Mineral Resources. Incorporating Mt Marion A$9.00 AUSTRALIA. Event. Impact. Earnings and target price revision. Price catalyst

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1 AUSTRALIA MIN AU Price (at 02:04, 15 Jun 2016 GMT) Underperform A$9.00 Valuation - Sum of Parts A$ month target A$ month TSR % -5.7 Volatility Index High GICS sector Commercial & Professional Services Market cap A$m 1, day avg turnover A$m 14.2 Number shares on issue m Investment fundamentals Year end 30 Jun 2015A 2016E 2017E 2018E Revenue m 1, , , ,162.1 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 % ROA % ROE % EV/EBITDA x Net debt/equity % P/BV x MIN AU vs Small Ordinaries, & 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, June 2016 (all figures in AUD unless noted) 15 June 2016 Macquarie Securities (Australia) Limited Incorporating Mt Marion Event We incorporate the Mt Marion Lithium project into our earnings forecasts and lower our recommendation to Underperform for (MIN) following strong share price appreciation this year (MIN up 120% vs the Small ords index up 6% YTD). Impact Market is excited about the Lithium opportunity. We believe excitement surrounding MIN s 43.1% owned Mt Marion Lithium project has been a key contributor to MIN s share price performance this year. The project could produce as much as 80% of the current shortfall in the lithium market and we have valued the project at $1.10 per share using a long-term spodumene price of US$600/t. Iron ore prices still low. We believe another key driver of the MIN share price was the spike in the iron ore price earlier this year. We are forecasting costs fall again to A$50/t in FY17 driven by MIN s continuous focus on both costs and productivity. Using spot exchange rates and iron ore prices results in cashflow of close to zero. Mining services proving its quality in the current environment. The mining services business and particularly the CSI crushing business has been proving it is a quality business in what can only be described as a tough external environment. Underlying crushing capacity continues to grow. The stock is trading at ~18x FY17e PER. MIN is trading at its highest PE relative (1.5x) since listing, demonstrating the market s excitement with both the recent bump in iron prices and the Mt Marion Lithium project. Whist there is no stock that is directly comparable to MIN given its hybrid mining services/mining earnings mix, MIN is trading at a substantial premium to best of breed pure mining services (MND 12.5x FY17e PER) and mining (FMG 6.2x FY17e PER) stocks. In the light of these examples, MIN looks expensive on a relative basis. Earnings and target price revision FY16 eps up 5.3% to 52.2cps on Q4 iron prices. FY17 eps up 0.4% to 49.4cps with incorporation of Mt Marion earnings being offset by lower iron ore assumptions. Price target raised from $5.35 to $8.30 due to the inclusion of Mt Marion and a multiple increase on the mining services business from 7x to 8x FY17e EBIT. Price catalyst 12-month price target: A$8.30 based on an EV/EBITA methodology. Catalyst: Commodity price movements and crushing/epc contracts. Action and recommendation We lower our recommendation to Underperform despite the quality of the MIN mining services business and balance sheet strength on relative and absolute valuation grounds. We believe the market is currently capitalising too high a long term lithium price into the stock. Please refer to page 13 for important disclosures and analyst certification, or on our website

2 Market is excited about the Lithium opportunity We believe excitement surrounding the lithium market and MIN s 43.1% owned Mt Marion Lithium project has been a key contributor to MIN s share price performance this year. Macquarie has produced recent reports on MIN s joint venture partner, Neometals (NMT, Ben Crowley, Outperform, 55c price target Neometals Limited - Approaching the finish line) and the broader lithium market, Global Lithium Report - Fully charged, but no shortage. The project is being fast-tracked having been mothballed for a number of years. Mt Marion currently has defined Indicated and Inferred resources of 23.2Mt at 1.39% Li2O. No reserves are currently defined although a large infill and extensional drilling programme is underway. Mining, processing and transport to port will be managed by MIN under a build, own, operate agreement. Mining at Mt Marion will be via conventional drill and blast load and haul operations. Liberation of spodumene is via a conventional crush and screen with concentration via gravity, dense media separation and floatation. Fig 1 Mt Marion location Source: NMT, MIN, Macquarie Research, June 2016 Mt Marion is expected to produce ~200,000tpa of 6% spodumene concentrate and 200,000tpa of 4-6% spodumene concentrate. Spodumene is an intermediate product used in the production of lithium carbonate (LCE). 15 June

3 Fig 2 Mt Marion site layout Source: NMT, MIN, Macquarie Research, June 2016 Construction activities have been underway at Mt Marion since 4QFY15 and, to date, all site clearing and preparation, office installation, detailed engineering and design work and concrete civil work has been completed. Access to port facilities is being finalised and the project remains on track to ship its first concentrate in 2HCY16. In 2015, the project entered into an off-take and equity investment agreement with Ganfeng. Under the agreement, Ganfeng took a 43.1% equity position in the project. Ganfeng has entered into a long term off-take for 100% of spodumene concentrate production at benchmarked market prices subject to an agreed but undisclosed floor price. The project could produce as much as ~45,000t LCE equivalent, or around 80% of the current shortfall in the LCE market. Current ownership of the project is NMT 13.8%, MIN 43.1% and Ganfeng 43.1%. China s shadow Lithium market - Off contract sales could provide material short term pricing upside Macquarie commodities recently started coverage of the lithium market, where prices have risen 50% since the start of Lithium demand was up 8% YoY overall and 22% YoY in batteries last year. The rally has been aided by established producers consciously not lifting output to meet this demand. Macquarie commodities are of the view that the market will remain tight on an 18-month view, with an average price target of $8,250/t for This annual average represents 16% upside from current spot, but on a shorter-term basis, overshooting into the mid-to-high $8,000s per tonne looks likely. However, Macquarie commodities doesn t believe that the market has a capacity constraint and think major producers will be forced to lift output by the threat of new market entrants, capping the price rally from late-2017 despite the compelling demand story. As with many other strategic or speciality metals, the lithium market is relatively small and pricing mechanisms are opaque. There is no exchange for trading the metal with pricing generally determined by bi-lateral agreements between suppliers and consumers. 15 June

4 Fig 3 Macquarie benchmark LCE and spodumene price forecasts Source: Customs data, Company reports, Macquarie Research, June 2016 There is no spot market and no defined spot price but there is what can be termed an off-contract market. Off-contact pricing can be substantially higher than contract rates although typically volumes are small. We expect new and aspirant producers to operate largely in the off-contract market. Specifically, we refer to the Chinese conversion sector which has effectively been cut out of the global spodumene supply chain by the ALB/Tianqui acquisition of the Greenbushes mine. This has led to a pronounced shortage of LCE feedstock within the Chinese conversion sector resulting in the evolution of a secondary market in which significant premiums are being paid for almost any kind of lithium carbonate or lithium hydroxide precursor. Anecdotally, we understand that volumes being sold in public auctions or in off-contract deals have achieved prices of US$12,000/t to US$19,000/t. We also note that recent price guidance from Orocobre (ORE AU, A$4.65, Outperform, TP: A$5.00, Andrew Hodge) suggests that they expect to receive average price of US$10,000/t LCE in 3QCY16, a substantial increase on the US$7,500 received in the 2QCY16 and a 21% premium on our forecast peak benchmark price of US$8,250/t in CY17. We believe that this is a function of the feedstock shortage within the conversion market which is now impacting downstream materials handlers and cathode material manufacturers who are being driven down the supply chain to secure LCE. This is not unusual behaviour in industrial minerals markets and we look to historical analogues in the minerals sands market in particular, as well as rare earths, uranium and although a much larger market, iron ore. We believe that the current pricing being seen in the spodumene market is an aberration driven by anti-competitive behaviour on the part of key vertically integrated players. This is starving small scale Chinese converters of feedstock which is in turn driving irrational marketplace behaviours. In our view, this is likely being compounded by hoarding, trading and general speculation. 15 June

5 Fig 4 We expect the Mt Cattlin and Mt Marion projects to bring the LCE market back into a short term balance Source: Customs data, Company reports, Macquarie Research, June 2016 Ahead of the full ramp up of Mt Cattlin (a 112,000tpa spodumene project currently being restarted by Galaxy Resources, Ben Crowley, underperform, $0.42 price target) and Mt Marion we expect this situation to persist, and should either of the new spodumene projects stumble then we would expect upward pricing pressure in this secondary market to remain. The key risk to this off-contract deals scenario is the potential for Greenbushes to be ramped up or for ALB/Tianqui to release Greenbushes material back into the market. Greenbushes run rates in the Sep 15-Feb 16 period are averaging 420ktpa of spodumene concentrate, well below nameplate capacity of 740ktpa. We maintain our long term view on declining prices but believe that in the short term we will continue to see significant off-contract premiums. Due to the long-term pricing uncertainty for LCE we believe that lithium equities are being valued in line with off-contract prices. Our forecasts for the Mt Marion Lithium project assume a US$600/t spodumene price We have included Mt Marion in our MIN estimates for the first time and detail our earnings estimates once the project reaches full production below. Fig 5 Mt Marion could be a big money spinner for MIN if prices hold at forecast levels Material summary 6% Product kt % Product kt Total kt Prices Price (FOB) 6% US$/t Price (FOB) 4% US$/t FX 0.74 Profit and loss Revenue A$m Revenue/ton A$/t Cost/ton A$/t Costs A$m EBITDA A$m Tax rate % 30.0% NPAT A$m 82.2 MIN share % 43.1% MIN share (equity accounted NPAT) A$m 35.4 Source: Macquarie Research, June June

6 The above table assumes a 1.75mtpa mining operation producing 200ktpa each of 6% and 4% spodumene concentrate in a steady state with the 6% concentrate being sold at US$600/t. For the sake of our analysis, we assume the 4% product is priced at a linear discount to the 6% product plus 15%. We have assumed all in costs of A$350/t once the project reaches steady state for both the 6% and 4% product. Using these assumptions, we estimate MIN s 43.1% shareholding in the project will produce an annual $35.4m equity accounted NPAT contribution once in steady state production. This equates to eps of ~19cps. Given the project is expected to commence production in Q2 FY17, FY18 is the first year we expect steady state production. We have valued the project on an NPV basis using an 8% discount rate given the mine is forecast to finish production in This is in accordance with the valuation used in our NMT report. This gives an NPV of $205m or $1.10 per MIN share. Our valuation gives an effective steady state PER of 5.8x. While this PER seems low, it is due to the ~8 year mine life. MIN will be very sensitive to the assumed lithium price as detailed below. Fig 6 Each US$100 per tonne increase in the spodumene price adds ~$13m in NPAT and over $70m in NPV to MIN NPAT sensitivity to Spodumene price (A$m) NPV sensitivity to Spodumene price (A$m) , ,000 Source: Macquarie Research, June 2016 A $13m increase in NPAT equates to ~14% of our FY17 NPAT forecast of $92.8m and $70m in NPV equates to ~$0.37 per share to our MIN valuation. 15 June

7 Iron ore prices still low We believe another key driver of the MIN share price was the spike in the iron ore price earlier this year. After averaging ~US$47.40 in Q2 and Q3 of FY16, Macquarie expects the Q4 price to average ~US$55. The average H1 FY16 wet CFR iron ore price realised by MIN was A$64.53 per tonne while costs averaged A$57.25 excluding A$5.11 of depreciation. Fig 7 MIN has done a great job on costs as iron ore prices have fallen Estimated realised Fe price (AUD) Estimated cash cost (AUD) $140/t $140/t $120/t $120/t $100/t $100/t $80/t $80/t $60/t $60/t $40/t $40/t $20/t $20/t $0/t H1 12 H2 12 H1 13 H2 13 H1 14 H2 14 H1 15 H2 15 H1 16 H2 16e FY17e $0/t H1 12 H2 12 H1 13 H2 13 H1 14 H2 14 H1 15 H2 15 H1 16 H2 16e FY17e Source: MIN, Macquarie, June 2016 The January 2016 cash cost was A$53.60/t. Costs still remain a key focus with the focus on larger road trains and port and rail charges in particular. Our FY16 production forecast is ~12.0mt. We are forecasting costs fall to A$50/t in FY17 driven by MIN s continuous focus on both costs and productivity. Recent initiatives include super-quad trucks and carbon fibre truck trays. This would give EBITDA (cash) margins of ~$5/t using Macquarie s forecast exchange rate of 0.67 in FY17. Using spot exchange rates and iron ore prices results in this cashflow reducing to close to zero as the charts below demonstrate. Fig 8 FY17e Iron ore cash margin falls to break even at spot FX Estimated cash Macq e FX Estimated cash spot FX $40/t $40/t $35/t $35/t $30/t $30/t $25/t $25/t $20/t $20/t $15/t $15/t $10/t $10/t $5/t $5/t $0/t H1 12 H2 12 H1 13 H2 13 H1 14 H2 14 H1 15 H2 15 H1 16 H2 16e FY17e $0/t H1 12 H2 12 H1 13 H2 13 H1 14 H2 14 H1 15 H2 15 H1 16 H2 16e FY17e Source: MIN, Macquarie, June 2016 Another key factor for FY17 costs for MIN will be the recent recovery in the oil price which adds to cost, particularly in its Pilbara operations where ore is trucked ~330km to Port Hedland. MIN has no take or pay obligations in any of its operations and has in the past shown its willingness to curtail production in response to low commodity prices. The key sensitivity remains volatility in the iron ore price and FX. Given we expect ~12mtpa of iron ore production in both FY16 and FY17 we have detailed the key sensitivities below. 1c on FX = $10.2m EBITDA or a 4.0% change in our FY17 estimates US$1/t on price = $13.5m EBITDA or a 5.3% change in our FY17 estimates MIN has a stretch target to get all in costs below $44/t. This would place MIN in a similar cost position to the far larger Fortescue. Whilst it is tempting to dismiss this as impossible to achieve for a company the size of MIN, management have proven to be very innovative to date. 15 June

8 kt Macquarie Wealth Management We see several large cost saving opportunities for the company over the next 1-2 years and would expect some announcements over the coming 12 months. These include a move of Carina volumes to Esperance, LNG power and the BOTS light rail system. Mining services proving it is a quality business in the current environment The mining services business and particularly the CSI crushing business has been proving it is a quality business in what can only be described as a tough external environment. Fig 9 Crushing volumes boosted by FMG over FY12 - FY14 but now recovering nicely FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16e FY17e Source: MIN, Macquarie Research, June 2016 While the overall mining services EBITDA contribution can be volatile depending on the contribution of EPC contracts such as the Rio Nammuldi project in FY15, underlying crushing capacity continues to grow. We expect most of the profits on the Nammuldi Incremental tonnes EPC contract to be booked in FY17. While we expect MIN to tender for further EPC opportunities in the future we have assumed no earnings from this source in FY18 and beyond. In FY16, we expect underlying crushing capacity to grow 11% to 94mtpa. In FY17, we expect limited growth in crushing volumes due largely to management changes at some of MIN s largest customers. We expect the Mt Marion operations contract to make a large revenue contribution in FY17 and FY18 given our forecast in Fig 5 above that costs at that project will be ~$140m annually. MIN s crushing contracts are predominantly for satellite-type facilities and given the expansion and cost saving plans of the iron ore majors, we see several opportunities for the crushing business into the medium term. We expect CSI to crush increased volumes as mining clients look to take advantage of incremental commodity volumes to lower costs. The cost saving focus of mining companies is also likely to benefit MIN due to its track record of low cost, quality and high plant availability. Crushing contracts are typically negotiated under a sliding scale arrangement with minimum contracted volumes. MIN has historically processed volumes in excess of minimum contract requirements. The average weighted tenure for MIN s existing contracts in six years. We estimate the other mining services businesses revenues will fall in FY16 in line with the broader mining services market. We are not forecasting a quick recovery for these businesses. 15 June

9 The stock is trading at ~18x FY17 PER We highlight our NPAT and EBITDA forecasts compared to FactSet consensus in the chart below. Fig 10 We are broadly in line with consensus EBITDA for FY17e and higher on NPAT Macq e v Consensus NPAT ($m) Macq e v Consensus EBITDA ($m) FY15 FY16e FY17e FY18e 0.0 FY15 FY16e FY17e FY18e Macq e Factset consensus Macq e Factset consensus Source: Macquarie research, Factset, June 2016 MIN is targeting FY16 EBITDA of $ m and we have upgraded our forecast from $260.9m to $268.0m to account for recent strength in iron ore prices. The key volume assumptions behind this forecast are 12mt of iron ore exports and 94mt of crushing. Our FY17 forecasts for iron ore assume positive $2.50/t EBITDA, $5/t in D&A and an EBIT loss of $2.50/t. This compares to our previous EBIT breakeven forecast. Offsetting this we have included earnings estimates for the Mt Marion Lithium project for the first time. We have included a 6 month contribution for both the operations contract and MIN s 43.1% equity accounted profit share. The detailed workings for this are detailed in Figure 6 above. We have a lower accounting tax rate in FY17 due to the Mt Marion earnings being equity accounted and this accounts for our NPAT forecast being above consensus despite our EBITDA forecast being broadly in line. Our mining services forecasts have seen limited change other than the inclusion of the Mt Marion contract referred to above. Fig 11 MIN is trading at its highest PE relative since listing MIN absolute PER MIN PE relative 25 min-au ASX 200 Industrials 1.8 min-au Rolling 36M Mean Mean + 1 Stdev Mean - 1 Stdev Source: Macquarie, Factset, June 2016 The charts above clearly highlight that MIN is trading at its highest PE relative since listing demonstrating the market s excitement with both the recent bump in iron prices and the Mt Marion Lithium project. 15 June

10 Whist there is no stock that is directly comparable to MIN given its hybrid mining services/mining earnings mix we have detailed the valuations of best of breed pure mining services and mining stocks below. Monadelphous (MND, John Purtell, underperform, $5.95 target). MND is widely regarded as a quality constructor and asset maintenance business in the mining services space as is currently trading on a FY17e consensus PER of 12.5x and EV/EBIT ratio of 6.5x. In common with MIN, it also has a very strong balance sheet. Fortescue (FMG, Hayden Bairstow, outperform, $3.50 target). FMG is a large pure play iron ore miner and is currently trading on a Macq e FY17 PER of 6.2x. We have used Macquarie estimates in this case to account for the different iron ore price assumptions used in consensus. In the light of these examples, MIN looks expensive on a relative basis. We have detailed our MIN valuation in the table below. Fig 12 Price target upgraded to $8.30 with Mt Marion included FY17e Multiple- Low Multiple High Value - Low Value - High Non-mining EBIT Lithium Project NPV Total Less Net Debt Diluted Shares on Issue Valuation $7.57 $8.30 Source: Macquarie Research, June 2016 Our price target of $8.30 includes $204.9m in NPV for the Mt Marion lithium project. As discussed above, this NPV assumes 400ktpa of spodumene product with the high grade product being sold at US$600/t until the mine ends in The NPV assumes an 8% discount rate similar to our NMT valuation (MIN s partner at Mt Marion). Our 7-8x EBIT multiple for mining services EBIT compares favourably to the current MND trading multiple referred to above and reflects the stronger outlook, greater tenure (weighted average ~six years contract life) and high returns generated. We have attributed no value to the iron ore business given it is forecast to be loss making at the EBIT level and marginally cash-flow positive at the EBITDA level. Our price target is based on the high end of our FY18 valuation. 15 June

11 (MIN:$9.00) 15-Jun-16 Interim results 1H15(a) 2H15(a) 1H16(a) 2H16(e) Profit & Loss 2015A 2016E 2017E 2018E Revenue Revenue $m EBITDA $m EBITDA $m Depreciation $m Depreciation $m Amortisation of goodwill $m Amortisation of goodwill $m EBIT $m EBIT $m Net Interest expense $m Net interest expense $m Pre-Tax Profit $m Pre-Tax Profit $m Tax Expense $m Tax Expense $m Net Profit $m Net Profit $m Outside equity interests $m Outside equity interests $m Net Abn/Extra $m Net Abnormals/Extra. $m Reported Earnings $m Reported Earnings $m Adjusted Earnings $m Adjusted Earnings $m Gross Cashflow $m Gross Cashflow $m EPS (Adj/dil) c EPS (adj/diluted) c EPS growth % EPS growth % % -5.3% 22.3% CFPS c PE (adj) x CFPS Growth % nmf nmf 25.3 CFPS c EBITDA/Sales % CFPS Growth % EBIT/Sales % PGCFPS x Earnings Split % DPS c Revenue Growth % Yield % EBIT Growth % Franking % Profit and Loss ratios 2015A 2016E 2017E 2018E Cashflow Analysis 2015A 2016E 2017E 2018E Revenue Growth % EBIT Growth % Pre-tax Profit $m EBITDA/Sales % Depreciation & Amortisation $m EBIT/Sales % Tax Paid $m Effective tax rate % Gross cashflow $m Payout ratio % Changes in working capital $m EV/EBITA x Other $m EV/EBITDA x Operating Cashflow $m EV/Sales x Acquisitions $m Capex - Plant & Equip. $m Balance sheet ratios Asset Sales $m ROE % Other $m ROA % Investing cashflow $m ROFE % Dividend (ordinary) $m Net Debt $m Equity raised $m Net Debt/Equity % < 0 < 0 < 0 < 0 Other $m Interest Cover x nmf Financing cashflow $m Price/NTA x NTA per share $ Net Change in cash/debt $m EFPOWA m Historical performance 2012A 2013A 2014A 2015A Balance Sheet 2015A 2016E 2017E 2018E Cash $m Revenue $m Receivables $m EBITDA $m Inventories $m Depreciation/Amortisation $m Investments $m EBIT $m Property, plant & equipment $m Net interest expense $m Intangibles $m Pre-Tax Profit $m Other Assets $m Tax Expense $m Total Assets $m Net Profit $m Payables $m Net Abn/Extra $m Short Term Debt $m Long Term Debt $m EPS (adj/dil) c Other Liabilities $m EPS growth % Total Liabilities $m Ordinary DPS c Shareholders Funds $m EBITDA/Sales % Minority Interests $m EBIT/Sales % Total Shareholders Equity $m ROE % ROFE % Total Funds employed $m 1, , , ,799.2 EFPOWA m A 2016E 2017E 2018E Sales EBITDA Margin 21.8% 24.2% 22.8% 23.3% EBIT Margin 12.0% 12.4% 11.1% 12.3% Tonnes Mn 315, Fe 10,305,000 12,005,325 12,365,485 12,736,449 Total 10,620,000 12,005,325 12,365,485 12,736,449 Source: Company data, Macquarie Research, June June

12 Fundamentals Macquarie Wealth Management Macquarie Quant View The quant model currently holds a strong positive view on Mineral Resources. The strongest style exposure is Price Momentum, indicating this stock has had strong medium to long term returns which often persist into the future. The weakest style exposure is Profitability, indicating this stock is not efficiently converting investments to earnings; proxied by ratios like ROE or ROA. 39/296 Global rank in Comm. & Prof. Services % of BUY recommendations 60% (3/5) Number of Price Target downgrades 0 Number of Price Target upgrades 2 Attractive Quant Local market rank Global sector rank Displays where the company s ranked based on the fundamental consensus Price Target and Macquarie s Quantitative Alpha model. Two rankings: Local market (Australia & NZ) and Global sector (Comm. & Prof. Services) Macquarie Alpha Model ranking A list of comparable companies and their Macquarie Alpha model score (higher is better). Factors driving the Alpha Model For the comparable firms this chart shows the key underlying styles and their contribution to the current overall Alpha score. Macquarie Atlas Roads Gro Macquarie Atlas Roads Gro Cleanaway Waste Managemen 0.1 Cleanaway Waste Managemen SAI Global -0.1 SAI Global GWA Group -0.2 GWA Group Seven Group Holdings -0.4 Seven Group Holdings Virgin Australia -2.0 Virgin Australia % -80% -60% -40% -20% 0% 20% 40% 60% 80% 100% Valuations Growth Profitability Earnings Momentum Price Momentum Quality Macquarie Earnings Sentiment Indicator The Macquarie Sentiment Indicator is an enhanced earnings revisions signal that favours analysts who have more timely and higher conviction revisions. Current score shown below. Drivers of Stock Return Breakdown of 1 year total return (local currency) into returns from dividends, changes in forward earnings estimates and the resulting change in earnings multiple. Macquarie Atlas Roads Gro Cleanaway Waste Managemen SAI Global GWA Group Seven Group Holdings Virgin Australia Macquarie Atlas Roads Gro Cleanaway Waste Managemen SAI Global GWA Group Seven Group Holdings Virgin Australia % -50% 0% 50% 100% Dividend Return Multiple Return Earnings Outlook 1Yr Total Return What drove this Company in the last 5 years Which factor score has had the greatest correlation with the company s returns over the last 5 years. Price to Earnings FY1 Price to Earnings NTM Price to Cash FY1 Dividend Yield LTM SAL Growth 5yr Historic CFROI Change in Cash FY0 Operating Leverage Inc. -26% -22% -22% -22% Negatives Positives -30% -20% -10% 0% 10% 20% 30% 27% 26% 25% 24% How it looks on the Alpha model A more granular view of the underlying style scores that drive the alpha (higher is better) and the percentile rank relative to the sector and market. Alpha Model Score Valuation Growth Profitability Earnings Momentum Price Momentum Quality Capital & Funding Liquidity Risk Technicals & Trading Normalized Score Percentile relative to sector(/296) Percentile relative to market(/397) Source (all charts): FactSet, Thomson Reuters, and Macquarie Research. For more details on the Macquarie Alpha model or for more customised analysis and screens, please contact the Macquarie Global Quantitative/Custom Products Group (cpg@macquarie.com) 15 June

13 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 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 Asia/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 31 March 2016 AU/NZ Asia RSA USA CA EUR Outperform 50.34% 59.09% 46.67% 44.76% 60.66% 46.12% (for global coverage by Macquarie, 3.72% of stocks followed are investment banking clients) Neutral 34.14% 25.66% 32.00% 49.90% 30.33% 35.10% (for global coverage by Macquarie, 4.79% of stocks followed are investment banking clients) Underperform 15.52% 15.26% 21.33% 5.33% 9.02% 18.78% (for global coverage by Macquarie, 2.31% of stocks followed are investment banking clients) MIN AU vs Small Ordinaries, & rec history (all figures in AUD currency unless noted) 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, June month target price methodology MIN AU: A$8.30 based on a EV/EBITA methodology Company-specific disclosures: MIN AU: Macquarie Bank Limited makes a market in the securities in respect of Limited. Important disclosure information regarding the subject companies covered in this report is available at Date Stock Code (BBG code) Recommendation Target Price 19-Feb-2016 MIN AU Neutral A$ Dec-2015 MIN AU Neutral A$ Nov-2015 MIN AU Outperform A$ Aug-2015 MIN AU Neutral A$ Aug-2015 MIN AU Neutral A$ Feb-2015 MIN AU Neutral A$ Jan-2015 MIN AU Neutral A$ Oct-2014 MIN AU Neutral A$ Sep-2014 MIN AU Neutral A$ Aug-2014 MIN AU Neutral A$ Jun-2014 MIN AU Neutral A$ Apr-2014 MIN AU Outperform A$ Feb-2014 MIN AU Outperform A$ Jan-2014 MIN AU Outperform A$ Aug-2013 MIN AU Outperform A$ Jun-2013 MIN AU Outperform A$10.59 Target price risk disclosures: MIN AU: Any inability to compete successfully in their markets may harm the business. This could be a result of many factors which may include geographic mix and introduction of improved products or service offerings by competitors. The results of operations may be materially affected by global economic conditions generally, including conditions in financial markets. The company is exposed to market risks, such as changes in interest rates, foreign exchange rates and input prices. From time to time, the company will enter into transactions, including transactions in derivative instruments, to manage certain of these exposures. Analyst certification: 15 June

14 We hereby certify that all of the views expressed in this report accurately reflect our personal views about the subject company or companies and its or their securities. We also certify that no part of our compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report. The Analysts responsible for preparing this report receive compensation from Macquarie that is based upon various factors including Macquarie Group Limited (MGL) total revenues, a portion of which are generated by Macquarie Group s Investment Banking activities. General disclosure: This research has been issued by Macquarie Securities (Australia) Limited ABN , AFSL , a Participant of the ASX and Chi-X Australia Pty Limited. This research is distributed in Australia by Macquarie Wealth Management, a division of Macquarie Equities Limited ABN AFSL ("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 Apart from Macquarie Bank Limited ABN (MBL), any MGL subsidiary noted in this research,, 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 contains 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. This research has been prepared for the use of the clients of the Macquarie Group and must not be copied, either in whole or in part, or distributed to any other person. If you are not the intended recipient, you must not use or disclose this research in any way. If you received it in error, please tell us immediately by return and delete the document. We do not guarantee the integrity of any s or attached files and are not responsible for any changes made to them by any other person. Nothing in this research shall be construed as a solicitation to buy or sell any security or product, or to engage in or refrain from engaging in any transaction. This research is based on information obtained from sources believed to be reliable, but the Macquarie Group does not make any representation or warranty that it is accurate, complete or up to date. We accept no obligation to correct or update the information or opinions in it. Opinions expressed are subject to change without notice. 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 Macquarie Group 15 June