suisse HOLT, Credit Suisse research

UK retailing: re-iterate overweight

UK retailing is another sector that tends to be abnormally sensitive to the oil price (and

over the past year should have performed better given the fall in the oil price).

Figure 23: A falling oil price tends to be positive for the

relative performance of the UK general retail sector

Figure 24: A fall in the share of household disposable

income spent on oil tends to be positive for the relative

performance of the UK general retail sector

-100%

-50%

0%

50%

100%

150%-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

1991 1994 1997 2000 2003 2006 2009 2012 2015

General retail price relative, y/y% change

Oil price, y/y% change, rhs, inverted

1.9%

2.0%

2.1%

2.2%

2.3%

2.4%

2.5%

2.6%

2.7%

2.8%

2.9%0.4

0.6

0.8

1.0

1.2

1.4

90 94 98 02 06 11 15

General retail price relative

Share of UK household disposable incomespent on oil, rhs inverted

Rise in oil prices, retail underperforms


Moreover, the P/E relative is cheap, especially against its global peers, and earnings

revisions are positive. We upgraded the sector to overweight in our report, Overweight UK

equities post-election; sector changes (8 May 2015).

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27 May 2015


Figure 25: UK general retail is trading below its average

PE relative

Figure 26: Relative to international peers, UK general

retail trades at a substantial discount

55%

65%

75%

85%

95%

105%

115%

125%

135%

145%

155%

1995 1998 2001 2005 2008 2011 2015

UK Retailing: 12m fwd. P/E rel. to mkt

Average (+/- 1 SD)

5

10

15

20

25

30

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Euro area general retail

UK general retail

US general retail

12 month forward PER


The backdrop to the UK consumer is particularly strong given that real wage growth is now

at a 10-year high (and should rise further given the fall in unemployment) and vacancy

growth is consistent with 2% employment growth, while UK private sector earnings growth

is now showing meaningful signs of acceleration. Against this backdrop, UK retail sales

volume growth – particularly in non-food stores – has been extremely strong (it is currently

running at around 8% Y/Y – see appendix).

If sterling were to strengthen because UK rates expectations are a little too sanguine, then

UK retailing should outperform.

Figure 27: 4-week earnings momentum has picked up

strongly despite the rise in the oil price…

Figure 28: …and vacancy growth remains consistent with

2% employment growth

-100%

-80%

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

2008 2009 2010 2011 2012 2013 2014 2015

UK earnings revisions 4-week

13-week

-40

-30

-20

-10

0

10

20

30

40

-2.5

-1.5

-0.5

0.5

1.5

2.5

3.5

2003 2005 2007 2009 2011 2013 2015

Employment, y/y%

Vacancies, y/y%, lead 3m, rhs


27 May 2015


Figure 29: UK wage growth is now showing meaningful

signs of acceleration and should rise further given the fall

in unemployment

Figure 30: The UK retail sector tends to outperform when

sterling strengthens

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5-1.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

2001 2003 2005 2007 2009 2011 2013 2015

Private sector regular pay growth, single month

Change in UK unemployment from a year ago, 3mlead rhs

0.4

0.5

0.6

0.7

0.8

0.9

1

1.1

1.2

1.3

70

75

80

85

90

95

100

105

2002 2004 2006 2008 2010 2012 2015

TW£, lhs

UK general retail relative, rhs


Our preferred names in this space are shown below. From a top-down perspective, we

particularly like Kingfisher which was on our M&A target list (see M&A: the wave builds, 29

April), is a play on a European recovery (c50% of revenues), is engaged in restructuring

and is particularly cheap relative to Home Depot.

Figure 31: Outperform-rated UK retail stocks

Name Absrel to

Industry

rel to mkt %

above/below

average

Abs

rel to mkt %

above/below

average

FCY DY

Price, %

change to

best

3m EPS 3m Sales

Consensus

recommendation

(1=Buy; 5=Sell)

Credit Suisse

rating

Kingfisher 15.8 67% 11% 1.3 -38% 2.7 3.1 9.9 -6.5 -9.0 3.0 Outperform

Poundland Group 20.1 85% -16% na na na 1.5 -34.3 -3.9 -2.0 3.0 Outperform

Lenta Gdr Each 5 Repr

1 Ord16.6 70% -7% na na -1.5 0.0 30.5 -9.2 -1.6 2.4 Outperform

B&M European

Val.Ret. (Di)23.9 101% -6% na na na 1.3 -51.5 -1.8 0.2 2.0 Outperform

-----P/E (12m fwd) ------ 2015e Momentum, %------ P/B ------- HOLT2015e, %


Oil importing GEMs

There has been, in general, a poor fit between country performance and net oil importers

since the trough in the oil price but this is not the case for emerging markets.

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27 May 2015


Figure 32: There has been a very poor fit on the whole between market performance and

net oil imports (as % of GDP) since the trough in the oil price

South Korea

India

Netherlands

Japan

Indonesia

Spain EUChina Germany

France

Italy

US

Australia

Brazil

UKArgentina

Mexico

Canada

0%

5%

10%

15%

20%

25%

30%

-4% -3% -2% -1% 0% 1% 2% 3%

Equ

ity m

kt p

erf s

ince

the

trou

gh in

the

oil p

rices

(14

th

Jan)

Oil net exports as % of GDP (59 USD average oil price)

Norway (6.7%, 15%)


India: In our recent emerging markets upgrade note, India scored fifth on our composite

scorecard, while Brazil was third bottom (see Emerging Markets: upgrade to benchmark, 6

May 2015).

Looking at India/Brazil versus the oil price, it is clear that when the oil price weakens, the

Indian stock market looks attractive. In the case of India, the fall in the oil price helps the

current account position as well as dampens inflation (which with high real rates allows

interest rates to fall).

Indian equities appear abnormally oversold, at levels from which they historically

outperform and India is no longer clearly expensive. Even the rupee seems to be

undervalued versus the export market share that India achieves.

Figure 33: Indian equities should outperform Brazilian

equities if the oil price falls

Figure 34: India equities are significantly oversold

40

50

60

70

80

90

100

110

120

130

14030

35

40

45

50

55

60

2011 2012 2013 2014 2015

MSCI India rel to Brazil, LCBrent price, rhs, inverted

-25%

-15%

-5%

5%

15%

25%

35%

2000 2003 2006 2009 2012 2015

MSCI India, deviation from 6mma, rel AC world

Average (+/- 1SD)


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

27 May 2015


Figure 35: …and the PE relative has now corrected Figure 36: The Indian rupee is undervalued if we look at

currency valuation relative to the export market share

80%

90%

100%

110%

120%

130%

140%

150%

160%

170%

180%

2000 2003 2006 2009 2012 2015

India 12m fwd PE rel GEM Average (+/- 1SD)

-80%

-78%

-76%

-74%

-72%

-70%

-68%

-66%

-64%

0.4%

0.6%

0.8%

1.0%

1.2%

1.4%

1.6%

1.8%

2.0%

1996 1998 2001 2003 2005 2008 2010 2012 2015

India exports % of World exports

Currency deviation from PPP


Korea: Korea is the biggest net oil importer. Korean earnings momentum is positive and it

is one of the biggest beneficiaries of a pick-up in global growth (which, as we argued last

week, the rise in real bond yields seems to be implicitly predicting). See Bonds sell off:

Implications for equities, 15 May. Again, like India, it has been one of the worst performing

regions this year.

Figure 37: Korea's earnings momentum has improved

sharply…

Figure 38: …and earnings remain highly leveraged to the

global cycle

-35%

-25%

-15%

-5%

5%

15%

25%

35%

2007 2009 2011 2013 2015

South Korea: 3-month earnings revisions relative to Global

7.2

6.0

3.5 3.4

2.9 2.8 2.7 2.52.3 2.2

1.9

0.1

0

1

2

3

4

5

6

7

8

Japa

n

Kor

ea

Ger

man

y

US

Fra

nce

Rus

sia

Italy

Spa

in

Indi

a

UK

Chi

na

Bra

zil

Beta of EPS to Global IP


We provide further detail on our overweight stance in Emerging Markets: upgrade to

benchmark, but in summary: the KOPSI is cheap, corporate governance is improving from

very low levels, the market is under-owned and the Won is also looking abnormally

undervalued against export market shares.

https://plus.credit-suisse.com/r/d8iuwo

https://plus.credit-suisse.com/r/d8iuwo



27 May 2015


Figure 39: Korea has one of the lowest pay-out ratios in

the world but it has started to increase in recent quarters

Figure 40: Investors tend to be very underweight Korea

5%

10%

15%

20%

25%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Korean pay-out ratio

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

2.2

2.4

Jan 02 Jan 04 Jan 06 Jan 08 Jan 10 Jan 12 Jan 14

India Thailand

Indonesia China

S Korea Taiwan

Fundmanger weighting (benchmark=1)

Source: Thomson Reuters, Credit Suisse research Source: EPFR, Credit Suisse GEM Equity Strategy team research

Energy consuming stocks

Below we screen for stocks that were beneficiaries of a falling oil price and which have

some degree of pricing power. The names are listed below, and could be among the

beneficiaries from a correction in the price of oil.

Figure 41: Energy consuming stocks

Name

Price performance rel

respective market since

trough in oil price

Absrel to

Industry

rel to mkt %

above/below

average

Abs

rel to mkt %

above/below

average

FCY DY

Price, %

change to

best

3m EPS 3m Sales

Consensus

recommendation

(1=Buy; 5=Sell)

Credit Suisse

rating

Osaka Titanium 7% 26.4 153% -42% 2.5 -51% na 0.6 -35.2 21.9 -2.4 2.7 Outperform

Fedex 10% 16.2 101% -4% 3.7 33% 5.3 0.5 6.4 -1.0 0.2 2.0 Outperform

Wolseley 22% 15.5 93% 26% 3.5 25% 4.2 2.4 na 0.5 -2.4 2.7 Outperform

Ryanair Holdings 50% 15.1 94% -23% 4.7 19% 3.7 1.0 13.7 8.9 2.5 2.0 Outperform

Easyjet 10% 12.2 76% -21% 3.1 48% 2.2 3.5 12.2 1.8 -2.3 2.1 Outperform

Dollar General 9% 18.0 77% 9% 4.0 10% 3.1 1.1 9.3 -1.6 -0.2 2.1 Outperform

Wal Mart Stores -8% 16.0 86% -26% 3.1 -41% 5.0 2.5 32.1 -6.8 -1.7 2.8 Outperform

Carnival 12% 16.5 75% -4% 1.5 -44% 1.9 2.2 31.1 -2.5 -3.1 2.4 Outperform

Croda International 17% 20.1 118% 31% 7.9 44% 3.1 2.5 -13.1 0.2 -0.5 2.9 Outperform

Akzo Nobel -2% 16.4 96% 22% 2.9 -21% 3.4 2.3 12.7 7.2 2.2 2.8 Outperform

Pirelli 20% 14.8 132% 18% 3.0 102% 2.7 2.7 26.2 -3.7 -1.3 2.9 Outperform

Thomas Cook Group 6% 11.1 51% 29% 75.9 321% 11.1 1.9 -17.4 -10.4 -3.8 2.4 Outperform

-----P/E (12m fwd) ------ ------ P/B ------- 2015e, % HOLT 2015e Momentum, %


Of these stocks, Akzo Nobel is cheap on HOLT, has positive earnings momentum and

has underperformed since the recent trough in the oil price.

Cautious of Russian exposure

We would be cautious of Russian exposure. Each $10 on the oil price improves the

Russian current account position by nearly 2.5% of GDP (thus offsetting more significant

domestic adjustments), and with 50% of fiscal revenues from oil and around 20% of GDP

directly (and a further 15% of GDP indirectly) accounted for by oil, it clearly has a

significant growth impact. We can see that the European stocks with high Russian

sensitivity have closely followed the oil price.

27 May 2015


Figure 42: The relative performance of European stocks with Russian exposure follows

the oil price

37

42

47

52

57

62

67

72

20

40

60

80

100

120

140

2005 2007 2009 2011 2013 2015

Brent oil price European stocks with Russian exposure in USD rel. market, rhs


The screen below shows European companies with significant Russian exposure.

Figure 43: European stocks with exposure to Russia

Name Russian exposure Absrel to

Industry

rel to mkt %

above/below

average

Abs

rel to mkt %

above/below

average

FCY DY

Price, %

change to

best

3m EPS 3m Sales

Consensus

recommendation

(1=Buy; 5=Sell)

Credit Suisse

rating

Oriflame Cosmetics

Sdr

50% sales 13.7 63% -3% 5.9 -61% 0.8 3.1 -22.2 -13.9 0.9 2.7 Underperform

Carlsberg 'B' 37% sales 16.8 80% 2% 1.4 -37% 4.9 1.5 -18.0 -4.3 1.7 3.3 Outperform

Henkel 9% sales 18.3 85% 30% 3.9 24% na 1.9 na 0.0 1.9 2.3 Not Rated

Fortum 20% of 2015E EBITDA 18.1 115% 37% 1.5 -23% 3.4 7.3 23.2 -8.6 -12.1 3.1 Not Rated

Telenor 7% sales 17.1 103% 24% 4.2 63% 2.8 4.3 18.4 -4.9 4.6 2.9 Neutral

Teliasonera 19% of net income 13.2 80% -26% 2.0 -11% 6.9 6.1 14.5 -7.4 3.0 2.9 Neutral

Adidas 10% sales 20.2 107% 28% 2.7 -41% 3.2 2.1 -1.3 0.3 3.8 2.6 Neutral

Renault 8% sales 8.7 78% -41% 1.1 -3% 3.6 2.5 102.6 7.9 2.0 2.3 Outperform

Nokian Renkaat 26% sales 17.5 157% 28% 3.5 0% 6.1 4.7 -5.9 13.9 2.1 3.2 Underperform



Our GEM equity strategy team's model of Russian equity market performance forecasts

c.24% downside potential for the market by year-end, even using the Credit Suisse

forecast for a higher oil price.

27 May 2015


Figure 44: Our GEM equity strategy team forecasts c.24%

downside for the Russian equity market

Figure 45: Model details

200

400

600

800

1000

1200

1400

1600

1800

2004 2006 2008 2010 2012 2014 2016

Predicted MSCI Russia

Actual MSCI Russia

Model inputs Coeff. P-value Current y/e 2015 Upside

25 May Scenario from

current

Oil (Brent) 0.13 0.088 66.2 71.0 7.3%

RUB USD -0.25 0.019 49.9 50.0 0.2%

IFO business expec. 1.05 0.000 103.0 99.0 -3.9%

CRB Metals Index 0.75 0.000 734 874 19.0%

MSCI Russia

25 May y/e 2015

Adj R square: 0.79 Actual 569 569

Observations: 137 Warranted 468 434

Intercept 0.00 Upside % -17.8 -23.7

Source: Credit Suisse GEM Equity Strategy team Source: Credit Suisse GEM Equity Strategy team

27 May 2015


Appendix Long-term oil price

Figure 46: Bull markets in oil tend be short, bear markets protracted

0

30

60

90

120

150

1861 1880 1899 1918 1938 1957 1976 1995 2015

Real oil price (2013 US$)

Average

3 yrs

28 years 20 years

3 yrs 5 yrs

9 yrs

9 yrs

19 yrs11 yrs

35 year average = 56$

Source: Credit Suisse Fixed Income Strategy team

Sell-side net buy recommendation backtest

Figure 47: The European IOC sector tends to underperform following the point at which

analysts have become as positive on the sector as they are now

Date 1m 3m 6m 12m

20-Sep-95 2% -5% -4% -10%

20-Aug-08 6% -12% -17% 2%

20-Jun-12 -1% 2% 10% 16%

20-Dec-13 0% -1% -8% 12%

Av erage 2% -4% -5% 5%

Ty pical 0% 0% 1% 1%

% of rise 75% 25% 25% 75%

Relative performance of Europe IOCs after sell side

recommendations were at current levels


27 May 2015


UK retail sales volume

Figure 48: UK retail sales volumes at non-food stores have been extremely strong

recently

-4

-2

0

2

4

6

8

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Non-food store sales volume, % change Y/Y, 3 m.m.a.

Predominantly food stores sales volume, % change Y/Y, 3 m.m.a.


Russia vs the oil price

Figure 49: The performance of MSCI Russia relative has tended to track the oil price

closely

30

50

70

90

110

130

60

80

100

120

140

160

180

200

220

240

260

Jan 13 Jul 13 Jan 14 Jul 14 Jan 15

MSCI Russia rel world, $ terms Brent price, rhs


27 May 2015


US IOCs

We would argue that US IOCs look in aggregate slightly more attractive than their

European counterparts. They look cheaper on P/B relative to the market and remain

oversold (having underperformed YTD despite the rise in the oil price). We would,

however, note that the dividend yield relative is not as attractive as it is for the European

integrateds and their FCF yield is lower in some cases (see Figure 10).

Figure 50: US IOCs look cheap on P/B relative… Figure 51: … and attractive on DY relative

40%

50%

60%

70%

80%

90%

100%

110%

120%

130%

140%

1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015

US IOCs P/B rel market

Average

70%

120%

170%

220%

270%

1990 1994 1998 2002 2006 2010 2015

US IOCs DY rel market Average


Figure 52: The price relative remains oversold despite

rebounding recently

Figure 53: Earnings momentum is still negative

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

1990 1993 1996 1999 2002 2005 2008 2011 2014

US IOCs %dev from 6mma, rel to market Average

-80%

-60%

-40%

-20%

0%

20%

40%

60%

80%

1993 1996 1999 2002 2005 2008 2011 2014

US IOCs 3m breadth Rel market


27 May 2015


US airlines

US airlines are very oil sensitive (10% off the oil price has historically led to 14%

outperformance), are cheap on P/E relatives and oversold. Capital discipline still looks

reasonable (with capex to sales still at the low end of its historical range). Our analysts

have an Outperform rating on Delta Air Lines, JetBlue Airways, Southwest Airlines and

United Continental.

Figure 54: US airlines trade on a P/E relative close to its

previous low

Figure 55: Price momentum of the sector is c.1 standard

deviation oversold

0%

50%

100%

150%

200%

250%

300%

350%

2003 2006 2009 2012 2015

US Airlines 12m forward PE rel market Average

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

1997 2000 2003 2006 2009 2012 2015

US Airlines %dev from 6mma, rel to US Market

Average (+/- 1SD)


Figure 56: Capex to sales is moving higher, but remains

low by historic standards…

Figure 57: …and the sector tends to outperform when the

oil price falls

0%

5%

10%

15%

20%

25%

30%

1997 2000 2003 2006 2009 2012 2015

US Airlines Capex to Sales

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%-60%

-40%

-20%

0%

20%

40%

60%

80%

2007 2008 2009 2010 2011 2012 2013 2014 2015

Oil US $/BBL

US Airlines price relative to market, inverted, rhs


27 May 2015


US retailing

The US retailing sector historically is heavily influenced by the oil price and should have

performed better given the fall in the oil price and also the strength of the dollar.

Figure 58: The retailing sector should be doing much

better given the fall in the oil price

Figure 59: The retail sector should benefit from USD

strength

-30%

-20%

-10%

0%

10%

20%

30%

40%-100%

-50%

0%

50%

100%

150%

200%

1995 1999 2003 2007 2011 2015

Oil price, y/y%

US general retail relative, rhs, inverted

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

1995 1999 2003 2007 2011 2015

Trade-weighted US$, y/y%

US general retail relative, rhs, y/y%


There continues to be a strong inverse correlation between consumer confidence and the

oil price.

Figure 60: Falling gasoline prices tend to be positive for

US consumer confidence

Figure 61: Relative earnings momentum has just rolled

over but remains positive

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%-25

-15

-5

5

15

25

2008 2009 2010 2011 2012 2013 2014 2015

UMich consumer confidence,expectations, 6m ch (6m lag)

Gasoline prices, 6m%ch, rhs, inverted

-30%

-20%

-10%

0%

10%

20%

30%

40%

1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015

US Retailing 3m breadth of revisions Rel to mkt

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

Valuations of retailing ex Amazon are back to reasonable levels and Amazon on P/S or

HOLT is not expensive.

27 May 2015


Figure 62: US retailing ex Amazon 12-month forward P/E

relative to the market

Figure 63: Amazon relative to market price to sales

70%

80%

90%

100%

110%

120%

130%

1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015

US retailing ex Amazon 12m fwd P/E rel market

Average (+/- 1SD)

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

2.2

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Amazon price to sales rel US mkt


Earnings revisions have rolled over (as shown in Figure 61).

Total payroll income growth at 4% p.a. should support real retail sales growth of c.3%yoy.

Figure 64: Payroll income growth fell recently but

remains elevated

Figure 65: US real retail sales continue to grow at c3%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

1990 1993 1996 1999 2002 2005 2009 2012 2015

Payroll income y/y%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

1996 1999 2002 2005 2008 2011 2014

Real retail sales


We continue to prefer the US home improvement companies that are still looking cheap

relative to the market at a time when we continue to believe that the long-run level of

housing starts is c.1.5m (the NAHB is consistent with this level).

27 May 2015


Figure 66: US home improvement retail stocks trade just

below neutral on P/E relative to the market

Figure 67: The NAHB index is consistent with c1.5m

housing starts

70%

90%

110%

130%

150%

170%

190%

1995 1999 2003 2007 2011 2015

US home improvement 12m fwd PE rel market

Average (+/- 1SD)

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2,200

2,400

0

10

20

30

40

50

60

70

80

90

1986 1990 1995 2000 2005 2010 2015

US NAHB index US Housing starts (000's, rhs)


Figure 68: We highlight Home Depot and Lowe's in the US home improvement market

Name Absrel to

Industry

rel to mkt %

above/below

average

Abs

rel to mkt %

above/below

average

FCY DY

Price, %

change to

best

3m EPS 3m Sales

Consensus

recommendation

(1=Buy; 5=Sell)

Credit Suisse

rating

Home Depot 20.3 87% -12% 15.7 152% 5.4 2.1 -7.9 0.7 0.5 2.1 Outperform

Lowe's Companies 19.8 85% -1% 6.7 72% 5.5 1.4 -13.2 0.6 0.7 2.2 Outperform



27 May 2015


Sector weightings

Figure 69: European sector weightings

Over/underweighting

score

Benchmark

weight (a)

Recommended

weight (b)

Difference from

benchmark (bps) (b-a)

Change from

previous (score)

Software & Services 1.50 1.6 2.4 78

Commercial Services & Supplies 1.25 1.3 1.6 31

Telecoms 1.20 4.8 5.8 93

Media 1.20 2.7 3.2 51

Banks 1.12 12.1 13.5 135

Hotels & Leisure 1.12 1.2 1.3 13

Semiconductors & Semiconductor Equipment 1.10 0.9 1.0 9

Pharmaceuticals & Biotechnology 1.08 12.6 13.5 91

Automobiles & Components 1.07 3.6 3.8 23

Transportation 1.06 1.5 1.6 8 2

Insurance 1.05 6.0 6.2 25

Capital goods 1.00 8.3 8.3

Chemicals 1.00 3.9 3.9

Utilities 1.00 3.9 3.9

Household & Personal Products 1.00 1.9 1.8

Health Care Equipment & Services 1.00 1.3 1.2

Food & Staples Retailing 1.00 1.2 1.2

Technology Hardware & Equipment 1.00 0.9 0.9

Construction Materials 1.00 0.8 0.8

Pulp & paper 1.00 0.2 0.2

Metals & Mining 0.99 2.6 2.6 -5

Diversified Financials 0.90 3.4 3.0 -36

Consumer Durables & Apparel 0.90 2.6 2.3 -28

Beverages 0.85 3.3 2.8 -51

Retailing 0.80 1.5 1.2 -30

Real Estate 0.80 1.3 1.0 -27

Energy 0.80 7.4 5.8 -156 -1

Food Products 0.74 5.4 4.0 -143

Tobacco 0.65 1.8 1.2 -64

Total 100.0 100.0 Source: Thomson Reuters, Credit Suisse research

27 May 2015


Companies Mentioned (Price as of 22-May-2015)

Adidas AG (ADSGn.F, €75.34) AkzoNobel (AKZO.AS, €69.82) Amazon com Inc. (AMZN.OQ, $427.63) Anglo American Plc (AAL.L, 1062.5p) B&M European Retail (BMEB.L, 332.0p) BHP Billiton (BHP.AX, A$29.25) BP (BP.L, 457.75p) Carlsberg (CARLb.CO, Dkr648.5) Carnival (CCL.N, $47.35) Chevron Corp. (CVX.N, $104.89) ConocoPhillips (COP.N, $65.11) Croda International (CRDA.L, 2927.0p) Delta Air Lines, Inc. (DAL.N, $43.18) Dollar General (DG.N, $73.56) EOG Resources (EOG.N, $90.26) EasyJet (EZJ.L, 1591.0p) ExxonMobil Corporation (XOM.N, $86.52) FedEx Corporation (FDX.N, $175.18) GlaxoSmithKline plc (GSK.L, 1464.5p) Glencore (GLEN.L, 292.4p) Home Depot (HD.N, $112.16) International Airlines Group (ICAG.L, 542.5p) JetBlue Airways Corporation (JBLU.OQ, $20.44)

Kingfisher (KGF.L, 365.4p) Lenta Ltd (LNTAq.L, $9.01) Marks & Spencer (MKS.L, 594.0p) Mediaset (MS.MI, €4.62) Next (NXT.L, 7450.0p) Nokian Tyres (NRE1V.HE, €31.22) Occidental Petroleum (OXY.N, $77.01) Oriflame Cosmetics (ORIsdb.ST, Skr136.6) Osaka Titanium Technologies (5726.T, ¥2,772) Pirelli (PECI.MI, €15.53) Poundland (PLND.L, 314.7p) Renault (RENA.PA, €98.81) Rio Tinto (RIO.L, 2902.5p) Royal Dutch Shell plc (RDSa.L, 1970.5p) Ryanair (RYA.I, €10.9) Southwest Airlines Co. (LUV.N, $36.86) Telenor (TEL.OL, Nkr175.3) TeliaSonera (TLSN.ST, Skr51.5) Thomas Cook Group plc (TCG.L, 147.3p) Total (TOTF.PA, €47.73) United Continental Holdings, Inc. (UAL.N, $53.69) Wal-Mart Stores, Inc. (WMT.N, $75.86) Wolseley (WOS.L, 4060.0p)

Disclosure Appendix

Important Global Disclosures

The analysts identified in this report each certify, with respect to the companies or securities that the individual analyzes, that (1) the views expressed in this report accurately reflect his or her personal views about all of the subject companies and securities and (2) no part of his or her compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report.

The analyst(s) responsible for preparing this research report received Compensation that is based upon various factors including Credit Suisse's total revenues, a portion of which are generated by Credit Suisse's investment banking activities

As of December 10, 2012 Analysts’ stock rating are defined as follows:

Outperform (O) : The stock’s total return is expected to outperform the relevant benchmark*over the next 12 months.

Neutral (N) : The stock’s total return is expected to be in line with the relevant benchmark* over the next 12 months.

Underperform (U) : The stock’s total return is expected to underperform the relevant benchmark* over the next 12 months.

*Relevant benchmark by region: As of 10th December 2012, Japanese ratings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. As of 2nd October 2012, U.S. and Canadian as well as European ra tings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. For Latin American and non-Japan Asia stocks, ratings are based on a stock’s total return relative to the average total return of the relevant country or regional benchmark; 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 attractiv eness 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 12-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%, which 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.

27 May 2015


Credit Suisse's distribution of stock ratings (and banking clients) is:

Global Ratings Distribution

Rating Versus universe (%) Of which banking clients (%)

Outperform/Buy* 42% (53% banking clients)

Neutral/Hold* 39% (50% banking clients)

Underperform/Sell* 16% (44% banking clients)

Restricted 3%

*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 holdings, 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.

See the Companies Mentioned section for full company names

The subject company (CVX.N, RDSa.L, TCG.L, BHP.AX, BP.L, LNTAq.L, TOTF.PA, ORIsdb.ST, WMT.N, PLND.L, KGF.L, ADSGn.F, PECI.MI, MS.MI, COP.N, AKZO.AS, DG.N, BMEB.L, XOM.N, GLEN.L, CCL.N, RIO.L, OXY.N, HD.N, JBLU.OQ, EOG.N, GSK.L, DAL.N, UAL.N) currently is, or was during the 12-month period preceding the date of distribution of this report, a client of Credit Suisse.

Credit Suisse provided investment banking services to the subject company (CVX.N, RDSa.L, TCG.L, BP.L, LNTAq.L, TOTF.PA, WMT.N, PLND.L, COP.N, BMEB.L, XOM.N, GLEN.L, RIO.L, HD.N, EOG.N, GSK.L, UAL.N) within the past 12 months.

Credit Suisse provided non-investment banking services to the subject company (ORIsdb.ST, KGF.L, XOM.N, DAL.N) within the past 12 months

Credit Suisse has managed or co-managed a public offering of securities for the subject company (RDSa.L, TCG.L, BP.L, WMT.N, PLND.L, COP.N, XOM.N, GLEN.L, HD.N, GSK.L, UAL.N) within the past 12 months.

Credit Suisse has received investment banking related compensation from the subject company (CVX.N, RDSa.L, TCG.L, BP.L, LNTAq.L, TOTF.PA, WMT.N, PLND.L, COP.N, BMEB.L, XOM.N, GLEN.L, RIO.L, HD.N, EOG.N, GSK.L, UAL.N) within the past 12 months

Credit Suisse expects to receive or intends to seek investment banking related compensation from the subject company (CVX.N, CRDA.L, RDSa.L, TCG.L, BHP.AX, BP.L, LNTAq.L, TOTF.PA, WMT.N, PLND.L, TEL.OL, KGF.L, ADSGn.F, PECI.MI, MS.MI, COP.N, 5726.T, BMEB.L, XOM.N, GLEN.L, CCL.N, RIO.L, OXY.N, HD.N, JBLU.OQ, EOG.N, AMZN.OQ, LUV.N, GSK.L, MKS.L, UAL.N) within the next 3 months.

Credit Suisse has received compensation for products and services other than investment banking services from the subject company (ORIsdb.ST, KGF.L, XOM.N, DAL.N) within the past 12 months

As of the date of this report, Credit Suisse makes a market in the following subject companies (CVX.N, FDX.N, ORIsdb.ST, WMT.N, COP.N, DG.N, XOM.N, CCL.N, OXY.N, HD.N, JBLU.OQ, EOG.N, AMZN.OQ, LUV.N, DAL.N, UAL.N).

As of the end of the preceding month, Credit Suisse beneficially own 1% or more of a class of common equity securities of (RYA.I, CRDA.L, ORIsdb.ST, ADSGn.F, PECI.MI, ICAG.L, NXT.L, UAL.N).

Credit Suisse and its related bodies corporate have a substantial interest greater than 5% in (ORIsdb.ST)

Credit Suisse has a material conflict of interest with the subject company (GLEN.L) . Credit Suisse Securities (Europe) Limited is acting as financial advisor in connection with the GlencoreXstrata sale of its interest in the Las Bambas copper mine project in Peru to a consortium owned 62.5% by MMG Limited, 22.5% by GUOXIN International Investment Corporation Limited and 15.0% by CITIC Metal Co. Limited.

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.

Important Regional Disclosures

Singapore recipients should contact Credit Suisse AG, Singapore Branch for any matters arising from this research report.

The analyst(s) involved in the preparation of this report have not visited the material operations of the subject company (RYA.I, CVX.N, CRDA.L, RDSa.L, TLSN.ST, TCG.L, BHP.AX, BP.L, LNTAq.L, TOTF.PA, FDX.N, ORIsdb.ST, WMT.N, PLND.L, TEL.OL, KGF.L, ADSGn.F, PECI.MI, EZJ.L, MS.MI, RENA.PA, CARLb.CO, COP.N, AAL.L, 5726.T, AKZO.AS, AKZO.AS, AKZO.AS, DG.N, BMEB.L, XOM.N, WOS.L, GLEN.L, CCL.N, RIO.L, ICAG.L, OXY.N, HD.N, NRE1V.HE, JBLU.OQ, EOG.N, AMZN.OQ, LUV.N, GSK.L, DAL.N, MKS.L, NXT.L, UAL.N) within the past 12 months

Restrictions on certain Canadian securities are indicated by the following abbreviations: NVS--Non-Voting shares; RVS--Restricted Voting Shares; SVS--Subordinate Voting Shares.

27 May 2015


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.

Credit Suisse Securities (Europe) Limited (Credit Suisse) acts as broker to (TCG.L, ORIsdb.ST, KGF.L, EZJ.L, RIO.L).

The following disclosed European company/ies have estimates that comply with IFRS: (RYA.I, CRDA.L, RDSa.L, TLSN.ST, TCG.L, BP.L, ORIsdb.ST, TEL.OL, KGF.L, ADSGn.F, EZJ.L, MS.MI, RENA.PA, CARLb.CO, AAL.L, AKZO.AS, XOM.N, WOS.L, RIO.L, MKS.L, NXT.L).

As of the end of the preceding month, the subject company (ORIsdb.ST) beneficially owned 5% or more of the total issued share capital of Credit Suisse Group.

Credit Suisse has acted as lead manager or syndicate member in a public offering of securities for the subject company (RDSa.L, TCG.L, BP.L, TOTF.PA, WMT.N, PLND.L, MS.MI, COP.N, AAL.L, XOM.N, GLEN.L, RIO.L, HD.N, EOG.N, GSK.L, DAL.N, UAL.N) within the past 3 years.

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.

To the extent this is a report authored in whole or in part by a non-U.S. analyst and is made available in the U.S., the following are important disclosures regarding any non-U.S. analyst contributors: The non-U.S. research analysts listed below (if any) are not registered/qualified as research analysts with FINRA. The non-U.S. research analysts listed below may not be associated persons of CSSU and therefore may not be subject to the NASD Rule 2711 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.

Credit Suisse Securities (Europe) Limited ........ Andrew Garthwaite ; Marina Pronina ; Robert Griffiths ; Yiagos Alexopoulos ; Nicolas Wylenzek

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.

Important Credit Suisse HOLT Disclosures

With respect to the analysis in this report based on the Credit Suisse HOLT methodology, Credit Suisse certifies that (1) the views expressed in this report accurately reflect the Credit Suisse HOLT methodology and (2) no part of the Firm’s compensation was, is, or will be directly related to the specific views disclosed in this report.

The Credit Suisse HOLT methodology does not assign ratings to a security. It is an analytical tool that involves use of a set of proprietary quantitative algorithms and warranted value calculations, collectively called the Credit Suisse HOLT valuation model, that are consistently applied to all the companies included in its database. Third-party data (including consensus earnings estimates) are systematically translated into a number of default algorithms available in the Credit Suisse HOLT valuation model. The source financial statement, pricing, and earnings data provided by outside data vendors are subject to quality control and may also be adjusted to more closely measure the underlying economics of firm performance. The adjustments provide consistency when analyzing a single company across time, or analyzing multiple companies across industries or national borders. The default scenario that is produced by the Credit Suisse HOLT valuation model establishes the baseline valuation for a security, and a user then may adjust the default variables to produce alternative scenarios, any of which could occur.

Additional information about the Credit Suisse HOLT methodology is available on request.

The Credit Suisse HOLT methodology does not assign a price target to a security. The default scenario that is produced by the Credit Suisse HOLT valuation model establishes a warranted price for a security, and as the third-party data are updated, the warranted price may also change. The default variable may also be adjusted to produce alternative warranted prices, any of which could occur.

CFROI®, HOLT, HOLTfolio, ValueSearch, AggreGator, Signal Flag and “Powered by HOLT” are trademarks or service marks or registered trademarks or registered service marks of Credit Suisse or its affiliates in the United States and other countries. HOLT is a corporate performance and valuation advisory service of Credit Suisse.

For Credit Suisse disclosure information on other companies mentioned in this report, please visit the website at https://rave.credit-suisse.com/disclosures or call +1 (877) 291-2683.

27 May 2015


References in this report to Credit Suisse include all of the subsidiaries and affiliates of Credit Suisse operating under its investment banking division. For more information on our structure, please use the following link: https://www.credit-suisse.com/who_we_are/en/This report may contain material that is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would subject Credit Suisse AG or its affiliates ("CS") to any registration or licensing requirement within such jurisdiction. All material presented in this report, unless specifically indicated otherwise, is under copyright to CS. None of the material, nor its content, nor any copy of it, may be altered in any way, transmitted to, copied or distributed to any other party, without the prior express written permission of CS. All trademarks, service marks and logos used in this report are trademarks or service marks or registered trademarks or service marks of CS or its affiliates. The information, tools and material presented in this report are provided to you for information purposes only and are not to be used or considered as an offer or the solicitation of an offer to sell or to buy or subscribe for securities or other financial instruments. CS may not have taken any steps to ensure that the securities referred to in this report are suitable for any particular investor. CS will not treat recipients of this report as its customers by virtue of their receiving this report. 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. 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