Hasbro, Inc. HAS NASDAQ Hold Leisure Products

Transcription

1 One Year Price Chart September 16, 2016 Hasbro's Boys Segment Should Peak In 2017-'18...Our Analysis Hasbro, Inc. HAS NASDAQ Hold Leisure Products Company Update In this piece, we discuss our expectations for (and analysis of) Hasbro's Boys biz over the next several years. This is the company's largest segment (in terms of sales), and was the subject of some scrutiny with 2Q earnings, due to decelerating growth. But based on a strong line-up of entertainment properties and acquisition/retention of key licenses, further expansion across international geographies, and Hollywood's support of "toyatic" film properties, we remain positive on the prospects for this part of the company, and forecast a peak for Boys in 2017-'18. What's new: in this piece, we discuss our expectations for (and analysis of) Hasbro's Boys biz over the next several years. Bottom line: we forecast a peak for Hasbro's Boys segment in 2017-'18, based on a confluence of company initiatives and macro forces including 1) a strong line-up of entertainment properties and acquisition/retention of key licenses; 2) further expansion across international geographies; and 3) Hollywood's support of "toyatic" film properties ~ we see new Transformers content and a ramping Beyblades license, providing incremental contributions during this part of the product cycle. Our net revenue estimates for 2016-'18 are $1.816 billion/$2.107 billion/$2.177 billion, respectively ~ if accurate, 2017-'18 will eclipse the previous Boys record set in '11 ($1.822 billion). We have updated our Hasbro model, to better align our brand assumptions and estimates, by segment. Our estimates include EPS of $4.05/$4.53/$4.70 for 2016-'18, respectively. Within Boys, we have increased our Star Wars estimate for '16, based on an analysis of NPD data, share gains for Hasbro, and general momentum for the property, and now forecast $485 million (vs. $450 million previously). We've also noted an uptick in sales of Yo-Kai Watch in various European markets. And we see limited risk to our Transformers' forecasts at this point, but continue to monitor the ongoing developments at Paramount with interest. Separately, we have embedded slightly higher freight costs amid the Hanjin Shipping bankruptcy. Opinion/valuation/rating: we remain positive on the strong entertainment line-up and collection of licenses which provides above average visibility for Boys and Girls, longer-term growth prospects for International, and opportunities to enhance shareholder value (namely dividends) through re-deployment of cash flow. At 17.9x forward earnings vs. growth forecasted in the low double-digits range, we rate HAS Hold with an $83 target price, which assumes the shares trade at 18.3x our '17 EPS estimate. Due to a policy change, we are establishing 12-month target prices on our Hold-rated names under coverage. Changes Previous Current Rating Hold Target Price NA FY16E EPS (Net) $4.01 $4.05 FY17E EPS (Net) $4.47 $4.53 FY16E Rev (net) $4.81B $4.81B FY17E Rev (net) $5.20B Price (09/15/16): $ Week Range: $89 $65 Market Cap.(mm): 9,877.4 Shr.O/S-Diluted (mm): Enterprise Val. (mm): $10,506.5 Avg Daily Vol (3 Mo): 1,170,510 LT Debt/Total Cap.: 49.0% Net Cash/Share: $(4.95) Book Value/Share: $12.69 Dividend($ / %) $2.04 / 2.6% S&P Index 2, EPS (Net) 2015A 2016E 2017E Q1 $0.21 $0.38A $NE Q A NE Q NE Q NE FY Dec $3.51A $4.05 $4.53 P/E 22.2x 19.2x 17.2x Rev (net) 2015A 2016E 2017E FY Dec $4.45B $4.81B $5.20B Drew E. Crum, CPA decrum@stifel.com (216) David Pang, CFA pangd@stifel.com (202) Stifel Equity Trading Desk (800) Stifel 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. All relevant disclosures and certifications appear on pages of this report.

2 Hasbro's Boys segment should peak in 2017-'18 In 2011, Boys set a sales record at $1.822 billion, a year in which the segment received contributions from 3 properties that each eclipsed $400 million in net revenue: 1) Transformers ($483 million; largely Boys but some contribution to Preschool); 2) Beyblades ($477 million); and 3) Nerf ($410 million; vast majority was Boys). But looking ahead, we see a confluence of company initiatives and macro forces, that should propel the business to record highs, including 1) a strong line-up of entertainment properties and the acquisition/retention of key licenses; 2) further expansion across international geographies; and 3) Hollywood's support of "toyatic" film properties. We discuss this in more detail below. The entertainment pipeline: CEO Brian Goldner has described this as, "an unprecedented era of entertainment for the company", and we agree. We can't recall a deeper or more diverse line-up of theatrical content for Hasbro, which features a combination of owned brands and licensed-based properties, including the following: 1) 6 Star Wars films (2015-'20) including Star Wars: Episode VIII (December '17); 2) 3 Transformers films (2017-'19) including Transformers: The Last Knight (June '17); and 3) 15+ Marvel pics during 2016-'20 including Spider-Man: Homecoming (July '17). Licenses: over the last few years, Hasbro has secured several multi-year licenses for key properties, including Star Wars and Marvel, both of which run through 2020, in addition to Yo-Kai Watch (new in '16), and the re-launch of Beyblades (in select markets 2H16). And we think the duration of these contracts provides added visibility for Boys. International (Hasbro): sales for International have increased at a CAGR in the high single-digits range over the last 10 years, to nearly $2 billion in '15 (vs. $959 million in '06), and represented 44% of net revenue (vs. 30% in '06). Part of this growth has been fueled by emerging markets, which achieved a top line CAGR of +22% during 2008-'15, including $630 million last year (14% of Hasbro's net revenue). And going forward, management expects emerging markets to expand at a rate in the low double-digits range (ex- foreign exchange), which should outpace the industry (est. 3%-5% on a global basis). International (box office): over the last several years, we've argued that growth across "the entertainment ecosystem" would serve as a tailwind for the toy industry, and our thesis here is unchanged. For example, the international box office, which at more than $27 billion in '15, was nearly $11 billion higher vs. 2006, while the # of digital screens (which facilitate better distribution/greater flexibility around programming) eclipsed 140k last year (vs. less than 3k a decade ago), according to MPAA ~ what it means is that more individuals could see a film that features a Hasbro-made toy, and hence higher theater traffic should yield higher toy sales, in our opinion. The international television marketplace: the number of television households and multichannel subscribers (or pay-television penetration rates), along with pay-television options (i.e., OTT, IPTV, DTTV, cable, and satellite), has increased drastically over the last several years, which we see as important for television programming based on Hasbro Boys' brands, including content from Lucasfilm (Star Wars Rebels), Marvel Animation (Avengers: Secret Wars), Hasbro Studios (Transformers Robots in Disguise), Dentsu Entertainment (Yo-Kai Watch), and Sunrights (Beyblade Burst anime), for example ~ we think this creates more consumer impressions and drives awareness for Hasbro's owned- and licensed-based properties, which potentially translates to higher toys and games sales. And the company's recent acquisition of Boulder Media, should further these efforts, in our opinion. Hollywood's support of "toyatic" film properties has emerged over recent years, and is evident when examining the release schedule, which is filled with several "consumer-friendly" franchises. We believe there have been 2 catalysts here. First, the collapse of the home entertainment market (physical media), which at its peak 10 years ago, comprised 60%-70% of a film's ultimate, but is significantly lower today. While growth for the global box office (2006-'15 CAGR = +5%; $38 billion+ last year) has compensated for this shortfall to some degree, studios have sought alternative means to monetize content, including consumer product and licensing. Additionally, media companies have attempted (or are still trying) to emulate the success that Disney (DIS, $92.50, Hold rated by Stifel analyst Ben Mogil) has enjoyed with its Consumer Products (CP) division, where licensing is an integral piece of the business (and we estimate toys comprises 30%+ of this total) ~ to illustrate Disney CP's FY2015 segment OI at $1.752 billion nearly tripled vs. FY2006. Considering these trends, we believe that if a studio wants to maximize a property's sales and profits, it's likely to partner with a large toy manufacturer such as Hasbro. It's worth noting that U.S. retail sales for entertainment/licensed-based toys (2011-'15 average growth rate = +4%) have outperformed the industry (+1%) over the last several years, based on data from The NPD Group. Our Boys segment analysis in more detail Below we discuss our Boys segment forecast in greater detail. In summary, our net revenue estimates for 2016-'18 are $1.816 billion/$2.107 billion/$2.177 billion, respectively, which implies average growth in the mid single-digits range. If we're accurate with our assumptions, 2017-'18 will eclipse the previous Boys record set in '11 ($1.822 billion). Note: our Boys model 2016E: we forecast net revenue at $1.816 billion (+2%) which reflects the following: 1) a full year of contribution for Star Wars (notably The Force Awakens toys in 1H) ~ we've increased our Star Wars' Boys estimate, as described Page 2

3 below; 2) low double-digits growth for Nerf (Hasbro's largest brand); and 3) the inclusion of the Yo-Kai Watch license (new); against 4) declines for Transformers (down high single-digits or $20 million+ in Boys); and 5) lower results for Jurassic Park ($100 million in toy sales last year including about $80 million in Boys) as the film, Jurassic World, is lapped. 2017E: we forecast net revenue at $2.107 billion (+16%): the 2 key (and positive) swing factors here (in our opinion) include 1) the theatrical release of Transformers: The Last Knight (June '17; estimated incremental $100 million+ in Boys revenue); and 2) the re-launch of the Beyblades license (est. $175 million). We also assume modest growth for the Marvel franchise which should benefit from a Spider-Man movie, partially offset by some slippage for Star Wars, and the absence of Jurassic Park as the license will shift to Mattel (MAT, $31.31, Hold) at the beginning of the year. 2018E: we forecast net revenue at $2.177 billion (+3%) which assumes significant contributions from Beyblades (est. $350 million) as the license has historically hit a peak in 2-year of a product cycle. Hasbro's Boys segment...some background Hasbro's Boys segment is the company's largest (in terms of sales). Last year, the business generated net revenue of $1.776 billion, representing 38% of the company's total (vs '15 average = 34%), and featured Hasbro's 3 biggest brands: Nerf, Star Wars, and Marvel, which we estimate generated cumulative net revenue for the Boys segment of $1.330 billion. Boys has also been Hasbro's fastest growing business over an extended period. In 2015 for example, Boys' sales increased y/y by +20%, pacing ahead of the 10-year CAGR of +9% (or average annual growth = +17%), as well as other segments for the company, including Games (10-year CAGR = +0%), Girls (+6%), and Preschool (+6%), on a comparable basis. In terms of profitability, the company does NOT provide specific details here, but with 2 Franchise Brands (Nerf + Transformers), which enjoy above average margins, and comprise around 50% of sales, we estimate a segment opm in the mid-teens range. Key brands for the Boys segment include the following: 1) Nerf: 1 of 7 Franchise Brands and Hasbro's largest last year (est. Boys revenue at $500 million+), featuring foam-based weaponry (largely "blasters") and sports-related product; 2) Star Wars: a Partner Brand based on the film series created by George Lucas, it was Hasbro's 2nd largest product line in '15 (Boys revenue approaching est. $500 million); 3) Marvel: a Partner Brand based on a library of super hero characters (i.e., Spider-Man, Captain America, The Incredible Hulk, etc.), it was Hasbro's 3rd largest product line in '15 (est. Boys revenue at $400 million+); 4) Transformers: 1 of 7 Franchise Brands, featuring transforming alien robots, with now 4 tent pole films to its credit (since 2007) that have collectively grossed nearly $3.8 billion on a global basis; 5) Beyblades: a licensed brand based on a Japanese manga series ~ Hasbro's toy line in the past has centered on spinning tops; and 6) Yo-Kai Watch: a new license for Hasbro in '16, this cross-media universe was spawned by the 2013 launch of role-playing video games developed/published by Japanese game company, Level-5 ~ to date the franchise has generated over $2 billion in merchandising sales. Other notable Boys' brands in the portfolio include the following: 1) Paramount slate - Hasbro recently partnered with Paramount Pictures to create a slate that will include several Hasbro-owned brands including G.I. Joe, Micronauts, Visionaries, M.A.S.K., and ROM; 2) Jurassic Park - a Universal IP that generated $100 million in sales last year ~ the license will shift to Mattel in '17); and 3) Indiana Jones - part of the Lucasfilm universe, with a pic scheduled for '19, although we're not sure if Hasbro has this license (Paramount controls the theatrical rights). Estimates Summary: we forecast an EPS CAGR in the low double-digits range for 2016-'18, which assumes the following: 1) revenue up mid single-digits (on average); 2) gross margin at 62.9% (+60 bps through 2018 vs. '15); 3) OPM gains through 2018 of +160 bps (vs. 2015) to 17.1%; 4) net interest expense in the $100 million range; 5) an effective tax rate of 26.5%; and 6) modest accretion from share buybacks (cumulative $395 million for 2016-'18). We have updated our Hasbro model, to better align our brand assumptions and estimates, by segment, since several properties generate sales that are allocated to more than one product category. For example, while the majority of Transformers' sales are reported with Boys, the franchise also has SKUs that are included with Preschool. Within Boys, we have increased our Star Wars estimate for '16, based on 1) an analysis of NPD data (as discussed below); 2) share gains for Hasbro (est. mid/high 40%s range); and general momentum for the property (Rogue One film in December '16), and now forecast $485 million (vs. $450 million previously). More specifically, The NPD Group reported retail sales for Star Wars in the U.S. during 1H16 were $300 million, "nearly tripling" vs. the year ago period. Assuming Hasbro's share of this total is in the mid 40s% range, and international represents 45% of the mix (consistent with guidance), if sell-through is 90% of shipments, the implied 1H16 sell-in would be $223 million, or 32% of Boy's 1H16 revenue, which we think is reasonable. And based on 15 performance, where NPD noted U.S. retail sales were $700 million+, the implied comp for Star Wars in 2H16, is about $600 million. In order to match these results, 2H16 Star Wars retail sales in the U.S. would need to be in the $400 million range, or down 30%+ y/y. And thus management's implied guidance for '16 (around $500 million) seems conservative, to us because it Page 3

4 implies: 1) rather severe retail sales declines (30%+) during 2H16; and/or 2) material share erosion for Hasbro during 2H16, both of which we see as less likely outcomes. We see limited risk to our Transformers' (Boys) forecasts at this point, which include $256 million/$360 million/$315 million for 2016-'18, respectively, with the increase in 2017 reflecting contributions from a theatrical release. While Transformers is one of Paramount's biggest film franchises (and thus we doubt a release would get pushed), we continue to monitor the ongoing developments here with interest, since there appears to be increasing scrutiny on the studio, amid recent changes to senior management and the board. Stifel 2016E: EPS of $4.05 (+15%; vs. $4.01 previously) on revenue of $4.814 billion (+8%; +9% ex- fx) which assumes the following: 1) operating profit up +14% (+80 bps y/y to 16.3% opm) on leverage from revenue growth partially offset by higher royalties + freight costs, product development, advertising, and SD&A expenses; 2) net interest expense of $96 million; 3) an effective tax rate of 26.4% (vs. 24.7% last year); and 4) $145 million of share repurchases to offset dilution from stock comp. Revenue by product category: 1) Boys up +2% to $1.816 billion (38% of total; within $6 million of the peak set in '11) which assumes growth for Nerf + Star Wars, contributions from Yo-Kai Watch and Beyblades (albeit modest), against slightly lower results for Marvel, and more severe declines for Transformers + Jurassic World; 2) Games up +1% to $1.294 billion (27% of total) on a modest increase for Magic the Gathering; 3) Girls up +35% to $1.075 billion (22% of total) primarily due to the inclusion of Disney Princess + Trolls, partially offset by declines for legacy brands; 4) Preschool up +6% to $630 million (13% of total) with gains for Play-Doh. Stifel 2017E: EPS of $4.53 (+12%; vs. $4.47 previously) on revenue of $5.200 billion (+8%). Stifel 2018E: EPS of $4.70 (+4%; vs. $4.67 previously) on revenue of $5.290 billion (+2%). Target Price Methodology/Risks Our $83 target price on HAS is based on a blended methodology and assumes the shares trade at 18.3x our 2017 EPS estimate. Principal risks to our target price on Hasbro include: 1) maintaining popularity of the product line; 2) exposure to consumer spending; 3) rising input costs including raw materials, labor, transportation, and currency appreciation; 4) competition in the leisure/entertainment category; 5) seasonality; 6) customer concentration among retailers; and 7) volatility of entertainment properties. Company Description Hasbro is a leading toy and game company, which designs, manufactures, and markets leisure entertainment brands and products, including Magic the Gathering, Monopoly, Transformers, Star Wars, My Little Pony, and Play-Doh, among others, which are sold across all major retail channels, both in the U.S. and international geographies. Page 4

5 HASBRO Revenue Mix Page 5

6 HASBRO Boys revenue by brand Page 6

7 HASBRO Hasbro segment revenue 2006A- 15A Boys net revenue (CAGR) has outpaced all other segments for Hasbro over the last decade. Page 7

8 HASBRO Boys segment revenue 2006A- 20E Page 8

9 HASBRO Boys segment revenue estimates Hasbro Boys Segment Sales Estimates 2016-'20 ($s mil) E 2017E 2018E 2019E 2020E Nerf $355 $445 $550 $525 $605 $580 $615 $630 $625 $640 $635 $647 $645 Star Wars $200 $220 $400 $450 $400 $485 $412 $465 $412 $450 $412 $440 $400 $435 Marvel $240 $280 $380 $375 $352 $350 $372 $355 $360 $340 $340 $335 $340 $330 Transformers $266 $435 $297 $277 $279 $256 $383 $360 $319 $315 $298 $300 $255 Beyblades $110 $35 $0 $40 $25 $175 $350 $200 $25 Yo-Kai Watch $0 $0 $0 $50 $75 $25 $0 $0 Jurassic Park $5 $5 $80 $15 $10 $0 $0 $0 $0 Other $62 $64 $69 $75 $60 $75 $62 $81 $72 $100 $125 Total $1,238 $1,484 $1,776 $1,816 $2,107 $2,177 $1,990 $2,010 $1,792 $1,815 % growth -22% 20% 43% 22% 16% 3% -9% -8% -10% % of total 30% 35% 40% 38% 41% 41% NA NA Source: Company data and Stifel estimates Page 9

10 HASBRO Star Wars analysis Hasbro Star Wars Sales 2016E vs H U.S. retail industry retail $105 $300 2H U.S. retail industry retail $600??? CY U.S. industry retail retail $705??? 1H U.S. industry wholesale wholesale $84 $240 2H U.S. industry wholesale wholesale $480??? CY U.S. industry wholesale wholesale $564??? The NPD Group reported 1H16 Star Wars retail sales in the U.S. were $300 million, up nearly 3x y/y. The NPD Group reported 15 Star Wars retail sales in the U.S. were more than $700 million. 1H U.S. industry shipments shipments $93 $267 2H U.S. industry shipments shipments $533??? CY U.S. industry shipments shipments $627??? Hasbro's U.S. share (%s) 42% 46% 1H Hasbro's U.S. shipments $39 $123 2H Hasbro's U.S. shipments $224??? CY Hasbro's U.S. shipments $263??? 1H Hasbro's ROW shipments $32 $100 2H Hasbro's ROW shipments $183??? CY Hasbro's ROW shipments $215??? The geographic split for Hasbro s Star Wars sales was domestic 55%/ROW 45%, during 15 and 1H16. 1H Hasbro global shipments $75 $71 $223 2H Hasbro global shipments $425 $407??? CY Hasbro global shipments $500??? Source: Company data, The NPD Group, and Stifel estimates Page 10

11 HASBRO Star Wars analysis 2016E Hasbro Star Wars Sales Sensitivity Analysis ($s mil) HAS share HAS share HAS share 2H16 U.S. retail sales -60% -45% -30% -15% 0% 37% $89 $122 $155 $189 $222 40% $95 $130 $166 $201 $237 42% $101 $139 $176 $214 $252 45% $107 $147 $187 $227 $267 47% $113 $155 $197 $240 $282 2H16 U.S. retail sales -60% -45% -30% -15% 0% 37% $79 $109 $138 $168 $197 40% $84 $116 $147 $179 $211 42% $90 $123 $157 $190 $224 45% $95 $131 $166 $202 $237 47% $100 $138 $175 $213 $251 2H16 U.S. retail sales -60% -45% -30% -15% 0% 37% $367 $420 $474 $528 $582 40% $376 $434 $491 $549 $606 42% $386 $447 $508 $569 $630 45% $396 $460 $525 $590 $655 47% $405 $474 $542 $610 $679 Source: Note: the Company 2 variables data, in this The analysis NPD Group, are 1) and Hasbro's Stifel estimates share of Star Wars retail sales in the U.S.; and 2) the % change in Star Wars retail sales in the U.S. which were about $600 million. Source: Company data, The NPD Group, and Stifel estimates Represents a revenue outcome below implied guidance Represents a revenue outcome above implied guidance 2H16 Hasbro U.S. retail sales 2H16 Hasbro U.S. wholesale shipments 2016 Hasbro global wholesale shipments Based on 1) an analysis of NPD data (U.S. retail sales up nearly 3x to $300 million during 1H16); 2) share gains for Hasbro (est. mid/high 40s% range); and 3) general momentum for the property (Rogue One film in Dec 16), management s implied guidance for Star Wars revenue (around $500 million) seems conservative, to us because it implies: 1) rather severe retail sales declines (30%+) during 2H16; and/or 2) material share erosion for Hasbro during 2H16, both of which we see as less likely outcomes. Page 11

12 HASBRO Film pipeline Hasbro Hasbro Film Boys Properties: Segment Film 2014 Properties: and beyond 2016-'20 ($s mil) ($s mil) Film Film Owned/ Owned/ Box Box office office Toy Boys revenue toy sales est. estimate Property/brand Property/brand Film Film release release date date licensed licensed (global) (global) '16 '14 '17 '15 '18 '16 '19 '17 '20 Deadpool Deadpool Feb-16 licensed $782 $3 $0 $0 $0 $0 Captain America Captain America: The Winter Soldier Apr-14 licensed $715 $25 $3 $0 $0 Captain America Captain America: Civil War May-16 licensed $1,151 $125 $128 $0 $0 $0 $0 X-Men X-Men: Days of Future Past May-14 licensed $748 $5 $2 $0 $0 X-Men X-Men: Apocalypse May-16 licensed $544 $534 $545 $5 $0 $0 $0 $0 Spider-Man The Amazing Spider-Man 2 May-14 licensed $709 $125 $25 $25 $0 Doctor Strange Doctor Strange Nov-16 licensed - $10 $0 $0 $0 $0 Transformers Transformers: Age of Extinction Jun-14 owned $1,091 $483 $330 $325 $0 Star Wars Rogue One: A Star Wars Story Dec-16 licensed - $400 $485 $0 $0 $0 $0 Guardians of the Galaxy Guardians of the Galaxy Aug-14 licensed $744 $25 $5 $5 $0 Wolverine Untitled Wolverine film Mar-17 licensed - $0 $5 $0 $0 $0 Ouija Ouija Oct-14 owned $100 $5 $3 $3 $0 Guardians of the Galaxy Guardians of the Galaxy Vol. 2 May-17 licensed - $0 $35 $0 $0 $0 Marvel Big Hero 6 Nov-14 licensed $652 $20 $5 $2 $0 Transformers Transformers: The Last Knight Jun-17 owned - $0 $383 $360 $0 $0 $0 The Avengers The Avengers: Age of Ultron May-15 licensed $1,403 $0 $150 $35 $0 Spider-Man Spider-Man: Homecoming Jul-17 licensed - $0 $128 $150 $0 $0 $0 Jurassic Park Jurassic World Jun-15 licensed $1,669 $0 $50 $10 $0 Thor Thor: Ragnarok Nov-17 licensed - $0 $25 $0 $0 $0 Ant Man Ant Man Jul-15 licensed $519 $0 $10 $5 $0 Star Wars Star Wars: Episode VIII Dec-17 licensed - $0 $412 $465 $0 $0 $0 Fantastic Four The Fantastic Four Aug-15 licensed $168 $0 $5 $5 $0 Black Panther Black Panther Feb-18 licensed - $0 $0 $5 $0 $0 Jem and the Holograms Jem and the Holograms Oct-15 owned $2 $0 $10 $60 $35 Untitled Marvel (Fox) Untitled Marvel (Fox) Mar-18 licensed - $0 $0 $5 $0 $0 Star Wars Star Wars: The Force Awakens Dec-15 licensed $2,028 $0 $500 $0 $0 The Avengers Avengers: Infinity War Part I May-18 licensed - $0 $0 $128 $125 $0 $0 Deadpool Deadpool Feb-16 licensed $282 $0 $0 $5 $0 Star Wars Untitled Han Solo Star Wars film May-18 licensed - $0 $0 $412 $450 $0 $0 Captain America Captain America: Civil War May-16 licensed - $0 $0 $75 $5 Transformers Transformers 6 Jun-18 owned - $0 $0 $319 $315 $0 $0 X-Men X-Men: Apocalypse May-16 licensed - $0 $0 $5 $0 Ant-Man Ant-Man and the Wasp Jul-18 licensed - $0 $0 $5 $0 $0 Gambit Gambit Oct-16 licensed - $0 $0 $5 $0 Spider-Man Untitled animated Spider-Man film Dec-18 licensed - $0 $0 $43 $50 $0 $0 Ouija Ouija 2 Oct-16 owned - $0 $0 $5 $0 Captain Marvel Captain Marvel Mar-19 licensed - $0 $0 $0 $5 $0 Doctor Strange Doctor Strange Nov-16 licensed - $0 $0 $10 $0 The Avengers Avengers: Untitled Avengers Infinity War film Part II May-19 licensed - $0 $0 $0 $128 $125 $0 Trolls Trolls Nov-16 licensed - $0 $0 $15 $0 Transformers Transformers 7 Jun-19 owned - $0 $0 $0 $298 $300 $0 Moana Moana Nov-16 licensed - $0 $0 $10 $0 Indiana Jones Untitled Indiana Jones film Jul-19 licensed - $0 $0 $0 $25 $0 $0 Star Wars Rogue One: A Star Wars Story Dec-16 licensed - $0 $0 $500 $0 Marvel Untitled Marvel film May-20 licensed - $0 $0 $0 $0 $5 Marvel Untitled Marvel film Jul-20 licensed - $0 $0 $0 $0 $5 Marvel Untitled Marvel film Nov-20 licensed - $0 $0 $0 $0 $5 Total $545 $628 $1,040 $988 $916 $955 $456 $430 $15 % growth -12% -6% 81% 66% -7% -8% -50% -55% -97% Note: box office total is as of August July September 22, 31, , 2016 Source: boxofficemojo.com, company data, and Stifel estimates Page 12

13 HASBRO Global box office growth Page 13

14 HASBRO U.S. retail toy sales growth Entertainment/licensedbased toys ( avg = +4%) have outperformed the industry (+1%) over the last several years. Page 14

15 2016 Stifel. This report is produced for the use of Stifel customers and may not be reproduced, redistributed or passed to any other person or published in whole or in part for any purpose without the prior consent of Stifel. Stifel, Nicolaus & Company, Incorporated, One South Street, Baltimore, MD Page 15

16 The information contained herein has been prepared from sources believed to be reliable but is not guaranteed by us and is not a complete summary or statement of all available data, nor is it considered an offer to buy or sell any securities referred to herein. The most recent research and all applicable disclosures may be accessed by accessing Research Page at Additional information available upon request. Sources for data in this workbook include: Stifel estimates Company reports Page 16

17 Profitability/solvency Balance sheet Cash flow Growth Income statement Valuation Hasbro, Inc. (HAS) September 16, 2016 Stifel Drew Crum, CPA David Pang, CFA Hasbro Summary model ($s mils, except EPS) Fiscal Year ends December E 2017E 2018E P/E EV/Rev EV/EBITDA MV/FCF P/BV Revenue $4,277.2 $4,447.5 $4,814.2 $5,199.9 $5,289.5 COGS $1,698.4 $1,677.0 $1,803.8 $1,937.0 $1,962.4 Gross profits $2,578.8 $2,770.5 $3,010.5 $3,263.0 $3,327.1 EBITDA $797.1 $844.2 $949.8 $1,041.0 $1,064.2 EBIT $639.1 $688.9 $784.9 $873.0 $902.2 Pre-tax profit $537.5 $594.3 $688.4 $773.0 $802.2 Taxes $123.8 $146.7 $181.6 $204.8 $212.6 Adjusted net income $408.7 $445.0 $514.2 $575.0 $596.6 EPS $3.15 $3.51 $4.05 $4.53 $4.70 Revenue 4.8% 4.0% 8.2% 8.0% 1.7% EBITDA 2.5% 5.9% 12.5% 9.6% 2.2% FCF 18.0% 20.4% -6.2% 19.8% 7.4% EBIT 7.2% 7.8% 13.9% 11.2% 3.3% EPS 13.2% 11.6% 15.2% 11.9% 3.9% Cash from operating activities $454.4 $552.4 $529.4 $604.1 $638.5 Depreciation & amortization $158.0 $155.3 $164.9 $168.0 $162.0 Cash from investing activities ($0.5) ($103.6) ($123.7) ($121.2) ($120.5) Capital expenditures ($113.4) ($142.0) ($144.4) ($143.0) ($143.3) Acquisitions $0.0 $0.0 $0.0 $0.0 $0.0 FCF $341.0 $410.4 $385.0 $461.1 $495.1 Cash from financing activities ($231.0) ($346.5) ($325.3) ($275.6) ($339.7) Stock repurchases ($459.6) ($87.2) ($144.5) ($125.0) ($125.0) Dividends ($216.9) ($225.8) ($249.7) ($275.1) ($296.7) Total assets $4,532.1 $4, Cash & cash equivalents $893.2 $976.8 $1,057.2 $1,264.5 $1,442.8 Accounts receivable $1,094.7 $1, Inventory $339.6 $ Total liabilities $3,023.7 $3, Accounts payable $212.5 $ Total debt $1,812.4 $1,711.7 $1,560.0 $1,560.0 $1,560.0 Shareholders' equity $1,465.7 $1, Gross margin 60.3% 62.3% 62.5% 62.8% 62.9% EBITDA margin 18.6% 19.0% 19.7% 20.0% 20.1% OPM 14.9% 15.5% 16.3% 16.8% 17.1% Net margin 9.6% 10.0% 10.7% 11.1% 11.3% FCF margin 8.0% 9.2% 8.0% 8.9% 9.4% ROIC 15.4% 15.6% 16.5% 16.9% 16.2% Net debt-to-ebitda Debt-to-capital 55.3% 50.7% Source: company data and Stifel estimates Page 17

18 Stifel Stifel Drew Crum, CPA Drew Crum, CPA David Pang, CFA David Pang, CFA Hasbro Hasbro Income Statement (mils except EPS) Income Statement (mils except EPS) Fiscal Year ends Dec 1Q14 1Q15 1Q16 2Q14 2Q15 2Q16 3Q14 3Q15 3Q16E 4Q14 4Q15 4Q16E Fiscal Year ends Dec E 2017E 2018E Total sales , , , , , , Total sales 4, , , , , % growth 2.4% 5.0% 16.5% 8.2% (3.8%) 10.2% 7.3% 0.1% 6.5% 1.3% 12.8% 4.9% % growth 4.8% 4.0% 8.2% 8.0% 1.7% Cost of sales Cost of sales 1, , , , , % revenue 38.1% 34.7% 34.9% 38.6% 37.0% 36.6% 41.0% 39.4% 39.0% 39.8% 37.9% 37.8% % revenue 39.7% 37.7% 37.5% 37.3% 37.1% % growth (0.2%) (4.2%) 17.2% 6.6% (7.8%) 8.9% 6.0% (3.9%) 5.6% (3.3%) 7.4% 4.6% % growth 2.1% (1.3%) 7.6% 7.4% 1.3% Gross profit Gross profit 2, , , , , % margin 61.9% 65.3% 65.1% 61.4% 63.0% 63.4% 59.0% 60.6% 61.0% 60.2% 62.1% 62.3% % margin 60.3% 62.3% 62.5% 62.8% 62.9% % growth 4.0% 10.7% 16.1% 9.3% (1.3%) 11.0% 8.2% 2.9% 7.1% 4.6% 16.5% 5.1% % growth 6.6% 7.4% 8.7% 8.4% 2.0% Amortization Amortization % revenue 2.0% 1.8% 1.0% 1.4% 1.7% 1.0% 0.9% 0.6% 0.5% 1.1% 0.6% 0.6% % revenue 1.2% 1.0% 0.7% 0.6% 0.4% % growth 17.4% (3.4%) (32.9%) (1.2%) 12.2% (34.9%) (9.9%) (29.5%) (5.9%) (29.7%) (42.5%) 7.2% % growth (9.8%) (17.0%) (20.2%) (16.9%) (24.1%) Program production cost amortization Program production cost amortization % revenue 0.7% 1.6% 0.7% 0.8% 0.9% 0.6% 1.7% 0.8% 1.0% 0.9% 0.9% 1.0% % revenue 1.1% 1.0% 0.9% 1.0% 1.0% % growth (18.6%) 138.2% (44.3%) (34.9%) 7.6% (30.3%) 35.5% (52.8%) 34.8% (17.0%) 11.4% 26.6% % growth (1.3%) (9.8%) 0.6% 21.7% 1.7% Royalties Royalties % revenue 7.3% 8.3% 8.4% 8.5% 7.2% 7.9% 6.6% 7.7% 7.6% 7.0% 10.2% 9.3% % revenue 7.2% 8.5% 8.3% 8.4% 8.4% % growth 0.4% 19.2% 18.4% 40.4% (19.1%) 21.6% 11.4% 17.9% 4.5% 1.3% 64.2% (4.2%) % growth 11.5% 23.3% 6.1% 8.8% 1.7% Research and product development Research and product development % revenue 6.96% 7.27% 6.88% 6.24% 7.22% 7.24% 3.96% 4.40% 4.20% 5.03% 4.68% 4.85% % revenue 5.2% 5.5% 5.4% 5.4% 5.4% % growth 8.2% 9.8% 10.1% 7.9% 11.4% 10.5% (1.9%) 11.3% 1.6% 24.4% 5.0% 8.6% % growth 9.4% 9.2% 7.5% 6.5% 1.7% Advertising Advertising % revenue 9.9% 9.5% 9.6% 9.9% 9.8% 9.9% 10.0% 9.7% 9.6% 9.5% 8.3% 8.2% % revenue 9.8% 9.2% 9.2% 9.2% 9.2% % growth 0.2% 0.7% 17.9% 10.9% (4.1%) 11.0% 8.1% (3.7%) 5.5% 2.5% (2.1%) 4.0% % growth 5.6% (2.6%) 8.2% 7.5% 2.0% Selling, distribution, and administration Selling, distribution, and administration , , , % revenue 28.7% 29.3% 28.1% 24.6% 26.7% 27.2% 16.5% 17.0% 17.1% 19.0% 19.9% 19.7% % revenue 20.8% 21.7% 21.7% 21.5% 21.5% % growth 4.0% 6.9% 11.7% 4.5% 4.6% 12.0% 7.1% 2.9% 7.2% 7.8% 18.0% 3.7% % growth 6.0% 8.4% 8.2% 7.2% 1.7% Total operating expenses Total operating expenses 1, , , , , % revenue 55.6% 57.7% 54.7% 51.4% 53.5% 53.7% 39.6% 40.2% 40.0% 42.6% 44.5% 43.7% % revenue 45.3% 46.8% 46.2% 46.0% 45.8% % growth 3.4% 9.0% 10.6% 9.5% 0.1% 10.7% 7.5% 1.5% 6.0% 5.0% 17.8% 3.0% % growth 6.4% 7.3% 7.0% 7.4% 1.5% Operating income/(loss) Operating income/(loss) % margin 6.4% 7.6% 10.3% 10.0% 9.5% 9.7% 19.4% 20.4% 21.0% 17.6% 17.7% 18.6% % margin 14.9% 15.5% 16.3% 16.8% 17.1% % growth 9.8% 24.8% 58.5% 7.9% (8.6%) 12.4% 9.4% 5.6% 9.4% 3.8% 13.1% 10.3% % growth 7.2% 7.8% 13.9% 11.2% 3.3% Interest expense, net Interest expense, net Other (income) expense, net (4.98) (4.70) 2.66 (4.76) (2.33) (6.06) Other (income) expense, net 8.51 (2.53) Pre-tax income Pre-tax income % revenue 3.8% 4.8% 7.1% 7.8% 6.7% 7.6% 17.4% 18.7% 19.3% 14.7% 15.8% 16.9% % revenue 12.6% 13.4% 14.3% 14.9% 15.2% Income tax (benefit) Income tax (benefit) % tax rate 30.6% 24.8% 20.7% 27.7% 24.9% 26.3% 26.6% 27.4% 27.0% 19.6% 24.6% 27.0% % tax rate 23.0% 24.7% 26.4% 26.5% 26.5% Minority interest (0.57) (0.85) (1.78) (0.66) (1.53) (2.69) (0.30) (1.22) (1.50) (1.09) (1.37) (1.50) Minority interest (2.62) (4.97) (7.47) (6.80) (7.00) Adjusted net income Adjusted net income % margin 2.7% 3.7% 5.9% 5.7% 5.2% 5.9% 12.8% 13.6% 14.2% 11.9% 12.0% 12.4% % margin 9.6% 10.0% 10.7% 11.1% 11.3% % growth 180.3% 43.3% 82.8% 23.7% (11.6%) 24.6% 8.9% 6.8% 11.0% 4.1% 13.6% 8.5% % growth 11.6% 8.9% 15.6% 11.8% 3.8% EPS EPS % growth 173.1% 50.6% 81.9% 24.6% (8.8%) 24.4% 11.5% 8.3% 10.7% 8.4% 14.0% 8.0% % growth 13.2% 11.6% 15.2% 11.9% 3.9% Diluted shares outstanding Diluted shares outstanding Source: Company data and Stifel estimates Source: Company data and Stifel estimates Page 18

19 Stifel Stifel Drew Crum, CPA Drew Crum, CPA David Pang, CFA David Pang, CFA Hasbro Hasbro Revenue (mils) Revenue (mils) Fiscal Year ends Dec 1Q14 1Q15 1Q16 2Q14 2Q15 2Q16 3Q14 3Q15 3Q16E 4Q14 4Q15 4Q16E Fiscal Year ends Dec E 2017E 2018E Product category Product category Games Games 1, , , , , Wizards of the Coast Wizards of the Coast Monopoly Monopoly Gaming mega brands Gaming mega brands Digital gaming Digital gaming Action battling Action battling Classics Classics All others All others Puzzles Puzzles Boys Boys 1, , , , , Transformers Transformers Star Wars Star Wars Marvel Marvel Indy Jones Indy Jones G.I. Joe G.I. Joe Nerf Nerf Beyblades Beyblades Yo-Kai Watch Yo-Kai Watch Other Other Girls Girls 1, , , , Littlest Pet Shop Littlest Pet Shop FurReal Friends FurReal Friends My Little Pony My Little Pony Disney Princess Disney Princess Baby Alive Baby Alive Furby Furby Nerf Rebelle Nerf Rebelle Other Other Preschool Preschool Total , , , , , , Total 4, , , , , External revenue External revenue U.S. & Canada U.S. & Canada 2, , , , , International International 2, , , , , Global operations Global operations Entertainment and Licensing Entertainment and Licensing Total , , , , , , Total 4, , , , , Product category Product category Games -4.5% 6.9% -1.9% -11.6% -6.2% 7.6% 2.0% -8.0% 6.0% -4.3% 11.3% -3.5% Games -3.9% 1.3% 1.3% 0.7% 0.1% Boys 2.1% 10.0% 23.6% 32.4% 1.4% 4.3% 22.1% 23.9% -4.8% 20.8% 35.1% -1.9% Boys 19.9% 19.7% 2.3% 16.0% 3.3% Girls 20.8% -15.6% 41.2% 9.6% -22.2% 35.2% 4.9% -27.7% 31.5% -10.4% -17.1% 35.0% Girls 2.1% -21.9% 34.6% 7.0% 1.0% Preschool -3.7% 21.6% 11.0% -3.6% 13.6% 4.9% -6.8% 16.6% 4.5% -0.3% 17.1% 4.5% Preschool -3.9% 16.8% 5.5% 1.8% 1.0% Total 2.4% 5.0% 16.5% 8.2% -3.8% 10.2% 7.3% 0.1% 6.5% 1.3% 12.8% 4.9% Total 4.8% 4.0% 8.2% 8.0% 1.7% External revenue External revenue U.S. & Canada -1.3% 2.4% 28.3% -1.6% 0.6% 10.6% 3.9% 5.2% 3.6% -0.3% 28.5% -0.9% U.S. & Canada 0.8% 10.0% 7.2% 6.4% 1.0% International 5.4% 0.1% 12.9% 16.7% -8.6% 10.6% 11.4% -5.6% 10.3% 1.7% 2.9% 10.3% International 8.0% -2.5% 10.7% 9.3% 2.5% Global operations 34.1% 4.6% % 10.2% 18.9% -99.0% -13.1% -19.5% 0.0% 1.4% % 0.0% Global operations 1.3% -51.7% -59.4% 0.0% 0.0% Entertainment and Licensing 13.3% 73.9% -29.9% 34.9% 0.0% 8.9% 9.7% -2.3% 9.0% 9.6% 0.9% 7.5% Entertainment and Licensing 14.9% 11.5% -1.2% 12.0% 1.5% Total 2.4% 5.0% 16.5% 8.2% -3.8% 10.2% 7.3% 0.1% 6.5% 1.3% 12.9% 4.8% Total 4.8% 4.0% 8.2% 8.0% 1.7% Source: Company data and Stifel estimates Source: Company data and Stifel estimates Page 19

20 Stifel Drew Crum, CPA David Pang, CFA Hasbro Statement of Cash Flows (mils) Fiscal Year ends Dec E 2017E 2018 Cash flows from operating activities: Net income (loss) Depreciation Amortization Program production cost amortization Deferred income taxes (9.76) (18.95) Stock-based compensation D Accounts receivable (112.37) (227.81) (132.03) (138.84) (110.00) D Inventory (28.94) (99.35) (34.81) (37.41) (38.99) D Prepaid expenses and other current assets D Program production costs (31.42) (42.51) (45.00) (48.00) (50.00) D Accounts payable and accrued liabilities (0.96) D Other including long-term advances (47.42) 9.75 (43.60) (64.60) (50.00) Net cash provided (used) by operating activities Cash flows from investing activities: Additions to property, plant, and equipment (113.39) (142.02) (144.43) (143.00) (143.35) Investments in acquisitions, net of cash acquired Proceeds from dispositions Proceeds from partial sale of equity interest in j.v Purchases of short-term investments Other Net cash provided (used) by investing activities (0.48) (103.65) (123.70) (121.23) (120.49) Cash flows from financing activities: Net proceeds from borrowings w/original maturities of 3+ mos Repo/repay of borrowings w/original maturities of 3+ mos (425.00) (350.00) 0.00 Net proceeds from short-term borrowings (87.31) Purchases of common stock (459.56) (87.22) (144.51) (125.00) (125.00) Stock option transactions Excess tax benefits from stock-based compensation Dividends paid (216.86) (225.80) (249.75) (275.11) (296.69) Other financing activities (7.01) (3.68) (7.00) (7.00) (5.00) Net cash provided (used) by financing activities (230.96) (346.46) (325.26) (275.61) (339.69) Effect of exchange rates changes on cash (12.25) (18.76) Net increase (decrease) in cash and equivalents Cash and equivalents at beginning of period , , Cash and equivalents at end of period , , , Source: Company data and Stifel estimates Page 20

21 Stifel Drew Crum, CPA David Pang, CFA Hasbro Balance Sheet (mils) Fiscal Year ends Dec Q16 Assets Cash and equivalents Accounts receivable, net 1, , , Inventories Prepaid expenses and other current assets Total current assets 2, , , , PP&E, net Goodwill Other intangibles Other Total assets 4, , , , Liabilities Short-term borrowings Current portion of long-term debt Accounts payable Accrued liabilities Total current liabilities 1, , , Long-term debt , , , Other liabilities Total liabilities 2, , , , Shareholders' equity Preferred stock Common stock Additional paid-in-capital Retained earnings 3, , , , Accumulated other comprehensive loss (34.14) (95.45) (146.00) (174.30) Treasury stock (2,554.73) (2,980.07) (3,040.90) (3,089.10) Redeemable noncontrolling interests Total equity 1, , , , Total liabilities and equity 4, , , , Source: Company data Page 21

22 Important Disclosures and Certifications I, Drew E. Crum, certify that the views expressed in this research report accurately reflect my personal views about the subject securities or issuers; and I, Drew E. Crum, certify that no part of my compensation was, is, or will be directly or indirectly related to the specific recommendations or views contained in this research report. Our European Policy for Managing Research Conflicts of Interest is available at Rating and Price Target History for: Hasbro, Inc. (HAS) as of Q2 Q3 Q1 Q2 Q3 Q1 Q2 Q3 Q1 Q2 Q Rating Key B - Buy UR - Under Review H - Hold NR - No Rating S - Sell NA - Not Applicable I - Initiation SU - Rating Suspended D - Discontinued Created by BlueMatrix For a price chart with our ratings and any applicable target price changes for HAS go to The rating and target price history for Hasbro, Inc. and its securities prior to February 25, 2015, on the above price chart reflects the research analyst's views under a different rating system than currently utilized at Stifel. For a description of the investment rating system previously utilized go to. Stifel or an affiliate is a market maker or liquidity provider in the securities of Hasbro, Inc.. The equity research analyst(s) responsible for the preparation of this report receive(s) compensation based on various factors, including Stifel s overall revenue, which includes investment banking revenue. Our investment rating system is three tiered, defined as follows: BUY -We expect a total return of greater than 10% over the next 12 months with total return equal to the percentage price change plus dividend yield. HOLD -We expect a total return between -5% and 10% over the next 12 months with total return equal to the percentage price change plus dividend yield. SELL -We expect a total return below -5% over the next 12 months with total return equal to the percentage price change plus dividend yield. Occasionally, we use the ancillary rating of SUSPENDED (SU) to indicate a long-term suspension in rating and/or target price, and/or coverage due to applicable regulations or Stifel policies. SUSPENDED indicates the analyst is unable to determine a reasonable basis for rating/target price or estimates due to lack of publicly available information or the inability to quantify the publicly available information provided by the company and it is unknown when the outlook will be clarified. SUSPENDED may also be used when an analyst has left the firm. Of the securities we rate, 49% are rated Buy, 42% are rated Hold, 3% are rated Sell and 6% are rated Suspended. Within the last 12 months, Stifel or an affiliate has provided investment banking services for 15%, 7%, 0% and 13% of the companies whose shares are rated Buy, Hold, Sell and Suspended, respectively. Page 22

23 Additional Disclosures Please visit the Research Page at for the current research disclosures and respective target price methodology applicable to the companies mentioned in this publication that are within Stifel's coverage universe. For a discussion of risks to target price please see our stand-alone company reports and notes for all stocks. The information contained herein has been prepared from sources believed to be reliable but is not guaranteed by us and is not a complete summary or statement of all available data, nor is it considered an offer to buy or sell any securities referred to herein. Opinions expressed are subject to change without notice and do not take into account the particular investment objectives, financial situation or needs of individual investors. Employees of Stifel, or its affiliates may, at times, release written or oral commentary, technical analysis or trading strategies that differ from the opinions expressed within. Past performance should not and cannot be viewed as an indicator of future performance. As a multi-disciplined financial services firm, Stifel regularly seeks investment banking assignments and compensation from issuers for services including, but not limited to, acting as an underwriter in an offering or financial advisor in a merger or acquisition, or serving as a placement agent in private transactions. Affiliate Disclosures Stifel, includes Stifel Nicolaus & Company ( SNC ), a US broker-dealer registered with the United States Securities and Exchange Commission and the Financial Industry National Regulatory Authority and Stifel Nicolaus Europe Limited ( SNEL ), which is authorized and regulated by the Financial Conduct Authority ( FCA ), (FRN ) and is a member of the London Stock Exchange. Registration of non-us Analysts: Any non-us research analyst employed by SNEL contributing to this report is not registered/qualified as a research analyst with FINRA and is not an associated person of the US broker-dealer and therefore may not be subject to FINRA Rule 2241 or NYSE Rule 472 restrictions on communications with a subject company, public appearances, and trading securities held by a research analyst account. Country Specific and Jurisdictional Disclosures United States: Research produced and distributed by SNEL is distributed by SNEL to Major US Institutional Investors as defined in Rule 15a-6 under the US Securities Exchange Act of 1934, as amended. SNEL is a non-us broker-dealer and accordingly, any transaction by Major US Institutional Investors in the securities discussed in the document would need to be effected by SNC. SNC may also distribute research prepared by SNEL directly to US clients that are professional clients as defined by FCA rules. In these instances, SNC accepts responsibility for the content. Research produced by SNEL is not intended for use by and should not be made available to retail clients, as defined by the FCA rules. Canadian Distribution: Research produced by SNEL is distributed in Canada by SNC in reliance on the international dealer exemption. This material is intended for use only by professional or institutional investors. None of the investments or investment services mentioned or described herein is available to other persons or to anyone in Canada who is not a permitted client as defined under applicable Canadian securities law. UK and European Economic Area (EEA): This report is distributed in the EEA by SNEL, which is authorized and regulated in the United Kingdom by the FCA. In these instances, SNEL accepts responsibility for the content. Research produced by SNEL is not intended for use by and should not be made available to non-professional clients. The complete preceding 12-month recommendations history related to recommendation(s) in this research report is available at Brunei: This document has not been delivered to, registered with or approved by the Brunei Darussalam Registrar of Companies, Registrar of International Business Companies, the Brunei Darussalam Ministry of Finance or the Autoriti Monetari Brunei Darussalam. This document and the information contained within will not be registered with any relevant Brunei Authorities under the relevant securities laws of Brunei Darussalam. The interests in the document have not been and will not be offered, transferred, delivered or sold in or from any part of Brunei Darussalam. This document and the information contained within is strictly private and confidential and is being distributed to a limited number of accredited investors, expert investors and institutional investors under the Securities Markets Order, 2013 ("Relevant Persons") upon their request and confirmation that they fully understand that neither the document nor the information contained within have been approved or licensed by or registered with the Brunei Darussalam Registrar of Companies, Registrar of International Business Companies, the Brunei Darussalam Ministry of Finance, the Autoriti Monetari Brunei Darussalam or any other relevant governmental agencies within Brunei Darussalam. This document and the information contained within must not be acted on or relied on by persons who are not Relevant Persons. Any investment or investment activity to which the document or information contained within is only available to, and will be Page 23