Corus Entertainment Inc.

Transcription

1 Company Comment Thursday, April 14, 2016, Pre-Market 1 Corus Entertainment Inc. No Change to Our Investment Thesis Jeff Fan, CPA, CA, CFA - (416) (Scotia Capital Inc. - Canada) jeff.fan@scotiabank.com Rating: Sector Perform Target 1-Yr: C$12.00 ROR 1-Yr: 9.8% Valuation: 6.75x EV/EBITDA on NTM EBITDA 1 year forward Key Risks: Slowdown in adv spending; Subscriber churn from Pick and Pay TV model (CJR.B-T C$11.97) Moby Parkhani - (416) (Scotia Capital Inc. - Canada) Matthew J Lee - (416) (Scotia Capital Inc. - Canada) Div. (NTM) $1.14 Div. (Curr.) $1.14 Yield (Curr.) 9.5% Event We updated our CJR model post Q2/F16 results. Implications Within the TV business, we have lowered our estimates on advertising revenue as secular trends towards digital advertising in tandem with soft economic conditions lead us to expect a lower growth rate in H2/16. Corus' MD&O segment achieved steady growth in Q2/16 driven by distribution deals on Nickelodeon content. We see this as a small positive step towards growing this revenue stream but CJR is still not the creator. We slightly increased our forecast on MD&O driven by further distribution deals CJR announced. We expect total Television revenue and EBITDA of $628M and $292M, respectively in F2016. We have reduced our radio EBITDA forecasts as revenue continues to decline more quickly than costs. Corus was unable to cut fixed costs at a sufficient rate to maintain margins in Q2/16. We believe that this trend will continue and don't expect Corus to be able to improve margins in the second half of the year. We now expect radio to report EBITDA of $32M (-13% YOY) and revenue of $153M (-5% YOY) for F2016. Recommendation We maintain our Sector Perform rating and $12 price target. Our thesis remains that the time to invest in CJR is when there is visibility of a true transition. Pertinent Revisions Qtly Adj. EPS (FD) Q1 Q2 Q3 Q4 Year P/E Capitalization 2014A $0.65 A $0.31 A $0.49 A $0.31 A $ x 2015A $0.60 A $0.33 A $0.36 A $0.28 A $ x 2016E $0.49 A $1.17 $0.49 $0.17 $ x 2017E $0.55 $0.22 $0.46 $0.19 $ x (FY-Aug.) 2013A 2014A 2015A 2016E 2017E EBITDA (M) $270 $290 $277 $431 $634 Adj Earnings/Share $1.65 $1.76 $1.57 $1.94 $1.42 Free Cash Flow/Sh $1.83 $2.14 $2.27 $1.60 $1.40 EV/EBITDA 9.5x 10.2x 7.2x 8.2x 6.6x Price/Earnings 15.3x 13.9x 9.1x 6.2x 8.4x Price/FCF 13.8x 11.4x 6.3x 7.5x 8.6x Revenues (M) $804 $833 $815 $1,201 $1,733 Debt/EBITDA 1.7x 3.0x 2.8x 4.5x 2.8x BVPS16E: $18.55 ROE16E: 11.92% Historical price multiple calculations use FYE prices. Source: Reuters; company reports; Scotiabank GBM estimates. All values in C$ unless otherwise indicated. ^ Non-Voting New Old Adj. EPS16E $1.94 $1.29 Adj. EPS17E $1.42 $1.41 Market Cap (M) $1,041 Net Debt + Pref. (M) $764 Enterprise Value (M) $1,805 Shares O/S (M) 87 Float O/S (M) 79 ScotiaView Analyst Link For Reg AC Certification and important disclosures see Appendix A of this report. Analysts employed by non-u.s. affiliates are not registered/qualified as research analysts with FINRA in the U.S.

2 2 CJR s Quarter Was In Line; No Change to Our Investment Thesis Our investment thesis remains unchanged after Q2 results generally meet expectations. We continue to believe that Corus will be able to maintain its dividend of 9.8%, which should attract dividend seeking investors to the stock. However, we are looking to get more clarity around the integration of Shaw Media and will remain cautious on the stock until there is more visibility of a true transition. We maintain our Sector Perform rating and $12 price target. With the synergies flowing through over the next 1-2 years and dividend stability, we believe CJR valuation has some temporary support at 6.7x NTM EBITDA. We do not expect any material multiple re-rating beyond 7.5x unless CJR can achieve its transition to become an impactful content creator. TV Advertising Revenue Lowered; Partially Offset by MD&O We have decreased our specialty advertising revenue forecast as market conditions continue to remain soft. Specialty TV ad revenues declined 8% YOY, which was slightly worse than our estimate of -6% YOY. This was driven by soft macro-economic conditions reducing total advertising spend in combination with the secular trend towards digital advertising. We have reduced our advertising forecast in the back of 2016 to -8% YOY. Merchandising, distribution and other revenue increased 7% driven by distribution deals (when adjusting for one-time payment of $6.5M from Bell). Corus MD&O segment achieved steady growth in Q2/16 driven by distribution deals on Nickelodeon content (CJR not the creator). Management has noted that owning and controlling more content is a key strategic focus of the new Corus, and we believe Q2 results were a step in the right direction. Further distribution deals on CJR s owned library could generate growth for the business and move investors focus away from labelling CJR as a broadcaster. However, we note even with strong execution this is many years away. We slightly increased our forecast on MD&O driven by further distribution deals CJR announced (Masters of Flip, Buying the View and Netflix deal for Nickelodeon content). We expect total Television revenue and EBITDA of $628M and $292M respectively for F2016. Radio Declining Faster than Anticipated Radio EBITDA declined at a faster rate than we expected. Radio EBITDA of $5.2M (- 17% YoY) was significantly below our estimate of $7M as a result of lower than expected reductions of fixed costs. We expect Corus to continue to face some pressure on cost cutting in the segment and have slightly increased our costs estimates. We now expect radio to report EBITDA of $32M (-13% YOY) and revenue of $153M (-5% YOY) for F2016. The New Corus We believe the Shaw Media acquisition provides CJR management with more time to achieve its strategy to own and control more content. Until then, for the next 1-2 years, we expect the acquisition synergies will keep EBITDA and FCF stable. We expect this will bring net debt/ebitda down to below 3.0x by F18. For F2016 we now expect the combined entity to report revenue of $1,201M and EBITDA of $431M. As for the dividend, we estimate the payout ratio (% of FCF) will be manageable in F16 and F17 at approximately 50% but this is mainly because of SJR's DRIP participation, which saves CJR approximately $80M annually. SJR has committed to the DRIP for F16 and F17. By F18, if SJR no longer participates, the payout ratio rises close to 80%.

3 3 Exhibit 1 - Summary Model Year ending August 31 (CORUS ONLY; DOES NOT INCLUDE SHAW MEDIA E 2017E 2018E Q1/F15 Q2/F15 Q3/F15 Q4/F15 Q1/F16 Q2/F16E Q3/F16E Q4/F16E Specialty Advertising Conventional Advertising Specialty Subscription Pay TV Subscription Total Television % of Total Revenue 69% 69% 66% 64% 63% 71% 69% 70% 65% 70% 67% 67% 61% Television Content (Nelvana) % of Total Revenue 11% 11% 14% 15% 17% 9% 12% 10% 15% 11% 16% 12% 18% Radio Advertising Radio Content Total Radio % of Total Revenue 21% 20% 20% 20% 20% 20% 19% 20% 20% 20% 17% 21% 21% Revenue Mix (% of Total Revenue) Total Specialty Revenue 53% 53% 37% 26% 26% 56% 53% 55% 49% 54% 52% 31% 26% Specialty TV: Subscription 28% 29% 20% 14% 14% 25% 31% 28% 31% 25% 33% 16% 16% Specialty TV: Advertising 26% 25% 17% 12% 11% 31% 22% 26% 18% 29% 19% 15% 10% Pay TV Revenue 13% 13% 5% 0% 0% 13% 13% 13% 13% 13% 13% 0% 0% Conventional Advertising 3% 2% 2% 1% 1% 2% 2% 2% 2% 2% 2% 1% 1% Television Content (Nelvana) 11% 11% 9% 6% 7% 9% 12% 10% 15% 11% 16% 6% 8% Total TV Revenue Mix 79% 80% 52% 33% 34% 80% 81% 80% 80% 80% 83% 38% 35% Television Revenue Growth Metrics Specialty TV Revenue: Advertising 15% -6% 0% 1% -6% 1% -7% -12% -10% -6% -8% 6% 13% Specialty TV Revenue: Subscription 25% 2% 4% 1% -2% 10% 1% -3% -1% 2% 7% 3% 3% Merchandising, Distribution and Other -24% 5% 18% 1% 10% -12% 25% 12% -1% 26% 32% 8% 8% Year ending August 31 ($M; execpt EPS; INCLUDES Shaw Media Q3/16) E 2017E 2018E Q1/F15 Q2/F15 Q3/F15 Q4/F15 Q1/F16 Q2/F16E Q3/F16E Q4/F16E Revenue Radio Television Corus Shaw Media (from Q3/16) 420 1, Total Revenue ,201 1,733 1, Radio Growth (%) -6.0% -6.4% -5.3% -3.9% -4.9% -5.1% -7.6% -7.2% -6.0% -2.2% -5.6% -6.8% -6.8% Television Growth (%) 6.5% -1.0% -4.0% -7.9% -1.2% 2.0% 2.0% -4.6% -3.4% 1.2% 5.3% -12.3% -10.6% Shaw Media Growth (%) -3.3% -3.7% Total Revenue Growth Organic(%) 2 3.7% -2.1% 2.7% 0.0% -3.0% 0.5% 0.0% -5.1% -3.9% 0.5% 3.2% 2.1% 3.6% EBITDA Radio Television Corus Shaw Media (from Q3/16) Synergies and one time costs Corporate (29) (20) (23) (23) (23) (3) (6) (5) (6) (5) (7) (5) (6) Total EBITDA Radio Growth (%) -17.5% -18.6% -12.5% 4.1% -1.0% -19.1% -26.5% -19.0% -10.5% -0.1% -16.8% -19.3% -20.6% Radio Margin (%) 26.4% 22.9% 21.1% 22.9% 23.8% 28.1% 17.2% 23.4% 21.7% 28.7% 15.1% 20.3% 18.4% Television Growth (%) 14.4% -4.8% 12.1% -7.9% -4.9% 1.5% 2.9% -15.3% -7.8% 5.1% 36.4% 1.6% 8.7% Television Margin (%) 41.4% 39.8% 46.5% 46.4% 44.7% 46.2% 38.5% 39.4% 34.1% 47.9% 49.8% 45.6% 41.4% Shaw Media Growth (%) -6.9% -5.4% Shaw Media Margin (%) 33.2% 32.0% 31.4% 39.1% 20.7% Total EBITDA Growth (%) 11.4% -4.3% 13.1% 5.2% 0.3% 22.0% 17.5% 0.9% 13.6% 2.8% 33.3% 3.6% 11.0% EBITDA Margin (%) 34.8% 34.0% 35.9% 36.6% 37.8% 41.1% 31.2% 33.8% 28.7% 42.0% 40.3% 39.3% 27.1% Depr. & Amort EBIT Interest Taxes Non-controlling Interest Net Income to Common 150 (25) (87) (8) Average Shares (M) - Basic Adjusted EPS ($C) $1.76 $1.57 $1.94 $1.42 $1.41 $0.60 $0.33 $0.36 $0.28 $0.49 $1.17 $0.49 $0.17 EPS Growth (%) 7% -11% 23% -26% -1% -66% 359% -202% -1% -20% 255% 35% -40% Dividend per Share ($C) $1.09 $1.14 $1.14 $1.14 $1.14 $0.27 $0.28 $0.28 $0.28 $0.28 $0.28 $0.28 $0.28 Dividend Growth (%) 6.9% 4.6% 0.0% 0.0% 0.0% 6.9% 4.6% 4.6% 4.6% 4.6% 0.0% 0.0% 0.0% Payout ratio (% of Adjusted EPS) 62% 72% 59% 80% 80% $25M CAPEX from CJR and Leverage is expected to decline due to PayTV proceeds from BCE. Other: Capex $16M from 3 SJR Media Capex Intensity 1.4% 2.0% 3.1% 2.4% 2.4% 1.2% 2.6% 2.4% 2.1% 1.2% 3.8% 2.9% 3.9% Cash EBIT (EBITDA - Capex) Cash EBIT Margin (%) 33.3% 32.0% 32.8% 34.2% 35.3% 39.8% 28.6% 31.4% 26.6% 40.8% 36.5% 36.3% 23.2% Net Debt ,952 1,779 1, ,980 1,952 Net Debt/ EBITDA 3.0x 2.8x 3.0x 2.8x 2.7x 3.3x 3.1x 2.9x 2.8x 2.6x 0.9x 3.1x 3.0x FCF FCF/share ($C) $2.15 $2.27 $1.60 $1.40 $1.51 $0.40 $0.53 $0.74 $0.60 $0.76 ($0.02) $0.67 $0.20 Payout Raio (% of FCF) 51% 50% 49% 47% 76% 68% 53% 38% 47% 37% -1432% 42% 84% 1 CJR payout jumps to ~80% 2015 FCF included $20M cash proceeds from venture funds and associated companies. post SJR DRIP participation 13-Apr-16 2 Growth rate excludes Pay TV and SJR Media Subscriber growth excluding the impacts of PayTV and Disney is -4% in F16 and -3% in F17. Disney channel advertising begins to flow through 2H/16 and subscriber revenue starts in Q1/16. Specialty TV advertising revenue growth rate excluding Disney is -10% in F16 and -7% in F17. Shaw Media contributes to CJR results for 5 months in F16. EBITDA includes synergies and onetime costs. Radio EBITDA margin is expected to remain stable due to cost control offsetting revenue decline. F16 TV EBITDA margin is expected to be more stable due to the addition of Disney and removal of PayTV absorbing the underlying specialty TV ad revenue pressure. Cash Dividend payout ratio (% of FCF) will be managable at ~45% with SJR DRIP participation. Without DRIP we estimate payout ratio jumps to ~80%. Source: Company reports; Scotiabank GBM estimates.

4 4 Exhibit 2 - Target Price Table One-Year Target Price Calculation ($M, except otherwise noted) F2016E* F2017E F2018E Total EBITDA (excluding Pay TV and including Shaw Media) NTM 1-YR FWD Current Valuation (Proforma) Total EBITDA (excluding Pay TV and including Shaw Media) Share Price $11.97 Multiple 6.78x 6.75x Total Enterprise Value 4,250 4,285 Implied EV/EBITDA (NTM) 6.8x Less: Net Debt (PF Pay TV proceeds and Shaw Media acquisition) 1,980 1,863 P/E Multiple (NTM) 6.9x Equity Value 2,270 2,422 FCF Yield (NTM) 12.3% Fully Diluted Shares Outstanding (M) (including shares issued to SJR and sub receipts) Share Price (Current/Target) $11.97 $12.00 Implied EV/EBITDA (target) 6.8x Dividend Yield 9.5% P/E Multiple (target) 8.4x Total ROR 9.8% FCF Yield (target) 12.2% *Adjusted to include full year SJR Media EBITDA and exclude Pay-TV EBITDA Source: Company reports; Scotiabank GBM estimates. Exhibit 3 - Valuation Comparables NTM Valuation One-Year Market Dividend FCF Yield Country (Currency) Company Ticker Rating Current Price Div. / Share Target Price ROR Cap ($M) Yield EV/cash EBIT EV/EBITDA P/E Full tax 1 Actual tax Telecom & Cable Can (C$) Quebecor Inc. QBR.B-CA Focus Stock $32.10 $0.14 $ % 3, % 14.5x 7.0x 13.9x 4.9% 4.9% Can (C$) Shaw Comm. (PF WIND & Media) SJR.B-CA Sector Outperform $24.31 $1.19 $ % 11, % 16.8x 7.5x n.a. 3.3% 3.3% US (US$) Comcast Corporation CMCSA-US Sector Outperform $61.95 $1.10 $ % 153, % 11.2x 7.4x 16.4x 5.9% 5.7% Can (C$) Rogers Communications RCI.B-CA Sector Outperform $49.95 $1.92 $ % 25, % 14.3x 7.8x 16.4x 6.0% 6.6% Can (C$) Cogeco Cable CCA-CA Sector Outperform $66.95 $1.56 $ % 3, % 12.0x 6.6x 11.7x 10.4% 10.2% Can (C$) BCE Inc. BCE-CA Sector Outperform $59.65 $2.73 $ % 51, % 14.9x 8.5x 17.7x 5.1% 5.8% US (US$) Verizon Communications VZ-US Sector Outperform $51.29 $2.26 $ % 209, % 10.9x 6.7x 12.8x 7.2% 7.5% Can (C$) TELUS Corporation T-CA Sector Perform $40.71 $1.76 $ % 24, % 19.5x 8.2x 16.3x 3.7% 3.6% US (US$) AT&T Inc. T-US Sector Perform $38.25 $1.92 $ % 235, % 10.9x 6.5x 13.4x 8.3% 8.3% US (US$) Time Warner Cable Inc. TWC-US Sector Perform $ $3.00 $ % 57, % 18.8x 9.0x 28.1x 2.5% 3.0% Can (C$) Manitoba Tel (PF Allstream) MBT-CA Sector Underperform $32.32 $1.30 $ % 2, % 15.2x 8.0x 25.9x 4.8% 6.3% Media Can (C$) DHX Media Ltd. DHX.B-CA Sector Outperform $7.29 $0.06 $ % % 10.6x 10.1x 16.4x 5.2% 5.2% Can (C$) Corus Ent. (Pro forma Shaw Media) CJR.B-CA Sector Perform $11.97 $1.14 $ % 1, % n.a. 6.8x 6.9x 12.3% 12.3% Prices as at Apr. 13, 2016 U.S. Average* 11.6x 7.0x 15.2x 6.9% 7.0% 1 Assumes full cash taxes are paid; MBT has a tax holiday until Can. Average* 15.8x 8.1x 15.4x 5.0% 5.4% Sources: Factset; Scotiabank GBM estimates. Cable Average* 13.5x 7.8x 18.4x 5.0% 4.9% *U.S. and Can. Averages do not include DHX or CJR Integrated Telco Average* 11.8x 6.9x 13.9x 7.3% 7.5% Source: Company reports; Scotiabank GBM estimates. ScotiaView Analyst Link

5 5 Appendix A: Important Disclosures Company Ticker Disclosures (see legend below)* BCE Inc. BCE B26, B8, G, H.P.147, I, S, U Cogeco Cable Inc. CCA VS214 Corus Entertainment Inc. CJR.B I DHX Media Ltd. DHX.B I Manitoba Telecom Services Inc. MBT S Quebecor Inc. QBR.B G, U Rogers Communications Inc. RCI.B G, I, N1, S, U TELUS Corporation T G, H.P.147, I, J, U I, Jeff Fan, certify that (1) the views expressed in this report in connection with securities or issuers that I analyze accurately reflect my personal views and (2) no part of my compensation was, is, or will be directly or indirectly, related to the specific recommendations or views expressed by me in this report. This research report was prepared by employees of Scotia Capital Inc. and/or its affiliates who have the title of Analyst. All pricing of securities in reports is based on the closing price of the securities principal marketplace on the night before the publication date, unless otherwise explicitly stated. All Equity Research Analysts report to the Head of Equity Research. The Head of Equity Research reports to the Managing Director, Head of Institutional Equity Sales, Trading and Research, who is not and does not report to the Head of the Investment Banking Department. Scotiabank, Global Banking and Markets has policies that are reasonably designed to prevent or control the sharing of material non-public information across internal information barriers, such as between Investment Banking and Research. The compensation of the research analyst who prepared this report is based on several factors, including but not limited to, the overall profitability of Scotiabank, Global Banking and Markets and the revenues generated from its various departments, including investment banking. Furthermore, the research analyst s compensation is charged as an expense to various Scotiabank, Global Banking and Markets departments, including investment banking. Research Analysts may not receive compensation from the companies they cover. Non-U.S. analysts may not be associated persons of Scotia Capital (USA) Inc. and therefore may not be subject to FINRA Rule 2241 restrictions on communications with subject company, public appearances and trading securities held by the analysts. For Scotiabank, Global Banking and Markets Research analyst standards and disclosure policies, please visit gbm.scotiabank.com/disclosures. Scotiabank, Global Banking and Markets Research, 40 King Street West, 33rd Floor, Toronto, Ontario, M5H 1H1. * Legend B8 B26 G H.P.147 I J N1 S Ronald Brenneman is a director of BCE Inc and is a director of The Bank of Nova Scotia. Thomas C. O'Neill is a director of BCE Inc. and is Chairman of the Board of The Bank of Nova Scotia. Scotia Capital (USA) Inc. or its affiliates has managed or co-managed a public offering in the past 12 months. Jeff Fan, a member of Jeff Fan's household and/or an account related to Jeff Fan own securities of this issuer. Scotia Capital (USA) Inc. or its affiliates has received compensation for investment banking services in the past 12 months. Scotia Capital (USA) Inc. or its affiliates expects to receive or intends to seek compensation for investment banking services in the next 3 months. Scotia Capital (USA) Inc. had an investment banking services client relationship during the past 12 months. Scotia Capital Inc. and its affiliates collectively beneficially own in excess of 1% of one or more classes of the issued and outstanding equity securities of this issuer.

6 6 U VS214 Within the last 12 months, Scotia Capital Inc. and/or its affiliates have undertaken an underwriting liability with respect to equity or debt securities of, or have provided advice for a fee with respect to, this issuer. Our Research Analyst visited Cogeco Data Services, a data centre operation, on November No payment was received from the issuer for the travel-related expenses incurred by the Research Analyst to visit this site. Numbers are located to the left of the lines they represent. Numbers indicated with a plus sign (+) have more than one target or rating change in the given month. # Date Corus Entertainment Inc. (CJR.B) Closing Price Rating Target- 1YR 1 12-Apr-13 C$24.88 Sector Outperform * Jul-13 C$24.30 Sector Outperform * Apr-14 C$23.69 Sector Outperform * Jul-14 C$24.01 *Sector Perform * Oct-14 C$21.51 Sector Perform * Jan-15 C$21.65 Sector Perform * Mar-15 C$18.41 *Sector Underperform * Apr-15 C$17.55 Sector Underperform * Jul-15 C$17.22 Sector Underperform * Jul-15 C$14.14 Sector Underperform * Aug-15 C$13.32 Sector Underperform * Oct-15 C$12.54 Sector Underperform * Jan-16 C$10.70 *Sector Perform Jan-16 C$10.38 Restricted 13 4-Feb-16 C$9.48 Sector Perform * Apr-16 C$11.73 Sector Perform *12.00 * represents the value(s) that has changed.

7 7 Definition of Scotiabank, Global Banking and Markets Equity Research Ratings We have a four-tiered rating system, with ratings of Focus Stock, Sector Outperform, Sector Perform, and Sector Underperform. Each analyst assigns a rating that is relative to his or her coverage universe or an index identified by the analyst that includes, but is not limited to, stocks covered by the analyst. The rating assigned to each security covered in this report is based on the Scotiabank, Global Banking and Markets research analyst s 12-month view on the security. Analysts may sometimes express to traders, salespeople and certain clients their shorter-term views on these securities that differ from their 12-month view due to several factors, including but not limited to the inherent volatility of the marketplace. Ratings Focus Stock (FS) The stock represents an analyst s best idea(s); stocks in this category are expected to significantly outperform the average 12-month total return of the analyst s coverage universe or an index identified by the analyst that includes, but is not limited to, stocks covered by the analyst. Sector Outperform (SO) The stock is expected to outperform the average 12-month total return of the analyst s coverage universe or an index identified by the analyst that includes, but is not limited to, stocks covered by the analyst. Sector Perform (SP) The stock is expected to perform approximately in line with the average 12- month total return of the analyst s coverage universe or an index identified by the analyst that includes, but is not limited to, stocks covered by the analyst. Sector Underperform (SU) The stock is expected to underperform the average 12-month total return of the analyst s coverage universe or an index identified by the analyst that includes, but is not limited to, stocks covered by the analyst. Other Ratings Tender Investors are guided to tender to the terms of the takeover offer. Under Review The rating has been temporarily placed under review, until sufficient information has been received and assessed by the analyst. Risk Ranking As of June 22, 2015, Scotiabank, Global Banking and Markets discontinued its Low, Medium, and High risk rankings. The Speculative risk ranking reflects exceptionally high financial and/or operational risk, exceptionally low predictability of financial results, and exceptionally high stock volatility. The Director of Research and the Supervisory Analyst jointly make the final determination of the Speculative risk ranking. Scotiabank, Global Banking and Markets Equity Research Ratings Distribution* Distribution by Ratings and Equity and Equity-Related Financings* Percentage of companies covered by Scotiabank, Global Banking and Markets within each rating category. Percentage of companies within each rating category for which Scotiabank, Global Banking and Markets has undertaken an underwriting liability or has provided advice for a fee within the last 12 months. Source: Scotiabank GBM. For the purposes of the ratings distribution disclosure FINRA requires members who use a ratings system with terms different than buy, hold/neutral and sell, to equate their own ratings into these categories. Our Focus Stock, Sector Outperform, Sector Perform, and Sector Underperform ratings are based on the criteria above, but for this purpose could be equated to strong buy, buy, neutral and sell ratings, respectively.

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