Aveo Group. Knocking off the milestones A$3.46 AUSTRALIA. Event. Impact. Earnings and target price revision. Price catalyst. Action and recommendation

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1 AUSTRALIA AOG AU Price (at 04:00, 16 Aug 2016 GMT) Outperform A$3.46 Valuation A$ DCF (WACC 8.0%, beta 0.9, ERP 5.0%, RFR 3.8%, TGR 2.0%) 12-month target A$ month TSR % Volatility Index Low GICS sector Real Estate Market cap A$m 1, day avg turnover A$m 2.6 Number shares on issue m Investment fundamentals Year end 30 Jun 2016A 2017E 2018E 2019E Revenue m 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 DPS growth % Total div yield % Franking % ROA % ROE % EV/EBITDA x Net debt/equity % P/BV x AOG AU vs ASX 200 Prop, & 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, August 2016 (all figures in AUD unless noted) 17 August 2016 Macquarie Securities (NZ) Limited Knocking off the milestones Event Aveo released its full-year results, which were slightly above our forecasts and the guidance the company previously provided. The company also took the opportunity to announce the unconditional agreement to acquire the last RVG minority shareholder, and a capital raise to fund the transaction. Impact Acquires RVG minorities. The key piece of new released today was the unconditional agreement to acquire the last minority in RVG. While we have a strong preference to organic growth in this sector, at first glance this transaction looks good. First, Aveo are acquiring the assets at a good price (13% discount to NTA, which is struck using a high discount rate). Second, there is a strong strategic rationale (Aveo can implement its new occupancy agreement and can redevelop RVG s villages). Underlying EBITDA exceeds expectations ($119.8m, MacqE = $115.4m). Retirement EBITDA was slightly below our expectations (-$1.9m), but development ($4.4m) and non-retirement earnings ($3m) pushed the result above our expectations. Maintains FY18 guidance. The company provided new guidance for FY18 that included the impact of the Freedom and RVG minority acquisitions. Once the impact of these acquisitions have been removed the two targets were very similar. Composition of FY18 guidance has changed. Following the acquisition of Freedom, Aveo are taking a different route to adding care to villages. Where possible, they are converting their service apartment offering to Freedoms. Freedom charges higher prices to occupy its units and a 40% DMF (with 50% gains sharing) but has a not-for-profit care offering. As a result, forecasted care profits have been significantly reduced and established business and development have increased. Earnings and target price revision EPS revisions: FY17E = +1.6%, FY18E = +8.8% and FY19E = 18% (FY19E revision was driven by higher non-retirement earnings). Target price unchanged. Price catalyst 12-month price target: A$4.35 based on a DCF methodology. Catalyst: First-half result Action and recommendation We have an Outperform recommendation on Aveo and a target price of $4.35. Our target price is based on a DCF that includes only 50% of the company s development target. We have used this conservative development assumption to reflect the risk of Aveo accelerating its development rate to 500 in FY18. In our view, the key risks to the transition (selling down nonretirement, accelerating retirement development significantly and selling down the new village units in a timely fashion) are reducing with time. Please refer to page 9 for important disclosures and analyst certification, or on our website

2 Acquisition of RVG minorities Aveo announced the unconditional agreement to acquire the last remaining RVG minority shareholder. While we have a strong preference for organic growth in this sector, at first glance this transaction makes a lot of sense: The acquisition was carried out at a 13% discount to NTA, which in our view is conservative (retirement villages are valued using high discount rates (for instance, 12.5% to 14.5% for Aveo s retirement villages). Aveo can modify the occupancy agreements for new residents switching them from freehold and on to the new standard Aveo contract. Aveo can redevelop RVG villages. A fully underwritten institutional placement was also announced to fund the acquisition at a 2.6% discount to Tuesday s closing price, which will raise $125 million. The net impact of the RVG acquisition of minorities is $7-9 million of EBIT in FY18; it is worth noting that the value-accretive changes Aveo intends to make are long-dated, and so in our opinion, this does not reflect the true value of full ownership. Summary of the result The table below summarises the result and our forecasts at the EBITDA level Fig 1 Result review (EBITDA) ($ m) Division Actual Forecast Difference % Retirement % Development % Non-retirement % Corporate % Underlying EBITDA % Retirement (Established business and Care) was slightly below our forecasts with stronger than expected realised gains/dmf (which was the result of higher than expected turnover) offset by higher than expected costs. Development was above our expectations and guidance driven by strong development margins (18.7%, MacE = 13.8% when applying the same calculation methodology as the other retirement operators). Non-retirement was slightly ahead of our forecast; this is the profit from the sell-down of the nonretirement developments and as a result is difficult to forecast. Corporate was slightly ahead of expectations. New profit guidance The table below contains Aveo s new profit guidance and our estimates. Fig 2 Retirement EBIT ($ m) FY16 FY17 MacqF Guidance FY18 MacqF Guidance Established business Development Care and support services Retirement August

3 The company s previous profit guidance did not include the recently acquired Freedom villages or the impact of the buyout of the RVG minorities, and so the most significant changes that were made to FY18 guidance were driven by these changes. The acquisition of Freedom has led to some significant changes in the composition of earnings. Aveo has also decided to focus on adding care to its village through the Freedom, rather than through Allied health. While Freedom targets residents looking for significant levels of care, they provide this care using a non-profit standalone entity. Instead, Freedom generates its profits from: DMF/Capital gains: Freedom has a 40% DMF with 50/50 capital gains sharing. As the residents have relatively short tenure, this combination is an attractive structure for the owners. Aveo estimate that this will add $12-14 million EBIT in FY18. Development: Aveo s serviced apartments are priced at a significant discount to Freedoms, and so by converting its apartments to the Freedom business model, they hope to generate health development profits (as well as increasing occupancy). Aveo estimate that this will add $14-15 million EBIT in FY18. Using this information, it is possible to reconcile the change in EBIT forecast. Specifically: Fig 3 Guidance reconciliation EBIT ($ m) Old guidance Freedom RVG 7-9 Adjusted old guidance New guidance In our view, given the approximate nature of forecasting several years into the future and the changes that have been made, the adjusted old and new guidance are equivalent. Non-retirement sell-down Aveo made good progress selling down its residential community developments. Fig 4 Progress selling non-retirement assets Project Location 1H 2H Full Year Target Land Saltwater coast, Point cook VIC Peregian springs and ridges, Peregian QLD springs The Rochedale Estates, Rochedale QLD Shearwater, Cowes VIC Currumbin QLD Total land Apartments Aerial VIC The Milton, Mitlon QLD Total apartments This table shows that Aveo hit its target for land sales and came close for Apartments. In our view, the only slight issue highlighted in the table above is that settlements slowed in H2, but the following table shows that pre-sales increased. 17 August

4 Fig 5 Non-retirement pre-sales Jun-16 Dec-15 Change Project Location Remaining lots Pre sold lots Residual Pre sold lots Pre-sold lots Land Saltwater coast, Point cook VIC Peregian springs and ridges, QLD Peregian springs The Rochedale Estates, QLD Rochedale Shearwater, Cowes VIC Currumbin QLD Total land Apartments Aerial VIC The Milton, Mitlon QLD Total apartments The only development to see a decline in presales was Peregian Springs, which is selling into a softer market. The above table also shows there are only 1,350 lots yet to be sold/pre-sold and 348 are in Currumbin (the company is trying to change the zoning on this land parcel). Valuation DCF In our opinion, the best way to value retirement village operators is DCF; the cash flows and earnings of recently developed villages take a number of years to reach mature levels. Consequently, current earnings understate the true earnings power of these companies. To set our price target, we have elected to use a DCF that only includes 50% of Aveo s 500+ development target from FY18. The reduced development rate is used to risk adjust the valuation for the uncertainty surrounding a company that is ramping up its development rate. We applied a similar approach to Summerset until they provided sufficient evidence that they could build and sell units at the increased target. The table below provides the sensitivity of our valuation to this assumption. Fig 6 DCF valuation sensitivity to development rate % of development target # units DCF 0% % % % % % There two other key valuation sensitivities of that are worth reviewing: Deferred management fee. The deferred management recently adopted by Aveo is set at a premium to a number of other operators. The central case assumes that Aveo utilises the new contract for all new incoming residents. If Aveo is forced to provide clients with 50% capital gain participation then this reduces our valuation by $1.50. House price appreciation. Retirement unit prices are set with reference to the house prices in the village s catchment, because the sale of the family home is the typical method of financing the acquisition of the right to occupy a retirement unit. Our central case assumes 3% house price inflation, if house prices appreciate at 4% per annum (or alternatively, increase by only 2% per annum) this increases our valuation by $1.40 (reduces our valuation by $1.60). 17 August

5 Price-earnings multiple We use earnings multiples as a sanity check on our DCF valuation. We use underlying earnings as the removes the impact of unrealised gains. The table below provides Bloomberg consensus adjusted price-earnings ratios and our forecast eps growth rates for Aveo and its closet comparable companies (Metlifecare, Ryman and Summerset). Fig 7 Adjusted price-earnings multiples (CY2016) Aveo Metlifecare Ryman Summerset Share price Underlying EPS (cps) Underlying P/E Five year growth 15% 10% 16% 25% Source: Bloomberg, Macquarie Research, August 2016 Aveo looks relatively attractive on the basis of price-earnings: it has the second lowest multiple, but middle of the pack growth. Adjusted, adjusted earnings The significant earnings currently being generated by the sell-down in non-core non-retirement assets cloud the true earnings picture and so we focus on retirement EBIT. However, the adjusted earnings used to calculate Aveo P/E include this adjustment and so we have included the table below to show how the P/E changes when these assets and their earnings are excluded. In our view, this shows that the business would be trading on a similar P/E if management sold off all the developments assets and used the proceeds to buy back shares at $3.46. Fig 8 Adjusted, adjusted EPS and P/E $ m FY17E Aveo underlying earnings Non-retirement EBITDA Tax on non-retirement EBITDA 13.5 Post tax non-retirement earnings Underlying earnings ex-non retirement Expected cash from development 510 Reduction in shares (at $3.46) 147 Adjusted shares 433 Adjusted, adjusted eps 0.17 P/E 20.5 Asset-based multiples Comparisons of price to book are popular in the aged-care sector, and so we have included this approach for the sake of completeness. The book values of retirement village operators suffer from a couple of significant issues: The discount rates used by valuers are significantly above those typically used for listed companies. Each village is valued individually and so the valuer uses a WACC of an undiversified unlisted asset. At the risk of stating the obvious, this metric ignores the value of development. 17 August

6 Fig 9 Price to book multiples (CY2016E) Aveo Metlifecare Ryman Summerset Share price BPS ($ps) P/B ROE 6% 6% 12% 10% Source: Bloomberg, Macquarie Research, August 2016 Aveo and Metlifecare look attractive on the basis of this metric. They trade at around book value, which is half that of Summerset and a third of Ryman multiple. In our view, this suggests that investors are not paying for Aveo development pipeline or are placing a discount on Aveo and Metlifecare because of their modest ROE. Stocks mentioned: MetlifeCare (MET NZ, NZ$5.90, Outperform, TP: NZ$5.00) Ryman Healthcare (RYM NZ, NZ$9.40, Outperform, TP: NZ$11.00) Summerset Group (SUM NZ, NZ$5.34, Outperform, TP: NZ$5.60) 17 August

7 Fig 10 Financial summary PROFIT & LOSS 1H16a 2H16a 1H17e 2H17e PROFIT & LOSS FY16a FY17e FY18e FY19e Revenue Revenue RVG and other fees RVG and other fees Realised resale gains Realised resale gains Management fees Management fees Care fees Care fees Retirement revenues Retirement revenues Non-retirement reveneus Non-retirement reveneus Total revenue Total revenue Development profits Development profits Retirement operating expenses Retirement operating expenses Non- retirement costs Non- retirement costs Corporate overhead Corporate overhead Total underlying expenses Total underlying expenses Underlying EBITDA Underlying EBITDA Adjustments Adjustments EBITDA EBITDA Depreciation Depreciation Amortisation Amortisation EBIT EBIT Net interest expense Net interest expense NPBT NPBT Taxation Taxation Minorities Minorities Accounting NPAT Accounting NPAT Adjustments Adjustments Underlying NPAT Underlying NPAT KEY ASSUMPTIONS 1H16a 2H16a 1H17e 2H17e KEY ASSUMPTIONS FY16a FY17e FY18e FY19e RV units developed RV units developed Aged-care beds developed Aged-care beds developed Gross RV unit development margins 3% 21% 15% 15% Gross RV unit development margins 12.1% 15.0% 15.0% 15.0% Gross occupancy advances Gross occupancy advances RVG return 0.0% 0.0% 0.0% 0.0% RVG return 0.0% 0.0% 0.0% 0.0% MULTIPLES AND PER-SHARE METRICS 1H16a 2H16a 1H17e 2H17e MULTIPLES AND PER-SHARE METRICS FY16a FY17e FY18e FY19e EPS (realised) 8.9c 8.2c 8.7c 9.6c EPS (realised) 17.1c 18.3c 21.2c 21.1c PER (realised) 23.2x 20.3x 20.5x 18.9x PER (realised) 20.3x 18.9x 16.4x 16.4x Payout ratio (realised) 0.0% 48.8% 0.0% 49.9% Payout ratio 48.8% 49.9% 50.1% 49.8% DPS (cps) 0.0c 8.0c 0.0c 9.0c DPS (cps) 8.0c 9.0c 10.6c 10.5c Dividend yield 0.0% 2.3% 0.0% 2.6% Dividend yield (gross) 2.3% 2.6% 3.1% 3.0% NTA per share 3.0c 3.0c 3.1c 3.2c NTA per share 3.0c 3.2c 3.3c 3.4c P/NTA 1.1x 1.1x 1.1x 1.1x P/NTA 1.1x 1.1x 1.1x 1.0x EV/EBITDA 18.4x 15.4x 19.1x 19.8x EV/EBITDA 15.4x 19.8x 17.5x 16.7x Shares on issue (closing) Shares on issue (closing) KEY RATIOS 1H16a 2H16a 1H17e 2H17e KEY RATIOS FY16a FY17e FY18e FY19e Revenue growth (ex FVA) -3.7% 60.1% 58.9% 12.5% Revenue growth (ex FVA) 28.7% 29.6% 24.4% 5.5% NPAT growth (IFRS) 117.6% 81.0% -27.0% 10.7% NPAT growth (IFRS) 100.0% -10.6% 18.4% -0.3% EPS growth (IFRS) 111.4% 73.5% -33.2% 0.8% EPS growth (IFRS) 93.3% -18.6% 16.6% -0.3% Realised NPAT growth 89.2% 41.8% 7.0% 28.8% Realised NPAT growth 62.7% 17.6% 17.3% -0.3% Realised EPS growth 83.9% 35.9% -2.1% 17.3% Realised EPS growth 57.2% 7.3% 15.5% -0.3% DPS growth n/a 60.0% n/a 12.5% DPS growth 60.0% 12.5% 17.8% -0.9% ROA (IFRS) 4.0% 4.4% 3.4% 3.0% ROA (IFRS) 4.4% 3.0% 3.1% 3.0% ROE (IFRS) 6.2% 7.3% 5.9% 5.9% ROE (IFRS) 7.3% 5.9% 6.5% 6.3% Debt/(debt + equity) 9.6% 20.5% 20.1% 18.4% Debt/(debt + equity) 20.5% 18.4% 17.7% 12.0% Interest coverage (IFRS) 438.7x #DIV/0! #DIV/0! n/a Interest coverage #DIV/0! n/a n/a n/a BALANCE SHEET 1H16a 2H16a 1H17e 2H17e BALANCE SHEET FY16a FY17e FY18e FY19e Cash & equivalents Cash & equivalents Receivables Receivables Inventories Inventories Plant Property and Equipment Plant Property and Equipment Investment Properties 2,757 3,331 3,829 4,016 Investment Properties 3,331 4,016 4,393 4,698 Equity-accounted investments Equity-accounted investments Intangibles Intangibles Other Other Total assets 3,399 4,089 4,270 4,430 Total assets 4,089 4,430 4,732 4,998 Bank overdraft Bank overdraft Payables Payables Occupancy advances (net) 1,312 1,519 1,585 1,656 Occupancy advances (net) 1,519 1,656 1,849 2,151 Deferred tax liability (net) Deferred tax liability (net) Other Other Total Liabilities 1,828 2,429 2,482 2,586 Total Liabilities 2,429 2,586 2,818 3,023 Total Shareholders Equity 1,571 1,660 1,788 1,844 Total Shareholders Equity 1,660 1,844 1,915 1,976 DCF VALUATION Total $/share % CASH FLOW FY16a FY17e FY18e FY19e WACC 8.00% Receipts from residents TGR 2.00% Payments to residents Payments to suppliers/employees Retirement units 3, % Other operating cashflow Care beds % Total operating cashflow Corporate % Investing cashflow Enterprise value of retirement 3, % Free cash flows (equity) Non retirement % Dividends Enterprise value 3, % Equity raised/(bought back) Net debt % Purchase of treasury stock Landbank & WIP % Debt raised/(repaid) Equity value: combined group 3, % Change in cash August

8 Macquarie Quant View The quant model currently holds a marginally positive view on. The strongest style exposure is Growth, indicating this stock has good historic and/or forecast growth. Growth metrics focus on both top and bottom line items. The weakest style exposure is Quality, indicating this stock is likely to have a weaker and less stable underlying earnings stream. 376/1092 Global rank in Real Estate % of BUY recommendations 67% (2/3) Number of Price Target downgrades 0 Number of Price Target upgrades 0 Fundamentals 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 (Real Estate) 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. Servcorp Charter Hall Retail REIT ALE Property Group Abacus Property Group Shopping Centres Australa Gateway Lifestyle Group Servcorp Charter Hall Retail REIT ALE Property Group Abacus Property Group Shopping Centres Australa Gateway Lifestyle Group % -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. Servcorp Charter Hall Retail REIT ALE Property Group Abacus Property Group Shopping Centres Australa Gateway Lifestyle Group NaN Servcorp Charter Hall Retail REIT ALE Property Group Abacus Property Group Shopping Centres Australa Gateway Lifestyle Group % -30% -20% -10% 0% 10% 20% 30% 40% 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. CFROI Capex Growth Earnings Stability Sales to EV FY0 RNOA Return on Assets FY1 Operating Margin NTM Profit Margin FY1-28% -28% -31% Negatives Positives -25% -40% -20% 0% 20% 40% 23% 21% 20% 38% 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(/1092) 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) 17 August

9 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 30 June 2016 AU/NZ Asia RSA USA CA EUR Outperform 45.17% 56.00% 36.36% 43.16% 63.39% 45.91% (for global coverage by Macquarie, 6.27% of stocks followed are investment banking clients) Neutral 36.21% 28.59% 40.26% 50.38% 29.46% 36.96% (for global coverage by Macquarie, 6.33% of stocks followed are investment banking clients) Underperform 18.62% 15.41% 23.38% 6.46% 7.14% 17.12% (for global coverage by Macquarie, 5.38% of stocks followed are investment banking clients) AOG AU vs ASX 200 Prop, & rec history MET NZ vs NZSE50, & rec history RYM NZ vs NZSE50, & rec history (all figures in AUD currency unless noted) SUM NZ vs NZSE50, & rec history (all figures in NZD currency unless noted) (all figures in NZD currency unless noted) (all figures in NZD 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, August month target price methodology AOG AU: A$4.35 based on a DCF methodology MET NZ: NZ$5.00 based on a DCF methodology RYM NZ: NZ$11.00 based on a DCF methodology SUM NZ: NZ$5.60 based on a DCF methodology Company-specific disclosures: AOG AU: Macquarie and its affiliates collectively and beneficially own or control 1% or more of any class of 's equity securities. Important disclosure information regarding the subject companies covered in this report is available at Date Stock Code (BBG code) Recommendation Target Price 02-Feb-2016 AOG AU Outperform A$4.35 Target price risk disclosures: AOG 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. 17 August

10 This publication was disseminated on 17 August 2016 at 10:57 UTC. Macquarie Wealth Management MET NZ: 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. RYM NZ: 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. SUM NZ: 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: 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 17 August

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