Australian Quant Action

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1 Jan-91 Oct-91 Jul-92 Apr-93 Jan-94 Oct-94 Jul-95 Apr-96 Jan-97 Oct-97 Jul-98 Apr-99 Jan-00 Oct-00 Jul-01 Apr-02 Jan-03 Oct-03 Jul-04 Apr-05 Jan-06 Oct-06 Jul-07 Apr-08 Jan-09 Oct-09 Jul-10 Apr-11 Jan-12 Oct-12 AUSTRALIA Top ranked stocks in the Macquarie Alpha model Code RMD REA FLT RRL CSL GNC PRY TEL COH RHC Company Name RESMED INCO. REA GROUP LIMITED FLIGHT CENTRE LIMITED REGIS RESOURCES LIMITED CSL LTD. GRAINCORP LIMITED PRIMARY HEALTH CARE LTD. TELECOM CORP.OF NZ.LTD. COCHLEAR LIMITED RAMSAY HEALTH CARE LTD. Bottom ranked stocks in the Macquarie Alpha model Code WHC NHC QBE ASX AWC FMG TAH EGP HVN BLD Company Name WHITEHAVEN COAL LIMITED NEW HOPE CORP.LTD. QBE INSURANCE GROUP LTD. ASX LIMITED ALUMINA LTD. FORTESCUE METALS GP.LTD. TABCORP HOLDINGS LTD. ECHO ENTERTAINMENT GLD. HARVEY NORMAN HDG.LTD. BORAL LTD. The impact Volatility for investors The Stock Picker Strikes Back Event In recent months, the return correlation of stocks has lowered sharply from previous historic highs. Along with this the time series volatility of the market has also subsided. Impact An environment that combines low volatility (less chance of macro uncertainty) with high cross-sectional dispersion in returns should be beneficial for stock pickers and quantitative models as they are able to take advantage of mispricing opportunities. To consider the implications for investing, we track volatility and dispersion phases through the cycle. We define two volatility regimes (high and low) and similarly two dispersion regimes (cross sectional) creating four possible combinations. Fig 1 Average correlation of stocks has been decreasing (52 week rolling average pair-wise correlation for ASX300) 35% 30% 25% 20% 15% 10% 5% 0% Outlook Inside we show how the average return for most major investment styles is stronger in a low volatility / high dispersion regime. Despite our regime classification categorising the current state as high volatility and high dispersion, the trend is moving towards a state of low volatility and high dispersion. This should be favourable for stock pickers and Quantitative models such as the Macquarie Alpha model. 30 November 2012 Macquarie Securities (Australia) Limited Stocks at the top of the model include Carsales.Com (CRZ), Resmed Inc (RMD), REA Group (REA), Monadelphous Group (MND) and Flight Centre (FLT). A more detailed list is included on the third page of the note. Please refer to the important disclosures and analyst certification on inside back cover of this document, or on our website

2 Jan-91 Oct-91 Jul-92 Apr-93 Jan-94 Oct-94 Jul-95 Apr-96 Jan-97 Oct-97 Jul-98 Apr-99 Jan-00 Oct-00 Jul-01 Apr-02 Jan-03 Oct-03 Jul-04 Apr-05 Jan-06 Oct-06 Jul-07 Apr-08 Jan-09 Oct-09 Jul-10 Apr-11 Jan-12 Oct-12 Jan-91 Dec-91 Nov-92 Oct-93 Sep-94 Aug-95 Jul-96 Jun-97 May-98 Apr-99 Mar-00 Feb-01 Jan-02 Dec-02 Nov-03 Oct-04 Sep-05 Aug-06 Jul-07 Jun-08 May-09 Apr-10 Mar-11 Feb-12 Macquarie Private Wealth Analysis In recent months, the stock-to-stock correlation has lowered sharply from previous all-time highs. Another way to think about this dynamic is to look at the monthly cross sectional volatility (CSV) of stocks. If this is high, then there is greater reward for picking between the winners and the losers. Equally as important however is the time series volatility (TSV). If this is high at the same time it will generally wipe out the benefits of the higher cross sectional dispersion. TSV has been trending down also in recent months. To compare this through time we look below at the ratio of CSV to TSV. Fig 2 Cross Sectional Volatility divided by Time Series Volatility Higher ratio should be more favourable for stock pickers An environment that combines low volatility (less chance of macro uncertainty) with high crosssectional dispersion in returns should be beneficial for stock pickers and quantitative models as they are able to take advantage of mispricing opportunities. To test this we define two volatility regimes (high and low) and similarly two dispersion regimes creating four possible combinations. We are then able monitor the performance of various investment styles through time. We show below in Figure 3 the regime classification through time. Fig 3 Regime Classification Fig 4 The impact of Volatility for investors Low Vol, Low Dispersion High Vol, High Dispersion Low Vol, High Dispersion High Vol, Low Dispersion For simplification purposes we have classified the regimes based on the entire history and use above and below average to classify the regimes. We acknowledge this does have some bias in construction however this still should give us a reasonable indication of the environment at the time. 30 November

3 We are then able to calculate the factor returns in each regime to compare. Below we show the median factor Information Coefficient for each style in the different regimes. Fig 5 Median Information Coefficient (IC) by regime 50% Returns generally strongerin Low Volatilty / High Dispersion regimes 40% 30% 20% 10% 0% -10% -20% Earnings Yield Dividend Yield Earnings Revisions 12m Momentum Low Risk MQI Growth Technicals Low Vol, Low Dispersion High Vol, High Dispersion Low Vol, High Dispersion High Vol, Low Dispersion The results appear to support our hypothesis with periods of low volatility and high dispersion producing the strongest returns for most styles. Despite our systematic regime classification categorising the current state as high volatility and high dispersion, the trend is moving towards a state of low volatility and high dispersion. In this environment the returns to most styles should be stronger. The Macquarie Alpha model is the Quant team s multi-factor model that should benefit from such an environment. The model is dynamic with the weighting of each group rebalanced annually. Group weightings are based on the historical performance, persistence and correlation of the factor groups. Each factor grouping contains underlying factors. These factor groups are also rebalanced annually based on the historical performance, persistence and correlation of the factor groups. Please contact a member of the team for more information on the model. Top and Bottom ranked stocks in our model are shown below. Fig 6 Top and Bottom stocks from the Macquarie Alpha model Top Ranking Stocks in the Alpha Model Bottom Ranking Stocks in the Alpha Model Code Name Alpha Code Name Alpha CRZ CARSALES.COM LIMITED 13.8% WHC WHITEHAVEN COAL LIMITED -16.0% RMD RESMED INCO. 12.5% LYC LYNAS CORPORATION LTD % REA REA GROUP LIMITED 11.3% FXJ FAIRFAX MEDIA LIMITED -10.8% MND MONADELPHOUS GROUP LTD. 11.0% BSL BLUESCOPE STEEL LTD. -8.7% FLT FLIGHT CENTRE LIMITED 10.7% AQA AQUILA RESOURCES LIMITED -7.6% TPM TPG TELECOM LIMITED 10.6% AGO ATLAS IRON LIMITED -7.4% RRL REGIS RESOURCES LIMITED 10.4% SDL SUNDANCE RESOURCES LTD. -7.1% FXL FLEXIGROUP LIMITED 9.9% MSB MESOBLAST LTD. -7.1% CSL CSL LTD. 9.4% SGM SIMS METAL MAN.LTD. -5.8% GNC GRAINCORP LIMITED 9.4% IGO INDEPENDENCE GROUP NL -4.9% WTF WOTIF COM HOLDINGS LTD. 9.0% NHC NEW HOPE CORP.LTD. -4.6% DLX DULUXGROUP LTD. 8.5% MIN MINERAL RESOURCES LTD. -4.2% IOF INVESTA OFFICE FUND 8.4% QBE QBE INSURANCE GROUP LTD. -3.8% PRY PRIMARY HEALTH CARE LTD. 8.0% ASX ASX LIMITED -3.7% TEL TELECOM CORP.OF NZ.LTD. 7.9% AWC ALUMINA LTD. -3.5% COH COCHLEAR LIMITED 7.8% FMG FORTESCUE METALS GP.LTD. -3.4% PMV PREMIER INVESTMENTS LTD. 7.7% SWM SEVEN WEST MEDIA LIMITED -3.0% PNA PANAUST LIMITED 7.0% BKW BRICKWORKS LIMITED -2.9% PPT PERPETUAL LTD. 7.0% KAR KAROON GAS AUS.LTD. -2.6% RHC RAMSAY HEALTH CARE LTD. 7.0% TAH TABCORP HOLDINGS LTD. -2.2% LLC LEND LEASE GROUP 6.9% QUB QUBE HOLDINGS LTD. -2.0% TLS TELSTRA CORPORATION LTD. 6.8% TPI TRANSPACIFIC INDS.GLD. -1.8% JBH JB HI-FI LIMITED 6.7% GFF GOODMAN FIELDER LTD. -1.7% SVW SEVEN GROUP HDG.LTD. 6.6% EGP ECHO ENTERTAINMENT GLD. -1.6% SUN SUNCORP GROUP LTD. 6.5% HVN HARVEY NORMAN HDG.LTD. -1.5% 30 November

4 Factor Performance Summary: It was a reasonably challenging week for the Macquarie Alpha model with most factors struggling to add value. Technical factors did well signalling strong mean reversion for the week. Valuation: Most value factors performed poorly however the market reverted back to dividend yield in a modest way. The IC for forward yield was just over 4% last week. Analyst Sentiment: Earnings revisions also struggled this week along with most of the other analyst sentiment signals. Momentum: Shorter term momentum (3M) was the only momentum factor that had a positive IC for the week. Longer term momentum underperformed last week with 12m momentum having an IC of -7.8%. Fig 7 Factor Performance: Information Coefficients 25% 20% 15% 10% 5% 0% -5% -10% -15% Analyst Sentiment Capital & Funding Growth Liquidity Low Risk Momentum Profitability/ Return on Capital Quality Technical Indicators Valuation Macquarie Alpha Last Week 4W Avg YTD Last Week 4W Avg YTD Last Week 4W Avg YTD Last Week 4W Avg YTD Valuation -6.3% -2.7% 1.9% Profitability/ Return on Capital -4.8% -3.7% 8.0% Analyst Sentiment -11.2% -2.0% -4.6% Earnings Yield NTM -8.6% -6.3% -8.6% CFROI -0.7% -5.9% -10.7% Consensus Recommendatio -7.9% -9.6% -22.0% Earnings Yield FY0-3.6% -3.7% 3.5% ROA NTM -2.6% 0.2% 3.7% DPS Revisions 3M -10.9% 2.1% -4.2% Book Yield NTM -7.2% -2.0% -8.2% ROE NTM 1.4% 0.6% 7.6% Earnings Revisions 3M -6.0% 3.2% 8.8% Dividend Yield NTM 4.3% 4.2% 23.3% ROIC NTM -4.4% -2.2% 1.4% Up-down Earnings Revision 0.6% 3.8% -2.0% Sales Yield NTM 4.8% 3.9% -2.0% Maquarie Sentiment Indicat 1.6% 5.7% 6.2% EBITDA / EV NTM -0.4% -2.3% -17.9% Quality 0.3% 2.8% 6.1% Recomm. Revisions 3M -0.8% 1.4% -3.1% Earnings Stability 2.9% 5.5% 15.3% Price Upside -0.2% -16.3% -42.5% Technical Indicators 7.5% -0.2% -10.1% Macquarie Quality Indicator -8.7% -7.3% -6.4% Low Risk -12.0% 7.7% 15.2% Momentum 1M -3.5% 1.7% 25.9% Operating Accruals -6.6% -8.8% -12.0% Altman Z-score -15.0% -7.0% -2.0% RSI 14 Day -7.6% 4.4% 5.5% Profit Margin NTM -5.6% -0.6% 8.4% Earnings Certainty -8.7% 11.7% 26.2% Stochastic Oscillator -2.7% -2.9% 5.5% Merton Model -11.3% -0.9% 10.4% Williams %R -10.5% 0.8% 7.5% Liquidity 9.1% 6.2% 0.2% Relative Volatility -3.3% 2.1% 9.9% Relative Turnover -1.9% 10.0% 12.0% Volatility 250D -1.1% -13.0% -43.7% Grow th -12.4% -1.7% -2.7% Size 12.3% 9.2% 18.6% BETA -5.7% -7.5% -38.2% 5 Year EPS Trend -11.7% -2.7% -6.3% Turnover 20D 11.1% 8.2% 6.9% EPS Growth FY-1/FY0 1.0% -8.9% 4.4% Broker Coverage 6.7% -0.7% 2.2% Momentum -4.7% 11.4% 22.8% EPS Growth FY0/FY1-3.7% 4.1% -9.2% Momentum 12M -7.8% 12.3% 30.3% Margin Growth FY0/FY1-14.1% -7.6% -18.3% Capital & Funding -0.3% -0.6% 14.6% Momentum (12M - 1M) -8.3% 12.2% 26.4% ROA Growth FY0-FY1-4.9% 5.6% -13.1% Buybacks to Shares 4.5% 5.1% 17.5% Momentum 3M 4.1% 4.4% 0.7% ROE Growth FY0/FY1-1.5% 6.6% -12.7% Captial Expenditure Growth 8.7% -2.6% -17.4% Momentum 6M -2.6% 14.1% 28.3% Sales Growth FY0/FY1-10.5% -6.3% -25.8% Increase in the Number of S -6.1% -1.5% -11.5% Macquarie Periodic Moment -0.4% 4.4% 23.1% External Financing 3.3% -2.4% -8.9% Macquarie Alpha -9.3% 3.9% 13.1% 30 November

5 Size and Sector Performance Below we show the recent returns of Small and Large cap indices. Large Cap companies outperformed Small Cap companies over the last 12 months. Fig 8 Small versus Large Cap Returns 20% 15% 10% 5% 0% -5% -10% -15% -20% -25% -30% S&P ASX 100 S&P ASX 100 Industrial S&P ASX 100 Resources S&P ASX Small Ordinaries S&P ASX Small Industrials S&P ASX Small Resources 1 week 1 Month 12 Months All sectors had positive returns last week. The best performing sectors were Telecom, Energy and IT. The worse performing sectors were Health Care, Utilities and Financials. Fig 9 S&P ASX 200 Sector Total Returns Health Telecommunication Services Information Technology Financials Consumer Staples Utilities Consumer Discretionary Industrials Materials Energy -20% -10% 0% 10% 20% 30% 40% 50% 12 Months 1 Month 1 week S&P ASX 200 Resources S&P ASX 200 Industrial S&P ASX 200 / Financial x Property Trusts -SEC S&P ASX 200 / Property Trusts -SEC S&P ASX 200 Headline Index Name 1 week 1 Month 12 Months S&P ASX % 0.5% 9.4% S&P ASX 200 / Property Trusts -SEC -0.3% -1.4% 18.4% S&P ASX 200 / Financial x Property Trusts -SEC 2.3% -0.8% 17.7% S&P ASX 200 Industrial 1.6% 0.2% 16.7% S&P ASX 200 Resources 2.0% -0.5% -9.6% GICS Industries Consumer Discretionary 2.3% 4.3% 7.8% Consumer Staples 2.0% 2.0% 17.8% Energy 1.7% -2.3% -8.9% Financials 1.9% -0.9% 17.9% Health 6.5% 8.5% 44.5% Industrials 2.3% -0.5% -0.3% Information Technology 1.6% 3.0% 18.3% Materials 2.0% 0.2% -7.5% Telecommunication Services 0.9% 4.6% 36.2% Utilities 2.6% 2.4% 14.9% -15% -10% -5% 0% 5% 10% 15% 20% 12 Months 1 Month 1 week 30 November

6 Volume Watch: Keeping an ear to the ground Volume is often considered a good proxy for investor attention. In previous research we have explored the interaction of Volume and Momentum which tends to exhibit a life-cycle. Stocks with high volume and high momentum will typically outperform whilst those with poor momentum and poor volume will underperform. Below we show the top and bottom ranking Large and Small cap stocks by Relative Volume. This is calculated as the ADV over the last week divided by ADV over the last 6 months. Fig 10 ASX100 High Volume Fig 11 ASX100 Low Volume Last Week ADV Code Name Over 6m ADV FXJ-AU Fairfax Media Ltd. 378% TWE-AU Treasury Wine Estates Ltd. 352% LYC-AU Lynas Corp. Ltd. 231% ALL-AU Aristocrat Leisure Ltd. 213% RRL-AU Regis Resources Ltd. 189% CGF-AU Challenger Ltd. 157% CSL-AU CSL Ltd. 151% SYD-AU Sydney Airport 143% ALQ-AU ALS Ltd. 138% MTS-AU Metcash Ltd. 137% Last Week ADV Code Name Over 6m ADV EGP-AU Echo Entertainment Group 39% PNA-AU PanAust Ltd 44% CFX-AU CFS Retail Property Trust 52% DOW-AU Downer EDI Ltd. 54% DUE-AU Duet Group 59% GNC-AU GrainCorp Ltd. 59% QRN-AU QR National Ltd. 61% ARI-AU Arrium Ltd 62% CPA-AU Commonwealth Property 64% DJS-AU David Jones Ltd. 64% Fig 12 ASX Small Ordinaries High Volume Fig 13 ASX Small Ordinaries Low Volume Last Week ADV Code Name Over 6m ADV SXL-AU Southern Cross Media Group 423% NST-AU Northern Star Resources Ltd. 389% CCV-AU Cash Converters International 372% FLT-AU Flight Centre Ltd. 352% HZN-AU Horizon Oil Ltd. 339% SPL-AU Starpharma Holdings Ltd. 326% ELM-AU Elemental Minerals Ltd. 321% NWH-AU NRW Holdings Ltd. 306% ASL-AU Ausdrill Ltd. 305% MPO-AU Molopo Energy Ltd. 303% Last Week ADV Code Name Over 6m ADV OMH-AU OM Holdings Ltd. 20% TME-AU Trade Me Group Ltd. 21% MCE-AU Matrix Composites & Eng 22% BTR-AU Blackthorn Resources Ltd. 25% NMG-AU Noble Mineral Resources Ltd. 25% PCL-AU Pancontinental Oil & Gas N.L. 27% AQP-AU Aquarius Platinum Ltd. 29% SAR-AU Saracen Mineral Holdings Ltd. 30% PAN-AU Panoramic Resources Ltd. 33% KMD-AU Kathmandu Holdings Ltd. 33% 30 November

7 Technical Indicators In our report on Let s get technical, Macquarie Quant, April 2009 we found that Williams %R was the most effective mean reversion indicator in the Australian market. Williams %R Developed by Larry Williams, this measures the relative location of the closing price in relation to the high-low range over a set time period with the intention to identify over extended moves in a non-trending market. The indicator will typically peak and turn down a few days before the price peak of the underlying security and vice versa when forming a trough. It is calculated by first determining the highest high and lowest low over the preceding n periods, then taking the ratio of the highest high minus the current price divided by the highest high minus the lowest low. Values range between -100 and 0. W = -100 * ((Hn Tc)/(Hn-Ln)) Hn = highest price in n periods; Ln = lowest price in n periods, Tc = today s Close Values between 0 & -20 it is deemed as overbought; between -80 and -100 it is deemed as oversold. Like the RSI we once again multiply the score by -1 to make sure high scoring (overbought stocks close to 0) rank lowly. Additionally, we also test a normalised version of the signal on a 3-, 6- and 12-month basis. Fig 14 ASX100 Overbought Fig 15 Small Ordinaries Overbought Code Name Williams R SYD SYDNEY AIRPORT 0 DUE DUET GROUP 0 WHC WHITEHAVEN COAL 0 ANN ANSELL LTD. 0 DXS DEXUS PROPERTY GROUP 0 FXJ FAIRFAX MEDIA LIMITED 0 CSL CSL LTD WBC WESTPAC BANKING CORP COH COCHLEAR LIMITED RMD RESMED INCO Code Name Williams R AIX AUSTRALIAN INFR.FUND 0 ENV ENVESTRA LIMITED 0 AQP AQUARIUS PLATINUM LTD. 0 IRE IRESS LTD. 0 SIP SIGMA PHARMS.LTD. 0 SAI SAI GLOBAL LIMITED 0 PXS PHARMAXIS LTD. 0 HZN HORIZON OIL LTD. 0 APZ ASPEN GROUP 0 IFN INFIGEN ENERGY 0 Fig 16 ASX 100 Oversold Fig 17 ASX Small Ordinaries Oversold Code Name Williams R CPA COMMONWEALTH PR WRT WESTFIELD RETAIL TRUST -80 GNC GRAINCORP LIMITED PRU PERSEUS MINING LIMITED AGO ATLAS IRON LIMITED -75 MTS METCASH LTD HVN HARVEY NORMAN HDG.LTD EGP ECHO ENTERTAINMENT LYC LYNAS CORPORATION LTD WDC WESTFIELD GP Code Name Williams R AAC AUSTRALIAN AGRI.CO.LTD MAH MACMAHON HOLDINGS -100 IMD IMDEX LIMITED -100 GBG GINDALBIE METALS LTD CCP CREDIT CORP GROUP LTD ABU ABM RESOURCES NL -100 CDD CARDNO LIMITED SKE SKILLED GROUP LTD NWH NRW HOLDINGS LIMITED AAX AUSENCO LIMITED November

8 FX Commodity Corp Bond Sovereign Bonds Equity Asset Class 29 Nov Dec Dec Dec Dec Jan Jan Jan Jan Jan Feb Feb Feb Feb Mar Mar Mar Mar Apr Apr Apr Apr May May May May May Jun Jun Jun Jun Jul Jul Jul Jul Jul Aug Aug Aug Aug Sep Sep Sep Sep Oct Oct Oct Oct Oct Nov Nov Nov Nov 12 Macquarie Private Wealth Macquarie Risk Index In September 2011 we launched the Macquarie Financial Risk Index 1. The Macquarie Risk Index (MFRI) is a global cross-asset risk index which provides a holistic view of overall risk within the economy. We focus on Equity, Sovereign and Corporate Bonds, FX and Commodity asset classes. This provides a useful framework to understand risk and its drivers throughout global financial markets We show below the current readings of the MFRI. Green represents low risk, amber medium risk and red high risk. Fig 18 Macquarie Financial Risk Index (MFRI) MFRI Equity Soveriegn Bonds Corporate Bonds Commodity FX Economics US Equity EU Equity EM Equity UK Equity Japan Equity Asia ex Equity US Sovereign Bonds EU Sovereign Bonds UK Sovereign Bonds EM Sovereign Bonds Japan Sovereign Bonds Asia Ex Sovereign Bonds High Yield Investment Grade Energy Agriculturals Base Metals Precious Metals EU FX UK FX Asia Ex FX Japan FX EM FX US FX Green signals low risk (higher risk appetite), Red signals high risk (lower risk appetite) and Amber signals normal risk environment 1 See Risky Business Stressing about risk, Macquarie Quantitative Research, September November

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