Contact Energy. Earnings and target price revision. No change. Price catalyst. Action and recommendation. Our 12 mth PT remains $5.70 ps.

Transcription

1 NEW ZEALAND CEN NZ Price (at 00:56, 30 Nov 2012 GMT) Outperform NZ$5.33 Volatility index Low 12-month target NZ$ month TSR % Valuation NZ$ - DCF (WACC 8.1%, beta 0.6, ERP 7.0%, RFR 4.0%) 5.58 GICS sector Utilities Market cap NZ$m 3, day avg turnover NZ$m 1.6 Number shares on issue m Investment fundamentals Year end 30 Jun 2012A 2013E 2014E 2015E Revenue m 2, , , ,591.2 EBIT m Reported profit m Adjusted profit m Gross cashflow m CFPS CFPS growth % PGCFPS x PGCFPS rel x EPS adj EPS adj growth % PER adj x PER rel x Total DPS Total div yield % Franking 1 % ROA % ROE % EV/EBITDA x Net debt/equity % P/BV x NZ imputation credits are only able to be used by shareholders to offset NZ income tax liability. CEN NZ vs NZSE50, & rec history Note: Recommendation timeline - if not a continuous line, then there was no Macquarie coverage at the time or there was an embargo period. Source: FactSet, Macquarie Research, November 2012 (all figures in NZD unless noted) 30 November 2012 Macquarie Securities (NZ) Limited Capital management options mulled Event s (CEN) Board has recently turned its attention to capital management options. Macquarie estimates that CEN could return between $0.38ps to $0.65ps of excess capital to shareholders tax efficiently. More generally, we see firming retail prices, the CY13 swaption roll-over, lower carbon costs and lower TOP gas risks offsetting a net ancillary revenue step-down and an over-supplied wholesale market. We think FY13 earnings risk remains moderately positive. Impact Our capital return range turns on the rating agency treatment of CEN s capital bonds (nil equity credits to 100%) to be decided by Feb next year. We expect a decision by the CEN Board to be announced after the FY13 result. To summarise our investment thesis for CEN: Firming wholesale prices We forecast a narrowing of the surplus NZ energy margin over the next six years as mid-merit thermal capacity retirements and/or de-ratings and recovering demand offset new committed capacity adds; Tiwai closure risk remains very low The NZAS smelter is currently positioned in the middle (53% of global capacity has a higher cost) of the global cash cost and this does not materially change post the Jan 2013 electricity price step-up on our analysis; Retail prices firm on SOE margin restoration Current NZ wide mass market electricity margins are around 3% with the state-owned retailers ranging between -2% to 1% and private sector 9% to 11%; Global renewable valuation premiums returning The material compression in the renewable to conventional generator multiple premium over the past 3 yrs is now stabilising and beginning to recover; FCF and DPS grow 6% pa FCF is forecast to grow by 6% pa on contained SIB capex and gradually recovering underlying earnings. We have DPS growing at 6% pa on an ave. 81% earnings payout (61% FCF); FY13 consensus earnings look realistic At its Aug FY12 release CEN stated its comfort with FY13 consens. We do not see any change here. Earnings and target price revision No change Price catalyst 12-month price target: NZ$5.70 based on a DCF methodology. Catalyst: Feb interim, quarterly retail prices, mid-dec Huntly unit 3 closure Action and recommendation Our 12 mth PT remains $5.70 ps. Please refer to the important disclosures and analyst certification on inside back cover of this document, or on our website

2 1-Dec-09 1-Dec-10 1-Dec-11 1-Dec-12 1-Dec-13 1-Dec-14 1-Dec-15 1-Dec-16 1-Dec-17 1-Dec-18 1-Dec-19 1-Dec-20 GWh (annual surplus above WEM) $/MWh (OTA - settled price) Macquarie Private Wealth We summarise below the key points to our thesis for. Wholesale prices to recover slowly as reserve margins peak We continue to forecast a narrowing of the surplus energy margin over the next six years as midmerit thermal capacity retirements and/or de-ratings and recovering demand offset new committed capacity adds. Fig 1 NZ surplus energy position peaks FY12; wholesale pricing to recover slowly Base case Base case and Otahuhu OCGT conv. No thermal closures Wholesale futures price Allowing for mean forced (~6%) and scheduled outages, available fuel supply and transmission constraints. 2. Expected winter wind and geothermal generation based on long-run average supply installed capacity of North Island controllable hydro schemes allowing for forced and scheduled outages and de-rated to account for energy and other constraints which affect output during peak times. 3. Embedded generation included in supply side estimate. 4. Expected winter demand, allowing for the normal demand response to periods of high spot prices (excluding any response due to savings campaigns or forced rationing). 5. Huntly has been de-rated by 130MW overnight to reflect spinning reserve (80 MW) and frequency keeping (50MW) requirements. This equates to 303GWh (or a constant 69MW over a 6 month winter period). 6. Energy demand forecasts have been reduced by 2% to allow for voluntary demand response. This includes voluntary demand response resulting from high spot prices or retailer pricing initiatives, but excludes reductions in demand as a result of savings campaigns or calls for conservation. Source: Macquarie Securities, Transpower, December 2012 Over FY12, CEN sold around 12% of its generation into the wholesale spot market see below. Pricing in the retail markets (mass market and C&I) will ultimately reflect wholesale prices but with a 1-2 year delay typically. 30 November

3 Fig 2 CEN FY12 net spot exposure Cover purchased 623 Net Spot Exposure 1312 CFD Retail Hedge Retail Losses Exposed to w holesale spot prices 12 month average book duration; re-prices to ASX futures typically Generation C & I month average book duration; re-prices to ASX futures typically Mass Market 3875 Annual contract re-pricing typically Generation Sales 1. Retail volume is adjusted to reflect aggregate LWAP:GWAP and balancing 'retail hedge cost' is shown separately Source: Macquarie Securities, Company Data, December 2012 We forecast CEN s FCF to increase by around twice the inflation rate over the next seven years. This is predicated on what we see as a conservative LT retail price path (real $90/MWh energy and 5% margin by 2024 i.e. post the absorption of the excess reserve margin and exhaustion of lower cost geothermal options). Retail prices moving up on more commercial SOE behaviour We expect to see the SOEs continue to move retail pricing up in order to more closely reflect the current forward energy costs (approximately $80/MWh before shape and location adjustments). Note, current NZ wide mass market electricity margins are around 3% with the state-owned retailers ranging between -2% to 1% and the private sector players ranging between 9% to 11%. Note, each of the three SOE gentailers have announced energy only price increases well ahead of our expectations so far this calendar year. Assuming a normalisation of these margins to around 5% by 2020 yields 5 very different retail price paths (ex pass-throughs) ranging between 1.1% pa (TrustPower) to 4.2% pa (Genesis Energy). For every 100bp change to our CEN retail price path, its forward EV/EBITDA capitalisation multiple changes by around 25bp. 30 November

4 Fig 3 Same wholesale price path; 5 different retail price paths MED w eighted average pries inc and ex lines Terminal retail margin 1/08/2012 1/06/2020 Prices inc lines Genesis Energy Mercury Energy Meridian Energy Trustpow er Prices excl lines Genesis Energy Mercury Energy Meridian Energy Trustpow er Residential margin analysis (c/kwh) % bill cagr (FY12-20) Energy cost - LRMC % % 3.1% LWAP/TWAP 1.0 4% % 2.6% Energy losses 0.6 2% % 2.2% Retail operating cost allow ance % % 1.0% Netw ork costs % % 2.3% Metering 0.6 2% 0.6 2% 1.0% Total retail + netw ork costs % % 2.4% Retail margin % % -5.3% Levies and other pass-throughs 0.1 0% 0.1 0% 2.0% Total residential price % Total residential price - ex pass-throughs and netw ork costs % Genesis Energy Energy cost - LRMC % % 3.1% LWAP/TWAP 1.0 4% % 2.6% Energy losses 0.6 2% % 2.2% Retail operating cost allow ance % % 1.0% Netw ork costs % % 2.3% Metering 0.6 3% 0.6 2% 1.0% Total retail + netw ork costs % % 2.4% Retail margin % % nm Levies and other pass-throughs 0.1 0% 0.1 0% 2.0% Total residential price % Total residential price - ex pass-throughs and netw ork costs % Mercury Energy Energy cost - LRMC % % 3.1% LWAP/TWAP 1.0 4% % 2.6% Energy losses 0.6 2% % 2.2% Retail operating cost allow ance % % 1.0% Netw ork costs % % 2.3% Metering 0.6 2% 0.6 2% 1.0% Total retail + netw ork costs % % 2.4% Retail margin 0.2 1% % 26.5% Levies and other pass-throughs 0.1 0% 0.1 0% 2.0% Total residential price % Total residential price - ex pass-throughs and netw ork costs % Meridian Energy Energy cost - LRMC % % 3.1% LWAP/TWAP 1.0 4% % 2.6% Energy losses 0.6 2% % 2.2% Retail operating cost allow ance % % 1.0% Netw ork costs % % 2.3% Metering 0.6 3% 0.6 2% 1.0% Total retail + netw ork costs % % 2.4% Retail margin % % na Levies and other pass-throughs 0.1 0% 0.1 0% 2.0% Total residential price % Total residential price - ex pass-throughs and netw ork costs % Trustpow er Energy cost - LRMC % % 3.1% LWAP/TWAP 1.0 4% % 2.6% Energy losses 0.6 2% % 2.2% Retail operating cost allow ance % % 1.0% Netw ork costs % % 2.3% Metering 0.6 2% 0.6 2% 1.0% Total retail + netw ork costs % % 2.4% Retail margin % % -7.7% Levies and other pass-throughs 0.1 0% 0.1 0% 2.0% Total residential price % Total residential price - ex pass-throughs and netw ork costs % NZ weighted average Energy cost - LRMC % % 3.1% LWAP/TWAP 1.0 4% % 2.6% Energy losses 0.6 2% % 2.2% Retail operating cost allow ance % % 1.0% Transmission 1.7 7% % 5.7% Distribution % % 1.5% Metering 0.6 2% 0.6 2% 1.0% Total retail + netw ork costs % % 2.4% Retail margin % % 9.9% Levies and other pass-throughs 0.1 0% 0.1 0% 2.0% Total residential price % Total residential price - ex pass-throughs and netw ork costs % Source: MED, Macquarie Securities December November

5 Renewable premium (EV/EBITDA FY+1) Macquarie Private Wealth Global renewable generation valuation premium coming back The material compression in the renewable to conventional generator multiple premium (i.e. 250bp to around zero) over the past three years (see below) is, in our view, due to concerns around the sustainability of renewable energy incentive measures (e.g. tax credits, feed-in tariffs etc) around the world. Fig 4 Global renewable /conventional generator valuation premium returning Source: Company data, Macquarie Securities, December 2012 There are no such incentive measures in place in NZ other than the ETS (with its phase-in rates still in place). As such, NZ renewable energy generators are less susceptible to policy reversals and may have been unduly de-rated alongside their European and North American comps. Board considering capital management initiatives; announcement 3Q13 expected (CEN) is coming to the end of a substantial growth period (admittedly with a meaningful SIB component in respect of Te Mihi). CEN has expended $540m pa on average over FY10-12 compared to forecast capex of $250m in FY13 and then a long run SIB rate of around $100m. Macquarie estimates that CEN could return between $0.38ps to $0.65ps of excess capital to shareholders with a decision by the Board expected to be announced after the FY13 result. CEN has $246m of imputation credits (at June 2012) and around $1.1b of available subscribed capital (ASC) and is expected to be able to return these amounts tax efficiently to NZ resident shareholders. We believe that Origin would be indifferent between share buyback or special dividend at this stage. 30 November

6 Fig 5 FY15 capital return scenarios - Hybrid at 0% equity credit ($m) FFO/Debt (%) constraint S&P BBB benchmark 24% 25% 26% 27% 28% Wholesale price ($MW/h FY15) Macq forecast FFO defined as operating profit after tax, add dep/amortisation, add deferred inc. tax, add major non-cash items. Debt ex surplus cash 2. Reference FY15 wholesale price (and incl. associated retail price adjustments) Source: Macquarie Securities estimates November 2012 Fig 6 FY15 capital return scenarios - Hybrid at 100% equity credit ($m) FFO/Debt (%) constraint S&P BBB benchmark 24% 25% 26% 27% 28% Wholesale price ($MW/h FY15) Macq forecast FFO defined as operating profit after tax, add dep/amortisation, add deferred inc. tax, add major non-cash items. Debt ex surplus cash 2. Reference FY15 wholesale price (and incl. associated retail price adjustments) Source: Macquarie Securities estimates December 2012 The capital return range turns on the rating agency treatment of CEN s capital bonds but we have provided a sensitivity to medium term wholesale electricity prices and various gearing levels. FFO/Debt is the key rating agency constraint with 25% being an approximate threshold for CEN s current Standard & Poor's long-term credit rating of BBB/stable. The $200 million hybrid debt issue (subordinated, unsecured, redeemable, cumulative fixed rate capital bonds issued in December 2011) are rated BB- by Standard & Poor's. We look at these scenarios assuming 100% and 0% equity credit for the capital bond issue due to uncertainty surrounding the future rating treatment of the bond. S&P indicated earlier last month that it is reviewing the equity credit that it applies to hybrid securities and that this review could lead to a revision of the equity content for some existing instruments from high to either intermediate or minimal equity content. S&P is shedding little light on these proposed changes ahead of its formal request for comment process later in the month with the final verdicts not due until January or February next year (suggesting we may have to live with this uncertainty for some time). 30 November

7 2001A 2002A 2003A 2004A 2005A 2006A 2007A 2008A 2009A 2010A 2011A 2012A 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E FCF yield Macquarie Private Wealth Free cashflow/dps set to grow at 6% pa We outline our FCF projections below. CEN FCF is forecast to grow by around 6% pa on contained SIB capex and gradually recovering underlying earnings. We have DPS growing at a similar rate on an average 81% earnings payout ratio or 61% FCF payout ratio. Fig 7 CEN FCF grows by around twice inflation from here 16% 14% forecast 12% 10% 8% 6% 4% 2% 0% Source: Company data, Macquarie Securities, December 2012 Consensus earnings look realistic The company at its August FY12 release stated its comfort with FY13 consensus (FY13 EBITDAF pre-result $525m) with firmer retail tariffs, the CY13 swaption roll-over, lower carbon costs and lower TOP gas risks expected to offset a net ancillary revenue step-down and an over-supplied wholesale market. The material North/South Island price separation seen over November has been essentially neutral for CEN, we think, with its swaption and (single) peaker cover working broadly as expected. 30 November

8 Fig 8 CEN net energy margin breakdown FY08 FY09 FY10 FY11 FY12 CEN generation GWh ,030 Cover purchased (inc swaptions) GWh (-) Mass market sales GWh ,188 (-) C&I sales GWh (-) Retail losses GWh (-) CfD sales GWh Retail hedge cost (sales x (1-LWAP:GWAP)) GWh Net spot exposure GWh 2,972 1,228 1,379 1,232 1,312 Net spot exposure GWh 2,972 1,228 1,379 1,232 1,312 x GWAP $/MWh Spot exposed revenue $m Thermal generation GWh x fuel cost (inc transmission) $/MWh Fuel cost 1 $m (253) (251) (265) (279) (321) Cover purchased (inc swaptions) GWh x cover cost $/MWh Hedge cost $m (74) (49) (59) (43) (67) Retail sales GWh 7,896 7,703 7,674 8,253 8,280 x average sale price (ex pass-throughs) $/MWh Sales revenue $m Net Energy Margin $m (-) Cost to serve $m (-) Non-thermal maintenance $m (-) Thermal maintenance $m (-) Other costs/(income) $m (+) LPG EBITDAF $m (+) Meters EBITDAF $m (+) Gas EBITDAF $m EBITDAF $m Prices Reference TWAP (HAY) $/MWh Retail LWAP $/MWh Average retail sales price (ex pass-throughs) $/MWh CfD LWAP $/MWh Generation (exposed) GWAP $/MWh Swaption GWAP $/MWh Aggregate LWAP:GWAP x includes losses on distressed gas sales Negative spark spread 3 years out of past 5. Estimated FY12 Otahuhu B spread $75/MWh SRMC and GWAP $88/MWh or $28m. Source: Macquarie Securities December 2012 Swaption FY12 net cost of $12m will be saved from CY13 on (i.e all-in cost $98/MWh and GWAP $79/MWh (i.e. 20% discount to exposed GWAP) We summarise our estimate on the swaption roll-off $12m annualised benefit above. Industrial load risk and Tiwai NZ s relatively stable residential load provides a degree of stability to overall demand. To wit, LT residential load growth has averaged around 1.1% pa up until the GFC and 0.8% pa from Industrial load has demonstrated more volatility (in part due to the segment s sensitivity to economic activity levels but also due to fuel switching). Current forest product load is materially below its LT average and, despite recent concerns over basic metals load (specifically, the NZAS Tiwai smelter load and Pacific Steel), Macquarie continues to see greater risk around this segment s future demand. 30 November

9 GWh GWh Macquarie Private Wealth Fig 9 Electricity demand pre and post GFC %/1.3% LT/post GFC CAGR 2.7%/0.0% %/-0.2% /%0.8% CY04 CY05 CY06 CY07 CY08 CY09 CY10 CY11 * Total CAGR LT/post GFC 1.6%/-0.1% Agriculture/forestry/fishing Commercial (inc transport) Industrial Residential Source: MED, Macquarie Securities, December 2012 Fig 10 Industrial load forest products under pressure CY04 CY05 CY06 CY07 CY08 CY09 CY10 CY11 CY12 10 yr ave. Other Wood, pulp, paper and printing Basic metals Source: MED, Macquarie Research, November 2012 We note that in the case of NZAS, the smelter is positioned in the middle (53% of global capacity has a higher cost) of the global cash cost as at March 2012 (see below). We note that NZAS is a tolling plant, producing primary aluminium from alumina supplied from the Yarwun and Queensland Alumina refineries at Gladstone in Queensland, Australia. As such, the plant has an inherent NZD/USD currency hedge 30 November

10 Fig Global aluminium smelter USD cash cost curve Source: Wood Mackenzie Dataset Q NZAS s current cost position is based on a 355ktpa production rate (current utilisation rate around 85%) and has an energy cost component equivalent to 32% of the total cash cost. If we assume a 10% step up in NZAS s electricity costs from 1 January 2013 (under new term financial contract), this (ceteris paribus) would push up its total cash cost by around US$60/t and barely move its position on the cost curve. This cost change assumes no relief for NZAS under the aluminium price, CPI and wholesale price indexation built into the 2013 contract which could materially mitigate the step-up we believe. We see the probability of a closure of this plant as extremely low. 30 November

11 (CEN:$5.33) Interim Results 1H/12A 2H/12A 1H/13E 2H/13E Profit & Loss 2012A 2013E 2014E 2015E June y/e Sept/June y/e2 Operating Revenue $m Operating Revenue $m EBITDAF - Recurring $m EBITDAF - Recurring $m Depreciation $m Depreciation $m Amortisation $m Amortisation $m EBIT - Recurring $m EBIT - Recurring $m EBIT $m EBIT $m Net Interest Expense $m Net Interest Expense $m Pre-Taxation Profit $m Pre-Taxation Profit $m Taxation Expense $m Taxation Expense $m Profit after Taxation $m Profit after Taxation $m Minorities $m Minorities $m Reported Profit after taxation $m Reported Profit after taxation $m Tax-affected Non -Recurring Items $m (8) Tax-affected Non -Recurring Items $m Pre Abnormal Profit after Tax $m Pre Abnormal Profit after Tax $m Adjusted Earnings 1 $m Adjusted Earnings 1 $m Adj for non-recurring items Wholesale and retail electricity 1H/12A 2H/12A 1H/13E 2H/13E Wholesale and retail electricity 2012A 2013E 2014E 2015E Wholesale electricity revenue $m Wholesale electricity revenue $m Retail electricity sales (gross) $m Retail electricity sales (gross) $m Retail electricity sales (net of energy cost) $m Retail electricity sales (net of energy cost) $m Key Assumptions Key Assumptions Average Wholesale Price Realised - GWAP ($/M Wh) Average Wholesale Price Realised - GWAP ($/M Wh) CFD year average strike price ($/M Wh) CFD year average strike price ($/M Wh) Hedge level (volume basis, inc retail) (GWh) 88% 93% 83% 83% Hedge level (volume basis, inc retail) (GWh) 91% 83% 83% 83% Total generation (GWh) Total generation (GWh) Energy cost/gwap (x) Energy cost/gwap (x) Gas purchase and transmission cost ($/GJ) Gas purchase and transmission cost ($/GJ) Discounted Cashflow Valuation Profit and Loss Ratios 2012A 2013E 2014E 2015E PER (adj Earnings) x PV FCFs Available to Owners $m 5511 EPS (adj Earnings) c Less Net Debt (inc Associate debt share) $m 1437 EPS (Reported) c Equity Value $m 4074 DPS c Shares Outstanding m 707 Revenue Growth % 20% -12% 5% 5% Equity Value per Share $m 5.76 EBIT Growth % 20% 1% 13% 14% Includes PV Tax Losses $m - EBITDA/Sales % 19% 22% 23% 24% EBIT/Sales % 12% 14% 15% 16% Assumptions Effective tax rate % 26% 28% 27% 26% Risk free rate 4.0% Payout ratio % Asset beta 0.57 EV/EBIT x Post-tax market risk premium 7.0% EV/EBITDA x Target D/V 42% EV/Sales x Nominal WACC (%) 8.1% Balance Sheet Ratios Terminal Year Assumptions ROE % EBITDA (FY20) $m 671 ROA % Perpetuity growth rate % pa 2.5 ROFE % Terminal EV/EBITDA x 9.53 Net Debt $m Capex=Depreciation yes Net Debt/Equity % Net Interest Cover (EBIT) x Price/NTA x NTA per share cps EFPOWA m Cashflow Analysis 2011A 2012A 2013E 2014E Balance Sheet 2012A 2013E 2014E 2015E Pre-taxation Profit $m Depreciation & Amortisation $m Tax (Paid)/Credit $m (23) (35) (73) (76) Cash $m Other $m Receivables $m Gross Cashflow $m Inventories $m Changes in Working Capital $m (11) (33) 11 (2) Investments $m Other $m Property, Plant & Equipment $m Operating Cashflow $m Intangibles $m Acquisitions $m Other Assets $m Capital Expenditure $m Total Assets $m Asset Sales $m Payables $m Other $m Short Term Debt $m Investing Cashflow $m (530) (566) (338) (160) Long Term Debt $m Dividend (ordinary) $m Other Liabilities $m Equity Raised $m Total Liabilities $m Other $m Shareholders' Funds $m Financing Cashflow $m 317 (43) (172) (180) Minority Interests $m Total Shareholders' Equity $m Net Change in Cash (inc FX) $m 165 (168) (119) 59 Total Funds Employed $m Source: Company data, Macquarie Research, November November

12 Important disclosures: Recommendation definitions Macquarie - Australia/New Zealand Outperform return >3% in excess of benchmark return Neutral return within 3% of benchmark return Underperform return >3% below benchmark return Benchmark return is determined by long term nominal GDP growth plus 12 month forward market dividend yield Macquarie Asia/Europe Outperform expected return >+10% Neutral expected return from -10% to +10% Underperform expected return <-10% Macquarie First South - South Africa Outperform expected return >+10% Neutral expected return from -10% to +10% Underperform expected return <-10% Macquarie - Canada Outperform return >5% in excess of benchmark return Neutral return within 5% of benchmark return Underperform return >5% below benchmark return Macquarie - USA Outperform (Buy) return >5% in excess of Russell 3000 index return Neutral (Hold) return within 5% of Russell 3000 index return Underperform (Sell) return >5% below Russell 3000 index return Volatility index definition* This is calculated from the volatility of historical price movements. Very high highest risk Stock should be expected to move up or down % in a year investors should be aware this stock is highly speculative. High stock should be expected to move up or down at least 40 60% in a year investors should be aware this stock could be speculative. Medium stock should be expected to move up or down at least 30 40% in a year. Low medium stock should be expected to move up or down at least 25 30% in a year. Low stock should be expected to move up or down at least 15 25% in a year. * Applicable to Australian/NZ/Canada stocks only Recommendations 12 months Note: Quant recommendations may differ from Fundamental Analyst recommendations Financial definitions All "Adjusted" data items have had the following adjustments made: Added back: goodwill amortisation, provision for catastrophe reserves, IFRS derivatives & hedging, IFRS impairments & IFRS interest expense Excluded: non recurring items, asset revals, property revals, appraisal value uplift, preference dividends & minority interests EPS = adjusted net profit / efpowa* ROA = adjusted ebit / average total assets ROA Banks/Insurance = adjusted net profit /average total assets ROE = adjusted net profit / average shareholders funds Gross cashflow = adjusted net profit + depreciation *equivalent fully paid ordinary weighted average number of shares All Reported numbers for Australian/NZ listed stocks are modelled under IFRS (International Financial Reporting Standards). Recommendation proportions For quarter ending 30 Sept 2012 AU/NZ Asia RSA USA CA EUR Outperform 50.00% 56.85% 61.54% 41.38% 63.19% 44.15% (for US coverage by MCUSA, 7.35% of stocks covered are investment banking clients) Neutral 36.62% 25.14% 27.69% 52.13% 30.77% 30.57% (for US coverage by MCUSA, 9.31% of stocks covered are investment banking clients) Underperform 13.38% 18.02% 10.77% 6.49% 6.04% 25.28% (for US coverage by MCUSA, 0.00% of stocks covered are investment banking clients) Company Specific Disclosures: Important disclosure information regarding the subject companies covered in this report is available at Analyst Certification: The views expressed in this research reflect the personal views of the analyst(s) about the subject securities or issuers and no part of the compensation of the analyst(s) was, is, or will be directly or indirectly related to the inclusion of specific recommendations or views in this research. The analyst principally responsible for the preparation of this research receives compensation based on overall revenues of Macquarie Group Ltd (ABN , AFSL No ) ( MGL ) and its related entities (the Macquarie Group ) and has taken reasonable care to achieve and maintain independence and objectivity in making any recommendations. General Disclosure: This research has been issued by Macquarie Securities (Australia) Limited (ABN , AFSL No ) a Participant of the Australian Securities Exchange (ASX) and Chi-X Australia Pty Limited. This research is distributed in Australia by Macquarie Equities Limited (ABN , AFSL No ) ("MEL"), a Participant of the ASX, and in New Zealand by Macquarie Equities New Zealand Limited ( MENZ ) an NZX Firm. Macquarie Private Wealth s services in New Zealand are provided by MENZ. Macquarie Bank Limited (ABN , AFSL No ) ( MBL ) is a company incorporated in Australia and authorised under the Banking Act 1959 (Australia) to conduct banking business in Australia. None of MBL, MGL or MENZ is registered as a bank in New Zealand by the Reserve Bank of New Zealand under the Reserve Bank of New Zealand Act Any MGL subsidiary noted in this research, apart from MBL, is not an authorised deposit-taking institution for the purposes of the Banking Act 1959 (Australia) and that subsidiary s obligations do not represent deposits or other liabilities of MBL. MBL does not guarantee or otherwise provide assurance in respect of the obligations of that subsidiary, unless noted otherwise. This research is general advice and does not take account of your objectives, financial situation or needs. Before acting on this general advice, you should consider the appropriateness of the advice having regard to your situation. We recommend you obtain financial, legal and taxation advice before making any financial investment decision. 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The Macquarie Group accepts no liability whatsoever for any direct, indirect, consequential or other loss arising from any use of this research and/or further communication in relation to this research. The Macquarie Group produces a variety of research products, recommendations contained in one type of research product may differ from recommendations contained in other types of research. The Macquarie Group has established and implemented a conflicts policy at group level, which may be revised and updated from time to time, pursuant to regulatory requirements; which sets out how we must seek to identify and manage all material conflicts of interest. The Macquarie Group, its officers and employees may have conflicting roles in the financial products referred to in this research and, as such, may effect transactions which are not consistent with the recommendations (if any) in this research. The Macquarie Group may receive fees, brokerage or commissions for acting in those capacities and the reader should assume that this is the case. The Macquarie Group s employees or officers may provide oral or written opinions to its clients which are contrary to the opinions expressed in this research. Important disclosure information regarding the subject companies covered in this report is available at 30 November